This week, the industry got its chance to comment on the May 14, 2018 Petition for Declaratory Ruling (Petition) filed by CenturyLink in Docket 10-90. In its Petition, the ILEC requested the FCC to end the industry uncertainty regarding whether switched access local switching charges should apply to traffic carried by over-the-top VoIP providers who ride another carrier's network such as a CLEC, and do not own the end user customer. 

CenturyLink argues that in this scenario, local switching charges should apply. 

CenturyLink continues to believe that the proper interpretation of these rules as applied to VoIP traffic exchanged with the PSTN is that they permit a LEC partnered with a VoIP provider to collect end office local switching...when the LEC and/or its VoIP partner perform certain critical call initiation or termination processes...irrespective of whether the VoIP provider also controls last-mile facilities used to reach the VoIP provider’s end user customer. (CenturyLink Petition, at p. 2).

This Petition may surprise some because a giant ILEC like CenturyLink is taking the side of CLECs. However, as those who follow it know, in the last few years, the company has become a mixed bag, purchasing large CLECs such as Level 3. Clearly, CenturyLink's CLEC affiliates have had difficulty getting switched access customers to pay for calls carried by their over-the-top VoIP partners. 

Unfortunately for CenturyLink, the other two giant ILECs, do not share CenturyLink's new-found fondness for CLECs, and they gave the Petition a clear thumbs down! For example, AT&T states:

All of the relevant precedents from the Commission and the courts—as well as the longstanding terms of CenturyLink’s own access tariff (and those of other incumbent LECs)— uniformly provide that the core and distinguishing function of an end office switch is the interconnection of calls on trunks to and from last-mile customer loop facilities...In fact, in 2011—the same year in which the VoIP rules were issued—the Commission emphatically held that end office switching charges were authorized to compensate LECs for making the substantial investment in switches that make tangible connections to their customers...By contrast, merely transmitting calls for routing over the public Internet is not equivalent to interconnection—and thus does not involve the same functions as end office switching.

In its Petition, CenturyLink nevertheless requests that the Commission rule that, for LECs and VoIP providers offering “over-the-top” VoIP calling—which, by definition, do not provide interconnection that places calls onto last-mile customer loop facilities—the 2011 rules should be interpreted to allow end office switching charges...Such a ruling cannot be sustained: there is simply no reasonable reading of the Commission’s 2011 rules—which incorporate decades of precedent that establish the meaning its key terms—that would allow LECs partnering with over-the-top VoIP providers to assess end office access charges.  Rather, the Commission should confirm that the 2011 rules have always prohibited end office switching charges on over-the-top VoIP calls.  (AT&T Comments, filed June 18, 2018, at p. 2).

Verizon agreed: 

The Commission should deny CenturyLink’s petition, consistent with its longstanding prohibition against LECs collecting access charges for functions they do not provide. Despite that clear rule, some competitive LECs and their over-the-top VoIP provider partners have engaged in arbitrage and double billing by claiming that placing traffic on the Internet to be routed to customers anywhere in the country (or the world) is the functional equivalent of end office switching. Beyond that, some competitive LECs are increasingly purchasing toll-free traffic — often fraudulently generated — from over-the-top VoIP providers to exploit the still high originating end office switched access rates, as well as routing IP traffic through multiple competitive LECs to generate duplicative billing. The petition, if granted, would give license to those arbitrage schemes. (Verizon Comments, filed June 18, 2018 at p. 1).

The opinion here is that AT&T and Verizon are correct. Simply connecting a customer to the Internet does not duplicate the end office functions of local switching. Therefore, switched access charges should not apply. 

There is too much arbitrage occurring in telecommunications. Until inter-carrier compensation moves to bill-and-keep, the FCC would be well advised to restrict the recovery of switched access charges to LECs that own the end user customer and are the ones providing the actual functions of originating and terminating long distance calls.