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Proposed Rule2026-05727

Reforming Legacy Rules for an All-IP Future; Accelerating Network Modernization

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Published

March 24, 2026

Issuing agencies

Federal Communications Commission

Abstract

In this document, the Federal Communications Commission (Commission) adopted a Notice of Proposed Rulemaking seeking to accelerate network modernization by proposing to reform regulations that have hindered the transition to all-internet Protocol (IP) networks. Building upon the Commission's longstanding efforts to reform the legacy intercarrier compensation (ICC) framework, the Commission proposes to move remaining ICC charges to a bill-and-keep framework and detariff them, and invites comment on this proposal. To enable carriers to recover costs from their end users, the Commission proposes to eliminate ex ante pricing regulation and tariffing of end-user charges, also referred to as Telephone Access Charges (TACs). Following the transition of ICC charges to bill-and-keep, the Commission seeks comment on phasing out Connect America Fund Intercarrier Compensation (CAF ICC) support. The NPRM also seeks comment on removing remaining regulatory obligations--including tariffing and outdated account information exchange requirements--for interstate and international long-distance services, given the longstanding competitiveness of these markets. In addition, the Commission seeks comment on the elimination of regulations that will no longer be necessary in a post-Time-Division Multiplexing (TDM) environment and invites input on a transitional framework to ensure regulatory and market stability during the shift to an all-IP marketplace. Finally, the Commission encourages commenters to identify ways to promote technological modernization while enhancing long-term efficiency, competition, and service quality for consumers. In all these reforms, the Commission intends to proceed thoughtfully, mindful of the complex issues, transition timelines, and paramount connectivity goals.

Full Text

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[Federal Register Volume 91, Number 56 (Tuesday, March 24, 2026)]
[Proposed Rules]
[Pages 14408-14443]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-05727]

[[Page 14407]]

Vol. 91

Tuesday,

No. 56

March 24, 2026

Part V

Federal Communications Commission

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47 CFR Parts 43, 51, 54, et al.

Reforming Legacy Rules for an All-IP Future; Accelerating Network
Modernization; Proposed Rule

Federal Register / Vol. 91 , No. 56 / Tuesday, March 24, 2026 /
Proposed Rules

[[Page 14408]]

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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 43, 51, 54, 61, 64, and 69

[WC Docket Nos. 25-311, 25-208; FCC 26-11; FR ID 335397]

Reforming Legacy Rules for an All-IP Future; Accelerating Network
Modernization

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, the Federal Communications Commission
(Commission) adopted a Notice of Proposed Rulemaking seeking to
accelerate network modernization by proposing to reform regulations
that have hindered the transition to all-internet Protocol (IP)
networks. Building upon the Commission's longstanding efforts to reform
the legacy intercarrier compensation (ICC) framework, the Commission
proposes to move remaining ICC charges to a bill-and-keep framework and
detariff them, and invites comment on this proposal. To enable carriers
to recover costs from their end users, the Commission proposes to
eliminate ex ante pricing regulation and tariffing of end-user charges,
also referred to as Telephone Access Charges (TACs). Following the
transition of ICC charges to bill-and-keep, the Commission seeks
comment on phasing out Connect America Fund Intercarrier Compensation
(CAF ICC) support. The NPRM also seeks comment on removing remaining
regulatory obligations--including tariffing and outdated account
information exchange requirements--for interstate and international
long-distance services, given the longstanding competitiveness of these
markets. In addition, the Commission seeks comment on the elimination
of regulations that will no longer be necessary in a post-Time-Division
Multiplexing (TDM) environment and invites input on a transitional
framework to ensure regulatory and market stability during the shift to
an all-IP marketplace. Finally, the Commission encourages commenters to
identify ways to promote technological modernization while enhancing
long-term efficiency, competition, and service quality for consumers.
In all these reforms, the Commission intends to proceed thoughtfully,
mindful of the complex issues, transition timelines, and paramount
connectivity goals.

DATES: Comments are due on or before May 26, 2026; reply comments are
due on or before June 22, 2026. Written comments on the Paperwork
Reduction Act proposed information collection requirements must be
submitted by the public, Office of Management and Budget (OMB), and
other interested parties on or before May 26, 2026.

ADDRESSES: Pursuant to Sec. Sec. 1.415 and 1.419 of the Commission's
rules, 47 CFR 1.415, 1.419, interested parties may file comments and
reply comments. Comments may be filed using the Commission's Electronic
Comment Filing System (ECFS). You may submit comments, identified by WC
Docket Nos. 25-311 and 25-208 by the following methods:
<bullet> Electronic Filers: Comments may be filed electronically
using the internet by accessing the ECFS: <a href="https://www.fcc.gov/ecfs/search/search-filings">https://www.fcc.gov/ecfs/search/search-filings</a>.
<bullet> Paper Filers: Parties who choose to file by paper must
file an original and one copy of each filing.
<bullet> Filings can be sent by hand or messenger delivery, by
commercial courier, or by the U.S. Postal Service. All filings must be
addressed to the Secretary, Federal Communications Commission.
<bullet> Hand-delivered or messenger-delivered paper filings for
the Commission's Secretary are accepted between 8:00 a.m. and 4:00 p.m.
by the FCC's mailing contractor at 9050 Junction Drive, Annapolis
Junction, MD 20701. All hand deliveries must be held together with
rubber bands or fasteners. Any envelopes and boxes must be disposed of
before entering the building.
<bullet> Commercial courier deliveries (any deliveries not by the
U.S. Postal Service) must be sent to 9050 Junction Drive, Annapolis
Junction, MD 20701.
<bullet> Filings sent by U.S. Postal Service First-Class Mail,
Priority Mail, and Priority Mail Express must be sent to 45 L Street
NE, Washington, DC 20554.
<bullet> People with Disabilities. To request materials in
accessible formats for people with disabilities (braille, large print,
electronic files, audio format), send an email to <a href="/cdn-cgi/l/email-protection#b1d7d2d2848185f1d7d2d29fd6dec7">[email&#160;protected]</a> or
call the Consumer & Governmental Affairs Bureau at 202-418-0530.
In addition to filing comments with the Secretary, a copy of any
comments on the Paperwork Reduction Act proposed information collection
requirements contained herein should be submitted to the Federal
Communications Commission via email to <a href="/cdn-cgi/l/email-protection#b1e1e3f0f1d7d2d29fd6dec7">[email&#160;protected]</a> and to Nicole
Ongele, FCC, via email to <a href="/cdn-cgi/l/email-protection#f4ba9d979b9891dabb9a93919891b4929797da939b82">[email&#160;protected]</a>.

FOR FURTHER INFORMATION CONTACT: For further information about this
proceeding, please contact Erik Raven-Hansen, Pricing Policy Division,
Wireline Competition Bureau, at (202) 418-1532, <a href="/cdn-cgi/l/email-protection#b5d0c7dcde9bc7d4c3d0db98ddd4dbc6d0dbf5d3d6d69bd2dac3">[email&#160;protected]</a>, or Irina Asoskov, Pricing Policy Division, Wireline
Competition Bureau, at (202) 418-2196, <a href="/cdn-cgi/l/email-protection#b1d8c3d8dfd09fd0c2dec2dadec7f1d7d2d29fd6dec7">[email&#160;protected]</a>. For
additional information concerning the Paperwork Reduction Act proposed
information collection requirements contained in this document, send an
email to <a href="/cdn-cgi/l/email-protection#69393b28290f0a0a470e061f">[email&#160;protected]</a> or contact Nicole Ongele at (202) 418-2991.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice
of Proposed Rulemaking (NPRM) in WC Docket Nos. 25-311, 25-208; FCC 26-
11, adopted on February 18, 2026, and released on February 19, 2026.
The full text of this document is available for public inspection at
the following internet address: <a href="https://docs.fcc.gov/public/attachments/FCC-26-11A1.pdf">https://docs.fcc.gov/public/attachments/FCC-26-11A1.pdf</a>.
Ex Parte Rules: The proceeding this document initiates shall be
treated as a ``permit-but-disclose'' proceeding in accordance with the
Commission's ex parte rules. Persons making ex parte presentations must
file a copy of any written presentation or a memorandum summarizing any
oral presentation within two business days after the presentation
(unless a different deadline applicable to the Sunshine period
applies). Persons making oral ex parte presentations are reminded that
memoranda summarizing the presentation must (1) list all persons
attending or otherwise participating in the meeting at which the ex
parte presentation was made, and (2) summarize all data presented and
arguments made during the presentation. If the presentation consisted
in whole or in part of the presentation of data or arguments already
reflected in the presenter's written comments, memoranda or other
filings in the proceeding, the presenter may provide citations to such
data or arguments in his or her prior comments, memoranda, or other
filings (specifying the relevant page and/or paragraph numbers where
such data or arguments can be found) in lieu of summarizing them in the
memorandum. Documents shown or given to Commission staff during ex
parte meetings are deemed to be written ex parte presentations and must
be filed consistent with rule 1.1206(b). In proceedings governed by
rule 1.49(f) or for which the Commission has made available a method of
electronic filing, written ex parte presentations and memoranda
summarizing oral ex parte presentations, and all attachments thereto,
must be filed through the electronic comment filing system

[[Page 14409]]

available for that proceeding, and must be filed in their native format
(e.g., .doc, .xml, .ppt, searchable .pdf). Participants in this
proceeding should familiarize themselves with the Commission's ex parte
rules.
Paperwork Reduction Act Analysis: This document may contain
proposed new or revised information collection requirements. The
Commission, as part of its continuing effort to reduce paperwork
burdens, invites the general public and the Office of Management and
Budget (OMB) to comment on the information collection requirements
contained in this document, as required by the Paperwork Reduction Act
of 1995, Public Law 104-13. In addition, pursuant to the Small Business
Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C.
3506(c)(4), we seek specific comment on how we might further reduce the
information collection burden for small business concerns with fewer
than 25 employees.
Providing Accountability Through Transparency Act: Consistent with
the Providing Accountability Through Transparency Act, Public Law 118-
9, a summary of this Notice of Proposed Rulemaking is available at
<a href="https://www.fcc.gov/proposed-rulemakings">https://www.fcc.gov/proposed-rulemakings</a>.
To request materials in accessible formats for people with
disabilities (e.g. Braille, large print, electronic files, audio
format), send an email to <a href="/cdn-cgi/l/email-protection#6f090c0c5a5f5b2f090c0c41080019">[email&#160;protected]</a> or call the Consumer &
Governmental Affairs Bureau at (202) 418-0530.
Regulatory Flexibility Act: The Regulatory Flexibility Act of 1980,
as amended (RFA), requires that an agency prepare a regulatory
flexibility analysis for notice-and-comment rulemaking proceedings,
unless the agency certifies that ``the rule will not, if promulgated,
have a significant economic impact on a substantial number of small
entities.'' Accordingly, the Commission has prepared an Initial
Regulatory Flexibility Analysis (IRFA) concerning potential rule and
policy changes contained in this NPRM. The IRFA is set forth below. The
Commission invites the general public, in particular small businesses,
to comment on the IRFA. Comments must be filed by the deadlines for
comments on the Notice of Proposed Rulemaking indicated on the first
page of this document and must have a separate and distinct heading
designating them as responses to the IRFA.
Procedural Matters: Comments and reply comments must include a
short and concise summary of the substantive arguments raised in the
pleading. Comments and reply comments must also comply with Sec. 1.49
and all other applicable sections of the Commission's rules. We direct
all interested parties to include the name of the filing party and the
date of the filing on each page of their comments and reply comments.
All parties are encouraged to use a table of contents, regardless of
the length of their submission. We also strongly encourage parties to
track the organization set forth in the NPRM to facilitate our internal
review process.

Synopsis

Introduction

Today, we take the next step to accelerate network deployment and
modernization by proposing comprehensive reform of the regulatory
framework for voice telecommunications rates. The reforms proposed in
the NPRM are part of a broader initiative to encourage carriers to
transition to all-IP networks. In October 2025, the Commission adopted
a Notice of Proposed Rulemaking aimed at revising incumbent local
exchange carriers' (LECs) interconnection obligations to better align
with modern technologies (90 FR 54266). In a future proceeding, the
Commission will also consider proposed reforms to modernize its legacy
high-cost support mechanisms. These proceedings, though separate, are
underway and are being closely coordinated.
The voice services market has evolved dramatically over the past
several decades--shifting from switched access to IP technologies. As a
result, consumers have gained access to a wide range of competitive
alternatives to traditional analog telephone services, including fixed
Voice over internet Protocol (VoIP), mobile, and satellite options.
Completing the transition to IP will promote technological
modernization and public safety and consumer protection benefits;
enhance long-term efficiency, competition, and service quality for
consumers; and lead to decreased maintenance expenses for service
providers. Although IP-based technologies are widely available, some
providers continue to use legacy TDM equipment, potentially due in part
to regulatory incentives embedded in the intercarrier compensation
(ICC) regime, as well as the costs associated with transitioning to IP
technologies. We recognize that shifting from the current regulatory
framework for intercarrier compensation, interexchange services (i.e.,
long-distance services), and end user charges--which is rooted in
decades-old assumptions and outdated technology--to a full bill-and-
keep framework is complex and will take time to ensure that the changes
do not create regulatory uncertainty or hinder network modernization.

Background

Recognizing the rise of competition, particularly intermodal
competition, from wireless, cable, VoIP, and satellite services, we
propose reforms to facilitate the transition from circuit-switched
networks to packet-based IP networks. The circuit-switched network
(also known as the public switched telephone network or PSTN) is the
traditional telephone system that sets up a dedicated path for each
call. TDM is a method used in this system to send multiple calls over
the same line by assigning each one a time slot. We use these terms
interchangeably in this item because TDM is the primary method by which
circuit-switched networks operate.
The Commission has adopted reforms to the original regulatory
framework--which assumed that each end user would be served by one
incumbent local exchange carrier (LEC)--over time, including in the
2011 USF/ICC Transformation Order, and we propose to complete those
efforts in this proceeding. While, as a matter of convenience, we
sometimes refer in this document to the proposed elimination of ex ante
pricing regulation as the ``deregulation'' of intercarrier and end-user
access charges, we do not propose to fully deregulate these charges.
For example, local exchange carriers remain subject to the Commission's
regulatory authority under sections 201, 202, and 208 of the Act. These
statutory provisions authorize the Commission to determine whether
rates, terms, and conditions are just, reasonable, and not unjustly or
unreasonably discriminatory in the context of a section 208 complaint
proceeding. The Commission retains the authority to initiate
proceedings ``on its own motion'' (sua sponte).
Access Charge History. Until the 1970s, most telephone subscribers
obtained both local and long-distance services from the Bell System,
owned and operated by AT&T. Some telephone subscribers received local
service from independent incumbent local telephone companies; however,
they could only obtain long-distance service from AT&T Long Lines.
Compensation for traffic exchanged between the Bell Operating Companies
(BOCs) and the hundreds of unaffiliated independent (i.e., non-Bell)
LECs was handled through individual agreements rather than uniform
tariffs. The emergence of competitive interexchange carriers (IXCs) in
the 1970s introduced competition in long-distance service, but these
carriers still

[[Page 14410]]

relied on the BOCs and the independent LECs--that held local
monopolies--for access to end users. Following the 1982 court-ordered
breakup of the Bell System, AT&T's local exchange operations were
divested. All IXCs, including AT&T, then paid the BOCs and independent
LECs for providing the necessary access to end users (i.e., exchange
access service). In 1983, the Commission replaced the earlier
agreement-based system with an intercarrier compensation system built
around uniform interstate access charge rules.
Commission Reforms Responding to Competition. In response to
growing long-distance competition and to strengthen incentives for
regulated carriers to operate efficiently, over the past several
decades, the Commission has undertaken a series of reforms to modernize
its regulatory framework. In 1991, it adopted mandatory price cap
regulation for the largest LECs ``to avoid the perverse incentives of
[cost-based] rate-of-return regulation,'' which continued to apply to
most rural and small LECs, and to ``act as a transitional regulatory
scheme until the advent of actual competition makes price cap
regulation unnecessary.'' The 1996 Telecommunications Act (the 1996
Act) further advanced a pro-competitive, deregulatory policy framework
and required the Commission to forbear from applying any provision of
the Communications Act of 1934, as amended (the Act) when competitive
conditions are met. Acting on this authority, in 1996, the Commission
promptly eliminated tariffing obligations for nondominant IXCs
providing interstate, domestic, interexchange telecommunications
services. The Commission has consistently recognized that tariffing
obligations were originally imposed to protect consumers from unjust,
unreasonable, and discriminatory rates in a concentrated market, but
that end-user tariffs have become unnecessary in a marketplace where
the provider faces significant competitive pressure for subscribers.
The Commission undertook major intercarrier compensation reforms
following the 1996 Act to bring the American public benefits of
competition and choice by rationalizing the access rate structure. In
these proceedings, the Commission reduced certain interstate access
charges for price cap and rate-of-return carriers, respectively, and
permitted local carriers to offset the interstate access rate
reductions through an increase in end-user charges and additional
subsidies from the Universal Service Fund (USF). Although the high-cost
program increased in size as a result of the creation of these
programs, consumers also typically saw reductions in their long-
distance phone bills during this time period.
Adoption of Bill-and-Keep. In the 2011 USF/ICC Transformation
Order, the Commission significantly modernized the intercarrier
compensation system to ensure affordable voice and broadband service
``as consumers increasingly shift from traditional telephone service to
substitutes including VoIP, wireless, texting, and email.'' By
transitioning terminating switched access charges to bill-and-keep, the
Commission created ``a more incentive-based, market-driven approach
[to] reduce arbitrage and competitive distortions by phasing down
byzantine per-minute and geography-based charges . . . provid[ing] more
certainty and predictability regarding revenues to enable carriers to
invest in modern, IP networks.'' ``Bill-and-keep'' refers to an
arrangement under which carriers look first to their subscribers to
cover the costs of the network, then to explicit universal service
support where necessary. As the Commission observed, ``Bill-and-keep
brings market discipline to intercarrier compensation because it
ensures that the customer who chooses a network pays the network for
the services the subscriber receives. Specifically, a bill-and-keep
methodology requires carriers to recover the cost of their network
through end-user charges which are potentially subject to competition.
The Commission further advanced this approach in 2020 by moving 8YY
originating end-office access charges to bill-and-keep.
Broader Deregulatory Efforts. This year, President Trump issued a
series of Executive Orders calling on administrative agencies to
alleviate unnecessary regulatory burdens. Consistent with this
direction, in March, the Commission's Office of General Counsel issued
a Public Notice seeking public comment on ``deregulatory initiatives
that would facilitate and encourage American firms' investment in
modernizing their networks, developing infrastructure, and offering
innovative and advanced capabilities.'' Commenters identified part 61
tariff requirements and part 69 access charge rules as ripe for further
deregulation and streamlining. We agree that the Commission should look
at these regulatory areas and initiate this proceeding to seek comment
on proposals to reform the regulatory framework for the voice services
market given the technological and marketplace developments in recent
years.

Marketplace Dynamics in Voice Services

The telecommunications industry is undergoing significant
transformations, driven by technological advancements and evolving
consumer preferences. As the industry transitions from traditional TDM-
based networks to IP-based and mobile voice services, regulatory
frameworks must adapt to support innovation and competition.

End-User Trends in Voice Communications Services

Technological and competitive advancements have significantly
outpaced the existing regulatory framework, including prior
deregulatory efforts. Today, incumbent LECs face competition in the
voice calling marketplace from diverse sources, including competitive
providers offering both facilities-based VoIP and mobile service,
satellite broadband providers, and, most recently, over-the-top (OTT)
applications for voice calling, such as Ooma, Zoom, Microsoft Teams,
Google Meet, and WhatsApp. These OTT applications, layered over
broadband connections, offer integrated communication features,
including voice, video, and text messaging, at little to no additional
cost to the consumer, and as a result, competitive alternatives have
been widely adopted by consumers.
In 1996, incumbent LECs controlled over 99% of the local voice
market due to their ``virtually ubiquitous'' networks and the resulting
low incremental costs of serving each additional customer. By the end
of 2023, the number of mobile telephone subscriptions in the U.S.
exceeded the total population, and more than 75% of adults lived in
households that relied exclusively on mobile voice service. Even among
fixed voice connections, their share had declined to just 25% by June
2024, with the majority of remaining subscriptions held by non-
incumbent LECs offering interconnected VoIP services.
Our analysis of the voice services marketplace confirms that
competitive alternatives to incumbent LEC voice calling services
abound. To make an initial determination of the available competitive
alternatives to incumbent LEC voice service, we examine data from the
Broadband Data Collection (BDC), which shed light on the incumbent LECs
and competitors offering fixed and mobile voice service based on
reported voice service subscriptions across the United States. As of
December 31, 2024, the BDC data indicate that only 0.8% of census
tracts do not have a competing non-incumbent

[[Page 14411]]

LEC with at least one facilities-based residential fixed voice
subscriber in the tract. If a non-incumbent LEC provider has reported
at least one subscription in a census tract (switched access,
interconnected VoIP, over-the-top, etc.), that tract is considered
served by the non-incumbent LEC. We find it more informative, however,
to examine broadband coverage and the number of competing broadband
providers available at residential locations, since all broadband
providers either also offer voice services as part of a bundled service
package or support over-the-top voice services. First, BDC data, as of
December 31, 2024, indicate that 87.7% of households had two or more
providers offering 10/1 Mbps, 85.3% of households had two or more
providers offering 25/3 Mbps, and 74.4% of households had two or more
providers offering 100/20 Mbps. We further note that, even where a
household only has the choice of the incumbent LEC for fixed broadband
service, it will have the ability to take stand-alone broadband
internet access service and then subscribe to over-the-top voice
services instead of the incumbent LEC's public switched telephone
network (PSTN) service as long as the incumbent LEC offers broadband.
Moreover, the vast majority of U.S. households have access to one
or more mobile wireless providers offering 4G LTE or 5G-NR service. As
of June 30, 2025, 99.4% of residential locations had access to 4G LTE
or 5G-NR service. And it is clear that an increasing percentage of U.S.
households have dropped fixed voice service in favor of mobile voice
service. The National Center for Health Statistics estimated that 78.7%
of adults lived in households with at least one mobile voice
subscription and no fixed voice subscription as of December 2024. This
reflects a nearly 10 percentage point increase over three years when
69% of adults were estimated to live in mobile-only households in
December 2021.
Recent advancements in satellite broadband--particularly the
widespread deployment and availability of low Earth orbit (LEO)
systems--have introduced a new platform capable of supporting voice
services. While providers such as Starlink, Amazon's LEO constellation
(formerly Kuiper), and Eutelsat OneWeb do not currently offer bundled
VoIP services, their broadband speeds are sufficient to support third-
party, over-the-top interconnected voice applications that compete with
traditional voice services. In the past six years, the number of active
satellites in the U.S. has grown from 2,000 to 9,641, an increase of
approximately 382%. About 5,700 of those satellites are LEOs--a number
that is projected to rapidly grow within the next two years.
How can we improve this analysis to develop a more granular picture
of the competitive alternatives to voice service? How can we account
for the fact that the BDC data on switched access voice services are
subscription data for voice services and, therefore, understate
availability? How can broadband availability data inform our analysis
given the intermodal competition for voice services over broadband?
What other types of services (e.g., mobile, satellite) should be
reasonably included in analyzing competitive alternatives to incumbent
LECs' voice services? We do not, however, conflate analysis of the
voice services market with that of data services, which presents
additional considerations. Nor do we reach any conclusions regarding
competitive conditions in the data services market or in markets for
bundled voice and data services. Our review here is limited to switched
access services. If an incumbent LEC offers voice services to a
particular region and has an affiliate offering broadband in the same
area, should we count the incumbent LEC's broadband affiliate as a
competitive alternative where the two services overlap? Similarly,
should we count an incumbent LEC's mobile affiliate as a competitive
alternative in the same situation? Would the answers to the last two
questions change if both an incumbent LEC's broadband and mobile
affiliates offer such services in the same service area as the
incumbent LEC?
The growing reliance on alternatives to traditional switched access
voice services such as mobile voice service and VoIP appears to
indicate that consumers increasingly view voice services as
interchangeable, regardless of the underlying technology. For example,
the 2024 American Community Survey, conducted by the Unites States
Census Bureau, found that approximately 93.2% of U.S. households had
one or more non-dial-up internet subscriptions. We note, however, that
any comparison we make here between these technologies is one-
directional and is necessarily limited to the interchangeability of
voice services. Traditional switched access voice service has a
significantly narrower functional scope than broadband, mobile, or
satellite services, and lacks the capability to replicate the broader
data transmission offerings those services provide. For example, while
one may place a mobile wireless call from the same location as a fixed
landline, one cannot place a call on a landline while roaming.
Accordingly, from the consumers' perspective, mobile voice service may
be considered as a potential substitute for switched access service;
however, switched access--offering inferior performance over outdated
technology--cannot reasonably to be regarded as an effective substitute
for mobile voice service.
The prevalence of mobile-only households further underscores this
shift. These trends suggest that the voice services marketplace has
evolved into a technology-neutral environment, where consumers
prioritize functionality and accessibility over the specific platform
used. In essence, anyone with a broadband connection--regardless of the
technology used to deliver it--can access voice services. Given this
evolution, we seek comment on how best to define the scope of voice
services for regulatory purposes in today's converged communications
landscape. Should we adopt a technology-neutral approach when defining
the voice services marketplace for purposes of determining the number
of competitive alternatives in a particular area? If so, what criteria
should be used to determine whether different types of voice services
(e.g., TDM-based, interconnected VoIP, mobile, OTT VoIP) provide the
same functionality? To what extent do consumers view mobile, VoIP, and
other IP-based voice services as substitutes for TDM-based service? Are
there any remaining distinctions between voice service types that are
meaningful from a consumer perspective? Should we rely on existing
definitions of voice service previously adopted by the Commission, such
as those used in the BDC or Communications Marketplace Report?
If the Commission determines that various types of voice services
are substitutable, should it rely on BDC data--which provides location-
specific availability information--to assess service coverage and
competitive alternatives? If not, what alternative data sources should
the Commission consider? Commenters are encouraged to submit any data
that could assist the Commission in evaluating the current state of the
voice services marketplace.
Has the widespread broadband deployment made it easier to enter the
voice services market? What challenges do providers typically face when
attempting to expand into new geographic areas? Are there regulatory,
technical, or economic barriers that make expansion difficult? What
specific advantages do incumbent LECs have over new entrants,
particularly as end users rapidly move away from switched

[[Page 14412]]

access services? To what extent do Commission regulations hinder new
entrants from competing effectively with incumbents who benefit from
ICC and USF support? Do consumers face significant costs when changing
voice service providers? Commenters are encouraged to provide detailed
insights into the ease or difficulty of expanding into new service
areas.

Regulatory Incentives Affect IP-Network Adoption

The current regulatory framework permits LECs to receive access
charge payments for TDM-based switched voice services, but not for
entirely IP-based or mobile voice services. Although carriers are
allowed to tariff and assess access charges for VoIP-PSTN traffic, they
are not allowed to do so for IP-to-IP traffic. Thus, by enabling LECs
to recover a portion of their network costs from other carriers, the
ICC system could be viewed as insulating TDM network technology from
the effects of market forces. We seek comment on whether this disparity
reduces LECs' incentives to invest in IP networks and services. Is this
an accurate assessment of the dynamics in the voice services
marketplace? Does the existing ICC framework discourage some carriers
from transitioning to IP-based technologies due to the potential loss
of ICC revenues and, in some cases, associated USF support? Would a
transition to a bill-and-keep framework and associated deregulation
facilitate the industry-wide migration to IP?
In contrast, all-IP voice providers and commercial mobile radio
service (CMRS) carriers have generally operated under a bill-and-keep
regime and do not receive access charges, except where negotiated
through specific agreements, and the Commission has observed that
``this framework has proven to be successful for that industry.''
Indeed, IP-based and mobile voice services have experienced significant
growth in recent years. Does this suggest that these services are more
efficient than traditional TDM-based offerings? Or is this growth due
more to consumer preference for modern technologies? Or is it
combination of both factors? To what extent does the ICC regulatory
structure distort competition and delay technological transition?
The ICC regime was designed to make universal voice service
available in a voice-centric world. However, today's consumers require
far more than basic voice service--they rely on high-speed, reliable
broadband for work, education, healthcare, and civic engagement. The
Commission recently sought comment on how section 251(c)'s
interconnection mandates burden carriers and ``stymies IP network
investments,'' and now, we seek comment on the impact of maintaining
the ICC regime on carriers' incentives to upgrade their networks to the
IP-networks of the next generation. We also seek comment on the ways
the legacy rules are aligned or misaligned with current consumer needs.
Carriers have informed the Commission that TDM network components
are becoming increasingly ``outdated, inefficient, harder to acquire
and maintain, and increasingly expensive.'' Are there safety, security,
or service continuity risks associated with reliance on second-hand or
obsolete equipment? We note that some legacy and transitional 911
networks continue to rely on TDM-based facilities, such as selective
routers and DS1/DS3 circuits, to route and deliver 911 calls to public
safety answering points until they can fully upgrade to NG911. Would
our proposals change the incentives for incumbent LECs to continue to
support these network elements during the NG911 transition? Would 911
Authorities or consumers incur additional costs if incumbent LECs no
longer receive ICC in connection with legacy facilities used to provide
911 service? Could these changes lead, directly or indirectly, to
interruptions in 911 service, and if so, are protections needed to
ensure the continuity of 911 service? Why or why not? What form should
any protections take? We seek comment on the incentives and
disincentives carriers, and particularly rate-of-return LECs, may face
to upgrade their networks to all-IP. What role does ICC and CAF ICC
play for incumbent LECs? What incentives do incumbent LECs, especially
rate-of-return carriers, have to upgrade infrastructure, improve
service quality, or respond to consumer complaints, particularly where
they may earn revenues from ICC and CAF ICC? What are the consequences
for consumers, especially in rural or high-cost areas, when providers
have not yet upgraded networks or improved service? How can the
Commission ensure that pricing policies support access to affordable,
high-quality communications networks while avoiding unintended
consequences such as underinvestment in future-proof networks?

Pricing Reform for an All-IP Future in Voice Services

To accelerate the transition to all-IP networks, we propose to
complete the intercarrier compensation reforms initiated by the
Commission in 2011 by transitioning the remaining intercarrier charges
to a bill-and-keep framework. To support cost recovery, we also propose
to eliminate ex ante pricing regulation and to mandate the nationwide
detariffing of Telephone Access Charges and seek comment on phasing out
CAF ICC once the transition to bill-and-keep is complete. Additionally,
recognizing the longstanding competitiveness of the interstate and
international long-distance markets, we propose to eliminate rate
regulation, tariffing requirements, and account record exchange
obligations for these services. We seek comment on transition issues,
costs, and how to ensure continued connectivity.
We recognize that alternative approaches to cost recovery such as
intercarrier compensation, end-user charges, and universal service
funding can intersect in different ways with the universal service
principles of section 254 of the Act. When addressing the cost recovery
issues discussed in this Notice of Proposed Rulemaking we invite
general comment on how the principles of section 254 should inform the
Commission's approach or how those principles might implicate related
issues that should be considered in a separate proceeding focused on
universal service.

Proposed Intercarrier Compensation Reform

To further the transition to all-IP networks and promote more
efficient, modernized networks, the Commission must complete the reform
of intercarrier compensation by transitioning the remaining access
charges to a bill-and-keep framework. The ICC framework is based on
per-minute charges, which ``are inconsistent with peering and transport
arrangements for IP networks, where traffic is not measured in
minutes.'' At the time the Commission adopted bill-and-keep as the end
state for all intercarrier compensation traffic, it sought comment on
whether ``any final transition of originating access [should] be made
to coincide with the final transition for terminating access.'' The
Commission has already transitioned terminating end office access
charges to bill-and-keep for price cap and rate-of-return carriers.
Other terminating access charges, such as terminating tandem switching
and common transport for rate-of-return carriers, and originating
access charges for all carriers, other than for 8YY calling, remain
subject to the intercarrier compensation regime. We now seek comment on
how to complete the transition to bill-and-keep for the remaining ICC
charges in a thoughtful

[[Page 14413]]

way, both originating and terminating, for all carriers.

Remaining Access Charges That Are Not at Bill-and-Keep

The Commission's adoption of bill-and-keep as the end state of its
legacy intercarrier compensation framework shifted the ways carriers
may recover their network costs, marking a departure from a complex
system of intercarrier charges, end-user charges, and universal service
support mechanisms to a more direct framework where carriers are to
recover their network costs directly from their customers. The
Commission found these changes were necessary as ``consumers
increasingly shift[ed] from traditional telephone service to
substitutes.'' While the Commission opted for a multi-year transition
plan for the charges then moved to bill-and-keep, it did not specify or
begin a transition of all of the existing ICC charges at that time. We
now return to complete the task and seek comment on how to best
implement bill-and-keep to support carriers as they transition to all-
IP calling. As we explain in greater detail below, the access charges
still in use include: (1) non-8YY originating switched access charges,
such as end office switching, tandem switching and common transport,
and dedicated transport rates; (2) some terminating switched access
charges, including certain tandem switching and common transport and
dedicated transport rates; and (3) originating 8YY access charges,
including joint tandem switched transport and database query rates.
The bill-and-keep framework recognizes that both the calling and
called parties benefit from a call, and therefore that both should bear
their own costs to complete the call. Under bill-and-keep principles,
because customers bear the costs of their carrier of choice, customers
receive clearer pricing signals, and consequently, carriers are
incentivized to operate more efficiently, to invest in their networks,
and engage ``in substantial innovation to attract and retain
customers.'' In turn, consumers then benefit from lower ``effective
price[s] of calling, through reduced charges and/or improved service
quality.'' In further support of the decision to move most terminating
access charges to bill-and-keep, the Commission in 2011 also concluded
that the incremental cost of call termination is ``very nearly zero,''
rendering any potential benefit from rate-setting ``more than offset by
the considerable costs of doing so,'' and that even if bill-and-keep
does not allow for overall cost recovery, ``it is more efficient to
ensure cost recovery via direct subsidies.''
We now seek comment on whether these conclusions support the
movement of all remaining access charges to bill-and-keep for all
carriers. Will carriers realize benefits through regulatory simplicity
upon completing the transition to bill-and-keep? We believe the move to
bill-and-keep would also ease the administrative burdens that carriers
face to ensure their compliance with regulatory and legal frameworks
and seek comment on this belief. Under the bill-and-keep framework we
propose today, the reciprocal compensation aspect will be satisfied
when each carrier collects the cost for a call from its own customers,
which moots the need for separate accounting and administrative tasks
for charges and payments to other carriers. We seek comment on this
view and any other types of administrative burdens that are eased or
otherwise mooted as a result of bill-and-keep. We also seek comment on
how the easing of these administrative burdens supports the transition
to all-IP networks, and how consumers may also realize these benefits.
Interested parties have long known that bill-and-keep is the
``default methodology that will apply to all telecommunications
traffic,'' and we believe further delaying the transition to bill-and-
keep may continue to result in market distortion and hinder the
transition to all-IP networks. As the Commission has observed,
``[i]ntercarrier compensation rates above incremental cost have
enabled'' arbitrage opportunities, many of which the Commission has
tried to remedy in recent years. Put differently, arbitrage
opportunities will remain a persistent threat to market efficiency
where the compensation framework imposes duties to bear costs that are
detached from each party's incremental costs of the services used to
complete the call. Given that the ICC framework acts as ``an implicit
subsidy'' for the entire network of a call, we believe that the
incentives to engage in these types of market distorting behaviors will
continue to exist until the transition to bill-and-keep is completed.
We seek comment on whether the Commission's partial implementation of
bill-and-keep to date may have created or contributed to marketplace
inefficiencies. Have the longevity of the ICC regime and the partial
continuation of the original access charge regime for non-IP voice
calls resulted in carriers reinvesting in existing equipment, as
opposed to investing in the development of IP networks? Will such
dynamics be effectively muted by the completion of the move to bill-
and-keep? We seek comment on the extent to which carriers that are
transitioning to IP networks or that have been delayed in deploying IP
networks are experiencing increased costs from the legacy ICC
framework, such as costs incurred from retaining tandem switches.
Additionally, we believe that completing the gradual, multi-year
transition of remaining access charges to bill-and-keep will permit
incumbent LECs to adapt to lower rates in a manner that will provide
them time and funding to evolve their networks and, as necessary,
business models, and we seek comment on that proposed transition below
to prevent revenue shocks. How will a multi-year transition period
minimize any such effects? In 2011, the Commission stated that bill-
and-keep ``will ultimately eliminate the competitive distortions and
consumer inequities'' that stem from competing carriers employing
different technologies used to complete a call which ``are subject to
different regulatory classifications and requirements.'' Has that
prediction proven to be true? Why or why not? Do the charges we propose
moving to bill-and-keep today present any different considerations or
potential market effects than those taken to bill-and-keep previously?
We ask commenters to be as thorough as possible in any explanations.
While we discuss various access charges below, we seek to obtain
the clearest possible picture of the current access charge landscape.
To that end, we seek broad comment on what tariffed switched access
charges are being charged today and the revenues associated with those
charges. This includes any intercarrier compensation charges still
collected by competitive LECs. Commenters should be as specific as
possible in identifying and describing these access charges, including
by reference to the Commission's rules, and in providing revenue
figures.
Originating Switched Access Charges. Originating switched access
refers to the set of services provided by a LEC to transmit long-
distance calls over its local network using end office and tandem
switches to route these calls from a calling party to an IXC's point of
presence (POP). In the USF/ICC Transformation Order, the Commission
only initiated the transition to bill-and-keep for certain terminating
access charges, due largely to the Commission's view that reforming
originating access charges was less pressing at the time. In light of
those observations and the Commission's

[[Page 14414]]

stated goal of implementing bill-and-keep as the default framework for
all-IP networks, the Commission capped price cap incumbent LECs'
intrastate and interstate originating and terminating switched access
rates, and rate-of-return incumbent LECs' interstate originating and
terminating and intrastate terminating access charges. Rate-of-return
incumbent LECs' intrastate originating access charges were not capped.
However, outside of capping the aforementioned originating access
charges, the Commission took no further action on originating access
charges. Since then, in the 8YY Access Charge Reform Order, the
Commission curbed arbitrage abuse by bringing 8YY originating end
office switching rates to bill-and-keep, creating a new 8YY joint
tandem switched transport rate element and capping the rate for this
element, and capping the 8YY database query rate, for both intrastate
and interstate traffic, but has otherwise left the ICC regime of
originating switched access charges undisturbed.
Building on the USF/ICC Transformation Further Notice, we seek
comment on capping all intrastate originating access rates that have
not yet been capped and transitioning all remaining intrastate and
interstate originating access charges to bill-and-keep, consistent with
the Commission's stated goals in the USF/ICC Transformation Order. This
includes but is not limited to any end office charges, dedicated
transport charges, tandem switching charges, or other separately
identifiable originating access rate elements. We believe these steps,
which replicate those taken to move most terminating access charges to
bill-and-keep, are necessary to avoid cost-shifting during the
transition, and seek comment on that view. We also seek comment on how
carriers avoided or resolved any issues stemming from the ongoing
operation of originating access charges, and how those solutions may
aid or assist the Commission's implementation of bill-and-keep for the
same charges.
The Commission's current ICC framework applies different rules and
restrictions to price cap carriers and rate-of-return carriers. In
particular, this distinction between carriers reflects underlying
differences in how each is compensated for the provision of switched
access services under our rules, owing in part to rate-of-return
carriers' greater reliance on access revenues to support their
networks. Given that greater efficiency can be achieved by a transition
to bill-and-keep as the end-state for all switched access traffic, are
there any specific concerns or considerations, either by carrier
regulatory status or size, that the Commission should account for when
transitioning originating access charges to bill-and-keep? If so, what
are they, and how should they be handled? We believe a universal
approach to moving all originating access charges to bill-and-keep is
more efficient and predictable, and we seek comment on whether that
perspective is supported by the experiences of both network operators
and consumers under the previous transition.
We also seek comment on whether all originating access charges
should be moved to bill-and-keep in the same manner or on the same
schedule. How much revenue is still associated with originating access
charges? What impacts might carriers experience during or after the
transition of all originating access charges to bill-and-keep? Please
explain as completely and specifically as possible how moving
originating access charges to bill-and-keep may disparately impact
carriers, including any details on service availability and
performance. Are there obstacles that prevented carriers from preparing
for these changes since they were first proposed in 2011? In
particular, we seek comment on how these actions may affect
intermediate access providers, such as tandem providers or centralized
equal access providers, that arguably stand in distinctive postures in
the call flow and may not have end users of their own. Under a bill-
and-keep framework, we anticipate that the originating LEC would be
responsible for arranging transport from its tandem to the network
edge, typically by contracting with intermediate carriers. Similarly,
the terminating LEC would need to arrange transport from the network
edge to its tandem, which may also involve contracting with
intermediate carriers. Under bill-and-keep, an independent third party
tandem would not be prohibited from charging contractually negotiated
prices to its LEC-customers in exchange for service. To recover these
costs, LECs would likely need to set end-user rates at levels
sufficient to allow them to compensate intermediate carriers for their
services in turn. Is this an accurate assumption of how the market will
operate under a bill-and-keep framework? Are there any actions the
Commission may need to take to preserve competition in markets that
depend on such carriers as all remaining access charges move to bill-
and-keep, and if so, what are they, and why?
In the USF/ICC Transformation Further Notice, the Commission noted
that commenters suggested that it should not prioritize originating
access charges because for many ``originating access is simply `an
imputation, not a real payment,''' but also recognized other
commenters' claims that these charges ``remain[ ] problematic for
independent long distance carriers and competitive LECs.'' We seek
comment on these perspectives. Since 2011, have these views changed? If
so, what lessons can the Commission apply to the effort to move
originating access charges to bill-and-keep? Does the diminishment of
the standalone long-distance market discussed elsewhere in this Notice
of Proposed Rulemaking affect commenters' positions?
Terminating Switched Access Charges. In contrast, the Commission
moved certain ``terminating end office switching and certain transport
rate elements'' to bill-and-keep in the USF/ICC Transformation Order.
Terminating switched access refers to the set of services provided by a
LEC to transmit long-distance calls over its network using end office
switches to route these calls from an IXC's POP to a called party.
Importantly, in 2011, the Commission distinguished the terminating
access charges for price cap carriers and competitive LECs that
benchmark their access rates to price cap carriers from those of rate-
of-return carriers and competitive LECs that benchmark their access
rates to rate-of-return carriers. Specifically, all carriers'
terminating end office access charges were brought to bill-and keep.
For terminating tandem switching and common transport access services
provided by price cap carriers, rates were taken to bill-and-keep where
the carrier owns the tandem and the terminating end office switch;
otherwise, price cap carriers' rates for these services are capped.
Thus, for price cap carriers where the terminating carrier does not own
the tandem serving switch, transport and termination within the tandem
serving area has not yet been transitioned to bill-and-keep. In
contrast, terminating tandem switching and common transport access
services provided by rate-of-return carriers were capped under both of
these scenarios. As for dedicated transport, the Commission capped the
rates for these services in the USF/ICC Transformation Order, with no
transition plan announced.
In service of the goal of encouraging all providers to move to
modern, all-IP networks, we now seek comment on completing the move to
bill-and-keep for all remaining terminating access charges consistent
with the transition of other access charges. We prefer to transition
all remaining terminating

[[Page 14415]]

switched access charges to bill-and-keep in lockstep but given that the
Commission previously only moved certain terminating access charges to
bill-and-keep, we seek comment on whether the Commission alternatively
should treat any remaining terminating access charges going forward
differently and, if so, why. How much revenue is still associated with
terminating access charges? Will moving the remaining terminating
access charges to bill-and-keep in lockstep with originating access
charges benefit providers and consumers, or would an alternative
approach be less administratively burdensome? If so, why?
Switched Access Tandem Switching and Tandem Switched Transport
Access Charges. We seek to refresh the record on moving all remaining
tandem switching and tandem switched transport access charges to bill-
and-keep. Tandem switching refers to the use of a tandem switch to
route long-distance calls between an end office switch and a wire
center serving an IXC's POP. Tandem switched transport refers to the
common transport of individual long-distance calls of multiple IXCs
using shared circuits between a tandem switch and an end office switch
and dedicated transport between a tandem switch and a serving wire
center. As noted above, the Commission has transitioned these charges
to bill-and-keep only in specific circumstances, and the remaining
tandem switching and tandem switched transport access charges, like
other remaining access charges, continue to be capped. We seek comment
on whether the transition of other terminating access charges to bill-
and-keep has affected these two types of access charges. How much
revenue is still associated with switched access tandem switching and
tandem switched transport?
In the USF/ICC Transformation Order, the Commission noted concerns
from carriers that the treatment of transport and tandem services under
the adopted transition plan would create incentives for cost shifting
and that rate caps would create disincentives for interconnection or
exacerbate arbitrage in the market for transport services. Have any
carriers experienced cost shifting as some carriers predicted?
Separately, but similarly, have any carriers encountered arbitrage or
other kinds of exploitative behavior related to non-transitioned tandem
switching and tandem switched transport access charges? We seek comment
on any alternate approaches that would resolve such concerns, including
with respect to transport access charges. Should these charges be
transitioned to bill-and-keep concurrently with the other access
charges in this item? If not, what is an appropriate transition
timeframe for transport access charges, and why?
Switched Access Dedicated Transport. We seek comment on the
transition to bill-and-keep of switched access dedicated transport
services. Dedicated transport access service refers to the provision of
service that moves traffic over separately committed transport
facilities between the serving wire center and: (1) the tandem
switching office (e.g., as part of a tandem-switched transport
service); (2) an end office (i.e., Direct-Trunked Transport); or (3) an
IXC's point of presence (i.e., Entrance Facility). To date, the
Commission has only capped the rates for these charges. We seek comment
on whether and, if so, how dedicated transport should be moved to bill-
and-keep. How much revenue is still associated with switched access
dedicated transport? Is there a need to treat switched access dedicated
transport services differently from other switched access services
(e.g., end office switching, tandem switching and common transport
between an end office switch and a tandem switch)? Under our existing
rules, IXCs decide whether to buy direct-trunked transport or tandem
switched transport and pay access charges for whichever of these
services they choose. After the proposed transition of all access
charges to bill-and-keep is complete, including dedicated transport,
should IXCs continue to be permitted to specify how their traffic is
transported? Are there any other considerations that the Commission
should weigh when deciding whether and how to move dedicated transport
access charges to bill-and-keep? If so, what are they and how should
they affect the Commission's decision-making? In all-IP networks, does
the Commission need to regulate dedicated transport at all?
Transit Service. Transit service routes non-access traffic of two
carriers that are not directly interconnected with each other through
an intermediary carrier's network. In essence, ``transit is the
functional equivalent of tandem switching and transport'' whereas
``transit refers to non-access traffic'' while ``tandem switching and
transport apply to access traffic.'' The Commission did not exercise
its authority over transit under section 251(b)(5) in the USF/ICC
Transformation Order, despite taking a unified approach to moving all
traffic to bill-and-keep. Indeed, on the record before it, the
Commission recognized that ``a competitive market for transit services
exists.'' We now seek to refresh the record on how the Commission
should view transit service following the move to bill-and-keep.
Commenters should identify ``the need for regulatory involvement and
the appropriate end state for transit service.'' How much revenue is
still associated with transit service? Have there been marketplace
changes in the way transit services are offered as other regulated
transport access services moved to bill-and-keep? We seek comment on
whether those developments, if any, might guide the Commission in
taking action on transit service charges as equivalent services move to
bill-and-keep. As a functionally equivalent service, did carriers
experience rate increases for transit services or other adverse
consequences when some transport access service rates were capped and
moved to bill-and-keep? We recognize that functional equivalency is not
always a direct comparison for substitute services, however we seek
comment on whether transit services served as a substitute for tandem
switching and transport during the Commission's transition of transport
access services to bill-and-keep. In the time since the USF/ICC
Transformation Order was adopted, has the market for transit services
remained competitive?
We also acknowledge that transit services may become critical when
IP interconnection is the default. As a result of the flexibility that
transit services offer and the availability of technological
alternatives to deliver transit, transit for IP services and transit to
the network edge in the bill-and-keep end state for ICC may replace
tariffed transport access services as carriers ultimately switch to IP
networks for voice calling. We think this may be one possible option
for carriers that wish to provide voice calling using TDM after the
move to all-IP voice calling as the default. We seek comment on the
likelihood of this shift, and on how carriers that utilize IP networks
for voice calling may use or rely upon transit services to complete IP-
based voice calling. We also seek comment on the end state of transit
services under a nationwide bill-and-keep framework for ICC, given that
transit services are not currently rate-regulated. We note that in the
USF/ICC Transformation Order the Commission does not distinguish
between transit services where a CMRS carrier indirectly interconnects
with a wireline carrier or where carriers indirectly interconnect via
IP technologies, from transit services used to indirectly interconnect
wireline carriers, and we seek comment on whether the Commission should

[[Page 14416]]

recognize such differences going forward, and if so how. We seek
comment on whether there is any need for additional Commission action
concerning transit service at this time. For example, are there any
benefits from a uniform regulatory framework for traffic that the
Commission should be aware of? Should the Commission formally recognize
transit services under the authority granted by section 251 for clarity
and consistency within our rules? In an all-IP world, is there any need
for the Commission to regulate transit service, of any type?
Remaining 8YY Access Charges. We propose to transition the
remaining 8YY charges--specifically, the originating joint tandem
switching and common transport charge of $0.001 per minute to the bill-
and-keep framework together with the other originating access charges.
We seek comment on this proposal. How much revenue is still associated
with the remaining 8YY access charges? Since toll-free calling requires
an 8YY provider to compensate other carriers for transmitting traffic
and associated charges, we also seek comment on how moving the tandem
switched transport access service charge to bill-and-keep would impact
the toll-free nature of 8YY calling. We also seek comment on the role
these services may play in the distance insensitive, all-IP calling
world.
Remaining Switched Access Charges. The goal of this proceeding is
to move all remaining intrastate and interstate switched access charges
to bill-and-keep. That includes all charges for the rate elements
identified in our part 69 rules or the functionally equivalent rate
elements. Under our existing rules, the intrastate terminating access
rate structure for both price cap and rate-of-return incumbent LECs is
required to be the same as the interstate terminating access rate
structure specified under our part 69 rules. Our existing rules do not
require the intrastate and interstate originating access rate
structures to be the same. As such, we seek comment on whether there
are any additional charges--beyond those discussed herein or specified
in part 69--that should also be moved to bill-and-keep.
Call Routing Charges Bearing Special Consideration. As we move all
other access charges to bill-and-keep, we are especially cognizant of
those access charges that require special consideration due to the role
each plays in traditional TDM voice calling, call routing, and
identification. Specifically, we seek comment on whether the Commission
should move the charges for the Signaling System 7 (SS7) call signaling
service and 8YY database query to bill-and-keep. Both of these access
services provide key information to carriers in the TDM call path,
assisting in identifying calling parties as well as determining the
pathway along which a call can be completed. Given the specific nature
of these services, we seek comment on how to move the access charges
for these parts of the TDM call routing system to bill-and-keep, if the
Commission decides to do so. We seek comment on and encourage proposals
that address the call routing and calling party identification aspects
of these two services and how they are used to identify the correct
call path. How much revenue is still associated with these two
services? Will call signaling service remain relevant or necessary once
we move to all-IP networks? Should the Commission delay taking action
to move either the 8YY database query charge or the signaling charges
to bill-and-keep until a more complete record on post-transition all-IP
call routing develops? We seek comment on whether these charges help
resolve problems with call routing and calling party identification
that are not cured by the move to IP networks, absent other solutions.
Given that IP networks are more efficient than TDM networks, will IP-
based solutions more effectively or efficiently handle tasks like
calling party identification or toll-free calling look ups, or
otherwise render these services obsolete? Are alternative call
signaling and call identification solutions already available for IP
calling? We seek comment on how to transition these access charges to
bill-and-keep.
With respect to the 8YY database query charge, we also ask whether
it would be more appropriate to recover the costs of administering the
database through a mechanism similar to that used for the North
American Numbering Plan, such as contributions based on FCC Form 499-A
filings. We seek comment on whether a comparable database will be
necessary to handle 8YY traffic in an all-IP environment. If so, what
modifications to the Commission's rules would be needed to ensure that
the 8YY database remains fully functional and effective in a post-TDM
landscape?
VoIP-PSTN Traffic. In the USF/ICC Transformation Order, the
Commission adopted transitional rules specifying the default
intercarrier charges for VoIP-PSTN traffic. Consistent with its other
intercarrier compensation reforms, the Commission specified that VoIP-
PSTN traffic ``ultimately will be subject to a bill-and-keep
framework.'' To that end, the Commission brought all VoIP-PSTN traffic
within the section 251(b)(5) framework and adopted ``a prospective
intercarrier compensation framework for VoIP traffic.'' Under this
framework, the default intercarrier compensation rates for intrastate
and interstate toll VoIP services are equal to interstate access rates
applicable to functionally equivalent PSTN services and the default
intercarrier compensation rates for other VoIP-PSTN traffic are the
otherwise applicable reciprocal compensation rates. We seek comment on
the charges currently assessed for VoIP-PSTN traffic, including a
description of the rate elements for which these rates are being
charged. We also seek comment on what carriers, if any, are tariffing
these charges and the revenues associated with these charges. To the
extent there are currently-assessed intercarrier compensation charges
for VoIP-PSTN traffic, we propose to bring those charges to bill-and-
keep, consistent with the declaration the Commission made in the USF/
ICC Transformation Order and the reforms proposed in this Notice of
Proposed Rulemaking. We seek comment on this proposal.
The Role of States After the Transition to Bill-and-Keep. We seek
comment on the states' perspective on and experience with the
transition of some access charges to bill-and-keep after the USF/ICC
Transformation Order. We also seek comment on the roles states should
have following the transition of all access charges to bill-and-keep.
Will the implementation of bill-and-keep nationwide affect state
regulations, and if so, how? Will the move to bill-and-keep have
varying impacts across different states? If state regulations over
intrastate access charges are not preempted, and intrastate charges are
left as they currently stand by the completion of our move to bill-and-
keep, will incentives for carriers to use legacy technologies remain?
What role could or should state regulators have in resolving disputes
that might arise from the transition to bill-and-keep?

Proposed Transition of Remaining Access Charges to Bill-and-Keep

Capping Intrastate Access Charges. As the first step in the
transition of the remaining intercarrier charges, we propose to
immediately cap those access charges that remain uncapped, namely the
intrastate originating switched access charges for rate-of-return
carriers and competitive LECs that benchmark to rate-of-return
carriers, effective 30 days after the final rules adopted in a
forthcoming order are published in the Federal Register. Freezing these
rates would ensure that rates do not increase

[[Page 14417]]

and would help prevent carriers from shifting costs to other rate
elements during the transition period. We seek comment on this
proposal. Our proposal is consistent with the approach taken in the
USF/ICC Transformation Order. We tentatively conclude that capping
these charges will provide certainty and stability during the
transition process and minimize disruption for consumers and service
providers and seek comment on this conclusion. How would this affect
carriers' present business plans? Does it prevent possible arbitrage or
gaming of rates? Alternatively, should the Commission make any cap on
remaining access charges effective a certain time period after an
order's adoption? If so, how long after adoption of an order
implementing the transition to bill-and-keep, as proposed in this
Notice of Proposed Rulemaking, should such a cap become effective? What
are the potential benefits and drawbacks of this approach?
In the USF/ICC Transformation Order, the Commission recognized that
intrastate access rate disparities ``created incentives for arbitrage
and pervasive competitive distortions within the industry.'' To address
this concern the Commission, after initially capping certain interstate
and intrastate switched access rate elements, reduced the intrastate
rates to parity with interstate rates. Because there is no evidence of
similar intrastate rate disparities today, we decline to propose a
transitional step after capping rates that would require carriers to
reduce intrastate rates to interstate rate parity. We seek comment on
this approach.
Transition Period for Intercarrier Access Charges. To mitigate the
potential operational disruptions an abrupt regulatory shift may cause,
we propose a two-year transition period for the remaining intercarrier
access charges, including both intrastate and interstate access charges
which had previously been capped in the USF/ICC Transformation Order,
as well as transit rates and rate-of-return incumbent LECs' originating
intrastate switched access rates, which were not capped in 2011. In the
8YY Access Charge Reform Order, the Commission created a new 8YY
originating joint tandem switched transport rate and capped the rate
for this rate element, and lowered and capped the 8YY toll free data
base query rate. Under our proposal, these rates also would be
transitioned to bill-and-keep over a two-year transition period. This
approach is consistent with the Commission's contemplated two-year
transition to bill-and-keep for originating access rates in the USF/ICC
Transformation Further Notice and with concerns in the record that
``establishing separate transitions for different intercarrier charges
invites opportunities for arbitrage.'' To achieve the goal of moving
all remaining access charges by price cap and rate-of-return carriers
to bill-and-keep, we propose a 24-month transition period as follows: a
33% reduction in each remaining access charge as of the first annual
interstate access tariff filing following the effective date of an
order in this proceeding; another 33% reduction by the following annual
tariff filing (that would mean a total 66% reduction at that time from
the initial rates); and a final 34% reduction as of the annual tariff
filing following that one, thereby completing the transition to bill-
and-keep, bringing all remaining access charges to zero. To further
clarify how the two-year period operates, the first reduction occurs at
month 0 of the transition, the second reduction occurs at month 12, and
the final reduction occurs at month 24. We seek comment on this
proposed transition schedule.
We seek comment on whether the proposed timeframe effectively and
expeditiously facilitates the transition from existing intercarrier
compensation charges to a bill-and-keep framework, while also
facilitating carriers' migration from TDM-based switched access
services to all-IP networks. Does the proposed transition period
provide sufficient time for carriers to adapt to the evolving
regulatory and technological landscape? If not, what alternative
timeframe would strike the right balance between minimizing disruption
and advancing the transition? Will the transition otherwise affect
existing commercial contracts or interconnection arrangements between
parties? We do not anticipate that the proposed reforms will result in
the abrogation of existing contracts, and we seek comment on this
tentative conclusion. Providers are encouraged to identify any issues
related to how the transition may interact with existing commercial
contracts, including the sufficiency of contractual change of law
provisions or similar terms and conditions to address issues here.
The Commission has noted that all originating access charges
``should be eliminated at the conclusion of the ultimate transition to
the new intercarrier compensation regime.'' The record suggests that
establishing separate transitions for different charges could lead to
arbitrage opportunities. Accordingly, we propose that the two-year
transition period apply uniformly to all remaining originating and
terminating access charges for both interstate and intrastate traffic,
all of which would transition to a bill-and-keep framework on the same
schedule. We seek comment on this proposal. Alternatively, should we
instead consider a transition schedule that differentiates among
various access charges? If so, what alternative schedule should the
Commission consider and why would that be more appropriate? Should, for
example, the Commission distinguish the 8YY database query charge or
the signaling charge for a different transition period than we apply to
other originating access charges? If so, why, and what periods should
apply for which charges? Similarly, are there reasons to distinguish
transit services during the transition of the remaining access charges
to bill-and-keep? Likewise, should dedicated transport be transitioned
in the same manner as the common transport access charges? Should the
Commission engage in a more specific transition plan for these
services, or is the same two-year transition plan as with tandem
switched transport and tandem switching appropriate? Why or why not? If
there remain reasons to distinguish between any types of access charges
when reaching bill-and-keep, we request that commenters identify those
reasons and charges with specificity, and support why they should be
distinguished.
In the USF/ICC Transformation Order, the Commission adopted
separate transition schedules for rate-of-return and price cap
carriers. Here, we propose that the transition period apply uniformly
to all carriers that currently tariff access charges. Establishing
different timeframes for different categories of carriers could lead to
unintended consequences, such as inefficiencies or opportunities for
arbitrage. We seek comment on whether rate-of-return carriers should be
granted additional time to transition these rates. If so, what
justification supports a longer transition period, and how much
additional time would be appropriate? We also invite comment on whether
a two-year transition would be too rapid for certain carriers. If so,
what safeguards could the Commission implement to mitigate such
concerns?
We seek comment on lessons learned during previous transitions to
bill-and-keep. For those terminating access charges that already have
moved to bill-and-keep, we seek comment on carriers' experiences during
the transition. Specifically, did any carrier experience new or novel
difficulties in implementing bill-and-keep? If so, please describe the
difficulties and any actions taken to resolve them. We also

[[Page 14418]]

seek comment on whether the Commission had accurately gauged the
marketplace effects from the transition to bill-and-keep for these
charges.
Competitive LEC Benchmarking. For intercarrier compensation
purposes, when access charges move to bill-and-keep for price cap or
rate-of-return carriers, the same rate applies to those charges for
benchmarking competitive LECs. We seek comment on how the transition of
the remaining switched access charges to bill-and-keep will affect
competitive LECs that benchmark to incumbent LEC rates. Are there any
circumstances that would signal adverse effects in those markets? After
bill-and-keep has been successfully implemented for all access charges,
is the competitive LEC benchmarking rule still necessary, since
competitive LECs will be prohibited from charging any access charges?
We seek comment on these and any other perspectives on how moving the
remaining access charges to bill-and-keep will impact benchmarking
competitive LECs.

Network Edge

The network edge refers to the demarcation point in the
telecommunications network for establishing financial responsibility
between sending and terminating carriers for transmitting calls in a
bill-and-keep framework. The network edge is distinct from a point of
interconnection (POI) because a call may pass through multiple POIs
before reaching the network edge--the point at which the originating
carrier's financial responsibility for the call ends and the
terminating carrier's responsibility begins. Under the intercarrier
compensation regime, there was no need to define the network edge
because access charges determined which carrier paid for each segment
of traffic delivery. As the Commission completes the transition to
bill-and-keep and accelerates the transition to all-IP communications
networks, the definition of the network edge becomes important for
determining financial responsibility for transport costs between
carriers' networks.
When the Commission began the transition to bill-and-keep in the
USF/ICC Transformation Order, it defined the network edge for non-
access traffic exchanged between rural rate-of-return LECs and CMRS
providers. The Commission also explained that it did not intend to
``affect the ability of states to define the network edge for
intercarrier compensation under bill-and-keep as a general matter'' and
sought comment on transitioning the remaining access charges to bill-
and-keep and on related network edge issues. In 2017, the Commission
sought to refresh the record on intercarrier compensation reform,
including carrier obligations to deliver traffic under bill-and-keep.
To date, the record reflects a lack of consensus on how to define the
network edge. In addition, evolving market conditions, ongoing
technological advancements, and the reforms proposed in this Notice of
Proposed Rulemaking underscore the need for a fresh look at network
edge issues.
In the USF/ICC Transformation Further Notice, the Commission stated
that it ``believe[d] states should establish the network edge pursuant
to Commission guidance,'' and sought comment on this approach and other
options. Given the amount of time that has elapsed since comments on
this issue were filed, we renew our request for input now. As the
Commission considers the reforms proposed in this Notice of Proposed
Rulemaking--moving to bill-and-keep to encourage the transition to all-
IP networks--we seek input on whether carriers and state regulatory
commissions believe there is a need to and benefit from defining the
network edge today, and on the role that the Commission and states may
play in that process.
To promote consistency across states in defining the network edge,
would guidance from the Commission be helpful? If so, what form should
that guidance take--for example, general principles, best practices, or
a default framework? Would a default framework provided by the
Commission be the most practicable solution if a state fails to define
the network edge or if states develop inconsistent definitions? We seek
comment on how the Commission should proceed in a manner that ensures
consistency with sections 251 and 252 of the Act. We are interested
also in hearing from state commissions about how any action by the
Commission might affect past state decisions or open proceedings. To
aid the Commission in potentially offering guidance, we seek to learn
as much as possible from the experience and knowledge that states have
garnered in addressing network edge issues.
At the same time, we also invite input from providers, consumers,
and other stakeholders on their experiences and perspectives regarding
these questions and issues. We are particularly interested in learning
whether the industry is in agreement on principles that would serve as
the basis for defining the edge. Because LECs may need to rely on
third-party carriers to deliver or receive calls, we seek comment on
whether the current marketplace for transit services is sufficiently
robust to ensure that disparities in size between large transit
providers and small LECs do not undermine the latter's bargaining power
to negotiate fair and reasonable terms and conditions.
Network Edge Issues During Transition to Bill-and-Keep and All-IP
Networks. Do commenters anticipate disputes over financial
responsibility for transporting voice traffic during the transition
unless the network edge is clearly defined? If so, when should such a
definition take effect? To facilitate the transition to all-IP
networks, should the Commission require each state to designate a
single point of interconnection (POI) for TDM and VoIP traffic during
the two-year transition and designate that POI as the network edge?
States have already been required to designate a single POI as the
NG911 Delivery Point. The Commission does not intend to disrupt present
commercial agreements in any actions it may take and welcomes any
comments to ensure that result. Should carriers be financially
responsible for transporting traffic to that POI--including the cost of
any necessary TDM-to-IP conversion--even if it lies outside of their
traditional service areas? We anticipate that, because it would be
costly for a carrier to transport a call from its service area to the
POI designated as the network edge within a state, the carrier would
instead convert the call to IP format and hand it off to an
intermediate carrier. That intermediate carrier would then carry the
call to the network edge, where it would be handed off to the
terminating carrier or to an intermediate carrier selected by the
terminating carrier. Accordingly, each call would have only one network
edge and would likely be transported in IP most of the way.
Would carriers be able to contract with intermediate providers to
deliver traffic to the POI, and could they leverage existing network
capabilities amidst evolving all-IP platforms to reduce costs? We also
ask whether a single POI per state aligns with states' responsibilities
under sections 251 and 252 and whether states have the resources and
time to implement this approach. Alternatively, should the Commission
leverage existing regional IP meet points as the default network edge
to reduce costs and avoid creating separate state-specific POIs? IP-
based calls significantly reduce the cost of transport compared to TDM-
based calls. Would this be more efficient and cost-effective during the
two-year phase-out of access charges?

[[Page 14419]]

We also seek comment on the relationship between defining points of
interconnection in the network and defining the network edge. We
recognize that the definition of network edge is an important point for
both this Notice of Proposed Rulemaking and the IP Interconnection
Notice of Proposed Rulemaking, and we seek comment on how we should
consider the overlap. How does the definition of the network edge for
purposes of ICC impact other aspects of the IP transition?
Network Edge After Transitions to Bill-and-Keep and All-IP Networks
Are Completed. Once the industry completes the transition of the
intercarrier access charge system to a national bill-and-keep
framework, we anticipate that carriers generally will seek to maximize
efficiencies by delivering voice traffic in IP format. Most carriers
already have the capability to offer VoIP services to their end users.
As of December 2023, only 9% of residential connections remained
copper-based. It is, therefore, likely that at the end of the
transition period voice calls carried in IP format from origination to
termination will travel through established internet exchange points
and pathways as does all other current internet traffic. The industry
has already established standards for transmitting VoIP calls over the
internet without compromising call quality. Once all communications are
transitioned from the PSTN to all-IP networks, do carriers or state
commissions believe there is a need to define the network edge? Should
such a definition apply to networks still using TDM facilities after
the proposed transition to bill-and-keep is completed if some networks
have not completely transitioned to all-IP networks by then? Would this
definition continue to be necessary so long as TDM facilities are in
use? Should the Commission set a definite sunset date for when the
network edge definition would no longer be applied?
In the absence of access charges defining the financial
responsibility for transporting voice traffic in all-IP networks, does
the network edge still need to be defined to establish financial
responsibility, or what steps should be taken, to ensure that financial
disputes do not cause service disruptions? At the same time, we seek
comment on whether the Commission or the states have the authority to
define the network edge when the transition to all-IP networks is
completed? Given that IP traffic is jurisdictionally mixed in nature,
should the Commission preempt state authority to define the network
edge for all-IP traffic? We also seek comment on whether the Commission
alternatively should distinguish voice traffic from other traffic and
whether this establishes a need to determine network edges for voice
traffic in all-IP networks. If so, we ask commenters to explain why,
and describe and illustrate a potential network edge in this scenario.
Is it correct to assume that most providers already maintain either
direct peering arrangements or agreements with third-party IP transit
providers for transporting existing internet traffic from their end
users, and that they can readily in a cost-efficient manner incorporate
voice traffic--given that it represents only a small portion of overall
data traffic--into those existing arrangements? To the extent that, at
the end of the transition to bill-and-keep and all-IP networks,
carriers continue to rely on TDM technology, we propose that the costs
associated with a carrier's continued TDM use should be borne by the
carrier that elects to maintain it and seek comment on this proposal.
For example, under this proposal, any costs associated with converting
a call to IP format will be borne by the carrier that elects to
originate, interconnect, or terminate the call in TDM.
We strongly encourage parties to submit concise, clear-cut call-
flow diagrams to help illustrate and explain their comments. Parties
should also define their use of the terms ``transit,'' ``meet point,''
``interconnection point,'' and ``peering point,'' including
distinctions.

Implementation of the Transition to Bill-and-Keep

We seek comment on the role of tariffs during the transition of
interstate and intrastate access charges to bill-and-keep. We propose
to maintain a role for tariffing access charges to implement the rate
step down to bill-and-keep (i.e., zero). After access charges
transition to bill-and-keep, we propose to grant incumbent and
competitive LECs forbearance under section 10 of the Act from the
application of section 203 tariffing requirements to access charges.
The Commission will, at that time, no longer permit any tariffs
containing access charges. We seek comment on this proposal and any
alternative proposals.
Background. The Commission's existing ICC framework has relied on
tariffing access charges to ensure that common carriers' ``charges,
practices, classifications, and regulations'' are ``just and
reasonable'' under section 201 of the Act and not subject to ``unjust
or unreasonable discrimination'' under section 202 of the Act. Under
section 203(a) of the Act, ``common carriers'' are required to file
with the Commission ``schedules,'' i.e., tariffs, ``showing all charges
for itself and its connecting carriers for interstate and foreign wire
or radio communications.'' A carrier may not ``charge, demand, collect,
or receive'' a different amount for such communications, ``refund or
remit'' a portion of the charges, or ``extend to any person any
privileges or facilities in such communication, or employ or enforce
any classifications, regulation, or practices affecting such charges,
except as specified in such [tariff]'' pursuant to section 203(c) of
the Act. Section 204 of the Act authorizes the Commission to ``conduct
a hearing concerning the lawfulness'' of ``any new or revised charge,
classification, regulation, or practice'' contained in a tariff. Upon a
finding of unlawfulness of the tariffed charge, section 205 of the Act
authorizes the Commission to ``determine and prescribe . . . the just
and reasonable charge.'' Tariffed rates that are subsequently found to
be unlawful are not subject to refund liability for damages incurred
while the tariffed rate was in effect.
The Commission's part 61 tariffing rules, among other things,
ensure compliance with the Commission's part 69 access charge regime.
In the USF/ICC Transformation Order, the Commission relied on the
continued tariffing of access charges to transition terminating
interstate and intrastate access charges to bill-and-keep. During the
transition, the Commission permitted LECs to tariff intrastate toll
traffic with the states, and interstate toll traffic with the
Commission. In lieu of tariffing access charges, however, carriers were
free to enter into negotiated agreements. The Commission's July 1
annual access charge tariff filings, among other things, implemented
the transition of terminating access charges to bill-and-keep required
by Sec. Sec. 51.700 to 51.715 and 51.901 to 51.919 of the Commission's
rules.
Role of Tariffs During Transition to Bill-and-Keep. To provide
carriers with financial certainty, we propose to preserve a role for
tariffing access charges during the transition of intrastate and
interstate access charges to bill-and-keep. During the proposed
transition, carriers will tariff interstate and intrastate access
charges consistent with the transitional rate step-down described
above. We propose that the Commission would continue to accept new
interstate tariffs and revisions to existing tariffs and states would
be expected to do the same for intrastate tariffs. Alternatively,
should we allow carriers to immediately detariff

[[Page 14420]]

intrastate and interstate access charges, i.e., bring them down to
zero, if they choose to do so? Why or why not? Should we allow carriers
to enter into negotiated commercial agreements instead of tariffing
access charges? We seek comment on these proposals and any other
alternatives.
VoIP-PSTN Traffic. During the transition adopted in the USF/ICC
Transformation Order, the Commission permitted ``LECs to file tariffs
that provide that, in the absence of an interconnection agreement, toll
VoIP-PSTN traffic will be subject to charges not more than originating
and terminating interstate access rates.'' During that transition, the
Commission permitted LECs to tariff interstate toll VoIP-PSTN traffic
in interstate tariffs and intrastate toll VoIP-PSTN traffic in
intrastate tariffs. Should the Commission adopt a similar approach to
transition the remaining intrastate and interstate access charges to
bill-and-keep? Meaning, during the transition, should the Commission
permit carriers to tariff interstate originating VoIP-PSTN traffic in
interstate tariffs and intrastate originating VoIP-PSTN traffic in
intrastate tariffs? What are the costs and benefits of this approach
and any alternatives? During the transition, to what extent should the
Commission permit carriers to tariff interstate and intrastate
terminating VoIP-PSTN traffic? The Commission has held that carriers
may not tariff purely IP-IP traffic that does not touch the PSTN. In
other words, carriers may not tariff access charges if the LEC or its
VoIP provider partner does not provide a physical connection to last
mile facilities used to serve an end user over the TDM-based PSTN
network. We similarly propose to maintain the prohibition of carriers
and their VoIP provider partners from tariffing purely IP-to-IP traffic
that does not touch the PSTN and seek comment on this proposal.
Reciprocal Compensation Agreements. In the USF/ICC Transformation
Order, the Commission asserted legal authority to bring all traffic--
terminating and originating access service--within the section
251(b)(5) reciprocal compensation regime in order to advance the
migration to all-IP networks. ICC traditionally has been subdivided
between access charges (payments to LECs to originate and terminate
long-distance traffic) and reciprocal compensation (payments between
carriers to transport and terminate local traffic). Section 251(b)(5)
of the Act imposes a duty on LECs ``to establish reciprocal
compensation arrangements for the transport and termination of
telecommunications.'' Section 252 of the Act outlines the
responsibilities of incumbent LECs to negotiate, arbitrate, and approve
interconnection agreements and allows parties to petition state
commissions ``to participate in the negotiation and to mediate any
differences.'' How will the transition of access charges to bill-and-
keep affect reciprocal compensation agreements? Is the section
251(b)(5) framework appropriate for originating access service? Why or
why not? What is the role of state commissions, if any, in resolving
disputes between incumbent LECs and competitive LECs over rates for
reciprocal compensation? How could the Commission's section 251(b)(5)
framework be improved for originating and terminating access service?
Is there any evidence that rates, terms, and conditions contained in
reciprocal compensation agreements are unjust and unreasonable? Is
there any evidence that LECs are offering similarly situated customers
rates, terms, and conditions that are unjustly or unreasonably
discriminatory?
Under sections 251 and 252 of the Act, incumbent LECs generally
cannot compel other LECs to negotiate over traffic that is not
exchanged by tariff. In the USF/ICC Transformation Order, the
Commission declined to extend the duty of CMRS providers to negotiate
interconnection agreements with incumbent LECs to competitive LECs and
other interconnecting service providers. The Commission, however,
sought comment in the USF/ICC Transformation Further Notice on
extending the interconnection agreement process adopted in the T-Mobile
Order to all telecommunications carriers. As part of any detariffing
reforms we propose, we seek comment on whether we need to revisit the
rights and obligations of carriers to negotiate interconnection
agreements.
NECA. Most rate-of-return carriers establish rates for access
service by participating in the National Exchange Carrier Association,
Inc. (NECA) tariff and tariff pools. During the transition to bill-and-
keep, should we allow rate-of-return carriers to continue to make
elections regarding participation in the NECA tariffs and pooling
process? Why or why not? Because we propose to detariff the remaining
interstate access charges once carriers transition to bill-and-keep, we
propose to require rate-of-return carriers participating in the NECA
tariff pools to remove access charges from the NECA tariff pools once
they transition to bill-and-keep. We seek comment on this proposal and
the role of the NECA tariff and tariff pools during and after the
transition of access charges to bill-and-keep.
Role of Intrastate Tariffs. Under the framework adopted in the USF/
ICC Transformation Order, rates for intrastate access traffic continued
to be tariffed in state tariffs. We seek comment on the extent to which
carriers should continue to tariff remaining intrastate access charges
with state commissions pursuant to intrastate tariffs. To what extent
do carriers tariff TDM-based intrastate access charges in state
tariffs? To what extent do carriers tariff intrastate VoIP-PSTN traffic
in state tariffs? Is VoIP-PSTN traffic inherently jurisdictionally
mixed in nature and therefore not subject to state regulation? We seek
comment on the role of the states and state commissions to ensure
compliance with the transition of remaining intrastate access charges
to bill-and-keep. Are there concerns that carriers could shift cost
recovery for access services from interstate to intrastate tariffed
rates? If so, are there any actions the Commission and state
commissions could take to prevent a windfall or double-recovery? Are
there other arbitrage opportunities that the Commission and state
commissions should address in any framework adopted? Is there any
evidence that intrastate access charges vary by state? Is there any
evidence of arbitrage opportunities with respect to intrastate
originating access charges provided by rate-of-return carriers?
Existing Agreements. We seek comment on how existing commercial
contractual agreements might be affected by the reforms we propose. The
reforms we propose above would require carriers to revise their
interstate and intrastate switched access charge tariffs. We do not,
however, propose to repeal existing commercial contracts,
interconnection agreements, or service guides, or propose to require a
``fresh look'' at these agreements. Instead, we propose to defer to
existing change-in-law provisions with respect to these agreements and
seek comment on this approach. To what extent do our proposed reforms
trigger contractual change-in-law provisions allowing for the parties
to renegotiate certain rates, terms, and conditions? Are there
situations in which the proposed reforms could not be addressed through
change-in-law provisions? Would the Commission's waiver process under
Sec. 1.3 address any such concerns? If not, would the public interest
still be best served by proceeding with the proposed reforms?

[[Page 14421]]

Forbearance From Section 203 Tariffing Obligations for Intercarrier
Access Charges

In this section, we propose to grant incumbent and competitive LECs
forbearance under section 10 of the Act from the application of section
203 tariffing requirements to interstate access charges once all access
charges transition to bill-and-keep. If the Commission forbears from
section 203 of the Act, sections 204 and 205 of the Act would no longer
apply with respect to interstate access charges. We therefore propose
to also forbear from sections 204 and 205 of the Act with respect to
detariffed interstate access charges once all access charges transition
to bill-and-keep. We propose to require LECs to detariff remaining
interstate access charges after which the Commission would no longer
accept interstate tariffing of these charges. Instead, carriers would
enter into negotiated commercial agreements and/or list rates, terms,
and conditions in service guides. We seek comment on whether the
section 10 criteria for forbearance are met.
Beginning in the 1980s, the Commission pursued permissive and
mandatory detariffing policies. Initially courts found that the
Commission lacked mandatory detariffing authority; however, that
changed with the 1996 Act, which compelled the Commission to forbear
from applying statutory requirements where certain criteria are met.
Section 10 of the Act requires the Commission to forbear from applying
any requirement of the Act and Commission rules if it finds that the
rule is unnecessary to ensure just and reasonable rates or to protect
consumers and that forbearance serves the public interest, particularly
by promoting competition.
The Commission has exercised its forbearance authority to order
mandatory detariffing in various contexts. The Commission has expressed
concern that ``the necessity of filing tariffs hinders competitive
responsiveness'' and the filed-rate doctrine reduces competition. More
recently, commenters have identified part 61 tariffing requirements as
ripe for further deregulation and streamlining. For example, commenters
argued that tariffs are ``cumbersome and slow'' and thus
``unnecessary'' and that ``thanks to competition are largely
obsolete.''
Are tariffing requirements for access charges under section 203 of
the Act still necessary, following the transition to bill-and-keep, to
ensure that rates, terms, and conditions of access service remain just
and reasonable, and not unjustly or unreasonably discriminatory? When
Congress passed the 1996 Act, incumbent LECs controlled 99.7% of the
local telephone service marketplace. Today, incumbent LECs' switched
access lines account for only 3.1% of the voice telephony marketplace.
Once the transition to bill-and-keep is complete, will tariffing these
services still be necessary to ensure that rates, terms, and conditions
of service are just and reasonable and not unjustly or unreasonably
discriminatory? Will carriers and their customers be able to receive
the same or similar transparent price and service information provided
by tariffs through negotiated contractual agreements, service guides,
and other agreements? We seek comment on the extent that competition
for voice services is sufficient to constrain prices for access
services to just and reasonable levels absent tariffing access charges.
Are sections 201, 202, and 208 of the Act, in conjunction with
market forces, sufficient to protect consumers from unjust and
unreasonable rates, terms, and conditions or unjust and unreasonable
discrimination without continued tariffing of access charges? If
continued tariffing of access charges is necessary to protect consumers
following the transition to bill-and-keep, why? Is there price, cost
support, service, or other information, that otherwise would be
available through a tariff filing, that carriers should make available
to Commission staff and the public for purposes of preparing complaints
under section 208 of the Act? For example, section 211 of the Act
requires carriers to ``file with the Commission copies of all
contracts, agreements, or arrangements with other carriers.'' And Sec.
43.51 of our rules requires carriers to maintain a copy of contracts
between telephone carriers and connecting carriers available to
Commission staff and the public upon request. Is this information
sufficient to protect consumers? Absent tariffs, to what extent can
customers assert their rights under interconnection agreements or
reciprocal compensation agreements? If contract negotiations break
down, to what extent can customers avail themselves of state mediation
and arbitration procedures under sections 251 and 252 of the Act? To
what extent can consumers pursue remedies under state consumer
protection and contract laws in ways otherwise precluded in a tariffing
regime by the filed-rate doctrine?
Is forbearance from tariffing consistent with the public interest?
For example, would forbearance from tariffing switched access services
promote competitive market conditions? Does tariffing access charges
create disincentives for carriers to transition from TDM to all-IP
networks? To what extent does tariffing access charges impose
unnecessary regulatory burdens on carriers? Would detariffing access
charges reduce compliance costs, increase regulatory flexibility,
increase incentives to invest in innovative products and services, or
otherwise be in the public interest? Why or why not? Are there ways the
Commission could reorient the tariffing regime to incentivize carriers
to transition from TDM to all-IP networks? If the Commission detariffed
access charges, what effect would this have on prices, service
availability, innovation, and competition? To what extent does
detariffing access charges increase litigation costs and refund
liability for carriers by removing protections under the filed-rate
doctrine? To what extent does detariffing access charges increase
transaction costs through individually-negotiated contractual
agreements? Are there any approaches the Commission could take to
minimize these concerns?
Other Considerations. If we detariff access charges, what other
rules should we subject to forbearance or further streamlining as a
result? Commenters advocate that ``a careful review'' of parts 32, 36,
64, 65, and 69 of the Commission's rules is necessary. Parts 32, 36,
64, 65, and 69 contain rules for calculating CAF BLS support
attributable to common line and Consumer Broadband-Only Loop (CBOL)
services and interstate rates for common line, CBOL, and special access
services subject to rate-of-return regulation. Parts 32, 64, and 65
contain rules for calculating high-cost loop support. At the end of the
transition to bill-and-keep, to what extent should we also grant rate-
of-return carriers forbearance from provisions of the parts 32, 63, 64,
65, and 69 cost assignment rules, and part 36 separations rules? Should
we also forbear from Sec. 54.1305 reporting requirements for rate-of-
return carriers' access charges? We seek detailed comment on these and
other rules we should eliminate or forbear from and the associated
costs and benefits. Commenters note that to the extent that the
Commission does not reform its universal service rules for legacy
carriers that cross-reference tariffs, ``such carriers . . . could
continue to impute such charges for universal service purposes without
actually filing any tariffs.'' To what extent should the Commission
allow carriers to impute access charges for purposes of calculating
universal

[[Page 14422]]

service support not based on tariffs? We seek comment on the extent to
which we need to revise our part 54 rules to reflect detariffing access
charges, specifically the CAF ICC support rules in Sec. 54.304 and CAF
BLS support rules in Sec. 54.901.
Role of Tariffs After Transition to Bill-and-Keep. We seek comment
on the continuing role of state and federal tariffs and associated cost
support (i.e., tariff review plans) once intrastate and interstate
access charges transition to bill-and-keep. We believe that
transitioning all access charges to bill-and-keep obviates the need to
tariff intrastate and interstate access services and seek comment on
this view. Going forward, to what extent should the Commission allow
carriers to permissively tariff certain rates, terms, and conditions of
interstate telecommunications service? For example, should we permit
carriers to continue to tariff terms and conditions of interstate
telecommunications services once the transition to bill-and-keep for
all access charges is complete? Are there any charges for interstate
telecommunications service we should permit common carriers to tariff?
Similarly, to what extent should the states allow carriers to tariff
certain rates, terms, and conditions of intrastate telecommunications
service? Should the Commission preempt state tariffing of remaining
access charges and, if so, under what statutory authority?
Alternatively, are there any approaches the Commission could take to
encourage states to detariff intrastate access charges? For example,
should we adopt a ``backstop'' if states fail to detariff intrastate
access charges within a specific period of time? If so, we seek comment
on how much time the states may need to detariff intrastate access
charges.
We also seek comment on the continuing role of tariffs and related
cost support once carriers complete the transition to end-to-end IP
voice communications. The Commission's tariffing regime applies to
common carriers. While carriers may tariff access charges for VoIP-PSTN
traffic, they are currently prohibited from tariffing access charges
for purely IP-IP traffic. We propose to maintain this prohibition and
seek comment on this approach. In light of this, we seek comment on the
role, if any, that the Commission's tariffing regime should play in an
all-IP world. Are there reasons to maintain the Commission's tariffing
regime after a transition of voice traffic to all-IP?

End Users Cover the Cost of the Networks They Choose

To support a more market-driven approach to cost recovery and
encourage continued investment in modern communications infrastructure,
we propose to deregulate and detariff end-user charges, known as
Telephone Access Charges, thereby allowing carriers to recover lost ICC
revenues directly from their end users. In addition, to further
strengthen the incentive for carriers to transition to all-IP networks,
we seek comment on phasing out CAF ICC support following the shift to
the comprehensive bill-and-keep framework. In particular, we seek
comment on how best to ensure a smooth and speedy transition for
carriers while appropriately recognizing any challenges.

Deregulating and Detariffing Telephone Access Charges

To facilitate the transition to a bill-and-keep framework and
ensure that carriers can recover their costs from end users, we propose
to eliminate ex ante pricing regulation and tariffing requirements of
all end-user charges associated with interstate access service offered
by incumbent LECs. Although the term ``access charges'' typically
refers to intercarrier charges, it includes some end-user charges that
we collectively reference as Telephone Access Charges (TACs). Our
proposals here are part of this new Notice of Proposed Rulemaking
seeking comment on issues in the context of completing the transition
of all remaining access charges to a bill-and-keep system and the
transition of TDM networks to all-IP technologies.
These end-user charges are remnants of legacy telephone regulation
when LECs were subject to comprehensive rate oversight designed to
protect subscribers from supracompetitive prices. The regulations were
intended to protect consumers from the monopoly power of incumbent LECs
and ensure that rates were just and reasonable, as required by the Act.
However, with the growth of competition in the voice services market,
rate regulation of incumbent LECs is no longer necessary to protect
consumers--who now have the ability to switch to alternative providers
if an incumbent LEC raises rates above competitive levels. To ensure
stability in the USF contributions base following any deregulation and
detariffing of TACs, we propose options for calculating federal USF
contributions and high-cost universal service support.

Overview of TACs and Procedural History

Section 203 of the Act, requires that common carriers file tariffs
or ``schedules showing all charges for itself and its connecting
carriers for interstate and foreign wire or radio communication . . .
and showing the classifications, practices, and regulations affecting
such charges.'' The Commission, through its tariff and ex ante pricing
rules, regulates various end-user charges for interstate access service
provided by incumbent LECs. Commission rules currently consist of five
tariffed TACs: the Subscriber Line Charge, Access Recovery Charge
(ARC), Presubscribed Interexchange Carrier Charge, Line Port Charge,
and Special Access Surcharge.
Subscriber Line Charge. The Commission created the Subscriber Line
Charge (SLC) in 1983 to allow incumbent LECs to recover a portion of
non-traffic-sensitive loop costs through a flat, per-line fee assessed
on end users. To prevent rate shock, particularly in high-cost areas,
the Commission capped SLCs and required that remaining common line
costs be recovered through a per-minute Carrier Common Line charge on
IXCs. In 1996, the Commission reformed interstate access charges to
better align rates with cost causation principles and established a
federal high-cost universal service support mechanism to replace
implicit subsidies. The Commission further reformed interstate access
charges in the CALLS Order that included increasing the SLC caps for
price cap carriers to $6.50 per month for primary residential and
single-line business lines, $7 for non-primary residential lines, and
$9.20 for multi-line business lines. In the MAG Order, the Commission
adopted the same caps for residential lines and single and multi-line
businesses served by rate-of-return carriers. There is no non-primary
residential line SLC rate element for rate-of-return carriers under our
rules.
Access Recovery Charge. To mitigate revenue losses for incumbent
LECs and support broadband investment resulting from the transition to
bill-and-keep adopted in the 2011 USF/ICC Transformation Order, the
Commission allowed incumbent LECs to recover a portion of their reduced
intercarrier compensation revenues (i.e., Eligible Recovery) from end
users through an Access Recovery Charge (ARC), and where applicable,
through CAF ICC support. For residential and single-line business
customers, ARC increases are capped at $0.50 per month, up to a maximum
monthly charge of $2.50

[[Page 14423]]

(price cap carriers) and $3.00 (rate-of-return carriers). For multi-
line businesses, increases are limited to $1.00 per month, and the
maximum monthly charge is capped at $5.00 (price cap carriers) and
$6.00 (rate-of-return carriers). The combined ARC and SLC for multi-
line businesses may not exceed $12.20 per line per month. In addition,
the Commission adopted the Residential Rate Ceiling, which prohibits
incumbent LECs from assessing an ARC on residential customers that
would cause the carrier's total charges for basic local telephone
service to exceed $30.
Presubscribed Interexchange Carrier Charge. Created in 1997, the
Presubscribed Interexchange Carrier Charge (PICC) recovers a portion of
the interstate common line costs not recovered by the SLC. This is a
monthly per-line access charge that a price cap carrier may bill an IXC
for automatically routing a multi-line business customer to that
presubscribed IXC when the end-user business customer makes a long
distance call via a 1+ telephone number. If the end-user customer does
not have a presubscribed IXC, the price cap carrier may collect the
PICC directly from the end user. Some price cap incumbent LECs do not
assess a PICC presumably because they are able to recover all of their
interstate common line costs through the SLC and other rate elements.
Line Port Charge. The Line Port Charge is a monthly end-user charge
that recovers costs associated with digital lines, such as integrated
services digital network (ISDN) line ports, to the extent those port
costs exceed the costs for a line port used for basic, analog service.
This charge, which was established for price cap carriers in 1997 and
for rate-of-return carriers in 2001, varies because costs are carrier
specific.
Special Access Surcharge. Adopted in 1983, the $25 per month
Special Access Surcharge is assessed on trunks to address the problem
of a ``leaky private branch exchange (PBX).'' This problem can arise
where large end users that employ multiple PBXs in multiple locations
lease private lines to connect their various PBXs and permit long-
distance calls to leak from the PBX into the local public network,
where they are terminated without incurring access charges. The
assessed amount currently constitutes only a de minimis portion of
revenues for a very small number of carriers. For example, the National
Exchange Carrier Association projects that less than a dozen of its
members will collect a total of $2,100 from charging the Special Access
Surcharge in tariff year 2025-2026.
Procedural History. In 2020, the Commission sought comment on its
proposal to eliminate ex ante pricing regulation of TACs and to require
both incumbent and competitive LECs to detariff these charges, and in
June 2025, the Commission issued a Public Notice to refresh the record
on that proposal. We incorporate the existing record by reference, but
emphasize that the proposal set forth in this Notice of Proposed
Rulemaking is part of a broader, comprehensive reform of the switched
access cost recovery system. Accordingly, we encourage commenters to
evaluate this proposal as part of the Commission's effort to
comprehensively reform its intercarrier compensation regime as the
nation moves to all-IP communications networks.

Deregulating Telephone Access Charges

Since the Commission adopted these end-user charges and caps in
1980, and in response to both the enactment of the 1996 Act and
subsequent technological changes, the voice service marketplace has
fundamentally changed. Today, consumers and businesses nationwide have
a variety of competitive alternatives to voice services provided by
incumbent LECs and may purchase voice service as part of bundled IP-
based services--including wireless, video, and broadband. None of the
various entities providing competing voice services, including mobile
wireless providers, competitive LECs, interconnected VoIP providers,
and over-the-top VoIP providers are subject to price regulation of end-
user charges. Thus, mobile wireless providers and competitive LECs are
free to price these services as they wish, subject only to the general
requirement that the rates be just and reasonable.
Consistent with other proposals in this Notice of Proposed
Rulemaking to complete the transition to bill-and-keep, we propose to
eliminate ex ante pricing regulation for TACs and mandatorily detariff
these charges nationwide by exercising our authority to forbear from
the related tariffing and pricing rules and obligations. Ex ante
pricing regulation of Telephone Access Charges includes the
Commission's rules that establish these rates and charges. 47 CFR
51.915(e), 51.917(e), 69.115, 69.152, 69.153, 69.157. Tariffing
requirements are contained in section 203 of the Act and part 61 of the
Commission's rules. 47 U.S.C. 203(a); 47 CFR part 61. We propose to
forbear from both ex ante pricing regulation and tariffing obligations.
We seek comment on whether the three-prong test for forbearance in
section 10 of the Act is satisfied.
Are the TAC rules and requirements imposing ex ante price
regulation and tariffing still necessary to ensure that the charges,
practices, classifications, or regulations for the services at issue
are just and reasonable and are not unjustly or unreasonably
discriminatory, given the widespread competition for voice services as
discussed above? As the Commission has previously explained,
``competition is the most effective means of ensuring'' that rates are
just and reasonable. When markets become competitive, pricing and
tariffing regulations are not only unnecessary, they can become
counterproductive. In 2016, the Commission examined the voice services
marketplace and observed that ``[t]here has been an indisputable
`societal and technological shift' away from switched telephone service
as a fixture of American life.'' The Commission's conclusion is even
more true today, given the proliferation of non-switched access voice
service alternatives in the marketplace. As carriers transition to all
IP-network services in an increasingly competitive marketplace, voice
service will become one of many applications on that network. With the
industry poised to complete the transition of remaining access charges
to bill-and-keep following the adoption of an order, we expect carriers
will rely on IP-network efficiencies to recover service costs directly
from their end users, like other IP-based services do today. Given
these IP-related efficiencies and the proportionately small data volume
voice traffic comprises, is it nonetheless likely that carriers will
significantly increase end-user charges over the long term if they are
no longer subject to ex ante rate regulation and detariffed? If so,
then for how long might such increases persist?
Will the widespread availability of competitive alternatives for
voice services constrain the prices pertaining to TACs? Are the related
tariffing requirements and ex ante pricing regulation no longer
necessary for consumer protection? Will enabling end-user rates to more
closely reflect the actual costs incurred by incumbent LECs to provide
service send more accurate pricing signals, stimulate competition, and
lead to more efficient investment and production? Will it also promote
transparency and support a more sustainable and market-driven framework
for voice services? Are the steps we propose aligned with the overall
objectives in this Notice?
Do ex ante pricing regulation and tariffing requirements no longer
serve the public interest, given the evidence of widespread competition
and the harmful effects that unnecessary

[[Page 14424]]

regulation can impose? The Commission has found that costs of
regulation may outweigh the benefits, even in less-than-fully-
competitive markets, particularly where regulatory costs are imposed on
only one class of competitors. In this case, because TACs are limited
to legacy voice service provided by incumbent LECs and do not apply to
end-user-IP or mobile voice services, eliminating ex ante rate
regulation of end-user charges will likely enable efficient pricing
signals and lead incumbent LECs to align their services more closely
with end-user needs. Similarly, eliminating the administrative costs of
ex ante pricing regulation and tariffing requirements may help free up
resources that carriers can devote to deploying next-generation
networks with modern voice and advanced communications services. We
seek comment on these effects and other effects we should consider.
Under a bill-and-keep framework, carriers will have the opportunity
to recover their costs of providing voice service directly from end
users, subject to the competitive constraints of the marketplace which
we consider to be in the public interest. Would removing ex ante rate
regulation and detariffing end-user charges provide carriers with the
pricing flexibility and certainty necessary to support a successful
transition to a bill-and-keep framework for intercarrier compensation?
Will increased pricing flexibility enable carriers to respond more
promptly and effectively to evolving competitive conditions in the
marketplace?
Other Rules Related to TACs. We propose to eliminate the
Residential Rate Ceiling because it would serve no purpose after the
elimination of ARCs. We also seek comment on any additional rules
related to TACs that should be eliminated. We decline to revisit the
Commission's prior proposal to impose restrictions on how carriers
display end-user charges on customer bills. We ask commenters to
evaluate these proposals in the context of the two converging industry
transitions that form the basis of this Notice of Proposed Rulemaking:
the financial transition from intercarrier compensation to subscriber-
based cost recovery, and the technological transition from legacy TDM
switched access services to all-IP services. What other rules may
impede the financial and technological transitions and therefore
warrant elimination or modification? We ask that commenters provide
specific rule sections and language edits if necessary.

Implementing Telephone Access Charge Reform

To allow affected carriers sufficient time to detariff and perform
any needed billing system changes, we propose a transition that would
permit carriers to detariff Telephone Access Charges with a July 1
effective date, consistent with the effective date of the annual access
charge tariff filing following the effective date of the order in this
proceeding, and would require carriers to detariff these charges no
later than the effective date of the second annual tariff filing
following the effective date of such order. Carriers would be allowed
to permanently remove Telephone Access Charges from relevant portions
of their interstate tariffs only on one of these two annual access
tariff filing dates at their option. Carriers would not be permitted to
detariff these charges on any other dates. Once detariffed, these
charges will no longer be subject to ex ante pricing regulation. We
seek comment on these proposals. Would this timeframe provide carriers
with sufficient time to complete any billing system changes, notify
customers of rate changes, and more generally complete tariff revisions
and detariffing? If not, how much time would carriers require? If
carriers believe other detariffing timeframes are appropriate, they
should specifically explain and provide the reasoning of their
proposal. Do the two designated annual filing dates offer carriers
sufficient flexibility in choosing when to detariff their TACs?

Proposed Changes to Universal Service Support and Contributions
Calculations Related to Telephone Access Charge Deregulation

Telephone Access Charges Used to Calculate USF Support. Revenues
from some TACs are factors in the computation of USF support for rate-
of-return carriers. Specifically, ARC revenue is subtracted from the
Eligible Recovery to determine the amount of CAF ICC support a rate-of-
return carrier is entitled to receive. Although our rules prohibit an
incumbent LEC from assessing an ARC on residential customers that would
cause the carrier's total charges to exceed the Residential Rate
Ceiling, a rate-of-return carrier can recover this amount through CAF
ICC. The SLC, Line Port Charge, and Special Access Surcharge revenues
are subtracted from a carrier's common line revenue requirement to
determine the amount of Connect America Fund Broadband Loop Support
(CAF BLS) a carrier is entitled to receive.
CAF ICC. As discussed below, the CAF ICC support that a rate-of-
return carrier receives is reduced by the ARC that the carrier is
permitted to charge or by an imputed amount in certain situations. In
this NPRM, we seek comment on phasing down CAF ICC following the
completion of the transition of the remaining access charges to bill-
and-keep. We also propose to discontinue all CAF ICC calculations under
Sec. 51.917 effective June 30 of the tariff year in which the
transition to bill-and-keep is completed. Following the detariffing of
TACs, including the ARC, CAF ICC will no longer be based on the portion
of Eligible Recovery not recovered through the ARC. Thus, a rate-of-
return carrier would not need to subtract ARC revenues from Eligible
Recovery to determine the amount of CAF ICC support it is entitled to
receive. We seek comment on this assumption. We invite parties to
suggest other approaches for addressing potential effects of
detariffing TACs on CAF ICC. Parties should identify potential issues
and quantify the costs and benefits that would result from any
alternative proposals.
CAF BLS. Pending additional review and discussion in related
proceedings, we propose that legacy rate-of-return carriers receiving
CAF BLS support based on costs use fixed amounts--$6.50 per month for
residential and single-line business lines, and $9.20 per month for
multi-line business lines (the maximum SLC permitted under our rules)--
to calculate their CAF BLS. Using fixed values rather than tariffed
rates will ensure stable support calculations while simplifying
administration during TAC deregulation and the detariffing transition.
We anticipate minimal impact since most such carriers already are
entitled to assess the maximum SLCs. We seek comment on this proposal.
We also propose to remove any requirement to offset Special Access
Surcharges from CAF BLS during the TAC deregulation and detariffing
transition period. As a result, a carrier receiving CAF BLS will not
have to reflect any revenues from the Special Access Surcharge in
determining revenues for purposes of calculating CAF BLS. Given the
minimal amount of Special Access Surcharge revenues currently being
collected, we expect making this change will have a negligible impact
on carriers' receipt of CAF BLS support. Additionally, we propose to
require carriers to use the rates they are charging for line ports as
of the effective date of an order adopting these reforms in their CAF
BLS support calculations. This recognizes that rates

[[Page 14425]]

for individual Line Port Charges vary among carriers.
We expect that these proposed approaches will limit any adverse
effects on the CAF BLS program during the TAC deregulation and
detariffing transition and also minimize the administrative and other
burdens on legacy rate-of-return carriers, most of which are small
entities. We invite parties to comment on this expectation. Are there
alternative approaches the Commission should consider to account for
the transition of TAC revenues when carriers calculate their CAF BLS?
Contributions to USF and Other Federal Programs. Every
telecommunications carrier that provides interstate telecommunications
services has an obligation to contribute, on an equitable and
nondiscriminatory basis, to the federal USF and several other programs.
Contributions to the USF are based on a percentage of the providers'
interstate and international end-user telecommunications revenues.
Thus, carriers must apportion telecommunications revenues between the
intrastate, interstate, and international jurisdictions. Although the
Commission has not codified any rules for how USF contributors should
allocate revenues between the interstate and intrastate jurisdictions
for contributions purposes, many incumbent LECs (and some competitive
carriers) have relied on the tariffing of TACs at the federal level as
their means of determining their interstate and international revenues
for contributions purposes. Among other things, the Commission
instructs that revenues from services offered under interstate tariffs,
such as revenues from federal subscriber line charges, should be
classified as interstate revenues. Carriers report their revenues on
FCC Form 499-A and those revenues are used for purposes of determining
carriers' contributions to the USF, the Interstate Telecommunications
Relay Service Fund, Local Number Portability Administration, and North
American Number Plan Administration.
In certain cases the Commission permits providers to use safe
harbors or traffic studies to allocate revenues. Wireless
telecommunications providers and providers of interconnected and non-
interconnected VoIP may avail themselves of safe harbors to allocate
interstate revenues. The Commission has set an interstate safe harbor
of 37.1% for wireless providers and 64.9% for VoIP providers. In
adopting the wireless safe harbor, the Commission reasoned that this
would ensure that mobile wireless providers' obligations are on par
with carriers offering similar services (e.g., wireline
telecommunications providers) that must report actual interstate end-
user telecommunications revenue. And, in adopting the VoIP safe harbor,
the Commission explained that interconnected VoIP service is often
marketed as a substitute for wireline toll service and is thus an
``appropriate analogue'' for that service. On this basis, the
Commission established the 64.9% safe harbor, which was the percentage
of interstate revenues reported to the Commission by wireline toll
providers. Wireless providers and providers of interconnected and non-
interconnected VoIP may also rely on traffic studies if they are unable
to determine their actual interstate and international revenues.
Traffic studies must be filed with the Commission and follow strict
requirements.
We propose to adopt an interstate safe harbor during the transition
of access charges to bill-and-keep allowing carriers to treat 25% of
their local voice services revenue--including revenues from local
exchange service and associated access charges, but excluding bundled
toll services--as assessable for contributions purposes. As the
Commission has recognized, adopting a safe harbor is ``necessarily the
product of line drawing.'' Here, we note that our proposed 25% safe
harbor reflects the historical allocation of common line costs to the
interstate jurisdiction, and should therefore not meaningfully affect
the contribution factor. Alternatively, a carrier that does not want to
rely on the safe harbor would have the option of providing a traffic
study demonstrating the actual percentage of its voice traffic that is
interstate and international in nature and using that percentage to
determine its contributions base. We seek comment on these proposals,
including alternative safe harbors. Should we apply the 64.9% safe
harbor for VoIP to all voice services as the industry transitions
toward all-IP networks? As the industry contributions to the USF are
calculated based on USF demand, how relevant is the safe harbor rate,
since the contribution factor will be applied across the entire
assessable base to collect the amount needed to fund demand for the
quarter?

Phasing Out CAF ICC

We seek comment on phasing out CAF ICC following the transition of
the remaining access charges to bill-and-keep as proposed above.
Consistent with the principle of bill-and-keep, carriers would look to
their own end users instead of USF support to recover the costs of
their networks following the phasedown. We expect that gradually
phasing out CAF ICC, in conjunction with the other reforms we propose
today, will expedite the transition to all-IP networks by giving
carriers the incentive to invest in new technologies. We recognize that
a gradual and thoughtful approach is essential to avoid creating
regulatory uncertainty and minimize impacts on carriers, such as
destabilizing revenue and hindering future network investment. As
discussed below, we seek comment on a phasedown of rate-of-return
carriers' CAF ICC support amounts over two years following the
completion of the transition to bill-and-keep to promote an orderly
transition away from CAF ICC support. We seek comment on alternative
approaches--enacting the phasedown by instead reducing the amount of
the total CAF ICC budget over the same time period as well as beginning
the phasedown in conjunction with the transition to bill-and-keep.
Background. As part of the intercarrier compensation reforms
adopted in the USF/ICC Transformation Order, the Commission created a
``transitional recovery mechanism to facilitate incumbent LECs' gradual
transition away from ICC revenues.'' The recovery mechanism has two
basic components. First, the Commission defines the revenues that
incumbent LECs are eligible to recover, other than those derived from
access rates that are at bill-and-keep, which is referred to as
``Eligible Recovery.'' Then, the Commission specifies how incumbent
LECs may receive their Eligible Recovery. In general, a carrier's
Eligible Recovery is based on a decreasing percentage of the cumulative
reduction in revenue each year resulting from the intercarrier
compensation reform transition.
Eligible Recovery is calculated differently for rate-of-return and
price cap carriers. As of July 1, 2019, price cap incumbent LECs no
longer receive CAF ICC support. Thus, at present, only rate-of-return
carriers may receive CAF ICC support. The calculation of a rate-of-
return carrier's Eligible Recovery begins with its Base Period Revenue.
A rate-of-return carrier's Base Period Revenue is the sum of certain
intrastate switched access revenues net reciprocal compensation
revenues received by March 31, 2012 for services provided during Fiscal
Year 2011, and the projected revenue requirement for interstate
switched access services for the 2011-2012 tariff period. The Rate-of-
Return Carrier Baseline Adjustment Factor is equal to 95% for the
period beginning July 1, 2012 and is reduced by 5% of its previous
value in each

[[Page 14426]]

annual tariff filing. A rate-of-return carrier's Eligible Recovery for
each relevant year of the transition is equal to the adjusted Base
Period Revenue for the year in question, less the sum of: (1) projected
intrastate switched access revenue; (2) projected interstate switched
access revenue; and (3) net reciprocal compensation revenue (currently
zero as reciprocal compensation rates are now at bill-and-keep).
The Commission's rules require rate-of-return carriers to project
intercarrier compensation revenues for use in determining Eligible
Recovery. Because projected demand likely differs from actual demand,
the Commission adopted a true-up procedure for rate-of-return carriers
to adjust their Eligible Recovery to account for any difference between
projected and actual switched access and ARC revenues resulting from
demand variations. Thus, the recovery mechanism now incorporates in the
Eligible Recovery calculation a true-up of the revenue difference
arising from differences between projected and actual demand for
interstate and intrastate switched access services and the ARC for the
tariff period that began two years earlier. Under the true-up
procedure, a carrier's Eligible Recovery for the period reflecting the
true-up would be reduced if the carrier's actual demand exceeded
projected demand. Likewise, a carrier's Eligible Recovery would be
increased if the carrier's actual demand was less than projected
demand. The true-up process runs on a two-year lag such that any true-
up payments are reflected two years after the relevant funding period.
After calculating Eligible Recovery, incumbent LECs may recover
that amount first through the ARC, subject to caps, and, where
eligible, CAF ICC support. A rate-of-return carrier may recover any
Eligible Recovery that it did not or could not have recovered through
the ARC through CAF ICC. For purposes of receiving CAF ICC support, a
rate-of-return carrier must impute the maximum ARC charges it could
have assessed under the Commission's rules. The Universal Service
Administrative Company (USAC) administers CAF ICC. Under the
Commission's rules, the CAF ICC funding period provides for
disbursement of funds beginning July 1 through June 30 of the following
year. A rate-of-return carrier seeking CAF ICC support must file data
with USAC establishing projected eligibility for CAF ICC funding during
the upcoming funding period, including any true-ups associated with
earlier funding periods, on the date it files its annual access tariff
filing with the Commission, which is generally July 1. During the
funding period, USAC monthly pays each rate-of-return carrier one-
twelfth of the amount the carrier is eligible to receive during that
annual funding period. USAC revises CAF ICC support amounts through the
true-up process, which reconciles actual versus projected revenues for
purposes of determining a carrier's Eligible Recovery.
Claims for CAF ICC support have decreased annually over the past
decade. In 2015, CAF ICC claims were approximately $426 million but
they have dropped to approximately $330 million in 2025. For program
year 2026, FCC staff estimates that CAF ICC disbursements will be
approximately $324 million, indicating continued decline. As there are
currently no published CAF ICC claims data for FY 2026, staff used CAF
ICC disbursements for December 2025 from the USAC disbursement tool to
develop an annualized estimate of likely CAF ICC claims. December 2025
CAF ICC disbursements were approximately $27 million. Multiplying that
figure by 12 months equals approximately $324 million. We believe this
is an accurate estimate of what CAF ICC claims will be for FY 2026.
Approximately 1,091 rate-of return carriers currently receive CAF ICC
support.
Discussion. We seek comment on phasing down CAF ICC support over
two years, beginning once the transition to bill-and-keep is complete.
As an initial matter, we note that the recovery mechanism adopted in
the USF/ICC Transformation Order is ``limited in time.'' Indeed, in the
USF/ICC Transformation Further Notice, the Commission sought comment
``on the timing for eliminating the recovery mechanism--including end
user recovery--in its entirety.'' The time-limited nature of the
recovery mechanism is consistent with the Commission's goal of moving
all intercarrier compensation charges to a bill-and-keep framework. As
noted, the Commission phased out CAF ICC support for price cap carriers
by 2019. In the USF/ICC Transformation Further Notice, the Commission
sought comment on whether CAF ICC for rate-of-return carriers should be
subject to a defined phase-out similar to the phase-out adopted for
price cap carriers.
We seek comment on switched access line loss and decreases in
switched access revenues since the adoption of the USF/ICC
Transformation Order. In the USF/ICC Transformation Order, the
Commission observed that ``carriers are losing lines and experiencing a
significant and ongoing decrease in minutes-of-use.'' The Commission
observed that rate-of-return carriers' interstate switched access
revenues had been declining by approximately 3% annually. Taking into
account declining switched access revenue and declining minutes-of-use,
the Commission limited the decrease in the baseline amount from which
rate-of-return carriers calculate Eligible Recovery to 5% annually.
Rate-of-return carriers' Base Period Revenue from which carriers
calculate Eligible Recovery has cumulatively been reduced by more than
50% since July 1, 2012 due to the annual 5% reduction in that amount.
In the USF/ICC Transformation Further Notice, the Commission sought
comment on how to treat demand in determining Eligible Recovery for
rate-of-return carriers, proposing to modify the recovery baseline,
including through the use of the same 10% decline it uses for price cap
carriers. As we consider how to gradually and thoughtfully phase down
CAF ICC support, we invite comment on switched access line loss and
decreases in switched access revenues for rate-of-return carriers. In
the USF/ICC Transformation Order, the Commission predicted that such
trends were likely to continue. Have rate-of-return carriers continued
to experience switched access line loss and decreases in switched
access revenues since adoption of the USF/ICC Transformation Order? If
yes, do those declines support phasing out CAF ICC? Why or why not?
How might the transition of the remaining originating and
terminating access charges to bill-and-keep and the deregulation of
end-user charges affect the ability of carriers to recover their costs?
To aid the Commission in evaluating cost recovery, we seek cost data
demonstrating the percentage of revenues derived from intercarrier
compensation. The Commission has recognized that as the
telecommunications industry transitions to all-IP networks, ``non-
regulated services are an increasingly important source of revenue
derived from multi-purpose networks.'' Given this trend and the
availability of other sources of revenue in an all-IP world, what
effect would the phase-out of CAF ICC likely have on carriers' ability
to recover the costs of their networks, particularly given the
transition of access charges to bill-and-keep and the deregulation of
end-user charges we propose today? How would our phase-out of CAF ICC
facilitate the transition to all-IP networks? Would beginning the
phase-down following the transition to bill-and-keep provide rate-of-
return carriers with greater financial stability during

[[Page 14427]]

the transition to bill-and-keep? Why or why not?
We seek comment on a three-step phase-out. First, we would
discontinue the requirement for all CAF ICC calculations under Sec.
51.917 of the Commission's rules effective June 30 of the tariff year
in which the transition to bill-and-keep is completed. The tariffing
period is coterminous with the CAF ICC support funding period, which
runs from July 1 through June 30 of the following year. 47 CFR
54.304(b). For example, if the Commission adopts an order reforming CAF
ICC in 2026, CAF ICC calculations pursuant to Sec. 51.917 of the
Commission's rules would end as of June 30, 2026, regardless of when
the Commission adopts its order.
Second, in the first tariff year following the transition of access
charges to bill-and-keep, rate-of-return carriers would receive 66% of
the amount of CAF ICC support they received in the tariff year in which
the transition to bill-and-keep is completed. In the second tariff year
following the transition of access charges to bill-and-keep, rate-of-
return carriers would receive 33% of the amount they received during
the tariff year in which the transition to bill-and-keep was completed.
Beginning in the third tariff year, carriers would no longer receive
CAF ICC support. We believe that this phase-out approach would provide
sufficient time for rate-of-return carriers that may currently rely on
CAF ICC support to upgrade their networks and make necessary
adjustments, and we seek comment on this view.
We also seek comment on how to establish the baseline amount from
which to enact the phase-out. As noted above, we seek comment on
discontinuing all CAF ICC calculations under Sec. 51.917 of the
Commission's rules effective June 30 of the tariff year in which the
transition to bill-and-keep is completed. Our proposed baseline
amount--the amount of CAF ICC support carriers receive in the tariff
year in which the transition to bill-and-keep is completed (i.e., all
ICC charges are at zero)--includes demand and therefore revenue true-up
amounts for switched access services, Access Recovery Charges, and the
imputation of Access Recovery Charges on CBOLs corresponding to the
tariff year two years prior to the tariff year in which the transition
to bill-and-keep is completed, as these revenues are trued-up with a
two-year lag under our existing rules. This approach is
administratively simple and reflects precisely how CAF ICC should be
calculated under our existing rules. Our proposed baseline will not
consider revenue true-ups corresponding to the tariff year in which the
transition is completed as these will not be available on the start
date of the CAF ICC phasedown (i.e., July 1 of the tariff year
following the one in which the order is adopted) and otherwise would be
inconsistent with the Commission's rules. Furthermore, even if these
demand true-ups were available on the start date, their inclusion in
the baseline amount, which already includes true-up revenues
corresponding to two years prior to the tariff year in which the
transition is completed, would lead to double-counting of the relevant
revenues. As an alternative, the amount of CAF ICC carriers received
during the tariff year in which the transition is completed (tariff
year ``0'') could be adjusted by subtracting the true-ups already
reflected in that amount and adding the true-ups corresponding to
tariff year 0 when these become available. Under this alternative, the
CAF ICC support the carriers receive in the first tariff year of the
phasedown would then be trued up. We believe that this alternative is
too complicated. We seek comment on whether the benefits of simplicity
reflected in our proposed approach outweigh any costs.
As an alternative to stepping down each rate-of-return carriers'
CAF ICC support to zero by the percentages specified above over two
consecutive tariff years, should we instead phase out CAF ICC by making
incremental reductions to the total amount budgeted for the program
over three tariff years? As noted above, for program year 2026, FCC
staff estimates that CAF ICC disbursements are approximately $324
million. For example, taking that as a starting point, we alternatively
propose to reduce the total annual budget for CAF ICC to $225 million
(about 70% of the 2025 budgeted amount) beginning on July 1 following
the completion of the transition to bill-and-keep, and then to $100
million (about 31% of the 2025 budgeted amount) beginning on July 1 of
the second year, and finally to $50 million (about 15% of the 2025
budgeted amount) beginning on July 1 of the third year following the
completion of the transition. After the third year, the CAF ICC budget
would be zero. Because this alternative proposal reduces the total
amount budgeted for CAF ICC rather than an individual carrier's CAF ICC
support amount, it would still be necessary to calculate each carrier's
CAF ICC support amount pursuant to each budget reduction. Do commenters
agree? Why or why not? How would each carrier's CAF ICC support be
calculated under this approach? Could we reduce each carrier's CAF ICC
support so that each receives the aforementioned percentages of its
baseline amount in the first, second, and third phasedown year (i.e.,
respectively 70%, 31%, and 15% of the amount of CAF ICC support it
received in the tariff year in which the order is adopted)? How, if at
all, would phasing out CAF ICC through reductions in the total budget
be preferable to reducing each carrier's support amount as discussed
above?
Finally, rather than phasing down CAF ICC following the completion
of the transition of remaining access charges to bill-and-keep, we seek
comment on whether we should initiate the phase-out in conjunction with
the transition to bill-and-keep. Under this approach, the three-step
phase-out would begin June 30 of the tariff year in which the
Commission adopts an order phasing down CAF ICC support. The baseline
amount from which the Commission would enact the phasedown would be the
amount of CAF ICC support carriers receive in the tariff year in which
the Commission adopts an order phasing down CAF ICC support. Effective
June 30 of the tariff year in which the Commission adopts an order
phasing out CAF ICC, the Commission would discontinue the requirement
for all CAF ICC calculations under Sec. 51.917 of the Commission's
rules. Then in the first tariff year following the Commission's
adoption of an order, rate-of-return carriers would receive 66% of the
amount of CAF ICC support they received in the tariff year in which the
order was adopted. And, in the second tariff year following the
Commission's adoption of an order, carriers would receive 33% of the
amount they received during the tariff year in which the order was
adopted. In the third tariff year, carriers would no longer receive CAF
ICC support. We seek comment on the advantages and disadvantages of
each of these approaches, and whether there are other approaches we
should consider.

Deregulating Domestic Interstate and International Long-Distance
Interexchange Services

In this section, we seek comment on the markets for domestic and
international interstate interexchange services (long-distance
services) and propose to detariff and deregulate these services. The
Commission has generally used the term ``long-distance'' service to
refer to all ``interexchange service'' or ``telephone toll service.''
We propose to grant carriers forbearance from these remaining
regulations that impose

[[Page 14428]]

unnecessary regulatory burdens on carriers providing domestic and
international long-distance services. We also propose to forbear from
tariffing requirements for the remaining domestic and international
long-distance telecommunications services. We seek comment on these
proposals.

Domestic Interstate Interexchange Services

The Commission has largely deregulated and detariffed domestic,
interstate, interexchange services provided by IXCs except for a narrow
subset of services and reporting requirements. In 1995, the Commission
reclassified AT&T as nondominant in the interstate, domestic,
interexchange market because AT&T lacked market power with respect to
this market. In light of the 1996 Act and increasing competition, in
1996 the Commission exercised its forbearance authority under section
10 of the Act to prohibit nondominant IXCs from tariffing interstate,
domestic, interexchange services under section 203 of the Act. The
Commission concluded that ``market forces'' would ensure that ``rates,
practices and classifications'' for interstate, domestic, interexchange
services provided by nondominant IXCs are ``just and reasonable'' and
``not unjustly or unreasonably discriminatory'' and that it could
address any illegal conduct through the complaint process. The
Commission further found that detariffing domestic, interstate,
interexchange services would ``enhance competition among providers of
such services'' and ``promote competitive market conditions.''
Accordingly, the Commission adopted Sec. 61.19(a) of its rules which
provides that ``carriers that are nondominant in the provision of . . .
interstate, domestic interexchange services shall not file tariffs for
such services.''
In 1997, the Commission reconsidered the extent to which
interexchange services provided by nondominant IXCs were subject to
mandatory detariffing. Specifically, the Commission allowed nondominant
IXCs to permissively detariff ``interstate, domestic, interexchange
direct-dial services to which end-users obtain access by dialing a
carrier's access code'' (i.e., dial-around 1+ service). In other words,
IXCs were allowed, but not required, to tariff dial-around 1+ services.
Dial-around 1+ calls are long-distance calls made by accessing an IXC
other than the presubscribed IXC generally to take advantage of lower
rates offered by the competing IXC. The Commission concluded that,
absent a tariff, IXCs lacked a way to establish an enforceable contract
for dial-around 1+ services due to technical limitations which
prevented the IXC from distinguishing dial-around 1+ calls from direct
dial 1+ calls. Accordingly, section 61.19(b) of the Commission's rules
allows nondominant IXCs to file tariffs for ``dial-around 1+ services''
that are ``made by accessing the interexchange carrier through the use
of carrier's carrier access code.'' The Commission also allowed
permissive detariffing for the first 45 days of service to new
customers that contact the LEC to choose their primary IXC. The
Commission reasoned that tariffing should be permissible in this case
because an IXC ``does not have direct contact with the customer'' and
``may be unable immediately to ensure that a legal relationship is
established.'' Accordingly, section 61.19(c) of the Commission's rules
allows nondominant IXCs to tariff domestic, interstate, interexchange
services applicable to ``customers who contact the local exchange
carrier to designate an interexchange carrier or to initiate a change
with respect to their primary interexchange carrier.''
In 2007, the Commission classified the BOCs and their independent
incumbent LEC affiliates as ``nondominant in the provision of in-
region, interstate and international, long distance services.'' In
effect, the BOCs and their independent incumbent LEC affiliates, among
other things, were no longer subject to section 203 tariffing
requirements and are barred from tariffing ``in-region, interstate and
international, long distance services.''
Interexchange Marketplace. We seek comment on the state of the
marketplace for TDM-based domestic, interstate, interexchange services
provided by telecommunications carriers. We invite commenters to submit
or identify data that would justify further pricing deregulation and
detariffing of legacy TDM domestic, interstate, interexchange services.
To what extent do TDM-based standalone or bundled long-distance service
providers face declining sales and customers? To what extent do
customers still purchase dial-around 1+ services from IXCs subject to
tariff? Between December 2015 and December 2023, total voice
subscriptions for local exchange telephone service and long-distance
service decreased from 64.6 million to 20.6 million. Over this same
period, total switched access lines provided by incumbent LECs declined
from 51.1 million to 16.5 million connections, while interconnected
VoIP provided by non-incumbent LECs increased from 46.5 million to 58.1
million. However, these figures are dwarfed by 386.1 million mobile
wireless voice subscriptions as of December 2023. We seek updated data
and information on the marketplace for bundled local and long-distance
interexchange service and presubscribed domestic, interstate,
interexchange service.
The Commission traditionally regulated legacy TDM-based
telecommunications service intercarrier compensation by distinguishing
local traffic (reciprocal compensation) from long-distance traffic
(access charges). More modern wireless and VoIP services are offered on
an all-distance basis. To what extent is the distinction between local
and long-distance service relevant to consumers? As of June 2024,
approximately 40% of incumbent LEC switched access lines (5.84 million
lines) were presubscribed to an IXC that is not an incumbent LEC or
affiliate of an incumbent LEC. To what extent do business and
residential customers currently purchase stand-alone long-distance
service from presubscribed IXCs? To what extent do business and
residential customers currently purchase long-distance service from an
IXC unaffiliated with their LEC? To what extent do customers designate
an IXC to the LEC?
Would forbearance from tariffing domestic, interstate,
interexchange services (long-distance) under section 203 of the Act
meet the statutory forbearance criteria under section 10 of the Act,
specifically dial-around 1+ services and customer-designated IXC
services? Why or why not? Is tariffing these services no longer
necessary to ensure just and reasonable rates, terms, and conditions of
service that are not unjustly or unreasonably discriminatory? Is
tariffing these services no longer necessary to protect consumers? Is
forbearance from tariffing these services consistent with the public
interest? Would forbearance from tariffing these services promote
competitive market conditions? The Commission permitted IXCs to tariff
dial-around 1+ interexchange service because the technology at the time
could not distinguish these calls from direct dial 1+ calls to
establish a contractual relationship. In light of LECs then ``rapidly''
deploying SS7-capable switches, the Commission predicted that the
concern which gave rise to the rule ``will not be an issue in the near
future.'' Are IXCs capable of distinguishing dial around 1+ services
from direct dial 1+ interexchange calling? Do advanced IP calling
services eliminate the technical concerns that rationalized the rule?

[[Page 14429]]

Certification and Recordkeeping Requirements. When the Commission
detariffed nondominant interexchange services in 1996, it imposed
certification and recordkeeping requirements to ensure compliance with
the geographic rate averaging and rate integration obligations under
section 254(g) of the Act. Section 254(g) of the Act ensures ``that the
rates charged by providers of interexchange telecommunications services
to subscribers in rural and high cost areas shall be no higher than the
rates charged by each such provider to its subscribers in urban
areas.'' This section also ensures that a ``provider of interstate
interexchange telecommunications services shall provide such services
to its subscribers in each State at rates no higher than the rates
charged to its subscribers in any other State.'' The Commission
codified this provision in Sec. 64.1801 of its rules.
To ensure compliance with section 254(g) of the Act, in 1996 the
Commission required nondominant IXCs providing interexchange services
to ``file annual certifications signed by an officer of the company
under oath that they are in compliance with their statutory geographic
rate averaging and rate integration obligations'' under section 254(g)
of the Act. The intent was to ``put carriers on notice that they may be
subject to civil and criminal penalties for violations of these
requirements, especially willful violations.'' Section 64.1900 of the
Commission's rules requires nondominant IXCs providing detariffed
interstate, domestic, interexchange services, to annually certify
through an officer of the company, under oath, that it is in compliance
with their ``geographic rate averaging and rate integration
obligations'' under section 254(g) of the Act.
In light of marketplace and technological developments, we seek
comment on whether we should forbear from section 254(g) and eliminate
Sec. 64.1801 of the Commission's rules. Does forbearance from section
254(g) satisfy the statutory criteria under section 10 of the Act? Why
or why not? Is section 254(g) of the Act no longer necessary to protect
consumers, particularly in rural and high cost areas? To what extent
has the transition from distance-sensitive TDM-based services to all
distance IP-based services rendered section 254(g) of the Act
unnecessary? Do the costs and burdens associated with the transition
from distance-sensitive TDM-based services to all distance IP-based
services disproportionately impact smaller, rural providers? Are there
sufficient competitive alternatives to TDM-based interexchange service
in rural and high cost areas such as wireless and satellite? Are
competitive alternatives to interexchange service being offered at
rates in rural and high cost areas no higher than urban and lower cost
areas?
We also seek comment on whether we should eliminate certification
requirements under Sec. 64.1900 of the Commission's rules. Commenters
in the Commission's Delete, Delete, Delete proceeding identified Sec.
64.1900 certifications as ``needless certifications'' that ``require
regulatees (who are already required to comply with the law) file
additional paperwork with the Commission that they are indeed complying
with the law.'' If the Commission forbears from section 254(g) of the
Act, is Sec. 64.1900 no longer necessary? Do the costs to carriers of
administering Sec. 64.1900 certifications outweigh the benefits? Are
Sec. 64.1900 certifications no longer necessary to ensure just and
reasonable rates, terms, and conditions of interexchange service that
are not unjustly or unreasonably discriminatory? Are these requirements
no longer necessary to protect consumers, particularly in rural and
high cost areas? Would forbearance be in the public interest and
promote competitive market conditions? Does the Commission have
sufficient authority under section 208 of the Act and other sources to
punish the behavior Sec. 64.1900 certifications were intended to
discourage?
In 1996, the Commission also required nondominant IXCs to make
public current rates, terms, and conditions for all detariffed
interstate, domestic, interexchange services. The Commission recognized
that ``in competitive markets carriers would not necessarily maintain
geographically averaged and integrated rates for interstate, domestic,
interexchange services'' as required by section 254(g) of the Act. The
Commission found that ``publicly available information is necessary to
ensure that consumers can bring complaints, if necessary, to enforce''
the 1996 Act's geographic rate averaging and rate integration
requirements. Section 42.10 of the Commission's rules requires
nondominant IXCs to make publicly available their current rates, terms
and conditions for all interstate, domestic, interexchange services and
also make this information available online on their websites. Section
42.11 of the Commission's rules requires nondominant IXCs to
``maintain, for submission to the Commission and to state regulatory
commissions upon request, price and service information regarding all
of the carrier's . . . interstate, domestic, interexchange service
offerings.'' This information must be available to be produced within
ten business days and must be retained for at least two years and six
months following the date the carrier ceases to provide service.
In light of marketplace changes and technological developments, we
seek comment on whether the Commission should eliminate Sec. Sec.
42.10 and 42.11 of its rules. Without these recordkeeping requirements,
to what extent can the public, Commission, and state regulatory
commissions review rates, terms, and conditions to ensure compliance
with section 254(g) of the Act? If the Commission forbears from section
254(g) of the Act, are Sec. Sec. 42.10 and 42.11 of the Commission's
rules no longer necessary? We seek comment on whether the costs on
carriers of maintaining price and service information required by
Sec. Sec. 42.10 and 42.11 outweigh the benefits. To what extent do
these rules impose unnecessary regulatory burdens on carriers?
Are there any other rules related to domestic, interstate,
interexchange service that the Commission should consider revising,
streamlining, or eliminating? If so, why? Do the costs of maintaining
these rules outweigh any benefits?
Transition. We seek comment on whether we should adopt a transition
for IXCs to detariff domestic, interstate, interexchange services and,
if so, how long this period should be. We believe a two-year transition
period to detariff these services would be appropriate and would
coincide with the transition of switched access charges to bill-and-
keep and seek comment on this approach. During the transition period
under our proposed approach, IXCs would be allowed to cancel their
tariffs for interstate, domestic, interexchange services and the
Commission would accept revisions to the IXC's tariffs for these
services. However, the Commission would not accept new tariffs or
revisions to existing tariffs for long-term service arrangements for
domestic, interstate, interexchange service beyond the two-year
transition. At the conclusion of the transition period, IXCs would no
longer be permitted to tariff domestic, interstate, interexchange
services and would have to cancel any such tariffs. We seek comment on
this proposed approach.

Eliminating Outdated Interexchange Service Requirements

We also propose to eliminate outdated customer account record
exchange requirements contained in part 64 of the

[[Page 14430]]

Commission's rules. The Commission adopted these rules in the early
2000s to facilitate the exchange of customer account information
between LECs and IXCs in order to execute customer billing change
requests in a timely manner. We seek comment on whether we should
delete part 64, Subpart CC given changes in the marketplace or whether
these rules remain necessary, in whole or in part. Do these rules
impose unnecessary burdens on LECs and/or IXCs? Are these rules
necessary to protect consumers or to facilitate timely exchange of
customer account information? Do our rules prohibiting slamming and
establishing truth-in-billing requirements resolve the underlying
concerns of our customer account record exchange requirements such that
these requirements are no longer necessary? And would that remain true
if we modify the slamming and truth-in-billing rules as we recently
proposed? Do carriers rely on these rules to implement customer
requests or for other business and operational reasons? Are there
modifications to these rules that might better serve consumers and
carriers in lieu of elimination of the rules?

International Interexchange Service

Detariffing International Interexchange Service

We propose to eliminate all remaining tariff requirements
applicable to international interexchange services for dominant and
nondominant carriers. Currently, carriers that are classified as
dominant in the provision of international telecommunications services
on a particular route for reasons other than holding a foreign carrier
affiliation are required to file tariffs for international
interexchange service. With respect to nondominant carriers, in the
2001 International Interexchange Order, the Commission no longer
required these carriers to file tariffs for their international
interexchange services but they may file tariffs based on four limited
exceptions under ``permissive detariffing.'' The Commission found that
the market at the time for nondominant carriers necessitated the
detariffing in accordance with the forbearance criteria in section 10
of the Act but allowed and did not require carriers to file tariffs
under ``permissive detariffing.'' The Commission allowed ``permissive
detariffing'' of certain services, stating that these exceptions to the
general detariffing rule were necessary to address specific, largely
short-term situations where the reliance upon a contract could delay
service initiation for a particular user. Over the past two decades,
the international interexchange service marketplace has changed
significantly with the myriad options for international calling now
available, including free VoIP. We seek comment generally on the
current market and usefulness of tariffing for dominant carriers and
whether the Commission should continue to allow permissive tariffing
for nondominant carriers in these limited circumstances. We seek
comment on whether the current international interexchange service
tariffing rules remain in the public interest.
Dominant Carriers. We propose to detariff international
interexchange services for dominant carriers entirely. Accordingly, we
tentatively conclude that the Act requires us to forbear from applying
section 203 of the Act and to adopt a policy of complete detariffing
for dominant carrier international interexchange services. We seek
comment on this tentative conclusion. We further seek comment about
whether this tentative conclusion meets the three prongs of the
statutory forbearance criteria of section 10(a). Is tariffing dominant
international interexchange service no longer necessary to ensure just
and reasonable rates, terms, and conditions of service that are not
unjustly or unreasonably discriminatory? Is tariffing international
interexchange service no longer necessary to protect consumers? Is
forbearance from tariffing consistent with the public interest? Would
forbearance from tariffing interexchange services promote competitive
market conditions? As discussed in greater detail below, we tentatively
conclude that a formal market power analysis is not required, nor must
we determine that carriers are nondominant in the provision of
international interexchange services in order to support our
forbearance analysis. To the extent commenters argue that the
Commission should or must determine that carriers are nondominant in
the provision of international interexchange services, what type of
market analysis would be required or appropriate?
We further seek comment on the current state of the international
interexchange market. Are there currently any carriers with market
power on the U.S. end of any U.S.-international routes? If there are
currently no dominant carriers, are the market conditions suitable for
a carrier to become dominant on a U.S.-international route in the
future? What other factors should we consider in examining the
international interexchange market for dominant carriers since we last
revised the rules? Are there any regional differences that we should
consider? How would detariffing these services comport with our
international trade obligations? How could this change mitigate the
risk of international contract disputes? Has the market for
international interexchange service evolved through technology such
that dominant carrier tariffs are no longer needed? If we find that
there are no longer dominant carriers on U.S.-international routes,
should we remove the dominant carrier tariff requirement as it would no
longer be needed, consistent with broader goals of the Commission's
Delete, Delete, Delete proceedings?
Nondominant Carriers. We propose to eliminate the permissive tariff
requirement for nondominant carriers. We seek comment on this proposal.
The Commission allows nondominant carriers to file permissive tariffs
on four services listed in Sec. 61.19 of the Commission's rules. For
nondominant carriers, are there any reasons for retaining the
permissive tariff rule? We seek comment on whether the services listed
in the rule have changed significantly in the last 20-plus years. Are
there any services that we should retain for permissive tariffing and
why? Our records indicate that nondominant carriers continue to tariff
some international interexchange service. We seek comment on the extent
that carriers still tariff these international services. How would
detariffing these services comport with our international trade
obligations? How could this change mitigate the risk of international
contract disputes? Do the current services for permissive tariffs
continue to be offered in the market? For example, how prevalent is the
availability and use of 1010-XXX dial-around international long
distance service? Is international inbound collect calling to the
United States commonly in use? How have Mobile Satellite Services (MSS)
offerings evolved since 2001? What other considerations should we take
into account? We believe that on-demand MSS as described when the
permissive tariff rule was adopted is no longer an available service,
and seek comment on this. What would be the benefits of removing the
rule? What are the cost and benefits for either approach? How would
this affect small entities?
Twenty years ago, new LEC customers could contact their LEC service
provider and request (or change) an international interexchange
provider, without establishing a direct relationship between the
customer and the international interexchange provider

[[Page 14431]]

until the parties entered into a contract. Do local exchange carrier
customers still contact their provider to request a different
international interexchange carrier? To the extent that these customers
still contact their provider to request a different international
interexchange carrier, is 45 days still a reasonable timeframe for a
provider to establish a contract with the customer after the provider
receives a customer's request? If so, we seek information or estimates
on the number of customers that still contact their landline carrier to
change their international interexchange carriers.
Would removal of permissive tariffs impede competition in the
market for international interexchange services? For example, do
international dial-around services still exist, and if so could they be
provided in the absence of tariffs? When the international IXC tariff
rules were adopted, international dial-around service providers could
not enter into contracts with customers without tariffing. Moreover,
the Commission noted decades ago that mass market customers rarely, if
ever, consult tariff filings and when they do, they find them difficult
to understand. What methods exist for communicating service plans and
rates to customers today?
We believe that elimination of permissive tariffs for nondominant
carriers will produce pro-consumer benefits by incentivizing carriers
to be more responsive to customer demands and to offer a greater
variety of innovative price and service packages. The elimination of
all nondominant carrier tariff filings would also prevent potential
situations in which carriers seek to avoid contract obligations or
refuse to negotiate with customers based upon the filed-rate doctrine
(which is in effect even for tariffs filed on a permissive basis) and
the Commission's tariff filing and review processes. We seek comment on
our assessment.

Public Disclosure and Retention Requirements

When the Commission detariffed international interexchange service
in 2001, it found that adopting public disclosure and maintenance of
information requirements would benefit consumers and further the public
interest, while also promoting carrier compliance with the requirements
of the Act. The Commission also believed that these requirements would
permit consumers to have the information necessary to make efficient
choices regarding their optimal service plans. The Commission has
recognized that consumers need information about carriers' rates,
terms, and conditions. For example, the Commission stated that
``consumers will need information concerning carriers' rates, terms and
conditions in order to bring complaints to ensure carrier compliance
with the requirements of the Act . . . .'' Consumers also need this
information to determine the most appropriate rate plans that may meet
their individual calling patterns. Below we seek comment on our
proposal to eliminate or reduce these disclosure and maintenance
requirements given the changes in the international interexchange
market since they were adopted.
Public Disclosure. For nondominant IXCs, we seek comment on whether
to eliminate the public disclosure requirement in Sec. 42.10 of the
Commission's rules. Nondominant carriers provide information to the
public through either voluntary tariffs for certain services or through
the public disclosure requirements. For the public disclosure
requirement, nondominant carriers provide information to the public
concerning current: (1) rates; (2) terms; and (3) conditions for all of
their international interexchange services, in at least one location
during regular business hours, and on websites (if the carrier
maintains a website). As discussed herein, if the Commission removed
the ability for nondominant IXCs to file voluntary tariffs (permissive
tariffs), we propose to eliminate the nondominant IXCs' public
disclosure requirement to have publicly accessible rate and service
information files available at a physical location. Should nondominant
IXCs instead provide that information on their websites since under the
current requirement, if a nondominant IXC maintains a website currently
it must make such rate and service information available there in a
timely and easily accessible manner, and update this information
regularly? Or, should we eliminate the Sec. 42.10 public disclosure
requirements for nondominant IXCs altogether? Is this information
necessary for consumers to make an informed choice, and is this
information necessary for the Commission to evaluate consumer
complaints and enforce sections 201 and 202 of the Act? We seek comment
on the benefits and costs for either of these approaches. How would
this comport with international obligations to make such offers
available? If the publicly accessible information is available at a
physical location (rather than, or in addition to, a website), where
should this be and how should it be maintained and updated for public
access? Moreover, how would our rule changes impact small entities?
What are the cost and benefits that may result from our proposal
compared to the current cost and benefit?
For dominant IXCs, we consider a public disclosure requirement
given the changes discussed above. As a starting point, dominant
carriers provide the public with information about service rates,
terms, and conditions through filing tariffs with the Commission.
However, as discussed today, if the Commission no longer requires
tariffs for dominant international IXCs, and if there are any dominant
IXCs still providing service, we seek comment whether we should adopt
new public disclosure requirements for dominant IXCs. Should a new
public disclosure requirement for dominant IXCs be the same or
different than the disclosure requirements for nondominant carriers?
What market considerations and consumer needs influence the amount of
and method for a public disclosure requirement for dominant IXCs? Would
limiting the public disclosure requirement to website information posts
instead of physical location files help achieve our goal of giving the
public information about service rates, terms, and conditions for
dominant interexchange service?
Retention Rule. We seek comment whether to eliminate or modify the
retention rule that requires nondominant carriers to maintain price and
service information regarding all of their international interexchange
service offerings. Under Sec. 42.11 of the Commission's rules, the
Commission requires nondominant international IXCs to retain price and
service information regarding all of their international interexchange
service offerings for a period of at least two years and six months
following the date the carrier ceases to provide international services
on such rates, terms and conditions. This affords the Commission
sufficient time to notify a carrier of the filing of a section 208
complaint. This price and service information must be maintained in a
manner that allows the carrier to produce such records within ten
business days of receipt of a Commission request. In adopting these
requirements, the Commission stated that such records would assist the
Commission in monitoring compliance with the Act and the Commission's
rules and will help address potential violations that may require
enforcement action. We seek comment on whether we should eliminate this
rule. If we retain it, should the dates be shortened?

[[Page 14432]]

How would our rule changes impact small entities? What are the cost and
benefits that may result from our proposal compared to the current cost
and benefit?

Filing of Carrier-to-Carrier Contracts for International Service for
Dominant Carriers

We propose to eliminate Sec. 43.51(b)(2) of the Commission's rules
that requires routine filing of dominant interexchange carrier-to-
carrier contracts with foreign carriers as this rule is no longer
necessary. Section 211(a) of the Act requires a carrier to file with
the Commission the contracts that the carrier has with other carriers
affecting traffic regulated under the Act. Section 211(b), provides
that the Commission ``shall also have the authority to exempt any
carrier from submitting copies of such minor contracts as the
Commission may determine,'' giving the Commission ``the discretion to
exempt carriers from filing contracts, including those referred to in
section 211(a), when we determine that those contracts are of minor
significance to the regulatory scheme.'' Section 43.51 implements
section 211 of the Act by requiring certain common carriers providing
domestic services and all common carriers providing international
services to file with the Commission copies of carrier-to-carrier
contracts for domestic and international services. Section 43.51
requires these carriers to file copies of contracts, agreements,
concessions, licenses, authorizations, or other arrangements that
relate to the exchange of services and the interchange or routing of
traffic and matters concerning rates. The current contract filing
requirements for international interexchange carriers apply to U.S.
dominant carriers for any service on any of the U.S.-international
routes included in the contract, other than U.S. carriers classified as
dominant due only to a foreign carrier affiliation. Section 43.51 also
states that any U.S. carrier, other than a provider of commercial
mobile radio services, that is engaged in foreign communications, and
enters into an agreement with a foreign carrier, is subject to the
Commission's authority to require the filing of a copy of each
agreement to which it is a party.
Even if we retain dominant international interexchange carrier
rules, we propose to eliminate the routine filing of carrier-to-carrier
contracts because less burdensome options are available for the
Commission to obtain this information. We propose instead to require
dominant international carriers to maintain copies of the contracts
(specifically, contracts related both to: (a) the exchange of services
and (b) rates as described in Sec. 43.51(a)(i) and (ii)) on their
premises, consistent with the contract maintenance provision of Sec.
43.51 that applies to contracts for domestic service, and that the
international interexchange carrier contracts must be readily
accessible to Commission staff and members of the public upon
reasonable request. For example, we may want to review the carrier-to-
carrier contract when a complaint against a dominant carrier is filed
with the Commission. We also propose that upon request by the
Commission, the interexchange carrier would promptly (and within 10
business days) need to forward individual contracts to the Commission.
We seek comment on this proposal, as well as methods by which the
Commission can request the contracts (e.g., via electronic filing
through ICFS, email, or paper mailing). Moreover, we expect that such
contracts will rarely need to be filed, considering that few, if any,
contracts have been filed since the late 1990s. Would this requirement
satisfy the United States' international trade commitments to ensure
``that a major supplier will make publicly available either its
interconnection agreements or a reference interconnection offer''? If,
on the other hand, the filing of these foreign communications contracts
is no longer necessary, should the Commission rescind the related rules
and what exact rules should be deleted?

Transition to Mandatory Detariffing of International Interexchange
Services

We propose to eliminate the ability to file permissive tariffs and
completely detariff international interexchange services for dominant
carriers and nondominant carriers pursuant to section 203 of the Act
for their international interexchange services, following the
transition plan for access charges to mandatory detariffing described
above. We propose that once a carrier (whether dominant or nondominant)
has detariffed its international services, it must be in compliance
with the relevant public information and disclosure requirements, to
the extent any international services remain and to the extent that we
adopt any such requirements for dominant carriers. We seek comment on
these proposals, and we invite commenters to offer other transition
proposals, including a shorter timeframe. How would our proposals
impact small entities? What are the cost and benefits for either of our
proposals?

Necessary Rule Changes

We propose rules below that would effectuate the reforms proposed
in today's Notice of Proposed Rulemaking. We seek comment on these
proposed rules. We also seek comment on any other specific rule changes
or new rules necessitated by today's proposals after consideration of
the record. Any comments proposing new or amended rules should include,
as part of the commenter's submission, a draft rule or markup of an
existing rule.

Other Considerations

We believe that a thoughtful transition of all remaining access
charges to bill-and-keep will lead to more efficient telecommunications
networks to serve consumers. We seek comment on this belief and general
comment on how providers' market incentives will change as they
complete the transition of remaining access charges to bill-and-keep.
Are there other reasons that carriers may need to maintain and prolong
the use of legacy TDM networks which we have overlooked? Are there any
access services that would continue to offer utility in an all-IP
network? If so, what are they, and why?
Costs of the IP Transition for Rate-of-Return Carriers. We invite
comment on the estimated costs of the transition to all-IP networks for
rate-of-return carriers, including the costs associated with
transitioning remaining access charges to bill-and-keep. The Commission
has observed that ``rate-of-return carriers are particularly sensitive
to disruptions in their interstate revenue streams.'' To what extent
will rate-of-return carriers need additional funding to implement the
IP transition? If so, what type of funding mechanism do commenters
propose? Instead of phasing out CAF ICC as discussed above, should the
Commission instead continue to allow rate-of-return carriers to receive
CAF ICC support until the transition to all-IP networks is complete?
How should the Commission determine when the transition is complete for
this purpose? Is existing CAF ICC support sufficient to cover some or
all of the costs of the IP transition? Why or why not? We ask that
commenters provide detailed information regarding any gaps between
existing support and the costs to fully transition to an all-IP
network.
If the Commission were to create a new funding mechanism specific
to the IP transition for certain carriers, how should that funding be
allocated among eligible carriers? Should such funding be tied to the
costs of the IP transition as a whole, allocated based on lost

[[Page 14433]]

intercarrier compensation revenues, or based on some other metric? How
should the Commission obtain reliable cost data? Should the Commission
adopt a Total Cost and Earnings Review mechanism similar to the
mechanism adopted in the USF/ICC Transformation Order to allow carriers
to demonstrate that supplemental funding is needed? If so, what
categories of information should carriers be required to provide to the
Commission? Should any new funding mechanism be based only on the
forward-looking costs of the transition? How should carriers estimate
those costs for the Commission? We invite comment on these and any
other issues concerning the need for additional funding for rate-of-
return carriers to support the IP transition.
Competitive Conditions. How will the transition to the bill-and-
keep framework and all-IP networks change the market power that various
carriers currently exercise? As providers transition to bill-and-keep
and move to all-IP interconnection, will certain types of providers
gain market power over voice services, and will any be positioned to
exercise market dominance? For instance, could intermediate carriers
exert disproportionate negotiating leverage over smaller rural LECs, or
is the market for intermediate and transit services sufficiently
competitive to mitigate such concerns? Conversely, will the transition
to bill-and-keep and IP networks help prevent any particular providers
from gaining dominance and market power? What effect, if any, will the
IP transition have upon providers that maintain their networks using
TDM technology? Are any consumers at risk of large price increases for
service as a result of the transition to bill-and-keep? If so, which
consumers, and why, and are alternative voice services available to
those consumers?
Access Arbitrage Concerns. The Commission has long fought against
arbitrage of its access charge system. Most recently, the Commission
adopted rules to combat the insertion of an internet Protocol Enabled
Service (IPES) provider into the call flow to evade its access
stimulation rules. The Commission has previously concluded that the
transition to bill-and-keep will reduce arbitrage incentives. In the
USF/ICC Transformation Order, the Commission found that bill-and-keep
would reduce arbitrage opportunities by enabling rates to reflect the
incremental cost of providing service, rather than average costs across
the entire network. We tentatively conclude that the Commission's
reasoning in the USF/ICC Transformation Order still applies and we seek
comment on this conclusion. However, we still seek comment on whether
transitioning remaining access charges to bill-and-keep in the manner
set out above could create incentives for providers to introduce
unnecessary entities or charges into the call flow and increase charges
during or after the transition. Have market-driven arrangements led to
efficient practices? We request that commenters describe how arbitrage
opportunities might arise after providers have completed the move of
all remaining access charges to bill-and-keep. Similarly, what aspects
of an all-IP network may be subject to abuse?
Potential Intercarrier Disputes. The Commission has observed that
shifts in intercarrier compensation regimes can generate disputes over
issues such as call routing and cost recovery. Disputes between
carriers can delay completing the transition to bill-and-keep, impose
unnecessary costs, and potentially deter bringing innovative calling
services to consumers. We therefore seek comment on the nature of
disputes likely to occur during and after the transition of remaining
access charges to bill-and-keep. What types of disputes may occur
(e.g., financial responsibility and build-out obligations, billing and
collection disagreements, call routing disputes, and access arbitrage
allegations) as carriers shift remaining access charges to bill-and-
keep? What disputes currently exist with the exchange of IP traffic?
What role should the Commission have, if any, in resolving disputes
that might arise from completing the transition to bill-and-keep? Are
there any aspects of an all-IP call flow that might benefit from
Commission oversight in order to deter or eliminate such disputes or
abuse?
Quality of Service Considerations. As the transition to IP-based
networks continues, we recognize that transitioning remaining access
charges to bill-and-keep may influence how providers approach standards
of service quality and availability. While competitive forces may
encourage providers to maintain and improve standards to attract and
retain customers, we seek comment on if market forces alone are enough
to ensure that consumers receive reliable and high-quality voice
service. We seek comment on whether and, if so, how the Commission
should consider additional oversight of service quality and
availability standards for voice calls transmitted over IP networks. If
the Commission were to adopt additional oversight, what aspects of
service quality and availability should be subject to minimum standards
(e.g., call completion rates, reliability, latency, and accessibility)?
What metrics or performance benchmarks would be appropriate to evaluate
compliance with such standards? Are the Commission's current rules that
prescribe service quality and availability standards adequate, or even
necessary, for IP networks? We note that providers are currently
required to comply with various service quality and availability
standards. Does IP-based calling inherently provide the call quality
that the Commission would otherwise require from providers, obviating
the need for prescriptive standards? How have providers of voice calls
over IP ensured service standards to date?
Additional Considerations. Are there any legacy networks, including
critical infrastructure, that are being overlooked or would suffer from
moving to bill-and-keep? If so, how and why? How will the transition to
bill-and-keep impact providers' legacy 911 voice service and NG911
service and other critical government services? How will the transition
to bill-and-keep affect rural LECs and smaller providers? How will the
transition to bill-and-keep affect Centralized Equal Access (CEA)
providers? How will the transition to bill-and-keep affect third-party
tandem or intermediate providers? Are there carriers that may not want
to convert their legacy networks to IP? If so, which carriers, and why?
Are there any rules or regulations we should adopt, or other steps we
should take with respect to particular groups of carriers that may be
disparately impacted by the transition to bill-and-keep? If so, what
are they, and why? Are there systems or resources that carriers believe
are necessary to effectuate the transition? For example, is a database
needed to help route calls to various providers' IP addresses? If so,
how should the costs of operating that database be covered? Would it be
appropriate to recover the costs of administering the database through
a mechanism similar to that used for the North American Numbering Plan,
such as contributions based on FCC Form 499-A filings. Should this
database be combined with the 8YY database to improve efficiency of
call routing?
We seek comment on whether the transition of all remaining access
charges to bill-and-keep may result in any conflicts or inconsi

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