AT&T last week asked the FCC to address what it called “nefarious” inter-carrier compensation(ICC) practices including unusually high tandem switching and transport access charges and non-competitive 800-number database dips. In a blog post AT&T noted that such practices are counter-productive to FCC efforts to phase out the traditional approach toward inter-carrier compensation in favor of a “bill-and-keep” approach in which carriers will pay few, if any, charges to one another for exchanging voice traffic.
Inter-Carrier Compensation Arbitrage
The unusually high tandem switching and transport access charges come into play for competitive local exchange carriers who terminate calls to companies engaged in access stimulation, also known as “traffic pumpers.” The traffic pumpers traditionally have included companies offering services such as free or low-cost conferencing and chat lines that receive a high volume of calls. Such companies traditionally have chosen local carriers that charge other carriers large fees for terminating calls. The benefit for the traffic pumpers is that they traditionally have received a portion of ICC revenues from their local carriers.
Initially traffic pumpers received a portion of terminating per-minute access charges but that loophole was largely closed when the FCC ruled that competitive local carriers engaged in access stimulation – defined as those whose incoming calls exceeded their outgoing calls by a certain ratio – should not peg their access rates to the incumbent local carrier but instead to the lowest-priced price cap carrier in the state.
According to AT&T, however, there is now a new opportunity for traffic pumpers involving unusually high tandem switching and transport costs paid to terminating carriers. Those fees are mileage based, enabling a local carrier to deliberately configure its network to maximize mileage fees which it can then share with the traffic pumpers.
AT&T’s petition to the FCC asks the commission to forbear from tariffing tandem switching and transport access, arguing that the market is a competitive one, with companies such as Inteliquent, Level 3, Peerless Network and Hypercube offering services.
Currently, long-distance carriers must pay properly tariffed and billed tandem and transport charges, but according to AT&T “are not always clearly permitted to select the provider of those services or the most efficient means to transport traffic” – an economic relationship that AT&T calls “perverse.”
800-Number Database Dips
AT&T also asks the FCC to forbear from rules that permit local carriers to charge for per-query database dips on toll-free calls to their customers – charges AT&T says are sometimes non-competitive and which the local carriers may be sharing with traffic pumper customers.
Here, too, AT&T notes that competitive choices exist. But, the company argues, “toll-free database query charges assessed on [long-distance carriers] are not subject to any market discipline.”
Image courtesy of flickr user S Lowe.