Global Crossing Telecommunications

• Decision Date: 21 August 2001
• Docket Number: No. 00-1204,00-1204
• Citation: 259 F.3d 740
• Parties: (D.C. Cir. 2001) Global Crossing Telecommunications, Inc., Petitioner v. Federal Communications Commission and United States of America, Respondents Bell Atlantic-Delaware, Inc., et al., Intervenors
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 740

259 F.3d 740 (D.C. Cir. 2001)

Global Crossing Telecommunications, Inc., Petitioner v. Federal Communications Commission and United States of America, Respondents

Bell Atlantic-Delaware, Inc., et al., Intervenors

No. 00-1204

United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 15, 2001

Decided August 21, 2001

On Petition for Review of an Order of the Federal Communications Commission

Michael J. Shortley, III argued the cause for petitioner. With him on the briefs were Danny E. Adams and Steven A. Augustino.

Rodger D. Citron, Counsel, Federal Communications Commission, argued the cause for respondent. On the brief were Christopher J. Wright, General Counsel, John E. Ingle, Deputy Associate General Counsel, Laurel R. Bergold, Counsel, A. Douglas Melamed, Acting Assistant Attorney General, U.S. Department of Justice, and Catherine G. O'Sullivan and Andrea Limmer, Attorneys.

Michael E. Glover, Edward Shakin, Gilbert E. Geldon and John M. Goodman were on the brief for intervenors Verizon Telephone Companies.

Before: Sentelle, Tatel, and Garland, Circuit Judges.

Opinion for the Court filed by Circuit Judge Garland.

Garland, Circuit Judge:

Global Crossing Telecommunications, Inc. petitions for review of an order of the Federal Communications Commission (FCC), requiring Global Crossing to pay Verizon Telephone Companies compensation for payphone calls originating from Verizon payphones and routed over Global Crossing's network.¹ Finding the FCC's decision consistent with the statutory scheme and neither arbitrary nor capricious, we deny the petition for review.

I

In 276 of the Telecommunications Act of 1996,² Congress directed the FCC to:

prescribe regulations that--

(A) 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 ...; [and]

(B) discontinue ... all intrastate and interstate payphone subsidies from basic exchange and exchange access revenues, in favor of a compensation plan as specified in subparagraph (A).

47 U.S.C. 276(b)(1)(A), (B).³ Pursuant to Congress' direction, the FCC issued orders in 1996 that implemented the provisions of 276, including paragraphs (A) and (B). See Report and Order, Implementation of the Pay Telephone Reclassification and Compensation Provisions of the Telecommunications Act of 1996, 11 FCC Rcd 20,541 (1996); Order on Reconsideration, 11 FCC Rcd 21,233 (1996), aff'd in part and remanded in part sub nom. Illinois Pub. Telecomm. Ass'n, 117 F.3d 555 (D.C. Cir. 1997) (collectively, Payphone Orders).

With respect to paragraph (A), the FCC required interexchange carriers (IXCs) that carry calls originating from payphones to compensate the payphone service provider (PSP).⁴ See 47 C.F.R. 64.1300(a) ("[E]very carrier to whom a completed call from a payphone is routed shall compensate the payphone service provider for the call at a rate agreed upon by the parties by contract."); Report and Order, Payphone Orders, 11 FCC Rcd at 20,566, p 48; id. at 20,584, p 83. Previously, PSPs had received no revenue for originating certain calls (such as subscriber 800 and other toll-free number calls) and were prohibited from blocking callers from making some of those calls (such as access code calls). See Bell Atlantic-Delaware v. Frontier Communications Servs., Inc., 14 FCC Rcd 16,050, 16,053-54, p 5 (Com. Car. Bur. 1999)(hereinafter "Bureau Order"). The Commission concluded that PSPs must be compensated for all such calls, and determined that IXCs, as the primary beneficiaries of those calls, should be responsible for providing that compensation. See id. at 16,054, p 5; Report and Order, Payphone Orders, 11 FCC Rcd at 20,584, p 83.

To implement paragraph (B), the FCC ruled that in order to receive compensation for completed calls originating from its payphones, a PSP that is also a local exchange carrier (LEC PSP), see supra note 4, "must be able to certify" that it has complied with several requirements, including the institution of "effective intrastate tariffs reflecting the removal of charges that recover the costs of payphones and any intrastate [payphone] subsidies." Order on Reconsideration, Payphone Orders, 11 FCC Rcd at 21,293, p 131. The FCC delegated to its Common Carrier Bureau the authority to make "any necessary determination as to whether a LEC has complied with all requirements" for compensation. Id. at 21,294, p 132.

Verizon is a LEC PSP that offers local exchange and payphone services in the northeast and mid-Atlantic states. Global Crossing is an IXC that provides both interstate and intrastate telephone toll service. Since October 1997, when the per call compensation requirement became effective, Verizon has delivered calls from its payphones to Global Crossing.

In June 1997, in order to obtain compensation for calls originating from Verizon's payphones and carried by Global Crossing, Verizon presented Global Crossing with signed letters attesting that it had complied with all of the conditions for receiving compensation, including the elimination of intrastate subsidies. Global Crossing replied that it would not pay compensation until Verizon provided additional information, specified by Global Crossing, establishing that Verizon had in fact satisfied the compensation eligibility prerequisites--particularly the removal of those subsidies. In June 1998, representatives of Verizon and Global Crossing met with staff of the Common Carrier Bureau, who advised that under the FCC's rules and orders, "IXCs must compensate a LEC payphone service provider upon receipt of the LEC's certification of eligibility without further inquiry or requirements." Bureau Order, 14 FCC Rcd at 16,058, p 10. Nonetheless, Global Crossing continued to refuse to pay, and, on July 15, 1998, Verizon filed a formal complaint with the FCC pursuant to 47 U.S.C. 208.⁵ The complaint alleged that Global Crossing had violated 47 U.S.C. 276, as well as 47 C.F.R. 64.1300, by failing to compensate Verizon for more than 11,200,000 calls. Complaint pp 33-35.

In September 1999, the Common Carrier Bureau held that Verizon had adequately certified its compliance with the prerequisites for receiving compensation and ordered Global Crossing to pay Verizon for applicable past and future calls. Bureau Order, 14 FCC Rcd at 16,052, p 3. The Bureau determined that "[t]he term 'certification' ... does not mandate that a LEC payphone service provider prove to the IXC payor that it has satisfied each compensation eligibility prerequisite," but rather requires that a LEC "attest[ ] authoritatively to an IXC payor that such LEC payphone service provider has satisfied each prerequisite." Id. (emphasis added). The Bureau found that interpretation to be consistent with prior Commission orders, and permissible under the language of 276. Id. at 16,063-65, pp 18-19, 22. And it held that if Global Crossing (or any other IXC) wished to question "the veracity of a LEC's certification," it was obliged to do so by filing its own complaint with the Commission, rather than by simply refusing to make payment. Id. at 16,068, p 27.

The FCC affirmed the Bureau's decision in all respects. Order on Review, Bell Atlantic-Delaware v. Frontier Communications Servs., Inc., 15 FCC Rcd 7475, 7480, p 11 (2000) (hereinafter "FCC Order"). The Commission also refused to consider Global Crossing's "affirmative defense" that Verizon "in fact, had not qualified for payphone compensation." Id. at 7479, p 9. The Commission held that this "so-called 'affirmative defense' " was "irrelevant to evaluating [Global Crossing's] obligation to pay upon receiving certification," and "was not properly before the Bureau in the context of" a complaint filed by a LEC PSP. Id. "[T]he proper way for an IXC to challenge a LEC's failure to remove unlawful subsidies," the FCC declared, "is to initiate a Section 208 proceeding at the Commission." Id. at 7479-80, p 9.

II

Global Crossing contends that the FCC's determination, that an IXC must pay a LEC PSP compensation merely upon certification that the LEC has discontinued subsidizing its payphone service, is neither consistent with 276 of the Telecommunications Act nor the product of reasoned decisionmaking. We consider these two arguments below.

A

In addressing Global Crossing's statutory argument, we apply the two-step framework of Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).⁶ We first ask "whether Congress has directly spoken to the precise question at issue," in which case we "must give effect to the unambiguously expressed intent of Congress." Id. at 842-43. If, however, the "statute is silent or ambiguous with respect to the specific issue," we move to the second step and defer to the agency's interpretation as long as it is "based on a permissible construction of the statute," id. at 843, and is "reasonable in light of the Act's text, legislative history, and purpose," Southern Cal. Edison Co. v. FERC, 116 F.3d 507, 511 (D.C. Cir. 1997).

Global Crossing asserts that permitting Verizon to receive compensation merely upon its certification that it has discontinued subsidies is inconsistent with the express language of 276, which requires the Commission to promulgate regulations that "discontinue ... all intrastate and interstate payphone subsidies ... in favor of a compensation plan." 47 U.S.C. 276(b)(1)(B). That language, Global Crossing argues, "ties the timing of the receipt of compensation to the removal of the subsidies," rendering Verizon unqualified to receive compensation until it first removes all of its subsidies. Reply Br. at 10. By allowing Verizon to rely on certification alone, petitioner continues, the FCC permitted the LEC PSP to receive per call compensation without regard to whether it had in fact discontinued its payphone subsidies.

The FCC does not disagree that 276 requires...