ICC Reform Step 3

We’re in the midst of reviewing all of the ILEC “Step 3” filings so our CLEC clients will know what their new terminating end office switched access rates must look like (or be based on in the case of composite access rates) effective July 31, 2014. CLECs missed out on the fun of actually calculating the rates this round and are simply in the role of benchmarking against the ILEC rates. So, CLEC winners and losers are determined by how each ILEC decided to effect these reductions.


While there does not seem to be a lot of latitude for creativity here – there are really only three elements to deal with (four if you include the diminutive Information Surcharge) — the ILECs did make it interesting. Verizon gets points for style since it created a new element – the Composite Terminating End Office Charge (CTEOC — pronounced sit ē ôkI assume?) and dumped the rest. AT&T took a similar approach, but instead of a new element they just loaded up terminating Local Switching. CenturyLink simply reduced each of the end office elements in a proportional manner.

But when it really got interesting was when I compared the ILEC filed rates with my early estimates of what the new end office rates should look like based on the Step 3 reduction calculations. The missing pieces in my calculations, known  only to the filing ILECs, were 1) the per minute equivalent rate for Dedicated Trunk Ports (DTPs), which are billed on a monthly recurring basis*; and 2) the overall mix of Dedicated Trunk Ports vs. Common Trunk Ports (CTPs). My initial estimates assumed 9000 minutes per DS0 per month, and a 90/10 DTP/CTP split.

Assuming the ILECs did their calculations correctly, deviations from my estimates  would tell me something about the assumptions I made regarding these missing pieces. Here are just a few examples: Verizon’s proposed CTEOC in the former Bell Atlantic areas is $0.003162. Under my initial assumptions, the reduced rate would have been $0.0026999. Looking at it another way, if we lived in a world with just CTPs, the reduced rate would have been $0.002963. This tells us that Verizon gets more revenue on a per minute equivalent basis from DTPs than from CTPs. Not a huge surprise, but mildly counterintuitive.


Along those same lines, AT&T’s proposed terminating Local Switching rate in the former SWBT areas is $0.003898. In this case, if you add the current CTP and Local Switching rates, you only get $0.003463! This tells us that SWBT gets substantially more revenue on a per minute equivalent basis from DTPs than from CTPs – by my calculations about three times as much.


On the other end of the spectrum, we have AT&T’s proposed terminating Local Switching rates in CA of $0.004036. So, in this case, DTPs were worth quite a bit less (again, on an equivalent basis) than CTPs. Of course, we all knew that the former PacBell area had a freakishly high CTP rate, so this was not a big surprise.


Why does this matter? For benchmarking CLECs, this kind of rate mixing and matching can create winners and losers. Depending on a CLEC’s mix of common vs. dedicated ports and what area of the country they serve, their effective Step 3 reductions could deviate significantly from their competitors.


Are you a Step 3 winner or Step 3 loser? Shoot me an email and we can help you figure it out!


biggest Winner logo3 biggest loser


              * Look for an upcoming blog on the different

              treatment of the Dedicated Trunk Port charges.







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