Is There a Catch Within Toll-Cutting Plans?

WASHINGTON (01/27/2000) - Users who are considering money-saving packet voice options but who would rather lower their regular telephony rates if they could may get more ammunition from an unusual coalition of six carriers.

The coalition -- consisting of AT&T Corp., Sprint Corp. and four big local exchange carriers - is asking the U.S. Federal Communications Commission to halve the per-minute charge local carriers impose on long-distance carriers to complete calls.

The flip side of the proposal? The six carriers say they want the FCC to "simplify" the myriad fixed monthly charges that appear on many bills. But critics of the proposal say the way such simplification would be achieved amounts to an increase in monthly charges. And they warn the FCC should only be considering proposals that reduce per-minute and monthly fixed charges.

The group with the new proposal dubs itself the Coalition for Affordable Local and Long Distance Service (CALLS). The carriers say they came up with their proposal partly because the growth of packet telephony threatens the nation's universal-service system, which among other things ensures that rural customers have affordable phone service.

Phone calls sent over the Internet or other carrier data networks aren't subject to "access charges" - the amount built into regular per-minute long-distance tolls to compensate local carriers on the originating and terminating end of the call. Because those access charges help fund universal service, the more users who break away from the regular phone system, the less money available for universal service, the CALLS proposal says.

To prevent that from happening, CALLS wants the FCC to reduce the access charge to little more than a half a penny per minute so that it would barely affect any user's decision whether to use Internet telephony. But in return, CALLS wants the FCC to authorize big carriers to raise $650 million more for universal service through another method other than per-minute charges.

Also part of the group's proposal: The FCC would combine two charges that appear on residential customers' bills -- the Subscriber Line Charge (SLC) and the Presubscribed Interexchange Carrier Charge (PICC) -- into one, but raise the legal cap on the combined charge to $7 per month. Most business customers would continue to have those charges assessed separately.

Some user advocates say that's a bogus deal. The SLC (which telecom insiders pronounce "slick") and PICC (or "pixie") don't conform to the government's usual rule that industry-mandated charges be based on marginal costs, not past capital investment, says Mark Cooper, research director of the Consumer Federation of America.

"We opposed all that stuff in the first place," Cooper says. "Why the hell should I bleed now [to support] something I opposed?" The FCC should especially reduce government fees on second residential phone lines into people's homes, Cooper says, claiming they cost phone companies less to install than the first lines.

Where will the money come from?

Another problem: the new $650 million in funding. The CALLS proposal doesn't specify where the money will come from. But CALLS attorney John Nakahata concedes it's possible that long-distance carriers will raise the percentage of universal-service surcharges on large business users -- now already as high as 6.6 percent -- to raise the money.

Still, Nakahata says consumer advocates are wrong when they insist that all types of universal-service funding -- monthly surcharges and per-minute access fees -- must drop.

"That view assumes that the costs of building the network are the same in every part of the country, and that's patently untrue," Nakahata says.

He gets support from one association of large business users, the Ad Hoc Telecommunications Users Committee. The consumer SLC and PICC charges are actually below cost compared to the percentage universalservice surcharges paid by businesses, said a letter to the FCC by Ad Hoc attorney James Blaszak.

"Perpetuation of the existing subsidized residential service rates is indefensible," Blaszak said.

But if the FCC adopts the CALLS proposal, Blaszak said, it should also simplify the business SLC and PICC charges, and restrict carriers from collecting the new $650 million via excessive user surcharges.

The FCC is expected to vote on the CALLS proposal by March.

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