28 July 2006

The Missoula plan

Those of us who are interested in the history of telecommunications in the US recall the different "plans" (eg. Ozark) that were developed by NARUC and were implemented by the FCC. Well, the issue of intercarrier settlements has arisen again because of the emergence of VoIP and the recent wave of mergers in the telecommunications industry. As a result, NARUC developed the "Missoula Plan". A very brief presentation about the motivation and the expected outcome can be found here; the text of the plan is here.

It is interesting to view this matter in the context of carrier interconnection and universal service. Interconnection has long been an object of contention between carriers (see this for a recent rendition); and many have argued that universal service funding is seriously flawed (see this, for example).

Do you think the Missoula Plan makes progress toward resolving some of these issues?

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Jeff said...

For Anyone interested, this offeres additional documents on the missoula plan. They may be helpful.

Pat said...

At the National level, the Missoula Plan unifies intercarrier charges for most of lines and moves all intercarrier rates closer together. It is still unclear at the States level what the plan does; for example, intrastate funds.

While I am convinced that the current universal service funding is seriously flawed, also, the Missoula Plan does not adequately address this issue. A solid example is that the fund increases 185% increase in past six years and it increases to the customers.

However, I do think that the Missoula Plan is a good start for a new era of cross-platform telecommunications though.

Jeff said...

As Pat said, the fact of the matter is that the issues currently at hand need to be addressed. The regulation of the the telcos, at present day, is overly complex and allowes too much room to "play the system". In addition, many of the regulations in place today seem to be tailored for a time of the past, before technologies such as VOIP and Wireless were ubiquitous enough to cloud boundaries.

It does not seem to me, however, the the Missoula plan is a clear cut solution to the problem. While it may be what is needed rock some of the telco's out of their currently comfortable position, it has some flaws.

I can't help but wonder why some of the larger telcos are supporting the plan. It seems to me, that for them it is more bad news than good. Perhaps someone else can shed some light on this thought?

Pui said...

Like many others said, I agree with you all that the Missoula plan doesn't seem to solve all the problems resulting from the regulatory in the past. However, it seems to me that this plan may help alleviating the problem of an ineficient system because, in my opinion, it does reflect the actual cost of the network usage(marginal cost which must be small). Also, a good system shouldn't allow regulartory arbitrage.

In addition, I think that the perfect plan would never exist. There's a lot of complexity in an uneven system. There're something we'd never know unless we've tried it.

As jeff comment about the supporting from the larger telcos, I'm not exactly sure about this but I think they do not worry about the small carriers. Instead, they are concerned about the unfair ISP's bound traffic which now subject to reciprocal compensation in the Missoula plan.

oat said...

I agree with all of you that the plan could solve only some parts of the problems.
To me,the plan seems to be a good solution in the aspect of reduction of regulatory arbitrage.

I agree with the unified interconnection rates for different types of traffic but not for different type of carriers.

If the revenue neutrality is considered among carriers especially, ILECs and CLECs, I don’t think the plan will meet its goal. Large ILECs will be more advantageous for this game.

Because some of ILECs probably received almost their investment payback from the network whereas CLECs still need more revenue requirement due to their depreciation and marginal cost issues.

Velin said...

I agree with the statements of Pat and Jeff about that the plan will bring more accountability, but I cannot help but wonder if the Missoula Plan missed the boat.
Is it just me or discussing telecom only in terms of Voice traffic, or minutes of usage, is not sufficient anymore? As Jeff said, VoIP and all other data services have changed the rules of the game.
It makes me wonder if this plan will be just another Computer Inquiry (IV). The question of why the big telecom companies are supporting this plan also ponders me, since I assume they have better understanding of technology and how it impacts their business, than most of us.

pratik said...

pratik: The main goal of the Missoula plan is to achieve unified inter carrier compensation and unified rates, and as far as these goal is concerned according to the mentioned plan i'm convinced that it will get succeed in achieving it's goal.

It's a significant step towards reforming regulation - to accommodate today's inter modal, increasingly internet oriented communication environment and it's mainly going to benefit to the consumer as this plan will lower their telephone bills.

this plan seems to minimize arbitrage opportunities and competitive distortion

and the main reason behind many participant support for intercarrier reform is the availability of sufficient revenues provided by legislation to ensure that carriers and their customers are not harmed by such reforms.

so overall this plan seems to be good from the consumer's and economist's perspective . but as far as benefit of carrier is concerned this might not be good for some carriers?

Maria said...

Regarding The Plan, I'm impressed to see this large amount of companies working and setting agreements in areas that will definitely affect their revenues.

I think The Plan covers many important issues, including some implementation issues which sometimes are not considered in this kind of documents, and so they become useless. The Phantom Traffic section shows The Plan supporters are aware of the problem and they present possible solutions for it.

It is also interesting to see how The Plan is including not only traditional telephony traffic, but also wireless, ISP and VoIP traffic, and is considering some mechanisms to extend broadband service in a way that is reasonable for rural carriers. All these topics show that The Plan supporters know about new technologies and future trends affecting their business.