This article originally appeared in the March issue of INTERNET TELEPHONY magazine

On Nov. 18, 2011, the FCC (News - Alert) released an order and notice of proposed rulemaking that overhauled the Universal Service Fund distribution mechanism and intercarrier compensation. Among other things, the order establishes a new default framework for the termination of VoIP traffic, with an ultimate end-state of bill-and-keep where providers do not charge an originating carrier for terminating traffic but instead recover costs from their own customers. 

The NPRM portion of the FCC’s order seeks comment on a number of topics including ways the FCC can encourage IP-to-IP Interconnection. Initially, the FCC reiterates that the duty to negotiate in good faith does not depend on the underlying network technology. The NPRM requests comment on the scope of any IP-to-IP interconnection policy framework, whether the framework should be limited to the exchange of voice traffic or if it should cover other types of traffic, the statutory authority it has to impose an IP-IP interconnection mandate, and other related topics.

The NPRM also signals the FCC’s concerns about overlap with the backbone market as it suggests that its framework should be “narrowly tailored to avoid intervention in areas where the marketplace will operate efficiently.” Finally, the NPRM proposes that if a carrier has deployed an IP network and receives a request for IP-to-IP interconnection but instead mandates use of TDM, that carrier must bear the costs of conversion from IP to TDM and asks for comments on how such a requirement should be implemented.

This far-reaching proceeding will be significant to VoIP providers and others that operate IP networks. Through this proceeding the FCC may significantly alter the regulatory and financial obligations of IP network providers and users for years to come.