FCC Proposes Reforms to Eliminate Intercarrier Compensation Arbitrage

The Federal Communications Commission has long recognized that arbitrage opportunities in the intercarrier compensation (ICC) system harm consumers, undermine broadband deployment, and distort competition. Despite the FCC’s adoption of a national, default bill-and-keep framework as the ultimate end state for the exchange of all telecommunications traffic and its efforts to reduce wasteful arbitrage, a variety of arbitrage schemes continue to evolve and once again flourish.

In this Notice of Proposed Rulemaking, to eliminate financial incentives to engage in access stimulation, the FCC proposes to adopt rules to give access-stimulating local exchange carriers (LECs) two choices about how they connect to interexchange carriers (IXCs). First, an access-stimulating LEC can choose to be financially responsible for calls delivered to its network so it, rather than IXCs, pays for the delivery of calls to its end office or the functional equivalent. Or, second, instead of accepting this financial responsibility, an access-stimulating LEC can choose to accept direct connections either from the IXC or an intermediate access provider of the IXC’s choice, allowing IXCs to bypass intermediate access providers selected by the access-stimulating LEC. In the alternative, the FCC seeks comment on moving all traffic bound for an access-stimulating LEC to bill-and-keep. The FCC also seeks comment on additional alleged intercarrier compensation (ICC) arbitrage schemes and ways to eradicate these schemes.