FCC’s Controversial ARC Subject to NARUC Debate
State regulators tackled the significance of the FCC’s access recovery charge (ARC) early on at its winter committee meetings in Washington. Panelists struggled to make sense of the charge, which has spurred heated filings between the D.C. Public Service Commission and Verizon and is a concern that’s come up in other states, as FCC filings have shown. A panel of telco and state regulators met Saturday afternoon to discuss the contested charge, introduced to make up for revenue telcos lost in reduced access rates when the FCC issued its November 2011 USF order.
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"Let’s go back to the Ark of the Old Testament,” said Keith Oliver, Home Telecom senior vice president-corporate operation, referring to the biblical boat’s purpose of transporting life to the new world. “We'll see whether [FCC Chairman Julius] Genachowski’s ARC does so as well.” He framed the charge as part of “a much larger transition into the broadband arena.” The FCC originally downplayed the charge’s impact but recent worries are the “beginning of the pains that are coming,” Oliver said.
AT&T Executive Director-Global Public Policy Saikat Sen called the charge “a compromise solution” and emphasized the issue’s complexity. Its purpose is to “absorb the rate shock for the time being,” he added, though he noted the difficulties for consumers. E911 and Telecom Relay Service surcharges also complicate the picture as Sen sees phone bills, calling the former “a big monster now” once AT&T took a closer look at the issue.
"The whole creation of the ARC by the FCC is fundamentally flawed,” said Christopher White, deputy rate counsel of the New Jersey Division of Rate Counsel, speaking on behalf of the National Association of State Utility Consumer Advocates. The idea for such a charge was “raised at the 11th hour” in the proceedings that created it, he said. “It sets a floor on rates by permitting additional charges -- and those charges are paid for by consumers,” White said. “It’s the worst of the alternatives that are available.” Core Communications General Counsel Chris Vanderverg called the ARC “the regulatory equivalent of ‘let them eat cake,'” and said it risks losing companies’ customers and raises questions the FCC should have considered beforehand.
D.C. PSC Policy Adviser Cary Hinton described the back-and-forth his commission has engaged in with Verizon and the FCC. “We felt it was justifiable that we be exempted” from the ARC because “unlike most states, we have no intrastate access services,” so Verizon wasn’t losing revenue in Washington, Hinton said. He described confusion at the PSC when realizing that Verizon selectively assessed the ARC in different states and excluded neighboring Virginia. He slammed that reasoning: “They found a handful of exchanges, frankly less than 10 percent of their exchanges, met the $30 rate cap [in Virginia].” But the FCC quashed the D.C. PSC’s objections. Hinton said Verizon’s charge was deemed permissible because the rules were all “vague enough” that Verizon was in the clear. Verizon has defended its use of the charge and said PSC Chairman Betty Ann Kane has tried injecting policy into a tariff proceeding (CD Jan 14 p13). The ARC’s purpose is broader than the PSC realizes, Verizon said. The telco declined comment beyond its available filings.
"And yet Verizon didn’t violate a rule,” said Katie Cummings, deputy director of the Virginia Corporation Commission. “To be honest with you, I feel put in a very difficult position … where I've had to support and defend Verizon and the FCC against another state.” She defended Verizon’s ability to charge what it wanted and its interpretation of the rules, criticizing the “mishmash of information” compounding the problem.
"When we see rate discrimination, we know where it is,” said Telecom Analyst Labros Pilalis of the Pennsylvania Public Utility Commission. He summed up the ARC debate as being a simple rate-making case. His PUC wasn’t thrilled when it saw a charge landing in Pennsylvania when people in Loudoun County and McLean, Va., and in California didn’t have to pay it, he said.
"Consumers don’t understand their phone bills,” said Greg Doyle, telecom manager of the Minnesota Department of Commerce, to panelists. “They just don’t. And the ARC is no help to that problem."
"The FCC’s historic reform in 2011 of the outmoded Intercarrier Compensation system is beginning to unleash billions in annual benefits to consumers by eliminating hidden callings costs while removing major barriers to deployment of advanced broadband networks,” an FCC spokesman told us in a statement about ARC criticisms.