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Breaking Down the FCC Order: ICC Rates

Posted by:  on Dec 02, 2011


The FCC Commissioners unanimously approved the FCC USF/ICC Reform Order on October 27, 2011, and released the Order on November 18, 2011.  The Order was published in the Federal Register on November 29, 2011, making the effective date December 29, 2011, (assuming there are no requests for reconsideration and appeal). While December 29 is the effective date, the Order does list specific effective dates for various rules.

The Order is clear that the end state is to phase out regulated per-minute intercarrier compensation (ICC) charges by adopting bill-and-keep as the default methodology for all ICC traffic.  To provide a gradual transition, terminating access rates will be transitioned over nine years for rate-of-return carriers.  The FCC recognizes the need to further evaluate the timing, transition and possible need for a recovery mechanism for rate elements including originating access, common transport elements not reduced and dedicated transport. The Order addresses these rate elements in a FNPRM (Further Notice of Proposed Rule Making).  The transition for rate-of-return carriers and Competitive LECs (CLECs) that benchmark to rate-of-return carrier rates is as follows:

  1. As of the effective date of the Order, all interstate switch access rate elements, including all originating and terminating rates and reciprocal compensation rates, are capped. Intrastate terminating rates are also capped.
  2. July 1, 2012 – Intrastate terminating switched end office rates (including terminating Carrier Common Line, if applicable), transport rates, originating and terminating dedicated transport and reciprocal compensation rates (if above the carrier’s interstate access rate) are reduced by 50 percent of the differential between the rate and the carrier’s interstate access rate.
  3. July 1, 2013 – Intrastate terminating switched end office rates (including terminating Carrier Common Line, if applicable), transport rates and reciprocal compensation (if above the carrier’s interstate access rate) are reduced to parity with interstate access rate.
  4. July 1, 2014 – Interstate and intrastate terminating switched end office and reciprocal compensation rates are reduced by one-third of the differential between end office rates and $0.005.
  5. July 1, 2015 – Interstate and intrastate terminating switched end office and reciprocal compensation rates are reduced by an additional one-third of the original differential to $0.005.
  6. July 1, 2016 – Interstate and intrastate terminating end office and reciprocal compensation rates are reduced to $.005.
  7. July 1, 2017 – Interstate and intrastate terminating switched end office and reciprocal compensation rates are reduced by one-third of the differential between its end office rates ($0.005) and $0.0007.
  8. July 1, 2018 – Interstate and intrastate terminating switched end office and reciprocal compensation rates are reduced by an additional one-third of the differential between its end office rates as of July 1, 2016 and $0.0007.
  9. July 1, 2019 – Interstate and intrastate terminating switched end office and reciprocal compensation rates are reduced to $0.0007.
  10. July 1, 2020 – Interstate and intrastate terminating switched end office and reciprocal compensation rates are reduced to bill-and-keep ($0.00).

There are a couple items to note regarding the transition identified above:

  • For many states, intrastate transport is still billed as non-LTR (Local Transport Restructure), meaning miles are billed from the end office to the SWC (Serving Wire Center) while interstate transport is billed as LTR, meaning miles are billed in segments from the remote to host and host to tandem.  Keep in mind, steps 2 – 10 only affect terminating usage. Originating continues to bill as it does today.  To do steps 2 and 3, there is concern that intrastate originating transport will be billed as non-LTR while intrastate terminating transport might be billed as LTR.  NISC is in the process of making database changes to accommodate this more easily.  There is discussion in the industry that questions if steps 2 and 3 can be accomplished by leaving all intrastate transport as non-LTR (if intrastate transport is already tariffed as non-LTR) and still satisfy the requirements of the 50 percent differential in step 2 and rate parity in step 3 by meeting the goal of reduced rates without specifically making all the individual rates elements exactly the same.
  • In steps 4 – 10, transport rates (facility, termination, tandem switching) continue to bill.  The main rate elements that are expected to change are local switching, information surcharge and reciprocal compensation.
  • Even though reciprocal compensation is identified in all 10 steps, this will be for landline to landline usage only as LEC-CMRS intraMTA traffic, subject to reciprocal compensation, is expected to change to bill-and-keep once existing interconnection agreements are renegotiated as explained in my previous blog, which can be found here: http://www.nisc.coop/blog/2011/11/23/inside-telecom-fcc-order-released/.

For more information on the FCC Order, continue to check nisc.coop/blog.

 
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