1. Reciprocal Compensation
The duty to establish reciprocal compensation arrangements for the transport and termination of telecommunications
State commission to determine negotiated terms and conditions are just and reasonable
If provide for the mutual and reciprocal recovery by each carrier of costs associated with the transport and termination on each carrier’s network facilities of calls that originate on the network facilities of the other carrier;
Such costs determined on the basis of a reasonable approximation of the additional costs of terminating such calls
Bill and Keep possible

2. The problem with ISP’s Highly asymmetrical traffic
Large payments from ILECs to DLECs
Was the largest income source for many DLECs

3. Traffic to ISPs Local or interstate?
Regarded as local by many State commissions
February 1999 FCC order—interstate by virtue of ”end-to-end” analysis—don’t terminate at ISP—analogous to access service
March 2000 DC Circuit vacated that conclusion—why not telephone exchange service? Why are ISPs not like other businesses that use communication services to provide goods and services to customers?

4. The FCC’s Response NPRM FCC 01-131, April 19, 2001:
Traffic delivered to ISPs is “information access” and so not subject to reciprocal compensation ( and so interstate in nature and subject to the FCC)
Interim, transitional recovery scheme
First six months, ISP-bound traffic capped at a rate of $.0015/MOU; next 18 months, capped at $.0010/MOU; thereafter capped at $.0007/MOU
ILEC has to exchange all local traffic at this rate
Cap on ISP-bound traffic subject to compensation, previous amount plus 10% growth factor
Rebuttable presumption that traffic that exceeds 3:1 ratio is ISP-bound traffic

5. How long can the interim scheme last?
July 8, 2008
DC Circuit Court of Appeals ordered the FCC to provide valid legal justification for its interim rules by November 5, 2008, or the interim rules would be vacated
FCC hasn’t responded to the Courts’ requests for justification of its interim approach for 6 years

6. And there’s more . . . NPRM FCC 01-132
Proceeding to update inter-carrier compensation rules
Examine Bill-and-Keep arrangements
Examine various compensation arrangements, both local and access
Still no decision

7. Inter-carrier compensation

8. Missoula Proposal Move intrastate rates to interstate levels
Three year transition period
Different tracks (smaller ILECs treated differently)
Offset revenue losses for the ILECs by
Increasing SLC to $10.00
Creating yet another $2.225 billion fund

9. AT&T-Verizon Proposal
Proposed in September of 2008
Uniform termination rate of $.0007 for all traffic regardless of jurisdiction or carrier
Increase of SLC to $10.50
Lost revenues by ILECs recovered from USF

10. FCC’s November 4 Meeting
Former FCC Chair tried to ram through a proposal (combining some elements of the AT&T/Verizon proposal) to change inter-carrier compensation and the USF all without time for comment---failed
Mentioned in National Broadband Plan as a necessary step to be taken