III. Non-Cost-Based Elements of Access Charges

Verizon's access charges include TIC and SBC's access charges include NIC. The history and derivation of these charges is discussed in D.04-12-022, and need not be repeated here. No party disputes that these charges are not based on cost, and are assessed on a per-minute basis for all long-distance calls originated or terminated by a local exchange carrier for a third-party long distance carrier.

In D.04-12-022, we also discussed the undesirable effect of excessive access charges on competition where not all market participants are subject to the charges. Changes in California's telecommunications market, namely the mergers of the two largest local exchange carriers with the two largest long distance carriers, discussed above, and the local exchange carriers' entry into the long distance market, have greatly diminished the fraction of the long distance market actually paying the access charge to an unaffiliated entity. To the extent access charges are set above cost, local exchange carriers and their affiliates incur lower costs than independent carriers, which could undermine our goal of a fair and competitive market.