Many smaller “over-the-top” (“OT”) VoIP providers and/or their competitive LEC service providers have been stonewalled in attempts to collect otherwise applicable intercarrier compensation (“ICC”) charges from large carriers/wireless operators, most especially AT&T and Verizon.  The Giants are often disputing bills on the grounds that, in the case of OT VoIP, no one is providing the functional equivalent of Time Division Multiplexing (“TDM”) end office switching claimed necessary to bill for the ICC charges under the FCC’s “VoIP Symmetry Rule.”  Verizon and AT&T argue no ICC payments are due when OT VoIP is provided; only facilities-based VoIP providers are eligible for ICC payments.  The FCC recently rejected this hollow argument, as discussed below.  Accordingly, affected providers may wish to revisit their ICC collection efforts.

On February 11, 2015, the FCC released a declaratory ruling on the VoIP Symmetry Rule.[1]  In essence, the VoIP Symmetry Rule, which was adopted in 2011,[2] allows “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 architecture.”

The FCC’s new Ruling was issued to clarify the VoIP Symmetry Rule and end conflicting interpretations of the Rule that are “are hindering IP-to-IP interconnection negotiations.”  According to the FCC, it is terminating a controversy involving “the assessment of end office switching charges under the VoIP symmetry rule as applied to VoIP-PSTN traffic.”  The FCC recognized the migration of many end user customers from the PSTN to VoIP services provided by integrated VoIP providers, but acknowledged the VoIP providers often still relied on LECs to deliver the VoIP traffic to the PSTN.  The Commission noted that, while most integrated VoIP providers supply the direct connection with the end user customer, “over-the-top” providers do not.  The VoIP Symmetry Rule stated, in essence, that an entity providing end office switching or its “functional equivalent” in connection with VoIP services may assess the appropriate ICC charge.

The Ruling confirms the validity of the VoIP Symmetry Rule and indicates it is technology neutral.  At paragraph 3, the FCC states:  “It does not require, and has never required, an entity to use a specific technology or its own facilities in order for the service it provides to be considered the functional equivalent of end office switching.”  There has been industry consensus that ICC applies to a facilities-based VoIP provider.  Now, the FCC makes it clear ICC also applies when a competitive LEC partners with an “over-the-top VoIP provider to exchange traffic with interconnected carriers.”

Some carriers, including the behemoths, Verizon and AT&T, have refused to pay some ICC bills, arguing “a competitive LEC partnering with an over-the-top VoIP provider cannot deliver the functional equivalent of end office switching,” based on several earlier FCC decisions.  AT&T and Verizon have argued the functional equivalent of end office switching “requires the ‘physical’ work of connecting trunks to loops,” such that there is no end office switching unless the VoIP provider supplies the “last mile connection” to the end user customer’s premises.[3]  The Commission rejects that argument and declares OT VoIP is eligible for ICC compensation.

In paragraph 19, the FCC summarizes its decision as follows:

[W]e clarify that the Commission’s VoIP symmetry rule does not require a competitive LEC or its VoIP provider partner to provide the physical last-mile facility to the VoIP provider’s end user customers in order to provide the functional equivalent of end office switching, and thus for the competitive LEC to be eligible to assess access charges for this service.

The Commission reaffirmed the VoIP Symmetry Rule is not limited to facilities-based VoIP services.  The competitive LEC need not perform the same functions or use the same technology as traditional TDM technology.  The FCC believes its Ruling is consistent with Congressional intent for the industry to move to modernized (IP-based) networks.  Verizon’s old saw that anything permitting arbitrage must be eliminated was rejected yet again, as the FCC pointed to the existence of its access stimulation rules and the ultimate phase-out of ICC for call termination are solutions for unfair arbitrage plays.[4]

The Ruling also addressed call functionality, while rejecting a demand for exact comparability with TDM end office switching.  According to the Commission, ICC applies when there is “call control,” i.e., “the functions necessary to ensure call set-up, conduct and take-down” and “a connection from the transport (across the network) to the termination point (phone device).”  In summary, the FCC stated:  “[W]e find that, under the VoIP symmetry rule, the functional equivalent of end-office switching exists when the intelligence associated with call set-up, supervision and management is provided.”  It then agreed such functions were provided where OT VoIP is supplied in connection with a competitive LEC.

Next and as noted above, the Commission announced its Ruling was retroactive as it did not make any new law.  Verizon’s and AT&T’s protestations that they reasonably relied on their earlier interpretation of the VoIP Symmetry Rule were quickly dismissed by the Commission.[5]

Finally, the FCC encouraged the industry to encourage parties to “move toward all-IP networks and reiterate the important policy goals underlying the VoIP symmetry rule of advancing competition, moving toward an all-IP network, reducing intercarrier compensation disputes, and remaining technologically neutral.”

Based on this new ruling, competitive LECs providing end office switching functionality in connection with OT VoIP providers may wish to take a second look at their ICC accounts and consider a more aggressive collection strategy.  The same applies to OT VoIP providers that may be billing ICC charges or sharing ICC revenues with a competitive LEC.  Where there is sharing, it is important to make sure that any revenue-sharing operations comply the FCC’s and some PUC’s access stimulation rules. 

In the event you have questions about the Ruling or other aspect of ICC reform or need assistance with collecting unpaid ICC bills connected with OT VoIP traffic, please contact Robert Jackson at 703-714-1316 or rhj@commlawgroup.com