AT&T's New Interstate Private-Line Tariffs 9, 10 and 11 Challenge Telecom Managers.
This article reviews the historical development of the new private-line tariffs; compares AT&T's pre- and post-divestiture tariffs; summarizes AT&T's complex new Tariffs 9, 10 and 11; presents some--but by no means all--of the new service options that are available; and describes the challenges for telecommunications management that this restructured and ever-changing tariff environment has made necessary.
The breakup of the Bell System was intended to encourage competition among interexchange carriers, which--under the Local Access and Transport Area (LATA) system--are known as interLATA carriers. Since the January 1984 divestiture of AT&T, the Bell operating companies (BOCs) can furnish end-to-end telecommunications services within individual LATAs, but are prohibited from providing service between LATAs. Service between LATA is provided by the InterLATA carriers, such as AT&T Communications, MCI, Western Union, GTE Sprint, USTS and SBS.
Regulation and InterLATA Service
Interstate interLATA services are subject to regulation by the Federal Communications Commission; intrastate interLATA services are provided by one or more interLATA carrier(s) authorized by the respective regulatory body in each state. In some states, AT&T Communications is the only intrastate interLATA carrier; however, in many states, other common carriers (OCCs) have now been authorized to provide interLATA service in competition with AT&T.
Under AT&T's pre-divestiture Tariff 260, an interstate private-line channel was furnished as a complete end-to-end service, with each end of the circuit terminating at the customer's premises though each of the two end exchanges. Since the BOCs and AT&T Long Lines were part of the integrated Bell System, the entire circuit was provided by AT&T in combination with its local operating companies. Under this arrangement, the role of each of the two or three Bell System entities that were typically involved in the provision of an interstate private line was largely transparent to the customer. That is, even though the local BOC typically provided the local channel connections between the customer's premises and the AT&T Long Lines central office, the customer dealt only with AT&T, which made the necessary arrangements with the BOC(s) to create the end-to-end service.
With the breakup of the Bell System, the local-exchange carriers--the BOCs--now provide the local service that connects a customer's premises to an interLATA carrier terminating facility. AT&T refers to its facilities as central offices, while some other carriers label theirs as "points of presence" (POPs). This article uses the generic term "point of interface" (POI) to refer to an interexchange carrier's terminating facility. The interexchange carriers provide service between POIs in different LATAs and, if a carrier has several POIs in the same LATA, may offer intraLATA service between its POIs, as well.
To facilitate the interLATA competition that divestiture was intended to create, it was necessary to restructure the interstate private-line tariffs to separate the local-access service provided by the local-exchange carriers from the interLATA service furnished by the interexchange carriers (IECs). Even though AT&T's restructured tariff includes local channels, the access service is actually provided by the respective local-exchange carrier at tariffed rates that AT&T is required to pay.
Some form of access between the customer's premises and the IEC's POI is always required. In the new tariff environment, the customer will be able to:
* Obtain the required access from AT&T as part of its end-to-end service;
* Obtain the access service directly from the local-exchange carrier (the BOC in Bell territory or the independent telco in non-Bell territory) and coordinate it with AT&T's (or another IEC's) interLATA service; or
* Arrange for access to be furnished by a supplier other than the local-exchange carrier (for example, a local cable or fiber-optic carrier) or by means of a customer-provided access system, and coordinate this access facility with AT&T's (or another IEC's) interLATA service. (This option is not presently available, but will become possible once the appropriate interface specifications have been established by AT&T.)
Exchange carrier-provided local access to interstate interLATA service is covered under the FCC-regulated special-access tariffs.
The filing of AT&T's Tariffs 9, 10 and 11 culminated many months of investigation and public comment by the FCC and interested parties. Our firm, ETI, was intimately involved in the public investigation of a new rate structure for interstate private lines through its work for user parties and as a consultant to a staff division of the FCC during the initial private-line restructure investigation in 1979-80.
Review of AT&T's Post-Breakup Private-Line Tariff
The FCC's review of AT&T's post-divestiture private-line tariff began three months prior to the January 1, 1984 breakup of the Bell System and continued into the second quarter of 1985. During this time, the local-exchange carriers filed and revised special-access tariffs no fewer than four times. AT&T's proposed post-divestiture tariffs offered end users local channels that AT&T, in turn, would obtain from the local-exchange carriers at rates contained in their special-access tariffs. Thus, each time the were changes to the special-access tariffs field with the FCC, AT&T had to make corresponding changes in its restructured tariff. It was not long after the special-access tariffs became effective on April 1, 1985 that a final version of AT&T's post-divestiture private-line tariff was filed with the FCC.
The most-obvious difference between AT&T's pre- and post-divestiture tariffs is that AT&T's private lines now priced using three tariffs (9, 10 and 11) rather than a single tariff (260). The expansion of AT&T's tariff to three volumes may be attributed to the numerous service options that are now available to users. To enable users to select various routing, carrier, warranty and other srevice options, AT&T had to provide users with much more detailed information in its tariff.
In this era of interstate-carrier competition, it's becoming increasingly up to the user, and not to the carrier, to determine the private-line service routings and options that are most cost-effective. In fact, AT&T explicity states in its tariff that circuits designed and routed by AT&T will not necessarily minimize costs for the user.
AT&T's Tariff 260 differs from the new Tariffs 9, 10 and 11 in a number of important ways:
* Service Options: Tariff 260 provided interstate service from end to end; AT&T's restructured tariffs provide service from end to end or from POI to POI, depending o n the customer's preference. Rates for AT&T's POI-to-POI service are contained in Tariff 9.
* Routing Options: Under Tariff 260, the customer had no routing options. Channel mileage was determined by simply calculating the air-line distance between rate centers at each end of the circuit. Under AT&T's new tariff, a customer can either select end-to-end service designed by AT&T or specify the routing that AT&T is to follow. There will be many situations whereby the customer can achieve considerable savings by not using AT&T's "default" routing.
Need for Up-to-Date Information
However, in order to design the circuit to achieve minimum cost, the customer needs a complete and up-to-date copy of AT&T Tariffs 9, 10 and 11, as well as analytical tools and methods for comparing the various routing options. AT&T's Tariff 9 contains rate information for the interLATA portion of circuits; Tariff 10 lists AT&T central offices, rate centers and service availability; and Tariff 11 contains rate information for AT&T-provided local channels and "access-coordination functions"--a new unbundled rate element explained later.
* Carrier Options: When a customer obtained an interstate channel under AT&T's Tariff 260, the entire circuit was provided by AT&T. Under the new private-line tariffs, a customer can obtain local access from AT&T (Tariff 11), from the local-exchange carrier (special-access tariff), or from other sources, such as a private microwave system.
* Performance Guarantee Options: When AT&T provided interstate circuits under its old Tariff 260, AT&T assumed responsibility for the quality of the circuit from end to end. Under AT&T's restructured tariff, customers connecting non-AT&T-provided local-access services to an AT&T interLATA channel have a choice: they can select whether or not they want AT&T to guarantee the quality of the circuit from end to end. Guaranteed end-to-end service with non-AT&T access requires purchase of the access-coordination function under Tariff 11. Similarly, when a user connects an AT&T-provided local channel to an AT&T-provided interLATA channel, AT&T automatically guarantees the circuit, and the associated access-coordination function charges apply.
* Unbundled Rate Elements: In order to enable customers to select among many new circuit options, the new tariffs are characterized by a much-greater degree of rate-element unbundling than under the old pricing arrangement. Purchasing private-line channels has become much more like ordering a new car: the customer must select from an extended list of options, each one of which has an associated price and conditions of availability attached.
In summary, AT&T's Tariffs 9, 10 and 11 offer the end user a multitude of options for routing, service, performance, local carriers, and more--al of which affect the nonrecurring and monthly charges that the end users pays for the circuit. The complexity of the private-line tariffs makes it virtually impossible, without careful analysis, to identify the most cost-effective private-line-service option.
Selection of POI Is Important
For instance, when AT&T designs an end-to-end circuit, it selects the POI that is closest to each customer premises. In some cases, however, routing to the closest POI is not the least-expensive option. As noted earlier, the AT&T tariff states that its routing configuration for end-to-end circuits may not produce the least cost.
Take, for example, a voice-grade circuit provided end to end by AT&T from customer premises (NPA-NXX of 617-762) in Norwood, Massachusetts, to customer premises (518-457) in Albany, New York. Under AT&T's method, a local channel would run from Norwood to Brockton (the closest AT&T POI to Norwood) and the interLATA channel would link AT&T's Brockton POI with its POI in Albany. Figure 1 depicts the circuits configuration. Under the AT&T "default" routing, the local channel is routed east, although the ultimate destination is to the west.
Configuration by User Is Better
If the same circuit from Norwood to Albany were configured by the user, and not by AT&T, a considerable savings may be achieved by serving Norwood from a more-distant POI that happens to be in the same general direction as the ultimate destination of the circuit. In this case, the correct choice of POI would be Framingham, Massachusetts, rather than Brockton. The local channel would link Norwood with Framingham, and the interLATA channel would run from Framingham to Albany, rather than from Brockton to Albany, rather than from Brockton to Albany. The user would pay the same for the local channel ($151.86) but would realize considerable savings on the interLATA channel ($259.35 for Framingham-Albany rather than $273.75 for Brockton-Albany).
Overall, the end-to-end circuit would have cost $550.46 under the AT&T default routing, but only $536.06 under the user-specified routing, as shown in Figure 2. In this instance, the user would have saved $14.40 per month ($172.80 per year) without any change in the physical quality of the circuit from the customer's standpoint. Such savings can be achieved merely to specify an alternate route for pricing purposes.
Measurement of Mileage Varies
Incidentally, the Norwood-to-Albany circuit priced under AT&T's Tariff 260 would have measured interexchange-channel mileage from the Norwood Rate Center to the Albany Rate Center--a more-direct route than under AT&T's new rate structure.
The potential cost savings from user-specified routing are amplified when customer premises are located in rural areas. Since there are generally fewer POIS in these less-populated areas, local-channel mileage usually will be greater than that in heavily populated areas. As a result, the user's choice of an origin POI (depending upon its distance from the destination POI) can greatly affect the corresponding inter-office and overall circuit costs.
For example, a voice-grade circuit from Ticonderoga, New York, to Springfield, Massachusetts, could be routed to the closest, or AT&T "default," POI 60 miles away in Plattsburgh, New York, for a cost of $171.66 per month. The interLATA channel cost (Plattsburgh-springfield) would be $297.75 per month, for a total circuit cost of $594.26 (with the Springfield local channel costing $124.85 per month). In contrast, had the user selected the Albany POI (85 miles away), the corresponding increase in the local-channel charge (to $179.72 per month) would have been more than offset by the savings resulting from the Albany-Springfield interLATA charge of $217.15 per month. In this case, user-specified routing yielded a monthly savings of $72.54, or $870.48 annually.
Complication to Minimum Costing
In some situations, the minimum-cost-routing configuration may not be as obvious as in that example. Local-channel rates charged by AT&T and by the local-exchange carriers in their special-access tariffs vary by state. In some states, the local-channel mileage rate charged by AT&T and/or the exchange carrier may be higher than the interLATA mileage rate charged by AT&T. In other states, the opposite may be true--the mileage rate for the interLATA channel may exceed the milage rate charged for local channels. So, in states where AT&T's interLATA mileage rate is higher than the mileage rate charged for local channels by AT&T or by the local-exchange carrier, the user may be able to reduce expenses by selecting the AT&T POI that minimizes interLATA mileage at the expense of increasing local-channel mileage.
In any event, the most cost-effective private-line-service option may be far from obvious. Those end users and telecommunications managers who have access to the most-current tariff information and analytical tools will best be able to minimize their private-line expenses.
Here, then, is a summary of AT&T's post-divestiture tariffs:
Summation on the New Tariffs
AT&T's Tariff 9 provides rate and service information that pertains to interLATA service furnished by AT&T between its POIs. Tariff 10 contains vertical and horizontal (V&H) coordinate and service-availability information about AT&T's rate center and POIs. Tariff 11 includes rate and service information concerning local channels furnished by AT&T. What follows is a brief summary of rate elements contained in each of these tariffs.
AT&T's Tariff 9 includes five general types of rate elements for an AT&T-provided interLATA channel:
Inter-Office Channels: An inter-office channel connects two or more AT&T POIs. Monthly charges for an inter-office channel comprise a fixed charge plus a mileage-based charge. Unlike AT&T's Tariff 260, which applied mileage charges under Schedule I, II or III (depending upon the classification of the terminating rate centers), Tariff 9 contains one schedule of mileage charges for each type of private-line service.
Central-Office Connections: A central-office connection is used to connect the customer's premises to the appropriate AT&T POI. Even when no local-access facility is required, as in some tandem-type connections, central-office connections are still required. In these cases, the customer generally incurs other charges, such as for central-office functions.
Central-Office Functions: A central-office function is provided at the juncture of two or more channels, such as switching, transfer or conferencing arrangements.
Channel Options: A channel option improves the suitability of a private line for its intended use and includes various elements, such as signaling and data conditioning.
Miscellaneous Activity Charges: Tariff 9 contains charges for miscellaneous activities and services provided by AT&T, such as special engineering and testing, and changing installation due date.
Publication of Lengthy Tomes
AT&T's Tariff 10, more than 500 pages in length, contains no rate elements, but provides all the service availability and V&H coordinate information about AT&T's rate centers and POIs that's essential to price out a circuit.
Tariff 11, some 1,000 pages long, contains all the rate and service information relative to local channels provided by AT&T. As noted earlier, AT&T obtains local channels from the local-exchange carrier that serves a particular LATA. As a result, the rate structure for AT&T's local channels closely resembles that found in the exchange carriers' special-access tariffs and, as in the special-access tariffs, the rate levels vary by state.
However, there's an important difference between AT&T's local-channel tariff and the local-exchange carriers' special-access tariffs in the means by which local-channel mileage is measured for pricing purposes. The special-access tariffs measure channel mileage between wire centers, while AT&T measures channel mileage between rate centers. In Tariff 11, in the case where the customer's premises and the AT&T POI are served by different BOC wire centers but are located in the same AT&T rate-center area, a non-distance-sensitive fixed rate for an intra-rate center channel applies. For the same local channel provided by the local-exchange carrier, a mileage charge would apply, with distance measured between the two serving wire centers. Thus, AT&T's intra-rate center local-channel rates are based on a an average of the applicable exchange carrier special-access rates, and the charges for a local channel provided under AT&T's Tariff 11 may vary considerably from that for the equivalent local channel provided under the appropriate exchange carrier access tariff.
Addition to the Complexity
AT&T has advised the FCC that it will likely adopt the wire center-based pricing used in the special-access tariffs in the future. When this occurs, the pricing of private-line channels will become even more complex.
AT&T's Tariff 11 contains a variety of different, optional rate elements, but one charge--access-coordination function--always applies whenever any Tariff 11 local channel or service function is used.
Access Coordination Function: This is a new unbundled rate element that provides the customer with a guarantee of end-to-end service continuity and quality. Under Tariff 11, one access-coordination charge applies for each two-point local channel provided by AT&T.
When local access to an AT&T interoffice channel is obtained from non-AT&T sources, such as from the local-exchange carrier, an access-coordination charge applies if the customer wants AT&T to guarantee the quality of service from end to end. When the customer wants AT&T to present a bare interface at its POI, with no guarantee of end-to-end service quality, the access-coordination charge does not apply.
Explanation of Local Channels
AT&T's Tariff 11 provides for two kinds of two-point local channels that connect the customer premises with an AT&T POI:
Intra-Rate Center Channels: An intra-rate center channel is used to connect a customer premises in the same AT&T rate-center area, or to connect a customer premises with an AT&T POI in the same rate-center area. As noted above, the monthly changes for an intra-rate center channel are not distance-sensitive; a fixed charge applies regardless of the distance between end points of the local channel.
Inter-Rate Center Channels: An inter-rate center channel is used to link one customer premises with another customer premises that's in a different rate-center area or to connect a customer premises with an AT&T POI in a different rate-center area. When the inter-rate center channel links customer premises, mileage is measured between the rat centers serving the respective premises. When an inter-rate center channel terminates at an AT&T POI, mileage charges apply between the rate center that serves the customer premises and the POI.
In addition to these intra- and inter-rate center local channels, Tariff 11 includes new rate elements for multipoint channels with BOC-provided bridging. Many of AT&T's existing multipoint private-line channels have been reconfigured so that these rate elements do not apply automatically to the majority of existing circuits; however, these options can help multipoint customers offset some of the exceptionally high rate increases for multipoint configurations. Tariff 11 includes four types of local channels to connect two or more BOC bridging points:
Connection of Bridging Points
Intra-Rate Center Bridged Local Channel: An intra-rate center bridged local channel is used to connect a customer premises to a BOC bridging hub in the same rate center or to connect a BOC bridging hub to an AT&T POI in the same rate-center area.
Intra-Rate Center Interbridged Local Channel: An intra-rate center interbridged local channel connects two BOC bridging hubs in the same AT&T rate-center area.
Inter-Rate Center Bridged Local Channel: An inter-rate center bridged local channel connects a customer premises to a BOC bridging hub in a different rate-center area or connects a BOC bridging hub to an AT&T POI in different rate-center areas.
Inter-Rate Center Interbridged Local Channel: An inter-rate center interbridged local channel is used to connect two BOC bridging hubs in different AT&T rate-center areas. Figure 3 illustrates these four types of local-channel bridging.
In sum, Tariff 11 includes six types of local channels. To use Tariff 11 effectively, however, it is necessary to refer both to Tariff 10 to determine the intra- or inter-rate center status of a local channel and to the special-access tariffs to determine the location(s) of BOC bridging hubs.
Inclusion of Other Charges
In addition, Tariff 11 includes some miscellaneous charges:
Inside Wiring Charge: Both AT&T's Tariff 11 and the exchange carrier special-access tariffs include a charge for inside wiring. Thsi charge applies to local channels that terminate at a customer's premises with BOC-provided inside wiring.
Special-Access Surcharge: Tariff 11 includes the special-access surcharge of $25 alent local channel that has access to the public switched telephone network. This surcharge applies unless a circuit has been certified as exempt.
Under current FFC rules, if a surcharge applies, then a private-line channel is also assessed a "message station equipment charge." Unlike the $25 surcharge, this fee varies by state--the average is about $11. As a result, for circuits subject to a surcharge, the total price difference is about $36 per non-exempt end point.
Channel Options: Tariff 11 also includes channel options such as signaling and conditioning. Like the other Tariff 11 rates, charges for channel options vary by state.
In 1984, the interstate tariff environment was characterized by immense change, and one can be sure that interstate private-line tariffs will continue to evolve. Revisions to the exchange-carrier access tariffs and to AT&T's interstate tariffs include new procedures for ordering and discontinuing private-line services; these procedures are likely to be changed again in 1985-86. New rates filed by AT&T later this year are likely to include large increases in the nonrecurring installation charges for private-line services. Customers may be required to place orders for private lines considerably in advance, and charges may apply for cancellation of an order or for postponement of the delivery date. As a result, the ability of a user to lease a private-line channel for one month or less, common in the pre-divestiture era, is not likely to ever again be an economically justified option. Private-line "churn"--the practice of frequent service changes and reconfigurations--will become increasingly expensive.
Whether leasing a private-line channel from a carrier or constructing a private system, customers are being forced to make a greater time and financial commitment to private-line services. As a result, private-line networks are not just expenses to be controlled, but are rapidly becoming assets to be managed.
This means that the management of leased private-line networks must focus increasingly upon day-to-day cost control, auditing, longer-term planning, and other tasks that go beyond the periodic "optimization" of network configurations. Management tools must allow for more-detailed analysis and evaluation of network routing, carriers and other service options now available to customers.
Accumulation of Information
Of course, the accuracy fo the analysis depends heavily upon having access to the most up-to-date tariff information. With tariffs undergoing so much rapid change during recent months, network professionals must find new management tools and methods to meet the challenges ahead.
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|Author:||Bechner, J.; Gately, S.; Montgomery, W.P.|
|Date:||Jun 1, 1985|
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