State Commissions Still Face More Work If CAF Order Upheld, Say State Advocates
States will continue to have a role in arbitration if the 10th U.S. Court of Appeals upholds the 2011 FCC Connect America Fund order, state advocates told us after the Nov. 19 oral argument. The CAF order revamped the rules of the $4.5 billion-a-year fund and set intercarrier compensation on a path toward bill-and-keep (CD Nov 20 p2). At the oral argument in Denver, FCC attorney Richard Welch argued that AT&T v. Iowa Utilities Board took away the states’ exclusive power for ratemaking, and it gave the FCC power in that area. Chief Judge Mary Beck Briscoe, part of a three-judge panel, then asked Welch what’s left to the state commissions. Welch answered that the arbitration and negotiation process still exists for the state commissions when telcos can’t agree.
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
States will still have plenty to do if the CAF order is upheld, David Bergmann, counsel for the National Association of State Utility Consumer Advocates, told us. “Commissions will still have their service quality jurisdiction, the ability to arbitrate terms and conditions other than the price in intercarrier disputes, and they will continue to make their voices heard on the federal level.” State commissions would be more likely to shift in focus than reduce their staff, said Bergmann. Bill-and-keep would take the ratemaking out of the states’ hands for intercarrier compensation by imposing a rate of zero on all transactions, he said. “We argued, along with others, that it was unlawful and wrong for public policy,” said Bergmann. “Not requiring carriers to share the costs for the networks onto which they put traffic does not make economic or equitable sense."
Arbitrations by the state commissions could be limited because of their primary role to set rates, said NARUC General Counsel Brad Ramsay, who argued on behalf of the state commissions, in an interview. “To the extent that there is an absolute refusal to interconnect, I suppose that the states would have that to do, but the central reason for putting the states in the arbitration role is to get prices and terms of service.” Ramsay’s oral argument focused on the need for “reciprocal compensation” as defined in the CAF order. “It will be difficult for the FCC to prevail on all three areas that needs to get reciprocal compensation,” he told us. “I don’t think that it will get the zero rate, to set the interim rates, or access charges.” If any of these three go, a “big chunk” of the order would be eliminated, he said.
Bill-and-keep would ultimately result in the customer paying for the network, said Bergmann. “By reducing intercarrier compensation rates, the carriers will have to recover their costs from their own customers, and this will have an extreme impact on local customer rates.” Carrier A, the local carrier, should be compensated by Carrier B, the long-distance carrier, for the use of its network, and the payment should not come from the customers, said Bergmann. Lifeline service costs could also go up as a result of the intercarrier compensation reforms, he said. “To the extent that local rates go up and the Lifeline support amount does not go up, Lifeline customers will be paying more for their service,” which will “become less affordable to them,” said Bergmann.
Bergmann and Ramsay said the 10th Circuit’s aggressive questioning might mean the panel is going to strike down parts of the order. “When the judges look at the briefs and the arguments on reciprocal compensation, I expect them to find it irrational,” said Ramsay. “The FCC did not have a response on it in their brief because there is no response.” Ramsay expects the court’s decision to come in 10 months to a year, he said. “Whenever it comes out, I expect a 50 percent chance that it will to go the Supreme Court, especially if they lose big on one of the intercarrier compensation issues.”