Date: Fri, 11 Sep 92  22:34:09 EDT
From: Paul Robinson <FZC@CU.NIH.GOV>
Newsgroups: comp.dcom.telecom
Subject: Comments on NON-TELCO Dial Tone
Reply-To: TDARCOS@MCIMAIL.COM
Organization: TELECOM Digest
X-Submissions-To: telecom@eecs.nwu.edu
X-Administrivia-To: telecom-request@eecs.nwu.edu
X-Telecom-Digest: Volume 12, Issue 711, Message 2 of 8

Comments about the alternate local phone system article:


The article I copied from the {Washington Post} spurred me on
a little bit toward some ideas I had.

Over the last two weeks I have been seriously considering going into a
head-to-head conflict with the local telephone company.  By doing the
one thing the local Telco has generally had the exclusive right to do:
provide wireline dial service.  (Sometimes referred to as "hauling
dialtone".)  By buying trunk lines from C&P, running telephone wire on
PEPCO's electric poles, and then selling it to whoever would buy it.
(Whether I could get away with it is another matter.  I think I
could.)  

My only real concern was raising the financing to do this.  What I had
decided to do was buying or renting a PBX, buying a block of telephone
numbers and running phone wire wherever people wanted to have other
(less expensive) phone lines installed. These rates do not include
what the electric company would charge to lease space on their
telephone poles, nor whether the county would require paying a charge
to cross street right of way (I am assuming that hanging wire on the
Electric Company's poles would preclude being charged for county
right-of-way fees.)

I looked up the current rating structure.  DID trunks run about $20
apiece per month; the phone numbers are 20c apiece ($4 per block of
20, a whole exchange of 10,000 numbers would run about $2,000 a
month.)  Outgoing trunks are also about $20 each.  (This is for phones
in Montgomery and Prince Georges Counties in Maryland; the rate in DC
and VA is $1 per phone number per month, in blocks of 20).  So if we
assume the average figure is 15 trunks per 100 phones, an exchange of
10,000 estimated phones would require 1,500 incoming DID circuits and
1,500 outgoing trunk lines, plus 10,000 phone numbers.  This would
cost $62,000 per month to have the equivalent of 10,000 phone lines.
Oh my, I forgot the $3.50 per trunk charge, or add another $5,250, for
a total of $67,250 per month to have the equivalent of 10,000 phone
lines.  Which means the base cost (without any profit to me) would be
$6.83 per line.

The base cost for a residential measured service line is $5.05 per
line and 9c per completed outgoing call.  Therefore a competing
telephone company cannot compete on price in the lowest class of
service.  Except that the local telco is allowed to impose on all
phone lines a $3.50 "Federally mandated subscriber line charge," which
while they try to make it look like a tax, it's a way of charging
AT&T, MCI and Sprint less for their lines to be connected in order to
push the charge back onto the customers.  This essentially sets the
lowest cost rate for a residential telephone line at $8.50 plus tax
from C&P Telephone.

C&P's installation cost is around $35 per trunk line, plus the
installation of the DID station (telephone) numbers.  After the first
20 lines are installed, the numbers cost $4 per 20 additional numbers.
The first 20 numbers, to be installed, however, cost $750.00.

That means -- on a large scale -- to install a whole exchange and
allow connection to it, means that it would cost (not including the
PBX), about $108,000 for installation, or $11 a line plus $68,500 a
month for the service.

Even if I go with something smaller, the numbers are the same.  Let's
say I go with 200 phone numbers and 30 trunks each way.  To install 60
trunk lines will cost $2100 and the 200 phone numbers will cost $800
to install, for a total of $2900 or almost $11 per line.

The monthly service charges would be 60x$23 or $1380 for the trunk
lines and $40 for the phone numbers or $1420 for 200 phone lines or
$7.10 per line.

The one way to make money at this is to reduce the number of circuits
going to the telephone company.  If I figure 10 and 10 per 100, then
the numbers are as follows:

    10,000 phone numbers          200 phone numbers

Incoming  1000 x $20.  $40000       20 x $20.  $400
Outgoing  1000 x $20.   20000       20 x  20.   400
Phone #  10000 x  .20    2000      200 x .20     40
Line chg  2000 x  3.50   7000       40 x  3.50  140
 Total                  49000                   980
 Per Line        4.90                     4.90

If the charge only applies to outgoing trunks, knock off about $.35
per line.

Assuming that the electric company charges, say, $5 per pole and the
numbers come out that for hauling traffic I need to allocate $1 per
line for renting pole space, the cost comes out to be $5.90 per line
as the charge for me to provide the service.  On the other hand, I
might be able to use the space owned by the cable company for less,
perhaps.

Current minimum rates for business phone lines are $18 per line per
month.  This is the only place an alternative carrier can compete on,
since I could conceivably offer the same service as the phone company,
for $9 a month, charge the same rates per local call, and make a
profit.

The only thing that would otherwise be a problem is the installation
costs which are part of setting up the system, and paying for the PBX.
If I rented a PBX the cost should not be astronomical, I hope.
(Someone once mentioned a rule of thumb to me of $1,000 per line to
buy and install a PBX.  Perhaps if I rented a PBX I could do this
cheaper, or buy a used one.  (Anyone know what a used DMS-100 (or
equivalent) sells for?  That's about the size needed to handle 10,000
lines.  :) )