Supplemental Brief — GLOBAL CROSSING TELECOM. v. Metrophones

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No. 05-705

GLOBAL CROSSING TELECOMMUNICATIONS, INC.,

Petitioner,

Vv a

METROPHONES TELECOMMUNICATIONS, INC.,

Respondent.

On Writ of Certiorari to the United States

Court of Appeals for the Ninth Circuit

SUPPLEMENTAL BRIEF FOR RESPONDENT

MICHAEL W. WARD

Michael W. Ward, P.C.

1608 Barclay Boulevard

Buffalo Grove, IL 60089

(847) 243-3100

DAVID J. RUSSELL

Keller Rohrback L.L.P.

1201 Third Avenue

Suite 3200

Seattle, WA 98101

(206) 623-1900

ROY T. ENGLERT, JR. *

DONALD J. RUSSELL

DAMON W. TAAFFE

Robbins, Russell, Englert,

Orseck & Untereiner LLP

1801 K Street, N.W.

Suite 41]

Washington, D.C. 20006

(202) 775-4500

*Counsel of Record

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SUPPLEMENTAL BRIEF FOR RESPONDENT

Pursuant to Rule 25.5 of the Rules of this Court, respondent

Metrophones respectfully submits this spplemental brief to

present a single late authority that was not available to be

included in Metrophones’ brief on the merits. Specifically,

Metrophones calls to the Court’s attention an Order the Federal

Communications Commission (FCC) released on September 15,

2006, after briefing in this case was complete. App., infra, la-

15a. The Order “take[s] th{e] opportunity to reaffirm and

amplify what the Commission has concluded twice before: that

‘failure to pay in accordance with the Commission’s payphone

rules, such as the rules expressly requiring such payment ...,

constitutes ... an unjust and unreasonable practice in violation of

secton 201(b) of the [Communications] Act.’” App., infra, 9a

(ellipses in original) (quoting 2003 Payphone Order, 18

F.C.C.R. at 19,990 ¥ 32); see App., infra, 9a-13a (elaborating).

Metrophones and the United States have argued in their

briefs filed July 26, 2006, that the FCC had already said more

than enough about this subject to merit Chevron deference, and

that the FCC’s conclusions are compatible with the governing

statutory framework and reasonable. The new Order provides

still further confirmation (though none should be necessary) of

the reasonableness of the FCC’s consistent interpretation. It

also renders more untenable than ever the D.C. Circuit’s deci-

sion — which conflicts with the Ninth Circuit decision below —

in APCC Services, Inc. v. Sprint Communications Co., 418 F.3d

1238, 1248 (D.C. Cir. 2005) (“We do not say that the Com-

mission has no power to interpret § 201(b) to encompass viola-

tions of its rules, and thereby to create private rights of action in

courts when previously there were none. We do say the Com-

mission did not attempt to exercise any such power here.”),

petition for cert filed, 74 U.S.L.W. 3371 (U.S. Dec. 12, 2005)

(No. 05-766).

The FCC’s new Order is by no means necessary to allow

this Court to resolve this case in respondent’s favor. It cannot

be ignored, however. An agency’s “interpretation of [regula-

2

tions or statutes] in an administrative adjudication * * * is

agency action, not a post hoc rationalization of it.” Martin v.

OSHRC, 499 U.S. 144, 157 (1991) (emphasis in original); see

also Smiley v. Citibank (South Dakota), N.A., 517 U.S. 735,

740-741 (1996); Barnhart v. Walton, 535 U.S. 212, 221 (2002).

CONCLUSION

For the reasons stated above and in respondent’s brief and

the amicus brief supporting respondent, the judgment of the

court of appeals should be affirmed.

Respectfully submitted.

MICHAEL W. WARD Roy T. ENGLERT, JR.*

Michael W. Ward, P.C. DONALD J. RUSSELL

1608 Barclay Boulevard DAMON W. TAAFFE

Buffalo Grove, IL 60089 Robbins, Russell, Englert,

(847) 243-3100 Orseck & Untereiner LLP

1801 K Street, N.W.

Suite 411

Washington, D.C. 20006

DAVID J. RUSSELL (202) 775-4500

Keller Rohrback L.L.P.

1201 Third Avenue *Counsel of Record

Suite 3200

Seattle, WA 98101

(206) 623-1900

SEPTEMBER 2006

APPENDIX

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Federal Communications Commission

Order on Review

IN THE MATTER OF APCC SERVICES, INC., DATA NET

SYSTEMS, LLC,DAVEL

COMMUNICATIONS, INC., JAROTH, INC. D/B/A

PACIFIC TELEMANAGEMENT SERVICES, AND

INTERA COMMUNICATIONS CORP., COMPLAINANTS,

v.

NETWORKIP, LLC, AND NETWORK ENHANCED

TELECOM, LLP, DEFENDANTS.

File No. EB-003-MD-011

FCC 06-139

Adopted: September 14, 2006

Released: September 15, 2006

By the Commission:

I. INTRODUCTION

1. In this Order on Review, we deny an Application for

Review! filed by NetworkIP, LLC, and Network Enhanced

Telecom, LLP (collectively, “Network”) pursuant to section

1.115 ofour rules.’ The Application challenges a Memorandum

Opinion and Order’ released by the Enforcement Bureau

(“Bureau”) granting a liability complaint‘ filed by Complainants

' Application for Review, File No. EB-003-MD-011 (filed Mar. 1, 2005)

(“Application”).

247 C.F.R. § 1.115

> APCC Services, Inc. v. NetworkIP, LLC, Memorandum Opinion and Order,

20 FCC Red 2073 (Enf. Bur. Feb. 1, 2005) (“Bureau Liability Order”).

* Formal Complaint, File No. EB-003-MD-011 (filed June 3, 2003)

2a

(collectively, “APCC”’) against Network pursuant to section 208

of the Communications Act of 1934, as amended (“Act”).’ The

Bureau Liability Order found, inter alia, that Network’s failure

to compensate APCC for certain completed payphone calls in

accordance with section 64.1300 of our rules® violated section

201(b) of the Act.’ As explained below, Network’s Application

presents no facts or arguments that persuade us that the Bureau

made any procedural or substantive errors. Consequently, we

affirm the Bureau Liability Order and deny the Application.* In

doing so, we reiterate that, consistent with common industry

parlance, the term “facilities-based” carrier, as used in our

payphone compensation rules and orders, means an entity that

has a possessory interest in a switch involved in routing the calls

for which compensation is sought.

Il. BACKGROUND

_ 2. The Bureau Liability Order explains in detail the factual

and legal background of the dispute raised in this formal

complaint proceeding.’ In brief, Complainants are, or act as the

billing and collection agents of, payphone service providers

(“Complaint”).

> 47 C.F.R. § 208.

* 47 C-F.R. § 64.1300. Unless otherwise indicated, all C.F.R. references to

Part 64 of the Commission’s rules are to the rules in effect during the period

October 7, 1997 through November 23, 2001.

747 U.S.C. § 201. See, e.g., Bureau Liability Order, 20 FCC Red at 2074,

q 1, and 2085, q 26.

* APCC filed a motion to strike Network’s Application on procedural

grounds. Complainants’ Motion to Strike Defendants’ Application for

Review, File No. EB-003-MD-01 | (filed Mar. 16, 2005). See Opposition to

Complainants’ Motion to Strike, File No. EB-03-MD-011 (filed Mar. 23,

2005). Because we are denying the Application on substantive grounds, we

dismiss APCC’s motion as moot.

* Bureau Liability Order, 20 FCC Red at 2074-78, $f 2-13. We incorporate

by reference those explanations.

3a

(“PSPs”).'° Network is a telecommunications carrier that owns

switches and offers other entities a package of telecom-

munications services that enables those entities (“Debit Card

Providers”) to provide pre-paid calling cards to end-user

customers.'' The parties dispute whether it is Network or the

Debit Card Providers who bears the responsibility under our

rules and orders for payment of dial-around compensation to

APCC for certain completed “coinless” payphone calls, i.e.,

coinless calls that were routed, in part, by a Network-owned

switch, and that were made by end users from APCC’s

payphones using prepaid calling cards sold by Debit Card

Providers. '”

3. As the Bureau Liability Order stated, the applicable rule

during the relevant period was the following: with respect to

each call at issue, whichever entity -- Network or a Debit Card

Provider -- was the last identified “facilities-based” carrier

before the terminating local exchange carrier (“LEC”) in the

chain of entities responsible for the call (hereinafter, the “last

‘facilities-based’ carrier”) must compensate APCC for the use

of its payphones to place those calls." The Bureau Liability

Order further found, based on Commission precedent, that to be

“facilities-based,” a carrier must have & possessory interest in a

switch used to route the calls.'*

4. Applying those standards to the facts here, the Bureau

Liability Order concluded that Network, and not the Debit Card

° Bureau Liability Order, 20 FCC Red at 2074, { 2.

"' Bureau Liability Order, 20 FCC Red at 2077, Ff 9-10.

Bureau Liability Order, 20 FCC Red at 2078-79, 13, 2080-81, | 17,

2082-83, | 21, 2083, 4 22, 2084, ¥ 24.

" Bureau Liability Order, 20 FCC Red at 2077-78, 4] 10-11. Network

effectively acknowledged that rule below (Bureau Liability Order, 20 FCC

Red at 2079, ¢ 14) and does not challenge that rule here.

* Bureau Liability Order, 20 FCC Red at 2079-82, Ff 14-20.

4a

Providers, was the last “facilities-based” carrier, because

Network, and not the Debit Card Providers, was the last non-

LEC carrier in the chain of entities responsible for the call who

had a possessory interest in a switch used to route the calls. In

so concluding, the Bureau Liability Order rejected Network’s

argument that the Debit Card Providers were “facilities-based”

because the Debit Card Providers could track call completion

data from Network’s switches via the Internet.'* In other words,

the Bureau Liability Order rejected Network’s contentions that,

in this context, call tracking ability equates to switching

capability, and switching capability makes an entity “facilities-

based.”"* Accordingly, the Bureau Liability Order granted the

Complaint and held that Network is the entity responsible for

paying payphone compensation to APCC."’

Ill. DISCUSSION

A. The Bureau Correctly Determined that Network Is

Liable for Payment of Dial-Around Compensation.

5. In its Application for Review, Network reiterates the

same arguments it made below regarding the meaning of the

relevant payphone compensation requirements. As it asserted

previously, Network argues that, prior to the issuance of the

Bureau Liability Order, the Commission had not clearly

expressed the requirement that, to be considered “facilities-

based” for payphone compensation purposes, an entity must

have a possessory interest in a switch used to route the coinless

payphone calls at issue."* According to Network, the

Commission had previously suggested that an entity may be

'’ Bureau Liability Order, 20 FCC Red at 2077-78, FJ 10-12, 2082, ¢ 20.

'* Bureau Liability Order, 20 FCC Red at 2083-84, Ff 22-23.

"’ Bureau Liability Order, 20 FCC Red at 2079-80, 2085, F¥ 14-16, 26.

'* Application at 12-16; Reply to Opposition to Application for Review, File

No. EB-003-MD-011, at 2, 4, n.3 (filed Mar. 25, 2005) (“Reply”).

Sa

considered a “facilities-based” carrier under the payphone

compensation rules, even if the entity has no possessory interest

in a switch, as long as the entity somehow manages, in some

other way, to “maintain its own switching capability.”'°

Network also asserts, as it did below, that the Debit Card

Providers do “maintain their own switching capability,” even

though they do not have a possessory interest in a switch,

because the Debit Card Providers have what Network describes

as “call tracking ability." Thus, in Network’s view, the

Bureau erred by applying a “possessory interest” standard and

by declining to find that the Debit Card Providers are “facilities-

based” carriers liable for payphone compensation.

6. We reject Network’s assertions and affirm the Bureau’s

determinations, including the Bureau’s interpretation of our

precedent that “switching capability” means a possessory

interest in a switch, such as a lease interest or ownership

interest." We conclude that Network’s construction of

Commission precedent (i) ignores the commonly understood

meaning of the term “facilities-based;”"” (ii) overlooks a

reasonable interpretation of governing language in a key

Commission order;” and (iii) undermines the primary purpose

of the payphone compensation rules.“ We also agree with the

Bureau that Network’s claim must fail, even assuming,

arguendo, that an entity who “maintains its own switching

'? Application at 12-16; Reply at 4.

er 16-18; see Reply at 3-4 (arguing that “switching capability”

and “call tracking ability” are synonymous).

* See, e.g., In the Matter of Implementation of the Pay Telephone

Reclassification and Compensation Provisions of the Telecommunications

Act of 1996, Order on Reconsideration, 11 FCC Red 21233, 21277 at | 92

(1996) (subsequent history omitted).

” Bureau Liability Order, 20 FCC Red at 2079, 2081, F¥ 15-16, 19.

* Bureau Liability Order, 20 FCC Red at 2081, | 18.

* Bureau Liability Order, 20 FCC Red at 2082, q 20.

6a

capability” can be considered a “facilities-based” carrier despite

lacking a possessory interest in a switch (which is not actually

possible). Here, the Debit Card Providers had only call tracking

ability. “Switching capability” and “call tracking ability” are not

synonymous; the former encompasses far more functions than

the latter.” Thus, Network has failed to demonstrate that the

Debit Card Providers “maintain their own switching capability.”

Hence, we affirm in its entirety the Bureau Liability Order

granting the Complaint, and find that Network is liable for

payment of dial-around compensation to APCC.”

B. The Bureau Did Not Commit Error in Deferring its

Ruling on Two Motions.

7. As permitted by our rules,”” APCC “bifurcated” its

claims, asking for a ruling on liability issues first and, then, if

liability were found, a subsequent ruling on the amount of

damages owed.” During this liability phase of the proceeding,

the Bureau decided to defer until the damages phase (if any)

ruling on two motions filed by APCC.” These two motions

> Bureau Liability Order, 20 FCC Red at 2083-84, F¥ 22-23.

© As it did below, Network makes some curser; arguments about how the

Commission has previously recognized that certain novel arrangements for

conveying assets have been deemed to convey possessory interests. Reply

at 5. We agree with the Bureau that there is no material resemblance

between Network’s agreements with the Debit Card Providers and the

arrangements listed in Network’s Reply. See Bureau Liability Order, 20

FCC Red at 10-11, 9 21.

” 47 C.F.R. § 1.722(d).

74 Complaint at 24. APCC has now filed a supplemental complaint for

damages. Supplemental Complaint for Damages, File No. EB-003-MD-01 1

(filed April 4, 2005) (“Supplemental Complaint”).

7? APCC v. NetworkIP, LLC, Letter from Radhika Karmarkar, FCC, to

Counsel, File No. EB-03-MD-01 1 (rel. July 8, 200(3]); APCC v. NetworkiP,

LLC, Letter from Radhika Karmarkar, FCC, to Counsel, File No. EB-03-MD-

011 (rel. June 13, 2003).

Ta

essentially concern whether the statute of limitations reduces the

amount of damages for which Network is potentially liable.”

8. Network asserts that the Bureau’s deferral constitutes

prejudicial error, because APCC’s motions are obviously

meritless, and “it is not practical to conduct an investigation

until the parties know the relevant time period in dispute.”*"

Network states that the Commission should, therefore, rule now

that the statute of limitations reduces the scope of APCC’s

potential damages.”

9. We disagree. In complaint proceedings bifurcated into

liability and damages phases, the Commission has provided

Bureau staff with discretion to determine which issues should be

reached in which phase in order to manage the matter in the

most efficient and fair manner.” Encompassed within that

discretion is the determination whether a statute of limitations

issue should be reached in the liability phase or the damages

phase, especially where, as here, the defendant concedes that a

material portion of the alleged damages accrued within the

© The first motion seeks waiver of the “relation back” deadline in 47 C.F.R.

§ 1.718, Complainants’ Motion for Partial Waiver of Section 1.718 of the

Commission’s Rules, File No. EB-003-MD-01 1 (filed June 3, 2003); and the

second motion seeks permission to file a reply regarding Network's response

to the first motion. Complainants’ Conditional Motion for Leave to File

Reply, File No. EB-003-MD-011 (filed June 17, 2003).

' Application at 5-6. See id. at 4, 8-9.

* Application at 4-10. We note that, in the damages phase of the proceeding,

the Enforcement Bureau did rule on the two motions at issue here. APCC v.

NetworkIP, LLC, Order, 20 FCC Red 16727 (Enf. Bur. 2005).

* See, e.g., Implementation of thc Telecommunications Act of 1996,

Amendment of Rules Governing Procedures to be Followed When Formal

Complaints are Filed Against Common Carriers, Report and Order, 12 FCC

Red 22497, 22501, 4 5, 22511, 4 30, 22539, | 95, 22549, 4 116, 22558-

22559, Ff 143-44, 22575, | 178, 22581, 194 (1997) (describing the broad

discretion that the Commission delegated to staff to structure complaint

proceedings) (subsequent history omitted).

8a

limitations period.** Indeed, Network itself seems to

acknowledge that the statute of limitations issue here pertains

more to the “investigation of damages” than to the investigation

of liability.° Accordingly, we conclude that it was reasonable

and not prejudicial for the Bureau to defer ruling on APCC’s

motions in the liability phase of this proceeding. Consequently,

we deny Network’s Application for Review on this ground.

C. Network's Failure to Pay Dial-Around Compensation

Constitutes an Unjust and Unreasonable Practice in

Violation of Section 201(b) of the Act.

10. As stated above, the Bureau Liability Order held that

Network’s failure to pay dial-around compensation constitutes

a violation of section 201(b) of the Act, which prohibits a

common carrier from engaging in any “practice[ ] ... in

connection with ... communication service ...that is unjust and

unreasonable.”** Put differently, the Bureau Liability Order

held that Network’s failure to pay payphone compensation as

required by rule 64.1300 is an unjust and unreasonable practice

in connection with communication service within the meaning

of section 201(b) of the Act.

11. After the release of the Bureau Liability Order, federal

courts have differed about whether the Commission has

sufficiently ruled that a violation of its payphone compensation

rules constitutes a violation of section 201(b) of the Act, such

that a payphone service provider has a private cause of action

under the Act to recover unpaid payphone compensation.”’ In

“See generally AT&T Corp. v. BellSouth Telecommunications, Inc.,

Memorandum Opinion and Order, 19 FCC Red 23898, 23915 at ¥ 45 (2005)

(deferring to the damages phase the question of the extent to which the statute

of limitations affected the amount of recoverable damages).

8 See Application at 5-6.

% 47 U.S.C. § 201(b).

*” Compare APCC Services, Inc. v. Sprint Comm. Co., 418 F.3d 1238 (D.C.

9a

light of this split of authority, we take this opportunity to

reaffirm and amplify what the Commission has concluded twice

before: that “failure to pay in accordance with the

Commission’s payphone rules, such as the rules expressly

requiring such payment ... , constitutes ... an unjust and

unreasonable practice in violation of section 201(b) of the

Act.”** This interpretation rests on the plain language of section

201(b) and on the crucial importance of ensuring fair

compensation for payphone service providers.

12. The question presented is: whether a failure to pay

payphone compensation in accordance with the Commission’s

rules is, within the meaning of section 201(b), a (i) “practice in

connection with” (ii) “communication service” (iii) that is

“unjust and unreasonable.””® We answer in the affirmative, for

the following reasons.”

Cir. 2005) (“APCC v. Sprint”) (holding that the Commission has not yet

made a “clear statement (and analysis)” that a violation of its payphone

compensation rules constitutes a violation of section 201(b) of the Act), with

Metrophones Telecommunications, Inc. v. Global Crossing

Telecommunications, Inc., 423 F.3d 1056 (9 Cir. 2005), cert granted, 126

S.Ct. 1329 (2006) (“Metrophones v. Global Crossing”) (holding that the

Commission has already made a “fair and considered judgment” that a

violation of its payphone compensation rules constitutes a violation of section

201(b) of the Act); Flying J, Inc .v. Sprint Communications Co., 2006 WL

18603 (D. Utah Jan. 4, 2006) (same as Metrophones v. Global Crossing);

APCC v. Sprint, 418 F.3d at 1253-1255 (dissenting opinion of Chief Judge

Ginsburg) (same as Metrophones v. Global Crossing).

** In the Matter of the Pay Telephone Reclassification and Compensation

Provisions of the Telecommunications Act of 1996, Report and Order, 18

FCC Red 19975, 19990, $32 (2003) (“2003 Report and Order’), aff'd, Order

on Reconsideration, 19 FCC Red 21457, 21459 n.17 (2004) (“2004 Recon

Order”). As Chief Judge Ginsburg observed in dissent in APCC v. Sprint,

“[t}he court can say ‘[t}here was no authoritative interpretation of § 201(b)

in this case’ only because it makes no mention of the 2003 Report and Order

and fails to note that the Commission filed an amicus brief in this case

advancing the same position.” APCC v. Sprint, 423 F.3d at 1254.

* 47 U.S.C. § 201(b).

“ See Metrophones v. Global Crossing, 423 F.3d at 1067-1070 (finding that

10a

13. First, the “communication service” referenced in section

201(b) plainly includes the “communication by wire” referenced

in section 201(a).*' The Act defines “communication by wire”

as “the transmission of writing, signs, signals, pictures, and

sounds of all kinds by aid of wire, cable, or other like

connection between the points of origin and reception of such

transmission...."“* When a carrier receives and transports

payphone calls, it engages in the transmission of sounds by aid

of wire between the points of origin and reception of such calls.

Accordingly, when a carrier receives and transports payphone

calls, it engages in “communication service” within the meaning

of section 201(b).”

14. Second, a carrier’s obligation to pay payphone

compensation under our rules arises solely from its receipt and

a failure to pay payphone compensation in accordance with the

Commission’s rules is, within the meaning of section 201(b), a practice in

connection with communication service that is unjust and unreasonable, for

__the reasons we explain below); APCC v. Sprint, 418 F.3d at 1254-1255

(dissenting opinion) (same).

“' 47 U.S.C. §§ 201(a), (b).

“ 47 U.S.C. § 153(51).

* In various contexts, the Commission has treated payphone service as a

communications service. See, e.g., In the Matter of Implementation of the

Pay Telephone Reclassification and Compensation Provisions of the

Telecommunications Act of 1996, Order on Reconsideration, 11 FCC Red

21233, 21340-41, | 244 (1996) (stating that “all payphones serve the public

interest by providing access to basic communications services”) (subsequent

history omitted); /n the Matter of Implementation of the Pay Telephone

Reclassification and Compensation Provisions of the Telecommunications

Act of 1996, Order, 12 FCC Red 20997 (1997) (discussing tariffing

requirement for basic payphone services provided by the Bell Companies);

In the Matter of Request to Update Default Compensation Rate for Dial-

Around Calls from Payphones, Report and Order, 19 FCC Red 15636, 15644,

{ 20 (2004) (finding “payphone services are particularly critical to those with

few other communications service options”); see also APCC v. Sprint, 418

F.3d at 1254-1255 (dissenting opinion).

lla

transport of a payphone call. It follows that a carrier’s failure

to fulfill that obligation is a “practice in connection with” its

communication service of transmitting the call.“

15. Third, a carrier’s failure to pay payphone compensation

rises to the level of being “unjust and unreasonable.” This

misconduct achieves such “magnitude,”** for at least two

reasons. First, a failure to pay payphone compensation is not a

tariff or contract violation, but a direct violation of Commission

rules.” Second, a carrier’s failure to pay payphone compen-

sation in accordance with the Commission’s rules undermines

the attainment of an express Congressional goal — to “promote

the widespread deployment of payphone services to the benefit

of the general public....”*” Specifically, to help achieve the goal

“ See Metrophones v. Global Crossing, 423 F.3d at 1067-1070; APCC v.

Sprint, 418 F.3d at 1254-1255 (dissenting opinion).

“ APCC v. Sprint, 418 F.3d at 1248 (noting that, in a 1999 order, the

Commission did not specify that a failure to pay payphone compensation

reached the “magnitude” of an unjust and unreasonable act).

“ The fact that a failure to pay payphone compensation directly violates

Commission rules specifically requiring such payment distinguishes this

situation from other situations where the Commission has repeatedly declined

to entertain “collection actions.” See, e.g., U.S. Telepacific Corp. v. Tel-

America of Salt Lake City, Inc., Memorandum Opinion and Order, 19 FCC

Red 24552, 24555-56, ¥ 8-10 (2004) (“Telepacific v. Tel-America Order’’).

Specifically, whereas the payphone compensation rules directly impose

payment duties on the payor, the rules and statutory provisions regarding the

charges at issue in other kinds of “collection actions” impose duties only on

the payee (i.e., duties to impose charges in a certain manner and/or in a

certain amount) and not on the payor. See, e.g., Telepacific v. Tel-America

Order, 19 FCC Red at 24556, n.28. Thus, the failure to pay in the latter

situation does not contravene the Act or our rules, though it may be unlawful

on other grounds and thus actionable in court. See, e.g., TelePacific v. Tel-

America Order, 19 FCC Red at 24555-56, 4 8-10.

“47 U.S.C. § 276(b(1). The Commission recently explained some of the

reasons why Congress believed it important to promote the widespread

deployment of payphones: “We acknowledge, as did Congress in passing

section 276, that payphones ... provide a unique back-up communications

option when subscription services — whether wireline or wireless — are

12a

of widespread deployment of payphones, Congress directed the

Commission to adopt swiftly rules to ensure that “all payphone

service providers are fairly compensated for each and every

completed intrastate and interstate call using their

payphone....”** Thus, Congress viewed our payphone compen-

sation rules — and, ergo, carriers’ compliance with those rules —

as crucial to the statutory scheme. As the Commission has

explained:

“[S]ection 276 makes it our responsibility to ensure that

inadequate compensation does not cause deployment to

drop to levels insufficient to serve the public interest....

The purpose of that rate prescription {in our payphone

compensation rules] is ... to support, to the extent possible,

a functioning market and promote payphone deployment by

ensuring that dial-around calls bear an appropriate share of

the costs of operating payphones.””

In other words, a carrier’s failure to pay payphone compensation

in accordance with our rules reduces payphone revenues, which,

in turn, can ultimately facilitate a reduction in the deployment

of payphones. Consequently, a carrier’s failure to pay payphone

compensation in accordance with our rules strikes at the heart

of Congress’ design for implementing an important statutory

unaffordable or unavailable. Payphone services are particularly critical to

those with few other communications service options — including low-income

customers, the elderly, and residents of rural areas. Payphones also enhance

access to emergency (public health and safety) services.” Jn the Matter of

' Request to Update Default Compensation Rate for Dial-Around Calls From

Payphones, Report and Order, 19 FCC Red 15636, 15644 at 4 20 (2004)

(“Compensation Rate Order’) (footnotes omitted).

* 47 U.S.C. § 276(b)(1 (A).

“ Compensation Rate Order, 19 FCC Red at 15644-15645, %] 21, 25. Jd. at

15645, | 24 (noting the connection between payment of the dial-around

compensation rate under our rules and the level of payphone deployment).

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objective.” Such misconduct clearly amounts to unjust and

unreasonable action.”

16. Accordingly, we reiterate here what the Commission has

previously stated both expressly? and implicitly:* failure to pay

in accordance with the Commission’s payphone compensation

rules constitutes an unjust and unreasonable practice in violation

of section 201(b) of the Act.

© See generally Compensation Rate Order, 19 FCC Red at 15644-, 4¥ 21

(“(D]eclining [payphone] deployment is causing inconvenience to consumers

and may even be starting to pose a public safety issue. The public,

community organizations, and government officials view the decline in

deployment as a negative development.”) (footnotes omitted).

*! See Metrophones v. Global Crossing, 423 F.3d at 1067-1070; APCC v.

Sprint, 418 F.3d at 1254-1255 (dissenting opinion). See generally Alexander

v. Sandoval, 532 U.S. 275, 284 (2001) (stating that a private cause of action

lies for violation of an agency regulation that authoritatively interprets a

Statutory provision within the agency’s delegated authority). We note that

there is no basis for limiting the scope of section 201(b) to violations only of

Commission rules promulgated pursuant to section 205 of the Act, 47 U.S.C.

§ 205. See, e.g., Metrophones v. Global Crossing, 423 F.3d at 1067-1070

(and Commission orders cited therein); APCC v. Sprint, 418 F.3d at 1254-55

(and Commission orders cited therein) (dissenting opinion).

* 2003 Report and Order, 18 FCC Red at 19990, 4 32; 2004 Recon Order,

19 FCC Red at 21459 n.17.

8 See, e.g., In the Matter of Implementation of the Pay Telephone

Reclassification and Compensation Provisions of the Telecommunications

Act of 1996, Third Report and Order, and Order on Reconsideration of the

Second Report and Order, 14 FCC Red 2545, 22648 at 232 (1999) (citing

section 201as authority for promulgating payphone compensation rules)

(subsequent history omitted); Bell Atlantic-Delaware, Inc. v. Frontier and

Bell Atlantic-Delaware, Inc. v. MCI Telecom. Corp., Memorandum Opinion

and Order, 16 FCC Red 8112 (2001) (granting two complaints for damages

for failure to pay dial-around compensation). See also APCC Services, Inc.

v. TS Interactive, Inc., Memorandum Opinion and Order, 19 FCC Red 10456

(Enf. Bur. 2004) (granting complaint for damages for failure to pay dial-

around compensation); /ilinois Bell Tel. Co. v. One Call Communications,

Inc., Memorandum Opinion and Order, 16 FCC Red 16697 (Enf. Bur. 2001)

(granting complaint for damages for failure to pay dial-around

compensation).

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Se See EE SE

17. In sum, we agree with the Bureau that, because Network

has a possessory interest in switches used to route the payphone

calls at issue, Network is a facilities-based carrier whose failure

to pay dial-around compensation to APCC constitutes a

violation of section 64.1300 of our rules, and thus section

201(b) of the Act.* Moreover, we disagree with Network that

the Bureau committed error by failing to address immediately

two motions related to Network’s statute of limitations defense.

Consequently, we deny Network’s application for review and

affirm the Bureau Liability Order.

IV. ORDERING CLAUSE

18. Accordingly, IT IS ORDERED, pursuant to sections

4(i), 4(j), 201(b), 208, and 276 of the Communications Act of

1934, as amended, 47 U.S.C. §§ 154(i), 154(j), 201(b), 208, and

276, and sections 1.115, 1.720-1.736, and 64.1300 of the

Commission’s rules, 47 C.F.R. §§ 1.115, 1.720-1.736, and

64.1300, that Network’s Application for Review IS DENIED,

APCC’s motion to strike IS DISMISSED as moot, and the

Bureau Liability Order IS AFFIRMED to the extent described

herein.

* Because our finding of a violation of section 201(b) of the Act will afford

APCC all of the relief to which it would be entitled upon a finding of a

violation of section 276 of the Act, we need not and do not reach the

Bureau’s conclusion that Network’s conduct violated section 276 as well as

section 201(b). See generally APCC v. Sprint, supra; Greene v. Sprint

Communications Co., 340 F.3d 1047 (9* Cir. 2003) (both decisions holding

that section 276 does not establish a private cause of action to recover

payphone compensation).

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FEDERAL COMMUNICATIONS COMMISSION

Marlene H. Dortch