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Intercarrier Compensation

USTelecom believes the Federal Communications Commission (FCC) must reform the intercarrier compensation regime and provide the industry with much-needed financial certainty.

Status

Intercarrier compensation (ICC) is a complex system which allows carriers to charge each other to send traffic on each other’s networks. Rates vary according to traffic origination, termination, carrier and traffic type. Access charges and reciprocal compensation are governed by federal and state rules in a structure which allows smaller and rural companies to survive.

Background

Marketplace changes, evolutions in technology and recent reforms have upset the balance established by the previous system, requiring immediate reforms. In particular, many carriers have been adversely affected by arbitrage schemes such as a phantom traffic – traffic that is not labeled and thus cannot be billed properly – and traffic pumping, which artificially increases traffic to a high-cost area to boost revenues.

Intercarrier compensation and universal service are intrinsically linked as critical revenue streams for telecom carriers, so the FCC tackled reform of the two issues in a single order in 2011. The FCC’s Universal Service Fund and Intercarrier Compensation Order made a series of important reforms to the intercarrier compensation regime, including taking immediate action to address these arbitrage issues. An update to the order was adopted in March 2014.

USTelecom Position

USTelecom has consistently advocated in support of intercarrier compensation reforms and urged immediate action on the arbitrage issues such as phantom traffic and traffic pumping. We’ve advocated before the FCC with proposed solutions and on Capitol Hill outlining the urgent need for reform.

Additional Resources

FCC Overview
FCC March 2014 Order