Fixing Intercarrier Compensation

1. TC 310 June 4, 2008 Fixing Intercarrier Compensation

2. Review of Problems • Arbitrage • Unstable compensation

3. Solution • Unified Compensation • Two Contenders • CPNP: Cost based, not implicit • Bill-and-Keep

4. Terminating Access Monopoly • Effective solution must always prevent this • Ex. No access rate caps on CLECs • Non-dominant, abuse this until 2001 • No recourse (can't send to customers)‏ • “Bad” companies win customers

5. Solution 1No Regulation • Deny Interconnection • Dependable telecommunications too important

6. Solution 2Competitive CPNP • Same scheme, new measure of cost • Need to get costs right • Same problems if costs “wrong”

7. Solution 3Bill-and-Keep • Responsible for own network traffic • Regulators define interconnection points • Ultimately leads to less regulation

8. Problems with Bill-and-Keep • Calling party causes costs • Create incentive to originate calls • Where is connection point?

9. Authority ProblemsImplementing Bill-and-Keep • 1996 Act problematic • Jurisdiction • Authority interpretation

10. Political Problems • National policy ruffles State feathers • Conflicting interest groups • Some customers pay • Explicit Subsidies necessary