Interconnection & Compensation

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 don’t 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. RLEC common Tandem MSC 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

18. Terminating Compensation • Transiting • RBOCs position • Not required • Transit service is unregulated • Market rates

19. 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 WSP’s subject to 251(c) obligations • New rule says “interconnection” • FCC seems to have meant recip. comp. • Can RTC opt-in to WSP ICA?

27. 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. IXC RLEC Tandem MSC Indirect: Landline to Wireless MTA

32. Deciding to Enter Into ICA • MTA Rule and IXC Traffic • AtlasTelephone 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. IXC RLEC Tandem MSC Indirect MTA