A coalition representing a broad spectrum of service providers — led by incumbents but including international carriers as well as mobile, telco and VoIP advocacy groups — submitted a letter yesterday to the Federal Communication Commission (FCC) to urge creation of a uniform inter-carrier compensation rate no higher than $.0007 per minute for all calls terminated to the PSTN.
The group also called on the FCC to clarify that VoIP services are under the jurisdiction only of the Federal government.
The reforms, if enacted, would represent some of the most far-reaching changes to telecommunications policy in this decade.
The coalition includes AT&T (News - Alert), CompTIA, CTIA, Global Crossing, the Information Technology Industry Council, National Association of Manufacturers (NAM), New Global Telecom, PointOne, Sprint Nextel Corp., The Telecommunications Industry Association (TIA), T-Mobile USA, Verizon (News - Alert) Communications and the VON Coalition.
The inter-carrier compensation issue has long been a sore point for local exchange carriers, which argue that the amounts and wide variation in fees are a dysfunctional system that is unique to the United States. However, inter-carrier compensation today is a lifeline for rural operators, which depend on the revenues to offset their higher costs and the lower rates they are able to charge.
Setting a Deadline
The letter asks the FCC to act by November, which gives the commission just three months to make a decision on a highly contentious issue. The carrier group wants quick action on inter-carrier compensation reform because the FCC is facing two deadlines.
First, with the Bush administration ending, telcos are anticipating the loss of an FCC chairman who has been friendly to their concerns. Second, a federal judge has given the FCC until Nov. 5 to make a decision on an intercarrier-compensation issue that has languished since 2001. That issue is the special case of termination of calls to ISPs. The judge asked the FCC to come up with an equitable way to charge incumbent local-exchange carriers (ILECs) for termination of calls to an ISP because users of dial-up services sometimes would stay on a line all day, racking up huge termination charges without adding to their own phone bills.
In addition, FCC chairman Kevin Martin has said that he wants the commission to tackle the issue of inter-carrier compensation this year.
“Within the industry there is wide recognition that the disputes that are arising every day [around inter-carrier compensation] are becoming too much to bear,” says Paul Kouroupas, vice president of regulatory affairs, Global Crossing (News - Alert). “There’s ongoing litigation, regulatory arguments, etc. All carriers recognize that the system is just broken.”
NCTA (News - Alert), which represents rural carriers, has made several proposals, one of which is to impose a special access charge on VoIP services that access the PSTN. This would even include free services, such as callback systems or even wake-up calls, that originate on a VoIP service but terminate on the PSTN. However, NCTA did not return by presstime several calls to get its reaction to the current efforts.
In addition to addressing inter-carrier compensation, the FCC’s Martin also has expressed an interest in reforming the Universal Service Fund (USF), another effort the FCC may take up before the end of the year. Rural carriers depend on inter-carrier compensation for about 30 percent of their revenue, says Jim Kohlenberger (News - Alert), executive director, The VON Coalition, a VoIP advocacy group.
“USF is a true subsidy program,” Kohlenberger adds. “Access charges were never designed to be [a subsidy]. but it turned out that way.”
However, today the USF is highly limited, allowing carriers to use its monies only for traditional analog services (though some have tested those limits). “We have proposed that USF needs to be modernized and to move from analog to broadband,” Kohlenberger says.
Taking on a Big Chore
Reforming both the inter-carrier compensation rules and the Universal Services Fund, two highly contentious issues, would put a lot on the FCC’s plate at a time when the agency is nearing the ends of terms and has been criticized for having become too politicized. The November 5 deadline set by the federal judge to resolve dial-up compensation is the day after the presidential election.
However, working in the FCC’s favor is the fact that the issue has been an open docket for about seven years. “So you would think that sheer embarrassment would get them to move on it,” says Global Crossing’s Kouroupas.
More important, he says, “Multiple parties have submitted comments into the record on various IP dispute issues and compensation issues. So there is a lot of information on the record already to make a decision. But it will take political courage and determination.”
The VoIP Play
Besides intercarrier compensation, the letter also calls on the FCC to declare unequivocally that only the federal government has jurisdiction over VoIP regulation. Lingering efforts by several states to impose regulations that are onerous to VoIP operators have made the industry eager to have the federal government, in the form of the FCC, declare itself “in charge.”
The coalition is an interesting combination of players, some of whom historically have been at odds over VoIP. In the past some ILECs have balked at cooperation with VoIP providers for, among other things, access to the 911 network. However, the letter addresses issues that are critical for each industry--intercarrier compensation for LECs and federal jurisdiction for VoIP–raising the possibility that the two camps may have found it more advantageous to support each other’s causes than to continue to be at odds.
According to Kohlenberger, even former VoIP opponents “all recognize that VoIP is the future and that we need to have exclusive federal jurisdiction and we should not apply access charges to VoIP.” Access charges and the current USF “hold us back in the transition to broadband networks. We believe both need to be resolved and resolved soon.”
About Inter-carrier Compensation
Inter-carrier compensation refers to fees for calls between carriers. Whenever a voice call originates with one carrier but terminates with another, the originating carrier pays an inter-carrier compensation fee, usually a fraction of a cent per minute.
Termination rates can vary significantly particularly for rural carriers, which can charge much higher per-minute rates, a practice developed originally to compensate for the higher cost of serving rural areas. Termination rates also vary by location, whether a call is local, long distance, intrastate, or interstate. In one special case, calls to Internet service providers (ISPs) are free to the consumer as part of the fixed local rate but carriers must pay by the minute to terminate the calls. The average fee across multiple categories is $.0245 cents per minute, according to estimates for 2008 by the National Telecommunications Cooperative Association (NTCA).
At the current average compensation rate of $.0245 per minute the National Telecommunications Cooperative Association (NTCA), an industry organization of rural carriers, predicts mounting revenue shortfalls over the next five years because of fewer billed minutes.
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Charlotte Wolter is a contributing editor for TMCnet. To read more of Charlotte�s articles, please visit her columnist page.