Has the New York PSC Found a Way to Assess Wireless Providers?

A fascinating decision from the New York State Public Service Commission (“PSC”) released on February 4, 2010 regarding whether the PSC could direct a wireless provider, Sprint PCS, to negotiate an interconnection agreement with a non-incumbent local exchange carrier (“CLEC”) and whether it could set a reciprocal compensation rate for the exchange of local (intra-MTA) traffic. At the heart of this case is section 5(6) of the Public Service Law (“PSL”), which precludes PSC jurisdiction over wireless service until there is a determination to end the suspension. Could the PSC do what was asked by the CLEC as long as section 5(6) is still in place? The answer was yes.

While section 5(6) is intended to prevent the PSC from regulating wireless service until it conducts a hearing and determines that the time has come to lift the prohibition on regulating wireless service, the state (and counties) already assess taxes on wireless service and collect E-911 fees to support the emergency response centers. While it is clear that the PSC can not, currently, require a wireless company to file a tariff and set specific rates for services as it can with landline local exchange carriers (“LECs”), the question before it was more subtle: could the PSC set rates for the termination of intrastate CLEC-wireless traffic? Under a recent decision of the FCC regarding T-Mobile, the FCC clarified that the states’ general authority to regulate rates for intrastate wireless traffic is not limited, except that LECs cannot impose compensation obligations pursuant to state tariffs. They can, however, have state-enforced intercarrier compensation rates contained in interconnection agreements negotiated with wireless providers.

Even though it recognized the importance of this FCC decision, Sprint PCS still argued that the PSC’s actions were precluded by section 5(6). The PSC found that its authority under PSL section 97(3) to establish just and reasonable rates where two or more telephone companies are interconnected superseded the prohibition in section 5(6) regarding wireless service and that federal law had already determined that intra-MTA traffic is indeed local traffic and reciprocal compensation is due.

“Therefore,” the PSC held, “while we are not precluded under PSL from establishing a rate for the termination of wireless traffic to LEC networks, under federal law in order for the rate to be just and reasonable it must also be mutually available to both parties. We will, therefore, proceed in establishing a just and reasonable rate for the termination of wireless traffic under PSL §97(3) which will be mutually available to both parties, and direct the parties to enter into negotiations and report back to the Commission within 60 days on how they plan on incorporating that rate into an traffic exchange agreement in accordance with the . . . FCC’s pricing standards.”

So, the PSC determined that establishing a reciprocal compensation rate between a CLEC and a wireless provider for the exchange of local traffic does not violate PSL section 5(6)’s prohibition of regulating wireless service. Does that mean that while section 5(6) is in place, the PSC can begin to assess wireless providers for regulatory assessments (payments made by landline providers to support the PSC’s operations, currently set at one-third of one percent of intrastate revenue) or for Targeted Accessibility Fund (“TAF”) assessments, which are paid by landline providers and support Lifeline, the relay service for the deaf, and E-911 access? These assessments – like the reciprocal compensation rate – are also not the types of tariffed rates or terms and conditions of service which are contemplated by the section 5(6) suspension.

With wireless and VoIP providers now capturing about half of the intrastate voice market, the PSC is only collecting about half of the regulatory assessment dollars it should be receiving from voice providers. Additionally, TAF contributors have seen their rate double in the past few years because only 50 percent of the market participates to support these vital programs. With this decision, the PSC may have opened the door to leveling the playing field for voice providers in New York. See Utility Regulatory Assessments: The Time Has Come to Include VoIP and Wireless. PULP Network, January 29, 2010.

Lou Manuta