Date: Mon, 23 Jun 1997 10:55:54 -0400
From: Fred R. Goldstein <email@example.com>
Subject: Re: Billing Issues From a CLEC's Perspective
Chris Ziomkowski <firstname.lastname@example.org> wrote,
> First, what is the current interpretation of the Act of '96 regarding
> becoming a facilities based CLEC without CAP? In other words, does it
> actually require the ILEC to unbundle their local loop and give access
> to the copper, or is the only way for a CLEC to obtain the copper by
> reselling the ILEC's switch? If a CLEC is allowed access to the
> copper, does that mean that the CLEC can steal all the high profit
> origination fees from long distance while leaving the ILEC to absorb
> the cost of the local loop, which in many cases are sold at or below
The rollout of local telephone competition certainly opens up a lot of
questions. I've been boning up on it lately, as it has become another
area for my consulting practice. While some of the information is
subject to nondisclosure, an awful lot isn't, if you can find it. One
good place to start is the FCC's web page.
There are two different scenarios for a local "competitor". One, for
which the quotes are applicable, is Total Service Resale. This is
apparently what MCI is offering in the case of their residential
Callpack service in Chicago; it provides the quickest way to get into
the low end of the business, though it's hardly worth doing on a
long-term basis. With Resale, the "competitor" essentially becomes a
marketing and billing agent for the Incumbent telco (ILEC). They gain
access to the ordering computer, and get billing detail records for
"their" subscribers. But the lines are 100% pure ILEC. The rates are
basically the ILEC's too -- the reseller gets a discount (say, 11-20%,
though actual percentages vary within guidelines) on tariff rates.
The discount is based on how much ILEC marketing and billing expense
is transferred to the reseller; there is no notion of cost-based
pricing for the services themselves, since they're based on the
existing ILEC tariff.
Note that when "migrating" to a reseller, nothing but the paperwork
changes, so the phone number stays the same, the installation cost is
minimal (or zero), the dial tone sounds the same, etc.
The second scenario is facilities-based competition. In this case the
CLEC owns actual facilities which it uses to connect to its
subscribers. Again to use MCI as an example, they have a CO switch of
their own in Chicago which is used to provision services to their own
subscribers. Initially this is only economical for high-volume (T1 or
more) subscribers, hence the resale.
In the facilities-based scenario, it's possible to have the entire
service provisioned by the CLEC, or for the CLEC to provide some of
their own service and to purchase "unbundled network elements" (UNE)
from the ILEC. These elements include local loops, switching,
transport (interoffice bandwidth), operator services, 411, 911, etc.
Unbundled network elements are generally priced based on cost, not
CLEC tariff prices. So it's possible that the price of an ILEC
residence line (before discount, under tariff, and not necessarily
"compensatory") is less than the price of an unbundled local loop
In general, the cost studies (TELRIC) needed for UNE pricing are not
done yet, but the FCC has suggested some "proxy" numbers. Local loop
proxies range (on a per-state average, large-CLEC basis only) from
just under $9.83/mo (MA) to $25.36 (ND), with most big states in the
With facilities-based competition, the CLEC can be more creative with
service offerings, pricing, etc. By next year, major markets will
have number portability, so "migrating" ILEC subscribers can keep
their phone numbers; for now, each CLEC needs its own batch of prefix
codes, which explains a lot of area-code exhaust now going on.
> Second, the Act seemed to allow for a CLEC (or an ILEC for that
> matter) to charge termination fees to its peer for local calls
> terminating on its equipment from the other's service. If that's the
> case, and if I'm a facilities based CLEC, what prevents me from simply
> purchasing a large number of residential lines from the ILEC and
> making 24hr. calls into my own network, all the time collecting fees
> from the ILEC. If this is the case, does it mean an end to unmetered
> local calling?
That would be fraud, similar to the 900-service operators who called
themselves. Besides, that would consistute use of a residence line for a
business purpose :-).
It is true, however, that carriers must pay each other to terminate
calls. In most cases these "accounting rates" (the older term) for
local traffic are in the half-cent per minute range, but they're
bilaterally negotiated. "Bill and keep" (no charge for traffic
exchange) is allowed but uncommon.
> Local number portability (YIKES!) was also a hot topic at the
> conference. As we all know, LNP is supposed to be a reality within a
> rate center by Q4 1997 in the five major metropolitan areas. (Does
> anyone actually have a good definition of what a rate center is? There
> seems to be alot of confusion.)
Rate center rules do seem to vary a little bit state by state. In
general it refers to the point from which calls are billed -- any two
lines from the same rate center are treated the same when called from
elsewhere. Generally this translates to "exchange area or zone
therein". But it can be hard to pin down in some local places, which
is a bit off topic.
> From everything I've seen, this Act has effectively ended flat rate
> local service once the CLECs get into full swing, barring cooperation
> between the ILEC and the various CLECs ...
I don't see that at all. Flat rate service is based on the notion
that when you average all flat-rate subscribers together, they cost x
to serve, so you charge x plus margin. The average 1FR line generates
something like ten hours a month of usage. At half a penny a minute,
even if 100% of it went to the ILEC, the accounting-rate payment of
say $3 would not be a big pain, and the CLEC would collect on calls to
its subscribers too, so it would probably balance out near zero.
Fred R. Goldstein email@example.com
BBN Corp. Cambridge MA USA +1 617 873 3850
Date: 15 Sep 1997 16:25:18 GMT
From: fgoldstein@bbn.NO$LUNCHMEAT.com (Fred R. Goldstein)
Subject: Re: Hypocrisy of ISP Welfare and Myth of Internet Free Market
In article <firstname.lastname@example.org>, email@example.com says:
> What is Nathan (and indeed the RBOCs who cry in their beer about
> overloaded switches) going to say when the 4,500 ISPs in the US wake
> up to the fact that they can already, and soon will be able to do ever
> faster and cheaper, drop the use of local loop telco services and
> convert their customers to no-licence digital wireless? Bypassing the
> local wired common carriers entirely?
> When the shoe is on THAT foot, watch the RBOCs start bitching about
> the 'bypass' technologies, and Internet phone.
> *REAL* competition and open marketplace anyone?
Interesting digression. Telcos' (specifically, ILECs') collective
market power is eroding under both technological and regulatory
weight. Alas, the vast majority of dial-up Internet users (especially
the low-volume residential recreational users) are stuck with ILEC
phones as their only option at the present time. So it is important
to keep that channel available.
But yes, Virginia, there is a Santa Claus on the horizon. The catch
is that no one gift works for everyone.
Wireless answers are getting better. Last winter the FCC gave us a
wonderful gift in the "Unlicensed National Information Infrastructure"
(U-NII) band, allowing up to 4 watts ERP for unlicensed wideband
high-speed data in the 5.7 GHz range. This is too new for equipment to
be available yet but there is huge potential for cellular-style (in
topology, not pricing, but hey those towers look nice) "community
networks". This goes back to Apple's 1995 petition. There's also a
2.4 GHz "unlicensed PCS" band medium-speed data; a fair amount of gear
is now available for this. The 902 MHz "junque band" is still there
but rather a bit noisy for longer-range (non-LAN) uses.
Trouble is, these radio frequencies (the term "microwave" scares off
civilians who think of ovens and thus danger) are somewhat limited to
"line of sight". If you have a high tower or hilltop surrounded by
the plains of Colorado or Arizona, then you'll do well. But here in
New England we have rolling hills (tougher to get line-of-sight) and
big trees (foliage fade). Some areas have serious rain fade problems.
So a wireless solution typically ends up missing substantial areas.
Still worth pursuing though.
Two other gambits stem from the Communications Act of 1996, based on
the status afforded to Competitive LECs. A CLEC who owns a switch
negotiates a "reciprocal compensation" agreement with the Bell. This
is sort of like what the UK and now Holland have -- the LEC recipient
of a call is paid to terminate it. (US IXCs, on the other hand, pay
the LEC at both ends.) The ILEC and CLEC are peers and pay each
other. An ISP on a CLEC switch therefore generates "terminating
minutes of use" revenue for the CLEC -- why do you think MFS (CLEC)
bought UUNET (ISP)? Typical MOU reciprocal compensation rates are
.3 - .7 cents/minute. Some ISPs are becoming or are creating
data-oriented CLECs to take advantage of this.
The second approach is "Unbundled Network Elements" (UNEs). Here,
ILECs must rent CLECs elements of their network (the FCC defined the
list) at cost-based prices. Local loops, switch ports, and LEC switch
and trunk minutes-of-use are all included as UNEs. Incoming switch
use is generally free, and ISDN PRI ports and interoffice mileage
under UNE agreements are a fraction of tariff rates. Same network,
So the ILECs have less incentive to try to screw ISPs than they did a
year ago, because the ISPs have CLEC alternatives (switched or
switchless). And radio technology is making the local-loop bottleneck
less critical than it used to be.
I suppose an ideologue can call anything a subsidy, but enough lawyers
have pounded on these rules to make for a very tender cutlet.
Fred R. Goldstein k1io fgoldstein"at"bbn.com
GTE Internetworking - BBN Technologies, Cambridge MA USA +1 617 873 3850
Opinions are mine alone; sharing requires permission.
Date: Thu, 23 Jul 1998 16:27:00 GMT
From: fgoldstein@bbn.NO$LUNCHMEAT.com (Fred R. Goldstein)
Subject: Re: Ameritech Charges Illinois Competitor With Bootlegging
In article <firstname.lastname@example.org>, webmaster@areacode-
info.com says ...
> Ameritech charges that Chicago-based Focal Communications is skirting
> the operating rules for the use of possibly hundreds of thousands of
> phone numbers in the state and violating its interconnection agreement
> with Ameritech by incorrectly billing calls made to Focal's customers.
Ameritech has been on a bender, trying to screw CLECs out of their
reciprocal compensation payments due on ISP-bound calls. This is just
another Big Lie in their campaign. It's almost libelous against Focal
and the dozens of other CLECs -- and possibly a few ILECs -- who do
the same thing.
> According to Ameritech's complaint, Focal's "Virtual Office" offering
> ties up Chicago area numbers, and "improperly manipulates" the phone
> numbering system, giving phone numbers in suburban area codes to Focal
> customers elsewhere.
> But in Focal's scheme, the local numbers are typically assigned to
> business locations in downtown Chicago. When an employee of those
> companies, working from home, calls what would appear to be a "local"
> phone number in the outlying suburbs -- such as Schaumburg or Aurora
> -- the call is actually sent to an office location miles away in
> Chicago, thereby tying up a phone number that could be assigned to
> customers in those suburban areas.
What Focal is doing is offering a form of Foreign Exchange service.
This is something Ameritech has been doing forever. What makes it
different is that Focal, like almost every other CLEC, doesn't have
separate switches in every little town. They have one switch in
Chicago which serves the whole region. In general, CLECs operate that
way, with one switch (or a small number) per region. Since they're
not delivering analog loops *directly* from those switches, this works
If a CLEC wants to deliver analog lines to a bulk business customer
(eg, Centrex) or to a mix of customers in an area, they typically put
a multiplexor in that area, perhaps in a telco colo cage (to use ILEC
loops) or on site. They get LOCAL numbers for that location, either
their own prefix or, more recently, ported pre-existing numbers (Local
Number Portability). They can stick these muxes (also called DLC,
SLC) anywhere, for hundreds of miles, where they have bandwidth.
Remember, they CANNOT put switches in telco colo rooms (not allowed),
and usually CANNOT run voice-frequency analog lines from their
switches into telco colo cages, even if they wanted to! They mux lots
of sites onto one switch. THEREFORE the CLEC metropolitan switch has
a LOT of prefix codes on it, based on the areas it serves.
Now, let's say a company, say, Sears, decides it wants to have dial-in
"telecommuter" service. If they went to Ameritech, Ameritech would
run FX lines (usually over T1s) back to the COs they were serving. So
besides their downtown location, they might pay intra-LATA FX mileage
(usually around $20/mile/T1) to get numbers local to other places.
(Ameritech-IL only has an 8-mile local radius.) A Kankakee number
pays mileage to the Kankakee switch.
But by using Focal, they connect to the same switch, and simply assign
a Kankakee number in addition to the Chicago number. No FX mileage,
since it's the same switch, though Focal has to connect its switch to
the same Bell (Ameritech) tandem that Ameritech's Kankakee CO connects
to. In other words, CLEC metropolitan switches do FX more cheaply
(not a tariff artifact, but really cheaper) than ILEC switches.
Focal has a "full house" of prefix codes in Ameritech's Chicago LATA.
That means that they have as many prefix codes as it takes to be local
(within 8 miles) of every Ameritech exchange. They all come back to
one switch. And they AGGREGATE these prefix codes onto the same hunt
group, so 312-abc-9876 for Chicago Loop and 773-def-9876 for
Chicago-Kedzie and 847-ghi-9876 for Waukegan, etc., all point to the
same lines. This is wonderful for dial-in pools. Lots of ISPs have
moved to Focal, as have other businesses.
And number aggregation is what CLECs do everywhere. MFS/UUNET all
over. PacWest all over CA. GlobalNAPs and XCOM in Massachusetts and
soon elsewhere. Brooks all over. Phone Michigan out of Flint. Lots
of others. Many prefix codes on one switch, so it's local to
And it's what some ILECs do! PacBell for years has had "San Francisco"
rate center numbers in their suburban switches, so they could provide
FX without hauling the calls all the way. GTE has "Fairfax" prefix
codes in its Dulles, VA switch, so airport-area subscribers can have
local-to-Metro-DC numbers without having to get them from Bell COs.
SNET even has its own "full house" service now in Connecticut, where
12 well-selected prefix codes are aggregated for statewide coverage.
This not only pleases the ISP subscribers, but it takes all that
"pesky" ISP traffic off of the local COs, some of which weren't, after
all, sized for heavy incoming loads, but just happen to be local to
the right places.
So far as I know, number aggregation (combining FX prefixes onto one
line) was actually pioneered in the UK, by Energis, a few years ago.
They map dozens of local numbers onto your selected ports. No LATAs
there to deal with, either.
Number conservation is important. Number portability and
prefix-sharing should be implemented, to allow CLECs to have local
numbers wherever they want them without wasting entire prefixes.
Focal is only doing what they have to do under today's inefficient
rules. But that's not what Ameritech is upset about. They just don't
like competition. Period.
Fred R. Goldstein k1io fgoldstein"at"bbn.com
GTE Internetworking - BBN Technologies,
Cambridge MA USA +1 617 873 3850
Opinions are mine alone; sharing requires permission.
From: email@example.com (Fred Goldstein)
Subject: Re: True local competitors?
Date: Thu, 31 Dec 1998 03:10:37 GMT
On 29 Dec 1998 22:36:18 PST, firstname.lastname@example.org (Satch) wrote:
>Their own switches? Many do.
>Their own loop plant? Haven't heard of *any* competitive service
>(co-existing with a legacy LEC) that has any traditional loop plant. There
>are some companies that try to piggy-back on cable TV connections, though.
No respectable CLEC would pull copper loop plant -- it's a legacy that
doesn't pay off for new installs. Even most ILECs only pull it for
shorter distances (typically <12kf) now, with DLCs in the field. But
some CLECs do pull optical fiber to the subscriber site, and many rent
ILEC copper (unbundled local loop). A CLEC *might* pull some short
copper drops though.
I do know of one CLEC that planned to pull copper to their neighboring
office park. There was even a spare conduit. Then Bell brought them
their interconnection fiber, to reach the rest of the network. So
much for spare conduit. Not a good business plan at all.
Fred R. Goldstein k1io fgoldstein"at" wn.net
Opinions are mine alone; sharing requires permission.
Date: Sun, 01 Aug 1999 21:48:16 -0400
From: Fred Goldstein <email@example.com>
Subject: Re: Real Competition in the Local Loop?
At 07:04 PM 7/31/1999 -0400, firstname.lastname@example.org writes:
> I'd like to know how many Americans that do have the real choice
> between two or more LECs; as far as I know the old LECs are still the
> only available choice for residential customers.
Very few. There are a handful of places where CLECs offer residential
service to individual houses via Bell loops, though few CLECs even
try. And there are a handful of places where the cable TV company
offers telephony via the cable plant. I'm one of the lucky few to
have that option; my analog house line now comes from MediaOne over
its HFC cable plant. They're lighting up their Massachusetts
territories pretty quickly and by now probably have around 8000
subscribers on two switches. A handful of multiple dwelling unit
complexes around the country also have CLEC service, sometimes from a
> Maybe someone could clarify this for me. The LEC, as I understand it,
> owns the access network from the Central office to the customer.
Correct. Except for CATVs or anyone else who wants to bother
stringing separate cable, or someone who uses radio (extremely rare
here at present).
> Is there any ongoing initiative about achieving local loop unbundling
> so that not only the Internet access but also the adsl service could
> be provided by other companies than the LEC if so desired by the
Local loop unbundling has been the law since 1996, and there are xDSL
CLECs who make use of it. But the price is high enough to make this
more of a business option (substitute for fractional-T1 or T1 ISP
access) than a residential one. Also, loop rentals are generally
higher than the residential local service rate, making it look
unattractive to many CLECs.
Plus, until two months ago, the only way to get at an unbundled loop
was to rent a 100 square foot collocation cage in the ILEC CO, if the
ILEC had room. Which they amazingly were often very short of, even in
buildings where a single digital switch replaced a huge mass of
crossbars or steppers. There is now a federal order that ILECs offer
cageless collocation space, by the square foot or rack, so you don't
need a whole cage to get in, and they have to let you inspect a CO
that they claim is full. These steps should result in more
collocation and unbundled-loop usage over the next year.
Date: Tue, 3 Aug 1999 11:48 EST
From: FGOLDSTEIN@wn1.wn.net (Fred R. Goldstein)
Subject: Re: Real Competiton in the Local Loop?
email@example.com (Steven Lichter) writes:
> I saw the order for cageless collocation, do you have any idea what a
> security problem that could cause, people running all over the place
> and who knows what could happen. I don't work for a ILEC anymore; I'm
> retired, but I do contract for for the local ILEC as well as the
> people who have the cages and for the most part they feel the same
> way, they don't want anyone messing around with there equipment
No problem at all for the ILEC -- as the order states, the cageless
collocators can go into a room where there is no ILEC stuff, or the
ILEC can build a cage around *its* own area.
Mutual suspicion among cageless collocators is a different problem.
The solution is to NOT use CO/cage-style open racks. Instead, the
cageless users put everything into lockable rack cabinets. This is
the norm at some cageless CLEC collocation rooms anyway.
Of course the people who already have the cages no doubt resent the
lower cost of entry to new cageless competitors. But this is exactly
the move needed to get some competition into the resi market.
BTW, while someone recently stated that most CLECs have residential
tariffs, it is NOT true that a CLEC can be forced to put in an analog
line at resi rates in any old house. If a CLEC only tariffs T1-sized
circuits, then that's what you can order from them. Some CLECs played
around with reselling ILEC lines, but that was usually a flop and in
any case isn't real competition for the network. Now if you want a
PRI going into your house, a lot of CLECs will arrange it.
Date: Sun, 10 Oct 1999 22:38:16 -0400
From: Fred Goldstein <firstname.lastname@example.org>
Subject: Re: MCI+Sprint - How Come This is OK?
In V19 I465, Lee Winson wrote:
>> What you are going to see now is one stop shopping from five or six
>> companies instead of one.
> Five or six companies? For the average small-potatoes user? Certainly
> not now.
There is no one-stop shopping. There are rebillers and aggregators,
but a smart buyer will shop around for the best deals on each portion.
In the LD space, there are hundreds or thousands of nominal LD
carriers, but it really comes down to there being a handful of
separate networks with a bunch of resellers. AT&T, MCI Worldcom, and
Sprint are the major suppliers to the LD resellers. Qwest, Level3 and
Williams have various amounts of fiber in the ground, but don't have
the switching superstructures. They seem more interested in selling
bandwidth to ISPs. (GTE and Frontier own IRUs on Qwest fibers,
Frontier has its own minor LD operations.)
But when you come to the high-volume big-bucks 800 service sector, the
big three stand alone. (Judith Oppenheimer is invited to corroborate
or correct me.) It costs millions and millions to develop the
specialized software that drives the fancy 800 services that large
users depend upon. You don't buy that off the shelf from Lucent or
Nortel! So the little guys don't have it. (Again, resale doesn't
With Sprint and MCIW merging, it comes down to two players. That
invites collusion; with only one competitor, it's easy to raise or
hold up prices knowing that the one other guy is unlikely to blink.
WIth three or more vendors, collusion breaks down rapidly -- witness
how PCS (six licenses per market) caused a rapid drop in prices by the
original cellular duopolists.
>> We had a system that gouged long distance callers in order to support
>> dirt cheap local service. It was socialism pure and simple.
Not socialism, which is govt. ownership, but a govt.-supported monopoly
capitalism. More mercantilist than socialist.
> Long distance rates are not comparable between now and them because
> the rate structures are completely different. Many rate plans require
> a monthly service charge which is usually NOT added to rate comparisons.
> High volume far distance users are probably paying less. Low volume
> short distance users are definitely paying more.
Gimme a break. Zero-minute callers yes. But in 1985, LD was around
27 cents per minute if you had a good deal; of that, maybe 15 cents
went to the LECs as access charges. Today access charges average more
like four cents/minute, and the LD carriers give a dime a minute for a
low-volume user with no "plan fee". The LD carriers do get socked
monthly "PICCs" by the ILECs, which they pass back; that's just a
deception by the FCC to raise local rates indirectly.
> (Short haul interstate calls had far lower rates before than now
> when all rates are uniform regardless of distance.)
Usually, but that was "postalizing" before 1984, and the use of heavy
LEC per-minute access charges rather than percentage-based universal
service surcharges forced further postalization.
> An additional problem today is fingerpointing between LD and local
> companies over access charges. The end consumers end up paying for
> charges to BOTH, (And of course there's the added bureaucracy of
> splitting charges between different companies.)
It's a straightforward charge, vs. Ye Olde Bell System's "separations"
method, which had some hidden bureaucracy of its own.
> And another un-counted cost is the telecom staff employed by large
> users to manage their systems. Previously this work was done by
> the phone company itself. Regardless of the merit of requiring
> a company to have its own staff (or hire a telecom consultant),
> those costs need to be added to long distance rate costs.
Gimme a break!!! I was a telecom manager at a good-sized company back
in the late '70s, and there were more people doing that job then than
now. The phone company was the enemy, pure and simple. We shopped
around within the monopolist's tariffs for things like WATS (six bands
to choose from), foreign exchange, etc., and we used trunk queueing
and any other angle we could figure out. Plus we had to audit bills
for frequent errors. At least that last element hasn't changed much.
And rental PBXs were another costly nightmare. Any company who let the
monopoly telco "take care of them" was being ripped off big time.
> It is not merely "monopolies" but also excessive concentrations of
> market power. A merger of this magnitude at the present time repre-
> sents a significant increase in concentration and is not in the public
Well I agree with that!
> Without question, no mergers should be allowed until the local companies
> are allowed to offer full services.
Non-sequitur. Do you think that if Bell Titanic gets its Section 271
approval in New York, they're suddenly going to rent backhoes and
trench the lower 48 states? It's a resale job. And it sounds like
SBC's mandated entry into 30 out-of-territory local markets will be
just a resale job, acting as sales agents for the local ILECs. Big
whoop. SNET long distance was resale. ALL of the RBOCs made resale
agreeements with the Big 4 (before Worldcom bought MCI) in preparation
for eventual Section 271. In any case, the RBOCs are doing a great
job of evading their legal obligations to open up their networks to
I'm working on some interconnect-agreement stuff now, and while they
talk about being "open" for Section 271 purposes, the terms they're
demanding now are guaranteed to prevent a CLEC from ever breaking
even. And that's if they bother to even negotiate. As far as I'm
concerned, any ILEC who hasn't passed Section 271 by now (none have!)
should be penalized by being banned from even asking for the next five
years, and fined big time if they don't meet all of their obligations
within five months. OF course it'll never happen.
> Unlike years ago when each customer required a dedicated copper pair
> and carrier systems were expensive and limited, it is easy today to
> lay high capacity fiber. Cable companies rapidly wired much of the
> country with coax, then came back and wired them with fiber. There is
> no reason a competing company couldn't build its own independent local
> loop. Indeed, such a company would have an advantage over the Bells
> since its plant would be more modern.
You are kidding, of course. Run the numbers. If you have to
overbuild an existing outside plant and have less than half of the
incumbent's take rate, your cost/subscriber will be much higher no
matter how hard you try. RCN tried it and they're losing money big
time, and they're mosty peddling TV. (Paul Allen apparently needs
another tax loss.) MediaOne does do a nice job of cable telephony,
but that's an incumbent CATV with enough market share on the TV front
to finance the cable. NOBODY pulls new copper, and fiber is too
costly for anybody whose monthly bill is under four figures.
> I have been a Bell Atlantic customer for a great many years and have
> been very satisified with their service.
Is Ripley's still in business?