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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