terminating versus orginating telephone minutes

Payments between interconnecting telephone companies distinguish between terminating and originating telephone call minutes.  You say let’s talk tonight.  If I call you, my telephone company pays your telephone company per minute of our conversation.  If you call me, your telephone company pays my telephone company per minute of our conversation.   Telephone companies, and other companies providing voice communication services, thus care greatly about the “direction” of telephone conversations.

Communication, however, is fundamentally mutual, not directional.   Placing a telephone call is a type of request for attention. That has significant direction and often has highly asymmetric value across parties.  Time in communication, however, is not the same as a request for attention. I can’t communicate with you if you won’t communicate with me.   During a telephone conversation, either party is technically free to hang up at any time.  Within most telephone conversations, who called whom matters little.  The distribution of value within a continuing conversation depends on many factors other than who called whom.

Who calls whom has little significance for communications infrastructure cost.  The call direction relevant to payments between telephone companies is merely a convention associated with call set-up. Signaling outside of these network conventions (“Hey Bill, give me a call!” or digital non-telephone-network technologies that signal one telephone switch to initiate a call to another telephone switch) can easily reverse the conventional direction of a call.[*]  At a technical level within a modern, packet-based communications network, the predominate direction of network traffic depends on who talks more, not on who called whom.  More importantly, the direction in which most packets move has no significance for network cost.

From 1991 to 2008, U.S. incumbent local telephone exchange operating companies typically have reported roughly twice as many terminating telephone call minutes as originating call minutes.  Ignoring accounting associated with multi-person (conference) calls, every originating minute is always associated with one terminating minute.  Hence, for a bounded population communicating with each other, terminating telephone minutes necessarily equal originating telephone minutes. The imbalances in terminating to originating minutes probably come mainly from economic opportunities for competing or alternative communications infrastructure. At least historically, billing end-user customers has been more profitable than billing interconnecting telephone companies. Hence competitors have tended to target end-users with a relatively low ratio of terminating minutes to originating minutes. Similarly, non-telephone companies with their own communication infrastructure have saved more money by using their communications infrastructure to originate minutes than by using it to terminate minutes. The over-all effect is to skew incumbent local exchange carrier minutes toward terminating minutes.

The effect of telephone service competition on the ratio of terminating to originating minutes can be seen both across customer classes and across regions.   The Ameritech telephone operating company distinguishes its interstate switched access telephone minutes by whether those minutes are interconnected with a competitive access provider.  Public tariff data for Ameritech show that telephone minutes that Ameritech interconnects with a competitive access provider have a higher ratio of terminating minutes to originating minutes.  In public tariff data for demand years 1997 and 1998, the Nynex telephone operating company distinguished switched access telephone minutes interconnected in Lata 132 (New York City).  Lata 132, with a high density of persons and economic activity, has more competition among telephone companies than do other service areas.  Somewhat surprisingly, Nynex’s switched access interconnected telephone minutes show roughly than the same terminating/originating ratio in Lata 132 and outside Lata 132.  However, originating minutes in Lata 132 declined 2.0% from 1997 to 1998, while originating minutes outside of Lata 132 grew 2.2%.  Within Lata 132 in 1998, Nynex multi-line business telephone customers had a 2.6 ratio of terminating to originating minutes, while single-line telephone customers had a ratio of 1.8.

Telephone companies’ accounting of originating and terminating telephone call minutes is rather inconsistent.  The terminating / originating minute ratio has varied greatly across years.  For example Bell Atlantic reported a ratio of 0.88 for 1995, and 1.88 for 1996.  Ameritech reported a ratio of 1.61 for 2002, but 2.08 and 2.48 for 2001 and 2003, respectively.  Pacific Bell has reported a ratio below 1 from 1996, and Nevada Bell has reported a ratio below 1 from 1992.  Inconsistent reporting of terminating and originating telephone minutes is not surprising in light of the communicative and network superficiality of the terminating-originating distinction.

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Data: Online spreadsheet of U.S. local telephone companies’ originating and terminating interstate switched access minutes (Excel version); coded dataset of Ameritech transport interconnection charge minutes, 1998-2009; coded dataset of Nynex switched access minute elements, 1998-1999

[*] An early example of reversing the conventional direction of calls was international callback.  In 2003, the FCC eliminated its comity-based prohibitions on call-back.

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