[BETA] Fortnightly

Having committed to employing competition in the telecommunications local exchange carrier (LEC) market to elicit the broadest range of service offerings while ensuring fair rates, state commissions are now establishing regulations to put the new policies into effect. Current investigations focus on the proper costing and rate-setting methods for interconnection and transport services among newly competing carriers. In addition, state regulators are beginning to devise solutions to the problem of number portability: allowing customers to keep the same telephone number while switching carriers for their local dial-tone service. Who will provide a unified directory listing service is another question under consideration.

The Washington Utilities and Transportation Commission (UTC) has advanced efforts to transform the state's telecommunications industry from a monopoly to a competitive business. While rejecting tariffs filed by U S WEST Communications, Inc., an incumbent LEC that advanced an integrated carrier access and interconnection plan to accommodate alternative LECs and interexchange carriers (IXCs), the UTC set out its

polices on: 1) local interconnection, 2) local transport restructure, 3) expanded interconnection requirements such as virtual collocation, and 4) cost study and individual service-cost imputation requirements for unbundled local exchange service rates. The UTC also granted complaints brought by local service competitors against GTE Northwest Inc., another established LEC operating in the state, citing anticompetitive interconnection offerings. The UTC directed GTE to interconnect with the complaining companies on the same terms and conditions as it interconnects with U S WEST and other incumbent LECs.

In setting the framework for establishing rates for the interconnection service, the UTC ruled that the approved compensation mechanism must maintain a balance between the objective of promoting diversity in the supply of services and the responsibility to ensure that the incumbent carriers are fairly compensated. It adopted a "bill-and-keep" mechanism as an interim measure, finding serious flaws in all of the price-based compensation plans introduced by parties to the proceeding, including the per-minute "toll-type" access charge proposed by U S WEST. (Under the bill-and-keep method, each company terminates the traffic originating from other companies in exchange for the right to terminate its traffic on that company's network. Individual LECs and new market entrants theoretically bear a

proportional share of the overall costs associated with reciprocal traffic exchange.) The UTC concluded that the concept of mutual traffic exchange embodied in the bill-and-keep method represented a simple and reliable way for companies to interconnect and exchange services in a way that benefits their customers. The UTC said that in the future the LECs need to develop cost-based rates for specific interconnection services. It added, however, that usage-based rates were inappropriate because the costs underlying interconnection are primarily fixed. The UTC also said that further study is required to determine whether Total Service Long-run Incremental Cost (TSLRIC) is the appropriate cost measure. It said it was not yet prepared to accept the argument that rates must be set at TSLRIC to prevent incumbent LECs from earning profits on services provided to competitors. Washington Utilities and Transportation Commission v. U S WEST Communications, Inc. et al., Docket Nos. UT-941464 et al., Oct.