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ACA: FCC Should Cover VoIP Interconnection Under 251/252 Of Telecom Act

The American Cable Association urged the Federal Communications Commission to eschew VoIP Interconnection trials sought by AT&T and others because they are unnecessary in making the competitively significant legal determination that bedrock interconnection protections found in sections 251 and 252 of the Telecommunications Act of 1996 apply to cable VoIP providers, regardless of the communications technology used.

"The FCC should act now to affirm that regardless of technology, all interconnection for the exchange of  traffic is governed by sections 251 and 252 of the Act," ACA President and CEO Matthew M. Polka said. "Confirming that interconnection rights exist when exchanging managed VoIP traffic is the critical issue the FCC should address."

ACA views came in comments filed July 8 with the FCC in response to the public notice issued by the agency's Technology Transitions Policy Task Force, which sought input on three specific trials - VoIP Interconnection, Next Generation 911, and Wireline to Wireless - and offered the opportunity to comment on AT&T's IP Trial proposal. ACA commented only on the VoIP Interconnection trial and, to the extent it involves similar issues, on the AT&T IP Trial proposal.

ACA members face regulatory-related issues in exchanging managed VoIP traffic, stemming from the fact that incumbent providers possess and exercise market power when it comes to interconnection negotiations.  ACA members need to rely upon the interconnection framework of section 251(c)(2) and 252(d)(1) of the 1996 Telecom Act to ensure they are able to interconnect with dominant ILECs at cost-based rates and on reasonable and non-discriminatory terms.

Despite competition in select retail voice markets, larger ILECs continue to dominate the interconnection and transit markets, ACA said. Because the larger ILECs operate in and control larger geographic areas than any competitive provider, they control more end points that competitors need to reach and have less need to interconnect with other providers to terminate traffic. This places the larger ILECs in a dominant position in interconnection negotiations vis-a-vis competitive providers.

Additionally, the two largest ILECs (AT&T and Verizon) gain additional leverage in negotiations because they control significant volumes of wireless and international traffic through their unregulated affiliates; and the larger ILECs' networks not only reach many more end points than any competitive provider, they include vastly more transport links and longer-haul facilities.

This means that unaffiliated competitive local exchange carriers rely on the larger ILECs for indirect interconnection among their networks, providing one more element of leverage. And larger ILECs, for instance, frequently condition interconnection on multiple dedicated connections to each tandem within each Local Access and Transport Area (LATA), regardless of the amount of traffic anticipated and restrict the ability of carriers to transit traffic across the ILEC network, both of which raise the cost of service for cable operators artificially.

"In short, when dealing with these larger ILECs, cable operators providing managed VoIP service are at a disadvantage in negotiating reasonable and competitive rates and terms. ACA members already have experienced problems when seeking IP interconnection with ILECs," Polka said.

Given this background, questions about the need for the interconnection provisions of the Act to apply to VoIP service do not lend themselves to trials.

Instead, the FCC should first determine that as a legal matter sections 251 and 252 apply regardless of the transmission technology. Then, if there is a forbearance proceeding, it would collect economic data about the state of the market and analyze it to determine whether the ILECs have market power.

This is the well-accepted approach used by antitrust authorities to analyze competition in markets, and the FCC has used this type of market power analysis frequently to determine whether competition has increased sufficiently to render certain regulatory protections no longer necessary and has found it to be well-designed to protect consumers, promote competition, and stimulate innovation.

ACA said there are basic problems with conducting such trials to answer questions whether interconnection regulations should be in effect.

Trials will almost certainty produce artificial or distorted results: Knowing that the outcome of the trials will bear directly on whether interconnection regulations will apply, ILECs will tend to be on their best behavior to indicate that agreements can be reached in a completely deregulated environment, or worst behavior to demonstrate that the application of sections 251 and 252 will produce a regulatory morass.

"Such gaming is inherent in this situation, particularly where the ILECs fundamentally oppose a mandate that would constrain their behavior," Polka said.

In addition to examining the legal and regulatory issues involved with VoIP interconnection, the FCC's Task Force inquired about whether the trials should involve technical issues. ACA said that from the perspective of cable operators, these technical issues are largely settled or can be readily settled and trials are not warranted. Cable operators know the technical requirements for providing managed VoIP service and the exchange of traffic between networks.

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