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Regulatory Reforms in Telecom Mature

Fortnightly Magazine - January 15 1996

31, 1995 (Wash.U.T.C.).

The California Public Utilities Commission (CPUC) has also adopted the bill-and-keep method for telecommunications companies to receive mutual compensation for up to a year, effective January 1, 1996. During that time, the CPUC will hold hearings to assess the effectiveness of the method and determine whether it would be fair to adopt an alternative pricing scheme. (See, Re Open Access and Network Architecture Development of Dominant Carrier Networks, 161 PUR4th 509 (Cal.P.U.C. 1995).) More recently, the CPUC turned back claims by the state's incumbent LECs that the bill-and-keep requirement forced them to share their facilities with competitors and as such constituted an unconstitutional taking of their property without just compensation. The CPUC found that the method leaves both incumbent carriers and new market entrants responsible for their own costs with respect to call termination. It said that the allocation of costs under the plan did not reduce the overall return to LECs to such a low level to qualify as confiscatory under the developed case law applicable to regulated public service companies. Re Open Access and Network Architecture Development of Dominant Carrier Networks, R.95-04-043, I.95-04-044, Decision 95-09-121, Sept. 27, 1995 (Cal.P.U.C.).

As part of its ongoing process to establish a "level playing field" for competition in the LEC market, the New York Public Service Commission (PSC) has also approved a framework for intercarrier connection and compensation as well as directory listings and publication. The rules follow earlier rulings establishing interim requirements that apply to all entities intending to provide local exchange service, including implementation of an interim number portability plan and an investigation into the feasibility of "true number portability." (See, Re Continuing Provision of Universal Service, Case 94-C-0095 Sept. 25, 1995 (N.Y.P.S.C.).)

The PSC recently established a set of interim rules governing compensation eligibility for interconnection services provided by competing carriers. The rules differentiate between facilities-based LECs that do and do not provide the full range of local exchange services (business, residential, and lifeline). While most parties to the proceedings agreed on the broad goals and methods for implementing competition, a few of the specific proposals adopted by the PSC were more contentious, including: 1) equal meet-point rates for the exchange of local traffic amount carriers, 2) a flat-rate pricing option as an alternative to measured rate tariffs, and 3) intraLATA presubscription for all customers, including those served by new market entrants. The interconnection framework adopted by the PSC is based on an

access-charge system designed to stimulate the development of alternative sources for the purchase of a dial tone by customers. The access charge rate design includes a different, lower charge to be paid by facilities-based LECs. Service providers offering only "niche" services (e.g., business-only service), or those offering nonfacilities-based local service (e.g., IXCs) would continue to pay existing access charges. The PSC explained that the current access-charge levels include a contribution to the costs of universal service, and that no approved funding method recognized the need for a local network in providing all types of telecommunications services. Finally, the PSC required incumbent carriers to make directories