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On January 28, 2026, the Federal Communications Commission ("FCC") issued a draft Notice of Proposed Rulemaking ("NPRM") titled "Reforming Legacy Rules for an All-IP Future; Accelerating Network Modernization" in WC Docket Nos. 25-311 and 25-208. This proceeding is among the most consequential telecommunications rulemakings in decades—particularly for providers that continue to rely on, interact with, or interconnect through legacy TDM-based networks and compensation structures.
The NPRM proposes a broad suite of reforms intended to accelerate the industry's transition away from legacy voice-era frameworks and toward an all-IP ecosystem, including changes to intercarrier compensation ("ICC"), access charge recovery mechanisms, and legacy tariff rules. The FCC's proposals are likely to be shaped heavily by incumbent carrier priorities (including AT&T, Verizon, Lumen, Frontier, and others) and the operational realities of major technology and platform companies (e.g., Google, Meta, Microsoft, Amazon) unless smaller providers engage proactively—either through trade associations or targeted coalitions—to ensure the record reflects the needs of competitive providers, rural operators, and mid-market carriers.
Background: Voice Market Transformation and Regulatory Lag
The FCC's NPRM is grounded in the Commission's view that marketplace realities have outpaced the legacy regulatory framework. The FCC observes that incumbent local exchange carriers ("LECs") now compete not only with competitive LECs and facilities-based VoIP providers, but also with wireless, satellite broadband, and over-the-top applications such as Zoom, Microsoft Teams, and WhatsApp.
The FCC notes that by the end of 2023, mobile subscriptions exceeded the total U.S. population, with more than 75% of adults living in mobile-only households, and that by June 2024, incumbent LECs accounted for approximately 25% of fixed voice connections, while 99.4% of residential locations had access to 4G LTE or 5G-NR coverage.
In this context, the Commission proposes to complete the transition away from legacy compensation rules and legacy tariff-based recovery mechanisms that were designed for a fundamentally different era of telecommunications.
Proposed Intercarrier Compensation Reform: Completing the Move to Bill-and-Keep
A central proposal in the NPRM is to complete the ICC transition framework adopted in the 2011 USF/ICC Transformation Order, including a full transition of remaining access charges to bill-and-keep ("B&K") over a 24-month period.
The FCC proposes, among other measures:
- Capping remaining intrastate originating switched access charges for rate-of-return and competitive LECs, effective 30 days after publication of final rules.
- A three-step reduction schedule for remaining charges:
- 33% reduction in Year 1
- additional 33% reduction in Year 2 (66% total reduction)
- final 34% reduction completing the transition to B&K
- Transitioning both originating and terminating access charges, including tandem switching, transport services, and dedicated transport rates.
- Moving remaining 8YY charges and VoIP-PSTN traffic into the B&K framework.
Why this matters: Providers that currently depend on access charge revenues, rely on existing transport structures, or operate in markets where ICC recovery remains meaningful should evaluate how the transition schedule may affect revenue, network interconnection strategy, and commercial agreements.
Defining the "Network Edge": Interconnection and Financial Responsibility Under B&K
The FCC seeks comment on defining the "network edge," meaning the demarcation point used to establish financial responsibility between carriers under a B&K framework.
Key issues raised include:
- Whether the FCC should establish a default framework for network edge determinations or instead provide guidance to states.
- Whether a single point of interconnection per state should be required during the transition period.
- Which party bears TDM-to-IP conversion costs and how those costs should be allocated.
- The role of intermediate carriers and transit services in IP-based routing and traffic exchange.
- Whether the network edge concept remains necessary after a complete IP transition.
Why this matters: Network edge rules can determine who pays for transport, where interconnection must occur, and which carrier bears conversion costs—issues that can materially affect provider economics and bargaining leverage.
Telephone Access Charges Deregulation: Moving Cost Recovery to End Users
The NPRM proposes eliminating ex ante pricing regulation and mandatory tariffing for end-user "Telephone Access Charges" ("TACs"), enabling carriers to recover costs more directly from subscribers rather than through intercarrier charges.
The FCC identifies TACs that may be affected, including:
- Subscriber Line Charge ("SLC"), currently capped at $6.50–$9.20/month depending on line type
- Access Recovery Charge ("ARC"), currently capped at $2.50–$6.00/month
- Presubscribed Interexchange Carrier Charge ("PICC") (multi-line business customers)
- Line Port Charge (digital services)
- Special Access Surcharge (generally $25/month for certain trunks)
The FCC proposes a transition period that would allow carriers to detariff charges on July 1 effective dates following adoption of a final order.
Why this matters: Providers should evaluate customer-facing pricing impacts, disclosure practices, and downstream effects on billing, customer retention, and competitive positioning—particularly in markets where price sensitivity is high.
CAF ICC Phase-Out: Proposal to Eliminate Support Over Two Years
The FCC also seeks comment on phasing out Connect America Fund Intercarrier Compensation ("CAF ICC") support following completion of the B&K transition. The FCC notes CAF ICC has declined from approximately $426 million (2015) to $346 million (2024), with an estimated $324 million (2025).
The proposed phase-out would operate as follows:
- CAF ICC calculations would discontinue effective June 30 of the transition completion year.
- Year 1: carriers receive 66% of baseline
- Year 2: carriers receive 33% of baseline
- Year 3: complete elimination of CAF ICC support
The FCC also seeks comment on alternatives, including reducing the total program budget rather than reducing support amounts on a carrier-by-carrier basis.
Why this matters: For carriers still receiving CAF ICC support, the proposal raises immediate planning concerns regarding replacement revenue, operational cost recovery, and long-term sustainability—especially in high-cost service areas.
Interexchange Services Deregulation: Eliminating Remaining Tariff Obligations
The FCC proposes further deregulation of domestic interstate and international interexchange ("IX") services, based on the Commission's view that these markets have long been competitive.
Domestic IX proposals include:
- Mandatory detariffing of dial-around 1+ services and customer-designated IXC services currently subject to permissive tariffing
- Eliminating geographic rate averaging and rate integration certification requirements under Section 254(g)
- Removing certain public disclosure and recordkeeping obligations
International IX proposals include:
- Complete detariffing for both dominant and nondominant carriers
- Elimination of permissive tariff exceptions for certain service categories
- Removal of contract filing requirements for dominant carriers
Why this matters: Providers should consider whether detariffing impacts contract strategy, customer notice practices, dispute resolution risk, and how services are packaged and marketed.
Universal Service Fund (USF) Impacts: Contributions and Support Calculations
The FCC acknowledges the proposed reforms will affect both USF contributions and support calculations.
Key proposals include:
- Adopting a 25% interstate safe harbor for local voice services revenue during the transition period
- For CAF BLS support calculations:
- Using fixed SLC amounts of $6.50 (residential/single-line business) and $9.20 (multi-line business), rather than tariffed rates
- Eliminating Special Access Surcharge offset requirements
- Using effective-date Line Port Charge rates for ongoing calculations
The FCC estimates that a CAF ICC phase-out could reduce the USF contribution factor from approximately 37.6% to 35.4% of interstate and international revenues.
Why this matters: Providers should assess how changes to safe harbors, support calculations, and contribution obligations may affect USF exposure, reporting assumptions, and revenue classification strategies.
Procedural Deadlines, Ex Parte Rules, and Docket Consolidation
Comments will be due 60 days after Federal Register publication, and reply comments will be due 90 days after publication. The proceeding will be governed by the FCC's permit-but-disclose ex parte rules.
The FCC also proposes consolidating related proceedings into WC Docket Nos. 25-311 and 25-208, potentially terminating dormant proceedings including WC Docket Nos. 20-71 and 07-135. The Commission also encourages industry collaboration and may convene meetings to address operational challenges and build consensus on implementation pathways.
Key Takeaways for Providers
This NPRM is not a routine cleanup item—it is a structural overhaul that may reshape:
- How carriers recover network costs
- How interconnection is negotiated and implemented in an all-IP environment
- The viability of legacy compensation and support mechanisms
- Customer-facing billing and tariff practices
- Competitive dynamics between incumbents, competitive carriers, and platform-based providers
Providers that will be operationally or financially impacted should consider developing an advocacy strategy early—particularly because record-building will likely be driven by the largest incumbent carriers and technology stakeholders unless smaller and mid-market providers actively participate.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
