ICF PROPOSAL SPARKS MORE COMPENSATION RATE DEBATE

After a more than a year of negotiations, the Intercarrier Compensation Forum (ICF) released its plan to replace the current intercarrier-compensation system with a regime that would move toward bill-and-keep accounting, but many expected criticisms of the proposal have been levied.

ICF's proposal calls for the FCC to discard the current system effective July 1, 2005 — the date current interstate-access tariffs are scheduled to expire — in favor of a unified access rate for all calls to the PSTN. The new rate of 0.000175 cents per minute would be significantly less than current access charges (see chart) and would change to a bill-and-keep system eliminating all charges in 2011.

Most industry sources favor a unified regime to eliminate implicit subsidies in charges that do not reflect carriers' costs and encourage regulatory arbitrage.

“It's just broken,” ICF facilitator Gary Epstein said of the current regime. “The rules for connecting today's networks were written in 1984 and are no longer relevant.”

The ICF plan would require carriers originating calls terminating on the PSTN — including wireless and voice-over-IP calls — to ensure that traffic reaches the terminating carrier's network edge. The terminating carrier would complete the call.

Calls between rural and non-rural LECs are notable exceptions. For calls terminating on rural networks, originating carriers to pay for transport to the terminating rural carrier's end office — not just to the edge of its network — at a cost of 0.9 cents per minute. Under the ICF proposal, this would be the only access charge after 2011.

Epstein said establishing a usage-based cost recovery mechanism for rural carriers was a critical compromise. Analysts say rural carriers' support is needed to make intercarrier-compensation politically palatable.

But the ICF plan would not make rural carriers whole, according to the National Telecommunications Cooperative Association (NTCA), which represents rural ILECs. The extra access charge “just doesn't generate a whole lot of money,” NTCA Senior Telecommunications Specialist Scott Rieter said.

An NTCA study showed rural carriers with less than 100,000 lines would lose $2 billion — or $22 per line each month — with bill-and-keep, Rieter said. The ICF plan only would allow them to recoup less than 25% of this shortfall.

This would leave rural carriers increasingly dependent on limited end user revenues — the ICF plan calls for increases in subscriber-line-charge cap — and universal service support.

Consumer groups have objected to the proposed SLC increases, and some wireless carriers disagree with the ICF's numbers-based contribution proposal. Any unified compensation plan would require the FCC to pre-empt state commissions' intrastate rates, which could be legally and politically risky.

“What we're doing now is not debating; we're setting the stage for debate,” Legg Mason telecom analyst Blair Levin said. “I think there's a consensus on the nature of the problem, but there's no consensus on how to solve it.”