Insights

Overview of FCC Order to Reducing Traffic-Pumping Through Updated Billing Procedures

Jun 17, 2021

On October 9, 2020, the Federal Communications Commission (FCC) approved a Report and Order to reform Toll-Free (8YY) origination access charges.  

“Ever since they were first introduced over a half-century ago, Toll-Free calls have provided an essential service to consumers and businesses, providing a recognizable way to contact a business,” stated FCC Chairman Ajit Pai. “But the complex carrier-to-carrier billing system underpinning these 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.” 

With an end goal of reducing Toll-Free traffic pumping and other rate arbitrage in today’s current system, the FCC order will transition Toll-Free intercarrier compensation billing to a simpler, less nuanced system. In particular, the order proposes updated measures that aim to “preserve and enhance the value of Toll-Free service for consumers and businesses alike.”

In preparing the order, the FCC focused on three specific areas of interest as discussed in detail below:

8YY Database Query Dip Charges

8YY database dips function by accessing routing databases that are available from Service Control Points (SCPs) as well as users of Somos’ proprietary call routing data solution RouteLink®. For each dip, an associated charge per dip is incurred. Through the record in the proceeding, the Commission found that not only were database query dip charges vastly inconsistent across the board, but that they were likewise being billed at a rate that was much higher than the actual cost of performing the dip. Similarly, the record showed that a single call could go through multiple dips, which increased a call’s cost without necessarily providing additional value. 

One of the results of these types of activities has been the proliferation of a practice commonly known in the industry as “dip fraud,” wherein a seconds-long call is placed solely to generate a dip charge. Dip fraud has long been a nuisance to the Toll-Free industry, one that the FCC and traffic-pumping fraud fighters alike have been deeply committed to mitigating. One way that the FCC has identified to discourage this practice is to update the way in which dips charges are priced. The released order includes a three-year phased-in approach to reduce dip charges that will culminate on July 1, 2023. 

• Year 1: On July 1, 2021 dip rates will be capped at $0.004248
• Year 2: On July 1, 2022 dip rates will be further reduced and capped at $0.002124
• Year 3: On July 1, 2023, dip rates will be capped at $0.0002

In addition to updating how dip rates are charged, the FCC’s order also prohibits multiple dip charges for a single call. While previously, a call that went through multiple dips could incur a charge for each dip performed, the new billing processes and procedures will only allow for a single query charge per call. While calls will still be permitted to make multiple dips as needed, carriers performing additional dips will not be permitted to charge for these additional queries.

Originating End Office Access Charges

Another change that is included in the FCC’s order is a transition from the currently used originating end office access charge model to a bill-and-keep model. For those who may not be familiar, bill and keep refers to an intercarrier compensation arrangement that relies on carriers to obtain reimbursement for call transport from their end users, through monthly subscriber line charges, or from the FCC’s Universal Service Fund, rather than carriers looking to each other for payment for the traffic they exchange. 

Similar to the updates that will be made to 8YY database query dip billing as part of the new FCC order, the transition to the updated billing model will follow a three-year phased-in approach that will likewise culminate on July 1, 2023. 

• Year 1: On July 1, 2021, Intrastate rates that are higher than interstate rates must be brought down to the interstate rates.
• Year 2: On July 1, 2022, rates will be capped at 50% of the existing capped rates.
• Year 3: On July 1, 2023, all end office access charges will move to Bill and Keep and no money will flow from one carrier to another for origination of 8YY calls.

Originating Transport and Tandem Switching Charges

The FCC is also imposing a single nationwide tariffed joint tandem switched transport access service rate cap of $.001 per minute for originating 8YY traffic that will go into effect on July 1, 2021. The FCC considered, but ultimately rejected, moving this rate also to bill and keep, as well as rejecting a three-year phase in that was adopted for dip queries and originating end office access charges.  The companies that will be affected by this update include carriers that pass traffic between other carriers but do not directly engage with end users.

Whenever there are telecommunications rates that are more expensive than the cost of service, an opportunity for bad actors to exploit the system for personal and/or financial gain is rendered. Toll-Free traffic pumping is a perfect example of this: Bad actor pumps millions of minutes to unsuspecting Toll-Free subscribers – usually in the middle of the night or on weekends – in order to avoid conversation with the Toll-Free subscriber as well as to extract a profit from the revenue generated from the call. This practice has long plagued the industry as well as hindered the FCC’s ability to ensure consumer confidence in voice calls.

With this first step, we look forward to seeing a decrease in Toll-Free traffic pumping, as the new order works to take the profit out of this practice. Why is all of this important to the health and vitality of our industry? In large part because when scammers no longer find it lucrative to pump Toll-Free minutes, they take their efforts for proliferating ill-gotten gains outside the realm of Toll-Free. 

For more information, the Report and Order in its entirety can be found by clicking the following link: https://ecfsapi.fcc.gov/file/100909565817/FCC-20-143A1.pdf