Regulatory Watch : Sprint Faces Removal from Federal Contracts; Revamping TELRIC Rules

Sprint Could Join MCI in Removal from Contract Bids

MCI—already banned from winning new federal contracts by the General Services Administration (GSA)—faces investigations from at least three directions after Verizon and AT&T complained that the long-distance carrier allegedly masked or routed long-distance calls to avoid paying access charges. The Department of Justice and the FCC are looking into whether the failed giant avoided paying billions of dollars in access fees.

Beating carrier partners out of revenue is far from rare. Carriers often strip call identification and other data from CDRs to trick terminating carriers into believing that long-distance calls are local calls, thus avoiding expensive access fees. The practice is widespread throughout the industry. (For more on how carriers beat access charges, see “Carriers Cheating Other Carriers,” Billing World & OSS Today, August 2003, p.12.)

The House Energy and Commerce Committee asked the FCC in July to hand over any documents it has that pertain to actual or alleged violations of access rules. The committee’s chairman, Rep. Billy Tauzin, R-La., said in his letter to the FCC that he was especially piqued that MCI reportedly initiated an “in-state access” recovery fee on residential bills, even as it avoided paying the access fees itself.

Now Sprint is feeling the heat from the GSA for overbilling the Justice Department for access charges. The GSA is threatening to ban the carrier from winning federal contracts for three years. Sprint officials are aghast, because they thought they had settled the issue back in June with a $5.2 million payment.

But should Sprint and MCI both be kicked out of the federal contract game? A spokesman for Tauzin thinks not. “It’s like comparing apples and oranges in these allegations,” he says. “Sprint has admitted an overbilling problem, and Sprint has been punished—and rightfully so. But barring the company from future contracts is way out of the question.”

But he has no such pity for MCI. “We have asked the FCC to investigate a wide range of documents, and we plan to hold hearings; clearly if the allegations are true, MCI should be prohibited from getting any contracts,” he says. “We’re just going to have to wait and see how many zeros are behind the fraud.”

House Committee Wants TELRIC Rules Revamped

Complaining that TELRIC rules “actively discourage investment,” Tauzin, Rep. John Dingell, D-Mich., and other members of both houses of Congress have called on the FCC to reform the pricing model ILECs use to charge for switches, enhanced extended links and other network elements by the end of the year.

The lawmakers asked the FCC to immediately halt the use of the TELRIC pricing model while it starts the process to reform it. They want the commission to base UNE element pricing on “real-world” networks and to order states to recalculate existing UNE rates as soon as the new rules are adopted.

TELRIC, long a spur in the industry’s saddle, forces facilities-based carriers to charge for the use of their networks as if they were running an optimal network. The rates they set for UNEs are based on several factors, which theoretically should match what it costs the incumbent to run its network. But it hasn’t come close, according to Tauzin and others in the industry who oppose the TELRIC pricing model—especially the incumbents.

“The primary problem is that the commission’s TELRIC pricing rules are based on hypothetical, ideally efficient networks rather than real-world network elements that must be provided by the CLECs on an unbundled basis,” the lawmakers complained in their July letter to the FCC.

But as usual, politics are crouched behind the details. The FCC’s Triennial Review in the spring upheld TELRIC, but gave states more power in determining whether TELRIC prices will be applied to the purchase of switches on a case-by-case basis. This—as well as the FCC’s refusal to strike down the UNE-P regime completely—has stuck in Tauzin’s craw mightily. The FCC has yet to release its final ruling on its Triennial Review, and the letter may serve as a jab at the commission for failing to dump TELRIC in the spring.