Transcript Corporate Profile

Cost Recovery Mechanisms
MATI Tribal
Telecommunications Conference
June 7-9, 2004
Presented by Doug Kitch & Vince Wiemer
Alexicon, Inc.
Governing Authorities
FCC Rules govern federal jurisdiction
Most states mirror or concur with federal
rules
Tribes can be self-governing or choose to
work in cooperation with state Commissions
Generally, smaller telecom carriers =
Rate of Return (ROR) carriers; larger
carriers = Price Cap carriers
Being a ROR carrier currently provides for
favorable regulatory environment from a cost
recovery standpoint
Copyright © 2004
Alexicon, Inc.
Funding Sources Available
National Exchange Carrier
Association (NECA) Pools
Allows for recovery of interstate
costs
Cost study is necessary to
jurisdictionalize costs
NECA Administers 2 Pools:
• Carrier Common Line (CCL) Pool
• Traffic Sensitive Pool
Copyright © 2004
Alexicon, Inc.
Funding Sources Available
Collectively “Universal Service
Support”
High Cost Loop Support (HCLS)
Local Switching Support (LSS)
Interstate Common Line Support
(ICLS)
These 3 Mechanisms, in addition
to NECA Cost Recovery, are
essential in making a business
case!
Copyright © 2004
Alexicon, Inc.
High Cost Loop Support
Complicated algorithm that helps
subsidize local rates (per FCC
rules) to facilitate complying with
“affordable” standard
Available to NECA pool and nonpool members
Fund size capped
Currently approximately $1+ billion
Copyright © 2004
Alexicon, Inc.
Local Switching Support
Supports smaller carriers with
high switching costs. Effectively
shifts part of the cost of switchrelated equipment from the state
to interstate jurisdiction
Available to NECA pool and nonpool members
Fund size approximately $500
million
Copyright © 2004
Alexicon, Inc.
Interstate Common Line
Support
Recovers residual CCL
revenue requirement
Available to NECA pool and
non-pool members
Fund size currently about $1
Billion
Copyright © 2004
Alexicon, Inc.
Interstate Common Line
Support
As of 7/1/03, CCL pool and CCL
access revenue effectively went
away. All residual CCL revenue
requirement is “portable” and in
the form of ICLS.
CCL Revenue Requirement less
End User/Subscriber Line Charges
less Special Access Surcharge =
ICLS
Copyright © 2004
Alexicon, Inc.
Universal Service Ideology
& Considerations
Driven by Telecommunications
Act of 1996
Quality services available at just,
reasonable, comparable, and
affordable rates
Access to advanced services in all
areas of the United States
Access to advanced services
should be available to schools,
libraries, and rural health care
providers
Copyright © 2004
Alexicon, Inc.
Universal Service Ideology
& Considerations
All telecom providers should
contribute on an equitable and
nondiscriminatory basis
Exempt if de minimis
Copyright © 2004
Alexicon, Inc.
Eligibility Requirements
Eligible Telecommunications
Carrier (ETC)
State Commission designation that
the carrier meets the requirements
for a service area as designated by
the state Commission
Petition to the state Commission for
ETC status
State Commission may designate
more than one ETC in a rural service
area if in the public interest
Copyright © 2004
Alexicon, Inc.
Other Considerations
Important in Early Stages to
Investigate and Verify that Billing is
Correct
Affects Carrier Access Billing System
(CABs)
• A LEC’s Access Revenues Will Likely
Comprise 30% to 50% of Their Total
Revenues
– MOU Sensitive Billing
– Special Access Billing
Affects NECA Settlements
Could Affect Customer/Local Billing
Copyright © 2004
Alexicon, Inc.