Varying definitions of 'local'

By Scott Bradner
Network World, 06/14/99

In late February, the Federal Communications Commission decided that, at least for now, it was the states' responsibility to decide if and how local phone companies have to pay intermediate carriers for users' calls to their ISPs. We are now starting to see the result of letting the locals decide.

When you place a call to your dial-up ISP, you almost always do so through an incumbent local exchange carrier (ILEC), such as Bell Atlantic or US WEST. But sometimes the call is transferred to a competitive local exchange carrier (CLEC) for delivery to the ISP's location.

Even with an ILEC and CLEC involved, calls to the ISP are currently billed to the user as local calls because the ISP generally has a point of presence in the same community as the caller. Because most ISP users have selected a flat-rate local phone plan from their LEC, these calls are not charged by the minute.

The ILEC gets its money from the monthly flat-rate fee. The CLEC charges the ISP a monthly fee for the phone line. In addition, Congress ruled in 1936 that LECs are due some extra money, called "reciprocal compensation," when they take a call from another LEC and deliver it to a local customer. So if calls to ISPs are "local," then CLECs get extra money.

But now the FCC has sort of said that calls to ISPs are "largely interstate" and thus are not subject to the reciprocal compensation. So for now, the FCC is leaving the final determination to the states.

The FCC's decision ( is the normal nonterse result of an over-regulated industry, comprising 27 pages and 110 footnotes. By letting each state do its thing, the report guarantees there will be considerable confusion in this area with states deciding things differently. But the FCC does serve notice that it is thinking of making a national rule to cover this situation.

If you use a dial-up ISP, you might want to take a look at the report, in particular Paragraph 29. The FCC acknowledges there should be some type of intercarrier compensation for ISP calls.The commission believes the compensation is "not likely to be based entirely on minute-of-use pricing structures."

"Entirely" is the operative word here. If this prediction holds, you will start getting per-minute bills from phone companies for your ISP use. It's only a matter of how badly, not if, you'll get hit.

There is at least one bright spot in all of this: Ameritech has proposed that any compensation be based on sharing the revenue for ISP-bound calls. Nah, that won't go anywhere - it's too logical.

Disclaimer: I suppose logic has a place at Harvard, though M.I.T. seems better for that. But the above is my own evaluation.