Bill and keep
Encyclopedia
Bill and keepalso known as net payment zero (NPZ), is a pricing arrangement for the interconnection
(direct or indirect) of two telecommunications networks under which the reciprocal call termination
charge is zero. That is, each network agrees to terminate calls from the other network at no charge. According to the OECD, Bill and Keep is defined as "A pricing scheme for the two-way interconnection of two networks under which the reciprocal call termination charge is zero - that is, each network agrees to terminate calls from the other network at no charge".
Bill and keep represents a modern approach to interconnection charging in which the networks recover their costs only from their own customers rather than from their competitors. Such an arrangement acts to remove the wholesale cost barrier to the retail pricing for off-network calls and has been proven to result in significantly higher levels of calling activity.
On October 27, 2011, the U.S. Federal Communications Commission
(FCC) announced that it would adopt a bill-and-keep framework for all telecommunications traffic exchanged with local exchange carrier
s (LECs) as part of an effort to reduce arbitrage
practices such as traffic pumping and phantom traffic, encourage the deployment of IP-based networks
, and reduce artificial competitive distortions between wireline
and wireless carriers.
In the European mobile telecommunications
sector, absent a bill and keep arrangement, the wholesale markets have traditionally applied the calling party pays (CPP) principle in which an originating network pays the terminating network a charge called the mobile termination rate (MTR) or fixed termination rate (FTR) for calls to the terminating network. The MTRs paid under the CPP model, therefore, act as a cost floor to the retail pricing, preventing lowering of prices and innovation of retail propostitions. In many countries including the UK, the CPP model has thus led to a high level of regulatory activity aimed at capping the MTRs at a competitive level, which inevitably acts to reinforce the cost floor rather than being pro-competitive.
Although Bill and Keep has gained momentum, some drawbacks have been identified with this model, such as issues related to the quality of service offered to the end user.
Interconnection
In telecommunications, interconnection is the physical linking of a carrier's network with equipment or facilities not belonging to that network...
(direct or indirect) of two telecommunications networks under which the reciprocal call termination
Call termination
Call termination, also known as voice termination, refers to the routing of telephone calls from one telephone company, also known as a carrier or provider, to another.The terminating point is the called party or end point...
charge is zero. That is, each network agrees to terminate calls from the other network at no charge. According to the OECD, Bill and Keep is defined as "A pricing scheme for the two-way interconnection of two networks under which the reciprocal call termination charge is zero - that is, each network agrees to terminate calls from the other network at no charge".
Bill and keep represents a modern approach to interconnection charging in which the networks recover their costs only from their own customers rather than from their competitors. Such an arrangement acts to remove the wholesale cost barrier to the retail pricing for off-network calls and has been proven to result in significantly higher levels of calling activity.
On October 27, 2011, the U.S. Federal Communications Commission
Federal Communications Commission
The Federal Communications Commission is an independent agency of the United States government, created, Congressional statute , and with the majority of its commissioners appointed by the current President. The FCC works towards six goals in the areas of broadband, competition, the spectrum, the...
(FCC) announced that it would adopt a bill-and-keep framework for all telecommunications traffic exchanged with local exchange carrier
Local exchange carrier
Local Exchange Carrier is a regulatory term in telecommunications for the local telephone company.In the United States, wireline telephone companies are divided into two large categories: long distance and local...
s (LECs) as part of an effort to reduce arbitrage
Arbitrage
In economics and finance, arbitrage is the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices...
practices such as traffic pumping and phantom traffic, encourage the deployment of IP-based networks
Internet backbone
The Internet backbone refers to the principal data routes between large, strategically interconnected networks and core routers in the Internet...
, and reduce artificial competitive distortions between wireline
Plain old telephone service
Plain old telephone service is the voice-grade telephone service that remains the basic form of residential and small business service connection to the telephone network in many parts of the world....
and wireless carriers.
In the European mobile telecommunications
Cellular network
A cellular network is a radio network distributed over land areas called cells, each served by at least one fixed-location transceiver known as a cell site or base station. When joined together these cells provide radio coverage over a wide geographic area...
sector, absent a bill and keep arrangement, the wholesale markets have traditionally applied the calling party pays (CPP) principle in which an originating network pays the terminating network a charge called the mobile termination rate (MTR) or fixed termination rate (FTR) for calls to the terminating network. The MTRs paid under the CPP model, therefore, act as a cost floor to the retail pricing, preventing lowering of prices and innovation of retail propostitions. In many countries including the UK, the CPP model has thus led to a high level of regulatory activity aimed at capping the MTRs at a competitive level, which inevitably acts to reinforce the cost floor rather than being pro-competitive.
Although Bill and Keep has gained momentum, some drawbacks have been identified with this model, such as issues related to the quality of service offered to the end user.