FCC delays controversial vote

The agency removes item on its agenda for November 4 meeting that would have changed how phone companies pay each other to carry long-distance phone calls.

Marguerite Reardon Former senior reporter
Marguerite Reardon started as a CNET News reporter in 2004, covering cellphone services, broadband, citywide Wi-Fi, the Net neutrality debate and the consolidation of the phone companies.
Marguerite Reardon
4 min read

The Federal Communications Commission is postponing a controversial vote on how phone companies pay each other for long-distance calls that traverse their networks.

The commission was expected to vote Tuesday on a proposal spearheaded by Chairman Kevin Martin that would have drastically changed intercarrier compensation, the complex system established between phone companies for paying each other for connecting long-distance calls. It would have also changed how fees are assessed and collected for the Universal Service Fund, which helps phone companies provide service in rural areas.

But on Monday, the FCC pulled the item from its agenda, which means a vote on these highly controversial issues will be delayed. The four commissioners are asking to reopen public discussion on several proposals with the hope that the item can be brought up again at the FCC's December 18 meeting.

In a statement Martin expressed his frustration and disappointment with the commission's inaction.

"I am disappointed that we will miss the opportunity for comprehensive reform," he said. "I would like to be encouraged by my colleagues' commitment that they will truly be ready to complete this much needed reform on December 18. The nature of the questions they would like to include makes me doubt they will have found their answers with an additional seven weeks. I believe the far more likely outcome is that, in December, the other commissioners will merely want another Further Notice and another round of comment on the most difficult questions. I do not believe they will be prepared to address the most challenging issues and that the commission will be negotiating over what further questions to ask in December."

The problem that Martin was trying to address in his proposal with respect to intercarrier compensation was that right now carriers charge each other different rates for connecting long-distance calls. Some operators charge less than a penny per call while others charge much more than that.

Martin's proposal called for establishing a more uniform pricing model that would have ultimately lowered rates. This would have meant some phone companies would lose money under the new rate plan. To make up for that, Martin proposed allowing these carriers to make up the difference by charging customers as much as $1.50 more a month for residential service and $2.50 a month more for business customers.

Martin also wanted to revise the Universal Service Fund. Currently, carriers receiving USF funds are given subsidies based on fees collected from incumbent phone companies. Right now, carriers are required to pay a percentage into the fund based on the volume of long-distance calls their customers make. The actual cost is paid by customers, who are assessed a fee on their monthly bills whether they make long-distance calls or not.

Martin's proposal would have altered this formula, and also required USF recipients to promise to offer high-speed Internet service to all customers within five years.

Martin's proposals were largely seen as beneficial to large phone companies such as AT&T, Verizon Communications, and Qwest Communications International. But consumer advocates, small and midsize phone companies, and state regulators have been opposed to the proposal, arguing that it would ultimately jack up prices for phone service.

Opposition has also been growing among politicians. And on Monday six more senators--Chuck Hagel (R-Neb.), Patrick Leahy (D-Vt.), Bernard Sanders (I-Vt.), George Voinovich (R-Ohio), Byron Dorgan (D-N.D.), and Robert Casey (D-Pa.)--sent letters to the FCC asking the commissioners to postpone the vote.

The issue of intercarrier compensation has been talked about and debated in the FCC since 2001. And the FCC has been looking at reforming USF since 2005.

It's no secret that Martin, who will be leaving his post in January when a new administration takes office, wanted to tackle these issues before the end of his term as chairman. But the FCC also faces a November 5 court-mandated deadline to come up with a solution that addresses a sliver of this problem. A federal court this summer told the FCC to come up with an equitable way to charge local phone companies terminating calls to an Internet service provider.

Martin said Monday in his statement that he plans to construct a narrow order to deal with the court-mandated issue, but he was skeptical that it would satisfy the court given the fact that the commission has put off resolving the bigger issue of intercarrier compensation.

"I remain skeptical that such an order, which retains artificial and unsupported distinctions between types of Internet traffic, will be seen any more favorably by the court than the commission's two previous attempts," he said. "I recognize that few other issues before the commission are as technically complex and involved, with many competing interests, as are reforming the Intercarrier Compensation and Universal Service programs. But neither of those two realities are excuse for inaction."

For their part, commissioners Michael Copps, Jonathon Adelstein, Deborah Taylor, and Robert McDowell said in a joint statement that they were "disappointed that the chairman has withdrawn the fundamental reform item from tomorrow's agenda."

The commissioners went on to say that they were united in the common goal of "modernizing our universal service and intercarrier compensation policies." But they also said it "is equally important to ensure that any reform proposal receive the full benefit of public notice and comment--especially in light of the difficult economic circumstances currently facing our nation."