The FCC on Thursday took another step toward reforming the complex rules governing payments among carriers to complete calls by soliciting comments on seven different proposals to overhaul the system known as intercarrier compensation.
Regulators say the multibillion dollar system that distinguishes between various types of carriers and services is outdated and needs to be replaced with a uniform regime.
“Our intercarrier compensation system is Byzantine and broken,” FCC Commissioner Michael Copps said. “We have in place today a scheme under which the direction and amount of payments vary depending on whether carriers route traffic to a local provider, a long-distance provider, an Internet provider, a CMRS carrier or a paging provider. In a marketplace defined by convergence and technological change, this hodgepodge of rates looks more like an historical curiosity than a rational compensation system.”
Outlining its principles, the FCC said any reform should encourage the development of competition and investment in telecommunications networks while preserving the national phone subsidies that are linked to intercarrier compensation. Regulators also are encouraging proposals that require minimal rules and conform to deregulation.
Among the questions regulators will thoroughly examine is how reform would affect American consumers and billions of dollars in phone subsidies, which are used to keep service affordable throughout the country.
Local exchange carriers like SBC Communications Inc. and Verizon Communications Inc. collect billions of dollars in so-called access fees to originate and terminate other carriers’ calls on their networks, but even they say such advances in technology as Internet phone service are blurring the traditional distinctions linked to intercarrier compensation.
A group of large U.S. carriers, including AT&T Corp., Global Crossing Ltd. and SBC Communications Inc., has proposed abolishing over time the fees carriers pay one another to complete calls and moving to a so-called bill-and-keep system. The proposal would authorize local phone companies to raise the “subscriber line charge.” The fee allows local phone companies to recover a portion of the costs of completing long-distance calls on their local networks.
The group known as the Intercarrier Compensation Forum argues the changes would not come at a high price for consumers because long-distance phone companies would have an incentive to lower rates.
The rates carriers pay one another to complete calls can vary widely depending on the type of carrier and where the local is being connected, but regulators say the distinctions do not reflect the actual cost of interconnection. Regulators also have complained the intercarrier compensation system has encouraged carriers to exploit differences in the rules for financial gain when their priority should be efficiently supporting consumers and businesses.
“As the staff report demonstrates, a bill and keep regime encourages the development of competition by rewarding carriers based on their ability to serve customers efficiently rather than their ability to exploit regulatory arbitrage opportunities,” FCC Chairman Michael Powell said.
Rural phone companies across the country are expected to fight to preserve the fees they collect from other carriers to complete calls because these fees often represent half or more of their total revenue.
The FCC opened a docket in 2001 to reform intercarrier compensation, but the agency has not significantly changed the system since then.
