Settlement Costs

Date: Wed, 30 Oct 1996 17:31:39 -0500
From: Scott Huddle <>
Your argument changes from an economic one to a political one. If
you want to run for office, there are better forums. If you want
to convince people who are building commercial networks, get
some facts.

In your reply to Dillon, you accuse him of having inaccurate figures.

Now, the fact is, he's probably not been around long enough to have read
the report, that has long since entered into the net consciousness. I
remember seeing it about 5-6 years ago. I think it was a BellCore
study, but I may be misremembering. It concluded that over half the
cost of operating the RBOCs was customer billing.

As I remember, it in turn was based on the reported figures to the PUCs
of the RBOCs, looking at the depreciated cost of the cable plant, the
stated cost of yearly plant maintenance, and the proportion of equipment
unrelated to billing. As I remember, virtually all the switch
maintenance costs (particularly configuration and software) was unit
billing related. All the customer service reps and such were assumed
billing related, while directory service operations were not. Then,
proportion the management cost accordingly, and assumed that everything
else is billing related.

Now, that may have been an old report. I'm sure MCI would be delighted
to reveal its current figures for plant depreciation and maintenance,
and the amount that it pays (the RBOCs) for unit timing and printing and
mailing the statements, along with all the payment collection costs.

When you are ready to send that to this list, I will accept your further
criticism here of Dillon's numbers. Thank you.
    Key fingerprint = 17 40 5E 67 15 6F 31 26 DD 0D B9 9B 6A 15 2C 32
    Key fingerprint = 2E 07 23 03 C5 62 70 D3 59 B1 4F 5E 1D C2 C1 A2

Somebody who should know these things told me privately that the cost of
billing systems for MCI is currently 78%

While it can be difficult to figure these things out for sure I believe
that a significant element of the push by RBOC's into the ISP business is
to protect themselves in case the billing costs bubble is burst and they
are basically forced to flat-rate monthly billing or die. With an ISP
subsidiary they have a good chance of surviving by placing resources in
the ISP and letting the metered rate portion of the company wither away.

Michael Dillon - ISP & Internet Consulting
Memra Software Inc. - Fax: +1-604-546-3049 - E-mail:

Oops. I'm getting two different messages confused here. The 78% figure has
nothing to do with MCI specifically. It comes from the telco billing
industry, i.e. companies to whom the telcos outsource some of their
billing operations.

Michael Dillon - ISP & Internet Consulting
Memra Software Inc. - Fax: +1-604-546-3049 - E-mail: