Lumen, Frontier, Verizon among telcos to lose millions due to new FCC reg

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The new regulation is being instituted because the FCC has found fraud. (Pixabay)

There’s a new FCC regulation that’s going into effect on July 1, that will cost some telecom companies millions of dollars per month. It relates to some arcane tandem switching regulations for toll-free calls, such as 1-800 calls.

Data crunching company Simplify Compliance calculates that large local exchange carriers (LECs) such as Verizon and AT&T will end up losing about $13.57 million per month, each. Lumen (formerly called CenturyLink) could lose as much as $6.78 million per month, and Frontier could lose $3.39 million per month.

The issue stems from something called “8YY tandem switching and transport access charges.” Sheri Teutsch, a product manager at Simplify Compliance, said there are three charges when an 800 number (toll-free call) goes through a switch. There’s a facilities charge, a terminating charge and tandem-switching charge. These charges are going to be rolled up into a single charge with a capped rate.

The charges are billed between carriers for use of their access lines. The money is revenue for the company that owns the access lines. The charges don’t have anything to do with end-customers’ bills.

Teutsch said the impact of the new regulations will affect “any LEC that leases or uses another LEC’s facilities or access lines.”

“The impact is pretty dramatic for all telecom carriers whether it involves fixed or mobile traffic,” said Michael Iapalucci, a product director with Simplify Compliance. “The FCC reg changes mandate a step-down in tariff rates that will greatly reduce carrier revenue - but not from subscribers. This revenue is billed between carriers for the use of their networks to originate toll-free calls on mobile and landlines. So, the industry impact is tremendous as it affects all toll-free calls.”

Simplify Compliance calculated the estimated impact to large carriers, such as AT&T and Verizon and CenturyLink (Lumen) as well as the impact to a mid-sized carrier (Frontier) and smaller LECs.

Simplify Compliance

Iapalucci said “everybody that owns any type of access line” will be losing revenue as of July 1. The regulation takes effect in a three-year stepdown. Wireless and VoIP providers will be most affected this year.

The new regulation is because of fraud

The new regulation is being instituted because the FCC has found “increasing arbitrage and fraud” related to 8YY, according to a CCMI blog that lays out all the details of the 8YY changes. CCMI is a business unit of Simplify Compliance.

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“Such schemes takes various forms, including ‘traffic pumping’ by robo-callers who are paid to make massive numbers of illegitimate calls to toll free numbers; ‘benchmarking’ and ‘mileage pumping’ by competitive local exchange carriers that aggregate other carriers’ 8YY traffic to hand it off to 8YY providers in areas where they can charge higher rates after transporting it an inflated distance; and ‘double dipping’ schemes to assess multiple toll free database queries when only one such query is needed,” according to an FCC filing, cited by CCMI’s blog.