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Level 3 Yanks VOIP Petition

Light Reading
News Analysis
Light Reading

Level 3 Communications Inc. (Nasdaq: LVLT) has withdrawn its petition to the Federal Communications Commission (FCC) that would have shielded some VOIP carriers from paying "access charges" when switching calls to the PSTN.

The Colorado-based carrier withdrew the forbearance petition Monday, one day before the FCC's deadline for acting on the issue. The withdrawal is a punch to the gut for the VOIP industry, prolonging the regulatory uncertainty about the fees to which VOIP calls are subject.

Sources close to the situation say it became apparent late last week that Level 3 was not going to get the majority of FCC commissioners to grant the petition. As is common in such cases, Level 3 chose to withdraw the petition rather than have it in the public record that the FCC disagreed with its request.

"After Michael Powell left the commission, that left two Republican commissioners and two Democratic commissioners," says Dana Frix, a Washington, D.C.-based attorney who represents interexchange carriers and VOIP providers. "It would appear that Level 3 believed that the FCC's decision would have had a negative effect on their case going forward."

Light Reading reported last Thursday that the FCC was expected to deny Level 3's petition by today's deadline. That would have sent a message that the commission did not agree that VOIP providers should be exempted from paying access charges when terminating calls over the PSTN. These charges exacted from traditional phone companies make up the subsidies used for programs such as Universal Lifeline and E911.

Level 3's CEO James Crowe says the carrier was only acting 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," he said in a statement.

Now that Level 3 has backed off its request, for whatever reason, several things could happen. VOIP providers could, for instance, start incurring access charges for calls terminated with wireline carriers, and they would likely pass on the additional costs to customers. Some, however, feel that the ILECs will soon sue VOIP providers retroactively for the access charges they feel they are due.

Frix points out that the implications of Level 3's petition would only have applied to VOIP services such as Vonage Holdings Corp. and Skype Technologies SA, because calls from those providers originate on an IP device. The FCC already ruled against AT&T Corp. (NYSE: T) when the carrier claimed exemption from access charges because of the IP-based infrastructure that only helps transport (as opposed to originate or terminate) voice traffic.

But the most likely outcome of this situation is simply continued uncertainty over whether VOIP call traffic should or will be subject to the complex and confused system of intercarrier compensation that currently plagues the telecom industry.

"I fear that withdrawal of the petition leaves us in that same ambiguous netherland," writes Jeff Pulver, founder of Vonage and the VON coalition, on his blog. "We have no rules dictating whether and, if so, what compensation might be owing to those last-mile wireline providers that 'ever-so-graciously' connect VOIP providers to their 'ever-so-precious' customers."

— Mark Sullivan, Reporter, Light Reading

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User Rank: Light Beer
12/5/2012 | 3:22:22 AM
re: Level 3 Yanks VOIP Petition
Trying to charge a fee to VoIP providers terminating calls in the PSTN will just drive them underground. They will be forced to try to bypass the PSTN end-to-end, assuming originating and terminating calls in an IP device means they have no fees to pay. This will just drive traffic off the PSTN all the faster.
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