CommLaw Monitor News and analysis from Kelley Drye’s communications practice group Wed, 03 Jul 2024 01:52:19 -0400 60 hourly 1 FCC Initiates Rulemaking to Deregulate End-User Charges and Simplify Customer Bills Tue, 21 Apr 2020 14:03:31 -0400 The FCC has proposed new rules to eliminate several obscure telecommunications charges that were either mandated or authorized for price regulated local exchange carriers and then mirrored by many competitive telecommunications providers. At its March 2020 Open Meeting, the Commission adopted a Notice of Proposed Rulemaking (NPRM) that would eliminate the FCC’s regulation of the Subscriber Line Charge, and several other end-user access charges largely created as cost-recovery mechanism during access charge reforms in the 1990’s and early 2000’s. The NPRM also would prohibit all carriers from both listing these charges in their tariffs and breaking out these charges into separate line items on customer bills. These moves are touted by the Commission as relieving carriers of price regulation and increasing transparency for consumers.

Deregulating and Detariffing End-User Access Charges

The Commission’s proposal would eliminate ex ante price regulation of all five remaining access charges that incumbent local exchange carriers ("ILECs") can assess on end users and require both ILECs and competitive local exchange carriers ("CLECs") to detariff all such charges. (The FCC does not regulate CLECs access charges so long as they are just and reasonable.) The five end-user charges on the regulatory chopping block are:

  • Subscriber Line Charge – A flat per-line fee, capped by the FCC, that ILECs can assess on customers to recover a portion of the costs associated with transporting calls on the ILEC’s local facilities. This charge, also referred to as the “SLC” (pronounced “slick”) or the End User Common Line Charge ("EUCL"), stemmed from the earliest access charge orders as a way to recover non-recurring charges associated with providing the ability to make interstate calls.
  • Access Recovery Charge – An end-user charge created by the FCC in 2011 as a mechanism to mitigate reduced ILEC intercarrier compensation revenues from charges assessed on IXCs as a result of the transition to the intercarrier bill-and-keep regime. The ARC allowed ILECs to recoup some of the costs no longer collected from other carriers through per-minute access charges.
  • Presubscribed Interexchange Carrier Charge – A fee that price cap ILECs can assess on multi-line business subscribers who do not presubscribe an IXC to recover a portion of the ILECs’ local transport costs. The PICC (pronounced “Pick-C”) was introduced shortly after the Telecommunications Act of 1996 with the advent of competitive local service.
  • Line Port Charge – A monthly charge ILECs can assess to recover the cost associated with porting digital subscriber lines to the switch in the ILEC’s central office if it exceeds the cost for porting analog lines.
  • Special Access Surcharge – A monthly charge to recover transit costs for calls that “leak” out of a private branch exchanges ("PBXs") onto the public network, such as when large business customers allow employees to use a PBX to make long-distance calls without incurring access charges. This charge has been in place since the early days of telephone access charges.
The FCC says its rule changes are warranted because of increased competition in the voice service market, including by interconnected VoIP, wireless, and over-the-top providers. The Commission recognizes that competition may not be sufficient in rural and other high-cost areas, but proposes to find that other price constraints exist, such as obligations associated with the receipt of federal high-cost Universal Service Fund (USF) support.

Notwithstanding the Commission’s proposed approach, the NPRM invites comments on “alternative approaches to determining where and under what circumstances [it] should eliminate” price and tariff controls. One such proposal it offers is a case-by-case assessment finding rate regulation is unnecessary if: (1) a competing voice provider serves 75% of the census blocks in the same area as the ILEC; (2) the Eligible Telecommunications Carrier in the area is subject to the reasonable comparability benchmark; or (3) the state has deregulated intrastate rates. The Commission also seeks comment on the whether it should mandatorily detariff other charges related to federal programs, such as pass-through fees for USF contributions.

USF Reporting Impact

The Commission’s proposed action may impact how carriers allocate revenues between interstate and intrastate jurisdictions for the purpose of determining USF contribution amounts. To prevent carriers from gaming the system to reduce their contributions, the FCC is seeking comment on two alternative proposals for allocating revenues: a 25% safe harbor, where 25% of revenues would be allocated to interstate services, or bright-line rules for how carriers allocate revenues.

Prohibiting Line Item Charges on Customer Bills

The second major piece of the NPRM is a proposal to prohibit all carriers (ILECs and competitive carriers) from assessing end-user access charges as separate line items on customer bills, which they are currently permitted to do. The FCC said that the carrier descriptions for these charges vary significantly and unnecessarily complicate customer bills. The Commission states that it has sought to reduce the ambiguity of carriers’ advertised rates and simplify customer bills using its Truth-In-Billing rules, and its proposed action here would be consistent with those goals. Prohibiting carriers from listing end-user access charges separately, the NPRM asserts, would result in advertised prices that are closer to the total prices that appear on customer bills. This would increase transparency for consumers by removing the inconsistent line item descriptions and enable consumers to more easily compare voice service offerings by different providers.

Comments on the proposed access charge reforms are due 30 days after the NPRM is published in the Federal Register, with reply comments due 15 days later.

Because this proposal would affect both incumbent and competitive carriers, and may impact federal USF reporting, telecommunications service providers should review the NPRM carefully. Now would be a good time to review the line item and surcharge structure of a carrier’s services to determine if any changes should be made.

California Requires Most Carriers to Post a Performance Bond Thu, 15 Aug 2013 08:39:45 -0400 A May 2013 California Public Utilities Commission decision requires most companies holding a California CPCN or wireless registration (“WIR”) to submit a $25,000 continuous performance bond. The decision also revises application/registration requirements, increases filing fees and sets a minimum annual User Fee. In addition, the CPUC will convene a workshop to consider whether to require VoIP providers to register with the Commission.

The primary impact of this decision for most providers in California will be the new performance bond requirement. The CPUC's bond requirement takes effect on August 21, 2013. Thereafter, entities failing to obtain a performance bond may be subject to revocation proceedings.

Bond requirement

The new bond requirement applies to every company holding a telecommunications CPCN or WIR in California except incumbent local exchange carriers that are Carriers of Last Resort (“COLR”), their wholly or majority-owned affiliates, and Cox Communications where it serves as a COLR. Currently authorized carriers must submit their bonds as Tier 1 advice letters by August 21, 2013 unless granted an extension. Action will be taken to revoke the CPCN or WIR authority of any company that fails to comply with the requirement. Beginning in 2014, each carrier must submit a copy of its performance bond annually by March 31st.

New licensees and registrants will be required to submit their bonds within five days after their authority is effective.

Note: A request for rehearing, filed by T-Mobile, Cricket and Sprint Nextel, specifically addressing the application of the bond requirement to wireless carriers is pending.

Other Changes
• A minimum $100 payment is established for the annual User Fee.
• The information required for CPCN applications and WIR registrations has been expanded to require more details concerning key management and owners and a more rigorous regulatory history submission.
• Fees for CPCN applications and WIR registrations are being increased.

Second Circuit Finds That ILEC Transit Service Is Governed by Section 251(c)(2) and Subject to Lower TELRIC Rates Wed, 08 May 2013 15:17:56 -0400 Barbara Miller contributed to this post.

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

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

The Second Circuit’s decision represents the second federal appellate decision in little over a month shooting down arguments of AT&T seeking to limit the scope of their interconnection obligations under Section 251. In April, we reported that the United States Court of Appeals for the Sixth Circuit ruled that a State commission may fashion interconnection obligations under Section 251(a) that differ from those applicable under Section 251(c)(2).

The Second Circuit’s opinion addresses the rates and sections of the Act applicable to “transit traffic.” The Second Circuit described the “principal question [as] whether AT&T, an interconnecting carrier, is obligated under § 251(c)(2) to provide this routing of traffic, or transit service, at lower TELRIC rates or whether AT&T is permitted to charge higher negotiated rates” under Section 251(a). The Second Circuit recognized that the provision of transit traffic service by ILECs is essential to most CLECs entering the market. The Court further acknowledged that, if ILECs are allowed to impose higher, negotiated rates rather than TELRIC rates, then the additional costs imposed on the CLECs would put the CLECs at a competitive disadvantage. The Court concluded that allowing an ILEC to impose unregulated rates on indirectly interconnecting CLECs would undermine the very purpose of the Act, namely, to provide CLECs with the tools necessary to compete with the ILECs and to offset the inherent advantages that ILECs have through their infrastructure. The Second Circuit also found that nothing in Section 251(c)(2) limits that provision to the transmission and routing of traffic between a CLEC and the ILEC’s end users. Accordingly, the Court held that ILECs are obligated under Section 251(c)(2) to provide transit traffic service at TELRIC rates and not higher negotiated rates under Section 251(a).

While the Court limited its order to rates charged by the parties to contract in dispute, the application of this decision and its rationale is not limited to those parties. The Act provides the option of negotiated resolutions under § 252(a) and expresses a preference for those negotiated resolutions. The Court agreed with the District Court that the DPUC erred in imposing regulated rates on all of AT&T’s transit service contracts. The Court joined other federal appellate courts facing similar questions by concluding that the DPUC’s order would undermine Section 252(a) and the preference for negotiated outcomes. Thus, while the Court did not issue an order requiring the use of TELRIC rates for transit traffic, it found that TELRIC-based rates are available to CLECs when other rates are not agreed upon – at least they will be in Connecticut, New York and Vermont, the States bound by the Second Circuit.

In reaching its conclusions, the Court addressed two other topics of note. Before reaching the substance of the primary issues – the application of Section 251(c)(2) to, and the rates for, transit traffic – the Court held that the FCC’s consideration but current inaction on the topic of whether Section 251(c)(2) applied to transit service did not pre-empt State commission action on the question of transit traffic rates. Rather, the Court found, in the absence of guidance from the FCC, that Congress gave State commissions the “latitude to exercise their expertise in telecommunications and the needs of the local market” and that the State commission was free to rule on the issue.

The Court also rejected AT&T’s argument that, because the agreement in dispute was fashioned as a commercial agreement and not expressly a Section 252 interconnection agreement, the DPUC did not have the authority to review it. The Second Circuit held that the DPUC had the authority to review the agreement and determine whether the subject matter fell under Section 251, and therefore, was subject to the regulatory framework of Sections 251 and 252 – in other words that it was, in fact, an interconnection agreement. The DPUC made just such a determination by concluding that negotiations for transit service should have been conducted by the carriers pursuant to Section 252.

Appeals Court Rules that Federal Courts May Hear Interconnection Agreement Claims in the First Instance Tue, 30 Apr 2013 20:27:34 -0400 Barbara Miller co-authored this post.

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

At the outset, the court noted two propositions that are roundly accepted and not in dispute in the case. First, it noted that a federal court has jurisdiction to interpret the terms of an ICA under 28 U.S.C. section 1331. Second, it also noted that “every circuit to have considered the question” has concluded that a state commission also has such authority to interpret the terms of an ICA. The question presented by Sprint, however, was the “more particularized” question of whether a state commission must interpret an ICA before a federal district court can do so.

In finding that the federal courts have jurisdiction in the first instance, the court held that neither the text of the 1996 Act nor the FCC decisions applying it provide state commissions with exclusive jurisdiction to interpret and enforce state-approved ICAs. Notably, relying in part on an FCC amicus brief disavowing the interpretation, the court disagreed with a Third Circuit decision, that held state commissions had exclusive authority to resolve disputes over ICAs in the first instance. Instead, the Fourth Circuit ruled that the FCC’s Starpower decision only stands for the proposition that state commissions have authority to interpret and enforce ICAs when asked to do so and not that state commissions have exclusive authority to do so.

The Court further found that prudential exhaustion considerations do not require presentation to a state commission prior to heading to federal court either. The Court disagreed with Sprint that state commissions have a special expertise on matters relating to interconnection that courts lack. Because of that and the fact that the Act imposes no explicit exhaustion requirement, the Court declined to impose one.
FCC Opens the Year with A New Look at the Transition from TDM to IP Networks Wed, 02 Jan 2013 07:49:21 -0500 Jameson Dempsey co-authored this post.

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

The first petition was filed by AT&T on November 7th, 2012, the day after the 2012 Presidential election. AT&T’s petition seeks a rulemaking that would allow ILECs to host trial runs of specific regulatory reforms in discrete areas where legacy PSTN networks have been retired in favor of all-IP networks. AT&T argues that these trial runs will demonstrate that conventional public-utility style regulation is no longer necessary or appropriate. The petition also highlights a few areas where AT&T believes reform would limit regulatory uncertainty and increase investment in IP networks. Among other rules, AT&T seeks reform to (and essentially elimination of):

  • Section 214 discontinuance requirements
  • Notice-of-network-change rules
  • Federal and state service-obligation rules
  • Remaining “equal access” obligations
  • Dialing parity rules
  • Legacy copper loop requirements

AT&T’s petition comes on the heels of an earlier ex parte letter that it filed with the Commission on August 30, 2012. That letter included a proposed “checklist” of similar reforms to promote the transition to IP-enabled networks. The National Association of State Utility Consumer Advocates (“NASUCA”) opposed AT&T’s letter, contending that the proposed reforms would severely limit the ability of the FCC to effectively regulate communications networks, and would harm both consumers and the broader telecommunications ecosystem.

The second petition was filed by the National Telecommunications Cooperative Association (“NTCA”), an association representing rural ILECs. The NTCA does not propose deregulatory trial runs, but instead seeks a more traditional comprehensive evaluation of the regulatory scheme to be applied to IP networks. NTCA argued that the FCC should adopt a “smart regulation” approach to the TDM-to-IP transition that would protect consumers, promote competition, and ensure universal service. In particular, the NTCA proposed that the FCC: (1) develop a list of existing regulations that are not applicable to IP-based services; (2) seek comment on which of those regulations should be eliminated, retained, or modified; and (3) set a firm but reasonable deadline for completing reform.

The NTCA petition also proposed near-term solutions that would create incentives to promote the IP transition. First, it asks the FCC to confirm that all interconnection is covered by the Communications Act regardless of technology, and to allow carriers to recover the costs associated with exchanging traffic through such interconnections. Second, the NTCA argues that the FCC should reform its universal service rules to provide rural and small carriers with funding for broadband-only customers, and to offer universal service support to “middle mile” network facilities that transmit data between “Internet points-of-presence and distant high-cost areas.”

The FCC has set a comment deadline of January 28, 2013 and a reply deadline of February 25, 2013.

Wireline Competition Bureau Clarifies and Revises the FCC's Rules as Carriers Prepare to Make Transitional Intrastate Access Reciprocal Compensation Rate Reductions Mon, 11 Jun 2012 15:44:17 -0400 Compliance with the FCC's revised intercarrier compensation rules adopted in its USF/ICC Transformation Order continues to be a work in progress for many carriers. The rules have generated several waves of questions as the July 1, 2012, deadline for reducing certain intrastate terminating switched access rates fast approaches. On June 6, 2012, the Wireline Competition Bureau released an Order designed to answer a number of questions that had arisen regarding this transition. The Bureau clarified and revised a number of rules that had been troubling both carriers and state commissions as they tried to make sense of the FCC's rules and comply with the transition requirements. Carriers preparing their July 1, 2012 tariff revisions should review this order to ensure their filings are consistent with the FCC rules.

First, the Bureau clarified the deadlines surrounding the transitional intrastate filings which the rules adopted last year required to be filed and become effective on July 1, 2012. Earlier, in March of this year, the Bureau had established an effective date of July 3, 2012, for the 2012 interstate access charge filings for incumbent LECs. The main reason for having doing so was that incumbent carriers filing on 15 days' notice would otherwise have to make their tariff filings on a weekend so as to have the annual access charge tariffs take effect on the traditional date of the first of July. The Bureau issued in the June 6 Order a clarification that it had granted to incumbent LECs a waiver of the July 1, 2012, deadline for reducing intrastate access and non-access reciprocal compensation rates. While the Bureau encourages states to move the effective dates for intrastate rate changes to July 3 for as many rates as possible, the Bureau permits, but does not require, states to move the effective dates for the transitional intrastate filings from July 1 to July 3, 2012.

For purposes of fairness in the treatment of competitive LECs and incumbent LECs, in the Order, the Bureau extended a limited waiver to competitive LECs of the rules requiring CLECs to reduce the rates applicable to their intrastate terminating access reciprocal compensation rates as of July 1, 2012. Now, like ILECs, CLECs may file those reductions so that they are effective July 3, 2012. But, as with ILECs, the Bureau left it in the hands of state commissions whether the effective date for the complaint state tariff filings would be July 1 or July 3. For this reason, it is critical that CLECs, like ILECs, understand the deadlines being set by the state commission(s) with jurisdiction over them to ensure proper compliance.

For those ILECs and CLECs that tariff an universal service contribution factor in their interstate tariffs and will be making an annual access charge filing with the FCC in 2012 , the Bureau made corresponding accommodations. In the June 6 Order, the Bureau granted a waiver of the FCC's rules to allow such carriers to continue charging the second quarter universal service contribution factor through July 2, 2012, on end user charges that are part of their interstate tariffs (such as subscriber line or end user common line charges). From July 3 on, carriers can begin to assess the third quarter universal service contribution factor on such end user charges. Other end user charges these carriers might assess that are not contained in their interstate switched access charge tariffs remain subject to the third quarter contribution factor as of July 1, 2012.

Second, the Bureau addressed certain substantive aspects of the intrastate transitional access charge reductions due to be effective on July 1 (or 3, depending on the state). The Bureau recognized that different carriers have a variety of different rate structures and rate levels, and face a corresponding variety of challenges in implementing the FCC's new rules. Thus, in the June 6 Order, the FCC sought to grant such carriers additional flexibility when seeking to comply with the Commission's rules requiring the reduction of intrastate terminating switched access rate levels 50% toward their interstate counterparts as of July 1 (or, now, 3). As an initial matter, the FCC clarified that the two methods of reducing access charges set forth in the rules -- establishing transitional intrastate rates using its intrastate access rate structure or apply interstate rates and structures while assessing for one year a transitional per-minute charge on end office switching -- were merely illustrative and did not preclude other methods as long as they adhere to the overarching principle that a carrier reduce its overall intrastate switched access rates by the amount calculated by the FCC's rules for that category of carrier. Thus, so long as a carrier produces a reduction in revenues equal to the reduction required in 2012, a carrier may reduce any intrastate switched access rate elements it chooses to achieve that result

Further, believing that carriers with one or more intrastate elements at rate levels below interstate rate levels were particularly likely to face difficulties due to the rules' proscription against raising intrastate switched access rates, the Bureau provided clarification that rate levels of individual intrastate rate elements can be raised in certain circumstances. Specifically, the Bureau explained, "for carriers required to make reductions to intrastate switched access rates in 2012 under the intercarrier compensation transition, achievement of unified rate levels and rate structure overrides the prohibition on rate element increases included in the adopted transition rules." What this means is that carriers may increase individual intrastate switched access rate element levels above comparable interstate rate element levels in their 2012 intrastate access filings without violating the rules as long as the overall reduction of affected intrastate switched access rates is satisfied. In a similar vein, the Bureau clarified that "for carriers required to make intrastate switched access rate reductions in 2012, any intrastate switched access rate element that is below the functionally equivalent interstate switched access rate must be increased to the interstate level no later than July 1, 2013 to be consistent with the use of aggregate revenue relations reflected in our transition rules" without violating the rules.

The June 6 Order also clarified one matter for incumbent LECs when calculating their Eligible Recovery under the new rules. AT&T sought and received clarification that demand associated with non-CMRS reciprocal compensation traffic exchanged pursuant to bill-and-keep arrangements should be excluded from Fiscal Year 2011 reciprocal compensation demand used to calculate the reduction a carrier experienced in net reciprocal compensation revenues.

The matters address in the Bureau's June 6 Order may not exhaust those that carriers have as the deadline looms for initial reductions to intrastate access charges in conformance with the FCC's rules, but they do provide some added measure of certainty about how to comply. If further questions remain, carriers are well advised to bring those issues to the Commission staff as soon as possible if consultation with their counsel cannot provide definitive answers.

Tidbits from the FCC's Proposed Budget Tue, 14 Feb 2012 08:54:20 -0500 Yesterday, the FCC released its proposed budget for fiscal year 2013 (beginning in October 2012). The budget offers a few interesting insights into the balance of the FCC's functions. It also offers a preview of what to expect with the FCC's regulatory fees, which are due in September of each year. See below for more.

FCC Proposed Budget. The FCC released its proposed FY 2013 budget yesterday. It also released a press release highlighting that the budget will, among other things, promote its efforts to "accelerate broadband deployment" and to implement reforms to the Universal Service Fund programs.

A few highlights relevant to the areas we cover in this blog:

Enforcement is the FCC's largest bureau. The budget proposes an Enforcement Bureau of 299 FTEs, 15% of the total FTEs in the Commission. Enforcement is largest bureau, larger than Wireless Telecom (232 FTEs) and Media (213 FTEs). The Wireline Competition Bureau is proposed to have only 170 FTEs, which is smaller than the Consumer & Governmental Affairs Bureau (195 FTEs).

Twice as many employees work on "competition and innovation" in wireless than in the Wireline Competition Bureau. The budget distributes the number of FTEs by goal identified by the FCC. According to the distribution, in FY 2012 (the current year), Wireless Telecom has 143 FTEs working on "competition and innovation," while the Wireline Competition Bureau has roughly half that amount, 77 FTEs. For FY 2013, the budget restates the goals somewhat, but Wireless Telecom will have 100 FTEs furthering the goal to "promote competition," while the Wireline Competition Bureau will have only 54. Enforcement (53), OET (53) and International (52) have nearly as many FTEs identified as promoting competition as does the Wireline Competition Bureau.

Wireless also will have more FTEs who "advance key national purposes" than Wireline Competition (34 vs 20).

Enforcement has nearly as many employees working on "public safety" as does the Public Safety and Homeland Security Bureau. The budget identifies 61 Enforcement FTEs as furthering the goal of "public safety and homeland security." The Public Safety Bureau, by contrast, has 83.

FCC Regulatory Fees should rise 3% over the next two years. FY 2011 Regulatory Fees (which were paid in September 2011) collected $335 million. The FY 2102 budget calls for the FCC to collect $339 million in Regulatory Fees. The FY 2013 budget proposes a request of $346 million in Regulatory Fees. Next year's fee total is 1% higher; while the fee total proposed in the budget (which would be collected in two years) is 3% higher. There always is a slight shift in the FTE allocations each year, so the actual amount of the increase for each category may vary slightly.

Broadcasters and other entities with spectrum not obtained via auction should be cautious. The FCC is also backing legislation that will allow the Commission to collect user fees on unauctioned spectrum licenses. This legislation, if enacted, would phase the user fees in over time, but would collect $4.8 billion through 2022, per the FCC.

FCC Clarifies USF Reform/Intercarrier Compensation Order Wed, 08 Feb 2012 12:28:14 -0500 This post was drafted by Chip Yorkgitis.

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

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

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

FCC ICC/USF Reform Order Published in Federal Register Tue, 29 Nov 2011 12:11:13 -0500 This morning, the FCC's November 18, 2011 High-Cost USF and Intercarrier Reform Compensation Order was published in the Federal Register triggering an effective date of December 29, 2011 for all parts of the Order and rule changes adopted therein, except for the information collection requirements contained in some of the rules adopted. Those information collection requirements will not become effective until approved by the Office of Management and Budget. A subsequent Federal Publication will be made announcing the effective dates of those sections. A copy of today's Federal Register publication is available here.

FCC Releases Text of Intercarrier Compensation Order Sat, 19 Nov 2011 10:43:52 -0500 Late yesterday, the FCC released the text of its USF Reform and Intercarrier Compensation Reform Order, which it adopted on October 27. The FCC's rules, among other things, transition terminating access charges to zero, apply access to VoIP-PSTN traffic, adopt rules addressing access stimulation (prevalent in free conferencing, for example), and tackling the problem of phantom traffic.

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

The order is available at this link.

CompTel Asks Court to Compel Action on Special Access Wed, 10 Aug 2011 08:15:00 -0400 Since 2002, purchasers of special access services from the incumbent local telephone companies have been asking the FCC to revise its pricing rules for the services. Last month, CompTel (the leading trade association for competitive carriers) and a coalition of others asked the United States Court of Appeals for the DC Circuit to require the FCC to resolve its pending special access proceeding within six months. The CompTel petition is a petition for mandamus -- a court order compelling action by the agency. The FCC has not yet responded to the petition.

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

Special access pricing was a component of the FCC's National Broadband Plan. It is mentioned in two recommendations:

Recommendation 4.7: The FCC should comprehensively
review its wholesale competition regulations to develop a
coherent and effective framework and take expedited action
based on that framework to ensure widespread availability
of inputs for broadband services provided to small
businesses, mobile providers and enterprise customers.

Recommendation 4.8: The FCC should ensure that special
access rates, terms and conditions are just and reasonable.

The pending rulemaking was opened by Notice of Proposed Rulemaking in January 2005. The most recent Commission action was a request for additional data in October 2010.

Another VoIP-Related Access Charge Issue Makes its Way to the FCC Tue, 09 Aug 2011 08:30:39 -0400 The Commission's long-standing refusal to classify VoIP services continues to feed litigation between telecommunications carriers. Previously, a coalition of carriers asked the courts to decide the issue and it appears likely the FCC will address VoIP at least prospectively, but in the meantime, cases like this will persist.

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

As background, Verizon has refused to pay originating access charges billed by Pac-West for calls delivered to Verizon toll-free service customers (toll-free services are originated by dialing 800, 888, 877 or 866 prefixes, i.e., "8YY" calls). Pac-West receives these calls, which are originated in VoIP format, conducts a database lookup to determine that the carrier is Verizon, converts the call to TDM format to hand-off to Verizon and then delivers the call to Verizon. For this, Pac-West bills its tariffed interstate access charges to Verizon.

Pac-West's petition focuses on a narrow legal question concerning the origination of 8YY traffic. Pac-West seeks a declaratory ruling that Verizon may not refuse to pay these access charges on the grounds that the call originated in IP format. Specifically, Pac-West seeks a ruling that Verizon must pay applicable tariffed access charges regardless of whether the call originates in IP format or as a TDM call. Pac-West argues that the Commission need not classify VoIP services generally, but only needs to address the particular 8YY access services that Pac-West provides.

Pac-West argues that, by its nature, 8YY traffic always is access traffic. IXCs such as Verizon sell a "called party pays" service to their subscribers and in turn "constructively and actually order" originating access services from carriers like Pac-West. It contends that VoIP traffic is "telecommunications" (regardless of whether it is a "telecommunications service" -- the pending question involving VoIP). Access service is defined to include origination or termination of "telecommunication", which, Pac-West argues, renders irrelevant whether the call originated as VoIP or as TDM. Either way, Pac-West's access charges apply to the traffic.

Verizon's petition, on the other hand, attacks the language of Pac-West's tariff, regardless of the legal question at issue. Relying on recent cases involving YMax and Northern Valley Telephone Company, Verizon argues that Pac-West's tariff violates FCC tariffing rules and thus is void ab initio. Verizon contends that Pac-West's tariff prior to June 9, 2010 failed to contain specific rates and unlawfully contained cross-references to other tariffs. It contends that the tariff after June 9, 2010 is unlawfullly vague in its explanation of the rates and still contains unlawful cross-references. Verizon invites the Commission to rule that Pac-West could not collect access charges under its tariff, and if it does so, Verizon contends, the decision would "effectively end the federal court litigation."

The FCC sought comment on the two petitions. Comments were due yesterday, but it will take a few days to be sure that all comments are posted to the docket.

Broad Coalition Seeks Rulemaking for MPLS-Based Services Tue, 29 Mar 2011 07:53:45 -0400 A broad coalition of telecommunications carriers is asking the FCC to initiate a rulemaking proceeding to determine the proper treatment of MPLS-based services for regulatory and Universal Service purposes. The coalition, which includes Verizon, XO, Level 3, Qwest and four other carriers, are providers of services based on the Multi-Protocol Label Switching (MPLS) technology. The carriers recently met with advisors to the FCC's Wireline Competition Bureau and urged the FCC to clarify prospectively the proper treatment of services based on this technology.

MPLS is a technology that enables Internet protocol networks to make routing decisions based on user-assigned labels. MPLS is employed in many advanced data networks in order to provide users with highly-flexible, secure "virtual" networks. Unfortunately, several controversies have developed over whether an MPLS-based service is a regulated "telecommunications service" or an unregulated "information service."

The coalition carriers acknowledge this issue, and urge the FCC to initiate a rulemaking to address the proper treatment going forward:

we explained that as a class of services, many MPLS-enabled services in fact have the characteristics of information services and are treated as such. Regardless, we said that to settle uncertainty the Commission should address the treatment of MPLS-enabled services in either its expected upcoming Notice of Proposed Rulemaking regarding universal service contributions or a different rulemaking proceeding in order to establish clear rules and expectations should the Commission decide to seek contributions on services based on MPLS. We suggested it would be appropriate for the Commission to address MPLS-enabled services going forward in order to ensure consistent prospective treatment throughout the industry.

This is not the first MPLS-related request to be submitted to the FCC. The Commission has a USF appeal that presents the issue (available in parts here: part 1, part 2, part 3, part 4) and has a Petition for Clarification regarding statements it made in its FCC Form 499-A (for USF revenue reporting).

FULL DISCLOSURE: Kelley Drye represents XO Communications Services in its MPLS-related USF appeal.

FCC Releases USF and ICC Reform NPRM Thu, 10 Feb 2011 07:56:21 -0500 Late yesterday, the FCC released its latest NPRM on high cost USF and ICC reform (see our 2/8 post). The 289 page item, available here, sets forth staggered comment dates triggered by federal register publication. The first -- 30 days after Federal Register publication -- is for comments on intercarrier compensation for VoIP traffic, rules to address phantom traffic and rules to reduce access stimulation. Reply comments are due 15 days after that. Comments on the rest of it will be due on the same day (45 days after Federal Register publication). State members of the Federal-State Joint Board on Universal Service get two extra weeks to file comments. All reply comments on the remaining sections are due 80 days after federal register publication.

FCC Focuses Bully Pulpit on 911 Practices Tue, 30 Mar 2010 08:47:25 -0400 The Genachowski FCC is enamored with the bully pulpit as an enforcement tool. In the year since the new Chairman has taken office, we've seen examples with FCC letters to Apple regarding its iPhone approval practices; letters to Google concerning the classification of Google Voice; and letters to wireless carriers concerning their early termination fees. This time, the FCC's Public Safety and Homeland Security Bureau "reminds" telecommunications carriers of the need to provide diversity and redundancy in their 911 and E-911 services. Although the Public Notice is not enforceable and does not cite to enforceable rules, it clearly is intended to influence carrier behavior. Those who fail to heed this "reminder" could find themselves in an investigation questioning whether their practices are "just and reasonable."

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

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

The Public Notice identifies the following examples of lack of diversity causing outages:

  • Placement of all E911 trunks or ALI links on the same Digital Cross-connect System;
  • Placement of all E911 trunks or ALI links on the same DS1 transport facility (which then fails due to a line cut, failure of a control processor or failure of a power supply);
  • Failure of E911 due to failure of a single fuse;
  • Failure of E911 due to problems with a single Remote Terminal serving a PSAP;
  • Failure of E911 due to simultaneous failure of redundant timing cards.

The Bureau cautions carriers to "avoid placing an entire group of 911/E911 trunks or ALI links on one piece of transmission equipment." It also cites the Network Reliabilty and Interoperability Council (NRIC) best practices as a model in several instances in the Public Notice. These are not binding rules, but the Bureau is looking toward them for guidance.

Final note: The Public Notice mistakenly retained a draft date of May 28, 2009 in the footer. Clearly, the Bureau has been concerned with 911 outages for some time.

Pennsylvania PUC Claims Jurisdiction over VoIP Access Charges Tue, 02 Mar 2010 19:31:48 -0500 In a February 11, 2010 ruling in Palmerton Telephone Company v. Global NAPs South, Docket No. C-2009-2093336, the Pennsylvania PUC concluded that Global NAPs is required to pay intrastate access charges for terminating VoIP calls. The opinion is 30 pages long and highly detailed, but overall it appears to be contrary to the recent decision by the U.S. District Court in Paetec v. CommPartners, where the court ruled that VoIP services are not subject to access charges. And although the PA PUC attempted to distinguish another May 1, 2009 ruling of the U.S. Court of Appeals in Vonage v. Nebraska PSC preempting a state regulation of VoIP, the new PA PUC decision appears to contradict that Vonage ruling as well. The May 2009 Vonage opinion upheld a lower court finding that the FCC had "concluded nomadic interconnected VoIP services were only subject to regulation by the FCC." The PA PUC rejects that reading of Vonage on the basis that Global NAPs' wholesale services are different from Vonage's retail services (even while recognizing that over 50% of Global NAPs traffic may be VoIP). The PUC thus claims jurisdiction and orders Global NAPs to pay intrastate access charges to Palmerton.

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

Federal Court Rules that VoIP Need Not Pay Access Charges Fri, 19 Feb 2010 07:00:00 -0500 The U.S. District Court in D.C. ruled today that IP-originated calls are "information services" that are subject to the local reciprocal compensation scheme - and not access charges - for intercarrier compensation. The ruling came in Paetec Communications v. CommPartners, LLC, U.S. Dist Ct for DC, Civ. Action No. 08-0397. Paetec filed the case against CommPartners seeking to collect access charges for all calls, both TDM and VoIP originated. CommPartners conceded that it owed access fees on the TDM calls, but argued that VoIP calls are information services exempt from access under the FCC's longstanding access charge exemption for such calls. The Court agreed. In reaching its opinion...

the Court came to some noteworthy conclusions. First, it found that IP-originated calls that terminate in TDM format are "information services" because they meet the "net protocol conversion" test. The Court stated that the FCC "has had the controversy on its docket for a decade, [but] has been unable to decide it." But citing other court decisions on net protocol conversion, the court ruled that IP-to-TDM qualifies as an information service.

Next, the court concluded that reciprocal compensation applies, not Paetec's access tariff. In reaching this conclusion, the court found that the "filed rate doctrine" did not overrule the statutory scheme that would apply reciprocal compensation rather than access to VoIP traffic. "A tariff cannot be inconsistent with the statutory framework", the court said. Since the Court concluded that only one compensation scheme could apply under the statute - either access charges or reciprocal compensation - the law dictates that recip comp should apply to VoIP notwithstanding the filed tariff doctrine. Finally, the court rejected Paetec's unjust enrichment and quantum meruit arguments because it found them inconsistent with the Communications Act's "exclusive methods of intercarrier compensation", a finding which the court said made those claims "statutorily barred."

FCC Seeks Comment on Two USF Appeals Tue, 19 Jan 2010 12:31:29 -0500 Continuing its recent custom, the FCC quickly sought comment on two Universal Service Appeals. The issues involved in these appeals include classification of information services, classification of reseller revenues and identification of subscriber line charge (SLC) revenues. Carriers offering similar services take note.

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

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

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

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

Full Disclosure: Kelley Drye represents Grande in its appeal.

Qwest Files Access Charge Lawsuit Against CLECs in Seattle Wed, 26 Nov 2008 10:51:55 -0500 Qwest has begun following in the footsteps of SBC/AT&T by bringing collection actions against CLECs and their IXC customers for access charges which are allegedly due for terminating traffic to Qwest customers. On November 26, 2008 Qwest sued several companies in federal district court in Seattle, Washington. Defendants included Anovian, Broadvox, Transcom Enhanced Services and Transcom Communications, Maskina and Unipoint. The lawsuit claims that long distance calls were terminated to Qwest local customers without paying access charges due to Qwest.