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March 21, 2005

Level 3 Withdraws Forbearance Petition to Preclude the Imposition of Access Charges on Connected IP-Wireline PSTN Traffic

Level 3 withdrew its pending forbearance petition at the FCC, just one day ahead of a mandatory FCC ruling. Grant of the petition would have made clear that connected IP-wireline PSTN services would not be hauled into the intercarrier compensation quagmire that currently plagues most of the US telecom industry. Denial of the petition would have left the industry with lingering uncertainty as to whether or not access charges should apply to connected VoIP services. I fear that withdrawal of the petition leaves us in that same ambiguous netherland. We have no rules dictating whether and, if so, what compensation might be owing to those last-mile wireline providers that "ever-so-graciously" connect VoIP providers to their "ever-so-precious" customers.

I have not yet seen an explanation from Level 3 as to why it withdrew its petition the day before the FCC was obligated to act on that petition. We, however, were at the FCC meeting with Level 3 and the FCC Commissioners late last week, and have had growing concerns that the FCC was not yet prepared to grant the petition. Perhaps the attitude was, pull the petition, build some good blood, live to fight another day, and hope for certain in the relative short term. Admittedly, with the FCC in the first week of its leadership transition, it was somewhat speculative how the issue might have played out, but, frankly, Chairman Martin, does strike me as someone who wants to lead us out of the intercarrier compensation absurdity as quickly as possible. I was hopeful that his leadership in granting the Level 3 petition would have moved us that much faster in the right direction.

Some have argued that the FCC should resolve all of the issues in one grand, unified, omnibus order. I have some concerns about the likelihood of such an effort. Frankly, the issues are so politically and economically volatile, it will take an FCC with a solid backbone to compel a unified solution. Perhaps (I hope), Chairman Martin has that spine.

The fact is that the FCC has been trying for 8 years. It's only been the occasional piecemeal efforts that have made the issues a little more susceptible to resolution. Imagine if the FCC had to move the LECs from 10 cent/minute tariffed access rates to bill-and-keep in one fell swoop, rather than from a "meager" ½ cent/minute to something less. That would have been a political impossibility. Biting off a few stray, relatively innocuous, pieces here and there that doesn't pose immediate dramatic rate shock to an industry segment would be a nice way to segue into a more rational intercarrier compensation structure. I would think that the regulators would relish any action that would force everyone's hand and compel all industry players to sit down and hammer out a resolution that might hurt everyone a little at first, but ultimately would establish the right structure with the proper incentives to drive all innovators and entrepreneurs to building out broadband networks and deploying new technologies and services that promise to transform the ways in which we communicate. I, for one, am quite concerned about rolling out new services and technologies that might, perchance, require some connectivity to the wireline PSTN. God forbid I should be hit with an access charge bill for one on my FREE services. Did I mention my services are FREE? How am I supposed to deploy my services and build an IP-based communications community with the specter of access charges hanging over me? For now, I'm relegated to interconnect with other IP islands and, perhaps, with the wireless carriers, who seem to recognize the value of maximizing the capabilities and usage of their networks.

The bottom line is that the intercarrier comp regime is so screwed up that anything that forces all sides to sit down to negotiate a more sensible regime, such as bill-and-keep or peering-type arrangements, is a good thing in my mind. Grant of the Level 3 Petition would have brought us that much closer to resolution. At a minimum, it would have clearly exempted the IP-based communications providers from the regulatory swamp.

I still find it interesting to note that the LECs seem to have won the intercarrier comp battle on all sides. In those few instances where the LEC is the net payer of intercarrier compensation, the rate is astoundingly low (e.g., recip comp for ISP-bound traffic), and where the LEC is the net recipient of intercarrier compensation, those rates have remained staggeringly high (i.e., originating and terminating long distance traffic). Perhaps, once the Bells become net payers of long distance access (after their respective acquisitions of long distance providers), they will see the light and we will move to a more rational system of intercarrier compensation. By then, it will obviously be the sleeves off their vests. But perhaps, we will see, in hindsight, the absurdity of charging to connect to the users of the narrowband, wireline PSTN. Perhaps, then we will all begin to really look to the future and promote a ubiquitous, interconnected all-IP, all broadband network of networks.

I, for one, long for the day when the last-mile wireline carriers recognize that they need us as much as we need them - that creation of a unified, ubiquitous network of networks, with relatively easy transiting between and across platforms and technologies is in everyone's best interest and no one should be extracting monopoly rents to reach anyone else's captive customers.

Posted by jeff on March 21, 2005 10:45 PM | Permalink

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Comments

Seems to me Level 3 pulled the petition as a gesture of good will for the new FCC Chairman Martin.

I agree the regs are obsolete, but intercarrier compensation is just one piece of the ugly puzzle. So why not scrap it all and start over? So it takes a little longer don't you think the the FCC has a "solid spine"?

It seems that all issues such as USF, E911 etc need to restructed anyway don't you think?

Posted by: Diana at March 25, 2005 02:57 PM