Controlling access to end-users through interconnection has historically been used by network providers as a tool for achieving business objectives.
Generally, network service providers have an incentive to use interconnection to advance the strategic goals of
- protecting or expanding market position [Brock Economics of Interconnection at iii ("If there are no regulatory controls on compensation for interconnection, the monopolist of part of the market can extend its monopoly power to the entire market")] [Noam Interconnecting the Network of Networks at 72 ("In setting intermediate and final prices, the incumbent is likely to engage in price squeezes. In general, price squeezes are likely to occur in situations in which integrated monopolists sell both to themselves and to others. When the entrant offers an identical or substitutable service (assume for a moment that the interconnector is more efficient) the incumbent would offer interconnection under terms that would squeeze the entire profit of the interconnector, as well as its efficiency advantages.").][Charter Order para. 93 (concluding that Charter would have the ability to leverage interconnection to harm rival edge providers and OVDs)] [AT&T / DirecTV Merger Order para 217 (concluding that AT&T has the ability and incentive to use interconnection to disadvantage edge providers)] [2015 Open Internet Order, 30 FCC Rcd at 5694-95, ¶ 205 ( “broadband Internet access providers have the ability to use terms of interconnection to disadvantage edge providers and that consumers’ ability to respond to unjust or unreasonable broadband provider practices are limited by switching costs.”)]
- to extract rent from firms dependent on network services.
[Brock, Price Structure Issues, at 2 ("Incumbent telephone companies with market power have an incentive to use interconnection prices as a method of limiting competitive entry. Interconnection arrangements and prices have consequently been a major regulatory issue in the United States and other countries that have allowed competition in communications markets.")] [Noam Interconnecting the Network of Networks at 67 ("Control over interconnection becomes control over the market.")] [Intven, ITU 2000 at 3-1 (“Strategic anti-competitive behavior on interconnection matters by incumbents has retarded or prevented competition in many telecommunications markets around the world. Incumbents can engage in a wide range of behavior to frustrate effective competition.”)] [Economides Telecom Regulation at 57 (discussing vertical price squeeze by local exchange carrier against interconnecting independent long distance providers).]
At the turn of the 20th century, AT&T leveraged interconnection and network effect to squeeze independent telephone companies, denying them access to AT&T’s customers, thereby making the competing telephone companies’ service less valuable. When independent telephone services crumbled, AT&T would move in and capture market share. AT&T would repeat this strategy, refusing, for example, to interconnect with MCI and refusing to permit third-party customer premises equipment to interconnect with its network. With the break-up of AT&T, the Baby Bells would turn the table and charge above-cost interconnection access charges to long distance companies in order to capture additional revenue. [Economides Telecom Regulation at 71 (stating that local Bell Operating Companies that had been permitted to enter the long distance market were able to leverage their dominance in the local access market in order to effect a price squeeze on independent long distance companies, forcing them to withdraw from the market)] [DeGraba at 4 ("local telephone companies generally had no incentive to interconnect with competing local telephone companies, and, when forced to interconnect, generally sought to impose high interconnection costs on other networks.”)]
Derived from Connecting the Globe V. Competition in Telecommunications Services, FCC 1999
"The key to competition within telecommunications services is the ability of networks to interconnect. Interconnection allows communications to occur across networks, linking competitors so customers of different networks can communicate with one another (See History of Universal Service, competition at the end of the Bell patent era let to towns having multiple competing telephone networks that did not interconnect; the solution, according to AT&T was "One Nation, One Network, Universal Service").
"For competition to be successful at maximizing consumer benefits and innovation in the telecommunications market, carriers that compete for customers must also provide competitors with access to those customers. Shared access to customers occurs through interconnection, and access to all customers is necessary both for successful entry and for continued competition. If the incumbent, with the vast majority of customers, does not interconnect with new entrants, it is unlikely that the new entrants will remain economically viable.
"A regulatory framework is needed to aid in the transition from a monopoly environment to a competitive environment because a monopoly or dominant provider has a strategic interest to keep out or minimize competitors in its market. As a result, the monopoly or dominant provider has a strong incentive to limit interconnection. Therefore, a regulator that is independent of any operator and of inappropriate political influence should adopt rules that give new entrants bargaining strength equal to the incumbent's.
"The price of interconnection (or transport and termination), for example, could serve as a significant barrier to entry for new networks. An incumbent monopolist has an incentive to demand a high price to terminate calls originating on a new entrant's network and pay nothing for calls originating on its own network. In the United States, transport and termination charges are reciprocal and based on the long run incremental cost of providing the transport and termination on the incumbent's network.
"Thus, the primary purpose of mandated interconnection is to foster a competitive environment that is fair to all competitors. Because the incumbent service provider has the vast majority of customers, a new entrant must be able to interconnect in order to provide full access to its customers. Without the ability to interconnect, new entrants would be severely restricted in their ability to compete with the incumbent.
"Reasonable opportunities for interconnection are an essential element of the common carrier's duty of service. Railroads, for example, are required to interconnect at the point of choosing of the tendering carrier, unless otherwise specified by the shipper. Note 25: 49 USC 10742 & 10763 (1983). See also McKinney's Consolidated Laws of New York, Transportation Law, sections 97, 106, 112 which require interconnection with shippers and other railroads. And see Louisville & Nash RR v US, 238 US 1 (1915). [Noam 1994]
Telegraph networks were required to interconnect
- Post Roads Act 1866: Telegraph companies can freely use federal land and fell trees on the condition that they interconnect. [Brands p 2] [Brenner p 7]
- Peter Huber, Michael K. Kellogg, John Thorne, Federal Telecommunications Act 2nd Edition 406 (1999) (Post Roads Act of 1866 granted telegraph companies access to rights of way in exchange for obligations including non-discriminatory interconnection with other competing telegraph services
- 1984 Dual Service Era
- AT&T, Theodore Vail and Universal Service
- State legislatures begin to pass laws mandating interconnection [Brooks 114]
- US Telephone v Central Union, 171 F 130 (1909) (long distance carriers must interconnect, cannot discriminate against, local carriers
- Kingsbury Accord 1913 where AT&T agrees to interconnection after antitrust suit.
- MCI & AT&T
- USPS ECOM Email Service
- Mobile Telephone Service
- Telecommunications Act of 1996
47 USC s 201 (a) It shall be the duty of every common carrier engaged in interstate or foreign communication by wire or radio to furnish such communication service upon reasonable request therefor; and, in accordance with the orders of the Commission, in cases where the Commission, after opportunity for hearing, finds such action necessary or desirable in the public interest, to establish physical connections with other carriers, to establish through routes and charges applicable thereto and the divisions of such charges, and to establish and provide facilities and regulations for operating such through routes.
47 USC 251(c)(2) Interconnection The duty to provide, for the facilities and equipment of any requesting telecommunications carrier, interconnection with the local exchange carrier’s network—
(A) for the transmission and routing of telephone exchange service and exchange access;
(B) at any technically feasible point within the carrier’s network;
(C) that is at least equal in quality to that provided by the local exchange carrier to itself or to any subsidiary, affiliate, or any other party to which the carrier provides interconnection; and
(D) on rates, terms, and conditions that are just, reasonable, and nondiscriminatory, in accordance with the terms and conditions of the agreement and the requirements of this section and section 252 of this title.
See In re Implementation of the Local Competition Provision in the Telecommunications Act of 1996, CC Docket No. 96-98, FCC 96-325 (released August 8, 1996) petition for review pending sub. nom., Iowa Utilities Board et. al v. FCC, No. 96-3321 and consolidated cases (8th Cir. filed Sept. 6, 1996)
connection: 1. A provision for a signal to propagate from one point to another, such as from one circuit, line, subassembly, or component to another. 2. An association established between functional units for conveying information. Federal Standard 1037c.
47 CFFR 20.3 Interconnection or interconnected. Direct or indirect connection through automatic or manual means (by wire, microwave, or other technologies such as store and forward) to permit the transmission or reception of messages or signals to or from points in the public switched network.
47 USC 332(d) For Purposes of this section (Mobile Broadband): (2) the term "interconnected service" means service that is interconnected with the public switched network (as such terms are defined by regulation by the Commission) or service for which a request for interconnection is pending pursuant to subsection (c)(1)(B) of this section;
47 CFFR 20.3 Interconnected Service. A service: (a) That is interconnected with the public switched network, or interconnected with the public switched network through an interconnection service provider, that gives subscribers the capacity to communicate to or receive communication from
allother users on the public switched network;
The word "all" was deleted in the OI 2015 proceeding. OI 2015 Para 402: "We also note that, under the Commission’s definition of “interconnected service” in section 20.3 of the rules, a service is interconnected even if “. . . the service provides general access to points on the public switched network but also restricts access in certain limited ways.” Thus, the Commission’s definition, while requiring that the interconnected service provide the “capability” for access to all other users of the public switched network, also recognizes that services that restrict access to the public switched network, in certain limited ways, should also be viewed as interconnected. Accordingly, to the extent that there is an argument that, even with an updated definition of public switched network, mobile broadband Internet access still would not meet the definition of interconnected because it would only enable communications with some rather than all users of the public switched network, i.e., users with NANP numbers, we disagree and find that the Commission’s rules recognize that interconnected services may be limited in certain ways. Our interpretation of the Commission’s rules is consistent with their purpose, which is to ascertain whether the interconnected service is “broadly available.” It is also most consistent with, and must be informed by, the key section 332(d) guidepost that Congress provided to the Commission in granting it authority to define these terms. This guidepost refers to a service available to “the public” or to such classes of eligible users as to be effectively available “to a substantial portion of the public.” This focus of the inquiry on availability to the public or a substantial portion of it is also consistent with the specific purpose of the statute, which was to create a symmetrical regulatory framework for similar commercial services then being offered to consumers by cellular licenses and by SMR licensees who were using licenses that traditionally had been used to provide wireless service only to limited groups of users (e.g., taxi fleets). "
 47 C.F.R. § 20.3.
 In adopting the definition of interconnected service in the Second CMRS Report and Order, the Commission recognized that interconnected services could be limited and noted that “[i]n defining interconnected service in terms of transmissions to or from ‘anywhere’ on the PSN, we note that it is necessary to qualify the scope of the term ‘anywhere’; if a service that provides general access to points on the PSN also restricts calling in certain limited ways (e.g., calls attempted to be made by the subscriber to ‘900’ telephone numbers are blocked), then it is our intention still to include such a service within the definition of ‘interconnected service’ for purposes of our Part 20 rules.” Second CMRS Report and Order, 9 FCC Rcd at 1434-35, para. 55 n.104.
 See Second CMRS Report and Order, 9 FCC Rcd at 1434, para. 54; Wireless Broadband Classification Order, 22 FCC Rcd at 5917, para. 44.
 47 U.S.C. § 332(d)(1).
 See, e.g., CTIA Feb. 10, 2015 Ex Parte Letter, at 16 (“Congress intended to ensure that new offerings that were similar to preexisting cellular offerings be treated alike”). To make this point clear, and in the exercise of our authority to “specif[y] by regulation” what services qualify as CMRS services that make interconnected service available to the public or to such classes of eligible users as to be effectively available to a substantial portion of the public, we have made a conforming change to the definition of Interconnected Service in section 20.3 of the Commission’s rules.
In re Implementation of Section (3)(n) and 332 of the Communications Act; Regulatory Treatment of Mobile Services, Dkt 93-252, Second Report and Order (1993)
54. We believe that using the phrase "interconnected service," Congress intended that mobile services should be classified as commercial service if they make interconnected service broadly available through their use of the public switched network. The purpose underlying the congressional approach, we conclude, is to ensure that a mobile service that gives its customers the capability to communicate to or receive communication from other users of the public switched network should be treated as a common carriage offering (if the other elements of the definition of commercial mobile radio service are also present, or if the service can be deemed the functional equivalent of CMRS.
55. … In addition, we will consider a mobile service to be offering interconnected service even if the service allows subscribers to send or receive messages to or from anywhere on the public switched network, but only during specific hours of the day. We adopt this position because we do not wish to provide any incentive for a mobile service provider to limit access to the public switched network as a means of avoiding regulation as a CMRS provider. We agree, however, with those commenters who argue that our interpretation of interconnected service should not include interconnection with the public switched network for a licensee's internal control purposes.
Interconnected Service Provider
47 CFR 20.3 (undefined).
In re Implementation of Section (3)(n) and 332 of the Communications Act; Regulatory Treatment of Mobile Services, Dkt 93-252, Second Report and Order, para 60 (1993) ("A mobile service that offers service indirectly interconnected to the PSN through an interconnected commercial mobile radio service, such as a cellular carrier, will be deemed to offer interconnected service because messages could be sent to or received from the public switched network via the cellular carrier." The CMRS in this description would apparently be an "interconnected service provider.")
Compare "Interconnected VoIP Service Provider."
47 USC 397(3) The term “interconnection” means the use of microwave equipment, boosters, translators, repeaters, communication space satellites, or other apparatus or equipment for the transmission and distribution of television or radio programs to public telecommunications entities.
See also 47 USC 251 Interconnection
47 C.F.R. § 51.5 "Interconnection. Interconnection is the linking of two networks for the mutual exchange of traffic. This term does not include the transport and termination of traffic."
47 CFR 90.7 "Interconnection. Connection through automatic or manual means of private land mobile radio stations with the facilities of the public switched telephone network to permit the transmission of messages or signals between points in the wireline or radio network of a public telephone company and persons served by private land mobile radio stations. Wireline or radio circuits or links furnished by common carriers, which are used by licensees or other authorized persons for transmitter control (including dial-up transmitter control circuits) or as an integral part of an authorized, private, internal system of communication or as an integral part of dispatch point circuits in a private land mobile radio station are not considered to be interconnection for purposes of this rule part."
[OI 2015 para. 194 n. 482 ( Internet traffic exchange – or “interconnection” – “involves the exchange of IP traffic between networks. An Internet traffic exchange arrangement determines which networks exchange traffic and the destinations to which those networks will deliver that traffic. In aggregate, Internet traffic exchange agreements allow an end user of the Internet to interact with other end users on other Internet networks, including content or services that make themselves available by having a public IP address.”)]
"interconnection 1. The linking together of interoperable systems. [JP 1-02] 2. The linkage used to join two or more communications units, such as systems, networks, links, nodes, equipment, circuits, and devices." ATIS ; Fed Standard 1037C (Archived)
"Interconnection: The physical connection of telecommunication networks owned by two different operators." Ref.: ITU, WDTR-03, Glossary p.133 ITU Termite 6L - Terminology of Telecommunications - V.7
[Chapin p. 3 ("there is an important distinction between internetworking, which enables networks based on different telecommunication technologies and protocols to exchange data, and interconnection, which enables the owners and operators of different networks to collaborate as business entities in the provision of seamless end-to-end Internet connectivity to all of their individual customers.")]
"The term "physical interconnection" refers to the facilities connection (by wire, microwave or other technologies) between the end office of a landline network and the mobile telephone switching office (MTSO of a cellular network or the hardware or software, located within a carrier's central office, which is necessary to provide interconnection." - Need To Promote Competition and Efficient Use of Spectrum for Radio Common Carrier Services, Declaratory Ruling, 2 FCC Red 2910, 2918 n.27 (1987) (Interconnection Order).
Interconnection Under the Telecommunications Act of 1996
Obligations / Duties Statute Interconnection 251(a)(1) Persons with Disabilities 251(a)(2) Network Coordination 251(a)(2) Interconnection 271(c)(2)(B)(i)
Note: Commercial wireless carriers are considered telecommunications carriers but not Local Exchange Carriers. First Order, ¶ 1004. Therefore, commercial wireless carriers have the obligations stated above as carriers (Section 251(a) of the Telecommunications Act) and have rights under Section 251(b) & (c). Notes: See First Order, ¶ 993 ("These carriers meet the definition of 'telecommunications carriers' because they are providers of telecommunications services as defined in the 1996 Act and are thus entitled to the benefits of section 251(c), which include the right to request interconnection and obtain access to unbundled elements at any technically feasible point in an incumbent LEC's network."); 47 U.S.C. Sec. 153(26) ("The term 'local exchange carrier' means any person that is engaged in the provision of telephone exchange service or exchange access. Such term does not include a person insofar as such person is engaged in the provision of a commercial mobile service under section 332(c) of this title, except to the extent that the Commission finds that such service should be included in the definition of such terms."); Commission Adopts Rules to Implement Local Competition Provisions of Telecommunications Act of 1996, FCC NEWSReport No. D.C. 96-75 (August 1, 1996) ("In this order, the Commission applied sections 251 and 252 to LEC-CMRS interconnection. The Commission acknowledges that section 332 is also a basis for jurisdiction over LEC-CMRS interconnection, but declined to define the precise extent to that jurisdiction at this time."); First Order, para. 1023; 47 U.S.C. Sec. 332(c)(1)(B) ("Upon reasonable request of any person providing commercial mobile service, the Commission shall order a common carrier to establish physical connections with such service pursuant to the provisions of section 201 of this title. Except to the extent that the Commission is required to respond to such a request, this subparagraph shall not be construed as a limitation or expansion of the Commission's authority to order interconnection pursuant to this chapter.")
Local Exchange Carriers (including CLECs)
Obligations / Duties Statute All of the Above
Permit resale of all telecommunications services 251(b)(1) Provide number portability (from local carrier to local carrier, not from Georgia to Maine) 251(a)(2) Provide dialing parity 251(b)(3) Provide nondiscriminatory access to telephone numbers, operator services, directory assistance and directory listings 251(b)(3) Provide access to Poles, Ducts, Conduits and rights-of-way 251(b)(4)
Reciprocal Compensation 251(b)(5)
Info re local dialing parity 271(c)(2)(B)(xii)
Incumbent Local Exchange Carriers / Regional Bell Operating Companies
Obligations / Duties Statute All of the above
Negotiate in good faith 251(c)(1) Provide interconnection:
(A) for the transmission and routing of telephone exchange service and exchange access;
(B)"at any technically feasible point within the carrier's network;
(C)"that is at least equal in quality to that provided by the local exchange carrier to itself or to any subsidiary, affiliate, or any other party to which the carrier provides interconnection; and
(D)"on rates, terms, and conditions that are just, reasonable, and nondiscriminatory, in accordance with the terms and conditions of the agreement and the requirements of this section and section 252."
251(c)(2) Provide access to network elements on unbundled basis 251(c)(3) Resale at Wholesale rates any telecommunications service that the carrier provides 251(c)(4) Notice of Changes 251(c)(5) Provide physical collocation 251(c)(6) Network Elements 271(c)(2)(B)(ii) Access to Local Loop 271(c)(2)(B)(iv) Trunk-side Local Transport 271(c)(2)(B)(v) Local switching 271(c)(2)(B)(vi) 911/directory assistance/operator 271(c)(2)(B)(vii) White pages listings 271(c)(2)(B)(viii) Telephone numbers 271(c)(2)(B)(ix) Databases for call handling 271(c)(2)(B)(x) Interim number portability 271(c)(2)(B)(xi) Resale at wholesale rates 271(c)(2)(B)(xiv)
- Bell Atlantic-Delaware, Inc., Bell Atlantic-Maryland, Inc., Bell Atlantic-New Jersey, Inc., Bell Atlantic-Pennsylvania, Inc., Bell Atlantic-Virginia, Inc., Bell Atlantic-Washington, D.C., Inc., Bell Atlantic- West Virginia, Inc., New York Telephone Company, and New England Telephone and Telegraph Company, v. Global NAPs, Inc., File No. E-99-22, Memorandum Opinion and Order, December 2, 1999 resolving interconnection dispute between complainants and defendant about NAPs tarriff that charged per minute fee on IP telephony traffic
- FCC FINDS THAT VERIZON VIOLATED INTERCONNECTION REQUIREMENTS. News Release. News Media Contact: John Winston 7450 EB. Contact Lia Royle 7391, FCC 4/28/03
- Verizon v. CORE Communications, DMD 2009