Clients and Interested Parties:
Representing the latest development in an ongoing legal battle over payphone compensation rules, U.S. South Communications (U.S. South) recently filed with the Federal Communications Commission (FCC) an application requesting that the full Commission review a June 29, 2012 Declaratory Ruling by the Wireline Competition Bureau (Application). The Wireline Competition Bureau (WCB) had “clarified” in its Declaratory Ruling that a completing carrier’s obligation to pay per-call compensation to payphone service providers (PSPs) is not contingent on whether it receives payphone-specific coding digits. In its Application, U.S. South requests that the full Commission void the Declaratory Ruling and find instead that payphone-specific coding digits are a prerequisite to per-call compensation and that completing carriers may rely on payphone-specific coding digits in determining payment obligations to PSPs.
In 1996, the FCC adopted a “carrier-pays” per-call compensation system to PSPs for completed payphone calls. The FCC also adopted requirements for payphone-specific coding digits, which would be transmitted to completing carriers to assist them in tracking calls received from payphones. In 2007, a PSP referred to as “GCB” brought suit against U.S. South, a completing carrier, seeking compensation for completed payphone calls. U.S. South argued that it was not obligated to compensate GCB for phone calls for which it did not receive pay-phone specific coding digits.
The District Court ruled in favor of GCB, finding that GCB was owed compensation for completed calls even if the payphone-specific coding digits were not accurately transmitted. The District Court’s interpretation of the payphone compensation rules was reversed by Ninth Circuit Court of Appeals, which agreed with U.S. South, and the case was sent back to the District Court for a new decision. In its second consideration of the payphone compensation rules, the District Court referred two questions to the FCC under a “primary jurisdiction referral,” a doctrine which allows the District Court to ask the agency for an explanation of its rules. The Declaratory Ruling attempted to address the following two questions from the District Court: “(1) if a [PSP] has ordered a payphone line from the serving [local exchange carrier], whether the [completing carrier] is obligated to pay the PSP per-call compensation for completed coinless calls made from that payphone line; and (2) whether the PSP has responsibility for the transmission and receipt of payphone-specific coding digits by the carriers in the call path.”
The WCB responded to the District Court in its June 29, 2012 Declaratory Ruling. However, the implications of the Declaratory Ruling are still unclear, especially given the pending Application by U.S. South. In sum, the Declaratory Ruling claims that the payphone compensation rules have always stated that when a PSP orders a payphone line capable of transmitting payphone-specific coding digits, that is enough to obligate completing carrier to pay per-call compensation, regardless of whether the payphone-specific coding digits are successfully transmitted. The WCB did not offer an opinion on the applicability of the Declaratory Ruling to the facts of the GCB case. The full text of the Declaratory Ruling can be found here:
U.S. South Application for Review
U.S. South responded to the Declaratory Ruling by requesting that the full Commission respond to the primary jurisdiction referral, not the WCB. U.S. South argued that it was beyond the WCB’s authority to respond to the primary jurisdiction referral and, in any case, primary jurisdiction referrals should always be responded to by the full Commission as a matter of policy. Among other things, U.S. South claimed that the Declaratory Ruling incorrectly interpreted the existing payphone compensation rules; reasoned that the Declaratory Ruling inappropriately rendered the Commission’s payphone-specific coding digits system meaningless; and asserted that PSPs, not completing carriers, should bear the risk of improperly transmitted payphone-specific coding digits.
Accordingly, U.S. South requested that the full Commission declare instead that completing carriers may lawfully refuse payment for calls unaccompanied by payphone-specific coding digits—an outcome that would support U.S. South’s position in the underlying litigation. The full text of U.S. South’s Application can be found here:
GCB has indicated that it will file an opposition to the Application, suggesting that the battle over the FCC’s payphone compensation policies may be far from over. Pending review by the full Commission, the Declaratory Ruling represents the agency’s (in particular, the WCB’s) latest statement on payphone compensation. However, stakeholders continue to monitor the proceeding for further developments, as the obligations of completing carriers remain clouded.
If you have any questions regarding the ongoing legal developments related to payphone compensation, please do not hesitate to contact us.
Thomas K. Crowe, Partner
Cheng Yi Liu, Partner
Law Offices of Thomas K. Crowe, P.C.
1250 24th Street, N.W.
Washington, D.C. 20037
(202) 263-3640 (voice)
(202) 263-3641 (fax)
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