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Letter of the Week - Nancy on Intercarrier Compensation Rules

Dear Nancy,

The FCC is considering a proposal to change "intercarrier compensation" rules. These are the rules that determine how telecom companies pay each other to exchange voice and data communications traffic. The proposed order would systematically cut the compensation paid to rural telecom providers for communications traffic to the areas they serve, without reducing the underlying cost of providing their services.

The Consumers' Union has concluded the proposal could result in a multi-billion-dollar giveaway to the largest, urban-focused phone companies. The wrong decision on November 4 could lead to multiple negative consequences:

• Higher Consumer and Business Phone Bills:
Rate increases for consumers could range from several dollars to as much as $10 per month in some parts of the country.

• Decreasing Rural Broadband Investment:
The proposal could undercut broadband investment by eliminating billions of dollars in funding, the funding used by rural providers today to expand broadband deployment. While claiming to achieve 100 percent broadband availability, the proposal would realistically make achieving such a goal virtually impossible for the foreseeable future.

• Put Rural Development at Risk:
The proposal would slow rural economic development efforts in areas that rely on broadband connectivity to compete in the global economy. An issue this significant deserves the full attention of both Congress and the FCC. In fact, the National Association of Regulatory Utility Commissioners, which represents state regulatory officials around the country, as well as many members of Congress, have recently sent letters to the FCC Commissioners asking for a longer review period and more public comment on the FCC proposal.

I urge you to tell the FCC: stop the rush to consider the proposed order on November 4th.

Robert from Hiawatha

Dear Robert:

Thank you for contacting my office regarding your concerns with intercarrier compensation. I appreciate you taking the time to share your views with me.

As you mentioned in your letter the Federal Communications Commission (FCC) has been working with telephone companies, putting together a proposal for intercarrier compensation and universal service reform. I recently learned that the FCC has scheduled the ruling and order to be held on November 4, 2008 - Election Day.

Intercarrier compensation is the amount being paid from one carrier to another for telecommunication traffic (phone services, broadband services, dial-up services, etc). The rates for intercarrier compensation vary due to a variety of factors that include (but are not limited to): where the communication begins and ends, the types of carriers that are involved and the type of telecommunication traffic. Universal service refers to an initiative by the FCC to promote nationwide access to telecommunication services.

I have taken meetings with Embarq, AT&T, Sprint and a host of other middle to small telecommunications companies that have disparate views on the need for such comprehensive reform of the intercarrier compensation regime and the best way to achieve such reform. They all agree that there is a substantial risk of harm if the FCC were to rush judgment on this complex set of issues. The changes currently under consideration have the potential to increase charges to consumers, both through telephone rate increases and by increasing the size of the federal universal service fund. In addition, some proposals being considered the FCC would create massive disruption of the operational and financial relationships between carriers. This would potentially jeopardize Congress’ goal of promoting facilities-based competition to incumbent local exchange carriers like AT&T and Verizon.

The FCC proposal would result in significant rate increases to millions of rural consumers, increases that may cripple the pocket books of many across the nation during these tumultuous economic times. Kansas is the 11th most rural state in the country; nearly 25 percent of Americans live in rural areas. I strongly believe that it is essential for these communities to have access to the same broadband and telecommunication services as urban communities.

Other measures that are expected to be included in the proposal would also have state tax and revenue implications and would increase consumers’ rates. These are substantial changes that will have a widespread impact on the public, our state and many businesses. With such large changes, it does not seem appropriate that the FCC would be holding this meeting without making its proposal details available for public review and comment.

In response to the upcoming ruling, I have formally written to the Chairman of the FCC requesting time to learn about both the merits and drawbacks of the proposal and offer public comment on all issues. I believe hastened rule making by the FCC is not fair and could produce potentially adverse results on consumers and businesses.

I would also like to share with you another measure recently taken by Congress on a similar issue. Both the House and Senate passed S. 1492, the Broadband Data Improvement Act, creating the country’s first national broadband policy. This legislation requires the government to revise the definition for broadband and continue efforts to expand broadband service to geographic areas that currently have limited access.

The bill also requires the Small Business Administration Office to study the impact of broadband speed and price on small businesses. Another provision of the bill creates a new national grant program through the FCC to provide funds to states to create statewide broadband initiatives.

I have been an advocate for this legislation and am happy that it has become law. The bill was signed into law on October 10, 2008 and is now public law number 110-385. The Second District of Kansas has a number of rural areas, and I strongly believe that it is important for these communities to have access to the same broadband as urban communities. This law enables more of our local communities to connect to a world of fast paced communication and opportunity. The Broadband Data Improvement Act provides regulatory guidance and grant funding to ensure the improvement of broadband access for Kansans, benefiting our local businesses, educational institutions, and health care institutions.

There’s still more work to be done, and I believe the Broadband Data Improvement Act is a step in the right direction. I hope that the FCC delays their vote on the current proposal and does not make this hasty decision on Election Day while Members of Congress and their constituents are focused on other civic duties. The proposal needs to be subject to public review before further consideration by the FCC.

Thank you again for contacting my office about such an important topic. I hope you will continue to keep in touch with me about issues that matter to you. As your representative, opening a dialogue on the challenges facing our country is invaluable to me.

With warm regards,

Nancy Boyda
Member of Congress