ICF Plan Criticized For Not Addressing VoIP

This is “a huge problem for Level 3,” said its Dir.- Federal Regulatory Affairs Cindy Schonhaut: “The fact that [VoIP] is not addressed is not what we want or don’t want it’s just not addressed.” Schonhaut, whose company is an ICF member, said the plan means “when uniform rates kick in [in 3 years], VoIP moves right into that uniform rate.” Level 3 has a forbearance petition pending before the FCC that seeks exemption of VoIP from access charges, and the deadline for action is March 22. “So there is some mechanism within those 3 years that will kick in,” Schonhaut said. She said “the 2 issues that became critical are ISP-bound traffic compensation and compensation for VoIP. It’s hard to imagine us being able to come to an agreement on both of those, so we reluctantly” left that out of the ICF plan.

SBC Exec. Dir.-Federal Regulatory Eric Einhorn said he supported excluding VoIP from the plan: “The last thing we want to do is to overlay the [traditional telephony] problems… on top of VoIP. So, by not addressing VoIP, I think that we did good.” AT&T Labs Technical Consultant Penn Pfautz told us the ICF plan, if adopted, would eliminate “many of the issues of compensation surrounding exchange of VoIP-originated and - terminated traffic.” Einhorn agreed: “We think [the plan] will in fact take pressure off some issues.” He added that “to pick on the plan because it doesn’t” address transition to VoIP “I don’t think is a good idea.”

Pfautz said peering is something VoIP could do in the meantime. “One of the reasons why VoIP wasn’t addressed separately in the ICF was in many cases… carriers didn’t feel that they knew where that landscape was going,” he told us: “My perspective is that it’s [heading] towards a bill & keep environment, where you would already be with VoIP peering. And that’s why we didn’t see it as a failure. We are interested in going in the direction of eliminating noncost-based compensation.”

Pfautz said since the ultimate goal of the ICF was “to say carriers aren’t going to compensate each other with some exceptions, and the direction in which VoIP providers are moving is the same, then the 2 would really merge together.” Johnson criticized the transition to bill & keep: “Is bill & keep the solution? Yes, if the traffic is in balance, but if it’s not then bill & keep will not work.”

The ICF plan is not the only one the FCC is looking at. Others were produced by the Cost Based Interconnection Carrier Coalition (CBICC), Alliance for Rural Intercarrier Compensation (ARIC) and the Expanded Portland Group (EPG). Johnson said all recognized: (1) The need for an orderly transition rather than a flash cut. (2) The need to continue to provide stability for consumers through the USF fund. (3) The interrelatedness of intercarrier compensation to obligations for points of interconnection. (4) True, complete reform will require legislation. Noting that KMC didn’t belong to any of the groups, Johnson said the “right solution” for intercarrier compensation would “likely include the proposals that all 4 groups have put forward,” and panelists agreed any unified compensation scheme will require legislation.

Johnson criticized the ICF proposal for not being revenue-neutral. “Whatever proposal we move forward [should] be revenue-neutral and [shouldn’t] discriminate against any carriers,” she said. “The ICF plan is unnecessarily harsh on CLECs, because [it limits them] to one source of recovery for use of their networks,” she said, while allowing ILECs to continue to recover costs from both USF and end-user charges. “Any proposal that moves to bill & keep potentially takes an opportunity our of CLCEs to recover their revenue,” she said.

The ICF proposal is “a good starting point,” Johnson said, because “it’s comprehensive in nature” and “includes a nice cross-function of participant of the industry. It’s a good basis to begin discussions.” Pfautz said it was “important to understand that ICF sets a default… that would be used if carriers can’t decide on [compensation] themselves.”

Defending the ICF plan, Schonhaut and Einhorn said a nation-wide solution on intercarrier compensation was required. “We believe we need a nation-wide comprehensive solution with all the carriers that we interconnect with,” Einhorn said. But Johnson said: “I don’t disagree that it would be a good objective, but the plan should be economically-rational.” She added that she appreciated the forum had made “an effort to include carriers from different aspects of the communications sector.”

“Uncertainty is the worst thing,” Schonhaut said: “That’s why we took the step to stay in the ICF.” She said one of the ideas behind the ICF plan was to address implicit subsidies. She said those subsidies were supposed to go away years ago but didn’t. “Part of the reason for that is to do a comprehensive reform” requires a “detailed analysis. Unfortunately, the FCC doesn’t have the resources to do that. That’s why they [trust] the industry to do it.”

“It’s very critical what legal analysis the FCC uses” in making decisions, Schonhaut said: “The courts have smacked the FCC many times on the legal analysis… We have a lot of money spent crunching through what would be the best legal arguments for the FCC.” She said the ICF group worked “on the premise that the law is what it is, and discovered that you can’t do a uniform reform without changing the Telecom Act.”

Looking forward, Johnson said it was necessary to: (1) Collaborate with NARUC and state legislatures to address the need for legislation under any proposal and the role of state regulators in the process. (2) Reevaluate and seek industry consensus in the baseline assumptions that bill & keep is a viable solution. “The economic rationale does not support a bill & keep regime for all scenarios,” she said. Johnson also said “stakeholders need to stop focusing on what they disagree on and focus on the common ground issues… Stakeholders need to put our money where our mouths are. Given the elimination of pick & choose, carriers no longer have any excuses not to implement their proposed plans without any action from the FCC.”