Larry Darby reports on reforms in the telecommunications industry.

A coalition of long-distance and local-exchange companies has recently submitted to the Federal Communications Commission (FCC, or Commission) a proposal for restructuring telephone rates, known as the CALLS proposal (Coalition for Affordable Local and Long Distance Services). The CALLS proposal would reorient the charges imposed by local telephone companies to recover the costs of providing network facilities - trunks, lines, interconnecting devices, switches, operating systems and the like. Those facilities are shared by long-distance telephone companies - AT&T, MCI WorldCom, Sprint and others (sometimes referred to as interexchange carriers) - and by ordinary telephone subscribers, who use the networks for both local and long-distance calls, for voice, data, Internet, or other services, as well as for calls in urban and/or rural areas.

Under the CALLS proposal, a major part of the responsibility for recovering common local-telephone network costs would be shifted from long-distance carriers, who currently are passing the costs to their long-distance customers, directly to all telephone subscribers, without regard to how many long-distance calls the make. Users would perceive this change as a reduction in per-minute charges for longdistance calls along with an additional line-item on their monthly telephone bill. 

This paper offers sufficient background information to provide the context for the CALLS proposal, describes the proposal itself, summarizes the issues and identifies the principal stakeholders, and outlines the main positions. The paper then builds a case for the CALLS proposal, arguing that it will serve the national interest by promoting greater economic efficiency while stimulating competition in the marketplace and encouraging investment and innovation. The paper concludes that, on balance, the CALLS proposal will benefit consumers in the aggregate - both in the short term and in the long term, particularly - without adversely effecting the traditionally protected classes of users, those with low incomes or in those in rural areas.

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