A proposal by Core Communications to reform intercarrier compensation through a forbearance petition got angry responses from many telecom companies. In comments filed at the FCC, Bells and rural telecom companies alike said the proposal wouldn’t work and probably would dramatically increase demands on the universal service fund. Core filed the petition April 27 asking the FCC to refrain from enforcing Sec. 251(g) of the Telecom Act -- in essence replacing access charges with reciprocal compensation payments. Verizon accused Core of trying to “promote its own short-term interest in regulatory arbitrage at the expense of rational, pro-competitive regulation.” USTelecom said intercarrier compensation reform is “urgently” needed but the Core plan isn’t the way to do it. “These issues are complex, inter-related and of vital importance to carriers and customers alike,” said Embarq, a new company formed from Sprint Nextel’s former local exchange operations. Instead of resolving the issues in the ongoing proceeding, “Core proposes an end-around to the process via… a forbearance petition [with] only cursory analysis and assumptions,” Embarq said. The Western Telecom Alliance of rural telephone companies in western states questioned Core’s “flawed reasoning that a flash-cut elimination of access charges constitutes a feasible approach to intercarrier compensation reform.” The alliance took offense at Core’s “baseless factual assumptions” that opposition from rural telephone companies made intercarrier compensation reform difficult. It urged the FCC to quickly deny the petition “so that others will be discouraged from misusing forbearance petitions to attempt to circumvent the industry negotiations and rulemakings necessary to consider and resolve critical and complex matters like intercarrier compensation.” Some of the phone companies were less harsh on a 2nd part of the Core petition seeking forbearance from provisions in Sec. 254(g) that require rate integration and averaging. Rate integration requires carriers to offer the same long distance rates in all states while rate averaging requires similar rates in urban and rural areas. AT&T said it supported the 2nd part of the petition because “rate integration and rate averaging are tools that no longer serve any legitimate purpose.” Qwest said it supported the thinking behind the rate integration part, but forbearance might “sweep too broadly and include rules that remain publicly beneficial.” Instead, the FCC should begin a proceeding to reform rate integration and averaging, completing it within the 12-month clock that the forbearance petition set in motion. The FCC must act on forbearance petitions in 12 months unless it gives itself 3 months more. The petition is automatically granted if the deadline is missed. The comments were filed June 2.

CHICAGO -- TIA will make stronger carrier participation a major priority next year, for its 2nd Globalcomm event, TIA Pres. Matt Flanigan told us as the first Globalcomm wound down here this week. While TIA won’t make the first move, the group is open to working with USTelecom to combine their shows into a reconstituted Supercomm, he said.

Amid fears that lawmakers lacked a complete grasp of net neutrality’s implications, the House Judiciary Committee approved 20-13 its leadership’s Internet Freedom & Nondiscrimination Act (HR-5417). The legislation, sponsored by Chmn. Sensenbrenner (R-Wis.) and Ranking Member Conyers (D-Mich.), would amend the Clayton Act regarding “competitive and nondiscriminatory access to the Internet.” A manager’s amendment to clarify that nothing in the bill restricts broadband networks from offering controls to protect against objectionable content or manage their networks in a nondiscriminatory manner was also approved by the committee.

The IRS threw in the towel Thurs. on a long legal battle over the 3% long distance excise tax, saying it no longer will collect the federal tax and will issue an estimated $15 billion in refunds for the past 3 years. The agency said it’s “conceding” the legal dispute over the tax, which it called it an “antique tax,” and encouraged Congress to end the remaining excise tax on local phone service. The phone excise tax started over 100 years ago to finance the Spanish American War.

Net neutrality proponents are starting their battle in the Senate with a bill (S-2917) endorsed by Senate Commerce Committee Co-Chmn. Inouye (D-Hawaii). The bill, introduced by Sens. Snowe (R-Me.) and Dorgan (D-N.D.), would bar broadband providers from blocking or degrading Internet content. The bill goes further than a provision in Chmn. Stevens’ (R-Alaska) bill calling for an FCC study on net neutrality.

The draft telecom bill (S-2686) was too hard on cities, Senate Commerce Committee Chmn. Stevens (R-Alaska) said Wed. at the first of 2 hearings on it. Acknowledging as “fair criticism” complaints about the bill’s local franchising provisions, Stevens said those parts of the bill were “put in by others.” Stevens said he takes “credit or blame” for the bill’s handling of net neutrality, but wants more Democratic input before revising the bill.

The Senate Commerce Committee has no immediate plans to mark up an indecency bill that it had previously considered putting on the calendar for this week, Hill sources said. The committee Tues. announced its markup schedule, which didn’t include the bill (S-193), and a spokesman confirmed it wouldn’t be marked up this week.

“It’s time for the IRS to stop collecting this unlawful tax,” USTelecom said in response to a ruling by the 3rd U.S. Appeals Court, Philadelphia, that the telephone excise tax is unlawful. Five federal appeals courts, representing 13 states, now have ruled against the tax on long distance calls. The courts have said the excise tax applies only to long distance services that vary both with transmission time and distance. That means it doesn’t apply to long distance services that are priced by time but not distance, which is the prevalent method now. The IRS has argued the tax actually applies to services that are based either on distance or time, but the courts have said the law applies excise tax only to services that vary by both factors. The 3rd Circuit ruled Tues. on a case involving Reese Bros., a company that purchased long distance services at fixed per- min. rates without any distance charges. The company had sought a refund from the IRS for $319,496 in excise taxes and, when the IRS didn’t respond, it filed suit. When a lower court ruled in favor of the company, the IRS appealed. “The question presented in this appeal is whether the federal communications excise tax… applies to long distance telephone services that are priced based on a fixed per- minute, non-distance sensitive rate,” the court said: “Based on the plain language and structure of the statute, we conclude that it does not.”

USTelecom and Qwest urged the FCC to eliminate remaining Open Network Architecture (ONA) requirements, including the obligation to file ONA reports and post Comparably Efficient Interconnection (CEI) plans on company web sites. The requirements, imposed on former Regional Bell Operating Companies and GTE, are no longer needed “in light of the dramatic evolution of technology [and] highly competitive environment,” the companies said in a May 1 filing. “Elimination of outdated regulatory requirements” such as these “is one of the fundamental purposes of the Paperwork Reduction Act,” they said. The requirements date back to the 1980s and were imposed as a way of protecting competitors when the FCC decided the Bells could offer information services. The FCC originally required the Bells to provide “information” services through fully separate affiliates and then in 1986 permitted them to integrate these enhanced services with telecom services subject to non-structural safeguards and the ONI/CEI requirements. “The concern was that the companies would use existing market power in local exchange services to obtain a competitive advantage in information services markets by improperly allocating to their regulated core businesses costs that would be properly attributed to their competitive ventures and by discriminating against rival, unaffiliated ISPs… in favor of their own information services,” the companies said. The concerns no longer exist, they said.

The FCC should crack down on access charge “avoidance schemes” by acting on pending petitions in 2 dockets, said USTelecom and 211 of its small and midsized members in a letter sent Wed. to the Commission. Such schemes “are frustrating comprehensive intercarrier compensation reform and threatening local exchange carriers’ ability to maintain existing networks as they invest in broadband deployment, particularly in rural areas,” the letter said: “Conduct at issue in these two dockets is taking investment funds away from the LECs building the broadband networks on which VoIP and other Internet services ride and giving it to companies that are merely seeking to arbitrage regulatory asymmetries rather than deploy better networks.” USTelecom asked the FCC to: (1) Grant AT&T’s petition in WC Doc. 05-276 for a ruling letting it recover access charge revenue on calls that originate and terminate on the PSTN but “traverse an IP-based network at some intermediate part of the call flow.” (2) Grant Frontier’s petition in the same docket seeking payment for Feature Group A call services it provides for origination of long distance voice communications. (3) Deny VarTec’s petition in that docket seeking FCC “assistance in its effort to escape liability for knowingly routing voice communications access traffic through third-party providers that refuse to pay for the terminating access services on that traffic.” (4) Deny Grande Communications’ petition in WC Doc. 05-283 “seeking Commission blessing for a proposed call laundering scheme that would re-label traffic to, in effect, unlawfully obtain and resell terminating access services at reciprocal compensation rates.” USTelecom said its members “face nonpayment and underpayment for terminating access services they are obliged to provide… and they are not obtaining relief through litigation… which would be costly and time-consuming in any event.”