Regulatory Watch : MCI Settles Fraud Claim; VoIP Fees; Changing the CARE System

Even as MCI hopes to win a new contract under the General Services Administration’s upcoming Networx program, the beleaguered IXC is doling out $27 million to settle claims that it defrauded the GSA under FTS2001, its present Federal Telecommunications Service (FTS) contracts.

The U.S. Bankruptcy Court, which is presiding over the reemergence of the IXC from bankruptcy (once known as WorldCom) agreed to the settlement in late April. The civil settlement resolves a complaint leveled by a whistleblower that MCI knowingly passed through pre-subscribed interexchange company charges (PICC) in excess of the costs and fees that MCI WorldCom was allowed to assess under the FTS 2001 contract. PICC (pronounced “pixie” in the industry) are fees that long distance companies pay to local telephone companies to recover part of the costs of providing facilities, such as underground conduit and telephone poles that link each telephone customer to the telephone network.

GSA records show that MCI and other IXCs ran into other difficulties when they transitioned from the FTS2000 to the FTS2001 contracts.

The FTS administers the telecom contracts, which allow federal agencies to buy long-distance voice service from companies like MCI, AT&T and Sprint.

The GSA awarded FTS2001 long-distance service contracts to Sprint in December 1998 and another to MCI WorldCom in January 1999. Under the terms of the contracts, each carrier was guaranteed revenue of at least $750 million. Over the life of the contracts, which run for four base years and have four, 1-year options (for a total of eight years), the revenue runs into billions of dollars.

Problems also arose when the other IXCs tried to transition from the FTS2000 to the FTS2001 contracts. One of the biggest issues was that the IXCs’ billing organizations were unprepared for the work, according to GSA documents. For instance, Sprint, MCI and AT&T didn’t have enough billing staff members, which led to enormous billing mistakes. In other cases, long-distance and other services (such as video and data links) were held up because ILECs such as Verizon were slow in provisioning access to the network.

VoIP Bills Aim to Keep Taxes Away

Not only do people want to keep VoIP calls free from access charges, federal lawmakers also want the technology to be free of sales taxes.

Two bills, introduced by Rep. Chip Pickering, R-Miss., and Sen. John Sununu, R-N.H, in early May could make it illegal for states to tax or impose fees on VoIP calls. Not only that, but the bills would give jurisdiction over VoIP to the federal government, keeping states out of the regulatory process.

The VoIP Regulatory Freedom Act of 2004 directly bans states from enacting laws or regulating VoIP—but requires VoIP carriers to pay Universal Service Fees.

Citing the history of strife, lawsuits and regulatory bickering between ILECs and the competitive telecom industry, Pickering said the bills would prevent “patchwork regulation” from stifling innovation and growth of VoIP businesses.

If the bills become law, the FCC will report to Congress every two years and ask for any new regulations to be applied to VoIP providers.

FCC May Change CARE Requirements

The Customer Account Record Exchange (CARE) system needs a second glance, the FCC says. It has asked carriers and other interested parties for comments on whether the commission should impose mandatory information sharing requirements on all local and long-distance telephone companies.

CARE is voluntary, but acts as a standard for customer information. Carriers use it to create new customer accounts when subscribers come on board. The information is also used to execute and confirm customer orders and to track churning customers. When a customer decides to leave one IXC for another IXC, or otherwise changes his billing name and address (BNA) information, the LECs pass on the CARE information to the IXC. Bad or incomplete CARE information translates into a rough changeover for the customer, who may get over-billed or confused with another customer.

Apparently, some carriers are not giving enough CARE information or are giving the wrong CARE information to competitors.

Incorrect CARE information has also hampered smooth LNP performance, the FCC says. When a customer asks to transfer his home phone number to his wireless phone, the wireless operator relies on the CARE information to get the new customer’s account up properly.

Lack of uniformity in CARE information has led to billing mistakes, customer complaints and other regulatory headaches, but the FCC says it doesn’t know how pervasive those mistakes are.