Reciprocal compensation payments by Bell companies are growing de...

Reciprocal compensation payments by Bell companies are growing despite lower rates in some areas, creating “distortions” that will continue until FCC reforms system, BellSouth Vp Robert Blau said in Feb. 1 ex parte letter to Commission. Writing on behalf of BellSouth, Qwest, SBC and Verizon, Blau told Commission that declining rates had been offset by “continuing rapid growth of dial-up Internet minutes.” At same time, cost of network facilities used by CLECs to route Internet calls to ISP modem banks has declined, creating “ever greater economic inefficiencies and distortions,” he said. Only solution is for FCC to require carriers to recover those costs “from their own customers.” Blau said Bells have had difficulty providing figures to prove CLEC costs are going down, as requested by FCC, because “the costs at issue belong to the CLECs who, of course, have no interest in making these data publicly available.” However, Blau attached report by Morgan Stanley Dean Witter analysts that he said “corroborates our view that market forces will not reduce rates fast enough to resolve the reciprocal compensation problem at least in the foreseeable future.” Blau said report also showed CLECs were billing both ISP and ILECs for terminating dial-up traffic at rates well above costs and, therefore, many were reaping extraordinary profits on services rendered to the ISP. Financial information in report also revealed that “reciprocal compensation payments… could be eliminated in their entirety without forcing the CLECs to raise per line charges to their ISP customers.” Blau said Dean Witter analysis supported Bell company view that reciprocal compensation payments “represent a totally unreasonable transfer of revenue from the ILECs to CLECs for reasons that have no basis in economics or the law.”