In its Feb. 9 Notice of Proposed Rulemaking (NPRM), the FCC announced a variety of proposals to reform the existing system of intercarrier compensation (ICC). ICC includes both interstate and intrastate access charges (which are fees typically imposed by local exchange carriers (LECs) on interexchange carriers (IXCs) for originating and terminating long distance calls) as well as reciprocal compensation, which is the system under which LECs pay and receive compensation for terminating (but not originating) local traffic, ISP-bound traffic, and other traffic not subject to pre-1996-Act access charges or other specific payment arrangements.

Over the long run the FCC wants to eliminate all existing per-minute ICC payments and replace them either with a bill-and-keep (no payment) system, or a system in which payments are flat monthly amounts based on bandwidth, not minutes of use. In the short run, the FCC proposes certain steps to deal with some significant industry ICC problems, including resolving disputes regarding what rules apply to traffic to and from interconnected Voice-over-Internet-Protocol (VoIP) service providers, dealing with “phantom” traffic, and problems arising from so-called “access stimulation” arrangements. The FCC’s proposed long-run changes would be adopted in coordination with its adoption of a “Connect America Fund” (CAF) to replace the existing system of High-Cost universal service support.