Major changes to tandem switched pricing effective July 1st 2017 – Part 1 RBOC/ILECs

Overview

Starting July 1st 2017 carriers are implementing the sixth step in the Terminating Switched End Office Access Service reductions benchmarking requirement set forth in the FCC’s 11-161.

This includes a major change to how switched access pricing of tandem switched connections are made. There can be a 2:1 variation or more of the cost. For the RBOCS and ILECs the pricing elements to be used are no longer determined by only the OCN of an Access Tandem, End Office or End Office Remote. Effective July 1st 2017 the price depends upon the ownership of the Access tandem serving the End Office or End Office Remote.

Ownership is a new concept.  If an Access tandem is owned by a Price Cap Carrier we must now check for each End Office it serves. If that End Office is owned by the same company or an affiliate then so-called Company Tandem to End Office rates are used. Otherwise so-called 3rd party rates are used.

Click here a list of the Price cap carrier OCNS and their affiliation

FCC order 11-161

Here’s what the FCC order says about the July 1st 2017 changes

Price Cap Carriers

(1) Each Price Cap Carrier shall … remov(e) any intercarrier charges for terminating End Office Access Service.

2) Each Price Cap Carrier shall establish, for interstate and intrastate terminating traffic traversing a tandem switch that the terminating carrier or its affiliates owns, Tandem-Switched Transport Access Service rates no greater than $0.0007 per .

Rate of Return carriers

(i) ….  The 2017 interstate Target Composite Terminating End Office Access Rate means $0.0007 per minute plus two-thirds of any difference between that carrier’s Terminating End Office Access Service Rate as of July 1, 2016 and $0.0007 per minute.

What does this mean?

For Price Cap carriers

a. End office charges (LS2 terminating) go from a maximum of $0.0007 per minute to zero.

Note however that host/remote charges are unchanged.

b. This introduces the concept of Telephone Company and their Affiliates – If a PCAP End Office is owned by the same Telephone Company (or an affiliate) as that of the Access Tandem that serves it – the total of Tandem terminating rate elements must not exceed $0.0007 per minute.

Since this is PCAP End Office the End Office switching will be zero so $0.0007 is the total charge.

The FCC has issued informal guidance …see FCC guidance on tariff filings… that makes it clear this rule only applies to affiliated PCAP carriers. Wireless and CLECs are NOT considered affiliates.

CLEC pricing is affected indirectly and this is discussed in Part 2 of this blog.

For Rate of Return (ROR) carriers

a. End Office charges go from a maximum of $0.005 per minute to a maximum of

0.005-(0.005-0.0007)/3=0.003566667

Note – for some ROR Terminating End Office Access Service Rates as of July 1, 2016 are less than 0.005 so their new rate will also be lower.

b. Tandem transmission components are not changed.

New Tariff structure

As a specific example lets examine cases where a Verizon Access tandem serves both Verizon and Frontier owned End Offices. Verizon to Verizon is the same company so the Company Tandem to End Office tandem transport rate elements apply.

Frontier is a PCAP company but not affiliated with Verizon so the 3rd party tandem transport rate elements apply.

End Office switching is zero for both companies.

Verizon-Frontier overview pptx 2017-06-26_11-00-42

Sample tariff pages

The July 1st tariffs have a new set of rate elements – for example Verizon FCC#11

 verizon 11 2017-07-01 composite

Tandem switched transport terminating elements now have two flavors

  • Terminating to telephone company End Offices (total of $0.0007 in this case)
  • Terminating to third party (total of $0.001574  plus $0.000002/mile in this case)

For Verizon End Offices the terminating rate goes to zero

The FCC makes it clear that Telephone Company in this context means Verizon and all its (PCAP) affiliates. (excluding their Wireless and CLEC affiliates).

Pricing examples

Verizon Access Tandem SYRCNYSU50T serves both Verizon and Frontier End Offices .

Our NetExpress product shows the total cpm for every End Office/OCN/Access Tandem/Jurisdiction/Direct or tandem delivery combination. The detail of each rate element and what percentage are also included.

For example :

Verizon-Verizon 2017-07-01

So an IXC terminating a call to a Verizon End Office via a Verizon Access tandem will now pay $0.0007 a minute) .

We will discus in Part 3 what this means for the economy of Direct End Office Trunks.

Verizon Access Tandem to a non-Verizon End Office

As an example lets look at End Office BNTPNYXADS0. This End Office (OCN=0096) belongs to  Citizens Telecomm Co of NY (dba Frontier Comm. of NY) so is owned by Frontier.

Frontier FCC#1 July 1st 2017 tariff

Frontier 1 Group 1 2017-07-01 composite

Now Frontier is a PCAP but is not affiliated with Verizon so 3rd party rates are used through out.

So the charges are:

Verizon-frontier 2017-07-01.png

Observations

  • You can see that the OCN 9104 Tandem Switching rate in this case is 3rd party rate of $0.001574 as the Access tandem is feeding a non-Verizon End Office.
  • This is more than twice the Telephone Company Tandem to End Office rate of $0.0007 used when the Access Tandem feeds a Verizon End Office.
  • There are also 3rd Party  tandem transport rates of $0.000116 compared to the  Telephone Company Tandem to End Office of zero in the Verizon to Verizon case
  • You can see that OCN 9104 uses different values for  transport rate elements depending upon ownership of the End Office.

Part 2 of this blog will deal with the much more complicated pricing rules where CLECs are involved.

Author: Mike Hills

VP Vice President Research and Development CCMI Previously President i2Gemini

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