DECISION DATE NEARS IN DISPUTE ON IXC-WIRELESS ACCESS CHARGES

With court-requested date for FCC ruling less than 2 weeks away, question remains at Commission whether mobile carrier may seek compensation from IXC for long distance traffic terminated on wireless network. U.S. Dist. Court, Kansas City, last year stayed litigation brought by Sprint PCS against AT&T, directing companies to take those issues to FCC. U.S. Dist. Judge Nanette Laughrey said if Commission didn’t rule on referred issues by June 24, litigation would move forward. Several sources said this week that direction Commission would take on issue still wasn’t clear. Sprint PCS has argued in ex parte filings that no federal law or Commission policy bars it from recovering all termination costs from AT&T. But AT&T told agency in filing last week that “any decision to modify current compensation arrangements between CMRS providers and IXCs is better suited to the intercarrier compensation proceeding where all the relevant factors can be evaluated.”

Dispute dates to 1998 when Sprint PCS began asking AT&T and other IXCs to compensate it for costs it incurred in terminating interexchange long distance traffic. It told FCC it sent invoices to AT&T, which refused payment. Sprint PCS filed collection action in Circuit Court of Jackson County, Mo., in Aug. 2000, arguing that implied contract had been breached. Case was moved to federal court in Kansas City, where AT&T argued Sprint PCS’s assessment of access charges amounted to “unreasonable practice” because under Communications Act, FCC policy and industry practice, wireless carriers didn’t demand or receive compensation from IXCs when they terminated calls from long distance networks. In Oct. filing that sought declaratory ruling from FCC, Sprint PCS said it “questions whether the Commission possesses the legal authority to prohibit it from recovering its call termination costs from long distance carriers. This is especially the case given the Commission’s decision not to regulate CMRS rates for interstate access.” Sprint PCS said AT&T paid some telecom carriers for terminating its long distance traffic, but refused to pay Sprint when it performed “identical function.” Carrier told FCC: “It appears that the only reason that AT&T refuses to pay Sprint PCS is because Sprint PCS uses radio spectrum rather than wired cables in the provision of its exchange access services.” AT&T has told FCC that letting “wireless carriers charge access would be inconsistent with the deregulatory nature of wireless interconnection that the Commission has adopted in previous proceedings.”

AT&T recently responded to what it described as “informal request” from FCC staff on its ability to block traffic that was subject of dispute with Sprint PCS, although it was unclear whether that was direction toward which FCC was leaning for solution. In May 8 response, AT&T said it exchanged 2 kinds of traffic with Sprint PCS: (1) 8YY calls made by Sprint PCS customers and terminated by AT&T to its 8YY customers. (2) Long distance calls placed by AT&T to Sprint PCS subscribers. On 8YY, AT&T estimated it would take 2 years to develop equipment modifications needed to block such calls. On long distance calls placed by AT&T to Sprint PCS users, AT&T said it wouldn’t have technical ability to block such traffic once Nov. 24, 2002, implementation dates kicked in for wireless local number portability and thousand- block number pooling. “Even if AT&T had the technical ability to block Sprint PCS traffic, however, that capability would not allow the Commission to avoid regulating the level of Sprint PCS’s access charges in the event that the Commission were to conclude that Sprint PCS is entitled to impose access charges on IXCs,” AT&T said.

Such compensation issues are part of intercarrier compensation notice of proposed rulemaking that FCC issued in April 2001. Commission has been weighing idea of making intercarrier charges more uniform and NPRM sought views on how to replace patchwork of compensation systems, including reciprocal compensation and access charges, with one payment form, probably bill-and-keep. Bill-and-keep basically means that neither carrier pays other. While issue of how IXCs compensate wireless carriers for terminating traffic is likely to come under umbrella of larger proceeding, several sources said outcome of Sprint PCS-AT&T dispute still was important because it concerned past-due amounts and because timing of when intercarrier compensation proceeding would end wasn’t clear. Sprint PCS has acknowledged in filings that intercarrier compensation proceeding will cover such issue but has stressed that bill and keep system on going forward basis doesn’t address existing payment regime or past amounts owed. Industry source said IXC-CMRS payment issues also had grown in importance as wireless traffic itself had increased with proliferation of low-cost plans. Sprint PCS-AT&T back payments have accrued to close to $80 million, source said. Because petition for declaratory ruling was filed, decision must be released by full Commission, sources said. FCC Wireline and Wireless bureaus have been working on issue.

Proceeding has drawn widespread interest among IXCs and wireless carriers. WorldCom told FCC in filing late last month that “existing law does not allow wireless carriers to impose access charges on IXCs with which they do not interconnect directly.” WorldCom disagreed with Sprint PCS that interconnection between wireless carriers and IXCs was governed by calling-party-pays regime. Spokeswoman said Wed. WorldCom “inadvertently” had paid bills sent by Sprint PCS for access charges “until we realized what we were being billed for.” WorldCom then disputed amount it had been billed. “We continue to be billed and we continue to dispute those bills and not pay them,” she said. Pending dispute has disrupted payment obligations sought by other carriers, as well, sources said. WorldCom has argued to FCC that “simply completing or originating a call does not constitute the provision of an access service.” Under existing system, wireless and IXC networks interconnect indirectly and exchange traffic on bill-and-keep basis, IXC said in May 29 filing.

Verizon Wireless contended in recent ex parte filing that FCC should move toward bill-and-keep system for LEC- wireless carrier interconnection. But carrier urged that FCC not adopt bill-and-keep without “answering the question, ‘bill-and-keep for what?'” In comment period late last year, Western Wireless and VoiceStream said they favored granting Sprint’s petition for declaratory ruling. They said wireless carriers didn’t have same regulatory mechanisms available when seeking compensation for IXC access to their networks. They sought system under which wireless carriers would have right to file access tariffs with rates up to specified benchmark that would have safe harbor provision from FCC.

Sprint PCS has argued in recent weeks that under Communications Act, wireless carriers are entitled to charge for services provided and that all common carriers are required to set just and reasonable rates. Sprint PCS said that under FCC-ordered calling-party’s-network-pays regime, AT&T must compensate carriers that terminate traffic for it. “AT&T does, in fact, compensate every type of carrier that provides terminating services to it -- with the exception of wireless carriers,” Sprint said. It also contended that wireless carriers didn’t have to obtain prior FCC approval to collect access charges.