Intercarrier Compensation (ICC)  

CTIA Position:

CTIA-The Wireless Association® supports overhauling the antiquated and backward-looking Intercarrier Compensation (ICC) system to extend economic benefits to consumers instead of providers. ICC reform is necessary to achieve the National Broadband Plan’s goals of maintaining global mobile broadband leadership for the United States and providing ubiquitous nationwide mobile broadband coverage.

The ICC system dictates the financial and technical terms under which carriers exchange telecommunications traffic. This system was designed during the days when wireline telephony was the only technology available, and is now outdated, inefficient and inadequate to serve consumers in today’s competitive, multi-dimensional telecom market. The current system arbitrarily favors certain technologies and results in fewer choices and higher prices for consumers.

CTIA advocates a fair system called the Mutually Efficient Traffic Exchange (METE) plan, which is the optimal way to update ICC and best serve consumers by allowing the market to work, and when limited regulation is necessary, eliminating distinctions between different types of technology platforms and encouraging efficiency. The METE approach would better reflect the many different service offerings available to consumers today and reduce regulatory costs which lead to higher prices for consumers.

Key Points:

• Rules That Encourage and Reward Efficiency Lead to Better Services at Lower Costs. Eliminating unnecessary regulations and exposing carriers to the rigors of the competitive market will mean consumers have more choices and better service. To that end, individual carriers should be responsible for recovering their networks costs from their own end-user customers. Known as “bill and keep,” this process encourages efficiency and promotes competition.
• All Carriers Should be Treated the Same. The current ICC system is weighted heavily in favor of incumbent local exchange wireline carriers (ILECs), because it is anchored in a technologically outdated understanding of the telecommunications market. The result is that wireless carriers are prevented from competing on an even footing—especially in rural areas. The ICC system should treat all carriers the same and not favor one technology over another.
• Consumers Will Benefit from a Transition to a Mutually Efficient Traffic Exchange (METE) System. The METE plan establishes a basic obligation for an originating provider to deliver traffic to the terminating provider’s “network edge.” It eliminates regulatory distinctions between different types of providers and traffic. This means that increasing consumer demands for mobile and broadband services will not be disadvantaged in comparison to traditional wireline services. The plan would eliminate artificial regulatory distinctions, by applying a uniform compensation system for all calls, rather than applying a hodge-podge of rules that no longer reflect the way that consumers communicate. The METE plan would also set federal rates for transit based on efficient, forward-looking costs and give wireline carriers additional flexibility in how they recover costs from end-user customers. To the extent a carrier serves an objectively high cost area, the METE proposal also contemplates limited access to universal service subsidies. Finally, the METE plan eliminates incentives for artificial stimulation of traffic in high-cost areas. These schemes, known as “traffic pumping,” cost consumers and carriers millions.
• Administrative Simplicity Will Translate to Better Enforcement and Real Cost Savings for Consumers. A revised ICC system, such as the METE plan, will greatly decrease administrative complexity. Excessive administrative complexity not only hinders efforts by carriers and regulators to monitor and enforce compliance with the ICC system, but it also increases costs for carriers. Those unnecessary costs are ultimately reflected in the price of service to consumers.

Last Updated: January 2011