FCC IBC Fee: Damaging or Anachronistic?
The annual IBC (International Bearer Circuit) fee. What is this, you ask? As a builder or owner of an undersea cable system, why do I care about it? Do I have to worry about this thing even if I am a bank? An Internet Service Provider? An oil company? The short answer is yes. Yes and yes. Described as “[one of] the biggest issues facing cable owners today” by the CEO of a major transoceanic cable system, the fee is levied by the U.S. Federal Communications Commission (FCC) on international license holders. The FCC claims that the fee is simply used to recover regulatory costs.
per second) per year in FY2007, carriers interviewed by Pioneer Consulting estimate that this now represents 10-25% of the annual lease revenue for a circuit. The annual IBC fee for a STM-1 (about 2400 “circuits”) from New York to London (or anywhere outside the US, for that matter) is now about US$2,500 (see the Chart “STM-1 IBC Fee”) and the fee for a STM-64 is about US$162,000. In the transatlantic market, where the lease price is only marginally above the equipment price and margins are thin, the IBC fee is enough to push profit into a loss.
Recouping the Commission’s costs by collecting fees on international traffic is not a new idea. For years, the FCC has been recording outbound international traffic by mandating carriers to report their IBCs (defined as an equivalent circuit of 64 kilobits per second). So why has this become an issue now? Put simply, the fee basis has not been flexible enough to cope with plummeting bandwidth prices and the recent increase in the types of customers purchasing capacity on the plethora of international communications facilities. (Recent, that is, in the glacial pace of regulatory reform.)
By Howard Kidorf
Despite the fact that the FCC’s annual adjustment of the IBC fee saw a reduction to US$1.05 per “circuit” (defined as 64 kilobits
Industry Perspective Complaints about these fees are not new. As far back as 2004, Tyco (while they still owned the TGN; VSNL has continued these objections) filed with the FCC a comprehensive objection 33