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Access charges are the fees that are paid to telephone networks to access their networks.  Access charges are a form of cost shifting that supports the most expensive parts of the telephone infrastructure.  Individuals pay flat rate access charges (Subscriber Line Charges or SLCs. These are also known as "customer access line charge" (CALC) or "end user line charge" (EUCL)) on their phone bill, generally about $3.50 for the first line and up to $6 for the second [these rates have increased].  Long distance telephone companies (IXCs) pay metered per minute access charges (switched access charges) to the local network both to originate and terminate the telephone call.  If the access charge rate is 2 cents per minute, the long distance company would pay 2 cents to the local network of the individual making the call and 2 cents per minute to the network receiving the call, creating a 4 cents per minute fee for that call.

Internet Service Providers (aka enhanced service providers or information service providers) are exempt from these access charges.

Although the Commission has recognized that enhanced service providers (ESPs), including ISPs, use interstate access services, since 1983 it has exempted ESPs from the payment of certain interstate access charges. Pursuant to this exemption, ESPs are treated as end users for purposes of assessing access charges. Thus, ESPs generally pay local business rates and interstate subscriber line charges for their switched access connections to local exchange company central offices. They also pay the special access surcharge on their special access lines under the same conditions applicable to end users. In the Access Charge Reform Order, the Commission decided to maintain the existing pricing structure and continue to treat ESPs as end users for the purpose of applying access charges. The Commission stated that retaining the ESP exemption would avoid disrupting the still-evolving information services industry and advance the goals of the Telecommunications Act of 1996 to ‘preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services.’

In re GTE Telephone Operators GTOC Tariff No. 1 GTE Transmittal No. 1148, Memorandum Opinion And Order, CC Docket  No. 98-79, 13 FCC Rcd. 22466,  para 7 (October 30, 1998), recon. denied (February 26, 1999). 

VoIP providers have sought to bypass access charges by taking advantage of the ESP exemption. If a VoIP service is an information service, they avoid the IXC access charge; if however, they get categories as a telecom service, then they must pay an access charge to the local exchange carrier. Where access charges have been reduced to zero, such as at the interstate level, this becomes less of a factor. However there remains intrastate access charges that continue to be substantial and a source of contention for VoIP arbitrage. See Florida.

There are also other important telephone fees to consider that are important to Internet service.  These include reciprocal compensation and universal service.

In sum, since ISPs are treated "as if" they are end users, they pay the access charges that end users pay.  These are generally SLCs on business lines.  They do not pay the switched access charges of long distance companies.

See also:

Federal Activity

Regulatory Proceedings
 

Closed

In the Matter of Federal-State Joint Board on Universal Service,  CC Docket No. 96-45  (April 10, 1998) (aka Report to Congress, Steven's Report) 
See VoIP.

  • In re GTE Telephone Operators GTOC Tariff No. 1 GTE Transmittal No. 1148, Memorandum Opinion And Order, CC Docket  No. 98-79, 13 FCC Rcd. 22466,  para 7 (October 30, 1998), recon. denied (February 26, 1999). 

  • Access Charge Reform, Notice of Proposed Rulemaking, Third Report and Order, and Notice of Inquiry, 11 F.C.C.R. 21354, 5 Comm. Reg. (P & F) 604 (1996)

Interstate Access Charge Reform NOI 

CC Docket No. 96-262; CC Docket No. 94-1; CC Docket No. 91-213; CC Docket No. 96-263, CC Docket No 96-488
Comment period has closed but you may still express your opinion. This is a Permit-but-Disclose proceeding which means you can still provide your opinion to the FCC but must provide a summary of any presentation to the FCC Secretary for inclusion in the record.  FCC Ex Parte Fact Sheet ¶ 10. 

"The Commission's existing policies have been designed for traditional circuit-switched voice networks, and thus, may impact the development of emerging packet-switched data networks used by the information service providers.  The Commission determined that it must identify those policies that would best facilitate the development of the high-bandwidth data networks of the future, while preserving efficient incentives for investment and innovation in the underlying voice network.  Consequently, the Commission today issued an NOI to seek comment on whether it should, in addition to access charge reform, consider actions relating to interstate information services and the Internet.  In particular, in light of concerns raised over congestion on the public switched network, the Commission sought comment on how it can most effectively create incentives for the deployment of services and facilities to allow more efficient transport of data traffic to and from end users.  " FCC Public Notice 1996
  • Amendments of Part 69 of the Commission's Rules Relating to Enhanced Service Providers, CC Docket No. 87-215, Order, 3 FCC Rcd 2631 (1988) (ESP Exemption Order).
    • "On June 10, 1987, we adopted a Notice of Proposed Rulemaking in this docket to consider whether providers of interstate enhanced services should be assessed interstate access charges. We sought comment from interested parties on this issue, and asked for detailed data on the state of the enhanced services industry.   The record in this proceeding indicates that, as a result of a number of complex and interrelated factors, the enhanced services industry is entering a unique period of rapid and substantial change.   First, the Open Network Architecture (ONA) Plans required in our Computer III proceeding were filed on February 1, 1988, but have not yet been implemented.   Second, the District Court overseeing the Modification of Final Judgment (MFJ) in the Bell System divestiture case has recently modified the restriction in the decree that had previously prevented the Bell Operating Companies (BOCs) from offering any information services. These regulatory and judicial events make this an unusually volatile period for the enhanced service industry.   We have decided not to eliminate the exemption from interstate access charges currently permitted enhanced service providers at this time.   Under the circumstances, we also find that any discrimination that exists by reason of the exemption remains a reasonable one so long as the enhanced services industry remains in the current state of change and uncertainty. [FN4]  While we could simply keep this docket open until these changes have run their course, this approach could add to the substantial uncertainty already confronting the enhanced services industry.   Accordingly, we will terminate this rulemaking proceeding.   We will continue to observe the effects of these factors, and at some appropriate future date, we can revisit the issue.   We  would, of course, commence any such proceeding by issuing another Notice of Proposed Rulemaking. " ¶ 1.
  • Notice of Proposed Rulemaking 2 FCC Rcd. 4305 July 17, 1987
      • In 1983 we adopted a comprehensive "access charge" plan for the recovery by local exchange carriers (LECs) of the costs associated with the origination and termination of interstate calls. At that time, we concluded that the immediate application of this plan to certain providers of interstate services might unduly burden their operations and cause disruptions in provision of service to the public.   Therefore, we granted temporary exemptions from payment of access charges to certain classes of exchange access users, including enhanced service providers.   Three years later, in the Second Report and Order in CC Docket No. 86-1, in which we eliminated the exemption for resale carriers, we announced our intention to reexamine the exemption granted to enhanced service providers after our consideration of certain related issues in the Computer III proceeding. We recently completed that consideration. We issue this Notice of Proposed Rule Making to consider whether interstate access charges should be assessed on enhanced service providers.   We tentatively conclude that it is now appropriate that enhanced service providers, like providers of interstate basic services, be assessed access charges for their use of local exchange facilities, and we propose amendments to our rules to accomplish that end.
      • In the Notice of Proposed Rulemaking, the FCC "tentatively concluded that an access charge exemption was no longer appropriate."  The House Commerce Committee held hearings at that time and argued that the FCC should not impose access charges on ESPs.  In this Order, the FCC "concluded that this is not an appropriate time to assess interstate access charges on the enhanced services industry,  we will terminate this rulemaking proceeding."  Para. 20. The fact that the FCC proposed imposing access charges on ESP in the past was given as a justification during Committee Testimony for the passage of the Internet Access Charge Prohibition Act of 2000 by the House.
    • In the Matter of Northwestern Bell Telephone Company Petition for Declaratory Ruling MEMORANDUM OPINION AND ORDER 2 FCC Rcd. 5986 Adopted:  September 9, 1987;  Released:  October 5, 1987
      • On December 9, 1986, Northwestern Bell filed a petition for a declaratory ruling that Teleconnect is required to pay access charges for interstate calls placed to a Teleconnect service called Talking Yellow Pages.   Teleconnect filed an opposition to the Northwestern Bell petition on December 23, 1986, in which it asserts that its Talking Yellow Pages is an enhanced service and is therefore entitled to an exemption from interstate access charges under our rules.   On January 21, 1987, we released a public notice requesting comments on the petition.   In this order we clarify that under our current rules, enhanced service providers are treated as end users for access charge purposes.   Since end users would not pay interstate access charges when using local exchange facilities in the manner Teleconnect is using them to provide Talking Yellow Pages, we conclude Teleconnect is similarly not subject to such charges.   Accordingly, the petition of Northwestern Bell is denied.
    MTS and WATS Market Structure
    Order, 97 FCC 2d 682 (1983)    		 .Docket No. 78-72
    "As Internet services were growing, the telephone network was splintering. One's long distance service was no longer the same as one's local telephone service. In order to address how these telephone services would relate to each other, the FCC initiated the access charge proceedings. "'Access charges' are fees collected by the local telephone companies for the origination or termination of any interstate or foreign
    telecommunication".(19) In other words, it is the fee paid by long distance networks to interface with the local telephone networks. Included in the proceedings was consideration of how Enhanced Service Providers would fit within this regulatory scheme. 

    "In 1983, the Commission determined that Enhanced Service Providers would be exempt from the access charge requirements of long distance carriers(20) even if an Enhanced Service Provider may be providing long distance communications services to users.(21) Thus, Enhanced Service Providers are "end users".(22) As end users, they would acquire telephone service just line any other business.(23) 

    "Once again, the rational for the Commission's actions was based on maintaining the competitive Enhanced Service Provider market. According to the Commission, 

    At the time we adopted the original access charge plan, however, we concluded that the immediate application of that plan to certain providers of interstate services might unduly burden their operations and cause disruptions in providing service to the public.  Therefore, we granted temporary exemptions from payment of access charges to certain classes of exchange access users, including enhanced service providers. . . . We reiterated our view that rate shock, which provided the original basis for the special treatment of enhanced service providers, justified a temporary but not a permanent exemption . . .(24)
    "The Enhanced Service Provider industry was in a unique period of change. Telcos were entering the Enhanced Service Provider market for the first time without the use of separate subsidiaries.(25) Computerize information networks such as Compuserve and America Online were coming online and capturing the public attention.(26) Thus, the Commission concluded that this volatile and competitive market justified the continuation of the Enhanced Service Provider exemption from access charges. "

    --"The Internet at the FCC: Cybernauts vs. Ma Bell." (1997)

    In the Notice of Proposed Rulemaking, the FCC "tentatively concluded that an access charge exemption was no longer appropriate."  The House Commerce Committee held hearings at that time and argued that the FCC should not impose access charges on ESPs.  In this Order, the FCC "concluded that this is not an appropriate time to assess interstate access charges on the enhanced services industry,  we will terminate this rulemaking proceeding."  Para. 20. The fact that the FCC proposed imposing access charges on ESP in the past was given as a justification during Committee Testimony for the passage of the Internet Access Charge Prohibition Act of 2000 by the House.

    		 .

    Papers

    • Florida Public Service Commission White Paper on Internet Pricing: Regulatory Implications and Future Issues September 25, 2000
    • J. GREGORY SIDAK, American Enterprise Institute (AEI), DANIEL F. SPULBER, Northwestern University Cyberjam: The Law And Economics Of Internet Congestion Of The Telephone Network, Harvard Journal of Law and Public Policy, Vol. 21, p. 327, 1998 SSRN Electronic Paper Collection (argues that the FCC temporary exemption from access charges for ISPs should be terminated)
    • Robert Cannon, "The Internet at the FCC: Cybernauts vs. Ma Bell." (1997) (A discussion of the access charge notice of inquiry, of telco claims that ISPs are not paying their fair share on the public switched telephone network, and of telco claims that the Internet is causing congestion on the public switched telephone network).
    • "What is the "Enhanced Service Provider" Status of Internet Service Providers?", FCBA News (February 1997).

    Caselaw

    • Southwestern Bell Tel. Co. v. FCC, 153 F.3d 523, 544 (8th Cir. 1998) (concluding that, based on Congress's intent to leave Internet unregulated, ISPs should be excluded from the imposition of interstate access charges)

    Links

      Access Charge Reform Proceeding

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