News and Finance

In the old days, it used to mean something when a person made a long-distance call. It meant they were paying through the nose for it.

That was before federal telecommunication reforms in the past two decades changed the way companies charged one another for carrying calls across their networks. It was before all-you-can-eat calling plans gave us large chunks of minutes at lower prices. And before cell phones changed the calling equation.

Nobody gives much thought these days to where a call starts and where it ends. Unless, that is, you are one of the large phone companies — AT&T and Sprint, for example — doing business within the state of Missouri. A quirky feature of the state’s telecommunications system has those companies paying hefty fees every time one of their Missouri customers makes a long-distance call that stays within the state’s borders.

It’s a system that could change soon if legislative efforts in Jefferson City are successful this year.

"This is the old way of doing things. It’s the last remaining dinosaur," said Sen. John Griesheimer, R-Washington, author of one of three bills targeting the issue this session.

Under attack are the state’s intrastate access rates — the per-minute fees phone companies charge for carrying each other’s calls. Rates vary from company to company, but the basic equation is that larger companies pay higher rates, in effect subsidizing operations in less-profitable areas of the state. AT&T, for example, is allowed to charge about 3 cents a minute for carrying other companies’ calls. Some small carriers are allowed to charge 20 cents or more per minute, according to the Missouri Public Service Commission.

For companies such as AT&T — one of the forces behind the push for change — these fees add up to millions of dollars a year in payments made to smaller state carriers. It’s estimated that some $200 million is paid each year in intrastate access fees, though it’s unclear how much of that is paid by AT&T. Missouri’s rates are the third-highest in the nation, behind North and South Dakota.

It’s not the sort of thing most people ever notice, because few people pay for their long-distance calls by the minute. It might, however, be known to those who use pre-paid calling cards. AT&T’s cards, for example, point out that you get only one minute of talk time for every eight minutes you buy — for in-state long-distance calls.

"Our whole position is that those rates need to come down, just as they have in nearly every other state," said Kerry Hibbs, an AT&T spokesman.

There’s actually not a lot of disagreement about that. The question that’s causing a fair amount of heartburn for some rural communities is this: Who’s going to make up for all those millions of dollars AT&T and Sprint are paying to carriers serving areas where lack of population density makes it a challenge to provide service without assistance?

Through legislative exemptions, small carriers are being left out of the debate, but it’s still an issue for hundreds of communities served by two large, but highly fragmented carriers: CenturyLink and Windstream Missouri. CenturyLink, for example, offers service in 285 Missouri communities, many with fewer than 1,000 customers.

Without the money collected through access rates, CenturyLink says, it will be a challenge to maintain service, jobs and investments in its communities, where state law requires them to provide service to anyone who wants it.

"CenturyLink is not opposed to access reform, as long as it addresses both sides of the equation," said Doug Galloway, a spokesman for the Monroe, La.-based company.

At least for the moment, that’s not happening. This week, the Missouri House passed HB1750, calling for a reduction in access rates by 50 percent over 10 years. The measure, which has been sent to the Senate, offers no way for impacted rural carriers to recoup lost revenue. However, it did exempt dozens of tiny, independent carriers.

Debate over the bill, which passed 111-40, was generally divided along rural/urban lines, with legislators grappling over whether it would hurt small communities.

"In the long term, ending a subsidy which my constituents largely pay for, will eventually benefit everyone in Missouri," said the bill’s author, Rep. Timothy Jones, R-Eureka,

Others, however, disputed the notion that the legislation would spur new investment and competition.

"Not everyone is jumping on the bandwagon to come down to our part of the country and offer lower rates, because there simply aren’t customers down there," said J.C. Kuessner, D-Eminence.

In most states, whenever rates are lowered, there has been some sort of provision made for those carriers losing money. Often, that’s been in the form of special funds — supported through fees on all users — set up to subsidize service in high-cost areas.

The federal government used a similar approach when it forced a reduction in interstate access charges. It set up the Universal Service Fund to support weaker carriers.

A similar fund to offset Missouri’s access rate changes could be established by charging all phone users a fee of 25 cents to 60 cents a month, said Michael Balhoff, a Maryland-based telecommunications consultant who has done work for CenturyLink.

But to do nothing for rural carriers while still forcing them to offer service to everyone doesn’t make sense from a fairness perspective: "It’s like compelling McDonald’s to put a restaurant in the middle of wheat field," Balhoff said.

And there are those who say the ultimate losers in this fight will be the residents of those smaller communities, who could end up paying much higher costs for their phone service. And nobody’s phone rates will go down, said Mike Dandino, who recently retired as chief legal advisor for the Office of Public Counsel.

Dandino insisted that the movement to lower access rates should not be referred to as "reform," and that any money saved by AT&T and others would go straight to their bottom lines.

"Is it really reform if it’s going to increase the local users’ rates? It’s only reforming somebody’s profit and loss statement," Dandino said.

Juana Summers of the Post-Dispatch contributed to this report.

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