FCC changes intercarrier compensation rules for 8YY calls

The FCC adopted a report and order to change the rules for intercarrier compensation on toll free calls. The rule changes are designed to remove underlying incentives for 8YY arbitrage schemes, for example, fraud schemes that exploit the intercarrier compensation rules. Here’s an overview.

8YY fraud schemes

The report and order lists four types of fraud schemes that target 8YY telephone numbers:

1. Traffic pumping. Robocallers are paid to make massive numbers of illegitimate calls to toll free numbers.
2. Benchmarking. An originating carrier in one part of the country sends its toll free calls to a CLEC (Competitive Local Exchange Carrier) in another part of the country where the ILEC (Incumbent Local Exchange Carrier) has relatively high access charges.
3. Mileage pumping. Carriers inflate the distance to inflate the transport charges.
4. Double-dipping. Schemes where voice service providers access multiple toll free database queries when only one such query is needed.

“The complex carrier-to-carrier billing system underpinning 8YY services has encouraged robocallers to make massive numbers of illegitimate calls to toll free numbers and enabled other arbitrage practices that have driven up costs for consumers and businesses” said Ajit Pai, FCC Chairman. “Now, the gravy train is over. We’re on track to transition to a simpler intercarrier billing system that will end the waste and arbitrage and enhance the value of toll-free services for consumers and businesses.”

Report and order

To remove the financial incentives to commit fraud, the report and order makes the following changes:

1. Originating end office access charges will be moved to bill-and-keep over a three-year transition period. Under bill-and-keep arrangements, a carrier generally looks to its end-users—which are the entities and individuals making the choice to subscribe to that network—rather than looking to other carriers and their customers to pay for the costs of its network.
2. 8YY originating transport and originating tandem switching fees will be combined into a single nationwide tandem switched transport access service rate capped at $0.001 per minute.
3. Charges for 8YY database queries needed to route 8YY calls will be transitioned to $0.0002 over approximately three years. Carriers will not be allowed to charge for more than one such query per call.

Timing

The order provisions will take effect with the following schedule:

1. Cap all originating 8YY end office, tandem switching and transport, and database query charges at their current rates as of the effective date of this order, which will be 30 days after its publication in the Federal Register.
2. Reduce originating 8YY end office charges to bill-and-keep over three further steps beginning July 1, 2021 and ending July 1, 2023.
3. Adopt a single uniform nationwide rate cap of $0.001 per minute for originating 8YY tandem switching and transport access charges as of July 1, 2021.
4. Reduce database query charges to a cap of $0.0002 per query in three steps ending July 1, 2023.
5. End double dipping by prohibiting carriers from charging for more than one query per call as of the effective date of this order, which will be 30 days after its publication in the Federal Register.

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