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The Changing Web of FCC Regulation of Telephone Service

Susan Bahr
Telecommunications Attorney
Blooston, Mordkofsky, Jackson & Dickens
2120 L Street, NW - Suite 300
Washington, DC 20037
Phone: (202) 828-5554
Fax: (202) 828-5568
[email protected]

The Federal Communications Commission (FCC) regulates a number of entities, including telephone companies, ITFS licensees and private radio licensees. It also adopts regulations that must be followed by end users of telecommunications services, such as higher education institutions. By keeping abreast of FCC regulations, you can determine how best to manage your telecommunications costs, how to profit from changing telecommunications regulations, and how to ensure your institution�s compliance with regulations that impact end users.

Telephone Numbering

One example of a regulatory change that impacts end users is the conversion from three-digit Carrier Identification Codes (CICs) to four-digit CICs. For example, when you dial 10288 before a long distance number, the "10288" is a carrier access code (CAC) that permits you to reach the long distance company (a.k.a. "carrier") identified by the 3-digit CIC "288." Only 3-digit CICs were assigned in the past, but they have been used up. Now, four-digit CICs are being assigned and must be used with 7-digit CACs. For example, 1010288 is a 7-digit CAC that permits you to reach the carrier identified by the 4-digit CIC "0288."

From January 1, 1998 to June 30, 1998, most local telephone companies will support both three-digit CICs and four-digit CICs. Beginning July 1, 1998, only four-digit CICs will be supported.

Check your fax machines and modems for any preprogrammed telephone numbers that may be using three-digit CICs. Also, check to see that your PBXs will support the additional digits required to use 7-digit CACs. And, most importantly, if you have alarm systems that dial off-campus alarm companies, check with your alarm companies to ensure that the alarm systems will support four-digit CICs.

Faxes and Fax Machines

Another example of regulations that impact your institution as an end user of telephone services are the FCC�s rules concerning the use of fax machines. In a margin at the top or bottom of each transmitted page, or on the first page of the transmission, a fax must include: (a) the date and time it is sent; (b) an identification of the business, other entity or individual sending the message; and © the telephone number of the sending machine or sender. Fax machines made after December 19, 1992 (and fax/modem boards made after December 12, 1995) must have the capability to clearly mark such information on each message

Of course, sending faxes in compliance with these rules may not be as bothersome as receiving unsolicited faxes. The FCC provides suggestions for how to handle unsolicited faxes on its Web page at:

Internet - Rates and Services

The FCC also has an ongoing proceeding in which it is addressing the alleged congestion of the telephone network caused by Internet usage. In 1997, the FCC decided not to impose additional charges for the use of the Internet. Instead, it solicited comment on how it should solve the alleged congestion of the telephone network.

One possible solution was proposed by former FCC Chairman Reed Hundt. He suggested that if competition were introduced in the local loop, local switch and T1 lines, congestion would be reduced.

Hundt stated that the local loop was not designed for digital packet-switched communications, but that competitors should lease the loops for high-speed digital traffic. Local telephone companies may also use the loops for digital transmission. In fact, in the past few months, local telephone companies apparently have increased their marketing of Integrated Services Digital Network (ISDN) services and other digital services which can be used to access the Internet. Digital Subscriber Line technologies which use existing copper loops may offer the added advantage of routing traffic around the local switch.

Hundt also supported the creation of a nationwide packet-switched network for data communications as an alternative to the current circuit-switched network, which is more appropriate for voice services. A call to an Internet Service Provider (ISP) would be recognized by a local switch as a call to that ISP based on the telephone number called, and the local switch could hand off the call to the packet-switched network.

Hundt also stated that T1 lines, which are used by ISPs, are overpriced. The FCC should have power to lower the prices for interstate and intrastate T1s, he said, and the FCC should be given authority by Congress to preempt state regulation of any digital packet network services. But the FCC has been fenced off from regulating intrastate rates and services, as recognized in several recent decisions of the Eighth Circuit Court of Appeals. It likely would take an act of Congress to let the FCC regulate intrastate T1 rates and packet network services. State regulatory commissions likely would pose strong opposition.

In the short term, however, service providers could share traffic congestion information on a real-time basis, and make that information available to end users. The Network Reliability and Interoperability Council (NRIC) made a similar recommendation to the FCC. Telephone companies could use such information to route calls to ISPs via a different node on a network than is used to access the ISP, or perhaps to a different network. Information about the local network, ISPs and the networks that support them could be aggregated and made available to end users on a real-time basis.

With information about Internet traffic, end users that have access choices could make informed decisions about which ISP to use, how to access that ISP and when -- helping to balance the load on the electronic highways just as rush-hour traffic maps in large cities help drivers balance the load on asphalt.

The laws needed to mandate the implementation of all of Hundt's goals likely won�t be enacted in the near term. Not only has Hundt left the FCC, but the five-member Commission has a total of four new Commissioners -- most of whom have a hands-off approach to the Internet. Nevertheless, telephone companies can act on their own to provide increased choices for data communications traffic, and some already have done so.


As of October 7, 1997, the coin rate for making a local call from a payphone was deregulated. In many areas of the country, the local coin rate has increased to 35 cents.

At the same time, changes have occurred in the payments that interstate long distance companies must make to payphone providers for 800, dial around (e.g., the use of a CAC before a number), and operator assisted (i.e., 0+) calls. Some of the issues concerning the amount that must be paid and which long distance companies must pay have been the subject of court appeals. Suffice it to say, however, that payphone owners should be receiving more compensation from long distance companies than they did in the past. Depending on your institution�s contracts with payphone providers, you may be able to profit from the increased compensation that payphone providers now receive. If your current payphone provider will not share some of these increased revenues, perhaps now is the time to shop for another provider.

Slamming Long Distance Service

Slamming has become the number one source of telephone-related complaints received by the FCC and state regulatory commissions. Slamming is the unauthorized change of an end user�s primary long distance company. The fault doesn�t necessarily lie with the unauthorized long distance company. Errors can be made by the subscriber, the underlying carrier for a reseller, or the local telephone company. Mistakes can occur in their internal processes or in communications between these parties.

Resolving any one slamming incident can be complex. If your institution is slammed, you likely would want the local telephone company to undo the change. You also may have the option of filing a complaint with the FCC, or with a state agency. At the federal level, the FCC may impose its standard fine for slamming: $40,000. At the state level, carriers may have their operating authority taken away, or their employees may be subject to imprisonment, depending on state law.

One thing is for sure: the unauthorized carrier must turn over any revenues it receives to the properly authorized carrier. The FCC now is trying to decide whether the authorized carrier should refund those payments to the subscriber, and whether subscribers may obtain damages beyond refunds of their payments.

To prevent slamming, the FCC recommends that end users obtain "PIC freezes" (a.k.a. "account freezes") which require a customer to directly ask the local telephone company to make the carrier change. Freezes may be especially valuable to a university that needs to ensure that account changes aren�t made haphazardly.

Detariffing Long Distance Service

For years, the FCC has repeatedly attempted to detariff interstate long distance service, but to date, the FCC has been unsuccessful due to court challenges. "Tariffs" are the lists of rates for interstate services that long distance companies file at the FCC. Long distance companies generally favor some degree of detariffing because it would appear to give them more flexibility in developing rate plans without having to put them on paper and file them at the FCC.

The two most recent FCC decisions detariffing interstate long distance service have been held up by appeals in court. If briefs and oral argument would be scheduled in the next few months, a court decision may be issued in Fall 1998 or Winter 1999. If the court were to permit some degree of detariffing, long distance companies may begin to detariff their services sometime later in 1999.

Detariffing may be beneficial to large long distance customers, such as higher education institutions. A customer that has a long-term contract that references a tariff may find itself free to look for a new long distance company, depending on the terms of the contract. The large resellers of long distance service similarly may be able to bargain for better terms with their existing long distance company or to shop for another long distance company. Thus, with detariffing, there should be much churn in the interstate long distance industry and many opportunities to shop for better deals.

The need to look for better deals may have been increased by new charges long distance companies now are imposing on their customers. Some companies impose on their customers a "primary interexchange carrier charge" (PIC-C) that the long distance company must pay to the local telephone company. Other companies are charging their customers for their share of the long distance companies� contributions to the federal universal service support mechanism. Still others may be adding charges to calls made from payphones in order to recover the payments that the long distance companies must make to the payphone owners. Because not all long distance companies are assessing all three charges on their customers and they are not charging the same amounts, now may be a good time to reevaluate your long distance service rates and these new charges that your long distance company may be adding to each bill.

Universal Service

Beginning this year, federal universal service support is available to elementary/secondary schools and libraries. Colleges and universities will not directly receive such support, but could benefit by joining bidding groups with elementary/secondary schools and libraries, and obtaining discounts on computer and telecommunications equipment and services.

Contributions to the universal service support mechanism must be made by every telecommunications carrier that provides interstate telecommunications service. This includes colleges and universities that resell interstate long distance service on a common carrier basis. Contributions also must be made by every provider of interstate telecommunications that offers telecommunications for a fee on a non-common carrier basis, except that colleges and universities have been exempted from this requirement.

If your institution resells interstate long distance service on a common carrier basis, check the universal service rules to ensure your compliance with any reporting and contribution requirements.

Penalties for Violating FCC Rules

Although the requirement to use lead sheets or other identification on facsimile transmissions seems to be a minor inconvenience, failure to comply with that FCC regulation or other regulations could expose your institution to fines of up to $10,000 per day for each day of a continuing violation, and up to a total of $75,000. Depending on the severity of the rule violation and other factors, the daily fine may be reduced below $10,000.


With these changing FCC regulations in mind, give some thought about how your institution may profit from the increasing payphone compensation, the potential detariffing of interstate long distance service and the ability to participate in competitive bidding groups for telecommunications services. Check your fax machines, modems, PBXs and alarm equipment to ensure that they can and will use four-digit CICs. Also, check to see that procedures are in place to ensure that facsimile transmissions contain the necessary identification information.

And keep abreast of regulatory developments as they may affect the costs for telecommunications services your institution uses. Such regulations may provide opportunities for increasing profits on services your institution provides to others. Finally, continue to monitor FCC regulatory developments to ensure your institutions compliance as regulations change and new ones are adopted.

Susan Bahr is a telecommunications attorney with Blooston, Mordkofsky, Jackson & Dickens in Washington, DC. She can be reached at (202) 828-5554, and [email protected]. This article does not constitute legal advice. Persons needing legal advice should seek the advice of counsel.

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