FCC Chairman Set to Leave as Vote on Access Fees Looms

It has been about seven weeks since FCC Chairman Michael Powell informed President Bush in a letter he planned to leave the U.S. agency this month.

Although rumors have been circulating in Washington, D.C. for months over potential candidates to replace Powell — including FCC Commissioner Kevin Martin and Rebecca Klein, former chairwoman of the Public Utility Commission of Texas — the White House has not named a new chief and it is not known when exactly the current chairman will leave his post.

Powell indicated Tuesday at the Voice on the Net (VON) conference in San Jose, Calif., he is likely to end his tenure next week. Powell has been with the FCC since 1997. Neither an FCC spokesman nor Powells chief of staff would offer details.

If Powell leaves the agency before President Bush names his replacement, the commission can designate one of its members to act as interim chairperson. That would be either Republican: Martin or FCC Commissioner Kathleen Abernathy, whose tenure at the agency also has been rumored to be nearing an end. Abernathy has not revealed plans to leave and has said she serves at the pleasure of the president and will serve in whatever capacity he wishes, says her senior legal advisor, Matthew Brill.

Powell is possibly sticking around until the commission votes on a petition by Level 3 Communications Inc., the national telecommunications carrier.

The forbearance petition is part of the ongoing debate over the rates telecom carriers must pay such local phone companies as SBC Communications Inc. to hand off calls over the PSTN, the acronym for the traditional public switched telephone network.

The FCC recently opened a proceeding to revise the rules affecting billions of dollars in interconnection payments among U.S. carriers. Congress also might draft legislation affecting the complex regulatory regime known as intercarrier compensation, as part of an attempt to overhaul the Telecommunications Act of 1996.

The Level 3 petition is only a piece of the larger intercarrier compensation proceeding and will be automatically granted under the law if the commission does not act by March 22. It is highly unlikely the FCC would not act by the deadline, reveals an industry source.

Level 3, a wholesale carrier hauling other communications providers voice and data traffic, is asking the commission to reaffirm that it should pay LECs (local exchange carriers) rates based on reciprocal compensation, rather than higher-priced access fees, to terminate traffic over the PSTN when it originates a call over an IP network.

Most calls still originate over the public network created more than a century ago following Alexander Graham Bells invention of the telephone in 1875. However, U.S. cable operators, traditional phone companies and others like Vonage Holdings Corp. have begun offering tens of millions of consumers an alternative to traditional phone service: VoIP, the acronym for Voice over Internet Protocol.

The interconnection issues draw confusion and controversy when calls touch both the PSTN and the escalating number of IP networks.

SBC, the second-largest local phone company, asserts that Level 3 is obligated to pay access fees under the circumstances in question.

Access fees can range from half a penny to several cents per minute, while rates based on reciprocal compensation are much lower at a fraction of a penny per minute. Bottom line: the FCCs decision will affect a few hundred million dollars in revenue LECs collect from other providers, or a significantly greater amount, depending on the source.

According to a study Level 3 submitted to the FCC, non-rural incumbents like SBC would collect $114 million in 2005 and $167 million in 2006 in additional access charges if the commission imposed access fees on the traffic in question. That represents only a 1.8 and 3 percent increase, respectively, compared to what the incumbents presently collect in intercarrier compensation, according to Level 3.

The United States Telecom Association, a trade group representing hundreds of LECs, including SBC, disputes the numbers in the study by QSI Consulting Inc. A separate analysis by National Economics Research Associations Inc. shows that the QSI study severely underestimates the impact on access charges nearly [$1 billion] of revenue in 2008 alone even without taking into account a number of other significant deleterious effects ., USTA Vice President of Law and General Counsel James Olson wrote in a letter to the FCC.

The commission has circulated a response to the petition, although the item is not slated on Thursdays monthly agenda meeting. That means the commissioners will vote separately on the petition through the agencys electronic system.

The FCC circulates an item after the chairman signs off on it. Powell has taken a hands-off approach to regulating Internet technology and is in favor of granting the Level 3 petition.

In a research note published March 1, Medley Global Advisors analyst Jessica Zufolo said Powell had not secured a vote of the majority at the five-member commission. To date, the industry continues to meet with and submit documents to the FCC on the Level 3 petition and broader issues involving intercarrier compensation. None of the commissioners have voted on the petition.

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