Wireline Companies Look to FCC Decisions

Rural Arkansas telephone companies may be facing a cut to their revenue streams, depending on what the Federal Communications Commission decides to do next year.

The FCC has been discussing reductions in interstate access charges in an effort to foster competition among carriers, but local exchange carriers rely on interstate and intrastate access charges for a large portion of their revenue.

Rick Reed, general manager of Prairie Grove Telephone Co., said about 40 percent of his company’s annual revenue comes from access charges.

Interstate access charges are earned by a company, such as PGTC, when it completes a call to a local customer from someone in, say New York. The New York company pays PGTC about 1.5 cents a minute for the usage of its local switches and lines.

The interstate access charge has already been reduced from about 6 cents per minute over the past five to six years. Intrastate access charges, assessed by the Arkansas Public Service Commission, are about 5.7 cents a minute, said Greg Ashcraft, a controller with South Arkansas Telephone Co. of Hampton and a vice president with the Arkansas Telecommunications Association.

In February, the FCC filed a notice of proposed rulemaking document entitled “Developing a Unified Intercarrier Compensation Regime.”

The document supports reasons why access fees should be changed and then proposes a “bill-and-keep” approach: “Under a bill-and-keep approach, neither of the interconnecting networks charges the other network for terminating traffic that originates on the other carrier’s network. Rather, each network recovers from its own end users the cost of both originating traffic delivered to the other network,” the document reads.

Some principals of rural telephone companies worry that if the FCC eliminates access charges, they will have to pass costs on to customers.

But access charges are only one of a plethora of revenue issues small telephone companies face.

Ashcraft said, on top of the FCC threat, rural carriers are losing customers to wireless services and VoIP (voice over Internet protocol), a way to make long distance calls over the Internet.

“We’re getting bombarded from all sides,” Ascraft said.

Of course, Ashcraft and others point out problems with wireless and VoIP, which include reliability and 911 service.

Dean Gibson, vice president of Pinnacle Communications of Lavaca and president of the ATA, said the cost per unit of providing service in Fayetteville is less for a larger company than it is for him to supply service in his area.

The FCC essentially requires him to have the same technology and equipment as a larger company and supply the same service to his 3,400 rural customers as SBC offers in Springdale, he said.

“There are certain base costs and I don’t have the customer base to pass it on to,” he said.

Gibson said he doesn’t know for sure when the FCC will make a ruling on access charges, but he expects it will be sometime in early- to mid-2006.

Meanwhile, Reed of PGTC said his company will continue to do what it does best — connect its rural customers to the world.

“Our goal is to provide broadband service to every home that wants it,” Reed said.