Phone Plan Could Cost Cable $200M

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To keep phone rates cheap, some phone giants want cable to chip in.

A telecom-industry plan designed to overhaul the country’s Byzantine access-charge and intercarrier-compensation regimes would cost cable at least $200 million if enacted this year.

The plan, unveiled last week by AT&T Corp., SBC Communications Inc. and other phone giants, would require cable companies to kick in $1 to $1.20 per month, per broadband subscriber.

UNIVERSAL FUND

The money would go toward the maintenance of universal service, a program of implicit and explicit subsidies that allows rural telcos to provide customers with dial-tone access at affordable rates, often below the real cost of service.

The plan would siphon off between $208 and $250 million in cable-modem revenue based on 17.3 million current high-speed data subscribers. Cable’s contributions would mount as MSOs add HSD customers.

Cable companies would also be required to contribute another $1 to $1.20 for every VoIP subscriber that receives a phone number.

Hitting up cable for money was the idea of the nine-member Intercarrier Compensation Forum, which also includes MCI Inc., Sprint Corp. and Level 3 Communications. Verizon Communications Inc. and BellSouth Corp. participated earlier in the year, but dropped out.

Cable’s cost estimate was provided by Gary Epstein, ICF’s Washington, D.C.-based attorney.

The National Cable & Telecommunications Association hasn’t opposed contributing VoIP revenue to the universal service fund, but the cable trade group has asked regulators to provide assurances that the size of the fund has been measured accurately.

In addition to ensuring the health of universal service, the IFC said the decision to tax cable-modem revenue was designed to harmonize “today’s disparate treatment of (digital subscriber line) and cable-modem services.”

Although DSL providers pay into universal service, cable companies do not contribute video programming or high-speed data revenue to the program. Cable companies, such as Comcast Corp. and Cox Communications Inc., do contribute based on a portion of their circuit-switched phone revenue.

Access charges are per-minute payments paid by long distance companies to local phone carriers that originate and terminate long-distance calls. Intercarrier compensation consists of fees that competing carriers pay one another to exchange local telephone traffic.

While simple in theory, the system is hobbled by inefficiencies and pricing structures. In some cases, intrastate long-distance calls can cost more than interstate long-distance calls.

ACCESS SHRINKAGE

Over the years, access charges have helped support universal service, but the rapid growth of the cell phone industry and the advent of voice-over-Internet protocol (VoIP) telephony have taken business away from long-distance companies, lessening the access-charge revenue paid out to rural carriers.

With the system coming apart at the seams, AT&T and SBC have joined forced to expand the revenue pool by creating a new system that included a hit on cable-modem revenue.

The plan is a 99-page document replete with new acronyms and bureaucratic jargon as dense as the program it is trying to reform.

The FCC received the plan last Monday, and the ICF asked for approval before July 2005.

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