[Asterisk-biz] Reciprocal Compensation

Wed Jul 27 06:08:51 MST 2005

Go to 

http://www.robotics.net/papers/clechowto.html

Thansk to Nathan Of Broadvoice, this is what i got from his web site.

I think its one of the best web site i have seen regarding this. subject.

Reciprocal Compensation

When a local call is placed inside an ILEC's network, the ILEC is responsible for 
originating and terminating the call. If the call local call is placed from an ILEC 
customer to a CLEC customer the ILEC is now only responsible to originate the call 
and the CLEC is responsible to terminate the call. When this happens the ILEC 
saves the cost of terminating the call. If the traffic between the two parties is equal 
then the savings is a wash and nether party pays the other for their 
origination/termination of the call. If, however, there are more call minutes of traffic 
that the ILEC is originating/terminating than the CLEC is originating/terminating, the 
CLEC will owe the ILEC. The reciprocal is true. The amount that is owed is the 
reciprocal compensation rate and varies between $0.002 - $0.01 a min.

If the parties believe that the traffic between them will be roughly equal then they 
may opt for "bill and keep." Under "bill and keep" there is no payment of local traffic 
at all. Many agreements start with bill and keep and then later change to reciprocal 
compensation after six months if the traffic flow is not even.

In the past the ILECs have done all they could to get reciprocal compensation as 
high as possible. They argued to the state public utilities commissions (PUCs) that it 
cost them a lot to terminate traffic. Before the Act, the only other people offering 
phone services were competitive access providers (CAPs) such as MFS. The CAPs 
would sell access to large businesses that mostly made outgoing calls, thus the 
CAPs would pay reciprocal compensation to the ILECs to terminate their calls.

This all changed after the Act when CLECs started selling access to ISPs. ISP 
traffic is all inbound and CLECs that provide access to ISPs are getting millions of 
dollars in reciprocal compensation payments every month. Now all of a sudden, the 
ILECs claim that it does not cost much to terminate traffic and should not need to 
pay CLECs as much as they do. When this did not work, the ILECs started saying 
that calls to ISPs were not local calls and thus they did not need to pay 
compensation. Their argument is that when you call an ISP, you are not calling the 
ISP, but actually some destination on the Internet. This is a very lame argument, but 
many people have are starting to believe this. In fact, the FCC ruled that they 
believe that calls to ISPs are interstate in nature, but that they would leave it up to 
the states to decide for now.

In any event this is not a solved issue. CLECs say that if ISP traffic is interstate in 
nature then they should get paid access charges just like any other long distance 
provider. The ILECs have no real argument on the definition of the type of traffic 
this is: whether it is local or interstate, something should be paid to the CLEC for 
terminating traffic because the ILEC saves when it does not need to terminate it. 
Most people believe that the FCC said ISP traffic was interstate in nature in order to 
get jurisdiction over it and the reciprocal compilation will be around for a long time. 
However, the reciprocal fee will more likely approximate $0.002 than $0.01. 

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