FCC Opens Rulemaking on Traffic Pumping
The FCC has “tentatively concluded” that it should revise rules on access tariffs to ensure they remain “just and reasonable” in light of alleged “access stimulation” efforts by rural phone companies. The rulemaking targets what some call “traffic pumping.” It occurs when companies such as free calling services generate high volumes of traffic for rural telecom carriers, which then increase access charges paid by long distance companies that transport the increased traffic to the local carriers’ service areas.
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“Although it is reasonable for carriers to seek to increase demand for their services, it is also critical to ensure that rates remain just and reasonable over time as costs and demand change,” the FCC said in a rulemaking notice issued late Tuesday. The agency said the issue is even more critical in light of a Telecom Act provision that eased tariff regulation. Some tariffs are “deemed lawful” if the agency doesn’t act on them within a specific period, the FCC said.
The FCC seeks comment on several ways to address alleged access stimulation. One plan would require carriers to file revised tariffs if demand exceeded a threshold. The tariff filings would give the FCC a chance to “review the relationship between rates and… costs” when there’s “significant increases in traffic,” the FCC said. Switching costs don’t rise proportionate to the rise in demand for access, the FCC said. Another idea is for carriers to file certifications with their tariffs, attesting that they aren’t stimulating traffic. The agency is also considering using its forbearance power to stop enforcing the “deemed granted” provision of the Telecom Act “if a mid-course tariff filing is triggered by a sufficient increase in demand.”
To understand the impact of access stimulation, “we need to establish a more complete record” of how high-volume services are provided and “how compensation occurs between involved parties,” the FCC said. The notice seeks information on practices of both incumbent and competitive local exchange carriers. The FCC asked local carriers for data on projected costs from the higher traffic “to permit us to evaluate the effect of the demand increase on the projected… rate-of-return.” Comments will be due 30 days after the order appears in the Federal Register.
The FCC “tentatively concluded” that a rate-of-return carrier sharing revenue or other compensation with an end user customer and then bundling that cost with access “is engaging in an unreasonable practice” that violates the Communications Act and the FCC’s “prudent expenditure standard.” Parties should “describe in detail what monies or other benefits the LEC provides to the provider of the stimulating activity, including, for example, direct payments, revenue sharing, commissions or free service,” the FCC said. “AT&T and Qwest allege that the LECs experiencing or creating this access growth share the access revenues they receive with the service providers whose services are generating the demand growth.”
FCC Acts on Qwest Complaint
The FCC in a separate order partly granted a formal complaint by Qwest against Farmers and Merchants Mutual Telephone Company, of Wayland, Iowa. The FCC said the phone company earned an excessive rate of return from access charges during July 2005 - June 2007 and that the company’s tariff should be reviewed. But it also ruled that Qwest couldn’t recover damages because the tariff had been “deemed lawful.”
Qwest had accused Farmers of having a “deliberate plan to increase dramatically the amount of terminating access traffic delivered to its exchange via agreements with conference calling companies,” the FCC said. The agency said it was convinced by Qwest’s argument “that Farmers’ costs did not rise by nearly the same proportion as its access revenues.” But when the company asked the FCC to deny the “deemed granted” status of Farmers’ tariff and apply damages, the agency said it couldn’t legally do that.
On the other hand, the FCC denied Farmers’ request for a ruling that Qwest made only partial payment for Farmers’ access services and so is engaging in “unlawful self help.” The FCC said the request “is tantamount to a cross complaint,” which FCC complaint rules “expressly prohibit.” - - Edie Herman