You started it!
I’ve got a wry smile on my face as I bang out this month’s column. The topic for this month is, “Who’s the carrier, anyhow?” or “Who’s serving whom?” The players in this political opera are a star-studded line-up that includes none other than Southwestern Bell Telephone (SWBT) and its list of accounts receivable.
Here’s the story. On April 25, 1997, SWBT sent a letter to Regina Keeney, chief of the FCC’s Common Carrier Bureau. In its letter, Southwestern Bell asked Chief Keeney whether the FCC would mind if the phone company collected some overdue bills from a few paging business customers that included AT&T, AirTouch Paging, PageNet and some other luminaries. It seems that some of SWBT’s largest customers were refusing to pay for the phone service used to terminate paging traffic.
In a later letter responding to Southwestern Bell’s earlier correspondence, the parsimonious paging companies explained why they were ducking SWBT’s collection department. They pointed out that in 1996 Congress changed the language of the Telecommunications Act, and, in Section 251(b)(5), the Act now says that local exchange carriers (LECs) are prohibited from charging commercial carriers for terminating traffic that originates on the LECs’ networks.
Southwestern Bell has argued that it is not attempting to charge for the traffic, it is only trying to recover costs for the “facilities” to carry the traffic to the paging companies.
Oh, I’ve got it. That’s like the cable television company telling you that it’s not charging you for HBO, it’s just charging you for the use of the satellite downlink that just happens to carry HBO. The fact that the rate is the same as if you were paying for HBO is just a coincidence that could be easily cleared up_if you could just see it correctly.
The issues surrounding this little tiff between industry behemoths get extremely philosophical and esoteric: If a person picks up a phone and dials a pager number, who is being served and by whom? Because I majored in Zen and diesel mechanics at Harvey’s School For Frustrated Journalists, I’ll take a shot at this one.
When the customer, let’s call him Mortimer, picks up the phone, he’s placing an order with the phone company. He has dialed a number, and the phone company has guaranteed Mortimer that his call will be routed through its wires and switches to some unit that is connected to the phone system for receiving the call. The call might go to Mortimer’s mom’s telephone set, Don Imus’ fax machine, the psychic hotline or a paging terminal.
Assuming that the order is successful, Mortimer’s call will be received, and communication of some sort will happen. According to the Telecommunications Act, if Mortimer’s call is routed to a commercial carrier of communications, say “Acme Paging,” the phone company is prohibited from charging Mortimer and Acme Paging. Mort picks up the tab as a part of his phone service.
Congress seems to think that this arrangement is fair because it’s the phone company’s customer that initiated the request for service. The paging customer didn’t ask Mort to call. (Come to think of it, if a call goes to [instead of from] a cellular customer, that cellular customer didn’t ask for that particular service either. Hmmm.) In a nutshell, Congress said that if your customer is the one demanding service, you can’t charge other carriers for your use of their system to meet that demand.
This use of commercial logic is a radical departure by regulators from their long history of ignoring the basic tenets of contract law. In fact, it’s incredible! When you provide service to a customer, you expect that you will have to pay all suppliers that create the necessary inventory of goods and services to fulfill the demand. You pay the telephone company, the electric company, the site lessor and a host of other people to deliver services to your customers. Only the phone company was allowed to charge its customer, Mort, and the commercial supplier of the service that Mort demanded.
At the core of this dilemma was the government’s attempts to open up greater competition between LECs. The idea was that one LEC wouldn’t charge another when the traffic originated on the first LEC’s system. Or, as we used to say on the playground, “You started it!” But the ramifications of the statute could reach far beyond the competitive machinations of regional Bell operating companies (RBOCs) and other wireline carriers.
Consider the effect on paging, commercial microwave, fiber-optic systems, LANs, interconnected private carriers, cellular, PCS, ESMR and more. If the carrier of a particular wireless service is deemed commercial, then the telephone company is not supposed to charge for terminating the call with the commercial carrier. In fact, the issue arises as to whether the commercial carrier could charge the telephone company. This question is far from frivolous, and it is being discussed before the California Public Utilities Commission.
It is conceivable that telephone numbers used by paging and other wireless companies could become toll calls to offset the cost to telephone companies of using the wireless carrier’s system to satisfy the demand of the telephone companies’ customers. Someday, PageNet and AirTouch could be writing letters to the FCC to complain about the fact that an RBOC had failed to pay its bill to the paging company, instead of the other way around.
The FCC has shown its courage in dealing with this situation by asking for comments on the subject. I expect that it will get a bunch of comments from both paging companies and telephone companies that are trying to protect their respective turfs. It might also get a few whispers from other commercial carriers who are aware of the kind of advantage that a favorable ruling on behalf of wireless carriers might reap.
Meanwhile, here’s my scheme. I’m going to file a tariff with the local public utility commission to turn my customer premises equipment into a commercial entity that passes traffic to the extension in my den. Then I’m going to let it be known to every charity, aluminum siding salesman, real estate agent, lawn service company, religious cult and long-distance telephone company that I’d be happy to talk to them about their terrific products and services. Just to make sure that the phone keeps ringing, I’m going to run newspaper ads that suggest that a woman named Lola LaFlame will be waiting in my den to take calls. I figure I’ll be able to send the telephone company charges that almost keep up with the weekly increases in my cable bill.
Following up… I got a call the other day from a Nextel employee who works in the corporate communications office. He said that he had read my column regarding the company’s difficulty in obtaining profitability (June MRT), which caused him to laugh off an important body part. According to him, the company was doing better than expected and had announced that it would likely move out of the red in the third quarter of 1998.
After congratulating him on the company’s improved performance, I asked whether the predictions take into account interest payments that kick in at that time (to the tune of about $50 million per year, based on Nextel’s existing long-term debt of over $3 billion). I didn’t really get an answer to that question.
Instead, he predicted that I would have to “eat crow” about my comments about Nextel’s financial struggle. I assured him that if Nextel’s performance is as good as predicted, I’ll be happy to consume, in public, a bit of the noxious bird. Bring on the black, beaked entr,e and I’ll happily chew a tune of “I’m Sorry,” complete with Brenda Lee hairdo. Now, what’s he going to do if I’m right?
Schwaninger, MRT’s regulatory consultant, is a partner in the law firm of Brown and Schwaninger, Washington, DC. He is a member of the Radio Club of America.