Good, Tough and Timely. Revising Intercarrier Compensation

By Carl Ford

Examining the political landscape, it's good that the FCC is focusing on the issue of Intercarrier compensation.  It's also the focus via the topic of phantom traffic, a form of arbitrage based on the ambiguities in the rules about termination based on interconnection--not the call's origination.

The existing system of Intercarrier compensation came about after the divestiture of AT&T, and it operated on assumptions about the cost of transport which were accurate for the time, but have lost relevance today. 

A call placed today, as Executive Director of the VON Coalition Jim Kohlenberger points out, costs as much to go across the office as it does to go around the world. State tariffs now have lower rates for services, thanks to competition between fiber and IP.  Locally, however, the price may not reflect the market.

To be clear, we are talking about rate anomalies between the jurisdictions of interstate, interlata and local. Hank Hultquist of AT&T did a great job talking about these issues in a recent podcast (Saunderslog 7/16/2008); this is not a VoIP discussion specifically.  But Verizon and others have been working in hopes that the Federal Communications Commission reaffirms that VoIP is within the federal jurisdiction.

It would be inaccurate to say that this standardization has complete consensus among phone carriers. Embarq and NECA look to redefine the concept of a carrier and claim that VoIP and POTS are comparable services.  However, these claims look to isolate the functions of communication. It is limiting when a service like an audioblog becomes subject to the same rules as home phone services.  The funny thing is that many NECA members have benefited from the use of VoIP technology in their delivery of POTS.  The adoption of IP technology by many rural carriers also has expanded the portfolio of services they offer.

From a free market perspective, the time is right to change the rules. When the cost of a phone call is approaching zero, the expense of tracking Intercarrier compensation is burdensome.  It is even worse to track origination and termination based on jurisdiction in an increasingly nomadic mobile environment, particularly if the interconnected carriers dispute the data.

According to the VON Coalition, "With the right policies, VoIP enabled competition can save consumers an astounding $110 billion over the next 5 years - putting real money back into consumers' pockets through the power of competition."  

The opportunity exists to ride the technology bandwagon and harness VoIP as a broadband driver; just a 7 percent increase in broadband adoption could create nearly 2.4 million more jobs per year. Enabling work at home and mobile connectivity should be part of the overall mission to provide broadband services throughout the United States.

Chairman Martin and the commissioners have the desire to lead us into a new era of access models -- an era that recognizes that POTS is a service and VoIP is a technology. The chairman has my support in his efforts, and I hope you will join me by giving him yours.

Carl Ford is Strategic Adviser and Community Developer for FierceMarkets. His words of wisdom can be found at www.carlford.net