Connect America Fund; Developing a Unified Intercarrier Compensation Regime, 5431-5436 [2020-01658]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 85, Number 20 (Thursday, January 30, 2020)]
[Notices]
[Pages 5431-5436]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-01658]


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FEDERAL COMMUNICATIONS COMMISSION

[WC Docket No. 10-90, CC Docket No. 01-92; FCC 19-131; FRS 16436]


Connect America Fund; Developing a Unified Intercarrier 
Compensation Regime

AGENCY: Federal Communications Commission.

ACTION: Notice.

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SUMMARY: In this document, the Federal Communications Commission 
clarifies its interpretation of the VoIP Symmetry Rule, finding that 
the 2015 Declaratory Ruling was misguided in its interpretation of the 
VoIP Symmetry Rule and holding that a LEC providing retail service with 
a VoIP provider partner provides the functional equivalent of end 
office switching and thus may assess end office switched access charges 
only if either the LEC or its VoIP partner provides a physical 
connection to the last-mile facilities used to serve the end user. By 
adopting this interpretation of the VOIP Symmetry Rule, the Commission 
reduces intercarrier disputes and uncertainty and promotes competition.

DATES: Effective January 30, 2020.

ADDRESSES: Federal Communications Commission, 445 12th Street SW, 
Washington, DC 20554.

FOR FURTHER INFORMATION CONTACT: Rhonda Lien, Wireline Competition 
Bureau, Pricing Policy Division, via phone at 202-418-1540 or email at 
[email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Federal 
Communications Commission's Order on Remand and Declaratory Ruling, in 
WC Docket No. 10-90, CC Docket No. 01-92; FCC 19-131, adopted on 
December 12, 2019 and released December 17, 2019. A full-text version 
of the document can be found at the following internet address: https://ecfsapi.fcc.gov/file/1217069113807/FCC-19-131A1.pdf. Alternative 
formats are available to persons with disabilities by sending an email 
to [email protected] or by calling the Consumer & Governmental Affairs 
Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY).

I. Introduction

    1. One of the foundational missions of the Federal Communications 
Commission (Commission) is to ensure that communications networks are 
available to Americans throughout the country. And for decades, the 
Commission has indirectly subsidized the deployment and expansion of 
local voice telephone networks through its intercarrier compensation 
system. These rules allowed, for example, local exchange carriers (or 
LECs) to collect end office switching charges or charges recovered from 
long-distance carriers (known as interexchange carriers or IXCs) for 
terminating long-distance calls to the LECs' local customers.
    2. Calls were traditionally delivered over the legacy system of 
interconnected voice telephone networks known as the public-switched 
telephone network, or PSTN. For nearly the last decade, the Commission 
has worked to facilitate the

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efficient transition from traditional legacy voice networks to modern 
internet Protocol-based networks. In 2011, the Commission recognized 
that, as a consequence of the transition to these IP-based networks and 
services, consumers were increasingly purchasing Voice over internet 
Protocol (VoIP) services. As a result, voice telephone traffic 
increasingly originates or terminates in IP format, but is also 
exchanged over PSTN facilities. To address the growing VoIP-PSTN 
traffic, and as part of its commitment to promoting investment in and 
deployment of IP networks, the Commission adopted the VoIP Symmetry 
Rule, which ``permit[s] a LEC to charge the relevant intercarrier 
compensation for functions performed by it and/or by its retail VoIP 
partner, regardless of whether the functions performed or the 
technology used correspond precisely to those used under a traditional 
. . . architecture.''
    3. Several years later, the Commission offered an interpretation of 
the VoIP Symmetry Rule that allowed LECs that partner with over-the-top 
VoIP providers to collect end office switching charges on their VoIP-
PSTN traffic. This 2015 Declaratory Ruling was immediately challenged, 
vacated by the United States Court of Appeals for the District of 
Columbia Circuit (the D.C. Circuit), and remanded to the Commission for 
further consideration. We also have under consideration a Petition for 
Declaratory Ruling filed by CenturyLink seeking to have the Commission 
reaffirm the 2015 Declaratory Ruling.
    4. To provide certainty to carriers, promote the deployment of 
modern all-IP networks, and advance competition in the voice services 
market, we now clarify our interpretation of the VoIP symmetry rule and 
reaffirm our commitment to well-established Commission precedent that 
takes account of the functions a LEC or its VoIP provider partner are 
actually performing. Accordingly, we interpret our VoIP Symmetry Rule 
to permit LECs to assess end office switched access charges only if the 
LEC or its VoIP partner provides a physical connection to the last-mile 
facilities used to serve an end user. If neither the LEC nor its VoIP 
provider partner provides such physical connection to the last-mile 
facilities used to serve the end user, the VoIP-LEC partnership is not 
providing the functional equivalent of end office switched access and 
the LEC may not assess end office switched access charges.

II. Background

    5. The IP transition has generated a great deal of regulatory 
uncertainty. In early 2011, the Commission resolved a formal complaint 
brought by AT&T alleging that YMax Communications Corp., a competitive 
LEC, was improperly assessing switched access charges for voice 
services it provided in conjunction with its partner magicJack, LP. 
magicJack provided consumers ``the ability to use the internet to make 
and receive calls throughout most of North America'' through a device--
the eponymous ``magicJack''--that plugged into a computer's USB port 
and a telephone jack ``into which an ordinary landline telephone can be 
plugged.'' Customers had to ``separately procure high speed internet 
access service from a third-party ISP in order to use the magicJack 
device to place or receive calls.'' YMax provided access to numbers and 
to the PSTN for magicJack's customers, but ``did not provide any 
physical transmission facilities'' connecting YMax to the premises of 
any non-carriers/non-internet Service Provider (ISP) persons or 
entities. In its complaint, AT&T alleged that YMax violated the 
Communications Act of 1934, as amended, by assessing switched access 
charges not authorized by its tariff, because YMax did not provide 
services such as ``Switched Access Service'' or ``End Office Switched 
Access'' to ``end users'' as defined in its tariff.
    6. The Commission examined the YMax tariff provisions in question 
``according to their common meaning in the industry.'' The Commission 
held that the terms ``termination'' of ``End User station loops'' and 
``end user lines'' have well-established meanings within the 
telecommunications industry, in Commission orders, and in court 
decisions. In all of those contexts, the terms generally refer to a 
physical transmission facility that provides a point-to-point 
connection between an individual home or business and a telephone 
company office. The Commission held that YMax was not providing ``end 
office switched access'' because it did not provide a ``physical 
transmission facility that provides a point-to-point connection.'' In 
reaching its decision, the Commission rejected YMax's argument that it 
was providing ``virtual loops'' via the customer's internet access.
    7. In the Transformation Order, 76 FR 73830, the Commission 
recognized that its approach to intercarrier compensation needed to 
evolve along with changing technologies and network functions, and 
adopted a prospective transitional intercarrier compensation framework 
for VoIP-PSTN traffic, or ``traffic exchanged over PSTN facilities that 
originates and/or terminates in IP format.'' Specifically, this 
framework established default intercarrier compensation rates for toll 
VoIP-PSTN traffic equal to interstate access rates and default 
intercarrier compensation rates for other VoIP-PSTN traffic at 
otherwise applicable reciprocal compensation rates. The Commission 
specified that the term ``VoIP-PSTN'' related to ``whether the exchange 
of traffic between a LEC and another carrier occurs in Time-Division 
Multiplexing (TDM) format (and not in IP format), without specifying 
the technology used to perform the functions subject to the associated 
intercarrier compensation charges.'' The Commission adopted a 
``symmetric'' framework, reasoning that such an approach best balanced 
its policy goals of encouraging migration to an all-IP network, 
reducing intercarrier compensation disputes, providing greater 
certainty to the industry regarding intercarrier compensation revenue 
streams, avoiding marketplace distortions and arbitrage that could 
arise from an asymmetrical approach to compensation, and advancing 
competitive and technological neutrality.
    8. Specifically, the VoIP Symmetry Rule ``permit[s] a LEC to charge 
the relevant intercarrier compensation for functions performed by it 
and/or by its retail VoIP partner, regardless of whether the functions 
performed, or the technology used correspond precisely to those used 
under a traditional TDM (time division multiplexing) architecture.'' 
The VoIP Symmetry Rule specifies that, ``a local exchange carrier shall 
be entitled to assess and collect the full Access Reciprocal 
Compensation charges prescribed by this subpart that are set forth in a 
local exchange carrier's interstate or intrastate tariff for the access 
services defined in Sec.  51.903 regardless of whether the local 
exchange carrier itself delivers such traffic to the called party's 
premises or delivers the call to the called party's premises via 
contractual or other arrangements with an affiliated or unaffiliated 
provider of interconnected VoIP service, as defined in 47 U.S.C. 
153(25), or a non-interconnected VoIP service, as defined in 47 U.S.C. 
153(36), that does not itself seek to collect Access Reciprocal 
Compensation charges prescribed by this subpart for that traffic.'' 47 
CFR 51.913(b). Among the categories of services defined in section 
51.903 is End Office Access Services, which are

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defined as ``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.'' Local switching is one of the rate elements of End 
Office Access Charges, whereas there are separate common line charges 
that recover, as a general matter, the costs associated with the 
physical loop and line port.
    9. In 2012, YMax sought clarification about ``the minimum 
functionality required'' for a competitive LEC to collect full access 
for VoIP-PSTN traffic pursuant to the then-new VoIP Symmetry Rule. YMax 
asserted that the Commission should affirm that ``a LEC is performing 
the functional equivalent of ILEC access service . . . whenever it is 
providing telephone numbers and some portion of the interconnection 
with the PSTN, and regardless of how or by whom the last-mile 
transmission is provided.'' The Wireline Competition Bureau rejected 
YMax's arguments and explained that `` `although access services might 
functionally be accomplished in different ways . . . the right to 
[assess] charge[s] [pursuant to the VoIP Symmetry Rule] does not extend 
to functions not performed by the LEC or its retail VoIP service 
provider partner.' '' The Bureau explained that YMax's interpretation 
could lead to double billing and that the Commission was careful to 
``prevent double billing and charging for functions not actually 
provided.'' As a result, the Bureau rejected YMax's proposed rule 
interpretation.
    10. In the 2015 Declaratory Ruling, the Commission reviewed the 
precedent establishing that the hallmark of end office switching is the 
connection of trunks to lines and concluded that ``the cases cited . . 
. are distinguishable from the facts before us or have been superseded 
by the changes adopted in the USF/ICC . . . Transformation Order.'' The 
Commission focused instead on what it described as the ``critical 
functions'' of switched access in the traditional TDM network and 
compared them to key physical switching functions in the IP network. 
Based on this review, the Commission determined that it should allow an 
``equal application of the [VoIP Symmetry] rule'' to all types of VoIP 
services and allow both facilities-based and over-the-top VoIP 
providers or their LEC partners to collect end office switching charges 
on VoIP-PSTN traffic.
    11. AT&T appealed the 2015 Declaratory Ruling, arguing that 
services provided by over-the-top VoIP-LEC partnerships do not 
constitute the functional equivalent of end office switching services 
because end office switched access involves a physical connection 
between the LEC and the last-mile facilities used to serve an end user. 
On appeal, the D.C. Circuit rejected as arbitrary and capricious the 
Commission's attempt to omit the physical connection of lines and 
trunks from the necessary functions of end office switching because it 
left the Commission unable to distinguish between end office and tandem 
switching. The court also found that the Commission had not 
successfully rebutted the commonly understood meaning of end office 
switching, as discussed in YMax I. As the court explained, ``YMax I 
represents the Commission's apparent understanding of the `commonly 
understood meaning[]' of end office switching around the time of the 
Transformation Order.'' The court further explained that YMax I, as 
well as earlier guidance dating back to the 1990s, ``appear to identify 
end-office switching as supplying actual or physical interconnection.'' 
The court determined that ``[t]he ruling's only explanation for why 
interconnection is `not require[d]' is that, in VoIP-PSTN calls, `the 
customer is separately paying for [the] broadband connection . . . . 
That the customer is paying for the broadband interconnection doesn't 
support the conclusion that interconnection is unnecessary for end-
office switching--it merely indicates that it is provided by a party 
other than a VoIP-LEC.''
    12. After the court remanded the 2015 Declaratory Ruling, 
CenturyLink submitted a Petition for a Declaratory Ruling, urging the 
Commission to issue a declaratory ruling regarding the appropriate 
intercarrier compensation for over-the-top VoIP-LEC traffic to and from 
the PSTN and reaffirm the conclusions of the 2015 Declaratory Ruling 
regarding the correct interpretation of the VoIP Symmetry Rule. The 
Commission sought and received comments on CenturyLink's petition. 
CenturyLink argues that the Remand Order does not decide the correct 
interpretation of the VoIP Symmetry Rule in relation to over-the-top 
VoIP traffic, and requests that the Commission ``complete the remand'' 
from the court and ``resolve the underlying dispute as to the proper 
interpretation'' of the VoIP Symmetry Rule. AT&T and Verizon disagree. 
AT&T, for example, asserts that ``there is no merit to CenturyLink's 
effort to sideswipe the text of the 2011 rules, [and] the decades of 
precedent establishing the meaning and application of those rules to 
over-the-top VoIP traffic.''
    13. Litigation and other disputes regarding access charges related 
to the VoIP Symmetry Rule continue. In its Petition, CenturyLink 
details ongoing litigation regarding the interpretation of the VoIP 
Symmetry Rule. According to O1 Communications and Peerless Network, the 
Remand Order ``has resulted in disputes between local exchange carriers 
. . . and interexchange carriers . . ., primarily AT&T and Verizon, 
over the appropriate compensation for over-the-top VoIP traffic.'' 
Peerless also alleges that several large interexchange carriers ``not 
only refuse to pay access charges on [over-the-top] VoIP traffic, but 
invented new disputes for access charges they had previously paid, 
resulting in a claimed `claw back' of prior payments.'' According to 
AT&T, two district courts issued rulings regarding access disputes 
arising under the VoIP Symmetry Rule and ``both district courts stayed 
or vacated their decisions'' after the release of the Remand Order.

III. Discussion

    14. Upon consideration of the record in this proceeding and 
consistent with Commission precedent, we reaffirm the long-standing 
definition of what constitutes ``end office switching'': A VoIP-LEC 
partnership that interconnects a call with a customer's last-mile 
facility performs the functional equivalent of end office switching and 
may charge for that functionality. By contrast, a VoIP provider, or a 
VoIP-LEC partnership, that transmits calls to an unaffiliated ISP for 
routing over the internet does not provide the functional equivalent of 
end office switching, and may not impose an end office switching access 
charge on IXCs that receive or deliver traffic to or from the VoIP-LEC 
partnership. Today's ruling provides carriers with certainty and 
predictability about the applicability of the VoIP Symmetry Rule, while 
helping to resolve past disputes.
    15. In reaching our conclusion, we also conclude that the 2015 
Declaratory Ruling failed to properly interpret the VoIP Symmetry Rule 
in light of the commonly understood meaning of end office switching. 
Commission precedent is clear that a physical connection to the last-
mile facilities used to serve an end user is the key characteristic of 
end office switching, and absent such physical connection, a VoIP-LEC 
partnership is not performing the functional equivalent of end office 
switching. For example, the Responsible Accounting Officer decisions 
consist of a Common Carrier Bureau letter providing cost accounting 
guidance for remote switching equipment, and a

[[Page 5434]]

subsequent Commission-level reconsideration order of the letter. 
Accordingly, on remand, we decline to follow the interpretation of the 
VoIP Symmetry Rule adopted by the Commission in the 2015 Declaratory 
Ruling and deny the CenturyLink Petition for a Declaratory Ruling in 
this regard.
    16. The Commission has historically analyzed end office switching 
in the context of regulating traditional voice services. The Commission 
has consistently recognized that interconnection is a hallmark of end 
office switching, and that interconnection involves connecting 
``subscriber line to subscriber line or subscriber line to trunk.'' As 
the D.C. Circuit and commenters explain, prior Commission and Bureau 
orders demonstrate that the Commission has always understood physical 
interconnection to be the hallmark of end office switching. As AT&T 
points out, ``all of the relevant precedents from the Commission and 
courts . . . uniformly provide that the core and distinguishing 
function of an end office switch is the interconnection of calls on 
trunks to and from last-mile customer loop facilities.'' In particular, 
as the D.C. Circuit observed, YMax I reveals the commonly understood 
meaning of end office switching at the time of the Transformation 
Order, which is directly relevant to our application of the functional 
equivalency evaluation under our traditional test: The Commission 
clearly held that YMax was not providing ``end office switched access'' 
because it did not provide a ``physical transmission facility that 
provides a point-to-point connection.''
    17. We thus conclude that a physical interconnection continues to 
be the critical and defining characteristic of end office switching. 
LECs and their VoIP provider partners merely transmitting calls to 
unaffiliated ISPs for routing over the public internet are not 
performing this essential function of end office switching. In adopting 
the VoIP Symmetry Rule in 2011, the Commission demonstrated no 
intention to rethink that key aspect of end office switching. 
Therefore, we decline to continue pursuing the Commission's misguided 
decision in 2015 to depart from this well-understood interpretation of 
end office switching. Returning to that historical understanding in our 
application of the VoIP Symmetry Rule here also fully addresses the 
D.C. Circuit's concerns with the 2015 Declaratory Ruling.
    18. In adopting the VoIP Symmetry Rule, the Commission reaffirmed 
its practice of determining whether a carrier can impose access charges 
by considering whether the service being provided is functionally 
equivalent to a service for which LECs have been allowed to impose 
access charges. As the Commission explained, ``under the Commission's 
historical approach in the access charge context, when relying on 
tariffs, LECs have been permitted to charge access charges to the 
extent that they are providing the functions at issue.'' Although the 
Commission did not expressly discuss physical connections, it used the 
traditional test, and re-codified it, in order to clarify that a LEC 
could collect access charges when it transmitted a call using a format 
other than TDM (such as IP); and that a LEC could collect access 
charges for functions performed not only by itself but also by its VoIP 
partner.
    19. Our interpretation is consistent with the Commission's 
statement in the Transformation Order that a LEC can charge for 
functions it or its VoIP provider partner perform even if they do not 
`` `correspond precisely to those used under a traditional TDM 
architecture.' '' That statement underscores the Commission's 
commitment to considering functional equivalency when looking at 
different types of network architectures consistent with its historical 
practice. We thus find no basis for the assertion in the 2015 
Declaratory Ruling that that language from the Transformation Order 
demonstrated that the Commission adopted a new functional equivalence 
test. Where the Commission did choose to depart from its historical 
approaches in other aspects of its VoIP symmetry analysis, it did so 
expressly and unambiguously. Most notably, the Commission expressly 
departed from its historical standard with regard to which entity--the 
LEC or its VoIP provider partner--must be providing the relevant 
functionality. The Commission made no such indication of its intent to 
change course in the standard for evaluating what functionality 
actually was being provided. Instead, in adopting that new approach of 
allowing either the LEC or its VoIP provider partner to provide the 
functionally equivalent service, the Commission found clear support in 
the YMax I decision for its pronouncement that the VoIP Symmetry Rule, 
``do[es] not permit a LEC to charge for functions performed neither by 
itself or its retail partner.'' Further, the interpretation of the VoIP 
Symmetry Rule in this Order best advances the policy goals of the 
Transformation Order of ``encouraging the deployment of all-IP 
networks, promoting competition in the voice marketplace, reducing 
intercarrier compensation disputes, and avoiding marketplace 
distortions and arbitrage that could arise from an asymmetrical 
approach to compensation.'' Our unwillingness to so quickly assume a 
change in policy as the 2015 Declaratory Ruling did likewise accords 
with an agency's general administrative law obligation to acknowledge 
and explain changes in course.
    20. Our conclusion that the VoIP Symmetry Rule allows recovery of 
end office switching charges only where the LEC or its VoIP provider 
partner provides the physical connection furthers the Commission's goal 
of promoting IP investment, particularly last-mile investment, by 
rewarding investment in last-mile connections. We disagree with 
CenturyLink's assertion that our actions in this Order will provide a 
``competitive disincentive'' to carriers that move to IP-based services 
and will otherwise hinder the transition to IP. To the contrary, the 
Commission's ``intercarrier compensation framework is intended to 
`promote investment in and deployment of IP networks,' '' and 
permitting a VoIP-LEC partnership to ``mak[e] minimal investments in 
softswitches and the like and piggy-back[] on the far more extensive 
investments that facilities-based broadband internet access providers 
have made'' would contravene that goal. In contrast to the commonsense 
notion that linking a LEC's ability to impose end office charges to the 
provision of connections between lines and trunks by the LEC or its 
VoIP provider partner (during the transition to bill-and-keep) promotes 
last-mile investment essential to IP networks, we find the theory for 
promoting IP networks in the 2015 Declaratory Ruling to be speculative 
and insufficiently supported. Indeed, the Commission's conclusion that 
the 2015 Declaratory Ruling would promote IP networks and services 
largely relied on high-level policy statements from the Transformation 
Order about the effects of intercarrier compensation reform, or reform 
of VoIP intercarrier compensation, more generally. However, the 2015 
Declaratory Ruling did not explain how allowing LECs and their over-
the-top VoIP provider partners to recover access charges for functions 
they are not performing would promote that sort of investment or 
otherwise advance the Commission's goals.
    21. Relatedly, we conclude that that our reading of the VoIP 
Symmetry Rule is the better interpretation in the overall context of 
trying to promote competition in the voice marketplace than the 
approach taken by the Commission in the 2015 Declaratory Ruling. We 
reject

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arguments that the continued presence of TDM in some aspects of 
providers' networks--particularly for 8YY calls--suggests either that 
we are not serious about promoting IP networks or that our policies in 
that regard have failed. The migration to IP networks necessarily is a 
transition--not a flash cut--that has been, and remains, ongoing. 
Additionally, issues related to intercarrier compensation policies in 
other contexts, such as those related to 8YY calls, are more 
appropriately taken up in a proceeding where they are at issue. The 
Commission currently has an open proceeding (WC Docket No. 18-156) 
focusing on intercarrier compensation issues related to the provision 
of 8YY services. At best, the approach adopted in the 2015 Declaratory 
Ruling may have temporarily encouraged voice competition where 
broadband connections already existed that allowed VoIP providers and 
their LEC partners to collect access charges during the transition to 
bill-and-keep. But where no such IP-based last-mile connections 
existed, the approach adopted in the 2015 Declaratory Ruling would have 
discouraged VoIP providers and their LEC partners from building last 
mile connections, because they could simply recover the same access 
charges without building last mile connections. Contrary to Teliax's 
assertion that our interpretation of the VoIP Symmetry Rule discourages 
competition by treating over-the-top VoIP services differently than 
facilities-based VoIP services, we find that our approach is 
technologically neutral. Carriers may be compensated for services they 
actually perform, and, as discussed above, we find that over-the-top 
VoIP-PSTN partnerships do not perform the functional equivalent of end 
office switched access. Having explained how the approach we take today 
aligns with the Commission's long-standing policy goals, we also take 
issue with Teliax's claim that our policy analysis relies on ``high-
level . . . statements without hard analysis.'' Moreover, unlike our 
approach today, the approach the Commission took in the 2015 
Declaratory Ruling was inconsistent with the policy goals set forth in 
the Transformation Order. As a result, while we conclude that our 
textual justification for our approach--coupled with the fact that it 
addresses the problems with the 2015 Declaratory Ruling identified by 
the court--is a sufficient basis for our decision, we also find that 
our decision is strengthened by our policy analysis.
    22. We also conclude that because our approach is better aligned 
with the approach taken by the Commission in the Transformation Order 
and is consistent with the historical functional equivalence test, it 
provides the more symmetrical approach to access charge compensation 
and we therefore expect it to advance the Transformation Order's goals 
of reducing market distortions, arbitrage, and compensation disputes. 
We are unpersuaded by the 2015 Declaratory Ruling's concerns about IP-
to-IP interconnection negotiations. That ruling framed one set of 
negotiating parties as in the wrong because they were negotiating from 
a baseline that presumed an interpretation of the intercarrier 
compensation rules for VoIP-PSTN traffic that differed from the one the 
Commission adopted there. Having confirmed the correctness of those 
parties' understanding of the VoIP Symmetry Rule, however, we do not 
see the same grounds to criticize their negotiating approach--even 
assuming arguendo that negotiating approach is what is reflected in the 
characterizations in the 2015 Declaratory Ruling. Particularly because 
the VoIP Symmetry Rule does not apply by its terms to IP-to-IP 
interconnection, we are not persuaded that our clarification of the 
VoIP Symmetry Rule provided here will have a negative effect on 
providers' ability to negotiate such agreements, rather than simply 
clarifying the legal baseline for VoIP-PSTN traffic for both sides to 
any such negotiation. More generally, our experience persuades us that 
uncertainty regarding the governing legal rules is the most significant 
source of intercarrier compensation disputes, and that once the rules 
are clarified, parties are able to work out the implementation details 
in a way that reduces the need for future disputes and litigation. We 
also disagree with the 2015 Declaratory Ruling's characterization of 
the litigation surrounding the VoIP Symmetry Rule as arising because 
parties could not distinguish between facilities-based and over-the-top 
VoIP services. We agree with AT&T that, because of the fundamentally 
different physical arrangements between facilities-based and over-the-
top VoIP services, the two can be distinguished with relative ease. We 
remind parties that, pursuant to the Transformation Order, providers 
may choose to use a variety of different methods to identify and track 
compensable VoIP-PSTN traffic for billing purposes. Relatedly, we 
disagree with CenturyLink that in adopting the Transformation Order, 
the Commission adopted a ``safe harbor'' for determining what traffic 
would be subject to the new VoIP-PSTN compensation structure, much less 
that any such ``safe harbor'' ``necessarily applied end office charges 
to OTT traffic.'' Rather, the Commission merely suggested various 
methods providers could use to determine how much traffic was subject 
to access charges. Nothing in the Transformation Order implies, let 
alone states, that providers opting to use these methods were entitled 
to end office access charges for any or all of their traffic.
    23. Indeed, in the Remand Order, the court vacated the 2015 
Declaratory Ruling based, at least in part, on its concern that the 
Commission's ``new'' functional equivalence test had all but erased the 
distinction between tandem switching and end office switching. We 
respond to these concerns by reiterating the Commission's longstanding 
view that end office switching involves the connection of trunks to 
lines and by clearly declaring that a VoIP provider, or its LEC 
partner, provides the functional equivalent of end office switching 
only when it provides a physical connection to the last-mile facilities 
used to serve an end user. This clarification provides a clear test for 
functional equivalency in the context of the VoIP Symmetry Rule and 
provides a bright-line distinction between tandem switching and end 
office switching for purposes of this rule. It also provides clarity 
and guidance to those parties involved in the ongoing disputes and 
litigation regarding the correct interpretation of the VoIP Symmetry 
Rule as discussed by commenters. We reiterate that providers, including 
over-the-top VoIP-LEC partnerships, may assess access charges for other 
access services they provide, such as dedicated transport access 
service or tandem-switched access service, to the extent they provide 
those services or the functional equivalent thereof. Thus, VoIP-LEC 
partnerships are entitled to collect access charges for tandem 
switching and transport services, for example, only to the extent that 
they actually provide those services, or the functional equivalent of 
those services. We leave carriers to determine the appropriate 
compensation for such services in accordance with their agreements and 
applicable tariffs.
    24. Our decision today is fundamentally technologically neutral. As 
Verizon explains, ``distinguishing between facilities-based and over-
the top VoIP providers is technology neutral--the different treatment 
has nothing to do with the providers' choice of technology . . . but 
with the fact that the former are doing work that the latter

[[Page 5436]]

are not.'' We agree. The services provided by over-the-top VoIP 
providers and facilities-based VoIP providers are not functionally 
equivalent--the latter provides the physical connection to the last-
mile facilities used to serve an end user, and the former does not. We 
thus reject the overbroad suggestion in the 2015 Declaratory Ruling 
that ``disparate treatment based on technological distinctions between 
facilities-based and over-the-top providers directly contradicts the 
advancement of `competitive or technological neutrality.' '' Where 
there are material technological distinctions, differences in treatment 
can be appropriate. The reasoning underpinning the 2015 Declaratory 
Ruling is circular: It is only by excluding interconnection from the 
scope of end office switching that the 2015 Declaratory Ruling could 
have treated differences between facilities-based and over-the-top VoIP 
providers as immaterial. Our interpretation ``embraces the concept of 
compensation for new and non-traditional functionality,'' but not at 
the expense of a departure from the historical standard for functional 
equivalency that we find represents the best interpretation of the VoIP 
Symmetry Rule.
    25. In departing from the Commission's interpretation of the VoIP 
Symmetry Rule in the 2015 Declaratory Ruling, we are mindful of the 
fact that ``an agency is free to change its mind so long as it supplies 
`a reasoned analysis.' '' The Supreme Court has observed that there is 
``no basis in the Administrative Procedure Act or in our opinions for a 
requirement that all agency change be subjected to more searching 
review. . . . [I]t suffices that the new policy is permissible under 
the statute, that there are good reasons for it, and that the agency 
believes it to be better, which the conscious change of course 
adequately indicates.'' Relevant precedent holds that we need only 
``examine the relevant data and articulate a satisfactory explanation 
for [our] action,'' a duty we fully satisfy here. The ``possibility of 
drawing two inconsistent conclusions from the evidence does not prevent 
an administrative agency's finding from being supported by substantial 
evidence.'' Thus, contrary to CenturyLink's assertion that we cannot or 
should not depart from the conclusion of the 2015 Declaratory Ruling, 
we are ``entitled to assess administrative records and evaluate 
priorities'' in light of our current policy judgments as well as in 
response to a remand order from the court. Indeed, by vacating the 2015 
Declaratory Ruling and remanding the matter to us, the D.C. Circuit 
required us to reevaluate the Commission's reasoning in the 2015 
Declaratory Ruling and take into the account the weaknesses in that 
ruling that the D.C. Circuit identified in its opinion.
    26. In the interest of further clarity, we find that this 
Declaratory Ruling should have retroactive effect. As a general matter, 
declaratory rulings are adjudicatory and are presumed to have 
retroactive effect. Clarifying the law and applying that clarification 
to past behavior are routine functions of adjudications. As various 
commenters point out, the applicability of the VoIP Symmetry Rule has 
not been clear. This retroactive clarification is necessary to provide 
clarity on the meaning of the VoIP Symmetry Rule. As such, we reject 
the assertion that the interpretation of the VoIP Symmetry Rule adopted 
in this Order may not be applied retroactively because such 
interpretation would result in ``manifest injustice'' and that our 
revised interpretation of the VoIP Symmetry Rule may be applied only 
prospectively. Instead, retroactivity is necessary to prevent an undue 
hardship being worked upon those parties who properly interpreted the 
VoIP Symmetry Rule and have been in disputes ever since.

IV. Ordering Clauses

    27. Accordingly, it is ordered that, pursuant to sections 4(i), 
201, 202, and 251 of the Communications Act of 1934, as amended, 47 
U.S.C. 154(i), 201, 202, and 251, and sections 1.1 and 1.2 of the 
Commission's rules, 47 CFR 1.1, 1.2, this Order on Remand and 
Declaratory Ruling in WC Docket No. 10-90 and CC Docket No. 01-92 is 
adopted.
    28. It is further ordered that the Petition of CenturyLink for a 
Declaratory Ruling filed May 11, 2018 is denied.
    29. It is further ordered that, pursuant to section 1.103 of the 
Commission's rules, 47 CFR 1.103, this Order on Remand and Declaratory 
Ruling shall be effective upon release.

Federal Communications Commission.
Marlene Dortch,
Secretary.
[FR Doc. 2020-01658 Filed 1-29-20; 8:45 am]
 BILLING CODE 6712-01-P