Congress, could you lend a hand?

Last week, this space was devoted to the merits of the Intercarrier Compensation Forum's proposal to establish a unified intercarrier-compensation regime. This week, we examine some of the legal and political pitfalls of the plan.

I've yet to come across anyone in the telecom industry who does not believe fundamentally that the current intercarrier-compensation regime is significantly flawed and that a unified, "a bit is a bit" access regime is needed to remove the incentive for providers to play regulatory-arbitrage games.

Despite this agreement on two huge points, making a unified intercarrier-compensation plan a reality promises to be a treacherous journey.

I believe the Intercarrier Compensation Forum (ICF) proposal represents a realistic structure for solving this festering problem. It's a unified access system, reflects the input of a wide variety of communications providers and includes an additional revenue source for rural carriers that likely is needed to be politically acceptable.

Note that I'm only addressing the structure of the ICF plan and not its economic viability. I trust that we'll have plenty of research groups crunching numbers for carriers in the near future and that adjustments can be made, if necessary.

And somebody better be crunching those numbers on behalf of consumers, too. The ICF plan allows for substantial increases in the subscriber line charge (SLC) that every customer pays. My hunch is that the cheaper long-distance charges that could result from little or no access charges will offset the SLC increases and that lifeline subsidies can help those truly impacted, but it better be proven on paper. Otherwise, consumer groups will squash this before it has a chance to go anywhere.

Even if these hurdles are cleared, the fundamental problem with the ICF plan, or any other unified intercarrier-compensation proposal, is that it inherently requires the FCC to set all access rates. Unless all 50 states agree to mirror the FCC rates--an improbable scenario, and one that would be difficult to sustain--that means pre-empting state commissions that set intrastate rates.

Theoretically, the FCC can pre-empt, and that's what the ICF is asking it to do, although ICF spokesman Gary Epstein avoided the word "pre-emption" like the plague during the recent press conference unveiling the organization's proposal.

However, FCC pre-emption seems risky. The agency has suffered numerous setbacks in court recently, and the fact that courts have not upheld its claims of jurisdiction in reciprocal-compensation and cable-modem proceedings does not bode well.

Based on current law, the argument for pre-emption seems questionable, at best. That likely means an FCC pre-emption orderwould create an endless loop of litigation, which would defeat the purpose of providing the regulatory clarity needed to encourage investment. It's a key reason why the ICF lost three RBOC members.

However, there are legitimate policy arguments for pre-empting state commissions, and intercarrier compensation may be one of them. Voice over IP may be another instance, but arguing that VoIP is not a substitute for traditional telephony when VoIP providers advertise it as such also sounds shaky.

With this in mind, Congress really needs to make any pre-emption call. We're talking about tossing aside decades of precedent in which states have set rates in a largely successful industry--and allowing some regulatory experimentation in 50 jurisdictions--in favor of granting the FCC complete authority and hoping that its rules come out right the first time.

On the other hand, a single set of FCC rules theoretically should provide greater clarity, and that's what Wall Street and communication providers claim they need to spur investment.

Admittedly, depending on Congress to provide clarity to a situation may sound laughable, but it is better positioned to do so than the FCC, which is handcuffed by an outdated law. Congress can change the law; the FCC can't. Furthermore, Congress controls purse strings--a topic over which the FCC has no jurisdiction--and could allay the fears of states that have significant funding tied to their ability to regulate telecom carriers.

This does not mean pre-emption is necessarily the right policy decision. However, if such a significant policy change is going to be made, it should be made by hundreds of elected representatives, not by as few as three appointed FCC commissioners with no direct accountability to the electorate.

If Congress chooses a pre-emptive path, then the FCC can proceed with a plan to establish a unified intercarrier-compensation regime. If not, the commission will have to work closely with states to try to resolve the problem. But the notion of FCC embarking on the ICF plan or another version of a unified access system on its own under current law appears to be little more than a recipe for uncertainty.

E-mail me at djackson@primediabusiness.com.