Intercarrier compensation represents the payments made by the telecommunications companies who originates the call to the telecommunications carrier or service provider that terminates the call. This regime comes in 2 flavors: switched access (compensation for long distance calls) and reciprocal compensation (compensation for local calls).

Intercarrier Compensation Reform

The FCC is in the process of overhauling the mechanism by which each carrier would pay each other to originate and terminate calls. There are a number of loopholes in the current regime established in the Telecommunications Act of 1996 and subsequent proceedings. The main loopholes are compensation for VoIP and wireless calls.

Why is it important?

Intercarrier compensation reform is important because the current proposals stand to reduce expenses for large carriers and increase expenses for smaller carriers and end users.

What is the impact on the telecom industry?

Long distance companies, namely AT&T and Verizon, who currently pay the majority share of intercarrier compensation charges will show expense decreases. Small companies, namely start up VoIP and wireless providers, will see significant increases in intercarrier compensation. Additionally, AT&T’s proposal also vies to shift additional expenses to end users by increasing monthly regulatory fees called Subscriber Line Charges (SLCs).

What is the impact on small businesses?

Small businesses could see increases to Subscriber Line Charges (SLCs) if the AT&T proposal prevails.

How can telecommunications companies position themselves to survive?

The only way to survive is to make sure you are billing every minute that you can.

Additional Resources: Download articles submitted to the FCC from other telecommunication companies

Eva Fettig is Co-Owner of UsageWorks LLC, providing software services to the telecommunications industry through reporting, reconciliation, and data trend analysis.  Ms. Fettig is also Principal of The Fettig Group, offering consulting to telecommunications service providers in the areas of intercarrier compensation recovery, profitability management, regulatory, and compliance. UsageWorks allows you to not only know what was billed accurately, but also know what wasn’t billed and most importantly provides the necessary roadmap to closing the gaps. UsageWorks scenarios can give you an insight into change to revenue as a result of intercarriercompensation reform. The content of this article is copyrighted and cannot be distributed without a written consent of UsageWorks and Eva Fettig.