STATEMENT OF
CHAIRMAN KEVIN J. MARTIN
Re: High-Cost Universal Service Support, WC Docket No. 05-337; Federal-State Joint 
Board on Universal Service, CC Docket No. 96-45; Lifeline and Link Up, WC Docket 
No. 03-109; Universal Service Contribution Methodology, WC Docket No. 06-122; 
Numbering Resource Optimization, CC Docket No. 99-200; Implementation of the Local 
Competition Provisions in the Telecommunications Act of 1996, CC Docket No. 96-98; 
Developing a Unified Intercarrier Compensation Regime, CC Docket No. 01-92; 
Intercarrier Compensation for ISP-Bound Traffic, CC Docket No. 99-68; IP-Enabled 
Services, WC Docket No. 04-36
Today we tell the U.S. Court of Appeals for the D.C. Circuit and the Federal-State Joint 
Board on Universal Service that, after years of deliberation, we are still unready to move forward 
with comprehensive reform of intercarrier compensation and universal service.  Instead, we issue 
another open-ended Further Notice of Proposed Rulemaking on a variety of approaches for 
comprehensive reform, and my colleagues promise to act on it by December 18.  
I am disappointed by the Commission’s unwillingness to step up and make tough choices 
to modernize our intercarrier compensation and universal service programs.  I am also doubtful 
that the Commission will find itself any better equipped to act in another six weeks.  However, I 
vote to approve this item because this is the only path my colleagues could agree on, and failure 
to respond to the Court in particular would result in an even sorrier state of affairs – immediate 
vacatur of our rules.
First, I am skeptical of today’s response to the Court, which directed us to justify the 
Commission’s interim intercarrier compensation rules for ISP-bound traffic.  The Order treats 
ISP-bound traffic differently than all other traffic, including other IP traffic.  The Order retains 
the interim rate cap of $0.0007 for terminating this traffic indefinitely.  I doubt that an Order that 
retains artificial and unsupported distinctions between types of IP traffic and maintains an interim 
rate without establishing an end game will be seen any more favorably by the Court than the 
Commission’s two previous attempts.  
By singling out ISP-bound traffic for different treatment, we perpetuate the current 
patchwork of rates for different traffic.  The Order argues that disparate treatment of ISP-bound 
traffic is justified to combat arbitrage.  Yet arbitrage exists precisely because traffic is terminated 
at a variety of rates.  
In addition, the $0.0007 rate cap for ISP-bound traffic was intended to be an interim 
measure pending comprehensive reform of intercarrier compensation.  Indeed, the record does not 
support a differential rate for ISP-bound traffic except on an interim basis.  And even then, 
$0.0007 can only be justified as an interim rate under a cost standard that we fail to adopt.  A rate 
of $0.0007 is inconsistent with the current TELRIC standard, and the Order does not adequately 
explain why we retain this rate in the absence of moving forward with adopting a cost standard 
consistent with $0.0007.  However, the Order simply states that the $0.0007 cap shall remain in 
place until we adopt more comprehensive intercarrier compensation reform.  That is, we are 
establishing a perpetual interim rate.  Although the Order is silent as to whether the $0.0007 rate 
is “interim,” let’s be clear – this is an interim rate to nowhere.  I therefore believe that we have 
failed to respond to the Court.
In 2005, the Court denied an earlier mandamus petition based on the Commission’s 
representation that it was committed to comprehensive reform.  The Commission pointed to its 
Further Notice on comprehensive reform, including permanent rules to succeed the interim 
intercarrier compensation regime for ISP-bound traffic. 
Three years later, the Commission once again finds itself asking the Court not to vacate 
our rules because the Commission remains committed to comprehensive reform.  And once again, 
the Commission points to a Further Notice on comprehensive reform as evidence of its 
commitment.
I question whether my colleagues will be any more willing to adopt comprehensive 
reform in December.  As explained below, I believe when December comes, the other 
Commissioners will simply pursue another Further Notice and another round of comment on the 
most difficult issues.  If the Court wants a response – and is willing to give the Commission the 
benefit of the doubt rather than vacate our rules immediately – it should enforce our promise of 
reform on pain of automatic vacatur on December 19.
It is unfortunate that the Commission could not agree to adopt the comprehensive 
solution.  I had proposed a comprehensive approach that would have transitioned all traffic to a 
final uniform rate, regardless of the type of traffic or jurisdiction.  This approach would have 
answered the Court’s direction – and I think it would have done so in a legally sustainable way.
Specifically, I would have concluded that all traffic falls within section 251(b)(5) and 
called upon each state to set a glide path to a reciprocal compensation rate applicable to all traffic 
under section 252(d)(2).  Under this proposal, traffic terminated at rates below the glide path, 
such as ISP-bound traffic, would continue to be terminated at those rates, on an interim basis, 
until such traffic is swept into the glide path.  Ultimately, the glide path would end at a lower, 
final uniform rate for all traffic.  
Second, I view our failure to implement the Joint Board’s recommendations as a 
tremendous missed opportunity.  In particular, I supported the Joint Board’s determination that 
broadband should be included in the universal service program.  As I have said before, to fully 
appreciate and take advantage of the Internet today, consumers need broadband connections.  
Without this underlying infrastructure, efforts to implement advances in how we communicate, 
work, and provide education cannot succeed.  
My proposal for implementing this recommendation would have spurred rapid and 
widespread deployment of broadband.  I would have asked each carrier receiving high-cost 
universal service support to commit to provide broadband to all consumers in its study area 
within 5 years as a condition of continuing to receive support.  If a carrier did not make that 
commitment, we would conduct a reverse auction to find out if any other carrier could do so.  If 
nobody came forward, then we would have identified an unserved area, and could then determine 
what additional steps might be necessary to bring broadband to those consumers.  In addition, I 
would have created a broadband Lifeline and Link Up program to ensure that low income 
consumers are not left out of our broadband future.
Finally, I am disappointed with the Further Notice issued today.  After a decade of 
comment on these issues, we begin again from square one.  To be clear, this is not a targeted 
Further Notice on a specific reform proposal.  We are putting out for comment several proposals 
that would lead to radically different outcomes.  In the Further Notice and in my colleagues’ 
statement, my colleagues invite comment on conflicting questions, which reveal that they have no 
fundamental proposal for reform.
· Do we include broadband within the universal service program – or not?  
· Do we provide support to competitive carriers based on their own costs?  A reverse 
auction?  Or do we phase out their support altogether?  
· Should terminating rates be uniform by state – or uniform by carrier?
· Should we use an incremental cost standard for setting termination rates – or the existing 
TELRIC standard?  
These questions have been debated exhaustively in the record for years.  I fail to see how further 
comment over the next six weeks will help us resolve these issues.  
Indeed, the longer we wait, the more difficult these issues become.  Regulatory arbitrage 
will increase as long as rates differ by type of traffic and jurisdiction.  Moreover, carriers are 
booking IP traffic at vastly different rates that must be reconciled eventually.  This type of traffic 
will continue to grow as carriers invest in broadband networks.  
I would like to be encouraged by my colleagues’ commitment that they will truly be 
ready to complete this much needed reform on December 18.  The nature of the questions they 
included in the Further Notice makes me doubt they will have found their answers within an 
additional six weeks.  I believe the far more likely outcome is that, in December, the other 
Commissioners will merely want another Further Notice and another round of comment on the 
most difficult questions.  I do not believe they will be prepared to address the most challenging 
issues and that the Commission will be negotiating over what further questions to ask in 
December.
I recognize that few other issues before the Commission are as technically complex and 
involved, with as many competing interests, as are reforming the intercarrier compensation and 
universal service programs.  But neither of those two realities are excuse for inaction.