Senators Amy Klobuchar, Jon Tester, and Jeff Merley introduced a bill in the Senate aimed to fix the problem. A similar bill was introduced last year that died in committee. This is not a new issue and the FCC has taken several steps in the recent past to try to fix the problem. In 2011 the FCC placed 2,150 calls to rural areas and 344 of them never reached the called party. Another 172 calls were of very poor quality and almost impossible to hear. That’s an astounding one fourth of the calls placed and either failed or didn’t work.
In 2012, in Docket CC 01-92 the FCC prohibited several practices by carriers that were resulting in huge delays in completing calls, in lost calls and in the poor quality. For example, they made it illegal to place a ring onto the phone of the calling party until that call has reached the called party. People making calls heard a long ring and were giving up on calls they placed to rural areas before the call even reached the other end.
That order also put a limit on the number of times that a given call could be handed from one carrier to another. That is something that is common in the world of least-cost call routing. Carriers have tables that choose one of many possible different carriers to send a given call based upon the price that carrier is going to charge them. But then the carriers they hand the calls to do the same thing and it’s possible for calls to be handed between carriers multiple times during the process.
This is a problem for calls made to rural areas because the access charges in those areas are higher than the charges for calling urban places. Access charges are the fees that a local telephone company bill to long distance carriers for using their networks. In a world of least-cost routing, many carriers don’t want to pay the higher cost to complete a rural call. The FCC has taken steps to remove the price barrier by phasing the access charges for terminating calls to zero. But even that isn’t going to completely eliminate the problem because there is also a mileage charge component to access charges, and so places that are far outside of cities will continue to cost more than calls to urban areas.
The FCC further implemented new rules in 2013 (Docket WC 13-39) that give the FCC the ability to fine carriers who don’t properly complete calls to rural locations. But the problem still persists. The common belief in the industry now is that some long distance carriers are just dumping rural calls and not handing them to anybody else. The proposed new laws would make it easier for the FCC to prosecute such carriers.
The problem that least-cost routing creates in the industry is that the margins on long distance calls are really slim for the intermediate carriers. For intermediate carriers that guarantee their rates to others, too many calls to rural places can put their profits underwater.
In the industry we call this sort of situation “arbitrage”. This arises when there are different costs for doing the same function in different ways. Arbitrage situations have always caused troubles. Carriers who can bill the higher prices in an arbitrage situation strive to bill for as many minutes as they can. And carriers who pay those higher prices look for alternatives to pay something less. A significant percentage of the carrier issues with long distance over the last few decades are the results of these arbitrage situations.
The problem the FCC faces is that it’s really hard to catch the carriers who are dropping calls. The whole phone network was established with an understanding that when a carriers is handed a call to that they always tried their best to complete it. That understanding is what made the US phone network the envy of the world. But generally there were not too many companies involved in a long distance call. Most calls years ago involved the local telco where the caller lived, one long distance carrier in the middle, and another local telco where the called party lived.
But today the least-cost routing tables and the fact that many calls are partially or totally VoIP calls makes it hard to even find out which carriers are in the middle of a given call. If a carrier is dumping rural calls, if they are smart enough to destroy any records that they ever received such calls, it’s very hard to definitely prove they are the culprit.
We are undergoing a transition over the next decade to an all-IP network between carriers. This might eliminate some of the problem if that reduces the need for intermediate least-cost carriers. But it also might not change anything, and as long as there is a price difference between completing a rural and an urban call, this problem is likely to remain.