On Thursday the FCC adopted, with some modifications to the “triggers”, the draft Order on access stimulation. As I indicated in my earlier blog (Draft Access Stimulation Order -- Big Net with Big Consequences? dated 9/16/19), there were number of problems with the FCC’s proposed solution to the arbitrage issue. The last-minute modifications illustrate how challenging it is when you approach a stated policy problem – carriers carrying high volumes of traffic over routes with much higher than average mileage – with an indirect, discriminatory, traffic ratio-based solution.The Order is intended to address access stimulation – and the Commissioners had interesting things to say about that issue that often reached back to pre-2011, a time when there really were high access rates that could be exploited. Comparisons were made to velociraptors, and we heard short lessons about “no free lunch”, for example. But in the end, the order defines access stimulators as carriers with the wrong traffic ratios, the wrong ratios lead to drastic shifting of economic responsibility and, importantly, carriers are not all treated the same.
High transport mileage – when applied to certain kinds of traffic -- was identified as the key policy problem, but the Order doesn’t address mileage at all in the solution part of the document. At the risk of stretching a Seinfeld quote too far “You’re good at identifying the mileage problem. You’re just not good at solving the mileage problem – and that’s really the most important part!”
Under the new Order CLECs become access stimulators with the new 6:1 terminating to originating ratio in a single month. Rural, rate of return (ROR) ILECs were able to obtain a tacked-on, harder to trip 10:1 trigger over a three-month period plus an end office traffic volume of 500K minutes or more. Price cap ILECs, as before, are immune from the access stimulation triggers. To be clear, carriers can all handle this kind of traffic (and even carry it over long transport mileages). They can all bill access charges on this traffic. But if CLECs and, to a lesser extent, ROR LECs carry too much of it (or any kind of terminating traffic that shifts their traffic ratio out of the proscribed limits), the consequences kick in. Price Cap ILECs can carry as much of this traffic as they want.
Who again is impacted by this? It certainly impacts access stimulators -- but remember that the Order re-defines what that term means. Any CLEC with end users that trips the traffic imbalance triggers is now an access stimulator. As I asked before, do you know what your traffic ratio is? Intermediate Providers will need to be aware of the trigger-tripping behavior of their subtending companies – either through the subtending company “self-identifying” as an access stimulator or by way of the Intermediate Provider’s new role as traffic imbalance police. IXCs are also part of the Order’s “self-policing” squad, so expect new opportunities for IXCs to challenge (i.e., refuse to pay) any terminating switched access billing. This is especially true since this Order, unlike the 2011 Order, does nothing to dissuade IXC “self-help” behavior.
Based on input from numerous parties, the FCC did clarify how the ratio should be derived – “We clarify that all traffic should be counted regardless of how it is routed“ and “All originating and terminating interstate traffic should be counted in determining the interstate terminating-to-originating traffic ratio. This also means that all terminating traffic from all sources, not just one IXC, should be counted in determining a traffic ratio.” Interestingly, however, the IXCs and Intermediate Providers are still part of the new self-policing squad even though this clarification demonstrates that the traffic ratios they see may not be the relevant ratio when it comes to trigger tripping.
Commissioner O’Reilly summed up some of my concerns well when he said “I do worry that delineating between rural local exchange carriers (LECs) and competitive LECs runs counter to the spirit, if not the letter, of the Telecom Act. Moreover, I have concerns over the particulars of this line-drawing effort and suspect that it will need to be revisited in the future.” I agree, and I don’t think this Order is going to be the last thing we hear on this issue.