TMI's Raiders of the lost ARC


Dr. Rene’ Belloq to Indiana Jones: “Inside the Ark are treasures beyond your wildest aspirations.”



With some ARCs now at $2.00 per line per month, I would not say the charge rises to the level of “treasures beyond your wildest aspirations,” but it’s not exactly trivial either.

Of course, I’m talking about the Access Recovery Charge (ARC) the FCC authorized the ILECs to charge in the ICC Reform Order. Because that decision is forcing reduced terminating switched access rates, the ARC helps ILECs recover these lost revenues. (It also shifts significant revenue from the intrastate jurisdiction to interstate, and thus warranted some attention on the revised 499-A form.)

The FCC capped these charges — the maximum theoretical ARC, for example, for customers of price cap ILECs would be $2.50 after 5 years. The FCC expected, however, that the average actual ARC would be less than half that. A sample of current RBOC ARCs are:

ARC snapshot 

(see download at the end of this article for a complete chart on ARC included in our free LEC End User Charge spreadsheet)

But what about CLECs? At first glance, it looks like the FCC prohibits CLECs from charging an ARC:

           “We decline to provide an explicit recovery mechanism for competitive LECs.”


       “…we disagree with parties that advocate making the recovery mechanism [the ARC]  we adopt today available to all carriers, both incumbent and competitive, or to all carriers that currently receive access charge revenues.”

When you look more closely, though, a different story emerges. They say CLEC “end-user charges are not subject to comparable rate regulation and therefore those carriers are free to recover reduced access revenue through regular end-user charges.”

The question, then, is what is a “regular” end user charge?

The FCC’s footnote on this comment is helpful: 

          For instance, the Commission has declined to regulate the SLCs of competitive LECs. See Cost Review Proceeding for Residential and Single-Line Business Subscriber Line Charge (SLC) Caps; Price Cap Performance Review for Local Exchange Carriers, CC Docket Nos. 96-262, 94-1, Order, 17 FCC Rcd 10868, 10870 n.8 (2002) (subsequent history omitted); see also CLEC Access Charge Order, 16 FCC Rcd at 9955, para. 81 (stating that competitive LECs competing with CALLS incumbent LECs are free to build into their end-user rates a component equivalent to the incumbent LEC’s SLC).

So, CLECs are free to charge end user components that are equivalent to the ILEC components, and the Subscriber Line Charge (SLC) is the example they used. It’s worth noting here that the ICC Reform Order also allowed ILECs to combine the ARC with the SLC to form a single charge, so it appears we can extend that freedom to CLEC ARCs as well.

The bottom line is CLECs are not subject to FCC end-user rate regulations, and are free to charge SLCs, ARCs or any other end-user element of their choosing (as long as it does not violate Truth-in-Billing requirements). As switched access revenues continue to decline, an ARC can soften the blow a bit. The ILECs have not been shy about taking advantage of this recovery element, and it seems CLECs should not be either.

One more thing — CLECs generally enjoy the same level of rate-setting freedom intrastate as they do interstate. Establishing an ARC at the state level will avoid the burden (to the CLEC and its end users) of Federal USF charges that would apply to any new end user interstate charges.


LEC End User & ARC rates



 About Carey Roesel