[March 18, 2005]

VoIP to Pay PSTN Access Charges?

By David Sims, TMCnet CRM Alert Columnist

Light Reading is reporting that the Federal Communications Commission is expected to deny a forbearance petition that has kept VoIP providers from paying PSTN access charges, just days before the Commission’s March 22 deadline, sources close to the Commission say.

VoIP providers would then be subject to access charges for terminating their calls on other carrier networks.

There are no independently confirmed reports, and Level 3 officials contacted said they have no idea what the FCC will do, but by March 22 nd, the FCC will, by action or default, make a decision. If the deadline passes with no decision the forbearance is upheld.

Level 3 has asked for forbearance from interstate access charge rules to sharply reduce the company’s payments for VoIP calls completed over the public switched telephone network. According to the United States Telecom Association, “if allowed, this petition would drastically reduce revenues to local service providers that invest in and maintain communications infrastructure in high-cost rural areas.”

In mid-February 234 small and mid-sized member companies of the USTA sent a letter to the five FCC Commissioners urging them to deny the Level 3 petition, which in their eyes “would allow the company to avoid paying what it legally owes” for use of local communications networks.

The USTA has filed an analysis with the FCC in which it claims that a QSI Consulting study for Level 3 does not disclose the full extent of harm to universal service and investment from Level 3’s petition.

“Level 3’s attempt to carve out its own sweetheart deal could jeopardize the communications infrastructure in rural areas and could derail efforts to comprehensively update the industry’s intercarrier compensation system,” said USTA President and CEO Walter B. McCormick, Jr. “Level 3’s attempt to gain a lower price than its competitors is a misuse of the forbearance process; it is not seeking forbearance, but rather a cheaper price.”

Level 3 claims in its December 2003 petition that forbearance from access fees “will allow innovative Voice-embedded IP applications to continue to blossom and flourish, increase investment, spur product and technological innovation, and drive deployment and demand for advanced services.”

Opponents, which include Bells and rural carriers, depict Level 3’s case as nonsensical, calling an attempt to exempt a growing portion of the telecom world from the urgent need to reform the access-fee system.

Access fees are payments carriers make to each other to connect calls.

Staci Pies, vice president of governmental and regulatory affairs at VoIP provider PointOne Telecommunications who worked at Level 3 when the petition was filed, and before that held an office at the FCC in Washington told Light Reading there will be a denial of forbearance, but “because of the way they will deny it, following that will be an additional order that will change the rules in such a way that Level 3 and others like them will be afforded relief.”

The commissioners “understand that it doesn’t make any sense to deny the forbearance because the rules are substandard, and then not change the rules,” Pies adds.

The FCC’s denial of Level 3’s petition wouldn’t necessarily mean the FCC is requiring or approving of access charges on VoIP calls, Light Reading says. Carriers might interpret the denial in a variety of ways, one of which would open up VoIP companies to lawsuits over access charges from incumbent carriers.

Depending on how a denial might be written, it would mean that the ILECs could sue CLECs and VoIP providers for retroactive fees they feel they could have collected during the period of forbearance, Pies says. “Then they will immediately raise the rates for the traffic.”

Level 3 participates in the Intercarrier Compensation Forum, an industry group formed to fix the current regulatory structure around pricing for inter-carrier traffic, which is widely seen throughout the industry as in terrible need of an overhaul.

According to Pies the new FCC-chairman designate, Kevin Martin, has been careful not to show his cards on the issue.

Level 3 and other VoIP providers contend that IP-based phone services are not, and have never been, subject to access charges when VoIP calls terminate on the PSTN. Access charges can include additional fees meant to subsidize such things as Universal Service subsidies, and those fees, of course, are passed on to the customer. For VoIP customers this could mean paying for phone service by the minute, an idea that would almost make the whole point of VoIP moot.

VoIP carriers would rather pay the incumbent LECs on a negotiated, market-driven basis known as “reciprocal compensation” for terminating traffic on their networks.

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