Missoula Plan Plan reflects themes that always seem to appear – Different treatment for different ILECs by size and by type of regulation (price cap versus rate of return) – Concern to keep the Rural Ma and Pa carriers whole – Phase-in of changes – Increase of the SLC – Creation of yet another subsidy flow from the USF

Tracks of ILECs Track 1 – RBOCs, CLECs, CMRS carriers: Million ILEC loops Track 2 – Mid-size rural carriers: 12.5 Million ILEC loops Track 3 – Small, rate of return, rural carriers: 7.5 million loops

Proposed reforms for access charges Multi-step plan (4 steps) Track1 – Terminating access rates will be reduced in three equal steps to $ and then in Step 4 will be $ – Originating access charges—intrastate will equal interstate—no higher than $ for tandem switching and common transport and no higher than $0.002 for end office switching

Track 2 – If price cap Terminating access no higher than $ for tandem and common transport and no higher than $ for end office Originating access no higher than $ for tandem and common transport and no higher than $0.002 for end office – If rate of return Terminating no higher than $ and $ Originating no higher than $ and $0.002

Track 3 – Intrastate access charges will be reduced to the level of interstate access charges in four steps and the resulting access charge level will be used as a cap for reciprocal compensation rates if those rates would other wise be higher.

Increases to SLC Track 1 – SLC caps will rise to $10.00 over four step years (increase of $3.50 from $6.50) Track 2 and 3 – Increase of $2.25 over 3 years to $8.75

Reforms for interconnection of non- access traffic Carriers establish specified points or “edges” to their network for interconnection (similar to POPs for access traffic) Telephone numbers will be used to determine whether access charges or reciprocal compensation rates apply Phantom traffic—every originating provider to deliver accurate telephone number and other signaling information to both intermediate and terminating providers

Compensation for traffic exchanged between non-ILECs will be symmetrical at Track 1 rates Traffic between any two ILECs will be charged by each carrier at the rates applicable to its track Traffic exchanged between an ILEC and a non- ILEC will be symmetrical

Cost recovery Early Adopter Fund – Support for states that have created a fund to reduce state access charges—states to recover some of the funding they distributed to carriers who have reduced their intrastate access rates— to be used only to decrease the size of the state recovery mechanisms Restructure Mechanism – ILECs to recover any shortfall left after the SLC is increased