WASHINGTON-A group of nine wireline companies, two with wireless affiliates, are proposing to radically change the way carriers compensate each other to carry traffic on each other’s networks, and most of the wireless industry is none too happy about it.
“It is an awful compromise. It is a deal with the devil,” said David Sieradzki, outside counsel for Western Wireless Corp. “They create massive new funds that are intended to keep the rural local exchange carriers whole so wireless has to pay into it but they cannot take out.”
The Intercarrier Compensation Forum’s plan would create a new universal-service fund that would always stay with the wired provider even if the customer chose a wireless provider for telecom service. Western Wireless has long fought to receive universal-service subsidies for serving rural customers. RLECs have fought back, not wanting to lose the subsidies they have been receiving for years.
Noting the wireline-only focus of the universal-service system, a consultant at A.T. Kearney Inc. said the universal-service system needs to be scrapped and replaced with something that recognizes the important role wireless plays in telecom. “We need to think about scrapping the whole system and acknowledging the importance of wireless carriers. Wireless has everything you want on the wireline side,” said Andrew Cole, senior executive in charge of A.T. Kearney Inc.’s North American wireless practice. “Wireless should be the meat at the center of the plate instead of the vegetables at the side of the plate.”
Today, money comes to the USF based on a percentage of long-distance revenues, both interstate and international. The ICF proposal moves away from that to a rate based on each connection defined by telephone numbers.
Many policy-makers want to create a different system of USF financing because they fear the fund could go broke soon. One reason long-distance revenues are shrinking is that buckets of minutes of local and long-distance services-offered almost exclusively by wireless carriers-allow consumers to inexpensively use wireless services to make long-distance calls, bypassing long-distance providers.
The main purpose of the universal-service system is to make telecommunications affordable enough for rural Americans to enjoy the same services at comparable prices as urban Americans. Universal-service subsidies are only one revenue stream enjoyed by RLECs; another is access charges-the rate all LECs charge long-distance providers to carry traffic. When customers choose wireless to make long-distance calls, LECs often complain they do not receive the proper compensation.
The ICF has been meeting for months to try to come up with a consensus plan that it can present to the FCC to solve an access charges problem that has gotten much more tricky with the advent of new technologies, including wireless.
Under the current system, adopted in the wake of the Telecommunications Act of 1996, carriers pay each other to carry traffic using a scheme known as reciprocal compensation. The incumbent LECs, particularly the regional Bell operating companies, have complained that with the Internet, some competitive carriers are gaming the system because more traffic goes out than comes in, so the Bells have to pay. The Bells began arguing for a new scheme of bill-and-keep, where carriers decide the best method to transport calls, buy this transport and then bill their customers what they think the market will bear. Wireless carriers have made the same argument that because more calls go out from wireless phones than come in to the networks, wireless carriers end up paying others to carry traffic.
In May, the independent wireless carriers walked.
“The independent wireless carriers found that the balance being struck was not to their best interest. The very broad picture of the ICF proposal has been known for months, so the negotiations about transitions and about how much would be transferred between end users were being played, but the overall big picture about how you move toward bill-and-keep, how you keep the RLECs whole have been in place for a long time,” said Michael Altschul, senior vice president and general counsel for the Cellular Telecommunications & Internet Association. “Each of the funding mechanisms applies to wireless carriers and their customers, but wireless cannot receive subsidies from many of the funds, so the overall balance doesn’t apply to wireless. Everybody else gets something and gives something but wireless just gives.”
Verizon Communications Inc. and BellSouth Corp. also left the negotiations. Sprint Corp. and SBC Communications Inc. remain.
“For various reasons, some carriers stayed, some dropped out, but the plan itself reflects the conversation that has taken place over the last year. Just because one member left does not mean their participation was expunged. The nine companies that are here agree with 100 percent of the plan. There are probably another nine companies that agree with 80 percent of the plan,” said ICF facilitator Gary Epstein during a press conference Aug. 16.
