SBC Blasts Level 3’s VoIP Proposal

SBC says Voice over IP provider Level 3 is attempting to gain
an unfair regulatory advantage in its effort to avoid paying access fees
for IP traffic that interconnects with the public switched telephone network

In a letter sent Thursday to Federal Communications Commissioner (FCC)
Michael Powell and obtained by, SBC Senior Vice
President James C. Smith wrote that Level 3 is seeking a “quick,
self-serving fix” to avoid the “lawful assessment” of access charges.

In December 2003, Level 3 filed a forbearance petition with the FCC to
reaffirm that VoIP providers should be charged a lower “reciprocal
compensation rate” when connecting to the PSTN rather than the higher
access charge assessed when long distance and wireless carriers touch the
Bell legacy copper network.

VoIP providers are currently paying the lower reciprocal rate while waiting
for an FCC decision. If the FCC does not rule on the petition by the
statutory deadline of March 22, the petition will be deemed granted.

The lower reciprocal rate applies only to “information
services” as defined by the FCC. The agency is currently conducting a review
of all IP-based services, but it has not legally defined Internet telephony
as an information service.

Further, SBC claims, IP networks are charging other carriers the full access charge when
connecting a PSTN call to an IP network.

“Level 3 is able to collect access charges from wireless providers and long
distance providers,” Smith wrote. “Level 3 is now asking the FCC to sanction
this one-sided arrangement so Level 3 and similar carriers can officially
eliminate their obligations to pay access charges for VoIP-to-PSTN calls,
but maintain their ability to receive access charges for PSTN-to-VoIP

Level 3, which criticized the access charge as a “compelled subsidy” in a
interview with, declined to comment on the new SBC accusations
until it had time to review Smith’s letter to Powell.

“The absurd result of Level 3’s petition would be that PSTN-based customers
who purchase wireless or traditional long distance service would be forced
to subsidize Level 3 and other CLECs (competitive local exchange carriers)
that do business with VoIP providers,” Smith wrote in his letter.

The war of words between Level 3 and SBC is part of a larger proceeding at
the FCC aimed at modernizing the rules for exchanging traffic between
networks. The federal courts have already ruled that the old tariff system
on phone calls is stifling competition.

A group of nine carriers known as the
Intercarrier Compensation Forum (ICF), which includes SBC and Level 3, has submitted a proposal to the
FCC for new interconnection rates to update the nearly 20-year-old system.
In Thursday’s filing with the FCC, SBC urges the agency to reject Level 3’s
petition until the ICF proposal is fully reviewed.

“With its imprudent … petition, Level 3 seeks to jump ahead of the commission
on intercarrier compensation reform by obtaining a quick, self-serving fix
on one intercarrier compensation issue without the slightest regard for how such
piecemeal relief would complicate resolution of all the other issues to
which this one issue is inextricably tied,” the SBC letter states.

The SBC letter asks the FCC to turn “its full attention to the holistic
reform proposals that SBC and Level 3 are advocating in the ICF plan.”

Michael Balmoris, SBC’s executive director of public affairs, said, “We
believe that the current system must be reformed, but until that time,
everyone must play by the same rules.”

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