WASHINGTON-Sprint PCS last month became the first wireless carrier to ask a state commission to base the amount BellSouth Corp. pays Sprint PCS for connecting calls on the costs Sprint PCS incurs rather than an amount set by BellSouth.
“Sprint PCS is entitled to receive in reciprocal compensation a rate that recovers its additional costs of terminating BellSouth’s traffic. Sprint PCS is not obligated to use BellSouth’s rates as a proxy. The [Telecommunications Act of 1996] imposes a duty upon BellSouth to establish reciprocal compensation arrangements with Sprint PCS for the interconnection, transport and termination of calls,” the company said.
The petition for arbitration filed with the Florida Public Service Commission is the first time a wireless carrier has asked a state commission to base reciprocal compensation on a cost study provided by the wireless carrier rather than a proxy proposed by the incumbent local exchange carrier, said Jonathan M. Chambers, Sprint PCS vice president for regulatory affairs.
Chambers noted that Western Wireless Corp. filed a cost study in Hawaii but not for reciprocal compensation purposes.
In its filing, Sprint said it has attempted to negotiate with BellSouth but has been unable to come to an agreement.
When Congress passed the telecom act, it recognized that there may be difficulties in negotiating interconnection agreements so it said that if negotiations failed, parties could ask state regulators to arbitrate the dispute. The arbitrated settlement can then be fought in federal court.
Since its negotiations with BellSouth failed, Sprint has asked for arbitration. It says its cost study, which was filed under a cloak of nondisclosure, deems its costs for connecting BellSouth’s calls to be $0.066. BellSouth claims the costs are $0.003776.
BellSouth downplayed the importance of the Sprint Florida petition, saying “It is a contract dispute, and that is what arbitration is for.”
The problem seems to be centered on what is included in the cost study. Sprint PCS believes it should be able to receive compensation for its entire network except the costs of handsets. BellSouth disagrees, saying transport costs cannot be included in costs recovered by reciprocal compensation.
“Sprint PCS claims that a [commercial mobile radio services] provider should be allowed to charge an ILEC asymmetrical reciprocal compensation rates that include the entire cost of its network (excluding the handset) plus the cost of obtaining spectrum. Sprint PCS largely ignores the policy implications of its proposal. Sprint PCS seeks an unearned competitive advantage for CMRS providers. Its proposal would eliminate the incentive in the current system for both carriers to minimize their costs. It would also favor one technology over another,” said BellSouth in a related proceeding at the Federal Communications Commission.
Sprint is asking the FCC to declare what wireless costs can be used for reciprocal compensation purposes.
Also related to the Sprint Florida petition, the U.S. Supreme Court has said it will hear a case on how universal-service fees are calculated.
This case, said Michael Altschul, could have an impact on wireless/wireline reciprocal compensation. Altschul is the vice president and general counsel for the Cellular Telecommunications Industry Association.
In the case, which comes from the U.S. Court of Appeals for the 5th Circuit, GTE Corp. (now Verizon Communications) argues that historical costs should be used to determine universal-service fees. Rather than historical embedded costs, the FCC said forward-looking costs should be used.
Sprint’s cost model filed in Florida relies on forward-looking costs.
