It's Time to Re-Regulate LEC Billing Services

Posted: 02/1999

It’s Time to Re-Regulate LEC Billing Services
By Robert M. McDowell, Esq.

Molly shudders as she hears the local exchange carrier (LEC) representative confess to
the trade show audience that his company soon would stop billing "dial-around"
calls on behalf of interexchange carriers (IXCs). Molly’s company, a small IXC
headquartered in the dusty Southwest, is profitable mainly because of dial-around or
"casual calling," wherein customers dial extra digits to access their long
distance carrier of choice.

"Without LEC billing," Molly thinks, "there’s no way we can offer the
casual-calling services demanded by our customers." What Molly doesn’t know is that
the industry’s LEC billing misfortunes are just beginning.

Molly’s plight is identical to that of scores of other IXCs. Fear and confusion
surrounding the gloomy prospects of continued LEC billing options have many in the IXC
industry bracing for the worst. Casual-calling billing problems were the first telltales
to forecast the coming turmoil over LEC billing. Casual calling includes 101XXXX, credit
card and even collect calls. It has gained tremendous popularity in the past two years as
consumers have found they can save money by dialing extra access code digits. Also, casual
calling has skyrocketed to become a $12 billion-a-year business, creating a revenue stream
larger than that of the movie industry. Not surprisingly, the regional Bell operating
companies (RBOCs) have targeted this booming market for themselves–once they’re allowed
into in-region long distance. If the RBOCs no longer bill for competitive services, many
carriers simply will sink.

In an effort to prevent some of these problems, two years ago Washington-based
America’s Carriers Telecommuni-cation Association (ACTA) asked the Federal Communications
Commission (FCC) to declare billing name and address (BNA) information an unbundled
network element (UNE) as defined by the Telecommunications Act of 1996 (see, "Are the
LECs Choking Off Casual Calling?," PHONE+, May 1997). Once declared a UNE, LECs then
would be required to render casual-calling BNA to IXCs upon reasonable request.

Later, MCI Communications Corp. (now MCI WorldCom Inc.) expanded on the ACTA petition
by asking the FCC to issue rules requiring the LECs to offer casual-calling billing
services as well as BNA. So far, the FCC continues to look the other way. While the FCC
dallies, IXCs’ LEC billing problems are becoming dire.

The monopolies arbitrarily are terminating billing services that they provide on behalf
of dozens of IXCs–especially small ones. With no rules governing their dominance of the
billing market, the RBOCs have cut off billing services for any reason, and no reason at
all.

For example, the RBOCs have used the anti-cramming guidelines (which were never agreed
to by IXCs on a large scale) as a weapon against IXCs. "One month, we had 33,000
bills go out to end users in one RBOC’s territory," laments Gerard, a vice president
of regulatory affairs for a medium-sized IXC. "The RBOC supposedly logged 30 cramming
complaints and started to cut us off. Not only is that ratio a mere .09 percent of our
total customer base there, but it ended up that most of the customers were calling to
complain about the PICC [primary interexchange carrier charge], an FCC-mandated fee."

Trying to explain the situation to the RBOC was an impossible task. The RBOC offered no
fair audit or internal review procedures. "It was like being up against a
totalitarian regime," Gerard recalls. "I knew we were dead meat."

Gerard’s company temporarily escaped LEC billing termination, but others have not been
so lucky. As justification for giving small IXCs the business equivalent of the death
penalty, the RBOCs point to the handful of unscrupulous carriers that slam and cram at
will. The sins of the few are held up as justification for punishing the many–and
endangering competition.

IXCs now must give their monopoly competitors their marketing materials to have them
tested for "purity" as defined by the LECs. The RBOCs are emboldened by the
FCC’s refusal to regulate their deeds. They routinely reach into IXCs’ pockets to give
customers credits, often without justification or notification to the IXC. Meanwhile,
billing clearinghouses become paralyzed–caught between serving their customers, the IXCs,
or fighting against their sole suppliers, the RBOCs. In the end, the IXCs always lose.

As we contemplate a world in which the RBOCs soon will provide in-region long distance,
we must act swiftly to ensure they are not our cop, judge, jury, executioner and
competitor. We are teetering on this precipice because in 1986 the FCC erroneously
concluded that the billing services industry was fully competitive and deregulated it. Ask
a room full of competitive telecom providers whether that premise is true and the air will
fill with a resounding "No!"

The time has come for the FCC to re-regulate LEC billing services and it must not dally
further. The Telecom Act clearly allows the commission to impose a nondiscrimination
requirement on LEC billing and collection. The FCC also has broad authority to retariff
LEC billing services under either Title I or Title II of the Telecom Act. To continue to
look the other way would be a dereliction of the commission’s duty and would be
devastating to competition. Meanwhile, look for this issue to be one of the hottest over
the next couple of years.

Robert M. McDowell is executive vice president and general counsel of America’s
Carriers Telecommunication Association (ACTA), Washington. He can be reached at his
McLean, Va., office at +1 703 714 1311.

ROUNDTABLE

On the FCC’s anti-slamming rules …

"The Federal Communications Commission’s (FCC’s) slamming action will only
increase consumer frustration and hurt small carriers. We anticipate Congress will take
quick action to fix this mess."

Robert M. McDowell, executive vice president and general counsel, America’s Carriers
Telecommunication Association (ACTA)

"Until now, companies guilty of slamming have been able to keep the money for long
distance calls made by the very people they’ve victimized. And that rewarded the companies
that were the worst offenders. With its ruling, the FCC has ensured that slamming will no
longer pay. This is great news."

Sol Trujillo, CEO, US WEST Inc.

"Today marks the first time that the FCC has initiated action that actually
‘compensates’ the consumer who has been slammed. Every other remedy proposed by the FCC
and Congress in the past has been aimed at compensating carriers who have lost customers
because of slamming."

Samuel A. Simon, chairman of the board, Telecommunications Research and Action
Center (TRAC)