Early Access Reduction Filings Ordered By Some States

In July 2014, pursuant to the FCC’s Order (FCC 11-161), price cap ILECs – and CLECs that benchmark to them – must reduce their interstate and intrastate terminating switched end office rates by one-third of the differential between their current rates and $0.0007. This reduction is referred to as Step Three of the FCC ICC/USF Reform Order. 

 

Several state Commissions, including those shown below, have issued orders with early filing dates and an effective date of July 1, 2014.

Here’s the problem…

In both Step One and Step Two of the phase down of terminating intrastate switched access rates, CLECs could reliably make their own calculations to develop the necessary intrastate reductions. This was because:

 

• In Step One CLECs computed the rate reductions by reducing their intrastate rates by half the difference between their interstate rates (benchmarked at ILEC rates) and their intrastate rates. Their interstate rates were already benchmarked at ILEC rates and ILECs did not file rate reductions at the interstate level. This created a static environment from which CLECs could make the necessary state reductions.

 

• In Step Two CLECs terminating intrastate switched access rates had to reach their interstate levels which were still benchmarked at the ILEC rates. The ILECs’ interstate rates were essentially unchanged since prior to November 2011. Again, this was a static environment from which CLECs could reliably anticipate and match the ILEC rates.

• However, with Step Three of the phase down, the ILECs’ interstate terminating switched rates are no longer static. Each ILEC will compute phased down interstate rates for terminating end office access service. The phased down rates may be filed as one reduced composite rate element or may be filed as reductions to the various rate elements making up end office access service. These reductions and the workpapers associated with them will be specific to each ILEC and will be based in part on computations based on prior period demand. CLECs are not in a position to know which option each ILEC will take or what the resulting rates will be until they are filed on June 16, 2014, with the FCC. The rates may be protest by other parties and will not go into effect until July 1, 2014.

The FCC recognized the need for CLECs to have additional time to file their rate changes. The FCC ICC Reform Order FCC 11-161, ¶ 807 reads:

 

¶807. Competitive LECs. To ensure smooth operation of our transition, we provide competitive LECs that benchmark their rates a limited allowance of additional time to make tariff filings during the transition period. Application of our access reforms will generally apply to competitive LECs via the CLEC benchmarking rule. For interstate switched access rates, competitive LECs are permitted to tariff interstate access charges at a level no higher than the tariffed rate for such services offered by the incumbent LEC serving the same geographic area (the benchmarking rule). There are two exceptions to the general benchmarking rule. First, rural competitive LECs offering service in the same areas as non-rural incumbent LECs are permitted to “benchmark” to the access rates prescribed in the NECA access tariff, assuming the highest rate band for local switching (the rural exemption). Second, as explained in Section XI.A above, competitive LECs meeting the access revenue sharing definition are required to benchmark to the lowest interstate switched access rate of a price cap LEC in the state.

 

CLECs are required to file their FCC changes by 7/16/2014. Those changes could include rates identical to the ILEC rates, or rates that reflect a blended rate within any state. Those filings may go into effect as late as 7/31. This gives the CLECs a very tight window to pull the ILEC rates, make any necessary calculations, prepare and file state and federal tariff revisions, and update billing systems.

 

Technologies Management, Inc. has contacted states that have issued early filing directives.  The results have been mixed, with some states indicating that they will re-evaluate their initial directives but others holding firm. 

Contact a TMI consultant if you have questions about implementation.