Carriers Debate FCC Role in Regulating IP-to-IP Interconnection

"The Commission has seldom witnessed as broad a consensus as the comments reveal exists with respect to the legal framework that governs IP-to-IP interconnection,” said CompTel, arguing that cable providers, rural carrier associations, CLECs, wireless providers, end-users and edge providers all recognize the commission’s statutory authority over IP-to-IP interconnection as provided in Sections 251 and 252 of the Communications Act (http://xrl.us/bmz7fb). Because VoIP services are telecommunications services and IP interconnection will be used for the provision of exchange access and telephone exchange service, ILEC Section 251(c) obligations “continue to apply in an IP world,” CompTel said.

Windstream said that although it generally prefers contractual interconnection agreements over regulatory intervention, “the inequality of bargaining power that underlay[s] the interconnection framework established for the TDM world is equally problematic in the IP-to-IP interconnection context, and this inequality renders unworkable a regime that does not include a regulatory backstop” (http://xrl.us/bmz7ga). The further notice itself said Section 251’s interconnection provisions “are technology neutral,” Windstream said, and Regional Bell Operating Companies’ attempt to evade the obligations “is a smoke-and-mirrors game that will not pass legal muster."

But subjecting voice communications to special obligations for IP-to-IP interconnection would be a backward-looking approach that harkens back “to a pre-convergence world of service-specific regulatory silos,” AT&T said in its reply comments (http://xrl.us/bmz7g9). In the eventual “all-IP future,” today’s distinctions between “voice” and “data,” “managed” and “over-the-top” VoIP, will be unstable and economically-insensible bases for long-term communications policy, AT&T said. Twenty years worth of unregulated Internet peering and transit arrangements prove that the current marketplace-driven system works just fine, it said. “Subjecting VoIP providers to interconnection obligations would not only make no policy sense, but also violate the Communications Act,” AT&T wrote, arguing that VoIP is an information service “immune from Title II common carrier regulation."

"There are no incumbent broadband providers,” said Verizon, arguing the commission “should avoid the temptation to carry over legacy interconnection obligations designed for a different time, a different network, and a different business model to the new world of IP interconnection for voice service” (http://xrl.us/bmz7ix). Because there are no incumbent networks or providers, there is “no good policy reason” to regulate one set of companies differently from others, Verizon said. The commission’s longstanding hands-off policy toward regulating the Internet has caused VoIP to flourish, and there is “no reason to deviate” when carriers today already are obligated to accept IP-originated traffic, it said.

Most cable companies seemed skeptical that IP interconnection could be accomplished without government oversight. Cox said it relies on its rights under Sections 251 and 252, and the commission should keep applying those to interconnection agreements between CLECs and ILECs “regardless of the regulatory classification of the service provided to the end user and regardless of the technology used” (http://xrl.us/bmz7qm). For Charter, clarifying that the existing interconnection regime applies to IP-to-IP interconnection “will enhance incentives for all providers to deploy IP networks and facilitate innovation in the voice services market by providing certainty to incumbents and competitors alike.” Time Warner Cable said that ILECs’ ubiquitous voice networks “give them the incentive to raise rivals’ costs” by demanding interconnection in TDM format, and so the commission should confirm that negotiating IP-to-IP interconnection for the exchange of telecommunications traffic between LECs is a “fundamental statutory duty of ILECs” (http://xrl.us/bmz7qj). However, Comcast came out against government intervention into IP interconnection arrangements, arguing it would be unnecessary and potentially harmful (http://xrl.us/bmz7rn). In addition to interfering with business arrangements that have let information services thrive in a largely unregulated environment, such regulation would “send precisely the wrong signal to foreign regulatory agencies eager to expand their jurisdiction over Internet service providers operating within their borders."

T-Mobile said adopting IP interconnection rules is critical for competitors. “Contrary to ILEC assurances, carriers’ incentives to migrate to next-generation networks will not be sufficient, without regulatory input, to transform PSTN [public switched telephone network] time division multiplexing (TDM) voice service ‘organically’ into IP voice service,” T-Mobile said (http://xrl.us/bmz69q). “The PSTN has tens of thousands of ILEC TDM POIs [points of interface] deployed over the past century, each of which presents an opportunity to impose transport and termination costs, as well as trunking and facility charges, on competitors.” All transport and tandem switching rates must be transitioned to “bill-and-keep” to “prevent the arbitrage that would result from ILECs shifting costs from end office termination services to tandem switching and transport elements,” T-Mobile said.

Sprint Nextel advocated interconnection at IP hubs where two carriers already have a presence, arguing IP-to-IP interconnection is “far more efficient than TDM-based technology” (http://xrl.us/bmz7ci). “This does not involve ‘forcing’ TDM carriers to build new IP networks for IP voice interconnection, and would help to discourage ILECs’ strategy of increasing the costs of their competitors by continued assessment of above-cost charges for interconnection with their TDM networks."

The FCC must ensure wireless carriers can interconnect and exchange traffic with ILECs in IP format, the Rural Cellular Association said. “AT&T and Verizon, alone among industry participants, argue that the Commission loses authority to enforce bedrock interconnection requirements as soon as IP technology is introduced into the network,” RCA noted (http://xrl.us/bmz7bs). “Wireless carriers, competitive wireline service providers, and even ILECs, agree that the Commission can and should require ILECs to provide IP-to-IP interconnection."

The Critical Messaging Association said it “emphatically disagrees” with the “obviously self-serving argument” by AT&T that the transit services market is competitive and need not be regulated by the commission (http://xrl.us/bmz7b2). “In fact, given the relatively low volumes of traffic involved, there is virtually no alternative to using ILEC switching and transport facilities to deliver transit traffic to critical messaging and other paging carriers,” said CMA, which was formerly the American Association of Paging Carriers. “CMA respectfully submits that the Commission can, and appropriately should, regulate the provision of transit services as unbundled network elements and as an inherent part of interconnection under Sections 251 and 252 of the Communications Act."

Most states urged the FCC to proceed at a slower pace generally in implementing intercarrier compensation rules and recognize state authority over intrastate access rates, several state commissions said. Rather than preempting state authority and mandating changes to intercarrier compensation, the FCC should pause in its implementation of reforms to clarify newly adopted rules and to understand the impact of the new rules, they said. They also urged the agency to allow flexibility in areas like access recovery cost.

Alaska carriers and others throughout the country are “scrambling to understand the reforms,” said the Regulatory Commission of Alaska (http://goo.gl/P8xdN). The FCC should delay implementation of additional reforms, at least for the reminder of 2012, to assess the impact of adopted reforms, it said. Additionally, bill-and-keep rates aren’t reasonable for rural carriers, it said. Should the FCC’s authority to implement bill-and-keep rates be upheld, it should offer exemptions for rural carriers, it said. The agency should also offer a limited waiver to rural carriers of certain call signaling requirements, it said. It noted many parts of the state network depend on multi frequency signaling which creates issues with implementing certain call signaling requirements.

The Pennsylvania Public Utility Commission (http://goo.gl/ZmIox) agrees with the Massachusetts Department of Telecommunications and Cable about the problem created by allowing carriers to recover lost revenues on a holding company level. That approach is overly burdensome to states like Pennsylvania, the PUC said. States with intrastate access rate reforms in place are to be allocated a portion of the costs, in the form of access recovery costs, to underwrite reform in areas that haven’t reformed their intrastate rates, it said. Consequently, states like Pennsylvania could be paying twice, it said. Recovery should be on a state-by-state and/or study area basis and not on a holding company basis, it said. The access recovery cost should be limited to carriers that have had an intrastate access revenue loss, said the Florida Public Service Commission (http://goo.gl/h9kbJ).

The Kansas Corporation Commission’s main concern is that the more revenue the FCC “eradicates” from Kansas LECs by tightening its rate regulation of access charges, the more revenue that rural LECs and possibly price cap LECs may seek to recover from the Kansas USF (http://goo.gl/tKl2T). The FCC should take a wait-and-see approach before “extending its stringent command-and-control price regulation to additional interstate and intrastate access elements,” it said.