Industry Continues to Disagree Over Intercarrier Compensation Fixes

“Rural carriers are different than non-rural carriers,” said GVNW Consulting in telling the Commission that the ICF’s bill & keep (B&K) plan “would create severe impacts on rural carrier customers.” GVNW, which represents rural telephone companies on regulatory issues, said a sample of 97 such carriers showed they would face a $4.08-$823.63 per line monthly shift in support. The shift would be from access charges to end-user charges or other support mechanisms such as universal service, the filing said. Most discussion about the impact on rural carriers has been based on aggregate data, which can “mask the impact on an individual company basis,” GVNW said.

CenturyTel warned that B&K -- “and similar proposals that seek to relieve carriers of their obligation to provide compensation for use of other carriers’ telecommunications infrastructure -- would shift a total of roughly $9 billion per year to new charges to be borne by consumers, including between $0.9 billion and $2.3 billion annually to new universal service mechanisms.” This could result in an average monthly increase of about $22 a line on rural consumer bills, which “would be devastating to rural communities,” CenturyTel said. Rural ILECs are important to the nation as the carriers of last resort, the company said.

ICF said its plan “offers the Commission a reasonable middle ground between the perpetual regulatory intervention advocated by supporters of calling party network pays schemes and the complete abdication of regulatory responsibilities supported by Verizon.” The plan would let the Commission “achieve both the deregulatory and the pro-competitive goals of the Telecommunications Act,” said ICF, which is made up of AT&T, Global Crossing, Level 3, General Communications, Iowa Telecom, MCI, SBC, Sprint and Valor Telecom. ICF said the plan gives ILECs an opportunity to recover revenues that might be lost through access reductions, “but it does not offer ILECs any guarantees of revenue neutrality in the face of growing competition.”

In comments apparently directed at the ICF, Verizon said the FCC should reject proposals that “take the form of regulatory mandates that impose a one-size-fits-all solution, such as a mandatory bill-and-keep regime.” Verizon told the Commission it “should be skeptical” of any group that wants a new regulatory regime as a transition to a market-based approach. “The goal of any [ICC] reform should be the replacement of the existing regimes of top-down regulation with negotiated, commercial agreements between interconnecting carriers,” Verizon said. “That is because a market-based approach, which relies on such agreements, is the best long-term solution… in the face of substantial technological change.”

Cablevision, a cable company that competes in local phone service, focused its reply comments on “Verizon’s arguments for reduced or eliminated regulation of [ICC], including its desire to free IP-to-IP traffic of all regulatory oversight whatsoever.” Cablevision told the FCC: “Freeing the ILECs -- who still occupy a market- dominant position throughout the country -- of regulatory responsibilities to interconnect efficiently with competitors merely because the ILECs have worked a technical change in their network would be contrary to the public interest and a grave blow to the continued development of competition…” Cablevision said Verizon’s recommendation for replacing ICC with negotiations should be rejected because “Verizon has proven repeatedly that it will not engage in ‘commercially reasonable’ negotiations with competitive carriers even in a regulated environment.”

XO Communications, a competitive local carrier, said it too opposes B&K as the path to reform. “While above- cost rates arguably found in the current intercarrier compensation system may create arbitrage incentives, the remedy is not to swing 180 degrees and mandate no compensation for transport and termination of traffic,” XO said. The company warned the FCC that while ICF members “would have the Commission erroneously believe that [their] plan is preferable because it appears widely supported by all industry segments,” in fact a “vast number of parties… do not support that plan.” XO said: “Just because the ICF may include one or more participants from several industry segments does not signify that the plan is a ‘consensus’ proposal. To the contrary, substantial opposition to the ICF proposal exists in virtually all segments of the industry.”

The Wis. PSC said “this lack of consensus has placed a tremendous amount of responsibility and burden upon the NARUC Task Force, which is working with industry groups to devise “a reasonably balanced approach to ICC reform.” The PSC said it’s possible NARUC and, independently, industry groups may develop revised plans so “the FCC should continue to encourage the presentation of new and consolidated approaches that achieve consensus.”

Meanwhile, the General Services Administration said govt. agencies that buy telecom services through bidding have “unique concerns” about intercarrier compensation plans. It’s important to them that the plan foster competition because “competitive bidding is only effective if there are multiple potential suppliers,” GSA said.

Wireless Industry Says its Proposal Meets FCC Goals

CTIA blasted most comments filed in the proceeding by those outside the wireless industry. It said most commenters “do not support or recommend lasting reform proposals” that would meet the FCC’s goals of “promoting economic efficiency and facilities-based competition, preserving universal service, ensuring competitive and technological neutrality and decreasing regulatory intervention in favor of market forces.”

Reform proposals by CTIA and other wireless carriers represent “the only industry segment that embraces and satisfies fully the Commission’s reform goals,” CTIA said. It said acting on other proposals would continue to “burden consumers with legacy costs and monopoly abuses, which will only further limit consumers’ choices of services and providers and raise end user rates overall.”

Unlike others, CTIA’s “mutually efficient traffic exchange” (METE) proposal would replace the “antiquated wireline-centric” ICC and universal service regimes with “a comprehensive approach that does not ‘play favorites’ with regard to technologies or service providers,” the group said. CTIA’s proposed interconnection and compensation rules would boost efficiency, delivering consumers the highest quality services at the lowest cost, it said: “A review of other comments confirms that the METE proposal is by far the best means for reforming the intercarrier compensation and universal service regimes.”

CTIA criticized multiple parties’ support for preserving “all arbitrary distinctions and disparate” ICC rates: “These distinctions and preferences benefit a limited class of service providers, which creates opportunities for arbitrage, anticompetitive behavior and inefficiencies, rather than protecting consumer interests.” The PETE proposal widely backed in the wireless industry is the only ICC reform approach that would remove such distinctions, CTIA said.

CTIA also criticized many proposals for placing “greater importance on carriers than on consumers” by stating that carriers have a right to revenue neutrality. Responding to opponents’ concerns that a bill-&-keep system would inhibit rural investment and raise end user rates, CTIA said its proposal would ensure that high-cost universal service remains available for those who are “incapable -- even when operating efficiently -- to provide high-quality services at affordable rates.” At the same time, it said, “relieving wireless and other carriers of the burdens of the current inefficient [ICC] system will provide them with the right signals for investment and competitive entry in currently underserved markets.”

The CTIA proposal gained wide backing in the wireless industry. “Only a unified, default bill-and-keep regime with competitively neutral interconnection rules… can offer maximum benefits for consumers, while achieving all of the Commission’s goals,” T-Mobile said. SouthernLINC Wireless said it agrees with CTIA and T-Mobile that “without effective default interconnection rules, carriers with greater bargaining leverage like ILECs will be able to impose their costs on their competitors by requiring them to exchange traffic in a manner that exploits that leverage.” Verizon Wireless said it agrees with CTIA that the FCC “should resolve whether originating LECs have the obligation to treat intraMTA calls that originate on their networks as local calls.” It urged the FCC to grant a Sprint petition by declaring it unlawful for carriers to refuse to recognize numbers as local where a carrier designates a code, regardless of how calls to that code are routed.

Nextel said it sees commenters having “general agreement that could yield an opportunity for the Commission to promote voluntary [B&K] arrangements” as part of long term ICC reform. Like Nextel, it said, many agree on the need for regulatory oversight of transit service to ensure its availability and the reasonableness of the rates, terms and conditions under which it is offered: “This will provide for efficient networking, enhanced opportunities for intermodal competition and lower prices to consumers.” Nextel also said it finds support among commenters for the position that revenue guarantees aren’t in the public interest.

Independent wireless carriers (IWC) Western Wireless and SunCom Wireless, which proposed a separate reform plan, said some of its aspects either were “endorsed or cited favorably” by CTIA, Nextel, Time Warner and U.S. Cellular. The IWC plan would eliminate arbitrary distinctions in compensation and traffic exchange and would create a bill-&-keep regime. The plan accounts for necessary modifications to related regulatory programs, such as universal service, and includes comprehensive provisions in those areas. “Although IWC strongly believes that its proposal is the most appropriate and workable… IWC recognizes that it may be necessary for the Commission to combine various aspects of different proposals in order to achieve the most desirable result in carrying out its mandate,” IWC said.