Results tagged “Windstream”

August 4, 2011 7:28 PM

What the Price Cap LECs Saw, and What They Need to See

Last Friday--after months of intense negotiation, compromise, and an exhaustive re-calculation of the Mayan Calendar--the six largest "price cap" LECs submitted a comprehensive USF/Intercarrier Compensation reform plan to the FCC ("the Plan").  [Note: you really only need to read "Attachment 1"--the rest just provides legal and economic support for the FCC to adopt the Plan.]  

Under the Plan, the only economic incentive to keep the PSTN alive will disappear on July 1, 2017.  On that date, the Plan--and the Prophecy--require that Price Cap LECs shall be required to make money just like any other business: by efficiently selling services to customers who voluntarily decide to purchase these services.  

This Plan, if adopted by the Commission, will serve to streamline intercarrier compensation, while more efficiently promoting the goal of universal access to broadband, as well as voice, services.  At first, all of this will sound kind of scary to many of you.  

Therefore, let me assure some of you that arbitrage will still be around for 6 more years, and the Plan only requires the end of subsidies as they currently exist.  The Plan is by no means a "Doomsday Prophecy", but merely a gateway to the implementation of simpler, more efficient, and more transparent, subsidy recovery mechanisms.  

Let's look at how the Plan would affect two large, PSTN-dependent industries, if adopted today:

VoIP Providers:

    1) Positive:  allows for recovery of all VoIP-originated or terminated "toll" calls at interstate access rates for the next two years!  That's a crazy incentive to upgrade to more efficient technology ASAP.  As a LEC, you don't have to maintain "big iron" to get big bucks.  There will also be a strong short term benefit to interconnected VoIP providers.  No more haggling with big LECs who only want to pay you $.0007/min, and there's a big difference between $.05 and $.0007.  For the next 6 years--albeit at descending rates--carriers serving end-users of VoIP service will be able to collect larger revenue streams than they are generally being paid today.

    2) Negative:  costs to over-the-top VoIP providers will increase, as may wholesale costs of transmission to interconnected VoIP providers (if purchased from a third party backbone operator--because as the costs collected from other carriers goes down, customer costs will increase; even in the wholesale world).

Wireless Carriers:  Stone cold positive.  No negatives here at all.  Wireless providers get a quick transition from intrastate access rates (which are usually much higher than interstate) to the much lower interstate rates, and decreasing rates over time.  It is notable that most of the Price Cap LECs in the Plan, DO NOT have wireless affiliates.

Regulatory "Underbrush" Grows on Both Sides of the Fence

All of the price cap LEC's supporting the Plan have waxed eloquent at one time or another about the need for the FCC to eliminate its outdated regulations a/k/a "regulatory underbrush."  The Price Cap LEC's Plan accomplishes a lot of these goals, but keep in mind, "regulatory underbrush" grew on both sides of the fence. 

The same byzantine, opaque, universal service system also resulted in cost recovery mechanisms in the form of "services" that are no where to be found in the modern, competitive services offered by cable companies, and wireless carriers.  For example, in a competitive market that didn't start as a regulated monopoly with the goal of keeping "basic" service rates low, would any of these things really emerge as "services" that customers would buy?    

    --"unlisted" phone numbers;

    --"foreign exchange" service (in wireless, you can port a NY number to a TX carrier, but LEC voice providers still make you pay to "port" your landline number a mile away);

    --"hunt groups" (say a customer has one number for its business, but the customer actually buys 10 lines to make sure calls are always answered--the automatic process of "hunting" (finding an open line attached to the main number)--is sold as a separate service);

    --phone handset "rentals":  there have got to be some people still renting that bakelite phone for 3 bucks a month;

    --inside wiring "protection";

    --selling common PSTN "vertical" switch features, like caller ID, a la carte;

    --charging extra for "touch tone" dialing (still happens).

Bottom Line:  The Price Cap LECs have a good plan to streamline regulations for "cost recovery."  But, allowing carriers to to recover costs by receiving explicit subsidies and charging a fair price for service may cause the FCC to wonder how much in costs is still recovered via distorted "services" that emerged from the antiquated regulatory regime in need of reform.  If you can think of any "cool" old, tariffed "services" that seem to have originated as a form of "cost recovery"--and are still being "sold"--please post in the comment section.