Iowa Moves to Curb Alleged Traffic ‘Pumping’

The Iowa move drew praise from Qwest. “We are pleased the IUB has issued rules that set apart traffic pumping and other access-stimulation schemes from legitimate switched-access calls to residents and businesses in rural areas,” said Steve Davis, senior vice president of public policy and government relations. “It is our hope that these rules serve as a precedent and model for eliminating unlawful arbitrage in other parts of the nation where traffic pumping cases and issues remain."

The Rural Iowa Independent Telephone Association is “disappointed” the board didn’t adopt “our recommendation that HVAS tariffs be allowed to automatically go into effect unless objections are filed and the notion that the IUB can revoke a certificate of public necessity,” said Executive Director Sheila Navis. The group takes exception to use of the term “access stimulation,” she told us by e-mail. “We noted in our comments that rural LECs, like RBOCs and IXCs, are regulated utilities,” Navis wrote. “Regulated utilities are private companies and, as such, should be finding new customers and new uses for its existing services. Economic forces of a free market system rightfully encourage any company -- including regulated utilities -- to increase the products and services they sell in order to increase their profits. … RIITA supports this Board’s reference to the situation as `High Volume Access Services,’ which is a much more accurate description."

The Iowa board added a definition of high volume access services (HVAS), based on the effect a single customer or group of similar customers may exert on a local exchange carrier’s total access billings in a given period, among other changes. “If a LEC’s total access billings increase, or are expected to increase, by more than 100 percent in less than six months, there will be a presumption that an HVAS situation exists,” the board said.

The board defines high volume access services as “any service that results in an increase in total billings for intrastate exchange access for a local exchange utility in excess of 100 percent in less than six months.” HVAS typically results in significant increases in interexchange call volumes and can include chat lines, conference bridges, call center operations, help desk provisioning or similar operations, it said. These services may be advertised as being free or for the cost of a long distance call and call service operators often provide marketing activities for HVAS in exchange for direct payments, revenue sharing, concessions or commissions from local service providers.

Hoping to avoid tangling true high volume pumping and normal variations in access billings or typical levels of growth, the board invited comment on the 100 percent/six months model’s appropriateness. Commenters challenged the model’s validity, warning that it could trip up legitimate spikes in traffic. Nonetheless, the board said Monday that the 100 percent/six months threshold will apply unless and until experience demands adjustment.

The board won’t assume that revenue-sharing automatically signals a pumping scheme, it said. “A blanket prohibition on revenue sharing agreements could result in unintended consequences in the form of prohibiting legitimate business arrangements (sales on commission, for example),” the order said. “The Board will not alter this rule to ban such agreements.” It banned the application of association access service rates to HVAS traffic. The board decided “certifications could be subject to individual interpretation and, therefore, would not be an effective mechanism,” it said. Acknowledging the risk of overburdening small utilities, the board said it will monitor the rules’ impact and, if needed, adjust them.

Under the rules, local exchange carriers adding a new HVAS customer or otherwise expecting or experiencing an HVAS situation must inform relevant interexchange carriers of the phone numbers involved and, for new customers, the date when they expect HVAS to start, the order said. “This notification will allow the IXCs to commence negotiations with the LEC regarding the terms and procedures for exchange of the HVAS toll traffic, with the possibility of seeking a Board resolution,” it said. “If the parties are able to negotiate new tariff provisions for HVAS, then this notice and negotiation period may also provide time for filing the agreed-upon tariff with the Board, prior to initiation of service. This timing is important; the LEC will have no access rate to apply to HVAS traffic until its individual HVAS tariff is accepted for filing and has become effective.” As Qwest and the state consumer advocate urged, the order was revised to allow 60 days for negotiation.

If the board has to resolve a matter, access rates for toll traffic to HVAS numbers may be based on the incremental cost of providing the service, not including any marketing or other payments to the HVAS customer, the board said. To account for uncertainty about projected HVAS traffic volumes, the rule allows use of rate bands varying by traffic level, “presumably with lower rates for higher volumes of HVAS traffic,” the board said. When an interexchange carrier suspects a local exchange carrier of traffic pumping but the 100 percent/six months threshold hasn’t been met, the interexchange carrier may file a complaint to the board for investigation, the order said. Local exchange carriers that fail to address HVAS situations would risk revocation of certification.

Access stimulation is addressed by the FCC’s National Broadband Plan, the board’s staff noted in an April memo. If put into effect, the federal plan’s handling of intercarrier compensation could render the new Iowa rules obsolete within 10 years, the staff said.