[March 22, 2005]

Level 3 to Pick Fight Later

By David Sims, TMCnet CRM Alert Columnist

According to Dow Jones, Level 3 Communications Inc. has withdrawn a petition with the Federal Communications Commission, requesting exemption from access fees for an internet telephone service known as VoIP.

It would have been one of the most heavily-anticipated rulings of the year, since if Level 3 had lost, prices for VoIP calls could have jumped.

A no-decision would have upheld the forbearance petition, so evidently Level 3 didn’t think their odds of getting an approval or no-decision were worth the risk.

“Level 3 has withdrawn the petition in deference to the Commission. Given the appointment of new leadership only three business days before the statutory deadline for ruling on the petition, we determined it was inappropriate to ask the agency to resolve this important issue in the timeframe required by law,” said James Q. Crowe, chief executive officer of Level 3 Communications, Inc.

The company filed its petition in December, 2003. Level 3 and its supporters argued that the current access fee system needs to be reformed and shouldn’t be applied to VoIP. Opponents argued that it was unwise to exempt a growing slice of the telecom market from the reform effort.

The FCC had until Tuesday to decide on the petition, under agency rules. Many analysts expected that the agency would deny the petition, especially given last week’s departure of former FCC Chairman Michael Powell, who was considered a champion of VoIP services.

Powell, who was seen as sympathetic to Level 3’s petition, was replaced last week by Kevin Martin, who has not publicly tipped his hand on the matter. Analysts agreed that Level 3 had no clear indication of which way the commission would rule, and may have chosen to wait for a more favorable climate.

The withdrawal was seen as something of a surprise, but Level 3 added that it may refile the petition in the future.

Crowe says the decision to withdraw the petition was made in consultation with industry participants “that share our views, including the VON Coalition and CompTel/Ascent.”

Level 3’s argument is that VoIP voice calls between the legacy telephone network and the Internet should be exchanged using reciprocal compensation rates, “which are lower than access charges and far closer to the network provider’s true cost.”

David Sims is contributing editor and CRM Alert columnist for TMCnet.