By: Andrew Regitsky
On December 28, 2020, USTelecom filed a Petition for Reconsideration of the FCC’s Order in the 8YY proceeding. Specifically, the ILEC association argued that the Commission’s refusal to allow price cap ILECs to recover lost 8YY revenues from new sources prohibited many of its members from being made whole when most 8YY access charges move to bill-and-keep.
Without the ability to recover costs associated with originating 8YY traffic revenue from their own customers, some carriers face important revenue shortfalls with no recourse. This is particularly the case where price cap carriers have reached the Commission-specified maximum voice service rate of $30 or have no “headroom” remaining in the eligible recovery formula to adjust their rates. In those cases, absent a new recovery mechanism, carriers are left without any means of recovering their origination costs. (USTelecom Petition for Reconsideration, Docket 18-156 at p. 3).
On February 17, 2021, Peerless Network filed an Opposition to the USTelecom Petition. The carrier made several arguments in its filing. First it claims that USTelecom caused the very problem it seeks the FCC to rectify by failing to ask for alternative revenue recovery mechanisms in its original 8YY consensus proposal that was accepted by the Commission. In effect, it requests the agency to redo its proceeding to ensure 8YY rates are higher and less ILEC revenues are lost.
USTelecom’s so-called “consensus proposal” failed to propose alternative 8YY originating switched access rates that did not rely on an off-setting revenue recovery mechanism, and instead wrongly assumed the Commission would adopt both its revenue recovery proposals and 8YY access rate reforms in toto. Thus, while USTelecom seeks to now obtain a revenue recovery mechanism through reconsideration, this request hides the alternative option—to reconsider the 8YY access rate reductions so that revenue recovery mechanisms are not needed. (Peerless Network Opposition, p. 2).
Next, Peerless argues that USTelecom’s Petition should be denied because carriers with unrecoverable revenues can file a waiver request with the Commission at any time.
Third, Peerless argues that the combined rate of $0.001 for tandem switching and tandem transport is not cost-based and harms tandem transport carriers such as itself with no way to recover lost revenues since it has no end user customers.
Moreover, because intermediate tandem providers that simply route originating 8YY traffic, like Peerless and others, do not serve the end users that place the 8YY calls associated with such traffic, they cannot offset such rate reductions by increasing local service charges to such end users. As a result, intermediate tandem providers are not made whole because the $0.001 rate does not sufficiently compensate them. (Id., p. 6).
In filing its Petition, Peerless appears angry at USTelecom for considering the revenue shortfalls of what it calls the oligopoly of AT&T, Verizon and CenturyLink without considering the impact on smaller LECs and intermediate tandem providers. However, its proposed solution, a “do over” of the original proceeding is almost assuredly a non-starter. As USTelecom notes in its Reply to Peerless:
The Peerless Opposition impermissibly seeks to expand the scope of USTelecom’s Petition to address its own grievances with the 8YY Access Charge Reform Order (Order). In fact, the vast majority of the Peerless Opposition serves not so much as a rebuttal to the narrow USTelecom Petition but as a petition for reconsideration in its own right of the entire Order. The Peerless Opposition states that instead of granting the relief requested, “the Commission should reset the rates for 8YY originating switched access to the regime and levels that pre-existed the 8YY Order, so that the interrelated issues of 8YY switched access rate reductions and revenue recovery may be considered and addressed holistically.” This greatly exceeds the relief requested in the USTelecom Petition. (USTelecom Reply to Peerless Network Opposition to Petition for Reconsideration, Docket 18-156. Filed March 1, 2021, at p 2).
A more promising line of attack against the FCC’s 8YY Order comes from Intelliquest, which filed a Petition for Review with the DC Circuit Court of Appeals on November 30, 2020. The company argues that the $0.001 rate for tandem switching and transport is not cost-based and is therefore unlawful. Instead, it claims the Commission should have adopted a cost-based rate of $0.0017. On January 11, 2021, USTelecom intervened in the case on the side of the FCC. We will keep you abreast of the progress of this case as it is addressed by the DC Circuit Court.