Will the FCC Reform Intercarrier Comp This Fall?

Can the FCC take a 7-year-old proposed rulemaking on intercarrier compensation and overhaul the system by November? Chairman Kevin Martin says he’s going to try.

That sound you hear is the industry raising its collective eyebrows, but crossing its collective fingers. That’s because the tangled intercarrier compensation regime is long overdue for reform.

Some carriers have figured out how to make IXCs pay thousands, if not millions, of dollars per month through traffic pumping. Others avoid their obligation to pay by disguising their traffic so their peers can’t charge them. Still others want interconnected VoIP providers to pay access charges. All of this bleeds over into the Universal Service Fund (USF) policy, too, complicating an already complex program.

“This is the telecommunications equivalent of health care,” said Andy Lipman, partner in the telecom practice at law firm Bingham McCutchen. “Everybody agrees it needs to be fixed.”

And some are saying the fix will come as early as November.

The impetus stems from a federal appeals court mandate. By Nov. 5, the FCC must — per that D.C. Circuit court — justify its reason for treating ISP-bound traffic as falling into the traffic classification of “information access.” If the FCC doesn’t meet the deadline, the court will override the agency’s authority, wreaking havoc on any carrier terminating traffic to an ILEC, sources say. That’s because different state rates suddenly would apply for traffic termination, rather than the across-the-board .0007 per minute.

This ball of confusion over intercarrier compensation all started in 2001 when ILECs told the FCC they should receive access charges for ISP traffic, rather than pay to use other carriers’ networks. Commissioners concurred and cemented that view in an order. But CLECs pushed back. They filed an appeal and, about a year later, federal judges sided with them and demanded the FCC substantiate the access charges decision. Seven years later, the FCC still has not complied. It must, by early November, or the court has promised to overturn the 2001 order. If that were to occur, wireless providers’ and CLECs’ costs would skyrocket.

But Martin has promised to address the ISP topic in time. And when he responded to the court’s ultimatum earlier this year, he said he would tackle the matter as part of overall intercarrier compensation reform. Martin’s timeline, sources say, is optimistic.

“I think it’s a stretch,” said Lipman. Intercarrier compensation “is about as complicated an issue as you have before the FCC. There are a lot of parties with disparate opinions. Not even the Bells are on the same page on this issue.”

There’s too much at stake to rush, said William Haas, regulatory and public policy vice president for PAETEC (PAET), a New York-based CLEC.

“This is a complex issue and to think that this can be resolved in a rational way in that amount of time ... is really putting a lot of undue strain on all the carriers that would be affected,” he said.

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