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8YY Proceeding a New Test of FCC's Intentions

Posted by Andrew Regitsky

Aug 25, 2017 10:00:00 AM

shutterstock_128401286.jpgThe next test for the Trump-era FCC is here. Reply comments were filed on August 15, 2017 in the proceeding which will determine whether originating or terminating access charges will apply to toll-free 8YY calls.

The large IXCs believe at a minimum that the current situation in which they pay originating access is untenable. They argue that with the transition of most terminating access charges to bill-and keep nearing transition, industry bad actors have moved their arbitrage schemes to originating access including 8YY calls.  As AT&T notes:

Many commenters acknowledge the reality that originating 8YY access charges are analytically indistinguishable from ordinary terminating access for intercarrier compensation purposes. Even many of those that do not support bill-and-keep acknowledge that the inefficiencies inherent in originating 8YY access charges billed to IXCs are inducing certain carriers to expand efforts to exploit arbitrage opportunities. Given that the economic case for bill-and-keep is unassailable and originating 8YY arbitrage in increasing rapidly as opportunities on the terminating end become more limited, the comments support (1) adopting rules subjecting originating 8YY access to the same intercarrier compensation arrangements as terminating access without delay. (AT&T Reply Comments, Docket 10-90, pp-1-2.).

The logic of AT&T's claims is indisputable though it has offered no actual proof that arbitrage schemes are significant. The entire rationale for bill-and-keep is to ensure that the cost-causer of a phone call pays for that call. As long as originating access charges continue, that will never happen. Moreover, since the open end of an 8YY call is similar to the terminating end of a typical toll call it makes sense that terminating access (nearing bill-and-keep) should apply as it had for years. Now that toll-free calls are becoming an arbitrage opportunity, Commission action is becoming more and more necessary. The question is, what exactly should the Commission do?

Some CLECs along with smaller ILECs believe it is premature for the FCC to take any further action before determining if toll-free free calls are really a significant source of arbitrage schemes, or whether the IXCs are exaggerating the problem to simply avoid paying access charges. In a joint filing, Windstream, Frontier and the National Rural Broadband Association (NTCA) claim it is the latter.

[W]e agree that, to the extent 8YY access stimulation schemes exist, such activities can distort the market and cause 8YY providers to incur unreasonable costs. However, as compared to the substantial record evidence with respect to terminating access stimulation in 2011—which included estimates of the cost of terminating access stimulation to interexchange carriers (“IXCs”) and numerous traffic pumping disputes—remarkably little evidence of 8YY access stimulation has been placed in the record beyond the bald assertions of a select few IXCs and 8YY service providers—e.g., AT&T, Verizon, and Sprint (collectively, the IXC Parties”)—who most stand to benefit from the elimination of such charges. Furthermore, what limited evidence has been presented suggests such access stimulation is confined to a small handful of competitive local exchange carriers (“CLECs”) and does not infect the LEC industry as a whole. Thus, before taking any action to reform the originating access regime writ large, the Commission should further investigate more specifically the scope of 8YY access stimulation. If after an appropriate investigation the Commission concludes such stimulation exists and is material, then it should consider making targeted efforts to address such unreasonable behavior. (Reply Comments of Windstream, Frontier, NTCA, Docket 10-90, pp. 1-2).

Based on what we know about this FCC, a sketchy record should be no impediment to stop it from taking the side of the large IXCs in this dispute. While IXCs own the logic here, commenters point out that they have provided few facts to back their assertions. Thus, there are legitimate arguments to be made for further developing the record before acting.

Of course, the FCC could implement the only possible permanent solution by moving originating access charges to bill-and-keep.  However, that is unlikely in the near future since the Commission is required to first conduct a study of the effects on rural providers of the transition of terminating access charges to bill-and-keep and none is scheduled. Additionally, the stress to find additional universal service dollars to make rural providers whole would be untenable based on the difficulties in funding the current program. Thus, I expect a permanent solution is likely to be ignored in the near-term while the Commission requires terminating access charges to apply to 8YY calls. That will be yet another bone for the big dogs coming soon.

By Andy Regitsky, CCMI

Telecom Under Trump

Topics: regulatory updates, CLECs, FCC, ILECs

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