Carrier group seeks fee overhaul

A group of carriers is lobbying the FCC to overhaul the way service providers are compensated for completing calls originating on competitors’ networks.

The so-called Intercarrier Compensation Forum (ICF), led by AT&T, MCI, Sprint and SBC, last week proposed a reform of disparate inter-carrier compensation arrangements that they claim “harms consumers and creates artificial regulatory advantages for certain carriers and technologies.” The group says its plan seeks to revamp the system to preserve competition, facilitate deployment of new technologies, and advance consumer interests.

The ICF members also include General Communication, Global Crossing North America, Iowa Telecom, Level 3 Communications and Valor Telecommunications. The group once included at least 25 member carriers participating at various stages throughout a yearlong effort to craft the new compensation plan.

Among those 25 were Verizon and BellSouth. They left the group last May when they could not fully endorse the compensation plan as it was at that time.

Both carriers are mulling the latest effort.

“We have not had time to parcel through it, to see how far it has or has not come since May,” a BellSouth spokesman says.

Verizon thought the May plan was a bit too comprehensive.

“A better approach is to back up and take bite size chunks” of the problem, as in addressing VoIP separately, then universal service, etc., a Verizon spokesman says.

Verizon agrees that the current compensation system needs to be fixed. According to the ICF, it harms consumers by forcing carriers to make arbitrary distinctions between local and long-distance services, which makes it more difficult for consumers to receive the service bundles they want. 

“Jurisdictional disparities in inter-carrier compensation often make it more expensive to call across the state than across the country or around the world,” the group claims in an executive summary of its plan.

The current arrangement also harms universal service, the ability to fund telecom service in rural and poor areas, the group claims. Some providers are able to avoid some or all of their contribution obligations, as consumers increasingly bypass interstate long-distance offerings in favor of wireless services, bundled service, and information services, according to the ICF.

But the ICF’s alternative is not without its critics. TeleTruth, a telecommunications customer advocacy organization, labeled the plan a “scam” that protects carrier interests at the expense of businesses and consumers.

“Instead of getting rid of intrinsic problems, they’re just raising rates,” says TeleTruth Chairman Bruce Kushnick.

Kushnick, who notes the lack of consumer representation, says the ICF is “more of a cabal than an economic analysis” group.

Nonetheless, its plan, if approved, begins to restructure rates on July 1, 2005, and to unify the disparate network interconnection and inter-carrier compensation regimes within three years. It does this by seeking to develop uniform network interconnection rules that provide a framework for voluntary carrier negotiations and establish default responsibilities in the absence of any carrier agreement. 

The network interconnection rules are also designed to protect universal service in rural regions by establishing modified default rules to apply to networks operated by a Covered Rural Telephone Company (CRTC).

Under the ICF plan, all inter-carrier compensation begins a four-step, three-year transition on July 1, 2005, to a uniform system with a single termination rate of $0.000175 per minute for all traffic. On July 1, 2010, the $0.000175 per minute termination rate is reduced to zero.

Revenue eliminated from inter-carrier compensation is replaced by a combination of end-user charges and new federal universal service support, according to the ICF plan. For large carriers, the maximum monthly residential and single-line business subscriber line charge (SLC) cap increases by 75 cents in each of the first two years of the plan.  

In each of the next two years, it increases by $1 on July 1, 2007, and by $1 on July 1, 2008.  As of July 1, 2008, all monthly SLC caps for non-CRTCs are unified, and the SLC cap is indexed for inflation starting on July 1, 2009.