Illinois Public Telecommunications Ass'n v. F.C.C., s. 96-1394
| Decision Date | 01 July 1997 |
| Docket Number | 96-1428,96-1486,Nos. 96-1394,96-1395,97-1021,96-1407,96-1479,96-1466,96-1429,97-1022,97-1048,97-1070 and 97-1080,97-1069,97-1016,96-1485,96-1482,96-1478,97-1039,96-1476,96-1484,s. 96-1394 |
| Citation | 326 U.S.App.D.C. 1,117 F.3d 555 |
| Parties | , 8 Communications Reg. (P&F) 339 ILLINOIS PUBLIC TELECOMMUNICATIONS ASSOCIATION, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents, Competitive Telecommunications Association, et al., Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
On Petitions for Review of Orders of the Federal Communications Commission.
Michael K. Kellogg, Washington, DC, argued the cause and filed briefs for petitioners Bell Atlantic Corporation, BellSouth Corporation, NYNEX Corporation, Pacific Telesis Group, Southwestern Bell Telephone Company and U.S. West, Inc.
Robert F. Aldrich, Washington, DC, argued the cause for petitioners American Public Communications Council, Georgia Public Communications Association and Illinois Public Telecommunications Association, with whom Albert H. Kramer was on the briefs.
Robert M. Gillespie, Associate General Counsel, Richmond, VA, Virginia State Corporation Commission, argued the cause for petitioners Utility Regulatory Commissions of the Various States. With him on the briefs were Lawrence G. Malone, Solicitor, Public Service Commission of New York, Albany, NY, Jonathan D. Feinberg, Assistant Counsel, Albany, NY, Penny Baker, Patrick S. Berdge, San Francisco, CA, Peter G. Ballou, Augusta, ME, Sheldon M. Katz, Montpelier, VT, Ann E. Henkener, Columbus, OH, George M. Fleming, Houston, TX, and Terrence J. Buda, Harrisburg, PA.
Theodore B. Olson, Washington, DC, argued the cause for petitioners Personal Communications Industry Association, Paging Network, Inc., and Pagemart II, Inc., with whom Scott Blake Harris, Washington, DC, and Robert L. Hoggarth, New York City, were on the briefs.
David W. Carpenter, Chicago, IL, argued the cause for petitioners Interexchange Carriers, with whom Mark C. Rosenblum and Peter H. Jacoby, Basking Ridge, NJ, Genevieve Morelli, Alexandria, VA, Danny E. Adams and Steven A. Augustino, Washington, DC, Michael J. Shortley, III, Arlington, VA, Dana Frix, C. Joel Van Over, Frank W. Krogh, Richard S. Whitt, Washington, DC, Douglas F. Brent, Louisville, KY, Leon M. Kestenbaum, Jay C. Keithley and Harold R. Juhnke, Washington, DC, were on the briefs.
John E. Ingle, Deputy Associate General Counsel, Federal Communications Commission, Washington, DC, argued the cause for respondent, with whom William E. Kennard, General Counsel, Christopher J. Wright, Deputy General Counsel, Laurence N. Bourne, Joel Marcus, Counsels, Joel I. Klein, Acting Assistant Attorney General, U.S. Department of Justice, Robert B. Nicholson and Robert J. Wiggers, Attorneys, were on the brief.
Michael K. Kellogg, Washington, DC, argued the cause for intervenors, the Regional Bell Operating Companies and National Telephone Cooperative Association, with whom L. Marie Guillory and David Cosson were on the brief.
Richard P. Bress, Washington, DC, argued the cause for intervenor Peoples Telephone Company. Maureen E. Mahoney was on the brief.
Robert F. Aldrich, Washington, DC, argued the cause for intervenor American Public Communications Council, with whom Albert H. Kramer was on the brief.
S. Walter Washington, Eva King Andries, Austin, TX, and Elizabeth A. Noel, Washington, DC, filed the joint brief for intervenors National Association of State Utility Consumer Advocates, et al.
Charles C. Hunter, Washington, DC, and Catherine M. Hannan, Bowie, MD, filed the brief for intervenor Telecommunications Resellers Association.
Before: EDWARDS, Chief Judge, GINSBURG and SENTELLE, Circuit Judges.
Opinion for the Court filed PER CURIAM.
Before us are 20 consolidated petitions seeking review of an order of the Federal Communications Commission revamping the regulatory regime for the payphone industry pursuant to the Telecommunications Act of 1996. The petitions challenge the Commission's decisions to (1) assume authority over the rates for intrastate local coin calls; (2) set the interim rate of compensation to payphone service providers (PSPs) for access code calls and subscriber 800 calls at the market rate prevailing in the majority of states that have deregulated local coin calls; (3) tie the permanent rate of compensation for such calls to the market rate for local coin calls; (4) require only large interexchange carriers (IXCs) to pay PSPs for these calls during the first year; (5) require all IXCs both to track compensable coin calls and to compensate PSPs after the first year; (6) reclassify payphone assets transferred from the regulated to the deregulated operations of a Bell Operating Company (BOC) at net book value and those transferred from a BOC to a separate affiliate at fair market value; and (7) forbid the BOCs from discriminating between their own and their competitors' PSPs in the provision of tariffed services.
We conclude that the Commission acted arbitrarily and capriciously in selecting the interim and permanent rates of compensation for access code and subscriber 800 calls; in requiring only large IXCs to pay PSPs for these calls during the first year; in failing to provide any interim compensation to PSPs for so-called "0+" calls and calls from inmate payphones; and in prescribing fair market value for payphone assets transferred from a BOC to a separate affiliate. Therefore, we grant in part and deny in part the petitions for review.
Historically only local exchange carriers (LECs) provided payphone service because its provision could not be accomplished independently from an LEC's network. In the mid-1980s the development of "smart" payphones enabled independent PSPs to begin competing against the payphone operations of the LECs. See Implementation of the Pay Telephone Reclassification and Compensation Provisions of the Telecommunications Act of 1996, Notice of Proposed Rulemaking (NPRM), 11 F.C.C.R. 6716 pp 4-6.
Generally speaking PSPs do not own the premises on which their payphones are located; instead, a PSP must contract with the owner of the premises, also known as the "location provider." See NPRM p 6. PSPs are compensated for calls made from their phones in two ways. First, they collect coins directly deposited into the payphones. This is the usual method of compensation for local calls. In the states (all but five) that regulate the rates for local coin calls a call costs from $0.10 to $0.35. Id. p 19 & n. 59. In the states that have deregulated local coin rates, the market rate for a coin call is $0.35 per call in four and $0.25 per call in one. Id. Second, each PSP--except those affiliated with a BOC--is compensated through a contract with an IXC (also known as an operator services provider or OSP) for the provision of operator services for collect calls and for calls billed to a calling card or to a third party. Pursuant to these contracts, the PSP agrees to "presubscribe" its payphones to the OSP for these types of calls; in other words, the OSP is the default IXC for any call made from the PSP's payphones. In exchange, the IXC agrees to pay the PSP a percentage of the revenues it earns from calls made from that PSP's payphones. Id. pp 7, 8. Calls made using the services of the presubscribed OSP are called "0+" calls because the caller simply dials "0" plus the number he is trying to reach. In addition to the above two methods of receiving compensation for calls made from payphones, the payphone operations of LECs also receive a subsidy from the carrier common line charges that the LECs assess the IXCs for originating and terminating long-distance calls. These subsidies place independent PSPs at a significant competitive disadvantage vis-a-vis the LECs' payphone operations. Id. p 8.
PSPs receive no compensation for access code calls and subscriber 800 calls. Access code calls are the calls to 800 numbers or 10XXX numbers that the caller uses to reach the long-distance carrier of his choice; all other 800 calls are known as subscriber 800 calls. PSPs used to block callers' attempts to "dial-around" the presubscribed OSP by means of an access code. With the passage of the Telephone Consumer Services Improvement Act (TOSCIA), Pub.L. No.101-435, 104 Stat. 986 (1990) (codified at 47 U.S.C. § 226), PSPs were no longer permitted to block such calls. See 47 U.S.C. § 226(c)(1)(B). Because access codes are often 800 numbers, TOSCIA effectively prevented the PSPs from blocking subscriber 800 calls as well. At the same time the Congress authorized the Commission to prescribe the compensation to be paid by the OSPs to the PSPs "for calls routed to providers of operator services" other than the presubscribed OSP. Id. § 226(e)(2). Pursuant to this provision the Commission ordered the OSPs to compensate the PSPs for access code calls but declined to prescribe compensation for subscriber 800 calls. See Policies and Rules Concerning Operator Services Access and Pay Telephone Compensation, 6 F.C.C.R. 4736 pp 34, 36 (1991), recon., 7 F.C.C.R. 4355 p 50 (1992).
It was against this background that the Congress enacted § 276 of the Telecommunications Act of 1996 "to promote competition among payphone service providers," 47 U.S.C. § 276(b)(1), by having the Commission "establish a per call compensation plan to ensure that all payphone service providers are fairly compensated for each and every completed intrastate and interstate call using their payphone." Id. § 276(b)(1)(A). In addition, the Act forbids a BOC from "subsidiz[ing] its payphone service directly or indirectly from its telephone exchange service operations or its exchange access operations" or from "prefer[ing] or discriminat[ing] in favor of its payphone service." Id. § 276(a). The Act also provides that the Commission must
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