AT&T Says Wireless Could Pay if FCC Doesn’t Act on Intercarrier Comp
Wireless carriers could see an immediate benefit of access charges remaining low if the FCC approves comprehensive changes to intercarrier compensation and the Universal Service Fund, a top AT&T regulatory official said Tuesday. In an interview, AT&T Senior Vice President Robert Quinn contested complaints by some wireless carriers that wireless has little to gain and much to lose if the FCC approves reforms proposed by Chairman Kevin Martin at the Nov. 4 meeting (CD Oct 21 p1). AT&T has not signed off on the intercarrier comp and USF proposals but is weighing them carefully, Quinn said.
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“Wireless carriers now get to terminate traffic at $.0007,” Quinn said. “If they're not analyzing the risk of that going away for their companies they're not doing their jobs … There’s an immediate benefit [based] on what they're paying today and what they could potentially pay if nothing happens.” Quinn said some wireless carriers see the benefit of keeping the rate for terminating traffic low. For example, in a September letter to the FCC, Sprint Nextel noted the benefits of keeping the $0.0007 terminating rate.
Barring agency action before Nov. 5, the D.C. Circuit will throw out the $0.0007 rate applied to ISP-bound traffic, replacing it with much higher reciprocal compensation rates. The court also will toss an accompanying “mirroring” rule, meaning higher rates for any carrier exchanging traffic with a large carrier now paying ISPs $0.0007.
By default, carriers terminating each others’ traffic pay state-set reciprocal compensation rates. But under FCC rules a carrier can elect to pay a dial-up ISP a reduced rate of $0.0007 per minute to terminate that ISP’s traffic. The rationale for this discount is that ISP traffic overwhelmingly moves in one direction -- to carrier from ISP. According to the mirroring rule, a carrier electing to pay $0.0007 for one-way traffic must allow all other carriers with which it exchanges traffic to pay $0.0007 terminating fees also, whether or not that traffic is one-way.
Many large price-cap carriers have elected to use the $0.0007 rate, and most wireless traffic is exchanged with those large carriers, so wireless carriers mostly pay $0.0007 terminating fees, Quinn said. If the court throws out the ISP compensation rules, carriers will have to pay reciprocal compensation rates four to nine times $0.0007, he said.
“Other wireless carriers are looking at this,” Quinn said. “I don’t think the wireless industry speaks with a single voice on these issues. A carrier like Sprint is a carrier that may not sound the same as a carrier like U.S. Cellular … The thoughtful carriers are the ones that are still trying to figure all of this out.” Quinn agrees with other wireless carriers complaining that a 10-year transition on intercarrier compensation, as envisioned in the order on circulation, is too long, he said. “Our view of the world is, when 10 years rolls around, there won’t be any more access,” he said. “The vast majority of traffic is going to be IP-originated at that point in time.”
USF support for wireless is “fundamentally broken” and in need of repair, Quinn said. He cited several examples that he said show distortion in how wireless carriers benefit from the fund, with no societal benefits. For example, in Washington state, he said, wireless carriers receive funds for serving rural areas but are using the money to install towers in urban areas. He asked why more than 10 wireless carriers should get money for serving the same study area in Mississippi or in an area in San Juan, P.R. He also said that in some instances wireless carriers can sell one customer five handsets and get five times the support a wireline carrier would get.
The wireless fund “serves no purpose,” Quinn said. “This is a religious issue, not an issue of reason.” Unless the FCC acts now a complete overhaul could be years away, he said. “If we lose this opportunity, we're going to have such a fundamentally worse problem three years from now,” he said. “It’s mind-boggling.”
A wireless industry source opposing Martin’s USF changes questioned Quinn’s arguments. “Everyone expects that at a minimum the FCC is going to address the [ISP] remand,” the official said. “He’s looking at a parade of horribles that only happens if the FCC does nothing.” Wireless carriers wouldn’t “instantaneously” face higher costs even under a worse case scenario, he said: “Most of these payments are subject to interconnection agreements, which are typically for two or three years.”