Policy

Plan Would Cost Cable at Least $200M

8/17/2004 12:09 PM Eastern

A telephone-industry plan to overhaul the country’s Byzantine access-charge and intercarrier-compensation regimes would cost cable at least $200 million in the first year.

The plan -- developed by AT&T Corp., SBC Communications Inc. and other phone giants -- would require cable companies to kick in $1-$1.20 per month, per broadband subscriber to help maintain affordable dialtone service throughout the country.

On a yearly basis, the plan would siphon off $208 million-$250 million in cable-modem revenue. The amount would increase as cable companies add high-speed-data customers.

Cable’s cost estimate was provided by Gary Epstein, a Washington, D.C.-based attorney for the Intercarrier Compensation Forum, the nine-company group that fashioned the cable surcharge.

Access charges are paid by long-distance companies to local phone carriers that originate and terminate long-distance calls. Intercarrier-compensation charges are fees that competing carriers pay one another to exchange local traffic.

Cable companies currently do not contribute video-programming or high-speed-data revenue to universal service. MSOs such as Comcast Corp. and Cox Communications Inc. do contribute based on a portion of their circuit-switched phone revenue.

Cable operators once paid 5% of their modem revenue to local governments as a franchise fee, but those payments stopped when courts and the Federal Communications Commission determined that cable-modem service was not a cable service under federal law.

Over the years, access charges have helped to support universal service, but the rapid growth of the cellular-phone industry and the advent of voice over Internet protocol have taken business from long-distance companies, shrinking access-charge revenue.

With the system starting to collapse, AT&T and SBC decided to join forces in an effort to expand the contribution pool by creating a new system that included a tax on cable-modem revenue.

The plan -- a 99-page document delivered to the FCC Monday -- would also require cable to contribute VoIP revenue.

The FCC will need months to review the plan.

September