Interconnection

1
Interconnection Compensation

• September 21, 2005
• Dearborn, MI
• Greg Whiteaker
• Principal
• Bennet Bennet, PLLC
• www.bennetlaw.com

2
Introduction

• Interconnection
• The terms on which carriers connect their
  networks for the exchange of traffic
• Intercarrier Compensation
• The terms on which carriers compensate each other
  the exchange of traffic

3
Introduction

• Lack of clarity in the rules governing
• Location of the POI
• Routing, transport and transiting obligations
• Who pays whom and
• How much?

4
Introduction

• Complicated by
• LNP
• NXX Codes with different rating and routing points

5
Introduction

• Disconnect between architecture of legacy
  landline networks and new networks
• Disconnect between compensation models
• Disconnect between the goals of encouraging
  competition and universal service

6
Introduction

• Particularly acute with wireless
• Subscriber pays for in and out
• Toll virtually meaningless
• IXCs dont pay wireless access

7
Introduction

• Terminating compensation
• Transport and transiting obligations
• Deciding to enter into an Interconnection
  Agreement (ICA)

8
Terminating Compensation

• Unidentified Traffic/Indirect Traffic
• Who is using your network?
• Can you recover for it?

9
Indirect Wireless to Landline

• MTA

10
Terminating Compensation

• Approaches-
• Diligent measurement
• Stop or regulate transiting
• Recover from transiting carrier
• Default terminating tariffs
• Interconnection/traffic exchange agreements

11
Terminating Compensation

• Unidentified Traffic
• Many carriers complain, but do not act
• Do not diligently measure and compare
• Must decide to pursue or not

12
Terminating Compensation

• Unidentified Traffic
• Where carriers have pursued, has dropped from
  double to single digits
• May be due to human errors
• May not be source you thought
• Even when you identify, you may not get paid

13
Terminating Compensation

• Stopping transiting?
• Require direct interconnection
• 251(c)
• interconnection at technically feasible point
• Interconnection for the routing and transport of
  traffic

14
Terminating Compensation

• Stopping transiting?
• Eliminating transiting is not the solution
• Indirect interconnection well established
• 251(a) duty
• Atlas Telephone case
• 251(b) compensation obligations
• FCC not going to duplicate the network

15
Terminating Compensation

• Transiting
• Direct not always efficient
• RTCs need indirect interconnection
• Many current reform proposals limit RTC transport
  obligations

16
Terminating Compensation

• Where a competing carrier directly interconnects
  or pays all transport, what is the justification
  for ANY toll charges?

17
Terminating Compensation

• Transiting
• Regulation
• Truth-in-labeling
• Records
• Reasonable rates

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Terminating Compensation

• Transiting
• RBOCs position
• Not required
• Transit service is unregulated
• Market rates

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Terminating Compensation

• Recovery from transiting carrier
• Some paying per interim agreements/settlements
• Some paying per tariff
• A lot of the fight is over records

20
Terminating Compensation

• Terminating Tariffs
• T-Mobile Decision
• LECs adopted wireless terminating tariffs
• Wireless carriers challenged
• Bypass negotiation
• Did not provide for reciprocal compensation
• Not TELRIC
• De facto bill and keep

21
Terminating Compensation

• T-Mobile Decision
• Tariffs not per se illegal
• CMRS providers were obligated to accept terms of
  approved tariffs, but
• No finding of any specific obligation
• No FCC cause of action

22
Terminating Compensation

• T-Mobile Decision
• Going forward, LECs may not use tariffs to impose
  compensation for non-access CMRS traffic

23
Terminating Compensation

• T-Mobile Decision
• LECs may request interconnection
• May compel negotiation and arbitration
• Wireless must negotiate in good faith

24
Terminating Compensation

• T-Mobile Decision
• Interim rates apply upon request, but
• No compensation owed for termination if no
  request for interconnection
• FCC noted that most traffic sent to CMRS by small
  LECs is terminated without compensation

25
Terminating Compensation

• T-Mobile Decision
• Reconsideration and appeal
• What interim rates apply?
• 8th Circuit previously struck down proxy pricing
• But same court upheld pricing rules re wireless
• FCC end office default .004

26
Terminating Compensation

• T-Mobile Decision
• Are WSPs subject to 251(c) obligations
• New rule says interconnection
• FCC seems to have meant recip. comp.
• Can RTC opt-in to WSP ICA?

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Terminating Compensation

• Where does this leave small telephone companies?
• May be able to identify and recover some
  additional traffic
• But no recovery from wireless without agreement

28
Deciding to Enter Into ICA

• Cost benefit analysis
• Open issue whether LECs can opt-in
• Internal and external costs
• Low interim rates?
• Rate based on forward costs?

29
Deciding to Enter Into ICA

• Traffic volume and balance
• Historic wireless balances are changing
• We have a lot of BNK agreements
• Depends on scope of MTA Rule

30
Deciding to Enter Into ICA

• MTA Rule and IXC Traffic
• Wireless traffic that originates and terminates
  in same MTA is telecommunications traffic
  subject to 251(b)-recip. comp.
• Is IntraMTA IXC traffic excluded from 251(b)?
• Are RTCs required to route to single POI in the
  MTA or LATA?
• Are RTCs required to use transit service?

31
Indirect Landline to Wireless

• MTA

32
Deciding to Enter Into ICA

• MTA Rule and IXC Traffic
• Atlas Telephone Case
• Recip. Comp. applies to all RTC-Wireless calls
  that originate and terminate in same MTA
  regardless of delivery through IXC
• RTCs required to transit traffic to WWC through
  SWBT

33
Deciding to Enter Into ICA

• Assumptions about traffic balance are changing
• Question assumption that originating LECs will
  not have to pay termination
• But many wireless carriers willing to pay transit
  on interim basis
• Scope of MTA rule still not clear

34
Deciding to Enter Into ICA

• LNP considerations
• Must port to wireless carrier whose coverage
  overlaps rate center
• Currently enforcement is stayed by court
• Will have to indirectly route local traffic
• Will volume increase?

35
Deciding to Enter Into ICA

• Money on the table?
• Wireless carriers willing to accept a range and
  call it a day
• RTCs held out for access
• Current rules recovery limited to additional
  cost
• No recovery for loop

36
Deciding to Enter Into ICA

• FCC Unified Intercarrier Compensation Proceeding
• Likely to be piecemeal
• Likely will deal with rating/routing issues first
• Unified rate
• Default rates (how low can you go?)
• RTCs may get some concession on transit/transport
  costs

37
Deciding to Enter Into ICA

• FCC
• Not interested in duplicating the landline
  network
• Wireless is the model
• Would like to see toll eliminated
• Not interested in administering complicated rules

38
Deciding to Enter Into ICA

• So do you request interconnection?
• Telephone companies can recover additional
  compensation
• Appears carriers (not just LECs) must establish
  recip. comp.
• But must assess the cost v benefit
• Lack of clarity of rules means opportunity for
  compromise and interim settlements

39
Interconnection Compensation

• Questions?
• Greg Whiteaker
• www.bennetlaw.com

40
Indirect

• MTA