Affordable Internet access for Californians was on the line this week when
the state’s Public Utilities
Commission decided to defer action on a fee dispute between incumbent
and local exchange carriers.
CPUC Commissioner Josiah Neeper said the dispute between the carries
boiled down to two issues. Whether Pacific Bell must pay reciprocal
compensation to Pac-West Telecomm
Inc. for termination of Internet traffic calls, and what the amount due
should be.
Both issues hinge in part on whether Internet-bound traffic is a local or
long-distance call. The high stakes argument in California is further
flamed by the fact that nearly 30 percent of the world’s Internet traffic
is reported to emanate from the state.
Interconnection agreements between the carries include a provision for
reciprocal compensation payments. Under most reciprocal compensation
agreements, when a local call starts with one phone company and ends up
being placed to another company’s network, the first company has to pay the
second company to terminate the call.
Stockton, Calif.-based Pac-West asked the CPUC to adopt a definition that
Internet-bound traffic is a local call, and unaffected by the physical
location of the caller.
Pacific Bell owes the CLEC, which provides dial-up access to some of the nation’s largest ISPs, $46 million in reciprocal compensation payments.
Pacific Bell proposes that local calls be defined as all connections made
less that 12-miles from the rate centers of the calling and terminating
parties. That would classify most ISP-bound traffic as
interstate in nature and exempt from reciprocal compensation fees.
Pac-West Chief Executive Officer Wally Griffin said he couldn’t imagine a scenario without
reciprocal payment.
“We’ve built our business plan around our contracts
with carriers. Dropping the payment would have a significant impact on our
ability to raise capital and serve our customers. We’d have to pass costs
along to the ISPs, who would in turn have to pass them to Internet users.
Our rural customers would be hardest hit by a PUC decision for Pac Bell.”
California is one of a dozen states that are currently reviewing their
regulation of reciprocal compensation because in February, the Federal Communications Commission classified
calls to the Internet as interstate in nature. Pacific Bell was quick to
challenge the October 1998 California PUC order that had reaffirmed calls
to the Internet as local in nature.
In April, a state-appointed arbitrator ruled against Pacific Bell in the
billing dispute with Pac-West and other California CLECs. Administrative
Law Judge Mattson ordered Pacific Bell to pay Pac-West their reciprocal
compensation fees and further urged all parties concerned to
“stay-the-course” and remain in line with the previous decision made by
California State commissioners.
Rather than pay Pac-West reciprocal compensation monies, Pacific Bell filed
for a hearing with the CPUC. Meanwhile, the disputed payments were placed
into an escrow account pending further review by the California commission.
Pacific Bell spokesperson Bill Mashek said “we don’t mind paying Pac-West
for local calls our customers make to their network. But the FCC says
Internet calls are interstate calls.”
Mashek said that an Internet call might originate in Sonoma County and go
all over the U.S. before ending, and unlike a brief local call, the
connection can last for hours. Pacific Bell contents that Pac-West is using
their network to connect people to the Internet and have Pacific Bell pay
for every minute someone is online. According to Mashek, in the interest
of fairness, reciprocal charges should not apply.
California Commissioner Neeper said he was inclined to agree with the FCC
opinion that ISP-bound call traffic is like a long-distance call.
Notwithstanding his own predilection, Neeper called for a generic
proceeding, rather than further arbitration to settle the reciprocal
compensations issues in California.
Neeper said a “generic proceeding will permit consideration of the full
range of issues relevant to the determination of ISP-bound traffic as local
or interstate and whether reciprocal compensation is the proper means of
intercarrier compensation.
The Commissioner added that “any attempt to prejudge FCC or this Commission
is premature if down within and arbitration proceeding, which is limited to
only two parties whereas the issues affect many other competitive carriers
and consumers.”
Commissioner Henry M. Duque concurred that the California Commission move
slowly to develop a deliberate policy based on a full record with all the
affected groups participating in the decision.
Duque said that the CPUC needed to take a “prudent approach to the decision
and muddle through to a final resolution.”
