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Varying definitions of "local"

by Scott Bradner

In late February the FCC decided that, at least for now, it was up to the states to decide if and how the local phone companies have to pay intermediate carriers for user's calls to their ISPs. We are now starting to see the result of letting the locals decide.

When you place a call to your dial-up ISP you almost always do so through the services of an incumbent local exchange carrier (ILEC) like the Bell regional operating companies Bell Atlantic and U.S. West. But some of the time the call is transferred to a competitive local exchange carrier (CLEC) for delivery to the ISP's location. Even with both an ILEC and a CLEC involved, the calls to the ISP are currently billed to the user as a local call since the ISP generally has a point of presence in the same general community as the caller is located. Since most ISP users have selected a flat-rate local phone plan from their LEC, these calls are not charged by the minute.

The ILEC gets its money from the monthly flat-rate fee. The CLEC does about the same by charging the ISP a monthly fee for the phone line. In addition, congress ruled in 1936 that the CLECs were due some extra money, called "reciprocal compensation," when they took a call from an ILEC and delivered it to a local customer. So if calls to ISPs are "local" then the CLECs get extra money.

But now the FCC has sort of said that calls to ISPs are "largely interstate" and thus not subject to the "reciprocal compensation" but, for now, the FCC is leaving the final determination up to the States.

The FCC's decision (http://www.fcc.gov/Bureaus/Common_Carrier/Orders/1999/fcc99038.txt) is the normal non-terse result of an over-regulated industry, comprising 27 pages and 110 footnotes. By letting each state do its thing, the report guarantees that there will be considerable confusion in this area with different states deciding things differently. But the FCC does serve notice that it is thinking of making a national rule to cover this situation.

If you do use a dial-up ISP you might want to take a look at the report, in particular at paragraph 29. The FCC acknowledges that there should be some type of inter-carrier compensation for ISP calls it believes that the compensation is "not likely to be based entirely on minute-of-use pricing structures." "Entirely" is the operative word here. If this prediction holds then you will start getting per minute bills from the phone companies for your ISP use. It's only a matter of how badly you get hit, not if.

There is some light in the mess; Amertech has proposed that any compensation be based on sharing of the revenue for the ISP-bound calls. Nah - that won't go anywhere - it's too logical.

disclaimer: I suppose logic as a place at Harvard, though MIT seems better for that, but the above is my own evaluation.