Tuesday, June 10, 2008

The Lack of Imputatation and How It Tilts the Competitive Playing Field

Some time ago, before the FCC streamlined tariffing regulations for ILECs and eliminated structural separation requirements, the long distance carrier side of an ILEC presumably had to pay the local exchange carrier side of an ILEC the $10 to change a subscriber's Primary Interexchange Carrier ("PIC") presubscriptions for 1+ inter-LATA and intra-LATA long distance calling. Now a company like Verizon can secure what I consider an artificial competitive advantage, because it does not have to incur and charge itself (i.e., impute) the $10 charge. Of course any competitor, or a competitor's subscriber has to pay 2 $5 PIC change fees.

It seems to me that a company like Verizon can generate some reluctance to change to a competing long distance carrier by charging a $10 while "waiving" the charge if a Verizon subscriber stays with, or changes to Verizon. Bear in mind that Verizon charges $4 or so for the privilege of making 5-7 cent per minute long distance calls, while other carriers offer lower rates without an additional recurring monthly charge.

I recognize that lots of people make all of their long distance calls via their cellphones--one of the benefits in having large monthly baskets of minutes. But for the consumer who still makes long distance calls via the wireline network, Verizon has the opportunity to make consumers think whether changing long distance carriers is worth a $10 "cover charge" that Verizon readily waives if you stick with their bundled services.