Adam Bender

EarthLink will consider legal action if the FCC sticks to its reasoning for its compensation system for ISP-bound traffic, Paul Kenefick, EarthLink’s law & public policy vice president, said in an interview. To meet a court deadline, the commission is expected to rule on the issue by midnight Wednesday (CD Nov 4 p1). FCC Chairman Kevin Martin said Monday the order would provide a new legal justification for the existing system. “I remain skeptical that such an order, which retains artificial and unsupported distinctions between types of Internet traffic, will be seen any more favorably by the court than the Commission’s two previous attempts,” Martin said. EarthLink expects Core Communications to appeal any order framed that way, Kenefick said. EarthLink has been absent from previous rounds of court action, because it wasn’t sure it had standing, but the company could file an amicus brief in the next battle, he said. EarthLink is a customer of Core and other carriers providing dial-up, not a carrier itself. Like Core, EarthLink wants the FCC to use reciprocal compensation rates for ISP traffic set by states, as it does for other traffic. ISPs are paid $0.0007 a minute for their traffic, significantly less than reciprocal compensation would pay. The FCC justifies the lower rate on grounds that dial-up ISP traffic is mostly one-way. If the Democrats take the White House, it could help Core’s and EarthLink’s case, Kenefick said, because Democrats are likelier to focus on promoting competitive alternatives in the access market.

Failing to win colleagues’ support, FCC Chairman Kevin Martin deleted an overhaul of the Universal Service Fund and intercarrier compensation from Tuesday’s meeting agenda. The order remains on circulation, but the agency will vote on no items related to USF or intercarrier compensation at the meeting, an FCC spokesman said. In a joint statement, the other four commissioners laid the blame on the chairman.

The FCC overhaul of the Universal Service Fund and intercarrier compensation appeared to be up in the air. In a note Friday, Stifel Nicolaus said four FCC commissioners planned not to vote Tuesday on Chairman Kevin Martin’s proposed overhaul of the Universal Service Fund and intercarrier compensation. “Instead, the commissioners plan to work towards a vote in December, giving parties more time to review and comment on reform proposals,” the analysts said. Martin hasn’t agreed to the December target, they said. The other commissioners told Martin they want comment on his plan and another shot at overhaul at the Dec. 18 meeting, two FCC officials told us, but the outcome is unclear. They called the situation “fluid” and said talks would continue over the weekend. Commissioners still plan to vote Tuesday on how ISP-bound traffic should be compensated, an issue that a court required them to tackle by Wednesday, they said.

Citing Core Communication’s lack of standing, a federal appeals court dismissed the ISP’s appeal of an FCC order that denied it forbearance. Core sought forbearance so it could replace access charges with reciprocal compensation. “At no point -- much less in the opening brief, as required for any element of standing that is not self-evident -- does Core show how its position … would be improved by grant of its petition for forbearance from regulation under [Section 251(g) rate regulation],” said the Court of Appeals for the District of Columbia Circuit in a Friday ruling. The decision is no surprise. In Oct. 7 oral arguments, judges never asked Core’s attorney about the appeal’s substance (CD Oct 8 p1). Core “failed to make clear how the requirements it mentions … cause any harm,” the D.C. Circuit said. Core didn’t “reveal what services it offered or planned to offer that are or would be affected by these statutory provisions,” nor did Core indicate how serious it was about entering new markets with the services, the court said. Core is reviewing the decision, it said. An FCC spokesman declined to comment.

In granting “concessions” to rate-of-return rural carriers on the FCC’s plan to overhaul intercarrier compensation, Chairman Kevin Martin “has ignored more than half of rural telephone subscribers across 42 states,” said Independent Telephone & Telecommunications Alliance President Curt Stamp late Wednesday. Earlier that day, the Western Telecommunications Alliance and the Organization for the Promotion & Advancement of Small Telecommunications Companies announced they worked out an acceptable, modified plan with Martin (CD Oct 30 p6). Mid-sized carriers that ITTA represents serve 17 million rural Americans, but those companies “will suffer a substantial reduction in annual revenue,” said Stamp in a written statement. Martin’s edits make a bad plan worse, Todd Daubert, an attorney for the USA Coalition, said in an interview. The Martin plan cuts out wireless carriers, he said. If no carrier in a market can deploy broadband, and reverse auctions don’t find someone who can, a rate-of-return wireline carrier would become a carrier of last resort by default, he said.

International submarine cable is a growth market after seeming “dead in the water” five or six years ago, Tim Stronge, Telegeography’s research vice president, said Thursday at a Federal Communications Bar Association event. Demand has caught up with the supply of lit capacity, spurring a “wave” of upgrades, he said. And prices are dropping thanks to cost reductions, Stronge said. The analyst said he expects another undersea cable boom in 2009 and 2010. The last boom, in 2000 and 2001, preceded a market crash when it became apparent that supply far outran demand. But companies should avert disaster this time, he said, because the supply increase is needed and costs are down. International Internet capacity grew 60 percent this year, and growth is expected to continue, Stronge said. Based on 2007 and 2008 numbers, South Asia is seeing the fastest growth, followed by the Middle East and Latin America, he said. Residential broadband subscribers are creating demand, Stronge said. Not including wireless broadband users, Telegeography expects 420 million broadband subscribers globally by year-end and 570 million by 2013, he said. Internet traffic is spurring capacity growth, and the Web accounts for most of the traffic, at 45 percent, he said. BitTorrent and other P2P applications commonly blamed for Internet congestion account for 25 percent, he said. Demand could be tempered by expansion of content delivery networks like Limelight, adoption of P2P traffic shaping, the P4P effort to make P2P more efficient and crackdowns on illegal file-sharing, he said. ISPs’ usage caps also could slow growth, he said.

Competitive telecom companies are looking to form more Washington alliances to combat large phone companies’ big lobbying budgets, industry officials and analysts said in interviews. The idea “just makes sense,” said Matt Salmon, CompTel president. AT&T and Verizon the two strongest telecom players in Washington, “dwarf” rivals, said David Kaut, Stifel Nicolaus analyst. Pooling resources on common issues would reduce “duplicative” work among competitors, enabling them to “get more bang for their buck,” he said.

Two trade association for small rural carriers said they back the FCC’s overhaul plan for the Universal Service Fund and intercarrier compensation, after FCC Chairman Kevin Martin agreed to several concessions for rate-of-return carriers. The Western Telecommunications Alliance and the Organization for the Promotion and Advancement of Small Telecommunications Companies approved the plan after “numerous direct conversations” with Martin, including a conference call Tuesday night ending around 7:45 p.m., directly before the start of sunshine. The National Telecommunications Cooperative Association called the endorsement “very risky and dangerous.”

With the proper revisions, major cable and wireless associations said, they would back FCC Chairman Kevin Martin’s plan to overhaul the Universal Service Fund and intercarrier compensation. Meanwhile, Qwest, congressmen and consumer advocates took sides. The FCC plans to vote Nov. 4 on the Martin plan. Sunshine was to have gone into effect Tuesday (CD Oct 28 p2).

With a lobbying ban looming, telecom interests are making feverish last-minute pitches to sway commissioners on possible overhauls for the Universal Service Fund and intercarrier compensation. Unless the FCC says otherwise, lobbying on the issue ends sometime Tuesday, with release of the commission’s sunshine notice for the Nov. 4 meeting. Verizon recently joined AT&T and Qwest in endorsing comprehensive reform.