FCC Chmn. Powell expressed optimism Mon. technology could address the challenges of providing Enhanced 911 services on broadband networks offering VoIP applications. “We do have that rare opportunity to join hands and develop the solutions early, before our citizens and our consumers are using these services in overwhelming numbers,” he told a National Emergency Number Assn. (NENA) forum in Washington.

With the Senate Commerce Committee preparing to examine VoIP this week, Sen. Sununu (R-N.H.) told us he believed the FCC should classify VoIP as an information service, which would be subject to lighter FCC regulation. Sununu has said he would introduce a VoIP bill soon that would call for that classification, as well as preempt much state and local jurisdiction over VoIP. “I don’t know if it’s clear that the FCC has jurisdiction in all cases,” Sununu said. “There’s a lack of clarity in the statute. Clearly, it’s interstate commerce and legislation should clearly define VoIP as an information service and establish a regulatory framework.”

Senate Appropriations Chmn. Stevens (R-Alaska) told the leadership of the Federal-State Joint Board on Universal Service reform he would oppose restricting the universal service fund (USF) to a single line. In a Jan. 22 letter to FCC Comr. Abernathy and Alaska Regulatory Comr. Nanette Thompson, who are co-chmn. of the board, Stevens said restricting USF to the primary line is “contrary to the fundamental purposes for universal services.” Stevens said the restriction to a single line would favor urban consumers over rural consumers. Extending USF to multiple lines would let rural carriers build out network facilities, he said. “I also worry that limiting support to primary lines would also become burdensome on small businesses operating in rural areas because they would be forced to pay higher rates for their telecommunications services in high-cost areas than they would pay in urban areas,” Stevens said. He also said he worried a “split decision” by the Board would result in confusion in rural areas and deter investment. “It is my hope that the Joint Board will be able to find a unified solution that will encourage investment in the rural markets rather than cause confusion,” Stevens said.

USTA Pres. Walter McCormick and 146 of the association’s small companies urged the FCC to act quickly to reaffirm that AT&T calls originating and terminating on the local exchange carriers’ circuit switched networks were telecom service subject to access charges. The AT&T petition asking the Commission to determine whether access charges apply to long distance voice calls transported over the Internet protocol backbone network has been pending more than 15 months. In an ex parte letter late last week, the companies warned the FCC that if it delayed action further, “the consequences may be catastrophic for rural LECs.” They complained the Commission’s inaction put them at risk because “access charges account for more than $2 billion in small company” interstate and intrastate revenue. They said an access charge exemption of long distance companies’ phone-to-phone IP services could “threaten the financial viability of small rural [LECs] and could affect consumers and impair customer service efforts by forcing rural LECs to delay network upgrades.” They also expressed concern an access charge exemption could release long distance companies from contributing to the Universal Service Fund, which they said “would greatly threaten the viability of the fund and the provision of universal telephone service to rural consumers.” The companies urged the Commission to act promptly and reject the AT&T petition. However, AT&T argued that issues related to universal service and access charge contribution were better addressed holistically in an intercarrier compensation reform proceeding that “eliminates the access charge regime entirely rather than begin the process of importing the competition-distorting access charge regime into this new technology.” In an ex parte meeting with FCC Comr. Adelstein and a follow-up ex parte filing late last week, AT&T also argued IP-based service providers were in fact compensating all LECs for terminating traffic and “all LECs were recovering their respective costs plus a reasonable profit for terminating that traffic.” AT&T said any claim that a carrier wasn’t recovering its costs was “an outright fabrication.”

As part of an effort to persuade the FCC to eliminate rate-of-return (ROR) regulation of rural ILECs (RLECs), Western Wireless gave the Commission a study titled “How Rate of Return Regulation Transformed the USF [Universal Service Fund] for Consumers into Corporate Welfare for the RLECs.” The study by Economics & Technology Inc. (ETI), included in Western Wireless’s reply comments filed Feb. 13 (CC Doc. 96- 45), said more than $1 billion in excess funding goes to rural ILECs and more than $500 million of their corporate operations expenses appeared to represent inefficiencies. Western Wireless -- which petitioned the FCC to open a rulemaking to eliminate ROR regulation of rural ILEC -- said the agency also should eliminate ROR-based access charges as part of intercarrier compensation reform and should recommend to the Federal-State Joint Board on Universal Service a way to replace ROR-based universal service support mechanisms “with a competitively neutral, forward-looking, least-cost technology-based universal service funding mechanism for all carriers.” A group of rural ILECs from Neb. told the FCC, also in reply comments, that some of Western Wireless’s comments “misrepresent the facts.” The Neb. companies said: “Innuendo, and not facts, is the only information that has been supplied to support the charge that the growth of high- cost universal service support [is caused by] ROR regulation.” The Neb. ILECs said the issues raised by the Western Wireless petition are being addressed in other proceedings so it’s “unnecessary and wasteful” to open another rulemaking as proposed by Western Wireless.

As state lawmakers get down to the serious business of their 2004 sessions, regulatory reform bills advanced in 6 states. They would alter PSC procedures and deregulate phone rates.

The FCC reportedly is close to voting down AT&T’s petition seeking exemption from access charges for calls transported on its IP backbone. Sources said FCC Comr. Adelstein had indicated he probably would join FCC Chmn. Powell and Comr. Abernathy in voting against the request. Adelstein reportedly had concerns about the petition’s legality. An option would have been to include the AT&T petition in the VoIP rulemaking that was initiated at the agenda meeting Thurs., but that didn’t happen, one source said. The problem is there’s “no good answer to the universal service concern” raised by AT&T’s petition, an FCC insider said. Meanwhile, a group of midsize telecom companies mostly serving rural areas urged the FCC to “act promptly” and deny an AT&T petition seeking exemption from paying access charges on phone-to-phone IP services. “This traffic is clearly telecommunications traffic subject to access charges under existing FCC precedent because there is no net protocol conversion between the originating and terminating points of the call,” the companies wrote last week in 2 identical letters to FCC Comrs. Martin and Abernathy. The letters were signed by CenturyTel, Commonwealth Telephone Enterprises, Consolidated Communications, CT Communications, D&E Communications, FairPoint, Iowa Telecom, SureWest, TDS Telecom, TXU Communications and Valor Telecom. The companies said how their networks originated and terminated calls for AT&T had “not changed, only the way AT&T transports a call over its own network [had] changed.” They warned the commissioners that “allowing AT&T to engage in self-help by withholding access payments” ran counter to FCC policies and the “certainty that [they] need to attract investment in their networks and promote universal service.” They said they were “concerned” the Commission’s failure to act quickly on the petition would pressure other carriers into “taking self-help measures similar to those taken by AT&T.” They also warned the FCC that “allowing this practice to continue [risked] undermining other regulatory policies such as E911 and CALEA” and had the “potential of interfering with the collection of monies for public policy funds, such as universal service.” The companies urged the FCC to reaffirm that the traffic described in the AT&T petition was subject to access charges and deny the petition.

Cable and telecom executives said VoIP had the potential to displace the Public Switched Telephone Network (PSTN) as it operated today. Speaking at a Precursor Group investors conference Tues., Vonage CFO John Rego said he believed VoIP would completely replace PSTN within 20 years. No one on the panel disagreed with his assessment. Verizon Pres.-Network Services Paul Lacouture said he believed traditional circuit switches would be traded out and replaced over the next 2 decades. Consumers already are beginning to make their phone calls over VoIP, but they “just don’t know it” because the technology is invisible to them, he said.

The Telecom Industry Assn. (TIA) urged the FCC to grant Pulver.com’s petition seeking a ruling that the company’s Free World Dialup (FWD) isn’t a telecom service, saying that would be “appropriate” and “timely.” The FCC is set to consider the petition at its agenda meeting Feb. 12. In an ex parte meeting last week with Jessica Rosenworcel, aide to FCC. Comr. Copps, the TIA argued VoIP wasn’t just another way of providing traditional phone service, but was “a new application on a new kind of network.” In a separate ex parte meeting with FCC Comr. Martin and aide Dan Gonzalez last Thurs., Cisco Systems said the Commission should: (1) Declare that Pulver.com’s FWD service was an interstate information service. (2) Address applicability of CALEA to different IP services, as well as issues raised by an AT&T petition on phone-to-phone IP telephony, in an “industrywide proceeding.” In a separate ex parte filing, Vonage stressed the importance of moving forward “expeditiously” with the pending VoIP NPRM. Addressing universal service, Vonage said it favored a contribution mechanism that would let VoIP providers contribute on a “more formal basis.” It also noted Sec. 254 of the Telecom Act provided the Commission broad discretion to modify Universal Service Fund (USF) contribution methodology.

An AT&T petition seeking exemption of phone-to-phone IP telephony from access charges could hurt rural telecom carriers, several associations said in an ex parte filing with the FCC last week. In an ex parte meeting with FCC Comr. Copps and aide Jessica Rosenworcel preceding the filing, the National Exchange Carrier Assn. (NECA), joined by Alltel, Independent Telephone & Telecom Alliance (ITTA), NTCA, OPASTCO and USTA urged the Commission to act quickly and dismiss the AT&T petition: “Continued FCC inaction only invites more ‘free riders’ and exposes rural consumers to unnecessary risk.” They warned the Commission that rural telephone consumers were particularly at risk because: (1) Access charges accounted for more than $2 billion in small company revenue. (2) Access revenue represented 70% of small telco revenue. (3) An access charge exemption of long distance companies’ phone-to-phone IP telephony services “could threaten the financial viability of small rural LECs and could affect consumers and impair customer service efforts by forcing rural LECs to delay network upgrades.” (4) Such an exemption could release long distance carriers from contributing to the Universal Service Fund (USF), which would “greatly threaten the viability of the fund and the provision of universal telephone service to rural consumers.” The associations also argued that AT&T’s use of IP technology to carry a call did “not equal ‘net protocol’ conversion. Calls originate as TDM and end as TDM -- nothing new here.” It also didn’t reduce LECs’ costs of originating or terminating calls, they said. The associations warned that AT&T’s request for “preferential treatment that favors a specific technology” was “an attempt at regulatory arbitrage.” They urged the Commission to treat phone-to- phone IP calls as traditional long distance when addressing the application of interstate access charges. “Reciprocal compensation payments are no substitute for access charges,” they said, and those arguing that continued application of access charges to AT&T would impair Internet growth “offer no evidence to support their claims.” If the AT&T petition is granted, the associations said, all carriers that had to pay access charges would use IP telephony, “gutting the access charge system and leaving SLCs and USF to make up the difference.” They urged the Commission to dismiss the petition “promptly on procedural grounds… Since AT&T is not claiming that it is an ISP, the relief it requests cannot be granted via declaratory ruling.” Meanwhile, AT&T continued to push the FCC to exempt the company from paying access charges when providing its phone-to-phone VoIP services. In ex parte meetings and in telephone conversations with FCC top staffers last week, AT&T said issues related to universal service and access charge contribution affected by the intersection of IP technology with the Public Switched Telephone Network (PSTN) would be “better addressed holistically in an intercarrier compensation reform proceeding that eliminated the access charge regime entirely rather than begin the process of importing the competition- distorting access charge regime into this new technology.”