NARUC Tunes Up Termination

A task force assembled by the National Association of Regulatory Utility Commissioners (NARUC) submitted to the Federal Communications Commission (FCC) Monday an intercarrier compensation reform plan that appears to stand a good chance of adoption.

The new plan, called the Missoula Plan, proposes a common (and lower) termination rate for VOIP and TDM traffic of .05 cents per minute, with two tiers of higher rates in the rural markets. It would largely erase differences among local, interstate, intrastate, and wireless termination rates.

Since most calls would be terminated at the same rates, proponents of the plan say the amount carriers spend on termination billing, tracking, and litigation would be greatly reduced.

NARUC general counsel James Ramsay says the plan has broader support than any other plan submitted to date, and therefore has a good chance of at least serving as a framework for adopting new rules. He adds that FCC chairman Kevin Martin has said publicly on several occasions that he intends to overhaul intercarrier compensation during his term. (See FCC's Martin Preaches Competition.)

A complex quilt of intercarrier termination rates has developed over decades. Because so many rates exist, carriers have in some cases manipulated the type or route of their traffic to get the lowest access rate possible. This has resulted in a good deal of wrangling in the courts between originating and terminating carriers, says Heavy Reading senior analyst John Longo. It’s thought that if the rate system is dramatically simplified the litigation will go away.

For those reasons, many of the RBOCs have come out in support of the plan. “It will reduce litigation that currently results as carriers try to arbitrage the system,” says AT&T Inc. (NYSE: T) spokesman Mike Balmoris. “The rules will be clearer, just by virtue of that fact there will be less litigation. Since the rate will be the same for everybody, nobody will be trying to get a lower rate.”

AT&T signed a letter of support along with around 200 other phone companies including BellSouth Corp. (NYSE: BLS), Level 3 Communications Inc. (NYSE: LVLT), and Global Crossing (Nasdaq: GLBC).

Not everybody is supporting NARUC’s plan. A group of organizations including CTIA , National Cable & Telecommunications Association (NCTA) , and Incompas issued a letter of opposition yesterday.

“It does not adequately address and in many cases would exacerbate problems with the current intercarrier compensation and universal service systems -- e.g., uneconomic regulatory distinctions and incentives for inefficiency,” the group says of the Missoula plan.

“It will increase Universal Service Funds by multiple billions of dollars, it will not solve the problems with intercarrier compensation, and we believe it will shield incumbent telephone companies from new competition,” says NCTA spokesman Brian Dietz.

Some consumer advocacy groups have come out against the plan because they believe it will increase phone bills for some people. They reason that because carriers will be getting compensated less for terminating calls, they will make consumers compensate for their lost earnings.

Comptel, which represents CLECs, was listed on the letter, but a spokeswoman said today her organization signed it mainly because NARUC was making it sound as if the whole industry supports the plan. Comptel, she says, is still studying the proposal.

Verizon Communications Inc. (NYSE: VZ) is conspicuously absent from both letters and chose not to comment on the matter Tuesday.

The FCC has reviewed several intercarrier compensation reform plans in the past, but has not been satisfied with any. For that reason, the commission requested that NARUC put together a task force to devise a new plan. NARUC itself has not formally endorsed the plan.

Our Washington sources say the FCC will move quickly to open the plan up for public comment. The commission could adopt portions of it if they feel that enough people know about it and have had enough chance to comment on record.

— Mark Sullivan, Reporter, Light Reading

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