8YY Draft Order Reflects USTelecom Consensus, Lacks Price Cap Recovery

The draft order on circulation revising who pays to move toll-free traffic and who gets paid (see here) hews fairly closely in many areas to the USTelecom consensus proposal (see 2006080002), FCC and industry officials and representatives said in interviews last week. Agency and company representatives said it's unlikely to be voted out soon because it's not a high-priority item. The regulator didn't comment Friday.

An FCC official said it possibly could get 5-0 support since everyone wants to change intercarrrier compensation, with the legacy ICC regime having no fans. Commissioner Jessica Rosenworcel dissented on the 8YY reform NPRM adopted in 2018 (see 1806070021); her office didn't comment now. USTelecom hopes for timely approval, said Vice President-Strategic Initiatives Mike Saperstein. "Reform can't start until the order is in place."

The draft moves originating end office charges for 8YY to bill-and-keep over a three-year period, said a commission official. It doesn't transition tandem switching and originating transport charges, and instead imposes a single nationwide cap for those services instead of going to bill-and-keep.

The order lacks a recovery mechanism for price cap carriers, which has been a sticking point for some providers since the NPRM was issued, said outside counsel for a company in the proceeding. An FCC staffer said the draft notes providers can use Connect America Fund ICC recovery to recoup costs, though some providers are at the limit and price cap carriers are stuck. Some other price cap carriers also are interexchange carriers and will see gains offsetting 8YY losses.

Saperstein said the order apparently includes a USTelecom-sought transition period for end office access charges being phased into bill-and-keep and transition to a uniform database query rate assessed when looking up which long-distance carrier needs to handle a call. He said the draft apparently includes the group's proposed tandem-switched transport access rate of .001 cent per minute. The cost recovery mechanism "is certainly an essential element for us," Saperstein said.

Arguing against the USTelecom compromise, Aureon Network Services said in a docket 18-156 post Friday it would regulate intrastate access service rates, beyond agency authority; stop Aureon from recovering costs of its centralized equal access network since it doesn't serve end users from whom the company could recover costs; and create new implicit subsidies. Instead, a rule should be adopted making clear 8YY access arbitrage is "unjust and unreasonable," said the company. Without an explicit cost recovery route, Aureon said, it and similar carriers would have to hike prices of unregulated service to subsidize regulated operations, giving competitors an unfair advantage in pricing of unregulated service.

Backing the draft, the Ad Hoc Telecom Users Committee said revising the 8YY access charge regime is "the next logical step in the fight against fraudulent calling" because the current pricing setup incentivizes arbitrage and access stimulation. Quarrels over who does or doesn't get to take advantage of a revenue replacement mechanism shouldn't stop changes to the 8YY terminating access problem, it said.