After years of industry complaints about some carriers taking advantage of the current access charge structure for toll-free 8YY calls, the FCC finally announced that at its upcoming June 7, 2018 meeting it will initiate a Further Notice of Proposed Rulemaking (FNPRM) in Docket 18-156 to eliminate 8YY arbitrage once and for all. 

In the FNPRM, the Commission proposes to:

Shift, over a three-year transition period, all interstate and intrastate originating toll-free end office and tandem switching and transport charges to bill-and-keep;

Address abuses of toll-free database query charges by capping these charges on a nationwide basis at the lowest rate currently charged by any price cap LEC and limit database charges to a single charge per call;

Obtain industry comments on other issues related to reforming 8YY access charges, including the effect that moving most originating access charges for toll-free calls to bill-and-keep will have on consumers, toll-free subscribers, and carriers, as well as the best way for carriers to recover legitimate revenues they may lose as a result of these proposals

In the FNPRM, the Commission summarizes the continuing problem of permitting LECs to charge originating switched access charges on toll-free calls:

Under our current rules, the LEC that originates an 8YY call is entitled to charge the IXC that terminates the 8YY call originating access charges for the specific services provided, which would typically include originating end office switching, database queries, interoffice transport and, often, tandem switching and transport. The amount of access charges an originating LEC receives for such calls is dependent on the applicable switching and transport rates, including the number of miles that are subject to the transport charge, which is billed on a per-minute, per-mile basis. In some cases, the originating LEC and a third-party tandem provider bill the IXC separately, but some intermediate carriers submit one bill for originating and tandem and transport charges to the IXC and subsequently reimburse the originating carrier pursuant to an agreement between the originating LEC and the tandem carrier. (FNPRM, PARA 15).

In addition, the charges for the database query required on each 8YY call to determine the appropriate IXC, have gotten out of hand: 

Because database queries can originate from either an end office or a tandem office, tandem providers can also charge the IXC for database queries. According to AT&T, it is not unusual for an IXC to be assessed a database dip charge by both the LEC that originates an 8YY call, and by the tandem provider that picks up that call. AT&T claims that database queries account for a significant share—approximately 19 percent—of the originating access charges it is billed for 8YY calls. (Id.). 

Robocalls make the situation much worse:

Thus, in the case of 8YY traffic, originating carriers involved in the call have incentives to route calls in ways that maximize the compensation they receive—regardless of whether they receive those access revenues directly or indirectly, via shared revenue arrangements. Moreover, the current system encourages bad actors to place fraudulent, or otherwise illegitimate, robocalls with the sole purpose of generating originating access revenues. These inflated charges raise costs for both IXCs and 8YY subscribers, which have no control over the choice of originating and intermediate providers. (Id. At para 16.).

The Commission believes that transitioning all interstate and intrastate originating toll-free end office and tandem switching and transport charges to bill-and-keep and capping query charges will largely eliminate the 8YY arbitrage problem. However, the agency notes that this proposal is different from the current requirements for non-toll-free calls where terminating tandem switching and transport charges are only required to move to bill-and-keep when the terminating price cap LEC owns the tandem. Thus, as an alternative, the Commission asks the industry if the same requirements should exist for toll-free traffic:

Accordingly, we invite comment on an alternative proposal to transition all originating interstate and intrastate end office 8YY access charges to bill-and-keep, but to move 8YY tandem switching and transport to bill-and-keep only where the originating carrier also owns the tandem. Under this approach, we propose to cap the mileage that carriers can charge for tandem switching and transport based on the number of miles between the originating end office and the nearest tandem in the same local access and transport area (LATA). As part of this alternative approach, we also propose to cap tandem switching and transport rates based on the rates charged by the incumbent LEC serving the LATA in which the call originates, without regard to the rates charged by the incumbent LEC serving the area where the tandem is located. (Id., at para 49).

Commenting parties should explain to the Commission which proposal would best eliminate the existing arbitrage. Assuming the FNPRM is adopting on June 7th, industry comments will be due 60 days after publication in the Federal Register. 

The Commission's decision to finally eliminate the arbitrage in 8YY calls along with its complementary proposal to wipe out switched access traffic pumping are long overdue and are a victory for ethical carriers and the public. Too many carriers exist simply to profit off access arbitrage, and the industry will be far better off without them.