FCC’s New Proposed Rules Would Apply Traffic-Pumping Triggers to VoIP Providers

Access charges are the fees local exchange carriers (LECs) charge long distance carriers (interexchange carriers, or IXCs) to originate or terminate the IXCs’ customers’ calls.  These have been the subject of disputes ever since the breakup of Ma Bell in 1984.  For over a decade now, the disputes have centered on a practice known as access stimulation (also called traffic pumping or access arbitrage).  This arbitrage became possible because, over time, the rates for access charges became disconnected from the costs of providing the service, with rates far exceeding costs.  That mismatch created an incentive for some LECs to make arrangements with entities that offered high-volume calling services (e.g., “free” chat lines, “free” conference calling) to route (“pump”) large volumes of long-distance traffic to their partner LECs’ switches for termination.  That enabled the LEC and service provider to split the profits from the high access charges paid by the IXCs sending all that traffic to be terminated (far more traffic than would ever occur with normal customers and calling patterns).

The FCC found such schemes harm consumers by increasing IXCs’ costs and rates.  It therefore sought to prevent them in a 2011 order and rules (26 FCC Rcd. 17663), and again in an order and rules in 2019 (34 FCC Rcd. 9035).  The 2019 Order adopted certain “traffic ratio triggers,” which classified a LEC as an unlawful traffic pumper if its interstate terminating-to-originating traffic ratio was too high (meaning it was terminating vastly more long-distance traffic than it originated).  A traffic pumper cannot recover terminating access charges.

The 2019 Order and rules appear to have driven some entities away from traffic pumping.  But they also led to efforts by access stimulators to evade the new rules by exploiting alleged loopholes.  AT&T, Verizon, Inteliquent, and Lumen allege that some LECs responded to the 2019 Order by setting up arrangements where long-distance traffic flows from the LEC to an “IPES” Provider (IPES standing for IP-enabled service, such as VoIP service) before reaching an end-user, or where an Intermediate Access Provider directly hands long-distance traffic to an IPES Provider, which then delivers the call to an end-user.  In either instance, the LECs or Intermediate Access Providers and IPES providers allege that the FCC’s access stimulation rules do not apply because they only govern long-distance traffic terminated by LECs.  Thus, they assert, the LECs and Intermediate Access Providers in such calls flows still can charge and recover terminating access charges and tandem switching and transport charges from IXCs.

In response, the FCC last month released a Further Notice of Proposed Rulemaking in WC Docket No. 18-155, tentatively proposing rules to make clear that in the situations just described, the IPES Provider would be deemed to engage in access stimulation when its interstate terminating-to-originating traffic ratios exceed the triggers that apply to LECs (and also, in that situation, the Intermediate Access Provider and any LEC could not impose terminating access charges of tandem switching and transport charges).  The FCC also sought detailed comments and diagrams related to the call flows described above.  The proposed rules would be the next step to close any alleged VoIP/IPES loophole in the access stimulation rules.  As an alternative to establishing its new proposed rules, the FCC also sought comment on whether it could or should simply issue a declaratory ruling clarifying that IPES Providers are treated as LECs under the FCC’s existing access stimulation rules, as some parties have long suggested.

Some day the FCC will achieve its goal of moving all access charges to bill-and-keep, but until then these types of issues and disputes will continue.

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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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