Telecom Law Monitor : Washington D.C. Telecom Lawyer & Attorney : Kelley Drye & Warren Law Firm : New York, Chicago, Connecticut, New Jersey, Brussels

Barbara Miller contributed to this post.

Last week, a federal appellate court issued a decision signaling a significant victory for Competitive Local Exchange Carriers (“CLECs”) that rely on Incumbent Local Exchange Carriers (“ILECs”) for transiting services in order to interconnect indirectly with other local carriers. Southern New England Tel. Co. v. Comcast Phone of Connecticut, Inc. et al., Docket No. 11-2332-cv (2d Cir. May 1, 2013).

The United States Court of Appeals for the Second Circuit (the “Court” or “Second Circuit”) held, among other things, that when an ILEC provides transit services between two indirectly interconnecting CLECs, Section 251(c)(2) of the Communications Act of 1934, as amended (the “Act”), applies and the CLEC’s are entitled to transit rates based on Total Element Long-Run Incremental Cost (“TELRIC”). The Court’s opinion affirmed a decision of the U.S. District Court for the District of Connecticut (“District Court”) which, in turn, upheld a Connecticut Department of Public Utility Control (“DPUC”) decision. The Court limited the direct application of its holding to the parties to the contract that was the subject of the suit – AT&T and Pocket Communications – but the implications of the opinion are much broader as ILECs have maintained for years that transit services do not fall within the scope of Section 251(c)(2) and are subject to market, not TELRIC, pricing.

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Barbara Miller co-authored this post.

This week, the Fourth Circuit issued an important decision concerning the jurisdiction and role of federal courts in the interpretation and enforcement of state-approved Interconnection Agreements (“ICAs”).  In Central Telephone Co. v. Sprint Communications Co., the Fourth Circuit held that plaintiffs are not required to bring claims relating to the interpretation and enforcement of state-approved ICAs to a state commission before they can be heard in federal court.  Instead, the court ruled that a party may bring a claim for breach of contract in federal court directly.  This decision opens a new option for parties seeking to interpret and enforce ICAs, at least in the states within the Fourth Circuit (which encompasses Maryland, Virginia, North Carolina, South Carolina and West Virginia).  

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Jameson Dempsey co-authored this post. 

With the new year upon us, the FCC will soon be receiving comment on one of the “big picture” issues facing telecom regulation: addressing the evolution of the Public Switched Telephone Network (“PSTN”) from “legacy” time-division multiplexing (“TDM”) systems toward an Internet protocol (“IP”) based network.  The transition from the traditional PSTN to IP has been a hot topic at the Commission and within the industry, as consumers increasingly “cut the cord” on landline copper networks and rely on mobile wireless or IP-enabled communications technologies running on broadband networks.  However, consumer groups and small carriers have warned that in recognizing the inevitable transition toward IP, the FCC should not abdicate—and in some cases must increase—regulatory authority over communications networks. Later this month, the FCC will receive comment on two divergent petitions proposing responses to the transition. These petitions provide the first opportunity for the FCC to frame the debate over IP-enabled communications in Obama’s second administration.

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Compliance with the FCC's revised intercarrier compensation rules adopted in its USF/ICC Transformation Order continues to be a work in progress for many carriers. The rules have generated several waves of questions as the July 1, 2012, deadline for reducing certain intrastate terminating switched access rates fast approaches. On June 6, 2012, the Wireline Competition Bureau released an Order designed to answer a number of questions that had arisen regarding this transition. The Bureau clarified and revised a number of rules that had been troubling both carriers and state commissions as they tried to make sense of the FCC's rules and comply with the transition requirements. Carriers preparing their July 1, 2012 tariff revisions should review this order to ensure their filings are consistent with the FCC rules.

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Yesterday, the FCC released its proposed budget for fiscal year 2013 (beginning in October 2012).  The budget offers a few interesting insights into the balance of the FCC's functions.  It also offers a preview of what to expect with the FCC's regulatory fees, which are due in September of each year.  See below for more.

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This post was drafted by Chip Yorkgitis and Josh Guyan.

On Friday, February 3, 2012, the FCC's Wireline Competition Bureau and Wireless Telecommunications Bureau jointly released an order revising and clarifying certain aspects of the sweeping universal service and intercarrier compensation reform order adopted last November. The clarifications address the rates applicable to VoIP-PSTN traffic, access stimulation and the CETC phase-down of high-cost support, among other things. 

The clarification order will be effective thirty days after it is published in the Federal Register, which is likely to occur quickly. However, as a practical matter, the clarifications are effective immediately in light of the rules being clarified already having taken effect.

For more information, see Kelley Drye's Advisory on the clarification order.

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This morning, the FCC's November 18, 2011 High-Cost USF and Intercarrier Reform Compensation Order was published in the Federal Register triggering an effective date of December 29, 2011 for all parts of the Order and rule changes adopted therein, except for the information collection requirements contained in some of the rules adopted.   Those information collection requirements will not become effective until approved by the Office of Management and Budget.  A subsequent Federal Publication will be made announcing the effective dates of those sections.  A copy of today's Federal Register publication is available here.

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Late yesterday, the FCC released the text of its USF Reform and Intercarrier Compensation Reform Order, which it adopted on October 27.  The FCC's rules, among other things, transition terminating access charges to zero, apply access to VoIP-PSTN traffic, adopt rules addressing access stimulation (prevalent in free conferencing, for example), and tackling the problem of phantom traffic.  

The order is 759 pages long, with over 2,500 footnotes and 84 pages of rules.  As we warned, the impact of these rules on individual business plans is highly fact-specific.  We encourage you to contact your advisor to learn more. 

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Since 2002, purchasers of special access services from the incumbent local telephone companies have been asking the FCC to revise its pricing rules for the services.   Last month, CompTel (the leading trade association for competitive carriers) and a coalition of others asked the United States Court of Appeals for the DC Circuit to require the FCC to resolve its pending special access proceeding within six months.  The CompTel petition is a petition for mandamus -- a court order compelling action by the agency.  The FCC has not yet responded to the petition. 

This is not the first time competitive carriers have gone to the court for action.  Back in 2003, the old AT&T (pre-acquisition by SBC) asked the same court to compel the FCC to act on AT&T's Petition for Rulemaking filed in 2002 to revise the special access rules.  In reliance on the FCC’s representations that it was diligently working the proceeding, the court required the FCC to file periodic status reports.  The court eventually dismissed the AT&T mandamus petition after the FCC issued the current Notice of Proposed Rulemaking in early 2005.  Six years later, the FCC has not completed that proceeding and CompTel asks the court to require a resolution. 

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The Commission's long-standing refusal to classify VoIP services continues to feed litigation between telecommunications carriers.  Previously, a coalition of carriers asked the courts to decide the issue and it appears likely the FCC will address VoIP at least prospectively, but in the meantime, cases like this will persist.

In the latest case, CLEC Pac-West and IXC Verizon Business sparred in dueling Petitions for Declaratory Ruling stemming from a primary jurisdiction referral by a U.S. District Court in California.  The petitioners offer vastly different approaches to resolving the dispute. 

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A broad coalition of telecommunications carriers is asking the FCC to initiate a rulemaking proceeding to determine the proper treatment of MPLS-based services for regulatory and Universal Service purposes.  The coalition, which includes Verizon, XO, Level 3, Qwest and four other carriers, are providers of services based on the Multi-Protocol Label Switching (MPLS) technology.  The carriers recently met with advisors to the FCC's Wireline Competition Bureau and urged the FCC to clarify prospectively the proper treatment of services based on this technology.

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Late yesterday, the FCC released its latest NPRM on high cost USF and ICC reform (see our 2/8 post).  The 289 page item, available here,  sets forth staggered comment dates triggered by federal register publication.  The first -- 30 days after Federal Register publication -- is for comments on intercarrier compensation for VoIP traffic, rules to address phantom traffic and rules to reduce access stimulation.  Reply comments are due 15 days after that.  Comments on the rest of it will be due on the same day (45 days after Federal Register publication).  State members of the Federal-State Joint Board on Universal Service get two extra weeks to file comments.  All reply comments on the remaining sections are due 80 days after federal register publication.

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The Genachowski FCC is enamored with the bully pulpit as an enforcement tool.  In the year since the new Chairman has taken office, we've seen examples with FCC letters to Apple regarding its iPhone approval practices; letters to Google concerning the classification of Google Voice; and letters to wireless carriers concerning their early termination fees.  This time, the FCC's Public Safety and Homeland Security Bureau "reminds" telecommunications carriers of the need to provide diversity and redundancy in their 911 and E-911 services.  Although the Public Notice is not enforceable and does not cite to enforceable rules, it clearly is intended to influence carrier behavior.  Those who fail to heed this "reminder" could find themselves in an investigation questioning whether their practices are "just and reasonable."

The Public Notice stemmed from a review by the Bureau of network outage reports that carriers are required to file.  The Bureau stated that it has observed a "significant number" of 911/E911 outages caused by a lack of diversity.  Moreover, it notes that these outages "could have been avoided at little expense to the service provider"  (emphasis mine).   The clear implication is that FCC tolerance for these types of outages will diminish over time. 

Follow the link for a discussion of the diversity mistakes highlighted by the Bureau.

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In a February 11, 2010 ruling in Palmerton Telephone Company v. Global NAPs South, Docket No. C-2009-2093336, the Pennsylvania PUC concluded that Global NAPs is required to pay intrastate access charges for terminating VoIP calls.  The opinion is 30 pages long and highly detailed, but overall it appears to be contrary to the recent decision by the U.S. District Court in Paetec v. CommPartners, where the court ruled that VoIP services are not subject to access charges.  And although the PA PUC attempted to distinguish another May 1, 2009 ruling of the U.S. Court of Appeals in Vonage v. Nebraska PSC preempting a state regulation of VoIP, the new PA PUC decision appears to contradict that Vonage ruling as well.  The May 2009 Vonage opinion upheld a lower court finding that the FCC had "concluded nomadic interconnected VoIP services were only subject to regulation by the FCC."  The PA PUC rejects that reading of Vonage on the basis that Global NAPs' wholesale services are different from Vonage's retail services (even while recognizing that over 50% of Global NAPs traffic may be VoIP).  The PUC thus claims jurisdiction and orders Global NAPs to pay intrastate access charges to Palmerton. 

These conflicting court and PUC rulings are providing increased need for the FCC to finally stop avoiding the issue and address directly the application of access charges to VoIP services.

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The U.S. District Court in D.C. ruled today that IP-originated calls are "information services" that are subject to the local reciprocal compensation scheme - and not access charges - for intercarrier compensation.  The ruling came in Paetec Communications v. CommPartners, LLC, U.S. Dist Ct for DC, Civ. Action No. 08-0397.   Paetec filed the case against CommPartners seeking to collect access charges for all calls, both TDM and VoIP originated.  CommPartners conceded that it owed access fees on the TDM calls, but argued that VoIP calls are information services exempt from access under the FCC's longstanding access charge exemption for such calls.  The Court agreed.  In reaching its opinion...

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Continuing its recent custom, the FCC quickly sought comment on two Universal Service Appeals.  The issues involved in these appeals include classification of information services, classification of reseller revenues and identification of subscriber line charge (SLC) revenues.  Carriers offering similar services take note.

Telepacific Appeal and Request for Stay.  In this appeal, Telepacific seeks reversal of USAC's classification of an integrated T-1 service as telecommunications.  Telepacific contends that its service is an information service based on the FCC's 2005 Wireline Broadband Internet Access Order. Telepacific also seeks a stay of the instruction that it refile a Form 499-A consistent with USAC's decision.  Comments are due January 29; replies February 3. 

USF filers should note that this appeal did not result from a USAC audit.  Instead, Telepacific attempted to revise its 499-A form, and USAC raised questions about the revision.  Ultimately, USAC disagreed with the classification reflected in the revision and rejected the filing.   In my view, USAC's rejection is procedurally improper.  All Form 499-As are certified by an officer of the company under penalty of perjury.  USAC should be obligated to accept and process a revision properly certified by an officer. 

Grande Communications.  In this appeal, Grande challenges three conclusions made in an audit of its 2004, 2005 and 2006 revenues.  First, Grande challenges USAC presumption that Grande assessed an interstate Subscriber Line Charge (SLC).  Second, Grande challenges USAC's classification of a wireline broadband Internet access service as telecommunications for a portion of the audit period.  Finally, Grande challenges USAC's reclassification of Grande reseller revenues, including at least one instance where USAC is seeking to collect USF from Grande and Grande's reseller customer simultaneously. 

Comments on the Grande appeal are due February 18.  Replies are due March 5.

Full Disclosure:  Kelley Drye represents Grande in its appeal. 

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Qwest has begun following in the footsteps of SBC/AT&T by bringing collection actions against CLECs and their IXC customers for access charges which are allegedly due for terminating traffic to Qwest customers. On November 26, 2008 Qwest sued several companies in federal district court in Seattle, Washington. Defendants included Anovian, Broadvox, Transcom Enhanced Services and Transcom Communications, Maskina and Unipoint. The lawsuit claims that long distance calls were terminated to Qwest local customers without paying access charges due to Qwest.

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