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Dear Senator:

     On behalf of the National Taxpayers Union’s (NTU’s) 1,300 members in South Dakota, I urge you to support Senate Bill 87 (SB 87), which would prohibit local exchange carriers (LECs) from assessing certain “access stimulation” charges. NTU has a longstanding history of opposition to unfair and disproportionately high tax rates on telecommunications services, as well as opposition to government subsidies for entities such as Rural Electric Cooperatives. We are concerned that much like those policies, current regulations regarding LECs may be burdening consumers with unnecessarily higher costs.

     Access stimulation (also known as traffic pumping) is the practice of artificially moving traffic onto a local exchange carrier. Traffic pumping takes place when an LEC enters into an arrangement with a calling company to carry “free services” over the LEC’s network. These include conference calls, pornographic chats, and international calling. But because federal law requires that wireless and long-distance carriers reimburse LECs for calls on the network, the LECs take advantage of the increase in traffic and assess high fees on the wireless and long distance carriers. Consumers are ultimately the ones who must pay these fees through higher telephone bills. What’s more, the LEC pays the calling company a kickback for the increased traffic.

     By one estimate, traffic pumping for free services now cost $190 million a year in charges that are ultimately passed onto wireless consumers in South Dakota and elsewhere. To date, the Federal Communications Commission (FCC) has received scores of complaints regarding traffic pumping. In the National Broadband Plan, the FCC has recommended the curtailment of traffic pumping in order to maintain the integrity of intercarrier compensation, an underpinning of the nation’s telecommunications system. Additionally, the American Legislative Exchange Council, the nation’s premier organization of conservative lawmakers, recently adopted a resolution that encouraged the FCC and state legislatures to resolve traffic pumping issues by, in part, ensuring that statutes at least do not promote traffic pumping.

     Regulations on both the telecommunications marketplace and the interaction among providers should be streamlined and kept to a sensible minimum. However, neither should those regulations create distortions that artificially impede upon the efficiency of the telecommunications sector nor impose higher prices on consumers. SB 87 strikes a sensible balance between these principles. Therefore, our members hope you will support this legislation.

Sincerely,

John Stephenson
State Government Affairs Manager