Regulatory News – Intercarrier Compensation Controversy Grows in Importance

Posted: 04/2001

Regulatory News

Intercarrier Compensation Controversy Grows
in Importance
By Kim Sunderland

The FCC ( is caught between a
rock and hard place over getting involved in intercarrier compensation issues
such as reciprocal compensation and access charges.

"The parties have all asked us to get involved," said Dorothy
Attwood, chief of the FCC’s Common Carrier Bureau (,
during a panel discussion on the topic at the Competitive Telecommunications
Association’s (CompTel) (
20th Anniversary Convention in Orlando.

"But the FCC said the issues must be resolved with your own
negotiations," Attwood told the IXC, CLEC and ILEC panelists. "Do you
want commission action or inaction?"

BellSouth Corp. (,
which hopes to gain FCC approval this year to offer in-region long-distance
services in at least one of its states, votes for the former.

"If carriers can’t resolve this then the FCC should step in," said
Robert T. Blau, BellSouth vice president of executive and federal regulatory
affairs. "Federal lawmakers are going to have to drive this debate."

Jake Jennings, vice president of regulatory affairs for CLEC NewSouth
Communications Corp. (,
said his company is looking at ways to decrease its costs and limit its capital
expenditures because "the revenues available to us also are fixed."

Losing certain compensation fees would hurt as much as the dry-up on Wall
Street CLEC investment.

Robert W. Quinn Jr., vice president of federal government affairs for
long-distance giant AT&T Corp. (,
said NewSouth was looking to subsidize its entry into new markets with access

"The CLEC strategy is not some sort of arbitrage opportunity,"
Attwood said in a scolding tone.

"That’s exactly what it is," Quinn responded.

If the situation continues to drag on, said Blau, a lot more uncertainty will
be created for CLECs.

"Carriers need to get together to resolve this because it’s not good for
anyone in the long run," he added.

But when 60 to 70 percent of NewSouth’s costs are fixed, Jennings said the
whole issue is about cost.

"It’s about the recovery of costs," Attwood said, "and where
do you get it?" Carriers constantly have to consider whether to move to a
business plan where costs can be recovered from either the end user or another

While it’s not an easy decision, the natural tendency is for a carrier to
recover its costs from another carrier, she said.

Historically, using access charges to recover costs was acceptable during the
reign of a monopoly, said Quinn. But in today’s marketplace, there’s no reason
for it, he said.

Rather than pay intercarrier compensation fees in whatever form, AT&T
threatened to block certain carrier traffic.

"There are some technologies to block some types of traffic," Quinn
said. "If forced to do it, we will."

Attwood doesn’t believe that any of the IXCs would compromise seamless
transmission. Such a move also is questionable as a public policy issue, she
said, adding that there are existing commission rules that restrict
anti-competitive conduct and behavior.

Nonetheless, blocking carrier traffic is a self-help alternative, Attwood
recognized. "If the FCC doesn’t do anything, we’ll see more of this kind of
self-help out of necessity," she warned panelists.

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