C.F. Communications Corp. v. Federal Communications Commission

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 2, 1997 Decided October 31, 1997

No. 95-1563

C.F. Communications Corporation, et al.,

Petitioners

v.

Federal Communications Commission and

United States of America,

Respondents

Century Telephone of Wisconsin, Inc., et al.,

Intervenors

Consolidated with

No. 95-1566

On Petitions for Review of Orders of the

Federal Communications Commission

---------

Albert H. Kramer argued the cause for petitioners, with

whom Robert F. Aldrich and Andrew J. Phillips were on the

briefs.

Aaron J. Rappaport, Attorney, Federal Communications

Commission, argued the cause for respondents. William E.

Kennard, General Counsel, Daniel M. Armstrong, Associate

General Counsel, John E. Ingle, Deputy Associate General

Counsel, and Carl D. Lawson, Counsel, Federal Communica-

tions Commission, Joel I. Klein, Acting Assistant Attorney

General, United States Department of Justice, Robert B.

Nicholson and Robert J. Wiggers, Attorneys, were on the

brief. Susan L. Fox, Counsel, Federal Communications

Commission, entered an appearance.

M. Edward Whelan, III, argued the cause for intervenors,

with whom Benjamin H. Dickens, Jr., Susan J. Bahr, and

David L. Nace were on the brief. David J. Gudino entered

an appearance.

Before: Edwards, Chief Judge, Sentelle and Randolph,

Circuit Judges.

Opinion for the court filed by Circuit Judge Sentelle.

Sentelle, Circuit Judge: These petitions seek review of a

Federal Communications Commission decision permitting lo-

cal telephone companies (known as "local exchange carriers"

or "LECs") to assess End User Common Line ("EUCL")

charges on an independent payphone provider. Petitioners--

the independent payphone provider and a trade association of

independent payphone providers--argue that the Commission

misinterpreted its rules to arrive at its decision. We agree,

and grant the petitions for review.

I. Background

A.

When a telephone customer places a call, a "loop" links the

telephone to the central office of a local exchange carrier,

where switching equipment routes the call to a local or long-

distance telecommunications network. Most of the LECs'

costs in operating their facilities do not vary depending on

how often the facilities are used; such costs are known as

"nontraffic sensitive" ("NTS") costs. The cost of installing

the loop is an NTS cost, for example, because that cost

remains the same whether a customer uses the loop to make

one call or one hundred calls. See National Ass'n of Regula-

tory Util. Comm'rs v. F.C.C., 737 F.2d 1095, 1104 (D.C. Cir.

1984). In contrast, the cost of the switching equipment tends

to increase with use, and is considered to be traffic-sensitive.

Id.

In 1983, the Commission released rules governing the

charges through which LECs would be compensated for

providing long-distance carriers (known as "interexchange

carriers" or "IXCs") with access to their local exchange

facilities. In re MTS and WATS Market Structure, Third

Report and Order, 93 F.C.C.2d 241, 242-43 (1983) ("Access

Charge Order"), modified on recon., 97 F.C.C.2d 682 (1983)

("Access Charge Reconsideration"), modified on further re-

con., 97 F.C.C.2d 834 (1984), aff'd and remanded in part sub

nom. National Ass'n of Regulatory Util. Comm'rs v. F.C.C.,

737 F.2d 1095 (D.C. Cir. 1984). The Commission decided

that, as a general matter, "end users" placing interstate calls

should bear the cost of the access charges. Therefore, the

Commission's rules provided that most subscribers were as-

sessed a monthly, flat-rate charge for the "end user common

line" element, permitting LECs to recover a significant

amount of the NTS costs associated with the subscribers'

loops.

In crafting its rules, the Commission faced a dilemma: how

to permit LECs to recover their investment in the public

payphones (and payphone lines) that they owned and operat-

ed. Payphones required special treatment, reasoned the

Commission, because the end users of payphones consisted of

the "transient general public," rather than the subscribers, as

in the case of private business or residential telephones. See

In re C.F. Communications Corp. v. Century Telephone of

Wisconsin, Inc., 8 F.C.C.R. 7334, 7335 p 10 (Com. Car. Bur.

1993) ("Bureau Order"). At first, the Commission deter-

mined that LECs would recover their payphone investments

solely through coin calls placed by end users. Access Charge

Order at 280. Under this solution, however, LECs were not

able to recover their investment from the many end users

who used payphones to make non-coin calls, such as collect,

credit card or third-party calls, causing either an inadequate

recovery for the LECs or a disproportionate burden on end

users paying by coin. Access Charge Reconsideration at 705.

On reconsideration, the Commission decided not to assess

any charge on end users of public payphones. Rather, the

Commission decided that LECs would recover the NTS costs

of operating their payphones and payphone lines from a

carrier common line element, which in turn was recovered

from the switched access charges imposed on IXCs and

interstate calls in general. Id. In other words, the Commis-

sion decided that public payphone users would no longer pay

for the NTS costs of operating public payphones, but that

those costs would in effect be subsidized by all interstate

callers.

The Commission, however, did not exempt all payphones

from EUCL charges. Although it excused "public" pay-

phones from the charge, it determined that "semi-public"

payphones would be subject to the charge. When it original-

ly announced the public/semi-public distinction, the Commis-

sion explained that "[a] pay telephone is used to provide

semipublic telephone service when there is a combination of

general public and specific customer need for the service,

such as at a gasoline station or pizza parlor. [Local telephone

companies] provide directory listing with this service." Id. at

704 n.40. By contrast, "[a] pay telephone is used to provide

public telephone service when a public need exists, such as at

an airport lobby, at the option of the telephone company and

with the agreement of the owner of the property on which the

phone is placed." Id. at 704 n.41. The Commission deter-

mined that NTS costs associated with semi-public payphones

should be "recovered from subscribers to that service in the

same manner that costs associated with an ordinary business

subscriber line are recovered" because "[t]hose fixed costs

can be recovered from an identifiable business end user

through flat charges." Id. at 706.

At the time the Commission developed this scheme for

payphone access charges, the only existing payphones were

owned by LECs. LEC-owned payphones are connected by

special "coin lines" to an LEC central office. A processor

located at the central office then does most of the work:

determining the cost of the call, timing the call, telling the

user how much money to deposit, and performing additional

tasks. Because they are not capable of processing and

supervising calls on their own, LEC-owned payphones are

considered to be "dumb."

In 1984, the Commission permitted payphones not owned

by LECs to enter the market. Unlike LEC-owned pay-

phones, the new independent payphones were "smart," ca-

pable of processing and supervising calls by means of a

microprocessor located inside the phone. These "smart"

payphones were attached to ordinary telephone lines; be-

cause they were self-sufficient, there was no need for spe-

cial "coin lines" to link them to an LEC central office.

Callers encounter independent payphones in the same

places where they would find LEC-owned payphones, such

as street corners, airports, shopping malls, and rural "mom

and pop" stores. Since callers are not able to tell whether

a given payphone is "smart" or "dumb," from a caller's

point of view, independent payphones are indistinguishable

from those owned and operated by LECs.

B.

Petitioner C.F. Communications Corporation ("CFC") oper-

ates independent payphones in Wisconsin, Michigan, Minne-

sota and Iowa. On May 10, 1989, CFC filed a complaint with

the Commission challenging several LECs' imposition of

EUCL charges on CFC's independent payphones. Petitioner

American Public Communications Council, Inc., a trade asso-

ciation of the independent payphone industry, intervened in

and participated in the complaint proceeding on CFC's behalf.

In its complaint, CFC argued that it should be excused

from EUCL charges because it did not qualify as an "end

user" under the Commission's rules. CFC also argued that

its payphones should be classified as "public"--and therefore

exempt from EUCL charges--because they were located in

public places and accessible to all members of the public.

Accordingly, CFC sought damages from the LECs in the

amount of the EUCL payments it had made to them.

The FCC's Common Carrier Bureau rejected CFC's argu-

ments, and held that the LECs had properly assessed EUCL

charges on CFC's independent payphones. See Bureau Or-

der. In the Order challenged in this case, the Commission

affirmed the Bureau's decision. See In re C.F. Communica-

tions Corp. v. Century Telephone of Wisconsin, Inc., 10

F.C.C.R. 9775 (1995) ("Order"). The Commission found that

CFC was an "end user" under its rules, and thus subject to

EUCL charges. Specifically, the Commission found that

CFC met the regulatory definition of "end user" because it

"offers telecommunications services exclusively as a reseller"

and that all such resale transactions "originate on [CFC's]

premises." See 47 C.F.R. s 69.2(m).

The Commission further concluded that CFC's independent

payphones did not qualify for the "public telephone" exemp-

tion from the EUCL charges. Relying on an FCC rule

defining "public telephone" as being "provided by a telephone

company," 47 C.F.R. s 69.2(ee), the Commission reasoned

that CFC's payphones were not "public" because CFC is not

a "telephone company" under the applicable rules. See 47

C.F.R. s 69.2(hh). In addition, the Commission deemed

CFC's payphones to be "semi-public" because--regardless of

how they were actually used--they were capable of private

use. Order at 9780, p 21.

C.

The Telecommunications Act of 1996 became law on Febru-

ary 8, 1996. Pursuant to the Act, the Commission initiated a

rulemaking proceeding to revise its rules governing pay-

phones. On September 20, 1996, and in several subsequent

orders on reconsideration, the Commission required the pro-

spective application of EUCL charges to both independent

payphones and to LEC-owned payphones. The Commission's

decision had no effect on the challenged EUCL charges that

CFC incurred prior to the effective date of the new rules.

II. Discussion

As a liminal matter, we note that we accord great deference

to an agency's interpretation of its own rules. Our deference

under these circumstances has sometimes been described as

even greater than our deference to an agency's interpretation

of ambiguous statutory terms. See Capital Network System,

Inc. v. F.C.C., 28 F.3d 201, 206 (D.C. Cir. 1994) (citing Udall

v. Tallman, 380 U.S. 1, 16 (1965)). An agency's interpreta-

tion of its own rule " 'becomes of controlling weight unless it

is plainly erroneous or inconsistent with the regulation.' " Id.

(quoting United States v. Larionoff, 431 U.S. 864, 872 (1977)).

Here, the Commission interpreted its rules to find that (1)

CFC is an "end user" subject to EUCL charges; and (2)

CFC's payphones are not "public telephones" and therefore

do not qualify for the "public telephone" exemption from

EUCL charges. Keeping in mind our great deference to the

Commission's interpretation of its rules, we review the Com-

mission's interpretations below.

A.

As its name implies, the End User Common Line charge is

assessed on an "end user." 47 C.F.R. s 69.5(a) ("End user

charges shall be computed and assessed upon end

users...."). Under the Commission's access charge rules, an

"end user" is defined as:

[A]ny customer of an interstate or foreign telecommuni-

cations service that is not a carrier except that a carrier

other than a telephone company shall be deemed to be an

"end user" when such carrier uses a telecommunications

service for administrative purposes and a person or

entity that offers telecommunications services exclusively

as a reseller shall be deemed to be an "end user" if all

resale transmissions offered by such reseller originate on

the premises of such reseller.

47 C.F.R. s 69.2(m).

It is not disputed that CFC, a reseller of LEC services,

qualifies as a "carrier" under this rule. Bureau Order at

7336, p 12; Order at 9777, p 10. As a "carrier," CFC is

deemed to be an "end user" if it meets one of the two

conditions listed above. According to the Commission, CFC

is an "end user" because it meets the second condition: it

"offers telecommunications services exclusively as a reseller,"

and "all resale transmissions offered by such reseller origi-

nate on the premises of such reseller." 47 C.F.R. s 69.2(m).

To determine if all of CFC's transmissions originate "on

the premises of [CFC]," the Commission analyzed the word

"premises," which is not defined in the Commission's rules.

Observing that the word "does not have a single fixed mean-

ing" and is "defined according to its context," Order at 9778,

p 13, the Commission found that in the context of Section

69.2(m), "premises" means "the place where, in most cases,

the equipment of the reseller is located and where the use of

the resold telecommunications services must originate." Id.

at 9779, p 17. Under this reading, every location where CFC

contracts to place a payphone would be considered CFC's

"premises."

While the Commission is correct that the word "premises"

"does not have a single fixed meaning," accord Gibbons v.

Brandt, 170 F.2d 385, 387 (7th Cir. 1948); O'Connor v. Great

Lakes Pipe Line Co., 63 F.2d 523, 525-26 (8th Cir. 1933), this

fact does not convert the word into a sort of Rorschach test,

permitting the Commission to read into the word anything it

pleases. We find that the Commission's interpretation of the

word "premises" is so far removed from any established

definition of that word that we must reject its interpretation

as plainly erroneous.

CFC's payphones are the personal property of CFC. An

agreement between CFC and the Central Wisconsin Airport

of the City of Mosinee, which is "typical" of CFC's agree-

ments with other location owners, Skrypczak Affidavit p 5,

explicitly states that CFC owns the payphones, and that the

"[t]elephones, booths and equipment are ... personal proper-

ty."

The term "premises," as used in this context, traditionally

refers to real property and its appurtenances. Black's Law

Dictionary 1062-63 (5th ed. 1979). Black's Law Dictionary

defines the term as "[a] distinct and definite locality, and may

mean a room, shop, building, or other definite area, or a

distinct portion of real estate." No matter how flexible the

meaning of "premises" may be, an item of personal property

may not sensibly be construed to be a "locality," a "definite

area," or a "distinct portion of real estate." Assuming a

payphone could be considered "premises" as appurtenant to

land, that would not make CFC's payphones the premises of

the company as CFC neither owns nor controls the land or

buildings on which its payphones are sited. The Commission

has provided no definition under which personal property

located on real property owned by another is considered to be

"premises," and we are aware of none.

The Commission, alternatively, suggests that "premises"

means the land or buildings on which CFC's payphones are

located. Order at 9778, pp 14-15. Recognizing that others

actually own the land or buildings on which the payphones

are located, the Commission found it significant that CFC had

what it termed "limited legal control" over the land or

buildings on which its payphones were located. The Commis-

sion did not explain the nature or source of this limited

control, but found that its existence justified treating the land

or buildings as CFC's "premises," even if CFC did not own

the land. Id. In other words, the Commission decided to

treat land owned by someone else as the "premises" of CFC

on the theory that CFC acquired an interest in the property

by contracting to place its payphone there. In so doing, the

Commission has not only distorted the plain meaning of

"premises" beyond any reasonable interpretation of the word,

but has rendered the phrase "originate on the premises of the

reseller" virtually meaningless. If any location in which a

"reseller" has the capacity to originate a call becomes its

premises, that requirement of the rule excludes nothing. The

Commission's interpretation, then, violates the familiar princi-

ple of statutory interpretation which requires construction "so

that no provision is rendered inoperative or superfluous, void

or insignificant." Mail Order Ass'n of America v. United

States Postal Service, 986 F.2d 509, 515 (D.C. Cir. 1993)

(internal quotations and citations omitted).

We do not suggest that the Commission could not amend

its rules to render "premises" a term of art encompassing

telephone equipment or land owned and controlled by a third

party on which telephone equipment is located. But to do so,

it must use the notice and comment procedure of the Admin-

istrative Procedure Act. It may not bypass this procedure by

rewriting its rules under the rubric of "interpretation." See

Indiana Michigan Power Co. v. Dept. of Energy, 88 F.3d

1272, 1276 (D.C. Cir. 1996) ("The [agency's] treatment of this

statute is not an interpretation but a rewrite."). In this case,

the Commission's interpretation of Section 69.2(m) does not

comport with the plain meaning of the term "premises" and

must be rejected.1

B.

In addition to our conclusion that the Commission erred in

determining that CFC was an "end user," we also hold that

petitioners are entitled to the relief sought for the alternate

reason that the Commission improperly discriminated be-

tween similarly situated phone services without a rational

basis. As we noted earlier, public telephones are not subject

to EUCL charges under the Commission's Access Charge

Reconsideration decision. In determining that CFC's pay-

phones were not subject to the "public telephone" exclusion,

the Commission relied on the following definition of "public

telephone": a "telephone provided by a telephone company

through which an end user may originate interstate or foreign

__________

1 Having determined that the Commission's interpretation of

"premises" fails to pass muster, we need not address its conclusion

that CFC "offers telecommunications services exclusively as a re-

seller" under Section 69.2(m). Order at 9779, p 18.

telecommunications for which he pays with coins or by credit

card, collect or third number billing procedures." 47 C.F.R.

s 69.2(ee) (emphasis added). Finding that CFC is not a

"telephone company," the Commission determined that CFC's

payphones did not qualify for the EUCL fee exemption.

Order at 9779-80, pp 19-20.

CFC concedes that it is not a "telephone company" under

Section 69.2(ee), but argues that the Commission improperly

applied that definition in this context. It observes that

Section 69.2(ee) was promulgated without explanation several

years after the Commission adapted its access charge rules,

and further observes--and the Commission does not dis-

pute--that the Commission drafted this definition with anoth-

er purpose in mind: clarifying the rules on allocation of

LECs' own investments in payphone equipment to particular

access charge elements.

We agree that the Commission's reliance on the definition

of "public telephone" in Section 69.2(ee) does not provide

sufficient justification for its distinction between CFC's pay-

phones and those operated by LECs. See Corporate Telecom

Services, Inc. v. F.C.C., 55 F.3d 672, 677 (D.C. Cir. 1995)

(rejecting the FCC's citation of "rules [which] appear to have

been designed with completely different purposes in mind").

When considered in its intended context, Section 69.2(ee)

makes sense: the Commission defined "public telephone" to

exclude independent payphones to clarify that, under the

rules governing LECs' recovery of their investment in pay-

phone equipment, LECs were not entitled to recover indepen-

dent payphone costs. In other words, Section 69.2(ee) makes

it plain that LECs may recover only their investment in

"public telephones" which they own and control, not in inde-

pendent telephones which are owned by others. However,

the Commission has shown no rational connection between

Section 69.2(ee) and the public/semi-public telephone distinc-

tion in its Access Charge Reconsideration decision. As ex-

plained earlier, the Commission exempted public payphones

from EUCL charges because it recognized that there was no

practical way to ensure that NTS costs were being shared

equally by all interstate end users of those payphones. In

light of the Commission's reasons for introducing the

public/semi-public distinction, we find that it has not shown

any legally significant difference between "public" payphones

owned by an LEC and those of the independent payphone

providers.

The Commission simply--and, we think, unreasonably--

ignored context and stated that "we must apply our rules as

they are now codified." Order at 9780, p 20. The Commis-

sion put on blinders after it found that CFC did not meet its

definition of "public telephone," not acknowledging that the

definition had been adopted in a different context; that the

"public telephone" exemption to the EUCL charges was

introduced in a Commission order, not in its rules; and that

the Section 69.2(ee) definition of "public telephone" was incon-

sistent with the original rationale for introducing the exemp-

tion in the Access Charge Reconsideration decision. We find

that the Commission's interpretation is not "reasoned," see

Corporate Telecom Services, 55 F.3d at 675 (rejecting FCC's

rule interpretation as inconsistent with the "values the provi-

sion is supposed to embody"), and therefore reject its conclu-

sion that CFC's payphones are not "public telephones" for

purposes of the exclusion from EUCL charges.

C.

Having found that CFC's payphones did not qualify for the

exclusion because they were not "public telephones," the

Commission declared that CFC's payphones were ineligible

because they were "semi-public." Order at 9780, p 21. Re-

jecting petitioners' request that it should decide if the pay-

phones were public or semi-public by examining how the

payphones were used, the Commission found it "more rele-

vant to examine how [CFC's] payphone lines can be used."

Id. (emphasis in original). The Commission then found that

CFC's payphones were capable of private use because, like

conventional telephones, they were connected to regular sub-

scriber business lines. This technical point--that CFC's pay-

phones were connected to regular subscriber business lines as

opposed to the coin lines attached to LEC-owned pay-

phones--was the Commission's sole reason for finding that

CFC's payphones were semi-public and not qualified for the

EUCL charge exemption. Bureau Order at 7336, p 13; Or-

der at 9780, p 21. The Commission attempts to justify its

distinction by arguing that under the Access Charge Recon-

sideration decision the existence of an "identifiable subscrib-

er" was the most important factor in determining that pay-

phones were public rather than semi-public.

The Commission has not adequately justified the distinction

it has drawn between CFC's payphones and LEC-owned

payphones. First, the Commission improperly relies on the

Access Charge Reconsideration decision. In that decision,

the Commission rejected its earlier approach of assessing a

per-call charge on payphone callers to recover the interstate

NTS costs of the payphone line, observing that it would be

inequitable for those who used coins to make payphone calls,

representing "only a fraction of those using pay telephones,"

to bear the cost of the EUCL charges. Access Charge

Reconsideration at 704. Recognizing that the "ideal solution"

of recovering NTS costs of public payphones from "end users

who rely upon pay phones to originate their interstate calls"

was not technologically feasible, the Commission decided

instead to eliminate the per-call charge on public payphone

users entirely. Id. at 705. The Commission, then, created an

exemption for public payphones because, due to the transient

nature of payphone users, there was no ultimate end user

from whom the charge could be recovered equitably. Thus,

notwithstanding the Commission's argument to the contrary,

the existence of an identifiable subscriber was not the control-

ling factor in its decision to exempt public payphones from

the EUCL charge, as the caller, not the subscriber, is the

ultimate end user in any event.

More importantly, even if the Commission had originally

justified its distinction between public and semi-public pay-

phones on the ground that semi-public payphones are subject

to EUCL charges because of the existence of an identifiable

subscriber, such an approach does not adequately explain why

the Commission exempted LEC-owned payphones from the

EUCL charge, but treated CFC's payphones as subject to the

charge. After all, the Commission's express reason for ex-

empting public payphones from EUCL charges applies to

CFC's payphones as well as to LEC-owned payphones. Fur-

thermore, the record reflects that CFC's payphones are

indistinguishable from LEC's payphones from a consumer's

point of view; at oral argument, counsel for the Commission

conceded that a consumer making a call from a bank of

payphones would have no idea whether that phone was inde-

pendently owned or owned by an LEC. And the Commission

does not dispute that CFC's payphones are indeed held out

for use by the general public. See Order at 9780, p 21 ("[W]e

recognize that it is not CFC's intent to provide private service

via its payphones.").

We also hold that the Commission erred when it focused on

how CFC's payphones could be used, as opposed to how they

were used. As we explained above, this test led the Commis-

sion to conclude that CFC's payphones were "semi-public"

because they were connected to ordinary business subscriber

lines, as opposed to special coin lines. The Access Charge

Reconsideration decision, which introduced the distinction

between "public" and "semi-public" for purposes of the

EUCL charge, does not mention this "capability of use"

distinction, and further suggests that the key distinction was

meant to be actual use. See Access Charge Reconsideration

at 704 n.40 ("[A] pay telephone is used to provide semipublic

telephone service when there is a combination of general

public and specific customer need for the service, such as at a

gasoline station or pizza parlor.") (emphasis added). Further,

since the record does not indicate that the loop costs of LEC-

owned payphones are significantly different from those of

CFC's payphones--and indeed, under the current regime,

both types of payphones are subject to the EUCL charge--

the technical distinction drawn by the Commission here has

no apparent relevance to the access charge at issue.

D.

We note that the Communications Act provides that "[i]t

shall be unlawful for any common carrier to make any unjust

or unreasonable discrimination in charges ... for ... like

communication service." 47 U.S.C. s 202(a). To determine if

a carrier is discriminating in violation of this provision, the

Commission asks: (1) whether the services are "like"; (2) if

they are, whether there is a price difference between them;

and (3) if there is, whether that difference is reasonable.

Competitive Telecommunications Ass'n v. F.C.C., 998 F.2d

1058, 1061 (D.C. Cir. 1993). To determine if services are

"like" under this provision, the Commission must "look to the

nature of the services offered and ascertain whether custom-

ers view them as performing the same functions." Id. (inter-

nal quotations and citation omitted).

Here, the Commission never explicitly considered whether

CFC's payphones and LEC-owned payphones provided "like"

services. Rather, it found that the LECs which had assessed

EUCL charges against CFC had not discriminated in viola-

tion of Section 202(a) because the LECs had followed FCC

rules when assessing these charges. Order at 9780, p 23.

Given our conclusion that the Commission misinterpreted its

rules, it appears that the Commission's Order may have

compelled LECs to discriminate in violation of Section 202(a):

consumers view CFC's payphones and LEC-owned pay-

phones as performing the same functions, and only LEC-

owned payphones are exempted from the EUCL charges.

Because we vacate the Commission's Order and remand for

further proceedings, however, we need not resolve whether

the Commission's interpretation compelled LECs to discrimi-

nate under Section 202(a), or the precise consequences if it

did.

Joined by Intervenor LECs Century Telephone of Wiscon-

sin, North-West Telephone Company and GTE North Incor-

porated, the Commission argues that CFC may not recover

the EUCL charges it has already paid because the LECs

which collected those charges did so in compliance with

Commission rules. Although we recognize the importance of

this issue, we need not resolve it here in light of our holding

that the Commission misinterpreted its own rules.

III. Conclusion

The Commission has articulated a difference between

CFC's payphones and LEC-owned payphones: CFC's

"smart" payphones are connected to ordinary business sub-

scriber lines and LEC-owned "dumb" payphones are connect-

ed to special coin lines. It has not, however, sufficiently

explained why this difference justifies its decision to assess

EUCL charges on the "smart" payphones but not the "dumb"

payphones. For this reason, and because the Commission's

interpretation of its rules was clearly erroneous, we vacate

the Commission's Order and remand for further proceedings

consistent with this opinion.