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Phone Firms Seek to Cut Call Fees

August 17, 2004|From Bloomberg News

SBC Communications Inc., AT&T Corp. and seven other U.S. telephone companies asked federal regulators to phase out most of the $37 billion of fees they pay to connect each other's calls, shift some costs to customers and adopt rules they say are more fair.

The plan presented to the Federal Communications Commission would overhaul rules for the "broken" compensation system, Gary Epstein, a former FCC official who mediated talks on the proposal, said at a Washington news briefing.

The carriers are seeking to end legal disputes and simplify a system that requires payments based on different per-minute rates, depending on the type of call or distance. AT&T and other long-distance phone companies pay higher fees to local providers including SBC, which was the only one of four U.S. regional carriers to endorse the plan.

"It provides a flashlight path for the FCC," said Scott Cleland, chief executive of Washington researcher Precursor. Regulators need to act soon "because the old regime ends at the beginning of 2005."

Other companies who support the proposal include long-distance carriers MCI Inc. and Sprint Corp., and Global Crossing Ltd. and Level 3 Communications Inc., which operate fiber-optic networks. Three closely held phone carriers in Texas, Iowa and Alaska also back the plan, Epstein said.

Details of the plan were filed with the FCC on Monday. The agency had sought proposals for changes to the rules.

Under the proposal, local phone companies would be able to charge as much as $10 a month per line in July 2008, up from $6.50 now, according to a statement issued by the group Epstein represents. Per-minute charges for connecting calls would fall to 0.0175 cent from as much as 7 cents.

Mark Cooper, research director of the Consumer Federation of America, said the changes would benefit businesses that make many calls and wealthier Americans who use Internet calling at the expense of people who don't use their phone as much.

In May, Verizon Communications Inc., the biggest regional carrier, and No. 3 BellSouth Corp. dropped out of talks on the proposal, saying it didn't adequately consider the issues of Internet phone calls and collecting fees for the federal Universal Service Fund, which subsidizes service in rural and poor areas.

Verizon spokesman Larry Plumb and BellSouth spokesman Bill McCloskey said Monday their companies would review the proposal.

Epstein said the plan would continue support for the Universal Service Fund and put Internet-call traffic on the same cost footing as traditional calling.

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