A Market Based Approach to Telecom Interconnection

This Article offers an all new solution to the problem of interconnection between telecommunication networks. The FCC recently proposed to take regulation of interconnection to the most extreme degree of intervention. According to this proposal, interconnection between LECs and other carriers would be mandatory and all termination charges demanded by LECs would be regulated down to zero. This move is contrary to the aim of opening telecom markets to competition while reducing regulatory intervention to the lowest possible level. In sharp contrast, this Article claims that interconnection between LECs and long-distance carriers should be deregulated. Under deregulation of access charges, and in the absence of mandatory interconnection, several market forces, revealed by the Article, and neglected by the FCC and the previous literature, are expected to keep termination charges from rising above competitive levels and encourage carriers to interconnect and provide their subscribers with ubiquity. Since recipients benefit from being accessible to long-distance callers just as long-distance callers benefit from gaining access to recipients, long-distance carriers possess potentially equal bargaining power vis a vis the LEC. Furthermore, under a market-based approach, long-distance carriers should be able to transit long-distance calls destined to LEC A's subscribers by interconnecting with LEC B. Similarly, long-distance carriers should be able to originate calls made by LEC A's subscribers by interconnecting with LEC B. Future growth of cellular telephony and broadband IP telephony is expected to strengthen these market forces. Such market forces will be further strengthened if the FCC's current requirement that long-distance carriers average their rates is eliminated. Local interconnection, on the other hand, should be mandated. Furthermore, the Article reveals how the FCC's recently proposed bill and keep approach to local interconnection meshes well with the proposed market-based approach to long-distance interconnection