IP: FCC appears poised to kill reciprocal compensation

[Dave Farber <dave () farber net>]

> Other points of view WELCOME djf




> Date: Thu, 19 Apr 2001 13:45:55 -0600
> To: dave () farber net
> From: Brett Glass <brett () lariat org>
>
>
> According to an article at
>
> http://news.cnet.com/news/0-1004-200-5594228.html
>
> the FCC appears poised to eliminate "reciprocal compensation," a scheme in 
> which interconnecting telephone companies share the revenue from a 
> telephone call.
>
> When a telephone customer makes a local call, he pays only his own 
> telephone company for it. If the recipient uses a different company, it 
> makes sense that the recipient's telephone company also get a share of the 
> revenues from the call, since it is devoting resources to completing it.
>
> This is the principle behind "reciprocal compensation," in which 
> interconnected local telephone companies make payments to one another 
> depending upon the number of calls that flow each way.
>
> The Baby Bells, or incumbent local exchange carriers (ILECs), originally 
> advocated this scheme. But when competitive local exchange carriers 
> (CLECs) have gone out of their way to sign up customers who mostly 
> received incoming calls (such as ISPs), they reversed their earlier stance 
> and began to lobby for a regime called "bill and keep" (in which each 
> company must complete calls for others with no compensation, but keeps all 
> of that money it gets from billing its own customers).
>
> Since the ILECs, which dominate local markets, have more customers to bill 
> and more customers making calls, this benefits them at the expense of 
> smaller competitors.
>
> Legislation eliminating reciprocal compensation was defeated in the House 
> last year due to strident protests from CLECs, ISPs, and consumers. (Many 
> consumer groups also chimed in, noting that elimination of reciprocal 
> compensation would raise the cost of basic dial-up Internet service -- the 
> most economical option and the only one available in many areas.)
>
> But as a result of political pressure and campaign contributions from the 
> CLECs, plus the new regime in Washington (which strongly favors a 
> laissez-faire approach to large businesses), it now appears that the FCC 
> will override the will of the people and move to eliminate reciprocal 
> compensation -- even when it was willingly agreed to in contracts between 
> ILECs and CLECs. (The "new" FCC has already moved to relax restrictions on 
> concentration of media ownership; see
>
> http://www0.mercurycenter.com/breaking/docs/001261.htm
>
> for more.)
>
> The result, alas, could be the re-monopolization of local telephone 
> service -- and a new monopolization of broadband Internet -- by the Baby Bells.
>
> --Brett Glass



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