The FCC’s Universal Service and inter-carrier compensation (ICC) reform order, also known as the Connect America Fund Order, provides further details about several key mandates outlined when the order was adopted last month — mandates designed to minimize access stimulation and phantom traffic and to resolve long-standing questions about whether VoIP traffic is subject to long-distance access charges.

Phantom Traffic
As Telecompetitor has reported, there are numerous practices that can be used to prevent a carrier from collecting per-minute long-distance access charges on calls to its customers. The USF and ICC reform order specifically addresses one of these practices—the practice of intentionally removing or altering identifying information so that the terminating carrier cannot properly bill for terminating the call. And now that the overall rules about VoIP and PSTN interconnection have been clarified, potentially carriers may be able to resolve other access avoidance disputes—such as those involving VoIP carriers that terminate long-distance calls to trunks intended for local calls.

Some VoIP providers have deliberately altered certain call identifiers or used other access avoidance schemes because they have argued that VoIP calls are not subject to access charges. In the new order, the FCC declared that VoIP calls that begin or end on the PSTN are subject to access charges, at least until the access charge system is phased out—an objective also encompassed in the order.

In the full text of the 750-page order released on Friday, the FCC specifically states that “VoIP traffic destined for the PSTN will now be required to transmit the telephone number associated with the calling party to the next provider in the call path.” The order also states that if the charge number (the party to be billed for the call) is different from the calling party number, that charge number also must be passed without alteration.

Recognizing that calls are sometimes handled by multiple carriers, the FCC said that “responsibility–and liability—should lie with the party that failed to provide the necessary information or that stripped the call-identifying information from the traffic before handing it off.”

VoIP Traffic Gets Unique Access Charge Treatment
Although VoIP providers are now subject to per-minute access charges for calls that begin or end on the PSTN, those charges will not always be the same as what traditional carriers pay for the same type of call. According to the new order, all toll (i.e., long-distance) VoIP calls will be subject to interstate access charges, even if they begin and end in the same state.

“By declining to apply the entire preexisting inter-carrier compensation regime to VoIP-PSTN traffic, prospectively, we recognize the shortcomings of that regime . . . ” wrote the FCC. “Requiring payment of all existing inter-carrier compensation rates applicable to traditional telephone service traffic as part of a transitional regime for VoIP-PSTN traffic would, in the aggregate, increase providers’ reliance on inter-carrier compensation at the same time the commission’s broader reform efforts seek to move providers away from reliance on inter-carrier compensation revenues.”

The FCC argued that it should not be difficult to implement a unique access charge regime for VoIP traffic.

“Commenters . . . contend that it is possible to make the distinctions necessary to implement such a framework, whether directly in some cases or through the use of proxies or factors or the like . . .,” wrote the FCC. “A number of commenters contend that factors or traffic studies have proved workable in addressing the jurisdiction of other traffic and similar approaches can be used for VoIP-PSTN traffic as well.”

Small telcos who rely heavily on access charge revenues have argued that if VoIP traffic is charged a different per-minute ICC rate than traditional voice traffic, there will be an incentive for network operators to misrepresent traditional traffic as VoIP. But the FCC apparently believes this concern can be addressed as part of the contract negotiation process.

The FCC noted that VoIP providers typically do not terminate traffic directly to local telcos but instead do so through a wholesale network operator. The FCC envisions that small telcos would negotiate contracts with those operators to determine the percentage of VoIP traffic involved.

“As an alternative, we permit the LEC to specify in its intrastate tariff that the default percentage of traffic subject to the VoIP-PSTN framework is equal to the percentage of VoIP subscribers in the state based on the Local Competition Report, as released periodically,” the FCC said.

In the ICC and USF reform order, the FCC also specifies that local telcos must negotiate direct IP interconnection agreements with other providers in good faith. In a notice of proposed rulemaking included in the order, the FCC also seeks input on whether it should impose additional IP-to-IP interconnection requirements.  The commission dedicated 17 pages to the topic, asking, for example, if the cost of IP-to-TDM connection should be borne by the carrier that elected TDM interconnection when a carrier that has deployed IP requests to interconnect in IP.

Access Charge Stimulation
When the USF and ICC reform order was adopted, the FCC said the order would address access charge stimulation, also known as “traffic pumping”—a situation in which a local telco shares access charge revenues with a free calling service provider that terminates a high volume of calls to the telco.

The full text of the order provides details about how the FCC hopes to address this, beginning with a plan to define access stimulation as occurring when two conditions are met. The first condition is that the local telco has entered into an access revenue sharing agreement and the second is that the local telco either has had a three-to-one interstate terminating-to-originating traffic ratio in a calendar month or has had a greater than 100% increase in interstate originating and/or terminating switched access minutes of use in a month compared to the same month in the preceding year. “We adopt these changes to ensure that the access stimulation definition is not over-inclusive and to improve its enforceability,” the FCC wrote in the order.

If a small telco is determined to have been involved in an access stimulation scheme, the telco will be required to file a revised tariff. “A rate-of-return [carrier] must file its own cost-based tariff . . .  and may not file based on historical costs. . . or participate in the NECA traffic-sensitive tariff,” the FCC said.

USF Reform Recap
In case you missed it, Telecompetitor also reviewed the highlights of the FCC Connect America Fund order that pertain to Universal Service reform.