AT&T Hopeful FCC Targets Intercarrier Compensation 'Arbitrage' Very Soon

The FCC could soon address intercarrier compensation "arbitrage," said two FCBA panelists Tuesday. The commission is taking the issues seriously in a proceeding "ripe" for action, said Matthew Nodine, AT&T assistant vice president-federal regulatory. He's hopeful the commission acts in a "very quick time frame" to curb arbitrage "schemes" that generate carrier payments. Moderator Philip Macres of Klein Law suggested the agency could look to act in Q1. The FCC didn't comment.

Nodine and a rural CLEC representative debated whether the FCC needs to take broad action to rein in rural carriers collecting access charges from interexchange carriers (IXCs) for connecting long-distance calls. AT&T believes the business practice of local carriers targeting high-volume conference-calling platforms in rural areas to stimulate access charge collection is an unjust practice the FCC should prohibit. Without such action, Nodine said schemes will continue "morphing" and be hard to control.

Nodine noted an AT&T filing Monday urging FCC adoption of a "Prong 1" proposal in a June NPRM. "Require the cost causer in current schemes to accept the financial obligation for the routing they have chosen in associating their high-volume services in remote areas," advised the filing in docket 01-92 on a meeting with an aide to Chairman Ajit Pai. AT&T opposed a "Prong 2" proposal to "mandate" direct interconnection with carriers engaged in arbitrage but is open to "mutually agreeable" arrangements.

Rural competitors lowered high-volume calling access rates after a 2011 FCC order took a "balanced" approach instead of barring free conferencing arrangements as sought by IXCs, said Innovista Law's David Carter, outside counsel for BTC (Western Iowa Networks), Great Lakes Communication, OmniTel Communications and other rural CLECs. He said the lower rates resolved most disputes with IXCs, with the biggest exception AT&T, which he said wants free conferencing eliminated to lower its costs. Rural CLECs' are concerned the NPRM seeks to address access stimulation without requiring extensive data submissions and studying the remedial effects of the 2011 order, he said. Rural competitors use the access revenue to deploy rural broadband, he added.

AT&T isn't against the services but rather arbitrage forcing its customers to "subsidize" free conferencing, Nodine said. He said the 2011 order sought to encourage innovative wireless and IP-based services, not just drive down terminating access rates for "1-plus calling," a "dying service." Explicit subsidies, not access revenue, should support rural broadband, he said.

Carter said there's "no evidence" AT&T subscribers subsidize free conferencing. He said AT&T and other IXCs established unlimited calling plans voluntarily and shouldn't be able to prevent their subscribers from using service to make calls they desire. If AT&T gets its way, it would put free conferencing out of business, he said. Carter noted the FCC is addressing the rates of centralized equal access providers in Iowa and South Dakota that facilitate IXC-LEC traffic exchanges. While the proceedings are ongoing, CEA rates will clearly be coming down, he said. Nodine countered that such efforts won't stop the arbitrage from popping up in other places, like "Whac-A-Mole."

NTCA Senior Vice President Mike Romano said incentives for arbitrage expanding would be reduced if the FCC adopts its Prong 1 proposal to "flip" the cost burden and its Prong 2 direct interconnection proposal. NTCA supports addressing arbitrage schemes without adopting a comprehensive intercarrier compensation overhaul addressing "network edge" issues, which could put USF and interconnection at risk, he said.

Assistant General Counsel Joe Cavender touted CenturyLink's broader proposal for IXCs to engage in LEC direct interconnection where they have enough traffic, requiring local carriers pay for intermediate transport in certain cases. When Romano and Carter voiced concerns about potential IXC gaming to impose costs on LECs, Cavender said CenturyLink would be open to a "reasonable threshold" to provide "comfort" to local carriers.