Reciprocal Compensation

(Recip Comp) - A form of financial compensation that occurs when a local or LD (Long Distance) service provider terminates a call on another provider's facilities. Imagine a phone call from New York to Los Angeles. It may start with the customer of a new phone company, then proceed to a local phone company (e.g., New York Telephone, part of Verizon). Then it may proceed to a LD company before ending in Los Angeles and going through another one or two local phone companies before reaching the person dialed. Under the existing rules, all the companies carrying these phone calls have to be paid in some way for their transmission and switching services. There are programs in place such that the company doing the billing and collecting the money pays over some of those monies to the other phone companies in the chain. One such program is called "reciprocal compensation." The opposite of recip comp is called "Bill and Keep." Under this program, the company billing the call gets to keep all the money. The others in the chain (or most of the others in the chain) get nothing.