Inter-Carrier Billing Faces Uncertain Future: Industry experts discuss trends in carrier access billing

They're boasting about it on their Websites. "ICG Collects Again: US West and Pacific Bell Pay More than $20 Million in Reciprocal Comp." "US LEC Receives Payment of $11.2 million From BellSouth." "ESpire Wins $14.2 Million from BellSouth For Past Due Reciprocal Comp." US LEC even adds this warning on its Website: "We will continue to pursue the necessary steps to cause BellSouth and other ILECs to comply with their agreements, and follow the overwhelming state and federal decisions that have ordered them to pay reciprocal compensation …"

"As long as the incumbents refuse to pay their bills, e.spire will aggressively pursue collection," Riley M. Murphy, general counsel and vice president at e.spire growled in a Website article. "It's time for them to honor our contracts instead of delaying payment and forcing litigation."

ILECs losing ISP call compensation fight

What's going on here? Why are ILECs being treated like deadbeat dads? RBOC-bashing aside, the gripes of these smaller carriers center around the refusal, in some cases, by RBOCs to pay for ISP-bound traffic. But the incumbents argue that there's nothing reciprocal about an Internet call. "The issue arises when a BellSouth telephone customer fires up his PC and makes his transmission to his ISP provider, who is served by its CLEC," says BellSouth spokesman Joe Chandler. "The call goes to the BellSouth switch to the CLEC network, then goes to the ISP and off to Internet land. The CLEC that serves the ISP sees the traffic and says, you owe us for terminating the call. But there's nothing local about it. Nor is there anything reciprocal about it. We never get calls terminating on the BellSouth network from the ISP."

Jonathon Askin, general counsel with the Association for Local Telecommunications Services (ALTS), disagrees. "The truth is, a call that terminates at an ISP is not really qualitatively different than any other call terminating within a local calling area," he says. "Why shouldn't a CLEC be entitled to compensation for terminating that call the same way it is compensated for terminating any other call?"

Trouble keeping tabs

Not only that, some ILECs can't determine with much accuracy which calls are normal local calls or a customer dialing up to the Internet. For carriers with tens of millions of lines, this is not a good thing. BellSouth can do little more than guess which calls are ISP-bound. "There's no way to tell the difference," Chandler says. Instead, the RBOC creates a report listing all calls of a duration of 10-15 minutes, and assumes the calls on that list are Internet-bound. BellSouth, however, can tell when its BellSouth.net customers are online because they have the NPA-NXX data to track them. But it can't view the CLECs customers the same way.

"CLECs know exactly the minutes that are being terminated on the network and where they're going to. They have the NXXs of the ISPs they serve," Chandler says. "Similarly, we have the NXXs of the trunk groups that we send traffic over to the CLEC. That gives us total minutes of use. The next part is not an exact science, but we use an auditing program to pull up all local calls of long duration. Armed with that report, we do some reconciling with the CLEC."

No system to determine ISP-bound calls

Does the carrier plan to create or design a way to determine ISP-bound calls? "We don't have the technology right now to track those calls and we don't see having the technology to do it in the near future," Chandler says.

The spokesman for another RBOC, who requested anonymity, said its developers are working on an algorithm and electronic method to determine modem traffic. Until then, it can't determine ISP-bound calls with any accuracy.

Thomas Thekkathala, managing partner of Telecom & Technology, says RBOCs would have to determine how the CLEC has its network configured. He suggests having CLECs file a Percentage Internet Protocol (PIP) filing - in a manner similar to Percent Interstate Usage filings - to control ISP-bound call claims.

Automated ISP-call determination system needed

An automated system to accurately determine ISP-bound calls would be welcomed by other ILECs who face similar disputes. The CLECs are shaking down ILECs for those payments, and state regulators and arbitrators are siding with the CLECs. ICG Communications, for instance, has been particularly aggressive. In addition to the $20 million from US West and PacBell, it has won disputes in several states, including Alabama and Ohio, where it nailed Ameritech for $38.6 million in compensation. Electric Lightwave in Vancouver, Wash., won compensation in five states from U S West. As part of its settlement with ICG, BellSouth in March signed a reciprocal compensation agreement "for rates that are dramatically lower than they've historically been," Askin says. The deal calls for each carrier to pay the other 0.2 cents per minute in 2000, 0.175 cents per minute next year and 0.15 cents per minute in 2002 for traffic termination. The rates cover BellSouth's nine-state territory.

"Ironically, the CLECs initially were very amenable to a bill-and-keep solution," Askin says. "It was the ILECs who said 'forget it, we're terminating all the calls. We have all the customers, bill-and-keep is no good, we want reciprocal compensation.’ They made their own bed. Now they're the ones who want to dramatically lower rates."

Chandler takes the high road on reciprocal comp dispute resolution: "They are our customers. There's no malice; it's a business transaction. We share information [with CLECs] so we can feel comfortable that we're billing properly."

Uncertainty muddies the water

The FCC, in the meantime, has been sending mixed signals on what it intends to do with the question of inter-carrier charges, period. Common Carrier Bureau Chief Larry Strickland, while participating on a Legg Mason panel in March, reportedly announced that his bureau is working on a "sweeping" plan to eliminate the telecom industry's system of inter-carrier charges and let the carriers pass on those costs to customers. The plan: eliminate interstate access charges, reciprocal compensation and payphone compensation and throw it out the window. Telcos would "go back to a situation where you have to recover your costs from your customer," an industry newsletter quoted him as saying. But a few days later, an FCC spokesperson tempered Strickland's comments. "To be clear, this isn't a proposal pending before the Commission right now,” the spokesperson said. “It isn't a proposal that is pending or imminent."

What will be required of billing systems?

Such sweeping comments raise uncertainty within the billing community about what will or will not be required of them six months or a year from now. "We have been waiting for an FCC order on reciprocal compensation for months," Askin says.

The telecom industry will have to wait longer for a definitive order. The U.S. Appeals Court of Washington, D.C. in March vacated an earlier FCC decision that said ILECs don't have to pay CLECs for ISP-bound calls because such calls are interstate in nature, and not local. The court questioned the FCC's use of end-to-end call analysis to determine that ISP calls are interstate. Now the FCC must postpone its new order until the air is cleared. "Things will continue as is until the FCC clarifies its method of reasoning," an FCC spokesman says. He says carriers will still abide by agreements already in place, and future ones may be negotiated by states."Interconnection agreements are coming to a close, CLECs and ILECs have been trying to figure out what the competition plan should be for ISP-bound traffic, and some of them have said to themselves, 'We can't wait forever for the FCC to do something, we've got uncertainty and our stockholders and customers want to know what's going on. Let's do what we can within the current framework.'"

But he's doubtful the FCC can successfully propose doing away with inter-carrier charges, because carriers have to find some way to pay for their networks. "There should still be some inter-carrier compensation to the extent that they still have a cost based on whatever Total Element Long Run Incremental Cost (TELRIC) methodology you apply,” the spokesman said. “There are still costs associated with completion with these calls, and the FCC has said that all inter-carrier compensation should be based on cost. It's going to be very difficult for them to bring reciprocal compensation and access charge rates down to zero. If there's no charge for reciprocal comp, then CLECs will never recover their costs."

OBF has changes in the works

The Ordering and Billing Forum (OBF) is developing standards that could potentially change the makeup of carrier-to-carrier billing and reconciliation systems. For instance, tThe OBF Billing committee is examining ways to make meetpoint record exchanges between facility-based LECs/CLECs/wireless carriers consistent with unbundled network element (UNE) record exchange, says Martha Huizenga, associate partner with TeleCon, LLC. The committee also wants to standardize dispute templates for local and access billing and create a national line level database to maintain carrier billing notification information. The goal is to make uniform what is now disparate methods of exchanging vital billing information among thousands of telcos, big and small.

These are three of the issues surrounding UNE billing:

· Issue 1690--Notification of billing information to unbundled local exchange carriers (ULECs)

· Issue 1667--Exchange of unbundled information via EMI {???} records between LECs/CLECs and ULECs

· Issue 1548--Billing verification in an unbundled environment. This would create a guideline for the exchange of information needed to verify a UNE bill.

The billing committee created Issue 2056 to make meetpoint record exchange and billing processes consistent between facility based LECs/CLECs/CMRS with the UNE billing issues listed above. As it now stands, Huizenga says, both detailed EMI records (11-01-XX) and summary records (11-50-XX) are exchanged between LECs/CLECs/CMRS carriers. As the issue progresses, the committee will discuss options for making record exchange and billing consistent with that of the UNE issues, including possible elimination of the summary record exchange between facility-based meetpoint companies. But some carriers, Huizenga says, especially the smaller ones, cannot send the detailed 11-01-XX records, which could force them to make billing system changes. However, both processes would remain in place for an interim time, she says. The billing committee began discussing the issue in February, so it could be some time before it is resolved. The Billing committee is aiming for consistency among all parties, because different standards and formats make billing and record exchange more complex.

Creating a standard dispute template

Issue 2002 concerns the billing committee's efforts to create standard paper and electronic templates for sending and receiving disputes. The forms would contain uniform fields to list any dispute, from a disagreement about rating and usage to an incorrect facilities charge.

"A LEC would tell a CLEC, for instance, 'when you're sending a dispute to our company, we would like you to use this format,'” Huizenga says. “The next carrier tells the same CLEC, 'Here's my format,' and then a third carrier says, 'You sent me the wrong format.' Pretty soon that carrier has three different formats to worry about. This is a lot of work." A CLEC may have to dispute bills with hundreds of other companies; therefore, the number of different dispute forms can be mind-boggling. Carriers that conform to the new guidelines may have to reconfigure fields in billing or reconciliation systems. As the issue is worked in the billing committee, the template fields that carriers want included and can include in the template will be negotiated with all participants, Huizenga says.The OBF started discussions about the templates in November; a resolution could come sometime this year, she adds.

Most contentious issue

The billing committee has created two issues to help identify all parties on a call route. Issue 1783 calls for the creation of a national repository for notification information. Issue 1182 seeks to create a national identifier for each industry representative and is seen as "a possible long-term answer to this industry issue," Huizenga says.

The billing committee and the Message Processing committee want to develop a line level database to maintain carrier billing notification information. The database would act as a short-term method for identifying which carrier to bill.

"The line level database issue is probably the biggest issue," Huizenga says. "The database would house all line numbers, listing the provider owning the line as well as other pertinent information. It becomes difficult to determine whom to bill, because the ULEC owns the number but not the switch. The LEC at the terminating end of the call cannot currently tell that the ULEC originated the call and is the carrier to be billed." If there is a comprehensive list of carriers and their billing notification data for each telephone number, Huizenga says, "No one will doubt whom to bill."

But carriers are a little wary of the plan: they want to know, says Huizenga, "Who pays for it? Will it be mandatory? Which industry segments will participate?" Many carriers already subscribe to the National Exchange Carrier Association (NECA), an organization that files interstate access charges with the FCC, and to the Local Exchange Routing Guide (LERG), a Telcordia (formerly Bellcore) document that lists all North American Class 5 central offices and describes their relationships to tandem offices. "So many [carriers] are asking 'What are the advantages of participating in a third database?’ and 'How much will it cost to participate?'" Huizenga says.

The OBF sent out a request for information (RFI) to vendors on Dec. 2, and received responses in January. Once the RFIs are examined, the committee will prioritize the fields and information needed for phases and request further information from vendors, Huizenga says.

ASP model for reconciliation?

Some are trying to create an ASP model for handling carrier-to-carrier billing, auditing, and other intercarrier reporting and dispute functionalities. One company, Lynch Associates LLC of Vienna, Va., is building toward an ASP model, as is Advanced Technologies and Services Inc. (ATS).

"We are in the process of creating an ASP model dealing with such issues as CABs bills, resale reconciliation and network optimization," says Don Lynch, managing partner of Lynch Associates. "Smaller carriers need basic services such as these, because they have neither the expertise or the funding required for systems."

"We’re developing software that allows our customers, through secure Internet access, to summarize their traffic studies for the purposes of billing reconciliation," says Ken Babcock, vice president of products and services at ATS. "There is a growing realization among carriers that it makes sense to enlist outside support for billing reconciliation. The ASP model has a lot of attraction, especially for the smaller CLECs, where hardware, software and personnel requirements for billing reconciliation processes are beyond their scope."

Though companies are moving to the ASP model, much still needs to be done to the mostly legacy systems.

"The current access reconciliation systems were originated and modeled on a long-distance access structure that was basically CABs formatted billing," Lynch says. "The open market now includes international, local, and IXC billing. The emerging access auditing systems are now developing functionality to read and audit these different bill formats. In addition, the structure of access costs is constantly changing. Flexibility will be the key issue going forward."