Level 3 Drops VoIP Rate Request

The VoIP wholesaler withdraws petition seeking FCC ruling on interconnection fees.

By Roy Mark | Posted Mar 22, 2005
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Level 3 Communications withdrew late Monday its petition seeking a Federal Communications Commission (FCC) ruling on the rates Voice over IP providers pay incumbent telephone companies to complete Internet telephony calls over the public switched telephone network (PSTN).

In late 2003, Broomfield, Colo.-based Level 3 wholesaler filed a forbearance petition asking the FCC to clarify whether Internet telephone companies should pay negotiated market rates for their voice traffic, which hits the PSTN, or the higher, government-mandated charges that long-distance and wireless carriers pay to interconnect with incumbent carriers.

By statute, the FCC was required to issue an opinion on the petition by today, but Level 3 CEO James Q. Crowe said his company withdrew its request in deference to new FCC Chairman Kevin Martin, who succeeded Michael Powell as head of the agency last week.

"Given the appointment of new leadership only three business days before the statutory deadline for ruling on the petition, we determined it was inappropriate to ask the agency to resolve this important issue in the timeframe required by law," Crowe said in a statement. "However, there remains a pressing need in the industry for clarity in this area, and Level 3 may elect to re-file the petition or take other appropriate regulatory actions in the future."

Currently, Level 3 and other VoIP providers pay incumbent carriers a negotiated market rate to complete calls over the Bells' legacy, last mile copper network. That rate is normally reserved for what the FCC classifies as information services. The FCC is currently in a review process of all IP-based services, including Internet telephony, but has not yet determined if they are information services.

Long distance and wireless carriers are classified by the FCC as telecommunications carriers and pay a higher "access" fee to incumbent carriers that include payments to the Universal Service Fund. VoIP providers fear if they are forced to pay the higher access rate, the additional costs to consumers will slow the rollout of the emerging technology.

Level 3's decision to withdraw its petition maintains the status quo for VoIP providers while the FCC completes its IP-based services review.

"Level 3 and other VoIP service providers continue to maintain that voice calls between the legacy telephone network and the Internet should be exchanged using reciprocal compensation rates, which are lower than access charges and far closer to the network provider's true cost," Crowe said.

As part of the complicated proceedings at the FCC, Level 3 is part of a group of nine carriers that have formed the Intercarrier Compensation Forum (ICF) to help determine new interconnection rates for a 20-year-old system that never anticipated IP services.

SBC and other incumbent carriers had opposed the Level 3 petition, arguing the rate issue should be determined by the consensus opinion of the ICF instead of piecemeal applications by individual VoIP carriers.

"The commission's record is one of strong support for Voice over IP, and we're confident it will resolve these important issues in an appropriate and timely manner," Crowe said. "There are a number of other avenues by which the commission can address the issue of VoIP and intercarrier compensation, and our hope is that it does so quickly in order to provide the industry with clear ground rules."

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