Access Stimulation and 8YY Abuse Continue to Plague Industry

By: Andrew Regitsky

No matter how hard the FCC tries to stop access stimulation and remove the arbitrage in the 8YY market it is clear abuse will continue until all switched access charges are moved to bill-and-keep.  That message, which should be obvious to anyone who has been in the industry for even a short time, was made clear once again in an ex parte telephone meeting between Bandwidth and the Commission on July 14, 2021.  Bandwidth is both a facilities-based CLEC and an IXC headquartered in Raleigh.  In their meeting, Bandwidth told the FCC that when it comes to switched access, it’s the “same old same old.”

During the call, the participants discussed various forms of continued originating and terminating tandem access arbitrage. Bandwidth explained that traffic pumping of Toll-Free calls persists even after the FCC’s adoption of originating 8YY access reforms.  Carriers are finding creative ways to replace the anticipated loss in revenue, such as by tariffing charges for the exchange of IP-IP traffic, “buying” originating toll free traffic to increase volume, and routing traffic through multiple tandems prior to delivering it to the RespOrg.  At the same time, carriers and their customers continue to find creative ways to increase revenue from terminating tandem charges, such as by homing telephone numbers to affiliated and unaffiliated tandems that result in multiple tandem switching charges or tandem charges in lieu of direct IP interconnection.  (Docket 18-156, July 16, 2021, Bandwidth letter to FCC).

Bandwidth noted the perverse impacts these actions are having on the industry:

[T]he challenge[s] Bandwidth faces is that these are only a select few instances of carriers doing inappropriate things that are taking hold more broadly in the marketplace as more carriers are following the lead of the few and creating an “if you can’t beat ’em, join ’em” environment.  Bandwidth [is concerned] that these industry practices create perverse incentives to perpetuate TDM traffic exchange that undermine the FCC’s objectives and STIR/SHAKEN framework, which works best when carriers interconnect in IP.  (Id.).

In its letter Bandwidth references two cases of alleged access and 8YY abuse that the FCC has recently red-flagged.  One involving a Core Communications tariff and another pertaining to Wide World’s restructuring of its business operations to impose tandem charges on IXCs that it otherwise was not entitled to bill.

In the Core case, the CLEC filed proposed revisions to its Interstate Tariff No 3 on April 22, 2021, in which it proposed to change the terms and conditions governing “good faith” billing disputes and late payment fees. It also proposed language stating that if it “discontinues service, it will provide, in connection with access traffic associated with the discontinued Customer, only those minimal functions necessary to identify the Customer as being the relevant carrier (i.e., 8YY database queries).”  Core also added sections regarding the blocking of “fraudulent or otherwise illegal traffic,” as well as disputes about such traffic, and proposed changes to allow it to charge an IXC for an 8YY database query “even if the underlying call is not completed.”

AT&T and Verizon requested the FCC to reject, or at a minimum, investigate the tariff filing, contending that Core was attempting to charge for “unnecessary work” and to “extract profit at IXCs’ expense” and that the tariff revisions ultimately will “permit Core to profit from 8YY arbitrage schemes and then allow Core to avoid any accountability for doing so.”

On May 6, 2021, the Commission suspended the tariff revisions for one day and launched an investigation.  It followed up on June 23, 2021, when it released an Order Designating Issues for Investigation in Docket 21-191.  The investigation will determine whether the tariff revisions concerning billing disputes, obligations regarding purportedly fraudulent traffic, obligations of customers cut off from service by Core, late payment fees, and 8YY database queries are consistent with the Act, the 8YY Access Charge Reform Order, and the Commission’s rules.

The other ongoing Commission action alleges access stimulation involving a Complaint filed by AT&T and Verizon against the CLEC Wide World.  The companies allege that Wide Voice carried out a scheme to preserve profits derived from access stimulation.  

In a Memorandum and Order (Order) in Docket 20-362, the FCC granted the Complaint, finding that Wide Voice rearranged traffic flows to circumvent the access stimulation rules, caused network congestion and call failure by rerouting large quantities of traffic, and attempted to force the IXCs to deliver traffic to a remote location that created no net public benefit as required by the Commission.  These actions violated section 201(b) of the Telecommunications Act which prohibits telecommunications carriers from engaging in unjust or unreasonable practices.  As a result, the Commission concluded that “Wide Voice may not bill AT&T and Verizon in connection with the traffic at issue in their Complaint and must refund any amounts the IXCs already have paid with respect thereto.”

While Wide World filed a Petition for Reconsideration of the Order on July 8, 2021, it is very unlikely to convince the FCC to change its opinion.  Moreover, with the DC Circuit Court’s recent affirmation of the Commission’s Access Stimulation Order hopefully fewer companies will attempt to bypass the rules.