INTERCARRIER FORUM CONTINUES TO MEET, STILL PLANS REPORT TO FCC
An inter-industry group seeking consensus on intercarrier compensation reform is still meeting frequently and plans to make a recommendation to the FCC soon, even though several key members have dropped out (CD May 21 p1). No one involved in the Intercarrier Compensation Forum (ICF) seemed certain about when the recommendation would be made. “A week or 2 maybe,” said one participant. “Weeks not months,” said another.
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A representative of AT&T, which is still active in the ICF, said he didn’t think the characterization that the forum had “collapsed” was accurate. “You are going to see a plan” possibly in the early part of June, he said. A representative of BellSouth, which had dropped out, said “in some respects we haven’t left.” He said BellSouth and possibly others remain in touch with the ICF. “Everyone is interested in seeing something positive come out of the process,” he said, but added that BellSouth would like to see some changes to add “balance” to the plan.
“We close no doors,” said attorney Gary Epstein, who has been acting as a facilitator during the 10-month ICF process, which he called “a massive effort.” One current member said it’s possible the ICF could make some “tweaks” to bring some of the deserters back in the fold. The number of carriers in the group has varied over time; one participant said it was originally as big as 25 members, another said 19 was the biggest number. There are less than 10 now.
However, another former participant said it was doubtful the remaining ICF group would attract returnees. Instead, more splinter groups are forming to find alternatives to the ICF plan, the official said. “I've been approached by members no longer there” to join in an alternative plan.
The FCC has been sending signals that it wants to return to its 3-year-old intercarrier compensation proceeding soon and has promised to consider all plans submitted to it. The proceeding had been put on hold while the ICF met. Legg Mason speculated in a report Fri. that the agency could start a new proceeding as soon as July based on the recommendations submitted by the ICF and others. Regardless of what is handed the FCC, it represented “10s of 1,000s of hours of work, a massive effort,” said Epstein. FCC officials have said whatever the ICF comes up with, even if it’s a smaller group presenting it, the information could be useful to the agency.
The group has been trying to come to agreement on a unified intercarrier compensation regime to replace access charges, reciprocal compensation and other inter-industry payment systems. It’s considered a difficult task because no proposal would benefit all sides, so participants are trying to find a compromise in which perhaps each gives a little, said one ICF member. The ICF’s starting point had been a proposal to go to bill and keep (BAK) because that’s what the FCC has been eying as a solution. BAK basically means no payments go back and forth, eliminating access charges and reciprocal compensation. To make up the ILECs’ lost access revenue, the plan would call for higher subscriber line charges (SLCs) and increases in the universal service fund.
The May 19 go-no-go vote, which one participant called a “gut check,” was held to determine whether the participants could support sending it to the FCC. “Given the number of people that bolted, the plan would have to be modified to bring a broader consensus,” said a former member.
While participants said they were constrained by nondisclosure agreements not to talk about specifics, some were willing to share details that give an idea of the difficult debate that occurred during the ICF’s meetings that were held several days a week, often 8 hours a day. For example, one former participant said CLECs that serve primarily business customers were troubled by a Bell proposal to assess the higher SLC charge only on residential customers, not businesses. He said that wouldn’t give a business-oriented CLEC much opportunity to recover their costs. He said there had been talk of phasing in the SLC increase a dollar a year for several years, possibly ending at as much as $10.
Some ILECs reportedly were concerned that higher SLCs would put them in a bad competitive position and cause them to lose more lines to UNE-P providers. And, some reportedly have faced concern from their top management about the political ramifications of raising these consumer charges. One former ILEC participant expressed concern about an “underlying assumption” that the FCC could make changes not only to the interstate access regime but also to intrastate access charges, the realm of state regulatory commissions. Wireless carriers said they were concerned about increases in universal service that would result from the plan. “Wireless carriers are shouldering more universal service and not getting as much out of it as some,” said a former ICF participant.
“Also, small [rural] companies are the key to making it work politically,” said a former participant. “If they are not comfortable, it’s debatable reforms will happen.” Rural companies are very dependent on access charges and universal service and they have been expressing concerns to Congress about intercarrier compensation reform, he said. “No rural carrier or even state commission would buy” an intercarrier compensation plan unless the universal service component was revamped ahead of time, said consultant Andy Regitsky, who wasn’t an ICF participant. This is too important to rural companies to accept a plan “based on promises,” he said: “The numbers have to be there to see.”
Several rural ILECs have dropped out of the ICF because of concern about SLC increases and some rural companies have proposed alternative plans to the FCC. One plan, offered by the “Expanded Portland Group,” is aimed at lessening the dependence on the SLC or universal service fund. It proposes making up for reduced access charges through a national Access Restructure Charge billed to all carriers that use the telephone numbers administered by the N. American Number Plan. In the 2nd phase, the industry would move to capacity- based port and link charges instead of the current compensation methods.
One former participant said the rural carriers’ idea may make sense. The final plan doesn’t have to be an “either-or situation,” he said. “You don’t have to recover all [costs] through a SLC, some of it could come from carrier charges.” He said one idea might be for small companies to be given the option of following the ICF plan or retaining some access revenue “with a different structure [to] cut down on gaming.” You need to build flexibility into any plan since it’s uncertain how BAK will work or how the market will react, he said.
CLECs also have proposed an alterative plan (CD May 12 p1) that would retain a “unified cost-based” payment for circuit-switched traffic with a “minimal increase” in the SLC. Under the plan proposed in May by the Cost-Based Intercarrier Compensation Coalition, all traffic would transition over at least 2 years to a single rate set by state regulatory commissions. “My sense is the [ICF] plan didn’t have much in it for the CLEC community,” said a former participant. He said he doubted if the current plan would clear FCC muster because “states, consumers groups… will yell” as well as some CLECs and rural LECs.
The ICF’s work covered more than the type and level of charges, participants said. The group also worked on setting up rules for how and where networks interconnect. The group learned early on that carriers design their networks differently, for example, long distance companies might drop traffic off at different points on an ILEC’s network. In addition, different functions, such as access and local service, dictate different network designs. And, access and reciprocal compensation sometimes involve different architectures. “Compensation rules [now] depend on the identity of the carrier,” in other words whether they are ILECs, CLECs, IXCs, said an ILEC participant.
To bring about a unified approach, “we're going to have to architect networks differently,” said a representative of a long distance carrier. “There’s been a lot of work on what a unified architecture looks like,” said a CLEC representative. The ICF’s work on this issue was like a “tutorial” and the results of that work, if nothing else, could be useful to the FCC, said a Bell representative. Participating in the ICF was a “huge educational opportunity” that “allowed parties to understand other points of view,” she said. As these issues come up at the FCC “people will be more informed of the ramifications of various proposals.”