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                                                                                                              February 25, 1999
                                
                                
                      Separate Statement 
                              of 
                    Commissioner Susan Ness




Re:  Implementation of the Local Competition Provisions in the Telecommunications Act of 
     1996 (CC Docket 96-98); and Inter-carrier Compensation for ISP-Bound Traffic (CC 
     Docket No. 99-68)

This proceeding is one of unusual importance and unusual complexity.  

The debate over reciprocal compensation for ISP-bound traffic is important for three main
reasons.  First, the issues we review here involve access to the Internet, a unique, extraordinary,
and ever-evolving national and international network of networks that is rapidly transforming
communication, commerce, and communities.  Second, reciprocal compensation may substantially
affect the nature and the extent of local telephone competition, which was a principal objective of
the Telecommunications Act of 1996.  Third, any decision in this area may affect relationships
between state and federal regulatory authorities, who must work in harmony to achieve successful
implementation of the Telecommunications Act.  

The debate is complex because it involves the application of legal precedents from the early 1980s
to services and carrier arrangements that were unimaginable only a few short years ago, as well as
provisions of the 1996 Act that have already led to considerable controversy and litigation.  We
must grapple with equities that may be quite different when viewed prospectively than when
viewed retrospectively.  A further complication is that reciprocal compensation involves certain
issues that can better be assessed by state public utility commissions than by the FCC, and yet it
also implicates important national interests affecting access to an interstate (and international)
service.

At the end of the day, however, I believe the case boils down to elementary and straightforward
propositions.  Switched network telephone calls to Internet service providers are inherently
interstate, which is the decision most consistent with our prior creation of an ESP exemption from
interstate access charges -- and with the interstate and international nature of the Internet.  But to
say this is not to overrule, undermine, or prevent state commission decisions that construe
interconnection agreements to require reciprocal compensation for ISP-bound traffic.  It was, and
remains, reasonable for the states (and federal district courts) to so rule, given our prior decisions
-- and the practices of the ILECs themselves -- to treat this traffic as local. 

And, although we are declaring that there are national interests that must be respected on a going-
forward basis, it may well be that these interests can be protected without changing the long-
standing decision to treat this traffic as local. One could readily imagine, for example, that states
will not seek to assess per-minute fees on Internet-bound calls, just as the FCC has repeatedly
resisted entreaties to do so.  One can also reasonably foresee that, even if ISP-bound traffic
continues to be handled by the state commissions under the usual 251/252 process, the parties
themselves (in voluntarily negotiated agreements) or the state commissions (if called upon to
arbitrate agreements between incumbents and new entrants) will in future agreements address the
issues associated with ISP-bound traffic in ways that avoid some of the obvious anomalies and
competitive distortions that may result from some of the current ILEC-CLEC arrangements.

In short, I believe the decision we have adopted is one that (1) comports with the law, (2) is fair
both to incumbent local exchange carriers and to competitive local exchange carriers, (3) does not
unravel the core determinations of the more than two dozen state commissions that have
addressed this issue, (4) sets the stage for future determinations that will eliminate or at least
attenuate any anomalies inherent in current compensation arrangements, and (5) preserves this
Commission's ability to safeguard the innovative, competitive, and unregulated character of the
Internet.  I hope that parties responding to the Notice of Proposed Rulemaking will focus on ways
in which all of these objectives may continue to be advanced.