Hardly a coincidence

When two seemingly unrelated events turn out to be linked, the connection can be fascinating: I've never forgotten an episode of the TV science series Nova-originally aired at least 10 years ago-in which researchers uncover a relationship between an asteroid that hit the earth and the extinction of the dinosaurs. While not so dramatic, such unexpected links also occur in telecom from time to time.

Item No. 1. A few weeks ago, I wrote about the dial-around long-distance market (Telephony, Jan. 26, page 112). For several years, smaller interexchange carriers invited customers to bypass their regular IXC and save money. Recently, MCI entered the dial-around market through its Telecom USA subsidiary, and I was intrigued that the company found that market lucrative enough to spend huge TV advertising dollars to support it.

Item No. 2. More recently, Telephony has covered access charge reforms that went into effect Jan. 1 (Telephony, March 2, page 68). Per-minute access charges, payable by the IXCs to the incumbent local exchange carriers, have been reduced slightly. Per an FCC mandate, however, IXCs are still expected to pay the same overall amount for access: To make up the difference, IXCs now must pay the LECs a monthly presubscribed IXC (PIC) charge-piquantly pronounced like "pixie" by regulatory types.

How IXCs are passing these charges on to their customers has generated controversy, which has obscured some equally important questions about the access charge changes-like whether IXCs will still pay the same overall amount. For example, because dial-around carriers typically are not a customer's presubscribed IXC, they pay very little in PIC charges.

Dial-around has always been a good strategy for obtaining customers through a low-risk, soft-sell approach. Now that dial-around carriers can benefit from reduced per-minute access charges while avoiding the monthly flat fees, it's an ever better-looking business-especially because an even higher percentage of access cost is due to be shifted to flat fees over time. Meanwhile, the presubscribed carriers may be left paying fees for customers who no longer give them any business.

Is it a coincidence that MCI started testing its dial-around offering about the same time that access charge reforms were announced, launching nationwide shortly before those reforms went into effect? I'd be surprised if these events were unrelated.