Posted 03/2000
Access Charge Reform Again?
By Jonathan E. Canis
This reduction would be accomplished by: 1) increasing the monthly subscriber line charge (SLC) that end users pay (this is the $3.50 charge most residential users find on their monthly phone bill--for business users, it runs from $5.00 to $9.00 per month); and 2) creating a new $650 million "universal service fund," paid for by competitive carriers.
At issue is how to deal with the historic cost of the ILECs' networks. When AT&T Corp. (www.att.com) was deregulated, it wrote off billions of dollars in outmoded network equipment. To date, the ILECs have avoided this harsh reality, fighting any reduction in their access revenues. As a result, most efforts at access reform have been revenue neutral to the ILECs--that is, they have simply moved the charges around from per-minute charges paid by IXCs to flat monthly charges paid by end users and universal service funds paid by competitive carriers. The overall amount of access revenues collected by the ILECs remains essentially the same.
The future of the CALLS proposal is unclear. FCC Chairman Kennard has stated he wants to see something like it implemented this year, but that will be tough. The CALLS members have positioned their proposal as a "take it or leave it" deal that must be adopted without modification. Most competitive carriers (IXCs and CLECs alike) strongly object to the $650 million universal service fund, arguing that it is designed simply to maintain ILEC revenues at current levels. Similarly, most consumer groups, and several state regulators, have opposed increases in the SLCs that residential and business customers will have to pay. Whether the CALLS proposal can survive the demands of these competing interests remains to be seen.
There is some hope for a market-based solution to this problem, however. Every day we hear more about advances in providing telephony over the Internet. As long as the FCC continues to keep Internet-based services free from regulation, the Internet will grow to provide a competitive alternative to traditional circuit-switched services. In addition, for the first time ever, a new class of CLEC is emerging that is overbuilding loops with fiber and/or wireless facilities--creating new networks that will bypass ILEC last-mile loop facilities altogether and provide end users and carriers with the ability to completely divorce themselves from the ILECs. Over the next few years, this combination of Internet and bypass networks will give consumers a real choice in telecom providers, and will for the first time apply direct market pressure to the rates ILECs can charge for their local services. Once this happens, the FCC can declare victory and deregulate ILEC access charges altogether, saving itself and the industry a huge headache.
Jonathan E. Canis, an attorney with the law firm of Kelley Drye & Warren LLP, writes a monthly guest column on regulatory issues. He can be reached at jcanis@kelleydrye.com.
