On April 1, 2020, the FCC released a Notice of Proposed Rulemaking (“NPRM”) proposing to deregulate and detariff remaining interstate end-user, access charges (together “End User Charges”)1 billed by incumbent local exchange carriers (“ILECs”), as well as prohibit competitive local exchange carriers (“CLECs”) from optionally tariffing similar charges. The new rules would also require all carriers to simplify their customers’ bills and address issues concerning Universal Service Fund (“USF”) and related federal program historic reliance on End User Charges as a method of calculating interstate local service revenues.
Responding to rapid consumer migration from traditional telephone services to a wide variety of modern alternatives, including mobile wireless services and over-the-top voice applications, this NPRM marks the Commission’s latest action to “eliminate outdated and unnecessary regulations” and “encourage efficient competition.” Public comments on the proposed rules are due 45 days after their publication in the Federal Register. Interested parties will then have an additional 30 days to file reply comments. A brief summary of key issues covered in the NPRM follows.
Eliminating ILEC and CLEC Tariffs for End User Charges and Other Mandatory Charges
The End User Charges subject to this NPRM consist of the Subscriber Line Charge, the Access Recovery Charge, the Presubscribed Interexchange Carrier Charge, the Line Port Charge, and the Special Access Surcharge. Since ILECs no longer enjoy a monopoly on voice services, the FCC sees no need to continue regulating these charges. Accordingly, it proposes to “find that widespread competition among voice services makes ex ante pricing regulation and tariffing of [End User Charges] unnecessary to ensure just and reasonable rates or to otherwise protect customers”. The NPRM specifically notes that when, as here, markets become competitive without government intervention, price regulations are not only unnecessary, but also “counterproductive” and thus “contrary to the public interest.” Therefore, the FCC proposes to detariff interstate ILEC End User Charges nationwide. In so doing, it seeks comments on any factors that support or undermine this proposal, including whether there would be any benefits to limit detariffing to smaller geographic areas.
The NPRM also seeks to detariff CLEC interstate End User Charges. Although current FCC rules do not require CLECs to file tariffs for these charges, some CLECs do so voluntarily. The NPRM finds no basis for this practice to continue, noting that CLECs, by definition, “are subject to competition and already have pricing flexibility.” Accordingly, the FCC proposes to require CLECs to detariff these charges nationwide.
Finally, the FCC recognizes that many carriers also include other charges related to federal programs in their tariffs, i.e., pass-throughs for USF contributions. The NPRM seeks comments on mandatorily detariffing these charges. The FCC reminds interested parties that its Truth-in Billing (“TIB”) rules will continue to govern if and how these charges can be passed through to end users.
Intrastate End User Charges
Although the FCC lacks legal authority to regulate purely intrastate charges, it invites information about the status and impact of state telephone rate deregulation generally.
Simplifying Consumer Telephone Bills
The FCC is concerned that subscriber telephone bills are too difficult for consumers to understand. For example, the NPRM explains that the industry refers to the Subscriber Line Charge on end-user bills in various ways, e.g., “FCC-Approved Customer Line Charge,” “FCC Subscriber Line Charge,” and “Federal Line Fee.” These terms, according to the FCC, are not only meaningless to consumers, but may also mislead them into concluding that the government mandates the amount of this or other End User Charges. In response, the NPRM seeks comments on a number of possible remedial measures, including:
- Modification of the TIB rules to explicitly prohibit carriers from assessing any separate End User Charges, such as Subscriber Line Charges and Access Recovery Charges, on customers’ bills after those charges are deregulated and detariffed;
- Ways to minimize any customer confusion regarding telephone bills during the transition to price deregulation and detariffing of End User Charges;
- The existence of states that authorize or require carriers to assess separate intrastate end-user charges (if so, commenters are encouraged to provide specific examples);
- In states which allow carriers to impose separate intrastate user charges, should carriers be required to clearly indicate on bills that these charges are not authorized federally; and
- Feedback on any consumer education initiatives the FCC or providers should undertake to help consumers understand any billing changes that may result from the adoption of the proposed changes.
USF and Other Related Federal Program Issues
The Commission’s rules contemplate End User Charge revenues in the calculation of USF support and intercarrier compensation. Unless those rules are amended to take account of elimination of End User Charges and their revenues, incumbent rural carriers that are rate-of-return regulated will not receive proper compensation. Thus, the FCC proposes new methodologies for calculating USF High Cost support and Connect America Fund Intercarrier Compensation.
Additionally, many service providers required to make USF contributions use interstate End User Charge revenues as part of their calculation of interstate and international revenues. To recognize the elimination of interstate End User Charges, the FCC seeks comment on a proposal to create a safe harbor that assumes 25% of local voice services revenues are interstate or continue to conduct a traffic study.
To give carriers enough time to amend their tariffs and billing systems, the FCC proposes a transition that would allow carriers to detariff End User Charges effective July 1 following the effective date of the order adopting the final rules2. They would then have an additional year to actually detariff these charges. However, carriers would not be allowed to remove these charges from their interstate tariffs on dates other than the annual tariff filing dates specified by the FCC. Once the transition ends, no carrier would be allowed to include these charges in its interstate tariffs.
The FCC also wants to know if the above timeline gives covered entities enough time to implement the necessary changes to customer billing, including updating corporate billing systems and giving subscribers adequate notice.
Marashlian & Donahue stands by, ready to help your business face these complex issues. If you have questions or would like more information, please contact Robert H. Jackson, Esq., at (703) 714-1316 or email@example.com, or Michal J. Nowicki, Esq. at (703) 714-1311 or firstname.lastname@example.org. Mr. Jackson has been involved with access charges since their inception in the mid-1980s. He was responsible for the regulatory aspects of telecommunications tariff and ratemaking, both in-house as an executive director for US West (now a part of CenturyLink) and as outside legal counsel to the National Exchange Carrier Association (“NECA”).
1 The specific charges are defined in the FCC’s rules. 47 C.F.R. §§ 51.915(e), 51.917(e), 69.115, 69.152, 69.153, 69.157.
2 The earliest expected deadline for detariffing End User Charges is July 1, 2021.