Coalition Files Plan with FCC to Reform Intercarrier Compensation Rules

A coalition representing AT&T Corp., Global Crossing Ltd., SBC Communications Inc. and six other telecommunications companies this week submitted a detailed plan to the FCC proposing to radically change the multi-billion dollar system governing payments between carriers to complete calls.

The plan, which was unveiled this summer, is the fourth major proposal groups have submitted to the commission to reform intercarrier compensation regulations. The proposal submitted by the Intercarrier Compensation Forum (ICF) represents about 15 months of work among current members and companies that have dropped out of the group, including BellSouth Corp. and Verizon Communications Inc.

“The plan appears to cover many issues and we are studying it,” an FCC spokesman said, declining further comment.

The ICF also has proposed changing the method by which carriers contribute to the Universal Service Fund, the multi-billion dollar pot of money used partly to support telecom services in areas where it is expensive to provide local phone service. End users would pay a flat fee every month to support the fund based on every phone number and high-speed Internet connection they have. That means cable companies and DSL providers also would charge high-speed Internet customers a fee to support the fund.

Numerous telecommunications companies insist the intercarrier compensation system is antiquated, provides the wrong incentives for carriers to evade fees and no longer reflects major changes in the industry, such as the precipitous decline in traditional long-distance minutes as a result of technologies like cellular service and the Internet.

“There is no longer any serious dispute that the current system of intercarrier compensation is hopelessly outmoded and that consumers are the victims. The telecommunications industry today is characterized by a patchwork of disparate intercarrier compensation schemes that were adopted piecemeal over the decades to address discrete regulatory problems,” the coalition stated in the FCC filing.

The ICF has proposed moving to a unified rate structure and drastically reducing the “access charges” and other fees carriers pay one another to complete calls -- eradicating the fees altogether in July 2011. Under the proposal, local phone companies would be authorized to raise the “subscriber line charge,” which is a flat fee consumers and businesses pay to help recover the cost of maintaining the local phone network.

In industry jargon, groups refer to such a system as a bill-and-keep proposal.

The plan also includes special provisions for small phone companies to protect revenue, including a provision that would allow them to charge carriers a terminating transport rate. These companies rely heavily on access charges and related fees, but groups representing rural carriers have already begun to critique the proposal.

“It’s good that they recognized that rural and small [carriers] are different but it doesn’t … solve all the many facets of intercarrier compensation,” says Aaryn Slafky, a spokeswoman with the National Telecommunications Cooperative Association.

NTCA maintains the provisions for rural carriers are not sufficient to recover the cost of owning and operating a rural incumbent network without relying heavily on universal service support.

This summer an ICF spokesman had estimated the proposed method for contributing to the Universal Service Fund would increase by $2.5 billion the amount of money available in the fund. In the FCC filing, the ICF says its plan “ensures a more stable [universal service] funding base by spreading the obligation to support universal service among a broader range of providers and eliminating loopholes based on service type, geography or technology.”

Members of the ICF include AT&T, Global Crossing, General Communication Inc., Iowa Telecom, Level 3 Communications Inc., MCI Inc., SBC, Sprint Corp. and VALOR Telecommunications LLC.

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