8YY Access Charge Reform, 31099-31116 [2018-14150]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 83, Number 128 (Tuesday, July 3, 2018)]
[Proposed Rules]
[Pages 31099-31116]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-14150]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 51 and 61

[WC Docket No. 18-156; FCC 18-76]


8YY Access Charge Reform

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, the Commission proposes to migrate 
interstate and intrastate originating end office and tandem switching 
and transport charges for toll free (8YY) calls to bill-and-keep, 
continuing the reform efforts that began with the 2011 USF/ICC 
Transformation Order. The Commission also proposes to cap 8YY database 
query rates at the lowest rate charged by any price cap local exchange 
carrier, and to limit charges to one database query charge per call, 
regardless of the number of carriers are in the call path or the number 
of database queries conducted. These proposals should limit 
unreasonably inflated charges and reduce or eliminate incentives for 
parties to engage in the types of abuse described in the record.

DATES: Comments must be submitted on or before September 4, 2018. Reply 
comments must be submitted on or before October 1, 2018.

ADDRESSES: You may submit comments, identified by WC Docket No. 18-156, 
by any of the following methods:
     Federal Communications Commission's Website: https://apps.fcc.gov/ecfs//. Follow the instructions for submitting comments.
     People with Disabilities: Contact the FCC to request 
reasonable accommodations (accessible format documents, sign language 
interpreters, CART, etc.) by email: [email protected] or phone: 202-418-
0530 or TTY: 888-835-5322.
    For detailed instructions for submitting comments and additional 
information on the rulemaking process, see the SUPPLEMENTARY 
INFORMATION section of this document.

FOR FURTHER INFORMATION CONTACT: Irina Asoskov, Wireline Competition 
Bureau, Pricing Policy Division at 202-418-2196 or at 
[email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's 
Further Notice of Proposed Rulemaking (FNPRM or Notice), FCC 18-76, 
released on June 8, 2018. A full-text version of the Further Notice of 
Proposed Rulemaking may be obtained at the following internet address: 
https://docs.fcc.gov/public/attachments/fcc-18-76a1.pdf.

I. Background

    1. AT&T first introduced interstate toll free service, using 800 
numbers, in 1967. The defining characteristic of that service, then 
known as Inward Wide Area Telecommunications Service (WATS), was that 
such calls were paid for by the company that received the calls and had 
subscribed to the toll free service. At the time, and for many years 
after, interstate calling rates were substantial, so the calling party 
received significant financial benefit from making a toll free call 
rather than a direct-dialed long distance (or toll) call. Today, by 
contrast, the prevalence of unlimited minutes plans for both wireless 
and wireline service and the advent of the internet and other advances 
in communications have reduced the financial benefit to the calling 
party of being able to make a telephone call and not pay for the toll 
portion of the call.
    2. Nonetheless, many businesses and consumers continue to find 8YY 
numbers useful. Demand for 8YY numbers continues to grow. In fact, the 
Commission recently authorized a new 833 code to supplement the 800, 
888, 877, 866, 855, and 844 codes already in use for 8YY calling. The 
record offers several explanations for the continued demand for 8YY 
numbers. A toll free number can give a business a national presence and 
``project a professional image.'' Toll free numbers can also act as a 
powerful branding tool, particularly if the subscriber can obtain a 
vanity number, such as 1-800-FLOWERS, that promotes its business. Many 
businesses also use toll free numbers to track the effectiveness of 
their advertising and marketing strategy. These marketing efforts 
increase the demand for toll free numbers, as businesses need to assign 
unique numbers to each advertising campaign or even to different 
segments of the same advertising campaign.
    3. The record indicates that 8YY minutes of use appear to be 
increasing, at least relative to other originating access minutes. As a 
result, according to some commenters, 8YY calls account for a 
substantial majority of originating access minutes. We seek comment on 
parties' experiences regarding demand for 8YY numbers and legitimate 
minutes of use. We also invite parties to provide additional 
information regarding the usefulness of 8YY numbers and demand for 8YY 
services.

A. History of Intercarrier Compensation for 8YY Calls

    4. Following the breakup of AT&T, the Commission analyzed the 
treatment of toll free originating and terminating switched access 
charges for purposes of carrier revenue recovery. In addition to end 
office rate elements, the Commission allowed LECs to recover a portion 
of fixed local loop costs through the carrier common line (CCL) charge 
that LECs were allowed to recover from IXCs. In devising the CCL rate 
element for toll free calls, the Commission recognized that toll free 
calls generally ``originated over regular local loops and terminated 
over a dedicated access line to the 8YY subscriber's premises.'' The 
Commission referred to the originating end of such calls as the ``open 
end'' and the terminating end as the ``closed end.'' In the 1986 WATS 
Order, the Commission placed the bulk of CCL charges on terminating 
access minutes,

[[Page 31100]]

allowing carriers to recover the rest of their loop costs through 
traffic-sensitive charges. The Commission also exempted the ``closed 
end'' of the call from the CCL charges, based on a finding that the 
costs of the closed end of a toll free call were covered by special 
access charges. Exempting the ``closed end'' of 8YY calls from CCL 
charges, however, meant that ``800 traffic would be exempt from carrier 
common line charges altogether, despite the fact that it makes use of 
the public switched network.'' In other words, because LECs recovered 
the bulk of their loop costs from terminating access charges, and the 
terminating end of toll free calls was exempt from the CCL charge, LECs 
were not able to recover from IXCs the loop costs associated with 
originating 8YY calls. The Commission allowed LECs to recover their 
loop costs by treating the originating (open) end of interstate 8YY 
calls as terminating for purposes of assessing the CCL charge.
    5. In 1997, the Commission reaffirmed its prior decision that the 
``open end'' of an 8YY call should be treated as the terminating end 
for access charge purposes. The Commission noted that ``an IXC is 
unable to influence the end user's choice of access provider for 
originating access services because the end user on the terminating end 
is paying for the [8YY] call.'' In the early 2000s, the Commission 
eliminated the CCL charge, but did not specifically address 8YY 
services. At present, originating carriers receive payments from 8YY 
providers for originating interstate toll free calls through 
originating end office, tandem switching and transport, and database 
query charges.
    6. Database query charges. From 1967, when AT&T first introduced 
toll free service, until late 1986, ``LECs were unable to provide 
access for 800 service to any IXC other than AT&T.'' In 1986, the Bell 
Operating Companies (BOCs) and other LECs began offering other IXCs 8YY 
access through an NXX-based methodology, whereby the first three digits 
following the 800 prefix of the dialed number were associated with a 
specific IXC. Toll free subscribers seeking a particular 800 number had 
to obtain it from the IXC to which the NXX in that number had been 
assigned and could not change carriers without changing their 800 
number. For example, if MCI had been assigned all numbers beginning 
with 800-468, then someone who wanted to subscribe to 800-468-3927 
(800-GO-TEXAS) would have to do business with MCI. In 1989, the BOCs 
and some other carriers began developing ``common channel signaling 
networks based on the CCS7 protocol,'' in which their CCS7 networks 
would be linked with databases containing the 800 service information. 
The Commission established a separate access element for the database 
cost recovery. The Commission required LECs to ``develop rates for 800 
data base access based only on their data-base-specific costs'' and 
expressed an expectation that the costs associated with the 800 number 
database would be ``relatively modest.''
    7. In 1993, the Commission determined that the newly-created 800 
database was ``absolutely necessary to the provision of 800 service 
using the data base access system'' and concluded that access to the 
database must be provided pursuant to tariff. In contrast to NXX-based 
routing, which relied on LECs using their central office switches to 
process 800 calls, the new routing technology required originating LECs 
to route 8YY calls through a switch equipped with a ``service switching 
point'' (SSP). The SSP would then ``suspend'' routing of the call until 
it determined where to send it by transmitting a query over the 
signaling system 7 (SS7) to a regional service control point (SCP). The 
SCP would regularly obtain routing information from the central (SMS/
800) database. Not all end offices of the LECs that owned an SCP were 
connected to the SCP. 8YY calls from consumers served by end offices 
that were not connected to an SCP were routed to one of the LEC's 
tandem switches equipped with an SCP and the call would be processed 
from there. Those LECs that did not own an SCP could purchase query 
services from a LEC that did.
    8. In a series of orders, the Commission determined that certain 
costs associated with the provision of 8YY database query services were 
reasonable and allowed price cap and rate-of-return carriers to include 
them in their rate calculations.

B. Access Charge Reforms Adopted in the USF/ICC Transformation Order

    9. In the USF/ICC Transformation Order, the Commission found that, 
over time, the intercarrier compensation system had become ``riddled 
with inefficiencies and opportunities for wasteful arbitrage.'' To rid 
the system of arbitrage schemes that impose ``undue costs on consumers, 
inefficiently diverting capital away from more productive uses such as 
broadband deployment'' and to provide incentives to transition 
telecommunications networks to IP technology, the Commission adopted a 
national, default bill-and-keep framework as the ultimate end state of 
all telecommunications traffic exchanged with a LEC. As the first step 
in implementing that framework, the Commission adopted a multi-year 
transition to bill-and-keep for many terminating access charges, 
determined that ``the originating access regime should be reformed,'' 
and capped most originating access charges, with the exception of 
intrastate originating access charges of rate-of-return carriers. The 
cap applied to a wide range of originating access charges, including, 
but not limited to, database query charges. The Commission also adopted 
bill-and-keep as the default compensation regime for non-access traffic 
between LECs and commercial mobile radio service (CMRS) providers, thus 
bringing that traffic into parity with CMRS-related access traffic, 
which had long been subject to bill-and-keep.
    10. Based on a determination that concerns regarding network 
inefficiencies, arbitrage, and costly litigation were ``less pressing 
with respect to originating access'' than with respect to terminating 
access, the Commission did not adopt any further reforms to originating 
access charges. In a Further Notice of Proposed Rulemaking that 
accompanied the USF/ICC Transformation Order, the Commission sought 
comment on the steps it should take to transition originating access 
and transport to bill-and-keep, as well as issues related to 8YY 
traffic. The Commission sought comment on the timing, transition, and 
possible need for a recovery mechanism for the remaining rate elements. 
The Commission explained that access charges for originating 8YY 
traffic have been treated similarly to terminating access charges for 
non-8YY calls. It sought comment on ``the appropriate treatment of 8YY 
originated minutes'' and on whether 8YY access reform should be treated 
differently from originating access reform more generally. Comments 
regarding these issues were mixed.

C. 8YY Routing and Related Access Elements

    11. To understand how the current 8YY system allows for arbitrage 
and fraud, it is necessary to understand the typical wireline call path 
for, and intercarrier charges associated with, 8YY calls. As described 
by various commenters, when a wireline customer places a call to an 8YY 
number, the call is initially carried by the caller's LEC to that 
carrier's end office switch. At that point, the LEC may conduct the 
database query from the end office switch to the SCP, where it obtains 
the routing information. Then the LEC may route the call to a tandem 
switch which

[[Page 31101]]

may or may not be owned by the same LEC. If the LEC did not conduct the 
database query at its end office, then it may conduct the query from a 
tandem office, or it may rely on a third-party tandem provider to 
perform the database query. Once the routing information has been 
obtained, the call is then routed to the IXC--either directly, or 
through an intermediate provider--and, ultimately, the 8YY customer.
    12. 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. 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.
    13. 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.
    14. While we have described the typical call paths for 8YY calls as 
laid out by commenters in the current record, to further our 
understanding of the issues, we invite commenters to provide additional 
information about their experiences with various call paths associated 
with 8YY calls.

D. More Recent Procedural History

    15. On September 30, 2016, AT&T filed a petition seeking 
forbearance from, among other things, rules related to the tariffing of 
8YY database query charges. AT&T alleged that ``some LECs are engaged 
in schemes to overcharge'' for certain originating 8YY traffic and 
claimed that ``arbitrage schemes are increasingly shifting to 8YY.'' 
AT&T pointed to a ``wide variation in the tariffed charges'' for 8YY 
database queries and asserted that the rates it had negotiated in 
contracts with some providers were generally lower--and more uniform--
than the tariffed rates for those services.
    16. Other IXCs echoed many of AT&T's concerns. Verizon argued that 
``[t]raffic pumping involving sham 8YY calls already is a serious 
arbitrage problem'' and Sprint agreed that the charges for 8YY database 
queries are ``unjustifiably high.'' Even parties that opposed the 
forbearance petition acknowledged that the variances in 8YY database 
query charges may create arbitrage opportunities. AT&T withdrew its 
petition before the Commission reached a decision.
    17. Subsequently, on May 19, 2017, the Ad Hoc Telecommunications 
Users Committee (Ad Hoc) filed an ex parte letter, urging the 
Commission to require carriers to ``apply the per minute charges for 
terminating traffic to the originating or `open' end of 8YY calls.'' Ad 
Hoc asserts that the Commission could reduce or eliminate incentives to 
use 8YY for arbitrage and access stimulation schemes if it were to 
treat originating 8YY calls the same as terminating access calls for 
purposes of intercarrier compensation.
    18. In a public notice dated June 29, 2017, the Wireline 
Competition Bureau invited interested parties to update the record on 
issues raised by the Commission in the USF/ICC Transformation Order 
with respect to access charges for 8YY. We incorporate the comments 
from the June 29, 2017 Public Notice and the FNPRM portion of the USF/
ICC Transformation Order into this record and seek further comment on 
issues related to 8YY access charge reform, as discussed in greater 
detail below.

II. Alleged Abuses of the 8YY Intercarrier Compensation Regime

    19. Parties raise concerns about abuses of the 8YY intercarrier 
compensation regime. Based on the current record in this proceeding, we 
propose to revise our rules to change the incentives that are leading 
to these reported abuses.
    20. In the USF/ICC Transformation Order, the Commission acted to 
``reduce arbitrage and competitive distortions'' which had occurred 
over time. However, commenters allege that because the Commission left 
originating access charges ``largely unreformed and expensive,'' abuses 
of the intercarrier compensation system with respect to 8YY service 
have flourished. The record currently includes descriptions of at least 
four different categories of schemes by which carriers are reported to 
be exploiting the current regime governing intercarrier compensation 
for originating 8YY traffic. In the interest of having a robust record, 
we seek additional comment on the existence, prevalence, and impact of 
each of these reported schemes and on any other 8YY-related schemes 
that commenters propose we address.
    21. Benchmarking abuse. Currently, pursuant to the competitive LEC 
benchmarking rule, competitive LECs are permitted to tariff interstate 
access charges at a level no higher than the tariffed rate for such 
services offered by the incumbent LEC serving the same geographic area. 
Commenters complain that some competitive LECs aggregate 8YY traffic 
from originating LECs and instead of ``benchmark[ing] its originating 
tandem switched transport rates to the rates tariffed by the incumbent 
LEC in the area where the call originated, the CLEC bills the higher 
rates tariffed by the incumbent LEC in the area where the call is 
handed off to the IXC.'' We seek comment on this practice and on 
whether it is a legitimate practice or an improper attempt to exploit a 
loophole in the Commission's rules. Are there examples of other forms 
of potential benchmarking abuse in addition to the one we describe 
here? How prevalent is benchmarking abuse? How much does it cost 
individual IXCs or 8YY subscribers in additional access charges? Are 
there legitimate reasons a LEC would choose to hand off 8YY traffic in 
an area other than where the call originated?
    22. Mileage pumping. Because originating carriers charge IXCs for 
transport on a per-minute, per-mile basis, the farther they transport 
the originating traffic, the greater the compensation they receive from 
the IXC serving the 8YY subscriber. As a result, originating carriers 
have an incentive to artificially inflate their mileage in order to 
maximize the transport rates they charge to the IXC, particularly if

[[Page 31102]]

transport rates are materially higher than transport costs, as some 
commenters' filings suggest. In fact, AT&T alleges that carriers engage 
in ``mileage pumping'' schemes, in which ``a CLEC tariffs a per-mile 
charge for transport and then either (i) bills the IXC for transport it 
does not actually provide . . . or (ii) inefficiently routes traffic 
long distances--sometimes more than a hundred miles--to inflate the 
number of miles applied to the per-mile transport charge.'' We seek 
comment on this practice. Are there other examples of mileage pumping 
schemes that differ from the ones described by AT&T? If so, please 
describe them. How prevalent are mileage pumping schemes? How much do 
they cost 8YY providers or subscribers in inflated charges? Are there 
legitimate reasons a carrier would haul traffic 100 miles or more 
before handing it off to an IXC?
    23. Traffic pumping. There is also evidence in the record that 
companies are using traffic pumping schemes to exploit inflated access 
rates. As described by commenters, in these schemes, a traffic pumper 
enters into a revenue sharing agreement with a LEC and subsequently 
uses automated software to place illegitimate calls to 8YY numbers. 
These calls often use auto dialers or ``robocallers'' to target 
Interactive Voice Response (IVR) systems and use varying means to keep 
the IVR engaged, preventing the call from ending. The LEC then bills 
the IXC for the calls--including the artificially inflated minutes of 
use--and shares the proceeds with the traffic pumper. These 
``[a]nnoying and disruptive 8YY calls'' waste the targeted businesses' 
resources and ``devalue [providers'] 8YY products.'' We seek comment on 
this practice. How prevalent are traffic pumping schemes involving toll 
free calls? Are there examples of 8YY traffic pumping schemes that 
differ materially from those already described in the record? We 
encourage parties to quantify the costs these schemes impose on 8YY 
providers and subscribers.
    24. Database queries. As the least regulated rate element of the 
8YY traffic flow, database queries also appear to have been the subject 
of abuse. Commenters point out substantial variance in database charges 
and contend that query charges are excessive and unrelated to actual 
costs. For example, AT&T provides numerous examples of database query 
charges, ranging from as low as $0.0015 to as high as $0.015. IXCs also 
claim that there are times when they are billed for multiple queries on 
a single call. We invite commenters to provide information about the 
actual cost of a database query to a LEC compared to the amount IXCs 
are being assessed for the database dips. We also seek comment on the 
impact on IXCs and their customers of paying these database charges. 
Are there ways for IXCs to determine whether a call has been ``dipped'' 
more than once? Is there any legitimate reason for a call to be 
subjected to multiple dips?
    25. Other abuses. We also seek comment on whether there are any 
other abuses related to 8YY access charges that are not described 
above. If so, what are they? What impact do any other 8YY-related 
abuses have on carriers and on 8YY subscribers? To the extent that 
commenters identify other abuses of the 8YY system, we seek comment on 
whether our proposed reforms would sufficiently address those abuses. 
If not, what additional measures would we need to take to eliminate 
those abuses?

III. Addressing Alleged Abuses of the 8YY Intercarrier Compensation 
Regime

    26. To address abuses of the current 8YY intercarrier compensation 
system, we propose to move, over time, all originating interstate and 
intrastate end office and tandem switching and transport charges 
related to 8YY calls to bill-and-keep. To avoid a flash cut to bill-
and-keep for originating 8YY access charges, we propose a three-year 
transition period. We propose to allow originating carriers to recover 
their costs primarily through end-user charges, though we invite 
comment on allowing some recovery through Connect America Fund (CAF) 
support. We also propose to cap 8YY database query rates nationwide and 
to prohibit carriers from assessing more than one database query charge 
per call, even if more than one carrier handles the call before it is 
handed off to an IXC. Additionally, we seek comment on other issues 
related to 8YY traffic, including alternative approaches to address 
abuses related to 8YY calls.

A. Moving 8YY Originating End Office and Tandem Switching and Transport 
Charges to Bill-and-Keep

    27. Consistent with the bill-and-keep framework the Commission 
adopted as ``a default framework and end state for all intercarrier 
compensation traffic,'' we propose moving all interstate and intrastate 
originating access charges related to 8YY calls to bill-and-keep, 
except for database query charges. We seek comment on this proposal. We 
also seek comment on an alternative approach that would transition all 
originating interstate and intrastate end office 8YY access charges to 
bill-and-keep but move 8YY tandem switching and transport to bill-and-
keep only where the originating carrier also owns the tandem.
1. Moving Most Elements of Originating 8YY Access Charges to Bill-and-
Keep Should Curtail Abuses of 8YY Calls
    28. The current record shows that toll free subscribers are 
burdened by unpredictable and uncontrollable call volumes and 
associated charges for calls to their 8YY numbers. With the 
proliferation of unlawful robocalls, the volume of traffic routed to 
8YY numbers no longer depends on the ``promotional efforts'' of the 8YY 
subscriber. Indeed, just the opposite is true--fraudulent calls are 
only ``controllable from the originating point.'' And there is 
significant evidence that some carriers are exploiting loopholes in the 
current intercarrier compensation system to inflate their bills to IXCs 
that serve 8YY customers. The intercarrier compensation system needs to 
adapt to this new reality.
    29. Accordingly, in an effort to combat the abuses that appear to 
plague the existing 8YY regime, we propose to move interstate and 
intrastate originating 8YY end office, tandem switching and transport 
access charges to bill-and-keep. Consistent with the USF/ICC 
Transformation Order, we propose to allow carriers to negotiate private 
agreements that depart from bill-and-keep, but not permit carriers to 
tariff any originating end office or tandem switching and transport 
charges related to 8YY traffic. We seek comment on this approach. Are 
there any obstacles that would prevent carriers from moving to bill-
and-keep for these charges? Would our proposal adequately address the 
problems currently plaguing the 8YY industry? As explained below, we 
expect our proposed changes to have numerous benefits, including: 
Removing incentives for abuse, reducing costs for consumers, 
potentially lowering rates or improving service for 8YY subscribers, 
encouraging the transition to IP services, and reducing the number of 
disputes over intercarrier compensation.
    30. The basic logic underpinning our proposal is that each carrier 
should be responsible for the costs of the parts of the call path which 
it has discretion to choose. Should we adopt any exceptions to the 
proposal? For example, are there instances where an IXC, or some other 
party, may require the originating LEC to route traffic through a 
specific tandem? If so, should the originating LEC be allowed to charge 
the IXC for the costs it incurs in using that tandem? If the 
originating LEC routes 8YY traffic over a tandem that it does not own, 
how should the

[[Page 31103]]

originating LEC and the tandem owner recover their respective costs? 
Should the originating LEC be required to pay the tandem owner for the 
use of the tandem and recover those costs from its own end users? Are 
there situations where such an arrangement would not be just and 
reasonable?
    31. Curtailing abuses. We seek comment on the extent to which our 
proposals will curtail 8YY abuses. In the USF/ICC Transformation Order, 
the Commission found that, over time, bill-and-keep will ``eliminate 
wasteful arbitrage schemes and other behaviors designed to take 
advantage of or avoid above-cost interconnection rates.'' The 
Commission's prediction has proven accurate, as filings submitted in 
this proceeding indicate that the transition to bill-and-keep has 
reduced fraud and abuse related to terminating traffic. However, the 
reforms adopted in the USF/ICC Transformation Order did not address 8YY 
traffic, and the record in this proceeding shows an increase in certain 
types of abuses ``designed to take advantage'' of the intercarrier 
compensation system, such as the inefficient routing of 8YY calls.
    32. In light of the positive outcome of bill-and-keep for 
terminating traffic, we expect that our proposed reforms to 8YY 
originating access charges will eliminate abuses--including 
benchmarking, mileage pumping, and traffic pumping schemes--related to 
8YY calls. All of these schemes arise from carriers' ability to bill 
IXCs inflated access charges relating to 8YY traffic. Moving the access 
elements associated with these abuses to bill-and-keep should eliminate 
any ability to profit from these activities. We expect the proposed 
reforms will provide originating carriers with the incentive to be as 
efficient and cost-effective as possible in routing 8YY traffic. We 
seek comment on this expectation.
    33. Based on the current record in this proceeding, we propose to 
revise our rules to change the incentives that are leading to abuses of 
the intercarrier compensation system for 8YY. We seek comment on each 
of these alleged abuses, including mileage pumping, traffic pumping, 
benchmarking abuse, and excessive and unnecessary database dips. How 
should our rules be modified to curb such abuses? Will moving 
originating end office and tandem switching and transport rates for 8YY 
calls to bill-and-keep discourage carriers from engaging in traffic or 
mileage pumping? We seek comment on any costs and burdens on small 
entities associated with the proposed rules, including data quantifying 
the extent of those costs or burdens.
    34. At least one competitive LEC that offers toll free services to 
businesses and also provides originating 8YY services opposes proposals 
to move originating access charges to bill-and-keep. This carrier 
asserts that fraudulent toll free calls should be addressed on a case-
by-case basis through inter-carrier cooperation and by the Commission's 
Enforcement Bureau and the Federal Bureau of Investigation. This 
carrier's contracts require its customers to adopt anti-fraud measures 
and provide remedies against customers that are suspected of engaging 
in unlawful activity. Do other carriers use similar contract 
provisions? How effective are they? What efforts do carriers or their 
customers make to identify illegitimate 8YY calls? How effective are 
those efforts? What security mechanisms do wholesalers or traffic 
aggregators employ to screen incoming calls? What obstacles do carriers 
or 8YY subscribers face in distinguishing illegitimate traffic from 
legitimate traffic? We seek comment on these and other issues related 
to the alternative approach of addressing unlawful toll free calls on a 
case-by-case basis.
a. Benefits to Consumers
    35. We seek comment on the extent to which our proposals will 
benefit consumers. In the USF/ICC Transformation Order, the Commission 
concluded that the intercarrier compensation regime distorted 
competition because carriers shifted their network costs onto other 
carriers and, as a result, consumers could not identify and switch to 
more efficient providers. At the same time, the Commission observed 
that ``because the calling party chooses the access provider but does 
not pay for the toll call, it has no incentive to select a provider 
with lower originating access rates.'' In the 8YY industry, consumers 
who call 8YY telephone numbers are not charged directly for the calls, 
do not know what their originating carrier is charging for routing 
their 8YY call and, therefore, cannot exercise effective consumer 
choice. Yet, inefficiencies and abuses of the intercarrier compensation 
system result in higher prices to 8YY subscribers, who must recover 
their costs from their customers--a group that likely includes 
originating 8YY callers. Thus, in the end, consumers indirectly 
subsidize inefficiencies and abuses of the 8YY intercarrier 
compensation system.
    36. In the USF/ICC Transformation Order, the Commission reviewed 
economic evidence and concluded that, upon transitioning to bill-and-
keep, ``carriers will reduce consumers' effective price of calling, 
through reduced charges and/or improved service quality.'' The 
Commission further predicted that these ``reduced quality-adjusted 
prices will lead to substantial savings on calls made, and to increased 
calling.'' This prediction appears to have proven true. For example, 
while there are several factors that may explain increased calling, 
significant growth has occurred in wireless subscribership since the 
Commission moved all CMRS traffic to bill-and-keep.
    37. We recognize that consumers appear to find toll free calling an 
attractive way to reach certain businesses and do not expect that to 
change if we move originating access charges for 8YY calls to bill-and-
keep. Given that the Commission has already moved wireless calls--
including 8YY calls from wireless numbers--to bill-and-keep, consumers' 
use of wireless services may be instructive in helping predict the 
effects our proposed changes will have on consumers' use of toll free 
services. Are there any lessons we can learn from the effect bill-and-
keep has had on wireless 8YY calls? We seek data on whether wireless 
8YY originating calls have increased or decreased over the past five 
years. Do consumers make fewer toll free calls from wireless phones 
than they do from wireline phones? Has the number of 8YY calls 
decreased as more people have switched to wireless phones as their 
primary method of telecommunications?
    38. We expect that transitioning 8YY calls to bill-and-keep will 
ultimately benefit consumers. We invite comment on this view and 
welcome commenters to provide economic analysis and data in support of 
their views.
b. Benefits to 8YY Subscribers
    39. We seek comment on the extent to which our proposals will 
benefit 8YY subscribers. Because incentives in the 8YY industry are 
misaligned (8YY subscribers are paying originating carriers that they 
did not select), 8YY subscribers are likely paying higher rates than 
they otherwise would, even for legitimate 8YY traffic. We anticipate 
that, by correctly aligning carriers' incentives and pricing signals, 
bill-and-keep will lead to increased competition and ``reduced quality-
adjusted prices'' for 8YY subscribers. In addition, we predict that 
moving to bill-and-keep will prompt ``carriers [to] engage in 
substantial innovation to attract and retain'' customers.
    40. We seek comment on these expectations and predictions. Are our 
proposed changes to the 8YY access charge regime likely to result in 
lower

[[Page 31104]]

rates for 8YY subscribers? Will our proposed changes lead to more 
competition and innovation? In the USF/ICC Transformation Order, the 
Commission estimated that ``incumbent LECs will, on average, pass 
through at least 50 percent of ICC savings to end users, while CMRS 
providers and competitive LECs will pass through at least 75 percent of 
these savings.'' Should we expect similar passthrough levels by 8YY 
providers? Are there effects that resulted from the Commission's 
actions in the USF/ICC Transformation Order that might be instructive 
here?
c. Encouraging the Transition to All-IP Services
    41. We seek comment on the extent to which our proposals will 
encourage the transition to all-IP services. We are concerned that the 
current compensation regime creates disincentives for carriers to 
transition to IP. For example, AT&T claims that ``CLECs engaged in 
arbitrage are resisting agreements to exchange traffic in IP format 
because they are reluctant to relinquish high access revenues from 
originating 8YY traffic that would go to bill-and-keep under an IP 
arrangement.'' Are other parties having similar experiences? Do other 
parties share AT&T's concerns that the current intercarrier 
compensation system is impeding the transition to all-IP services?
    42. There is no obvious justification for using tandem switches in 
an IP environment. As a result, carriers might be reluctant to 
transition to IP-based services because of concerns about lost 
intercarrier compensation revenues. We seek comment on this issue. Are 
there carriers that are reluctant to move to IP-based interconnection 
due to concerns about losing intercarrier compensation revenues? Will 
moving originating 8YY access charges--particularly tandem switching 
and transport charges--to bill-and-keep expedite the transition to IP 
services? Will it discipline prices? Will it improve network 
efficiency?
d. Reducing Intercarrier Compensation Disputes
    43. We seek comment on the extent to which our proposals will 
reduce intercarrier compensation disputes. The Commission found in the 
USF/ICC Transformation Order that ``bill-and-keep will . . . reduce 
ongoing call monitoring, intercarrier billing disputes, and contract 
enforcement efforts.'' Similarly, we expect that by eliminating the 
incentives to abuse the intercarrier compensation system for 8YY 
traffic, our proposed reforms will allow carriers to reduce the 
resources they currently dedicate to monitoring their 8YY call traffic 
and disputing 8YY invoices.
    44. We invite comment on these expectations. What would be the 
monetary impact of such savings? Is there any reason that our proposed 
reforms would not reduce intercarrier disputes related to 8YY calls? 
Are there any other benefits that are likely to arise from moving most 
8YY intercarrier compensation charges to bill-and-keep, in addition to 
the ones already discussed in this Notice?
2. Alternative Proposal
    45. We recognize that our proposal to move all tandem switching and 
transport to bill-and-keep is a departure from the approach the 
Commission took in reforming terminating access charges. In the USF/ICC 
Transformation Order, the Commission adopted bill-and-keep for 
terminating tandem switching and transport only where the terminating 
price cap carrier owns the tandem. 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.
    46. We seek comment on whether this alternative proposal would 
adequately address abuses in the 8YY marketplace, including 
benchmarking abuse and mileage pumping. If we adopt this approach, what 
are the relative benefits compared to our proposed framework for 
transitioning all tandem switching and transport elements of 
originating toll free traffic to bill-and-keep? For example, under this 
alternative approach, would there be less need for revenue recovery? 
How would common ownership of the end office and tandem be determined? 
Should we determine ownership at the holding company level? Is there 
any reason that an originating LEC should not be deemed to ``own'' a 
tandem that is owned or operated by an affiliate of the originating 
LEC? Finally, we seek comment on the drawbacks of this alternative 
proposal, particularly relative to our proposal to adopt bill-and-keep 
as the default methodology for all 8YY originating access charges, 
without regard to who owns the tandem.

B. Providing a Transition Period

    47. We propose to provide a three-year transition period for moving 
originating end office and tandem switching and transport access 
charges for 8YY calls to bill-and-keep. In proposing this transition, 
we acknowledge concerns that a ``flash cut'' to bill-and-keep might be 
``hugely disruptive for originating access providers and . . . could 
prompt `financial distress.' '' Adopting a glide path will allow 
providers to evaluate their cost recovery options and make any 
appropriate changes to their end-user rates to offset the loss of 8YY 
access payments.
    48. A three-year transition period would be consistent with the 
Commission's decision, in the USF/ICC Transformation Order, to adopt a 
glide path to a bill-and-keep methodology for many terminating access 
charges. That decision was prompted by a desire to ``provide industry 
with certainty and sufficient time to adapt to a changed regulatory 
landscape.'' As the Commission explained, ``adopting a gradual glide 
path to a bill-and-keep methodology for intercarrier compensation 
generally . . . will help avoid market disruption to service providers 
and consumers'' and ``moderate potential adverse effects on consumers 
and carriers of moving too quickly.''
    49. We propose a three-step transition process that corresponds 
with the process for filing annual access tariffs, to become effective 
on July 1 of every year. Each step will last one year and apply to all 
LECs that tariff rates related to originating 8YY calls. The rules will 
apply directly to incumbent LECs, including both rate-of-return 
carriers and price cap LECs, and will apply to competitive LECs through 
the continuing application of the existing benchmarking rule. At the 
first step, to become effective on July 1 of the base year, we propose 
to require carriers to reduce all interstate and intrastate originating 
end office and tandem switching and transport tariffed rates for 8YY 
calls by one-third. At the second step, one year later, we propose to 
require carriers to further reduce their originating end office and 
tandem switching and transport rates for 8YY calls by an additional 
one-third. At the third and final step, two years after the base year 
filing, we propose to require

[[Page 31105]]

carriers to move their tariffed rates for originating 8YY end office 
and tandem switching and transport to bill-and-keep. We seek comment on 
this proposal.
    50. Do commenters have concerns about the adoption of a transition 
period? Should we adopt different transition periods for originating 
end office access charges and for tandem switching and transport 
charges? If so, why and what should they be? Will our proposed 
transition adequately address concerns about problems associated with a 
flash cut? Conversely, would a shorter transition of 8YY traffic to 
bill-and-keep help speed the transition to IP services? Would the 
proposed transition impact some carriers differently than others? Are 
there any other aspects of 8YY traffic flow that we should address when 
we consider a transition period? We also seek comment on our proposed 
rules for effectuating this proposal. Do the proposed rules provide 
sufficient guidance for implementing our proposed transition period? 
Are there additional issues that we should address in the proposed 
rules to avoid confusion during implementation?
    51. Consistent with the rules the Commission adopted to implement 
the transition to bill-and-keep for terminating end office access 
services in the USF/ICC Transformation Order, we propose to require 
carriers to first convert their originating 8YY access charges to 
single composite per-minute rates for each of the four categories of 
services being transitioned (interstate originating end office access, 
intrastate originating end office access, interstate originating tandem 
switched transport access, and intrastate originating tandem switched 
transport access). Our proposed rules require LECs to calculate their 
baseline rates--which will be the starting point for the rate 
reductions described above--by dividing their baseline revenues from a 
particular category of access charges (e.g., interstate originating end 
office access charges for toll free calls) by the corresponding minutes 
of use for that category. We seek comment on this proposed approach. 
What lessons can be learned from implementation of the transition to 
bill-and-keep for terminating end office access services that we should 
apply here? Would this approach be reasonably straightforward to 
implement? Are there potential gaming or other implementation concerns 
about which we should be concerned?
    52. In the alternative, should we require LECs to reduce all rate 
elements for originating end office and tandem switching and transport 
for toll free calls by one-third the first year, by an additional one-
third the second year, and to bill-and-keep the third year? Would such 
an approach be simpler for carriers to implement from a tariffing and 
billing perspective? Does it make any difference to the carriers paying 
these access charges whether the transition involves composite rates? 
What are the advantages and disadvantages to one approach as compared 
to the other? Are there potential gaming or other implementation 
concerns about which we should be concerned if we adopt this three-year 
transition approach?
    53. Unlike the rules the Commission adopted in the Transformation 
Order, our proposed rules do not specifically address the treatment of 
fixed charges (e.g., non-recurring charges and some monthly recurring 
charges, such as those billed on a per-DS1 or per-DS3 basis). We seek 
comment on whether we should address such charges in connection with 
toll free calls by, for example, requiring LECs to allocate their fixed 
charges between 8YY and non-8YY calls. Or, should we bring per-minute 
charges related to originating toll free calls to bill-and-keep but 
defer action on fixed charges until we address originating access 
charges more broadly outside of the toll free context? Does the answer 
to this question depend on whether we require LECs to adopt composite 
rates as part of the transition of 8YY originating access charges to 
bill-and-keep?
    54. If we decide to include fixed charges as part of our reforms of 
originating access charges for 8YY calls, should we dictate a specific 
methodology for allocating such charges between toll free and other 
originating traffic? If so, how should the rules allocate fixed charges 
between 8YY and non-8YY calls? In the USF/ICC Transformation Order, the 
Commission directed carriers to allocate fifty percent of their fixed 
charges to terminating access and fifty percent to originating access. 
Should we take a similar approach here and direct LECs to allocate half 
of their fixed charges for originating access to toll free traffic? Or 
should a greater percentage of fixed charges be allocated to toll free 
originating traffic, particularly given that filings in the record 
suggest that toll free calls account for significantly more than half 
of all originating access minutes billed to IXCs? In the alternative, 
should we allow LECs to allocate based on their particular traffic 
data, but establish a default allocation for carriers that lack 
sufficient information regarding their traffic data? If we establish a 
default allocation, should the percentage be fifty percent allocated to 
8YY calls? Or should the percentage be different?
    55. In the USF/ICC Transformation Order, the Commission modified 
the CLEC benchmarking rule and adopted ``a limited allowance of 
additional time to make tariff filings during the transition period'' 
in order ``to ensure smooth operation of our transition'' to bill-and-
keep. We seek comment on whether a similar allowance is warranted here. 
For example, should we allow competitive LECs that benchmark their 
originating 8YY access charges to a competing incumbent LEC an 
additional 15 days from the effective date of the tariff to which a 
competitive LEC is benchmarking to make its modified tariff filing? 
Would such an allowance be necessary if we adopted our alternative 
proposal and required LECs to reduce their individual rate elements for 
toll free calls rather than converting their existing charges to 
composite per-minute rates? If all LECs were required to reduce their 
originating access rates for 8YY calls by the same proportions, would 
it be necessary to give competitive LECs additional time after 
incumbent LECs file their tariffs to come into compliance with the 
proposed reductions? We invite comments on these issues, as well as any 
other suggested modifications to the application of the CLEC 
benchmarking rule during the transition period, based on lessons 
learned during the transition to bill-and-keep for terminating access 
charges.
    56. We seek comment on any costs and burdens on small entities 
associated with the proposed rule, including data quantifying the 
extent of those costs or burdens. We also invite suggested 
modifications to the proposed transition. Are there other issues we 
should consider? Are there lessons learned during the transition to 
bill-and-keep for terminating access charges that should inform our 
approach here? Any alternative approaches should also be supported by 
data and other evidence showing their relative advantages and 
disadvantages. We welcome specific comments on the language and the 
potential impact of the proposed rules accompanying this item.

C. Revenue Recovery

    57. Some commenters express concerns about the financial impact of 
moving 8YY calls to bill-and-keep and argue that some carriers may need 
a source of revenue recovery to mitigate the impact of lost access 
revenues. Other commenters express concern that moving originating 
access for 8YY calls to bill-and-keep might deter consumers

[[Page 31106]]

from making toll free calls. The latter concerns appear to be based on 
an assumption that carriers will directly bill consumers for 
originating 8YY access on a per-call or per-minute basis. We do not 
propose that carriers should recover any lost revenue through 8YY-
specific charges, whether billed per-call, per-minute, or on a flat-
rated monthly basis. Such an approach would be inconsistent with the 
way most customers are billed for voice services today (e.g., flat-
rated, unlimited calling plans). We seek comment on whether there are 
additional steps we should take to address concerns that our proposed 
reforms might discourage legitimate 8YY calls.
    58. In the USF/ICC Transformation Order, the Commission adopted a 
transitional recovery mechanism to partially mitigate revenue 
reductions incumbent LECs would experience because of these 
intercarrier compensation reform measures. The recovery mechanism had 
two basic components. First, the Commission defined the revenue 
incumbent LECs were eligible to recover--referred to as ``Eligible 
Recovery.'' The Eligible Recovery calculation was different for price 
cap carriers and rate-of-return carriers, with the rate-of-return 
calculation based on a more complex formula, which included such 
carriers' 2011 interstate switched access revenue requirement. Second, 
the Commission specified that incumbent LECs may recover Eligible 
Recovery through limited end-user charges, and, where eligible, and a 
carrier elects to receive it, support from the CAF. The recovery 
mechanism differed between price cap carriers and rate-of-return 
carriers, with CAF ICC support for price cap carriers eventually 
phasing out, but no similar sunset for rate-of return carriers. The 
Commission declined to permit competitive LECs to participate in the 
recovery mechanism, explaining that, because competitive LECs lack 
market power for the provision of these services, they were free to 
recover reduced access revenue through regular end-user charges.
    59. More recently, in the Technology Transitions Order, the 
Commission concluded that incumbent LECs, like competitive LECs, are 
``non-dominant in their provision of interstate switched access 
services.'' Accordingly, incumbent LECs, like competitive LECs, should 
be able to recover revenues they may lose as a result of our proposals 
directly from their end users, subject only to the discipline of the 
market. This is similar to the approach the Commission took with 
competitive LECs in the USF/ICC Transformation Order, and to the 
approach the Commission adopted with CMRS providers. When those 
providers were transitioned to bill-and-keep, the Commission did not 
provide any revenue recovery mechanisms. Instead, the Commission relied 
on the competitive market to determine whether, and how much, those 
providers could increase their rates to recover any revenues lost due 
to the transition to bill-and-keep.
    60. We seek comment on whether incumbent LECs, like competitive 
LECs, should be able to recover their lost access charge revenues from 
their end users. Should the market determine whether any rate increases 
are reasonable? Is there any reason consumers would not be able to 
switch providers--for example, moving from a wireline LEC to a wireless 
provider--if their existing carrier charges too much for its services? 
Is there any reason LECs cannot adjust their end-user rates to recover 
revenues they may lose due to our proposed changes to the intercarrier 
compensation regime for originating 8YY calls? Should we provide any 
additional revenue recovery? For example, should we allow incumbent 
LECs to recover lost revenue through mechanisms, such as the Access 
Recovery Charge (ARC)? Why would carriers need to rely on ARCs if they 
are nondominant in the provision of the originating switched access 
services at issue here? If we allow carriers to recover lost revenues 
through ARCs, would we need to raise the Residential Rate Ceiling, 
which currently prohibits providers from imposing an ARC on any 
consumer paying an inclusive local monthly phone rate of $30 or more, 
in order to allow sufficient revenue recovery? Would we need to 
increase the existing cap on ARCs? Are there other issues to consider 
if we allow price cap carriers and competitive LECs to rely on 
increased ARCs? Are there any regulatory barriers that might impede 
incumbent LECs' ability to recover a reasonable amount of lost revenue 
from their end users? Are there any state or local regulations that 
would prevent LECs from raising their end-user rates to recover 
reasonable lost revenues related to intrastate 8YY calls?
    61. We also propose to exclude from any recovery mechanism revenues 
generated by illegitimate or unlawful 8YY calls, such as those 
involving autodialed calls to toll free numbers, because it would be 
unreasonable for a LEC to rely on access revenues generated by such 
calls. We seek comment on this issue. We also seek comment on how we 
should determine which portion of originating carriers' 8YY revenues 
are legitimate for purposes of establishing the need for revenue 
recovery. Do we need to make any determinations regarding what revenues 
LECs should reasonably be allowed to recover from their end users, or 
can we rely on the competitive market to discipline carriers' switched 
access rates?
    62. Rate-of-return carriers. While we propose to allow rate-of-
return carriers to recover their legitimate 8YY costs through 
reasonable increases in end-user rates--though not through new line 
items--we recognize that many rate-of-return carriers, particularly 
those serving rural areas, already require CAF ICC support to keep end-
user rates at acceptable levels. We seek detailed comment on the effect 
transitioning originating 8YY charges to bill-and-keep will have on 
rural and high-cost areas. Would rate-of-return carriers be 
disproportionately affected compared to price cap and competitive LECs? 
For example, for rate-of-return carriers, what proportion of 
originating access revenues are attributable to 8YY calls? Does this 
proportion differ significantly from that of price cap carriers? What 
effect would our existing rate-averaging and rate-integration rules 
have on our proposed reforms? We seek comment on the need for 
originating LECs to replace the revenues they currently obtain from 8YY 
calls. We urge commenters, whenever possible, to provide quantifiable 
data or evidence supporting their views.
    63. We also seek comment on whether we should provide rate-of-
return carriers additional CAF ICC support to help cover the costs of 
originating 8YY access or to replace some or all of the revenue such 
carriers currently earn from originating access on legitimate 8YY 
calls. Would using CAF ICC support in this manner comport with the 
Commission's mandate under section 254 to advance universal service 
through ``specific, predictable and sufficient'' mechanisms?

D. Limiting Database Query Charges

1. Adopting a Uniform Cap
    64. According to at least one commenter, database query charges 
comprise a significant proportion of the charges IXCs currently pay to 
originating LECs for 8YY calls. From the originating carrier's 
perspective, the database query is a cost a LEC must incur in order to 
route an 8YY call to the proper IXC, either by maintaining its own SCP 
database or by paying a third-party SCP for the database query.
    65. Nonetheless, we recognize the need to rein in any unreasonable

[[Page 31107]]

charges for database queries. IXCs point out that 8YY database query 
rates vary widely among carriers and are typically untethered from the 
costs incurred in querying a database. We propose to address concerns 
about excessive and irrationally priced rates for database query 
charges by capping those charges nationwide at the lowest rate 
currently charged by any price cap LEC. We also propose to allow only 
one database query charge per 8YY call.
    66. We invite comment on these proposals. In this item, we do not 
propose to move database query charges to bill-and-keep. Are there 
reasons that we should consider doing so immediately? Should we revisit 
that question after a set period of time? Are there harms that might 
arise if we moved other elements of originating access for 8YY to bill-
and-keep, before we moved database query charges to bill-and-keep? We 
also seek comment on alternative methods of ensuring that database dip 
charges are just and reasonable.
    67. Is the proposed cap on database query charges reasonable? 
Should we adopt a transition period for carriers to lower their rates 
to the proposed cap? If so, how should we structure such a transition 
period? Should we adopt a firm cap, as we propose, or should we 
establish a rebuttable presumption that rates above a certain threshold 
are presumptively unjust and unreasonable? Should we provide a specific 
waiver process for carriers that can demonstrate that their costs for 
database queries exceed the national cap? Should we build in automatic 
reductions to the permissible data base query charge to account for 
improvements in technology? If so, what amounts and over what 
timeframe? Conversely, should we allow adjustments to any rate caps to 
account for inflation? Does this proposal create the proper incentives 
for carriers to minimize access costs and route 8YY traffic as 
efficiently as possible? We also seek comment on any costs and burdens 
on small entities associated with this proposal, including data 
quantifying the extent of those costs or burdens.
2. Determining the Appropriate Cap
    68. AT&T alleges that query rates currently range from $0.0015 to 
$0.015 per query, and that rates can vary widely even among corporate 
affiliates. We seek comment and additional data on the variability of 
8YY database query rates. Do the rate examples provided by AT&T 
accurately reflect carriers' rates for database queries? We recognize 
that the rates were capped at their then-current levels by the adoption 
of the USF/ICC Transformation Order, but we seek comment on the 
underlying reason for the extreme variability in rates for database 
queries. Are these rates reflective of the costs carriers incur in 
providing database dip services? Do querying costs vary by geographic 
region? Do query rates (or costs) vary by the type of customer? How do 
incumbent LECs set their database query rates? What impact have high 
database query rates had on IXCs and 8YY subscribers?
    69. Evidence provided by AT&T indicates that the lowest rate 
currently charged by a price cap LEC is $0.0015 per query, charged by 
CenturyTel. Is this correct? If so, is there any reason this rate 
should not serve as a nationwide cap for all 8YY database query 
charges? Are rates above $0.0015 per query unjust and unreasonable? Is 
there any reason to believe this rate is below the cost of querying the 
database? Inteliquent observes that,

[r]ate structures between incumbent local exchange carriers trade 
off non-recurring setup charges, monthly recurring interconnect 
charges, 8YY query charge, per minute of use switching charges, and 
per minute per mile transport charges. For example, although some 
carriers charge a materially higher non-recurring set up charge or 
monthly recurring interconnect charge, those higher rates typically 
are offset by a lower per minute of use switching charge. Similarly, 
the 8YY DIP query charge may be high because the switched per minute 
of use charge is low, and vice versa.

    70. Is this a correct representation of how LECs allocate their 
charges? Is there any reason to believe that CenturyTel's rate of 
$0.0015 is artificially low because CenturyTel allocates some database 
dip costs to other originating charges? Should we consider a cap based 
on the average or median rates currently charged by LECs?
    71. What infrastructure is necessary to conduct a database query? 
How expensive is it to become an SCP owner/operator? How many SCP 
owner/operators are there? Is the market for database queries 
competitive? We encourage commenters to provide detailed information 
about the rates SCP's charge for database dips, the costs LECs incur in 
connecting to SCPs, and any other costs associated with database 
queries. Are there economies of scale associated with database dips?
    72. We understand that Somos is offering a new product--RouteLink, 
which ``provides direct access to authoritative Toll-Free data,'' thus 
eliminating any need for an SCP intermediary. How many carriers, 
Responsible Organizations (``RespOrgs''), or other entities use Somos's 
RouteLink? What advantages does RouteLink provide compared to other 
ways to connect to Somos's database? What effect, if any, does the 
introduction of RouteLink have on what constitutes a reasonable rate 
for database queries?
3. One Dip per Call
    73. Regarding our proposal to limit carriers to one database query 
charge per call, we recognize that the Commission has previously 
declined to impose such a requirement on LECs. Instead, the Commission 
deferred the matter to an industry association, the Ordering and 
Billing Forum of the Exchange Carrier Standards Association. Did this 
Association take any action on database query charges? Should the 
Commission act now, given the current concerns about carriers billing 
IXCs for more than one query per call? Specifically, we seek comment on 
whether billing for more than one query charge per 8YY call is an 
unjust and unreasonable practice, even if the duplicative queries are 
performed by different carriers in the call chain. Is there any 
legitimate reason that an IXC should reasonably be expected to pay for 
multiple database queries in connection with a single 8YY call?

E. Legal Authority

    74. In the USF/ICC Transformation Order, the Commission determined 
that it had the authority to comprehensively reform intercarrier 
compensation and move all interstate and intrastate access charges to 
bill-and-keep, explaining that ``the legal authority to adopt the bill-
and-keep methodology described herein applies to all intercarrier 
compensation traffic.'' Pursuant to this authority, the Commission 
adopted bill-and-keep as the end state for all traffic exchanged 
between carriers and adopted a glide path toward that methodology for 
all terminating access charges.
    75. The Commission's actions in the USF/ICC Transformation Order 
were upheld on appeal, including the Commission's decision to prescribe 
bill-and-keep as the default methodology for intercarrier compensation 
for various categories of traffic. The Court specifically rejected 
challenges to Commission's regulation of originating charges, noting 
that the FCC's inclusion of originating access charges in its reform 
effort was ``reasonable'' and entitled to deference.
    76. Our statutory authority to implement changes to pricing 
methodology governing the exchange of traffic with LECs flows directly 
from sections 251(b)(5) and 201(b) of the Act.

[[Page 31108]]

Section 251(b)(5) states that LECs have a ``duty to establish 
reciprocal compensation arrangements for the transport and termination 
of telecommunications.'' In addition to providing the substantive 
authority for various rules and requirements, the Supreme Court in AT&T 
Corp. v. Iowa Utilities Board, held that ``the grant in Sec.  201(b) 
means what it says: The FCC has rulemaking authority to carry out the 
`provisions of this Act,' which include Sec. Sec.  251 and 252.''
    77. In addition to our authority to reform originating 8YY access 
charges, we also have authority to establish a transition plan for 
moving toward that ultimate objective in a manner that will minimize 
market disruptions. Indeed, the Commission's pre-existing regimes for 
establishing reciprocal compensation rates for section 251(b)(5) 
traffic have been upheld as lawful, and can be applied to originating 
8YY traffic, as provided by our transitional intercarrier compensation 
rules related to ``ultimately phasing down'' originating access 
charges. As the U.S. Court of Appeals for the D.C. Circuit has 
recognized, ``[w]hen necessary to avoid excessively burdening carriers, 
the gradual implementation of new rates and policies is a standard tool 
of the Commission,'' and the transition ``may certainly be accomplished 
gradually to permit the affected carriers, subscribers and state 
regulators to adjust to the new pricing system, thus preserving the 
efficient operation of the interstate telephone network during the 
interim.''
    78. We invite comment on our legal authority to adopt the changes 
to the 8YY intercarrier compensation system that we are proposing in 
this Notice. Is there any reason that the precedents cited above would 
not apply to our current proposals? Does the Commission have the 
authority to create a revenue recovery mechanism and to cap database 
query charges as part of its reform of 8YY originating access? Does the 
Commission have the authority to make these changes pursuant to one or 
more different statutory provisions, other than sections 201(b) and 
251(b)(5)?

F. Related Issues

1. Role of Intermediate Providers
    79. To better inform our reform efforts, we seek comment on the 
role intermediate providers, such as third-party tandem providers, or 
other providers that are interposed in the call path between an 
originating carrier and 8YY providers, play in the 8YY market. We also 
seek comment on how wireless 8YY calls have been affected by the fact 
that CMRS providers cannot charge originating access charges.
    80. Several parties express frustration with certain practices 
employed by intermediate providers in the 8YY call flow. In particular, 
some carriers complain about the role intermediate providers play in 
facilitating abuses of the 8YY intercarrier compensation system. We 
seek comment on whether intermediate providers perform a legitimate 
function that should be preserved. Once originating 8YY traffic moves 
to bill-and-keep, we expect the market will determine how much, if 
anything, aggregators or other ``middlemen'' should be paid for their 
services (including database queries). Should the Commission provide 
any regulations or guidance regarding the offering of these services or 
compensation for these services? Or can we rely on the marketplace?
2. Network Edge
    81. Although we have issued a separate Public Notice to refresh the 
record on other intercarrier compensation issues, including the network 
edge, we seek comment on whether the network edge requires a distinct 
approach in the 8YY context, particularly in a scenario where an IXC 
seeks a direct connection for 8YY originating traffic. Parties argue 
that some carriers take advantage of the Commission's current rules by 
specifying inefficient transport routes for 8YY traffic. Should 
originating carriers be allowed to specify a certain transport route, 
particularly if they are financially responsible for the transport? 
Should we develop separate rules for certain locations (e.g., Alaska) 
with respect to 8YY traffic? What role, if any, should states continue 
to play in determining the network edge for 8YY traffic?
3. Traffic Imbalances
    82. Some parties argue that bill-and-keep is inappropriate for toll 
free calls because the traffic flow is unbalanced, i.e., 8YY 
subscribers are unlikely to call consumers and, therefore, the traffic 
always flows from the consumer to the 8YY subscriber. These arguments 
do not strike us as persuasive. As the Commission explained in the USF/
ICC Transformation Order, ``both parties generally benefit from 
participating in a call, and therefore . . . both parties should split 
the cost of the call.'' This reasoning applies to 8YY calls. If callers 
did not benefit from placing an 8YY call, then we would expect to see a 
decline in demand for 8YY numbers as well as in volume of 8YY calls, 
especially as more and more consumers have moved to wireless-only 
methods of telecommunications. This is not the case, however, as demand 
for 8YY numbers appears to be growing, as do minutes of use. Thus, it 
is clear that 8YY calls confer some benefit not only to the 8YY 
subscriber, but also to the calling party.
    83. Indeed, the Commission has previously ``reject[ed] claims that, 
as a policy matter, bill-and-keep is only appropriate in the case of 
roughly balanced traffic.'' We continue to reject such claims and 
reiterate that ``bill-and-keep is most consistent with the models used 
for wireless and IP networks, models that have flourished and promoted 
innovation and investment without any symmetry or balanced traffic 
requirement.'' Nonetheless, we seek comment on whether there is a 
legitimate reason to find that traffic imbalances make 8YY calls ill-
suited for bill-and-keep.
4. CMRS Providers
    84. We do not include CMRS providers in our proposals because 
wireless carriers are already subject to bill-and-keep for 8YY calls 
and their end-user rates remain largely unregulated. We seek comment on 
whether there are any CMRS-related issues we need to address in this 
proceeding. Have CMRS providers been able to meet their revenue needs 
for originating 8YY calls through pre-existing end-user charges? If 
not, what other mechanisms have CMRS providers used to meet their 
revenue needs related to originating 8YY calls?
    85. Some commenters assert that CMRS providers collect revenue for 
originating 8YY calls pursuant to revenue sharing arrangements with 
intermediate providers. We seek comment on this allegation. Are there 
wireless carriers that refuse to connect directly with other providers 
in order to facilitate revenue sharing arrangements? If so, how 
prevalent is this practice? What rationale do wireless providers use 
for refusing direct connection? How are 8YY access charges and database 
dips affected by a refusal of direct connection?
    86. We also seek comment on what lessons we can learn from the 
wireless experience with bill-and-keep as we reform originating access 
for wireline 8YY calls. What is the typical call path for wireless 8YY 
calls? Does it differ materially from the call path for wireline 8YY 
calls? Have wireless rates increased to account for access costs for 
which CMRS providers cannot charge other carriers? If so, how large 
have these rate increases been? Has competition effectively disciplined

[[Page 31109]]

CMRS providers' ability to increase their rates to account for ``lost'' 
access charge revenues?
5. Unintended Consequences
    87. Although we expect our proposals to bring numerous benefits to 
both carriers and end users, we do not want to overlook any potentially 
negative unintended consequences that could result from our proposed 
reforms. We therefore seek comment on the potential risks related to 
our proposals.
a. Potential Effects on Consumers
    88. Some commenters object that moving 8YY calls to bill-and-keep 
would undermine consumer expectations that 8YY calls are ``free'' to 
the calling party. Other parties counter that, ``from the beginning,'' 
the term ``toll-free'' has meant that ``the caller doesn't pay toll--
i.e., long distance--charges, not that the caller's monthly charge on 
his or her local bill will never change.'' Under our proposal, 8YY 
calls will remain ``toll free'' because originating callers will not be 
charged for the long-distance portion of the call. Nonetheless, we seek 
comment on whether 8YY calls will continue to meet consumers' 
expectations of ``toll free.'' Would it still be accurate to label 
these calls ``toll free'' since the long distance, or ``toll'' portion 
of the call would be free to the caller and paid by the 8YY subscriber?
    89. Some carriers claim they will need to educate their customers 
if toll free calls are no longer ``free.'' Would any consumer education 
be necessary or appropriate if we were to adopt our proposals? Do 
consumers need to be informed of the change in our originating access 
charge regime for 8YY calls? If so, what would it cost to disseminate 
such information? Who should bear the costs of educating consumers 
about these changes? Is there any merit to claims that transitioning 
8YY to bill-and-keep would leave providers open to ``false 
advertising'' claims because ``toll free'' calls will not be completely 
free? Are there any other possible negative consequences for consumers 
resulting from transitioning 8YY traffic to bill-and-keep?
b. Potential Effects on 8YY Subscribers
    90. Some commenters argue that moving originating 8YY access 
charges to bill-and-keep would harm 8YY subscribers, because consumers 
will be reluctant to place 8YY calls. Despite these concerns, the 
largest toll free subscribers appear to favor transitioning 8YY traffic 
to bill-and-keep. Would our proposed reforms disproportionately affect 
some 8YY subscribers more than others? From the 8YY subscriber 
perspective, do the benefits of transitioning to bill-and-keep outweigh 
the adverse consequences from it?
    91. What is the proportion of the originating 8YY access charges 
(including end office, tandem switching and transport) to the remaining 
8YY charges that 8YY subscribers pay, on average? Will 8YY subscribers 
continue to pay a larger proportion of the total costs of an 8YY call, 
or will the callers be responsible for the larger share? Will this 
calculus vary by geography?
    92. We also note that, despite evidence of abuse, 8YY numbers 
continue to be in high demand. What factors explain this dynamic? It is 
our understanding that this growth in demand is at least partially due 
to businesses using 8YY numbers in new ways, such as call tracking to 
determine which advertisements generate the most responses. Will the 
transition to bill-and-keep reduce the benefits of 8YY calls?
c. Other Consequences
    93. In this Notice, we propose to move 8YY originating end office 
and tandem switching and transport charges to bill-and-keep before 
reforming the remaining rate elements not yet affected by changes in 
the USF/ICC Transformation Order, including non-8YY originating 
traffic. Would doing so create new opportunities for abuses of the 
intercarrier compensation system, or shift abuses to other forms of 
originating access? If so, how? How would our proposed changes affect 
network efficiency?
    94. Are there any other possible unintended negative consequences 
of our proposals? Would our proposed reforms result in call completion 
issues, as predicted by some commenters? Would they ``lead smaller 
competitors to exit all or part of the market?''
6. Additional Proposals for Reform
    95. We invite parties to propose additional, or alternative, 
methods for reforming originating 8YY access charges. We also seek 
comment on proposals already in the record. We encourage commenters to 
consider how any proposal would reduce abusive practices related to 8YY 
calls. We particularly invite comparison of the relative benefits and 
drawbacks of these proposals compared to the proposals we have set 
forth in the Notice.

IV. Rule Revisions

    96. We seek comment on the rule changes proposed in Appendix A. 
Among other changes, we propose to add new definitions for the 
following terms: Baseline Composite Interstate Originating End Office 
Access Rate for Toll Free Calls, Baseline Composite Interstate Tandem-
Switched Transport Access Service Rate for Toll Free Calls, Baseline 
Composite Intrastate Originating End Office Access Rate for Toll Free 
Calls, Baseline Composite Intrastate Tandem-Switched Transport Access 
Service Rate for Toll Free Calls, Database Query Charge, and Toll Free 
Call. The proposed rules also discuss the proposed transition of 
originating access charges for toll free calls to bill-and-keep, 
proposed new limitations on database query charges for toll free calls, 
and proposed modifications to the CLEC benchmarking rules. What, if 
any, other rule additions or modifications would need to be made to 
codify these proposals? Are there any conforming rule changes that 
commenters consider necessary? Are there any conflicts or 
inconsistencies between existing rules and those proposed herein? We 
ask commenters to provide any other proposed actions and rule additions 
or modifications we should consider to address the issues regarding 8YY 
calls described in this Notice including updates to any relevant 
comments or proposals made in response to the USF/ICC Transformation 
FNPRM, and the June 29, 2017 Public Notice.

V. Procedural Matters

    97. Filing Instructions. Pursuant to Sec. Sec.  1.415 and 1.419 of 
the Commission's rules, 47 CFR 1.415, 1.419, interested parties may 
file comments and reply comments on or before the dates indicated on 
the first page of this document. Comments may be filed using the 
Commission's Electronic Comment Filing System (ECFS). See Electronic 
Filing of Documents in Rulemaking Proceedings, 63 FR 24121 (1998).
     Electronic Filers: Comments may be filed electronically 
using the internet by accessing the ECFS: https://www.fcc.gov/ecfs/.
     Paper Filers: Parties who choose to file by paper must 
file an original and one copy of each filing. If more than one docket 
or rulemaking number appears in the caption of this proceeding, filers 
must submit two additional copies for each additional docket or 
rulemaking number.
     Filings can be sent by hand or messenger delivery, by 
commercial overnight courier, or by first-class or overnight U.S. 
Postal Service mail. All filings must be addressed to the Commission's 
Secretary, Office of the Secretary, Federal Communications Commission.

[[Page 31110]]

     All hand-delivered or messenger-delivered paper filings 
for the Commission's Secretary must be delivered to FCC Headquarters at 
445 12th St. SW, Room TW-A325, Washington, DC 20554. The filing hours 
are 8:00 a.m. to 7:00 p.m. All hand deliveries must be held together 
with rubber bands or fasteners. Any envelopes and boxes must be 
disposed of before entering the building.
     Commercial overnight mail (other than U.S. Postal Service 
Express Mail and Priority Mail) must be sent to 9050 Junction Drive, 
Annapolis Junction, MD 20701.
     U.S. Postal Service first-class, Express, and Priority 
mail must be addressed to 445 12th Street SW, Washington, DC 20554.
    98. People with Disabilities. To request materials in accessible 
formats for people with disabilities (braille, large print, electronic 
files, audio format), send an email to [email protected]gov or call the 
Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-
418-0432 (tty).
    99. Ex Parte Requirements. This proceeding shall be treated as a 
``permit-but-disclose'' proceeding in accordance with the Commission's 
ex parte rules. Persons making ex parte presentations must file a copy 
of any written presentation or a memorandum summarizing any oral 
presentation within two business days after the presentation (unless a 
different deadline applicable to the Sunshine period applies). Persons 
making oral ex parte presentations are reminded that memoranda 
summarizing the presentation must: (1) List all persons attending or 
otherwise participating in the meeting at which the ex parte 
presentation was made; and (2) summarize all data presented and 
arguments made during the presentation. If the presentation consisted 
in whole or in part of the presentation of data or arguments already 
reflected in the presenter's written comments, memoranda, or other 
filings in the proceeding, the presenter may provide citations to such 
data or arguments in his or her prior comments, memoranda, or other 
filings (specifying the relevant page and/or paragraph numbers where 
such data or arguments can be found) in lieu of summarizing them in the 
memorandum. Documents shown or given to Commission staff during ex 
parte meetings are deemed to be written ex parte presentations and must 
be filed consistent with Rule 1.1206(b). In proceedings governed by 
Rule 1.49(f) or for which the Commission has made available a method of 
electronic filing, written ex parte presentations and memoranda 
summarizing oral ex parte presentations, and all attachments thereto, 
must be filed through the electronic comment filing system available 
for that proceeding, and must be filed in their native format (e.g., 
.doc, .xml, .ppt, searchable .pdf). Participants in this proceeding 
should familiarize themselves with the Commission's ex parte rules.
    100. Paperwork Reduction Act Analysis. This document contains 
proposed new and modified information collection requirements. The 
Commission, as part of its continuing effort to reduce paperwork 
burdens, invites the general public and the Office of Management and 
Budget to comment on the information collection requirements contained 
in this document, as required by the Paperwork Reduction Act of 1995, 
Public Law 104-13. In addition, pursuant to the Small Business 
Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 
3506(c)(4), we seek specific comment on how we might further reduce the 
information collection burden for small business concerns with fewer 
than 25 employees.
    101. Initial Regulatory Flexibility Act Analysis. Pursuant to the 
Regulatory Flexibility Act (RFA), the Commission has prepared an 
Initial Regulatory Flexibility Analysis (IRFA) of the possible 
significant economic impact on small entities of the policies and 
actions considered in this Notice. The text of the IRFA is set forth in 
Appendix B. Written public comments are requested on this IRFA. 
Comments must be identified as responses to the IRFA and must be filed 
by the deadlines for comments on the NPRM. The Commission's Consumer 
and Governmental Affairs Bureau, Reference Information Center, will 
send a copy of the NPRM, including the IRFA, to the Chief Counsel for 
Advocacy of the Small Business Administration.
    102. Contact Person. For further information about this proceeding, 
please contact Irina Asoskov, FCC, Wireline Competition Bureau, Pricing 
Policy Division, Room 5-A235, 445 12th Street SW, Washington, DC 20554, 
(202) 418-2196, [email protected]

VI. Initial Regulatory Flexibility Analysis

    103. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), the Commission has prepared this Initial Regulatory 
Flexibility Analysis (IRFA) of the possible significant economic impact 
on a substantial number of small entities by the policies and rules 
proposed in this FNPRM. The Commission requests written public comments 
on this IRFA. Comments must be identified as responses to the IRFA and 
must be filed by the deadlines for comments provided on the first page 
of the FNPRM. The Commission will send a copy of the Further Notice of 
Proposed Rulemaking, including this IRFA, to the Chief Counsel for 
Advocacy of the Small Business Administration (SBA). In addition, the 
FNPRM and IRFA (or summaries thereof) will be published in the Federal 
Register.

A. Need for, and Objectives of, the Proposed Rules

    104. In the USF/ICC Transformation Order, the Commission adopted a 
bill-and-keep framework--under which a carrier generally looks to its 
end users to pay for its network costs--``as the default methodology 
for all intercarrier compensation traffic.'' In the FNPRM portion of 
that item, the Commission also sought comment on additional steps to 
implement a bill-and-keep cost recovery mechanism for certain access 
charges and sought comment on outstanding issues subject to reform in 
the future, including originating access charges and cost recovery for 
toll free (8YY) calls. In this FNPRM, we propose transitioning 
interstate and intrastate originating end office and tandem switching 
and transport charges for 8YY traffic to bill-and-keep, consistent with 
the Commission's reforms and policy directives in the USF/ICC 
Transformation Order. In the FNPRM we also propose capping database 
query charges associated with 8YY calls. We also propose amending our 
rules to limit charges to one database query per 8YY call. The FNPRM 
also asks for comment on various issues related to the 8YY network 
generally and 8YY cost recovery specifically.

B. Legal Basis

    105. The legal basis for any action that may be taken pursuant to 
this Notice is contained in sections 1, 2, 4(i), 201-206, 251, 252, 
254, 256, 303(r), and 403 of the Communications Act of 1934, as 
amended, 47 U.S.C. 151, 152, 154(i), 201-206, 251, 252, 254, 256, 
303(r), and 403.

C. Description and Estimate of the Number of Small Entities to Which 
the Proposed Rules Will Apply

    106. The RFA directs agencies to provide a description of and, 
where feasible, an estimate of the number of small entities that may be 
affected by the proposed rule revisions, if adopted. The RFA generally 
defines the term ``small entity'' as having the same

[[Page 31111]]

meaning as the terms ``small business,'' ``small organization,'' and 
``small governmental jurisdiction.'' In addition, the term ``small 
business'' has the same meaning as the term ``small-business concern'' 
under the Small Business Act. A ``small-business concern'' is one 
which: (1) Is independently owned and operated; (2) is not dominant in 
its field of operation; and (3) satisfies any additional criteria 
established by the SBA.
    107. Small Businesses, Small Organizations, Small Governmental 
Jurisdictions. Our actions, over time, may affect small entities that 
are not easily categorized at present. We therefore describe here, at 
the outset, three broad groups of small entities that could be directly 
affected herein. First, while there are industry-specific size 
standards for small businesses that are used in the regulatory 
flexibility analysis, according to data from the SBA's Office of 
Advocacy, in general, a small business is an independent business 
having fewer than 500 employees. These types of small businesses 
represent 99.9% of all businesses in the United States, which 
translates to 28.8 million businesses. Next, the type of small entity 
described as a ``small organization'' is generally ``any not-for-profit 
enterprise which is independently owned and operated and is not 
dominant in its field.'' Nationwide, as of August 2016, there were 
approximately 356,494 small organizations, based on registration and 
tax data filed by nonprofits with the Internal Revenue Service (IRS). 
Finally, the small entity described as a ``small governmental 
jurisdiction'' is defined generally as ``governments of cities, 
counties, towns, townships, villages, school districts, or special 
districts, with a population of less than fifty thousand.'' U.S. Census 
Bureau data from the 2012 Census of Governments indicate that there 
were 90,056 local governmental jurisdictions consisting of general 
purpose governments and special purpose governments in the United 
States. Of this number, there were 37,132 General Purpose governments 
(county, municipal and town or township) with populations of less than 
50,000 and 12,184 Special Purpose governments (independent school 
districts and special districts) with populations of less than 50,000. 
The 2012 U.S. Census Bureau data for most types of governments in the 
local government category show that the majority of these governments 
have populations of less than 50,000. Based on this data, we estimate 
that at least 49,316 local government jurisdictions fall in the 
category of ``small governmental jurisdictions.''
    108. Wired Telecommunications Carriers. The U.S. Census Bureau 
defines this industry as ``establishments primarily engaged in 
operating and/or providing access to transmission facilities and 
infrastructure that they own and/or lease for the transmission of 
voice, data, text, sound, and video using wired communications 
networks. Transmission facilities may be based on a single technology 
or a combination of technologies. Establishments in this industry use 
the wired telecommunications network facilities that they operate to 
provide a variety of services, such as wired telephony services, 
including VoIP services, wired (cable) audio and video programming 
distribution, and wired broadband internet services. By exception, 
establishments providing satellite television distribution services 
using facilities and infrastructure that they operate are included in 
this industry.'' The SBA has developed a small business size standard 
for Wired Telecommunications Carriers, which consists of all such 
companies having 1,500 or fewer employees. Census data for 2012 show 
that there were 3,117 firms that operated that year. Of this total, 
3,083 operated with fewer than 1,000 employees. Thus, under this size 
standard, the majority of firms in this industry can be considered 
small.
    109. Local Exchange Carriers (LECs). Neither the Commission nor the 
SBA has developed a size standard for small businesses specifically 
applicable to local exchange services. The closest applicable NAICS 
Code category is Wired Telecommunications Carriers as defined above. 
Under the applicable SBA size standard, such a business is small if it 
has 1,500 or fewer employees. According to Commission data, census data 
for 2012 show that there were 3,117 firms that operated that year. Of 
this total, 3,083 operated with fewer than 1,000 employees. The 
Commission therefore estimates that most providers of local exchange 
carrier service are small entities that may be affected by the proposed 
rules.
    110. Incumbent LECs. Neither the Commission nor the SBA has 
developed a small business size standard specifically for incumbent 
local exchange services. The closest applicable NAICS Code category is 
Wired Telecommunications Carriers as defined above. Under that size 
standard, such a business is small if it has 1,500 or fewer employees. 
According to Commission data, 3,117 firms operated in that year. Of 
this total, 3,083 operated with fewer than 1,000 employees. 
Consequently, the Commission estimates that most providers of incumbent 
local exchange service are small businesses that may be affected by the 
rules and policies adopted. Three hundred and seven (307) Incumbent 
Local Exchange Carriers reported that they were incumbent local 
exchange service providers. Of this total, an estimated 1,006 have 
1,500 or fewer employees.
    111. Competitive Local Exchange Carriers (Competitive LECs), 
Competitive Access Providers (CAPs), Shared-Tenant Service Providers, 
and Other Local Service Providers. Neither the Commission nor the SBA 
has developed a small business size standard specifically for these 
service providers. The appropriate NAICS Code category is Wired 
Telecommunications Carriers, as defined above. Under that size 
standard, such a business is small if it has 1,500 or fewer employees. 
U.S. Census data for 2012 indicate that 3,117 firms operated during 
that year. Of that number, 3,083 operated with fewer than 1,000 
employees. Based on this data, the Commission concludes that the 
majority of Competitive LECS, CAPs, Shared-Tenant Service Providers, 
and Other Local Service Providers, are small entities. According to 
Commission data, 1,442 carriers reported that they were engaged in the 
provision of either competitive local exchange services or competitive 
access provider services. Of these, an estimated 1,256 have 1,500 or 
fewer employees. In addition, 17 carriers have reported that they are 
Shared-Tenant Service Providers, and all 17 are estimated to have 1,500 
or fewer employees. Also, 72 carriers have reported that they are Other 
Local Service Providers. Of this total, 70 have 1,500 or fewer 
employees. Consequently, based on internally researched FCC data, the 
Commission estimates that most Competitive LECs, CAPs, Shared-Tenant 
Service Providers, and Other Local Service Providers are small 
entities.
    112. We have included small incumbent LECs in this RFA analysis. As 
noted above, a ``small business'' under the RFA is one that, inter 
alia, meets the pertinent small business size standard (e.g., a 
telephone communications business having 1,500 or fewer employees), and 
``is not dominant in its field of operation.'' The SBA's Office of 
Advocacy contends that, for RFA purposes, small incumbent LECs are not 
dominant in their field of operation because any such dominance is not 
``national'' in scope. We have therefore included small incumbent LECs 
in this RFA analysis, although we emphasize that this RFA action has no

[[Page 31112]]

effect on Commission analyses and determinations in other, non-RFA 
contexts.
    113. Interexchange Carriers (IXCs). Neither the Commission nor the 
SBA has developed a definition for Interexchange Carriers. The closest 
NAICS Code category is Wired Telecommunications Carriers, as defined 
above. The applicable size standard under SBA rules is that such a 
business is small if it has 1,500 or fewer employees. U.S. Census data 
for 2012 indicate that 3,117 firms operated during that year. Of that 
number, 3,083 operated with fewer than 1,000 employees. According to 
internally developed Commission data, 359 companies reported that their 
primary telecommunications service activity was the provision of 
interexchange services. Of this total, an estimated 317 have 1,500 or 
fewer employees. Consequently, the Commission estimates that the 
majority of IXCs are small entities.
    114. Local Resellers. The SBA has developed a small business size 
standard for the category of Telecommunications Resellers. The 
Telecommunications Resellers industry comprises establishments engaged 
in purchasing access and network capacity from owners and operators of 
telecommunications networks and reselling wired and wireless 
telecommunications services (except satellite) to businesses and 
households. Establishments in this industry resell telecommunications; 
they do not operate transmission facilities and infrastructure. Mobile 
virtual network operators (MVNOs) are included in this industry. Under 
that size standard, such a business is small if it has 1,500 or fewer 
employees. Census data for 2012 show that 1,341 firms provided resale 
services during that year, all of which operated with fewer than 1,000 
employees. Thus, under this category and the associated small business 
size standard, all of these resellers can be considered small entities.
    115. Toll Resellers. The Commission has not developed a definition 
for Toll Resellers. The closest NAICS Code Category is 
Telecommunications Resellers. The Telecommunications Resellers industry 
comprises establishments engaged in purchasing access and network 
capacity from owners and operators of telecommunications networks and 
reselling wired and wireless telecommunications services (except 
satellite) to businesses and households. Establishments in this 
industry resell telecommunications; they do not operate transmission 
facilities and infrastructure. Mobile virtual network operators (MVNOs) 
are included in this industry. The SBA has developed a small business 
size standard for the category of Telecommunications Resellers. Under 
that size standard, such a business is small if it has 1,500 or fewer 
employees. Census data for 2012 show that 1,341 firms provided resale 
services during that year. Of that number, 1,341 operated with fewer 
than 1,000 employees. Thus, under this category and the associated 
small business size standard, the majority of these resellers can be 
considered small entities. According to Commission data, 881 carriers 
have reported that they are engaged in the provision of toll resale 
services. Of this total, an estimated 857 have 1,500 or fewer 
employees. Consequently, the Commission estimates that the majority of 
toll resellers are small entities.
    116. Other Toll Carriers. Neither the Commission nor the SBA has 
developed a definition for small businesses specifically applicable to 
Other Toll Carriers. This category includes toll carriers that do not 
fall within the categories of IXCs, operator service providers, prepaid 
calling card providers, satellite service carriers, or toll resellers. 
The closest applicable NAICS Code category is for Wired 
Telecommunications Carriers, as defined above. Under the applicable SBA 
size standard, such a business is small if it has 1,500 or fewer 
employees. Census data for 2012 show that there were 3,117 firms that 
operated that year. Of this total, 3,083 operated with fewer than 1,000 
employees. Thus, under this category and the associated small business 
size standard, the majority of Other Toll Carriers can be considered 
small. According to internally developed Commission data, 284 companies 
reported that their primary telecommunications service activity was the 
provision of other toll carriage. Of these, an estimated 279 have 1,500 
or fewer employees. Consequently, the Commission estimates that most 
Other Toll Carriers are small entities that may be affected by the 
rules proposed in the Notice.
    117. Prepaid Calling Card Providers. The SBA has developed a 
definition for small businesses within the category of 
Telecommunications Resellers. Under that SBA definition, such a 
business is small if it has 1,500 or fewer employees. According to the 
Commission's Form 499 Filer Database, 500 companies reported that they 
were engaged in the provision of prepaid calling cards. The Commission 
does not have data regarding how many of these 500 companies have 1,500 
or fewer employees. Consequently, the Commission estimates that there 
are 500 or fewer prepaid calling card providers that may be affected by 
the rules proposed in the Notice.
    118. Wireless Telecommunications Carriers (except Satellite). This 
industry is comprised of establishments engaged in operating and 
maintaining switching and transmission facilities to provide 
communications via the airwaves. Establishments in this industry have 
spectrum licenses and provide services using that spectrum, such as 
cellular services, paging services, wireless internet access, and 
wireless video services. The appropriate size standard under SBA rules 
is that such a business is small if it has 1,500 or fewer employees. 
For this industry, U.S. Census data for 2012 show that there were 967 
firms that operated for the entire year. Of this total, 955 firms had 
employment of 999 or fewer employees and 12 had employment of 1,000 
employees or more. Thus under this category and the associated size 
standard, the Commission estimates that the majority of wireless 
telecommunications carriers (except satellite) are small entities.
    119. The Commission's own data--available in its Universal 
Licensing System--indicate that, as of October 25, 2016, there are 280 
Cellular licensees that may be affected by our proposed rules. The 
Commission does not know how many of these licensees are small, as the 
Commission does not collect that information for these types of 
entities. Similarly, according to internally developed Commission data, 
413 carriers reported that they were engaged in the provision of 
wireless telephony, including cellular service, Personal Communications 
Service, and Specialized Mobile Radio Telephony services. Of this 
total, an estimated 261 have 1,500 or fewer employees, and 152 have 
more than 1,500 employees. Thus, using available data, we estimate that 
the majority of wireless firms can be considered small.
    120. Wireless Communications Services. This service can be used for 
fixed, mobile, radiolocation, and digital audio broadcasting satellite 
uses. The Commission defined ``small business'' for the wireless 
communications services auction as an entity with average gross 
revenues of $40 million for each of the three preceding years, and a 
``very small business'' as an entity with average gross revenues of $15 
million for each of the three preceding years. The SBA has approved 
these definitions.
    121. Wireless Telephony. Wireless telephony includes cellular, 
personal

[[Page 31113]]

communications services, and specialized mobile radio telephony 
carriers. As noted, the SBA has developed a small business size 
standard for Wireless Telecommunications Carriers (except Satellite). 
Under the SBA small business size standard, a business is small if it 
has 1,500 or fewer employees. According to Commission data, 413 
carriers reported that they were engaged in wireless telephony. Of 
these, an estimated 261 have 1,500 or fewer employees and 152 have more 
than 1,500 employees. Therefore, a little less than two thirds of these 
entities can be considered small.
    122. All Other Telecommunications. The ``All Other 
Telecommunications'' industry is comprised of establishments that are 
primarily engaged in providing specialized telecommunications services, 
such as satellite tracking, communications telemetry, and radar station 
operation. This industry also includes establishments primarily engaged 
in providing satellite terminal stations and associated facilities 
connected with one or more terrestrial systems and capable of 
transmitting telecommunications to, and receiving telecommunications 
from, satellite systems. Establishments providing internet services or 
voice over internet protocol (VoIP) services via client-supplied 
telecommunications connections are also included in this industry. The 
SBA has developed a small business size standard for ``All Other 
Telecommunications,'' which consists of all such firms with gross 
annual receipts of $32.5 million or less. For this category, U.S. 
Census data for 2012 show that there were 1,442 firms that operated for 
the entire year. Of these firms, a total of 1,400 had gross annual 
receipts of less than $25 million. Thus a majority of ``All Other 
Telecommunications'' firms potentially affected by our action can be 
considered small.

D. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements for Small Entities

    123. In this FNPRM, the Commission seeks public comment on 
additional steps to complete its intercarrier compensation reform 
regarding toll free or 8YY calls. The transition to complete the reform 
of new intercarrier compensation rules could affect all carriers, 
including small entities, and may include new administrative processes. 
In proposing these reforms, we seek comment on various reporting, 
recordkeeping, and other compliance requirements that may apply to all 
carriers, including small entities. We seek comment on any costs and 
burdens on small entities associated with the proposed rules, including 
data quantifying the extent of those costs or burdens. These issues 
include the appropriate path or transition to move 8YY originating 
access charges to bill-and-keep and on the appropriate recovery of 8YY 
database costs. We also seek data to analyze the effects of proposed 
reforms and need for revenue recovery.
    124. Compliance with a transition to a new system for 8YY 
originating access may impact some small entities and may include new 
or reduced administrative processes. For carriers that may be affected, 
obligations may include certain reporting and recordkeeping 
requirements to determine and establish their eligibility to receive 
recovery from other sources as 8YY originating access revenue is 
reduced. Modifications to the rules to address potential arbitrage 
opportunities will affect certain carriers, potentially including small 
entities. However, these impacts are mitigated by the certainty and 
reduced litigation that should occur as a result of the reforms 
adopted. The FNPRM seeks comment on several issues relating to bill-
and-keep implementation for 8YY originating access as well as cost 
recovery for 8YY database dips. The FNPRM also seeks comment on how 
reduced intercarrier compensation revenues in the future would impact 
carriers, and how recovery, if any, for those reduced revenues should 
be addressed. The Commission asks if the recovery approach adopted 
should be different depending on the type of carrier or regulation.

E. Steps Taken To Minimize the Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered

    125. The RFA requires an agency to describe any significant 
alternatives it has considered to the proposed rule which minimize any 
significant impact on small entities. These alternatives may include 
(among others): (1) The establishment of differing compliance or 
reporting requirements or timetables that take into account the 
resources available to small entities; (2) the clarification, 
consolidation, or simplification of compliance and reporting 
requirements under the rules for such small entities; (3) the use of 
performance rather than design standards; and (4) an exemption from 
coverage of the rule, or any part thereof, for such small entities.
    126. This FNPRM invites comment on a number of proposals and 
alternatives to modify or adopt 8YY originating access and database dip 
rules. As a general matter, actions taken as a result of our actions 
should benefit all service providers, including small entities, by 
providing greater regulatory certainty and by moving toward the 
Commission's goal of bill-and-keep for all access charges. In the 
FNPRM, we encourage small entities to bring to the Commission's 
attention any specific concerns that they have, including on any issues 
or measures that may apply to small entities in a unique fashion. We 
especially encourage commenters to discuss the proposed transitional 
recovery mechanism to help transition LECs away from existing revenues. 
Our proposed tailored approach to transitional recovery is designed to 
balance the different circumstances facing the different carrier types 
and provide all carriers with necessary predictability, certainty, and 
stability to transition from the current intercarrier compensation 
system. The FNPRM also seeks comment on other actions the Commission 
could take to further discourage or eliminate abuse of the intercarrier 
compensation regime that governs 8YY calls. Finally, we seek comment on 
alternatives to our proposals that we should consider to achieve our 
objectives with less impact on small entities.

F. Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rules

    127. None.

I. Ordering Clauses

    128. Accordingly, it is ordered that, pursuant to sections 1, 2, 
4(i), 201-206, 251, 252, 254, 256, 303(r), and 403 of the 
Communications Act of 1934, as amended, 47 U.S.C. 151, 152, 154(i), 
201-206, 251, 252, 254, 256, 303(r), 403, and Sec.  1.1 of the 
Commission's rules, 47 CFR 1.1, this Further Notice of Proposed 
Rulemaking is adopted.
    129. It is further ordered that pursuant to applicable procedures 
set forth in Sec. Sec.  1.415 and 1.419 of the Commission's rules, 47 
CFR 1.415, 1.419, interested parties may file comments on this Further 
Notice of Proposed Rulemaking on or before September 4, 2018 and reply 
comments on or before October 1, 2018.
    130. It is further ordered that the Commission's Consumer 
Information Bureau, Reference Information Center, SHALL SEND a copy of 
the Further Notice of Proposed Rulemaking, including the Initial 
Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of 
the Small Business Administration.

[[Page 31114]]

List of Subjects in 47 CFR Parts 51 and 61

    Telephone.

Federal Communications Commission.
Katura Jackson,
Federal Register Liaison Officer, Office of the Secretary.

Proposed Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission proposes to amend 47 CFR parts 51 and 61 as 
follows:

PART 51--INTERCONNECTION

0
1. The authority citation for part 51 continues to read as follows:

    Authority:  47 U.S.C. 151-55, 201-05, 207-09, 218, 220, 225-27, 
251-54, 256, 271, 303(r), 332, 1302.

0
2. Revise Sec.  51.903 to read as follows:


Sec.  51.903   Definitions.

    (a) Access Reciprocal Compensation means telecommunications traffic 
exchanged between telecommunications service providers that is 
interstate or intrastate exchange access, information access, or 
exchange services for such access, other than special access.
    (b) Baseline Composite Interstate Originating End Office Access 
Rate for Toll Free Calls means originating End Office Access Service 
billed revenue from interstate Toll Free Calls for [Base Year - 1] 
divided by end office switching interstate Toll Free calling minutes 
for [Base Year - 1].
    (c) Baseline Composite Interstate Tandem-Switched Transport Access 
Service Rate for Toll Free Calls means originating Tandem-Switched 
Transport Access Service billed revenue from interstate Toll Free Calls 
for [Base Year - 1] divided by tandem-switched interstate Toll Free 
calling minutes for [Base Year - 1].
    (d) Baseline Composite Intrastate Originating End Office Access 
Rate for Toll Free Calls means originating End Office Access Service 
billed revenue from intrastate Toll Free Calls for [Base Year - 1] 
divided by end office switching intrastate Toll Free calling minutes 
for [Base Year - 1].
    (e) Baseline Composite Intrastate Tandem-Switched Transport Access 
Service Rate for Toll Free Calls means originating Tandem-Switched 
Transport Access Service billed revenue from intrastate Toll Free Calls 
for [Base Year - 1] divided by tandem-switched intrastate Toll Free 
calling minutes for [Base Year - 1].
    (f) Competitive Local Exchange Carrier. A Competitive Local 
Exchange Carrier is any local exchange carrier, as defined in Sec.  
51.5, that is not an incumbent local exchange carrier.
    (g) Composite Terminating End Office Access Rate means terminating 
End Office Access Service revenue, calculated using demand for a given 
time period, divided by end office switching minutes for the same time 
period.
    (h) Database Query Charge means a charge that is expressed in 
dollars and cents that an originating carrier or tandem switch provider 
assesses upon an interexchange carrier for obtaining routing 
information for a Toll Free Call and includes any charges for signaling 
or transport services used to obtain such routing information.
    (i) Dedicated Transport Access Service means originating and 
terminating transport on circuits dedicated to the use of a single 
carrier or other customer provided by an incumbent local exchange 
carrier or any functional equivalent of the incumbent local exchange 
carrier access service provided by a non-incumbent local exchange 
carrier. Dedicated Transport Access Service rate elements for an 
incumbent local exchange carrier include the entrance facility rate 
elements specified in Sec.  69.110 of this chapter, the dedicated 
transport rate elements specified in Sec.  69.111 of this chapter, the 
direct-trunked transport rate elements specified in Sec.  69.112 of 
this chapter, and the intrastate rate elements for functionally 
equivalent access services. Dedicated Transport Access Service rate 
elements for a non-incumbent local exchange carrier include any 
functionally equivalent access services.
    (j) End Office Access Service means:
    (1) The switching of access traffic at the carrier's end office 
switch and the delivery to or from of such traffic to the called 
party's premises;
    (2) The routing of interexchange telecommunications traffic to or 
from the called party's premises, either directly or via contractual or 
other arrangements with an affiliated or unaffiliated entity, 
regardless of the specific functions provided or facilities used; or
    (3) Any functional equivalent of the incumbent local exchange 
carrier access service provided by a non-incumbent local exchange 
carrier. End Office Access Service rate elements for an incumbent local 
exchange carrier include the local switching rate elements specified in 
Sec.  69.106 of this chapter, the carrier common line rate elements 
specified in Sec.  69.154 of this chapter, and the intrastate rate 
elements for functionally equivalent access services. End Office Access 
Service rate elements for an incumbent local exchange carrier also 
include any rate elements assessed on local switching access minutes, 
including the information surcharge and residual rate elements. End 
office Access Service rate elements for a non-incumbent local exchange 
carrier include any functionally equivalent access service.

    Note to paragraph (j): For incumbent local exchange carriers, 
residual rate elements may include, for example, state Transport 
Interconnection Charges, Residual Interconnection Charges, and 
PICCs. For non-incumbent local exchange carriers, residual rate 
elements may include any functionally equivalent access service.

    (k) Fiscal Year 2011 means October 1, 2010 through September 30, 
2011.
    (l) Incumbent Local Exchange Carrier means a Price Cap Carrier or 
Rate-of-Return Carrier.
    (m) Price Cap Carrier has the same meaning as that term is defined 
in Sec.  61.3(aa) of this chapter.
    (n) Rate-of-Return Carrier is any incumbent local exchange carrier 
not subject to price cap regulation as that term is defined in Sec.  
61.3(aa) of this chapter, but only with respect to the territory in 
which it operates as an incumbent local exchange carrier.
    (o) Tandem-Switched Transport Access Service means:
    (1) Tandem switching and common transport between the tandem switch 
and end office; or
    (2) Any functional equivalent of the incumbent local exchange 
carrier access service provided by a non-incumbent local exchange 
carrier via other facilities. Tandem-Switched Transport rate elements 
for an incumbent local exchange carrier include the rate elements 
specified in Sec.  69.111 of this chapter, except for the dedicated 
transport rate elements specified in that section, and intrastate rate 
elements for functionally equivalent service. Tandem Switched Transport 
Access Service rate elements for a non-incumbent local exchange carrier 
include any functionally equivalent access service.
    (p) Toll Free Call means a call to a toll free number, as defined 
in Sec.  52.101(f) of this subchapter.
    (q) Transitional Intrastate Access Service means terminating End 
Office Access Service that was subject to intrastate access rates as of 
December 31, 2011; terminating Tandem-Switched Transport Access Service 
that was subject to intrastate access rates as of December 31, 2011; 
and originating and terminating Dedicated Transport Access Service that 
was subject to intrastate access rates as of December 31, 2011.
0
3. Add Sec.  51.921 to Subpart J to read as follows:

[[Page 31115]]

Sec.  51.921   Transition of Originating Access Charges for Toll Free 
Calls.

    (a) Effective [July 1, base year], notwithstanding any other 
provision of the Commission's rules, each Incumbent LEC shall 
calculate:
    (1) A single per-minute Baseline Composite Intrastate Originating 
End Office Access Rate for Toll Free Calls for each state in which it 
provides such service;
    (2) A single per-minute Baseline Composite Interstate Originating 
End Office Access Rate for Toll Free Calls;
    (3) A single per-minute Baseline Composite Intrastate Originating 
Tandem-Switched Transport Access Service Rate for Toll Free Calls for 
each state in which it provides such service; and
    (4) A single per-minute Baseline Composite Interstate Originating 
Tandem-Switched Transport Access Service Rate for Toll Free Calls.
    (b) Step 1. Beginning July 1, [base year], notwithstanding any 
other provision of the Commission's rules:
    (1) Each Incumbent LEC shall establish rates for intrastate 
originating End Office Access Service for Toll Free Calls in each state 
in which it provides such service using the following methodology:
    (i) Each Incumbent LEC shall calculate its [base year] Target 
Composite Intrastate Originating End Office Access Rate for Toll Free 
Calls. The [base year] Target Composite Intrastate Originating End 
Office Access Rate for Toll Free Calls means two-thirds of the Baseline 
Composite Intrastate Originating End Office Access Rate for Toll Free 
Calls.
    (ii) Beginning [July 1, base year], a LEC is prohibited from filing 
an intrastate access tariff that includes an Originating End Office 
Rate for intrastate Toll Free Calls that exceeds its [base year] Target 
Composite Intrastate Originating End Office Access Rate for Toll Free 
Calls for that particular state.
    (2) Each Incumbent LEC shall establish rates for interstate 
originating End Office Access Service for Toll Free Calls using the 
following methodology:
    (i) Each Incumbent LEC shall calculate its [base year] Target 
Composite Interstate Originating End Office Access Rate for Toll Free 
Calls. The [base year] Target Composite Interstate Originating End 
Office Access Rate for Toll Free Calls means two-thirds of the Baseline 
Composite Interstate Originating End Office Access Rate for Toll Free 
Calls.
    (ii) Beginning [July 1, base year], a LEC is prohibited from filing 
an interstate access tariff that includes an Originating End Office 
Rate for interstate Toll Free Calls that exceeds its [base year] Target 
Composite Interstate Originating End Office Access Rate for Toll Free 
Calls.
    (3) Each Incumbent LEC shall establish rates for intrastate 
originating Tandem-Switched Transport Access Service for Toll Free 
Calls in each state in which it provides such service using the 
following methodology:
    (i) Each Incumbent LEC shall calculate its [base year] Target 
Composite Intrastate Originating Tandem-Switched Transport Access 
Service Rate for Toll Free Calls. The [base year] Target Composite 
Intrastate Originating Tandem-Switched Transport Access Service Rate 
for Toll Free Calls means two-thirds of the Baseline Composite 
Intrastate Tandem-Switched Transport Access Service Rate for Toll Free 
Calls.
    (ii) Beginning [July 1, base year], a LEC is prohibited from filing 
an intrastate access tariff that includes an originating Tandem-
Switched Transport Access Service Rate for intrastate Toll Free Calls 
that exceeds its [base year] Target Composite Intrastate Originating 
Tandem-Switched Transport Access Service Rate for Toll Free Calls for 
that particular state.
    (4) Each Incumbent LEC shall establish rates for interstate 
originating Tandem-Switched Transport Access Service for Toll Free 
Calls using the following methodology:
    (i) Each Incumbent LEC shall calculate its [base year] Target 
Composite Interstate Originating Tandem-Switched Transport Access 
Service Rate for Toll Free Calls. The [base year] Target Composite 
Interstate Originating Tandem-Switched Transport Access Service Rate 
for Toll Free Calls means two-thirds of the Baseline Composite 
Interstate Tandem-Switched Transport Access Service Rate for Toll Free 
Calls.
    (ii) Beginning [July 1, base year], a LEC is prohibited from filing 
an interstate access tariff that includes an originating Tandem-
Switched Transport Access Service Rate for interstate Toll Free Calls 
that exceeds its [base year] Target Composite Interstate Originating 
Tandem-Switched Transport Access Service Rate for Toll Free Calls.
    (c) Step 2. Beginning July 1, [base year + 1], notwithstanding any 
other provision of the Commission's rules:
    (1) Each Incumbent LEC shall establish intrastate rates for 
originating End Office Access Service for Toll Free Calls in each state 
in which it provides such service using the following methodology:
    (i) Each Incumbent LEC shall calculate its [base year + 1] Target 
Composite Intrastate Originating End Office Access Rate for Toll Free 
Calls. The [base year + 1] Target Composite Intrastate Originating End 
Office Access Rate for Toll Free Calls means one-third of the Baseline 
Composite Intrastate Originating End Office Access Rate for Toll Free 
Calls.
    (ii) Beginning July 1, [base year + 1], a LEC is prohibited from 
filing an intrastate access tariff that includes an Originating End 
Office Access Rate for intrastate Toll Free Calls that exceeds its 
[base year + 1] Target Composite Intrastate Originating End Office 
Access Rate for Toll Free Calls for that particular state.
    (2) Each Incumbent LEC shall establish interstate rates for 
originating End Office Access Service for Toll Free Calls using the 
following methodology:
    (i) Each Incumbent LEC shall calculate its [base year + 1] Target 
Composite Interstate Originating End Office Access Rate for Toll Free 
Calls. The [base year + 1] Target Composite Interstate Originating End 
Office Access Rate for Toll Free Calls means one-third of the Baseline 
Composite Interstate Originating End Office Access Rate for Toll Free 
Calls.
    (ii) Beginning July 1, [base year + 1], a LEC is prohibited from 
filing an interstate access tariff that includes an Originating End 
Office Access Rate for interstate Toll Free Calls that exceeds its 
[base year + 1] Target Composite Interstate Originating End Office 
Access Rate for Toll Free Calls.
    (3) Each Incumbent LEC shall establish rates for originating 
Tandem-Switched Transport Access Service for intrastate Toll Free Calls 
in each state in which it provides such service using the following 
methodology:
    (i) Each Incumbent LEC shall calculate its [base year + 2] Target 
Composite Intrastate Originating Tandem-Switched Transport Access 
Service Rate for Toll Free Calls. The [base year + 2] Target Composite 
Intrastate Originating Tandem-Switched Transport Access Service Rate 
for intrastate Toll Free Calls means one-third of the [base year] 
Baseline Composite Intrastate Originating Tandem-Switched Transport 
Access Service Rate for Toll Free Calls.
    (ii) Beginning July 1, [base year + 2], a LEC is prohibited from 
filing an intrastate access tariff that includes an Originating Tandem-
Switched Transport Access Service Rate for intrastate Toll Free Calls 
that exceeds its [base year + 2] Target Composite Originating Tandem-
Switched Transport Access Service Rate for intrastate Toll Free Calls 
for that particular state.

[[Page 31116]]

    (4) Each Incumbent LEC shall establish rates for interstate 
originating Tandem-Switched Transport Access Service for Toll Free 
Calls using the following methodology:
    (i) Each Incumbent LEC shall calculate its [base year + 2] Target 
Composite Interstate Originating Tandem-Switched Transport Access 
Service Rate for Toll Free Calls. The [base year + 2] Target Composite 
Interstate Originating Tandem-Switched Transport Access Service Rate 
for Toll Free Calls means one-third of the [base year] Baseline 
Composite Interstate Originating Tandem-Switched Transport Access 
Service Rate for Toll Free Calls.
    (ii) Beginning July 1, [base year + 2], a LEC is prohibited from 
filing an interstate access tariff that includes an Originating Tandem-
Switched Transport Access Service Rate for interstate Toll Free Calls 
that exceeds its [base year + 2] Target Composite Interstate 
Originating Tandem-Switched Transport Access Service Rate for Toll Free 
Calls.
    (d) Step 3. Beginning July 1, [base year + 2], notwithstanding any 
other provision of the Commission's rules, all LECs shall, in 
accordance with bill-and-keep, revise and refile their interstate and 
intrastate switched access reciprocal compensation tariffs and any 
state tariffs to remove any intercarrier charges applicable to 
interstate and intrastate originating End Office Access Service and 
Tandem-Switched Transport Access Service for all interstate and 
intrastate rate elements for Toll Free Calls.
    (e) Nothing in this section shall prevent a LEC from negotiating a 
rate for Originating End Office Access Service for Toll Free Calls or 
for Originating Tandem-Switched Transport Access Service for Toll Free 
Calls that is different from its tariffed rates, or that is different 
from bill-and-keep if there is no tariffed rate for such services.
0
4. Add Sec.  51.923 to Subpart J to read as follows:


Sec.  51.923   Limitation on Database Query Charges for Toll Free 
Calls.

    (a) Notwithstanding any other provision of the Commission's rules, 
on [the first July 1/annual tariff filing after rule adoption], every 
Incumbent LEC shall cap the rates for database query charges in its 
interstate or intrastate tariffs at $.0015 per Toll Free Call.
    (b) Notwithstanding any other provision of the Commission's rules, 
on [the first July 1/annual tariff filing after rule adoption], LECs 
involved in the routing of a Toll Free Call to a provider of Toll Free 
calling services may not, collectively, charge the provider of Toll 
Free calling services more than one database query charge per Toll Free 
Call.

PART 61--TARIFFS

0
5. The authority citation for part 61 continues to read as follows:

    Authority:  Secs 1, 4(i), 4(j), 201-205 and 403 of the 
Communications Act of 1934, as amended; 47 U.S.C. 151, 154(i), 
154(j), 201-205 and 403, unless otherwise noted.

0
6. Amend Sec.  61.26 by revising paragraphs (a)(3)(i) and (e) to read 
as follows:


Sec.  61.26  Tariffing of Competitive Interstate Switched Exchange 
Access Services.

    (a) * * *
    (3) * * *
    (i) The functional equivalent of the ILEC interstate exchange 
access services typically associated with the following rate elements: 
Carrier common line (originating); carrier common line (terminating); 
local end office switching; interconnection charge; information 
surcharge; tandem switched transport termination (fixed); tandem 
switched transport facility (per mile); tandem switching; and Database 
Query Charge, as that term is defined in section [51.903(m)] of this 
chapter;
* * * * *
    (e) Rural exemption. Except as provided in paragraph (g) of this 
section, and notwithstanding paragraphs (b) through (d) of this 
section, a rural CLEC competing with a non-rural ILEC shall not file a 
tariff for its interstate exchange access services that prices those 
services above the rate prescribed in the NECA access tariff, assuming 
the highest rate band for local switching. In addition to that NECA 
rate, the rural CLEC may assess a presubscribed interexchange carrier 
charge if, and only to the extent that, the competing ILEC assesses 
this charge. Beginning July 1, 2013, all CLEC reciprocal compensation 
rates for intrastate switched exchange access services subject to this 
subpart also shall be no higher than that NECA rate. The rural 
exemption in this section does not apply to Toll Free Calls.
* * * * *
[FR Doc. 2018-14150 Filed 7-2-18; 8:45 am]
 BILLING CODE 6712-01-P