General Regulatory & Legal Advisory | Client Advisory

FCC Proposes Updates to Intercarrier Compensation Regime Rules to Eliminate Access Arbitrage; Includes Potentially Onerous and Costly Compliance Reporting Duty Imposed on Entire IP-Enabled Services Industry Sector

In 2019, the Commission adopted the Access Arbitrage Order, in which it revised its Access Stimulation Rules to prohibit local exchange carriers (LECs) and Intermediate Access Providers from gaming the intercarrier compensation regime by inflating traffic volumes to maximize access charge revenues. To crack down on new ways carriers are manipulating traffic to evade the Commission’s Access Stimulation Rules and continue their arbitrage schemes, the Commission released a Further Notice of Proposed Rulemaking, wherein the FCC:

  • Proposes ways to clarify perceived ambiguities in the Commission’s rules that some providers are exploiting to force IXCs and their end-user customers to continue to bear the costs of high-volume calling services by incorporating IPES Providers (IP enabled service or IPES) into the call path.
  • Proposes that when traffic is delivered to an IPES Provider by a LEC or an Intermediate Access Provider, and the terminating-to-originating traffic ratios of the IPES Provider exceed certain triggers established in the existing Access Stimulation Rules, the IPES Provider will be deemed to be engaged in Access Stimulation.
  • Proposes that Intermediate Access Providers would be prohibited from imposing tariffed terminating tandem switching and transport access charges on IXCs sending traffic to access stimulating IPES Providers or to such providers’ end-user customers.

Last, but certainly not least if your company is an IPES Provider (which includes providers of VoIP), is a proposed rule requiring IPES Providers to “count and report their call traffic volumes to the FCC to determine compliance with the Access Stimulation Rules.”

Under the Commission’s proposal, the IPES Provider would be responsible for calculating its traffic ratios and for making the required notifications to the Commission and affected carriers, just as LECs are responsible for these activities under the current rules. According to the FNPRM, this proposal is consistent with other reporting requirements imposed on VoIP providers, such as the obligation to report certain information on FCC Forms 477 and 499.

To be clear, the FCC is proposing to impose a regulatory compliance reporting duty upon an entire industry segment, one that is highly diverse and robustly competitive, all in the name of serving the interests of legacy incumbent LECs that, for decades, have resisted the call to upgrade their circuit switched network infrastructure to allow for greater direct IP interconnection with the thousands of competitive carriers whose traffic is terminated over their networks.  As most know, the retention of the major ILECs’ circuit-switched networks often require competitors to have and pay for, otherwise unnecessary Feature Group D connections in every LATA.  Anticipating the backlash emanating from the IP enabled services industry sector, the FCC goes on to state:

“Commenters should consider that although we intend to reduce or eliminate arbitrage opportunities, we do not want the financial consequences of our Access Stimulation Rules to apply to LECs or IPES Providers that are not engaged in harmful arbitrage schemes.”

Although the FCC attempts to assuage concerns that its proposed rule changes might impose significant economic and administrative burdens on companies that are not engaged in unlawful traffic stimulation, it is difficult to square the proposed rules – considering the intrusive and potentially onerous duty to calculate and report traffic ratios (with such information likely being available not only to the FCC for enforcement purposes, but also to the ILECs, which may engage in self-help or other means of frustrating competitors).

Our experienced attorneys can help your company prepare and file compelling public comments that can shape the direction in which these rules evolve. If you have any questions about the proposed rules, including the traffic reporting proposal, or would like help with filing comments, please contact Robert H. Jackson, at (703) 714-1316 or


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