Intercarrier Compensation Reform in 2008 Possible, Say Carriers

Panelists voiced optimism that FCC Chairman Kevin Martin will tackle intercarrier compensation reform this year. Last month, Martin pledged that he would address comprehensive reform by November (CD May 13 p2). There will be a major push for reform -- with results perhaps coming in pieces rather than all at once, said Verizon Executive Vice President Tom Tauke. The effort could establish a single rate for traffic termination, he said. If Martin says he wants it done, it’s possible, said Anna Gomez, Sprint Nextel government affairs vice president. “I think he’s going to try,” agreed Melissa Newman, Qwest regulatory affairs vice president. Deep reform is no easy task given the corollary issues, she said. “But I give [Martin] a lot of credit for putting that statement out there.”

FCC members probably will tackle universal service contribution issues before finishing work on distribution, Tauke said. Most of the industry agrees with switching the contribution mechanism to a system based on quantity of phone numbers. Carrier contributions now are based on interstate revenue.

An FCC judgment on whether Comcast violated net neutrality principles would be in industry’s interest, since it would confirm that the agency is enforcing its rules, Tauke said. Jim Cicconi, AT&T senior executive vice president, was also upbeat. The Comcast case could be a “blessing in disguise” that fleshes out net management issues, he said. Now, people better understand that some net management is needed to deal with congestion, he said.

Net neutrality’s fate if Sen. Barack Obama, D-Ill., is elected president is unclear, Tauke said. The presumptive Democratic nominee seems to favor a neutrality mandate, but has offered no details, Tauke said. Verizon opposes preemptive net neutrality legislation, given the impossibility of predicting the market years from now, he said. Anticipatory laws could thwart development of new services, he said. Newman agreed. By its nature, government can’t keep up with technology, and shouldn’t try, she said.

Gomez urged the FCC to make forbearance procedural rules to discourage “overly broad” petitions, Gomez said. “We're faced with forbearance petition after forbearance petition after forbearance petition,” she said. Newman disagreed. Forbearance petitions are not going away, and they're a fine mechanism for seeking relief from unbundling rules, she said. Sprint, competitive local exchange carriers and others dislike the process, but there will be “more, not less” forbearance petitions, she said. Qwest has a controversial forbearance petition pending for Phoenix, Denver, Seattle and Minneapolis (CD June 17 p5).

The next FCC should scrutinize the special access market, Gomez said, noting its lack of competition. The suggestion seemed to annoy Cicconi. The FCC and Justice Department have addressed special access multiple times “the last three years alone,” and Sprint has “been unable to prove that there isn’t ample competition,” he said. “While the words are there that these are monopoly facilities, the fact is, ever since the Democratic FCC deregulated special access,” special access reform proponents haven’t made their case, he said. Besides, Sprint has 50 million customers, he said. “It didn’t seem to have any problem finding the capital to invest in facilities,” and the new Clearwire venture shows it’s investing to create “ample choice for tomorrow.” Sprint will repeat special access arguments until action is taken, Gomez said.

In its pending acquisition of Alltel, Verizon Wireless knows what the Justice Department and FCC expect, Tauke said. Verizon is working with DoJ to address issues as they arise, he said. It’s “fair to say” divestitures will come in areas where Verizon and Alltel are the only two cellphone carriers, he said. And Verizon expects no trouble from the FCC because the deal won’t “change the face of the industry,” he said.

The pending Google-Yahoo deal for search and contextual advertising raises more questions, Cicconi said. The companies’ primary revenue source is advertising, he said. Combining advertising might not be an “outright takeover,” but it’s “certainly a creeping acquisition,” he said.