WASHINGTON-A U.S. appeals court in St. Louis last week reaffirmed federal telecom rules governing how mobile-phone and rural telephone carriers are paid for carrying each other’s traffic, a favorable wireless ruling on an aspect of highly convoluted and antiquated inter-carrier compensation and universal service regimes that time and technology have passed by.
Major stakeholders-telecom carriers, states, consumer groups, policy-makers and others-agree inter-carrier compensation and universal service systems are broken and need overhauling. They just cannot agree on how to do it, presenting a Herculean challenge on matters given a high priority by FCC Chairman Kevin Martin. Martin has talked about moving to what he calls a unitary rate as means to minimize regulatory arbitrage in inter-carrier compensation.
Billions of dollars are involved in inter-carrier compensation and universal service systems, the kind of serious money that incites warring factions to spend top dollar on lobbyists and communications lawyers to make their cases before Congress and the FCC. The Senate has taken a mildly ambitious stab at universal service reform in its telecom bill. Why not a bolder approach to universal service reform? The Senate Commerce Committee is comprised of powerful lawmakers with vocal, well-organized rural constituencies. Critics argue rural telephone companies disproportionately benefit from the current universal service scheme at the expense of many consumers and telecom carriers.
“Rural telephone companies are now so flush with subsidies that many of them pay out more in dividends to their owners than they charge for phone service. More than 100 rural telephone companies incur more than $500 per line in annual administrative expenses-what a typical mobile customer pays in total charges. These are corporate overhead costs not driven by expenses associated with providing service in low-density markets,” said Thomas Hazlett, a professor at George Mason University and director of the Information Economy Project at the National Center for Technology and Law, in a recent newspaper column.
Just as losing 8th Circuit appellant Iowa Network Services did not see eye to eye with Qwest Communications International Inc. on the FCC’s embrace of reciprocal compensation as payment methodology for calls originated, transported and terminated between rural telephone and mobile-phone carriers, rural landline and most top wireless operators disagree on whether the Missoula Plan for inter-carrier compensation reform is the right way to go.
The Missoula Plan, whose name is drawn from negotiations that began two years ago in Montana, supposedly is meant to transition inter-carrier compensation from a narrowband to a broadband world.
Three tracks
The Missoula Plan creates three tracks based on carrier size. Track I includes all wireless carriers, large wireline carriers and competitive local exchange carriers; track II is for mid-size rural wireline carriers; and track III is for rural rate-of-return local exchange carriers. For track I carriers, the subscriber line charge would increase in four steps to a cap of $10. The increase for tracks II and III would be less with the SLC charge capped at $8.75. The SLC contributes to universal-service funding.
Rural telephone companies are further protected by a provision in the plan that would kick in if the reduction of inter-carrier compensation was greater than the increase in the cap.
The Missoula Plan is the only one of its kind before the FCC. Rural carriers, AT&T Inc., BellSouth Corp. and others back the plan. Major wireless carriers, cable and consumer advocates claim the blueprint has glaring problems.
Cingular Wireless L.L.C. has broken with the mobile-phone industry on the Missoula Plan, siding with co-owners AT&T and BellSouth.
“For wireless carriers, the Missoula Plan provides much-needed stability,” Brian Fontes, vice president of federal affairs at Cingular, told RCR Wireless News in August. “The plan transitions to unified rates for the majority of minutes over a three-year period, reducing the amount of access charges. The plan also establishes an interconnection framework that mitigates disputes, allowing wireless carriers to focus on their customers; balances the financial burden for the transport of different types of traffic … and fixes inequities in the rules for what wireless carriers may charge for the termination of traffic.”
CTIA, a proponent of a bill-and-keep model, said the Missoula Plan would not serve the interest of consumers and fails to cure deficiencies identified in inter-carrier compensation and universal service systems. Rural local exchange carriers say that if bill-and-keep is adopted, they would lose a significant revenue source necessary to keep their networks functioning.
Inter-carrier compensation (sometimes referred to as access charges) is one of three rural telephone carrier revenue streams. Rural telcos also obtain money from end users and the universal-service fund.
