FCC Must Guide Industry Toward Clarity in Phone Bill Battle

Posted: 01/1999

FCC Must Guide Industry Toward Clarity in Phone Bill Battle
By Kim Sunderland

It’s anybody’s guess how much the Federal Commun-ications Commi-sion (FCC) will
regulate the way telecommunications carriers format their telephone bills. What’s certain
is that there’s a problem with how various industry segments present billing information
to their customers.

The FCC’s Notice of Proposed Rulemaking (NPRM) on truth in billing and billing format
(Common Carrier Docket No. 98-170) requested comments in November and replies in December
for the issuance of new billing rules. New rules were expected from the FCC by the end of
1998, but at press time that hasn’t happened. Until such rules are issued, sources say the
use of unclear, confusing phone bills will persist.

Many comments show some agreement on the need for clarity. Several industry trade
groups suggest that standard, yet flexible, billing rules might help the industry police
itself while furthering competition.

"Simple is smart," says Irene A. Etzkorn, executive vice president and
director of Simplified Communications Worldwide of Siegel & Gale, New York City.
"The FCC should not take a perspective approach, but should create writing and design
guidelines, which show how clear writing and information design can transform dense,
convoluted bills into readable, understandable bills."

The biggest abusers of unclear billing practices are the local exchange carriers
(LECs), according to comments from several filings.

In fact, the LECs are stifling local competition by using such billing practices,
according to America’s Carriers Telecommunication Association (ACTA), which represents
more than 260 interexchange carriers (IXCs), competitive local exchange carriers (CLECs),
information service providers and related vendors.

ACTA said in its filing that the FCC shouldn’t use a one-size-fits-all billing format
because competitive billing entities are far different from LECs, particularly the Bell
operating companies (BOCs), which abuse their market powers as billers.

For instance, according to ACTA, several of its IXC members report that the LECs
consider many customer inquiries regarding primary interexchange carrier charge (PICC) and
universal service line items as incidents of cramming, even though IXCs legally can bill
these charges. Once a LEC receives such inquiries–or thinks an IXC is marketing its
services improperly or charging a high rate for certain offerings–the LEC will cut off
billing services to that IXC, according to ACTA.

"For IXCs that rely exclusively on LEC billing services," ACTA said in its
filing, "such Draconian actions can be economically fatal."

The FCC wants "to have it both ways," the filing added, by not requiring LEC
billing services to be tariffed, while at the same time saying that competition alone
can’t solve consumer problems associated with billing services, which, therefore, must be
regulated.

"This apparent contradiction could be resolved if the commission would focus only
on LEC billing services," ACTA stated, suggesting that the FCC invalidate its 1986
order detariffing LEC billing services. Doing so, the association noted, will level the
playing field when the BOCs are allowed into in-region long distance and are competing
against their IXC billing customers.

Billing clearinghouses, which consolidate charges from telecom carriers and contract
with local phone companies for those charges to appear on one, simplified local bill, also
got into the fray. According to the Coalition to Ensure Responsible Billing–founded by
three billing clearinghouses–the procompetitive practice of issuing customers one phone
bill could be threatened if LECs are allowed to give "preferential treatment to
LEC-provided ancillary services on the bill, while imposing discriminatory conditions on
similar competitive services."

Regarding organization and content of the bill, the coalition suggested the following:

• Local service should be billed on one page with other charges on succeeding pages,
  grouped by billing clearinghouses where one is used;
• A status-change page may not be technically or practically feasible;
• The names of both the clearinghouse and the service provider should be listed on the
  bill if technically feasible;
• The toll-free number listed alongside a charge should be that of the billing
  clearinghouse, which is responsible for customer service functions;
• Many LECs aren’t technically able to include the street address and toll-free number of
  a service provider on the bill; and
• The bill should be clarified with regard to deniable charges and those that result from
  federal regulatory action.

Defining the Terms

But it’s the IXCs’ unclear billing practices that should be scrutinized, according to
the American Public Communications Council (APCC), a national trade group representing
more than 3,000 independent providers of pay telephone equipment, services and facilities.

For example, the IXCs’ multiple recovery of payphone compensation costs is a primary
example of the abuses the FCC should address in new truth-in-billing guidelines, according
to the council.

Many IXCs have added new charges and surcharges to their customers’ bills "to
purportedly recover costs incurred by carriers in paying new fees and charges under the
Telecommunications Act of 1996," such as universal service, access charges and
compensation paid to payphone service providers (PSPs), APCC said in its filing.

The council also stated that most major IXCs place payphone surcharges on callers’
originating access code or other operator-assisted calls from payphones and on 800
subscribers who receive such calls. At the same time, though, the IXCs don’t disclose in
their bills that they already have recovered "amounts well in excess of their actual
payphone compensation costs," according to APCC, which results in PSPs overpaying for
various services.

Bell Atlantic, New York Poster Child for Competition?

Conventional wisdom says Bell Atlantic will gain entry into the long distance market in
New York this year, setting the stage for regional Bell operating companies (RBOCs) to be
more responsive in opening their networks to competitive local exchange carriers (CLECs).
That was the word at the Association for Local Telecommunications Services (ALTS)
conference last month in Las Vegas.

"We need to develop a role model that’s something we’re going to be pushing for.
New York this next year will set the threshold" for what it takes to get [Section]
271 approval," said Royce Holland, CEO of Allegiance Telecom Inc., Dallas, and the
new chairman of ALTS.

"It can’t be the big bad Bells; it has to be the big bad US WEST, which is acting
more like Saddam Hussein than a responsible corporation," said Holland, adding that
ALTS plans this year to rate Bell company performance, and to convince regulators to
impose fines on RBOCs that aren’t meeting requirements.

According to Holland and Dave Ruberg, chairman, president and CEO of Intermedia, Tampa,
Fla., Bell Atlantic in New York is the incumbent that’s the furthest along in meeting the
Telecom Act’s 14-point checklist, and it expects the Federal Communications Commission
(FCC) to approve its 271 petition in the second quarter of 1999.

But Robert Knowling Jr., president and CEO of Covad Communications Co., Santa Clara,
Calif., said Bell Atlantic is "not a poster child" for competition. Collocation
costs in the Bell Atlantic region, he said, are the highest in the country– $90,000 for a
10-foot-by-10-foot wire cage. Knowling said Ameritech has been more a model for how the
Bells should open their networks to competitors.

In any case, the stars seem to be in alignment for Bell Atlantic in New York, FCC
Commissioner Michael Powell said in an interview following his keynote address, kicking
off the ALTS conference.

"It’s going to take a lot of guts to say ‘yes’ to anyone [requesting long distance
market entry through 271]," said Powell. "It has to be the right company, a
company willing to negotiate in good faith. It gives the regulators some comfort about
them."

Powell said the first Bell long distance entry also has to be in the "right
market." Local competition is not coming to all markets at the same time, he says.

Finally, he said, "it has to be the right PUC (public utilities commission)."
The FCC is only allowed 90 days to decide on 271 proposals, so there are a lot of
questions that need to be taken care of at the state level, which has an unlimited amount
of time to consider 271s, he said.

If these three pieces are in place, it will be easier for the FCC to justify its
decision to approve a 271 request, Powell said. "If competition won’t come to … New
York, we might as well fold up the tent and go home," he said.

–By Paula Bernier

FCC Looks to Revamp Universal Service

The Federal Communications Commission (FCC) has been all over universal service for the
past few months as it attempts to renovate the nation’s program for affordable and
accessible telecommunications services.

The FCC plans to have a comprehensive, two-part process in place by spring that
estimates how much nonrural local exchange carriers (LECs) will have to pay to provide
local telecom services to consumers in rural and other high-cost areas. In general, these
nonrural LECs are large local telephone companies.

In late October, the commission adopted a framework for estimating those costs. In late
November, the federal-state joint board on universal service made recommendations to the
FCC on universal service funding, while the FCC appointed a permanent administrator of
universal service funds. The commission says all of these moves are designed to help get a
new universal service system (USS) in place for nonrural carriers by July 1.

The FCC’s new "hybrid" cost model adopted in October mixes parts of industry
cost proxy models that the commission has been evaluating for the two years since the
Telecommunications Act of 1996 was signed. In the Telecom Act, Congress directed the FCC
and states to establish explicit universal service mechanisms that can be
"sustainable in a competitive environment." In 1997, the FCC adopted a plan for
implementing reform of the existing USS for high-cost areas.

In order to adopt such reform, the FCC is proceeding in two stages. The first stage is
this adoption of a cost framework that accounts for fixed elements such as network design,
network engineering and soil and terrain. In the second stage, the FCC will select the
"inputs" for the model, such as the costs of network components.

"The model platform adopted [Oct. 22] … will allow the commission to estimate
the cost of building a telephone network to serve subscribers at their actual geographic
locations," the FCC ruled in Common Carrier Docket No. 96-45. "The model is
capable of being adjusted to reflect any evolution in the definition of supported
services, and it is compatible with rural America’s ability to use the Internet and other
advanced telecommunications and information services."

Interexchange carriers (IXCs) and incumbent LECs say the FCC has taken a good first
step toward overhauling universal service.

"The FCC [is] ensuring that rural Americans continue to have affordable phone
service," says a US WEST Inc. representative. "By combining elements from
several competing plans, the FCC has reached a reasonable compromise that should help us
move toward getting a federal high-cost fund in place."

With a new cost model to brag about, the FCC then referred several questions related to
how nonrural LECs’ high-cost support should be determined once forward-looking costs have
been estimated.

The federal-state joint board on universal service came back with its answers Nov. 23
when it recommended (FCC 98J-7) that the FCC not make any major changes in the amount of
federal funding provided for universal service.

In a split decision, the joint board also voted to advise the FCC to scrap the 25
percent/75 percent jurisdictional division of responsibility for funding
"high-cost" support for nonrural telephone companies. It also suggested that the
FCC consider including intrastate revenues in the revenue base on which carriers are
assessed contributions to fund high-cost support.

–By Kim Sunderland