FCC Unveils Draft Order to Combat New Access Stimulation Schemes

On March 30, the FCC released a draft order for consideration at its April 20 public meeting that is intended to foreclose a new method for evading the Commission's rules and arbitraging the access charge regime.

As the draft order recounts, some local exchange carriers (LECs) in areas with high access charges partner with "free" conference call or chat line services that significantly increase the volume of terminating calls to the LECs and thereby dramatically boost the access charges that the LECs can bill to interexchange carriers (IXCs). Access charges are supposed to cover the LECs' costs of providing service. But access stimulation schemes unnecessarily raise the costs for IXCs – as well as their customers – and such schemes unjustly enrich the LECs and their call service partners.  

 

The tactics employed by arbitragers change over time, requiring periodic updates of the rules to curb access stimulation. According to the draft order, certain LECs have inserted Internet Enabled Protocol Service (IPES) Providers into the call pathway for these conference call and call services. Apparently, some LECs have converted traditional competitive LEC numbers into IPES numbers in order to claim that the Commission's 2019 order does not apply to them. The Commission's draft order would address this. If adopted by the Commission, the draft order would provide that "when traffic is delivered to an IPES Provider by a LEC or an Intermediate Access Provider and the terminating-to-originating traffic ratios of the IPES Provider meet or exceed the triggers in the existing Access Stimulation Rules, the IPES Provider will be deemed to be engaged in access stimulation."

 

The Commission's draft order appears a reasonable and necessary step to halt further gaming of the access charge regime. (For further background, see my July 2022 blog post.)

FCC Proposes Rule Clarifications to Stop Gaming of the Access Charge System

On July 14, the FCC voted to adopt a Notice of Proposed Rulemaking to address a new form of access stimulation arbitrage of the intercarrier compensation system that allegedly involves involving call flow IP enabled (IPES) Providers. 

Access charges are a vestige of the legacy intercarrier compensation system. As the Commission's Notice points out, access charges were intended to compensate carriers for use of their networks by other carriers. Although the rates were once cost-based and tied to normal call traffic volumes, they have since been capped. Some local carriers have exploited this by artificially stimulating terminating calls through arrangements with high-volume calling services such as "free" conference calling services and chat lines. According to the Notice, the resulting high call volumes generate revenues far in excess of costs that the access charges were designed to cover.

In its 2011 USF/ICC Transformation Order, the Commission adopted rules to stop the problem of access stimulation (also called "traffic pumping") for those terminating tandem switching and transport services that have not transitioned to bill-and-keep. (The problem was subject of a December 2010 blog post). And in 2019, the Commission updated those rules to prevent new arbitrager tactics. The update to those rules was upheld by the D.C. Circuit in 2021.

Based on input from interexchange carriers (IXCs), the Commission's Notice suggests the rules need to be clarified once more to prohibit new forms of access stimulation involving call flow IP enabled (IPES) Providers. Apparently, some IPES Providers have claimed that the Commission's Access Stimulation Rules do not apply to voice traffic that terminates to "IPES numbers." 

 

To address this apparent problem, the Commission's Notice states: 

[W]e propose that when traffic is delivered to an IPES Provider by a LEC or an Intermediate Access Provider and the terminating-to-originating traffic ratios of the IPES Provider exceed the triggers in the Access Stimulation Rules, the IPES Provider will be deemed to be engaged in access stimulation. In such cases, we propose that the Intermediate Access Provider would be prohibited from imposing tariffed terminating tandem switching and transport access charges on IXCs sending traffic to the IPES Provider or the IPES Provider’s end-user customer. 

To be sure, access stimulation is a complicated and even arcane subject. But there is no justification for gaming the intercarrier compensation system and sticking interexchange carriers with bogus charges. If IPES Provider-related arbitrage is taking place as alleged, then some kind of clarification of the rules by the Commission is in order. To that end, the Commission's vote to approve the Notice makes good sense.