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Federal Communications Commission
Washington, D.C. 20554
In the Matter of )
APCC Services, Inc., )
Radiant Telecom, Inc., ) File No. EB-05-MD-016
Intelligent Switching and Software, LLC, )
Radiant Holdings, Inc.,
MEMORANDUM OPINION AND ORDER
Adopted: May 15, 2008 Released: May 20, 2008
By the Commission:
1. This Memorandum Opinion and Order grants in substantial part a formal
complaint 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"). APCC alleges that Defendants violated
sections 201, 276, and 416 of the Act by failing to comply with
Commission payphone rules that impose compensation, call tracking, and
other obligations on "Completing Carriers." The principal question
presented is whether any of the Defendants is a completing carrier
within the meaning of 47 C.F.R. S: 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 . . . ." 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.
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. The local exchange
carrier ("LEC") serving the payphone transports the call to the
switching facilities of an interexchange carrier ("IXC"). Although the
initial IXC may transport the call to the terminating LEC, 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. 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
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. 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. 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.
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. 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."
6. The Commission revised that approach in the Tollgate Order, which
placed the compensation obligation on the "Completing Carrier." 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
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.
Second, the Commission found that, given their position in the call
stream, Completing Carriers "possess the most accurate call completion
information for such calls."
8. The Tollgate Order did not alter the obligations of switchless long
distance resellers. 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. 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.
The underlying facilities-based long distance carrier may recover
payphone compensation from its switchless reseller customers.
9. To ensure that Completing Carriers compensate PSPs for each and every
completed payphone call, a Completing Carrier must, in addition to
paying compensation, also (i) establish a call tracking system that
accurately tracks coinless payphone calls to completion; (ii) provide
quarterly Completing Carrier reports to PSPs listing the coinless
payphone calls completed by the Completing Carrier; 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
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." 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. The quarterly reports provided by Intermediate Carriers are
intended to help PSPs ensure that they are getting appropriate
compensation from Completing Carriers.
A. 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. Radiant does not own or lease a
switch. ISS is a facilities-based provider that offers calling card
processing services and call switching to calling card providers,
including Radiant. Radiant Holdings is the parent company of ISS, is
not a carrier, and, like Radiant, does not own or lease a switch.
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. 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
13. APCC is a billing and collections agent for PSPs, including the PSPs
on whose behalf APCC brings the Complaint ("represented PSPs").
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. 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.
A. Threshold Defenses
14. We begin by addressing two preliminary legal defenses that Defendants
raise. First, Defendants argue that the Complaint should be dismissed
because the Commission's rules do not permit class actions. We
disagree that APCC's complaint presents a class action case. A class
action is a suit brought by "one or more members of a class ... as
representative parties on behalf of all [members of the class]."
APCC's Complaint was not brought by a member of a class, but by an
agent (APCC) on behalf of its principals (the represented PSPs).
APCC's status as an agent thus distinguishes the cases relied upon by
Defendants, in which a member of a class filed the complaint.
15. Next, Defendants argue that APCC does not have standing because it, as
opposed to the PSPs it represents, has not been damaged by Defendants'
alleged failure to pay payphone compensation. We reject this argument
as well. Section 208 of the Act "explicitly confers standing upon `any
person' to complain of alleged wrongdoing by a common carrier, without
regard to injury suffered or direct interest in the matter."
A. "Completing Carrier" Analysis
16. This case turns on whether either Radiant or ISS is a "Completing
Carrier" within the meaning of our rules and orders. Rule 64.1300(a)
defines a "Completing Carrier" as "a long distance carrier or
switch-based long distance reseller that completes a coinless . . .
payphone call . . . ," and Rule 64.1300(b) places payment
responsibility for dial around calls on "a Completing Carrier that
completes a coinless access code or subscriber toll-free payphone call
from a switch that the Completing Carrier either owns or leases."
Radiant and ISS contend that they are not Completing Carriers because
in all cases calls that were handled by ISS's switch were subsequently
sent to other carriers that performed switching functions. In that
event, Radiant and ISS argue, some carrier downstream from them (not
specifically identified) is the completing carrier. APCC contends that
Radiant and ISS are Completing Carriers because their switch was the
platform that performed calling card services and they were the
primary economic beneficiaries of the calls, and that is the sense in
which the Commission used the term "completing" in the Tollgate Order.
17. As an initial matter, Radiant itself is not liable for dial around
compensation here. We find that Radiant is a switchless reseller that
sold prepaid calling cards used to make some of the coinless payphone
calls at issue here. Because it is not a switch-based reseller,
Radiant cannot be a Completing Carrier liable for payment under Rule
64.1300(b). We therefore deny the Complaint with respect to Radiant.
18. ISS, by contrast, is a switch-based reseller and serves as the calling
card processing platform for coinless calls placed via Radiant calling
cards. Thus, ISS stands in the shoes of Radiant for purposes of the
Completing Carrier analysis. For the reasons set forth below, we find
that ISS is a Completing Carrier and is therefore responsible for
compensating PSPs for dial around calls placed from their payphones.
ISS's failure to pay the required compensation violated rule 64.1300
and section 201(b) of the Act.
19. Rule 64.1300(a) does not define what it means to "complete" a call -
the action that gives rise to payment liability - in the context of a
prepaid calling card call. That term has no fixed technical meaning.
One possible interpretation, advanced by ISS, is that "completing" a
call narrowly means serving as the final switch that directs the call
to the terminating LEC. On that interpretation, ISS would not be a
Completing Carrier because it does not serve as the last switch in the
call chain. But another, broader, interpretation, put forth by APCC,
is that "completing" a call means serving as the switch-based card
processing platform on which a prepaid card call initially terminates
and switching the call toward its ultimate destination. On that
broader interpretation, ISS is a Completing Carrier.
20. We agree with APCC that S: 64.1300 and Tollgate Orders use the term
completion in the broader second sense described above. ISS's theory
that the final switch before the terminating LEC completes the call is
unsustainable on the face of the regulation, which defines a
"Completing Carrier" as "a long distance carrier or switch-based
reseller that completes" a dial-around call. But almost all, if not
all, calls are ultimately handled by an IXC that not only transports
the call but also necessarily performs some switching in order to
route the call to the terminating LEC. If ISS were correct that
"Completing Carrier" meant the last carrier to switch the call, an SBR
would never be a Completing Carrier. ISS's interpretation would render
the regulation's reference to switch based resellers meaningless.
ISS's interpretation would also result in the unfair placement of
payment liability on IXCs that did not, and could not, collect
dial-around fees from the person that initiates the call.
21. That understanding is implicit in the Tollgate Order, which
promulgated S: 64.1300 and against which the regulation must be read.
The Tollgate Order was premised on the idea of a three-part call chain
in which an initial IXC carried the call from the originating LEC to
the facilities of an SBR - the Completing Carrier - that could bill a
customer (or in the case of an SBR like ISS that performed switching
services for the billing switchless reseller) and that subsequently
switched the call toward its final destination. The Completing Carrier
was the middle link between the two legs of the call chain, even
though multiple carriers might be involved in either leg. This is
clear from the Tollgate Order's extensive discussion about the
Completing Carrier being the primary economic beneficiary of the call.
The SBR that is the Completing Carrier, the Commission found, has
"customers [that] use payphones in order to use the SBR's services to
complete a call, whether it is a simple 800 number, a calling card, or
a prepaid calling card. In other words, the PSPs provide services to
the SBRs so that the SBRs can render services to their SBR customers.
The SBR should be liable to pay for services rendered by its service
providers." That description applies precisely to Radiant, which sold
calling cards to customers and used ISS to perform its switching and
billing services. "Completing Carrier" as used in the Tollgate Order
did not refer to the last carrier to switch a call, but to the SBR
that ultimately provided service to and collected money from the
customer and thus was the primary economic beneficiary of the call.
Here, that carrier is Radiant, and because ISS provides the relevant
facilities-based services for Radiant, ISS is the Completing Carrier.
It is no surprise that ISS in fact subtracted from the calling card
accounts 28 cents per call to cover "FCC Mandated" "Payphone Charges."
As we stated in paragraph 3 of the Tollgate Reconsideration Order, the
Completing Carrier SBR is "the primary economic beneficiary [of a
coinless call] because the SBR's customer pays the SBR for the
payphone call." No other carrier in the call chain subsequent to ISS
would have had an opportunity to collect dial-around compensation
payments from a customer.
22. The Tollgate Order also defined "Completing Carrier" as "the carrier
best able to determine whether a payphone originated call directed to
a SBR switch has been answered by the called party." The Commission
contrasted a Completing Carrier with other carriers in the call
stream: an IXC "can track when the ... call begins and ends, but has
no way of discerning: (1) whether the call it delivers is only on the
first leg of the call from the end-user's location; and (2) whether
the call is launched and answered as an end-to-end completed call."
The Commission thus clearly contemplated that the Completing Carrier
would not necessarily be the first or last carrier to switch a call,
but rather the carrier in the call path with access to information
about both legs of the call - i.e., the carrier that operates the
"platform" on which call information is collected and processed.
Again, ISS fits that description to a tee.
23. Consistent with that understanding, the Tollgate Order refers
repeatedly to the Commission's intent to place payment liability on
the carrier that owns the "platform" from which calls are "completed."
For example, the Tollgate Order refers at paragraph 1 to payment for
"Payphone-originated calls that are completed on [a] facilities-based
long distance carrier's platform." Paragraph 43, discussing SBR audit
reports, requires the SBR to send the report "to all PSPs for which
the SBR completes payphone calls on its platform." Paragraph 36 states
that the compensation must be paid by "the SBR on whose platform the
coinless payphone call terminates." Paragraph 19 refers to the
situation under the prior rule, where "PSPs lacked the information
necessary to identify the origins of the calls switched to a SBR's
platform." As mentioned above, ISS operates a platform on which
calling card calls initially terminate and from which the calls are
sent to their destinations for completion. Downstream IXCs do not
operate such platforms.
24. ISS nevertheless claims that the Commission intended to place
liability on the last carrier to switch a call to the terminating LEC.
It relies on several points in the Tollgate Reconsideration Order in
which the Commission stated (in various formulations) that "the last
facilities-based long distance carrier in the call path that completes
the call" must pay dial around compensation. That reliance is
misplaced for several reasons. First, the snippets relied on by ISS do
not establish a strict last-switch approach. Statements placing
liability on the last-switch-based carrier that completes the call
simply beg the question of what it means to complete a call. As shown
above, completing a call as used in the Tollgate Order means
processing it at a platform and routing it toward its final
destination, not simply being the last switch in the call chain.
References to the "last switch" were plainly meant to distinguish the
rules established in the Tollgate Order from the prior rules, which
placed liability on the first switch-based carrier. Second, even if
the statements relied on by ISS did suggest a strict last-switch
approach, three or four isolated fragments could not contradict the
entire analytical framework of the Tollgate Order and the far more
numerous references to calls being completed on a processing platform,
as discussed above.
25. It is of no moment that ISS does not, as it claims, receive call
answer supervision information. One of the fundamental
responsibilities placed upon the Completing Carrier was to implement a
call tracking system that was audited and certified. As part of
fulfilling that responsibility, ISS was required to arrange to have
access to answer supervision supplied by downstream IXCs. ISS failed
to do so, and it may not now turn its regulatory default into an
26. Neither is ISS an "Intermediate Carrier" within the meaning of our
rules. Rule 64.1310(b) defines an intermediate carrier as "a
facilities-based long distance carrier that switches payphone calls to
other facilities-based long distance carriers." Because the category
of Intermediate Carriers is mutually exclusive with that of Completing
Carriers - one cannot be both with respect to the same call - the
definition of Intermediate Carrier must be read to include an implied
exception for Completing Carriers that switch a call to another
carrier. Any other reading would result in the strict last-switch rule
that we have shown above was not the rule we intended to adopt. We
note that although ISS claims to be an Intermediate Carrier, it in
fact filed no Intermediate Carrier reports, as required by
S: 64.1310(c). To the contrary, ISS has in the past paid dial-around
compensation to PSPs.
27. In sum, we find that Radiant and the other calling card providers are
switchless resellers that contracted with ISS, a facilities-based
carrier, to complete payphone calls on their behalf. As such, for
purposes of our payphone compensation rules, ISS was the "Completing
Carrier" within the meaning of rule 64.1300(a) for the payphone calls
28. Because ISS is a Completing Carrier, it is required to pay
compensation for every call completed during the third and fourth
quarters of 2004. APCC argues that ISS should be liable for all calls
delivered from the represented PSPs' payphones to ISS's switch,
regardless of whether they were in fact completed. APCC notes that ISS
violated Commission rules obligating Completing Carriers to track
calls to completion, and that, as a result, it is not possible to
determine the actual number of completed calls. Thus, APCC argues, "It
is entirely appropriate to make the violator, rather than the innocent
PSP, bear any loss from any `overpayments'...." In contrast, ISS
proposes that we apply a proxy to ascertain the number of completed
calls. Specifically, ISS debits end users' accounts for calls lasting
30 seconds or longer, and ISS contends that only these calls are
29. We decline to accept either party's proposal and, based on the limited
record in this case, adopt a middle view. APCC's proposal of
compensation for all calls regardless of whether they are actually
completed would contravene section's 276 directive that compensation
be paid only for "completed intrastate and interstate call[s]." In our
view, it is implausible that every call delivered to ISS during the
six months at issue was actually completed. We also believe that
application of ISS's 30-second proxy under these circumstances,
however, similarly would violate section 276. Clearly, application of
the 30 second proxy as proposed would exclude any completed call that
lasted fewer than 30 seconds. Moreover, ISS developed and understands
the financial consequences of the 30-second proxy. In contrast, the
represented PSPs did not have input into the proxy's development, nor
could they be aware of its financial consequences. Use of the proxy
here, then, would be tantamount to permitting ISS's unilateral
negotiation of a reimbursement amount that does not reflect payment
for each and every completed call to the represented PSPs as required
under Section 276.
30. Because the Defendants failed to comply with the Commission's call
tracking rules, we cannot ascertain the exact number of calls for
which ISS is liable. Consequently, in order to ensure that the
represented PSPs are adequately compensated, we believe it is
appropriate to hold ISS liable not only for calls delivered from the
represented PSPs payphones to ISS's switch lasting more than 30
seconds, but also for a significant portion of those calls lasting
less than thirty seconds. Accordingly, we find that 1,031,667 of the
calls delivered to ISS's platform during the third quarter of 2004,
and 660,876 of the calls delivered during the fourth quarter of 2004,
were completed. In this way, we endeavor to ensure that the
represented PSPs collect the monies they are owed and that ISS is not
unjustly enriched. We believe that the result reached here - although
not perfect - more accurately represents the number of calls that
were, in fact, completed. We emphasize that this course is the result
of ISS's willful failure to comply with the rules that, when followed
by Completing Carriers, ensure that the mandates of Section 276 are
31. Finally, we remind Completing Carriers that, in addition to section
208 complaint proceedings, any Completing Carrier that violates the
Commission's call tracking rules can be found liable pursuant to
section 503 of the Act, which provides for forfeitures against "[a]ny
person who is determined by the Commission ... to have ... willfully
or repeatedly failed to comply with any... order issued by the
Commission under this Act ...."
32. Defendants contend that the default rate for the fourth quarter of
2004 should be computed at the $.24 per call default rate rather than
the $.494 per call default rate subsequently established in the 2004
Rate Increase Order. Defendants rely on the fact that the increase in
the default rate from $0.24 to $0.494 was not properly reflected in
the Federal Register. We disagree. Regulations must be read in
conjunction with all relevant promulgating orders. Thus, rule 64.1300
should be read in conjunction with the Rate Increase Order, which
clearly and repeatedly stated that the per-call compensation rate for
dial-around calls was to be raised from $.24 per call to $.494 per
call. Moreover, it is "axiomatic that any regulation should be
construed to effectuate the intent of the acting body." The Commission
clearly intended to raise the per-call compensation rate to $.494 per
call; therefore rule 64.1300 must be construed so to state. Finally,
Defendants were not confused or misled by the error in the Federal
Register. On the contrary, Defendants discuss at length the fact that
the initial dial-around rate was $.24, that the Rate Increase Order
increased that rate to $.494, that the Federal Register should have
been revised at subsection "d" to reflect this increase, and that it
did not do so. Accordingly, the error is harmless, and Defendants'
argument to the contrary lacks merit. We therefore multiply the third
quarter number of calls by $.24 and the fourth quarter 2004 calls by
$.494, resulting in damages of $574,073.07.
33. In a similar vein, APCC requests that we award punitive damages
against Defendants. Assuming, without deciding, that we have authority
to award punitive damages, the facts here do not justify any such
award because APCC has not shown that Defendants acted "`maliciously,
wantonly or with a recklessness that betokens improper motive or
34. Finally, we address the issue of the appropriate interest rate. The
Commission has determined that, for the period at issue, unpaid
dial-around compensation accrues interest at the rate of 11.25% per
year. Under payphone industry practice, compensation for a dial-around
call is due on the first day of the quarter that is one quarter after
the one in which the billed call was made. Accordingly, prejudgment
interest begins to accrue on the day compensation is due. Defendants
argue that interest should be waived, or that the rate should be set
in accordance with the statutory rate provided in 28 U.S.C. S: 1961
because Defendants "had a solid legal basis for believing that no
payments were due at all." As discussed, however, the Commission has
expressly stated that unpaid dial-around compensation shall accrue
interest at the rate of 11.25% per year. Defendants' asserted
misunderstanding of the law cannot set aside a Commission rule in
IV. ORDERING CLAUSES
35. Accordingly, IT IS ORDERED, pursuant to sections 1, 4(i), 4(j), 201,
and 208 of the Communications Act of 1934, as amended, 47 U.S.C. S:S:
151, 154(i), 154(j), 201, and 208, and sections 1.720-1.736 and
64.1300-64.1320 of the Commission's rules, 47 C.F.R. S:S: 1.720-1.736,
64.1300-64.1320, that APCC Services, Inc.'s claims against Intelligent
Switching and Software, LLC under section 201(b) of the Act are
GRANTED to the extent indicated herein.
36. IT IS FURTHER ORDERED, pursuant to sections 1, 4(i), 4(j), 208, 276,
and 416 of the Communications Act of 1934, as amended, 47 U.S.C. S:S:
151, 154(i), 154(j), 208, 276, and 416, and sections 1.720-1.736 and
64.1300-64.1320 of the Commission's rules, 47 C.F.R. S:S: 1.720-1.736,
64.1300-64.1320, that APCC Services, Inc.'s claims against Intelligent
Switching and Software, LLC under sections 276 and 416 of the Act are
DISMISSED WITHOUT PREJUDICE.
37. IT IS FURTHER ORDERED, pursuant to sections 1, 4(i), 4(j), 201, 208,
276, and 416 of the Act, 47 U.S.C. S:S: 151, 154(i), 154(j), 201, 208,
276, and 416, and sections 1.720-1.736 and 64.1300-64.1320 of the
Commission's rules, 47 C.F.R. S:S: 1.720-1.736, 64.1300-64.1320, that
APCC Services, Inc.'s claims against Radiant Telecom, Inc. and Radiant
Holdings, Inc. are DENIED.
38. IT IS FURTHER ORDERED, pursuant to sections 1, 4(i), 4(j), 201, 208,
and 209 of the Communications Act of 1934, as amended, 47 U.S.C. S:S:
151, 154(i), 154(j), 201, 208, and 209, and sections 1.720-1.736 and
64.1300-64.1320 of the Commission's rules, 47 C.F.R. S:S: 1.720-1.736,
64.1300-64.1320, that, within 90 days of the release of this Order,
Intelligent Switching and Software, LLC shall pay APCC Services, Inc.
damages in the amount of $574,073.07, together with interest on such
damages at the rate of 11.25%, accruing on the first day of the
quarter that is one quarter after the one in which the billed call was
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Formal Complaint, File No. EB-05-MD-016 (filed Aug. 2, 2005)
47 U.S.C. S: 208.
47 U.S.C. S:S: 201, 276, 416.
See 47 C.F.R. S: 64.1300(a).
47 U.S.C. S: 276(b)(1)(A). The Commission has interpreted the statutory
term "completed call" to mean "a call that is answered by the called
party." In the Matter of Pay Telephone Reclassification and Compensation
Provisions of the Telecommunications Act of 1996, Report and Order, 18 FCC
Rcd 19975, 19987, P: 25 (2003) ("Tollgate Order").
See, e.g., Tollgate Order, 18 FCC Rcd at 19976, P:P: 1-2.
See, e.g., APCC Services, Inc., Data Net Systems, LLC, Davel
Communications, Inc., 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,
20 FCC Rcd 2073, 2075, P: 4 (2005) ("Network Order"); Order on Review, 21
FCC Rcd 10488 (2006). "Coin calls" placed from a payphone directly
compensate the PSP for use of the payphone and are not involved in the
Commission's payphone compensation rules, which pertain to coinless "dial
around" calls in which the caller does not directly compensate the
payphone operator (e.g., 1-800 and other toll-free calls and calls using
access codes to reach a service provider of choice). See Network Order, 20
FCC Rcd at 2075, P: 4.
Network Order, 20 FCC Rcd at 2075, P: 5.
Id. at 2076, P: 6.
Id. at P: 7.
See, e.g., First Payphone Compensation Order, 11 FCC Rcd at 20541 (1996);
Implementation of the Pay Telephone Reclassification and Compensation
Provisions of the Telecommunications Act of 1996, First Order on
Reconsideration, 11 FCC Rcd 21233 (1996); Second Order on Reconsideration,
16 FCC Rcd 8098 (2001) ("Second Order on Reconsideration"), vacated,
Sprint Corp. v. FCC, 315 F.3d 369 (D.C. Cir. 2002) ("Sprint v. FCC").
Second Order on Reconsideration, 16 FCC Rcd at 8108, P: 21.
See generally Tollgate Order; Order on Reconsideration, 19 FCC Rcd 21457
(2004) ("Tollgate Reconsideration Order") (collectively, "Tollgate
Tollgate Order, 18 FCC Rcd at 20018 (Appendix C); see also 47 C.F.R. S:
47 C.F.R. S: 64.1300(a).
See Tollgate Order, 18 FCC Rcd at 19988, P: 28; Tollgate Reconsideration
Order, 19 FCC Rcd at 21459, P: 3 ("In instances where an SBR completes a
call dialed by the SBR's customer from a payphone, the Commission reasoned
that the SBR was the primary economic beneficiary because the SBR's
customer pays the SBR for the payphone call.").
Tollgate Order, 18 FCC Rcd at 19988, P:P: 26, 35.
Tollgate Order, 18 FCC Rcd at 19976, P: 1 n.1.
Tollgate Order, 18 FCC Rcd at 19978, P: 7.
As noted, a "completed" call is one that is answered by the called party.
Calls that are not answered by the called party are not compensable.
47 C.F.R. S: 64.1310(a)(1).
Id. at S: 64.1310(a)(4).
Id. at S: 64.1320(a), (b).
47 C.F.R. S: 64.1310(b).
47 C.F.R. S: 64.1310(c). Each quarterly report must be in computer
readable format and include: (1) a list of all facilities-based long
distance carriers to which the Intermediate Carrier switched access code
and toll-free calls dialed from the PSP's payphone; (2) a list of all
access code and toll-free numbers dialed from each PSP's payphones that
local exchange carriers delivered to the Intermediate Carrier and the
Intermediate Carrier switched to the identified long distance carrier; (3)
the total volume of calls switched to each of these numbers; and (4) the
name, address, and phone number of the individuals for each identified
long distance carrier who serves as the Intermediate Carrier's contact at
the identified carrier. Id.
Second Revised Joint Statement of Stipulated Facts, Disputed Facts, and
Key Legal Issues, File No. EB-05-MD-016 (filed Aug. 1, 2006) at 6, P: 36
("Second Revised Joint Statement").
Id. at 6, P: 38.
Second Revised Joint Statement at 5, P: 34; 6, P: 41. ISS owns the switch
it uses in providing these services. Id. at 5, P: 32.
Second Revised Joint Statement at 2, P: 9. FCC filings state that Radiant
Holdings is also Radiant's parent company. See id. at 2, P: 7. Defendants
assert, however, that Radiant was spun off from Radiant Holdings in 2003.
Revised Answer to Formal Complaint, File No. EB-05-MD-016 (filed Oct. 7,
2005) ("Revised Answer") at 8, P: 7. Radiant Holdings changed its name to
Ntera Holdings, Inc. on March 23, 2004. Second Revised Joint Statement at
2, P: 8.
Second Revised Joint Statement at 5, P: 29. On or about November 27, 2006,
Defendants sought in Florida state court an Assignment for the Benefit of
Creditors of each of the Defendants (which appears to be akin to a Chapter
7 liquidation proceeding under federal bankruptcy laws). See Notice
Regarding (1) Change of Counsel Law Firm Affiliation, (2) Withdrawal of
Counsel, and (3) Assessment of Defendants' Assignment for the Benefit of
Creditor Filings, File No. EB-05-MD-016 (filed Jan. 19, 2007) at 2.
Defendants' counsel since have withdrawn from the proceeding before the
FCC, and no new counsel have entered an appearance in the FCC proceeding.
See Letter to Albert H. Kramer, Robert F. Aldrich and Jacob S. Farber,
counsel for Complainant, and Christopher W. Savage and Michael C. Sloan,
counsel for Defendants, from Lia B. Royle, Special Counsel, EB, MDRD, FCC
(dated Mar. 5, 2007).
Second Revised Joint Statement at 7, P:P: 44, 46, 47.
Id. at 5-6, P:P: 29-41; 8, P: 58; 10, P: 77.
Second Revised Joint at 2, P:P: 1-3.
Id. at 9, P: 60; 10, P: 79.
Id. at 8, P:P: 56-57.
Revised Answer at 1, 3 n.7, 4 n.10, 6-7 P:P: 1-2.
Fed. R. Civ. P. 23(b).
See Second Revised Joint Statement at 2, P:P: 1-4; Complaint Ex. 4 (Jaeger
Dec'n) at P:P: 4-6; Reply at 24-25.
See Revised Answer at 1 (citing Halprin, Temple, Goodman & Sugrue v. MCI
Telecomm. Corp., Memorandum Opinion and Order, 13 FCC Rcd 22568 (1998) and
Orloff v. Vodafone Airtouch Licenses LLC, Memorandum Opinion and Order, 17
FCC Rcd 8987 (2002)).
Revised Answer at 2 n.1.
Philippine Long Distance Tel. Co. v. Int'l Telecom, Ltd., Memorandum
Opinion and Order, 12 FCC Rcd 15001, 15005, P: 9 (1997). Accord American
Message Centers v. Sprint, Memorandum Opinion and Order, 8 FCC Rcd 5522,
5523, P: 6 (1993), petition for review denied sub nom., AMC v. FCC, 50
F.3d 35 (D.C. Cir. 1995). Cf. APCC Services, Inc. v. Sprint Communications
Co., 418 F.3d 1238, 1242-45 (D.C. Cir. 2005), vacated and remanded on
other grounds, 127 S. Ct. 2094 (2007) (holding that aggregators (including
APCC), acting as assignees for PSPs, had standing to sue in federal
district court to recover dial-around compensation for coinless payphone
47 C.F.R. S: 64.1300(a) (emphasis added).
Revised Answer at 8 P: 6 ("ISS operates a hardware and software calling
card platform that is used to provide service to Radiant and other calling
card providers.") & 35 (describing "calling card/switching platforms
operated by ISS").
We have used "complete" to mean answered by the called party, but that is
obviously not the sense of the word as used in S: 64.1300. The "Completing
Carrier" switches the call to "completion" whether or not it is answered
by the called party.
Tollgate Order, 18 FCC Rcd at 19989, P: 29.
See Second Revised Joint Statement at 14 P: 104 ("There are three
functions involved in a prepaid dial-around call: (1) the originating IXC
function; (2) the platform process/switching function; and (3) the
terminating IXC function whereby the call is transported to the
See Second Revised Joint Statement of Stipulated Facts at 7 P:43.
Tollgate Order, 18 FCC Rcd at 19992, P: 35.
Letter to Marlene H. Dortch, Secretary, FCC, from Christopher W. Savage
and Michael C. Sloan, counsel for Defendants (dated Sept. 12, 2006) at 1-2
(citing Tollgate Reconsideration Order, 19 FCC Rcd at 21463, P:P: 2, 3, 12
47 C.F.R. S: 64.1310(b).
Indeed, although we need not decide the matter in this case, it would seem
that the most logical understanding of Intermediate Carrier would be those
carriers that switch a call to a Completing Carrier, but not those coming
later in the call stream. Once the Intermediate Carriers have notified the
PSP of the Completing Carrier responsible for payment and call tracking,
the PSP has no significant need to know what carriers subsequent to the
Completing Carrier were involved in switching the call to termination.
See Second Revised Joint Statement at 3-4.
We deny APCC's Motion to Strike Portions of Revised Answer, File No.
EB-05-MD-016 (filed Oct. 20, 2005), because our disposition of the
Complaint renders the issues in that motion moot.
Complaint at 28-29, P:P: 78-80; Reply at 32-25, P:P: 54-61.
Complaint at 28, P: 78; Reply at 34, P:P: 59-60.
Reply at 33, P: 57.
Second Revised Joint Statement at 8, P: 55; Answer Exh. 1 (Asad Decl.) at
P: 7, Exh. 6 (Yelutas Decl.) at P: 8.
Second Revised Joint Statement at 22-23, P: 171.
47 U.S.C. S: 276(b)(1) (emphasis added).
ISS admits that the represented PSPs delivered 1,618,044 calls to ISS's
platform in the third quarter of 2004, of which 445,290 calls were
completed using ISS's thirty-second proxy, and that the represented PSPs
delivered 1,132,857 calls to ISS's platform in the fourth quarter of 2004,
of which 188,896 calls were completed using ISS's thirty-second proxy.
Second Revised Joint Statement at 22, P:P: 171-72. Adding to the number of
calls lasting 30 seconds or longer the number of calls mid-way between the
parties' respective proffered numbers, we conclude that 1,031,667 of the
calls delivered to ISS's platform during the third quarter of 2004 (i.e.,
445,290 + .5(1,618,044-445,290)), and 660,876 of the calls delivered
during the fourth quarter of 2004 (i.e., 188,896 + .5(1,132,857-188,896)),
The Commission has discretion to conduct proceedings "in such manner as
will best conduce to the proper dispatch of business and to the ends of
justice," 47 U.S.C. S: 154(j), and is obligated to award damages to which
the complainant is entitled. 47 U.S.C. S: 209. See APCC Services, Inc. v.
TS Interactive, Inc., Memorandum Opinion and Order, 19 FCC Rcd 10456,
10462, P: 16 (Enf. Bur. 2004) (where the record contains no call-detail
records or other evidence establishing the number of calls actually
completed, payphone compensation may be awarded based upon a "reasonable"
estimation of call completion rates).
47 U.S.C. S: 503(b)(1)(B).
Request to Update Default Compensation Rate for Dial-Around Calls from
Payphones, Report and Order, 19 FCC Rcd 15636 (2004) ("Rate Increase
Order"). See Answer at 37-42.
Answer at 40-41. In the Rate Increase Order, the Commission raised the
default per-call compensation rate from $.24 to $.494. Therefore, rule
64.1300 as published in the Federal Register should have been revised at
section (d) to state, "the carrier is obligated to compensate the [PSP] at
a per-call rate of $.494." Instead, the Federal Register stated as
(b) Except as provided herein, a Completing Carrier ... shall compensate
the [PSP] for that [dial-around] call at a rate agreed upon by the parties
(c) In the absence of an agreement as required by paragraph a [sic] of
this section, the carrier is obligated to compensate the PSP at a per-call
rate of $.494.
(d) In the absence of an agreement as required by paragraph b of this
section, the carrier is obligated to compensate the PSP at a per-call rate
This error has been corrected. Request to Update Default Compensation Rate
for Dial-Around Calls from Payphones, Erratum, 20 FCC Rcd 20231 (2005).
Thus, for example, the United States Supreme Court upheld the Commission's
rule obligating incumbent LECs to combine network elements, 47 C.F.R. S:
315(c)-(d), on the basis of a limitation expressed not in the rule itself,
but rather in the text of the order promulgating that rule. Verizon
Communications Inc. v. FCC, 535 U.S. 467, 535-39 (2002) (citing
Implementation of the Local Competition Provisions of the
Telecommunications Act of 1996, First Report and Order, 11 FCC Rcd. 15499,
15648 P: 294 (1996) (subsequent history omitted)). See United States
Telecom Ass'n v. FCC, 400 F.3d 29, 38 (D.C. Cir. 2005) (finding that
Commission rule 52.21, 47 C.F.R. S: 52.21, does not obligate wireline
carriers to provide location portability because the promulgating order so
states) (citing Telephone Number Portability, First Report and Order and
Further Notice of Proposed Rulemaking, 11 FCC Rcd 8352, 8356, P: 6 (1996);
Wyoming Outdoor Council v. USFS, 165 F.3d 43, 53 (D.C. Cir. 1998)
(reviewing a regulation's preamble as "evidence concerning contemporaneous
agency intent"); New York State Comm'n on Cable Television v. FCC, 571
F.2d 95, 97-98 (2d Cir. 1978) (construing Commission rule 76.31(b), 47
C.F.R. S: 76.31(b), in light of the order promulgating that rule).
See Rate Increase Order, 19 FCC Rcd at 15665, P: 92 ("[W]e find that...it
is appropriate to prescribe an increased default dial-around compensation
rate of $.494 per call"); id. at 15637, 15661, P:P: 1, 80.
United States v. Miller, 303 F.2d 703, 707 (9th Cir. 1962). Accord United
States v. Eastern of New Jersey, Inc., 770 F. Supp. 964, 976 (D. N.J.
1991); United States v. Unitank Terminal Serv., 724 F. Supp. 1158, 1165
(E.D. Pa. 1989); Harnischfeger Corp. v. EPA, 515 F. Supp. 1310, 1314 (E.D.
Wisc. 1981); Diaz v. INS, 648 F. Supp. 638, 644 (E.D. Cal. 1986).
Relying on Lal v. INS, 255 F.3d 998, 1004 (9th Cir. 1999), Defendants
argue that "an agency's regulations, as published in the Federal Register,
take precedence over the text of a conflicting agency order." Answer at
41. Lal stands for no such proposition. The "conflicting agency order" in
Lal was an appeal board's subsequent interpretation of an existing rule,
not, as here, an agency order that promulgates, and explains, a revised
See e.g., Answer at 4 (admitting that "the Commission may have intended to
raise that rate from $0.24 to $0.494 per call," and citing the Rate
Increase Order), Answer at 31-33, 38.
See United States Telecom Ass'n, 400 F.3d at 41 (mislabeling a notice of
proposed rulemaking as a request for comments on a petition for
declaratory rulemaking was not fatal where the error was "plainly
Complaint at 31-35, P:P: 85-96.
Halprin, Temple, Goodman, & Sugrue v. MCI Telecomm. Corp., 13 FCC Rcd
22568, 22582, P: 31 (1998) (citing Strouth v. Western Union Telegraph Co.,
Initial Decision, 70 FCC 2d 525 (1977), aff'd in relevant part, 70 FCC 2d
506 (Rev. Bd. 1978)).
See, e.g., APCC Services, Inc. v. NetworkIP, LLC and Network Enhanced
Services, LLP, Memorandum Opinion and Order, 22 FCC Rcd 4286, 4291-92, P:
11 (2007) ("APCC v. NetworkIP"); Request to Update Default Compensation
Rate for Dial-Around Calls from Payphones, Report and Order, 19 FCC Rcd
15636, 15661, P: 79 (2004); Bell Atlantic - Delaware, Inc. v. Frontier
Communications Services, Inc., Memorandum Opinion and Order, 16 FCC Rcd
8112, 8115, P: 17 & n.43 (2001); Implementation of the Pay Telephone
Reclassification and Compensation Provisions of the Telecommunications Act
of 1996, Third Report and Order, and Order on Reconsideration of the
Second Report and Order, 14 FCC Rcd 2545, 2630-31, P: 189 (1999);
Implementation of the Pay Telephone Reclassification and Compensation
Provisions of the Telecommunications Act of 1996, Second Report and
Order, 13 FCC Rcd 1778, 1805-06, P:P: 59-60 (1997) (some subsequent
APCC v. NetworkIP, 22 FCC Rcd at 4292, P: 11.
See, e.g., id.; Implementation of the Pay Telephone Reclassification and
Compensation Provisions of the Telecommunications Act of 1996, Fifth Order
on Reconsideration and Order on Remand, 17 FCC Rcd 21274, 21308, P: 101
(2002); Implementation of the Pay Telephone Reclassification and
Compensation Provisions of the Telecommunications Act of 1996, AT&T
Request for Limited Waiver of the Per-call Compensation Obligation, 13 FCC
Rcd 10893, 10895, P: 3 (1998).
Answer at 46, P: 81; id. at 57, P: 128.
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Federal Communications Commission FCC 08-131
Federal Communications Commission FCC 08-131