INTERCARRIER COMPENSATION FORUM CONTINUING DESPITE DEFECTIONS

Meetings will continue, attorney Gary Epstein, the former Wireline Bureau chief chairing the meetings, told us Thurs.: “The group is still in existence… We are still, I believe, the only cross-industry group looking to put together a comprehensive plan. We would welcome members back in the group but now we're continuing ahead.”

An industry consensus “would have made our job easier,” said FCC Comr. Adelstein when asked about the ICF’s split up. He said he hoped the group would get back together and, even if all carriers didn’t participate, “whatever they come up would be helpful to us.” At a media breakfast Thurs., Adelstein said it would be “particularly helpful” if the group shared with the FCC some network interconnection material gathered as part of the industry talks: “Apparently they were learning themselves about how their competitors’ networks interconnect to their own and make operations work. The industry was learning a lot about the interrelationships between networks. Certainly the FCC could benefit from that kind of information.”

“I think it shows how hard this is,” said an incumbent local exchange carrier source. “The FCC has clearly positioned itself the last few days to say we're going on anyway. The question is, are they going to pick up some of the more innovative proposals, or are they going to say let’s go with what we had?”

Several proposals are expected to be filed in addition to the ICF plan. They include proposals by a group of competitive local exchange carriers, by the so called Portland Group, and by the Alliance for Rural Intercarrier Compensation. FCC Wireline Bureau Chief Bill Maher said this week that Maher said Chmn. Powell wants a proposal by the end of the year and one is in the works in the bureau’s pricing division. That could be a limited proposal, such as an order on Internet service provider reciprocal compensation, possibly combined with a broader rulemaking tackling other issues.

Among the companies dropping out Wed. were Nextel, Western Wireless, CenturyTel, Allegiance and Time Warner Telecom. By Legg Mason’s count, only 8 companies remained in the group -- SBC, Qwest, AT&T, MCI, Sprint, Level 3, Global Crossing and GCI.

Sprint said in a statement late Thurs. it regretted so many major players had abandoned the talks. “We regret that some industry participants have recently backed away from a proposal being developed by the Intercarrier Compensation Forum,” the carrier said. “It is a complex problem presenting a significant challenge, but we believe that if industry representatives -- along with regulatory, political and consumer stakeholders -- work diligently in a real spirit of compromise, we can fix this problem to the benefit of every consumer in America.”

“We believe yesterday’s developments indicate that comprehensive reform of intercarrier compensation is not likely over the next year, as some had hoped, though there could still be incremental steps taken by regulators,” Legg Mason said. “Longer term, we continue to believe the system will have to undergo an overhaul because technology, bundling and past policy decisions are driving industry changes that appear to be incompatible with the current framework.”

Without BellSouth and Verizon the ICF proposal is a “non-starter,” CIBC said. The firm expected the FCC to take some time to structure a plan: “With the presidential election and the complexity of getting the states to approve the plan, we thought that it could be July 2006 at the earliest before anything gets implemented,” CIBC said. “Our outlook is now pushed back by at least 6 months to 2007. After that, we expect a lengthy transition period of 3 to 4 years.” UBS said: “We believe this outcome suggests reform is unlikely to be enacted in 2005, when a new FCC is forced to take up this complex issue.”