Last June the FCC released a Notice of Proposed Rulemaking (NPRM) in Docket 18-155 to once and for all stop certain CLECs from taking advantage of the arbitrage in switched access rates by artificially stimulating long-distance traffic to gain excess profits. Specifically, the Commission stated that access stimulation occurs when:

[A] local exchange carrier (LEC) with relatively-high switched access rates enters into an arrangement to terminate calls—often in a remote area—for an entity with a high call volume operation, such as a chat line, adult entertainment calls, and “free” conference calls, collectively high call volume services. (NPRM, Released June 5, 2018, at para. 2).

The agency noted that access stimulation harms consumers, undermines broadband deployment and distorts competition.

Now, nine months later, it appears a decision on access stimulation is imminent. As evidence, there have been a flurry of lobbying efforts recently by CLECs that engage in access stimulation. They are attempting to convince the Commission that their practice is beneficial to the public because it generates revenues that these LECs use to build broadband networks and provide free conference calling to many poor households.

The CLECs have even mounted a mini net neutrality-type of lobbying effort with several thousand consumers writing letters to express their concern that they will lose this “free” service.

Despite these efforts, it will be an uphill battle for these CLECs. The FCC has never accepted their arguments in the past and it is doubtful it will now. In 2011, the Commission took concrete steps to eliminate access stimulation when it moved many terminating switched access elements to bill-and-keep and identified LECs with one-sided originating to terminating access traffic ratios. Such LECs were forced to reduce their access rates. While this stopped the majority of traffic pumping, some LECs cleverly adjusted:

The record indicates that today’s access arbitrage schemes are often enabled by the use of intermediate access providers selected by the terminating LECs. When an intermediate access provider is in the call path, the IXC pays access charges on a per-minute-of-use (MOU) basis to the intermediate access provider and to the terminating LEC. This tactic evades existing Commission rules intended to stop access stimulation to the extent that an intermediate access provider is not captured by the definition of “access stimulation,” and thus, is not subject to those rules. (Id., at para. 6).

To end the arbitrage opportunities inherent in the current system, the Commission now plans to give carriers engaging in access stimulation a choice of either (1) accepting financial responsibility for terminating traffic delivered to their end offices; or, (2) accepting direct connections from the IXC or an intermediate carrier chosen by the IXC. If the stimulating LEC chooses to accept financial responsibility, it would:

[B]ear all financial responsibility for applicable intermediate access provider terminating charges normally assessed to an IXC (from the point of indirect interconnection to the access-stimulating LEC’s end office or functional equivalent), and would be prohibited from assessing transport charges for any portion of transport between the intermediate access provider and the LEC’s end office or functional equivalent that the LEC, itself, provides. (Id., at para. 10.).

If the access stimulator would rather not pay for terminating calls, it could, instead, allow direct connects:

Under this proposal, IXCs would have the option of selecting an intermediate access provider that would bill the IXC for transport to the access-stimulating LEC on a dedicated basis...[A]s a result of this election, an IXC would have the choice to connect with an access-stimulating LEC directly or indirectly through the LEC’s existing intermediate access provider or another IXC directly connecting to the access-stimulating LEC. (Id., at para. 13).

After the NPRM was released, access charge payers coalesced around the first alternative. As AT&T recently noted:

[T]he cost causer, in this case the access stimulator, should bear sole responsibility for the expenses associated with delivery of access stimulation traffic; AT&T reiterates that adopting the NPRM’s ‘prong one’ remains the most economically rational course of action and is most in line with the Commission’s stated policy goals of placing the cost where it should reside in a properly functioning marketplace—with the access stimulator who should look to its subscribers to recover network costs. (AT&T, March 7, 2019 letter to FCC, Docket 18-155, at p. 1.).

Recently, the Las Vegas-based CLEC Wide Voice offered a compromise in which the Commission would not target all the access charges of access stimulators but would concentrate only on tandem switching.

Rather than unnecessarily reversing interconnection obligations and compensation flows for one, often difficult to identify, category of LEC, the Commission should focus its efforts on further achieving the longstanding rate unity goals of the USF/ICC Transformation Order. The Commission should adopt a 15-mile transport rate cap for access stimulators. Doing so would simply and directly address the concerns at issue in this NPRM and eliminate any warrant for excessive restructuring at this late stage of the switched access compensation mechanism. (Wide Voice, January 15, 2019 letter to FCC, Docket 18-155, at p. 5).

The problem with this proposal is that there is no economic justification for a transport cap of 15 miles. It is simply a number plucked from the air. Therefore, it will almost certainly be rejected.

While the Commission is likely to accept the first alternative in its NPRM, it is also possible (and highly desirable) that it would pair this with a proposal to transition the remaining access elements to bill-and-keep. That is because no matter how many times the Commission tries to stop access stimulation, it will continue while arbitrage opportunities in access rates exist. Everybody knows this, especially the Commission