Paging companies, LECs at Odds Over Compensation

The Telecommunications Act considers them telecom carriers entitled to reciprocal compensation for terminating calls.So why do paging companies run into a brick wall when they try to negotiate equitable interconnection agreements with the nation's wireline carriers? Why have LECs thus far refused to pay reciprocal compensation for paging companies that terminate landline calls on their wireless networks?

"It's no secret that paging carriers have had more trouble with this issue than other wireless carriers," says Angela Giancarlo, director of federal and regulatory affairs for the Personal Communications Industry Association (PCIA). "Certain LECs allege that paging carriers, because of the one-way nature of the calls, are not entitled to reciprocal compensation."

Outside looking in

Paging companies are on the outside looking in. And what they see is a lot of potential revenue going down the drain. The nation's 1,776 paging carriers have between 45 million and 50 million paging units in service, which accounts for a lot of terminating calls that go uncompensated. Rick Joyce, partner at the Joyce and Jacobs law firm in Washington, D.C., estimates the lost revenue at "millions of dollars per carrier." Joyce’s firm represents Metrocall, Inc.

Paging calls incur costs

Although paging calls are, in effect, one-way transactions, paging networks still induce costs for terminating LEC customers, Giancarlo says.

"When a landline customer picks up his or her telephone to place a page, the call goes to the LEC end office, and then is switched by the paging carrier within either the wireless tandem or the end office and finds its way to the paging unit …both parties benefit," Giancarlo says. "Therefore, paging carriers, like other co-carriers, are entitled to reciprocal compensation. "And because LEC hardware sometimes can't tell the difference between a paging call, a PCS call or a cellular call, that lends credence to our argument that paging carriers are entitled to compensation."

Not so, says BellSouth

But if you ask Steve Inman, director of BellSouth's federal regulatory group, paging carriers never actually become part of the local telephone network, and therefore don't qualify for reciprocal compensation. "We have disagreed that we should pay them and we still disagree," Inman says. "Paging carriers are not competing LEC carriers; they are complementary carriers, similar to an answering service or alarm service."

"For instance," Inman says, "when a wireline customer dials the paging number, it goes to the wireline end office where the paging number is stored. From there we signal the paging equipment, like we would a PBX or telephone answering machine. Their equipment is more like enhanced equipment such as voice mail. The paging carrier's equipment answers the call, and asks the landline user for a numeric or voice message. Then the call is terminated on the landline. After the call is terminated, the paging equipment puts the message in cue, to be broadcast to the pager in a paging format over their wireless network. It's two separate, distinct calls, two separate telecommunications. At no time is there an open circuit between the LEC end user and the paging unit."

Still must have interconnect agreement

However, paging service providers must sign some sort of interconnection agreement with a wireline carrier before they can do business in that LEC's area. "If a wireline carrier and a paging carrier are sitting down trying to negotiate an agreement, it means one of two things," Giancarlo says. "If there's an agreement in place right now it's probably unfair to one side or the other, or to both, or the paging company is trying to break into new territory.

"Or let's say I'm a paging company and I've been in business since 1990, and I've had lots of agreements with U S West,” continues Giancarlo. “Then, after the Telecom Act of 1996, I'm now entitled to be compensated for their calls that I've been terminating since 1996 obviously, I want to sit down and renegotiate."

So paging carriers, in order to stay in business, sign agreements but continue to be kept out of the compensation loop - except when they pay compensation to the wireline side. "For the most part, LECs are standing by the local tariffs and billing paging carriers based on that," Joyce says. "They say, 'This is what your charges will be for local traffic. It's your choice. You can continue to pay under an agreement, but it won't be reciprocal.'" Joyce says paging companies are seeking compensation back to 1996.

FCC: LECs can’t charge paging carriers

But there's another twist. The FCC has always said that LECs can't charge paging companies for termination. So what's going on? "The FCC says LECs cannot charge paging companies for traffic that originates on our network," Inman says. "But I do expect them to pay for some of the facilities between our networks."

Some LECs, Joyce says, tell paging carriers they'll cut access to their network unless they ante up. "Small- to- medium-sized paging carriers have been intimidated by the phone companies and have paid the ILECs," he says. "Larger paging carriers, who have withheld payments, have been assuming that a phone company wouldn't be stupid enough to disconnect 1 million paging customers."

The LECs do bite back. BellSouth in January 1998 sued AirTouch Paging, alleging that AirTouch owed $600,000 in termination fees dating back to 1996. According to Joyce, the case was settled out of court.

Some of the misunderstanding has to do with how paging carriers interpret the word "traffic," Inman says. "When we say traffic, we mean minutes," he says. "But some paging companies argue that traffic includes both minutes and facilities such as telephone lines. They order facilities from state tariffs, just like when you order local service, then they refuse to pay their bills. When we ask for payment, they argue that they don't have to pay us for traffic."

Paging companies win a few

Paging companies are fighting back, and point to several victories that strengthen their position. First, the FCC interprets the Telecom Act to include paging companies as de facto telecommunications carriers and therefore entitled to collect reciprocal compensation. Second, in the FCC's August 1996 interconnection order, it again defined paging carriers as telcos entitled to compensation. Third, the 8th Circuit Court of Appeals ruling earlier this year supported the FCC's authority over the Telecom Act. The paging carriers also filed a formal complaint proceeding against the LECs in 1997, but FCC has not yet ruled on it.

A crack is growing in the walls around RBOCs and other LECs. Pacific Bell, for instance, lost a case in which Cook Telecom, Inc., used a cost study to convince the California Public Utilities Commission that paging carriers incur costs that deserve compensation. PacBell was ordered to pay Cook Telecom about 0.4 cents per minute for terminating calls, Joyce says. Since then, PacBell has been paying fees to Metrocall, AirTouch, and PageNet, among others, although PacBell is appealing the ruling. Bell Atlantic is paying paging carriers reciprocal compensation, including Metrocall, Page Net and others - on its own volition, Joyce says.

But the vast majority of LECs still refuse to pay compensation to paging carriers. "Phone companies have to wake up to reality," Joyce says.