NEW YORK-Echoing Rodney Dangerfield’s complaint, wireless carriers continue to say, “I don’t get no respect” as they fight skirmishes over local exchange carrier interconnection fees while the decisive battle is pending at the U.S. Supreme Court.
Winter’s fallow time finds the Federal Communications Commission in a holding pattern, awaiting the high court’s decision in a case out of Iowa that could affirm, modify or strike down FCC supremacy over state agencies in regulating telecommunications. Oral arguments were heard earlier this fall, and a decision is expected by late spring. The case, while primarily dealing with wireline interconnection issues, has frozen the FCC in its efforts to clarify interconnection rules for wireless carriers.
Meanwhile, storm troopers are riding in on another front to challenge the dominance of incumbent wireline telecommunications companies. The competitive local exchange carriers, whose forces were loosed by the Telecommunications Act of 1996, “are starting to build out, a good development for us because this gives us some alternatives,” said Michael Altschul, general counsel of the Cellular Telecommunications Industry Association.
“LECs are encouraging everyone to build alternative networks to bypass them,” concurred Rob Hoggarth, senior vice president of paging and messaging for the Personal Communications Industry Association.
“By not acting, the FCC is allowing the wireless industry, for better or worse, to create its own rules,” he said.
“CLECs are offering services competitively, and some paging carriers are choosing to become CLECs.”
A key issue in the case before the Supreme Court is a provision of the 1996 telecommunications law, “which incorporated co-carrier interconnection relationships for all carriers interconnecting with incumbent LECs … and reciprocal compensation agreements for transportation of telecommunications,” Altschul said.
After the FCC developed reciprocal compensation pricing rules to implement that provision of the 1996 federal law, state telecommunications regulators and local exchange carriers challenged the FCC’s authority to do so. They argued these types of decisions are under the jurisdiction of the states.
In July 1997, the federal Court of Appeals for the Eighth Circuit agreed with the wireless industry’s contention that “Congress had given the FCC (this) authority and carved out an exception for wireless,” Altschul said.
The appellate court ruled that, “since August 1997, wireless carriers have been entitled to cost-based reciprocal compensation following provisions of the FCC general order and the 1996 telecom act,” he said.
Since the appellate court ruling, LECs began negotiating interconnection fees, averaging about 3.5 cents per minute, for each call originated on a wireless system and terminated on a wireline network, Altschul said. In some rural areas, however, the wireline interconnection fees run as high as 11 cents per minute.
“Some industry reporting allowed us to figure this out without knowing individual numbers because no one is privy to the individual contracts. But no one has disagreed with our estimates,” Altschul said.
“We have a lot of information that it actually costs LECs less than one-half cent per minute to terminate wireless calls.”
The Baby Bells, which are seeking FCC permission to offer long-distance wireline services, have been the most cooperative to wireless carriers, said Altschul and Brian O’Connor, Aerial Communications Inc. general counsel
Far less so are small, rural LECs and large independent wireline telecommunications carriers, like GTE Corp. and U S West Inc. The interconnection rates Aerial pays to Ameritech Corp. and Bell Atlantic Corp. are way below those it pays to GTE and U S West, O’Connor said. One reason given has been that the smaller carriers’ switches require the LEC networks to do more work.
“Most LECs, including GTE, say our switches are low horsepower and can’t be dignified as remote or end-office switches,” O’Connor said. “With digital technology and [Signaling System 7], the cost of switching should be insignificant.”
For its part, the United States Telephone Association does not take a position on LEC/wireless interconnection, said Lawrence E. Sarjeant, USTA vice president for regulatory affairs and general counsel. “The costs are company specific [and are determined by] individual commercial negotiations … The costs in New York are going to be radically different than in Montana or Wyoming,” Sarjeant said.
Whether or not it costs more or less to terminate wireless calls on wireline networks, there remains in place the hard and fast rule about the time value of money. This fact gives established wireline carriers a significant advantage in a state-level war of attrition against smaller, start-up wireless telecommunications companies.
“GTE forces significantly higher interconnection rates on new entrants,” O’Connor said. “It’s a Hobson’s choice. Take a 50 (percent) to 60 percent reduction off tariff rates or arbitrate while paying tariff rates for a couple of years while we drag you through expensive arbitrations and appeals.”
The same also is true for paging carriers, which have been fighting this battle for decades, PCIA’s Hoggarth said.
“It’s a war of attrition. It is hundreds of millions of dollars in terms of facilities charges and termination compensation that has not been paid,” he said.
“From the LECs’ perspective, this is a drop in the bucket, but it is a high stakes issues for wireless carriers.”
Furthermore, independent paging companies have gotten worse treatment from LECs than those that are part of larger telecommunications carriers, Hoggarth said. Additionally, all paging companies are at a disadvantage in their dealings with LECs when compared to PCS providers offering paging services. That is due to the absence of guidelines like those the FCC has established as default, or proxy, interconnection rates for wireless voice carriers.
However, Hoggarth added, PCIA doesn’t fault the FCC for awaiting the Supreme Court decision before acting on some fronts.
“You have to appreciate where we are politically. As lobbyists, reporters and carriers, we live in the here-and-now,” he said.
“But the bigger picture is that the feds are looking for the states to do something.”
Hoggarth said PCIA believes the FCC has several important roles to play. It must establish negotiating criteria, assert finally and unequivocally the co-carrier equality of all telecommunications services providers and serve as overseer in negotiations between wireless and wireline carriers over reciprocal interconnection fees and other related issues, like facilities and numbering charges.
State regulators and courts have to be able to rely on a federal framework in order to make decisions in these areas, Hoggarth said.
Heather Forsgren Weaver contributed to this report.
