Click here for Adobe Acrobat version
Click here for Microsoft Word version
This document was converted from Microsoft Word.
Content from the original version of the document such as
headers, footers, footnotes, endnotes, graphics, and page numbers
will not show up in this text version.
All text attributes such as bold, italic, underlining, etc. from the
original document will not show up in this text version.
Features of the original document layout such as
columns, tables, line and letter spacing, pagination, and margins
will not be preserved in the text version.
If you need the complete document, download the
Microsoft Word or Adobe Acrobat version.
Federal Communications Commission
Washington, D.C. 20554
In the Matter of )
Qwest Communications Corporation, )
v. ) File No. EB-07-MD-001
Farmers and Merchants Mutual Telephone )
THIRD order on reconsideration
Adopted: March 16, 2010 Released: March 17, 2010
By the Commission:
1. This Order denies a Petition for Reconsideration filed by Farmers and
Merchants Mutual Telephone Company ("Farmers"). In short, the Petition
for Reconsideration asks the Commission to reconsider and reverse its
November 25, 2009 Second Order on Reconsideration because it is
"arbitrary and capricious and contrary to law," and because the
Commission purportedly lacked jurisdiction to issue it. For the
reasons below, we deny the Petition for Reconsideration.
2. Qwest Communications Corporation ("Qwest"), an interexchange carrier
("IXC"), filed a formal complaint against Farmers, an incumbent local
exchange carrier ("ILEC"), on May 2, 2007. Qwest alleged that Farmers
"engaged in an intentional scheme to collect unreasonably high
terminating switched access charges by inflating the amount of traffic
delivered to it by Qwest and other ... [IXCs] in a manner that
rendered Farmers' rates wholly unrelated to its costs." Specifically,
Qwest maintained - and discovery demonstrated - that Farmers had
entered into commercial agreements with certain conference calling
companies whereby the conference calling companies sent a high volume
of traffic to numbers in Farmers' exchange and, in return, Farmers
paid money or other consideration to the conference calling companies.
Farmers then assessed Qwest terminating access charges on those calls.
Qwest argued that those charges were unlawful for a variety of
reasons, and elected in its Complaint to have the amount of any
damages resulting from Farmers' conduct determined in a separate
3. In its Initial Liability Order, the Commission granted Count I of the
Complaint, finding that Farmers violated section 201(b) of the Act by
earning an excessive rate of return. The Commission ruled, however,
that Qwest could not recover damages because the Farmers tariff at
issue was "deemed lawful" under section 204(a)(3) of the Act. The
Commission further denied Counts II and III of the Complaint, which
alleged that Farmers' tariff did not allow Farmers to assess
terminating access charges on calls to conference calling companies
because the service provided did not constitute switched access as
defined in the tariff.
4. On November 1, 2007, Qwest filed a Petition for Partial
Reconsideration and a Motion to Compel Production of Documents,
arguing that evidence Farmers improperly withheld in discovery called
into question the veracity of Farmers' representations that the
conference calling companies were customers of its tariffed service.
The Commission granted Qwest's Petition for Partial Reconsideration in
part, initiating additional proceedings to consider the merits of
Qwest's arguments concerning the newly-identified evidence. Qwest
filed its Second Supplement to Petition for Partial Reconsideration on
May 29, 2008, which contained evidence supporting Qwest's assertion
that the conference calling companies, in fact, never took tariffed
services from Farmers.
5. In the Second Recon Order, the Commission, relying on the new evidence
brought to light by Qwest, reversed its earlier decision and granted
Counts II and III of the Complaint. The Commission determined that
Farmers violated sections 201(b) and 203(c) of the Act, rendering
Farmers liable to Qwest for damages to be determined in a subsequent
proceeding. The Commission further ordered Qwest to file any
supplemental complaint for damages within sixty days of the release of
the Second Recon Order. Farmers filed its Petition for Reconsideration
on December 18, 2009.
A. Section 405(b)(1) of the Act Did Not Deprive the Commission of
Jurisdiction to Issue the Second Recon Order.
6. Citing section 405(b)(1) of the Act, Farmers argues that the Second
Recon Order "constitutes unlawful agency action," because the
Commission did not issue the order within 90 days of Qwest's filing of
the Second Supplement to its Petition for Partial Reconsideration. We
find that the 90-day deadline for issuing an order granting or denying
petitions for reconsideration under the Act is inapplicable here.
Qwest filed its Petition for Partial Reconsideration on November 1,
2007. Within 90 days, the Commission released an order granting in
part the Petition for Partial Reconsideration: that order satisfied
section 405(b)(1) of the Act because it granted in part Qwest's
petition for reconsideration within 90 days after it was received by
the Commission. Also in that order, the Commission initiated
additional proceedings to compel production of and to consider
previously undisclosed evidence. Qwest's Second Supplement was
submitted as part of those additional proceedings. The Second
Supplement was not itself a separate petition for reconsideration of
an order, decision, report or action taken by the Commission. Thus, in
accordance with its rules, the Commission appropriately deferred a
ruling on the merits pending completion of the Commission-initiated
7. Nothing in section 405 of the Act required the Commission to resolve
the issues raised in Qwest's Second Supplement - submitted after the
production of additional documents, multiple rounds of discovery, and
briefing as part of Commission-initiated additional proceedings -
within 90 days. Even if section 405 were applicable here, however, the
Commission would not be without authority to act on Qwest's Second
Supplement. Judicial and Commission decisions uniformly hold that an
agency retains its authority to act notwithstanding the passage of a
statutory deadline, if Congress has not specified otherwise:
It is well settled ... that where Congress has placed an agency under a
legal obligation to render a decision within a stated time period but has
not set forth the consequences of exceeding that period, ordinarily the
time period is directory rather than mandatory, and an agency will not
lose jurisdiction over the matter upon expiration of that period.
Thus, the Commission does not lose jurisdiction to decide a
reconsideration petition if it fails to meet the 90-day deadline under
section 405. Nonetheless, Farmers argues that Congress intended such a
result, asserting that Congress expressed a desire to see petitions for
reconsideration that are subject to section 405(b)(1) resolved "in a
timely manner." Yet Farmers points to nothing in the statute or its
legislative history to suggest that Congress intended that the consequence
of missing the deadline for resolving petitions for reconsideration is
that the Commission forfeits jurisdiction over such proceedings.
A. The Conclusions in the Second Recon Order Were Reasonably Based on
the Evidence Produced During the Additional Proceedings Ordered by
8. The Petition for Reconsideration asserts numerous arguments that
Farmers raised - and the Commission addressed and rejected - in the
earlier stages in this proceeding. We decline to revisit those
contentions here. Farmers fails to present any new evidence that would
compel us to reconsider the Commission's previous findings. Moreover,
it is "settled Commission policy that petitions for reconsideration
are not to be used for the mere reargument of points previously
advanced and rejected." Rather, we address below the new assertions
Farmers makes, none of which we find persuasive.
1. Based on New Facts, the Commission Properly Determined that the
Conference Calling Companies Were Not "End Users" Under Farmers'
9. Farmers states that the Commission's determination in the Second Recon
Order hinged upon a single issue - "whether payments are required to
be made by the conference calling companies in order for them to have
subscribed to Farmers' services as set forth in its tariff." Farmers
maintains that the Commission's original order - the Initial Liability
Order - answered this issue in the negative, and that the Commission
should not have altered this conclusion without additional
explanation. We disagree with Farmers' contentions.
10. In its Answer, Farmers represented that the conference calling
companies "are customers because they purchase interstate End User
Access Service and pay the federal subscriber line charge." This
factual assertion was then uncontested, and the Commission accepted
it. In fact, contrary to Qwest's argument that Farmers' payment of
marketing fees to the conference calling companies that exceeded the
conference calling companies' payments to Farmers (i.e., "refunds")
altered the conference calling companies' status as end users, the
Commission concluded that this single factor did not affect the
conference calling companies' "end user" status.
11. On reconsideration, the landscape shifted dramatically. The record
contained many more facts about the relationship between Farmers and
the conference calling companies. Specifically, it became clear that
the conference calling companies never paid subscriber line charges or
made any other payments to Farmers and that Farmers never expected to
be paid. Moreover, in numerous respects, which the Second Recon Order
recites in detail, Farmers and the conference calling companies did
not structure their relationship in a manner consistent with Farmers'
tariff. Thus, Farmers errs when it states that the Second Recon Order
hinged upon the single issue of whether payments were required to be
made by the conference calling companies in order for them to have
subscribed to Farmers' services. This was but one of several issues
that the Commission evaluated in that order.
12. In short, Farmers withheld critical evidence during the earlier stages
of this proceeding, and it now attempts to bind the Commission to a
ruling that was predicated upon the incomplete factual record. On
reconsideration, the Commission is entitled to review new facts and to
change its ruling based on the new facts. That is precisely what
happened here, and we find that the Commission provided adequate
explanation in its Second Recon Order for changing its conclusion in
the Initial Liability Order.
1. The Initial Liability Order's Ruling on Count I of the Complaint Is
an Independent, Alternative Basis for Finding that Farmers Violated
Section 201(b) of the Act.
13. Farmers further asserts that the Second Recon Order is arbitrary and
capricious because it left intact the Initial Liability Order's
conclusion that Farmers earned an excessive rate of return while
simultaneously finding that the service provided by Farmers to the
conference calling companies was not subject to tariff. In essence,
Farmers claims these two determinations are fatally inconsistent. We
14. In the Second Recon Order, the Commission expressly upheld the initial
determination that Farmers had violated section 201(b) of the Act by
virtue of its overearnings, and noted that its earlier finding on
does not preclude Qwest from collecting damages based on the conclusions
in [Second Recon Order]. The tariffed rates are deemed lawful only to the
extent that the tariff actually applies, and we have now determined that
the tariff does not apply to the services that Farmers provided to Qwest
with respect to traffic destined for the conference calling providers.
We clarify that the Commission could have relied solely on its ruling on
Count I as an independent, alternative basis for finding that Farmers
violated section 201(b) of the Act. In other words, the Commission in the
Second Recon Order properly found that the service provided to the
conference calling companies was not tariffed, and the assessment of
switched access charges to Qwest therefore violated sections 201(b) and
203(c) of the Act. Even if the carriage of traffic from Qwest to the
conference calling companies could be said to constitute switched access
under Farmers' tariff, however, the Commission could have reached the same
conclusion by finding that Farmers' earning an excessive rate of return
violated section 201(b) of the Act.
A. We Deny Farmers' Petition for Stay.
15. Farmers filed a Petition for Stay of the effectiveness of the Second
Recon Order "pending reconsideration and appeal of that order." The
Commission considers requests for stay under a well-established
four-part test. Specifically, the petitioner must demonstrate that (1)
it is likely to prevail on the merits; (2) it will suffer irreparable
harm if a stay is not granted; (3) other interested parties will not
be harmed if the stay is granted; and (4) the public interest favors
granting a stay. Farmers has failed utterly to establish that it will
incur irreparable harm as a result of the Second Recon Order.
Accordingly, we deny the Petition for Stay.
16. Farmers argues that Qwest is "just one of several carriers" that claim
they are entitled to a refund from Farmers because the conference
calling companies are not end users under Farmers' tariff. According
to Farmers, it "could be subject to claims of approximately $22
million or more" if a stay is not granted, which purportedly would
result in bankruptcy and possibly a cessation of Farmers' operations
"if the litigation floodgates were suddenly opened." This claim,
however, is too speculative to warrant a stay.
17. As noted above, Qwest opted to have the Commission make a
"determination of damages ... in a proceeding that is separate from
and subsequent to the proceeding in which the determinations of
liability and prospective relief will be made." The Second Recon Order
constitutes the Commission's liability determination. The Commission
made no findings regarding damages, instead allowing Qwest to file a
supplemental complaint for damages within 60 days of the release of
the Second Recon Order. At this juncture, then, Farmers owes Qwest
nothing and will not owe Qwest anything unless and until the
Commission determines that damages are warranted. What's more, Farmers
has presented no evidence that resolution of this case will translate
into judgments for carriers in other litigation. Indeed, those
carriers presumably will have to present their own evidence of
damages, just as Qwest will in this case. To constitute "irreparable
harm" that warrants equitable relief, injury must be "both certain and
great ... actual and not theoretical." Equitable relief will not be
granted against something "merely feared as liable to occur at some
indefinite time." Because Farmers has offered evidence of nothing
beyond hypothetical injury, we find that a stay is not warranted.
IV. ordering clauses
18. Accordingly, IT IS ORDERED, pursuant to sections 4(i), 4(j), 201, 203,
206, 207, 208, 209, and 405 of the Communications Act of 1934, as
amended, 47 U.S.C. S:S: 154(i), 154(j), 201, 203, 206, 207, 208, 209,
and 405, and section 1.106 of the Commission's rules, 47 C.F.R. S:
1.106, that Farmers' Petition for Reconsideration IS DENIED.
19. IT IS FURTHER ORDERED, pursuant to sections 4(i), 4(j), 201, 203, 206,
207, 208, 209, and 405 of the Communications Act of 1934, as amended,
47 U.S.C. S:S: 154(i), 154(j), 201, 203, 206, 207, 208, 209, and 405,
and sections 1.43, 1.44(e) and 1.106 of the Commission's rules, 47
C.F.R. S:S: 1.43, 1.44(e), and 1.106, that Farmers' Petition for Stay
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Petition for Reconsideration, File No. EB-07-MD-001 (filed Dec. 18, 2009)
("Petition for Reconsideration").
Qwest Commc'ns Corp. v. Farmers and Merchants Mut. Tel. Co., Second Order
on Reconsideration, 24 FCC Rcd 14801 (2009) ("Second Recon Order").
Petition for Reconsideration at 1-2.
This proceeding has a lengthy history, which we will not recite in detail.
Rather, we incorporate by reference the background sections contained in
paragraphs 3 through 13 of the original order on the merits (see Qwest
Commc'ns Corp. v. Farmers and Merchants Mut. Tel. Co., Memorandum Opinion
and Order, 22 FCC Rcd 17973, 17974-77, P:P: 3-13 (2007) ("Initial
Liability Order")) and paragraphs 2 through 9 of the Second Recon Order,
24 FCC. Rcd at 14802-04, P:P: 2-9.
Formal Complaint of Qwest Communications Corp., File No. EB-07-MD-001
(filed May 2, 2007) ("Complaint").
Complaint at 1.
Initial Liability Order, 22 FCC Rcd at 17976, P: 9.
Initial Liability Order, 22 FCC Rcd at 17974, P: 3.
Complaint at 27, P: 59. See 47 C.F.R. S: 1.722(d)(2) (A complainant
seeking damages in a separate proceeding must "[s]tate clearly and
unequivocally that the complainant wishes a determination of damages to be
made in a proceeding that is separate from and subsequent to the
proceeding in which the determinations of liability and prospective relief
will be made.").
Initial Liability Order, 22 FCC Rcd at 17980-83, P:P: 21-25; 47 U.S.C. S:
Initial Liability Order, 22 FCC Rcd at 17983, P: 26; 47 U.S.C. S:
Initial Liability Order, 22 FCC Rcd at 17985-88, P:P: 30-39.
Qwest Communications Corporation's Petition for Partial Reconsideration,
File No. EB-07-MD-001 (filed Nov. 1, 2007) ("Petition for Partial
Reconsideration"); Motion to Compel Production of Documents, File No.
EB-07-MD-001 (filed Nov. 1, 2007).
Petition for Partial Reconsideration at 5-14.
Qwest Commc'ns Corp. v. Farmers and Merchants Mut. Tel. Co., Order on
Reconsideration, 23 FCC Rcd 1615 (2008) ("First Recon Order"). See 47
C.F.R. S: 1.106(k)(1) (If the Commission grants a petition for
reconsideration in part, it may "[o]rder such other proceedings as may be
necessary or appropriate.").
Second Supplement to Petition for Partial Reconsideration, File No.
EB-07-MD-001 (filed May 29, 2008) ("Second Supplement").
Second Recon Order, 24 FCC Rcd at 14805-13, P:P: 10-26.
Second Recon Order, 24 FCC Rcd at 14813, P:P: 26, 28.
Second Recon Order, 24 FCC Rcd at 14801, P: 1. On January 4, 2010, and
February 18, 2010, the Commission granted the parties' Consent Motions for
Extension of Time for Qwest to file its supplemental complaint for
damages. See Consent Motion for Extension of Time, File No. EB-07-MD-001
(filed Dec. 28, 2009) and Consent Motion for Extension of Time, File No.
EB-07-MD-001 (filed Feb. 17, 2009). Qwest presently must file any
supplemental complaint for damages by May 24, 2010.
47 U.S.C. S: 405(b)(1) ("Within 90 days after receiving a petition for
reconsideration of an order concluding ... an investigation under section
208(b) of this title, the Commission shall issue an order granting or
denying such petition.").
Petition for Reconsideration at 15. Thus, Farmers argues that the deadline
for Commission action on the Second Supplement was August 27, 2008.
Petition for Reconsideration at 19.
See 47 C.F.R. S: 1.106(k)(1)(iii).
See 47 C.F.R. S: 1.106(k)(1)(iii) ("If the Commission . . . grants the
petition for reconsideration in whole or in part, it may, in its decision:
. . .(iii) Order such other proceedings as may be necessary or
See, e.g., Brock v. Pierce County, 476 U.S. 253, 260-66 (1994) (despite
statutory language that the Secretary of Labor "shall" issue a final
determination as to misuse of funds within 120 days after audit or receipt
of complaint of misuse, the Secretary does not lose power to recover
misused funds after 120 days); 1993 Annual Access Tariff Filings Phase I,
1994 Annual Access Tariff Filings, Order Terminating Investigation, 20 FCC
Rcd 7672, 7688, P: 39 (2005) ("[T]he Commission's failure to conclude this
tariff investigation within the statutory time frame does not affect our
authority to conduct it to its conclusion."); 2002 Biennial Regulatory
Review, Report, 18 FCC Rcd 4726, 4739 n.70 (2002) ("[E]ven were a
statutory deadline missed, where Congress does not specify otherwise,
agencies do not lose their power to act after the statutory deadline ...
[W]here Congress intends the failure to meet a deadline to have a
regulatory consequence, it is quite able to indicate its intent.")
(citations omitted); AT&T Corp. v. Beehive Tel. Co., Inc., Memorandum
Opinion and Order, 17 FCC Rcd 11641, 11653, P: 23 (2002) ("It is well
established that the expiration of a statutory deadline for the Commission
to act does not divest the Commission of authority to continue moving
toward resolution of a proceeding."); 800 Data Base Access Tariffs and the
800 Service Management System Tariff, Order on Reconsideration, 12 FCC Rcd
5188, 5193-94, P: 15 (1997) ("[T]he courts ... have held that
administrative agencies retain their authority to act notwithstanding the
passing of a statutory deadline.").
Gottlieb v. Pena, 41 F.3d 730, 733 (D.C. Cir. 1994) (citation omitted).
Petition for Reconsideration at 18.
Nor do Farmers' many quotations from the Formal Complaints Order address
the question at hand - i.e., what is the result of a failure to satisfy a
90-day deadline. Petition for Reconsideration at 17 (citing Implementation
of the Telecommunications Act of 1996, Amendment of Rules Governing
Procedures to Be Followed When Formal Complaints Are Filed Against Common
Carriers, Report and Order, 12 FCC Rcd 22497 (1997) ("Formal Complaints
See, e.g., Petition for Reconsideration at 8-12 (filed rate doctrine);
12-15 (tariff interpretation); 24-25 (evidence not withheld). See also
First Recon Order, 23 FCC Rcd at 1618-20, P:P: 8, 11 (withheld evidence)
and Second Recon Order, 24 FCC Rcd at 14802-11, P:P: 10-22 (tariff
interpretation and filed rate doctrine).
In re S&L Teen Hosp. Shuttle, Order on Reconsideration, 17 FCC Rcd 7899,
7900, P: 3 (2002) (citations omitted). See also General Motors Corp. and
Hughes Electronics Corp., Transferors, and The News Corp. Ltd.,
Transferee, For Authority to Transfer Control, Order on Reconsideration,
23 FCC Rcd 3131, 3135 P: 11 (2008) (stating that the Commission has
rejected petitions for reconsideration where the petitioner essentially
repeats previously-relied upon arguments and "fails to raise new arguments
or facts that would warrant reconsideration") (citations omitted).
Petition for Reconsideration at 2.
Answer at vii, 27. (The Initial Liability Order mistakenly cites the
Complaint, rather than the Answer.)
It later came to light that the conference calling companies never paid
the subscriber line charge. See Second Recon Order, 24 FCC Rcd at 14806,
P: 12 & n.49; 14808, P: 16 & n.65.
Initial Liability Order, 22 FCC Rcd at 17987, P: 36.
Initial Liability Order, 22 FCC Rcd at 17987, P: 37.
Consequently, there were no "refunds" as the Initial Liability Order
presumed. The new facts included, inter alia, backdated invoices that were
sent only in response to litigation deadlines. Second Recon Order, 24 FCC
Rcd at 14808-09, P:P: 16, 18.
Second Recon Order, 24 FCC Rcd at 14806-10, P:P: 12-20.
First Recon Order, 23 FCC Rcd at 1618, P: 8.
See 47 C.F.R. S: 1.106(c). See also Qwest's Opposition to Petition for
Reconsideration, File No. EB-07-MD-001 (filed Dec. 28, 2009) at 6-8
("Reconsideration Opposition") (citing 14 factors identified by the
See supra note 36
Petition for Reconsideration at 20-21.
Second Recon Order, 24 FCC Rcd at 14813, n.98.
In its complaint, Qwest pled Counts II and III in the alternative. See
Complaint at 22, 25, P:P: 43, 52. The Commission is permitted to rely on
independent alternative grounds in a complaint proceeding. See, e.g.,
BDPCS, Inc. v. FCC, 351 F.3d 1177, 1183 (D.C. Cir. 2003); AudioText
International, Ltd, v. AT&T Corp., Memorandum Opinion and Order, 19 FCC
Rcd 3429, 3440 P: 30 (2004).
Farmers suggests that this conclusion is contrary to law because it
creates "a completely new form of traffic," or alternatively, that the
Commission lacks jurisdiction because the service that Farmers provided to
the conference calling companies is "private carriage." Petition for
Reconsideration at 21-23. This argument is specious. At issue in the
reconsideration proceeding was "whether the conference calling companies
were `end users' within the meaning of the switched access provisions of
Farmers' tariff." Second Recon Order, 24 FCC Rcd at 14805, P: 10. The
Commission has jurisdiction to make this determination. Moreover, as Qwest
correctly notes, the Commission did not reach the question of how that
traffic would be classified under its rules. Reconsideration Opposition at
Petition for Stay, File No. EB-07-MD-001 (filed Dec. 18, 2009) ("Petition
for Stay") at 1.
In the Matter of Shaw Communications, Memorandum Opinion and Order, 24 FCC
Rcd 5852, 5855, P: 12 (2009) (citing Virginia Petroleum Jobbers Ass'n v.
FPC, 259 F.2d 921, 925 (D.C. Cir. 1958)).
Similarly, Farmers also has not demonstrated good cause to stay the
effectiveness of the Commission's Second Recon Order. See 47 CFR S:
1.106(n) ("[U]pon good cause shown, the Commission will stay the
effectiveness of its order or requirement pending a decision on the
petition for reconsideration.").
Moreover, as the above analysis explains, we disagree that the Second
Recon Order is arbitrary and capricious, and conclude that Farmers will
not prevail on the merits. Further, we give no credence to Farmers' public
interest argument, because, as explained below, the Second Recon Order is
a liability order that will not "bankrupt Farmers." Petition for Stay at
Petition for Stay at 4-5.
Petition for Stay at 5.
47 C.F.R. S: 1.722(d)(2).
Second Recon Order, 24 FCC Rcd at 14801, P: 1.
Washington Gas Co. v. FERC, 758 F.2d 669, 674 (D.C. Cir. 1985) (citations
Federal Communications Commission FCC 10-43
Federal Communications Commission FCC 10-43