TELECOM Digest OnLine - Sorted: Re: Young Cell Users Rack Up Debt, One Dime at a Time

Re: Young Cell Users Rack Up Debt, One Dime at a Time

Fred Goldstein (
Sat, 15 Jan 2005 18:56:17 -0500

Some European correspondents continue to express surprise at the
American system of cell phone owner-pays, vs. the European caller-pays
system. This has already been hashed out pretty well, but there are a
few interesting wrinkles that people don't always think about, in the
area of wholesale intercarrier compensation.

When someone calls a European mobile phone (say, one of those British 7+
numbers, and remember we don't dial the "0" from overseas), they are at
least supposed to be aware that it's a premium-rate call. The calling
carrier is charged a terminating fee by the mobile phone company. It's my
understanding that in the U.K. that's a negotiated rate, but it's a fine
example of the "terminating monopoly". That is, on any phone call, no
matter how many carriers you can choose from in order to place the call,
there is only one carrier who can terminate the call!

So Vodafone can say "take it or leave it" to anyone else wanting to
call a Vodafone subscriber. As a result, the mobile carriers tend to
get around 20 cents US (hard to get too precise nowadays, due to the
Incredible Shrinking Dollar -- by now it may be over a quarter) per
minute. Their own subscribers, on the other hand, pay less than that
to make a call. It turns into a sort of "gouge the other guy"

Any monopoly has the potential for abuse, including terminating
monopolies in an otherwise-competitive marketplace. Ofcom's
predecessors were, I think, way off the ball when they allowed the UK
carriers to have unregulated terminating rates. Such "deregulation"
is a farce, just an excuse to gouge consumers, who of course
ultimately pay. There is no need to regulate retail rates or other
intercarrier rates when there's real competition, but the terminating
monopoly cries out for regulation.

In the United States, mobile carriers are treated *somewhat* like
other local carriers, with their own subscribers paying for the
convenience of mobility. Dialing a mobile number has *retail*
payments at the same rate as wireline calls. Note however that CMRS
retail rates are unregulated, and CMRS carriers are not subject to
state local-carrier regulation. (The FCC has jurisdiction.)

There is a key difference in intercarrier rates, though. Under the
current byzantine system of intercarrier compensation, a local
exchange carrier is usually entitled to "switched access" payments
when it originates or terminates a call outside of the retail local
calling area. (There are contractual exceptions, but they're becoming
less common.) Within the local calling area, "reciprocal
compensation" is paid instead; that's a lower rate, and the
originating leg is sent-paid (vs. collect for switched access). With
a mobile carrier, however, the retail local calling area isn't what
matters. Instead, it's Rand McNally's Commercial Atlas. A call to or
from a mobile within the Rand McNally Major Trading Area (MTA) is
treated as local *at wholesale*, otherwise it's switched access.
(Aside: The FCC originally adopted the MTA without Rand McNally's
permission, and the latter objected to its intellectual property being
abused. I presume they reached some settlement. MTA was first used
by the FCC for the 1994 PCS auctions.)

Normally, calls are billed based on the originating and terminating
NPA-NXX, which indicates the billing rate center. But a mobile phone
can be anywhere. So local carriers and mobile carriers don't bill on
a per-call basis; instead, there's an occasional study that determines
what fraction of calls to that mobile carrier are outside of the MTA.
That creates a blended rate for calls in each direction. The access
and reciprocal rates are subject to regulatory scrutiny, though the
actual formulas are a bit baroque.

The whole intercarrier system (of which mobile is one of the
less-controversial portions) is likely to be reformed this year,
though -- the FCC's rumored to be re-opening the issue by or at its
February 10 meeting. Note that today the intercarrier rate for
terminating a given call can differ based on whether it's local,
interstate toll/access, intrastate toll/access, ISP-bound,
mobile-originated, or IP-originated with the gateway at the caller's
site. (If it's IP-originated with the gateway at the carrier's site,
then it's treated differently, like a non-IP call. Obvious and
logical, right?)

Fred Goldstein k1io fgoldstein "at"
ionary Consulting

Post Followup Article Use your browser's quoting feature to quote article into reply
Go to Next message: Paul Coxwell: "Re: Young Cell Users Rack Up Debt, One Dime Message at a Time"
Go to Previous message: John Levine: "Re: Young Cell Users Rack Up Debt, One Dime Message at a Time"
TELECOM Digest: Home Page