Regulatory Watch

Old Issues Still in FCC's Hands

His fellow commissioners have just a couple of months to straighten out old business before FCC Chairman Michael Powell exits the FCC and leaves the whole mess to his still-unnamed successor. Issues such as intercarrier compensation and mandating uniform CARE procedures have yet to be resolved, even though they've been on the commission's agenda since time immemorial.

"Forget high-minded theories on the future of broadband competition or VoIP deployment for the common good," says a CLEC regulatory executive who asked not to be named. "They still haven't settled issues surrounding how carriers pay their bills."

The FCC, for instance, still hasn't solved the lack of uniformity in the way carriers pay each other for terminating traffic; misunderstandings have led some carriers to withhold these payments, tying financial settlements up in court.

"The fundamental problem is that different compensation regimes are used based on the type of traffic involved," says Alfred Mamlet, head of the telecommunications group at Steptoe & Johnson LLP. "If it concerns local access traffic—that is, CLEC traffic terminated by the ILEC—there's one set of rules; if a long-distance carrier pays a LEC to terminate its traffic, it's another formula; and so on. It doesn't make sense to have so many different rates, functions and rules."

Industry groups, including the Intercarrier Compensation Forum and several others, have presented the FCC with their own proposals for simplifying determination of what each carrier owes for terminating traffic. But the commission failed to rule on an all-encompassing policy, instead issuing another Notice of Proposed Rulemaking to get more input.

"The latest FCC rulemaking is that there will be unified intercarrier compensation for inter- and intrastate access or termination," Mamlet says, "but that unifies only two proposals; there are a whole bunch of proposals out there. The FCC has served up answers to a lot of important issues in the past, but on this one, it punted it away in terms of finally coming to a conclusion."

Carrier access billing systems (CABS), which have been around since courts ordered local calling to be unbundled from long-distance services, are inaccurate because the call origination data they depend on for charging access fees is wrong or just plain missing. The reason is that unscrupulous carriers intentionally strip calling number identification from the records that accompany calls to the switch.

Nearly every carrier can complain of lost revenue because it can't determine which carrier is sending it traffic and therefore doesn't know which carrier to charge. In some cases, IXCs bypass ILECs by sending long-distance traffic to CLECs for termination because they often charge cheaper termination rates, thus taking revenue from the incumbents. Wireless phone companies often leave the jurisdictional identification parameter (JIP) field blank in their call data so the wireline carrier can't identify their traffic and thus can't charge them for termination.

The result is a rather loose regime of calling codes, agreements, confederations and tariffs that needs reigning in and organizing, Mamlet says.

Universal Service Fund Still Shrinking

Improving the formula carriers use for contributing to the Universal Service Fund is an ongoing source of contention in the telecom industry. The pool of carriers required to contribute to the fund is shrinking through mergers and acquisitions, as well as from the loss of carriers through "natural selection." The pool is further diminished as some call types are ruled to be free of USF charges.

"This increases the burden on carriers still involved in the pool," Mamlet says. "It's creating a downward regulatory death spiral. At first, universal service assessment on carriers was 6 percent; now it's 10 percent, because people have bypassed the USF system instead of paying that 6 percent. The carriers that are left have to make up the difference, which robs their revenue stream."

CARE Records: Caught in a Time Warp

A third issue still hanging around the dockets at the FCC concerns the records carriers send each other when a customer changes long-distance carriers or switches to another phone company altogether. Customer account record exchange (CARE) data, which includes billing and address information, is supposed to be sent to the customer's new long-distance carrier in a timely fashion so the new IXC can get the customer's service up and running quickly. The process is also designed to get the billing system ready to begin charging its new customer for long-distance calls.

The process includes third-party verification, wherein the customer talks on the phone with an independent contractor who asks the customer to repeat his name, address and the name of the long-distance carrier he's switching to. The local phone company and/or the third-party verification firm are supposed to notify the customer's former IXC that its customer has churned.

In spite of what ought to be a relatively straightforward process, the new IXC sometimes doesn't get the CARE information for whatever reason, so it never starts long-distance service for the customer. The customer's former IXC believes its customer has moved on; meanwhile, the customer, believing that he's got a new long-distance carrier, begins to make long-distance calls. But since no IXC is assigned to the customer's line, the calls are automatically carried by a default IXC that doesn't recognize the phone number or the customer making the call. The result: the long-distance caller enters the little-known netherworld of "casual billing" and becomes fodder for some of the highest per-minute rates known to humanity, which sometimes reach $7.50 a minute or more and can include a hefty charge for just connecting the call.

The FCC in February launched a request for comments on how to best streamline CARE processes and wants to mandate uniform, efficient and trouble-free processes. As it now stands, CARE information is transmitted several ways—via phone call, fax, e-mail and even the U.S. Postal Service—which leads to confusion and lost records.

Who's got responsibility for sending the CARE information to which carrier depends on a set of confusing parameters, critics say.

Kimberly Miller, director of regulatory law and public policy at NeuStar Inc., has seen the damage that the flawed process can wreak on phone bills, as well as a carrier's reputation.

"There are a lot of complaints about mistakes when customers only want to change their long-distance carrier; it happens all the time," Miller says. "If the information is not exchanged properly, carriers can be accused of slamming," for instance.

Those complaints come streaming into the regulatory agencies, which then get involved. "What we've heard from the carriers and the FCC," she says, "is that from 30 percent to 50 percent of billing and slamming complaints will disappear as a result of the mandates the FCC wants to launch for handling CARE information."

Miller says the CARE process could be improved by installing a uniform interface carriers could link to and through which CARE information could be sent, filed and manipulated. All carriers involved could access the system and pull the information needed to complete the switch in long-distance carriers.

CTIA Happy Again With FCC on Interconnection Ruling

Maybe it's because of Valentine's Day, but wireless operators, angry at the FCC after it failed to address interconnection issues at its February hearing, have since fallen back in "like" with the commission.

In early February, the Cellular Telecommunications & Internet Association (CTIA) complained loudly when the FCC failed to act on complaints from wireless operators about what they considered extremely high interconnection rates wireline carriers charge them for terminating calls, especially in rural areas.

Stung by the FCC's apparent failure to address wireless interconnection issues during that meeting, wireless operators and the CTIA released a statement – attributed to CTIA President and CEO Steve Largent – that said "The FCC's failure to decide these petitions robs consumers in the very markets that would benefit most from additional competition." Three wireless operators -- T-Mobile, Western Wireless and Nextel -- petitioned the FCC to make their wireline partners lower termination rates which they described as "exorbitant."

The FCC also dropped a petition filed by Sprint PCS that asked the FCC to let wireless carriers designate their preferred rating and routing points for the exchange of local traffic. That way, Sprint argues, wireless carriers would be in a position to offer local telephone numbers to customers in rural markets.

Later in the month, when the FCC ruled that wireline operators had to let wireless carriers negotiate lower termination rates, wireless operators quickly made up with the FCC by offering up a verbal bouquet. "[Wireless operators] praised today's [Feb. 24] FCC ruling prohibiting local exchange carriers from filing discriminatory wireless termination tariffs," the announcement said. Under the new rules, local exchange carriers and wireless carriers will be "required to negotiate interconnection agreements" instead of having to pay higher termination fees.