Parsing the intercarrier compensation mess

While a vote to reform intercarrier compensation - how big carriers and little carriers "agree" to settle traffic - has been postponed, the arcane mess remains.  Saul Hansell at the NY Times does a deeper dive on the underlying issues involved.

If reform had been passed, a typical consumer's phone bill would have likely changed by no more than a couple of dollars per month; a little more for a rural resident, a little less for the people in the cities and ‘burbs.  As lobbying groups square off, rural telcos rally their Congressmen, while consumer advocates worry that AT&T and Verizon would have kept the money they stood to save from the changes, rather than passing savings on to customers through lower fees.

The dirty little secret here is that distance and geography don't matter for phone calls anymore, but the archaic volumes of regulation that defined the differences between long distance calls, local calls, and long distance calls within a state still exist. Invisible boxes called LATAs are drawn across the United States. Cross a LATA, and the phone company gets to bill you.

Another part of the equation has been the country's long-standing policy of subsidizing phone service (and now broadband) to rural customers. Some local phone companies get two-thirds of their revenues from termination fees and subsidies from the Universal Service Fund.

For more:
- Very nice NY Times blog on the intercarrier compensation mess.

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