Carriers Argue Over Origination Fees on Some VoIP Calls

Last year’s Universal Service Fund/intercarrier compensation order set prospective default terminating rates for all VoIP-PSTN calls, limiting terminating access rates for toll VoIP-PSTN calls to interstate levels. Windstream and Frontier in late December sought clarification, seeking in a filing to confirm that the commission “did not intend to displace intrastate originating access rates for PSTN-originated calls that are terminated over VoIP facilities.” Mike Saperstein, Frontier director-federal regulatory affairs, told us it filed the petition after Verizon started challenging its tariffs in several states.

The petition argued that the FCC had “explicitly refrained” from reducing origination charges for both interstate and intrastate calls that originated on the PSTN, pending a future rulemaking. Frontier and Windstream pointed to paragraphs of the USF/ICC order where the agency said it was “limiting reform to terminating access charges at this time,” and would “further evaluate” other charges in the future. “We seek comment on the need for an additional multi-year transition for originating access as part of the final transition to bill-and-keep,” the order said.

"We don’t believe that the FCC actually intended to use this order to change anything with the originating traffic,” Saperstein said. There were extensive discussions and meetings at the FCC that included Verizon and AT&T, and “this aspect was never included in any of the discussion that we had,” he said. “We all agreed that originating access would remain as-is. This whole issue was never put on the table for discussion at all.” Windstream and Frontier officials met with the commission recently to reiterate arguments they made (http://xrl.us/bmrxv7) in their filing (CD Feb 9 p19). AT&T executives, meanwhile, conducted their own meeting with Wireline Bureau officials to encourage the agency to move in the other direction (http://xrl.us/bmrikp).

"Various carriers are interpreting and implementing the rule differently across the industry,” AT&T attorney Christi Shewman wrote in an ex parte filing. “AT&T is concerned that this inconsistent implementation will lead to industry disputes regarding the appropriate compensation for this traffic going forward -- exactly the type of disputes the Order intended to prevent.” AT&T reads the rule to say “toll traffic that originates on the PSTN and terminates in IP format is subject to interstate -- and not intrastate -- originating access rates as the default,” according to its filing.

In comments filed Thursday, AT&T criticized Windstream and Frontier’s interpretation of the order. “Although Windstream and Frontier strain to string together various quotes from portions of the Order unrelated to the transitional scheme for VoIP-PSTN traffic to suggest this must have been what the Commission really meant, the Commission expressly said just the opposite,” AT&T said. The Windstream/Frontier approach would “create new asymmetries,” such as the same call being subject to interstate charges on one end and intrastate charges on the other, AT&T said.

Verizon agrees that the ICC order included originating access charges for VoIP-PSTN calls. In areas where Verizon acts as a LEC, it even modified its own state tariffs to charge the lower access rate on those calls, a spokesman said. “Some other carriers did not do this with their tariffs, so we would have to continue to pay the higher rate to them. We think that’s a misinterpretation of the order, which is clear on this point,” he said. “It isn’t reasonable to expect that we will charge a lower rate but pay a higher rate, so we had no choice but to challenge. But it’s in everyone’s best interest for the FCC to resolve this issue and not let it linger."

Stakeholders on both sides and the FCC agree the industry is moving toward a bill-and-keep framework in the long run, where carriers look first to their subscribers to cover the costs of the network. That’s rather than the “calling-party-network-pays” model that dominated ICC regimes over the past century, the commission has said. Until then, during a statutorily-defined transition period that will take between six and nine years, the details remain at issue, several industry officials said.

AT&T pointed to a sentence in the order saying the transitional compensation framework sets “default charges for ’toll’ VoIP-PSTN traffic ... equal to interstate access rates applicable to non-VoIP traffic, both in terms of the rate level and rate structure.” Saperstein isn’t “sure what that sentence actually is intended to mean, but we don’t believe it is the way AT&T sees it,” he said. If the commission did intend such a reading, Frontier and Windstream wrote in their petition, it should reconsider such a “misguided” decision, arguing it “would invite new arbitrage schemes where the Commission has vowed to eliminate them."

The FCC has been concerned about arbitrage schemes that let unscrupulous carriers game the system. LECs have no way of telling whether a call that originates in PSTN terminates in VoIP, so AT&T and Verizon’s reading would put Frontier “at the mercy of the other carrier to tell us if the traffic was VoIP or not,” Saperstein said. “This is a whole new realm of arbitrage.”