STATES, SMALL TELCOS OPPOSE FCC BILL & KEEP PROPOSAL

“Such a change in the LECs’ wholesale price structures likely will produce undesirable effects on their retail rates,” N.Y. Dept. of Public Service (NYDPS) said. “The probable result will be higher monthly subscription charges… making them less affordable, less comparable between rural and urban areas and less conducive to universal service.” NYDPS said FCC might not have problem left to solve because it already had improved weaknesses in current compensation schemes, for example reforming reciprocal compensation and nonrural ILEC access charges. NYDPS also expressed concern that bill & keep would enhance CLECs’ incentive to cream-skim by serving few customers that originated large volumes of traffic. That would be just opposite of kind of cream- skimming caused by reciprocal compensation in which CLECs had incentive to serve few customers that received large volumes of calls, NYDPS said.

Mo. PSC also raised concerns that proposal “tends to blur the distinction between federal and state jurisdiction. The ambiguity in jurisdiction is further exacerbated as the Commission seeks comment on whether certain state rates should conform with federal policy goals.” Mo. regulators said “this presents the risk that the Commission may preempt state decisions on state access and intercarrier compensation arrangements.” Mo. PSC said FCC should get more input from states as to “state-specific ramifications” of proposal before moving ahead. “For instance, it may be appropriate to establish a federal/state working group to analyze the issues in the NPRM in greater detail.”

Small, rural telcos saw bill & keep proposal as raising their costs for universal service, skewing access charge process, raising legal conflicts. GVNW Consulting, which offers management consultant services to small ILECs, suggested that any order that moved to bill & keep “without a concomitant universal service funding offset [would be] overturned in court.” GVNW questioned how FCC would replace access charges, which now support universal service to great extent, without leaving rural telcos strapped for money to fund universal service: “The majority of court cases over the past decades have supported the ability of the rural carrier to have the opportunity to recover the revenue requirement associated with the provision of universal service. The Commission has certain responsibilities and may not terminate certain of its obligations to rural carriers.”

Mo. Small Telephone Company Group (MoSTCG) said bill and keep could be appropriate when traffic between 2 networks was relatively balanced and costs of terminating traffic were similar but “it will simply not work in a situation where traffic is out of balance and costs are dissimilar.” Ronan and Hot Springs Telephone Companies, which serve communities on Flathead Indian Reservation in Mont., said they “strongly oppose” bill & keep plan because “any business that is required by law to provide services to its competitors without compensation will be unwilling and, ultimately, unable to make investments to improve its services.” Intercarrier bill & keep regime would be “severely detrimental to the universal service goals of state and federal law by its inevitable result of drastically increasing basic local rates,” 2 telcos said.

In joint filing, National Rural Telecom Assn. and OPASTCO said FCC couldn’t fully evaluate bill & keep idea until it adopted access charge reform plan for rural rate-of-return telcos. In addition, they said, there are “many major unknowns about the impacts, implications and risks of a unified bill-and-keep approach for all intercarrier compensation that must be evaluated and suitably resolved before the Commission could responsibly adopt such a plan.” More than 50 rural telcos, filing through consulting firm ICORE, said NPRM was “crucial” to their “long-term viability” and their “very survival.” Bill & keep arrangements “totally ignore cost and traffic differences and will improperly lead to increases in LEC end-user rates,” ICORE filing said. Bill & keep works well in interconnection contracts where costs are roughly equal, minimal traffic is exchanged or when one party agrees to bill & keep in return for other concessions, ICORE said. However, “for most small, rural ILECs [it] will spell disaster.”

On other hand, CTIA told Commission that bill & keep was “most efficient policy choice for LEC-CMRS [commercial mobile radio service] interconnection” because current scheme of reciprocal, symmetrical compensation was “inefficient” for wireless interconnection. Wireless-LEC interconnection problems predate Telecom Act “and remain in need of substantial reform,” CTIA said. FCC also should make clear that wireless providers were entitled to request single point of interconnection within LATA and, after Bells get Sec. 271 authority, within major trading area (MTA), CTIA said. FCC has authority under Sec. 332 of Telecom Act to order bill & keep for LEC-CMRS interconnection, CTIA said.

Information Technology Assn. of America (ITAA) raised separate issue: Concern that wording of NPRM could lead to FCC’s dropping enhanced service provider (ESP) exemption, which classifies ESPs, or information providers, as users and thus not subject to access charge payments. ITAA said NPRM “appears to reflect a serious misunderstanding regarding the regulatory status of ESPs.” Group urged FCC “to make clear that it does not intend to revisit the question of whether ESPs should continue to be allowed to obtain service from local exchange carriers on the same terms as other business users rather than being subject to carrier access charges.”