Q - Can you explain-in detail-how carrier access charges are passed on to the consumer?
A - Yes, and this will also clarify the answer given in last month's column.
As noted last month, in the past, these charges had been included in access or usage charges. As long distance service has become more competitive, IXCs increasingly have been itemizing them separately to make their usage rates appear lower.
There are actually two separate charges, due to recent changes in FCC regulations known as the "Interstate Access Charge System." The FCC describes the intentions of the system as follows:
"To ensure that all Americans have affordable access to telephone services;
To reduce long distance rates; and
To restructure various interstate charges to facilitate the development of increased competition for local telephone service".
Historically, monthly service fees paid to the local telephone company by the consumer did not fully cover the cost of operating and maintaining the local telephone network. These fees are intended to assist with recovery of "local loop" costs.
Effective January 1, 1998, the FCC modified the system to be more compatible with the growing competitive market. To recover some of the local network costs, local telephone companies collect the "Federal Subscriber Line Charge" from consumers and businesses. According to the FCC, the maximum charge for primary lines will remain at $3.50 per month for residential. The charge will increase for non-primary lines. The maximum non-primary residential line charge will be increased by up to $1.50 per month, with a maximum charge of $5.00 per line.
The maximum subscriber line charge for single-line business customers will also remain capped at $3.50 per month. For multiline business customers, the monthly charge will be either the average cost of providing a line in that state, or $9.00 per month per line, whichever is lower.
The second fee is the "Presubscribed Interexchange Carrier Charge" (PICC). In the past, costs not recovered by the subscriber line charges were collected through the per-minute access charges paid by the long distance companies. The PICC is a new way that long distance companies are charged access by the local telephone companies. Instead of paying a higher charge per minute, the IXCs now pay a flat rate per telephone line charge, plus a lower charge per minute. The flat charge applies to each residential or business line presubscribed to the IXC.
These rates will vary from state to state, depending on the actual cost of local service in each area. The intention is that as monthly per-line charges are imposed, per minute long distance rates should decline. In 1998, the maximum PICC per-line per month for primary residential and single-line business lines is $0.53. The maximum non-primary residential line is $1.50 per line per month. The maximum PICC for each multiline business line is $2.75. While some adjustments for inflation and special conditions may increase these charges in 1999 and 2000, the FCC plan calls for the average PICC for multiline residential or business customers to eventually be zero.
It should also be noted that the FCC did not mandate that the PICC or any new charges be added to the telephone bills. Moreover, these fees are described in various ways by the different IXCs, further contributing to the confusion over telephone bills that is also being addressed by the FCC. One calls it the "National Access Fee," another the "National Access Contribution," still another, "Enhanced Services." How carriers determine whether non-primary line charges should apply has caused considerable controversy (See Billing World, November 1998, "Accounting for Access Reform"). IXCs have only limited information for determining whether a single location has multiple lines. Similar problems exist for local telephone companies where there are separate accounts at the same address.
Additional information may be obtained by exploring the FCC Internet site at http://www.fcc.gov.
Q - How are the phone companies collecting the fees announced by the FCC to hook up schools to the Internet?
A - This is another new fee that may appear on your long distance bill, or the long distance portion of your bill from the local telephone company. The fee in question is the "Universal Service Fund Charge", which has been around for quite a while. It is a government-mandated subsidy to make local service affordable in low-income and rural areas. The Telecommunications Act of 1996 expanded this fee to provide for Internet connections in schools.
Long distance carriers are identifying and collecting this fee in various ways. AT&T calls it the "Universal Connectivity Charge" and adds a flat $0.93 per month. MCI calls it the "Federal Universal Service Fee" and adds 5 percent to the LD bill. Sprint calls it the "Carrier Universal Service Charge" and adds 4.5 percent to the bill.
Is it any wonder that consumers think bills are confusing?
Q - Please explain how clearinghouses are used in telecommunications.
A - There are generally three categories of telecommunications clearinghouses in North America. The first, the "Centralized Message Distribution System" (CMDS), was originally developed "way back when" by the Bell System to exchange collect, credit card and third number charges between local telephone companies. Before divestiture, it was administered and managed by AT&T, with Bell Operating Company representatives serving on a committee charged to ensure billing system compliance in record formats, timing of records, etc. After divestiture Bellcore assumed responsibility for administering of CMDS.
The second category of clearinghouse came into being to support open billing (the passing of billing charges from IXCs and other third party service providers to LECs). Companies such as Billing Concepts, HOLD and OAN provide these services by being a gateway between the third parties and the LECs. They also manage receivables, rejects, etc., on behalf of their client companies and charge transaction fees for services they perform.
The newest types are the clearinghouses that support the cellular, satellite and PCS wireless carriers. Their primary function is to manage the exchange of roamer records for billing by the home carrier. Most North American wireless carriers are members of the GTE-TSI, EDS or MACH clearinghouses. Where a serving carrier is a member of one and the home carrier is a member of another, the clearinghouses have gateways through which they pass the roamer records. Guidelines for wireless exchange and financial settlement are developed by CIBERNET and the working committees, which have carrier, billing vendor and clearinghouse members who participate.
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