At least half of the disputes over switched access charges these days (and has been for years) is about when end office (local) switching charges apply. FCC regulations permit LECs to recover these charges for originating and terminating long-distance calls on their networks.

Historically, local switching charges were assessed on every switched access minute that assessed the public-switched telephone network (PSTN). However, as the industry has moved to an Internet Protocol (IP) over the last decade, especially to Voice over Internet Protocol (VoIP) which use both IP and the PSTN to complete calls, it has become more challenging to determine exactly when local switching charges apply.

The Commission addressed this issue in 2011 when it adopted the “VoIP Symmetry Rule.” The rule allowed LECs and their VoIP-provider partners to recover local switching costs for delivering voice traffic to their customers. However, it failed to consider the use of so-called “over-the-top" VoIP providers. Such providers use the Internet but are not dedicated to delivering a call to a specific end user. This led to many disputes as IXCs claimed local switching should not apply when there is no physical connection to a customer line involved.

In 2015 the FCC attempted to correct this. It adopted a Declaratory Ruling stating that the VoIP Symmetry Rule would apply to LECs that partner with over-the-top VoIP providers to assess local switching charges on their VoIP-PSTN calls regardless of whether the functions performed, or the technology used correspond precisely to those used under a traditional (time division multiplexing) (TDM) architecture. This Ruling was unclear and led to further disputes and appeals.

Unfortunately for the FCC, after AT&T appealed, the DC Circuit Court vacated and remanded the Ruling, finding it failed to consider that local switching charges required a physical connection of customer lines and network trunks.

[T]he D.C. Circuit rejected as arbitrary and capricious the Commission’s attempt to omit the physical connection of lines and trunks from the necessary functions of end office switching because it left the Commission unable to distinguish between end office and tandem switching. The court also found that the Commission had not successfully rebutted the commonly understood meaning of end office switching...dating back to the 1990s, [that] appear to identify end-office switching as supplying actual or physical interconnection. (Draft Order on Remand and Declaratory Ruling, Docket 10-90, at para.11).

After the Court remand, CenturyLink filed a Petition for Declaratory Ruling asking the Commission to reaffirm the 2015 Declaratory Ruling. The Commission never acted on that Petition.

Finally, the Commission plans on addressing all local switching outstanding issues, including the Court remand, the CenturyLink Petition and the ongoing battles over when local switching charges apply at its upcoming December 12, 2019 meeting.

The agency plans on approving an Order on Remand and Declaratory Ruling that it claims “would provide certainty to carriers, promote the deployment of modern all-IP networks, and advance competition in the voice services market, by interpreting the VoIP symmetry rule consistent with long-standing Commission precedent and the historical understanding of end office switching functions.” Here is what the Commission intends to do.

1. Reaffirm, consistent with Commission precedent, judicial precedent, and industry practice, that providing physical interconnection to facilities serving the end user is the hallmark of “end office switching.”
2. Clarify that only those VoIP-LEC partnerships where one of the partners provides a physical connection to the last-mile facilities used to serve the end user may collect end office switched access charges.
3. Provide clarity and certainty to carriers and reduce intercarrier compensation disputes—including helping to resolve past disputes—related to VoIP-PSTN traffic.
4. Deny CenturyLink’s Petition for Declaratory Ruling.

In other words,

A VoIP-LEC partnership that interconnects a call with a customer’s last-mile facility performs the functional equivalent of end office switching and may charge for that functionality. By contrast, a VoIP provider, or a VoIP-LEC partnership, that transmits calls to an unaffiliated ISP for routing over the Internet does not provide the functional equivalent of end office switching, and may not impose an end office switching access charge on IXCs that receive or deliver traffic to or from the VoIP-LEC partnership. (Id., at 14).

It is important to note that this Declaratory Ruling will take immediate effect as soon as it is released on or soon after December 12. It will also be effective retroactively to cover ongoing local switching disputes! As the Commission notes,

This retroactive clarification is necessary to provide clarity on the meaning of the VoIP Symmetry Rule. As such, we reject the assertion that the interpretation of the VoIP Symmetry Rule adopted in this Order may not be applied retroactively because such interpretation would result in “manifest injustice” and that our revised interpretation of the VoIP Symmetry Rule may be applied only prospectively.80 Instead, retroactivity is necessary to prevent an undue hardship being worked upon those parties who properly interpreted the VoIP Symmetry Rule and have been in disputes ever since. (Id., at para 26.).