FCC Should Not “Reverse Course” on VoIP-PSTN Traffic

A March 8, 2012, joint letter to FCC Chairman Julius Genachowski from NTCA, Cbeyond, Earthlink, Integra Telecom, NCTA, tw telecom and Windstream incited a strong reaction from Level 3, who filed a rebuttal ex parte on March 14. The initial joint letter (explained here) urged the FCC to state that “all originating access charges are subject to the same treatment pending further reform.” A near-term conclusive statement condoning symmetric treatment of originating access would “ensure that reforms do not disrupt further broadband investment by incumbents or competitors,” the joint letter participants argued. The dispute over originating access rates largely centers on the treatment of VoIP-PSTN traffic, which the joint letter companies believe should be treated the same as PSTN-PSTN traffic. This appears to be a source of contention for Level 3.

Level 3’s response to the joint letter explains, “While Level 3 agrees with the compromise concerning a symmetrical compensation scheme for both TDM-based and VoIP-based service providers, it ultimately believes that the Commission should reject the agreed upon proposal, which would require the Commission to reverse course on the VoIP-PSTN traffic rules it adopted in the CAF Order, and apply the legacy access charge regime to VoIP-PSTN traffic.” Level 3 believes that if the FCC followed the urging of the joint letter parties, the USF/ICC Transformation Order rules would be fundamentally changed, not simply “clarified” as the joint letter parties argue.

Level 3 furthermore “strongly disagrees that the intrastate access charge regime should now be applied to VoIP-PSTN traffic,” and any decision that would apply legacy rules to VoIP “only exacerbated the uncertainty surrounding VoIP-PSTN traffic and would ultimately undo much of the Commission’s efforts to reform the intercarrier compensation regime.” Level 3 also believes that legacy rules would “serve as a disincentive to migrate customers to IP platforms in order for carriers to continue charging higher intrastate originating access rates.”

Level 3 concludes its letter asserting that the FCC “should reject calls to reconsider its rules, and decide against injecting additional legal and financial uncertainty into an industry that is already struggling to implement the current rules adopted in the CAF Order.” From an RLEC perspective, Level 3 certainly got that last part correct—the industry is struggling to move forward under the new regime. However, the FCC will likely need to develop a more extensive record on this VoIP-PSTN originating access issue over the coming months. As illustrated by many rural telecom stakeholders in the ICC reform FNPRM comments last month, originating access is an important source of revenue for RLECs. Any action by the FCC to shrink this revenue base should be met with expanded opportunities to recover lost originating access from the Recovery Mechanism. On the other hand, Level 3’s argument that outdated legacy rules should not bog down IP network migration certainly has merit, too.

Both sides argue that their respective positions will prevent IP investment stagnation and ensure certainty regarding originating access rules. Who do you agree with?