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In the 2011 USF/ICC Transformation Order, the Commission adopted rules to define and address access stimulation, the most-significant form of access arbitrage at the time.  Under the rules adopted in 2011, a LEC that is engaged in access stimulation is required to reduce its access charges either by adjusting its rates to account for its high traffic volumes (if a rate-of-return LEC) or to reduce its access charges to those of the price cap LEC with the lowest switched access rates in the state (if a competitive LEC).  The Commission did not ban access stimulation.   The rules adopted in 2011 define a LEC engaged in access stimulation as one having a revenue sharing agreement in which payment by the LEC is based on the billing or collection of access charges from interexchange carriers (IXC) or wireless carriers.  To be considered an access stimulator under the 2011 rules, a LEC must also meet one of two traffic triggers:  (1) have an interstate terminating-to-originating traffic ratio of at least 3:1 in a calendar month; or (2) more than a 100 percent growth in interstate originating and/or terminating switched access minutes-of-use in a month compared to the same month in the preceding year.

On June 5, 2018, the Commission released a Notice of Proposed Rulemaking, seeking to eliminate financial incentives that cause carriers to engage in access stimulation. In the Notice, the Commission sought comment on revisions to the definition of “access stimulation” and proposed rules designed to curb access stimulation. The Commission also sought comment on additional alleged ICC arbitrage schemes and ways to eradicate those schemes.

On September, 26, 2019, the Commission adopted a Report and Order and Modification of Section 214 Authorizations (Order) adopting rules requiring access-stimulating LECs—rather than IXCs—to bear financial responsibility for the tandem switching and transport charges associated with the delivery of traffic from an IXC to the access-stimulating LEC’s end office or its functional equivalent. Recognizing that access stimulation may occur even when there is no revenue sharing agreement between the LEC and the high-volume calling service provider, the Commission broadened the definition of access stimulation to include situations where there is no revenue sharing agreement but the access-stimulating LEC has an unusually high ratio of inbound calling traffic as compared to outbound calling traffic. The revised definition is calibrated to avoid mislabeling rural incumbent local phone companies as access stimulators. In the Order, the Commission also eliminated decades-old requirements that force IXCs delivering traffic to access-stimulating LECs that subtend certain intermediate access providers (known as centralized equal access or CEA providers) to use those CEA providers for tariffed tandem switching and transport services.

After the adoption of the 2019 Access Arbitrage Order, the Commission was made aware of efforts to exploit perceived loopholes in its Access Stimulation Rules. On July 14, 2022, the Commission adopted a Further Notice of Proposed Rulemaking seeking comment on proposed rules to combat ongoing arbitrage of the Commission’s intercarrier compensation system. For example, the Commission proposed to require Internet Protocol Enabled Service (IPES) Providers to calculate their traffic ratios and proposed rule modifications clarifying that an Intermediate Access Provider shall not charge an IXC for terminating switched access tandem and transport services for traffic bound to an IPES Provider whose traffic exceeds the traffic ratios in the Commission’s Access Stimulation Rules.

On April 20, 2023 the Commission adopted a Second Report and Order establishing rules to close perceived loopholes in its existing Access Stimulation Rules, including making IPES Providers subject to those rules. This means, among other things, that Intermediate Access Providers that send traffic to an IPES Provider engaged in Access Stimulation may not charge an IXC certain tariffed terminating access charges.

Principal Access Arbitrage Commission Actions

Friday, May 3, 2024