INTEREXCHANGE CARRIERS

IINTEREXCHANGE CARRIIERS
Interexchange Carriers (IXCs), otherwise known as “longdistance
carriers,” include the big three—AT&T, Worldcom,
and Sprint—all of which also operate wireless networks and
are migrating them to 3G capabilities.
In addition to providing long-distance telephone service
over wired and wireless networks, the IXCs offer business services
like Integrated Services Digital Network (ISDN), Frame
Relay, leased lines, and a variety of other digital services.
Many IXCs are also Internet service providers (ISPs), which
offer Internet access services, virtual private networks, electronic
mail, Web hosting, and other Internet-related services.
Bypass
Traditionally limited to providing service between local access
and transport areas (LATAs), the Telecommunications Act of
1996 allows IXCs to offer local exchange services in competition
with the Incumbent Local Exchange Carriers
(ILECs). But because the ILECs charge too much for local
loop connections and services and do not deliver them in a
consistently timely manner, the larger IXCs have implemented
technologies that allow them to bypass the local
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exchange. Among the methods IXCs use to bypass the local
exchange include CATV networks and broadband wireless
technologies, such as Local Multipoint Distribution
Service (LMDS) and Multichannel Multipoint Distribution
Service (MMDS).
With regard to cable, AT&T, for example, has acquired the
nation’s two largest cable companies, TCI and MediaOne, to
bring local telephone services to consumers, in addition to
television programming and broadband Internet access. As
these bundled services are introduced in each market, they
are provided to consumers at an attractive price with the
added convenience of a single monthly bill. Sprint uses
MMDS to offer Internet access to consumers and businesses
that are out of range for Digital Subscriber Line (DSL) services.
XO Communications, a nationwide integrated communications
provider (ICP) uses LMDS to reach beyond its
metropolitan fiber loops to reach buildings that are out of the
central business districts.
Long-Distance Market
In January 2001, the FCC released the results of a study on
the long-distance telecommunications industry. Among the
findings from the report:

In 1999, the long-distance market had more than $108 billion
in revenues, compared to $105 billion in 1998. In
1999, long-distance carriers accounted for over $99 billion
and local telephone companies accounted for the remaining
$9 billion.

Interstate long-distance revenues increased by 12.8 percent
in 1999 compared to 1.5 percent the year before.

Since 1984, international revenues have grown more than
fivefold from less than $4 billion in 1984 to over $20 billion
in 1999. The number of calls has increased from about
half a billion in 1984 to almost 8 billion in 1999.
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In 1984, AT&T’s market share was about 90 percent of the
toll revenues reported by long-distance carriers. By 1999,
AT&T’s market share had declined to about 40 percent,
WorldCom’s share was 25 percent, Sprint’s was 10 percent,
and more than 700 other long-distance carriers had
the remaining quarter of the market.

According to a sampling of residential telephone bills, in
1999 the average household spent $64 monthly on telecommunications.
Of this amount, $21 was for services provided
by long-distance carriers, $34 for services by local exchange
carriers, and the remainder for services by wireless carriers.

According to the same sampling of residential telephone
bills, 38 percent of toll calls in 1999 were interstate and
accounted for 50 percent of toll minutes. Also, 33 percent of
residential long-distance minutes were on weekdays, 30
percent on weekday evenings, and 37 percent on weekends.
Summary
Growing competition in long-distance services has eroded
AT&T’s market share from its former monopoly level to about
40 percent. With this competition has come increasing availability
of low-cost calling plans for a broad range of consumers.
As a result, average revenue per minute earned by
carriers has been declining steadily for several years, while
long-distance usage has increased substantially to make up
for that revenue shortfall. As more ILECs get permission from
the FCC to enter the in-region long-distance market, IXCs
will come under increasing competitive pressure because the
ILECs will be able to bundle local and long-distance calling
and Internet access into attractively priced service packages.