The History of Independent Telecommunications

©2004 3Alexicon, Inc.<br><br> The Great Depression The Great Depression The Great Depression had severe effects on the telephone industry Total telephones in service ? 10% Long distance calls ? 40% Many rural independent telco 9s went bankrupt AT&T became dominant force again with 15 million phones in service by 1940 Copyright ©2004 3Alexicon, Inc.<br><br> Smith vs. Illinois (1930) Smith vs. Illinois (1930) Supreme Court decision established the concept of jurisdictional separations Jurisdictional separations is assigning or allocating telephone plant and expenses as state or interstate based on the usage of the associated plant Origins of settlements paying a portion of local plant costs Established the principle that local companies should receive compensation for originating and terminating long distance calls Copyright ©2004 3Alexicon, Inc.<br><br> Communications Act of 1934 Communications Act of 1934 Established the goal of universal service as making available crapid, efficient, nationwide and worldwide wire and radio communications services with adequate facilities at reasonable charges.. dto all people of the United States Created the Federal Communications Commission to regulate interstate telephone and other communications services (radio, television, etc.) Copyright ©2004 3Alexicon, Inc. Settlements Settlements Smith vs. Illinois established the concept of separations by function, but accomplishing it was another matter National Association of Regulatory Utility Commissioners (NARUC) becomes concerned that too much cost is shifted to state jurisdiction causing a disparity in state and interstate access rates NARUC and FCC negotiate the process of separations over time Settlements to independents were distributed by the Bell system Copyright ©2004 3Alexicon, Inc.<br><br> Rural Electrification Act Rural Electrification Act In 1949, Congress amends REA 9s charter to provide loans to telephone companies In 1949, only 60% of rural homes and 30% of farms had telephone service; by 1985 telephone penetration had reached 94% Today, REA is known as the Rural Utility Service (RUS) which is an agency within the US Department of Agriculture Copyright ©2004 3Alexicon, Inc. Changes in Separations Changes in Separations NARUC held several conventions in the 1950 9s, 60 9s, and 70 9s that resulted in changes to the Separations Manual The various changes were named after the place where the convention took place The Charleston Plan in 1951, the Denver Plan in 1965, and the Ozark Plan in 1971 all made changes that shifted revenue requirement from the state to the interstate jurisdictions. Shifts from the state jurisdiction result in lowerlocal telephone rates, and lower intrastate toll rates Shifts to the interstate jurisdiction result in higher interstate toll rates Copyright ©2004 3Alexicon, Inc.<br><br> AT&T Divestiture AT&T Divestiture In 1984, the US District Court ordered the divestiture of the AT&T System separating its long distance business from its local operations (the Bell companies) Before 1984, AT&T was responsible for revenue distribution to the local Bell companies who then paid the independent companies Origination of access charges In 1983, the FCC created the National Exchange Carrier Association (NECA) to be the administrator of the division of revenue process NECA administers the distributions from the access pools Copyright ©2004 3Alexicon, Inc. Universal Service Funds Universal Service Funds USF is a government subsidy where toll callers support high- cost telephone areas High Cost Loop Local Switching Support Lifeline Schools & Libraries Funded by a flat, monthly per- line fee Copyright ©2004 3Alexicon, Inc. Telecom Act of 1996 Telecom Act of 1996 Congress reformed telecom laws by opening local telephone service to competition Created an uneasy balance between the goals of implementing competition while maintaining universal service Universal service funds became cportable d Explicit support structures required Also resulted in substantial decreases in access charges Places additional pressure on local rates Copyright ©2004 3Alexicon, Inc.<br><br> Current Issues Current Issues Still three main issues: Access rates = intercarrier compensation Universal service Separations Copyright ©2004 3Alexicon, Inc. Current Issues (cont Current Issues (cont 9 9 d) d) Challenge of modern day regulators is complicated by emerging technologies: wireless, Internet, video, voice-over-IP Proper regulatory framework must create/maintain a level playing field for various competing industries (cable vs. DSL; wireless vs.<br><br> wireline) without sacrificing universal service policy. The benefits of competition must be balanced against the costs of universal service. Competition itself is not the goal Policies that develop uneconomic incentives should be eliminated and/or avoided.<br><br> An environment with some stability must be created to encourage the future deployments of advanced services . Copyright ©2004 3Alexicon, Inc. Questions?<br><br> Questions?

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