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 NEWS  News  media  Information  202  /  418-  0500  TTY  202  /  418-  2555  Fax-  On-  Demand  202  /  418-  2830  Internet:  http://  www.  fcc.  gov  ftp.  fcc.  gov  Federal  Communications  Commission  445  12  th  Street,  S.  W.  Washington,  D.  C.  20554  This  is  an  unofficial  announcement  of  Commission  action.  Release  of  the  full  text  of  a  Commission  order  constitutes  official  action.  See  MCI  v.  FCC.  515  F  2d  385  (D.  C.  Circ  1974). 
 FOR  IMMEDIATE  RELEASE:  NEWS  MEDIA  CONTACT: 
 April  19,  2001  Michael  Balmoris  202-  418-  0253 
 Email:  mbalmori@  fcc.  gov 


 FEDERAL  COMMUNICATIONS  COMMISSION  RESOLVES  CARRIER  COMPENSATION  RULES  FOR  INTERNET  TRAFFIC 


 Reciprocal  Compensation  Ruling  and  Accompanying  Proposal  for  a  Unified  Carrier 
 Compensation  System  Provide  Regulatory  Stability  and  Fairness  for  Carriers 


 Washington,  D.  C.  –  Today,  the  Federal  Communications  Commission  (FCC) 
 announced  the  adoption  of  new  rules  to  clarify  the  proper  intercarrier  compensation  for 
 telecommunications  traffic  delivered  to  Internet  service  providers  (ISPs).  The  Commission 
 concluded  that  telecommunications  traffic  delivered  to  an  ISP  is  interstate  access  traffic, 
 specifically  “information  access,”  thus  not  subject  to  reciprocal  compensation.  Additionally, 
 rather  than  immediately  eliminate  the  current  system,  which  has  created  opportunities  for 
 regulatory  arbitrage  and  distorted  market  incentives,  the  Commission  established  a 
 transitional  cost  recovery  mechanism  for  the  exchange  of  this  traffic. 


 Intercarrier  compensation  refers  to  payments  among  telecommunications  carriers 
 resulting  from  their  interconnecting  networks.  Reciprocal  compensation  refers  to  the 
 payments  among  carriers  for  the  origination  and  termination  of  local  telecommunications 
 traffic  (there  is  a  separate  payment  scheme  for  payments  for  “long  distance”  calls,  referred  to 
 as  access  charges).  The  Commission  concluded  that  reciprocal  compensation  has  inherent 
 shortcomings  with  respect  to  the  recovery  of  costs  for  originating  and  terminating 
 telecommunications  traffic  delivered  to  ISPs. 


 In  conjunction  with  the  reciprocal  compensation  Order  released  today,  the 
 Commission  also  released  a  related  Notice  of  Proposed  Rulemaking  (NPRM)  concerning  a 
 Unified  Inter-  carrier  Compensation  Regime  (see  attached  news  release).  Both  proceedings 
 seek  to  harmonize  the  Commission’s  patchwork  of  intercarrier  interconnection  rules  to  make 
 them  compatible  with  a  deregulated,  competitive  telecommunications  environment.  The 
 Commission  will  also  conclude  the  competitive  local  exchange  (CLEC)  access  charges 
 proceeding  soon. 


 The  basic  structure  of  the  interim,  transitional  recovery  scheme  for  reciprocal 
 compensation  is  as  follows: 


 ƒ  For  the  first  six  months  following  the  effective  date  of  this  Order,  inter-  carrier 
 compensation  of  ISP-  bound  traffic  will  be  capped  at  a  rate  of  $.  0015/  minute-  of-use 
 (mou).  For  the  18  months  thereafter,  the  rate  will  be  capped  at  $.  0010/  mou. 
 Thereafter,  the  rate  will  be  capped  at  $.  0007/  mou. 
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 ƒ  The  rate  caps  for  ISP-  bound  traffic  apply  only  if  an  incumbent  LEC  offers  to 
 exchange  all  local  traffic  at  the  same  rate. 


 ƒ  A  cap  will  be  imposed  on  total  ISP-  bound  minutes  for  which  a  local  exchange 
 carrier  (LEC)  may  receive  this  compensation  equal  to  the  number  of  ISP-  bound 
 minutes  for  which  that  LEC  was  previously  entitled  to  compensation,  plus  a  ten 
 percent  growth  factor. 


 ƒ  To  identify  ISP-  bound  traffic,  the  Commission  adopts  a  rebuttable  presumption 
 that  traffic  exchanged  between  carriers  that  exceeds  a  3:  1  ratio  of  terminating  to 
 originating  traffic  is  ISP-  bound  traffic  subject  to  the  compensation  mechanism  set 
 forth  in  this  Order. 


 Background  The  Commission  released  a  Reciprocal  Compensation  Declaratory  Ruling  on  February 
 26,  1999,  which  concluded  that  ISP-  bound  traffic  was  “jurisdictionally  mixed  and  largely 
 interstate,  and  the  reciprocal  compensation  obligations  do  not  apply  to  this  traffic.” 
 Reciprocal  compensation  continued,  however,  under  the  then-  existing  contracts  of  carriers, 
 and  the  Commission  issued  a  NPRM  requesting  comment  on  the  most  appropriate  inter-carrier 
 compensation  mechanism  for  ISP-  bound  traffic. 


 On  March  24,  2000,  prior  to  release  of  a  decision  addressing  these  issues,  the  Court  of 
 Appeals  for  the  District  of  Columbia  Circuit  vacated  certain  provisions  of  the  Commission’s 
 reciprocal  compensation  ruling  and  remanded  the  matter  to  the  Commission.  Today’s  Order 
 resolves  the  issues  remanded  by  the  court. 


 -FCC-Docket 
 Nos.:  CC  96-  98,  99-  68 


 Action  by  the  Commission  April  19,  2001,  by  Order  on  Remand  and  Report  and 
 Order  (FCC  01-  131).  Chairman  Powell  and  Commissioners  Ness  and  Tristani,  with 
 Commissioner  Furchtgott-  Roth  dissenting  and  Chairman  Powell  and  Commissioner 
 Furchtgott-  Roth  issuing  separate  statements. 


 Common  Carrier  Bureau  Staff  Contact:  Tamara  Preiss  at  202-  418-  1520 


 News  about  the  Federal  Communications  Commission  can  also  be  found 
 on  the  Commission’s  web  site  www.  fcc.  gov. 
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