Discussion Papers

Bridger Mitchell, Ingo Vogelsang

Interconnection of Telecommunications Networks in the USA
Nr. 138 / Dezember 1994

Summary

US telecommunications policy is subject to complex tripartite authority - 50 state Public Utilities Commissions, the Federal Communications Commission and the antitrust laws. Since interconnection affects both interstate and intrastate telecommunications, it is regulated on both levels, sometimes with conflicting outcomes. In particular, the same type of interconnection service can be priced differently.

Interexchange carriers interconnect with local carriers for access to final consumers. Equal-access arrangements have been fully realized. Mobile carriers are entitled to any of several technical arrangements for interconnection to local networks and about half are required to provide equal access to interexchange carriers. However, the competing mobile carriers do not offer equal access to their customers and instead negotiate bulk rates with a single long-haul carrier. Other local access carriers - competitive access providers and cable television operators - have negotiated interconnection with local exchange carriers in a few states, encouraged by state regulators. Most interconnection arrangements have been reached as an outcome of regulatory or antitrust court proceedings so that the major terms of interconnection have regulatory approval. Carriers may file tariffs and rates for individual services within the frameworks established by these proceedings, and in the case of price-cap regulated charges may vary rates within established ranges. In addition, voluntarily negotiated arrangements are possible and have been responsible for leading examples of interconnection of other access providers in local networks.

Recent FCC decisions extended the right for expanded interconnection to all types of interconnectors, including interexchange carriers, competitive access providers, service providers and private networks and generally required physical collocation. Although the FCC ruling on physical collocation was legally overturned in Summer 1994, physical collocation has been realized in many cases and is likely to remain of great practical importance.

US regulators allowed TOs to integrate information services into their other network activities provided they adopted an open network architecture that made basic network access and information service elements available on an unbundled and non-discriminatory basis to other information service providers. However, only limited unbundling has been realized in practice and pricing of ONA services has not been nationally standardized.

Development of standards for interconnection between service providers and carriers is facilitated by an information industry liaison committee that meets regularly to develop and publish information and standards when specific services and types of access are requested of carriers. The US has extensive experience with interconnection to intelligent network services in the markets for freephone services and credit-card calling. Carriers offer freephone service through national, centrally-administered databases. This technology enables a subscriber to change to a different carrier yet retain a specific freephone number.

Federal regulators have sought to extend the principle of open network architecture to the services and components of a future intelligent network. Preliminary discussion focuses on how these objectives can be made compatible with protection of network security and reliability and realizing economies of scope of the primary network operator.

Vertical dis-integration created a huge market for interconnection of US telephone carriers. US regulators and courts have used network and service provider interconnection as a tool to actively encourage the development of competition in the telecommunications sector. Equal access, network unbundling and collocation were implemented to achieve this objective. Rate rebalancing is occurring, but more slowly than the federal regulator had proposed.

Interconnection revenues for switched access were used to finance the unbalanced rate structure. Dual regulation has accelerated the adoption of expanded interconnection but has stood in the way of uniform standards for an open network architecture.

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