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.

Continue reading “FCC’s New Proposed Rules Would Apply Traffic-Pumping Triggers to VoIP Providers”

CLECs Challenge FCC’s 2019 Access Stimulation Rules

Briefing is now complete at the D.C. Circuit in the latest appeal involving the FCC’s rules on access stimulation schemes.  Access stimulation (or traffic pumping) refers to a practice in which a local telephone company partners with entities that generate large amounts of terminating long-distance traffic, such as “free” conference calling providers and chat lines.  This allows the local telephone company to generate large revenues from the access charges that long-distance carriers must pay to terminate the calls through the local telephone company.  The revenues are then shared with the conferencing or chat line entities, which allows the services to be “free” to the end users.

In 2011, the FCC declared access stimulation a “wasteful arbitrage scheme” and adopted rules to curb the practice, primarily through requiring companies engaged in traffic pumping to reduce their rates to those of the large, urban carriers.  Connect America Fund, 26 FCC Rcd 17663, ¶¶ 656-201 (2011), aff’d, In re FCC 11-161, 753 F.3d 1015 (10th Cir. 2014).  However, those rules did not reduce the practice as much as hoped.  For instance, some traffic pumpers  adjusted their schemes by including intermediate carriers (tandem and transport providers) in the call flow, which increased the overall charges.

Continue reading “CLECs Challenge FCC’s 2019 Access Stimulation Rules”

© 2009- Duane Morris LLP. Duane Morris is a registered service mark of Duane Morris LLP.

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

Proudly powered by WordPress