[Federal Register Volume 83, Number 126 (Friday, June 29, 2018)]
[Proposed Rules]
[Pages 30628-30639]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-13699]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 51

[WC Docket No. 18-155; FCC 18-68]


Updating the Intercarrier Compensation Regime To Eliminate Access 
Arbitrage

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, the Commission proposed to adopt rules to 
curb the financial incentive to engage in access stimulation by giving 
access-stimulating LECs two choices for receiving calls. The access-
stimulating LEC can choose either: To be financially responsible for 
the delivery of calls to its network, in which case intermediate access 
providers would charge the access-stimulating LEC for the delivery of 
calls; or to accept direct connections from long distance carriers 
seeking to terminate telephone calls to the LEC or from intermediate 
access providers of the long distance carriers' choosing, which would 
allow the long distance carriers to bypass intermediate access 
providers chosen by the access-stimulating LEC. This document seeks 
comment on several alternatives, including requiring LECs engaged in 
access stimulation to immediately transition their terminating access

[[Page 30629]]

charges to bill-and-keep. This document also seeks comment on the 
effect the proposed rules will have on specific arbitrage schemes 
described in the record. Finally, it seeks comment on how to curb other 
arbitrage schemes.

DATES: Comments are due on or before July 20, 2018; reply comments are 
due on or before August 3, 2018.

ADDRESSES: You may submit comments, identified by WC Docket No. 18-155, 
by any of the following methods:
    <bullet> Federal Communications Commission's website: http://apps.fcc.gov/ecfs//. Follow the instructions for submitting comments.
    <bullet> People with Disabilities: Contact the FCC to request 
reasonable accommodations (accessible format documents, sign language 
interpreters, CART, etc.) by email: <a href="/cdn-cgi/l/email-protection#71373232444145311712125f161e07"><span class="__cf_email__" data-cfemail="6c2a2f2f595c582c0a0f0f420b031a">[email protected]</span></a> 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: Edward Krachmer, FCC Wireline 
Competition Bureau, Pricing Policy Division at 202-418-1525, or at 
<a href="/cdn-cgi/l/email-protection#236647544251470d685142404b4e4651634540400d444c55"><span class="__cf_email__" data-cfemail="7a3f1e0d1b081e5431081b1912171f083a1c1919541d150c">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice 
of Proposed Rulemaking (NPRM), WC Docket No. 18-155; FCC 18-68, adopted 
on June 4, 2018 and released on June 5, 2018. The full text of this 
document may be obtained at the following internet address: https://www.fcc.gov/document/fcc-proposes-reforms-eliminate-intercarrier-compensation-arbitrage.

I. Background

A. The Current Access Stimulation Rules

    1. To reduce access stimulation, as part of the USF/ICC 
Transformation Order, 76 FR 73860, FCC 11-161, the Commission defined 
``access stimulation'' as occurring when two conditions are met. First, 
the involved LEC must have a ``revenue sharing agreement,'' which may 
be ``express, implied, written or oral'' that ``over the course of the 
agreement, would directly or indirectly result in a net payment to the 
other party (including affiliates) to the agreement, in which payment'' 
by the LEC is ``based on the billing or collection of access charges 
from interexchange carriers or wireless carriers.'' Second, the LEC 
must also meet one of two traffic tests. An access-stimulating LEC 
either has ``an interstate terminating-to-originating traffic ratio of 
at least 3:1 in a calendar month, has had more than a 100 percent 
growth in interstate originating and/or terminating switched access 
minutes of use in a month compared to the same month in the preceding 
year.'' Even if a LEC no longer meets either of these traffic tests, 
once it is considered to have engaged in access stimulation, this 
regulatory classification persists so long as the LEC maintains any 
revenue sharing agreement.
    2. A LEC that is engaged in access stimulation is required by our 
rules to reduce its access charges either by adjusting its rates to 
account for its high traffic volumes (if a rate-of-return LEC) or to 
reduce its access charges to those of the price cap LEC with the lowest 
switched access rates in the state (if a competitive LEC). These 
reduced rates lower the cost to interexchange carriers (IXCs) and the 
amount received by the LEC and the provider of high call volume 
services with which it has a revenue sharing agreement.

B. Arbitrage Schemes After the USF/ICC Transformation Order

    3. Last year, the Wireline Competition Bureau (Bureau) issued a 
public notification, 82 FR 44754, seeking to refresh the record on ICC 
issues raised by the Commission in the USF/ICC Transformation Order. In 
response to that public notification, commenters argue that, 
notwithstanding prior Commission action, arbitrage continues as 
``companies engaged in access stimulation use a variety of tactics to 
prevent interexchange carriers from avoiding their excessive charges.'' 
The record indicates that today's access arbitrage schemes are often 
enabled by the use of intermediate access providers selected by the 
terminating LECs. When an intermediate access provider is in the call 
path, the IXC pays access charges on a per-minute-of-use (MOU) basis to 
the intermediate access provider and to the terminating LEC. This 
tactic evades existing Commission rules intended to stop access 
stimulation to the extent that an intermediate access provider is not 
captured by the definition of ``access stimulation,'' and thus, is not 
subject to those rules.
    4. Recent complaint activity suggests that much of the post-USF/ICC 
Transformation Order access arbitrage activity specifically involves 
LECs that use centralized equal access (CEA) providers to connect to 
IXCs. CEA providers are a specialized type of intermediate access 
provider that were formed in the 1980s to implement long distance equal 
access obligations (permitting end users to use 1+ dialing to reach the 
IXC of their choice) and to aggregate traffic for connection between 
rural incumbent LECs and other networks, particularly those of IXCs. 
There are currently three CEA providers, and the LECs that use them 
(subtending LECs) have traditionally been reliant on CEA providers for 
this equal access implementation as well as traffic measurement and 
billing.

II. Discussion

    5. We propose solutions to the persistent, costly, and inefficient 
access stimulation arbitrage scheme described here and seek comment on 
how to prevent other types of arbitrage. We are mindful of the fact 
that practices adjust to regulatory change; therefore we invite comment 
on how to avoid introducing incentives for new types of arbitrage to 
arise.

A. Requiring Access-Stimulating LECs Either To Be Financially 
Responsible for Calls Delivered to Their Networks or To Accept Direct 
Connections

    6. To rid the ICC system of the inefficiencies caused by access 
stimulation relating to intermediate access providers, we propose to 
require access-stimulating LECs to choose either to: (i) Bear the 
financial responsibility for the delivery of terminating traffic to 
their end office, or functional equivalent, or; (ii) accept direct 
connections from either the IXC or an intermediate access provider of 
the IXC's choice.
    7. Revised Financial Responsibility. We seek comment on the first 
prong of our proposal and the impact it will have on access stimulation 
schemes. Under this prong, an access-stimulating LEC that does not 
offer direct connections to IXCs would bear all financial 
responsibility for applicable intermediate access provider terminating 
charges normally assessed to an IXC (from the point of indirect 
interconnection to the access-stimulating LEC's end office or 
functional equivalent), and would be prohibited from assessing 
transport charges for any portion of transport between the intermediate 
access provider and the LEC's end office or functional equivalent that 
the LEC, itself, provides. What are the advantages of placing the 
financial responsibility for delivery of traffic to its end office, or 
functional equivalent, on the access-stimulating LEC? Are there 
disadvantages?
    8. What implementation issues does this part of our proposal raise? 
What steps would intermediate access providers need to take to bill 
access-stimulating LECs for terminating access

[[Page 30630]]

and to not bill IXCs? How much time do access-stimulating LECs and 
intermediate access providers need to make modifications necessary to 
accomplish this proposed change in financial responsibility? We propose 
to require carriers to come into compliance with these requirements 
within 45 days of the effective date of any revised rule. Is that 
timeframe sufficient? For example, is it possible to implement 
necessary billing system changes within that time frame? We similarly 
propose to require any carriers that newly qualify as access-
stimulating LECs to come into compliance with these requirements within 
45 days of such qualification.
    9. For purposes of this proposal, we propose to define 
``intermediate access provider'' as ``any entity that carries or 
processes traffic at any point between the final interexchange carrier 
in a call path and the carrier providing end office access service.'' 
We seek comment on the use of this definition in this context. Does it 
adequately capture the types of intermediate access providers currently 
benefiting from access stimulation schemes? Is it too narrow or too 
broad?
    10. Direct Connection. Commenters have argued that the volume of 
traffic bound for access-stimulating LECs justifies direct connections, 
but allege that access-stimulating LECs currently refuse to accept such 
connections. Direct connections do not pass through intermediate 
switches and are offered on a capacity basis at monthly-recurring 
rates, as opposed to a per-MOU rate. If there is a sufficient volume of 
traffic, the monthly charges for direct connections can often be 
substantially lower than per-MOU rates for an equivalent amount of 
traffic. As the second prong of our proposal, we propose to provide 
access-stimulating LECs the option to offer to connect directly to the 
IXC or an intermediate access provider of the IXC's choice as an 
alternative to bearing financial responsibility for intermediate access 
provider charges and ceasing to bill their own transport charges. Under 
this proposal, IXCs would have the option of selecting an intermediate 
access provider that would bill the IXC for transport to the access-
stimulating LEC on a dedicated basis. We seek comment on this proposal 
and on how best to implement it. We note that as a result of this 
election, an IXC would have the choice to connect with an access-
stimulating LEC directly or indirectly through the LEC's existing 
intermediate access provider or another IXC directly connecting to the 
access-stimulating LEC.
[GRAPHIC] [TIFF OMITTED] TP29JN18.009

    11. For direct connections between an IXC (or an intermediate 
access provider of the IXC's choosing) and an access-stimulating LEC to 
be established, not only must the access-stimulating LEC be willing and 
able to accept direct connections, but arrangements need to be made 
between the IXCs seeking to avail themselves of such connections and 
the LEC. If we adopt the approach we propose today, how long should we 
give existing access-stimulating LECs to indicate their willingness to 
accept direct connections and how long should we give them to implement 
those direct connections? How detailed a timeline should we adopt for 
this process? Should we adopt rules regarding the

[[Page 30631]]

conduct of any negotiations for direct connections? For example, should 
we adopt a timeframe within which negotiations must be concluded before 
the LEC must assume financial responsibility for the delivery of 
traffic or the impasse submitted to arbitration? Similarly, if, at some 
later date, an access-stimulating LEC decides to offer direct 
connections, what process should the access-stimulating LEC need to 
follow to cease bearing the financial obligation for the intermediate 
access providers' charges? How should we address LECs that meet the 
definition of access-stimulating LEC after adoption of our rules? If 
they chose to offer direct connections, what time frame should we 
provide for making and implementing that decision?
    12. We propose to adopt a rule that makes clear that allowing 
access-stimulating LECs to accept direct connection as a means of not 
bearing financial responsibility for intermediate access provider 
charges does not carry with it an obligation for such LECs to extend 
their networks absent a request and an independent obligation to do so. 
Is this a reasonable limitation? Are there any other limitations or 
exceptions we should apply? Are there other rules we should adopt to 
help providers implement the option to accept direct connections if a 
provider makes that choice? For example, because IXCs are not currently 
directly connected to access-stimulating LECs in the scenario to which 
our proposal applies, a third-party vendor may need to connect the two 
networks via dedicated transport such as, perhaps, the current 
intermediate access provider. Are there any rules that we should adopt 
to facilitate such arrangements?
    13. One result of permitting access-stimulating LECs that subtend 
CEA providers to connect with IXCs directly (or an intermediate access 
provider of an IXC's choice) would be to end the ``mandatory use'' 
policy applicable to some CEA providers, at least with respect to 
access-stimulating LECs. Historically, this mandatory use policy has 
permitted the CEA providers in Iowa and South Dakota to require IXCs to 
connect to LECs that subtend the CEA provider indirectly through the 
CEA provider's tandem switch rather than indirectly through another 
intermediate access provider or directly to the subtending LEC. In 
initially permitting this practice almost thirty years ago, the 
Commission concluded that it ``[did] not believe that the mandatory 
termination requirement for interstate traffic is unreasonable or 
differs substantially from the normal way access is provided, as both 
an originating and terminating service by the local exchange company.''
    14. It appears that access stimulation, particularly when practiced 
by competitive LECs, which were formed well after CEA providers were 
established, presents a reasonable circumstance for departing from the 
policy of permitting mandatory use requirements because delivery of 
such traffic, particularly in the pertinent volumes, was not the 
purpose for which CEA providers were formed. We seek comment on this 
assumption, and on the impact of this proposal on CEA providers, on the 
LECs that subtend CEA providers, and on the customers of such 
subtending LECs. For example, to the extent that creating the 
opportunity for access-stimulation traffic to bypass CEA providers 
threatens the viability of CEA providers, we seek comment on whether 
and how this potential effect should be addressed. Are there other 
companies that can perform the traditional functions of CEA providers, 
including equal access implementation and traffic measurement and 
billing? Recognizing that most states do not have CEA providers, are 
there ways that equal access and traffic identification and measurement 
are handled by small LECs in those states that can inform our decision 
making in this proceeding?
    15. Notice Requirement. We propose to require access-stimulating 
LECs to notify affected IXCs and intermediate access providers of their 
intent to accept financial responsibility for calls delivered to their 
networks or to accept direct connections from IXCs or intermediate 
access providers of the IXCs' choosing. Should we also require the 
access-stimulating LEC to provide public, written notice of its choice 
to the Commission? Should we provide specific requirements regarding 
the form and content of such notice? For example, should we require an 
access-stimulating LEC to accept direct connections at current points 
of interconnection (POI) with intermediate access providers, as well as 
at the LECs' end office, and to provide notice of those locations? Or, 
should we allow an access-stimulating LEC to choose where to provide 
POIs and to specify those locations in its notice? Should access-
stimulating LECs also provide notice to the Commission and state 
commissions of their choice to accept direct connections and of the 
location of their POIs? To ensure that the investment made by an IXC to 
extend its network to directly interconnect with an access-stimulating 
LEC is not stranded, should an access-stimulating LEC be prohibited 
from ending its election of direct connections once made? Should such a 
prohibition be permanent or for a specified period of time?
    16. Impact of this Proposal. We seek comment on the costs and 
benefits of our proposal. To what extent will our two-pronged proposal 
alleviate market distortions created by the ability of access-
stimulating LECs to bill for switched transport services at rates that 
our rules have not required to be reduced below 2011 interstate levels? 
Will the incentives created by our proposal for access-stimulating LECs 
to accept direct connections (to avoid bearing intermediate access 
provider charges imposed by a provider of the access-stimulating LEC's 
choosing) alleviate the problem of IXCs paying relatively-high tandem-
switched transport rates by giving IXCs more options to reach end 
users?
    17. How will our proposal affect incentives for carriers to migrate 
their services to IP? To what extent do parties expect that direct 
connections would be provided in time division multiplexed (TDM) format 
rather than IP? Are there circumstances under which an access-
stimulating LEC should be required, upon request, to interconnect using 
IP rather than TDM and bear any costs necessary to do so? Are calls 
bound for high call volume service providers ultimately converted to IP 
for delivery? Would requiring IP interconnection obviate the need to 
convert TDM traffic to IP for delivery?
    18. NTCA et al. Proposal. NTCA et al. has recommended that we adopt 
rules similar to the first prong of our proposal, but without providing 
an access-stimulating LEC the option of electing to accept direct 
connections as a means of avoiding bearing intermediate access provider 
charges. Under the NTCA et al. proposal, within 45 days of the 
effective date of the implementing rules, access-stimulating LECs would 
be required to revise their tariffs to remove any terminating 
interstate tandem switching and tandem transport charges of their own 
and also begin to assume financial responsibility for all intermediate 
switched access provider interstate tandem switching and transport 
charges for traffic bound for such access-stimulating LECs. The NTCA et 
al. proposal would also require access-stimulating LECs to provide 
written notice to all affected providers, including intermediate access 
providers, of the substance of these tariff revisions at the time that 
such tariff revisions are filed, as well as the fact that such access-
stimulating LECs will be bearing financial responsibility for pertinent 
intermediate switched access provider interstate tandem switching and 
transport charges.

[[Page 30632]]

    19. Although the NTCA et al. proposal does not preclude an access-
stimulating LEC from avoiding incurring intermediate access provider 
charges by beginning to accept direct connections, it also does not 
provide IXCs any incentive to accept offers of direct connection from 
such LECs. By permitting access-stimulating LECs to elect to accept 
direct connections, our proposal seeks to provide a formal means by 
which access-stimulating LECs may eventually avoid incurring 
intermediate access provider charges. We seek comment on the NTCA et 
al. proposal both as an independent proposal and also as it relates to 
our proposal above.
    20. CenturyLink Proposal. CenturyLink suggests that we consider an 
approach similar to our proposal, but with broader applicability. 
Rather than focusing on access-stimulating LECs, CenturyLink recommends 
shifting financial responsibility to any LEC that declines to accept a 
request for direct interconnection for the purpose of terminating 
access traffic. We seek comment on this recommendation. What would be 
the impact of such an approach on the affected companies and their 
customers?

B. Requiring All Access-Stimulating LECs To Transition to Bill-and-Keep

    21. If we do not adopt rules requiring access-stimulating LECs to 
either choose to accept financial responsibility for the delivery of 
calls or to accept direct connections, should we reduce all terminating 
tandem switching, common transport, and tandem-switched transport rate 
elements for access stimulators to bill-and-keep? Moving these access 
charges to bill-and-keep would be consistent with our overarching goals 
of discouraging arbitrage, in particular access stimulation, and 
ultimately transitioning all traffic to bill-and-keep. It would also be 
consistent with the Commission's finding in the USF/ICC Transformation 
Order that with respect to terminating traffic, the LEC's end user is 
the cost causer and therefore the LEC should look first to its 
subscribers to recover the costs of it network. To what extent would 
this approach resolve the access arbitrage concerns identified in this 
NPRM? We also seek comment on how this approach fits with the other 
proposals in this NPRM. For example, if we reduce all terminating 
access charges to bill-and-keep is there any remaining incentive for 
carriers to stimulate traffic? We also seek comment on any 
implementation issues or concerns related to the proposal. Should we 
provide for a transition period to bill-and-keep for access 
stimulators? If so, how long should the transition last and what steps 
should it include?
    22. We also seek comment on whether to require an access-
stimulating LEC to transition its dedicated transport and originating 
rates to bill-and-keep. The only potential access arbitrage scheme of 
which we are aware regarding originating access concerns 8YY traffic, 
which we leave for separate consideration. Outside the 8YY context, are 
there arbitrage schemes involving originating access about which we 
should be concerned? Can they be addressed by a transition to bill-and-
keep or by other proposals in this NPRM?

C. Defining Access Stimulation

    23. Given evidence that access stimulation schemes are still being 
perpetrated notwithstanding our existing rules, we seek comment on 
whether, and if so how, to revise the current definition of access 
stimulation to more accurately and effectively target harmful access 
stimulation practices. What has been the impact of the current 
definition over the last seven years? Has it proved effective at 
identifying actors that are distorting the ICC system for their own 
gain? If not, how can we revise the definition to more accurately 
identify these types of harmful practices? Should we, for example, 
modify the ratios or triggers in the definition? If so, how should 
those ratios or triggers be modified? Should we adopt triggers that 
relate to the stimulation of tandem and transport services? If so, what 
should those triggers be? Is the current revenue sharing agreement 
requirement in our rules sufficiently broad or should it be revised, 
and if so how? Or, should we remove the revenue sharing portion of the 
definition, because access stimulation seems to be occurring in some 
instances even in the absence of revenue sharing? Do commenters believe 
that revenue sharing alone is an indication of access stimulation? If 
so, should we revise our rules so that the existence of a revenue 
sharing agreement triggers the access stimulation rule? How will we 
know if parties are engaged in revenue sharing? Should we require these 
parties to self-report? If so, we seek comment on how to implement a 
self-reporting requirement.
    24. Alternatively, based on parties' experience with our existing 
access stimulation rules, is there reason to find that access 
stimulation itself is unjust and unreasonable because of the imposition 
of excess charges on IXCs, wireless carriers, and their customers? Or, 
is there a subset of such activities that we should separately identify 
as unlawful?
    25. To address specific concerns identified in the record, 
commenters should also consider the extent to which the access 
stimulation definition should be revised to address intermediate access 
providers. Do intermediate access providers that are not engaged in 
access stimulation as defined in our current rules nevertheless benefit 
from access stimulation schemes? To remove incentives for intermediate 
access providers to enable access arbitrage schemes, aside from the 
proposals discussed above, should we adopt new access stimulation 
rules, or modify our existing rules, to apply specifically to 
intermediate access providers? Would doing so be unduly burdensome to 
intermediate access providers or small LECs who subtend them? Are there 
technical obstacles that would make it infeasible for intermediate 
access providers to comply with the Commission's current, or any 
modified, access stimulation rules? Would a requirement that access-
stimulating subtending LECs notify the intermediate access provider 
that they are engaged in access stimulation and identify the traffic 
that is being stimulated provide a practical solution?

D. Addressing Other Arbitrage Schemes, and Alternative Approaches to 
Arbitrage

    26. The record indicates the existence of at least three other 
types of arbitrage schemes. We seek comment on the prevalence and 
impact of these types of schemes described in more detail below. Will 
any of the rules we propose today help retard these schemes? Are there 
other rules we should adopt to prevent these schemes?
    27. First, parties describe an access arbitrage scheme involving a 
revenue sharing or other type of agreement between an intermediate 
access provider and a terminating carrier that may not meet the 
definition of access stimulation under our rules, such as a Commercial 
Mobile Radio Service (CMRS) carrier. CMRS carriers are prohibited from 
tariffing access charges. However, intermediate access providers that 
transport traffic from an IXC to CMRS carriers can charge for access 
services through filed tariffs or negotiated agreements. Some IXCs 
claim that certain CMRS carriers that previously offered direct 
connections between their networks and the IXCs' networks have begun to 
use intermediate access providers to terminate their traffic from IXCs, 
to reap the benefit of alleged revenue sharing

[[Page 30633]]

agreements with the intermediate access providers. Should we adopt 
rules that discourage all revenue sharing agreements between 
terminating providers and intermediate access providers? If a 
terminating provider requires that some or all traffic be routed 
through an intermediate access provider, should we require the 
terminating provider to pay the intermediate access provider's charges? 
Or are there instances where it is most efficient or beneficial in 
other ways for a carrier to require traffic be routed through an 
intermediate access provider? What would be the costs and benefits of 
requiring a terminating provider that requires the use of a specific 
intermediate access provider to pay the intermediate access provider's 
charges? And would the cost-benefit analysis change if we focused any 
such rules on large terminating providers--i.e., those with 100,000 or 
more ``lines'' at the holding company level?
    28. Second, because LECs and intermediate access providers receive 
greater compensation from IXCs the further the LEC or intermediate 
access provider carries the traffic to reach a POI with the IXC, some 
commenters allege that LECs have changed their POI with IXCs for the 
sole purpose of artificially inflating their per-MOU, per-mile 
transport rates and revenue. This scheme is often referred to as 
mileage pumping. Shortly after the USF/ICC Transformation Order, the 
Commission released an order addressing this practice finding such 
network changes were merely sham arrangements and that the LECs did not 
have the unilateral right under their tariffs to make such changes. 
Nevertheless, allegations of mileage pumping continue. We seek comment 
on the prevalence of this practice, its impact in the market, and the 
likely effect of the rules proposed in this NPRM on this concern. What 
more can we do to prevent these practices?
    29. Third, some commenters raise concerns about the addition of 
superfluous network facilities for which the LEC can bill switched 
access charges, but the rates for which are not subject to the current 
transition to bill-and-keep. This practice is sometimes referred to as 
``daisy chaining.'' This practice may inefficiently inflate per-mile 
charges and insert unnecessary facilities to justify assessment of 
additional rate elements, such as remote switches that subtend end 
offices. What actions can we take to prevent daisy chaining?
    30. Would the CenturyLink suggestion of shifting financial 
responsibility to LECs that decline to accept direct connections 
eliminate or reduce the three types of inefficient routing schemes 
described above? Even if an IXC chose not to seek a direct connection, 
would the risk of IXCs seeking direct connections provide a 
disciplining counterweight to some providers' incentives to engage in 
mileage pumping or daisy-chaining? What would be the impact on affected 
parties?

E. Other Issues

    31. We recognize that any action we take to address access 
arbitrage may affect the costs to carriers and their customers and the 
choices they make, as they provide and receive telecommunications 
services. Consumers that enjoy high call volume services could be 
affected by regulatory adjustments targeting arbitrage. Are there 
efficiencies that are in the public's interest in what some describe as 
arbitrage? Would addressing the arbitrage described here unfairly 
advantage any particular competitor or class of competitors? If so, are 
there alternative means to address the arbitrage issues described here 
and presented in the record? How would the changes proposed herein 
affect small businesses?
    32. In the USF/ICC Transformation Order, the Commission considered 
direct costs imposed on consumers by arbitrage schemes. The Commission 
also found that access stimulation diverts ``capital away from more 
productive uses such as broadband deployment.'' We believe this 
continues to be true. Are there additional, more-current data available 
to estimate the annual cost of arbitrage schemes to companies, long 
distance rate payers, and consumers in general? Likewise, are there 
data available to quantify the resources being diverted from 
infrastructure investment because of arbitrage schemes? To what degree 
are consumers indirectly affected by potentially inefficient networking 
and cost recovery due to current regulations and the exploitation of 
those regulations? Are there other costs or benefits we should 
consider?

F. Legal Authority

    33. The proposals in this NPRM, targeted to address the particular 
issues described in the record, continue the work the Commission began 
in the USF/ICC Transformation Order to stop economically wasteful 
arbitrage activity and the damage it causes in telecommunications 
markets. Therefore, we rely on the legal authority the Commission set 
forth in the USF/ICC Transformation Order, as support for modifications 
to rules we propose in this NPRM. The Commission made clear that its 
rules to address access arbitrage would result in interstate access 
rates ``consistent with section 201(b) of the Act.'' The Commission 
likewise found that ``[o]ur statutory authority to implement bill-and-
keep as the default framework for the exchange of traffic with LECs 
flows directly from sections 251(b)(5) and 201(b) of the Act.'' We seek 
comment on whether additional statutory authority is available, or 
necessary, to support the actions proposed here.

III. Rule Revisions

    34. We seek comment on the rule changes proposed at the end of this 
document. What, if any, other rule additions or modifications should we 
make to codify these proposals? Are there any conforming rule changes 
that commenters consider necessary? For example, we intend for any 
rules that we adopt to apply not only to interstate traffic, but also 
intrastate traffic. Do our proposed rules adequately address this? 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 access arbitrage schemes described in this NPRM including 
updates to any relevant comments or proposals made in response to the 
USF/ICC Transformation FNPRM, 76 FR 78383.

IV. Procedural Matters

    35. 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).

<bullet> Electronic Filers: Comments may be filed electronically using 
the internet by accessing the ECFS: https://www.fcc.gov/ecfs/
<bullet> 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

[[Page 30634]]

filings must be addressed to the Commission's Secretary, Office of the 
Secretary, Federal Communications Commission.
    <bullet> 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.
    <bullet> 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.
    <bullet> U.S. Postal Service first-class, Express, and Priority 
mail must be addressed to 445 12th Street SW, Washington, DC 20554.
    36. People with Disabilities. To request materials in accessible 
formats for people with disabilities (braille, large print, electronic 
files, audio format), send an email to <a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="74121717414440341217175a131b02">[email protected]</a> or call the 
Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-
418-0432 (tty).
    37. 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.
    38. 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.
    39. Initial Regulatory Flexibility Act Analysis. Pursuant to the 
Regulatory Flexibility Act (RFA), we have prepared an Initial 
Regulatory Flexibility Analysis (IRFA) of the possible significant 
economic impact on small entities of the policies and actions 
considered in this NPRM. The Commission prepared an IRFA to accompany 
the first Further Notice of Proposed Rulemaking in this docket, USF/ICC 
Transformation FNPRM. The questions asked in this NPRM are different 
than those the Commission sought comment on previously. Therefore, we 
have prepared a new IRFA to reflect the substance of this NPRM. The 
text of the IRFA is set forth in section V of this document. 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.
    40. Contact Person. For further information about this proceeding, 
please contact Edward Krachmer, FCC Wireline Competition Bureau, 
Pricing Policy Division, Room 5-A230, 445 12th Street SW, Washington, 
DC 20554, (202) 418-1525, <a href="/cdn-cgi/l/email-protection#8acfeefdebf8eea4c1f8ebe9e2e7eff8caece9e9a4ede5fc"><span class="__cf_email__" data-cfemail="4c09283b2d3e2862073e2d2f2421293e0c2a2f2f622b233a">[email protected]</span></a>.

V. Initial Regulatory Flexibility Analysis

    41. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), we have 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 Notice of Proposed Rulemaking (NPRM). We request 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 NPRM. We will send a copy of the NPRM, including this 
IRFA, to the Chief Counsel for Advocacy of the Small Business 
Administration (SBA). In addition, the NPRM and IRFA (or summaries 
thereof) will be published in the Federal Register.

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

    42. In the USF/ICC Transformation FNPRM, the Commission sought 
comment on additional steps to implement the bill-and-keep regime as 
well as possible communications network definitional changes, the 
appropriate recovery mechanisms going forward and VoIP and IP-to-IP 
related intercarrier compensation issues. In this NPRM we propose to 
adopt rules to address access arbitrage schemes that persist despite 
previous Commission action. We propose to adopt rules to give access-
stimulating LECs two choices about how they connect to IXCs. First, an 
access-stimulating LEC can choose to be financially responsible for 
calls delivered to its networks so it, rather than IXCs, pays for the 
delivery of calls to its end office or the functional equivalent. Or, 
second, instead of accepting this financial responsibility, an access-
stimulating LEC can choose to accept direct connections from either the 
IXC or an intermediate access provider of the IXC's choosing. In the 
alternative, we seek comment on moving all traffic bound for an access-
stimulating LEC to bill-and-keep. The NPRM also seeks comment on 
potential revisions to the definition of access stimulation, in 
particular to address intermediate access providers. The record in this 
proceeding suggests additional access arbitrage activities are 
occurring, including: (1) Use of intermediate access providers by 
Commercial Mobile Radio Carriers; (2) mileage pumping; and (3) daisy 
chaining. Comment is sought on how best to address these activities. 
The

[[Page 30635]]

NPRM seeks comment on the costs and benefits of these proposals.

B. Legal Basis

    43. The legal basis for any action that may be taken pursuant to 
this NPRM is contained in sections 1, 2, 4(i), 201-206, 214, 218-220, 
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, 214, 218-220, 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

    44. 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 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.
    45. 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 comprehensive small entity size standards 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, 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.''
    46. 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.
    47. 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 and under the 
applicable SBA size standard, such a business is small if it has 1,500 
or fewer employees. U.S. Census data for 2012 show that there were 
3,117 firms that operated that year. Of that total, 3,083 operated with 
fewer than 1,000 employees. Thus under this category and the associated 
size standard, the Commission estimates that the majority of local 
exchange carriers are small entities.
    48. 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.
    49. 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 1,442 carriers, 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

[[Page 30636]]

estimates that most providers of competitive local exchange service, 
competitive access providers, Shared-Tenant Service Providers, and 
Other Local Service Providers are small entities.
    50. We have included small incumbent LECs in this present 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 effect on Commission analyses and determinations 
in other, non-RFA contexts.
    51. 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 indicates 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.
    52. 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. Of that number, all 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.
    53. 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.
    54. 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 interexchange carriers, 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 shows 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.
    55. 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.
    56. Wireless Telecommunications Carriers (except Satellite). This 
industry comprises 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 1000 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.
    57. 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 actions today. 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

[[Page 30637]]

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.
    58. 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 (WCS) 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.
    59. Wireless Telephony. Wireless telephony includes cellular, 
personal 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 one third of these 
entities can be considered small.
    60. Cable and Other Subscription Programming. This industry 
comprises establishments primarily engaged in operating studios and 
facilities for the broadcasting of programs on a subscription or fee 
basis. The broadcast programming is typically narrowcast in nature 
(e.g., limited format, such as news, sports, education, or youth-
oriented). These establishments produce programming in their own 
facilities or acquire programming from external sources. The 
programming material is usually delivered to a third party, such as 
cable systems or direct-to-home satellite systems, for transmission to 
viewers. The SBA has established a size standard for this industry 
stating that a business in this industry is small if it has 1,500 or 
fewer employees. The 2012 Economic Census indicates that 367 firms were 
operational for that entire year. Of this total, 357 operated with less 
than 1,000 employees. Accordingly we conclude that a substantial 
majority of firms in this industry are small under the applicable SBA 
size standard.
    61. Cable Companies and Systems (Rate Regulation). The Commission 
has developed its own small business size standards for the purpose of 
cable rate regulation. Under the Commission's rules, a ``small cable 
company'' is one serving 400,000 or fewer subscribers nationwide. 
Industry data indicate that there are currently 4,600 active cable 
systems in the United States. Of this total, all but eleven cable 
operators nationwide are small under the 400,000-subscriber size 
standard. In addition, under the Commission's rate regulation rules, a 
``small system'' is a cable system serving 15,000 or fewer subscribers. 
Current Commission records show 4,600 cable systems nationwide. Of this 
total, 3,900 cable systems have fewer than 15,000 subscribers, and 700 
systems have 15,000 or more subscribers, based on the same records. 
Thus, under this standard as well, we estimate that most cable systems 
are small entities.
    62. Cable System Operators (Telecom Act Standard). The 
Communications Act also contains a size standard for small cable system 
operators, which is ``a cable operator that, directly or through an 
affiliate, serves in the aggregate fewer than 1 percent of all 
subscribers in the United States and is not affiliated with any entity 
or entities whose gross annual revenues in the aggregate exceed 
$250,000,000.'' There are approximately 52,403,705 cable video 
subscribers in the United States today. Accordingly, an operator 
serving fewer than 524,037 subscribers shall be deemed a small operator 
if its annual revenues, when combined with the total annual revenues of 
all its affiliates, do not exceed $250 million in the aggregate. Based 
on available data, we find that all but nine incumbent cable operators 
are small entities under this size standard. We note that the 
Commission neither requests nor collects information on whether cable 
system operators are affiliated with entities whose gross annual 
revenues exceed $250 million. Although it seems certain that some of 
these cable system operators are affiliated with entities whose gross 
annual revenues exceed $250 million, we are unable at this time to 
estimate with greater precision the number of cable system operators 
that would qualify as small cable operators under the definition in the 
Communications Act.
    63. 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 may be affected by our action 
can be considered small.

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

    64. The NPRM proposes and seeks comment on rule changes that will 
affect LECs and intermediate access providers, including CEA providers. 
The NPRM proposes rules to further limit or eliminate the occurrence of 
access arbitrage, including access stimulation, which could reduce 
potential reporting requirements. One possible result of the proposed 
rules would be greater availability of direct connections between IXCs 
and access-stimulating LECs to avoid the use of intervening third 
parties, including CEA providers, and thus create more efficient and 
economical network connections. Direct connections would also likely 
reduce recordkeeping requirements. Specifically, we propose amending 
our rules to allow access-stimulating LECs to choose either to be 
financially responsible for the delivery of calls to their networks or 
to accept direct connections from IXCs or from intermediate access 
providers of the IXC's choosing. The proposed rules also contain 
notification requirements for access-stimulating LECs, which may impact 
small entities. Some of these requirements may also involve tariff 
changes.
    65. The NPRM also seeks comment on other actions the Commission 
could take to further discourage or eliminate access arbitrage 
activity. Rules which achieve these objectives could potentially affect 
recordkeeping and reporting requirements.

[[Page 30638]]

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

    66. The RFA requires an agency to describe any significant, 
specifically small business, alternatives that it has considered in 
reaching its proposed approach, which may include the following four 
alternatives (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.
    67. This NPRM invites comment on a number of proposals and 
alternatives to modify or adopt access arbitrage rules and on the 
legality of access stimulation generally. The Commission has found 
these arbitrage practices inefficient and to ultimately increase 
consumer telecommunications rates. The NPRM proposes rules to further 
limit or eliminate the occurrence of access stimulation as well as 
other access arbitrage in turn promoting the efficient function of the 
nation's telecommunications network. We believe that if companies are 
able to operate with greater efficiency this will benefit the 
communications network as a whole, and its users, by allowing companies 
to increase their investment in broadband deployment. Thus, we propose 
to adopt rules to give access-stimulating LECs two choices about how 
they connect to IXCs. First, an access-stimulating LEC can choose to be 
financially responsible for calls delivered to its networks so it, 
rather than IXCs, pays for the delivery of calls to its end office or 
the functional equivalent. Or, second, instead of accepting this 
financial responsibility, an access-stimulating LEC can choose to 
accept direct connections from either the IXC or an intermediate access 
provider of the IXC's choosing. In the alternative, we seek comment on 
moving all traffic bound for an access-stimulating LEC to bill-and-
keep. The NPRM also seeks comment on potential revisions to the 
definition of access stimulation, in particular to address intermediate 
access providers. The record in this proceeding suggests additional 
access arbitrage activities are occurring, including: (1) Use of 
intermediate access providers by Commercial Mobile Radio Carriers; (2) 
mileage pumping; and (3) daisy chaining. Comment is sought on how best 
to address these activities. The NPRM seeks comment on the costs and 
benefits of these proposals. Providing carriers, especially small 
carriers, with options will enable them to best assess the financial 
effects on their operation allowing them to determine how best to 
respond.
    68. The NPRM also seeks comment on other actions we can take to 
further discourage or eliminate access arbitrage activity. Comment is 
sought on alternatives to our proposal that could be considered to 
achieve our objectives with potentially less impact on small entities.

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

    69. None.

VI. Ordering Clauses

    70. Accordingly, it is ordered that, pursuant to sections 1, 2, 
4(i), 201-206, 214, 218-220, 251, 252, 254, 256, 303(r), and 403 of the 
Communications Act of 1934, as amended, and section 706 of the 
Telecommunications Act of 1996, 47 U.S.C. 151, 152, 154(i), 201-206, 
218-220, 251, 252, 254, 256, 303(r), and 403, and Sec.  1.1 of the 
Commission's rules, 47 CFR 1.1, this Notice of Proposed Rulemaking is 
adopted.
    71. 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 Notice 
of Proposed Rulemaking on or before July 20, 2018 and reply comments on 
or before August 3, 2018.
    72. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of the Notice of Proposed Rulemaking, including the Initial 
Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of 
the Small Business Administration.

List of Subjects in 47 CFR Part 51

    Common carriers, Communications.

Federal Communications Commission.
Marlene Dortch,
Secretary, Office of the Secretary.

Proposed Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission proposes to amend 47 CFR part 51 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. Amend Sec.  51.903 by adding paragraphs (k), (l), and (m) to read as 
follows:


Sec.  51.903  Definitions.

* * * * *
    (k) Access Stimulation has the same meaning as that term is defined 
in Sec.  61.3(bbb) of this chapter.
    (l) Intermediate Access Provider means any entity that carries or 
processes traffic at any point between the final Interexchange Carrier 
in a call path and the carrier providing End Office Access Service.
    (m) Interexchange Carrier means a telecommunications carrier that 
uses the exchange access or information access services of another 
telecommunications carrier for the provision of telecommunications.
0
3. Add Sec.  51.914 to read as follows:


Sec.  51.914  Additional provisions applicable to Access Stimulation 
traffic.

    (a) Notwithstanding any other provision of the Commission's rules, 
if a local exchange carrier is engaged in Access Stimulation, it shall 
within 45 days of commencing Access Stimulation, or by [date 45 days 
after the effective date of the final rule], whichever is later:
    (1)(i) Not bill any affected Interexchange Carrier or any 
Intermediate Access Provider for the terminating switched access tandem 
switching or any terminating switched access transport charges for any 
traffic between such local exchange carrier's terminating end office or 
equivalent and the associated access tandem switch; and
    (ii) Assume financial responsibility for the applicable 
Intermediate Access Provider terminating tandem switching and 
terminating switched transport access charges relating to traffic bound 
for the access-stimulating local exchange carrier; or
    (2) Upon request of an Interexchange Carrier for direct-trunked 
transport service, provision and enable direct-trunked transport 
service to either the Interexchange Carrier or an Intermediate Access 
Provider of the Interexchange Carrier's choosing within [period of time 
to be determined] of such a request.
    (b) Notwithstanding any other provision of the Commission's rules, 
if a local exchange carrier is engaged in

[[Page 30639]]

Access Stimulation, it shall within 45 days of commencing Access 
Stimulation, or by [date 45 days after effective date of the final 
rule], whichever is later, notify in writing all Intermediate Access 
Providers which it subtends and Interexchange Carriers with which it 
does business of the following:
    (1) That it is a local exchange carrier engaged in Access 
Stimulation;
    (2) That it will either:
    (i) Obtain and pay for terminating access services from 
Intermediate Access Providers for such traffic as of that date; or
    (ii) Offer direct-trunked transport service to any affected 
Interexchange Carrier (or to an Intermediate Access Provider of the 
Interexchange Carrier's choosing); and
    (3) To the extent that the local exchange carrier engaged in Access 
Stimulation intends to comply with paragraph (a) of this section 
through electing the option described in paragraph (a)(2) of this 
section, designate where on its network it will accept the requested 
direct connection.
    (c) Nothing in this section creates an independent obligation for a 
local exchange carrier to construct new facilities other than, as 
necessary, adding switch trunk ports.
    (d) In the event that an Intermediate Access Provider receives 
notice under paragraph (b) of this section that a local exchange 
carrier engaged in Access Stimulation will be obtaining and paying for 
terminating access service from such Intermediate Access Provider, an 
Intermediate Access Provider shall not bill Interexchange Carriers 
terminating tandem switching and terminating switched transport access 
for traffic bound for such local exchange carrier but, instead bill 
such local exchange carrier for such services.
    (e) Notwithstanding any provision of this section, any carrier that 
is not itself engaged in Access Stimulation, as that term is defined in 
Sec.  61.3(bbb) of this chapter, but serves as an Intermediate Access 
Provider with respect to traffic bound for an access-stimulating local 
exchange carrier, shall not itself be deemed a local exchange carrier 
engaged in Access Stimulation or be affected by this rule other than 
paragraph (d) of this section.
0
4. Amend Sec.  51.917 by revising paragraph (c) to read as follows:


Sec.  51.917  Revenue recovery for Rate-of-Return Carriers.

* * * * *
    (c) Adjustment for Access Stimulation activity. 2011 Rate-of-Return 
Carrier Base Period Revenue shall be adjusted to reflect the removal of 
any increases in revenue requirement or revenues resulting from Access 
Stimulation activity the Rate-of-Return Carrier engaged in during the 
relevant measuring period. A Rate-of-Return Carrier should make this 
adjustment for its initial July 1, 2012, tariff filing, but the 
adjustment may result from a subsequent Commission or court ruling.
* * * * *
[FR Doc. 2018-13699 Filed 6-28-18; 8:45 am]
BILLING CODE 6712-01-P


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