Termination rates

rdf:langString Termination rates

rdf:langString The termination rate is one of the three components in the cost of providing telephone service, and the one subject to the most variation. On every long-distance call in the United States, the customer pays for: * Origination (dial tone service): connecting the call from the originating customer's equipment to a telephone company central office or exchange). In the era of wired local telephone service (slowly coming to an end with the ubiquity of cell service, starting in the 2010s) this was usually provided by a single company in each locality. * The transportation of the signal (the call) to another telephone company office near the recipient of the call. * Termination, completing the call from the receiving company central office to the receiving subscriber's equipment. Historically, each of these steps could be carried out via a separate company, and the toll paid by the originating (or in some cases the receiving) caller would be split among the three providers. In the United States, the long-distance connection between the two local telephone company offices was furnished by the Bell System, until that was dismantled in 1984 with the mandated splitting of American Telephone & Telegraph (AT&T for anti-trust reasons. Since then, especially with the two largest remaining companies – AT&T (the same name, but quite different equipment and service) and Verizon), if the same company provides all three components it keeps the entire charge (toll) paid by the customer. Otherwise, the money received is divided; this is known as intercarrier compensation (ICC) and is intended to keep the telecommunications system functioning, by having every phone company receive compensation for the use of its network. To this day (2019) this is the system used for most international phone calls. The originating company in the originating country collects the money (except for collect calls, in which the receiver agrees to pay), keeps some for its expenses, pays some to a company which connects the two countries' networks, and pays another charge, the termination charge, to the company or government agency which connects the incoming international call to the subscriber's equipment in the destination country. While the toll for intra-country (domestic) calls is often controlled by government regulation, there is no world supervision of international call charges. The destination country company or government agency can charge anything the market will bear for its portion of the call — sometimes this varies depending on the part of the receiving country being called — and the originating company must collect and remit this fee to the destination country. As of 2019, there are dramatic differences between countries in the charge demanded by the receiving company for completing (terminating) the call. For example, on one network the 2019 cost of calling from the United States to the Dominican Republic is 6¢ ($0.06) per minute, while a connection to Cuba, a shorter distance, is 92¢ per minute. To some extent this reflects different costs and efficiencies in different countries, but it is used by some countries as a revenue source. In the past, high termination charges in some countries were used as a payment mechanism for phone sex services. In the best-known example, the Guyana Telephone and Telegraph Company was acquired by a U.S. company specifically for this purpose. The Guyanese were (deliberately) unable to access the phone sex lines. With the advent of cellular phone service, the basic structure did not change, but the services use different equipment than that used by the traditional networks, the companies are often different, and everything had to be renegotiated. There are often multiple providers for the originating and the termination portions of the call, since with cellular systems, in which the signal (the call) is transmitted between the customer and the central office via digital radio (before 2008, analog radio) rather than copper wire, the cost of setting up a new or competing service is far lower. In the United States, as of 2011 the termination charge for cellular calls was eliminated by federal regulation, meaning that as perceived by the consumer, there is no difference between the cost of calling a phone on a cell phone network and a phone on the traditional wired network ("land line"). In most foreign countries this is not the case, and because of the termination charges charged by the mobile networks which complete the calls, which are usually paid by the caller ("calling party pays", although in a few places receiving party pays), the cost of calling a subscriber on a cellular network can be dramatically higher than calling a land line. In some countries the charges vary depending on which of several competing cellular companies completes the call (which company the call recipient subscribes to).