Voip review

Byline: Donny Jackson

The FCC's denial of an AT&T attempt to exempt the long-distance giant's phone-to-phone IP service from access charges was expected, but more confounding was that the order offered little indication on the commission's stance regarding future intercarrier-compensation and voice-over-IP issues.

Filed in October 2002, the petition asked the FCC to rule whether existing laws required AT&T to pay access charges on calls between two public-switched telephone network phones carried over the carrier's IP backbone. AT&T claimed the IP conversion meant the traffic should be treated as Internet packets and not subject to access charges. Incumbent carriers countered that the AT&T service was not "true VoIP" and amounted to little more than a scheme to skirt access charges on normal public network calls.

Ultimately, the FCC sided with ILECs and denied AT&T's petition. FCC Chairman Michael Powell said AT&T's service did not offer any of the enhancements inherent in VoIP, so it was subject to the legacy access regime.

"In fact, the consumer receives the same plain old telephone service," Powell stated. "To allow a carrier to avoid regulatory obligations simply by dropping a little IP in the network would merely sanction regulatory arbitrage and would collapse the universal service system virtually overnight."

Although Powell tried to avoid appearing to reverse his position that VoIP should be lightly regulated, AT&T general counsel Jim Cicconi said that's exactly what the commission did.

"This sends an ominous signal as the FCC prepares to tackle even more critical questions that will either spur Internet telephony or stifle it in order to favor four monopoly phone companies," Cicconi said in a prepared statement. "Rather than leave a legacy that promotes technology and innovation, this FCC will be remembered as the commission that took the first steps to regulate the Internet, despite its public statements to the contrary."

But many VoIP proponents say they aren't reading too much into the AT&T decision. Bill Hunt, Level 3's vice president of public policy, said he is encouraged that the FCC considered Free World Dialup's IP-to-IP calls an information service that us exempt from access charges and that AT&T's service was not VoIP. As a result, Level 3 believes its service providing IP-to-public network calls may be subject only to access charges when the FCC rules on the carrier's petition for forbearance.

"The fact that the FCC continues to clarify rules with respect to when access charges apply, including the ESP exemption, reflects favorably on the Level 3 petition," Hunt said.

But Phil Marchesiello, an attorney for the law firm of Akin, Gump, Strauss, Hauer & Feld, believes the best clue offered by the FCC to date is a note in the IP services NPRM declaring the commission's philosophy that calls accessing the public network should compensate ILECs for using their last-mile networks.

"That suggests to me there will be access charges, although it may be a different system [than in the legacy intercarrier-compensation regime]," Marchesiello said. "I expect there will be something more than reciprocal compensation."

Because the FCC took 18 months to reach its conclusion on the AT&T petition, the carrier saved hundreds of millions of dollars by paying incumbent carriers reciprocal compensation for terminating calls carried on its IP network instead of access charges, which are much greater. The FCC did not rule whether AT&T must pay access fees retroactively. Instead, the commission decided to review any disputes on a case-by-case basis.

At least one of those disputes will be decided in court. SBC Communications sued AT&T in a St. Louis federal court for $141 million in retroactive access fees the day after the FCC released its ruling.

Reading the tea leaves of the FCC also is made more difficult by not knowing where the next major development in VoIP regulation will occur. In addition to the Level 3 forbearance petition, the FCC has Vonage's IP-to-public network declaratory ruling request and the comprehensive IP services NPRM to consider. The FCC is required to rule on the Level 3 petition by December, but sources indicated that no action is expected on the proceeding until after the November elections.

Meanwhile, there had been some speculation that the FCC might try to pre-empt state commissions' powers in the AT&T petition, but that did not occur.

"There are snakes in the weeds here [the states] carrying heavy poison, and the FCC still has its shin guards on," said a source who requested anonymity and is close to the situation.

In Congress, the Senate last week debated an Internet tax-moratorium bill that initially including VoIP but later appeared to drop the service from tax consideration. After such a bill is passed, there may be greater interest in a bill from Sen. John Sununu, R-N.H., that addresses rules for VoIP applications, according to Mark Mullet, Verizon Communications' vice president of government affairs.

Finally, the Intercarrier Compensation Forum is expected to make a proposal for a bill-and-keep system that would eliminate access charges, which would make most of the VoIP debates moot. However, the ICF was projected to unveil a plan by the end of April, but negotiations on key points stalled last week, meaning the industry group may not make a proposal until well into May, according to a source familiar with the ICF talks.