The FCC (www.fcc.gov) yesterday reduced telephone access charges by $3.2 billion, a move designed to increase local and long-distance competition and save consumers big bucks on their monthly telephone bills.
Access charges are the fees the IXCs pay to local telcos for access to their local phone network. Since passage of the Telecommunications Act of 1996, the FCC has been moving the price of that access towards levels that better reflect actual costs, and to date has reduced prices by a total of $6.4 billion. These reductions, an FCC spokesman says, have stimulated billions of dollars of investment in infrastructure and reduced consumer prices by 17 percent since 1996.
By adopting the CALLS (Coalition for Affordable Local and Long Distance Services) (www.phonepolicy.com) proposal to overhaul the interstate access charge system, the FCC hopes to continue this forward thrust. The commission says access charges now will be cut and restructured substantially over the next five years, beginning with a roughly $3.2 billion reduction July 1. CALLS proponents initially offered their reform plan last summer, revising it in March to appease consumer groups and telecom regulators. The FCC adopted the revised plan yesterday with some minor revisions.
As part of the CALLS plan, major long-distance companies agreed to pass on savings to consumers and to immediately eliminate monthly minimum usage charges. Although IXC rates have been steadily decreasing, low-volume users haven't been benefactors of those savings because of line-item charges such as monthly minimum usage fees.
Starting in July, all U.S. households should see savings on their phone bills, with reductions as high as 50 percent for those who don't make any long-distance calls, and more modest decreases for the moderate to heavy long-distance users, such as businesses.
AT&T Corp. (www.att.com) and Sprint Corp. (www.sprint.com), for example, which were involved in devising the CALLS plan, will eliminate monthly minimum usage charges from their basic rate plans. "This action alone will lead to immediate, significant savings for customers who make few long-distance phone calls," according to the FCC. Other members of CALLS include Bell Atlantic Corp. (www.bellatlantic.com), BellSouth Corp. (www.bellsouth.com), GTE Corp. (www.gte.com), and SBC Communications Inc. (www.sbc.com).
In addition to the elimination of monthly minimum usage charges, two other current phone bill charges --- the existing presubscribed interstate carrier charge (PICC) and the subscriber line charge (SLC) --- will be made into one line item, according to the FCC. For the first year, the commission says the new single charge is lower than the existing two charges combined. Consumers will continue to see savings, even as the charge increases in the second year. And subsequent increases are subject to further FCC action.
The new rules also will continue to provision financial support to companies offering phone service in high-cost rural and low-income areas, otherwise referred to as universal service. Currently, the FCC says roughly $650 million of revenue from access charges is used to support service to high-cost customers. Because this revenue is collected through interstate access charges, it's available only to the ILECs. But the FCC says that under the new rules, $650 million is removed from access charges and replaced with an assessment on all carriers' interstate revenues, which then is placed in a fund available to any carrier serving customers in high-cost areas.
The Telecommunications Research and Action Center (TRAC) (www.trac.org) calls the FCC's action a good deal, and that specifically, the public interest obligation of universal service is reaffirmed with a secured system of support for rural and low-income consumers.
"These difficult telephone issues always involve compromises. It is clear that the FCC as a whole … has insisted that this reform proposal look first at consumers, second at competition and third at the industry interests," said Samuel A. Simon, chairman of TRAC's board of directors.
Simon says the access pricing system now will be changed to a more flat-rated system that's "likely to lead to more Internet-style pricing packages in local and long-distance services."
Washington telecom attorney John Nakahata, spokesman for CALLS, agrees that this could be a trend of the future, and the adoption of the CALLS plan will allow these types of plans to proliferate.
"The FCC has committed to assuring that the long-distance industry savings from reduced access payments are passed through to consumers. TRAC will be monitoring the rates to assure that this is the case," Simon adds
Also monitoring implementation of the CALLS plan will be the local exchange competitors, according to industry lobbyist ALTS (www.alts.org). John Windhausen Jr., president of ALTS, says "competitive pressures will continue to reduce access charge levels in the coming years, with or without adoption of the CALLS plan."
"We will study the FCC's order before deciding if any further action may be necessary," Windhausen adds.
One long-distance giant, WorldCom Inc. (www.wcom.com), which didn't sign onto the CALLS plan, believes the plan eventually could create higher rates for customers and bump up revenue for the RBOCs. US West Inc. (www.uswest.com), which also isn't a CALLS member, still must abide by the FCC's decision.
FCC Commissioner Harold Furchtgott-Roth, who concurred in part and dissented in part from the commission's decision yesterday, said the restructuring of the access charge regime takes some steps in the right direction, particularly with those aspects that permit price-cap LECs to more fully to recover the fixed costs of the local loop through flat-rated charges. But, he said he would have moved "even more aggressively" to do so.
The RBOCs that do support the CALLS plan, however, seem happy with the FCC's decision. "The industry has come to terms with the fact of competition and the need to spread the burden of universal service over all telecom companies," says Duane Ackerman, chairman and CEO of BellSouth. "This plan has brought a reasonable solution to a long-running problem … and it addresses the future by keeping Internet access services affordable."
