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 SEPARATE  STATEMENT  OF  CHAIRMAN  MICHAEL  K.  POWELL 
 RE:  Developing  a  Unified  Intercarrier  Compensation  Regime  (CC  Docket  No.  01-  92). 
 Today  we  act  to  begin  the  second-  phase  of  our  unified  intercarrier  compensation  docket.  This  proceeding  sets  in  motion  an  ambitious  task  for  the  agency  because  it 
 touches  upon  two  of  our  most  cherished  principles  –  ensuring  fair  competition  and  protecting  universal  service.  Currently,  different  compensation  rules  apply  to  different 
 types  of  traffic  even  if  carriers  are  using  the  Public  Switched  Telephone  Network  in  the  same  way.  In  today’s  rapidly  changing  telecommunications  marketplace,  however, 
 different  treatment  creates  both  opportunities  for  regulatory  arbitrage  and  incentives  for  inefficient  investment  and  deployment  decisions.  These  disparities  mean  that  we  simply 
 do  not  have  a  choice  to  reform  the  current  intercarrier  payment  system;  we  must,  or  technology  will  render  it  a  quaint  antique  of  a  forgotten  time  when  only  one  carrier 
 provided  service  to  all  customers. 
 A  number  of  parties  have  proposed  answers  to  the  interrelated  set  of  questions  we  pose  today  –  including  the  Intercarrier  Compensation  Forum  (ICF),  Western  Wireless, 


 the  Alliance  for  Rational  Intercarrier  Compensation  (ARIC)  and  the  Expanded  Portland  Group  (EPG).  The  record  generated  from  previous  Commission  inquiries  into  this 
 subject  teaches  us  that  certain  abiding  principles  must  be  followed  if  intercarrier  reform  is  to  be  durable.  First,  rate  structures  should  be  unitary  and  must  eliminate  arbitrage 
 opportunities  between  federal  and  state  jurisdictions  and  between  local  and  long  distance  termination  rates.  Second,  our  rules  should  better  reflect  sound  economic  principles.  In 
 my  view,  a  regime  built  upon  “bill-  and-  keep”  proposals  is  the  solution  that  is  most  faithful  to  principles  of  cost  causation.  As  the  staff  report  demonstrates,  a  bill  and  keep 
 regime  encourages  the  development  of  competition  by  rewarding  carriers  based  on  their  ability  to  serve  customers  efficiently  rather  than  their  ability  to  exploit  regulatory 
 arbitrage  opportunities.  It  sends  rational  pricing  signals  to  the  market  because  consumers  are  equipped  with  information  that  allows  them  to  avoid  higher  cost  networks.  Third,  to 
 the  extent  reforms  are  made  to  our  compensation  rules  that  raise  universal  service  concerns  from  rural  carriers,  forgone  access  revenues  should  be  replaced  by  support 
 mechanisms  that  are  both  explicit  and  portable.  By  adhering  to  these  principles  we  ensure  that  our  compensation  rules  are  competitively  neutral  and  support  the  goal  of 
 achieving  lasting  facilities-  based  competition. 
 I  am  disappointed  that  the  Commission  was  unwilling  to  resolve  most  of  the  disputes  that  have  been  raised  in  declaratory  ruling  petitions  –  many  of  which  have  been 


 pending  for  years.  The  Wireline  and  Wireless  Bureaus  jointly  proposed  a  balanced  solution  to  these  very  difficult  issues  and  it  is  unfortunate  that  some  of  my  colleagues 
 declined  to  fully  consider  the  merits  of  this  proposal.  This  Commission  bears  an  important  responsibility  to  provide  regulatory  clarity  to  parties  who  have  waited  for  years 
 in  intractable  intercarrier  disputes.  I  have  heard  the  concerns  of  some  who  argue  that  the  Commission  should  avoid  a  piecemeal  approach  –  but  the  torrent  of  state  litigation  that 
 we  leave  unresolved  is  far  more  piecemeal  and  disruptive  to  carriers  than  decisions  by 
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 this  Commission.  I  urge  my  colleagues  to  reconsider  their  positions  and  act  upon  the  pending  petitions  for  declaratory  ruling  expeditiously  –  these  problems  are  not  going  to 
 get  any  easier  with  time. 
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