Intercarrier Compensation Comments to FCC Reflect Disparate Views

Although various organizations joined forces, including an inter-industry group called the Intercarrier Compensation Forum (ICF), comments submitted by our deadline still reflected disagreement, especially with the ICF plan: (1) Rural and competitive LECs urged the agency not to adopt a bill-&-keep (B&K) approach as proposed by the ICF. (2) The Rural Cellular Assn. (RCA) said the FCC should adopt B&K because it makes sense. (3) Consumer groups said B&K would harm consumers.

Sprint, an ICF member, said it’s true the ICF plan involved “significant” compromises but it’s “a realistic means to correct the problems generated by a broken calling-party-network-pays regime.” Sprint said the ICF plan will help consumers, including those in rural areas, by reducing costs, encouraging competition, stimulating new technologies and stabilizing universal service.

Instead of B&K, in which carriers connect to each other without payment, “uniform, cost-based intercarrier compensation rates [set for each LEC] should be charged whenever a service provider originates or terminates traffic on the LEC’s network,” said the Eastern Rural Telecom Assn. (ERTA). Reciprocal compensation, intrastate and interstate access rates should all migrate to the same rate over time, said ERTA, one of several commenters supporting views of a group known as the Rural Alliance.

The Subscriber Line Charge (SLC) should be lowered, not raised as proposed by the ICF, because the current SLC rate already exceeds the “forward looking economic costs of access allocated to the federal jurisdiction,” said a joint filing by the Tex. Office of Public Utility Counsel, Consumer Federation of America and Consumers Union. The consumer groups urged the FCC not to adopt a B&K system because it only works “where market power is controlled” through competition. “Unfortunately, we do not live in such a world,” the consumer advocates said: “Market power still exists in access markets for residential customers, while regulation is being relaxed. Under these conditions, bill and keep will lead to the abuse of consumers because it will result in large increases in end user rates.”

RCA said B&K should be adopted over a transition period of no more than 4 years. “Considering that persons receiving calls, for all practical purposes, benefit in a comparable manner to persons placing calls, there appears to be no sufficient reason to continue to assign the terminating cost of a call to the originating carrier,” RCA said. Instead, a B&K plan “would be both efficient and easy to administer,” it said.

The FCC won’t be able to adopt “any one plan in its entirety” because no group has proposed one that fully satisfies the law or the FCC’s goals,” said CLECs KMC and Xspedius in joint comments. “Rather the FCC will need to develop its own plan,” based on parts of plans that have been submitted by various groups, the CLECs said. However, they said, B&K doesn’t make sense: “Coercing carriers to perform network functions, such as transport and termination, without any compensation, will discourage facilities-based competition and robust interconnection.”

The N.Y. State Dept. of Public Service (NYSDPS) said part of the ICF proposal that would require federal preemption of state regulation of intrastate access charges would violate the Telecom Act: “The Commission’s authority to preempt the states [under Sec. 201 of the Telecom Act] falls only to those matters to which the 1996 Act applies, and jurisdiction over intrastate access charges was not changed under the 1996 Act.” Nor do any other sections of the Telecom Act apply, the regulators argued. One alternative would be to rely on commercial agreements, which would “allow parties in a competitive environment to develop solutions tailored to their particular needs,” the NYSDPS said. “Even where regulatory assistance is required, such as in arbitrating those agreements, there need be no expectation of nationally uniform outcomes,” the filing said.

USTA said there’s “well-established legal authority” for the FCC to preempt state regulation of ICC: “State regulation of intercarrier compensation has become inconsistent with a necessary federal policy of intercarrier compensation reform and, thus, preemption is appropriate under the inseverability doctrine.” USTA said “intercarrier traffic is increasingly mixed and impractical to separate jurisdictionally.”

The N.J. Board of Public Utilities said it agrees with several concepts included in a draft proposal by a NARUC task force: (1) ICC for origination and termination should be unified at rates based on forward-looking costs and should be the same for all carriers and all traffic in both interstate and intrastate jurisdictions. (2) Carriers should be free to negotiate other ICC arrangements, including B&K, on a voluntary basis. (3) The intercarrier charges should apply to VoIP calls that use the public switched network for origination or termination. (4) “State commission participation in a system of unified charges should be voluntary.” The board said “preservation of a meaningful state role… is preferable and, in our opinion, necessary in light of the current competitive nature of the telecommunications industry.”