Regulatory Watch : IXC’s May Have to Pay for Wireless Access

The FCC may have good news for wireless carriers who’ve been stiffed on per-minute termination charges by long-distance carriers. An upcoming ruling, based on Docket No. 01-316, could force IXCs to pay wireless carriers for terminating long-distance calls. Should the commission rule in their favor, the wireless carriers will suddenly have the legal strength to collect on a largely untapped source of revenue. Millions of long-distance calls a day flow from landline phones to wireless end users. IXCs already pay wireless carriers overseas for terminating calls; to be forced to do so in the United States as well would create even more revenue drain for them. If the IXCs try to pass the charges on to their customers, they could face consumer backlash.

Not only that, but U.S. wireless carriers could begin charging foreign IXCs for terminating their calls here. “It’s not that wireless carriers weren’t allowed to charge IXCs for termination,” says Parag Sheth, vice president of marketing at Vibrant Solutions. “It’s just that some wireless carriers have charged long-distance carriers, and some haven’t. Those that charge the IXCs have recouped tens of millions of dollars just doing that.”

IXCs Want Wireless Customers

to Carry Burden

Though wireless carriers and IXCs now use various settlement formulas, IXCs often insist wireless carriers recoup network costs from their wireless customers.

This doesn’t sit well with cell providers. “Wireless carriers don’t want to add to their per-minute rate,” says Linda Lancaster, executive vice president of carrier access billing at Intec Telecom Systems. “The IXC is the one getting the revenue from that long-distance call.”

The test case that brought the FCC into the fray came from a disagreement between two heavy hitters: one a top wireless carrier, the other a top long-distance hauler. For years, Sprint PCS has been accepting AT&T traffic on its wireless network, representing millions upon millions of calls. The two carriers had a compensation contract in place. However, in 2000, AT&T halted termination payments to Sprint, declaring that bill-and-keep rules should be the norm. In other words, wireless carriers should recover network costs from end users. “AT&T wasn’t paying Sprint,” Lancaster says. “AT&T got a huge bill from Sprint, and didn’t pay it.”

Sprint and AT&T, of course, sought relief in the courts. The courts determined that the argument belonged before the FCC. The two carriers took their argument to the FCC in October 2001. Sprint asked the FCC to rule that the Telecom Act allowed Sprint to collect for terminating calls. AT&T asked the FCC to rule that wireless termination charges are unwarranted and that the calls should be bill-and-keep. But if the FCC believes wireless carriers have a right to charge termination fees, AT&T argues, it should be based on TELRIC reciprocal compensation, not per-minute usage.

“Wireless carriers haven’t been regulated to work out an agreement with [wireline carriers],” Sheth says. “Reciprocal compensation rules were targeted to the wireline-to-wireline networks only.

It’s Anybody’s Guess

Whether the FCC will rule in favor of bill-and-keep or force IXCs to compensate the wireless carriers is anybody’s guess. The commission’s recent rulings—between ISPs and ILECs—show a bent for bill-and-keep. But Lancaster believes wireless carriers will be caught flat-footed if they don’t begin preparing now for a decision in their favor. “Cell carriers are going to need carrier access billing systems [CABS],” she says. “Long-distance carriers are going to insist on CABS if they lose this case.” The systems, which can record, analyze and compare wholesale network transactions, are used throughout the wireline industry to track the millions of calls that terminate on another carrier’s network. The systems help a carrier determine how much each of the other carriers owes it for terminating traffic on its network. It identifies carriers with existing contracts through a unique identifying number and batches those transactions into reports, which it then uses to charge for access. The systems can also produce reports for settling disputes about overcharges or determining credits for dropped calls.

Why would IXCs insist on CABS for verifying traffic? That’s the industry standard (though SS7 providers would disagree). Wireline carriers have used it routinely for years to dispute termination bills with other landline carriers. “The whole point is getting a standard bill out for dispute resolution, for validating,” Lancaster says.

Clearly, there is more to just owning an access billing system that records which carriers enter other carrier’s networks. At the end of each billing cycle, the receiving network has to have an accurate report on which carrier has terminated on its network. Accurate access records are powerful weapons for disputing unrealistic claims from long-distance carriers.

CABS produces a slew of reports and terminating data that have to be mined and analyzed. A minefield of mistakes lies in wait. Crowded or outdated switches drop calls; CDRs come in various formats, resulting in minutes unaccounted for and free rides—those calls that are never registered. When you have a deluge of carriers terminating on a network, it takes a large staff of auditors to piece together and verify myriad transactions.

The work is still chiefly manual. Many of the smaller carriers still have to flip through line-by-line computer printouts from the connecting carriers and compare them to their paper-based CDRs. Though already-strapped wireless carriers will have to invest in a larger auditing staff, the money recovered could easily pay for hiring costs.

“Cellular carriers can rein in more revenue,” Lancaster says. “Cell carriers are going to need CABS.”

FCC: Cable ISPs Are Information Services

In March the FCC gave the cable ISP community a gift—or a curse, depending on who you ask. The ruling, which confronted the question of whether cable ISP providers had to let competing ISPs onto their networks, answered with a resounding “no.” The decision is pinned chiefly on a definition, not legal entanglements. By ruling that Internet providers are involved in supplying information services, the FCC determined that ISPs are not required under the Telecom Act to let competitors in.

It’s not that the nation’s biggest ISPs hadn’t been preparing for open access. When AOL and Time Warner joined forces last year, one of the Justice Department’s biggest issues was whether the merger would lock out smaller ISPs—key, of course, to the pro-competition tenets of the Telecom Act. Anticipating that large ISPs would have to find ways to let competitors reach the last mile—a la Section 271—both AOL Time Warner and AT&T ran test beds to find ways to let MSOs handle the network access, OSS, billing and customer service issues.

The companies invested millions of dollars to create the network and hire mediation, OSS and billing vendors for the tests. The ruling left the test beds an expensive and unnecessary exercise, though the body of knowledge they produced may very well reap benefits elsewhere.