Parties Continue to Give FCC Conflicting Advice on Intercarrier-Compensation Arbitrage Fixes

The agency should "proceed with its proposal to place the financial responsibility on an access-stimulating LEC so it, rather than interexchange carriers (IXCs), pays for the delivery of calls to its end office or the functional equivalent," said AT&T. "The Commission also should make clear that CEA [centralized equal access] service providers are CLECs for purposes of the Commission’s traffic pumping rules. However, the Commission should not allow the access stimulating LEC a free pass by being able to make the IXCs responsible for all the additional costs of establishing direct connections and the delivery of the access stimulation traffic."

NTCA said the FCC's "two-pronged proposal unquestionably achieves the goal of setting proper incentives, offering in particular an incentive for more efficient arrangements for exchanging traffic between LECs and IXCs in the case of such high volumes -- and shifted financial responsibility if that does not occur." But the RLEC group disputed AT&T's "whack-a-mole concern" that access stimulators would move their traffic from LEC to LEC after direct interconnection. Incompas was supportive of the FCC proposal but said "it is equally critical that the NPRM's suggested notice requirement resolve compensation disputes between IXCs and LECs that are not participating in access stimulation."

Verizon and Sprint called for finishing the move to bill-and-keep for all telecom traffic. "Completing this transition would eliminate incentives for intercarrier compensation arbitrage once and for all," said Verizon. "In the interim, the Commission’s proposed targeted solution to access arbitrage should curtail bad behavior." Sprint supported "full bill-and-keep" and establishing a handful of points of interconnection nationwide where all providers connect either directly or indirectly, and assume responsibility for delivering and retrieving their traffic.

WTA continued to back a proposal it joined in an April letter from NTCA, AT&T, Verizon, Windstream, NCTA, Frontier Communications, CenturyLink and USTelecom. That proposal calls for access-stimulating LECs to remove any terminating interstate tandem switching and transport charges from their tariffs and to assume financial responsibility for all intermediate switched access provider interstate tandem switching and transport charges bound for such LECs, WTA said. It and NTCA opposed more sweeping access proposals. CenturyLink endorsed the joint call and plugged its proposed separate "framework for all other terminating access contexts," which was also backed by Peerless Network.

"To address disputes relating to rates assessed by tandem providers, the Commission should simply reset the rates that all tandem providers can charge," said T-Mobile. "However, the Commission must reject sweeping proposals promoted by IXCs and ILECs to unwind 20 years of competitive policy and mandate direct connections." Inteliquent said the FCC should "adopt a 10-mile cap on mileage for access stimulation traffic" and take action "against new forms of arbitrage that leverage call blocking schemes to drive up profits from access stimulation." It also agreed with AT&T the direct connection option needed revision. O1 Communications said, it wasn't surprising direct-connection proposals were opposed by T-Mobile and Inteliquent, which "are engaged in an exclusive relationship that discriminates against other transit providers and allows Inteliquent to transmit all types of traffic over direct connections, including both Wholesale and Retail Traffic, to T-Mobile's multi-million member customer base."

Others opposed the FCC and incumbent proposals and offered alternatives. "Neither the direct connection/LEC-must-pay nor the bill-and-keep proposals will solve the access arbitrage problem," said Iowa Network Services (Aureon). It said the FCC must "enforce the CEA mandatory use policy for all traffic bound for subtending LECs to ensure that the CEA rate is low enough to make traffic pumping unprofitable, adopt Aureon’s new rule to eliminate access arbitrage, regulate the rates for transit service, wholesale interexchange transport, and intermediate carrier transport, and ensure that those rates are cost-based." HD Tandem backed "a comprehensive and consistent application of rules for all similarly situated providers. If the Commission endorses incomplete or one-sided proposals and half-steps, it will have created a patchwork system of different types of access charges (e.g, access stimulation, non access stimulation, 8YY, intra-MTA, CMRS access, etc.) and stripped benefits for some carriers, while preserving the incentives for other carriers to collect and share access revenues."

A group of CLECs said IXCs misled the FCC. A "review of the IXCs’ comments show more of the same: unsupported and hyperbolic allegations of harm and negative consequences with no truthful, reliable, post-2011 data or evidence to support them," said BTC (Western Iowa Networks) and others. They added that various terms in the FCC's proposed rules, "including the terms 'financial responsibility,' 'intermediate access provider,' and 'direct connection,' are vague and confusing. Moreover, the Commission’s proposals are not desired by the very carriers that came to the agency asking for relief. Many of the IXCs are dismissive of the value behind the 'direct connection' proposal." Teliax urged the FCC "to ignore, as contrary to fact, AT&T’s argument that it cannot obtain direct connections with competitive CLECs and, as such, is 'forced' to pay excessive payments for intermediate (tandem) access." Others also filed in the docket.