FCC Ruling on Access Charges Should Be Vacated, Northern Valley Communications Tells D.C. Circuit Judges

A federal three-judge panel should vacate an FCC ruling that barred Northern Valley Communications from requiring long-distance phone companies to pay an access charge on calls to an end-user that receives Northern Valley’s services for free, the competitive LEC argued Monday before the U.S. Circuit Court of Appeals for the D.C. Circuit. The telco had been levying an access charge on telcos providing long-distance service for calls delivered to its customers. Northern Valley was one of many telcos the FCC said had engaged in “traffic pumping schemes,” in this case because it serves conference-calling companies that naturally generate high incoming call volumes. Although the FCC originally allowed Northern Valley to levy the access charge tariff, the agency said in a brief it eventually rescinded its approval in 2011 over changes to the tariff’s wording (http://xrl.us/bnx5qr).

Judge Raymond Randolph questioned why the FCC had not specified what amount of money constituted an acceptable access charge, asking whether that made it a “meaningless requirement.” Judge Brett Kavanaugh later pressed on whether the FCC could have ruled against the Qwest and Sprint Nextel complaints a second time based on the rules. FCC lawyer Joel Marcus said there was some ambiguity in the rules and that it was “conceivable” that such a ruling could have happened. But the logic behind the FCC’s ruling was right, he said.

The appeals court should vacate the FCC decision and reinstate Northern Valley’s tariff because the commission’s ruling conflicts with the “plain language” of the Telecom Act, argued Arent Fox attorney Ross Buntrock for the telco. The Act established CLECs as an alternative to the incumbent LECs that previously had an exclusive franchise to provide phone service at the local level. A 2001 FCC rule limited CLECs’ ability to file an access charge tariff as a way of discouraging traffic pumping, which the commission believes is abusive and economically inefficient, the agency said in its filing.

Central to the case Monday was a debate over the definition of an “end user” -- Northern Valley’s term in its tariff for call recipients -- since it had changed over the course of the tariff’s lifespan. Originally, the FCC said Northern Valley defined end-user as being “any Customer of an Interstate or Foreign Telecommunications Service that is not a carrier.” That definition changed following a 2009 FCC decision on traffic pumping that found an ILEC tariff wording required the recipient of a call to pay for interstate calling to be defined as an end-user (http://xrl.us/bnx5s3). Following that decision, Northern Valley amended its tariff to note that for its purposes “an End User need not purchase any service provided” by the telco, the FCC said.

Qwest and Sprint subsequently filed complaints with the FCC in 2010 over the revised definition, claiming it was illegal because the agency had found an end-user must by definition pay for a telco’s services. The FCC originally ruled against Qwest and Sprint, but decided in their favor in 2011, striking down Northern Valley’s revised definition. Northern Valley would need to re-file the tariff without the “unlawful” revised definition, the FCC said. The agency said it had previously found that its “access service rules and orders establish that a CLEC may tariff access charges only if those charges are for transporting calls to or from an individual or entity to whom the CLEC offers service for a fee” (http://xrl.us/bnx5s5).

The FCC “flip-flopped” when it first decided to rule against Qwest and Sprint’s complaints, but later ruled in their favor, Buntrock said. He said the commission was trying to give itself extra latitude to change its mind. The FCC could have simply made a rule requiring CLECs to charge all end users for telecom services, but it didn’t, he said.

CLECs like Northern Valley can set rates at its discretion, but once long-distance service providers get involved in a call’s transmission, CLECs must abide by FCC access charge rules, Marcus told the court. The FCC had long established that an end-user was a “consumer of telecommunications services,” and that Northern Valley had misapplied it to cover users who didn’t pay for the company’s conference call services, he said. The FCC had the authority to regulate CLECs’ access charge tariffs, but had generally held back from doing so except when a CLEC was abusing its position, Marcus said.