On April 25, 2012, the Federal Communications Commission (“FCC”) released its Second Order on Reconsideration (“Second Recon Order”) addressing certain aspects of its landmark 2011 USF/ICC Transformation Order. In addition to considering certain issues concerning universal service, the FCC modified its rules establishing a transitional framework for access reciprocal compensation for telecommunications traffic that originates and/or terminates in Internet protocol (“IP”) format which a local exchange carrier (“LEC”) exchanges with another carrier in time division multiplex (“TDM”) format, i.e., VoIP-PSTN traffic. In particular, the FCC modified its rules to permit LECs to tariff default access reciprocal compensation rates for originating intrastate VoIP-PSTN traffic equal to their then current tariffed intrastate originating switched access rates for non-VoIP-PSTN traffic from the effective date of the new rules revision through June 30, 2014. On and after July 1, 2014, LECs will be permitted to tariff default access reciprocal compensation rates for such traffic equal to their then current interstate originating switched access rates.

This new rule change becomes effective forty-five (45) days after publication in the Federal Register. That publication has not yet occurred. Until the effective date, LECs may, per the rules adopted in the USF/ICC Transformation Order, only tariff default access reciprocal compensation rates for originating intrastate VoIP-PSTN traffic equal to their interstate originating switched access rates.

In adopting this rule modification, the Commission underscored that:

There was no basis to clarify the transitional regulatory framework for intercarrier compensation for VoIP-PSTN traffic to the effect that it did not apply to intrastate originating VoIP-PSTN traffic as of the effective date of December 29, 2011. The FCC made clear that the rules adopted in the USF/ICC Transformation Order did in fact provide that, as of December 29, 2011, LECs were only permitted to tariff default access reciprocal compensation rates for originating and terminating VoIP-PSTN traffic, both intrastate and interstate, at interstate switched access rate levels for non-VoIP-PSTN calls. Rather than clarify its rules, in the Second Recon Order, the FCC modified its rules prospectively. The Commission took this action largely on new record evidence that there have been relatively few disputes over LEC access charges for originating intrastate VoIP-PSTN calls. Consequently, the Second Recon Order will have no retroactive impact on permissible levels of compensation LECs are entitled to for originating intrastate VoIP-PSTN traffic.
Under the rules, LECs terminating intrastate VoIP-PSTN traffic will still only be permitted to tariff default access reciprocal compensation rates at rate levels for interstate terminating non-VoIP-PSTN traffic.
LECs will still be permitted to tariff default access reciprocal compensation rates for interstate originating and terminating VoIP-PSTN traffic at rate levels for interstate originating and terminating non-VoIP-PSTN traffic.
The new rule applies regardless of whether the intrastate originating VoIP-PSTN traffic originates (or terminates) in IP or TDM format. (It must do one or the other (or both) to be VoIP-PSTN traffic.)
The Commission’s authority to adopt a compensation framework for VoIP-PSTN traffic, both originating and terminating, and both intrastate and interstate, stems from Section 251(b)(5) and Section 251(g) of the Act, as stated in the USF/ICC Transformation Order. The action taken in the Second Recon Order is not the result of the FCC’s reconsideration or rethinking of its jurisdictional authority.
There is no justification for the Commission to permit default origination charges for interstate VoIP-PSTN traffic to be set equal to intrastate originating switched access rates indefinitely.
No other aspect of the interim compensation framework for exchanging VoIP-PSTN traffic has been modified.

Please be advised that attorneys in Kelley Drye & Warren’s Communications practice group are experienced in addressing issues related to all aspects of the USF/ICC Transformation Order and intercarrier compensation in general. For more information regarding this client advisory, please contact your usual Kelley Drye attorney or any member of the Communications practice group.

Chip Yorkgitis
(202) 342-8485
cyorkgitis@kelleydrye.com

The FCC Clarifies the Access Reciprocal Compensation Rates LECS May Charge for Originating Intrastate VoIP-PSTN Traffic