Summary of Bills Pertaining to
Reciprocal Compensation
in the 106th Congress

This page summarizes the following bills:

• HR 4445, Reciprocal Compensation Adjustment Act of 2000.

Introduction. This bill deals with the controversial topic of the application of the reciprocal compensation provisions of the Telecom Act of 1996 to phone calls made to Internet Service Providers (ISPs). Incumbent local exchange carriers (ILECs), such as Bell Atlantic, are clamoring for legislation to end reciprocal compensation for calls made to connect to the Internet.

Section 251(b)(5) of the 1996 Act provides that local phone companies compensate each other for handling each other's local calls. One telephone company pays another telephone company for each local call the second company completes to one of its customers.

If one person whose local phone company is the ILEC makes a local phone call to another person whose local phone company is a CLEC, the CLEC is entitled to compensation from the ILEC for completing the call. The same is the case if the call originates with the CLEC and completes with the ILEC. Hence, it is "reciprocal compensation."

ILECs now complain that this provision is being abused by competitive local exchange carriers (CLECs) and Internet Service Providers (ISPs) for calls made to connect to the Internet. The ILECs argue that they are paying increasing amounts of money to companies that provide little service, and that this may result in the imposition of per minute charges on Internet access.

The problem, say the ILECs, is that their is no reciprocity with calls made for the purpose of connecting to the Internet. ILEC customers who use dial up modems to access the Internet via ISPs whose phone company is not the ILEC place calls "to the Internet", but the "Internet does not call them back." So, the compensation flows one way. The ILEC may have increased revenue from customers who purchase a second phone line for the purpose of Internet access. But the ILECs argue that the reciprocal compensation charges can exceed the their second line revenues revenues.

Reciprocal compensation applies only to "local" calls. Long distance carriers pay access charges to local phone companies when they exchange traffic. The classification of calls to connect to the Internet as "local", "long distance", "interstate", or whatever, is also the subject of much debate, and has been the subject of proceedings and deliberations by state regulatory agencies and the Federal Communications Commission.

HR 4445, Reciprocal Compensation Adjustment Act of 2000.

Sponsor. Rep. Billy Tauzin (R-LA). Original cosponsors: John Dingell (D-MI), Tom Bliley (R-VA), and Rick Boucher (D-VA).

Summary. HR 4445 IH is a short bill designed to redress a complex problem. It provides simply that local phone companies do not have to pay reciprocal compensation for calls made to ISPs or to otherwise connect to the Internet. It states: "... no local exchange carrier shall be required to make any payment for the transport or termination of telecommunications to the Internet or any provider of Internet access service."

It also provides that "Such transport or termination shall be considered interstate communications and subject to the exclusive jurisdiction of the Commission."

The bill would not affect existing contracts to provide reciprocal compensation, nor would it require to phone companies to offer to others the reciprocal compensation provisions contained in any such contracts.

Status. This bill was introduced on May 15, 2000. On June 22 the House Telecom Subcommittee held a hearing.

Legislative History with Links to Related Materials.

• 5/15/00. HR 4445 IH introduced in the House.
• 5/15/00. HR 4445 referred to the House Commerce Committee.
• 5/18/00. HR 4445 referred to the Telecom Subcommittee.
• 6/22/00. The House Telecom Subcommittee held a hearing. See:
   • Statement by Larry Strickling (FCC).
   • Statement by Rep. Tom Bliley (R-VA).
   • Tech Law Journal story.