Hello old Missoula

When telecommunications industry insiders get together to scheme about comprehensive industry plans, they either give the plan a clever acronym or name the plan after the place where the first meeting took place. The “Missoula Plan” moniker is an obvious homage to an “old school” inter-carrier compensation reform plan. In 1971, a small group of industry players met in the Ozark Mountains and developed the “Ozark Plan,” resulting in the regulatory structure and universal service funding mechanism the FCC is struggling to dismantle today.

At the time, AT&T was making good monopoly money and was willing to pay more for access to rural customers and agreed to share many more of the costs of the local network. Today, an equally robust AT&T supports the newly minted “Missoula Plan.” If you are looking for a blueprint for the next inter-carrier compensation structure, pay attention to the Missoula Plan.

The FCC began working on comprehensive inter-carrier compensation reform in 2001. At the risk of oversimplifying things, wireless carriers have argued for bill-and-keep while rural LECs have argued to keep their explicit and implicit revenue streams intact and unavailable to competitors. No compromise appeared possible. Two years ago, the only consensus plan submitted was the Intercarrier Compensation Forum (ICF) Plan. This plan was snakebit from the start and fractious fighting led to many public defections from that plan.

The Missoula Plan, the most recent attempt at a compromise plan, is expected to reduce many end-user rates in the short term. In the longer term, the plan's uniform rates should reduce or eliminate regulatory disparities between inter-carrier rate levels (e.g., wireline versus wireless, interstate versus intrastate and voice over IP versus circuit-switched telephony.)

Inter-carrier compensation rates that no longer vary by jurisdiction or technology should also minimize arbitrage opportunities and competitive distortions. The plan accomplishes this seemingly impossible feat by creating different compensation tracks for carriers based upon their size. Thus, there will still be disparities in compensation rates, especially for rural carriers. Even so, compensation rates will be lowered, eliminating implicit support for many smaller carriers. Under the Missoula Plan, every carrier loses a bit, which is supposedly the sign of a decent compromise.

Unlike the ill-fated ICF, the Missoula Plan has substantial industry backing. FCC Chairman Kevin Martin has indicated that he will take a serious look at the plan. With the industry in the midst of filing comments on the plan, it will be interesting to see how the its supporters respond to expected critiques, especially from some wireless carriers. Still, with its strong industry backing and the support of the state commissions through NARUC, Missoula may be the new Ozark.