August 26, 2009 11:49 AM

Here's To You, Mr. Traffic-Pumper, Access-Stimulator Telecom Guy!

With apologies to Bud Light, and their fabulous "Real Men of Genius" radio ads,  TeleComSense will, on occasion, try to honor those innovators in the communications industry, which devote so much ingenuity and effort to produce little-to-negative consumer welfare.  If you're not familiar with the Bud Light ads, they are, quite simply, the best radio ads, period--just click on the link above, and get ready for tons of simple-minded, yet clever (in a simple-minded kind of way) entertainment.  The format is always the same: a guy with a deep, booming voice offers a tongue-in-cheek "salute" to the frequently inexplicable, generally trivial, and always humorous, occupations, products, hobbies, or other segments of our "market-driven" society, while a cheesy '80s sound chorus will chime in with additional fanfare.  [Warning: if the "market" is your "religion", you might find these commercials quite blasphemous].

Unfortunately, the Bud Light crew beat me to one communications industry example--"Mr. Dishonest Cable TV Hooker Upper", but here are the "lyrics" to this tribute. The words in parentheses contain the singing parts.

Bud Light Presents Real Men of Genius
(Real Men of Genius)
Today, we salute you, Mr. Dishonest Cable TV Hooker Upper
(Mr. Dishonest Cable TV Hooker Upper)
On any given day, sometime between nine and four thirty,
you arrive ready to bring us the world and,.
for an extra twenty, you will bring us porn.
(naughty, naughty boy)
Hey, you've already got the van and the jumpsuit,
why not get into criminal activity?
(Just a naughty boy)
Afterall, what are they gonna do, throw you in cable jail?
( I don't think so)
So, crack open an ice cold budlight, Manhandler of the scrambler,
because isn't it about time someone hooked you up?
(Mr. Dishonest Cable TV Hooker Upper)

 

OK, here's a little background on our first TeleComSense "Real Industry Innovator"--the much-maligned "traffic pumper."  A "traffic pumper", or "access stimulator" is a LEC that finds a way to maximize the amount of traffic (minutes) that it can terminate at the highest switched access terminating rates (usually the rates allowed in the most rural areas).  But here's the trick, the "traffic pumper" does it without ever completing one additional call to a human in that service area.  While "access charges" existed, in one form or another, prior to the AT&T divestiture in 1984, it should be noted that access charges became much more visible  at the time of the AT&T divestiture, and were designed to enable long distance competition while continuing to compensate the newly-divested Bell Operating Companies and independent telephone companies for long distance calls made over their local networks.  In effect, access charges provided a way to maintain the longstanding cross-subsidization of "basic local exchange service," by "long distance service" in a market with multiple long distance providers. 

These rates were traditionally higher in rural territories (with less subscribers) because, although, there is virtually no incremental cost for any carrier to terminate any call, the Commission recognized that carriers with a low volume of calls will have less terminated minutes over which to recover the fixed cost of a switch than urban carriers, which would naturally terminate a higher volume of minutes.  It is important to note that these regulated rates are based on the days when a "switch" meant a "big iron" $1 million plus, Lucent 5ESS--that was the state of the art when these rates were last set.  These switches had a high fixed cost; today's modern IP-based switches are much cheaper and, more scalable, than the older "one size fits all" 5ESS switch.

However, because traffic is considered "terminated" when it reaches its "platform" destination, the "traffic pumper" is able to locate equipment (or pay others to set up inbound audio-conferencing bridges), designed to automatically redirect large volumes of calls through rural areas without ever really serving any local customers over "true" access lines to the area.  In other words, because of the legacy intercarrier compensation scheme--with its regulated rates, based on location--the traffic pumper can take advantage of the Commission's rules that "he who chooses (the caller "chooses" the terminating carrier by calling a certain number) doesn't pay (rather, the caller's carrier pays), and he who pays (the caller's carrier) does not choose the carrier through which it can terminate calls.  Thus, the traffic pumper's costs are less than any other carrier (no nettlesome high-cost/high maintenance long loops), but it has call volumes closer to those of an urban carrier, yet it charges rates that reflect the rates charged by the highest cost carriers!  Lowest costs, highest prices and a captive customer base sounds like a recipe for success, huh? 

It is notable that a traffic pumper is most frequently a "competitive" LEC ("CLEC"), because they are less regulated than incumbent LECs--that is affiliated with a rural LEC.  These CLECs earn their distinction over "real" CLECs, like a Cavalier Telephone, a DeltaCom, or Cbeyond, in that the "real" CLECs make almost all of their revenue from selling retail communications services to end-users (residential or business), or by selling wholesale telecommunications service to other carriers or ISPs.  The business of a "real" carrier (ILEC or CLEC) is downright pedestrian.  Customer buys service, service provider supplies service, and out-bound minutes are roughly equal to in-bound minutes; so, assuming a reciprocal price for terminations, little if any money actually changes hands.  Wake me up, already.

The "traffic pumper", on the other hand, proudly exploits all of the regulatory opportunities available to it . . . much like their contemporary cousins, the really inefficient high-cost carriers that take the most money (per line) from the Universal Service Fund.  [Hint, these could be the next TeleComSense Real Industry Innovators]  [In fact, some of the pumpers do both - bill carriers for access charges and the government for USF!] In a nutshell, the most admirable quality of the traffic pumper is that, like the early native Americans, they use all of the telecom laws--and sometimes even more.  No waste, but no worries because the FCC almost always makes it right in the end.  Why?  Because, with apologies to Eminem, only the FCC can say, "we're the ones that made you."  So, without further delay, we salute you, Mr. Traffic-Pumper, Access-Stimulator Guy!

TeleComSense Presents Real Industry Innovators
(Real Industry Innovators)

Today, we salute you, Mr. Traffic-Pumper, Access-Stimulator Telecom Guy!
(Mr. Traffic-Pumper, Access Stimulator Guy)

The population of your entire service territory could fit
into just two Greyhound buses.
(That's not much traffic.)

Yet, with the equipment you could store in just one luggage compartment of one bus, you could terminate all the calls to the New York Stock Exchange in one year
. . . all without serving one additional human in your service territory.
(Busy, busy, brokers . . . now we're cookin')

They say some guys have a license to steal, but you got yours
from the Federal Communications Commission under
Section 214 of the Communications Act!
(Take that Howard Stern!)

So, crack open a cold Bud Light, Mr. Orchestrator of the Arbitrage, and
enjoy the minute-upon-minute, thousands of times a minute, cascade of the Cold Hard Cash, you earned it, and even if you didn't . . . it's the law!

(Mr. Traffic-Pumper, Access-Stimulatory Telecom Guy)

Put down the Bud Light down and turn the radio off Jonathan... although I must say you should write lyrics for those commercials.

You comments about not terminating traffic to a human with in the area where the brigde is located is true about all conferencing bridges - even if you locate them in down town Los Angeles at One Wilshire. Most likely that bridge will only have 10% of it users in the same state. So I think you missed big their and that is a key point to your message.

Question where should they locate their bridges so that they can run a conferencing business where people call from the terminating area code and to what percent????

You said "A "traffic pumper", or "access stimulator" is a LEC that finds a way to maximize the amount of traffic (minutes) that it can terminate at the highest switched access terminating rates (usually the rates allowed in the most rural areas)."

Traffic pumper and access stimulator are terms that could be used for any phone service that is looking to grow. Neither title or the practice is illegal.

Often you new guys some how think that terminating access is a crime... Instead of a necessary part of a Public Switched Telephone Network that has thousands of different companies interconnecting with each other. The ability to interconnect relies heavily on terminating access. Terminating access relies on how much it cost to deliver a minute. FreeConferenceCall.com does not set those rates. FreeConferenceCall.com simply goes to the area that is willing to pay the most in terminating access BECAUSE it doesn't matter where they locate their bridges because they get calls from around the country and around the world - NOT WHERE THEIR BRIDGES ARE LOCATED.

If you ask me that means FreeConferenceCall has a valuable business model. You can start a conferencing business anywhere you want to in this country... do you want to change that? A conferencing company can charge as low a price as they want... do you want to change that?

What is it you want to change? What would you change? Do you have any suggestions or do you just write songs?

Epoe | September 28, 2009 4:32 PM | Reply

Hey, Epoe, thanks for the comment; I appreciate your feedback and the compliment (I think there was one in there);-)
You raised a lot of questions, and let me try to address them.

I think you know the answer to your first one--where should conferencing equipment be located? The best place is the most efficient place for all parties. For those who don't know, "One Wiltshire" is a "carrier hotel" in Los Angeles, where the Internet backbone providers (IXCs), competitive local exchange carriers, incumbents, and all kinds of other high-volume voice and data carriers interconnect their facilities, and One Wilshire, in Los Angeles, is one of the biggest--if not the biggest--in the country. Placing conferencing equipment in a location where no carrier has to incur switching, or transport costs, would seem to make perfect sense. This would still allow for "free" calling, via traditional, "free" (to the calling party) 8YY numbers, just not local area codes.

You mention that any growing company is expanding its terminating traffic. This is true, just not asymmetrically, as the conference callers traffic patterns grow. Moreover, the Iowa Utilities Board would take issue with your frequent use of the word "terminating"--as it held just last week that conference bridges, and other mechanical relay services, do not "terminate" calls to end-users. Hence, it held, carriers serving these firms are not entitled to charge for terminating access. https://efs.iowa.gov/efiling/groups/external/documents/docket/023026.pdf

Your last point, that a conference calling company will locate wherever the LEC is willing to "pay" (share?) the most in terminating access couldn't describe the problem better. You ask, what is wrong with that? Well, the answer is that because, in matters of intercarrier compensation, he who chooses the "destination" (called phone number) does not pay, and he who pays (the calling party's carrier) does not choose; therefore, costs are not transparent to users and traffic does not flow to the most efficient service sources. This is why every state allows pharmacists to substitute generic (efficient) prescription drugs, even if the Dr. has prescribed a "brand name."

Jonathan | September 28, 2009 8:19 PM | Reply

Termination is a fee that gets charged to the carrier of the calling party to gain access to the local exchange. If a carrier decides to price all the various termination charges in the country all at one low price regardless of where their new customer connects and how long the new customer stays connected, then that Carrier is “walking a tight rope” and bears the risk that he may be pricing below his costs which has other implications that an Antitrust Attorney might understand.
A Great Marketing Idea Though!
Unlimited Long Distance on the Public Switched Telephone Network which currently runs a filed tariff charged on a per minute metered model is uncongruent. ULD’s ALL YOU CAN EAT MODEL works when selling the internet or a private network but not the PSTN. There are no REAL unlimited long distance plans because the PSTN in not an all you can eat network.
Unlimited Long Distance Plans attract the highest volume users. Users that call high cost areas or frequent calls or connect for long periods of time entice the user to use more. And desensitize to user to price and connection time. The real traffic pumper is the customer that has been enabled by the Unlimited Long Distance Provider.
The reason a party line can exist in some city in Iowa and make a higher rate as opposed to working in a tier one metro is because the ULD has desensitized the users to pains of a tariff per minute network. If the customer was paying a per minute price they would use only party lines in the most efficient low cost areas.
I think you are one of these guys that want to split hairs on what termination is but you can’t see that you are doing it to the sole benefit of Unlimited Long Distance Providers only. I also think you are blind to all the problems it causes consumer and the destination the consumer wants to call.
Unlimited Long Distance inevitably gets priced to the competition instead of cost. This is a very slippery slope. Look at Magic Jack selling Unlimited Long Distance for $1.70 per month. Is that Magic or because they sell 12 months in advance (Think about it. Once device sales slow how is the company going to afford connecting those millions of customers to as much calling as they want on the PSTN?) At some point the consumer is going to get hurt by Unlimited Long Distance Companies charging less than their cost over a long period of time.
When pricing to the competition instead of their cost, the carrier suddenly becomes the Anti-Carrier that does not want to carry traffic. The Anti-Carrier does not want to connect to high cost areas or connect frequently or allow for long connection times. Anti-Carrier doesn’t even like the very user profile that they went after with their Unlimited Long Distance plans in the first place. The very reason the user bought the Anti-Carrier’s Unlimited Long Distance Plan.
Excuse my use of the Anti-Carrier but an Unlimited Long Distance Providers make the most money when the customer does not make a single call. Just trying to highlight the true intent of Unlimited Long Distance Providers. Thus the reason Anti-Carriers are trying to tell the party line companies where they have to do business to keep the costs down and keep thier Unlimited Long Distance plans successful.
That is what happens when a Carrier sells unlimited access to someone else’s network knowing that they are still obligated to pay for the service they take on behalf of the high volume user that are desensitized to price and connection and have become motivated to consume more than before. They knew the job of Anti-Carrier was dangerous when they took it.
Show me a single Unlimited Long Distance Provider that does not block calls, run traffic over exhausted lines or withhold payments. Show me one.
Next the law suits come and the FCC filings and the looting of the stores
When a company prices to their cost on the PSTN, the way that it was designed, they appreciate access stimulation. They encourage the use of the network. The PSTN is built on QOS which comes at a cost on a per minute basis. It’s a great network. However, offer it on an All You Can Eat basis and it leads to a misrepresentation of the network and its business model no ifs ands or buts. And don’t give me any of that “Well that is the way voip is sold and where the PSTN is headed because the VoIP network is an ALL YOU CAN EAT NETWORK but that doesn’t make the PSTN one.
And on your last point about destination: We are talking about two different things. I am saying that a business in the United States of America can choose its place of business. You are saying that the business chooses what city it works in and gets a number in that area and therefore chooses the destination of a person that calls them…? The Caller dials the destination on these calls and therefore chooses the destination – do you see that differently?

Epoe | October 1, 2009 2:21 PM | Reply

Epoe, what are you talking about? Access pumping has been around much longer than "unlimited" long distance pricing. Have you ever heard of Beehive? "Unlimited" is just one version of "averaged." The law doesn't allow carriers to surcharge users for calls to high-cost areas. If it did, this problem would go away. But as long as the law requires averaged rates, these scammers will find ways to generate high-volumes of traffic and stick 3rd parties with the bill. Go back and read section 254(g).

santa balls | October 2, 2009 8:31 AM | Reply

The LD carriers are selling and all you can eat buffet on someone else's buffet.
Sell all you can eat on your own network, but don't sell all you can eat on someone else's and then complain about it.

oh wait, I will sell you a tank of unlimited gas for $20
what? it cost me more then that? oh well lets make the oil refineries make it cheaper?

Make any sense? no

so why are the LD carries doing it?

Crush the balls | October 2, 2009 12:30 PM | Reply

Mr. Lee,
I have been following your blog and I feel compelled to comment. Santa Balls’ brief explanation of Sec. 254(g) is quite incomplete and somewhat misleading. The Act provides for a forbearance for optional calling plans as long as the plan is offered to similarly-situated customers. This means that the carrier does have some flexibility in the rate that it charges in a given area. Furthermore, the blog seems to imply that “averaging” entails applying the same averaged rate over different geographic areas. It should be made clear that 254(g) calls for the same averaged rate applied to callers from different geographic areas.

EPOE makes an interesting point that I have not heard until today. To paraphrase, the problem is that carriers are offering unlimited long distance (ULD) within the confines of a pay-per-minute network. ULD will naturally attract callers that use a lot of minutes. These callers would ordinarily be very cost conscious except that now, under the ULD plan, they do not care what the costs are and they will likely use even more minutes than they would have otherwise. The carrier used to have the incentive to drive minutes of use; The carrier would make more money if a caller spent more time on the telephone. Under the ULD plan the incentive is to stifle callers. The carrier makes the most money when the caller does not use any minutes at all.

It seems logical to assume that ULD plans attract the callers that use the most minutes, such as callers that use a lot of conferencing minutes. It does not really matter to the caller where or at what price the calls get completed. The carrier does not want this kind of traffic no matter what, not at any price, because the use of minutes drives the carriers’ profit down. By offering ULD the carriers have skewed the model, putting the economic incentives for all parties involved at odds. The ULD plan attracts callers that want to use a lot of minutes and even incentivizes them to use even more minutes, yet the carrier wants the caller to use as few minutes as possible. The conferencing company thrives because the ULD plan desensitizes the caller to costs, yet the carrier complains that the conferencing company is driving up costs and so the carrier wants to block the conferencing company calls or not pay for them at all. How can the carrier complain when it is the carrier that created their own problem by offering ULD?

Since callers do not care about costs, businesses that offer conferencing services and the like are bound to migrate to the locations that offer the highest price per minute in remuneration, because of the promise of greater profit and because if they did not go to the highest paying location, then a competitor would do so and potentially force him out of business, or at least make him less competitive. Therefore, there is a natural migration to the highest paying location.

Conversely, if carriers charged by the minute of use instead of offering ULD, thereby acting in concert with the pay-per-minute PSTN, then callers would use the conferencing service that offered the lowest cost (because now the caller would be cost conscious) and this would force the conferencing companies to take their traffic to the lowest paying (lowest per minute charge to the user) location, at least to the extent that their fixed and variable costs could be met by taking their traffic to that location.

This argument makes sense from an economic standpoint. Stop allowing ULD and market forces will drive conferencing companies to lower paying locations, thereby costing the carriers less money and fixing the problem that they themselves created.

So it logically follows that the plight that the carriers are complaining of (conferencing companies taking their traffic to high paying rural locations) is a problem of their own making. Carriers can solve their own problem by cutting out ULD.

Everyone is searching for a solution to the problem of high traffic termination costs for conferencing companies' traffic. Some people want to change the tariff system and are looking to the FCC to find a solution. The solution is as simple as a ban on ULD. Or, if you want to offer the ULD then make all carriers pay the filed tariff. The carriers will either charge more for ULD in order to meet their actual costs or they will stop offering ULD thereby causing market forces to drive the conferencing companies to lower cost locations. Competition in the marketplace makes this an economic certainty, and there seems to be a lot of competition in the marketplace.

Contrary to your opinion, I would bet money that carriers did not have the problem with conference call companies migrating to the high paying locations BEFORE carriers started offering ULD or similar “one price” plans.

Sparsment | October 2, 2009 7:10 PM | Reply

Santa Balls - what are you talking about? Can you explain how you see 254(g)? I think you need to go back and give it another look! Is that all you got?

Crush the balls has got it, if you want to sell an All You Can Eat offering you better own the restaurant. I think ATT still thinks the PSTN is their own private network. But it is not.

Jonathan... I would love to hear your opinion.

EPoe | October 2, 2009 7:37 PM | Reply

First, I love the comments, and thanks to everyone for reading and taking the time to comment. My best answer--as for what I think--is probably in the September 24th post (read the note at the beginning).

Epoe, I think your comment, and the comment from Sparsment, make it clear that on this issue (like a lot of other controversial matters) where you stand depends on where you sit. As far as Santa's interpretation of 254(g), I don't think you could get a more literal reading. The provision says that IXCs offering service in rural or high cost areas have to sell at the same price they provide service in urban areas. In other words, just about every IXC that sells a service that has any value--callers can call anywhere--has to sell everywhere at the lowest prices it offers anywhere.

Another part of the dispute that needs to be resolved is exactly the solution that some of the commenters are suggesting--IXCs raising the price of flat-rated long distance. The problem is that this horse has left the barn. "ULD" is here to stay, and until the FCC clarifies how they will regulate VoIP, rural and high cost carriers are in a lot more peril than having the retail service providers make their own rules, by deciding how they will classify their service.

At least the IXCs admit they are telecommunications providers and when they "terminate" traffic to local exchange end users, they pay access. VoIP providers, like Speakeasy, Magic Jack, and Google Voice, contend they can decide where their users can call--while advertising their service as a really cheap, flat-rated phone service.

Declaring "termination" charges to be the same everywhere, even if that rate is very, very low, does not preclude rural carriers from recovering their transport costs from anyone, at the same rates they charge today. The "termination" charges--from last point of aggregation (end office to end user)--might be really low, but the FCC would have to confront the issue of real, outside plant costs (i.e., the 10 mile residential loop) in a way that is competitively neutral for "VoIP" providers and traditional IXCs, and provides rural carriers with another mechanism for cost recovery.

The bottom line, though, from my viewpoint is that if all termination costs are the same, the "market" and not the existing FCC regulatory scheme (that only applies to firms willing to own up to the title "telecommunications service provider") will determine where where conference callers should most efficiently decide to place their equipment.

I don't know if this moves the debate much, but I do want to clarify that these posts are not anti-rural LEC at all. Rather, these posts are targeted toward an outdated, inefficient FCC cost-recovery scheme that "rewards" carriers willing to "stimulate" any traffic that can be classified as PSTN traffic (but is really just hooked up to machines). This same scheme--which rewards "PSTN" traffic, can also be seen to be paying rural carriers to NOT deploy broadband, and discouraging these carriers from efficiently upgrading their networks to offer their own end users more IP-based services--the exact opposite of where the Commission claims it wants to move its policies.

Thanks again, everyone, for the comments. I do like the debate. I just wish the FCC thought this debate was as worthwhile and engaging as we do. --Jonathan

Jonathan | October 5, 2009 1:02 AM | Reply

Jonathan, your interpretation of 254(g) is incorrect. Section 254(g) reads "...the Commission shall adopt rules to require that the rates charged by providers of interexchange telecommunications services to subscribers in rural and high cost areas shall be no higher than the rates charged by each such provider to its subscribers in urban areas. Such rules shall also require that a provider of interstate interexchage telecommunications services shall provide such services to its subscribers in each State at rates no higher than the rates charged to its subscribers in any other state." Notice the emphasis on "subscriber". Everyone pays the same price at a particular LOCATION, no matter where you call from. It does not say that all locations must charge the same rate, which you and Santa Balls seem to be saying. Your use of the words "anywhere and everywhere" instead of "anyONE and everyONE" is what makes your statement incorrect.

Next you jump to the Voip argument which noone has raised in this blog thread. You completely avoid the whole unlimited long distance argument except to say that ULD is here to stay. Could it be that you see the logic of the argument and so you have no rebuttal? Market forces ARE at work, and they are driving companies that use the PSTN to the higest paying locations (Econ 101). ULD companies created this particular market force when they introduced ULD, therewith creating their own incentive to NOT CARRY PHONE TRAFFIC. ULD means that they make the most money when they do not carry any traffic. ULD means that callers that use the MOST minutes will sign up for ULD (Econ 101). The carriers have created an evironment of competing and contradictory incentives. Why must the whole system change to accomodate the carriers who created the problem that they now complain of?

Let's hope that Adam Bender of Communications Daily is correct that the FCC will soon address this issue. Let's hope that they search for the cause of the problems at hand and not simply attempt to fix the symptoms.

Sparsement

Sparsement | October 5, 2009 1:39 PM | Reply

I honestly don't think unlimited long distance has much to do with this problem. If carriers charged X cents per minute, traffic pumpers with access chargers higher than X would still have the incentive to stimulate terminations. If their charges were sufficiently higher than X, they would still have the ability to share the proceeds with others in a way that makes the scheme practical. Indeed, this entire scheme was perpetrated by Beehive in an era when X was relatively high (probably more than 10 cents per minute). As I said, if carriers were permitted under 254(g) to surcharge callers for calls to "high cost" areas, this problem would go away. But they're not permitted to do so.

santa balls | October 5, 2009 2:10 PM | Reply

When ATT or VZ or Quest (major IXCs) decided to offer ULD Plans those companies became Carriers that do not want to carry traffic under those plans.

With Magic Jack selling an ULD plan in my eyes makes them a Carrier and makes them a Carrier that also does not want to carry traffic. However MJ’s argument is that their service is not a service it is an application and not subject to Common Carrier Laws

Google is paying to have traffic termination and giving the service away so their argument is that not only is their phone service an application and not phone service but they don’t charge anything at all. Therefore they are not subject to Common Carrier Laws.

All three of those horses are out of the barn based on your “out of the barn” rebuttal which makes all those companies in the right. Right?

All three have slightly different views as to why they should be able to block or withhold payment.

All three can be viewed as major land grab of prospective customers while pitching either better than paying per minute or lower than the customers current ULD.

All three price to the competition instead of their cost.

All three attract high volume usage customers.

All three entice those user to use more by taking the pain out of the per minute PSTN.

All three desensitize their user to both price and connection time.

Two have not clearly discerned to their customers that Unlimited Long Distance is a misrepresentation of the access to the PSTN that they are granting access to a per minute service. NOTE: There are NO REAL Unlimited Long Distance plans (even though they are out of the barn).

All three do not use customer’s complaints as part of their argument. Because there are no customers that think that some of their calls should be blocked when they have purchased ULD.

All three offer conferencing services or other applications.

All three attack applications that receive a high volume of calls NO MATTER where they are located – high tariff low tariff.

And your rebuttal is that they are out of the barn?

You also said all access charges should be the same – and let me guess those rates should be set by the companies in the three examples above because they are good guys and the companies that rely upon termination as a profit center should be punished by having the good guys sell access to their networks.

Where is the customer in all this… have you ever thought that the customer wants to these call services. Santa Balls said those free conference calling horses left the barn a long time ago.

What about the customer - do you think the Carrier that does not want to Carry traffic is a good deal for them?

Anonymous | October 5, 2009 2:54 PM | Reply

This is a reply to Santa Balls last comment (note to Jonathan: the reply link did not work right. maybe on my end but you might check it)

Let's just say that 254(g) means what you say (I don't think it does because I see phone bills all the time that charge different rates for different exchanges)My belief is that a caller from Los Angeles or New York pays the same price when they call Iowa as some one in South Dakota. That all subscribers pay the same rates to the SAME areas. Not all exchanges cost the same to the caller. All callers pay the same price to the exchange!

But let's just say you are right.

So how does the carrier set an average price if the carrier can't control how much the customer will call? Organizing a plan like that create the so called Anti-Carrier because the carrier does not want their customer to pick up the phone.

Its not that an average price wouldn't work. Sprint charges me a 10 cent per minute average price right now and if I go over the subscribed minutes they charge me for more minutes at a higher rate.

The problem is the customer is not subscribing to a specific number of minutes and therefor there is NO AVERAGE.

254(g)suggest some kind of an average and we can disagree on that. Unlimited Long Distance is a plan with NO AVERAGE Price because the customer does not submit to a fixed set of minutes.

Epoe | October 5, 2009 3:15 PM | Reply

Santa Balls, the unlimited long distance argument is central to the problem. Let me break it down. If carriers charged by the minute, then the high rural tariff would be passed on to the caller on a per minute basis. The caller would become sensitive to the price that they were paying per minute. This would force conferencing providers to migrate toward lower cost (lower tariff) locations, because the callers would want to use the conferencing provider that offered the lowest cost per minute (as passed though by the carrier). So, if one conferencing provider directs traffic to a location that costs five cents per minute (rural location) and another conferencing company pops up and starts charging one cent per minute (tier one metro location), then the caller is going to start using the service that charges only one cent per minute. Competition in the marketplace among conferencing providers assures that this would happen.

There is another positive byproduct that comes from charging by the minute of use instead of offering ULD. Carriers would now want to carry ALL traffic, even conferencing companies’ traffic, the more the better. The economic incentive would be to drive use of the PSTN, instead of stifling use (call blocking).

You know I have to take issue with your use of the word “scheme”. Conferencing companies and most other companies that have built business around the use of the PSTN provide a valuable service that callers desire. The PSTN was designed to promote commerce, among other uses. Carriers make a whole lot of money using the PSTN. The only reason that we are having this conversation today is that Carriers now make even more money if NO ONE uses the PSTN (because the carriers charge in advance for an unknown amount of usage by callers). If carriers charged by the minute of use then carriers would love the conferencing providers and consider them more like partners instead of adversaries.

The economic incentive to move one’s business to the place where one can make the most money is not a “scheme”, it is capitalism and economics at work. A business migrates to the location where it can make the most money. The only reason that a conferencing business can make the most money in rural locations is because the actual user of the service, the caller, doesn’t care where the call is terminated or how much the call costs. The caller pays the same price regardless.

Finally, carriers ARE allowed to charge more for high cost areas. They simply are not allowed to charge you more than they charge me for that same area. Don’t you remember your old telephone bill, before you got a “pay-in-advance” plan? I have a reference that makes it easier to understand my point. Look up “Tariff Filing of New England Telephone and Telegraph Company d/b/a Bell Atlantic-Vermont re: Sensible Minute Option Calling Plan.” The analysis in this Order should help out. It explains Sec. 254(g) pretty well. I imagine that once you see that carriers can charge more for higher cost areas you will come over to my camp.

By the way, I was not making this argument before EPoe pointed out the conflict with ULD plans. Until then, I thought that the rules in place were flawed because they incentivized companies to drop phone traffic at high cost locations. I was not looking at the cause of the problem. I was looking at the symptom. Now I realize that the FCC rules are fine. It is the calling plans that are causing the conflicts. I am following the economics behind the arguments. Note also that if carriers do what I suggest and go back to a pay per minute system, then this works against profit margins for conferencing companies. My argument only appears to be "pro" confereing companies because I am saying that the carriers are at fault for creating the business environment that they are complaining of.

Sparsement | October 5, 2009 4:22 PM | Reply

EPOE, thanks for bringing the "reply" issue to my attention. It doesn't work on my end, either. I'll raise it with the hosting company.

I'm going to make one more run at trying to convince you and Sparsement that the interpretation of 254(g) that I (and Santa Balls) are arguing for is correct. When the Telecom Act of 1996 was written, some of the most powerful Senators (Pressler from SD, Stevens from AK, and Inouye from HI) were from rural states. At that time (with the possible exception of Sprint), none of the large consumer IXCs were also large rural LECs. There was a concern in Congress that if the long distance market, in particular, were completely deregulated, then IXCs would avoid rural consumers or charge urban consumers higher rates to call rural subscribers. No one wanted rural consumers to be "redlined", so Congress prevented IXCs from charging higher rates to subscribers located in (or calling to) rural exchanges. The rural exchanges were still allowed to charge higher access rates, and it was up to the IXCs to figure out a "typical" consumer traffic pattern and come up with one rate--whether it was a "per minute" rate, or flat, all-you-can-eat, rate.

The result was a bunch of different calling plans--like today in cellular--with lower fixed monthly charges (and higher per-minute charges) for low-volume users, and the opposite (higher fixed rates and lower, per-minute rates) for high volume users. As per minute access rates decreased (as the result of the "CALLS" Access Reform plan in 2000, which took the RBOC urban rate down to $.005 (half-cent)a minute), the "high end" unlimited long distance ("ULD") plans got cheaper as well, because most traffic between voice customers is between customers in the more urban exchanges. However, the IXCs were making a "bet" based on "typical" voice calling patterns. They were bound to lose money on some customers (the "overachievers"), but the idea was that there were more "underachievers" (same flat rate, but the customer incurs lower "input" costs by making less calls, or less calls to high access destinations) so that the ULD plan on the whole was profitable.

The reason I am not avoiding the question when I say that the FCC needs to come up with a regulatory classification for VoIP is because, if the Commission wants to promote "free" conference calling services by skewing voice-centric calling patterns so that the highest-cost exchanges also get the highest volume traffic, the Commission should do so for all providers of voice calling services, so that all providers will have the same higher input costs and can raise their ULD plan rates (as many have suggested is the answer) without "traditional IXCs" being disadvantaged because they are "telecommunications service" providers, and not "VoIP" "applications" providers.

Finally, I agree with Sparsement in hoping that the Comm Daily is correct and the FCC will address this issue soon.

Jonathan Lee | October 5, 2009 6:59 PM | Reply

That's a very interesting version of capitalism where a company gets to file a term sheet with a regulator that creates a legal obligation on third parties to pay for certain "services" described in the term sheet. Especially when the regulator turns around and tells those third parties that they're not allowed to charge rates rates that flow through the varying prices of those "services" directly to the subset of consumers who are the beneficiaries of those "services." Nor are they allowed simply to refuse to purchase these "services." Ha! Sounds suspiciously like a plan to make someone else pay for your pipes.

The FCC came closer to capitalism with wireless carriers when it told them that they were free to charge whatever rates they wanted for this "service," except that they could only do so under an actual contract, and could not simply file tariffs and demand payment. How much do you think those wireless carriers have been able to get others to pay voluntarily for this "service"? Here's a hint - the first three letters are z-e-r-. . .

santa balls | October 5, 2009 7:21 PM | Reply

That's a very interesting version of a Carrier where the Carrier doesnt want to Carry traffic and where eventhough the Carrier has control over what they charge to the consumer (in the form of averages) they can't price their average based on the calling patterns of the consumers that they serve. Nor do they want to.

Magic Jack should be allowed to block calls because they priced their service so low and demand access at a lower rate whenever they see it necessary to create more profit margin.

Gosh that would insure that the carrier was always profitable and would never have to raise their price but could continue to lower it and customer calling patterns are regulated self-help against the networks that the consumer access is being sold.

Google is paying to connect their customers calls for FREE!

Their average is a negative?????

Epoe | October 6, 2009 11:47 AM | Reply

Jonathan you said: "This same scheme--which rewards "PSTN" traffic, can also be seen to be paying rural carriers to NOT deploy broadband, and discouraging these carriers from efficiently upgrading their networks to offer their own end users more IP-based services--the exact opposite of where the Commission claims it wants to move its policies."

I think you need to investigate that statement a little more. There are Rural phone companies deploying broadband with the revenue from termination. I don't know of any that are using broadband stimulus money to deploy conferencing. Do you? Or are you saying it might happen? What are you saying because you are dead wrong on that one? You are making that up! Name a company doing that! That's the opposite of the truth!

The reverse is true access stimulation supports the Rural phone companies and aids Rural Broadband deployment.

And if the Carriers price to their cost instead of the competition the consumers calling the Rural areas would pay for it.

Anonymous | October 6, 2009 12:24 PM | Reply

Under this logic, why not allow carriers to charge a dollar a minute for terminating access? After all, they could just pass that through in long distance prices. Who knows, maybe we could finance health care reform and not just subsidized conferencing services!

santa balls | October 6, 2009 2:06 PM | Reply

Jonathan, I can see that my explanation to you and Santa Balls was an oversimplification. You and Santa Balls rely upon a very literal interpretation of the rule and I am trying to explain the effect and application of the rule.
I'll try again.

The further description of 254(g) and the Congressional intent that you provide to bolster your (and Santa Balls') interpretation over-simplifies the issue and, in any event, misses the fact that the FCC already considered and addressed the 254(g) concerns raised by the IXCs when it established the CLEC benchmarking and rural exemptions when it undertook CLEC access charge reform. Specifically, when Congress enacted 254(g), it was doing nothing more than formally adopting the Commission's then existing rate averaging policy -- it was not intending to create any new obligations. As the FCC made clear when it was implementing 254(g), its long-standing policy recognized that different rate structures could satisfy the requirements of 254(g) and that these rates structures could appropriately take into consideration reasonable differences in duration, time of day, and mileage bands while still satisfying the geographically averaged rates requirement. The FCC has also held that IXCs are permitted to offer certain discounts and incentives to customers in some areas (i.e., urban areas) without offering those discounts or incentives to other parts of their service areas (i.e., rural areas). As such, because IXCs can create different rate structures with different mileage bands and otherwise offer incentives to customers in urban areas, IXCs can effectively "surcharge" callers for calls to high cost areas, because these rural areas typically involve further transport distances (thus the logic behind higher access charges in the first place) and/or because the IXC can offer incentives to urban areas that are not equally-available to rural areas.

More importantly, perhaps, this entire line of argument simply misses the fact that the FCC already considered the impact of 254(g) when it established the CLEC benchmarks and rural exemption for originating and terminating access charges. In the "Seventh Report and Order," the FCC stated that because 254(g) requires IXCs to average their rates and spread the cost of both originating and terminating access charges over all their end users, that implementing a safe harbor benchmarking rule for CLECs (with the rural exemption) was appropriate to ensure that CLECs and IXCs knew when conclusively reasonable and just rates could be tariffed. The FCC therefore concluded that IXCs were legally obligated to provide service to CLECs that had tariffed the benchmarked rates and that IXCs were required to discontinue their unlawful self-help practices (i.e., withholding payment, call blocking, call choking, etc. -- in other words, the very same practices the IXCs are still unlawfully using today to try to avoid competition in the conference call market). With regard to rural exchanges, the FCC also set a benchmark for these exchanges (the rates found in the NECA tariff). Here again, the FCC concluded that these NECA rates were conclusively just and reasonable for rural areas and that there can be no lawful basis for the IXCs to refuse to pay these rates. Indeed, they found that rate averaging actually worked to the advantage of the IXCs and that higher rural access rates for rural CLECs "merely deprives IXCs of the implicit subsidy for access to certain rural customers that has arisen from the fact that non-rural ILECs average their access rates across their state-wide study areas." (7th R&O, para. 67).

The FCC also considered the IXCs argument that this rural exception might cause a proliferation of chat line providers (and, presumably conference call providers) in these rural areas. (7th R&O, paras. 71-72). The FCC was appropriately skeptical of this argument then (as we all should be now) because of the insignificant amount of total traffic that is directed to and terminated with chat line and conference call providers in rural areas. After all, despite all this "traffic pumping" that AT&T bemoans about, it continues to make record profits and climb the Fortune 500 ladder, rising to number 8 on the Fortune 500 list.

So, the argument comes full circle -- the import of section 254(g) remains but an excuse of the IXCs to avoid paying lawfully assessed charges, despite the fact that the argument has already been considered and addressed by the FCC. And, absent ULD plans, the IXCs would charge consumers for each minute of traffic delivered to a conference call service, would collect more than enough money to cover the costs of the call (plus profit), and would have no incentive to engage in call blocking for these calls, because the IXCs would be making a profit on each call.

Sparsement | October 6, 2009 6:36 PM | Reply

I was simply stating that Jonathan's statement was false that no one is using broadband money to build out conferencing networks. Not trying to say that free conferencing is the solution to Rural Broadband but it does create revenues for the rurals.

But your funny Santa Balls :) Ill give you that...

Epoe | October 6, 2009 8:23 PM | Reply

EPOE, and Anonymous, I wanted to clarify the quote from my earlier post that Anonymous pointed out earlier today--- "This same scheme--which rewards "PSTN" traffic, can also be seen to be paying rural carriers to NOT deploy broadband, and discouraging these carriers from efficiently upgrading their networks to offer their own end users more IP-based services--the exact opposite of where the Commission claims it wants to move its policies." In the words of our former President, I think you may have "misunderestimated" the point I was trying to make.

I was not trying to imply that any carrier had abused stimulus money or would not use broadband grant money for proper purposes. The point of my statement was that IF connecting calls to conferencing equipment was synonymous with providing "switched access" to the "PSTN", then the higher the volume of conference calls handled, the more "switched access" capacity the carriers handling the calls will need. Assuming there is a real, positive cost associated with "terminating" this traffic, carriers that focus on expanding the volume of conference calling traffic they handle will naturally have a greater incentive to devote more cap-ex resources to switched-access equipment vs. "dedicated" access facilities, like broadband.

Now, if, as many (including me) maintain, the true cost of handling this traffic is much less than the price of terminating the traffic, I do not doubt that "free" conference calling has funded some broadband build-out (as Anonymous) asserts. Be that as it may, though, I have to agree with Santa Balls that this is not the most rational policy to stimulate broadband deployment.

Finally, while I agree with Sparsement that the CLEC Access Charge Order (Seventh Report and Order) clearly states that IXCs are not allowed to engage in "self-help", the CLEC Access Charge Order supports the 254(g) interpretation and policy that I (and Santa Balls) argue is the correct one. The FCC's "predictive judgment" regarding access stimulation turned out to be wrong, and the proliferation of "free" services (both conference calling and VoIP-based services) has made this issue one that demands immediate attention (as opposed to the proliferation of "broadband principles").

Jonathan | October 7, 2009 12:39 AM | Reply

I am not stating it as a rational to stimulate broad band... you guys are in the weeds.

It is obvious that there are two camps. One camp does not want to carry traffic and the other one wants to create traffic.

If this is not true explain how a company that sells unlimited long distance can make more money than when they dont carry traffic.

We all know FreeConferenceCall can make money by creating phone calls on the network.

But try and tell me that they want their customer to use the phone.

The customers are in my camp! They do not want some of thier calls blocked! I suppose you do?

EPoe | October 7, 2009 12:31 PM | Reply

Hmm, interesting short term bus plan FreeCalliing, provide a “free service” to customers, then charge someone else who has no choice, but to deliver the call. Sounds like the old reciprocal compensation game with infinite margin.

Switchinabarn | October 7, 2009 4:39 PM | Reply

Switch in a barn?

The funniest thing about all three of you guys is you always leave the customer out of it. Always.

The way you see it is that ATT pays for everything eg:"then charge someone else who has no choice, but to deliver the call."

Unlike reciprocal compensation the customer pays for long distance which is not true about the locals found in the reciprocal compensation game.

For some reason there is no customer in your eyes... everything revolves around the poor carrier that has to pay for the termination. The customer pays for the termination when it comes to long distance... Oh yeah that's write ATT is charging the customer for access but not to carrier calls

Epoe | October 8, 2009 5:02 PM | Reply

We're just going in circles here. The answer to your latest foolishness is that if AT&T and the other carriers were allowed to surcharge based on the level of terminating access associated with individual calls, the customers would stop using this service. Basically, if customers internalized these costs, the traffic pumpers would disappear. But they can't because of 254(g). You may think otherwise but you're wrong. This whole scam is based on leaving the customers out via a set of rules that keeps them from internalizing the costs of their behavior.

Next you'll say that it's not 254(g), it's unlimited long distance. And I'll say the nationwide average wholesale rate for terminations is well under a penny and the traffic pumpers charge well more than a penny, so even under averaged per-minute pricing the traffic pumpers would still be able to game the system. And I'll point out that Beehive invented these schemes at a time when long distance prices were per-minute, and quite high for that matter.

It seems like the one thing we agree on is that consumers use these services so much because they don't internalize the costs in the same way that carriers incur them. You think that consumers don't internalize the costs because the carriers have adopted an unlimited usage model. I think it's because of 254(g). Maybe the one thing we can agree on is that if consumers had to pay the actual cost of these terminations they'd stop using "free" chat lines and conference services. But somehow I doubt it.

santa balls | October 9, 2009 9:34 AM | Reply

Jonathan, Santa Balls and Switchinabarn

Here at FreeConferenceCall.com we receive all kinds of phone bills from customers mad about how much their carrier charges them for access to our bridges.

Yes as Epoe and Sparsement see it - bills in which ATT charges over $1.00 per minute to get to a location with a 5 cent tariff so your 254(g) argument is wrong. I have Frontier(AT&T) bill from a customer dated February 2009 where the per minute rate to one of our bridges in Iowa is $1.50 per minute, I will send them to you if you want to post them. But I don't think you will post them because they are proof that not only are you guys wrong that ATT is wrong. The craziest thing about this is that ATT won't pay the nickel after charging the consumer $1.50 to connect. That is pricing to their cost a nickle making it up almost 3000% and then refusing to pay the nickle... are you getting the picture here!!!!!


I am amazed how Santa Balls, Switchinbarn and you carry the water for ATT with such passion, yet you couldn't be more wrong!

ATT can price to cost ATT can charge different rates for different parts of the Country and they are doing it.

What say you?

Dave Erickson | October 9, 2009 11:01 AM | Reply

Does that settle it guys?

I would like to see those phone calls Dave

Santa Balls said:

"The law doesn't allow carriers to surcharge users for calls to high-cost areas. If it did, this problem would go away."

Just what I thought ATT could make this problem go away anytime. Or I guess I should say just what I thought there isn't a problem with the consumer paying for what they use.

Can you imagine ATT is charging a buck fifty a minute and they decided to block the calls they were making 3000% on. They must be anti-competitive or something.

Epoe | October 9, 2009 5:16 PM | Reply

Santa Balls said:

"Under this logic, why not allow carriers to charge a dollar a minute for terminating access? After all, they could just pass that through in long distance prices. Who knows, maybe we could finance health care reform and not just subsidized conferencing services!"

Hey Santa it looks like some Carriers are charging a dollar for a minute of terminating access... aaaa that would be AT&T. Geee I wonder if they are going to solve health care with that money or if they are just going to donate to more political campaigns???


Epoe | October 9, 2009 5:23 PM | Reply

Dave,

I'm not sure about your first point, because you use two carriers' names--AT&T and Frontier. Moreover, the facts aren't clear. For example, if AT&T was the wholesale carrier for Frontier, and it was Frontier who was providing retail local and long distance telecommunications services to its end-users, then it would be Frontier--the retail IXC--that had the "rate averaging" duty under 254(g). If AT&T was the wholesale carrier, it is a common feature of wholesale contracts to give a "firm" price only for services and costs under the entire control of the wholesale carrier in question. So-called "exogenous" costs are commonly "passed through" to the purchasing carrier, because the only costs the wholesale provider can control are its own network costs.

As to your second point--expressing your "amazement" at "how Santa Balls, Switchinbarn and [I] carry the water for ATT with such passion" because, you rely on your previous assertion that under 254(g), AT&T can pass through charges to its customers. Here's the thing, though, Dave: the only customers for whom AT&T can pass through charges for "termination" on the networks of other carriers are its wholesale customers, but not its many retail customers.

Finally, and you should really know this: AT&T's "water" is your "water". What I mean here is that, in 2006, when a CLEC, Core Communications "CoreTel", filed a Petition for Forbearance from the Commission's "rate averaging" rules interpreting 254(g), ONLY AT&T supported complete forbearance from the FCC's interpretation. So when you accuse Santa Balls, Switchinabarn and me with "carrying AT&T's water", we are not--AT&T would prefer the interpretation that you claim is correct, but that the FCC rejected when it denied CoreTel's Petition.

Here's the link: http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-07-129A1.doc As you can see, in paragraph 17, the Commission states that, "[o]nly AT&T appears to support complete forbearance from the rate averaging and rate integration required by section 254(g) of the Act (and related implementing rules) based on similar claims of competition in the interstate, interexchange marketplace." (footnote omitted) So, when you accuse Santa Balls, Switchinabarn, and me for passionately defending AT&T's views, we aren't. At least for me, I am trying to explain what the law is--not what I (or AT&T) thinks it should be--BUT that the FCC's interpretation (regardless of how fair it is) should be applied evenly to all providers to whom the law applies.

Jonathan | October 9, 2009 9:17 PM | Reply

I’d like to volunteer two fairly general points.

First, in a perfect world, telecommunications is predominately a fix-cost business. Once you’ve built the network, there is no incremental cost for carrying a phone call (or a packet of data or a video stream). There is the ongoing cost of maintaining the network, and to the extent that usage approaches capacity, expanding it.

This is evident in the history of LOCAL telephone service. In many locations, local phone service was sold on a “subscription” basis – you paid a flat rate to make and receive all the local calls you wanted. That made sense, because the real costs of running the network were in the string of the wires and the purchase of the switches, and of course the maintenance of that infrastructure. In some places, customers were (and still are) offered a choice of “flat” or “measured” service. Measured service carried a lower monthly charge, but a per-call or per-minute fee. This is simply a form of price discrimination, allowing those who use the network less (and presumably receive, or perceive, less value from it) to still subscribe, rather than abandon it because it is too expensive. This practice has been accepted for decades.

Long distance was introduced as a “luxury” service and cross-country facilities were expensive. Since usage would vary greatly from one customer to the next (some making only a few calls, others using the service extensively, and many not at all) it made sense to recover the fixed costs by charging on a per-minute-of-use basis. Thus, those that used the network the most, and derived the most value from it, would pay for it. And as usage grew, capacity needed to be increased, and it made sense that payments from those using the network would fund its expansion.

Today, from a technology perspective, the long distance networks – and even, to some extent, the mobile voice networks – have reached the state where capacity meets or exceeds the “natural” level of use (people are only interested in talking so much). As with the local network, there is no real incremental cost to carrying a phone call; the capacity is in place and all of the functions are automated. We just need to collect fees to operate and maintain the network (and pay the cost of collecting the fees!). In a perfect world, one can choose to price based on minute of use, or do it on a flat-fee (or tiered) basis. A savvy businessperson would likely employ some combination of pricing schemes to maximize his revenue, and that could certainly include an “unlimited’ plan. There is no justification (pending my second point) for suggesting that an “unlimited” plan is nonsensical or that an operator offering such a plan is incented to have their “unlimited” customers make fewer calls. That is like suggesting that an athletic club that offers members “unlimited” visits is somehow acting irrationally.

But now we get to my second point: access charges. These charges are not a “natural” attribute of telecom; they were created to address a social imperative. It was agreed that it was desirable to have as much of the population as reasonably possible connected to the network, and it was recognized that the cost of connection varied greatly, being much higher in less-dense areas. The cost of stringing the wires, and repairing damage from tornadoes and ice storms, would be amortized over far fewer customers in these places. It was decided that a cross-subsidy mechanism was appropriate, and the choice was made to implement that on a PER MINUTE OF USE basis, even though the costs being subsidized, like the other aspects of telecom, are almost entirely FIXED. The initial math was done, and refresh systems were put in place, to try to set the per-minute amounts so that, when multiplied by real usage, they would match the actual fixed costs that were targets for subsidy.

Some of the discussion in this thread gives the impression that the point of access charges is to grant a per-minute entitlement in exchange for terminating a call. That is not correct from a historical perspective, and to argue that now is disingenuous, at least with respect to location-specific premiums. In the cases being discussed here, the social imperative that begat access charges does not apply. Conference calling and chat lines and a variety of other mechanized services do not incur the installation and maintenance expenses associated with serving customers in low-density areas (even if, for whatever reason, they are connected to a “rural” phone company). More importantly, most would agree that regardless of how or where they connect, there is no reason for said services to enjoy a subsidy from network users at large.

Tying this together: If access charges were applied only as intended, rather than being arbitraged, they would go back to being a miniscule expense. Then telecom would go back to being dominated by fixed costs. And a variety of pricing plans could be reasonably offered, making both carriers and customers happy. Stop arguing about how carriers might “pass through” their access charges to their customers. We already have a mechanism for caller-pays “premium-priced” calls – 900 numbers. Leave access charges for their original purpose.

Sidenote -- isn’t this interesting, by the way: In this forum we see such vehement arguments AGAINST an unlimited plan for voice calls and FOR per-minute charges. But look at headlines elsewhere on the web, and you’ll see those same telecom providers being lambasted for charging by-the-bit for DATA plans, when what the marketplace (or at least the bloggers) seem so hell-bent on is an unlimited plan. Note that there is no analogy to “access charges” in the data world.

David Frankel | October 10, 2009 5:36 PM | Reply

David, David, David, gosh where do I even start!
Your cursory dismissal of the effects of unlimited calling plans on a pay-per-minute network does not justify your argument (convoluted and confused).

I have not heard anyone on this board arguing that they WANT to eliminate unlimited long distance plans. In fact it is counter-intuitive to assume so because the elimination would drive conferencing companies and the like to lower paying locations, resulting in lower profits. The argument is that there is a natural economic affect that is imposed by unlimited long distance plans, and the companies using these plans should not be crying in their beer because they drive honest businessmen to the highest paying locations.

By the way, no one has offered up a solution as to where and at what price this kind of traffic should terminate (except to say that they should not exist). We have a market driven economy and so market forces will determine where this kind of traffic (and almost all business activity for that matter) terminates. That is all this argument is meant to say. I think we are looking for a solution to the problem, but to say that these companies “have no value” (as you have said in the past) is partisan at best, and in my humble opinion just plain wrong. Millions of users, including Barak Obama and the Democratic National Party attest to this with the use of the vary businesses you lament about.

Furthermore, your use of “social imperatives” reflects your philosophical bent, but that is all it is…an opinion, much like a moral imperative where the bent of the subject defines the imperative…and we all know what your argument is. Please stop your wine about whether you should offer a “free” or “pay-for” service. Do both! There is a market for both.

The solution to your problem is not to ban business models that you simply disagree with, or fail to understand the economic benefits of. I know, let’s allow powerful market-driving businesses to promise anything that they want in order to grab up all the customers and then change their minds and block anyone that starts to encroach upon their model. That’s the business framework that we should all want to abide by…right?

Sparsement | October 12, 2009 12:39 PM | Reply

Mr. Frankle you mention in your many many filings to the FCC (on page 4 or you power point) that Unlimited Long Distance Plans have made the caller indifferent to Toll/Toll Free. That is the same point Epoe is making. Jonathan, Santa Balls and Switchinabarn have countered saying that 254(g)forces long distance providers to become Unlimited Long Distance Providers and they are victims of 254(g) and they can't price any other way other than Unlimited Long Distance (or just another form of Averaged). They have gone around and around skating the issue and I don't think they have done much to explain away Epoes original thought.

Now comes David Frankle with a history of telecom that is a great story from your prospective. I have a great idea... how about you tell us how 254(g) works.

And for the readers that don't know David Frankle has filed alot of paperwork with the FCC basically saying that he runs a business where he charges the customer and he is thinking about offering FREE conferencing but doesn't want to do it because it is just not right. David you ought to do what I do and that is to take advantage of both models while the sun is shinning. In doing so you would realize that it is not an either or situation. There are different user profiles and pay services work well for some where Free does not work at all and other would not conference at all if it wasn't for free.

Jonathan, you ignore the evils of Unlimited Long Distance and the idea that they make the most money when they run zero traffic. Can you just answer one question!!!!! Please. How does Magic Jack plan on making money with out blocking calls or limiting their customers use?

David Erickson | October 12, 2009 3:01 PM | Reply

Look s like ATT is a litlle pissed. i hope they loose their asses. i really do. ATT have been overcharging the American people for years. now it is thier time to pay for the rape of the American people.

BlueBox | October 12, 2009 6:32 PM | Reply

Sparsement: You state, "By the way, no one has offered up a solution as to where and at what price this kind of traffic should terminate (except to say that they should not exist)."

Starting with my April 2009 comments to the FCC, I made specific suggestions about setting an appropriate rate for this traffic. Clearly there are many opinions, and most recently I said that the FCC should consider values ranging from the "RBOC rate" to 0. There are arguments for (and against) all the choices. My point here is that I feel strongly that the "RLEC" (or NECA) rate is not the right one. I stand by my comments that those rates were not intended for this application. I feel that way regardless of whether the Obama campaign got some utility out of it or not.

I realize now that perhaps there is some confusion (on my part?) regarding the use in this discussion of "Unlimited Long Distance." I thought that was a reference to plans that do not charge end-users a per-minute premium for making long-distance calls. I get the sense that perhaps others are using it to mean distance-insensitive (or point-of-termination-insensitive) plans. Regardless of these distinctions, I think I see people arguing here that carriers (and other service providers) should be encouraged to modify their "unlimited long distance" plans to better reflect their challenges in dealing with what they perceive to be "excessive" access charges. My point is that if the "excessive" charges were mitigated, there wouldn't be a ULD "problem" and I wouldn't need to be tested on my 254(g) knowledge. I believe it is better to address the root problem than to have it cascade through the system.

David Erickson, you are correct -- I should have taken advantage of this, like you did, "while the sun is shining." When I first stepped into this debate, I failed to realize that resolution of it would be so elusive. Additionally, the IUB has ordered refunding of certain access charges already assessed. And as you have pointed out, some carriers are withholding payments and driving big legal expenses pursuing collection. So I remain nervous about the prudence of operating a business predicated on this model.

I told the FCC in my original filing: "Regulatory limbo (uncertainty) is the worst situation for my small business." Their original actions in 07-135 indicated some misgivings on their part with respect to the applicability of rural access charges to the services we're discussing here. I had hoped they would quickly finish the job and rule comprehensively on this matter, but they haven't and I'm hugely disappointed, because as you point out, that is opportunity missed for me (and something that would be quite helpful for all involved in this, and which many have requested).

Once I get a reading with some certainty, I'll definitely adjust my business model to take advantage of all available opportunities.

David Frankel | October 12, 2009 9:06 PM | Reply

David Frankel, David Erickson, EPOE, Santa Balls, Sparsement, Switchinabarn, and everyone else who contributed comments here:

Thank You!! I really appreciate you taking the time to engage in this thoughtful discourse. However, I thought it might be better if other people could see this "back and forth" as well, so I put up another post today--the ONE LINK ON INTERCARRIER COMP YOU HAVE TO READ!! http://www.telecomsense.com/2009/10/the-one-intercarrier-comp-link.php

Please continue your comments on that post. Although I'm going to put up another more detailed one this afternoon, based on what I've learned from this comment trail. Thanks again, everyone. --Jonathan

Jonathan | October 13, 2009 1:57 PM | Reply

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