# Supplemental Brief — GLOBAL CROSSING TELECOM. v. Metrophones

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0234%3A08

## Record

- **Collection:** Supreme Court brief
- **Document type:** Supplemental Brief
- **Published:** January 1, 2007
- **Citation:** 550 U.S. 45

## Text

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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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0234%3A08. Public record. Not legal advice.