OCTOBER 31, 2008, 11:47 P.M. ET

FCC Commissioners Seek Delay in Phone-Rate Vote

By FAWN JOHNSON and AMY SCHATZ
Wall Street Journal

http://online.wsj.com/article/SB122549312920589435.html


WASHINGTON -- Some commissioners at the Federal Communications 
Commission want to put off a controversial Election Day vote on a 
proposal to dramatically revamp the multi-billion-dollar system under 
which telephone companies pay each other to transfer calls.

FCC sources and analysts at Stifel Nicolaus and Co. say four 
commissioners on the five-member body want more time to review the 
sweeping proposal that FCC Chairman Kevin Martin circulated to them 
several weeks ago.

There is also some pressure on Mr. Martin from within the FCC to put the 
report out for public comment on Nov. 4 instead of having the final 
vote. People familiar with the situation say it is highly fluid, and 
negotiations between the commissioners' offices are expected to continue 
over the weekend.

A spokesman for Mr. Martin said the item is still on the agenda for the 
Nov. 4 meeting.

Mr. Martin's plan to revamp the payment system has garnered a chorus of 
protests from small and midsized phone companies, state regulators and 
consumer groups. They argue that the proposal has only been seen by FCC 
commissioners and staff and needs to be made public for review before 
the commission votes on it.

The three largest phone companies -- AT&T Inc., Verizon Communications 
Inc., and Qwest Communications International Inc. -- favor Mr. Martin's 
proposal. Wireless companies generally also support the plan, and a few 
rural phone groups have cautiously endorsed it if they are given certain 
guarantees.

The FCC also faces a Nov. 5 court-mandated deadline when it must justify 
the portion of the payment rules regarding dial-up Internet traffic.

Four of the FCC's five commissioners have been negotiating with each 
other -- without Mr. Martin -- since Wednesday to reach some agreement 
on elements of the massive proposed overhaul.

The commissioners jointly approached Mr. Martin on Friday with a new 
option, according to FCC officials close to the negotiations. They 
proposed publicly releasing a revised plan and, in return, they promised 
to vote on it in mid-December.

Mr. Martin has stuffed many must-pass items on the agency's Nov. 4 
agenda on concerns it could be significantly harder to get enough 
support on some issues after the election.

Mr. Martin, however, didn't agree with his colleagues' idea. He 
suggested he may simply shelve the comprehensive overhaul and instead 
circulate a narrower plan that addresses issues raised by the court.

Mr. Martin wants to lower the rates phone carriers pay each other to 
transfer calls to almost nothing and allow companies who would lose 
money from the change to raise their monthly subscriber rates by as much 
as $1.50 for residential phone lines. Businesses monthly rate increases 
could go as high as $2.50.

AT&T has told the FCC that the average increases in monthly phone rates 
would actually be about 67 cents for residents. Some residents would see 
no increases, AT&T said.

AT&T and Verizon are considered the big winners if Mr. Martin's proposal 
passes -- though the companies claim they would also lose money under 
the plan because they, like smaller phone companies, collect high access 
charges in rural areas.

A broad group of lawmakers have asked the commission to delay the vote, 
including House Energy and Commerce ranking Republican Joe Barton of 
Texas and Sens. Olympia Snowe (R, Maine), Amy Klobuchar (D, Minn.) and 
Claire McCaskill (D, Mo).

The current phone-exchange payment system, which dates back to the 
breakup of the Bell system in 1984, is widely divergent, with some 
carriers charging a fraction of a penny per minute for outside calls to 
their customers, and others charging hundreds of times that much for the 
same service.

Mr. Martin also wants to revise the way carriers receive government 
subsidies for offering phone service in hard-to-reach rural areas. 
Currently, all carriers are given subsidies based on an incumbent phone 
company's costs.

Under Mr. Martin's proposal, those subsidies would be given only to 
companies that promise to offer high-speed Internet service to all their 
customers within five years and can prove that they would lose money by 
doing so.

The FCC commissioners believe they could reach an agreement by Tuesday 
on new rules for the government subsidy program and ways to eliminate 
"phantom traffic," which happens when routing information is removed 
from phone calls so carriers don't know who to bill. The commissioners 
disagree on other elements of the plan, according to FCC officials close 
to the negotiations.

-- 
================================
George Antunes, Political Science Dept
University of Houston; Houston, TX 77204 
Voice: 713-743-3923  Fax: 713-743-3927
Mail: antunes at uh dot edu

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