PENNSYLVANIA PUBLIC UTILITY COMMISSION Generic Investigation Regarding Virtual NXX Codes; Doc. No. I-00020093 [35 Pa.B. 6064] Public Meeting held
September 9, 2005Commissioners Present: Wendell F. Holland, Chairperson; James H. Cawley, Vice Chairperson; Bill Shane, dissenting statement follows; Kim Pizzingrilli; Terrance J. Fitzpatrick
Statement of Policy By the Commission:
By Order entered March 4, 2005, the Pennsylvania Public Utility Commission (Commission) requested input in the form of supplemental comments from interested parties regarding any possible implications that newly enacted legislation, Act 183, P. L. 1398, 66 Pa.C.S. §§ 3011, et. seq. (Act 183)1 may have on the issue of Virtual NXX (VNXX) arrangements. This order addresses the supplemental comments received from the Pennsylvania Telephone Association (PTA), Verizon Pennsylvania Inc. and Verizon North Inc. (Verizon), CTSI, LLC (CTSI), Core Communications, Inc. (Core), the Office of Consumer Advocate (OCA), and the Office of Small Business Advocate (OSBA) and adopts a final policy statement.
Background
Telephone numbers consist of ten digits set forth as NPA-NXX-XXXX2 and are obtained by telephone companies from the North American Number Plan Administrator3 (''NANPA''). The first three digits of a 10-digit telephone number, or the ''NPA,'' refer to the area code.4 The second three digits in a 10-digit telephone number, or the ''NXX,'' refer to the ''central office code'' or ''NXX code.''5 In order to assign telephone numbers, a telephone company obtains a central office code or NXX code from the NANPA and usually assigns the NXX code to a switch6 pursuant to standard industry practice. A telephone company's central office switch normally serves a particular geographic area called a rate center.7 Accordingly, each NXX code generally corresponds to a particular geographic area or rate center.
When a telephone company assigns a telephone number from the NXX code to a customer, in general, it gives the customer a telephone number from a NXX code that is associated with the central office switch serving the particular rate center where the customer is physically located. The purpose of this assignment procedure by telephone companies is to ensure the proper routing of the telephone call and, more importantly, to ensure the accuracy and integrity of the rating structure so that calls between customers are properly billed by the telephone company.
With VNXX service, a customer can obtain a telephone number from a NXX code that is associated with a rate center or local calling area in which they are not physically located. This type of arrangement or service has been referred to as ''virtual'' NXX because the customer has only a virtual presence, as opposed to a physical presence, in the local calling area based solely on the use of the assigned NXX code for that local calling area.
In August 2002, we initiated a generic investigation at the above-captioned docket in order to consider the issue of VNXX codes given that the controversial practice, among other things, could have an adverse impact on Pennsylvania efforts to conserve numbering resources and prevent avoidable area code relief. As part of the generic investigation, interested parties filed comments addressing 13 specific questions related to the use of VNXX codes and also regarding what intercarrier compensation regime should apply to such arrangements. The Office of Administrative Law Judge conducted the generic investigation. The notice regarding the generic investigation was published October 19, 2002, at 32 Pa.B. 5240.
The generic investigation culminated with the issuance of an Investigation Report on February 9, 2004, as directed by the Commission. The Investigation Report outlined the parties' positions regarding the legality of VNXX service in Pennsylvania and the intercarrier compensation regime that should apply to such arrangements. By an Order entered May 24, 2004, the Commission released the Investigation Report to the public. The Commission did so in light of the fact that the Investigation Report was a valuable educational tool regarding the usage of VNXX codes in Pennsylvania. However, since the Investigation Report was not dispositive of the issues surrounding VNXX, the May 24, 2004 Order also directed Staff to submit a recommendation indicating whether any regulatory or policy changes regarding VNXX service needed to be implemented by the Commission. In accordance with the May 24, 2004 Order, Staff initiated its review of the Investigation Report. In the meantime, Act 183 became effective on December 1, 2004. Moreover, the Commission noted that the Federal Communications Commission (FCC) had taken action recently in a proceeding8 involving the appropriate intercarrier compensation regime for emerging technologies, including Internet access on the public switched network.
In light of these developments, we issued an Interim Order at this docket that was entered on March 4, 2005. We determined that additional comments on these particular topics would assist us in reaching a final determination on the use of VNXX arrangements in Pennsylvania. Accordingly, through the Interim Order, we requested input in the form of supplemental comments from interested parties regarding any possible implications that Act 183 may have on the issue of VNXX arrangements. Additionally, we sought input from interested parties on the potential impact of the recent action taken by the FCC in its pending intercarrier proceeding. The Interim Order was published on March 19, 2005 at 35 Pa.B. 1851.
The Pennsylvania Telephone Association (PTA), Verizon Pennsylvania Inc. and Verizon North (collectively Verizon), CTSI LLC (CTSI), Core Communications, Inc. (Core), the Office of Consumer Advocate, (OCA), and the Office of Small Business Advocate (OSBA) filed supplemental comments. This order addresses those comments and sets forth a final form policy statement on VNXX service.
Comments
PTA
The PTA filed supplemental comments on behalf of its members that are rural telephone companies serving areas adjacent to the ILECs where resale and UNE is occurring. In its supplemental comments, the PTA asserted that VNXX affects these small, rural companies by virtue of extended area service (EAS) routes that have been opened by the Commission between them and Verizon Pennsylvania, Verizon North and Sprint/United. The PTA explained that calls to the CLEC's customer appear to be ''local'' calls because the rate center associated with the NXX code by the CLEC is within the EAS calling plan of the adjacent ILEC. Nevertheless, the physical destination of the call may fall somewhere outside the listed rate center thus making the telephone call a long distance or toll call. The PTA argues that VNXX results in a complete lack of compensation for use of the network of the ILEC offering an EAS calling plan. Accordingly, the PTA characterizes VNXX as an ''arbitrage device to avoid toll and switched access charges.''
The PTA further asserts that under Act 183, Section 3017, 66 Pa.C.S. § 3017, governs the intercarrier compensation for telephone calls utilizing VNXX arrangements. The PTA states that the language of section 3017(b) clearly mandates that if a telephone call terminates outside of the local calling area of the calling party, access charges apply regardless of whether the rate center associated with the NXX code by the LEC is within the local calling area.
Additionally, the PTA notes that the Federal Communications Commission (FCC) currently has a pending proceeding in which it intends to set a regime that unifies compensation for all traffic types. The PTA suggests that since Act 183 clearly governs the compensation scheme for VNXX arrangements, the Commission should defer from taking any further action on VNXX until the FCC issues a decision in its pending intercarrier compensation proceeding.
Verizon
In its supplemental comments, Verizon asserts that VNXX is a substitute for toll-free calling services, such as 1-8XX service9 but is used as a scheme to avoid paying compensation to the underlying carriers whose networks are being used to haul the traffic. Verizon states that the ILEC provides transport for the VNXX call that resembles the transport provided for calls to 1-8XX numbers; however, the VNXX carrier does not compensate the ILEC for such transport because the VNXX carrier claims that the call is a ''local'' call. Verizon asserts that Act 183 requires that the geographic endpoints of a telephone call dictate the applicable intercarrier compensation In particular, Verizon echoes PTA's argument that section 3017 now absolutely requires that access charges be paid by carriers for VNXX calls and that any carrier refusing to pay tariffed access charges on VNXX traffic is violating the law.
CTSI
CTSI's supplemental comment asserts that Act 183 does not appear to affect expressly the intercarrier compensation regime for VNXX calls. Nevertheless, CTSI asserts that the FCC's pending unified intercarrier compensation proceeding will have an impact on the compensation rules for VNXX calls. As a result, CTSI states that the Commission should maintain the status quo and refrain from issuing any further rulings, decisions, or orders on VNXX pending resolution of the FCC's intercarrier compensation proceeding.
Core
Core asserts that federal law exclusively governs the intercarrier compensation regime for all calls, including ISP-bound calls. Core asserts that it is unlawful for the Commission to use any provision of Act 183 to change the applicable intercarrier compensation for VNXX calls by disrupting the FCC's established manner of determining the jurisdictional classification of a call. Core states that the FCC acknowledged that it is standard industry practice for telecommunications carriers to determine the jurisdictional classification and proper rating of a call by comparing the relevant V & H10 coordinates of the originating and terminating NPA-NXX codes associated with the call. Core asserts that FCC precedent has clearly established that the physical destination of the call does not govern its jurisdictional classification or rating structure. Core further asserts that if the NPA-NXXs of the originating and terminating codes are within the same local calling area then the call is a local call and is subject to the reciprocal compensation regime set forth in section 251(b)(5) of the Telecommunications Act of 1996, 42 U.S.C. § 251(b)(5).
Additionally, Core states that the legislative history of Act 183 reveals that the Act should have no impact on the intercarrier compensation for VNXX arrangements. Furthermore, Core asserts that any effort by the Commission to create another category of traffic--a VNXX category--for intercarrier compensation purposes would disrupt the FCC's goal of creating a unified intercarrier compensation system.
OCA
The OCA asserts that it is unaware of any impact that Act 183 may have on the applicable intercarrier compensation regime for VNXX arrangements in Pennsylvania. In fact, the OCA states that none of the rate modifications possible under Act 183 have any particular relationship to the use of VNXX codes. Additionally, OCA acknowledges that the FCC's unified intercarrier compensation proceeding might have an impact on the use of virtual NXX codes and the applicable intercarrier compensation regime for virtual NXX arrangements in Pennsylvania. The OCA suggests that the Commission should wait until the FCC has entered its order in its proceeding before the Commission attempts to resolve the issue concerning VNXX arrangements.
OSBA
In its supplemental comments, the OSBA states that it has not been able to identify any impact that Act 183 or the FCC's intercarrier compensation proceeding might have on either the use of virtual NXX codes or on the intercarrier compensation regime used for virtual NXX arrangements in Pennsylvania.
Discussion
VNXX service allows a telephone company to assign a telephone number to a customer in a calling area where the customer has no physical presence. Essentially, the telephone number of that VNXX customer is associated with the particular local calling area. Therefore, a telephone call from a person residing in the local calling area to the VNXX customer is rated as a ''local'' call by the telephone company of the calling party even though the VNXX customer is located outside of the calling party's local calling area. We acknowledge that VNXX service is an attractive option for businesses that want to expand their marketing base to customers in surrounding areas without incurring the costs of building additional facilities in that distant market or having consumers incur long distance charges in attempting to call them. We also note, however, that the ILECs are opposed to the use of VNXX arrangements and have expressed various reasons why the Commission should prohibit VNXX arrangements in Pennsylvania.
In light of the diametrically opposed views regarding VNXX service, we focused on two main issues in our generic investigation: (1) the legality of VNXX service in Pennsylvania and (2) the appropriate intercarrier compensation for VNXX arrangements. Upon our review of the initial comments and the supplemental comments submitted by the parties in this generic investigation, the Commission determines that there is no state or federal law or regulation that requires us to take any steps to prohibit the use of VNXX service in Pennsylvania. We agree with those parties that stated in their supplemental comments that there are no provisions in Act 183 that impact the legality of VNXX arrangements in Pennsylvania. Moreover, we determine that there are no public policy considerations that warrant a prohibition against the use of VNXX arrangements by telecommunications providers in Pennsylvania. Accordingly, we decline to implement any regulatory or policy changes regarding the use of VNXX arrangements in Pennsylvania.
Nonetheless, the heart of the dispute concerning VNXX service has never truly been its legality, but rather, the applicable intercarrier compensation scheme for such arrangements. The crux of the debate regarding what intercarrier compensation applies to VNXX arrangements is whether a VNXX call that passes between an ILEC network and a CLEC network should be rated as a local call (subject to reciprocal compensation charges) or a toll call (subject to access charges).
In their comments and supplemental comments submitted in this proceeding, the CLECs have continued to assert that the proper rating classification for telephone calls has always been based on a comparison of the NPA-NXX prefixes of the parties to the telephone call and that the geographical ending point of the telephone call does not govern the rating structure that applies to the call. We acknowledge that the current methods of identifying and rating all telephone calls, including telephone calls facilitated by VNXX arrangements, do not readily ascertain whether the traffic that originates at a local exchange calling area of an ILEC can be properly classified as anything other than local traffic.11
We also note that the FCC is engaged in a comprehensive proceeding that holds the potential of fundamentally affecting intercarrier compensation arrangements. In re Developing a Unified Intercarrier Compensation Regime, (FCC Rel.: March 3, 2005), CC Docket No. 01-92, Further Notice of Proposed Rulemaking, FCC )5-33 (Unified Intercarrier Compensation). Based on the FCC's activities in its Unified Inercarrier Compensation proceeding and their potential impact on intrastate access charge reform that primarily relates to rural ILECs, this Commission has stayed its related investigation proceeding at Docket No. I-00040105. Investigation Regarding Intrastate Access Charges and IntraLATA Toll Rates of Rural Carriers, and the Pennsylvania Universal Service Fund, Docket No. I-00040105, Opinion and Order entered August 30, 2005. Likewise, in view of the FCC's pending proceeding, we believe that it is premature for this Commission to reach any conclusions at this time on issues of intercarrier compensation for traffic that moves over VNXX code arrangements.
Conclusion
Based upon the discussion above, we decline to take any steps at this time to prohibit the use of virtual NXX service in Pennsylvania. Additionally, since the FCC is currently considering to establish a unified intercarrier compensation regime for all telecommunications traffic that utilizes the public switched network, we will not make any conclusions at this time on the issue of intercarrier compensation for traffic that moves over VNXX arrangements; Therefore,
It Is Ordered That:
1. The use of VNXX code arrangements within Pennsylvania is lawful.
2. This Statement of Policy shall apply in any future adjudication involving the issue of virtual NXX arrangements until the Commission issues a definitive ruling on intercarrier compensation.
3. The record in this proceeding be marked closed.
4. The Secretary's Bureau serves a copy of this Statement of Policy upon all jurisdictional ILECs and CLECs.
5. A copy of this Statement of Policy be published in the Pennsylvania Bulletin and published on our website.
JAMES J. MCNULTY,
SecretaryDissenting Statement of Commissioner Bill Shane Public Meeting September 9, 2005; SEP-2005-L-0075*
Generic Investigation Regarding Virtual NXX Codes; Doc. No. I-00020093 I agree with the Vice-Chairman that we should decline to take any steps to prohibit the use of virtual NXX service in the Commonwealth, however, I am of the opinion that Act 183 incorporates certain provisions that have established an intercarrier compensation scheme governing VNXX arrangements and that the Act clearly states that a Local Exchange Carrier must pay access charges whenever an ISP-bound call between its customers terminates in another local calling area even if the phone call is facilitated by a VNXX arrangement that has associated the VNXX customer's telephone number with the calling party's local calling area. This should be our policy and should be applied in any future adjudication involving the issue of virtual NXX arrangements unless and until the FCC issues an order in its unified intercarrier proceeding that preempts us from establishing an intercarrier compensation regime for all ISP-bound calls. For this reason, I cannot support the Vice-Chairman's Motion.
[Pa.B. Doc. No. 05-2006. Filed for public inspection October 28, 2005, 9:00 a.m.] _______
1 Act 183 enacted an amended version of the original Chapter 30 that provided for the regulatory reform of the telephone industry in Pennsylvania.
2 The ''N'' in the ''NXX'' represents any of the numbers 2 through 9 and the ''X'' represents any one of the numbers 0 through 9.
3 The North American Numbering Plan Administrator is the entity responsible for managing the North American Numbering Plan (''NANP''). Presently, Neustar is the entity managing the NANP.
4 See 47 C.F.R. § 52.7(a).
5 See 47 C.F.R. § 52.7(c). There are 792 possible NXX codes in each NPA or area code.
6 A switch is usually housed in a telephone company's central office. Thus, a switch is commonly referred to as ''central office switch.''
7 A rate center is a telephone-company designated geographic area that generally defines the local calling area of a customer. Rate centers comprise a telephone company's entire service territory. A telephone company's service territory can consist of any number of individual rate centers.
8 See In the Matter of Developing a Unified Intercarrier Compensation Regime, Notice of Proposed Rulemaking, CC Docket No. 01-92, 16 FCC Rcd 9610 (2001).
9 Toll-free 8XX numbers as identified by the North American Numbering Plan Administrator, for example, 800, 888, 877, or 866, allow callers to reach businesses and/or individuals without being charged for the call. The charge for using a toll-free number is paid by the called party (the toll-free subscriber) instead of the calling party. Toll-free numbers can be dialed directly to your business or personal telephone line.
10 Each NXX code is associated with a switch within a rate center. Additionally, each rate center has a particular vertical and horizontal (V & H) coordinate or rating point. Accordingly, the NPA-NXX prefixes are based upon individual and specific V & H coordinates. This rating point (or V & H coordinate) is significant as it is the starting point for determining mileage when calculating the cost of the telephone call between two end-users. If the rating points of the two NXX codes (representing both the calling party and called party) have a zero distance (are the same) or are within the same local calling area then the telephone call is rated as local.
11 Furthermore, an additional degree of difficulty relates to the issue of classifying a telephone call as local when an ILEC and a CLEC have different local calling areas in the same geographic locale. The Commission is currently investigating intercarrier compensation issues ''when the local calling area of the CLECs and the ILECs are different (i.e., the CLEC's local calling area is larger or smaller than the ILEC's local calling area).'' Generic Investigation in re: Impact On Local Carrier Compensation if A Competitive Local Exchange Carrier Defines Local Calling Areas Differently Than the Incumbent Local Exchange Carrier's Local Calling Areas but Consistent With Established Commission Precedent, Docket No. I-00030096, Investigation Order, entered June 26, 2003, at 5.
