Compromise Bill Calls for Phase Down Reduction of Telephone Intrastate Access Charges

March 26, 2011
Dwayne Page
Les Greer

Rural telephone companies, including DTC Communications will be forced to reduce their intrastate access charges to AT&T and other larger carriers beginning April 1, 2012 under legislation making its way through the Tennessee General Assembly.

The bill on its way to passage is a compromise between the smaller and larger telecommunications companies. The original bill, which had the support of most state legislators, would have called for an immediate reduction in the access fees resulting in a loss of revenue to the rural carriers, including DTC Communications by hundreds of thousands of dollars yearly.

Under the compromise bill, rural telephone companies including DTC will be forced to reduce their intrastate access charges in a phase down over the next six years, starting April 1st, 2012 until the rate is just under two cents per minute, the same as the interstate access fees.

Les Greer, CEO of DTC Communications, told WJLE Friday that the local cooperative will still lose revenue under this legislation, but since it is a phased in reduction, DTC will have time to adjust. "The reason we wanted to leave things as they were is because we have a contractual arrangement between the large carriers and DTC. It was governed by the Tennessee Regulatory Authority and the TRA set those rates. We (DTC) are charging all of those carriers the same rates and they have not changed since 1992. We didn't think the legislature ought to be setting retail rates between two commercial enterprises. Their (large carriers) argument was that the interstate rate is much lower than the intrastate and that they (rates) ought to all be the same. But there are some other components that help offset those lower revenue streams on the interstate rate that this bill does not take into account," said Greer.

"On the interstate rate, we (DTC) are currently charging just under two cents per minute. We charge just under four cents per minute for the intrastate rate. The bill proposes to take the intrastate rate down to the interstate rate. This will impact DTC Communications roughly about $115 to $120 thousand dollars a year for each year of the phase down and the phase down will start in April, 2012. This buys time for us to figure other revenue sources or other ways to increase revenues to offset that loss of revenues," said Greer.

"I would like to thank all the members of the cooperative and the business community (who supported us) on this bill with our legislators. I would especially also like to thank State Senator Mae Beavers and State Representative Terri Lynn Weaver for all the hard work they've done on our behalf. Unfortunately, we weren't as successful as we would have liked to be but I do appreciate their efforts and the efforts of the employees of DTC for speaking out on this issue," Greer concluded.

As amended, the legislation will reduce the disparity between intrastate and interstate access fees by a rate of 20 percent each year for five years beginning April 1, 2012 and each subsequent April 1.

When a customer places a telephone call, it generally travels over multiple networks, which are owned by different telephone companies, en route to its destination. To compensate owners for the use of their networks, telephone companies charge each other for calls that originate on each others networks. The carrier whose customer places the call pays a per-minute charge to the carrier whose customer receives the call. When the call is a long distance call, the charges are referred to as access charges.

There are two kinds of access charges. Calls that originate in one state and terminate in a different state are subject to interstate access charges. These calls are regulated by the Federal Communications Commission (FCC) and are the same throughout the U.S. Calls that originate and terminate within the same state are subject to intrastate access charges and fluctuate throughout the state. It is the intrastate access charges that this bill addresses.

Senate Bill 598 establishes a requirement that all telephone companies in Tennessee charge other telephone companies the same rate for connecting calls into their network, whether the calls originate inside or outside the state. It establishes a defined transition period during which intrastate access rates will be brought down in equal steps to the same level as interstate access rates.

The bill also provides the ability for telephone companies to account for increases in interstate access rate changes, which are federally governed, and change their intrastate rates to mirror federal changes. In addition, it requires all telephone companies to file and maintain a tariff price list with the Tennessee Regulatory Authority setting their access rates and structures.

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