STATE OFFICIALS MULL INTERCARRIER COMPENSATION PROPOSAL

Asked during a news briefing Mon. whether the industry will propose FCC preemption of the states to complete the plan, ICF facilitator-attorney Gary Epstein said the industry group thought the FCC had power to make the recommended changes without need of preemption. NARUC Gen. Counsel Brad Ramsay said the impact of the ICF plan on state authority is unclear because all details aren’t available. The ICF has briefed the FCC and filed an ex parte based on that briefing, but a formal, more complete filing with the agency isn’t expected for about 2 weeks.

“You can’t tell at this point whether there would have to be state preemption or a requirement for cooperative action from state regulators,” Ramsay said: “Everyone is waiting for the details.” A 2nd briefing is set later this week or early next on a conference call with NARUC’s intercarrier compensation task force. Medley Global Advisors predicted in a report that the ICF announcement will be the beginning of a “multifaceted lobbying process at the state level.” The report said “aspects of the plan that involve changes to federal/state jurisdiction, cost recovery for rural price-capped carriers, rate rebalancing and higher SLCs [subscriber line charges] on end user bills will weigh heavily on the minds of state commissions as they review the plan.”

Mark Cooper, research dir. of the Consumer Federation of America, said the plan was a “ripoff” because it would boil down to consumers paying much higher SLCs. “The majority of residential consumers don’t make enough phone calls to offset the increase,” he said. The FCC couldn’t justify raising the SLC “to $10 in the federal jurisdiction so the plan clearly would require having to go and muck up the states,” he said.

It wasn’t clear when the FCC might seek comments on the plan. Epstein said he didn’t know but thought it would have to be this year for the plan to begin in summer 2005 as proposed. Others have predicted any time from Sept. to Nov.

The FCC, which reportedly has developed its own draft notice of proposed rulemaking (NPRM), probably would issue a new NPRM combining the ICF plan, those of other industry groups “and the Commission’s own ideas,” Legg Mason said in a report Tues. “The simplest way would be to attach the ICF and other proposals and seek general public comment, but the agency may seek to analyze the plans and adjust its own preliminary proposals and thinking, which could take a little longer,” said the report.

“The FCC first must decide whether it has the legal authority to implement the plan, particularly in the area of intrastate access charges, which have been the domain of state regulators,” Legg Mason said. “If the FCC decides it has the authority, it remains to be seen whether the FCC would have the political will to push ahead, given the policy objections of others and the litigation risk.” The report predicted CLECs, some wireless carriers, consumer groups, state regulators, the other Bells and rural LECs would oppose the plan or at least seek changes. The FCC itself probably will make changes and its decisions probably will be subject to Hill scrutiny, Legg Mason said.

ALTS issued a statement saying it was disappointed with the plan because it moved to bill & keep while “ignoring the costs associated with using telecommunications facilities.” Such a system would “promote uneconomic arbitrage and further undermine incentives for carriers, especially facilities- based CLECs to deploy alternative local facilities,” said ALTS Pres. John Windhausen. He said most CLECs left the ICF because, while they agreed on the need for a uniform compensation plan, they wanted a plan that would give all carriers an opportunity to recover costs and not place “a large burden on consumers.” ALTS said it favors an alternative proposed in May by the Cost-Based Intercarrier Compensation Coalition.