Bryan Tramont *
On February 26, 1999, the Federal Communications Commission entered
its much-anticipated clarification of how the 1996 Act's Section
251(b)(5) reciprocal compensation provision applies to the jurisdictional
status of Internet Service Provider-bound traffic. Inter-Carrier
Compensation for ISP-Bound Traffic et al., CC Dockets 96-98 and
99-68 (rel. Feb. 26, 1999). The Decision is such a political and
legal high-wire act that it actually does little to settle the ongoing
dispute between Incumbent Local Exchange Carriers (ILECs) and their
Competitive Local Exchange Carrier (CLEC) rivals.
The Decision generated significant internal conflict at the Commission.
Commissioner Furchtgott-Roth alleged that the Chairman ignored Commissioner
Furchtgott-Roth's request that the item be pulled from the Commission's
agenda. Commissioner Furchtgott-Roth thus decided not to participate
in the Commission's final decision. Commissioner Furchtgott-Roth
also stated that the Chairman's office had directed the staff to
withhold information from other Commissioners. Commissioner Powell
issued a separate statement questioning the need for the Decision's
exploration of various bases for upholding existing state reciprocal
compensation decisions.
The Decision did resolve one issue. The FCC held that Internet
traffic is generally interstate based on the traditional jurisdictional
examination of the complete end-to-end nature of the underlying
communication. As interstate traffic, reciprocal compensation would
not traditionally be due. The FCC laid to rest two theories that
many states had been using to justify their decisions that reciprocal
compensation should be paid on ISP-bound traffic. First, it rejected
the CLECs' "two-call" approach that subdivided an Internet
session into two communications: a local call from the end user
to the ISP point of presence and a second call from the ISP to the
desired Internet destination. Second, the Commission also rejected
the theory that the FCC's ISP access charge exemption mandated reciprocal
compensation for ISP-bound traffic. Based on the FCC's conclusion
that ISP-bound traffic is largely interstate, it concluded that
Section 251(b)(5) and its corresponding regulations do not apply
to this traffic.
Yet the Commission undermined its jurisdictional conclusion by
leaving reciprocal compensation determinations to state commissions
pending a newly-initiated rulemaking on the topic. The FCC concluded
that "the mere fact that ISP-bound traffic is largely interstate
does not necessarily remove it from the section 251/252 negotiation
and arbitration process." The Decision offered two alternative
paths that may lead to application of reciprocal compensation to
ISP-bound traffic: (1) parties could voluntarily agree to subject
ISP-bound traffic to reciprocal compensation; or (2) states could
arbitrate reciprocal compensation disputesbased either on
a lack of agreement between the parties or "ambiguous"
contract provisionsbecause "state Commission authority
over interconnection agreements pursuant to section 252 `extends
to both interstate and intrastate matters.'" Yet this decision
leaves in place dozens of state decisions finding this traffic to
be localdirectly contrary to the Commission's jurisdictional
finding that such traffic is interstate. Although some state commissions
based their decisions on factors unrelated to the federal jurisdictional
issue, it is clear that these decisions would have been impacted
by an earlier FCC determination.
The Commission's decision seems to be an unfortunate political
compromise. Since the very first interconnection agreements were
reached, CLECs have received substantial amounts of reciprocal compensation
revenue as the months and ultimately years passed without any FCC
determination on this issue. Had the FCC acted promptly on the jurisdictional
issue, CLEC reliance on these revenues would never have developed
nor would states have been forced to resolve these issues without
federal guidance. Now, the Commission must sort out an awkward compromise
on the fate of reciprocal compensation.
* Bryan Tramont is an attorney specializing in telecommunications
and appellate issues at Wiley, Rein & Fielding. He is Chairman
of the Common Carrier Subcommittee for the Telecommunications Group.
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