The FCC adopted an order on Friday that calls for carriers to move to a bill-and-keep approach for access charges on toll-free calls. The goal of the FCC bill-and-keep action is to curb “arbitrage and fraud” undermining the intercarrier compensation system for toll-free calling.
Access charges are the per-minute charges that one carrier pays another for originating or terminating traffic between one another. Those charges tend to be higher in rural areas, where network costs are the highest and carriers recover some of those costs through the access charge system.
In recent years, arbitragers have taken advantage of this system.
One of the earliest forms of arbitrage involved the operator of a free conference call service or other service that receives a lot of toll-free calls partnering with an incumbent or competitive rural carrier to terminate those calls. The rural carrier would then share a portion of the intercarrier compensation revenue earned on those calls with the free conference call or other service, known as the “traffic pumper.”
The FCC has taken various actions aimed at curbing traffic pumping, including imposing different rules for intercarrier compensation when a rural carrier’s inbound traffic exceeds its outbound traffic by a certain ratio. But traffic pumpers and carriers that they work with have continued to find arbitrage opportunities on the terminating and originating side of the call.
FCC Bill-and-Keep for Access Charges
As the FCC explained in a press release, a bill-and-keep arrangement is one in which “carriers are paid by their subscribers rather than by other carriers to cover the cost of their networks.” According to the commission, this approach “ensures that the called party will continue to pay the toll charges for toll-free calls.”
The order adopted Friday calls for a “transitional step” in which transport and tandem switching charges for toll-free calls, also known as 8YY calls, will be combined into a single access charge capped at $0.001 per minute. In addition, charges for 8YY database queries will transition to $0.002 over a period of nearly three years.
In the FCC bill-and-keep press release, FCC Chairman Ajit Pai noted that “toll-free calls have provided an essential service to consumers and businesses, providing a recognizable way to contact a business.”
He added, though, that: “[T]he complex carrier-to-carrier billing system underpinning these services has encouraged robocallers to make massive numbers of illegitimate calls to toll-free numbers and enabled other arbitrage practices that have driven up costs for consumers and businesses.
“Now, the gravy train is over. We’re on track to transition to a simpler intercarrier billing system that will end the waste and arbitrage and enhance the value of toll-free services for consumers and businesses.”