In re APCC Services Inc., EB-05-MD-016

CourtFederal Communications Commission Decisions
Writing for the CourtMarlene H. Dortch Secretary
Decision Date20 May 2008
PartiesIn the Matter of APCC Services, Inc., Complainant, v. Radiant Telecom, Inc., Intelligent Switching and Software, LLC, and Radiant Holdings, Inc., Defendants.
Docket NumberEB-05-MD-016,FCC 08-131

In the Matter of APCC Services, Inc., Complainant,

Radiant Telecom, Inc., Intelligent Switching and Software, LLC, and Radiant Holdings, Inc., Defendants.

No. EB-05-MD-016

No. FCC 08-131

Federal Communications Commission

May 20, 2008

Adopted: May 15, 2008


Marlene H. Dortch Secretary

By the Commission:


1. This Memorandum Opinion and Order grants in substantial part a formal complaint[1] filed by APCC Services, Inc. ("APCC") against Radiant Telecom, Inc. ("Radiant"), Intelligent Switching and Software, LLC ("ISS"), and Radiant Holdings, Inc. ("Radiant Holdings") (collectively, "Defendants") under section 208 of the Communications Act of 1934, as amended ("Act").[2] APCC alleges that Defendants violated sections 201, 276, and 416 of the Act[3] by failing to comply with Commission payphone rules that impose compensation, call tracking, and other obligations on "Completing Carriers."[4]The principal question presented is whether any of the Defendants is a completing carrier within the meaning of 47 C.F.R. § 64.1300 and the orders implementing that regulation. As explained below, we find that whereas Radiant is a switchless reseller that bears no payment responsibility under our rules, ISS is a Completing Carrier. Because ISS has failed to comply with the payphone compensation rules, we order ISS to pay APCC damages in the amount of $574, 073.07, plus interest. Because we grant APCC's claims under section 201(b) of the Act, and such grant will afford APCC all the relief to which it would be entitled under sections 276 and 416(c) of the Act, we dismiss without prejudice APCC's claims under sections 276 and 416(c) of the Act.


A. Payphone Compensation Regime

2. Section 276(b)(1)(A) of the Act directs the Commission to "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 . . . ."[5] The statute itself does not specify the entity that must pay compensation, but the Commission's orders and rules implementing the statutory directive establish payphone service providers' ("PSPs'") rights to compensation for calls made from their payphones.[6]

3. The Commission's task of establishing a per call compensation plan for coinless payphone calls is complex, for multiple entities may be involved in the transmission of a coinless call.[7]The local exchange carrier ("LEC") serving the payphone transports the call to the switching facilities of an interexchange carrier ("IXC").[8] Although the initial IXC may transport the call to the terminating LEC, [9] often the initial IXC transports the call to a "reseller." The call may then be transported to one or more additional resellers before it is ultimately switched back to an IXC that transports the call to the terminating LEC.[10] In almost all, if not all, such cases, however, one carrier that handles the call will collect money from the ultimate customer, or provide services directly to a switchless reseller that collects money from the ultimate customer, whether that retail end user is a calling card customer or a subscriber to a toll-free number. That carrier will process the call at the mid-point of the call stream, between the IXC that first accepts the call from the originating LEC and the IXC that finally hands the call to the terminating LEC.

4. Some resellers possess the switching equipment required to perform the function of routing the call; other resellers (i.e., "switchless resellers") lack such equipment, so they only resell the telecommunications service (i.e., the ability of a customer to place a coinless payphone call), and rely on other carriers to perform the actual switching and transmission functions required to complete the call.[11] Only resellers that possess switching equipment ("switch-based" resellers or SBRs) can physically receive the call and route it onward, either to the LEC serving the call recipient or to the switch of another reseller.[12] Resellers typically do not own transmission facilities, but perform only switching and rely on IXCs to actually transport the call. However, any reseller may sell the underlying telecommunications service to the public, or to a switchless reseller. Such sales often take the form of prepaid calling cards, as they did in this case.[13]

5. The Commission has issued a series of orders addressing which carrier in the call path of a coinless payphone call should compensate the PSP.[14] Prior to the implementation of the current payphone rules, the Commission required the "first underlying facilities-based interexchange carrier to whom the LEC directly delivers the call to compensate the PSP."[15]

6. The Commission revised that approach in the Tollgate Order, [16] which placed the compensation obligation on the "Completing Carrier."[17] A "Completing Carrier" is defined as "a long distance carrier or switch-based long distance reseller that completes a coinless access code or subscriber toll-free payphone call or a local exchange carrier that completes a local, coinless access code or subscriber toll-free payphone call."[18]

7. The Commission imposed the compensation obligation on Completing Carriers for two reasons. First, the Commission determined that Completing Carriers "are the primary economic beneficiaries of coinless payphone calls transferred to their switch." That is, the Completing Carrier sells the dial-around service to end-user customers (or provides switching for a switchless reseller who sells to the end-users) and can recover payphone compensation from those customers.[19] Second, the Commission found that, given their position in the call stream, Completing Carriers "possess the most accurate call completion information for such calls."[20]

8. The Tollgate Order did not alter the obligations of switchless long distance resellers.[21] In the case of switchless long distance resellers, the Commission has recognized since the First Payphone Order in 1996 that although they are the primary economic beneficiary for calls made by their customers, they do not have the facilities to track calls.[22] In the interests of lower costs and administrative convenience, the Commission placed the responsibility on the entity with control over the tracking data, the underlying facilities-based long distance carrier, to compensate the PSPs on the switchless reseller's behalf.[23] The underlying facilities-based long distance carrier may recover payphone compensation from its switchless reseller customers.[24]

9. To ensure that Completing Carriers compensate PSPs for each and every completed payphone call, [25] a Completing Carrier must, in addition to paying compensation, also (i) establish a call tracking system that accurately tracks coinless payphone calls to completion;[26] (ii) provide quarterly Completing Carrier reports to PSPs listing the coinless payphone calls completed by the Completing Carrier;[27] and (iii) undergo a call tracking system audit by an independent third party and provide to the Commission and PSPs reports attesting to the accuracy of the system.[28]

10. As an additional measure to ensure that all payphone call activity is traced and accounted for, the Commission's rules also impose requirements on carriers that carry payphone traffic but do not themselves complete those calls. An "Intermediate Carrier" is defined as a "facilities-based long distance carrier that switches payphone calls to other facilities-based long distance carriers."[29] An Intermediate Carrier also must, every quarter, submit a call data report to each PSP that contains certain information about the calls that the Intermediate Carrier switched to other long distance carriers.[30] The quarterly reports provided by Intermediate Carriers are intended to help PSPs ensure that they are getting appropriate compensation from Completing Carriers.

B. The Coinless Payphone Calls at Issue

11. Radiant is a calling card provider that issues calling cards in its name and on behalf of other entities.[31] Radiant does not own or lease a switch.[32] ISS is a facilities-based provider that offers calling card processing services and call switching to calling card providers, including Radiant.[33] Radiant Holdings is the parent company of ISS, [34] is not a carrier, and, like Radiant, does not own or lease a switch.[35]

12. The coinless payphone calls at issue here were made by end-user customers with prepaid calling cards issued by Radiant and other calling card providers.[36] The calls took the following path: A LEC routed the call from the payphone to an IXC, which, in turn, routed the call to a switch owned by ISS. The ISS switch and calling card processing platform prompted the caller to provide his or her calling card account number, verified the account number, and then switched the call to another switch, owned by Ntera, which then selected the IXC that offered the lowest cost on that call. Ntera switched the call to that IXC, which, in turn, transferred the call to a LEC for termination at the called party's phone. The ISS switching platform determined whether the call was completed for purposes of billing the caller.[37]

13. APCC is a billing and collections agent for PSPs, including the PSPs on whose behalf APCC brings the Complaint ("represented PSPs").[38] Defendants have not compensated APCC or the represented PSPs for any of the calling card calls delivered from the represented PSPs' payphones to the ISS switch during the third and fourth quarters of 2004.[39] Nor have Defendants provided Completing Carrier reports or call tracking system audit reports for that period, or otherwise complied with the Commission's "Completing Carrier" rules.[40]


A. Threshold Defenses

14. We begin by addressing two preliminary legal defenses that...

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