Reports of Recip Comp's Demise Are Greatly Exaggerated

In her May 24, 1999 ISP-Planet article, Patricia Fusco asks, 'Who Killed Reciprocal Compensation in Massachusetts?' Her answer is 'Bad CLECs'— CLECs who focus on serving ISPs. She is wrong.

by Christopher W. Savage Partner, Cole, Raywid & Braverman L.L.P. [May 27, 1999]

First, a disclaimer: These views are my own, but I represent CLECs on this issue in many places, including Massachusetts, so I don't qualify as an "unbiased" source. But my points stand or fall on their own.

To start off: Reciprocal compensation for ISP-bound traffic in Massachusetts is not dead. The DTE vacated an earlier ruling that had held that the deal between Bell Atlantic and WorldCom provided for such compensation. It did not rule that the correct level of compensation for all time is zero. Actually, it recognized "that there were and may still be costs incurred by [CLECs] in terminating such traffic," and told the parties to sit down and try to negotiate the issue.

But even if the DTE is forever opposed to compensation for ISP-bound calls, this is no longer just a state issue. The FCC, having reaffirmed its view that ISP-bound traffic is jurisdictionally interstate, stepped up to the plate and proposed to establish federal rules regarding compensation.

An FCC ruling of "no compensation" would make no sense and is, in my opinion, unlikely. As long as ISPs don't pay access charges when customers call them—and the FCC adamantly rejects the "modem tax"—the money for carrying calls all the way to an ISP comes from the caller's local rates. When the ILEC only does half the work—that is, when it carries the call only part of the way to the ISP—it should not keep all the money. The FCC understands this. So when the dust settles, I expect that there will be compensation for ISP-bound calls, in Massachusetts and elsewhere, in accordance with federal rules.

And, the DTE ruling is an outlier. By my count, twelve states have looked at compensation for ISP-bound calls after the FCC's February ruling. Nine (New York, Delaware, Florida, Alabama, Ohio, Nevada, Washington, Oregon, and Hawaii) have told the ILECs to keep paying. One (North Carolina) has told a federal court that the FCC's ruling does not affects its earlier decision requiring payment. One (Missouri) has told parties to track the traffic and to pay based on what the FCC eventually does. And one—Massachusetts—has said that no payment is required. With all the confusion surrounding this issue, on the whole the states have done a good job sorting out the wheat from the chaff.

But there is something more fundamentally wrong with Ms. Fusco's idea that "Bad CLECs" are to blame for the DTE's decision. She seems to think that it is bad for CLECs to focus on meeting the needs of ISPs. It is not.

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