Verizon Telephone Co. v. Fed. Communications Commission
| Decision Date | 09 November 2001 |
| Docket Number | No. 00-1207,00-1207 |
| Citation | 269 F.3d 1098 |
| Parties | (D.C. Cir. 2001) Verizon Telephone Companies, et al., Petitioners v. Federal Communications Commission and United States of America, Respondents Sprint Corporation, et al., Intervenor |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
On Petitions for Review of Orders of the Federal Communications Commission
Aaron M. Panner argued the cause for petitioners and supporting intervenors. With him on the briefs were Michael K. Kellogg, Michael E. Glover, John M. Goodman, James D. Ellis, Roger K. Toppins, Jeffry A. Brueggeman, Jay C. Keithley, and Michael B. Fingerhut.
John E. Ingle, Deputy Associate General Counsel, Federal Communications Commission, argued the cause for respondents. With him on the briefs were Daniel M. Armstrong, Associate General Counsel, Laurel R. Bergold and Lisa E. Boehley, Counsel, John M. Nannes, Acting Assistant Attorney General, United States Department of Justice, Robert B. Nicholson and Robert J. Wiggers, Attorneys. Christopher J. Wright, General Counsel, Federal Communications Commission, and Lisa S. Gelb, Counsel, entered appearances.
Michael J. Thompson, Albert H. Kramer, Katherine J. Henry, and Andrew J. Phillips were on the joint brief of intervenors ABTEL Communications, Inc., et al. Robert F. Aldrich entered an appearance.
Michael E. Glover, John M. Goodman, James D. Ellis, Roger K. Toppins, Jeffry A. Brueggeman, Michael K. Kellogg, Aaron M. Panner, Jay C. Keithley, and Michael B. Fingerhut were on the brief of Local Exchange Carrier intervenors.
Before: Ginsburg, Chief Judge, Edwards and Sentelle, Circuit Judges
Opinion for the Court filed by Circuit Judge Edwards.
A group of local phone companies (known as "local exchange carriers," or "LECs") seek review of an order of the Federal Communications Commission ("FCC" or "Commission") holding them liable for violating the unreasonable charge provisions of 47 U.S.C.( 201(b) (1994). The violations occurred when the LECs wrongfully imposed so-called End User Common Line ("EUCL") fees on certain "independent payphone providers" ("IPPs"). In an agency adjudication that addressed complaints challenging the fees, the FCC initially construed the rules enunciated in an earlier rulemaking, In re MTS and WATS Market Structure, 97 F.C.C.2d 682 (1983) ("Access Charge Reconsideration") (setting rules by which LECs could recover costs associated with calls made on payphones), to allow the imposition of the fees. However, the FCC's decision did not survive judicial review. In C.F. Communications Corp. v. FCC, 128 F.3d 735 (D.C. Cir. 1997), the court held that the Access Charge Reconsideration did not allow for the fees. The case was remanded, leading the Commission to reverse itself in the order now under review. See In re C.F. Communications Corp. v. Century Tel. of Wisconsin, Inc., 15 F.C.C.R. 8759 (2000) ("Liability Order"). In changing its position following judicial review, the FCC conclusively determined that the LECs had violated the applicable Access Charge Reconsideration rules by imposing the EUCL charges; the Commission decided, however, that the question of what damages should flow from that violation was best reserved for another day.
In their present petition, the LECs contend, first, that the Liability Order is final, and thus immediately reviewable by this court. Second, they argue that the agency may not now sanction them for conduct that had been expressly approved, and may have even been compelled, by the Commission itself. The FCC responds that we lack jurisdiction at this time, because by leaving the issue of damages unresolved, the Liability Order was rendered non-final. Moreover, the Commission asserts that even if we do reach the merits, the LECs' retroactivity argument must fail, as whatever reliance those carriers placed on ultimately erroneous FCC pronouncements cannot excuse their violations of governing law as that law is properly construed. We conclude that the Liability Order is final, and that we therefore have jurisdiction to review it. It is true that the general rule is that an adjudicatory decision resolving only liability and not damages is not final. In this case, however, the relevant jurisdiction-conferring statute, 47 U.S.C. 208(b), provides that an order "concluding an investigation ... of the lawfulness of a charge" is a final order subject to immediate appeal. We are presented with just such an order here.
On the merits, we hold that it was appropriate for the FCC to find the LECs liable for their EUCL charges, even though the Commission initially construed the Access Charge Reconsideration rules to allow the charges. We do not believe that the Commission should be prevented from stating the law correctly merely because it may have misconstrued the applicable rules in the past. We emphasize, however, that this holding does not necessarily doom the LECs' retroactivity arguments. Because the FCC has not yet fixed the means by which it will calculate damages, the LECs are not foreclosed from presenting their equitable concerns to the agency during the next phase of the proceedings. We therefore express no opinion as to the Commission's authority to impose damages on the LECs for charges that they may have collected in reliance on the agency's initial (and mistaken) interpretations of the Access Charge Reconsideration rules.
Much of the regulatory and procedural background to the present petition is set out in C.F. Communications. See 128 F.3d at 736-38. We will not repeat that entire discussion here, but rather will concentrate on the most salient points. The underlying issue in this case is how local phone companies are to recover the costs that they incur when longdistance calls are made on coin-operated telephones. The story begins in 1983, when the FCC issued general rules establishing a regulatory mechanism for LECs to be compensated for providing long-distance carriers (known as "interexchange carriers" or "IXCs") access to their local networks. In re MTS and WATS Market Structure, Third Report and Order, 93 F.C.C.2d 241 (1983) ("Access Charge Rulemaking"), modified on recon., 97 F.C.C.2d 682 (1983), modified on further recon., 97 F.C.C.2d 834 (1984), aff'd and remanded in part sub nom. Nat'l Ass'n of Regulatory Util. Comm'rs v. FCC, 737 F.2d 1095 (D.C. Cir. 1984). For most phones, the Commission decided that these costs were to be footed by "end users" who would be assessed EUCL charges by the LECs. Pay telephones, however, which tend to have no predetermined end-user, required a different solution. Accordingly, the FCC decided to exempt public payphones from EUCL fees altogether, instead allowing the LECs to recover their costs from the IXCs directly, in the form of Carrier Common Line ("CCL") charges. See Access Charge Reconsideration at 705. Not all payphones were exempted, however. Instead, the FCC distinguished between true "public" payphones such as those in airports and on street corners and those which it labeled "semi-public" a category that included coin-operated phones found in restaurants and gas stations, where "there is a combination of general public and specific customer need for the service." Id. at 704 & n.40. Reasoning that this latter class could be linked to identifiable subscribers, the Commission allowed the LECs to impose flat EUCL charges on those subscribers, just as they would do for ordinary private phones. See id. at 706.
At the time when the Access Charge Reconsideration was issued, all of the nation's payphones were owned by the LECs themselves. This situation was soon undermined when the FCC allowed a group of "independent" providers to enter the payphone market. See Registration of Coin Operated Telephones, 49 Fed. Reg. 27,763 (July 6, 1984). These IPPs brought with them a technological advantage: so-called "smart" phones, which connected to ordinary phone lines rather than to the special coin lines that linked the LECowned phones to the central processors that supervise their calls. The new phones, which were able to perform this managerial task internally, needed no such specialized hookup. However, despite their architectural and cognitive differences, the two types of phones are found in the same kinds of places and are basically indistinguishable from the lay user's perspective. Nevertheless, when it came to EUCL charges, the LECs decided to treat the smart phones rather differently from their less sophisticated cousins. Acting at first without any guidance from the Commission other than the original Access Charge Reconsideration, the LECs imposed EUCL fees on all of the new phones not merely those located in semi-public places and assessed these tolls on the IPPs directly.
Unsurprisingly, the IPPs balked at these charges. Their concerns, however, were not well received by officials at the FCC. In 1988 and 1989, informal complaints filed by two IPPs generated two letters from Anita J. Thomas, an analyst in the Enforcement Division of the Commission's Common Carrier Bureau. In both of these letters, Thomas declared that by imposing EUCL fees on IPPs, the LECs violated neither their own tariffs nor the agency's regulations. See Letter from Anita J. Thomas to LeRoy A. Manke, Manager, Coon Valley Farmers Telephone Co. (Apr. 4, 1989), reprinted in Joint Appendix ("J.A.") 154; Letter from Anita J. Thomas to Lance C. Norris, Vice President, American Payphones, Inc. (Sept. 14, 1988), reprinted in J.A. 152. In May of 1989, another IPP, C.F. Communications Corp. ("CFC"), filed a formal complaint, alleging that the LECs' conduct had violated various provisions of the Communications Act and seeking reparations for the wrongfully collected EUCL charges. This challenge proved unsuccessful at the agency level, as both the Common Carrier Bureau and ultimately the Commission itself sided with the LECs. In re C.F....
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