SBC TIPToP Service Slammed

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SBC Communications Inc. came under fire this fall for introducing an interstate service that would allow VoIP providers to terminate traffic directly to its network. Critics say the offer known as TIPToP appears to discriminate against other telecommunications companies and is partly designed to bolster SBC’s argument that service providers directing traffic over IP networks should pay ‘access charges’ when touching the PSTN.

“In a clever strategy to both capitalize on VoIP adoption and mitigate its exposure to this adoption, SBC is rapidly deploying IP-based voice and video services while also seeking to gain control of the VoIP providers who currently avoid paying high interconnection fees,” says ATLANTIC-ACM analyst Aaron Nutt.

“It is obvious that … this is … an attempt by SBC to put legacy access fees on new technologies like VoIP,” says AT&T spokeswoman Claudia Jones.

SBC representatives assert the service is voluntary and does not influence proceedings at the FCC where the commission is revising the complex, multibillion-dollar system by which telecommunications providers pay local phone companies to complete calls.

“While MCI understands SBC’s assertion that the new TIPToP service is not mandatory, we remain concerned that the Bells will use the existence of this new service as an opening salvo to eliminate other lawful means for ISPs to terminate information services,” says MCI Inc. spokeswoman Carolyn Tyler.

SBC, the second largest local phone company, maintains TIPToP is a more efficient way to route traffic. SBC spokesman Mike Balmoris says VoIP providers can send their IP traffic to one company rather than several providers and pay a unified rate. “If a VoIP provider crunches all the numbers and considers the efficiency and convenience of TIPToP, the price of our offering may end up being lower for a VoIP provider than what the market is currently offering him today,” says Balmoris.

Federal regulators, however, are keeping a close eye on the service. In a statement released in November, FCC Chairman Michael Powell said the commission would take action - including possibly opening an investigation - if it determined SBC’s interstate connection service discriminates against its rivals or is being used to justify requiring VoIP providers to pay traditional access charges.

Staci Pies, vice president of governmental and regulatory affairs with VoIP provider PointOne, says companies purchasing TIPToP would pay SBC rates that are ‘definitely higher’ than the fees PointOne pays CLECs to interconnect with the PSTN. She says the fees PointOne pays CLECs are based on reciprocal compensation rates rather than interstate access charges, which are more expensive and do not reflect a local phone company’s actual costs because they incorporate subsidies.

Numerous aspects of TIPToP “appear to be discriminatory or anti-competitive,” according to Pies. For one thing, she says all qualifying traffic within a LATA would have to be sent to SBC’s network. That means VoIP carriers using CLECs like Level 3 and MCI to terminate IP voice traffic to the PSTN would have to stop sending all qualifying traffic to those companies in that LATA. She says that provision is unfavorable for a few reasons. One is a CLEC would impose penalties if PointOne terminated a contract early. And while there are instances in which it might be practical to move a PointOne customer to TIPToP, Pies says there are other circumstances in which it would not make economic sense.

SBC says the provision will help prevent some providers from exploiting the offer. “Because we’re offering a unified rate, we have to make sure that providers don’t try to send us only calls bound for areas with higher access charges,” Balmoris says.

Jason Oxman, general counsel with the Association for Local Telecommunications Services, says the provisions in the tariff “suggest SBC is not only trying to impose additional costs on VoIP providers. This is a direct attack [on] CLECs.”

But Balmoris questions the motives of SBC’s critics, who he points out have an incentive to bash the tariff because they offer services in competition with TIPToP. AT&T and MCI are among the CLECs that help VoIP providers access the PSTN.

In 2003, BellSouth Corp. released a similar interconnection service for VoIP providers in Miami and Atlanta, but it did not draw widespread criticism. The FCC has not received any formal or informal complaints about the tariff, according to an FCC spokesman.

BellSouth spokesman Al Schweitzer says BellSouth plans to make the BellSouth Internet telephony Gateway Service available in Charlotte, N.C. and New Orleans in January and introduce it in 11 additional LATAs in the Southeast in 2005.

BellSouth’s tariff is different from TIPToP in at least a few ways. Schweitzer says the product does not include a transport component. And BellSouth converts the IP traffic to the traditional TDM protocol, while SBC requires customers to do the conversion.

Balmoris says TIPToP was designed for customers with their own gateways that want to convert the call from IP to TDM, but the carrier will consider changes or upgrades based on the feedback it receives.

In April 2004, Qwest Communications International Inc. announced it would not charge access fees for true VoIP calls terminating on its TDM network.