The FCC Hurts Consumers by Not Clarifying Calling Card Regulations

One of the principal arguments made by proponents of big government is that regulations “set the rules for the road.”  They compare regulators to “traffic cops” or “referees.”  By this argument, corporations benefit by knowing the rules in advance, avoiding both uncertainty and litigation.  Consumers, we are told, benefit from transparency and protection from hidden and unnecessary costs.

But is that what really happens in practice?  The reality is that a lot of regulation is confusing, messy, unpredictable, hurts consumers, and can ead to costly litigation against both private-sector companies and the regulating agencies.

A classic case of this is the Federal Communication Commission’s (FCC’s) impenetrably complicated rules for how phone calls are switched between telephone networks and the vast array of telecommunications service providers, known as “inter-carrier compensation” regulations.  The FCC recently attempted to “reform” these regulations, but the resulting “rules of the road” are far from clear.

In October, we submitted a joint letter (with a prominent consumer organization) to the Federal Communication Commission making a simple request: to clarify regulations dealing with the fees on pre-paid calling cards, which had never been properly articulated, and which have resulted in costly and unnecessary litigation between phone companies and long-distance calling card companies.

Specifically, since 2006, it had been unclear whether access charges, fees charged to cards that feature a non-local number users must dial in order to then make their call, could also apply to locally-dialed access numbers.  This is an issue that affects millions of consumers of these cards, which are extremely popular with Latino consumers.

From our letter:

The outcome of this issue will have an immediate and significant impact on calling card consumers, many of whom are amongst our nation’s most economically-challenged consumers.  The cost of calls originating when a consumer calls a local access number and lower than they would be otherwise.  Collectively, these savings add up to billions of minutes.  Applying access charges to prepaid calling cards with locally-dialed access numbers will mean that consumers will have to pay tens of millions of dollars more in additional costs.

Unfortunately, the FCC failed to clarify this and other matters, which a variety of companies and other parties see as forcing them into litigation in order to gain clarity into these old and byzantine regulations (particularly true in the telecommunications industry).

Instead of rules of the road, we get litigation between rival firms, and between businesses and the government.  And instead of consumer benefits, consumers of calling card users are likely to face unnecessary higher costs.

The FCC has two incoming commissioners, and we hope that they will help move the commission to take these matters more seriously, helping consumers avoid the costs of both needless regulation and needless litigation.