FCC Orders Three-Year Transition to Bill-and-Keep for 8YY Originating End Office Access Charges While Capping Tandem Transport and Database Query Charges

October 16, 2020 | by Andrew Regitsky

FCC Orders Three-Year Transition to Bill-and-Keep for 8YY Originating End Office Access Charges While Capping Tandem Transport and Database Query Charges

In a Report and Order (Order) released on October 9, 2020 in Docket 18-156 that will become effective 30 days after it appears in the Federal Register, the FCC (1) initiated a three-year transition to move end office originating 8YY access charges to bill-and-keep; (2) by July 1, 2021, require tandem providers to eliminate existing tandem switching charges and transport charges for originating 8YY traffic, and instead subsume charges for both tandem switching and transport into a single joint tandem switched transport access service rate element not to exceed $0.001 per minute; and (3) by July 1, 2023, cap 8YY database query charges at $0.0002 per query and forbid more than one query charge per call.  Carriers that lose revenue from these switched access reductions can recover them through existing universal service charges such as the Connect America Fund.

The agency takes these actions because of the increasing arbitrage and fraud that exist in today’s 8YY market.

Such schemes takes various forms, including “traffic pumping” by robo-callers who are paid to make massive numbers of illegitimate calls to toll free numbers; “benchmarking” and “mileage pumping” by competitive local exchange carriers that aggregate other carriers’ 8YY traffic to hand it off to 8YY providers in areas where they can charge higher rates after transporting it an inflated distance; and “double dipping” schemes to assess multiple toll free database queries when only one such query is needed. (Docket 18-156, Order at para. 2).

Here is how the 8YY transition will occur:

Originating 8YY end office charges - will be reduced to bill-and-keep over three steps beginning July 1, 2021 and ending July 1, 2023.  As the initial step, the Commission caps all intrastate originating 8YY end office rates for rate-of-return ILECs not previously capped at their current levels as of the effective date of this Order.  Intrastate originating 8YY end office rates for price cap ILECs are already capped.

Effective July 1, 2021, all local exchange carriers are required to bring any intrastate originating 8YY end office access rates that exceed the comparable interstate rates into parity with the comparable interstate rates.

Next, the Commission requires all intrastate and interstate originating 8YY end office charges to transition from their capped amounts to bill-and-keep in two equal reductions.  Effective July 1, 2022, all originating 8YY end office rates are reduced to half of their capped levels. Then, effective July 1, 2023, all originating 8YY end office rates are reduced to bill-and-keep ($0.00).

Joint Tandem Switched Transport Access Service Rate Cap - The Commission adopts a single uniform nationwide rate cap of $0.001 per minute for originating 8YY tandem switching and transport access charges as of July1, 2021.  

Originating 8YY tandem switched transport access services include transport mileage charges, multiplexing charges, and transport termination charges for originating traffic, and all services related to the transport function, as well as all access charges related to the tandem switching function, regardless of the varying terminology used in tariffs.

The FCC will not require tandem transport rates to transition to bill-and-keep ensuring that intermediate carriers in the 8YY call path that do not directly serve end users will continue to be compensated.  However, the Commission notes that it eventually will move tandem transport to bill-and-keep sometime in the future.

In the interim, the agency caps all intrastate and interstate originating toll free tandem switching and transport rates at their current levels as of the effective date of this Order.

Then, effective July 1, 2021, all tandem providers must eliminate existing tandem switching charges and transport charges for originating 8YY traffic, and instead subsume charges for both tandem switching and transport into a single joint tandem switched transport access service rate element not to exceed $0.001 per minute.

8YY Database Query Charges – The Commission reduces database query charges to a cap of $0.0002 per query in three steps ending July 1, 2023.  In addition, as of the effective date of this Order, the FCC ends double dipping by prohibiting carriers from charging for more than one query per call.  The database query charge can only be assessed by the carrier originating the call.

First, the Commission caps all 8YY Database query charges not previously capped at their current levels as of the effective date of this Order.

Second, effective July 1, 2021, 8YY Database query rates for each carrier are capped at the national average query rate of $0.004248. (Capped 8YY Database query rates from step one of the transition that are lower than $0.004248 must remain at those lower capped rates.).

Third, effective July 1, 2022, all database query rates will be transitioned half of the way to the final target rate of $0.0002.  So, if a carrier’s database query rate is capped at $0.004248 in the second step, its cap would be $0.002224 on July 1, 2022.  If a carrier’s rate cap is below $0.004248, then it will use its capped rate to arrive at its rate effective July 1, 2022. 

Finally, effective July 1, 2023, carriers may not charge more than $0.0002 for an 8YY Database query.

Recovery of Lost Revenues – The Commission declines to make any changes to its rules to enable carriers to recover lost 8YY access revenues.  Carriers are free to recover these revenues from their customers through increasing their Subscriber Line Charges or Access Recovery Charges (up to the caps).  In addition, Rate-of-Return ILECs can use the Eligible Revenues methodology to recover much of their lost revenues.  Finally, carriers are free to petition the Commission if they believe that they need additional revenues not available through existing mechanisms.

CLECs – The Commission states that CLECs are required to reduce their rates as their neighboring ILECs do so to comply with the “Benchmark Rule.”

The Commission believes its actions will have many benefits for Americans:

First, by transitioning interstate and intrastate end office originating access rates for 8YY calls to bill-and-keep, moving 8YY tandem switching and transport services and database query charges to nationally capped low rates, and limiting database queries to one charge per call, we discourage inefficient routing designed to maximize 8YY access revenues. Consistent with the Commission’s findings in the USF/ICC Transformation Order, moving originating 8YY end office access rates to bill-and-keep will move prices closer to being cost reflective and, as a consequence, “carrier decisions to invest in, develop, and market communications services will increasingly be based on efficient price signals.”  Taken together, these actions will reduce the access charge and network operation costs carriers incur and will provide better investment incentives...

Second, our actions will reduce the 8YY originating access rates paid by interexchange carriers for legitimate 8YY calls...

Third, our actions will encourage carriers to efficiently transition to IP services. Under the current system of intercarrier compensation, access revenues can be inflated by inefficiently exchanging traffic over TDM facilities.  Reducing those revenues will reduce incentives to route traffic inefficiently and to use TDM facilities which will further encourage the transition to IP services...

Finally, our reforms will reduce intercarrier compensation disputes. Carriers will no longer need to devote as many resources to monitor their 8YY call traffic and dispute 8YY invoices.  For end office switching, billing will not be necessary. Although some of these benefits are difficult to quantify, together they will be substantial.  (Id., paras. 103-106.).

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