FCC Order Would Back Compensation for VoIP Providers and Their Partners

Industry officials had said the order was leaning in that direction. Both sides, including Level 3, AT&T and Verizon, met with commissioners in the past couple of weeks on the subject, said ex parte filings. But neither side was willing to predict how the commission will vote.

"The item circulated by the Chairman levels the playing field for VoIP providers, which deliver innovative services to millions of American homes and businesses,” an FCC spokesman told us in a statement. “The result will be further deployment of these services, more competitive choices for the public, and benefits to the economy as a whole by fostering more efficient communications."

The draft order, which FCC Chairman Tom Wheeler circulated Thursday, comes amid continuing debates over compensation. Bandwidth.com told commissioners that Verizon was withholding “significant” end-office switching payments to the company when terminating calls to customers Bandwidth.com serves in conjunction with its VoIP partners, said an Oct. 22 filing. The issue arises from the USF/ICC transformation over calls from a public switched telephone network (PSTN) provider customer to a VoIP customer. Bandwidth.com argued that a CLEC working with the VoIP company to connect the call is entitled to be compensated by the PSTN provider.

Bandwidth.com representatives, including President John Murdock, lobbied aides to all commissioners and Daniel Alvarez, Chairman Tom Wheeler’s legal advisor, on Oct. 20 and Oct. 21. The firm asked the FCC to “re-affirm” the transformation order’s VoIP symmetry rule and find that CLECs with VoIP partners perform the “functional equivalent” of local switching, "regardless of whether those partners are loop-facilities based or OTT providers.”

The meetings came after AT&T executives, including Bob Quinn, senior vice president-federal regulatory, and Hank Hultquist, vice president-federal regulatory, told an aide to Commissioner Mignon Clyburn on Sept. 30 that CLECs and VoIP providers play a “limited role” in calls that “may traverse hundreds or even thousands of miles on the public Internet before reaching the called parties,” said an Oct. 3 ex parte filing. AT&T executives referred to its 2013 letter to the commission, which said CLECs and VoIP providers “do not perform the physical work of connecting and switching VoIP-PSTN calls onto individual subscriber lines, and thus do not provide end office switching or its functional equivalent.” The CLECs “simply dump the calls” into “an undifferentiated stream onto the public Internet, over which they may travel … over the facilities of multiple Internet backbone providers and ISPs,” AT&T said. That does not involve “the same functions and work as using local switches to separate and place calls onto individual subscriber lines,” AT&T argued, noting the commission has said “the Internet is not equivalent to a subscriber line.”

The USF overhaul order’s symmetry was intended to ensure that just as when an ILEC charged access to a CLEC working with a VoIP provider for long-distance calls originated by a VoIP customer, so too should that CLEC be able to charge access for long-distance calls placed from the ILEC’s customers to that same VoIP provider, Level 3 Vice President-Federal Affairs Joseph Cavender and Harris Wiltshire’s John Nakahata told Clyburn’s aide Oct. 6, according to an ex parte filing. The two made the same arguments to Commissioner Jessica Rosenworcel’s aide the next day, the filing said.

Level 3 and Bandwidth.com have argued that AT&T has an asymmetrical view of the commission’s symmetry rule by arguing it is entitled to local switching access charges for calls originating with a VoIP customer and ending with an AT&T customer, but arguing it does not have to pay the charges when the call goes in the reverse direction. The VoIP side of a PSTN-to-VoIP or VoIP-to-PSTN call entails functions similar to loop, local switching and transport functions, Level 3 and Bandwidth said.

Bandwidth.com has resolved its differences with AT&T over the charges, Bandwidth.com said in the Oct. 22 filing. “No other carrier disputed Bandwidth’s end office switching charges under the VoIP symmetry rule until several weeks ago, when Verizon belatedly did so. Verizon now retroactively disputes all previously paid tariffed end office charges in their entirety, and refuses to pay all such charges prospectively.” The commission should clarify CLECs working with VoIP providers are entitled to the payments, because to do otherwise “would slow investment in the transition to IP switching and interconnection,” Bandwidth said. To not require the compensation would “be an asymmetrical penalty on carriers that adopt IP switching and thereby lose the ability to charge end office switching charges that they could continue to charge by leaving TDM switches in service” the company said. AT&T, Bandwidth.com, Level 3 and Verizon would not comment beyond their filings on Tuesday.

Verizon has also been lobbying FCC staff, according to an ex parte filing on Monday. It said “There is no dispute that a LEC can charge switched access on VoIP-PSTN traffic when the LEC provides switched access.” Referring to PSTN-to-VoIP calls, “a carrier cannot charge for an access function it does not provide,” Verizon Assistant General Counsel Curtis Groves and Alan Buzacott, executive director-federal regulatory affairs, told Alvarez on Oct. 22.