June 23, 2022 FCC FACT SHEET* Updating the Intercarrier Compensation Regime to Eliminate Access Arbitrage Further Notice of Proposed Rulemaking – WC Docket No. 18-155 Background: In 2019, the Commission adopted the Access Arbitrage Order, in which it revised its Access Stimulation Rules to prohibit local exchange carriers (LECs) and Intermediate Access Providers from gaming the intercarrier compensation regime by inflating traffic volumes to maximize access charge revenues. To crack down on new ways carriers are manipulating traffic to evade the Commission’s Access Stimulation Rules and continue their arbitrage schemes, the Commission will consider a Further Notice of Proposed Rulemaking. What the Further Notice Would Do: • Propose ways to clarify perceived ambiguities in the Commission’s rules that some providers are exploiting to force IXCs and their end-user customers to continue to bear the costs of high- volume calling services by incorporating IPES Providers (IP enabled service) into the call path. • Propose that when traffic is delivered to an IPES Provider by a LEC or an Intermediate Access Provider, and the terminating-to-originating traffic ratios of the IPES Provider exceed certain triggers established in the existing Access Stimulation Rules, the IPES Provider will be deemed to be engaged in Access Stimulation. • Propose that Intermediate Access Providers would be prohibited from imposing tariffed terminating tandem switching and transport access charges on IXCs sending traffic to access- stimulating IPES Providers or to such providers’ end-user customers. * This document is being released as part of a “permit-but-disclose” proceeding. Any presentations or views on the subject expressed to the Commission or its staff, including by email, must be filed in WC Docket No. 18-155, which may be accessed via the Electronic Comment Filing System (https://www.fcc.gov/ecfs/). Before filing, participants should familiarize themselves with the Commission’s ex parte rules, including the general prohibition on presentations (written and oral) on matters listed on the Sunshine Agenda, which is typically released a week prior to the Commission’s meeting. See 47 CFR § 1.1200 et seq. Federal Communications Commission FCC-CIRC2207-02 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) Updating the Intercarrier Compensation Regime to ) WC Docket No. 18-155 Eliminate Access Arbitrage ) FURTHER NOTICE OF PROPOSED RULEMAKING* Adopted: [] Released: [] Comment Date: 30 days after publication in the Federal Register Reply Comment Date: 60 days after publication in the Federal Register By the Commission: TABLE OF CONTENTS I. INTRODUCTION .................................................................................................................................. 1 II. BACKGROUND .................................................................................................................................... 2 III. DISCUSSION ...................................................................................................................................... 10 A. Proposed Rules When IPES Providers’ Traffic Ratios Exceed the Access Stimulation Triggers .......................................................................................................................................... 12 B. Other Proposed Rule Changes ....................................................................................................... 29 C. Clarifying or Interpreting Current Access Stimulation Rules ........................................................ 46 D. Legal Authority .............................................................................................................................. 48 E. Costs and Benefits of the Proposals ............................................................................................... 52 F. Efforts to Promote Digital Equity and Inclusion ........................................................................... 56 IV. PROCEDURAL MATTERS ................................................................................................................ 57 V. ORDERING CLAUSES ....................................................................................................................... 63 APPENDIX A – Proposed Rules APPENDIX B – Initial Regulatory Flexibility Analysis I. INTRODUCTION 1. In this Further Notice of Proposed Rulemaking, we seek comment on several proposals to prevent companies from executing new business strategies to engage in access stimulation by evading our existing Access Stimulation Rules, thereby harming consumers and imposing unwarranted costs on * This document has been circulated for tentative consideration by the Commission at its July 14, 2022 open meeting. The issues referenced in this document and the Commission’s ultimate resolution of those issues remain under consideration and subject to change. This document does not constitute any official action by the Commission. However, the Chairwoman has determined that, in the interest of promoting the public’s ability to understand the nature and scope of issues under consideration, the public interest would be served by making this document publicly available. The FCC’s ex parte rules apply and presentations are subject to “permit-but-disclose” ex parte rules. See, e.g., 47 C.F.R. §§ 1.1206, 1.1200(a). Participants in this proceeding should familiarize themselves with the Commission’s ex parte rules, including the general prohibition on presentations (written and oral) on matters listed on the Sunshine Agenda, which is typically released a week prior to the Commission’s meeting. See 47 CFR §§ 1.1200(a), 1.1203. Federal Communications Commission FCC-CIRC2207-02 America’s telecommunications networks. In 2019, the Commission adopted the Access Arbitrage Order,1 in which it revised its Access Stimulation Rules to prohibit local exchange carriers (LECs) and Intermediate Access Providers from charging interexchange carriers (IXCs)2 for terminating tandem switching and transport services used to deliver calls to access-stimulating LECs. The revised rules sought to end the ability of LECs to engage in arbitrage of the intercarrier compensation (ICC) system by extracting artificially inflated tandem switching and transport charges from IXCs to subsidize “free” high- volume calling services. This sort of arbitrage harms consumers, who ultimately bear the costs for these services, whether or not they use them. Since the rules took effect, the Commission has received information about new ways carriers are manipulating their businesses to continue their arbitrage schemes in the wake of the new rules. In this Further Notice, we propose ways to eliminate these new arbitrage schemes and the harms those schemes inflict on consumers. II. BACKGROUND 2. The access charge regime was originally designed to compensate carriers for the use of their networks by other carriers. It also helped ensure that people living in rural areas had access to affordable telephone service through a system of implicit subsidies. The key to this system was the charges IXCs were required to pay to LECs for access to their networks—particularly the high charges IXCs had to pay rural LECs to terminate calls to rural customers. In 1996, Congress directed the Commission to eliminate these implicit subsidies3—a process the Commission has pursued by steadily moving access charges to a bill-and-keep framework.4 As part of the ongoing transition to bill-and-keep, the Commission has capped most access charges and moved terminating end-office charges and some tandem switching and transport charges to bill-and-keep.5 3. Arbitrage schemes take advantage of relatively high access charges, particularly for the remaining terminating tandem switching and transport services that have not yet transitioned to bill-and- keep. Switched access charges were originally established based on the costs of providing service and normal call volumes.6 These rates were subsequently capped and are no longer based on actual costs or 1 Updating the Intercarrier Compensation Regime to Eliminate Access Arbitrage, WC Docket No. 18-155, Report and Order and Modification of Section 214 Authorizations, 34 FCC Rcd 9035 (2019) (Access Arbitrage Order or Order); see also Updating the Intercarrier Compensation Regime to Eliminate Access Arbitrage, WC Docket No. 18-155, Notice of Proposed Rulemaking, 33 FCC Rcd 5466 (2018) (Access Arbitrage Notice). 2 The term IXC, as used in this Further Notice, encompasses wireless carriers to the extent they are payers of switched access charges. 3 See 47 U.S.C. § 254(b)(5), (e); see also Connect America Fund et al., WC Docket No. 10-90 et al., Report and Order and Further Notice of Proposed Rulemaking, 26 FCC Rcd 17663, 17909, para. 747 (2011) (USF/ICC Transformation Order), aff’d, In re FCC 11-161, 753 F.3d 1015 (10th Cir. 2014) (noting the “direction from Congress in the 1996 Act that the Commission should make support explicit rather than implicit”); Access Arbitrage Order, 34 FCC Rcd at 9046, para. 26. 4 As the Commission has explained, “[u]nder bill-and-keep carriers look first to their subscribers to cover the costs of the network, then to explicit universal service support where necessary.” USF/ICC Transformation Order, 26 FCC Rcd at 17676, para. 34. 5 Id. at 17676-77, para. 35. 6 Most of the costs of providing telephone service are “fixed” network costs, that do not vary based on usage. Access charges for end office switching, tandem switching, and tandem switched transport between the end office and the tandem were based on dividing the costs that were attributed to interstate access by the number of interstate access minutes of use the LEC provided for each of these services. See, e.g., Access Charge Reform et al., CC Docket No. 96-262 et al., First Report and Order, 12 FCC Rcd 15982, 15994-96, 16006, paras. 28-31, 63 (1997). Rates no longer change based on traffic volumes so higher traffic volumes result in inflated revenues. USF/ICC Transformation Order, 26 FCC Rcd at 17875, para. 662 (“Commenters agree that the interstate switched access rates being charged by access stimulating LECs do not reflect the volume of traffic associated with access stimulation.”). 2 Federal Communications Commission FCC-CIRC2207-02 actual usage and therefore no longer decrease when traffic volumes increase.7 Some LECs devised business plans to exploit this fact by artificially stimulating terminating call volumes through arrangements with entities that offer high-volume calling services.8 The resulting high call volumes generate revenues that far exceed the costs that the terminating tandem switching and tandem switched transport charges are designed to cover. 4. “Free” conference calling, chat lines, and certain other services accessed by dialing a domestic telephone number are all types of calling services that can be, and are, used to artificially increase call volumes.9 The terminating switched access charges, however, were intended to allow LECs to recover the costs of operating their networks, not to allow LECs to subsidize “free” conference calling, chat line, and similar “free” services offered by the LECs’ end-user customers.10 IXCs nonetheless have no choice but to carry traffic to these high-volume calling services and pay the tariffed access charges to the terminating LECs or the Intermediate Access Providers the LECs choose, inefficiently transferring revenues from IXCs to the traffic stimulators that greatly exceed the cost these termination charges are intended to cover.11 As a result, terminating tandem switching and tandem switched transport charges that these high-volume calls generate are shared by all of the IXC’s customers, who collectively fund the “free” services offered by high-volume calling service providers, whether the IXC customers use those services or not. 5. In the 2011 USF/ICC Transformation Order, the Commission adopted rules identifying rate-of-return LECs and competitive LECs engaged in access stimulation and requiring that such LECs lower their tariffed access charges. The 2011 rules defined “access stimulation” as occurring when two conditions are satisfied: (1) the rate-of-return LEC or competitive LEC has entered into an access revenue sharing agreement that, “over the course of the agreement, would directly or indirectly result in a net payment to the other party;”12 and (2) one of two traffic triggers is met: either an interstate terminating-to-originating traffic ratio of at least 3:1 in a calendar month, or 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.13 At the same time, the Commission began moving terminating, end-office switched access charges to bill-and-keep.14 6. Parties engaged in access stimulation adapted to these rules by taking advantage of tandem switching and transport access charges that had not yet transitioned to bill-and-keep, namely, the 7 See USF/ICC Transformation Order, 26 FCC Rcd at 17934-36, fig. 9. 8 Access Arbitrage Notice, 33 FCC Rcd at 5467, para. 2. 9 Id. 10 By terminating traffic to high-volume calling services, LECs are able to generate enough access charge revenue to recover the costs of operating their networks, cover the costs of the “free” high-volume calling services, sometimes share revenue with the high-volume calling service, and still make a profit. USF/ICC Transformation Order, 26 FCC Rcd at 17874, paras. 656-57; Access Arbitrage Notice, 33 FCC Rcd at 5467, para. 2. 11 Access Arbitrage Order, 34 FCC Rcd at 9036, para. 2. 12 The rules adopted in 2011 stated the access revenue sharing agreement could be “express, implied, written or oral,” and that in such agreements, payment by the rate-of-return LEC or competitive LEC “is based on the billing or collection of access charges from interexchange carriers or wireless carriers. When determining whether there is a net payment under this rule, all payments, discounts, credits, services, features, functions, and other items of value, regardless of form, provided by the rate-of-return local exchange carrier or Competitive Local Exchange Carrier to the other party to the agreement shall be taken into account.” 47 CFR § 61.3(bbb)(1)(i) (2012). 13 47 CFR § 61.3(bbb)(1)(ii) (2012); USF/ICC Transformation Order, 26 FCC Rcd at 17874, para. 658. 14 See USF/ICC Transformation Order, 26 FCC Rcd at 17934-36, fig. 9. 3 Federal Communications Commission FCC-CIRC2207-02 terminating tandem charges for rate-of-return and competitive LECs.15 As a result, new access arbitrage schemes forced IXCs to pay high tandem switching and tandem switched transport charges to access- stimulating LECs or to Intermediate Access Providers that may be chosen by those access-stimulating LECs. And although the direct cost to IXCs of access stimulation dropped because of the rules adopted in 2011, the number of access-stimulated minutes did not.16 Indeed, arbitrageurs openly promoted “opportunities to get paid for generating minutes by dialing telephone numbers owned by access stimulator LECs.”17 7. In 2019, the Commission responded to the new access arbitrage schemes that had sprung up after 2011 by broadening the scope and reach of its Access Stimulation Rules. Most significantly, the Commission found that requiring “IXCs to pay the tandem switching and tandem switched transport charges for access-stimulation traffic is an unjust and unreasonable practice” that was prohibited pursuant to section 201(b) of the Communications Act of 1934, as amended (the Act).18 The Commission then adopted rules making access-stimulating LECs—rather than IXCs—financially responsible for the tandem switching and tandem switched transport service access charges associated with the delivery of traffic from an IXC to an access-stimulating LEC serving end users at its end office or its equivalent.19 The Commission adopted these changes to reduce carriers’ incentives to artificially inflate traffic volumes by routing traffic inefficiently to maximize access charge revenues.20 The Commission also found that combatting such arbitrage reduces call congestion and service disruptions.21 The Commission recognized that arbitrage may occur even when there is no revenue sharing agreement, so it modified the definition of access stimulation to include two alternative traffic ratio triggers (one applicable to competitive LECs and one applicable to rate-of-return LECs) that do not require a revenue sharing component.22 8. Since these rules took effect, parties have advised Commission staff of new efforts by access stimulators to evade the updated rules by integrating into the call flow IP enabled (IPES) 15 Access Arbitrage Order, 34 FCC Rcd at 9036, para. 3. Some terminating tandem charges for price cap LECs have moved to bill-and-keep, but not the terminating tandem charges for rate-of-return and competitive LECs, which are at issue here. See id. at 9039, para. 10; USF/ICC Transformation Order, 26 FCC Rcd at 17934-36, fig. 9. 16 Access Arbitrage Order, 34 FCC Rcd at 9036, para. 3. 17 Letter from Keith Buell, Senior Counsel, Sprint, to Marlene Dortch, Secretary, FCC, WC Docket No. 18-155, at 7 (filed May 16, 2019) (providing a screen shot of a Facebook page advertising one such scheme). 18 Access Arbitrage Order, 34 FCC Rcd at 9073, para. 92. 19 47 CFR §§ 69.4(l), 69.5(b); Access Arbitrage Order, 34 FCC Rcd at 9036-37, para. 4 (citing Access Arbitrage Notice, 33 FCC Rcd at 5467, para. 3). 20 Access Arbitrage Order, 34 FCC Rcd at 9044, para. 21. 21 See id. at 9036, para. 3. In addition to imposing direct costs on IXCs and their customers, access stimulation imposes other harms including call blocking and dropped calls caused by the staggering volume of minutes generated by these schemes. But cf. Letter from G. David Carter, Counsel to Joint CLECs, to Marlene Dortch, Secretary, FCC, WC Docket No. 18-155, at 1-2 (filed May 13, 2019) (claiming there is still insufficient evidence of the “harm and negative consequences” of access stimulation). 22 47 CFR § 61.3(bbb)(1)(ii)-(iii); Access Arbitrage Order, 34 FCC Rcd at 9053, para. 43. The definition of Access Stimulation revised in 2019 added that a LEC is deemed to be engaged in Access Stimulation if: (a) it is a competitive LEC serving end user(s) and has an interstate terminating-to-originating traffic ratio of at least 6:1; or (b) it is a rate-of-return LEC serving end user(s) and has an interstate terminating-to-originating traffic ratio of at least 10:1 in an end office in a three calendar month period and has 500,000 minutes or more of interstate terminating minutes-of-use per month in the same end office in the same three calendar month period. 47 CFR § 61.3(bbb)(1)(ii)-(iii). Neither of the two alternative prongs of the revised definitions added in 2019 require that the carrier also participate in a revenue sharing agreement. 4 Federal Communications Commission FCC-CIRC2207-02 Providers.23 For example, some parties described concerns that access stimulators are “converting traditional CLEC [(competitive LEC)] phone numbers to IPES numbers in order to claim that the [Access Arbitrage Order] is inapplicable” because the traffic is bound for telephone numbers obtained by IPES Providers and not bound for LECs serving end users.24 9. USTelecom and its members allege that a substantial and growing portion of traffic that previously terminated through access-stimulating LECs now terminates through IPES Providers.25 AT&T and Verizon allege that certain LECs are attempting to evade the Commission’s Access Stimulation Rules by, for example, having an IPES Provider take the place of the LEC delivering calls to an end user. As a result, IXCs allege, certain LECs claim the Access Stimulation Rules do not apply because the IPES Provider—and not the LEC—is responsible for delivering calls to the end user.26 In such a scenario, it is alleged that because the call flow does not include an access-stimulating LEC serving end users, such LECs continue to bill IXCs for the termination of access-stimulated traffic.27 Thus, IXCs and their long- 23 Letter from Matthew S. DelNero, Counsel to Inteliquent, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 18-155 et al., Attach. at 1 (filed Jan. 29, 2020) (“Initial impact of new rules, from Inteliquent’s observation of traffic flows: No reduction in MOU [(minutes of use)], but traffic is shifting from multiple rural CLECs to a limited number of rural CLECs and IPES providers; Rural CLECs previously identified as access stimulators and still receiving traffic appear to be claiming they are outside the scope of access stimulation rules.”). 24 Letter from Mike Saperstein, VP, Strategic Initiatives & Partnerships, USTelecom, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 18-155 (filed Sept. 22, 2020) (USTelecom Sept. 22, 2020 Ex Parte Letter); Letter from Michael Hunsender, Counsel for AT&T, & Scott H. Angstreich, Counsel for Verizon, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 18-155, at 1 (filed Mar. 26, 2020) (AT&T and Verizon Mar. 26, 2020 Ex Parte Letter) (“These companies claim that traffic routed to or from the PSTN through a LEC to telephone numbers assigned to a VoIP provider should be ignored when applying the Commission’s traffic-volume tests for identifying access stimulating LECs.”). In an attachment to its ex parte letter, USTelecom makes the point that “[a]lthough IPES providers cannot bill [tariffed] switched access, the tandem provider to the IPES entity can bill [tariffed] tandem switching on originating and terminating traffic.” USTelecom Sept. 22, 2020 Ex Parte Letter Attach. at 2. Likewise, VoIP providers also cannot charge tariffed switched access, including tandem switching and transport charges. Instead, VoIP providers describe the services they offer and the rates for those services in commercial agreements. For purposes of this Further Notice, we consider the term “IPES Provider” to include “VoIP provider,” and use the term “IPES Provider” throughout. We propose a definition for IPES Provider in Appendix A. Appx. A (proposed 47 CFR § 61.3(eee)). 25 See USTelecom Sept. 22, 2020 Ex Parte Letter Attach. at 3; see also infra Diagram 1. 26 AT&T and Verizon Mar. 26, 2020 Ex Parte Letter at 2-3 (“The attempted evasion of the Commission’s rules is particularly clear here. Wide Voice is the ‘CLEC partner to route traffic to the ILECs’ and ‘provide[s] connectivity to the PSTN’ for HD Carrier. HD Carrier has obtained VoIP numbering authorization and now—attempting to evade the Access Arbitrage Order—provides telephone numbers to Free Conferencing (and likely others). . . . In sum, Wide Voice claims that, by the simple expedient of moving Free Conferencing’s traffic to a VoIP provider . . . that that traffic no longer counts when assessing whether Wide Voice triggers the 3:1 or 6:1 ratios and is an access stimulator.”) (internal footnotes omitted). 27 See 47 CFR § 61.3(bbb)(1) (definition of Access Stimulation, which applies to LECs “serving end users”); Letter from Matt Nodine, Assistant Vice President, Federal Regulatory, AT&T, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 18-155, Attach. 2, Comments of AT&T Services, Inc., WC Docket No. 13-97 et al., at 5 (letter filed Feb. 11, 2022; comments rec. Oct. 14, 2021) (AT&T Feb. 11, 2022 Ex Parte Letter and AT&T Oct. 14, 2021, WC Docket No. 13-97, Comments) (explaining that “[e]ven though the Commission broadly proclaimed that it was unreasonable for IXCs to pay access charges on access stimulation traffic . . . certain CLECs and their VoIP partners have identified what they perceive to be loopholes in these rules; in their view, a CLEC is not engaged in ‘access stimulation’ where the CLEC inserts a VoIP partner into the calling path. Specifically, the rules provide that a CLEC is engaged in access stimulation when it is ‘serving end user(s),’ . . . and the perceived loophole is that a CLEC is not ‘serving end user(s)’ when it routes traffic through a VoIP entity.”) (internal citations omitted); see also, e.g., Letter from Lauren J. Coppola, Counsel for Wide Voice, LLC, to Marlene H. Dortch, Secretary, FCC, EB Proceeding No. 20-362, Bureau ID No. EB-20-MD-005, Attach. 1, Wide Voice, LLC’s Answer to Numbered Paragraphs of Formal Complaint of AT&T Corp., AT&T Services, Inc. and MCI Communications Services LLC at (continued….) 5 Federal Communications Commission FCC-CIRC2207-02 distance customers continue to bear the costs of these calls to high-volume calling services. Inteliquent and Lumen describe a different call flow scheme in which the traffic does not pass through a LEC. In this call flow, an Intermediate Access Provider (tandem service provider) transmits long-distance traffic directly to an IPES Provider.28 USTelecom explains that some IPES Providers claim that the Access Stimulation Rules do not apply to traffic terminating to “IPES numbers,” and therefore the IPES Providers are not responsible for the costs of tandem switching and transport, “regardless that their traffic patterns qualify as access stimulation under the Commission’s rules.”29 III. DISCUSSION 10. In this Further Notice, we propose to eliminate perceived ambiguity in our rules that the record shows companies are seeking to leverage to force IXCs and their long-distance customers to continue to bear the costs of high-volume calling services by incorporating IPES Providers into the call path. This is an increasingly important issue because IPES Providers are prevalent in today’s networks. As a result, we propose that when traffic is delivered to an IPES Provider by a LEC or an Intermediate Access Provider and the terminating-to-originating traffic ratios of the IPES Provider exceed the triggers in the Access Stimulation Rules, the IPES Provider will be deemed to be engaged in access stimulation. In such cases, we propose that the Intermediate Access Provider would be prohibited from imposing tariffed terminating tandem switching and transport access charges on IXCs sending traffic to the IPES Provider or the IPES Provider’s end-user customer. 11. The rules we propose will serve the public interest by reducing carriers’ incentives and ability to send traffic over the Public Switched Telephone Network (PSTN) solely for the purpose of collecting tariffed tandem switching and transport access charges from IXCs to subsidize high-volume calling services, which the Commission has found to be an unjust and unreasonable practice.30 Consistent with the Commission’s previous efforts to eliminate this conduct, our proposals seek to reduce the routing of artificially high volumes of calls to places where above-cost access charges continue to exist. Our proposals will reduce the ability to apply access charges to those calls, the costs of which are ultimately borne by consumers, most of whom do not even use high-volume calling services. A. Proposed Rules When IPES Providers’ Traffic Ratios Exceed the Access Stimulation Triggers 12. We seek comment on call paths involving Intermediate Access Providers, LECs, and IPES Providers.31 As an initial matter, we seek comment on whether the following diagram accurately illustrates how calls are delivered to high-volume calling service providers by IPES Providers that receive those calls from LECs. If not, how should the diagram be modified to make it more accurate? We encourage commenters to submit diagrams and explanations in the record to provide a more comprehensive and clearer understanding of the flow of traffic to high-volume calling service providers when an IPES Provider is inserted into the call flow. We strongly encourage parties to submit simple (Continued from previous page) 34 (filed Feb. 18, 2021) (“Wide Voice is not an access stimulating LEC” because it “does not have end users or provide end office termination services.”). 28 See infra Diagram 2; Letter from Matthew S. DelNero & Thomas G. Parisi, Counsel to Inteliquent, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 18-155, at 2 (filed Apr. 30, 2021) (Inteliquent/Lumen Apr. 30, 2021 Ex Parte Letter); see also Letter from Lauren Coppola, On behalf of CarrierX, LLC, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 18-155, Exh. A, at 6-7 (filed May 19, 2021) (CarrierX May 19, 2021 Ex Parte Letter). 29 USTelecom Sept. 22, 2020 Ex Parte Letter at 2. 30 Access Arbitrage Order, 34 FCC Rcd at 9073, para. 92 (citing 47 U.S.C. § 201(b)). 31 We recognize that Intermediate Access Providers are often, if not always, LECs, but for purposes of these discussions, we use the term “LEC” to refer to local exchange carriers that are not providing tandem services as part of the calls in question. 6 Federal Communications Commission FCC-CIRC2207-02 diagrams showing all providers in the call path to illustrate and help clarify the various calling scenarios that our proposals to combat access stimulation should target. Diagram 1 Hypothetical call path including a LEC and an IPES Provider 13. We also seek information on the providers’ services (tariffed and non-tariffed) and the access charges involved in routing these calls. When traffic is routed from an Intermediate Access Provider to a LEC as in Diagram 1, is that LEC at times the same entity that serves as the Intermediate Access Provider? In what circumstances? Commenters should enumerate each of the services provided by the Intermediate Access Provider, the LEC, and IPES Provider along this call path and which entities are charged for each service. For instance, when the LEC sends calls to the IPES Provider in the call path, is the LEC providing transport or other services? If the LEC delivers these calls to the IPES Provider, is the LEC providing any end-office functionality? When traffic is exchanged between the LEC and the IPES Provider, how is compensation, if any, handled between the two entities? What other services does the LEC charge for? Does the IPES Provider charge any entity in the call path for any services? If so, what services are provided by the IPES Provider, and which entity does the IPES Provider charge? Parties should provide any additional information that will enhance our understanding of how calls are routed and billed for along the hypothetical call path in Diagram 1, so we can better assess whether entities are meeting their financial responsibilities when they route traffic in this manner. 14. The record suggests that there are call flows that do not include a LEC between the Intermediate Access Provider and the IPES Provider (or the end user), as pictured in Diagram 2 below.32 In this scenario, the Intermediate Access Provider (tandem provider) delivers calls directly to an IPES Provider without an intermediate LEC. We seek comment on the existence of such call flows. Does Diagram 2 below accurately depict such call flows? If not, what adjustments need to be made to the diagram to make it more accurate? Diagram 2 Hypothetical call path where the Intermediate Access Provider sends traffic directly to the IPES Provider 15. IPES Providers are not “LECs” and thus parties may argue that our Access Stimulation Rules do not apply to them, whether traffic they terminate to high-volume calling service providers is 32 Inteliquent/Lumen Apr. 30, 2021 Ex Parte Letter at 2 (“[F]or access traffic, in contrast to the call flow for a traditional LEC end office scenario, traffic destined for an IPES provider does not necessarily traverse any LEC end office (including the Hosting LEC’s facilities.”) (emphasis in original). 7 Federal Communications Commission FCC-CIRC2207-02 received directly from Intermediate Access Providers or from LECs.33 This argument, however, leaves IXCs, who are captive to the routing decisions of IPES Providers that may choose Intermediate Access Providers solely to receive traffic they then deliver to the high-volume calling service provider, having to bear the cost of those routing decisions. These costs are ultimately passed onto the IXCs’ customers. These schemes are similar to those that existed before the Access Arbitrage Order was adopted, where access-stimulating LECs had no incentive to make economical routing decisions because the cost implications of those decisions would be borne by IXCs who would pass the resultant inflated costs on to their customer bases.34 16. For example, in response to the Access Arbitrage Order, one competitive LEC, Wide Voice, modified its business to no longer offer service to end users, and instead only functions as a competitive tandem provider and sends call destined for a high-volume calling service to HD Carrier (an IPES provider), which then terminates calls to the end user.35 The Commission found that Wide Voice’s actions resulted in it continuing to unlawfully bill IXCs for tandem services contrary to section 201(b) of the Act.36 Commenters should describe additional real-world examples of calls being routed from an Intermediate Access Provider directly to an IPES Provider (or indirectly through a LEC) that then terminates those calls to a high-volume calling service provider.37 Does this routing scheme impose unlawful costs on IXCs? We seek additional detail on this practice and specific proposals as to how best it should be addressed. Parties should explain what charges are being assessed, what entity is billing for what services, and which parties are being charged in these situations. Commenters should likewise describe any other aspects of this call flow that might provide additional opportunities for arbitrage and suggest ways our rules might be revised to foreclose those opportunities. 17. Proposal. We propose to clarify that an Intermediate Access Provider shall not charge an IXC tariffed charges for terminating switched access tandem switching and switched access tandem transport for traffic bound to an IPES Provider whose traffic exceeds the ratios in sections 61.3(bbb)(1)(i) or 61.3(bbb)(1)(ii) of our Access Stimulation Rules.38 We seek comment on this proposal, including the question of whether it is appropriate to apply to IPES Providers the 3:1 terminating-to-originating traffic ratio plus revenue sharing agreement trigger in section 61.3(bbb)(1)(i), and the 6:1 terminating-to- 33 USTelecom Sept. 22, 2020 Ex Parte Letter at 2. 34 Access Arbitrage Order, 34 FCC Rcd at 9074, para. 93. 35 AT&T Corp., AT&T Services, Inc., and MCI Communications Services LLC, Complainant v. Wide Voice, LLC, Defendant, Proceeding No. 20-362, Bureau ID No. EB-20-MD-005, Memorandum Opinion and Order, 36 FCC Rcd 9771, 9775, para. 11 (2021) (AT&T v. Wide Voice Enforcement Order). 36 AT&T v. Wide Voice Enforcement Order, 36 FCC Rcd at 9779, para. 20 (“We find that Wide Voice has violated section 201(b) of the Act in three respects: by restructuring its business operations so that it could impose tandem charges that it otherwise was not entitled to bill (Count V); by intentionally causing call congestion in an effort to force the IXCs into commercial arrangements that required the payment of tandem charges (Count I); and, for the same purpose, by unilaterally declaring a new interconnection point that does not create a net public benefit (Counts II and III).”); see also Letter from Tamar E. Finn, Counsel to Bandwidth, Inc., to Marlene H. Dortch, Secretary, FCC, WC Docket Nos. 18-156, 18-155, 13-97, and 07-243, at 1 (filed July 16, 2021) (Bandwidth July 16, 2021 Ex Parte Letter) (“Bandwidth applauds and is encouraged by the Commission's determinations” in the AT&T v. Wide Voice Enforcement Order.). 37 See Inteliquent/Lumen Apr. 30, 2021 Ex Parte Letter at 2 (explaining that long-distance calls are routed from IXCs through the Intermediate Access Provider to IPES Providers, and local calls are routed through a LEC to the IPES Provider). 38 We would expect the Intermediate Access Provider to charge the IPES Provider or the IPES Provider’s LEC partner any tariffed rates for switched access tandem switching and switched access transport services. See Access Arbitrage Order, 34 FCC Rcd at 9044, para. 21 (“Our new rules eliminate the incentives that access-stimulating LECs have to switch and route stimulated traffic inefficiently, including by using intermediate access providers to do the same.”). 8 Federal Communications Commission FCC-CIRC2207-02 originating traffic ratio trigger, absent a revenue sharing agreement, in section 61.3(bbb)(1)(ii). Commenters should consider that although we intend to reduce or eliminate arbitrage opportunities, we do not want the financial consequences of our Access Stimulation Rules to apply to LECs or IPES Providers that are not engaged in harmful arbitrage schemes. 18. Under our proposal, the IPES Provider would be responsible for calculating its traffic ratios39 and for making the required notifications to the Commission and affected carriers, just as LECs are responsible for these activities under the current rules.40 This proposal is consistent with other reporting requirements imposed on VoIP providers, such as the obligation to report certain information on FCC Forms 477 and 499.41 Similar to the approach the Commission took in the Access Arbitrage Order, we do not propose a specific format for the notification an access-stimulating IPES Provider would provide to affected carriers and the Commission.42 After the rules adopted in the Access Arbitrage Order became effective, some carriers satisfactorily notified the Commission that they were stopping their access stimulation activities by filing letters in docket 18-155.43 19. Under our proposal, if the IPES Provider’s traffic ratios exceed the applicable rule triggers, it would have to notify the Intermediate Access Provider, the Commission, and affected IXCs. The Intermediate Access Provider would then be prohibited from billing IXCs tariffed rates for terminating switched access tandem switching or terminating switched access transport charges.44 Instead, the Intermediate Access Provider could recover the costs from the IPES Provider, or the IPES Provider’s LEC partner. Thus, the entities choosing the call path—the IPES Provider or its partner— should only be willing to generate traffic that creates more value than the costs these tariffed access charges are intended to recover. As a result, they would have an economic incentive to make efficient call routing decisions and little, if any, incentive to artificially stimulate traffic. Do commenters agree with our view that this proposal, reflected in the amended rules in Appendix A, will help “ensure that the entities choosing what network to use . . . have appropriate incentives to make efficient decisions”?45 If 39 Appx. A (proposed 47 CFR § 61.3(bbb)); see CarrierX May 19, 2021 Ex Parte Letter at 1 (“CarrierX explained to Bureau staff that for the purposes of addressing access stimulation, IPES entities should be responsible for measuring traffic ratios.”); Letter from Matthew S. DelNero, Counsel to Inteliquent, to Marlene H. Dortch, Secretary, FCC, WC Docket Nos. 13-97, 07-243, 20-67, and 18-155, at 2 (filed May 4, 2022) (Inteliquent May 4, 2022 Ex Parte Letter). 40 Appx. A (proposed 47 CFR § 51.914(d)). 41 See 47 CFR § 1.7001(b) (requiring interconnected VoIP providers serving end users to file FCC Form 477). See generally 47 CFR § 64.604 (FCC Form 499). The Commission requires interconnected VoIP service providers to contribute to the Universal Service Fund as a means of ensuring a level playing field among direct competitors. See 47 CFR § 54.706(a); Universal Service Contribution Methodology et al., WC Docket No. 06-122 et al., Report and Order and Notice of Proposed Rulemaking, 21 FCC Rcd 7518, 7541, para. 44 (2006) (Universal Service Contribution Order) (extending contribution obligations to interconnected VoIP service providers). Although the Commission did not address the regulatory classification of interconnected VoIP services under the Act, the Commission concluded that interconnected VoIP service providers are “providers of interstate telecommunications” for purposes of universal service contributions. Id. at 7537, para. 35 (citing 47 U.S.C. § 254(d)). 42 See 47 CFR § 51.914(b). 43 See, e.g., Letter from Ronald Laudner, Jr., CEO, Interstate Cablevision, LLC, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 18-155, at 1 (filed Jan. 9, 2020) (noting that as of December 29, 2019, the company terminated end-user relationships with high-volume calling providers); Letter from Randy Foor, General Manager, Louisa Communications, Inc., to Marlene H. Dortch, Secretary, FCC, WC Docket No. 18-155, at 1 (filed Dec. 27, 2019) (notifying the Commission that the company terminated its end-user relationships with high-volume calling providers as of December 25, 2019). 44 See, e.g., Appx. A (proposed 47 CFR § 51.914(e)). 45 Access Arbitrage Order, 34 FCC Rcd at 9073, para. 89; see also id. at 9074, para. 93; USF/ICC Transformation Order, 26 FCC Rcd at 17905-06, para. 742. 9 Federal Communications Commission FCC-CIRC2207-02 commenters disagree, they should explain what other, or additional, actions we should take to ensure that service providers have the proper incentives. 20. As an alternative to imposing a requirement that the IPES Provider calculate its traffic ratios for purposes of our Access Stimulation Rules, we could require that the Intermediate Access Provider calculate the IPES Provider’s traffic ratios. Under this alternative, if the Intermediate Access Provider cannot perform this calculation, or the IPES Provider will not share relevant traffic ratio information with the Intermediate Access Provider, we would create a presumption that the IPES Provider’s traffic exceeds the Access Stimulation Rule ratios. In that case, the Intermediate Access Provider would not be able to charge IXCs terminating switched access tandem switching or terminating switched access transport charges. Would such an approach be more effective than the rule modifications described above and proposed in Appendix A? Commenters are encouraged to propose possible rule language to codify this presumption. 21. We propose to use the same framework for determining when an IPES Provider that was engaged in access stimulation no longer is considered to be engaged in access stimulation that we currently use for competitive LECs that have engaged in access stimulation.46 Thus, for example, if an IPES Provider is engaged in access stimulation because it exceeds the 6:1 traffic ratio in section 61.3(bbb)(1)(ii) of the Commission’s rules, we propose that it would no longer be considered to be engaged in access stimulation if its traffic ratio falls below 6:1 for six consecutive months and it does not engage in Access Stimulation as defined in section 61.3(bbb)(1)(i).47 Additionally, once such an IPES Provider no longer meets those criteria, it would be required to notify the Commission and any affected Intermediate Access Providers and IXCs that it is no longer engaged in access stimulation.48 We seek comment on these proposals. Do commenters consider the proposals to be over-inclusive or unnecessary? If so, are there ways to moderate the proposals to effect the same objective? 22. Calculations. We propose that IPES Providers would be responsible for calculating traffic ratios.49 Parties should describe any possible challenges that may affect the ability of an IPES Provider to perform the calculations needed to determine whether it meets the triggers established by the Access Stimulation Rules. Commenters should also explain if any of those challenges are so significant as to make our proposal unworkable. If so, we ask those commenters to propose alternatives that pose fewer challenges but still achieve our goals of removing the incentives for entities to engage in wasteful arbitrage and the imposition of unlawful charges on IXCs and their customers. 23. The Access Stimulation Rules currently require traffic ratios to be calculated on the basis of traffic “in an end office” for the purposes of determining whether the 6:1 and 10:1 traffic ratios are exceeded.50 We propose rule modifications to apply this same method to the 3:1 traffic ratio and when IPES Providers calculate traffic ratios for purposes of the Access Stimulation Rules.51 Would there be a benefit to making the Access Stimulation Rules uniform between LEC obligations and IPES Provider obligations? For example, does the inconsistent application of the “in an end office” requirement in the 46 See 47 CFR § 61.3(bbb)(2). 47 Appx. A (proposed 47 CFR § 61.3(bbb)(2)). 48 Appx. A (proposed 47 CFR § 51.914(g)). 49 Appx. A (proposed 47 CFR § 61.3(bbb)); see Letter from Lauren Coppola, On behalf of CarrierX, LLC, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 18-155, at 1 (filed May 19, 2021) (“CarrierX explained to Bureau staff that for the purposes of addressing access stimulation, IPES entities should be responsible for measuring traffic ratios.”); Letter from Matthew S. DelNero, Counsel to Inteliquent, to Marlene H. Dortch, Secretary, FCC, WC Docket Nos. 13-97, 07-243, 20-67, and 18-155, at 2 (filed May 4, 2022) (Inteliquent May 4, 2022 Ex Parte Letter). 50 47 CFR § 61.3(bbb)(1)(ii), (iii). 51 Appx. A (proposed 47 CFR § 61.3(bbb)(1)(i)(B), (ii)). 10 Federal Communications Commission FCC-CIRC2207-02 current rules cause confusion or opportunities for arbitrage? We also propose that the traffic ratios in our Access Stimulation Rules all be based on terminating-to-originating traffic measured “in an end office or equivalent.”52 To apply these requirements to an IPES Provider, what guidance should we provide as to what would be considered “equivalent” to a LEC’s end office? For example, when an IPES Provider is inserted in the call flow, should wherever the Intermediate Access Provider sends traffic be considered the “end office or equivalent”? Does the Commission’s holding in the VoIP Symmetry Declaratory Ruling that a VoIP provider will be providing end office functionality “equivalent” to a LEC when it provides the physical connection to the end user have any application here?53 24. Alternatively, should IPES Providers be required to calculate their traffic ratios based on the traffic the IPES Provider terminates in a specific state or to a specific end user? Is there some other method of calculation that would better aid us in identifying access stimulation for the purposes of our Access Stimulation Rules? Should IPES Providers calculate their traffic ratios in a manner that mirrors the geographic area served by the LEC’s end office, or by specific LATAs? Should we require IPES Providers to calculate their traffic ratios based on the traffic they receive from a specific Intermediate Access Provider? Are there other alternatives we should consider? Which approach would best support the effectiveness of our Access Stimulation Rules, ensure that all providers in a call flow have the proper economic incentives to promote efficiency, and eliminate harmful arbitrage opportunities? Commenters should submit any data they have that support a particular approach or that show the relative benefits of one approach versus another. 25. We also seek comment on any challenges related to our alternative proposal of requiring that the Intermediate Access Provider calculate the IPES Providers’ traffic ratios. Would an Intermediate Access Provider know, or have access to, the information necessary to determine the terminating-to- originating traffic ratios of IPES Providers to which it delivers and from which it receives traffic?54 Would tracking the originating and terminating traffic of individual IPES Providers be unduly burdensome for Intermediate Access Providers? What if the Intermediate Access Provider delivers traffic along multiple call paths and needs to calculate the traffic ratios for an IPES Provider for each call path? For example, do providers send originating and terminating traffic on different call paths when they partner with multiple LECs or other IPES Providers? Does an IPES Provider designate different traffic routes in the Local Exchange Routing Guide (LERG), such that it may select one LEC for the purposes of receiving local traffic, but receives long-distance traffic from a different access tandem to avoid having incoming long-distance and local traffic traverse the same LEC’s facilities?55 Are there reasons, other than promoting access arbitrage, for an IPES Provider to use more than one route for terminating traffic? If so, we ask commenters to explain those specific reasons. 26. Implementation. What implementation issues do our proposals raise? How much time would providers need to comply with the proposed rule changes? In the Access Arbitrage Order, the Commission gave carriers 45 days to come into compliance with the newly effective rules.56 Anticipating that IPES Providers would not need longer to comply than carriers did, we also propose a 45-day period for compliance after the effective date of the revised rules. Is this sufficient? Do interested parties 52 Appx. A (proposed 47 CFR § 61.3(bbb)). 53 Connect America Fund; Developing a Unified Intercarrier Compensation Regime, WC Docket No. 10-90 et al., Order on Remand and Declaratory Ruling, 34 FCC Rcd 12692, 12693, para. 4 (2019) (VoIP Symmetry Declaratory Ruling). 54 See generally Inteliquent/Lumen Apr. 30, 2021 Ex Parte Letter at 2 (explaining that “the IPES provider, not the Hosting LEC, necessarily has visibility into all of the IPES provider’s own access traffic”); Inteliquent May 4, 2022 Ex Parte Letter at 2-3 (describing network configurations with IPES providers). 55 See Inteliquent/Lumen Apr. 30, 2021 Ex Parte Letter at 2 (“Having made designations as to routing of traffic in the LERG, the IPES provider operates just like any other carrier.”). 56 Access Arbitrage Order, 34 FCC Rcd at 9068, para. 74. 11 Federal Communications Commission FCC-CIRC2207-02 foresee difficulties that would affect the time it will take to comply with the revised rules? Commenters should include suggested timeframes for implementation and an explanation of any challenges or concerns relating to coming into compliance with our proposed rules within a 45-day period. If 45 days are insufficient, how long should the transition period last, what steps would it include, and why is more time necessary now than was needed at the time the Commission adopted the Access Arbitrage Order? If proposing an alternative timeframe, we remind interested parties to balance any proposed implementation period with the fact that the longer the implementation period lasts, the longer these forms of wasteful access arbitrage continue. 27. Revenue Sharing. The reforms adopted in the 2011 USF/ICC Transformation Order focused on revenue sharing agreements between the terminating LEC and end users or other providers along the call path that provided incentives for improper behavior.57 In the 2019 Access Arbitrage Order, the Commission adopted rules to identify and address access stimulation arrangements that did not include a revenue sharing component.58 As we work to further strengthen our rules to combat ongoing arbitrage, we seek comment on whether revenue sharing agreements exist in the call routing scenarios described above. For example, do IPES Providers share revenue with common carriers that transmit traffic to the IPES Providers or their customers? Do Intermediate Access Providers share their revenues with IPES Providers, high-volume calling service providers, or the high-volume calling service providers’ end users? 28. Conversely, do high-volume calling service providers (or their end users) share revenue with LECs, Intermediate Access Providers, or IPES Providers? In any alternative call paths commenters describe in response to our questions in this Further Notice, we ask commenters to specify which entities, if any, could be or are sharing revenues with other entities. We are particularly interested in what makes certain call paths—or call path manipulations—attractive to those involved. For example, what entities are sharing revenues right now? What functions do those entities serve in completing calls, and whose revenues are being shared with others? In Appendix A, we propose modifying the existing definition of Access Stimulation in section 61.3(bbb) to include IPES Providers with or without access revenue sharing agreements, similar to the approach that currently applies to competitive LECs.59 Are ongoing revenue sharing arrangements covered effectively by the current Access Stimulation Rules? If not, what additional rule revisions are needed to capture today’s revenue sharing arrangements? Is there specific rule language commenters would propose to address revenue sharing arrangements that may not be covered by our current rules? B. Other Proposed Rule Changes 29. We seek comment on several additional rule change proposals. Are the proposed rule changes below necessary, or helpful, to the goal of eliminating harmful arbitrage? Would they, in concert with the other rule changes proposed in this Further Notice, help to comprehensively address arbitrage of our intercarrier compensation system? 30. End User and End Office Language. AT&T suggests that clarifications to the “end user” and “end office” language in the existing rules will prevent LECs from evading financial responsibility for access-stimulation traffic when an IPES Provider is inserted into the call path.60 First, AT&T suggests that we clarify the meaning of “end user” in section 61.3(bbb)(1) of our rules, which defines when carriers engage in access stimulation, by adding the underlined language, as follows. 57 47 CFR § 61.3(bbb)(1)(i)(A). 58 Access Arbitrage Order, 34 FCC Rcd at 9036-37, para. 4. 59 Appx. A (proposed 47 CFR § 61.3(bbb)(1)(i)-(ii)). 60 AT&T Oct. 14, 2021, WC Docket No. 13-97, Comments at 7 (arguing that modifications to both rules are needed to “ensure that the LECs’ ratios include traffic carried directly to called or calling parties, as well as traffic carried for a partnered VoIP provider that has been inserted into the call routing”). 12 Federal Communications Commission FCC-CIRC2207-02 A Competitive Local Exchange Carrier serving end user(s) engages in Access Stimulation when it satisfies either paragraph (bbb)(1)(i) or (ii) of this section; and a rate-of-return local exchange carrier serving end user(s) engages in Access Stimulation when it satisfies either paragraph (bbb)(1)(i) or (iii) of this section. For purposes of this section, a Local Exchange Carrier is serving end users when it provides service to a called or calling party, either directly or through arrangements with one or more VoIP providers or other entities that serve called or calling parties. For purposes of this section, a Local Exchange Carrier is not serving end users when it is an Intermediate Access Provider as defined in paragraph (ccc) of this section, i.e., when it is not the first or last LEC in the routing of a call to a called or calling party.61 31. We seek comment on this proposed amendment to our existing rule. Would the proposed language effectively remedy any perceived ambiguity that parties have sought to exploit in our current rules?62 Would the proposed language lead to any potentially unintended consequences that we should consider? Do commenters propose any revisions to this language? Would this rule modification successfully prevent LECs from avoiding financial responsibility for access-stimulation traffic when IPES Providers are in the call path?63 Are there considerations that would weigh against such a rule modification or in favor of some other modification(s) to this rule? Are the proposed rule modifications in Appendix A sufficient to address the concerns that AT&T intends to address with this proposed rule change? Alternatively, should we delete the “serving end user(s)” phrase from section 61.3(bbb)(1) of our rules? Would doing so be a simpler approach to address this perceived ambiguity? Or, should we add the phrase “serving end users” to sections 61.3(bbb)(2) and 61.3(bbb)(3) as provided in Appendix A? Would there be a benefit to making the rules consistent? Would there be any detrimental effects from doing so? 32. Secondly, AT&T proposes that we modify section 61.3(bbb)(1)(ii) of our existing rules to remove the reference to traffic calculations “in an end office” and revise how the access-stimulation traffic ratio is computed for LECs that provide numbers or interconnection to IPES Providers, as follows. The underlined language represents what would be added. A Competitive Local Exchange Carrier has an interstate terminating-to- originating traffic ratio of at least 6:1 in an end office in a calendar month. For any Competitive Local Exchange Carrier that provides numbers or interconnection to a VoIP provider, the LEC is engaged in access stimulation for purposes of that VoIP provider’s traffic when that VoIP provider has an interstate terminating-to-originating traffic ratio of at least 6:1 in a calendar month.64 33. Should we adopt this proposal? Would removing the language “in an end office” better accomplish our goal of providing clarity and understanding of our rules?65 Does the deletion of “in an 61 Id. 62 See id. at 8-9. 63 Access Arbitrage Order, 34 FCC Rcd at 9043, para. 20 (“The approach we adopt today—shifting financial responsibility for all tandem switching and transport services to access-stimulating LECs for the delivery of terminating traffic from the point where the access-stimulating LEC directs an IXC to hand off the LEC’s traffic— has broad support in the record.”). 64 AT&T Oct. 14, 2021, WC Docket No. 13-97, Comments at 7. AT&T also suggests that the phrase “in an end office” was erroneously included in sections 61.3(bbb)(1)(ii) and (iii) of the Commission’s rules, and that provides an independent reason for removing the language. Id. at 11-13. 65 Id. at 11-14. 13 Federal Communications Commission FCC-CIRC2207-02 end office” recognize, as AT&T suggests, that arbitrage schemes no longer target end office charges?66 Under this proposed approach, should the LEC be responsible for calculating the traffic ratios of the IPES Provider? If the LEC delivers traffic to multiple IPES Providers, should the LEC calculate a traffic ratio for each individual IPES Provider separately?67 Alternatively, should we maintain the “in the end office” language in section 61.3(bbb)(1)(ii) and (iii), and add it to section 61.3(bbb)(1)(i) as indicated in Appendix A? Would making the rules consistent in this manner reduce the opportunity for continued arbitrage of the ICC system? 34. Treat IPES Providers as LECs for Purposes of the Access Stimulation Rules. We also seek comment on a proposal submitted by Inteliquent and Lumen, suggesting that the Commission could, as an alternative to adopting new rules, “issue a declaratory ruling clarifying that IPES providers are treated as LECs for the purpose of the access stimulation rules.”68 Inteliquent and Lumen argue that “[t]o the extent an IPES provider’s ratio of terminating to originating traffic meets the triggers, it should be deemed to be engaged in access stimulation just like a traditional LEC,” because “the IPES provider both functions like a LEC for the purposes of the access stimulation rules and necessarily has visibility into its own access traffic.”69 According to Inteliquent, a LEC that provides interconnection to an IPES Provider serves only as a conduit for delivery of local traffic and has no insight into the IPES Provider’s long- distance traffic volumes.70 Therefore, Inteliquent contends, it would be inappropriate to make the LEC responsible for the IPES Provider’s traffic volumes.71 We seek comment on this suggestion. How relevant are other situations in which the Commission has applied certain regulations to VoIP providers?72 IPES Providers have the ability to obtain direct access to numbers.73 Could the Commission condition the ability of an IPES Provider to obtain direct access to numbers on an agreement by the provider to voluntarily subject itself to our Access Stimulation Rules?74 How would doing so affect our efforts to eliminate access arbitrage? 66 Id. at 13. 67 Id. at 2-3, 7-8 (proposing that “[i]f a LEC provides numbers or interconnection to multiple VoIP providers, then it would calculate a ratio for each VoIP provider, and if any of the VoIP providers meet the triggers, then the LEC would be subject to the access stimulation rules for that VoIP provider’s traffic”). 68 Inteliquent/Lumen Apr. 30, 2021 Ex Parte Letter at 2; see also Letter from Timothy M. Boucher, Asst. General Counsel, Lumen, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 18-155, Attach. 2, Reply Comments of Lumen, WC Docket No. 13-97 et al., at 6 (filed June 15, 2022) (Lumen June 15, 2022 Ex Parte Letter). 69 Inteliquent/Lumen Apr. 30, 2021 Ex Parte Letter at 2. 70 Inteliquent May 4, 2022 Ex Parte Letter at 2-3. 71 Id. at 3. 72 The Commission requires interconnected VoIP service providers to contribute to the Universal Service Fund as a means of ensuring a level playing field among direct competitors. Universal Service Contribution Order, 21 FCC Rcd at 7541, para. 44 (extending contribution obligations to interconnected VoIP service providers). Although the Commission did not address the regulatory classification of interconnected VoIP services under the Act, the Commission concluded that interconnected VoIP service providers are “providers of interstate telecommunications” for purposes of universal service contributions. Id. at 7537, para. 35 (citing 47 U.S.C. § 254(d)). 73 See Numbering Policies for Modern Communications et al., WC Docket No. 13-97 et al., Report and Order, 30 FCC Rcd 6839 (2015) (VoIP Direct Access Order), appeal dismissed, NARUC v. FCC, 851 F.3d 1324 (D.C. Cir. 2017). 74 The Commission has asked, in the Direct Access to Numbers proceeding, whether it should adopt changes to the VoIP direct access rules requiring that interconnected VoIP providers receiving direct access to numbers certify that their numbering resources will not be used to evade our Access Stimulation Rules. Numbering Policies for Modern Communications et al., WC Docket No. 13-97 et al., Further Notice of Proposed Rulemaking, FCC 21-94, at 9-10, para. 17 (Aug. 6, 2021). In that proceeding, the Commission is considering possible changes to the rules governing (continued….) 14 Federal Communications Commission FCC-CIRC2207-02 35. What rule changes would be necessary were we to decide to implement the proposal to issue a declaratory ruling to treat IPES Providers as LECs for purposes of the Access Stimulation Rules? For example, would we need to add a definition of “LEC” to our Access Stimulation Rules that would include IPES Providers solely for the purpose of compliance with the Access Stimulation Rules? Are the rules proposed in Appendix A sufficient to address Inteliquent and Lumen’s concerns that IPES Providers are being used to avoid the application of the Access Stimulation Rules and to allow the continued unlawful charging of IXCs?75 If not, what specific language do commenters suggest to help address these concerns or further the Commission’s goal of eliminating harmful access arbitrage? 36. As an addition or alternative to their declaratory ruling proposal, Inteliquent and Lumen suggest that “the Commission could declare that it is an inherently unjust and unreasonable practice for a party to attempt to evade the access arbitrage rules by moving LEC end office traffic to an affiliated IPES provider, where the traffic in question otherwise would have caused the LEC to be engaged in access stimulation under the rules.”76 We seek comment on this idea. What are the relevant considerations of such an approach? Would such an approach be overly broad? Would this approach efficiently capture improper behavior? The Commission has repeatedly resisted an outright ban on access stimulation.77 Would doing as Inteliquent and Lumen suggest effectively be a ban on access stimulation? 37. Interstate/Intrastate Language. The Commission made clear in the 2019 Access Arbitrage Order that the rules adopted to combat access stimulation were intended to prohibit access- stimulating entities from unlawfully billing IXCs for intrastate terminating switched access tandem switching or terminating switched access transport, bound for access-stimulating LECs, in addition to such interstate traffic.78 However, that language was not reflected in the text of the rules, only in the text of the Order.79 We now propose to codify, in sections 69.4(l), and 69.5(b) of our rules (as reflected in the proposed rule changes in Appendix A) that IXCs shall not be billed for interstate or intrastate terminating switched access tandem switching or terminating switched access transport.80 Would making these amendments facilitate enforcement of our Access Stimulation Rules?81 Are there other benefits in making these changes? Are any other amendments to these or other sections of our rules needed to fully and accurately capture the text of the Access Arbitrage Order? 38. IPES Provider Definition. We propose to define an “IPES Provider,” for purposes of our Access Stimulation Rules, as: IPES Provider means, for purposes of this part and §§ 51.914, 69.4(l) and 69.5(b) of this chapter, a provider offering a service that: (1) enables real-time, two-way voice communications; (2) requires a broadband connection from the user’s location or end to end; (3) requires Internet Protocol-compatible customer premises equipment (CPE); and (Continued from previous page) VoIP providers’ direct access to numbers and is not considering changes to the Access Stimulation Rules, which is the subject of this Further Notice. 75 Appx. A. 76 Inteliquent/Lumen Apr. 30, 2021 Ex Parte Letter at 3. 77 USF/ICC Transformation Order, 26 FCC Rcd at 17879, para. 672; Access Arbitrage Order, 34 FCC Rcd at 9051, para. 39. 78 Access Arbitrage Order, 34 FCC Rcd at 9076, para. 98 & n.302; see generally 47 U.S.C. § 251(b)(5); USF/ICC Transformation Order, 26 FCC Rcd at 17916-18, paras. 764-67. 79 The full text of the Access Arbitrage Order was published in the Federal Register. Federal Communications Commission, Updating the Intercarrier Compensation Regime to Eliminate Access Arbitrage, 84 Fed. Reg. 57629 (Oct. 28. 2019). 80 Appx. A. 81 AT&T Corp. v. FCC, 967 F.3d 840, 847 (D.C. Cir. 2020). 15 Federal Communications Commission FCC-CIRC2207-02 (4) permits users to receive calls that originate on the public switched telephone network and to terminate calls to the public switched telephone network or that originate from an Internet Protocol service and terminate to an Internet Protocol service or an Internet Protocol application.82 39. Parties have suggested using the term “IPES Provider” when referring to the provider being inserted in the place of the “LEC serving end users” as used in the Access Stimulation Rules. For example, Inteliquent suggests that IPES is “an industry term commonly used for VoIP providers that have received direct access to numbers, and it originates from the company code (OCN) type assigned to these providers by NECA [(National Exchange Carrier Association)].”83 AT&T suggests that “IPES providers are entities that, among other things, provide or facilitate Over the Top VoIP calling services, including ‘2-stage’ International calling services.”84 Do commenters agree with either of these definitions? We also seek comment on the definition proposed above (and captured in Appendix A), which is limited in its application to the Access Stimulation Rules. Are there alternative definitions of “IPES Provider” that commenters would suggest we use for purposes of our Access Stimulation Rules? What are the important functions or concepts this definition should capture? Would limiting our definition of “IPES Providers” to providers that have received direct access to numbers, as Inteliquent suggests, limit the effectiveness of the Access Stimulation Rules? Would commenters suggest using an existing definition to describe these IPES Providers who are being inserted into the call path, such as “IP-enabled voice service” provider, as defined in section 615b(8) of the Act?85 40. Alternatively, should we refer to these providers as “interconnected VoIP” providers, as defined in section 9.3 of our rules?86 Are there meaningful distinctions among these terms that would make one defined term better than another for purposes of the Access Stimulation Rules? We propose a definition of “IPES Provider” to be used solely in the context of our Access Stimulation Rules. Despite our attempts to limit the use of this defined term, do we need to be concerned about potential confusion with other, similar, terms defined elsewhere in our rules? Will the definition proposed in Appendix A capture all providers that could be used to try to circumvent the Access Stimulation Rules? 41. Intermediate Access Provider Definition. An Intermediate Access Provider currently is defined in our rules as “any entity that carries or processes traffic at any point between the final Interexchange Carrier in a call path and a local exchange carrier engaged in Access Stimulation.”87 Pursuant to our current Access Stimulation Rules, neither the Intermediate Access Provider nor the access-stimulating LEC shall bill an IXC for tariffed terminating switched access tandem switching and terminating switched access tandem transport charges for traffic between the Intermediate Access Provider and the access-stimulating LEC.88 In keeping with our other proposed rule modifications, we propose to amend the definition of Intermediate Access Provider to include any entity that “provides terminating switched access tandem switching and terminating switched access tandem transport services between the final Interexchange Carrier in a call path and: (1) a local exchange carrier engaged in Access Stimulation, as defined in paragraph (bbb) of this section; or (2) a local exchange carrier delivering traffic to an IPES Provider engaged in Access Stimulation, as defined in paragraph (bbb) of this section; or 82 Appx. A (proposed 47 CFR § 61.3(eee)); see also 47 CFR § 9.3 (providing a similar definition for “interconnected VoIP”). 83 Inteliquent May 4, 2022 Ex Parte Letter at 1 n.2. 84 USTelecom Sept. 22, 2020 Ex Parte Letter Attach. at 2. 85 47 U.S.C. § 615b(8). 86 47 CFR § 9.3. 87 47 CFR § 61.3(ccc). 88 47 CFR § 69.4(l)(2). 16 Federal Communications Commission FCC-CIRC2207-02 (3) an IPES Provider engaged in Access Stimulation, as defined in paragraph (bbb) of this section, where the Intermediate Access Provider delivers calls directly to the IPES Provider.”89 42. We seek comment on this proposed change to our definition of “Intermediate Access Provider.” Inteliquent and Lumen state that “IPES providers designate a Hosting LEC for purposes of receiving local traffic” and that “[t]his designation does not apply to long distance traffic, which is the traffic subject to the Access Arbitrage Order.”90 Therefore, we seek input on whether the part of our proposed definition above that includes “a local exchange carrier delivering traffic to an IPES Provider engaged in Access Stimulation” is necessary or how this part of the definition would otherwise be affected by what Inteliquent and Lumen describe in their filing. Do commenters suggest any other modifications to the definition? Are there services, other than terminating switched access tandem switching or terminating switched access tandem transport, that an Intermediate Access Provider might provide?91 If so, what are these services and who should be financially responsible for them? 43. Conforming Edits to Our Rules. Section 51.914(a)(2) of our rules presently states that a LEC shall designate, “if needed,” the Intermediate Access Provider that will provide certain terminating access services to the LEC.92 This designation is applicable in cases where an Intermediate Access Provider is different than the end office LEC. We therefore propose changing “if needed” to “if any,” so that the rule denotes a LEC shall designate an Intermediate Access Provider when and “if any” such designation is required.93 Not only is the “if any” language more accurate, but removing the “if needed” provision prevents any misconception that a LEC may otherwise subjectively decide on its own when such designation is needed. Regarding the designation of an Intermediate Access Provider by an IPES Provider, are there any instances when an IPES Provider is not required to designate an Intermediate Access Provider or when proposed sections 51.914(c)(1) and (d) in Appendix A would not be necessary? 44. Section 69.4(l) of the Commission’s rules requires that a LEC engaged in access stimulation “may not bill” IXCs terminating switched access tandem switching or terminating switched access tandem transport charges for access-stimulation traffic.94 Yet, in the Access Arbitrage Order, the Commission made clear that it is unlawful for a LEC engaged in access stimulation to charge an IXC terminating switched access tandem switching or terminating switched access tandem transport charges.95 In Appendix A we propose edits to section 69.4(l) of our rules to make this rule consistent with the Commission’s intent adopted in the Access Arbitrage Order; that a LEC engaged in access stimulation “shall not bill” IXCs for terminating switched access tandem switching or terminating switched access tandem transport charges on access-stimulation traffic. Similarly, we also propose to correct an error in section 69.5(b)(2) of the Commission’s rules that excluded the word “not,” change the word “may” to “shall” to be consistent with other uses in these rules, and make clear that it is “IXCs” and not “local exchange carriers” that are not being charged, as indicated in Appendix A. 45. We also seek comment on whether any rule changes proposed in this Further Notice introduce new opportunities for unlawful arbitrage. Would our proposed rule modifications accomplish our objectives of sending accurate pricing signals to customers by prohibiting Intermediate Access 89 Appx. A (proposed 47 CFR § 61.3(ccc) with proposed new wording underlined). 90 Inteliquent/Lumen Apr. 30, 2021 Ex Parte Letter at 2 (emphasis in original) (adding that the “IPES provider receives the long distance traffic from the access tandem, but this traffic, in many cases, does not traverse the Hosting LEC’s facilities”). 91 See, e.g., 47 CFR § 69.4 (listing access services). 92 47 CFR § 51.914(a)(2). 93 Appx. A (proposed 47 CFR § 51.914(a)(2)). 94 47 CFR §§ 69.4(l), 69.5(b)(1). 95 Access Arbitrage Order, 34 FCC Rcd at 9073, para. 92. 17 Federal Communications Commission FCC-CIRC2207-02 Providers that deliver traffic to IPES Providers that trigger the Access Stimulation Rules from charging IXCs for such calls? Would adopting our proposed rule changes create unintended consequences? For example, would any of the proposals introduce unnecessary complexity and present practical implementation challenges?96 If so, we seek comment on what exactly are the perceived complexities and implementation challenges related to the proposals in this Further Notice. Are there other types of access arbitrage happening today that are not described in this Further Notice? We ask commenters to provide any other proposed actions, alternatives, and rule additions or modifications we should consider. Are there any other conforming rule changes that commenters consider necessary? Are there any conflicts or inconsistencies between existing rules and those we propose? Finally, we propose several non- substantive edits, reflected in Appendix A, to, among other things, enhance readability and ensure compliance with rule drafting guidelines applicable to the Code of Federal Regulations. C. Clarifying or Interpreting Current Access Stimulation Rules 46. Applying the Existing Rules to IPES Providers. As an alternative to modifying our rules as proposed, we seek comment on whether it would be preferable for the Commission to issue a Declaratory Ruling interpreting the existing Access Stimulation Rules as applying to traffic routed from the PSTN through a LEC to an IPES Provider, or directly to the IPES Provider or to the end user, as parties have suggested since the rules first became effective.97 In the Access Arbitrage Order, the Commission explained that the access-stimulation traffic ratios are based on “the actual minutes traversing the LEC switch.”98 Most relevant to the current discussion, the Commission clarified that “all traffic should be counted regardless of how it is routed.”99 Indeed, the Commission emphasized this point several times in the Access Arbitrage Order.100 These explanations form the basis of arguments that “the Access Arbitrage Order already rejects” claims that traffic routed by LECs through an IPES Provider should not be counted for determining access-stimulation ratios.101 Is this a reasonable and accurate interpretation of the Commission’s decision? Would issuing a declaratory ruling interpreting the Access Stimulation Rules as requested above adequately address any perceived lack of clarity in the existing rules identified in this Further Notice? 47. Traffic to Be Counted. AT&T argues that the Commission should clarify that, when calculating the traffic ratios for the purposes of our Access Stimulation Rules, a LEC “may not include 96 Lumen June 15, 2022 Ex Parte Letter Attach. 1, at 2. 97 See AT&T and Verizon Mar. 26, 2020 Ex Parte Letter at 1-2; Letter from Tamara L. Preiss, Verizon, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 18-155, at 2 (filed Apr. 14, 2020) (“[T]he Commission should issue a declaratory ruling confirming that, under the Access Arbitrage Order and prior Commission precedent, traffic routed from the PSTN through a LEC to an interconnected VoIP provider is counted when applying the 3:1 and 6:1 ratios to that LEC.”); see also Letter from Matt Nodine, AT&T Services, Inc., Keith Buell, Sprint, Indra Chalk, T-Mobile USA, Inc., & Tamara Preiss, Verizon, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 18-155 (filed Jan. 23, 2020) (discussing “the application of the Commission’s new rules [(2019 Access Stimulation Rules)] to entities providing Voice over Internet Protocol services and to the LECs partnering with those entities, and additional steps that may be needed to reduce and eliminate access arbitrage”); AT&T Feb. 11, 2022 Ex Parte Letter Attach. 1, Letter from Matt Nodine, Assistant Vice President, Federal Regulatory, AT&T, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 13-97 et al., at 1-2 (filed Jan. 21, 2022) (“We explained that, while we believe that the current access arbitrage rules apply to VoIP traffic, certain access stimulators have advanced an interpretation of the rules that would exempt VoIP traffic from the calculation of the terminating-to-originating traffic ratios used to identify access stimulators.”). 98 Access Arbitrage Order, 34 FCC Rcd at 9057, para. 51 (emphasis in original). 99 Id. at 9058, para. 52 (“All originating and terminating interstate traffic should be counted in determining the interstate terminating-to-originating traffic ratio.” (emphasis added)). 100 Id. at 9057-58, paras. 51-52. 101 AT&T and Verizon Mar. 26, 2020 Ex Parte Letter at 2. 18 Federal Communications Commission FCC-CIRC2207-02 aggregated originating 8YY traffic—particularly traffic that it obtains from VoIP providers—as part of its traffic ratio” because of the potential for arbitrage and fraud associated with the routing of 8YY traffic.102 The Commission previously identified certain forms of toll free or 8YY aggregation as a form of originating arbitrage103 and took steps to minimize that arbitrage.104 AT&T suggests that if a LEC “aggregate[s] 8YY traffic from VoIP providers that have obtained numbering authorization,” the LEC “could begin routing access stimulation traffic from VoIP providers in the hope that, by engaging in both originating 8YY aggregation schemes and terminating access stimulation schemes, it could balance its terminating access stimulation traffic against its longstanding originating 8YY traffic and avoid hitting the Commission’s triggers.”105 We seek greater detail on this issue, as well as comment on the validity of AT&T’s concerns. Is this happening in the market now? If so, we ask commenters to propose rule revisions to address this issue. We also seek comment on any other issues regarding the treatment of originating 8YY traffic for purposes of calculating the traffic ratios related to the triggers in our Access Stimulation Rules. Would excluding such traffic alter carriers’ ratios sufficiently so as to cause them to trigger our Access Stimulation Rules even though they are not engaging in arbitrage? Should a significant increase in a carrier’s 8YY originating traffic be reported and treated as another trigger for our Access Stimulation Rules? Should 8YY traffic be included in those ratios? Why or why not? Should originating 8YY traffic be treated as terminating traffic for purposes of our Access Stimulation Rules?106 D. Legal Authority 48. We tentatively conclude that sections 201, 251, 254 and 256 of the Act provide us with the authority needed to adopt the rule changes proposed in this Further Notice. We seek comment on this authority, our ancillary authority in section 4(i) of the Act, and any other statutory authority that may support our proposed actions. We also seek comment on any concerns parties might have about our authority to adopt any of the proposals made in this Further Notice. 49. Section 201 of the Act. Our primary authority to adopt our proposed changes to the Access Stimulation Rules is section 201(b) of the Act. In the Access Arbitrage Order, the Commission determined that the imposition of tariffed tandem switching and tandem switched transport access charges on IXCs for terminating access-stimulation traffic is an unjust and unreasonable practice under section 201(b) of the Act.107 In our view, providers’ attempts to continue to assess tandem switching or tandem switched transport access charges on IXCs for delivering access-stimulation traffic to IPES Providers is unjust and unreasonable pursuant to section 201(b) of the Act, and virtually indistinguishable from practices the Commission has already found to be unjust and unreasonable. We seek comment on this view. Section 201(b) of the Act gives us the authority to “prescribe such rules and regulations as may be necessary in the public interest to carry out the provisions of this Act.”108 We seek comment on whether 102 AT&T Oct. 14, 2021, WC Docket No. 13-97, Comments at 10 (citing 8YY Access Charge Reform, WC Docket No. 18-156, 35 FCC Rcd 11594, 11595, 11600-03, paras. 2, 16-21 (2020) (8YY Access Charge Reform Order) (“Arbitrage and fraud, however, increasingly affect and undermine the system of intercarrier compensation that currently underpins toll free calling.”)). 103 8YY Access Charge Reform Order, 35 FCC Rcd at 11602-03, paras. 18-19. 104 See, e.g., id. at 11618, para. 54. 105 AT&T Oct. 14, 2021, WC Docket No. 13-97, Comments at 10-11 (emphasis in original). 106 8YY Access Charge Reform Order, 35 FCC Rcd at 11600-01, para. 16 n.43 (2020) (citing commenters that explain that the originating end of an 8YY call is similar to the terminating end of a non-8YY call, because for 8YY calls, the caller (who does not pay for the call) is insensitive to the access charges paid by the IXC to the LEC, and the IXC is forced to use the LEC chosen by the caller). 107 Access Arbitrage Order, 34 FCC Rcd at 9073-74, para. 92. The Commission’s decision was unrelated to, for example, how the traffic is routed. See id. at 9058, para. 52. 108 47 U.S.C. § 201(b). 19 Federal Communications Commission FCC-CIRC2207-02 this language provides us with the authority to require IPES Providers to designate the Intermediate Access Provider(s) that will provide terminating switched access tandem switching and transport services, to calculate their traffic ratios, and to notify Intermediate Access Providers, IXCs, and the Commission if the IPES Provider is engaged in Access Stimulation so that Intermediate Access Providers can determine whether they can lawfully charge IXCs for interstate and intrastate tandem services (and IXCs can determine if charges are appropriate).109 We also seek comment on our tentative conclusion that section 201(b) provides us the authority necessary to prohibit Intermediate Access Providers or other LECs from charging IXCs for access stimulation traffic routed through an IPES Provider, rather than through a LEC. 50. Sections 251, 254 and 256 of the Act. Our authority to take the actions proposed in this Further Notice is also rooted in other sections of the Act on which the Commission relied in the Access Arbitrage Order. First, section 251(b)(5) of the Act applies because our proposed new and modified rules apply, in large part, to exchange access and providers of exchange access that meet the definition of a LEC.110 Second, section 251(g) of the Act provides us with the authority to address problematic conduct which is occurring while the transition to bill-and-keep is not complete.111 Third, section 254 of the Act provides the Commission with the authority to eliminate implicit subsidies.112 Finally, section 256 of the Act requires the Commission to oversee and promote interconnection by providers of telecommunications services that is “efficient.”113 We seek comment on the applicability of sections 201, 251, 254, and 256 of the Act to give us the authority to take the actions proposed herein.114 51. Section 4(i) of the Act. Although we propose to conclude that our direct sources of authority identified above provide the basis to adopt our proposed rules, we also seek comment on whether our ancillary authority in section 4(i) of the Act115 provides an independent basis to adopt limited rules with respect to IPES Providers. We consider the proposed requirements to be “reasonably ancillary to the Commission’s effective performance of [its] . . . responsibilities.”116 Specifically, IPES Providers interconnected with the PSTN and exchanging IP traffic clearly constitutes “communication by wire or radio.”117 We seek comment on whether requiring IPES Providers to comply with our proposed limited rules is reasonably ancillary to the Commission’s effective performance of its statutory responsibilities under sections 201(b), 251, 254, and 256 as described above. E. Costs and Benefits of the Proposals 52. Our intercarrier compensation regime continues to be an important source of funding for certain rural service providers, including providers of tandem switching, to ensure all Americans are connected. Access arbitrage exploits our intercarrier compensation regime to benefit activities and providers that our policies are not intended to benefit. This encourages further exploitation of our rules, 109 See supra para. 17. 110 47 U.S.C. § 251(b)(5); see, e.g., Access Arbitrage Order, 34 FCC Rcd at 9076, para. 98. 111 47 U.S.C. § 251(g); see Access Arbitrage Order, 34 FCC Rcd at 9077, para. 102. 112 47 U.S.C. § 254(e) (requiring universal service support to be “explicit”); see Access Arbitrage Order, 34 FCC Rcd at 9075-76, para. 97. 113 47 U.S.C. § 256(b)(1); see Access Arbitrage Order, 34 FCC Rcd at 9074, para. 94. 114 47 U.S.C. §§ 201, 251, 254, 256; see Access Arbitrage Order 34 FCC Rcd at 9073-79, paras. 89-105. 115 47 U.S.C. § 154(i). 116 United States v. Sw. Cable Co., 392 U.S. 157, 178 (1968); see also, e.g., Rural Call Completion, WC Docket No. 13-39, Report and Order and Further Notice of Proposed Rulemaking, 28 FCC Rcd 16154, 16562, para. 35 (2013) (“Ancillary authority may be employed, at the Commission’s discretion, when the Act covers the regulated subject and the assertion of jurisdiction is reasonably ancillary to the effective performance of [the Commission’s] various responsibilities.”) (internal footnotes omitted). 117 47 U.S.C. § 152(a). 20 Federal Communications Commission FCC-CIRC2207-02 threatening the basic goals of connectivity at just and reasonable prices, a cost that alone justifies our action. The excess payments made due to arbitrage also operate as an unnecessary tax on end users, shrinking the efficient use of telecommunications services. Further, because the party that chooses the call path does not pay that tax, it has incentives to engage in wasteful actions. Examples of this waste include: • the pursuit of access arbitrage opportunities by routing traffic along more expensive call paths; • artificial stimulation of traffic; • disputes over questionable demands for payment by access stimulators; • attempts by IXCs to identify the sources of fraudulent traffic; and • time and money spent by parties seeking to protect against or reduce access arbitrage opportunities, as in this proceeding. 53. Costs incurred by these activities are not fully paid for by the consumers of high-volume calling services, who often pay nothing for these services. If consumers of these services were charged prices that wholly recovered the costs of arbitrage, then those who value the service less than those prices would decline to purchase the service. This would reduce waste or equivalently create value equal to the difference between the cost-covering prices and these consumers’ valuations of the service. 54. We recognize that any action we take to address ongoing access arbitrage may affect the costs and benefits to carriers and their customers and the choices they make, as they provide and receive telecommunications services. Consumers who enjoy high-volume calling services could be adversely affected by regulatory adjustments targeting arbitrage.118 Are there perceived benefits to access arbitrage or access stimulation? Would addressing access arbitrage as we propose unfairly advantage any competitor or class of competitors? If so, are there alternative means to address the arbitrage issues described here and presented in the record? 55. In the USF/ICC Transformation Order, the Commission considered direct costs imposed on consumers by arbitrage schemes.119 The Commission also found that access stimulation diverts capital away from more productive uses, such as broadband deployment.120 There is also evidence that the staggering volume of minutes generated by these schemes can result in call blocking and dropped calls.121 What has been the effect of the 2019 revisions to the Access Stimulation Rules? Are there additional, more-recent data available to estimate the annual cost of arbitrage schemes to companies, long-distance customers, and consumers in general?122 Likewise, are there data available to quantify the resources being diverted from more productive uses because of arbitrage schemes? To what degree are consumers indirectly affected by potentially inefficient networking or incorrect pricing signals due to ongoing access stimulation? Has competition been negatively impacted because “access-stimulation revenues subsidize the costs of high-volume calling services, granting providers of those services a competitive advantage 118 Access Arbitrage Order, 34 FCC Rcd at 9045-46, para. 25. 119 USF/ICC Transformation Order, 26 FCC Rcd at 17676, para. 33 (“We take immediate action to curtail wasteful arbitrage practices, which cost carriers and ultimately consumers hundreds of millions of dollars annually.”); see also id. at 17875-76, paras. 663-64. 120 Id. at 17875, para. 663 (“Access stimulation imposes undue costs on consumers, inefficiently diverting capital away from more productive uses such as broadband deployment.”). 121 Access Arbitrage Order, 34 FCC Rcd at 9036, para. 3. 122 Id. at 9038-39, para. 9 (“Before the [2011 Access Stimulation] rules were adopted, Verizon estimated that access arbitrage cost IXCs between $330 million and $440 million annually. By contrast, IXCs estimate that access arbitrage currently costs IXCs between $60 million and $80 million annually.”). 21 Federal Communications Commission FCC-CIRC2207-02 over companies that collect such costs directly from their customers?”123 Are there other costs or benefits to the proposals in this Further Notice that we should consider? F. Efforts to Promote Digital Equity and Inclusion 56. The Commission, as part of its continuing effort to advance digital equity for all,124 including people of color, persons with disabilities, persons who live in rural or Tribal areas, and others who are or have been historically underserved, marginalized, or adversely affected by persistent poverty or inequality, invites comment on any equity-related considerations125 and benefits (if any) that may be associated with the proposals and issues discussed herein. Specifically, we seek comment on how our proposals may promote or inhibit advances in diversity, equity, inclusion, and accessibility, as well as the scope of the Commission’s relevant legal authority. IV. PROCEDURAL MATTERS 57. Filing Instructions. Pursuant to sections 1.415 and 1.419 of the Commission’s rules, 47 CFR §§ 1.415, 1.419, interested parties may file comments and reply comments on or before the dates indicated on the first page of this document. Comments may be filed using the Commission’s Electronic Comment Filing System (ECFS). See Electronic Filing of Documents in Rulemaking Proceedings, 63 FR 24121 (1998). • Electronic Filers: Comments may be filed electronically using the Internet by accessing the ECFS: https://www.fcc.gov/ecfs/. • Paper Filers: Parties who choose to file by paper must file an original and one copy of each filing. Filings can be sent by commercial overnight courier, or by first-class or overnight U.S. Postal Service mail. All filings must be addressed to the Commission’s Secretary, Office of the Secretary, Federal Communications Commission. • Commercial overnight mail (other than U.S. Postal Service Express Mail and Priority Mail) must be sent to 9050 Junction Drive, Annapolis Junction, MD 20701. • U.S. Postal Service first-class, Express, and Priority mail must be addressed to 45 L Street NE, Washington, DC 20554. • Effective March 19, 2020, and until further notice, the Commission no longer accepts any hand or messenger delivered filings. This is a temporary measure taken to help 123 Id. at 9046, para. 26. 124 Section 1 of the Act as amended provides that the FCC “regulat[es] interstate and foreign commerce in communication by wire and radio so as to make [such service] available, so far as possible, to all the people of the United States, without discrimination on the basis of race, color, religion, national origin, or sex.” 47 U.S.C. § 151. 125 The term “equity” is used here consistent with Executive Order 13985 as the consistent and systematic fair, just, and impartial treatment of all individuals, including individuals who belong to underserved communities that have been denied such treatment, such as Black, Latino, and Indigenous and Native American persons, Asian Americans and Pacific Islanders and other persons of color; members of religious minorities; lesbian, gay, bisexual, transgender, and queer (LGBTQ+) persons; persons with disabilities; persons who live in rural areas; and persons otherwise adversely affected by persistent poverty or inequality. See Exec. Order No. 13985, 86 Fed. Reg. 7009, Executive Order on Advancing Racial Equity and Support for Underserved Communities Through the Federal Government (Jan. 20, 2021). 22 Federal Communications Commission FCC-CIRC2207-02 protect the health and safety of individuals, and to mitigate the transmission of COVID-19.126 o During the time the Commission’s building is closed to the general public and until further notice, if more than one docket or rulemaking number appears in the caption of a proceeding, paper filers need not submit two additional copies for each additional docket or rulemaking number; an original and one copy are sufficient. o After COVID-19 restrictions are lifted, the Commission has established that hand-carried documents are to be filed at the Commission’s office located at 9050 Junction Drive, Annapolis Junction, MD 20701. This will be the only location where hand-carried paper filings for the Commission will be accepted.127 58. People with Disabilities. To request materials in accessible formats for people with disabilities (braille, large print, electronic files, audio format), send an e-mail to fcc504@fcc.gov or call the Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-418-0432 (TTY). 59. Ex Parte Requirements. This proceeding shall be treated as a “permit-but-disclose” proceeding in accordance with the Commission’s ex parte rules.128 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 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. 60. Paperwork Reduction Act Analysis. This document contains proposed new or modified 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 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 126 See FCC Announces Closure of FCC Headquarters Open Window and Change in Hand-Delivery Policy, Public Notice, 35 FCC Rcd 2788 (OMD 2020), https://www.fcc.gov/document/fcc-closes-headquarters-open-window-and- changes-hand-delivery-policy. 127 See Amendment of the Commission’s Rules of Practice and Procedure, Order, 35 FCC Rcd 5450 (OMD 2020). 128 47 CFR § 1.1200 et seq. 23 Federal Communications Commission FCC-CIRC2207-02 might further reduce the information collection burden for small business concerns with fewer than 25 employees.129 61. Initial Regulatory Flexibility Analysis. Pursuant to the Regulatory Flexibility Act (RFA),130 we have prepared an Initial Regulatory Flexibility Analysis (IRFA) of the possible significant economic impact on small entities of the policies and actions considered in this Further Notice. The Commission prepared an IRFA to accompany the first Notice of Proposed Rulemaking in this docket.131 The questions asked in this Further Notice are different than those the Commission sought comment on previously. Therefore, we have prepared a new IRFA to reflect the substance of this Further Notice. The text of the IRFA is set forth in Appendix B. Written public comments are requested on this IRFA. Comments must be identified as responses to the IRFA and must be filed by the deadlines for comments on the Further Notice. The Commission’s Consumer and Governmental Affairs Bureau, Reference Information Center, will send a copy of this Further Notice, including the IRFA, to the Chief Counsel for Advocacy of the Small Business Administration.132 62. Contact Person. For further information about this proceeding, please contact Lynne Engledow, FCC Wireline Competition Bureau, Pricing Policy Division, 45 L Street, NE, Washington, D.C. 20554, 202-418-1520, Lynne.Engledow@fcc.gov. V. ORDERING CLAUSES 63. Accordingly, IT IS ORDERED that, pursuant to sections 1, 2, 4(i), 201, 251, 254, 256, 303(r), and 403 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151, 152, 154(i), 251, 254, 256, 303(r), and 403 and section 1.1 of the Commission’s rules, 47 CFR § 1.1, this Further Notice of Proposed Rulemaking IS ADOPTED. 64. IT IS FURTHER ORDERED that pursuant to applicable procedures set forth in sections 1.415 and 1.419 of the Commission’s Rules, 47 CFR §§ 1.415, 1.419, interested parties may file comments on this Further Notice of Proposed Rulemaking on or before 30 days after publication of this Further Notice of Proposed Rulemaking in the Federal Register, and reply comments on or before 60 days after publication of this Further Notice of Proposed Rulemaking in the Federal Register. 65. IT IS FURTHER ORDERED that the Commission’s Consumer and Governmental Affairs Bureau, Reference Information Center, SHALL SEND a copy of this Further Notice of Proposed Rulemaking, including the Initial Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration. FEDERAL COMMUNICATIONS COMMISSION Marlene H. Dortch Secretary 129 See 44 U.S.C. § 3506(c)(4). 130 See 5 U.S.C. § 603. 131 Access Arbitrage Notice, 33 FCC Rcd at 5484-94, Appx. B. 132 See 5 U.S.C. § 603(a). 24 Federal Communications Commission FCC-CIRC2207-02 APPENDIX A PROPOSED RULES Note: For ease of review, the proposed rules set forth below show amendments in underline for additions and strikethrough for deletions. For the reasons set forth above, the Federal Communications Commission proposes to amend Parts 51, 61 and 69 of Title 47 of the Code of Federal Regulations as follows: PART 51—INTERCONNECTION 1. Amend § 51.903 by adding paragraph (q) to read as follows: § 51.903 Definitions. * * * * * (q) IPES Provider has the same meaning as that term is defined in § 61.3(eee) of this chapter. 2. Amend § 51.914 by revising paragraphs (a), (b), (c), (d), and (e) and adding paragraphs (f) and (g) as follows: § 51.914 Additional provisions applicable to Access Stimulation traffic. (a) Notwithstanding any other provision of this part, if a local exchange carrier is engaged in Access Stimulation, as defined in § 61.3(bbb) of this chapter, it shall, within 45 days of commencing Access Stimulation, or within 45 days of November 27, 2019 [INSERT DATE 30 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER], whichever is later: (1) Not bill any Interexchange Carrier for interstate or intrastate terminating switched access tandem switching or terminating switched access transport charges for any traffic between such local exchange carrier’s terminating end office or equivalent and the associated access tandem switch; and (2) ShallDesignate if needed, the Intermediate Access Provider(s), if any, that will provide terminating switched access tandem switching and terminating switched access tandem transport services to the local exchange carrier engaged in Aaccess Sstimulation; and (3) that the local exchange carrier shall aAssume financial responsibility for any applicable Intermediate Access Provider’s charges for such services for any traffic between such local exchange carrier’s terminating end office or equivalent and the associated access tandem switch. (b) Notwithstanding any other provision of this part, if a local exchange carrier is engaged in Access Stimulation, as defined in § 61.3(bbb) of this chapter, it shall, within 45 days of commencing Access Stimulation, or within 45 days of November 27, 2019 [INSERT DATE 30 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER], whichever is later, notify in writing the Commission, all Intermediate Access Providers that it subtends, and Interexchange Carriers with which it does business of the following: (1) That it is a local exchange carrier engaged in Access Stimulation; and 25 Federal Communications Commission FCC-CIRC2207-02 (2) That it shall designate the Intermediate Access Provider(s) that will provide the terminating switched access tandem switching and terminating switched access tandem transport services to the local exchange carrier engaged in Aaccess Sstimulation; and (3) Tthat it the local exchange carrier shall pay for those services as of that date. (c) Notwithstanding any other provision of the Commission’s rules, if an IPES Provider, as defined in § 61.3(eee) of this chapter, is engaged in Access Stimulation, as defined in § 61.3(bbb) of this chapter, it shall, within 45 days of commencing Access Stimulation, or within 45 days of [INSERT DATE 30 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER], whichever is later: (1) Designate the Intermediate Access Provider(s), if any, that will provide terminating switched access tandem switching and terminating switched access tandem transport services to the IPES Provider engaged in Access Stimulation; and further (2) The IPES Provider may assume financial responsibility for any applicable Intermediate Access Provider’s charges for such services for any traffic between such IPES Provider’s terminating end office or equivalent and the associated access tandem switch, and (3) The Intermediate Access Provider shall not assess any charges for such services to the Interexchange Carrier. (d) Notwithstanding any other provision of the Commission’s rules, if an IPES Provider, as defined in § 61.3(eee) of this chapter, is engaged in Access Stimulation, as defined in § 61.3(bbb) of this chapter, it shall, within 45 days of commencing Access Stimulation, or within 45 days of [INSERT DATE 30 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER], whichever is later, notify in writing the Commission, all Intermediate Access Providers that it subtends, and Interexchange Carriers with which it does business of the following: (1) That it is an IPES Provider engaged in Access Stimulation; and (2) That it shall designate the Intermediate Access Provider(s), if any, that will provide the terminating switched access tandem switching and terminating switched access tandem transport services directly, or indirectly through a local exchange carrier, to the IPES Provider engaged in Access Stimulation; and (3) That the IPES Provider may pay for those services as of that date. (e) In the event that an Intermediate Access Provider receives notice under paragraphs (b) or (d) that it has been designated to provide terminating switched access tandem switching or terminating switched access tandem transport services to a local exchange carrier engaged in Access Stimulation or to an IPES Provider engaged in Access Stimulation, directly, or indirectly through a local exchange carrier, and that local exchange carrier engaged in Access Stimulation shall pay or the IPES Provider engaged in Access Stimulation may pay for such terminating access service from such Intermediate Access Provider, the Intermediate Access Provider shall not bill Interexchange Carriers for interstate or intrastate terminating switched access tandem switching or terminating switched access tandem transport service for traffic bound for such local exchange carrier or IPES Provider but, instead, shall bill such local exchange carrier or may bill such IPES Provider for such services. (f) Notwithstanding paragraphs (a) and (b) of this section, any local exchange carrier that is not itself engaged in Access Stimulation, as that term is defined in § 61.3(bbb) of this chapter, but serves as an Intermediate Access Provider with respect to traffic bound for a local exchange carrier engaged in Access Stimulation or bound for an IPES Provider engaged in Access Stimulation, or receives traffic from an 26 Federal Communications Commission FCC-CIRC2207-02 Intermediate Access Provider destined for an IPES Provider engaged in Access Stimulation, shall not itself be deemed a local exchange carrier engaged in Access Stimulation or be affected by paragraphs (a) and (b) of this section. (g) Upon terminating its engagement in Access Stimulation, as defined in § 61.3(bbb) of this chapter, the local exchange carrier or IPES Provider engaged in Access Stimulation shall provide concurrent, written notification to the Commission and any affected Intermediate Access Provider(s) and Interexchange Carrier(s) of such fact. PART 61 – TARIFFS 3. Amend § 61.3 by revising paragraphs (bbb), (ccc), and (ddd), and adding paragraph (eee) to read as follows: § 61.3 Definitions. * * * * * (bbb) Access Stimulation. (1) A Competitive Local Exchange Carrier or an IPES Provider serving end user(s) engages in Access Stimulation when it satisfies either paragraphs (bbb)(1)(i) or (bbb)(1)(ii) of this section; and a rate-of-return local exchange carrier serving end user(s) engages in Access Stimulation when it satisfies either paragraphs (bbb)(1)(i) or (bbb)(1)(iii) of this section. (i) The rate-of-return local exchange carrier, or a Competitive Local Exchange Carrier, or IPES Provider: (A) Has an access revenue sharing agreement, whether express, implied, written or oral, that, over the course of the agreement, would directly or indirectly result in a net payment to the other party (including affiliates) to the agreement, in which payment by the rate-of-return local exchange carrier, or Competitive Local Exchange Carrier, or IPES Provider is based on the billing or collection of access charges from interexchange carriers or wireless carriers. When determining whether there is a net payment under this partrule, all payments, discounts, credits, services, features, functions, and other items of value, regardless of form, provided by the rate-of-return local exchange carrier, or Competitive Local Exchange Carrier, or IPES Provider to the other party to the agreement shall be taken into account; and (B) Has either an interstate terminating-to-originating traffic ratio of at least 3:1 in an end office or equivalent in a calendar month, or has had 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 for such end office or equivalent. (ii) A Competitive Local Exchange Carrier or IPES Provider has an interstate terminating-to-originating traffic ratio of at least 6:1 in an end office or equivalent in a calendar month. (iii) A rate-of-return local exchange carrier has an interstate terminating-to- originating traffic ratio of at least 10:1 in an end office or equivalent in a three calendar three-calendar month period and has 500,000 minutes or more of interstate terminating minutes-of-use per month in the same end office in the 27 Federal Communications Commission FCC-CIRC2207-02 same three-calendar month period. These factors will be measured as an average over the three calendar three-calendar month period. (2) A Competitive Local Exchange Carrier serving end users or IPES Provider serving end users that has engaged in Access Stimulation will continue to be deemed to be engaged in Access Stimulation until: For a carrier or provider engaging in Access Stimulation as defined in paragraph (bbb)(1)(i) of this section, it terminates all revenue sharing agreements covered in paragraph (bbb)(1)(i) of this section and does not engage in Access Stimulation as defined in paragraph (bbb)(1)(ii) of this section; and for a carrier or provider engaging in Access Stimulation as defined in paragraph (bbb)(1)(ii) of this section, its interstate terminating-to-originating traffic ratio for an end office or equivalent falls below 6:1 for six consecutive months, and it does not engage in Access Stimulation as defined in paragraph (bbb)(1)(i) of this section. (3) A rate-of-return local exchange carrier serving end users that has engaged in Access Stimulation will continue to be deemed to be engaged in Access Stimulation until: fFor a carrier engaging in Access Stimulation as defined in paragraph (bbb)(1)(i) of this section, it terminates all revenue sharing agreements covered in paragraph (bbb)(1)(i) of this section and does not engage in Access Stimulation as defined in paragraph (bbb)(1)(iii) of this section; and for a carrier engaging in Access Stimulation as defined in paragraph (bbb)(1)(iii) of this section, its interstate terminating-to-originating traffic ratio falls below 10:1 for six consecutive months and its monthly interstate terminating minutes-of- use in an end office or equivalent falls below 500,000 for six consecutive months, and it does not engage in Access Stimulation as defined in paragraph (bbb)(1)(i) of this section. (4) A local exchange carrier engaging in Access Stimulation is subject to revised interstate switched access charge rules under § 61.26(g) (for Competitive Local Exchange Carriers) or § 61.38 and § 69.3(e)(12) of this chapter (for rate-of-return local exchange carriers). (ccc) Intermediate Access Provider. The term means, for purposes of this part and §§ 69.3(e)(12)(iv) and 69.5(b) of this chapter, any entity that provides terminating switched access tandem switching and terminating switched access tandem transport services carries or processes traffic at any point between the final Interexchange Carrier in a call path and: (1) A local exchange carrier engaged in Access Stimulation, as defined in § 61.3 paragraph (bbb) of this section; or (2) A local exchange carrier delivering traffic to an IPES Provider engaged in Access Stimulation, as defined in paragraph (bbb) of this section or; (3) An IPES Provider engaged in Access Stimulation, as defined in paragraph (bbb) of this section where the Intermediate Access Provider delivers calls directly to the IPES Provider. (ddd) Interexchange Carrier. The term means, for purposes of this part and §§ 69.3(e)(12)(iv) and 69.5(b) of this chapter, a retail or wholesale telecommunications carrier that uses the exchange access or information access services of another telecommunications carrier for the provision of telecommunications. (eee) IPES (Internet Protocol Enabled Service) Provider. The term means, for purposes of this part and §§ 51.914, 69.4(l) and 69.5(b) of this chapter, a provider offering a service that: (1) enables real-time, two-way voice communications; (2) requires a broadband connection from the user’s location or end to end; (3) requires Internet Protocol-compatible customer premises equipment (CPE); and (4) permits users to receive calls that originate on the public switched telephone network and to terminate calls to the 28 Federal Communications Commission FCC-CIRC2207-02 public switched telephone network or that originate from an Internet Protocol service and terminate to an Internet Protocol service or an Internet Protocol application. * * * * * PART 69 – ACCESS CHARGES 4. Amend § 69.4 by revising paragraph (l) to read as follows: § 69.4 Charges to be filed. * * * * * (l) Notwithstanding paragraph (b)(5) of this section, a local exchange carrier engaged in Access Stimulation as defined in § 61.3(bbb) of this chapter or the Intermediate Access Provider it subtends, or an Intermediate Access Provider that delivers traffic directly or indirectly to an IPES Provider engaged in Access Stimulation as defined in § 61.3(bbb) of this chapter, shall may not bill an Interexchange Carrier as defined in § 61.3(bbb) of this chapter for interstate or intrastate terminating switched access tandem switching or terminating switched access tandem transport charges for any traffic between such local exchange carrier’s or such IPES Provider’s terminating end office or equivalent and the associated access tandem switch. 5. Amend § 69.5 by revising paragraph (b) to read as follows: § 69.5 Persons to be assessed. * * * * * (b) Carrier’s carrier charges shall be computed and assessed upon all Interexchange Carriers that use local exchange switching facilities for the provision of interstate or foreign telecommunications services, except that: (1) Local exchange carriers shall may not assess a terminating interstate or intrastate switched access tandem switching or terminating switched access tandem transport charges described in § 69.4(b)(5) of this chapter on Interexchange Carriers when the terminating traffic is destined for a local exchange carrier or an IPES Provider engaged in Access Stimulation, as that term is defined in § 61.3(bbb) of this chapter consistent with the provisions of § 61.26(g)(3) of this chapter and § 69.3(e)(12)(iv). (2) Intermediate Access Providers shall not may assess a terminating interstate or intrastate switched access tandem switching or terminating switched access tandem transport charges described in § 69.4(b)(5) on local exchange carriers Interexchange Carriers when the terminating traffic is destined for a local exchange carrier engaged in Access Stimulation, or is destined, directly or indirectly, for an IPES Provider engaged in Access Stimulation, as that term is defined in § 61.3(bbb) of this chapter consistent with the provisions of § 61.26(g)(3) of this chapter and § 69.3(e)(12)(iv). * * * * * 29 Federal Communications Commission FCC-CIRC2207-02 APPENDIX B INITIAL REGULATORY FLEXIBILITY ANALYSIS 1. As required by the Regulatory Flexibility Act of 1980, as amended (RFA),1 the Commission has prepared this Initial Regulatory Flexibility Analysis (IRFA) of the possible significant economic impact on small entities by the policies and rules proposed in this Further Notice of Proposed Rulemaking. The Commission requests written public comments on this IRFA. Comments must be identified as responses to the IRFA and must be filed by the deadlines for comments provided on the first page of the Further Notice. The Commission will send a copy of the Further Notice, including this IRFA, to the Chief Counsel for Advocacy of the Small Business Administration (SBA).2 In addition, the Further Notice and the IRFA (or summaries thereof) will be published in the Federal Register.3 A. Need for, and Objectives of, the Proposed Rules 2. For many years the Commission has been fighting efforts to arbitrage its system of intercarrier compensation. In the 2011 USF/ICC Transformation Order, the Commission adopted rules identifying local exchange carriers (LECs) engaged in access stimulation and requiring that such LECs lower their tariffed access charges.4 In 2019, to address access arbitrage schemes that persisted despite prior Commission action, the Commission adopted the Access Arbitrage Order, in which it revised its Access Stimulation Rules to prohibit LECs and Intermediate Access Providers from charging interexchange carriers (IXCs) for terminating tandem switching and transport services used to deliver calls to access-stimulating LECs.5 The revised rules were adopted to end the ability of LECs to engage in arbitrage of the intercarrier compensation system by extracting artificially inflated tandem switching and transport charges from IXCs to subsidize “free” high-volume calling services.6 3. Since the 2019 rules took effect, the Commission has received information about new ways carriers are manipulating their businesses to continue their arbitrage schemes in the wake of the new rules. In the Further Notice, we seek comment on ways to address perceived loopholes in our rules that companies may be exploiting and to eliminate these new arbitrage schemes and the harms those schemes inflict on consumers.7 The rules we propose will serve the public interest by reducing carriers’ incentives and ability to send traffic over the Public Switched Telephone Network solely for the purpose of collecting tariffed tandem switching and transport access charges from IXCs to subsidize high-volume calling services, which the Commission has found to be an unjust and unreasonable practice.8 1 See 5 U.S.C. § 603. The RFA, see 5 U.S.C. §§ 601-12, has been amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), Pub. L. No. 104-121, Title II, 110 Stat. 857 (1996). 2 See 5 U.S.C. § 603(a). 3 Id. 4 Connect America Fund et al., WC Docket No. 10-90 et al., Report and Order and Further Notice of Proposed Rulemaking, 26 FCC Rcd 17663 (2011) (USF/ICC Transformation Order), aff’d, In re FCC 11-161, 753 F.3d 1015 (10th Cir. 2014). 5 Updating the Intercarrier Compensation Regime to Eliminate Access Arbitrage, WC Docket No. 18-155, Report and Order and Modification of Section 214 Authorizations, 34 FCC Rcd 9035 (2019) (Access Arbitrage Order); see also Updating the Intercarrier Compensation Regime to Eliminate Access Arbitrage, WC Docket No. 18-155, Notice of Proposed Rulemaking, 33 FCC Rcd 5466 (2018). 6 Access Arbitrage Order, 34 FCC Rcd at 9044, para. 21. 7 See supra Section III.C. 8 See supra Section III; Access Arbitrage Order, 34 FCC Rcd at 9073, para. 92 (citing 47 U.S.C. § 201(b)). 30 Federal Communications Commission FCC-CIRC2207-02 4. We propose to modify our Access Stimulation Rules to address access arbitrage that takes place when an Internet Protocol Enabled Service (IPES) Provider is incorporated into the call flow.9 We propose that when a LEC or Intermediate Access Provider delivers traffic to an IPES Provider and the terminating-to-originating traffic ratios of the IPES Provider exceed the triggers in the Access Stimulation Rules, the IPES Provider will be deemed to be engaged in access stimulation.10 In such cases, we propose prohibiting an Intermediate Access Provider from charging an IXC tariffed charges for terminating switched access tandem switching and switched access transport for traffic bound to an IPES Provider whose traffic exceeds the ratios in sections 61.3(bbb)(1)(i) or 61.3(bbb)(1)(ii) of our Access Stimulation Rules.11 We propose that the IPES Provider be responsible for calculating its traffic ratios and for making the required notifications to the Intermediate Access Provider and the Commission.12 We likewise propose modifying the definition of Intermediate Access Provider to include entities delivering traffic to an IPES Provider.13 5. We propose to use the same framework for determining when an IPES Provider that was engaged in access stimulation no longer is considered to be engaged in access stimulation, that we currently use for competitive LECs that have engaged in access stimulation.14 The Access Stimulation Rules currently require traffic ratios to be calculated at the end office. We propose rule modifications to apply this manner of traffic calculations to IPES Providers as well and that any final rules that are adopted will be effective 45 days after publication in the Federal Register.15 B. Legal Basis 6. The legal basis for any action that may be taken pursuant to the Further Notice is contained in sections 1, 2, 4(i), 201, 251, 254, 256, 303(r), and 403 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151, 152, 154(i), 201-206, 218-220, 251, 252, 254, 256, 303(r), and 403, and section 1.1 of the Commission’s rules, 47 CFR § 1.1. C. Description and Estimate of the Number of Small Entities to Which the Proposed Rules Will Apply 7. The RFA directs agencies to provide a description of, and where feasible, an estimate of the number of small entities that may be affected by the proposed rule revisions, if adopted. The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” In addition, the term “small business” has the same meaning as the term “small-business concern” under the Small Business Act. A “small-business concern” is one which: (1) is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the SBA. Small Businesses, Small Organizations, Small Governmental Jurisdictions. Our actions, over time, may affect small entities that are not easily categorized at present. We therefore describe here, at the outset, three broad groups of small entities that could be directly affected herein.16 First, while there are industry specific size standards for small businesses that are used in the regulatory flexibility analysis, according to data from the SBA’s Office of Advocacy, in general a small business is an independent 9 See supra Sections III.A-B. 10 See supra Section III.A. 11 See supra Section III.C. 12 See supra Section III.A. 13 See supra Section III.C. 14 See supra Section III.A. 15 Appx. A. 16 See 5 U.S.C. § 601(3)-(6). 31 Federal Communications Commission FCC-CIRC2207-02 business having fewer than 500 employees.17 These types of small businesses represent 99.9% of all businesses in the United States, which translates to 32.5 million businesses.18 8. Next, the type of small entity described as a “small organization” is generally “any not- for-profit enterprise which is independently owned and operated and is not dominant in its field.”19 The Internal Revenue Service (IRS) uses a revenue benchmark of $50,000 or less to delineate its annual electronic filing requirements for small exempt organizations.20 Nationwide, for tax year 2020, there were approximately 447,689 small exempt organizations in the U.S. reporting revenues of $50,000 or less according to the registration and tax data for exempt organizations available from the IRS.21 9. Finally, the small entity described as a “small governmental jurisdiction” is defined generally as “governments of cities, counties, towns, townships, villages, school districts, or special districts, with a population of less than fifty thousand.”22 U.S. Census Bureau data from the 2017 Census of Governments23 indicate that there were 90,075 local governmental jurisdictions consisting of general purpose governments and special purpose governments in the United States.24 Of this number there were 36,931 general purpose governments (county25, municipal and town or township26) with populations of 17 See SBA, Office of Advocacy, Frequently Asked Questions, “What is a small business?,” https://cdn.advocacy.sba.gov/wp-content/uploads/2021/12/06095731/Small-Business-FAQ-Revised-December- 2021.pdf (Dec. 2021). 18 Id. 19 5 U.S.C. § 601(4). 20 The IRS benchmark is similar to the population of less than 50,000 benchmark in 5 U.S.C § 601(5) that is used to define a small governmental jurisdiction. Therefore, the IRS benchmark has been used to estimate the number small organizations in this small entity description. See Annual Electronic Filing Requirement for Small Exempt Organizations—Form 990-N (e-Postcard), “Who must file,” https://www.irs.gov/charities-non-profits/annual- electronic-filing-requirement-for-small-exempt-organizations-form-990-n-e-postcard. We note that the IRS data does not provide information on whether a small exempt organization is independently owned and operated or dominant in its field. 21 See Exempt Organizations Business Master File Extract (EO BMF), "CSV Files by Region," https://www.irs.gov/ charities-non-profits/exempt-organizations-business-master-file-extract-eo-bmf . The IRS Exempt Organization Business Master File (EO BMF) Extract provides information on all registered tax-exempt/non-profit organizations. The data utilized for purposes of this description was extracted from the IRS EO BMF data for businesses for the tax year 2020 with revenue less than or equal to $50,000, for Region 1-Northeast Area (58,577), Region 2-Mid-Atlantic and Great Lakes Areas (175,272), and Region 3-Gulf Coast and Pacific Coast Areas (213,840) which includes the continental U.S., Alaska, and Hawaii. This data does not include information for Puerto Rico. 22 5 U.S.C. § 601(5). 23 See 13 U.S.C. § 161. The Census of Governments survey is conducted every five (5) years compiling data for years ending with “2” and “7.” See also Census of Governments, https://www.census.gov/programs- surveys/cog/about.html. 24 See U.S. Census Bureau, 2017 Census of Governments – Organization Table 2. Local Governments by Type and State: 2017 [CG1700ORG02]. https://www.census.gov/data/tables/2017/econ/gus/2017-governments.html. Local governmental jurisdictions are made up of general purpose governments (county, municipal and town or township) and special purpose governments (special districts and independent school districts). See also Table 2. CG1700ORG02 Table Notes_Local Governments by Type and State_2017. 25 See U.S. Census Bureau, 2017 Census of Governments - Organization, Table 5. County Governments by Population-Size Group and State: 2017 [CG1700ORG05]. https://www.census.gov/data/tables/2017/econ/gus/2017- governments.html . There were 2,105 county governments with populations less than 50,000. This category does not include subcounty (municipal and township) governments. 26 See U.S. Census Bureau, 2017 Census of Governments - Organization, Table 6. Subcounty General-Purpose Governments by Population-Size Group and State: 2017 [CG1700ORG06]. https://www.census.gov/data/ (continued….) 32 Federal Communications Commission FCC-CIRC2207-02 less than 50,000 and 12,040 special purpose governments - independent school districts27 with enrollment populations of less than 50,000.28 Accordingly, based on the 2017 U.S. Census of Governments data, we estimate that at least 48,971 entities fall into the category of “small governmental jurisdictions.”29 10. Wired Telecommunications Carriers. The U.S. Census Bureau defines this industry as establishments primarily engaged in operating and/or providing access to transmission facilities and infrastructure that they own and/or lease for the transmission of voice, data, text, sound, and video using wired communications networks.30 Transmission facilities may be based on a single technology or a combination of technologies. Establishments in this industry use the wired telecommunications network facilities that they operate to provide a variety of services, such as wired telephony services, including VoIP services, wired (cable) audio and video programming distribution, and wired broadband internet services.31 By exception, establishments providing satellite television distribution services using facilities and infrastructure that they operate are included in this industry.32 Wired Telecommunications Carriers are also referred to as wireline carriers or fixed local service providers.33 11. The SBA small business size standard for Wired Telecommunications Carriers classifies firms having 1,500 or fewer employees as small.34 U.S. Census Bureau data for 2017 show that there were 3,054 firms that operated in this industry for the entire year.35 Of this number, 2,964 firms operated (Continued from previous page) tables/2017/econ/gus/2017-governments.html. There were 18,729 municipal and 16,097 town and township governments with populations less than 50,000. 27 See U.S. Census Bureau, 2017 Census of Governments - Organization, Table 10. Elementary and Secondary School Systems by Enrollment-Size Group and State: 2017 [CG1700ORG10]. https://www.census.gov/ data/tables/2017/econ/gus/2017-governments.html . There were 12,040 independent school districts with enrollment populations less than 50,000. See also Table 4. Special-Purpose Local Governments by State Census Years 1942 to 2017 [CG1700ORG04], CG1700ORG04 Table Notes_Special Purpose Local Governments by State_Census Years 1942 to 2017. 28 While the special purpose governments category also includes local special district governments, the 2017 Census of Governments data does not provide data aggregated based on population size for the special purpose governments category. Therefore, only data from independent school districts is included in the special purpose governments category. 29 This total is derived from the sum of the number of general purpose governments (county, municipal and town or township) with populations of less than 50,000 (36,931) and the number of special purpose governments - independent school districts with enrollment populations of less than 50,000 (12,040), from the 2017 Census of Governments - Organizations Tables 5, 6, and 10. 30 See U.S. Census Bureau, 2017 NAICS Definition, “517311 Wired Telecommunications Carriers,” https://www.census.gov/naics/?input=517311&year=2017&details=517311. 31 Id. 32 Id. 33 Fixed Local Service Providers include the following types of providers: Incumbent Local Exchange Carriers (ILECs), Competitive Access Providers (CAPs) and Competitive Local Exchange Carriers (CLECs), Cable/Coax CLECs, Interconnected VOIP Providers, Non-Interconnected VOIP Providers, Shared-Tenant Service Providers, Audio Bridge Service Providers, and Other Local Service Providers. Local Resellers fall into another U.S. Census Bureau industry group and therefore data for these providers is not included in this industry. 34 See 13 CFR § 121.201, NAICS Code 517311. 35 See U.S. Census Bureau, 2017 Economic Census of the United States, Selected Sectors: Employment Size of Firms for the U.S.: 2017, Table ID: EC1700SIZEEMPFIRM, NAICS Code 517311, https://data.census.gov/cedsci/table? y=2017&n=517311&tid=ECNSIZE2017.EC1700SIZEEMPFIRM&hidePreview=false. 33 Federal Communications Commission FCC-CIRC2207-02 with fewer than 250 employees.36 Additionally, based on Commission data in the 2021 Universal Service Monitoring Report, as of December 31, 2020, there were 5,183 providers that reported they were engaged in the provision of fixed local services.37 Of these providers, the Commission estimates that 4,737 providers have 1,500 or fewer employees.38 Consequently, using the SBA’s small business size standard, most of these providers can be considered small entities. 12. Local Exchange Carriers (LECs). Neither the Commission nor the SBA has developed a size standard for small businesses specifically applicable to local exchange services. Providers of these services include both incumbent and competitive local exchange service providers. Wired Telecommunications Carriers39 is the closest industry with a SBA small business size standard.40 Wired Telecommunications Carriers are also referred to as wireline carriers or fixed local service providers.41 The SBA small business size standard for Wired Telecommunications Carriers classifies firms having 1,500 or fewer employees as small.42 U.S. Census Bureau data for 2017 show that there were 3,054 firms that operated in this industry for the entire year.43 Of this number, 2,964 firms operated with fewer than 250 employees.44 Additionally, based on Commission data in the 2021 Universal Service Monitoring Report, as of December 31, 2020, there were 5,183 providers that reported they were fixed local exchange service providers.45 Of these providers, the Commission estimates that 4,737 providers have 1,500 or fewer employees.46 Consequently, using the SBA’s small business size standard, most of these providers can be considered small entities. 13. Incumbent Local Exchange Carriers (Incumbent LECs). Neither the Commission nor the SBA have developed a small business size standard specifically for incumbent local exchange carriers. Wired Telecommunications Carriers47 is the closest industry with a SBA small business size standard.48 The SBA small business size standard for Wired Telecommunications Carriers classifies firms having 36 Id. The available U.S. Census Bureau data does not provide a more precise estimate of the number of firms that meet the SBA size standard. 37 Federal-State Joint Board on Universal Service, Universal Service Monitoring Report at 26, Table 1.12 (2021), https://docs.fcc.gov/public/attachments/DOC-379181A1.pdf. 38 Id. 39 See U.S. Census Bureau, 2017 NAICS Definition, “517311 Wired Telecommunications Carriers,” https://www.census.gov/naics/?input=517311&year=2017&details=517311. 40 See 13 CFR § 121.201, NAICS Code 517311. 41 Fixed Local Exchange Service Providers include the following types of providers: Incumbent Local Exchange Carriers (ILECs), Competitive Access Providers (CAPs) and Competitive Local Exchange Carriers (CLECs), Cable/Coax CLECs, Interconnected VOIP Providers, Non-Interconnected VOIP Providers, Shared-Tenant Service Providers, Audio Bridge Service Providers, Local Resellers, and Other Local Service Providers. 42 Id. 43 See U.S. Census Bureau, 2017 Economic Census of the United States, Selected Sectors: Employment Size of Firms for the U.S.: 2017, Table ID: EC1700SIZEEMPFIRM, NAICS Code 517311, https://data.census.gov/cedsci/table? y=2017&n=517311&tid=ECNSIZE2017.EC1700SIZEEMPFIRM&hidePreview=false. 44 Id. The available U.S. Census Bureau data does not provide a more precise estimate of the number of firms that meet the SBA size standard. 45 Federal-State Joint Board on Universal Service, Universal Service Monitoring Report at 26, Table 1.12 (2021), https://docs.fcc.gov/public/attachments/DOC-379181A1.pdf . 46 Id. 47 See U.S. Census Bureau, 2017 NAICS Definition, “517311 Wired Telecommunications Carriers,” https://www.census.gov/naics/?input=517311&year=2017&details=517311. 48 See 13 CFR § 121.201, NAICS Code 517311. 34 Federal Communications Commission FCC-CIRC2207-02 1,500 or fewer employees as small.49 U.S. Census Bureau data for 2017 show that there were 3,054 firms in this industry that operated for the entire year.50 Of this number, 2,964 firms operated with fewer than 250 employees.51 Additionally, based on Commission data in the 2021 Universal Service Monitoring Report, as of December 31, 2020, there were 1,227 providers that reported they were incumbent local exchange service providers.52 Of these providers, the Commission estimates that 929 providers have 1,500 or fewer employees.53 Consequently, using the SBA’s small business size standard, the Commission estimates that the majority of incumbent local exchange carriers can be considered small entities. 14. Competitive Local Exchange Carriers (LECs). Neither the Commission nor the SBA has developed a size standard for small businesses specifically applicable to local exchange services. Providers of these services include several types of competitive local exchange service providers.54 Wired Telecommunications Carriers55 is the closest industry with a SBA small business size standard. The SBA small business size standard for Wired Telecommunications Carriers classifies firms having 1,500 or fewer employees as small.56 U.S. Census Bureau data for 2017 show that there were 3,054 firms that operated in this industry for the entire year.57 Of this number, 2,964 firms operated with fewer than 250 employees.58 Additionally, based on Commission data in the 2021 Universal Service Monitoring Report, as of December 31, 2020, there were 3,956 providers that reported they were competitive local exchange service providers.59 Of these providers, the Commission estimates that 3,808 providers have 1,500 or fewer employees.60 Consequently, using the SBA’s small business size standard, most of these providers can be considered small entities. 15. Interexchange Carriers (IXCs). Neither the Commission nor the SBA have developed a small business size standard specifically for Interexchange Carriers. Wired Telecommunications 49 Id. 50 See U.S. Census Bureau, 2017 Economic Census of the United States, Selected Sectors: Employment Size of Firms for the U.S.: 2017, Table ID: EC1700SIZEEMPFIRM, NAICS Code 517311, https://data.census.gov/cedsci/table? y=2017&n=517311&tid=ECNSIZE2017.EC1700SIZEEMPFIRM&hidePreview=false. 51 Id. The available U.S. Census Bureau data does not provide a more precise estimate of the number of firms that meet the SBA size standard. 52 Federal-State Joint Board on Universal Service, Universal Service Monitoring Report at 26, Table 1.12 (2021), https://docs.fcc.gov/public/attachments/DOC-379181A1.pdf. 53 Id. 54 Competitive Local Exchange Service Providers include the following types of providers: Competitive Access Providers (CAPs) and Competitive Local Exchange Carriers (CLECs), Cable/Coax CLECs, Interconnected VOIP Providers, Non-Interconnected VOIP Providers, Shared-Tenant Service Providers, Audio Bridge Service Providers, Local Resellers, and Other Local Service Providers. 55 See U.S. Census Bureau, 2017 NAICS Definition, “517311 Wired Telecommunications Carriers,” https://www.census.gov/naics/?input=517311&year=2017&details=517311. 56 See 13 CFR § 121.201, NAICS Code 517311. 57 See U.S. Census Bureau, 2017 Economic Census of the United States, Selected Sectors: Employment Size of Firms for the U.S.: 2017, Table ID: EC1700SIZEEMPFIRM, NAICS Code 517311, https://data.census.gov/cedsci/table? y=2017&n=517311&tid=ECNSIZE2017.EC1700SIZEEMPFIRM&hidePreview=false. 58 Id. The available U.S. Census Bureau data does not provide a more precise estimate of the number of firms that meet the SBA size standard. 59 Federal-State Joint Board on Universal Service, Universal Service Monitoring Report at 26, Table 1.12 (2021), https://docs.fcc.gov/public/attachments/DOC-379181A1.pdf. 60 Id. 35 Federal Communications Commission FCC-CIRC2207-02 Carriers61 is the closest industry with a SBA small business size standard.62 The SBA small business size standard for Wired Telecommunications Carriers classifies firms having 1,500 or fewer employees as small.63 U.S. Census Bureau data for 2017 show that there were 3,054 firms that operated in this industry for the entire year.64 Of this number, 2,964 firms operated with fewer than 250 employees.65 Additionally, based on Commission data in the 2021 Universal Service Monitoring Report, as of December 31, 2020, there were 151 providers that reported they were engaged in the provision of interexchange services. Of these providers, the Commission estimates that 131 providers have 1,500 or fewer employees.66 Consequently, using the SBA’s small business size standard, the Commission estimates that the majority of providers in this industry can be considered small entities. 16. Local Resellers. Neither the Commission nor the SBA have developed a small business size standard specifically for Local Resellers. Telecommunications Resellers is the closest industry with a SBA small business size standard.67 The Telecommunications Resellers industry comprises establishments engaged in purchasing access and network capacity from owners and operators of telecommunications networks and reselling wired and wireless telecommunications services (except satellite) to businesses and households.68 Establishments in this industry resell telecommunications; they do not operate transmission facilities and infrastructure.69 Mobile virtual network operators (MVNOs) are included in this industry.70 The SBA small business size standard for Telecommunications Resellers classifies a business as small if it has 1,500 or fewer employees.71 U.S. Census Bureau data for 2017 show that 1,386 firms in this industry provided resale services for the entire year.72 Of that number, 1,375 firms operated with fewer than 250 employees.73 Additionally, based on Commission data in the 2021 Universal Service Monitoring Report, as of December 31, 2020, there were 293 providers that reported they were engaged in the provision of local resale services.74 Of these providers, the Commission 61 See U.S. Census Bureau, 2017 NAICS Definition, “517311 Wired Telecommunications Carriers,” https://www.census.gov/naics/?input=517311&year=2017&details=517311. 62 See 13 CFR § 121.201, NAICS Code 517311. 63 Id. 64 See U.S. Census Bureau, 2017 Economic Census of the United States, Selected Sectors: Employment Size of Firms for the U.S.: 2017, Table ID: EC1700SIZEEMPFIRM, NAICS Code 517311, https://data.census.gov/cedsci/table? y=2017&n=517311&tid=ECNSIZE2017.EC1700SIZEEMPFIRM&hidePreview=false. 65 Id. The available U.S. Census Bureau data does not provide a more precise estimate of the number of firms that meet the SBA size standard. 66 Federal-State Joint Board on Universal Service, Universal Service Monitoring Report at 26, Table 1.12 (2021), https://docs.fcc.gov/public/attachments/DOC-379181A1.pdf. 67 See U.S. Census Bureau, 2017 NAICS Definition, “517911 Telecommunications Resellers,” https://www.census.gov/naics/?input=517911&year=2017&details=517911. 68 Id. 69 Id. 70 Id. 71 See 13 CFR § 121.201, NAICS Code 517911. 72 See U.S. Census Bureau, 2017 Economic Census of the United States, Selected Sectors: Employment Size of Firms for the U.S.: 2017, Table ID: EC1700SIZEEMPFIRM, NAICS Code 517911, https://data.census.gov/cedsci/ table?y=2017&n=517911&tid=ECNSIZE2017.EC1700SIZEEMPFIRM&hidePreview=false. 73 Id. The available U.S. Census Bureau data does not provide a more precise estimate of the number of firms that meet the SBA size standard. 74 Federal-State Joint Board on Universal Service, Universal Service Monitoring Report at 26, Table 1.12 (2021), https://docs.fcc.gov/public/attachments/DOC-379181A1.pdf. 36 Federal Communications Commission FCC-CIRC2207-02 estimates that 289 providers have 1,500 or fewer employees.75 Consequently, using the SBA’s small business size standard, most of these providers can be considered small entities. 17. Cable Companies and Systems (Rate Regulation). The Commission has developed its own small business size standard for the purpose of cable rate regulation. Under the Commission’s rules, a “small cable company” is one serving 400,000 or fewer subscribers nationwide.76 Based on industry data, there are about 420 cable companies in the U.S.77 Of these, only five have more than 400,000 subscribers.78 In addition, under the Commission’s rules, a “small system” is a cable system serving 15,000 or fewer subscribers.79 Based on industry data, there are about 4,139 cable systems (headends) in the U.S.80 Of these, about 639 have more than 15,000 subscribers.81 Accordingly, the Commission estimates that the majority of cable companies and cable systems are small. 18. Cable System Operators (Telecom Act Standard). The Communications Act of 1934, as amended, contains a size standard for a “small cable operator,” which is “a cable operator that, directly or through an affiliate, serves in the aggregate fewer than one percent of all subscribers in the United States and is not affiliated with any entity or entities whose gross annual revenues in the aggregate exceed $250,000,000.”82 For purposes of the Telecom Act Standard, the Commission determined that a cable system operator that serves fewer than 677,000 subscribers, either directly or through affiliates, will meet the definition of a small cable operator based on the cable subscriber count established in a 2001 Public Notice.83 Based on industry data, only four cable system operators have more than 677,000 subscribers.84 Accordingly, the Commission estimates that the majority of cable system operators are small under this size standard. We note however, that the Commission neither requests nor collects information on whether cable system operators are affiliated with entities whose gross annual revenues exceed $250 million.85 Therefore, we are unable at this time to estimate with greater precision the number of cable system operators that would qualify as small cable operators under the definition in the Communications Act. 75 Id. 76 47 CFR § 76.901(d). 77 S&P Global Market Intelligence, S&P Capital IQ Pro, U.S. MediaCensus, Operator Subscribers by Geography (last visited May 26, 2022). 78 S&P Global Market Intelligence, S&P Capital IQ Pro, Top Cable MSOs 12/21Q (last visited May 26, 2022). 79 47 C.F.R. § 76.901(c). 80 S&P Global Market Intelligence, S&P Capital IQ Pro, U.S. MediaCensus, Operator Subscribers by Geography (last visited May 26, 2022). 81 S&P Global Market Intelligence, S&P Capital IQ Pro, Top Cable MSOs 12/21Q (last visited May 26, 2022). 82 47 U.S.C. § 543(m)(2). 83 FCC Announces New Subscriber Count for the Definition of Small Cable Operator, Public Notice, 16 FCC Rcd 2225 (CSB 2001) (2001 Subscriber Count PN). In this Public Notice, the Commission determined that there were approximately 67.7 million cable subscribers in the United States at that time using the most reliable source publicly available. Id. We recognize that the number of cable subscribers changed since then and that the Commission has recently estimated the number of cable subscribers to be approximately 48.6 million. See Communications Marketplace Report, GN Docket No. 20-60, 2020 Communications Marketplace Report, 36 FCC Rcd 2945, 3049, para. 156 (2020) (2020 Communications Marketplace Report). However, because the Commission has not issued a public notice subsequent to the 2001 Subscriber Count PN, the Commission still relies on the subscriber count threshold established by the 2001 Subscriber Count PN for purposes of this rule. See 47 CFR § 76.901(e)(1). 84 S&P Global Market Intelligence, S&P Capital IQ Pro, Top Cable MSOs 12/21Q (last visited May 26, 2022). 85 The Commission does receive such information on a case-by-case basis if a cable operator appeals a local franchise authority’s finding that the operator does not qualify as a small cable operator pursuant to § 76.901(e) of the Commission’s rules. See 47 CFR § 76.910(b). 37 Federal Communications Commission FCC-CIRC2207-02 19. All Other Telecommunications. This industry is comprised of establishments primarily engaged in providing specialized telecommunications services, such as satellite tracking, communications telemetry, and radar station operation.86 This industry also includes establishments primarily engaged in providing satellite terminal stations and associated facilities connected with one or more terrestrial systems and capable of transmitting telecommunications to, and receiving telecommunications from, satellite systems.87 Providers of Internet services (e.g., dial-up ISPs) or voice over Internet protocol (VoIP) services, via client-supplied telecommunications connections are also included in this industry.88 The SBA small business size standard for this industry classifies firms with annual receipts of $35 million or less as small.89 U.S. Census Bureau data for 2017 show that there were 1,079 firms in this industry that operated for the entire year.90 Of those firms, 1,039 had revenue of less than $25 million.91 Based on this data, the Commission estimates that the majority of “All Other Telecommunications” firms can be considered small. D. Description of Projected Reporting, Recordkeeping, and Other Compliance Requirements for Small Entities 20. In the Further Notice, we propose and seek comment on rule changes that will affect LECs, Intermediate Access Providers, and IPES Providers. We propose to modify our Access Stimulation Rules to address arbitrage which takes place when an IPES Provider is incorporated into the call flow. In the Further Notice, we propose rules to further limit or eliminate the occurrence of access arbitrage, including access stimulation, which could affect potential reporting requirements. The proposed rules also contain recordkeeping, reporting and third-party notification requirements for access- stimulating LECs and IPES Providers, which may impact small entities. Some of the proposed requirements may also involve tariff changes. 21. We propose that when a LEC delivers traffic to an IPES Provider and the terminating-to- originating traffic ratios of the IPES Provider exceed the triggers in the Access Stimulation Rules, the IPES Provider will be deemed to be engaged in access stimulation.92 We propose that the IPES Provider be responsible for calculating its traffic ratios and for making the required third-party notifications. As such, providers may need to modify their in-house recordkeeping to comply with the proposed rules. Under our proposal, if the IPES Provider’s ratios exceed the applicable rule triggers, it would have to notify the Intermediate Access Provider, the Commission, and affected IXCs.93 The Intermediate Access Provider would then be prohibited from charging IXCs tariffed rates for terminating switched access tandem switching or terminating switched access transport charges.94 86 See U.S. Census Bureau, 2017 NAICS Definition, “517919 All Other Telecommunications,” https://www.census.gov/naics/?input=517919&year=2017&details=517919. 87 Id. 88 Id. 89 See 13 CFR § 121.201, NAICS Code 517919. 90 See U.S. Census Bureau, 2017 Economic Census of the United States, Selected Sectors: Sales, Value of Shipments, or Revenue Size of Firms for the U.S.: 2017, Table ID: EC1700SIZEREVFIRM, NAICS Code 517919, https://data.census.gov/cedsci/table?y=2017&n=517919&tid=ECNSIZE2017.EC1700SIZEREVFIRM&hidePrevie w=false. 91 Id. The available U.S. Census Bureau data does not provide a more precise estimate of the number of firms that meet the SBA size standard. We also note that according to the U.S. Census Bureau glossary, the terms receipts and revenues are used interchangeably, see https://www.census.gov/glossary/#term_ReceiptsRevenueServices. 92 See supra Section III.A. 93 See supra Section III.A. 94 See supra Section III.A. 38 Federal Communications Commission FCC-CIRC2207-02 22. Our proposals may also require affected LECs and Intermediate Access Providers to file tariff revisions to remove any tariff provisions they have filed for terminating tandem switched access or terminating switched access transport charges. Although we decline to opine on whether our proposals may require carriers to file further tariff revisions, affected carriers may nonetheless choose to file additional tariff revisions to add provisions allowing them to charge access-stimulating LECs or access- stimulating IPES Providers, rather than IXCs, for the termination of traffic. 23. As an alternative to imposing a measurement requirement on the IPES Provider, we seek comment on requiring that the Intermediate Access Provider calculate the IPES Provider’s traffic ratios for purposes of our Access Stimulation Rules.95 If adopted, this proposal could impose recordkeeping, reporting, and third-party notification requirements on Intermediate Access Providers. Under this alternative proposal, if the Intermediate Access Provider cannot perform this calculation, or the IPES Provider will not share relevant traffic ratio information with the Intermediate Access Provider, the Intermediate Access Provider would not be able to charge IXCs terminating switched access tandem switching or terminating switched access transport charges.96 24. Our proposals may also necessitate that affected carriers make various revisions to their billing systems. For example, Intermediate Access Providers that serve LECs with access-stimulating IPES Providers in the call path (or that deliver traffic directly to an IPES Provider when no LEC is in the call path) will no longer be able to charge IXCs terminating tandem switched access rates and transport charges. As Intermediate Access Providers cease billing IXCs they will likely need to make corresponding adjustments to their billing systems. 25. In the Further Notice, we also seek comment on other actions we could take to further discourage or eliminate access arbitrage activity. Rules which achieve these objectives could potentially affect recordkeeping, reporting, and third-party notification requirements. E. Steps Taken to Minimize the Significant Economic Impact on Small Entities and Significant Alternatives Considered 26. The RFA requires an agency to describe any significant alternatives that it has considered in reaching its proposed approach, which may include the following four alternatives (among others): (1) the establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance and reporting requirements under the rules for such small entities; (3) the use of performance rather than design standards; and (4) an exemption from coverage of the rule, or any part thereof, for such small entities.97 We expect to consider all of these factors when we receive substantive comment from the public and potentially affected entities. 27. In this Further Notice, we invite comment on a number of proposals and alternatives to modify our Access Stimulation Rules. The Commission has found these arbitrage practices inefficient and to ultimately increase consumer telecommunications rates. Therefore, in the Further Notice, we propose rules to further limit or eliminate the occurrence of access stimulation in turn promoting the efficient function of the nation’s telecommunications network. We believe that if companies are able to operate with greater efficiency this will benefit the communications network as a whole, and its users, by allowing companies to increase their investment in broadband deployment. 28. Thus, we propose to adopt rules to address arbitrage which takes place when an IPES Provider is incorporated into the call flow.98 We propose that when a LEC delivers traffic to an IPES 95 See supra Section III.A. 96 See supra Section III.A. 97 5 U.S.C. § 603(c)(1)-(4). 98 See supra Section III.A. 39 Federal Communications Commission FCC-CIRC2207-02 Provider and the terminating-to-originating traffic ratios of the IPES Provider exceed the triggers in the Access Stimulation Rules, the IPES Provider will be deemed to be engaged in access stimulation.99 In such cases, we propose that the Intermediate Access Provider would be prohibited from imposing tariffed terminating tandem switching and transport access charges on IXCs sending traffic to an IPES Provider or the IPES Provider’s end-user customer.100 As an alternative to imposing a measurement requirement on the IPES Provider, we could require that the Intermediate Access Provider calculate the IPES Provider’s traffic ratios for purposes of our Access Stimulation Rules.101 Under this alternative proposal, if the Intermediate Access Provider cannot perform this calculation, or the IPES Provider will not share relevant traffic ratio information with the Intermediate Access Provider, we would create a presumption that the IPES Provider’s traffic exceeds the Access Stimulation Rule ratios.102 In that case, the Intermediate Access Provider would not be able to charge IXCs terminating switched access tandem switching or terminating switched access transport charges.103 29. We also seek comment on whether IPES Providers should be treated as LECs for the purpose of our Access Stimulation Rules.104 We received a proposal in the record that the Commission should “issue a declaratory ruling clarifying that IPES Providers are treated as LECs for the purpose of the access stimulation rules.”105 We seek interested parties’ opinion on whether adopting such a proposal would be more or less burdensome on small businesses. 30. In the Further Notice, we also propose to require carriers to comply with any adopted rules within 45 days. We seek comment on this time period and whether interested parties foresee difficulties that would affect the time it will take to comply with the revised rules. We expect that time period will allow even small entities adequate time to amend their tariffs, if needed, and meet the requirements in the proposed rules. 31. Comment is sought on how best to address access arbitrage activities. In the Further Notice, we seek comment on the costs and benefits of these proposals.106 Providing carriers, especially small carriers, with options will enable them to best assess the financial effects on their operations allowing them to determine how best to respond. We invite comment on how our proposals may affect the costs and benefits to carriers and their customers and the choices they make, as they provide and receive telecommunications services. We invite commenters to quantify both the costs and the benefits of our proposals and of any alternative approaches to reducing access stimulation activities. 32. We expect to consider the economic impact on small entities, as identified in comments filed in response to the Further Notice and this IRFA, in reaching our final conclusions and promulgating rules in this proceeding. The proposals and questions laid out in the Further Notice are designed to ensure the Commission has a complete understanding of the benefits and potential burdens associated with the different proposed actions. F. Federal Rules that May Duplicate, Overlap, or Conflict with the Proposed Rules 33. None. 99 See supra Section III.A. 100 See supra Section III.A. 101 See supra Section III.A. 102 See supra Section III.A. 103 See supra Section III.A. 104 See supra Section III.B. 105 See supra Section III.B. 106 See supra Section III.E. 40