In Feud over Access Fees, Level 3 Withdraws Petition

Federal regulators today were expected to provide some clarity in a feud over the fees Level 3 Communications Inc. and other telecommunications providers have to pay local phone companies to complete calls originating over an Internet Protocol network.

The feud lives on.

Level 3 has withdrawn a petition that under the law would have required the FCC to make a decision today in a thorny case pitting such local phone companies as SBC Communications Inc. against communications providers routing calls over IP networks.

Level 3 CEO James Crowe said in a statement the Colorado-based carrier withdrew the petition in deference to the commission, which is now being led by a new FCC chairman, Kevin J. Martin.

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, Crowe said. However, there remains a pressing need in the industry for clarity in this area, and Level 3 may elect to refile the petition or take other appropriate regulatory actions in the future.

Analysts, however, said Level 3 had another motive for withdrawing the petition: Level 3 did not have the support of the majority at the five-member commission, which currently has one vacancy. Michael Powell, who was chairman of the agency until last week, has supported granting the petition, analysts say.

The recent departure of Chairman Powell, whose support for the item all but assured its demise, left Level 3 with little choice but to withdraw its filing or face a denial of their petition from the full commission, Medley Global Advisors analyst Jessica Zufolo said today in a research note.

Had the petition not been withdrawn, regulators were expected today to rule on what rates such carriers as Level 3 are obligated to pay SBC and other local phone companies for completing a call over the public switched telephone network (PSTN) if the traffic originated over an IP network.

Level 3 asserted carriers are obligated to pay local phone companies rates based on reciprocal compensation, rather than higher-priced access fees. SBC argued that access fees apply.

The debate is part of a much larger feud over the multibillion dollar system governing payments between carriers to complete calls. The FCC has initiated a notice of proposed rulemaking to reform a system of intercarrier compensation that is generally viewed as Byzantine and outdated.

Some large carriers, including SBC and Level 3, have proposed abolishing the fees over time and authorizing local phone companies to raise end-user charges.

The controversy has become more heated as an escalating number of calls touch both IP networks and the more-than-century-old PSTN controlled by the four regional Bells and smaller local exchange carriers.

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