The first of the final two steps* in the FCC’s transition to “bill and keep” for terminating switched access is just a couple of months away. This is the phase that impacts Transport rates – and by Transport I mean Tandem Switching, Transport (fixed and per-mile), and Common Transport Multiplexing. Bill and keep is a way of referring to zero intercarrier compensation – each carrier bills its own end users and keeps that revenue rather than sharing a portion via some carrier-to-carrier compensation method.
In apparent recognition that not all Transport services are provided by carriers that have that end user relationship, the FCC does not require a move to bill and keep when the terminating carrier (i.e., end office provider) does not own the serving tandem switch. In other words, third party Transport providers’ rates do not need to be reduced in this final march to bill and keep. But what exactly defines a third party relationship in this context? That’s where it gets interesting. Opinions on tariffing a nd billing in a post Step 6 environment vary in some substantial ways. Certain end office/tandem relationships remain compensable at current rates, while others drop to zero – and there is now not a clear enough distinction between the two that shows consideration of the broad access market ramifications or provides sufficient regulatory certainty.
The confusion is significant enough – and the long-term market implications important enough – that CenturyLink has petitioned for a partial stay of Steps 6 and 7. In its petition, CenturyLink explained how it and the other price cap LECs sought guidance from the FCC on some of the Steps 6/7 details. What really got my attention was that while the clarifications were helpful in some ways, they also created additional, rather substantive questions. Rather than just filling in some minor details, the informal guidance ventured into some necessary – but, as yet, not fully explored -- policy matters.
CenturyLink’s argument that moving forward without the partial stay will “prematurely cement in place a disparate treatment of these [Transport] services based on arbitrary distinctions” is compelling. As one who works with many carriers and prepares dozens of access tariff filings every year, CenturyLink’s prediction that, absent a stay, “there will likely be a confusing morass as carriers take a variety of different approaches to the Section 51.907(g) requirements in the Year 6 annual tariff filing process that begins June 16, 2017” is not overstated – nor is it just a prediction. I am seeing confusion among carriers right now. And the more I engage in Step 6/7 planning discussions, the more this disruptive uncertainty materializes.
The switched access market has been plagued by ongoing, costly regulatory and legal disputes. The existing Rules on Steps 6 and 7, in combination with the FCC’s informal guidance to the price cap LECs, sets the stage for a whole new round of switched access controversy. Yes – Steps 6 and 7 have been on the calendar since the end of 2011. It seems only recently, however, that carriers have begun to realize that interpretations on these important (and long duration) steps vary, and the current combination of formal and informal guidance will not change that.
Comments on the CenturyLink Petition are due tomorrow, May 4, and Reply Comments are due May 11. Scene from "The Graduate" 1967
So, if you have an opinion on Steps 6 and 7, it’s time to speak now or forever hold your peace.
* For price cap LECs and CLECs that benchmark to price cap LECs
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