FCC Adopts Access Arbitrage NPRM Ahead of Meeting
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Tuesday, June 5, 2018

FCC Adopts Access Arbitrage NPRM Ahead of Meeting

The FCC has unanimously proposed rules aimed at eliminating access-stimulation arbitrage opportunities in its intercarrier compensation regime by giving access-stimulating local exchange carriers (LECs) two options for connecting to interexchange carriers (IXCs): taking financial responsibility for calls that IXCs deliver to the LEC’s network or allowing IXCs to deliver traffic directly or through an intermediate carrier of the IXC’s choice, “allowing IXCs to bypass intermediate access providers selected by the access-stimulating LEC.”

“In the alternative,” the FCC said in the notice of proposed rulemaking (NPRM) adopted yesterday and released today in Wireline Competition docket 18-155, “we seek comment on moving all traffic bound for an access-stimulating LEC to bill-and-keep. We also seek comment on additional alleged ICC arbitrage schemes and ways to eradicate these schemes.”

Comments on the NPRM, which had been scheduled for a vote at the FCC’s meeting on Thursday, but which was voted on circulation instead and removed from the agenda, will be due 21 days after publication of the notice in the “Federal Register,” and replies will be due 14 days after the comment deadline.

“In examining the issues in 2011, the Commission found access stimulation to be the most widespread access arbitrage scheme. It appears that continues to be the case today. Access stimulation (also known as traffic pumping) occurs when a local exchange carrier (LEC) with relatively-high switched access rates enters into an arrangement to terminate calls—often in a remote area—for an entity with a high call volume operation, such as a chat line, adult entertainment calls, and ‘free’ conference calls, collectively high call volume services. The Commission adopted rules governing access-stimulating LECs aimed at reducing their ability to profit from providing access to high call volume services. To circumvent the Commission’s rules, access-stimulating LECs have adjusted their practices, and now they support such services by interposing intermediate providers of switched access service not subject to the Commission’s existing access stimulation rules in the call route, thereby increasing the access charges interexchange carriers (IXCs) must pay,” the FCC explained in the notice.

The FCC noted that it is “mindful of the fact that practices adjust to regulatory change; therefore we invite comment on how to avoid introducing incentives for new types of arbitrage to arise.”

One of the alternatives suggested in the NPRM to the proposal to require access-stimulating LECs to accept responsibility for delivered calls or to accept direct connections from IXCs is to require all access-stimulating LECs to transition to bill-and-keep arrangements. The NPRM also raises questions about how to define access stimulation.

“Given evidence that access stimulation schemes are still being perpetrated notwithstanding our existing rules, we seek comment on whether, and if so how, to revise the current definition of access stimulation to more accurately and effectively target harmful access stimulation practices. What has been the impact of the current definition over the last seven years? Has it proved effective at identifying actors that are distorting the ICC system for their own gain? If not, how can we revise the definition to more accurately identify these types of harmful practices? Should we, for example, modify the ratios or triggers in the definition? If so, how should those ratios or triggers be modified? Should we adopt triggers that relate to the stimulation of tandem and transport services? If so, what should those triggers be? Is the current revenue sharing agreement requirement in our rules sufficiently broad or should it be revised, and if so how? Or, should we remove the revenue sharing portion of the definition, because access stimulation seems to be occurring in some instances even in the absence of revenue sharing? Do commenters believe that revenue sharing alone is an indication of access stimulation? If so, should we revise our rules so that the existence of a revenue sharing agreement triggers the access stimulation rule? How will we know if parties are engaged in revenue sharing? Should we require these parties to self-report? If so, we seek comment on how to implement a self-reporting requirement,” the FCC asked.

“Alternatively, based on parties’ experience with our existing access stimulation rules, is there reason to find that access stimulation itself is unjust and unreasonable because of the imposition of excess charges on IXCs, wireless carriers, and their customers? Or, is there a subset of such activities that we should separately identify as unlawful?” it added.

It asked for input on three other specific types of arbitrage: (1) “an access arbitrage scheme involving a revenue sharing or other type of agreement between an intermediate access provider and a terminating carrier that may not meet the definition of access stimulation under our rules, such as a Commercial Mobile Radio Service (CMRS) carrier”; (2) “mileage pumping,” which involves a LEC changing its point of interconnection (POI) “for the sole purpose of artificially inflating their per-MOU [minute of use], per-mile transport rates and revenue”; and (3) “the addition of superfluous network facilities for which the LEC can bill switched access charges, but the rates for which are not subject to the current transition to bill-and-keep.” —Lynn Stanton, lynn.stanton@wolterskluwer.com

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