Chapter II

//Chapter II
Chapter II 2018-06-12T04:54:24+00:00

Chapter II
The Major Changes

Equal Access For All

Prior to the divestiture (this is a word you often hear when referring to the Bell break-up which simply means a break-up or a separation) MCI had serious problems in being able to connect its services to the AT&T network, and in many cases, MCI was supplied with inferior connectivity compared to the service provided to AT&T Long Lines. Therefore, one of the stipulations of the break-up was that all of the RBOCs had to offer equal access for long distance to their competitors (The operative term is long distance. Remember this because it will be important later). Doing so would not be cheap, and the FCC and AT+T estimated it would cost the RBOCs approximately $2.5 billion dollars to provide the network.

To pay for this network, the FCC instituted access fees. Long distance companies pay this fee to the RBOC in order to access the network, and customers pay it as well. We see it on a phone bill as being a Subscriber Line Charge. Currently, all consumers pay a $3.50 FCC Subscriber Line Charge (sometimes called “End User Common Line”), while the long-distance companies pay approximately over 40% of their entire long-distance revenue back to the local operating companies in access fees and related charges.

Rate of Return

Another outcome of the dissolution was that the RBOCs were limited to a rate of return of 11%. Anything else that was earned above that was to be reinvested back into company.

Division into LATAs

Although it will not be presented again in this report, another interesting development was jurisdiction over a phone call. Was it a long distance call? Was it local call? Was it a Toll call? So the government created small geographic areas and dubbed them LATAs for Local Access Transport Areas. Latas were about the size of the historical area codes and they determined who owned the call.

This created a very large mess. For example, a Toll call, a call within a LATA, but not in the “local calling area,” had a different price and was handled differently from the point of view of everything from staffing and pricing to technological access. The Baby Bells were only allowed to handle calls that were “IntraLATA” (calls that started and terminated within a specific boundary) while a long distance call was one that crossed LATA lines, even within a specific state. Long distance calls are also known as “InterLATA” and “Interstate” calls, because they cross both LATA lines as well as state lines. Because of these artificial creations, a call from New York to Montauk, which is only 75 miles away but within the same LATA, and only handled by NYNEX in 1992, cost 90% more than a call to California, 3,000 miles away, handled by ATT!