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Finally, FCC Moves Forward on Inter-Carrier Compensation Reform

Posted by Andrew Regitsky

Sep 15, 2017 10:00:00 AM

Legal_Doc.jpgIn 2011 the FCC took the first steps to fixing the muddled inter-carrier compensation (ICC) system when it began a transition to bill-and-keep for many terminating access charges and for reciprocal compensation for local calls.

This was only a start, however, since originating access charges remain untouched and there continue to be many unresolved issues including, defining the network edge for traffic interconnecting with the Public Switched Telephone Network (PSTN), tandem switching and transport, and transit service. With transit service defined as:

[W]hen two carriers that are not directly interconnected exchange non-access traffic by routing the traffic through an intermediary carrier’s network. Thus, although transit is the functional equivalent of tandem switching and transport, today transit refers to non-access traffic, whereas tandem switching and transport apply to access traffic. (FCC Public Notice, DA 17-865, Released September 8, 2017, at p. 3.)

Six years later it appears the FCC is ready to resolve some of the unfinished ICC issues of 2011. No, it is not reducing originating switched access charges to bill-and-keep. That can't happen until the Commission conducts a complete analysis of the effects of the still unfinished terminating access transition. However, in sign of further action to come, the agency just issued a Public Notice on September 8, 2017, requesting the industry to refresh the record on the unresolved issues mentioned above. Comments are due 45 days after the Notice appears in the Federal Register. We discuss these issues below:

Network Edge 

The Commission notes that the network edge is the place where a carrier connects its traffic to that of another carrier. In 2011 it asked if the network edge should be defined as:

(1) a “competitively neutral” location “where interconnecting carriers have competitive alternatives—other than services or facilities provided by the terminating carrier to transport traffic to the terminating carrier’s network,” (2) a point in each Local Access and Transport Area (LATA) determined by a terminating carrier for Mutually Efficient Traffic Exchange, or (3) a terminating carrier’s central office, among other possibilities. It also sought comment on its determination that the states should establish the network edge pursuant to Commission guidance. (Id., p. 2).

Now, the Commission requests commenters to detail any new market or regulatory developments that could impact how the network edge is defined, including any actions taken by states to address this issue.

Tandem Switching and Transport

The transition in the 2011 ICC Order reduced tandem switching and transport charges only when the terminating price cap carrier also owns the tandem in the serving area. Moreover, for rate-of-return LECs, these charges were capped at interstate levels and not reduced any further. The Commission requests commenters to refresh the record on issues surrounding the transition of the remaining tandem switching and transport charges to bill-and-keep and asks:

Would changes to intercarrier compensation (ICC) for tandem switching and transport lead to inadequate revenues for any type of service provider, and, if so, how should the Commission address such shortfalls? We also welcome comment on whether the Commission should place any limitations on either the amount of potential recovery or the period of time within which such recovery should be available. We encourage parties to comment on the appropriate transition period to bill-and-keep for the remaining transport and tandem switching, and whether there should be a different transition period for originating tandem switching and transport services. (Id., pp. 2-3).

Transit Service

Transit service has been a thorny problem in which some argue there is thriving competition between ILECs and alternative transit providers keeping rates fair and equitable. However, many transit users have long claimed to be captive customers of ILECs and forced to pay inflated charges unrestrained by FCC regulation.

The Commission seek to refresh the record regarding the need to get more deeply involved in regulating transit services. Specifically, it requests parties to comment on whether it should adopt regulations governing the rates for transit services and what compensation regime should apply and why? It also requests comments on the state of current market for transit services and the effects of competition among transit service providers.

All companies that exchange access (and non-access) traffic should closely follow this proceeding and try to participate if possible. Switched access remains a large revenue source or cost for many companies, especially rural ILECs. Thus, how the network edge is defined and whether tandem switching and transport is reduced to bill-and-keep will have profound impacts on these companies.

Moreover, since so many carriers cannot economically directly interconnect, transit service rates remain extremely important. Therefore, this is clearly one proceeding to watch this Fall!  

By Andy Regitsky, CCMI

Telecom Under Trump

Topics: FCC, switched access