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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) Implementation of the ) Pay Telephone Reclassification ) CC Docket No. 96-128 and Compensation Provisions of the ) Telecommunications Act of 1996 ) MEMORANDUM OPINION AND ORDER Adopted: December 5, 1997 Released: December 5, 1997 By the Chief, Common Carrier Bureau: I. INTRODUCTION 1. On October 9, 1997, the Commission adopted the Order on Remand that established a new default rate for per-call compensation for subscriber 800 and access code calls originated from payphones. That order was adopted in light of the decision of the United States Court of Appeals for the District of Columbia Circuit ("the court"), which vacated and remanded portions of the Payphone Orders. MCI Telecommunications Corporation (MCI) has asked the Commission to stay its Order on Remand pending review of that order in the District of Columbia Circuit. In particular, MCI asks for a stay of that order insofar as it adopted a revised "default" compensation provision governing the payments that interexchange carriers ("IXCs"), such as MCI, make to payphone service providers ("PSPs"), in the absence of negotiated payments, for subscriber 800 and access code calls that originate on payphones. MCI contends that the order on remand is likely to be set aside on review, that MCI and other IXCs will suffer irreparable harm if the default compensation provision is not stayed, and that a stay will not injure other interested parties or the public interest. Two parties filed oppositions to MCI's stay request. We deny the request for stay because, as discussed more fully below, our remand decision is likely to be affirmed on review; because a stay is not necessary to avoid irreparable harm to MCI and other IXCs; and because we believe that a stay would injure other interested parties and the public. II. BACKGROUND 2. In the Payphone Orders, the Commission implemented the provisions of Section 276 of the Communications Act. Section 276 requires, among other things, that "all payphone service providers are fairly compensated for each and every" payphone call. The court affirmed many aspects of the Commission's Payphone Orders, but it vacated the interim default per-call compensation rate the Commission had set for subscriber 800 and access code calls at the same market-based $0.35 rate as for local coin calls. The court held that the Commission had not justified its conclusion that the costs of local coin calls were similar to those of subscriber 800 and access code calls, and it remanded that issue, among others, to the Commission for further proceedings. On remand, after receiving comment on this and other issues, the Commission adopted the Order on Remand, establishing an interim default compensation rate of $0.284 per call for the first two years of per-call compensation. This rate, was calculated by adjusting the market- based local coin rate for cost differences between local coin calls on the one hand, and subscriber 800 and access code calls on the other. The Commission also extended the default per-call compensation period from one to two years, to allow participants, including IXCs, local exchange carriers ("LECs"), and PSPs, additional time to adjust to market-based payphone compensation for subscriber 800 and access code calls. III. DISCUSSION 3. In determining whether to stay the effectiveness of one of its orders, the Commission applies the four-factor test established in Virginia Petroleum, as modified in Washington Metro. Under that test, a petitioner must demonstrate that: (1) it is likely to prevail on the merits of its petition for review; (2) it will suffer irreparable harm in the absence of a stay; (3) a stay will not injure other parties; and (4) a stay is in the public interest. As explained more fully below, we find that MCI has not satisfied any of the four factors for granting a stay. 1. Success on the Merits 4. MCI contends that the Commission has not justified its linking of the default per call compensation rate to the market rate for local coin calls; acted arbitrarily in adjusting the market-based rates for cost differences; and relied on an inadequate record. None of these contentions is likely to prevail in the court of appeals. 5. The court remanded the default compensation issue to the Commission because the Commission had not responded to data in the record showing that the costs of different types of payphone calls were not similar. The court did not hold, however, that the Commission erred in using the market- based local coin rate as the starting point for calculating the default rate for subscriber 800 and access code calls; indeed, the court implied that the default rate would have been upheld if the Commission had adjusted the local coin rate for cost differences and explained the adjustments. 6. On remand, the Commission considered alternatives to the market-based approach to establish a default rate, but rejected them as not required by the court's remand or by the statutory standards, and as inferior to its chosen approach consistent with the court's remand. The Commission obtained further data on cost differences and explained fully the adjustments that brought the $0.35 local coin rate down to $0.284 for subscriber 800 and access code calls. The Commission's actions are consistent with the agency's statutory mandate to ensure compensation for "each and every" call, and are fully responsive to the court's remand of the interim compensation issue. Moreover, although the default rate is to be used only to determine default compensation where no negotiated agreement for compensation exists and in most cases for not more than two years, it is supported by ample record evidence that the Commission discussed and analyzed in detail. Thus, we conclude that MCI is not likely to prevail on the merits of its appeal. 2. Irreparable Harm 7. To justify a stay, MCI must show that it will be irreparably harmed by the requirements of the Order on Remand. MCI apparently recognizes that: the Commission has authority to allow MCI to recover any overcharges it pays, in the event that MCI prevails ultimately on the merits; and if the Commission arguably lacks such authority as an initial matter, there are no such limitations on the reviewing court's power to require appropriate remedies. Accordingly, any "harm" to MCI pending review clearly is not irreparable and thus cannot justify interim relief. 8. It is not clear, in any event, that MCI will be harmed even in the interim period. The payments made to payphone operators are a cost of providing service that MCI is free to pass on to its own customers, just as it passes on other costs. The LEC Coalition indicates that MCI has in fact passed on to its customers a per-call surcharge, at the unadjusted rate of $0.35 per call, for several months now. Moreover, in the case of payphones operated by LECs, the application of the compensation plan coincided with reductions in carrier common line access charges paid to the LECs by MCI and other IXCs, resulting from the same Payphone Orders. Thus, MCI's alleged harm, in addition to being repairable, is largely offset by its ability to pass on its costs and by the reduction in access charges it pays to LECs. 9. MCI also argues that it will be harmed because as a result of the per-call compensation rate adopted in the Order on Remand, customers will want to block payphone calls and therefore there will be fewer payphones available to originate subscriber 800 and access code calls. Thus, MCI argues it will "realize an unquantifiable but significant reduction in revenue that would otherwise be realized from those calls." To justify a motion for stay, MCI must demonstrate that the alleged harm is "both certain and great . . . actual and not theoretical." MCI's claim with regard to unquantifiable reduction in revenue does not meet this standard for a stay; it does not provide information that would indicate this claim is anything other than speculative. Regardless, mere "economic loss does not, in and of itself, constitute irreparable harm." Moreover, the same result that MCI advances as a harm if the stay is not granted can be posited if the stay requested by MCI is granted. That is, if MCI were successful in its request for stay and the payment of per- call compensation is delayed, the continued lack of compensation for PSPs and LECs could conceivably lead to the lessened availability of payphones, thereby potentially leading to the loss of revenue on which, in part, MCI justifies its need for a stay. 10. MCI also argues that because the Commission granted a waiver of the requirement that LECs and PSPs provide payphone-specific coding digits until March 9, 1998, it is harmed because it is unable to block access code and subscriber 800 calls from payphones. Again, MCI does not show irreparable harm. We note that the Commission established the per-call default rate for one year in the Payphone Orders and extended that period to two years in the Order on Remand due in part to the perceived market imperfections in the negotiation process among IXCs, LECs and PSPs with regard to unregulated market-based per-call compensation. The Commission stated that it "recognized that competitive conditions, which are a prerequisite to a deregulatory market-based approach, did not exist yet, and would not be achieved instantaneously." Moreover, the Waiver Order stated that at most 40% of the payphones were affected by the waiver and on balance the public interest warranted granting the waiver. While MCI argues that it is unable to block certain calls for which its customers must pay compensation, due to regulatory constraints, LECs and PSPs are unable to block the use of their payphones by MCI's customers, and absent a negotiated agreement with MCI, the PSPs would not receive compensation without the requirements of the Payphone Orders and the Order on Remand. In addition, as discussed above, MCI is already charging its customers a per-call surcharge for these calls so it is not being harmed in the interim by the waiver, and it is benefiting from reduced access charges. Therefore, MCI is not suffering irreparable harm because of the waiver. The equities under the circumstances and the goals of Section 276 make it clear that per-call compensation for subscriber 800 and access code calls should not be delayed by a stay. 3. Harm to Others; the Public Interest 11. MCI has not shown that if we grant the stay "little if any harm will befall other interested persons or the public." A stay would deprive payphone providers of compensation for subscriber 800 and access code calls until the completion of appellate litigation. In addition, although IXCs might be required to compensate PSPs later, the presumptions of stay motion practice do not regard that as particularly relevant. As discussed above, a party moving for a stay must show the harm it will suffer in the absence of a stay will be irreparable; but that party does not enhance its equities by showing that the injury to another party resulting from a stay will be subject to repair. The standard for review of harm to others does not depend on whether the harm is repairable. Thus, where the injury to both sides is subject to later remedial action, that is, where, as here, either party ultimately can be made whole, a stay typically will not be granted. 12. In this case, moreover, granting or denying a stay does not result in equal results between the parties even assuming the eventual availability of true-up payphone compensation payments in both directions. Our analysis concludes that a stay would be harmful to other parties and adverse to the public interest. As stated above, the IXCs already have been relieved of part of their burden of paying carrier common line access charges to the LECs insofar as those charges in the past have subsidized LEC payphone operations. Granting the IXCs such as MCI a stay of the per-call compensation requirements on top of that access charge reduction would give the IXCs a temporary windfall, and would aggravate the immediate revenue loss to LEC providers of payphone services. 13. Balancing the equities presented by MCI's motion for stay, we believe that the public interest is best served by the immediate implementation of the Commission's compensation rules, subject to any true- ups that ultimately might be required. We believe that Congress made this choice in setting an expedited deadline for action. As we understand it, at least some of the IXCs already have passed on to customers their payphone compensation costs in the form of charges for payphone-initiated calls. We believe that it would be inequitable to permit the IXCs to retain those increases in revenues, yet excuse them from paying the payphone compensation costs that justified the increases. In the longer term, of course, depriving payphone providers of fair compensation would discourage them from deploying their payphones widely, which would be in derogation of an express congressional purpose. In reaching our conclusion we are influenced both by the importance of expeditiously implementing per-call compensation and our conviction that we will ultimately be affirmed on the merits. IV. CONCLUSION 14. For the foregoing reasons, we find that MCI has not made a substantial case on the merits and has not shown that interim relief is justified in this case, and we therefore deny MCI's motion for stay of the Commission's Order on Remand. V. ORDERING CLAUSES 15. Accordingly, the moving party having failed to justify interim relief, IT IS ORDERED pursuant to Sections 4(i) of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), and Section 1.103(a) of the Commission's Rules, 47 C.F.R.  1.103(a), and the authority delegated under Sections 0.91, and 0.291 of the Commission's rules, 47 C.F.R.  0.91, 0.291, that the motion for stay of the Commission's Order on Remand, filed on November 7, 1996, by MCI Telecommunications Corporation IS DENIED. FEDERAL COMMUNICATIONS COMMISSION A. Richard Metzger, Jr. Chief, Common Carrier Bureau