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
Alpine Communications, LLC, Clear Lake
) File No.: EB-12-MD-003
Independent Telephone Co., Mutual
Telephone Co. of Sioux Center, Iowa, )
Co., and Winnebago Cooperative Telephone
MEMORANDUM OPINION AND ORDER
Adopted: September 11, 2012 Released: September 12, 2012
By the Commission:
1. In this complaint proceeding, AT&T Corp. (AT&T) asks the Commission to
find that five Iowa local exchange carriers-Alpine Communications, LLC
(Alpine), Clear Lake Independent Telephone Company (Clear Lake),
Mutual Telephone Company of Sioux Center, Iowa (Mutual), Preston
Telephone Company (Preston), and Winnebago Cooperative Telecom
Association (Winnebago) (collectively, the Iowa LECs)-have violated
Sections 201(b) and 203 of the Communications Act of 1934, as amended
(Act). AT&T alleges that the Iowa LECs have engaged in an unlawful
"mileage-pumping" scheme that has allowed them to impose over one
hundred miles of distance-sensitive charges for the transport of
traffic that the Centralized Equal Access (CEA) provider in Iowa, Iowa
Network Services (INS), is required to provide at a flat,
distance-insensitive rate. For the reasons explained below, we grant
Counts I and II of the Complaint.
A. The Parties
2. AT&T is a New York corporation with its principal place of business in
Bedminster, New Jersey. Among other things, AT&T is an interexchange
carrier (IXC) providing telecommunications services that enable
customers from one local exchange area to call customers in other
local exchange areas.
3. Alpine, Clear Lake, Mutual, and Preston are Iowa corporations, with
principal places of business in Elkader, Clear Lake, Sioux Center, and
Preston, Iowa, respectively. Winnebago is a cooperative association
incorporated under Iowa law, with its principal place of business in
Lake Mills, Iowa. These five entities-the Iowa LECs-are incumbent
local exchange carriers (ILECs) that provide local exchange
telecommunications services in rural areas of Iowa.
4. Like other IXCs, AT&T does not have facilities extending to end user
customers. As a result, AT&T relies upon local exchange carriers
(LECs), which have such facilities, to provide "switched access
service" for the origination, transport, or termination of calls to or
from customers in a local exchange area. Generally speaking, IXCs pay
originating access charges to LECs that serve customers who initiate
long-distance calls within their local calling area and terminating
access charges to LECs that serve customers who receive long-distance
calls within their local calling area.
A. Iowa Network Services
5. In states in which there are multiple rural LECs each serving a
separate rural area, the Commission sometimes has approved and ordered
centralized equal access (CEA) arrangements. CEA service provides
presubscription and equal access capabilities through a centralized
switching system rather than through each end office switch. The
Commission first approved such a CEA arrangement in 1986, for the
state of Indiana.
6. In order to implement a CEA arrangement to carry long-distance traffic
efficiently to remote local exchanges in Iowa, about 135 rural Iowa
carriers formed a CEA provider called Iowa Network Services (INS) that
would own and operate a centralized switch in Des Moines and a fiber
"ring" that connects the centralized switch to points of
interconnection (POIs) located throughout Iowa. They developed this
arrangement in part because the costs of hauling long-distance traffic
to and from each of the many small rural carriers were high, and
competing IXCs found it too "expensive . . . to provide their own
facilities to each of these small exchanges, given the relatively low
amount of [long-distance] traffic they generate." The Commission
approved the CEA arrangement for Iowa in 1988. With the exception of
Alpine, the Iowa LECs in this case were among the carriers that formed
INS, and they remain INS shareholders.
7. Today, INS is a statewide fiber-optic network and switching system
that "offers and provides" CEA telecommunication services used to
facilitate the delivery of interstate (and intrastate) calls in Iowa.
Its central access tandem switching system is in Des Moines. Under the
INS CEA arrangement, IXCs must deliver their traffic to INS, and IXCs
generally do so by interconnecting with the INS access tandem in Des
Moines. INS then delivers the long-distance traffic received from IXCs
over its fiber ring to one of sixteen POIs located across the state.
At the POIs, the Iowa LECs connect with the INS network and transport
interstate switched access traffic between their POIs and their end
office switches. In short, IXCs and the Iowa LECs are indirectly
connected to each other through the facilities of INS.
A. The Relevant Tariffs and Traffic Agreements
8. This case concerns two tariffs. The first tariff is NECA Tariff F.C.C.
No. 5 (NECA Tariff), under which the Iowa LECs provide switched access
service to IXCs (such as AT&T) and bill the IXCs for such service. In
the NECA Tariff, "Switched Access Service" consists of three rate
categories: "End Office," "Local Transport," and "Chargeable Optional
Features." The type of Local Transport at issue in this litigation is
"Tandem Switched Transport."
9. The second tariff is the Iowa Network Access Division Tariff F.C.C.
No. 1 (INAD Tariff), under which INS provides CEA services to IXCs and
bills IXCs for such service. The terms of the INAD Tariff require IXCs
to pay INS a flat, non-distance-sensitive charge for every minute of
traffic transported on the INS fiber ring to the sixteen POIs
throughout Iowa. "Point of Interconnection" under the INAD Tariff
"denotes the demarcation point or network interface, on an Iowa
Network premises at which Iowa Network's responsibility for the
provision of [CEA] ends." The INAD Tariff imposes no charges on the
10. All five of the Iowa LECs participate in the INS CEA arrangement.
Individual Traffic Agreements govern the services INS provides to them
in connection with originating and terminating long distance traffic.
The Traffic Agreements obligate the Iowa LECs to use INS's CEA service
for all interexchange traffic bound to or from the Iowa LECs'
customers. The Traffic Agreements do not limit the amount of
interexchange traffic that INS will carry for the Iowa LECs under the
CEA arrangement, nor do they impose any charge on the Iowa LECs for
traffic carried to their POI on the INS ring, regardless of the
distance INS carries the traffic. The Traffic Agreements define "Point
of Interconnection" in an identical manner to the INAD Tariff.
A. The Iowa LECs' Effort to Increase Transport Charges
11. The Iowa LECs initially established POIs with the INS network at toll
centers in close physical proximity to their operating territories.
Then, between 2001 and 2005, each of the Iowa LECs changed its POI
with INS from the original location to Des Moines where the INS access
tandem is located. The Iowa LECs began billing AT&T mileage-based
transport charges for carrying the traffic between their local
exchanges and Des Moines. This created a significant increase in the
transport mileage used to calculate the Iowa LECs' switched access
charges. In particular, before the POI changes, none of the Iowa LECs
billed more than 65 miles of transport, and one billed only 9 miles of
transport; after the POI changes, each Iowa LEC billed over 100 miles
of transport charges. The additional transport mileage that the Iowa
LECs billed AT&T varied from a low of 79 additional miles to a high of
135 additional miles, as depicted in the following chart:
Principal Closest POI Closest POI Miles To
Iowa LEC Place of In LATA In LATA Des
POI in LATA
Alpine Elkader Cedar Rapids 65 144
Clear Lake Clear Lake Mason City 9 107
Mutual Sioux Center Sioux City 42 166
Preston Preston Davenport 38 173
Winnebago Lake Mills Mason City 25 126
12. The Iowa LECs did not build or deploy their own transport
facilities to Des Moines. Rather, they entered into what they
characterize as "leases" of virtual capacity on the INS fiber
ring facilities. Two of the Iowa LECs (Alpine and Preston)
maintain that their leases with INS are oral. The other three
Iowa LECs (Clear Lake, Mutual, and Winnebago) have written
agreements with INS titled "Agreement for Services," which list
services and corresponding prices. The Iowa LECs and INS did not
negotiate terms in any of the five purported leases, including
with respect to price. Rather, they derived the price for the
capacity leases from a pricing schedule established by INS for
participating telephone companies. INS sent bills to the Iowa
LECs for the virtual fiber capacity, and the Iowa LECs paid them.
13. The leases did not alter the functionality of INS's or the Iowa
LECs' networks. The traffic has continued to flow over precisely
the same facilities and routes as it did prior to the Iowa LECs'
purported POI changes, and INS has remained responsible for the
maintenance and operation of the leased facilities. In fact, the
Iowa LECs have no knowledge about what happened to the traffic
while it was on the INS leased facilities other than that it
reached the desired destinations, and they depended on INS to
ensure that the traffic was delivered between Des Moines and
their local exchanges.
14. The Iowa LECs entered into the lease arrangements and purported
to change their POIs with INS because, in part, they determined
that doing so would increase their net revenues and profits. And,
in fact, the leases have resulted in significant net increases in
the access charges that the Iowa LECs billed. The leases brought
about no benefits for the Iowa LECs' end user customers and no
benefits for IXCs.
A. The Parties' Dispute and the Primary Jurisdiction Referral
15. The Iowa LECs billed AT&T for, among other things, transport
service charges between Des Moines and their local exchanges.
Beginning in April 2007, AT&T contacted each of the Iowa LECs
objecting to the increased mileage charges and, pursuant to the
provisions in the NECA Tariff, notified the Iowa LECs that it was
withholding amounts that it claimed had been improperly billed as
a result of the purported move of the POIs to Des Moines. Until
about April 2008, AT&T paid these invoices in full. AT&T
subsequently began withholding payment for transport services,
and it continues to do so.
16. On December 5, 2008, the Iowa LECs filed a complaint against AT&T
in the United States District Court for the Northern District of
Iowa, seeking recovery of the access charges AT&T refused to pay.
AT&T subsequently filed counterclaims, alleging, among other
things, that the Iowa LECs have violated Sections 201(b) and 203
of the Act. The parties engaged in discovery and filed
cross-motions for summary judgment. In response to these motions,
the District Court issued an order referring "this matter . . .
to the FCC for resolution of the issues herein to the full extent
of the FCC's jurisdiction." At the Commission's instruction, the
parties prepared an agreed List of Issues that they believe the
Court's referral encompasses. They also submitted an extensive
statement of Stipulations.
17. As the Commission requested, AT&T filed the Complaint in response
to the Court's referral. In Count I of the Complaint, AT&T
alleges that the Iowa LECs have violated Sections 203 and 201(b)
of the Act by billing AT&T mileage charges not authorized under
the NECA Tariff. In Count II of the Complaint, AT&T alleges that
Iowa LECs have violated Section 201(b) of the Act because the
NECA Tariff, if construed as they propose, is unreasonable and
because they operate under "sham" arrangements.
A. The Iowa LECS Have Violated Sections 203 and 201(b) of the
18. In this section, we address the tariff violations alleged by
AT&T. First, AT&T claims that the Iowa LECs violated the NECA
Tariff by billing for mileage charges not authorized by the
tariff. Second, AT&T alleges that the defendants Mutual, Alpine,
and Preston violated the NECA Tariff by charging AT&T for
transport outside their LATAs. And third, AT&T contends that the
Iowa LECs violated the NECA Tariff by failing to give AT&T
reasonable notice of the POI change.
1. The Iowa LECs Billed AT&T Mileage Charges That Are Not
Authorized Under the NECA Tariff.
19. According to AT&T, the Iowa LECs do not have unfettered
discretion under the NECA Tariff to select a POI. Rather, the
NECA Tariff expressly incorporates the INAD Tariff's provisions
regarding location of the POI. In AT&T's view, under the INAD
Tariff, the location of the POI turns on where "responsibility"
for the traffic shifts from INS to the Iowa LECs, and AT&T
asserts that the Iowa LECs never assumed responsibility for the
traffic at Des Moines. AT&T argues that INS was responsible for
providing transport between Des Moines and the original POIs, and
that the Iowa LECs thus violated Sections 203 and 201(b) of the
Act by billing AT&T mileage charges associated with the changed
POIs. Alternatively, AT&T argues that, even if the tariff
provisions are ambiguous, the Commission should construe them in
20. As discussed below, we find that the NECA Tariff does not provide
the Iowa LECs an unqualified right to select a POI, but rather
incorporates the INAD Tariff's terms regarding POI selection. We
further find that the term "responsibility" in the INAD Tariff is
ambiguous, thereby rendering the NECA Tariff ambiguous as well.
Accordingly, we construe the tariff language against the Iowa
a. The NECA Tariff Provides that the INAD Tariff Establishes the
21. AT&T argues that Section 6.1.3(A) of the NECA Tariff "specifies
the POI[s] by referencing the INAD Tariff," and that no other
provision of the NECA Tariff addresses the Iowa LECs' POIs with
INS or otherwise authorizes the Iowa LECs to bill for transport
provided over INS's fiber ring. According to AT&T, the third
sentence of the relevant paragraph in Section 6.1.3(A) applies
and states that:
[w]hen service is provided in cooperation with a non telephone company
provider of Centralized Equal Access, the SWC will be that wire center
which would normally provide dial tone to the telephone company point
of interconnection with the non telephone company provider of
Centralized Equal Access specified in the tariff of the Centralized
Equal Access provider.
22. The Iowa LECs argue that AT&T improperly ignores the first
sentence of the relevant paragraph of Section 6.1.3(A), which
states that "where the Telephone Company elects to provide equal
access through a Centralized Equal Access arrangement, the
Telephone Company will designate the serving wire center." This
sentence, the Iowa LECs maintain, gives them the right to
designate the POI, because the SWC and the POI "will be at the
same place." We agree with AT&T that the first sentence of this
Section is not applicable, however, given the parties'
stipulation that INS is a "non telephone company" provider of
CEA. Thus, we find that, in order to determine the location of
the POI under the NECA tariff, we must look to the language of
the INAD Tariff.
a. We Construe the INAD Tariff's Definition of POI Against the
23. The INAD Tariff does not describe how the POI should be selected,
but rather provides, by way of definition, that "Point of
the demarcation point or network interface, on an Iowa Network
premises at which Iowa Network's responsibility for the provision of
Thus, under the INAD Tariff, the POI is where "responsibility" for
handling traffic shifts between INS and the Iowa LECs. According to
AT&T, the "most natural and straightforward reading of the INS
Tariff's definition of POI is that INS's responsibility ends when the
traffic is handed off by INS from its fiber ring to the facilities of
another carrier. For the Iowa LECs, AT&T says, that is not at Des
Moines but at the Iowa LECs' "traditional" POIs (which were located
close to their operating territories).
24. Although they repeatedly note in their Answer that the INAD
Tariff lists sixteen potential POIs (including Des Moines), the
Iowa LECs accept AT&T's proposition that ascertaining which
carrier has responsibility for handling traffic is key to
determining the actual POI. In other words, they acknowledge that
if the Commission finds that INS retained responsibility for the
traffic between Des Moines and the former POIs, the Iowa LECs'
POIs cannot be in Des Moines. Where the Iowa LECs differ with
AT&T is in their interpretation of the term "responsibility."
25. Relying upon the leases they entered into with INS, the Iowa LECs
contend that "responsibility" means "accountability" for CEA
service. The Iowa LECs maintain that, by virtue of the leases,
they had "exclusive" use of fiber and therefore acquired the
means to transport the traffic. Leased facilities, the Iowa LECs
say, are a telecommunication carrier's facilities for purposes of
imposing charges under a tariff. They further note that AT&T
itself does not own all the facilities it uses to conduct its
business and that AT&T leases facilities and recovers a portion
of its leased costs in its pricing to its customers. Thus, the
Iowa LECs argue that they assumed "responsibility" when they
entered into the leases within INS, and they are entitled to
impose access charges. In their view, whether they physically
maintained the network facilities is irrelevant.
26. In contrast, AT&T argues that construing the term
"responsibility" to mean strictly legal "accountability" is too
narrow. According to AT&T, it would be an "unnatural reading of
the tariff provision to contend that INS has `end[ed]' its
responsibility for the provision of CEA services even though INS
. . . continues to own, control, operate, and maintain the
facilities that are used to provide the CEA service." AT&T
asserts that the leases between INS and the Iowa LECs neither
ended INS's "responsibility" for the provision of CEA service nor
provided the Iowa LECs with responsibility and control of INS's
network. The oral leases, AT&T argues, were merely "paper
changes" supported by only vague evidence that the Commission
should discount, and the written leases expressly provided that
ownership and control of the INS network remained with INS.
27. We find that both the Iowa LECs and AT&T have presented
reasonable constructions of the term "responsibility." On the one
hand, the Iowa LECs make a valid point that it is not uncommon
for carriers to use leased facilities and impose charges for
traffic sent over them. On the other hand, AT&T plausibly asserts
that, notwithstanding the leases, INS retained control of its
facilities, and INS handled the traffic in the same manner. Thus,
we find the term "responsibility" to be ambiguous in this
context. In such circumstances, it is "well-established . . .
that any ambiguity in a tariff is construed against the party who
filed the tariff." Consequently, we construe the language in the
INAD Tariff and, in turn, the NECA Tariff, against the Iowa LECs.
28. In this instance, then, the POI is the point at which the Iowa
LECs connect with INS. The parties stipulated that the "leases"
did not alter the functionality of INS's or the Iowa LECs'
networks, and traffic continued to flow over precisely the same
facilities as it did prior to the Iowa LECs purported POI
changes. INS remained responsible for the maintenance and
operation of the lease facilities and, indeed, the Iowa LECs have
no knowledge about what happened to the traffic while it was on
the leased facilities. Just as before the purported POI change,
the Iowa LECs relied entirely upon INS to deliver traffic between
Des Moines and their local exchanges. Any notion that the Iowa
LECs validly changed their POIs by virtue of these "leases" is
further belied by the fact that INS continued to charge AT&T a
flat rate that covers switching and transport.
29. Moreover, tariffs should be construed to avoid "unfair, unusual,
absurd or improbable results" and should be interpreted to
"advance the purpose for which the tariff was imposed." We find
that this principle has applicability here. As explained in more
detail below, the Iowa LECs stipulate that moving their POIs to
Des Moines had no benefits for their end user customers or IXCs,
yet substantially increased access charges billed to IXCs. This
outcome is directly contrary to the purpose of the Iowa CEA
arrangement. That is, the Commission approved the creation of INS
in order to lower the cost of transporting traffic from Des
Moines to the various remote rural exchanges, and thus encourage
more IXCs to compete in those areas. Accordingly, the ambiguous
tariff provisions should be construed against the Iowa LECs.
30. For all of the foregoing reasons, we grant Count I of the
Complaint because the Iowa LECs' billed mileage charges are not
authorized under the NECA Tariff.
1. Mutual, Alpine, and Preston Violated the NECA Tariff by
Charging AT&T for Transport Service Outside Their LATAs.
31. AT&T contends that defendants Mutual, Alpine, and Preston
violated the NECA Tariff by charging for transport service
outside their local access and transport areas (LATA). AT&T
maintains that two independently dispositive clauses of the NECA
Tariff support its contention that the billing of transport
services outside a LEC's LATA falls outside the scope of the
tariff. According to AT&T, the NECA Tariff authorizes charges
only for access "within a LATA," yet these three defendants have
billed AT&T for transport to and from Des Moines, which is
outside the LATAs in which they serve their local customers (and
have local exchanges).
32. First, AT&T argues that the title page of the NECA Tariff
expressly circumscribes the area in which the access service
(including transport) may be provided, stating that the tariff
governs "the provision of Access Services within a Local Access
and Transport Area (LATA) or equivalent Market Area." AT&T
maintains that, by its plain terms, the NECA Tariff does not
apply to services like the transport services provided by Mutual,
Alpine, and Preston, that extend beyond their LATA boundaries.
Mutual, Alpine, and Preston have stipulated that Des Moines is
outside the LATAs in which they serve their local customers.
Although they disagree with AT&T's interpretation of this tariff
language, the Iowa LECs have offered nothing to counter its
33. Second, AT&T relies upon Section 6.1 of the tariff, which states:
Switched Access Service provides for the ability to originate calls
from an end user's premises to a customer designated premises, and to
terminate calls from a customer designated premises to an end user's
premises in the LATA where it is provided.
34. AT&T argues that this provision requires switched access services
to be provided in the same LATA as the end user's premises where
the calls originate or terminate. The Iowa LECs contend that this
sentence does not require them to provide access facilities in a
single LATA. Rather, according to the Iowa LECs, the LATA
reference in Section 6.1 is limited to the location of the LECs'
local exchange customers. On its face, however, Section 6.1
provides that Switched Access Service (which includes transport)
entails the ability to originate and terminate calls "to an end
user's premises in the LATA where it is provided." "It" refers to
the switched access service, which must be provided in the same
LATA as the end user's premises where the calls originate or
terminate. As noted above, the parties stipulate that Des Moines
is outside the LATAs in which Mutual, Alpine, and Preston service
their end users. Thus, they are charging AT&T for access services
(transport) that they provide, in part, outside the LATA of their
end users. Therefore, we agree with AT&T that the disputed
mileage charges for transport outside the LATA by these three
LECs are not authorized by the language in the NECA Tariff and
thus are unlawful.
1. The Iowa LECs Also Violated the NECA Tariff by Failing to
Provide AT&T with Reasonable Notice of Any Purported POI
35. AT&T also argues that the Iowa LECs failed to abide by the NECA
Tariff's requirements that they provide reasonable notice to AT&T
of POI changes. Section 2.1.9, entitled "Notification of
Service-Affecting Activities," states:
The Telephone Company will provide the customer reasonable
notification of service-affecting activities that may occur in the
normal operation of its business. Such activities may include, but are
not limited to the following:
- equipment or facilities additions,
- removals or rearrangements,
- routine preventative maintenance, and
- major switching machine change-out.
Generally, such activities are not individual customer service
specific, but may affect many customer services. No specific advance
notification period is applicable to all service activities. The
Telephone Company will work cooperatively with the customer to
determine reasonable notification requirements.
36. AT&T claims that the change of POIs is necessarily a
"service-affecting activity" under the NECA Tariff. We agree. The
NECA Tariff provides examples of service-affecting activities.
Although "change of POI" is not one of them, the list includes
"rearrangements," which we believe applies. The Iowa LECs
characterize the POI as the "location where the facilities of
INAD meet the facilities of the LEC." A change in that
location-especially when accompanied by a significant increase in
mileage charges-is tantamount to a "rearrangement" affecting
service. Consequently, the NECA Tariff obligated the Iowa LECs to
provide reasonable notice to AT&T when they changed their POIs.
37. AT&T argues that it did not receive actual notice of the POI
changes. However, two of the Iowa LECs contend that they in fact
gave actual notice of the changes to AT&T in the form of
correspondence. Specifically, Winnebago asserts that it notified
AT&T by including a letter with its October 2, 2001, bill that
stated: "Winnebago Cooperative Telephone Association will be
changing its POP location from Mason City, Iowa to Des Moines,
Iowa. This will become effective on October 11, 2001 and the
carrier access bills for usage after that date starting with the
December 1, 2001 CABS bill will reflect the change in the
transport facility." Although the letter was not signed,
addressed, or accompanied by proof of delivery, AT&T does not
deny receiving it, and we find that it adequately alerted AT&T to
the POI change. Preston asserts that it sent a letter to AT&T
apprising AT&T of the POI change, but Preston could not produce a
copy of the purported letter or any specific information about
the letter. Rather, Preston relied exclusively upon the
deposition testimony of Roger Kilburg who, without the benefit of
any documentary evidence, claimed to have detailed recollection
about mailing the letter more than eight years earlier. Given the
lack of documentary evidence supporting Mr. Kilburg's assertion,
we decline to credit his testimony, and we find no basis to
conclude that there was a letter providing notice to AT&T.
38. Further, we find that the adjustments that the Iowa LECs made to
the Local Exchange Routing Guide (LERG) and to another NECA
tariff did not provide constructive notice to AT&T. The
Commission's formal complaint rules require parties to plead all
facts in support of their claims and defenses fully and with
specificity. The Iowa LECs, however, did not specify the language
in the LERG or the tariff that they claim satisfies their notice
obligations. In the absence of any specific evidence/explanation
by the Iowa LECs, we cannot find that updates to the LERG and
revisions to NECA Tariff No. 4 constitute "reasonable" notice.
Thus, even if the Iowa LECs changed their POIs, those changes
were done in violation of the NECA Tariff because, with the
exception of Winnebago, the Iowa LECs failed to provide AT&T with
reasonable notice of the changes as required by the Tariff.
A. Alternatively, The Iowa LECs Have Violated Section 201(b) of the
Act Because the NECA Tariff is Unreasonable to the Extent It
Allows the Iowa LECs to Change Their POIs for the Sole Purpose
of Inflating Mileage Charges Paid by IXCs.
39. In Count II of the Complaint, AT&T alleges that if the NECA
Tariff is interpreted to grant the Iowa LECs an "unqualified"
right to change POIs, and thereby authorize billing vastly
increased mileage charges without corresponding benefit to
customers, the Iowa LECs have violated Section 201(b) of the Act
because the Tariff is unreasonable. AT&T further alleges that the
Iowa LECs have violated Section 201(b) by engaging in "sham
arrangements" designed to inflate mileage charges. We agree that,
if the NECA Tariff were to be interpreted (contrary to our
findings in part III.A) to allow the Iowa LECs to change their
POIs as proposed, the NECA Tariff would be unreasonable in the
respect AT&T identifies. Because this determination affords AT&T
all the relief it seeks in Count II, we do not reach the "sham
1. The Section 201(b) Claims Are Properly Before the Commission.
40. Before reaching the merits of Count II, we address the Iowa LECs'
contention that the Section 201(b) claims that are the subject of
Count II of the Complaint are not properly before the Commission.
Specifically, the Iowa LECs maintain that the federal courts do
not have authority to determine the reasonableness of a tariff
that has been approved by the Commission, as have both the NECA
Tariff and the INAD Tariff. The tariff of a telecommunications
carrier, they assert, becomes "legal" when it is filed with an
agency and becomes effective, and a carrier cannot be said to
have engaged in unjust and unreasonable practices if it was
exercising rights afforded to it under a legal tariff. In the
Iowa LECs' view, the Court on referral accordingly has not sought
guidance on the reasonableness of the tariffs, and the scope of
this proceeding is limited to issues of tariff interpretation.
41. This argument fails in several respects. To begin, under Section
206 of the Act, the federal courts have subject matter
jurisdiction over claims that common carriers have committed any
"act, matter or thing in this Act prohibited or declared to be
unlawful." Thus, AT&T properly brought its Section 201 claims in
federal court, and the court was within its discretion to refer
them to the Commission under the primary jurisdiction doctrine.
The Commission, too, has authority under Section 208 of the Act
to resolve formal complaints alleging violations of Section
42. Moreover, the scope of the issues referred included AT&T's
Section 201(b) claims. Although it denied summary judgment, the
district court noted that AT&T had sought referral of its
counterclaims, "including" (i.e., not limited to) "interpretation
of a number of technical terms within tariffs." The court stayed
the case and stated that the "matter is referred to the FCC for
resolution of the issue herein to the full extent of the FCC's
jurisdiction." The parties' Joint List of Issues included Issue
3, which broadly asked whether the LECs are "engaged in unjust
and unreasonable practices in violation of Section 201(b) of the
Act in connection with the furnishing of interstate communication
services." The parties did not limit Issue 3 to Section 201(b)
violations arising from billing in violation of the NECA Tariff,
and the Commission instructed AT&T simply to "file a formal
complaint against the LECs that raises issues 1 and 3 above."
43. Finally, in asserting that the NECA tariff is immune from review
for reasonableness because it is "legal," the Iowa LECs confuse
"legality" and "lawfulness":
"Legality" mainly addresses procedural validity. . . . A particular
rate . . . becomes "legal" when it is filed with an agency and becomes
effective. But a rate's legality is not enough to establish its
substantive reasonableness or "lawfulness." . . . A carrier charging a
merely legal rate may be subject to refund liability if customers can
later show that the rate was unreasonable. . . . Should an agency
declare a rate to be lawful, however, refunds are thereafter
impermissible as a form of retroactive ratemaking.
What's more, although tariffs that are "deemed" lawful are not subject
to refunds, if a "later reexamination shows them to be unreasonable,"
the Commission may afford prospective relief.
1. The Uncontroverted Evidence Demonstrates that the Iowa LECs'
Purported POI Changes Significantly Increased AT&T's Operating
Costs Without Providing Any Enhanced Service Choices or
Benefits to Customers.
44. Should the Commission interpret the NECA Tariff to permit the
Iowa LECs to change their POIs to Des Moines, AT&T argues that "a
tariff that provides a LEC with an `unqualified' or `absolute'
right to select a POI with a CEA provider directly contravenes
the Commission's orders authorizing CEA arrangements."
Specifically, AT&T relies upon the Commission's statements in
Indiana Switch rejecting AT&T's challenge to the ability of
independent LECs (ITCs) to "control . . . the designation of
[POIs]." The Commission stated:
[T]he cost increases ISAD's proposed arrangement imposes on AT&T are
outweighed by the proposal's benefits to thousands of subscribers in
Indiana. . . . If in some future case an IXC demonstrates that an
ISAD-like proposal significantly increases IXCs' operating costs
without significant increases in service choices or benefits to
subscribers, or unreasonably designates ITC points of interconnection
with IXCs, we may reach a different result. In other words, our
decision permitting ISAD to proceed should not be interpreted as
unbounded authority on the part of ITCs, or their affiliates, to
determine points of interconnection with IXCs.
According to AT&T, the NECA Tariff cannot reasonably authorize the
Iowa LECs to change POIs and increase costs on the IXCs unless there
are also significant increases in service choices or other benefits.
AT&T further asserts that there are no such benefits in this case. The
undisputed evidence confirms AT&T's assertion.
45. The Iowa LECs make several important admissions in this case. To
begin, they concede that they "entered into the lease agreements
and purported to change their POIs with INS because, in part,
they determined that they would increase their net revenues and
profits." Moreover, the relocated POIs and leases with INS
admittedly have "resulted in net increases in the access charges"
they billed. Indeed, the Iowa LECs acknowledge that, as a result
of their conduct, IXCs' local transport costs have increased by
as much as seven times. Finally, the Iowa LECs admit that their
relocated POIs and leases "brought about no benefits for the[ir]
end user customers ... and no benefits for IXCs." In other words,
the stipulated record demonstrates that the Iowa LECs' conduct is
precisely the type of future questionable behavior that the
Commission contemplated in Indiana Switch. We conclude that the
NECA Tariff is unjust and unreasonable in violation of Section
201(b) to the extent it allows the Iowa LECs' admitted
manipulation of POIs undertaken with the intent and effect of
"pumping" mileage charges.
46. Citing interrogatory responses filed in the underlying
litigation, the Iowa LECs make a fleeting attempt at the end of
the Answer to identify "various advantages" they accrued from
changing their POI to Des Moines. Specifically, the Iowa LECs
posit that these advantages include: "cost savings; more
efficient aggregation of traffic; the ability to provide a wider
variety of increased, future service, redundancy and the ability
to interface with the networks of other telecommunications
providers." Having reviewed the interrogatory answers, as well as
deposition testimony of the Iowa LECs concerning the purported
"advantages" of relocating their POIs, we conclude that their
strained attempts to manufacture other reasons for moving the POI
utterly lack credibility and do not support the merits of their
contention. Indeed, most of the purported "advantages" touted by
the Iowa LECs relate to improvements on the LEC side of the
POI-i.e., efficiencies that have nothing to do with the
facilities/services that are the subject of the leases between
INS and the Iowa LECs.
47. The Iowa LECs' remaining defenses fare no better. First, the Iowa
LECs protest that Indiana Switch does not represent a Commission
"blanket policy" concerning CEA arrangements and the rights of
LECs to designate POIs. We agree. Our decision today rests not
upon an overarching rule, but upon the particular stipulated
record in this case. The Iowa LECs further argue that, "[w]hile
the specific costs do increase on these routes, there is no
indication that the cost of CEA in Iowa is greater than if all
the IXCs had to make connection with all the LECs in Iowa." Even
if true, that does not justify a tariff provision that allows the
Iowa LECs to change their POIs solely to inflate mileage charges.
A justification for imposing costs on IXCs without corresponding
benefits to consumers undermines the goal of the Iowa CEA
arrangement, which was to "speed the availability of high
quality, varied competitive services to small towns and rural
48. Second, the Iowa LECs contend that INS reduced its cable and wire
facility expenses to reflect the reduction in its transport
facilities in circumstances where the transport service is
provided by the Iowa LECs. The parties stipulated, however, that
"INS has not quantified any resulting actual reduction in the
rates paid by IXCs." Moreover, INS's flat rate still covers both
tandem switching and transport, INS has continued to bill AT&T
that CEA rate, and the Iowa LECs are also billing AT&T for
transport. Finally, any reduction in INS's rate does not offset
the substantial increases in billed transport.
IV. ORDERING CLAUSEs
49. Accordingly, IT IS ORDERED, pursuant to Sections 1, 4(i), 4(j),
201, 203, 206, and 208, of the Communications Act of 1934, as
amended, 47 U.S.C. S:S: 151, 154(i), 154(j), 201, 203, 206, 208,
that Count I of the Complaint is GRANTED to the extent indicated
50. IT IS FURTHER ORDERED, pursuant to Sections 1, 4(i), 4(j), 201,
203, 206, and 208, of the Communications Act of 1934, as amended,
47 U.S.C. S:S: 151, 154(i), 154(j), 201, 203, 206, 208, that
Count II of the Complaint is GRANTED to the extent indicated
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
47 U.S.C. S:S: 201(b), 203; Formal Complaint of AT&T Corp., File No.
EB-12-MD-003 (filed Apr. 13, 2012) (Complaint).
In accordance with Section 1.722(d) of the Commission's rules, AT&T
requests that the Commission determine damages in a separate
proceeding. Complaint at 29, para. 75, 31, para. 83 (citing 47 C.F.R.
S: 1.722(d) (setting forth the requirements a complainant must satisfy
if it "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 are made").
Because this Order finds in AT&T's favor on liability, AT&T may file
with the Commission a supplemental complaint for damages in accordance
with 47 C.F.R. S: 1.722(e) ("If a complainant proceeds pursuant to
paragraph (d) of this section . . . the complainant may initiate a
separate proceeding to obtain a determination of damages by filing a
supplemental complaint . . . . ").
Complaint, Ex. 3 (Stipulations with Regard to Referred Matters in
Alpine et al. v. AT&T (Stipulations)) at 2, para. 6.
Stipulations at 2, para. 9.
Stipulations at 1-2, paras. 1-4.
Stipulations at 2, para. 5.
Stipulations at 2, para. 8.
Stipulations at 2, para. 10.
Stipulations at 2-3, paras. 11-13.
Stipulations at 3, para. 15, 18, para. 114.
Stipulations at 4, para. 21.
See Coon Valley Telephone Company, et al., Petitions for Waiver of the
Four Digit Carrier Identification Code (CIC) Implementation Schedule,
Order, 13 FCC Rcd 17490, 17494, para. 8 (Com. Car. Bur., Network
Services Div. 1998).
Stipulations at 4, para. 22. See Application of Indiana Switch Access
Div., Memorandum Opinion & Order, 1 FCC Rcd 634 (1986) (Indiana
Stipulations at 4, para. 25.
Stipulations at 5, para. 34 (citing Application of Iowa Network Access
Division, Memorandum Opinion, Order, and Certificate, 3 FCC Rcd 1468,
1468, para. 3 (Com. Car. Bur. 1988) (INAD Application Order)).
Stipulations at 4, para. 22. See INAD Application Order.
Stipulations at 4, paras. 23-24.
No intrastate calls - i.e., calls originated and terminated in the
same state-are at issue in this proceeding. Stipulations at 4, para.
Stipulations at 5, paras. 27-28. INS is a single legal entity with
three divisions: netINS, which provides internet access services; the
Interexchange Carrier Division (INICD), which owns the INS facilities;
and the Access Division (INAD), which leases digital switching, fiber
optic transmission capacity, and certain related services from INICD
to provide CEA service. Stipulations at 6, para. 37.
Stipulations at 5, para. 29.
Stipulations at 6, para. 38.
Stipulations at 5, para. 33, 6, para. 39, 25, para. 156. INS will
deliver traffic to any of the sixteen POIs, which include Cedar
Rapids, Clarinda, Creston, Davenport, Des Moines, Fort Dodge,
Grinnell, Knoxville, Mason City, Mount Ayr, Mount Pleasant, Newton,
Osceola, Omaha, Sioux City, and Spencer. Stipulations at 7, paras.
Stipulations at 5, para. 32, 6, para. 41, 25, para. 157.
Stipulations at 6, para. 41.
As explained below in section III.A.1, the parties disagree about
whether and how the tariffs interrelate regarding the right of the
Iowa LECs to determine the POI.
Stipulations at 3-4, paras. 14, 19. The Iowa LECs do not file
individual tariffs. Rather, they utilize tariffs administered by the
National Exchange Carrier Association (NECA). Qualifying carriers are
permitted to participate in the traffic-sensitive cost and revenue
pool that NECA administers on behalf of the vast majority of small
telephone companies. See 47 C.F.R. S:S: 69.601-69.610. NECA files
tariffed access rates that apply whenever an IXC uses any pool
member's NECA-tariffed access services. See 47 C.F.R. S: 69.3(d).
Complaint, Ex. 6 (NECA Tariff S: 6.1.3, 4th Rev. Page 6-5).
Stipulations at 3, para. 14. See Complaint, Ex. 6 (NECA Tariff S:
6.1.3, 4th Rev. Page 6-5). AT&T originally challenged the Iowa LECs'
practices and charges relating to an additional element of Local
Transport called "Tandem Switched Termination." Complaint at 20-22,
paras. 51-54 & n.58. However, AT&T subsequently moved to sever these
claims and convert them into an informal complaint, which it requested
be stayed. See Motion of AT&T Corp. to Sever Claims Relating to
Multiple Termination Charges, File No. EB-12-MD-003 (filed May 31,
2012). Defendants did not oppose AT&T's motion, and we granted it.
See Defendants' Response to Motion of AT&T Corp. to Sever Claims
Relating to Multiple Termination Charges, File No. EB-12-MD-003 (filed
June 7, 2012); see also Letter from Rosemary McEnery, FCC, to Counsel
for the Parties, File No. EB-12-MD-003 (filed June 11, 2012).
Stipulations at 5, para. 26.
Complaint at 2-3, paras. 4-5; Defendants' Answer to Formal Complaint
of AT&T Corp., File No. EB-12-MD-003 (filed May 3, 2012) (Answer) at
4, paras. 4-5. See Iowa Network Access Div. Tariff F.C.C. No. 1.,
Order, 4 FCC Rcd. 3947, paras. 2, 5 (1989).
Reply, Legal Analysis at 7 (citing INAD Tariff S: 2.5, 1st Rev. Page
Stipulations at 7, para. 48.
Stipulations at 7, paras. 47-48. Because Alpine is not an INS
shareholder, its agreement with INS is titled "Traffic Agreement."
Stipulations at 8, para. 49. See Complaint Conf. Ex. 19 (Alpine
agreement). The other Iowa LECs' agreements with INS are titled
"Shareholder Traffic Agreements." Stipulations at 7, para. 47. See
Complaint Conf. Exs. 20, 21, 22, and 23 (agreements of Clear Lake,
Mutual, Preston, and Winnebago). The Traffic Agreement does not differ
in any material way from the Shareholder Traffic Agreements.
Stipulations at 8, paras. 49-50.
Stipulations at 8, para. 51.
Stipulations at 8, paras. 54-55.
Stipulations at 8, para. 55.
Stipulations at 8, para. 56 (citing Traffic Agreements, S: 1(D) and
INAD Tariff F.C.C. No. 1 S: 2.6). The NECA Tariff does not define the
Stipulations at 9, para. 57. Specifically, the initial POIs were as
follows: Alpine - Cedar Rapids - established in 1997; Clear Lake -
Mason City - established in 1989; Mutual - Sioux City - established in
1989; Preston -Davenport - established in 1989; Winnebago - Mason City
- established in 1987. Stipulations at 9, para. 58.
Stipulations at 9, paras. 60-61.
Stipulations at 9, para. 60.
Stipulations at 9, para. 61, 19, para. 120.
Stipulations at 9, para. 61, 19, para. 120.
Stipulations at 14, para. 84, 15-17, paras. 92, 94-96, 98-99.
See Stipulations at 55, para. 91.
Stipulations at 12, para. 74.
Stipulations at 11, para. 73.
Stipulations at 12, para. 77.
Stipulations at 12, para. 77, 15, para. 88. The one exception is that
INS did not bill Preston for its purported lease from its inception in
November 2005 until April 2009, and has never charged Preston for
those prior months. Stipulations at 12, paras. 75-76, 15, para. 88.
Stipulations at 14, para. 84.
Stipulations at 16, paras. 94-95.
Stipulations at 16-17, paras. 98-99.
Stipulations at 11, para. 71.
Stipulations at 19, para. 120.
Stipulations at 17, para. 100. Indeed, INS continues to bill AT&T its
flat, distance-insensitive charge, which covers transport to any point
on the INS ring, regardless of distance. Stipulations at 17, para.
101. Although INS stated that, after entering into the lease
arrangements with the Iowa LECs, it excluded from the costs used by
the Commission to determine INS's CEA rate the internal costs
associated with the leases, INS has not quantified any resulting
actual reduction in the rates paid by IXCs. Stipulations at 18, para.
Stipulations at 22, para. 142.
Stipulations at 22, para. 143.
Stipulations at 22, para. 144.
Stipulations at 22-23, paras. 144-46.
Stipulations at 23, para. 147.
Complaint, Ex. 10 (Complaint, Alpine Commc'ns, LLC, et al. v. AT&T
Corp., No. 08-1042 (N.D. Iowa filed Dec. 5, 2008)).
Complaint, Ex. 2 (AT&T Counterclaims, Alpine Commc'ns, LLC, et al. v.
AT&T Corp., No. 08-1042 (filed Jan. 15, 2009)).
See Complaint at 9, paras. 21-22; Answer at 10-11, paras. 21-22;
Order, Alpine Commc'ns, LLC, et al. v. AT&T Corp., No. 08-1042 (N.D.
Iowa Dec. 16, 2010) (Alpine Primary Jurisdiction Order) at 4.
Alpine Primary Jurisdiction Order at 5.
Complaint Ex. 5, Alpine v. AT&T - Issues List Re FCC Referral (Joint
List of Issues). The Joint List of Issues identifies three issues (the
first of which contains seven subparts) that the parties agree were
the subject of the Court's referral. The first two issues ask whether
the Iowa LECs violated the terms of the NECA Tariff and/or Section 203
of the Act. The third issue inquires whether the Iowa LECs engaged in
unjust and unreasonable practices in violation of Section 201(b) of
Complaint Ex. 3, Stipulations.
Complaint at 4, para. 8. See Reply and Reply Legal Analysis of AT&T
Corp., File No. EB-12-MD-003 (filed May 10, 2012), Ex. 1 (Letter from
Lisa B. Griffin, FCC, to Counsel for the Parties, File No.
EB-12-MD-003 (Jan. 17, 2012) (January 17th Letter Ruling)).
Complaint at 4-5, paras. 10-11, 27-28, paras. 67-72; Reply at 6-7.
Complaint at 5, para. 12, 27-28, paras. 67-71, 73; Reply at 22-23.
Complaint at 5-6, para. 13, 27-28, paras. 67-71, 74; Reply at 23-24.
Complaint at 5, para. 10, 6, para. 15, 45, para. 111, 47, para. 114,
53, para. 128, 54-5, paras. 130-31.
Complaint at 41-42, para. 106.
Complaint at 36-40, paras. 93-103
Complaint 38, para. 98, 40, para. 102.
Complaint at 32-49, paras. 86-118; Reply, Legal Analysis at 6.
Complaint at 5, para. 11, 45-49, paras. 112-18.
See footnote 101 below.
Complaint, Legal Analysis at 33, para. 88, 41-42, para. 106 (citing
NECA Tariff S: 6.1.3(A), Original Page 6-7.3); Reply, Legal Analysis
at 7. In its entirety, the relevant paragraph of Section 6.1.3(A) of
the NECA Tariff states:
Unless otherwise ordered by the F.C.C., where the Telephone Company
elects to provide equal access through a Centralized Equal Access
arrangement, the Telephone Company will designate the serving wire
center. The designated SWC will normally be that wire center which
provides dial tone to the telephone company Centralized Equal Access
tandem office identified in NATIONAL EXCHANGE CARRIER ASSOCIATION,
INC. TARIFF F.C.C. NO. 4. When service is provided in cooperation with
a non telephone company provider of Centralized Equal Access, the SWC
will be that wire center which would normally provide dial tone to the
telephone company point of interconnection with the non telephone
company provider of Centralized Equal Access specified in the tariff
of the Centralized Equal Access provider. Those Telephone Company
offices providing equal access through centralized arrangements are
identified in NATIONAL EXCHANGE CARRIER ASSOCIATION, INC. TARIFF
F.C.C. NO. 4.
Complaint, Legal Analysis at 33, para. 88, 41-42, paras. 105-06;
Reply, Legal Analysis at 9.
Complaint, Legal Analysis at 33, para. 88, 41-42, para. 106 (citing
NECA Tariff S: 6.1.3(A), Original Page 6-7.3 (emphasis added)).
Answer, Legal Analysis at 35, paras. 106-07 (citing NECA Tariff S:
6.1.3(A), Original Page 6-7.3 (emphasis added)), 36, para. 108.
Answer, Legal Analysis at 36, para. 108.
Stipulations at 21, para. 129. The Iowa LECs further maintain that
sections 6.4.7 and 6.8.3 of the NECA Tariff, which state that the
"Telephone Company will designate the . . . routing to be used where
equal access traffic is provided through a centralized equal access
arrangement," give them discretion to select any POI. Answer, Legal
Analysis at 34, para. 105. Routing of calls referenced in those
sections describes only the call path and not the designation of the
POI. Indeed, the Iowa LECs appear to have conceded as much by
stipulating that, regardless of whether the POIs were the original
POIs or Des Moines, the traffic "has continued to flow over precisely
the same . . . route." Stipulations at 16, para. 94.
Reply, Legal Analysis at 7 (citing INAD Tariff S: 2.5, 1st Rev. Page
Complaint, Legal Analysis at 35, para. 91.
Complaint, Legal Analysis at 35, para. 91.
Answer, Legal Analysis at 27, para. 90, 28, para. 91, 35, para. 106,
43-44, para. 129, 45, para. 132.
Answer, Legal Analysis at 27-33, paras. 90-101, 36, para. 108. In
light of this acknowledgement, we find other evidence regarding LECs'
POI selections and the views of third party "experts" to be
irrelevant. See Answer, Legal Analysis at 34, para. 105; Answer Ex. H,
Affidavit of Burnie E. Snoddy at 2, paras. 3-4.
See Answer, Legal Analysis at 25, para. 86 & n.24, 27-28, para. 90.
Answer, Legal Analysis at 25, para. 86, 28, para. 91, 29-33, paras.
93, 96-98, 100. In other words, "if AT&T [had] an issue with the
traffic," it would contact the Iowa LECs. Answer, Legal Analysis at
29-30, paras. 93, 94. See Stipulations at 16-17, paras. 94-99.
Answer at 6, para. 10, 21, para. 72, 25, para. 86, 27, para. 90,
29-30, para. 93-94, 31, para. 97, 33-34, paras. 103-04
Answer, Legal Analysis at 25, para. 86.
Answer, Legal Analysis at 25, para. 86 & n.24.
Answer, Legal Analysis at 27-30, paras. 90, 93-94, 33-34, para. 103.
Answer, Legal Analysis at 30-33, paras. 96-98, 100, 101.
Reply, Legal Analysis at 17.
Reply, Legal Analysis at 17. See also Reply, Legal Analysis at 16-17
(the INS Tariff's reference to "responsibility" is "most naturally and
sensibly read to mean that [INS] has `responsibility' for the
provision of CEA service whenever the underlying facilities used to
provide the service are owned, controlled, operated, and maintained by
any part of INS."). The Iowa LECs spend considerable time in the
Answer making distinctions between two divisions of INS-INICD and
INAD. Specifically, they argue that INAD "removed the facilities
leased by the Iowa LECs from their facilities leased from" INICD, and
thus that INAD no longer has responsibility for the services provided
between Des Moines and the "traditional" POIs. See Answer at 3, para.
2, 6-7, para. 10, 17-19, paras. 59-62, 21, para. 72, 25-31, paras. 86,
89-96, 33-34, paras. 103-04, 47-49, para. 43. The Iowa LECs further
claim that their leases with INICD provide them with "responsibility"
over the INS facilities and the authority to bill for transport. See
Answer at 5-7, paras. 7, 10, 10, para. 18, 16-18, paras. 57-58, 60,
61, 24, para. 83, 25, para. 86, 26-27, paras. 89-90, 30-31, para. 96,
33-34, para. 103, 38, para. 113, 51-52, paras. 154-55. Because this
Order analyzes whether the Iowa LECs, as opposed to any part of INS,
exercised "responsibility" (as used in the INAD Tariff), we agree with
AT&T that there is no need to focus extensively on the relationship
between INICD and INAD. See Reply, Legal Analysis at 13 ("the Iowa
LECs place far too much weight on the existence of INS' internal
divisions and the use of leases between those divisions").
Reply, Legal Analysis at 13.
Complaint, Legal Analysis at 37, para. 85; Reply, Legal Analysis at
Reply, Legal Analysis at 18-20. AT&T claims that the leases actually
were "agreements for services." Reply, Legal Analysis at 20.
Answer at 18 & Answer Ex. F., Supplement Expert Witness Report of
Burnie Snoddy at 2 (noting that the leasing of network capacity and
facilities is a standard industry practice). See also Joint Statement
at 14-15, Stipulations 85-87, Reply at 21 (noting the use of leases to
provide "wholesale transport service").
Complaint, Legal Analysis at 36-40; Reply at 5, 18-22.
AT&T Corp. v. Ymax Communications Corp., Memorandum Opinion and Order,
26 FCC Rcd 5742, 5755, para. 33 (2011) (citing Associated Press v.
FCC, 452 F.2d 1290, 1299 (D.C. Cir. 1971); Qwest Commc'ns Corp. v.
Farmers & Merchants Mut. Tel. Co., Memorandum Opinion and Order, 24
FCC Rcd 14801, 14810, n.83 (2009), recon. denied, 25 FCC Rcd 3422
(2010), pet. for review denied, Farmers & Merchants Mut. Tel. Co. v.
FCC, 668 F.3d 714 (D.C. Cir. 2011); American Satellite Corp. v. MCI
Telecommunications Corp., Memorandum Opinion and Order, 57 FCC2d 1165,
1167, para. 6 (1976)).
Stipulations at 14, para. 84.
Stipulations at 16, para. 94.
Stipulations at 16, para. 95.
Stipulations at 16, para. 98.
Stipulations at 17, para. 99.
Stipulations at 17, para. 101. As a result, AT&T is being billed twice
for transport-once under the INAD Tariff (via the CEA flat,
non-distance-sensitive charge) and once under the NECA Tariff (via the
mileage-based transport charges). See also discussion below in
See Penn. Cent. Co. v. General Mills, 439 F.2d 1338, 1341 (8th Cir.
1986); Carrier Serv., Inc. v. Boise Cascade, 795 F.2d 640, 642 (8th
Cir. 1986); see also Complaint at 45-49; Reply at 10-12.
See Consol. Gas Trans. Corp. v. FERC, 771 F.2d 1536, 1545 (D.C. Cir.
1985); Nat'l Van Lines, Inc. v. U.S., 355 F.2d 326, 333 (7th Cir.
1966) ("[A]n interpretation which is reasonable and consistent with
the purposes of the tariff should be preferred to a construction which
is impractical or which leads to absurd consequences").
See discussion supra Section II.B.2; Stipulations at 17, para. 100,
and 19, para. 120.
See Application of Iowa Network Access Division, 3 FCC Rcd 1468
(C.C.B. 1989) at para. 3.
Complaint at 28-29, para. 73; Complaint, Legal Analysis at 49-50,
paras. 119-21; Reply, Legal Analysis at 22-23.
Complaint, Legal Analysis at 49, para. 119; Stipulations at 22, para.
Complaint at 9, para. 12; Complaint Legal Analysis at 19, para. 49;
Reply at 23; Complaint Ex. 6, Tariff FCC No. 5, Original Title Page 1,
Access Service (emphasis added).
Complaint Legal Analysis at 49-50; Reply at 22-23.
Stipulations at 22, para. 137.
See Answer at 7, para. 12, 15, para. 49; Answer Legal Analysis at
39-40, paras 119-21.
Complaint Ex. 6, NECA Tariff No. 5, S: 6.1, Original Page 6-1
(emphasis added); Reply Legal Analysis at 22-23.
Complaint Legal Analysis at 50; Reply at 22-23.
Answer at 15, para. 49, 7, para. 12, 39, para. 119.
Answer at 15, para. 49 & Ex. C, Affidavit of Norman St. Laurent (St.
Laurent Affidavit) at 7-8, para. 35.
Complaint Ex. 6, NECA Tariff No. 5, S: 6.1.
Stipulations at 22, para. 137.
Complaint at 29, para. 74; Complaint Legal Analysis at 50-52, paras.
122-25 n.130; Reply at 23-24.
Complaint Ex. 6, NECA Tariff No. 5, S: 2.1.9.
Reply at 23.
Complaint Ex. 6, NECA Tariff No. 5, S: 2.1.9.
Answer, Legal Analysis at 30, para. 93.
Cf. Reply at 23 (characterizing as a "remarkable admission" the Iowa
LECs' contention that the POI changes did not affect service because
the traffic continued to flow over the same routes and facilities as
before (citing Answer at 8, para. 13, 19-20, para. 63).
Complaint at 50-51, para. 122; Reply at 23-24.
Answer at 7, para. 13, 40-42, paras. 122-25. See Complaint Ex. 26,
Deposition of Terry Wegener (Wegener Deposition) at page 89, Answer
Ex. D (sample notice setter), Answer Ex. U, Deposition of Roger
Kilburg (Kilburg Deposition) at pages 42-43.
Complaint Ex. 25, Wegener Deposition at 89, Answer Ex. D (sample
See Reply, Legal Analysis at 24, n.35.
Answer Ex. U, Kilburg Deposition at pages 42-43.
Answer at 8, para. 13.
Answer Ex. U, Kilburg Deposition at pages 42-43.
The LERG is an industry guide generally used by carriers in their
network planning and engineering and numbering administration. It
contains information regarding all North American central offices and
end offices. See Answer, Ex. C, St. Laurent Affidavit at 7.
Answer at 19-20, para. 63 & n.15. Specifically, the Iowa LECs contend
that NECA F.C.C. Tariff No. 4 (Tariff 4), which describes, among other
things, the location and technical capabilities of wire centers
providing interstate access telecommunications service, was modified
via some unspecified adjustments. Answer at 19-20, n.15.
See 47 C.F.R. S:S: 1.720(a), (c), (h), 1.721(a)(5), (a)(11), 1.724(b),
(g), 1.726(e) (noting, among other things, that a party must attach
copies of all documents it intends to rely upon to support facts
alleged and legal arguments made by it). See also 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, 22534-37, paras.
Answer at 7-8, para. 13, 19-20, para. 63 & n.15. The Iowa LECs did not
include a copy of the relevant pages from NECA Tariff No. 4 or the
LERG with their Answer.
Complaint, Legal Analysis at 52-57.
Complaint, Legal Analysis at 61-67.
Answer at 10, para. 20, 22-23, paras. 78-79; Answer, Legal Analysis at
42-43, paras. 126, 128, 44-45, para. 132, 47, para. 138.
Answer, Legal Analysis at 42, para. 125, 45, para. 132, 46, para. 135.
Answer, Legal Analysis at 42, para. 126.
Answer, Legal Analysis at 42, para. 126.
Answer, Legal Analysis at 42, para. 125.
Answer, Legal Analysis at 42, para. 125, 43, para. 128, 44, para. 132,
46, para. 135, 47, para. 138, 53, para. 157, 53 (Prayer for Relief),
54 (Second Affirmative Defense).
47 U.S.C. S: 206. Cahnmann v. Sprint Corp., 133 F.3d 484, 488 (7th
Cir. 1998), cited by the Iowa LECs, is inapposite. That case held that
the Act extinguishes the right of a party to bring suit for breach of
contract under state law when the effect of the suit would be to
challenge a federal tariff. Similarly, the filed-rate cases cited by
the Iowa LECs-see Answer at 43, n.52-are inapplicable because they do
not concern a challenge to the justness or reasonableness of the
tariffs at issue in those cases.
See Reiter v. Cooper, 506 U.S. 258, 268 (1993) (the primary
jurisdiction doctrine is "specifically applicable to claims properly
cognizable in court that contain some issue within the special
competence of an administrative agency").
47 U.S.C. S: 208.
Alpine Primary Jurisdiction Order at 4.
Alpine Primary Jurisdiction Order at 5.
January 17th Letter Ruling at 3.
January 17th Letter Ruling at 3. The Iowa LECs read too much into a
statement in the January 17th Letter Ruling that AT&T's "motion to
refer the matter to the FCC was limited to `issues of tariff
interpretation.'" January 17th Letter Ruling at 4. That statement,
which drew a distinction between the preemption question and the other
matters that had been referred to the Commission, was merely quoting
from the heading of AT&T's argument beginning on page 18 of its brief
in support of its summary judgment motion. See Defendant's Brief in
Support of Motion for Summary Judgment (AT&T's Summary Judgment Brief)
at 18. The statement cited to the entirety of AT&T's argument at pages
18-20 of that brief, however, which clearly encompassed all of AT&T's
section 201(b) claims. See AT&T's Summary Judgment Brief at 19-20
("Fina1ly, if the Court does decide to refer issues of tariff
interpretation to the FCC, then the referral should also include
AT&T's counterclaims arising under Section 201. In Count II of its
counterclaims, AT&T alleges that Plaintiffs have committed an
unreasonable practice . . . [because] . . . the tariffs are
unreasonable under Section 201 . . . [and] Plaintiffs have engaged in
a sham transaction").
ACS of Anchorage, Inc. v. FCC, 290 F.3d 403, 410-11 (D.C. Cir. 2002)
(ACS of Anchorage) (citations omitted).
ACS of Anchorage, 290 F.3d at 411.
Complaint, Legal Analysis at 53, para. 129.
Indiana Switch, 1 FCC Rcd at 635, para. 5.
Indiana Switch, 1 FCC Rcd at 635, para. 5.
Complaint at 6, para. 16, 13-14, para. 35.
Complaint at 6, para. 16.
Stipulations at 11, para. 71.
Stipulations at 19, para. 120.
Complaint, Legal Analysis at 21, para. 53; Answer, Legal Analysis at
16, para. 53.
Stipulations at 17, para. 100.
See paragraph 44 & n.160 above.
Because we find that a carrier changing POIs for the sole purpose of
inflating mileage charges is an unjust and unreasonable practice, we
would have similar concerns regarding, and thus examine closely, any
tariff revisions that appear to permit this practice.
Answer, Legal Analysis at 51-52, paras. 155-56. The Iowa LECs made
these assertions in response to AT&T's "sham arrangements" argument,
which we do not reach in this Order. Nonetheless, given the potential
subject matter overlap, we consider the Iowa LECs' contentions in
deciding AT&T's tariff illegality argument. See discussion supra
Answer, Legal Analysis at 51-52, paras. 155-56.
Alpine is the only Defendant that even purports to demonstrate cost
savings in its interrogatory answer, yet its own deposition testimony
refutes the claimed savings. In fact, Alpine admits that it could have
gained the improvements it sought in its network without moving the
POI to Des Moines, but that it would not have gained the increased
mileage charges from the IXCs. Complaint, Exhibit 28, Deposition of
Christopher James Hopp (Alpine) at 63-67.
Answer, Legal Analysis at 43-45, paras. 129, 132.
Answer at 45-46, paras. 134, 136.
INAD Application Order, 3 FCC Rcd at 1468, para. 4.
Answer, Legal Analysis at 47, para. 142, 52, para. 156 (citing
Stipulations at 19, para. 109).
Stipulations at 19, para. 109.
Stipulations at 17, para. 101, 18, paras. 107, 109.
Stipulations at 17, para. 101, 18, paras. 107, 109-10.
(Continued from previous page)
Federal Communications Commission FCC 12-110
Federal Communications Commission FCC 12-110