FCC Implements Rules to Decrease Cost and Increase Efficiency of Toll Free Calling

On Oct. 9, the Federal Communications Commission (FCC) announced its adoption of new rules  aimed at both modernizing toll free calling and lessening fraud. The order found that while toll free, or 8YY, telephone numbers have played and continue to play a role in telecommunications, fraudsters have increasingly undermined the system of intercarrier compensation that facilitates toll free calling.

According to the order, these threats include “‘traffic pumping’ by robocallers 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.” For example, the press release explained, a fraudulent calling scheme impacted the National Suicide Prevention Lifeline toll free number in 2019, intermittently blocking legitimate incoming calls.

These schemes have reportedly had negative effects on toll free providers and consumers, and have prompted the FCC to act. According to FCC Chairman Ajit Pai, “now, the gravy train is over. We’re on track to transition to a simpler intercarrier billing system that will end the waste and arbitrage, and enhance the value of toll free services for consumers and businesses.” The order takes concrete steps to address these problems by “reducing the intercarrier compensation charges that provide the underlying incentive for 8YY arbitrage schemes.”

The adopted order shifts the majority of access charges for toll free calls to a bill-and-keep system, described in the order as a system under which “a carrier generally looks to its end-users––which are the entities and individuals making the choice to subscribe to that network––rather than looking to other carriers and their customers to pay for the costs of its network.”

Further, the new rules will “decrease the overall cost of toll free calls, reduce incentives for fraud and arbitrage, and increase efficiencies in call routing and compensation.” The order also includes a transitional phase to “avoid further opportunities for arbitrage or rate increases during the transitions, (by capping) all originating 8YY end office, tandem switching and transport, and database query charges at their current rates.” Finally, the order seeks to further encourage the transition to IP-based networks, and to “diminish the frequency and costs of 8YY intercarrier compensation disputes.”