NARUC Notebook

Speakers at an intercarrier compensation reform panel at NARUC were sharply split on whether the Missoula Plan to unify intercarrier rates for similar carriers would fix the compensation system’s problems. Joel Lubin, AT&T regulatory & policy vp, said the plan, backed by AT&T and more than 350 other large and small carriers across the industry, “is a workable means for managing the transition from the narrowband world to the new world that’s dependent on broadband.” He said consumers and the American economy will be the ultimate winners, calling the proposal significant because a group of diverse carriers once “at each other’s throats” came together on terms. The Missoula Plan would move over 4 years from today’s tangle of compensation rates to a unified intercarrier compensation rate for all types of traffic. There would be different rates for large, medium and small carriers. Revenue losses would be balanced by SLC increases, a new restructuring subsidy method and, as a last resort, local rate increases. Lubin said the plan would cut regulatory costs, end most interconnection disputes and advance universal service, and do so “by a rational, logical transition that will put technology in consumers’ hands in a meaningful and efficient way.” Prior intercarrier compensation reforms produced substantial consumer benefits and this one will, too, he said. But the Missoula Plan won’t hit FCC Chmn. Kevin Martin’s goal of intercarrier compensation solutions not raising local rates or hiking universal service costs, said Billy Jack Gregg, W.Va. PSC dir. of consumer advocacy: “This plan does both. It raises local rates through huge SLC increases and requires a 32% increase in a universal service fund that’s already bloated and unsustainable.” The roughly $6 billion in net revenue losses from unifying rates would be made up by SLC raises and universal service subsidy hikes totaling nearly $7 billion, Gregg said. “For consumers, this means only pain, pain, pain,” he said, urging NARUC to oppose the plan. Nan Thompson, a former Alaska regulator now with competitive carrier GCI, said the plan’s subsidy approach would “permanently entrench” incumbents and keep competitors from fielding new technologies that don’t require subsidies. The plan would eliminate many opportunities for regulatory arbitrage but also create new arbitrage opportunities, said John Sumpter of PacWest Telecom: “If this plan’s goal is to eliminate arbitrage, it fails.” Speaking in support of the plan, Bill Hahn of Level 3 Communications said it will end residential rate subsidies that discourage competition, and encourage competition for transit traffic. Consumers won’t face big SLC increases “because the competitive marketplace won’t tolerate them,” he said: “Competition will keep prices reasonable.” Doug Garret, Cox dir. of western regulatory affairs, said the plan might impair competitive carriers’ ability to geographically deaverage rates and offer deals to selected customer classes, while creating new opportunities for regulatory gamesmanship: “AT&T presents this as a choice between higher access charges or higher SLCs. But maybe there’s a 3rd choice, and that is that companies who can spend billions of dollars on a broadband infrastructure to sell video service in competition with cable companies don’t need billions of dollars in ratepayer subsidies.”