In 2019 the FCC changed the switched access rules, eliminating the loophole in the system that made it possible for a few LECs to partner with intermediate carriers and drive up access rates and minutes charged. This action largely eliminated the industry’s long-term access stimulation problem (although a few companies are still fighting the Commission on this). What this means is that the one remaining significant access arbitrage problem is the issue of 8YY charges. There are now indications that the Commission may soon address this issue with the probable result being an eventual move to bill-and-keep for all 8YY calls.

There is little doubt these days that many 8YY calls are fraudulent and are generated precisely to charge long-distance providers usage-sensitive originating access charges and 8YY database query fees. According to AT&T:

The typical scheme centers around a toll-free [Session Initiation Protocol] Termination Provider. The SIP Termination Provider advertises itself to small CLECs and offers to deliver large amounts of 8YY calls to the CLEC if the CLEC will share the resulting access charge revenue. The SIP Termination Provider also has arrangements with Call Generators, which typically use software programs to generate VoIP calls to 8YY numbers...

In this scenario, the small CLEC charges AT&T both usage-sensitive originating access charges and an 8YY database query charge. The small CLEC has a revenue sharing arrangement with the SIP Termination Provider under which it shares some of the access revenue (with the SIP Termination Provider, in turn, passing some of the revenue on to the Call Generator). The goal of these traffic-pumping partnerships is to keep the 8YY call going for as long as possible (to generate the most originating access minutes), while doing so in such a way as to avoid arousing suspicion. (FCC Docket 18-156, AT&T 1-13-20 Ex Parte, at pp. 2-3).

AT&T notes that with the move to bill-and-keep for most terminating switched access charges, the lion’s share of its remaining switched access charges are generated by 8YY calls.

Starting with the total universe of switched access charges (originating and terminating), almost two-thirds of AT&T’s total switched access expense today comes from usage-based charges, and another 11 percent represent database query charges for 8YY calls. These charges are now overwhelmingly on the originating side: 77 percent of AT&T’s total usage-based switched access (including database query charges) expense is originating. This landscape reflects the Commission’s success in transitioning most terminating access to bill-and-keep. What little usage-sensitive terminating access expense remains today is almost entirely local transport, mostly from rate-of-return LECs, whereas end office charges, which today are almost all originating, remain 55 percent of AT&T’s total switched access usage expense.

Zeroing in on AT&T’s originating access expenses, those expenses break down into 43 percent end office, 37 percent local transport, and 20 percent 8YY database query charges. Most of these end office and local transport expenses are for 8YY calling: AT&T estimates that about 99 percent of CLEC originating access charges today are for 8YY calls, and CLECs represent the majority of AT&T’s access expenses today. (Id., at p. 4).

AT&T’s believes the industry should immediately move to bill-and-keep for all 8YY calls and notes that since only a few CLECs are generating these fraudulent calls, most CLECs would not be significantly impacted.

But as NTCA – The Rural Broadband Association points out, an immediate move to bill-and-keep could have serious ramifications for rural ILECs. These small ILECs almost surely would lose a significant (to them) amount of switched access revenue if they were to abruptly lose the revenue of legitimate 8YY calls, with no access recovery mechanism. Moreover, NTCA is concerned about interconnection and network edge issues if 8YY calls move to bill-and-keep.

[W]here a larger national provider would no longer be responsible for transport to and from RLECs in connection with exchange of calls, it is possible – and perhaps even likely given long-running arguments by such national providers – that these entities will leverage such changes to demand rearrangement of existing interconnection arrangements and to move network edges that define the financial (cost) responsibility for the transport of calls from existing locations in rural areas to points that may be hundreds or even thousands of miles from the rural areas where those calls originate or terminate...The shift of all financial responsibility to RLECs serving relatively small customer bases in remote rural areas for transport to reach distant points would undermine universal service and the ability to maintain reasonably comparable rates. (FCC Docket 18-156, NTCA 2-13-20 Ex Parte, at p. 2).

NTCA recommends that to ensure protection for rural ILECs, the Commission should not move to bill-and-keep without an appropriate multi-year transition and should ensure that rural ILECs have an opportunity to recover all lost access revenues.

To address network edge concerns, NTCA recommends that

[rural ILECs] will be responsible for transport to the CMRS provider’s chosen interconnection point when it is located within the [RLEC]’s service area.” In the event that the CMRS provider were to choose a network edge outside of that area, the RLEC’s “transport and provisioning obligation stops at its meet point and the CMRS provider is responsible for the remaining transport to its interconnection point. (Id.)

This rule would preserve existing network edges, protecting rural ILECs.

All parties should recognize that the FCC has taken notice that 8YY charges remains a major industry irritant and the sole remaining access stimulation loophole in its rules. Parties engaging in this practice may want to wean themselves off, since the Commission is likely to act this year.