Access Charge Reform
7/12/2016
ECO 436 Industry Studies Seminar David G. Loomis 309-438-7979
Historical Problems
Separations process apportions costs
inter/intrastate and reflects universal service
and desirability of low local rates
 Local Transport Restructure – TIC or RIC
charge is 70% of revenues or $2.9 B out of
$4 B
 SLC capped; CCL recovers the rest
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7/12/2016
ECO 436 Industry Studies Seminar David G. Loomis 309-438-7979
Need for Reform
IXCs and ILECs agree that access charges
exceed economically efficient levels and
must be reduced
 Current charges create incentives for
uneconomic bypass i.e. CCL charges
 There is an over allocation of costs to
interstate jurisdiction
 ILECs are inefficient
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7/12/2016
ECO 436 Industry Studies Seminar David G. Loomis 309-438-7979
Need for Reform
ILECs can price squeeze by raising rivals’
costs in IXC market
 ILECs are subject to competition from
availability from UNEs
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7/12/2016
ECO 436 Industry Studies Seminar David G. Loomis 309-438-7979
Alternatives to CCL rate
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Recover costs in excess of SLCs through
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7/12/2016
Flat-per-line charge paid by IXCs
Bulk billing based on MOUs or revenues
Capacity charge - # and type of trunks ordered
from ILEC
Trunk port charge
Trunk port and line port charge
ECO 436 Industry Studies Seminar David G. Loomis 309-438-7979
Two Approaches to Access
Charge Reform
Market-based approach
 Prescriptive approach
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7/12/2016
ECO 436 Industry Studies Seminar David G. Loomis 309-438-7979
Market Based Approach
Rely on potential and actual competition from
new facilities-based providers and entrants
purchasing UNEs to drive costs towards
economic costs
Two phases
Phase 1 – show local market has been opened
to competition
Phase 2 – show actual competition exists
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7/12/2016
ECO 436 Industry Studies Seminar David G. Loomis 309-438-7979
Prescriptive Approach
Marketplace forces alone are not sufficient
 FCC must require LECs to move prices to
more economically-efficient levels
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7/12/2016
ECO 436 Industry Studies Seminar David G. Loomis 309-438-7979
Market-based Pros/Cons
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Pros
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Cons
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7/12/2016
Create incentives for ILECs to open markets
Allows market forces rather than regulation to
determine how quickly prices move towards
costs
Prices may not move as fast as prescriptive
Difficult to determine evidence of competitive
entry
ECO 436 Industry Studies Seminar David G. Loomis 309-438-7979
Prescriptive Pros/Cons
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Pros
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Cons
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7/12/2016
FCC can move prices more quickly
Avoid need for competitive entry criteria
Requires FCC to make detailed determination
of prices
Requires FCC to determine how much of
embedded costs ILECs recover
ECO 436 Industry Studies Seminar David G. Loomis 309-438-7979
Access Charge Reform Decision
Effective 1/1/98

SLC charges  Res.
- Primary Lines capped at $3.50; secondary
lines $5.00
 Single line bus. $3.50
 Multiline bus. - 9.00/line/mo (avg now is
$6.92/line/mo)
7/12/2016
ECO 436 Industry Studies Seminar David G. Loomis 309-438-7979
Access Charge Reform Effective
1/1/98
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7/12/2016
PICC - Presubscribed Interexchange Carrier
Charge
flat rate per line charge to IXCs to keep SLC low
and lower CCL
in 1998, max. PICC is $0.53/line/mo for res and
single line bus.
Non-primary res. PICC is $1.50/line/mo
Multiline bus. Is $2.75 1/1/99 increase by $1.50
ECO 436 Industry Studies Seminar David G. Loomis 309-438-7979
PICC increase 7/1/99
Max PICC raised to $1.04/line/mo for res.
And single line business
 Non-primary res. PICC is $2.53/line/mo
 Lowered switched access charge (CCL rate)

7/12/2016
ECO 436 Industry Studies Seminar David G. Loomis 309-438-7979
Changes effective 2/1/00
Eliminates residential and single line
business PICC
 Reduces over time the PICC for multiline
business until it is eliminated in most areas
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7/12/2016
ECO 436 Industry Studies Seminar David G. Loomis 309-438-7979
SLC Increases
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Increases SLC charge of residential and
single line business
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7/12/2016
7/1/2000 $4.35
7/1/2001 $5.00
7/1/2002 $6.00
7/1/2003 $6.50
ECO 436 Industry Studies Seminar David G. Loomis 309-438-7979
Removes Implicit Subsidies
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7/12/2016
$650 million in implicit universal service
support from access charges
replaces it with an explicit, portable universal
service fund charge
ensures affordable phone service for high-cost
areas.
ECO 436 Industry Studies Seminar David G. Loomis 309-438-7979