Compliance with the FCC’s revised intercarrier compensation rules adopted in its USF/ICC Transformation Order continues to be a work in progress for many carriers. The rules have generated several waves of questions as the July 1, 2012, deadline for reducing certain intrastate terminating switched access rates fast approaches. On June 6, 2012, the Wireline Competition Bureau released an Order designed to answer a number of questions that had arisen regarding this transition. The Bureau clarified and revised a number of rules that had been troubling both carriers and state commissions as they tried to make sense of the FCC’s rules and comply with the transition requirements. Carriers preparing their July 1, 2012 tariff revisions should review this order to ensure their filings are consistent with the FCC rules.

First, the Bureau clarified the deadlines surrounding the transitional intrastate filings which the rules adopted last year required to be filed and become effective on July 1, 2012. Earlier, in March of this year, the Bureau had established an effective date of July 3, 2012, for the 2012 interstate access charge filings for incumbent LECs. The main reason for having doing so was that incumbent carriers filing on 15 days’ notice would otherwise have to make their tariff filings on a weekend so as to have the annual access charge tariffs take effect on the traditional date of the first of July. The Bureau issued in the June 6 Order a clarification that it had granted to incumbent LECs a waiver of the July 1, 2012, deadline for reducing intrastate access and non-access reciprocal compensation rates. While the Bureau encourages states to move the effective dates for intrastate rate changes to July 3 for as many rates as possible, the Bureau permits, but does not require, states to move the effective dates for the transitional intrastate filings from July 1 to July 3, 2012.

For purposes of fairness in the treatment of competitive LECs and incumbent LECs, in the Order, the Bureau extended a limited waiver to competitive LECs of the rules requiring CLECs to reduce the rates applicable to their intrastate terminating access reciprocal compensation rates as of July 1, 2012. Now, like ILECs, CLECs may file those reductions so that they are effective July 3, 2012. But, as with ILECs, the Bureau left it in the hands of state commissions whether the effective date for the complaint state tariff filings would be July 1 or July 3. For this reason, it is critical that CLECs, like ILECs, understand the deadlines being set by the state commission(s) with jurisdiction over them to ensure proper compliance.

For those ILECs and CLECs that tariff an universal service contribution factor in their interstate tariffs and will be making an annual access charge filing with the FCC in 2012 , the Bureau made corresponding accommodations. In the June 6 Order, the Bureau granted a waiver of the FCC’s rules to allow such carriers to continue charging the second quarter universal service contribution factor through July 2, 2012, on end user charges that are part of their interstate tariffs (such as subscriber line or end user common line charges). From July 3 on, carriers can begin to assess the third quarter universal service contribution factor on such end user charges. Other end user charges these carriers might assess that are not contained in their interstate switched access charge tariffs remain subject to the third quarter contribution factor as of July 1, 2012.

Second, the Bureau addressed certain substantive aspects of the intrastate transitional access charge reductions due to be effective on July 1 (or 3, depending on the state). The Bureau recognized that different carriers have a variety of different rate structures and rate levels, and face a corresponding variety of challenges in implementing the FCC’s new rules. Thus, in the June 6 Order, the FCC sought to grant such carriers additional flexibility when seeking to comply with the Commission’s rules requiring the reduction of intrastate terminating switched access rate levels 50% toward their interstate counterparts as of July 1 (or, now, 3). As an initial matter, the FCC clarified that the two methods of reducing access charges set forth in the rules -- establishing transitional intrastate rates using its intrastate access rate structure or apply interstate rates and structures while assessing for one year a transitional per-minute charge on end office switching -- were merely illustrative and did not preclude other methods as long as they adhere to the overarching principle that a carrier reduce its overall intrastate switched access rates by the amount calculated by the FCC’s rules for that category of carrier. Thus, so long as a carrier produces a reduction in revenues equal to the reduction required in 2012, a carrier may reduce any intrastate switched access rate elements it chooses to achieve that result

Further, believing that carriers with one or more intrastate elements at rate levels below interstate rate levels were particularly likely to face difficulties due to the rules’ proscription against raising intrastate switched access rates, the Bureau provided clarification that rate levels of individual intrastate rate elements can be raised in certain circumstances. Specifically, the Bureau explained, “for carriers required to make reductions to intrastate switched access rates in 2012 under the intercarrier compensation transition, achievement of unified rate levels and rate structure overrides the prohibition on rate element increases included in the adopted transition rules.” What this means is that carriers may increase individual intrastate switched access rate element levels above comparable interstate rate element levels in their 2012 intrastate access filings without violating the rules as long as the overall reduction of affected intrastate switched access rates is satisfied. In a similar vein, the Bureau clarified that “for carriers required to make intrastate switched access rate reductions in 2012, any intrastate switched access rate element that is below the functionally equivalent interstate switched access rate must be increased to the interstate level no later than July 1, 2013 to be consistent with the use of aggregate revenue relations reflected in our transition rules” without violating the rules.

The June 6 Order also clarified one matter for incumbent LECs when calculating their Eligible Recovery under the new rules. AT&T sought and received clarification that demand associated with non-CMRS reciprocal compensation traffic exchanged pursuant to bill-and-keep arrangements should be excluded from Fiscal Year 2011 reciprocal compensation demand used to calculate the reduction a carrier experienced in net reciprocal compensation revenues.

The matters address in the Bureau’s June 6 Order may not exhaust those that carriers have as the deadline looms for initial reductions to intrastate access charges in conformance with the FCC’s rules, but they do provide some added measure of certainty about how to comply. If further questions remain, carriers are well advised to bring those issues to the Commission staff as soon as possible if consultation with their counsel cannot provide definitive answers.

Wireline Competition Bureau Clarifies and Revises the FCC’s Rules as Carriers Prepare to Make Transitional Intrastate Access Reciprocal Compensation Rate Reductions