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                           Before the
                Federal Communications Commission
                     Washington, D.C. 20554


In the Matter of                 )
                                )
APCC Services, Inc.,             )
Data Net Systems, LLC,           )
Davel Communications, Inc.,      )    File No. EB-003-MD-011
Jaroth, Inc. d/b/a Pacific       )
Telemanagement                   )
Services, and                    )
Intera Communications Corp.,     )
                                )
Complainants,                    )
                                )
              v.
                                )
Network IP, LLC, and            )
Network Enhanced Telecom, LLP,  )
                                )
Defendants.                     )                                 



                  MEMORANDUM OPINION AND ORDER

 Adopted:  January 31, 2005           Released:  February 1, 
2005

By the Chief, Enforcement Bureau:

I.   INTRODUCTION

     1.   In this Memorandum Opinion and Order, we largely grant 
a formal complaint1 filed by APCC Services, Inc., Data Net 
Systems, LLC, Davel Communications, Inc., Jaroth, Inc. d/b/a 
Pacific Telemanagement Services, and Intera Communications Corp. 
(collectively, ``Complainants'') against Network IP, LLC, and 
Network Enhanced Telecom, LLP (collectively, ``NIP'') pursuant 
to section 208 of the Communications Act of 1934, as amended 
(``Act'').2  Complainants claim thatNIP violated sections 
201(b), 276, and 416(c) of the Act3 by failing to pay 
Complainants the compensation required by section 64.1300 of the 
Commission's rules4 for certain payphone calls completed during 
the period October 7, 1997 through November 23, 2001 (the 
``Relevant Period'').5  For the reasons explained below, we find 
that NIP's failure to pay compensation to Complainants violates 
section 64.1300 of the rules and thus sections 201(b) and 276 of 
the Act.  Because we grant Complainants' claims under sections 
201(b) and 276 of the Act, and such grant will afford 
Complainants all the relief to which they would be entitled 
under section 416(c) of the Act, we dismiss without prejudice 
Complainants' claims under section 416(c).6     

II.  BACKGROUND

      II.A.    The Parties

     2.   APCC Services, Inc., Data Net Systems, LLC, Davel 
Communications, Inc., and Intera Communications Corp. are 
billing and collection agents for payphone service providers 
(``PSPs'').7  Jaroth, Inc. d/b/a Pacific Telemanagement Services 
is itself a PSP and also a billing and collection agent for 
other PSPs.8  NIP is a telecommunications carrier that owns 
switches and that offers other companies a package of 
telecommunications services that enables those companies to 
provide prepaid calling cards to end-user customers.9  End-user 
customers can use those prepaid calling cards to make 
``coinless'' calls from payphones.10  In this proceeding, 
Complainants seek compensation from NIP for such ``coinless'' 
calls placed from payphones owned by Complainants' PSP 
principals. 

      II.B.    The Rules Governing Compensation for Coinless 
      Payphone Calls

     3.   Section 276 of the Act and the Commission's 
implementing orders determine PSPs' rights to compensation for 
calls made from their payphones.  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....''11  

     4.   Two kinds of calls may be placed from a payphone.  The 
first kind is the ``coin call,'' in which the caller initiates 
the call by depositing coins into the payphone and then dialing 
the call recipient's number.12  With respect to these calls, the 
caller directly compensates the PSP for use of the payphone, and 
thus section 276 does not require the Commission to ``establish 
a per call compensation plan.''  The second kind of call is the 
``coinless call,'' in which the caller initiates the call not by 
depositing coins, but rather by dialing a special access number 
that triggers a specific service (which may or may not then 
require the dialing of additional numbers), such as directory 
assistance, operator service, toll-free (e.g., ``800'') service, 
and calling card service (either pre-paid or credit).13  With 
respect to these calls, the caller does not directly compensate 
the PSP for use of the payphone, and thus section 276 does 
require the Commission to ``establish a per call compensation 
plan.''

     5.   Complicating the Commission's task of establishing a 
per call compensation plan for coinless payphone calls is the 
fact that several entities may be involved, in one way or 
another, in a particular coinless payphone call.  The local 
exchange carrier (``LEC'') serving the payphone transports the 
call to the switching facilities of an interexchange carrier 
(``IXC'').14  In some instances, this IXC then transports the 
call to the LEC serving the call recipient.15  In other 
instances, however, the IXC transports the call to a 
``reseller,'' and the call may then be transported to one or 
more additional resellers before arriving at the LEC serving the 
call recipient.16  

     6.   Some of these resellers possess the switching equipment 
required to perform the function of transmitting the call; some 
resellers lack such equipment (i.e., ``switchless resellers'') 
however, so they only resell the telecommunications service 
(i.e., the ability to place a coinless payphone call), and rely 
on other carriers to perform the actual switching and 
transmission functions required to complete the call.17  In 
other words, only a reseller that possesses switching equipment 
can physically receive the call and route it onward, either to 
the LEC serving the call recipient or to the switch of another 
reseller.18  In a quite separate function, however, any reseller 
may resell only the telecommunications service to the public, or 
to a switchless reseller.  Such a switchless reseller may, in 
turn, resell the service to another switchless reseller, or may 
sell the service to the public, often in the form of prepaid 
calling cards.19  

     7.   Thus, with respect to each coinless payphone call, 
there may be two daisy-chains of carriers: one transporting the 
call toward the call recipient, and a separate one conveying 
only the service to the end-user consumer who pays for placing 
the call.20  And each of these chains can be lengthy.

     8.   Faced with this complex array, the Commission had a 
number of options in establishing a plan under section 276 of 
the Act to ensure that PSPs receive compensation for each 
coinless payphone call.  During the Relevant Period, the 
Commission chose the following plan:  with respect to each 
coinless payphone call, the party responsible for paying the PSP 
is the last identified ``facilities-based'' carrier that 
physically routes the call to the recipient's LEC.21  The 
Commission determined that establishing such a bright-line test 
for allocation of payment responsibility would be easier to 
administer, and reasoned that non-facilities-based resellers, 
who often sell services in advance, would be harder to locate 
than facilities-based entities.22  

      II.C.    The Coinless Payphone Calls at Issue

     9.   The coinless payphone calls at issue here were made by 
end-user customers with prepaid calling cards.  When the card-
holder placed a coinless call from a payphone owned by one of 
Complainants' principals, the LEC serving the payphone 
transported the call to the IXC that NIP had engaged to provide 
transport services.23  The IXC transported the call to one of 
three switches owned by NIP; that NIP switch then routed the 
call to the terminating LEC (i.e., the LEC serving the call 
recipient) for completion.24  

     10.  The prepaid calling cards used to make the coinless 
payphone calls at issue here were sold to end-user customers by 
entities (``Debit Card Providers'') to which NIP sold a package 
of telecommunications services that enabled the Debit Card 
Providers to offer prepaid calling cards to the public.25  NIP's 
package included (i) internet access to traffic and billing 
records specific to the Debit Card Provider, (ii) call routing 
by NIP, and (iii) resold transport services of the underlying 
IXC.26  The Debit Card Providers played no role in actually 
transporting the coinless payphone calls at issue here. 

     11.  NIP's relationship with the Debit Card Providers was 
set forth in detailed contracts.27  These contracts bear the 
title ``PREPAID CALLING CARD SERVICES AGREEMENT'' or 
``USAGE-BASED UNIVERSAL PIN SERVICES AGREEMENT'' (``Service 
Contract'').28  The Service Contracts describe the services that 
NIP provided to the Debit Card Providers, such as internet 
access to account information (including traffic and billing 
records), custom branding, and technical support.29  Moreover, 
many of the Service Contracts specify that the ``[Debit Card 
Provider] shall be responsible for all applicable taxes or 
assessments . . . (including Universal Service Fund and Payphone 
Compensation) relating to the Services.''30  

     12.  The Service Contracts do not suggest any intent for NIP 
to lease its switching equipment to the Debit Card Providers.  
For example, the Service Contracts contain no provision 
describing NIP's switch or switches, or specifying the switch 
type, manufacturer, or serial number.31  

     13.  This dispute began when, during the Relevant Period, 
end users used prepaid calling cards sold by Debit Card 
Providers to make coinless calls on payphones owned by 
principals of Complainants.  Upon learning which carriers were 
involved in transporting those calls, Complainants sought per-
call compensation from NIP, arguing that NIP was the last 
identified facilities-based carrier within the meaning of the 
Commission's orders.32  NIP declined to pay, asserting that 
Complainants should look, instead, to the various Debit Card 
Providers for compensation because, inter alia, the Debit Card 
Providers, not NIP, were the last identified facilities-based 
carriers within the meaning of the Commission's rules.33  
Complainants ultimately filed the instant Complaint alleging 
that NIP's failure to pay compensation violated the Commission 
orders implementing section 276 of the Act, and thus violated 
sections 276, 201(b), and 416(c) of the Act.   

III.      DISCUSSION

     14.  NIP effectively acknowledges, as it must, that 
whichever entity is the last identified ``facilities-based'' 
carrier with respect to the coinless payphone calls at issue 
here owes Complainants compensation for the use of their 
payphones to place those calls.34  Therefore, the task presented 
is deciding which entity is the last identified ``facilities-
based'' carrier, NIP or a Debit Card Provider.  For the 
following reasons, we conclude that NIP, and not a Debit Card 
Provider, is the last ``facilities-based'' carrier, and thus is 
the entity responsible for paying payphone compensation to 
Complainants.  

      III.A.   The Debit Card Providers Are Not ``Facilities-
      Based,'' Because They Lack a Possessory Interest in 
      Relevant Equipment.

     15.  The adjective ``facilities-based'' is a term of art in 
the telecommunications industry.  It is commonly understood - in 
payphone contexts and non-payphone contexts - to mean a carrier 
with some form of possessory interest in at least some of the 
equipment (such as a switch) used to complete calls.35

     16.  Here, the Debit Card Providers plainly fail to qualify 
as ``facilities-based'' carriers within the commonly understood 
meaning of that term of art:  the Debit Card Providers do not 
have any possessory interest in any of the telecommunications 
equipment used to complete the coinless payphone calls at issue, 
i.e., they do not own or lease a switch.36  Consequently, we 
have little difficulty in concluding that the Debit Card 
Providers are not ``facilities-based'' carriers for purposes of 
the payphone compensation rules, and that NIP is the facilities-
based carrier responsible for paying compensation to 
Complainants during the relevant period.  As a result, NIP's 
failure to pay compensation violates rule 64.1300(c) and thus 
sections 276 and 201(b) of the Act.37

     17.  NIP contends that, in the payphone compensation 
context, the Commission has essentially carved out an exception 
to the Commission's own explanations, and the industry's common 
understanding, of the meaning of ``facilities-based'' carrier.38  
In particular, according to NIP, the Commission has held that an 
entity may be considered a ``facilities-based'' carrier under 
the payphone compensation rules, even if the entity has no 
possessory interest in any telecommunications equipment, as long 
as the entity somehow manages in some other way to ``maintain 
its own switching capability.''39  To support this contention, 
NIP relies on one sentence in one Commission order, to wit:

      ``In [a prior Order], we concluded that the 
      underlying facilities-based carrier should be 
      required to pay compensation to the PSP in lieu of a 
      non-facilities-based carrier that resells services . 
      . . .  We clarify that a carrier is required to pay 
      compensation and provide per-call tracking for the 
      calls originated by payphones if the carrier 
      maintains its own switching capability, regardless if 
      the switching equipment is owned or leased by the 
      carrier . . . .  If a carrier does not maintain its 
      own switching capability, then, as set forth in the 
      [prior Order] and consistent with our clarification 
      here, the underlying carrier remains obligated to pay 
      compensation to the PSP in lieu of its customer that 
      does not maintain a switching capability.''40

In NIP's view, the sentence emphasized above means that a carrier 
may qualify as ``facilities-based'' if it ``maintain[s] its own 
switching capability'' by some mechanism other than owning or 
leasing a switch.  NIP is mistaken.

     18.  First, even when read in isolation, the sentence 
emphasized above can reasonably be interpreted to mean precisely 
the opposite of NIP's proffered construction:  in order to be 
``facilities-based,'' a carrier may ``maintain its own switching 
capacity'' in two ways - by  either owning or leasing switching 
equipment - but it does not matter which of those two ways the 
carrier chooses.  In other words, rather than rejecting a 
possessory interest requirement, the sentence simply clarifies 
the kinds of possessory interests that will suffice.41

     19.  Second, NIP's construction fatally ignores the context 
in which the Commission made the statement emphasized above.  
Specifically, NIP's construction fails to account for the fact 
that, when the Commission made that statement, the pre-existing 
regulatory context reflected the prevailing industry 
understanding that a ``facilities-based'' carrier is one that 
has some form of possessory interest in equipment.42  Read in 
that context, NIP's construction of the sentence emphasized 
above is wholly implausible.  Specifically, if the Commission 
had intended to depart so significantly from precedent and 
industry usage by eliminating altogether the possessory interest 
requirement for ``facilities-based'' carriers, the Commission 
surely would have done so expressly.  Indeed, what the 
Commission did do expressly, instead, was clarify that, in the 
payphone compensation context, the possessory interest 
requirement for ``facilities-based'' carriers may be satisfied 
not just by outright ownership of facilities, but by leasing of 
facilities, as well.  Subsequent Commission orders confirm the 
correctness of this interpretation (and the incorrectness of 
NIP's interpretation) by reiterating that, to be ``facilities-
based,'' a carrier must own or lease equipment. 43

     20.  Finally, read in the context of the principal purpose 
of the Commission's payphone compensation rules - to ensure that 
PSPs receive compensation for every completed coinless payphone 
call - NIP's contention that ``facilities-based'' does not 
require a possessory interest is not persuasive.  It may be 
true, as NIP asserts and as discussed below, that the Service 
Contracts purport to enable Debit Card Providers to track calls, 
which the Commission has recognized is an important component of 
ensuring that PSPs receive payment.44  However, just because an 
entity has call-tracking ability does not mean that the entity 
can be easily traced down the potentially long chain of entities 
with a financial interest in the completion of the call, or 
that, if found, the entity will likely have assets sufficient to 
permit recovery of payphone compensation.45  By contrast, an 
entity with a possessory interest in the telecommunications 
equipment used to complete the calls is more likely to be found 
and capable of paying its bills.  Moreover, the possessory 
interest requirement creates a bright-line, easily administrable 
test for determining the identity of the responsible party.  
NIP's ``maintaining switching capability'' test, on the other 
hand, eliminates the key distinction between entities that 
actually route calls, and entities that merely resell services, 
and is therefore vague, ambiguous, and ripe for confusion and 
litigation.46  That NIP found it desirable to try to disperse 
the payment responsibility among the numerous Debit Card 
Providers, whose ``own switching capability'' consisted of 
nothing more than access to data via an internet web site, 
demonstrates the prudence of locating the compensation 
responsibility squarely on carriers who have a possessory 
interest in the relevant equipment.

     21.  Perhaps sensing the weakness of its argument that 
``facilities based'' does not require a possessory interest in  
switching equipment, NIP argues alternatively that we should 
take a broad view of what constitutes such a possessory 
interest.47  According to NIP, the Commission has, in various 
circumstances, recognized novel forms of conveying assets, 
including indefeasible rights of use (``IRUs''),48 Switch 
Partitioning,49 unbundled network elements (``UNEs''),50 and 
Virtual Collocation.51  NIP appears to analogize its contractual 
relationship with the Debit Card Providers to these forms of 
conveyance.  Other than a vague assertion about switch 
partitioning,52 however, NIP does not describe any resemblance 
between its Service Contracts and any such arrangements, and we 
find none.53

      III.B.   Call Tracking Ability Does Not Equate to Switching 
      Capability.

     22.  Even assuming, arguendo, that NIP is correct that a 
company need not own or lease a switch to be considered 
``facilities-based'' under the payphone compensation rules, NIP 
must still establish that a carrier ``maintains its own 
switching capability'' in order for such a carrier to bear 
payment responsibility.  NIP fails here, as well.  NIP observes 
that, in deciding which entity should bear the responsibility of 
compensating PSPs, the Commission examined the question of which 
entity had the ability to track payphone calls.54  In NIP's 
view, therefore, an entity that can track payphone calls is an 
entity that ``maintains its own switching capability'' within 
the meaning of the Commission's orders.55  We disagree.  

     23.  Contrary to NIP's suggestion, the Commission never 
treated the terms ``call tracking ability'' and ``switching 
capability'' as synonymous in the relevant orders.56  Moreover, 
as evidenced by definitional rules that the Commission adopted 
in an analogous context, ``switching capability'' involves the 
possession of facilities, not just the ability to perform 
certain functions.57  Moreover, regarding functions, ``switching 
capability'' includes, at a minimum, the basic switching 
function of receiving and routing calls.58  Thus, even assuming 
the Debit Card Providers had call tracking ability, this 
ability, standing alone, hardly equates to the full range of 
facilities and functions that, in combination, constitute 
``switching capability.''

      III.C.   The Terms of the Service Contracts Do Not Warrant 
      Shifting the Payment Obligation to the Debit Card 
      Providers Under The Rules.       

     24.  NIP further asserts that the Commission should give 
effect to the parties' contractual intentions, and should not 
redraft or reform the provision of the Service Contracts that 
makes the Debit Card Providers responsible for payment of per-
call payphone compensation.59  NIP explains that it has 
structured its business in reliance upon its reading of the 
Order on Reconsideration60 and that it has never billed or 
collected from the Debit Card Providers any charges with which 
to pay payphone compensation.61  For these reasons, NIP argues, 
we should honor NIP's and the Debit Card Providers' intent,62 
and not hold the Service Contracts to ``unreasonable standards 
of technical legal precision.''63

     25.  We disagree.  First, as discussed above, NIP's scheme 
conflicts with the Commission's reasoned decision to place 
responsibility on facilities-based carriers only.    Second, in 
holding that NIP is liable to Complainants, we do not 
``redraft'' or ``reform'' NIP's Service Contracts with the Debit 
Card Providers.  Our holding does not concern what recourse NIP 
may have under the Service Contracts regarding Debit Card 
Providers that agreed but failed to pay payphone compensation.64  
We hold only that, pursuant to the Commission's orders 
implementing section 276 of the Act, the duty to compensate PSPs 
remains with the facilities-based carrier, here NIP.65 

     26.  In sum, under the payphone compensation rules, a 
carrier is ``facilities-based'' only if it has a possessory 
interest in the switching equipment used to transmit the calls 
at issue.  Somehow ``maintaining'' a switching capability by 
means other than having a possessory interest in the switch is 
not enough, even if the ``maintaining'' involves having call-
tracking capabilities.  Accordingly, NIP, and not the Debit Card 
Providers, is the ``facilities-based'' carrier that has the 
payphone compensation obligations in dispute here.  
Consequently, NIP's failure to pay payphone compensation to 
Complainants violated section 64.1300(c) of the rules and thus 
sections 276 and 201(b) of the Act.

                         *   *    *    *

     27.  With respect to Complainants' claim under section 
416(c) of the Act, our ruling under sections 201(b) and 276 of 
the Act will afford Complainants all of the relief to which they 
would be entitled were we to rule in their favor on this 
remaining claim.  Accordingly, we need not address this claim, 
and we hereby dismiss it without prejudice.

IV.  ORDERING CLAUSES

     28.  Accordingly, IT IS ORDERED, pursuant to sections 1, 
4(i), 4(j), 201(b), 208 and 276 of the Communications Act of 
1934, as amended, 47 U.S.C.  151, 154(i), 154(j), 201(b), 208, 
and 276, sections 1.720-1.736 and 64.1300-64.1320 of the 
Commission's rules, 47 C.F.R.  1.720-1.736, 64.1300-64.1320, 
and the authority delegated pursuant to sections 0.111 and 0.131 
of the Commission's rules, 47 C.F.R.  0.111, 0.131, that 
Complainants' claims under sections 201(b) and 276 of the Act 
are GRANTED.

     29.  IT IS FURTHER ORDERED, pursuant to sections 4(i), 4(j), 
208, and 416 of the Communications Act of 1934, as amended, 47 
U.S.C.  154(i), 154(j), 208, and 416, sections 1.720-1.736 and 
64.1300-64.1320 of the Commission's rules, 47 C.F.R.  1.720-
1.736, 64.1300-64.1320, and the authority delegated pursuant to 
sections 0.111 and 0.131 of the Commission's rules, 47 C.F.R.  
0.111, 0.131, that Complainants' claim under section 416 of the 
Act is DISMISSED WITHOUT PREJUDICE. 


                         FEDERAL COMMUNICATIONS COMMISSION

                         



                         David H. Solomon
                         Chief, Enforcement Bureau
                         

_________________________

1  Formal Complaint, File No. EB-03-MD-011 (filed June 3, 2003) 
(``Complaint'').
2  47 U.S.C.  208.
3  47 U.S.C.  201(b), 276, and 416(c).    
4  47 C.F.R.  64.1300.  Unless otherwise indicated, all C.F.R. 
references to Part 64 of the Commission's rules refer to the 
rules in effect during the Relevant Period.
5 Although the Complaint does not specifically allege a violation 
of section 276 of the Act, the Complaint does repeatedly assert 
that NIP violated the Commission's orders implementing section 
276.  See, e.g., Complaint at 4-6, 10,  4, 7, 16.  Given that 
the Complaint expressly links section 276 and the relevant 
Commission orders, we construe Complainants' allegations that NIP 
violated the orders implementing 276 to be tantamount to an 
allegation that NIP violated section 276. 
6 This Order addresses only whether NIP violated the Act, and not 
whether Complainants are entitled to damages, because 
Complainants exercised their right under rule 1.722, 47 C.F.R.  
1.722, to bifurcate a damages determination from the liability 
determination.  Complaint at 1-2. 
7  Complaint at 2-3,  1; Revised Joint Statement, File No. EB-
03-MD-011, at 6,  9 (filed Oct. 22, 2003) (``Revised Joint 
Statement'').  Although most sections of the Revised Joint 
Statement have numbered paragraphs, some do not.  In instances 
where the Revised Joint Statement has paragraph numbers, we have 
cited to both the page and paragraph number, and in the remaining 
instances we have cited only to the page number.
8  Complaint at 2,  1; Revised Joint Statement at 6,  9. 
9  Revised Joint Statement at 5, 6,  2, 8.  
10  See. e.g., Revised Joint Statement at 6,  8; 
Telecommunications Relay Services and the Americans with 
Disabilities Act of 1990, Coin Sent-Paid TRS Call from Payphones, 
Public Notice, 19 FCC Rcd 14104, 14105 (Com. Car. Bur. 2004). 
11 47 U.S.C.  276(b)(1)(A).  See, e.g., Sprint Corp. v. FCC, 315 
F.3d 369 (D.C. Cir. 2003) (``Sprint v. FCC'');  Implementation of 
the Pay Telephone Reclassification and Compensation Provisions of 
the Telecommunications Act of 1996, Report and Order, 11 FCC Rcd 
20541 (1996) (``First Report and Order'') (some subsequent 
history omitted); Order on Reconsideration, 11 FCC Rcd 21233 
(``Order on Reconsideration'') (some subsequent history omitted); 
Third Report and Order, and Order on Reconsideration of the 
Second Report and Order, 14 FCC Rcd 2545 (1999) (Third Report and 
Order) (subsequent history omitted).  
12 See, e.g., Third Report and Order, 14 FCC Rcd at 2548,  4 
(discussing methods of placing calls at payphones); Sprint  v. 
FCC, 315 F.3d at 370 (distinguishing ``coin calls'' from 
``coinless calls''). 
13  See, e.g., Third Report and Order, 14 FCC Rcd at 2549,  6 
(discussing long-distance payphone calls not using the pre-
subscribed long-distance carrier); First Report and Order, 11 FCC 
Rcd at 20551-52,  21 (listing types of payphone calls); Sprint  
v. FCC, 315 F.3d at 370 (describing coinless payphone calls).   
14 Revised Joint Statement at 6,  8.
15 See, e.g., Bell Atlantic-Delaware Inc., v. Frontier 
Communications Services, Inc., 16 FCC Rcd 8112, 8118 at  13 
(2001) (``Bell Atlantic I'') (``[T]he first facilities-based 
carrier (i.e., the IXC handling the traffic) compensate[s] PSPs 
for calls that it transfers directly to the terminating LEC.''); 
Bell Atlantic-Delaware Inc., v. MCI Telecommunications Corp., 
Memorandum Opinion and Order, 17 FCC Rcd 15918, 15922, at  9 
(Com. Car. Bur. 2002) (``Bell Atlantic II'') (``A first 
facilities-based carrier must compensate PSPs for calls that the 
facilities-based carrier transfers directly to a terminating 
LEC''); The Pay Telephone Reclassification and Compensation 
Provisions of the Telecommunications Act of 1996, Report and 
Order, 18 FCC Rcd 19975, 19978 at  6 (2003) (noting that first 
facilities-based carrier sometimes transmits calls directly to 
terminating LEC) (``Tollgate Remand Order'') (subsequent history 
omitted).
16 See. e.g., Bell Atlantic I, 16 FCC Rcd at 8118,  13; Bell 
Atlantic II, 17 FCC Rcd at 15918,  5; Tollgate Remand Order, 18 
FCC Rcd at 19979,  8.  The foregoing description applies only to 
a long-distance coinless payphone call, which is the only kind of 
call at issue here.  Revised Joint Statement at 6-7,  8, 10.
17 See, e.g., Order on Reconsideration, 11 FCC Rcd at 21277,  92 
(holding responsible resellers that maintain their own switching 
capability); Bell Atlantic I, 16 FCC Rcd at 8114, n.8 
(``Resellers can be divided into two categories - `switchless' 
and `switch-based.' Switchless resellers simply rename the 
underlying IXC service. Switch-based (or `facilities-based') 
resellers install their own switch to handle traffic.); Bell 
Atlantic II, 17 FCC Rcd at 15920,  5 (``Resellers can be divided 
into two categories - ``switchless'' and ``switch-based.'' 
Switchless resellers simply rename the underlying IXC service.  
Switch-based resellers . . ., on the other hand, install their 
own switch to handle traffic.''); AT&T Request for Limited Waiver 
of the Per-call Compensation Obligation, Memorandum Opinion and 
Order, 13 FCC Rcd 10893, 10915-16, at  38, (Com. Car. Bur. 1998) 
(``Coding Digit Waiver Order'') (clarifying obligations of 
switch-based resellers); Tollgate Remand Order, 18 FCC Rcd at 
19978-79,  7-8 (noting differing responsibilities of 
switchless- and switch-based resellers).  
18 Id.
19 See, e.g., First Report and Order, 11 FCC Rcd at 20586, 86 
(``[T]elecommunications services are often sold in advance, 
particularly in the debit card context, and resold more than once 
before a caller ultimately uses the service.''); Order on 
Reconsideration, 11 FCC Rcd at 21270-71,  75 (paraphrasing 
language quoted above from the First Report and Order); Coding 
Digit Waiver Order, 13 FCC Rcd at 10915-16,  38 (paraphrasing 
language quoted above from the First Report and Order).    
20 See, e.g. Bell Atlantic I, 16 FCC Rcd at 8114,  3 (``[A]n IXC 
and several resellers may carry a single payphone call before the 
call is transferred to a LEC for completion.'') (emphasis added); 
First Report and Order, 11 FCC Rcd at 20586, 86 
(``[T]elecommunications services are often sold in advance, 
particularly in the debit card context, and resold more than once 
before a caller ultimately uses the service.'') (emphasis added).
21 First Report and Order, 11 FCC Rcd at 20586, 86; Order on 
Reconsideration, 11 FCC Rcd at 21270-71, 21277,  75, 92; Bell 
Atlantic I, 16 FCC Rcd at 8118-19,  13-14; Bell Atlantic II, 16 
FCC Rcd at 15920-22,  9 (all promulgating or construing 47 
C.F.R.  64.1300(c)).  47 C.F.R.  64.1300(c) provides: ``In the 
absence of an agreement as required by subsection (a) herein, the 
carrier obligated to compensate the payphone service provider 
shall do so at a per-call rate equal to its local coin rate at 
the payphone in question.''  Although the codified rule did not 
specifically mention the term ``facilities-based,'' it is clear 
when read in conjunction with the relevant orders that the rule 
imposed the payment obligations on facilities-based carriers 
only.  Further, this allocation of payment responsibility to 
facilities-based carriers was expressly stated in the Federal 
Register summaries and thus is binding.  See, e.g., In Re 
Applications of Nelson Broadcasting Corporation, Memorandum 
Opinion and Order, 6 FCC Rcd 1765 (1991) (requirement in text of 
a rulemaking order but not in rule is binding if requirement is 
included in Federal Register summary).  See also 44 U.S.C.  1507 
(publication in Federal Register generally serves as constructive 
notice of agency action). 
22 First Report and Order, 11 FCC Rcd at 20586, 86
23 Revised Joint Statement at 6,  8.
24 Revised Joint Statement at 6,  8. 
25 Revised Joint Statement at 5,  2-3.  Some of the Debit Card 
Providers did not, in fact, sell calling cards directly to end 
users, but rather resold NIP's services to other entities, which 
then sold calling cards directly to end users.  Id.  Some 
provided ``PIN-based services.''  Id.  These nuances have no 
bearing on the issues here.
26 Revised Joint Statement at 5-6,  2, 4, 8.  
27 Revised Joint Statement at 5,  1; Answer, File No. EB-03-MD-
011, Exh. B. (filed Sept. 13, 2003) (``Answer''). 
28 Revised Joint Statement at 8,  18.  See, e.g., the opening 
words of  the  Prepaid Calling Card Services Agreement between 
NIP and Alltel Communications, Inc. (Sept. 22, 2000): 
      A.  Provider [i.e., NIP] is in the business of 
      providing Services . . .; and 
      B.  Customer desires to purchase Prepaid Calling 
      Services from Provider for resale to Card Holders.
  Such language describing the parties' relationship does not 
differ materially among the Service Contracts.
29 See Revised Joint Statement at 5-6,  4; Service Contracts at 
3.7 (custom branding) and 4.0 or 4.1 (technical support).
30 Revised Joint Statement at 7-8,  16.
31 Revised Joint Statement at 9,  20-21.  See generally Uniform 
Commercial Code  2A-103 (stating that identification of the 
goods to be let is the sine qua non of a lease).
32  APCC Services et al. v. NetworkIP, Informal Complaint, File 
No. EB-02-MDIC-0017, at 2-4 (filed Mar. 29, 2002); APCC Services 
et al. v. NetworkIP, Informal Complaint, File No. EB-02-MDIC-
0071, at 1-2 (filed Sept. 30, 2002); Complaint at 12-13,  25, 
28.  See Complaint Attach. 6 (e-mail from Greg Haledjian, Manager 
of Regulatory Affairs, APCC, to Toni Van Burkleo, Chief Financial 
Officer, NIP (Aug. 18-21, 2000)).  See generally Complaint at 11, 
17,  19-20, 40-42; Reply to Defendant's Answer, File No. EB-03-
MD-011, at 3, 4, 7 (filed Sept. 24, 2003) (``Reply''); 
Complainants' Reply Brief, File No. EB-03-MD-011, at 2-6 (filed 
Jan. 12, 2004) (``Complainants' Brief''). 
33 Complaint, Attach. 2, Letter from Anthony S. Doria, Chief 
Operating Officer, Network Operator Services, to Vincent R. 
Sandusky, APCC, (Jan. 14, 2000); Complaint, Attach. 4, Letter 
from Toni Van Burkleo, Chief Financial Officer, NIP, to Vince 
Sandusky, President, APCC (Jan. 26, 2000); Complaint, Attach. 6, 
e-mail from Toni Van Burkleo, NIP, to Greg Haledjian, APCC (Aug. 
17-19, 2000).  See Complaint at 9-11,  15, 17, 19.  At least 
some of the Debit Card Providers have not paid the per-call 
payphone compensation that Complainants seek.  Revised Joint 
Statement at 4, 8,  17.
34 Answer at iv, 2-3, 8-10,  40-41; Answer, Proposed 
Conclusions of Fact and Law, 19-20,  7-8, 11-13; Answer, 
Affidavit of Ronald Hutchison,  1, 5; Brief of NIP, File No. 
EB-03-MD-011, at 3-6, 9-12, nn.9, 18, 24. (filed Dec. 19, 2003) 
(``NIP's Brief''). 
35 Although context-specific variations exist, the term 
``facilities-based'' always denotes having some form of 
possessory interest in equipment or capacity.  See, e.g., 47 
U.S.C.  271(c)(1)(A) (defining ``facilities-based competitors'' 
as carriers providing service ``either exclusively over their own 
telephone exchange service facilities or predominantly over their 
own telephone exchange service facilities in combination with the 
resale of the telecommunications services of another carrier.''); 
Federal-State Joint Board on Universal Service, Order on 
Reconsideration, FCC 04-237, 2004 WL 2709589  9 (rel. Nov. 29, 
2004) (holding that a carrier must be ``facilities-based'' to be 
eligible for universal service support under section 214(e)(1)(A) 
of the Act, 47 U.S.C.  214(e)(1)(A), which itself requires that 
an eligible carrier use ``its own facilities.''); 47 C.F.R.  
63.09(a) (``Facilities-based carrier means a carrier that holds 
an ownership, indefeasible-right-of-user, or leasehold interest 
in bare capacity . . . .''); Verizon Communications Inc. v. FCC, 
535 U.S. 467, 491 (2002) (``[T]o engage in pure facilities-based 
competition [is] to build its own network to replace or 
supplement the network of the incumbent.''); Implementation of 
the Local Competition Provisions of the Telecommunications Act of 
1996, First Report and Order, 11 FCC Rcd 15499, 15508 at  10 
(1996) (``Local Competition Order'') (``An incumbent LEC's 
existing infrastructure enables it to serve new customers at a 
much lower incremental cost than a facilities-based entrant that 
must install its own switches, trunking and loops to serve its 
customers.'') (subsequent history omitted); Clarification of 
Section 43.61 International Traffic Data Reporting Requirements, 
Public Notice, 13 FCC Rcd 12809, 12810 (Int. Bur. 1998) (defining 
``facilities-based'' service as a service provided using channels 
of communication that the carrier owns, or in which the carrier 
has some other possessory interest, such as an indefeasible right 
of use (IRU) or a lease); Reporting Requirements For U.S. 
Providers Of International Telecommunications Services Amendment 
of Part 43 of the Commission's Rules, Notice of Proposed 
Rulemaking, 19 FCC Rcd 6460, 6488, at  74 (2004) (proposing 
revision of ``facilities-based'' definition that would continue 
to require ``ownership, indefeasible-right-of-user, or leasehold 
interest''); Bell Atlantic I, 16 FCC Rcd at 8114, n.8 (``Switch-
based (or `facilities based') resellers install their own 
switches to handle traffic.''); Bell Atlantic II, 17 FCC Rcd 
15918, 15920, n.12 (``Switch-based resellers also are known as 
`facilities-based' resellers.''); Tollgate Remand Order, 18 FCC 
Rcd at 19976, 1 (``[F]acilities-based long distance carrier is 
the switch-based reseller (SBR) or interexchange carrier that 
completes the call on a switch that it owns or leases.''); Harry 
Newton, Newton's Telecom Dictionary, 340 (16th ed. 2000) 
(defining ``Facilities Based Carrier'' as a ``telecommunications 
carrier which owns most of its own facilities . . . such as 
switching equipment and transmission lines . . . .  Non 
facilities based long distance carriers are known as switchless 
resellers.'').
36 NIP's Answer seems to contend that the Service Contracts 
conveyed to the Debit Card Providers a leasehold interest in 
NIP's switches.  Answer 3, 9-10, 19-20;  40-41, 7-9, 11-13; 
Answer, Affidavit of Ronald Hutchison at 2, 4,  4-6, 10 
(``Hutchison Affidavit'').  However, by failing to mention that 
contention again in its subsequent Brief, NIP appears to concede, 
wisely, that the Service Contracts do not convey to the Debit 
Card Providers any leasehold interest in NIP's switches.  In all 
material respects, the Service Contracts do nothing more than 
create fee-for-service arrangements.  Nothing in the Service 
Contracts suggests an intention to lease, such as a provision 
describing NIP's switch or switches, or identifying the switch 
type, manufacturer, or serial number.  See Revised Joint 
Statement at 9,  20-21. The Service Contracts contain no 
provisions covering insurance, or stating that NIP reserves title 
to its switching equipment.  See Revised Joint Statement at 9,  
22-23.  The words ``lessor'' and ``lessee'' never appear in the 
Service Contracts, and the word ``lease'' appears only once, in 
an unrelated context.  See Complainants' Reply at 8; Revised 
Joint Statement at 9,  19.  The Contracts' pricing provisions 
are not based on flat monthly fees, but rather on per-minute-
usage.  See Revised Joint Statement at 9,  20; Bruce E. Fritch, 
Equipment Leasing - Leveraged Leasing, 57 (3d ed. 1988) 
(``Equipment Leasing Treatise'') (``Most leases provide for equal 
monthly or quarterly rental payments over the fixed term of the 
lease.'') (Fritch).  Finally, the Service Contracts - which the 
parties stipulate ``are true, accurate, and speak for 
themselves'' - identify themselves as ``Services Agreement'' in 
their titles.  Revised Joint Statement at 8-9,  18, 24.  See 
Complainants' Reply Exh. 4, Fritch Appendix A at 1303-1316, Lease 
Agreement (reviewing terms typical of a lease agreement).
37 47 U.S.C.  201(b), 267; 47 C.F.R.  64.1300.
38 NIP's Brief at 3-7, 9-11.  
39 NIP's Brief at 3-7.
40 Order on Reconsideration, 11 FCC Rcd at 21277,  92 (emphasis 
added) (footnote and quotation marks omitted).
41 See Sprint v. FCC, 315 F.3d at 375 (``[In] the First 
Reconsideration Order, . . . the Commission simply clarified the 
definition of a phrase that it had used in the initial rule.  11 
F.C.C.R. at 21,277   92.'').
42 See n.35, supra.  
43 Id.  NIP further argues that, if we limit ``facilities-based'' 
carriers to carriers with a possessory interest in equipment, 
then we can apply that holding prospectively only, because such a 
holding was not sufficiently predicable from existing precedent.  
NIP's Brief at 1, 12-13; see generally Answer at 9,  40.  We 
disagree.  If NIP is referring to the Commission's orders, then 
the possessory interest requirement was clearly established 
therein, for the reasons explained above.  See Report and Order, 
11 FCC Rcd at 20586, at 86; Order on Reconsideration, 11 FCC 
Rcd at 21271-72, 21277,  75, 92; Bell Atlantic I, 16 FCC Rcd at 
8114, 8118, n.8,  13.  If NIP is referring to the rule itself, 
which does not specifically mention the term ``facilities-
based,'' it is well-established that where, as here, a 
requirement in the text of an order is not included, the 
requirement is nevertheless binding if it is included in the 
Federal Register summary.  See n.21, supra. 
44 Answer at 9; NIP's Brief at 3-7 (citing Order on 
Reconsideration, 11 FCC Rcd at 21277,  92; The Pay Telephone 
Reclassification and Compensation Provisions of the 
Telecommunications Act Of 1996, Second Order On Reconsideration, 
16 FCC Rcd 8098, 8101, at  5 (2001) (subsequent history 
omitted)).  
45 See generally First Report and Order, 11 FCC Rcd at 20586-
20592 86.
46 In this regard, the Commission has found debit card providers 
as a class particularly unsuited to bear the payphone 
compensation responsibility.  First Report and Order, 11 FCC Rcd 
at 20586,  86 (``[T]elecommunications services are often sold in 
advance, particularly in the debit card context, and resold more 
than once before a caller ultimately uses the service.  In such 
situations, it would be difficult to identify the party that is 
liable for the per-call compensation.'') (emphasis added); Coding 
Digit Waiver Order, 13 FCC Rcd at 10915-16,  38 (paraphrasing 
the language quoted above).  See generally Flying J, Inc., and 
Ton Services, Inc., Petition for Expedited Declaratory Ruling 
Regarding a Primary Jurisdiction Referral from the United States 
District Court for the District of Utah, Northern Division, 
Memorandum Opinion and Order, 18 FCC Rcd 10311, 10315 at 10 
(2003) (declining to find that credit card-based platforms 
constitute switches under current technology and Commission 
rules).  
47  NIP's Brief at i, 10, 18.
48  NIP's Brief at 11-12.
49  NIP's Brief at 15-16.
50  NIP's Brief at 16-17.
51  NIP's Brief at 17-18.
52  NIP contends that its relationship with its Debit Card 
Providers might be ``viewed'' as switch partitioning, but does 
not argue that such partitioning in fact occurred.  NIP's Brief 
at 16.  Switch partitioning arose as an alternative to the 
single-user private branch exchange (``PBX'').  Policies 
Governing the Provision of Shared Telecommunications Service, 
Report and Order, 3 FCC Rcd 6931, 6931 at  4 (1988).  In a 
``partitioned switch,'' software and special hardware treat 
certain lines as dedicated.  Id.  In contrast, an ``unpartitioned 
switch'' uses the minimum number of shared lines required to meet 
overall system needs.  Id.  In the instant proceeding, nothing 
suggests that NIP's Debit Card Providers' traffic used the same 
switch consistently, much less traveled via dedicated lines or 
ports.  Thus, NIP's arrangement bears no relation to 
partitioning. 
53 NIP itself states that UNEs are ``leased,'' NIP's Brief at 16; 
that virtual collocation is ``designated equipment . . . 
dedicated to the use of a particular interconnector,'' id. at 17; 
and that an IRU involves ``conveying assets,'' id. at 11.  No 
such circumstances exist here. 
54 NIP's Brief at 3-4, 6, 10 (citing Report and Order, 11 FCC Rcd 
at 20586, at 86; Order on Reconsideration, 11 FCC Rcd at 11 FCC 
Rcd 21277,  92; The Pay Telephone Reclassification and 
Compensation Provisions of the Telecommunications Act Of 1996, 
Second Order On Reconsideration, 16 FCC Rcd 8098, 8101, at  5 
(2001) (quoting  92 of the Order on Reconsideration.).
55 To support this argument, NIP points out that the Service 
Contracts purport to give Debit Card Providers the ability to 
track, in real time, the number of completed calls made through 
the use of a NIP switch and a Debit Card Provider's prepaid 
calling card.  Answer at 9, 20; NIP's Brief at 3-7, 14-15.  For 
the purposes of this Order only, we accept as true, arguendo, 
NIP's assertion that the Debit Card Providers ``can track [calls] 
and pay payphone compensation to the exact extent as can [NIP].''  
NIP's Brief at 5.  NIP's assertion is not supported in the 
record, however, and Complainants credibly suggest that, at times 
during the Relevant Period, the Debit Card Providers' call-
tracking ability may not have equaled NIP's.  See Complainants' 
Reply at 12, n.23. 
56 First Report and Order, 11 FCC Rcd 20586-20592,  88-101;  
Order on Reconsideration, 11 FCC Rcd at 21278-79,  93-96 
(sections in both orders titled Ability of Carriers to Track 
Calls From Payphones and not discussing payment obligation).  NIP 
cites to no Commission statement concluding or opining that 
``call tracking'' and ``switching capability'' refer to the same 
functions.
57 See 47 C.F.R.  51.319(c) (All our C.F.R. references to Part 
51 of the Commission's rules refer to the rules in effect during 
the Relevant Period ).          
58 See generally id.
59  NIP's Brief at 8-9.  Answer 3, 9-10, 19-20;  40-41, 8, 13; 
Hutchison Affidavit at 2,  4. 
60  NIP's Brief at 3-4.
61  NIP's Brief at 5.
62  Revised Joint Statement at 7-8,  16; Answer at 3, 9, 19, 21, 
22; NIP's Brief at 8-9.
63  NIP's Brief at 11.  In its Answer, NIP describes the Service 
Contracts as written evidence of the Debit Card Providers' 
switching capability.  Answer at 10,  41.
64  See generally First Report and Order, 11 FCC Rcd at 20586,  
86 (observing that facilities-based carriers may recover expense 
of payphone per-call compensation from reseller customers as they 
deem appropriate, including negotiating future contract 
provisions requiring reseller to reimburse facilities-based 
carrier for payphone compensation amounts associated with that 
particular reseller). 
65 Complainants exercised their right under section 1.722(d) of 
the rules, 47 C.F.R.  1.722(d), to bifurcate this proceeding and 
address only liability first.  Complaint at 1-2.  In its Answer, 
NIP raised various affirmative defenses that the parties 
subsequently stipulated ``would be more appropriately decided in 
the damages phase of this proceeding.''  Answer at 14-17; Revised 
Joint Statement at 4.  We concur with the parties' stipulation.