Click here for Adobe Acrobat version
Click here for Microsoft Word version
********************************************************
NOTICE
********************************************************
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.
*****************************************************************
Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of )
)
Bell Atlantic-Delaware, Inc., )
et al., )
)
Complainants, )
) File No. E-98-49
v. )
)
MCI Telecommunications Corp., )
)
Defendant.
MEMORANDUM OPINION AND ORDER
Adopted: August 1, 2002 Released: August 14,
2002
By the Commission:
I. INTRODUCTION
1. In this Order, we grant a Joint Request1 filed by the
parties - Bell Atlantic-Delaware, Inc., et al. (``Verizon'')2 and
MCI Telecommunications Corporation (``WorldCom'')3 - to this
formal complaint proceeding concerning application of Commission
payphone per-call compensation rules that were in effect until
November 23, 2001. The Commission recently revised the rules to
require the first facilities-based interexchange carrier
(``IXC'') to which a completed coinless access code or subscriber
toll-free payphone call is delivered by a local exchange carrier
(``LEC'') to compensate the payphone service provider (``PSP'')
for the call.4 Because the events at issue in this proceeding
transpired when the Commission's prior rules were in effect,
however, we are constrained to apply the prior rules.
2. In the Joint Request, Verizon and WorldCom ask the
Commission to resolve a dispute between them regarding the Bell
Atlantic Order, which the Commission released in this proceeding
on April 5, 2001. Specifically, the parties wish to know ``when,
under that Order, the first facilities-based carrier, in this
case WorldCom, is responsible for paying per-call compensation
and when the facilities-based resellers of that carrier's
services are responsible.''5
3. We hold - as we did in the Bell Atlantic Order - that
WorldCom's obligation to compensate Verizon for toll-free calls
under the Commission rules in effect during the relevant period
extended to calls that WorldCom handed off to ``LECs'', but that
WorldCom was not required to pay per-call compensation to Verizon
for calls that WorldCom handed off to switch-based resellers.6
In the latter case, WorldCom's obligation was limited during the
period in question to identifying the reseller responsible for
paying compensation to Verizon.
II. BACKGROUND
4. Section 276 of the Communications Act of 1934, as
amended (``Act''), requires 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....''7 In
response, the Commission adopted rules governing payphone
compensation.8 As a result of these rules, when payphone users
place toll-free calls that are routed to ``IXCs'', the IXCs must
compensate the PSPs``'' for completed calls.9
5. This compensation system becomes more complicated,
however, when IXCs sell space on their networks to other IXCs,
known as ``resellers.''10 Resellers can be divided into two
categories - ``switchless'' and ``switch-based.'' Switchless
resellers simply rename the underlying IXC service.11 Switch-
based resellers (``SBRs''), on the other hand, install their own
switch to handle traffic.12
6. The Common Carrier Bureau ruled in the liability phase
of this proceeding that Verizon properly had certified its
eligibility to receive per-call compensation, and, upon review,
we upheld this determination.13 Thereafter, Verizon and WorldCom
settled all but one issue between them - i.e., which entity is
responsible for paying per-call compensation for payphone calls
that an IXC hands off to a SBR.14 In the damages phase, we
resolved WorldCom's obligation to pay per-call compensation to
Verizon for such calls, as well as WorldCom's duty to provide
tracking information to Verizon regarding the calls.15 As part
of the order resolving the damages phase (i.e., the Bell Atlantic
Order), we directed the parties to attempt to resolve through
negotiations the precise amount of damages owed.16 They were
unable to do so.
7. On January 7, 2002, Verizon and WorldCom filed the
Joint Request, which proposed that the parties submit additional
briefs on the appropriate construction of the Bell Atlantic
Order.17 As a result, we directed the parties to submit briefs
regarding the respective obligations (under the Commission's
prior rules) of first facilities-based carriers and facilities-
based resellers to pay per-call compensation.18
III. ANALYSIS
8. The parties disagree about WorldCom's obligation to pay
per-call compensation in the event that WorldCom transfers a call
to a SBR. Verizon argues that the Commission's rules clearly
require WorldCom to compensate Verizon for such a call, and that
WorldCom can avoid its payment obligation ``if, and only if,
another carrier `identifies itself as being responsible for
paying per-call compensation.'''19 As support for this
proposition, Verizon cites the following sentence from the Bell
Atlantic Order: ``The logical construction of the language from
the Coding Digit Waiver Order requires a first facilities-based
carrier to pay unless the reseller has identified itself to the
first facilities-based carrier as being responsible for
compensation.''20 WorldCom, on the other hand, maintains that,
until very recently, the Commission squarely placed
responsibility for paying per-call compensation on a reseller,
rather than an IXC, if the reseller maintained its own switching
capability.21 According to WorldCom, the passage from the Bell
Atlantic Order on which Verizon relies is dictum about a
different aspect of the Coding Digit Waiver Order (i.e., the
obligation to disclose information regarding the identity of
switched-based resellers).22
9. We disagree with Verizon's interpretation of the Bell
Atlantic Order. Paragraph 14 of the Bell Atlantic Order
addressed Verizon's characterization of a sentence in the Coding
Digit Waiver Order. In particular, Verizon argued that, in order
for a first facilities-based carrier to be relieved of its
obligation to pay per-call compensation for a call handed off to
a reseller, the reseller must have identified itself to the PSP,
rather than to the first facilities-based carrier.23 The Bell
Atlantic Order rejected this characterization, finding that the
Coding Digit Waiver Order contained no such limitation, and that
such a limitation would not make sense: ``The logical
construction of the language from the Coding Digit Waiver Order
requires a first facilities-based carrier to pay unless the
reseller has identified itself to the first facilities-based
carrier as being responsible for paying compensation.''24 Thus,
a first-facilities based carrier does not have to pay per-call
compensation if a reseller is responsible for payment. Nothing
about this statement from the Bell Atlantic Order is inconsistent
with that order's general holding, which is articulated in
paragraph 13: A first facilities-based carrier must compensate
PSPs for calls that the facilities-based carrier transfers
directly to a terminating LEC or must identify the reseller
responsible for paying per-call compensation if it transfers
calls to a switch-based reseller.25 Consequently, like the
Coding Digit Waiver Order, the Bell Atlantic Order held that a
first facilities-based carrier that transfers calls to a switch-
based reseller does not have to pay per-call compensation. Such
carriers, however, do have to provide tracking information.26
10. This interpretation of WorldCom's obligations is
consistent with other portions of the Bell Atlantic Order.27 In
the first paragraph of the Bell Atlantic Order, which enunciated
the order's holding, the Commission wrote:
We hold that under the rules and orders that
are applicable to this case, the Defendants'
obligation to compensate Verizon for toll-
free calls extends to calls that the
Defendants hand off to local exchange
carriers..., but that the Defendants are not
required to pay per-call compensation to
Verizon for traffic that they hand off to
switch-based resellers. However, in the
latter situation, and upon Verizon's written
request, the Defendants must provide
information to Verizon that enables it to
identify any resellers responsible for
compensation.28
Similarly, in Paragraph 20 of the Bell Atlantic Order, the
Commission summarized its holding:
[W]e hold that the Commission's rules require
the Defendants to compensate Verizon for
toll-free calls transferred to terminating
LECs, but do not require the Defendants to
compensate Verizon for traffic transferred to
switch-based resellers. Rather, with respect
to the latter traffic, the Defendants must
provide Verizon information that enables it
to identify resellers responsible for
compensation.29
Thus, the Bell Atlantic Order makes clear that, with respect to
calls that WorldCom handed off to SBRs, WorldCom needed to do
nothing more than provide tracking information to enable Verizon
to identify the SBRs and attempt to collect payment. The Bell
Atlantic Order does not, as Verizon argues, require WorldCom to
act as a guarantor for compensation in the event a PSP is unable
to collect from an SBR.30
11. We therefore reiterate that, under the rules and orders
applicable to this case, WorldCom's obligation with respect to
calls it handed off to SBRs was limited to providing tracking
information to Verizon. Specifically, for each call, WorldCom
must provide the name of a contact person at the SBR, a telephone
number for that person, and the SBR's last known address.3132
IV. ORDERING CLAUSES
12. Accordingly, IT IS ORDERED, pursuant to sections 1,
4(i), 4(j), 208, and 276 of the Communications Act of 1934, as
amended, 47 U.S.C. §§ 151, 154(i), 154(j), 208, and 276, and
sections 0.111, 0.311, 64.1300, and 64.1310 of the Commission's
rules, 47 C.F.R. §§ 0.111, 0.311, 64.1300, and 64.1310, that the
Joint Request filed on January 7, 2002 is granted, consistent
with this Order.
13. IT IS FURTHER ORDERED that this proceeding is
terminated.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary
_________________________
1 Joint Request, File No. E-98-49 (filed Jan. 7, 2002) (``Joint
Request'').
2 The original named complainants in this action were Bell
Atlantic-Delaware, Inc.; Bell Atlantic-Maryland, Inc.; Bell
Atlantic-New Jersey, Inc.; Bell Atlantic-Pennsylvania, Inc.; Bell
Atlantic-Virginia, Inc.; Bell Atlantic-Washington, D.C., Inc.;
Bell Atlantic-West Virginia, Inc.; New York Telephone Company;
and New England Telephone and Telegraph Company. These companies
now are doing business as Verizon Communications. See Bell
Atlantic-Delaware, Inc., et al. v. Frontier Communications
Services, Memorandum Opinion and Order, 16 FCC Rcd 8112, 8112 n.1
(2001) (``Bell Atlantic Order''). This order is binding on all
named parties and their successors-in-interest.
3 MCI now is doing business as WorldCom, Inc. (``WorldCom''). On
July 25, 2002, WorldCom filed a Notice of Stay, alerting the
Commission that WorldCom recently had filed a Voluntary Petition
under Chapter 11 of the United States Bankruptcy Code. Notice of
Stay, File No. E-98-49 (filed July 25, 2002). Although WorldCom
maintains that its bankruptcy filing stays this proceeding, we
disagree. First, this Order cannot properly be considered a
``continuation'' of a proceeding. See 11 U.S.C. § 362(a)(1)
(bankruptcy petition operates as a stay of the ``commencement or
continuation ... of a judicial, administrative, or other action
or proceeding against the debtor that was or could have been
commenced before the commencement of the case under this title,
or to recover a claim against the debtor that arose before the
commencement of the case under this title''). Rather, it is
tantamount to a clarification of a prior order (i.e., the Bell
Atlantic Order) that the Commission issued prior to WorldCom's
bankruptcy filing, and that established the duties and
obligations of the respective parties prior to the bankruptcy
filing. Second, even assuming the automatic stay provision were
applicable, the regulatory exception to the stay provision
applies, because, in clarifying the Bell Atlantic Order, the
Commission is acting in a regulatory capacity (i.e., it is
interpreting the statutory duties and obligations of a regulated
entity). See 11 U.S.C. § 362(b)(4) (bankruptcy petition does not
operate as a stay of the ``commencement or continuation of an
action or proceeding by a governmental unit ... to enforce such
governmental unit's ... regulatory power, including the
enforcement of a judgment other than a money judgment, obtained
in an action or proceeding by the governmental unit to enforce
such governmental unit's ... regulatory power'').
4 See Pay Telephone Reclassification and Compensation Provisions
of the Telecommunications Act of 1996: RBOC/GTE/SNET Payphone
Coalition Petition for Clarification, Second Order on
Reconsideration, 16 FCC Rcd 8098 (2001), Third Order on
Reconsideration and Order on Clarification, 16 FCC Rcd 20922
(2001).
5 Joint Request at 1.
6 The Commission recently revised its payphone compensation
rules. See Pay Telephone Reclassification and Compensation
Provisions of the Telecommunications Act of 1996: RBOC/GTE/SNET
Payphone Coalition Petition for Clarification, Second Order on
Reconsideration, 16 FCC Rcd 8098 (2001), Third Order on
Reconsideration and Order on Clarification, 16 FCC Rcd 20922
(2001). Because the events at issue in this proceeding
transpired when the Commission's prior rules were in effect,
however, we are constrained to apply those rules.
7 47 U.S.C. § 276(b)(1)(A). Section 276 exempts emergency calls
and telecommunications relay service calls for hearing disabled
individuals from the per-call compensation requirement. Id.
8 See 47 C.F.R. §§ 64.1300-64.1340. See generally Implementation
of the Pay Telephone Reclassification and Compensation Provisions
of the Telecommunications Act of 1996, Report and Order, 11 FCC
Rcd 20541 (1996) (``First Payphone Order''), on reconsideration,
11 FCC Rcd 21233 (1996) (``Order on Reconsideration''), review
granted in part and denied in part Illinois Public
Telecommunications Ass'n v. FCC, 117 F.3d 555 (D.C. Cir.),
clarified on reh'g, 123 F.3d 693 (D.C. Cir. 1997), cert. denied,
523 U.S. 1046 (1998); Implementation of the Pay Telephone
Reclassification and Compensation Provisions of the
Telecommunications Act of 1996, Second Report and Order, 13 FCC
Rcd 1778 (1997), review granted in part and denied in part MCI
Telecommunications Corp. v. FCC, 143 F.3d 606 (D.C. Cir. 1998);
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 (1999), review denied
American Public Communications Council, Inc. v. FCC, 215 F.3d 51
(D.C. Cir. 2000).
9 See 47 C.F.R. § 64.1300(a) (``[E]very carrier to whom a
completed call from a payphone is routed shall compensate the
payphone service provider for the call....'') (amended Apr. 27,
2001).
10 A reseller, in turn, may resell service to another reseller,
and an IXC and several resellers may carry a single payphone call
before the call is transferred to a LEC for completion. See Bell
Atlantic Order, 16 FCC Rcd at 8113, ¶ 3.
11 Because switchless resellers lack their own facilities and
therefore do not have the ability to track calls, the Commission
has held that facilities-based carriers should pay compensation
to the PSP ``in lieu of a non-facilities based carrier that
resells service,'' and that, if they so choose, the facilities-
based carriers may ``impose the payphone compensation amounts on
[reseller] customers.'' First Payphone Order, 11 FCC Rcd at
20586, ¶¶ 86-87.
12 Switch-based resellers also are known as ``facilities-based''
resellers.
13 See Bell Atlantic-Delaware, et al. v. Frontier Communications
Services, Inc., et al., Memorandum Opinion and Order, 14 FCC Rcd
16050 (Com. Car. Bur. 1999), and Ameritech Illinois, U S West
Communications, Inc., et al. v. MCI Telecommunications
Corporation, Memorandum Opinion and Order, 14 FCC Rcd 18643 (Com.
Car. Bur. 1999), aff'd Bell Atlantic-Delaware, et al. v. Frontier
Communications Services, Inc., et al., Order on Review, 15 FCC
Rcd 7475 (2000), review denied Global Crossing
Telecommunications, Inc. v. FCC, 259 F.3d 790 (D.C. Cir. 2001).
See also Bell Atlantic Order, 16 FCC Rcd at 8115-17, ¶¶ 6-9.
14 Complainants' Initial Brief on the Reseller Issue, File No.
98-49 (filed July 10, 2000) at 1.
15 Bell Atlantic Order, 16 FCC Rcd 8113, ¶ 1.
16 Bell Atlantic Order, 16 FCC Rcd at 8121, ¶ 19. See 47 C.F.R.
§ 1.722(i)(4) (following a Commission determination regarding a
damages computation method or formula, the Commission may order
the parties to submit, within thirty days of the release date of
the damages order (1) a statement detailing the parties'
agreement as to the amount of damages; (2) a statement that the
parties are continuing to negotiate in good faith and a request
that the parties be given an extension of time to continue
negotiations; and (3) a statement detailing the bases for the
continuing dispute and the reasons why no agreement can be
reached).
17 Joint Request at 2.
18 Letter from David A. Strickland, Attorney Advisor, Market
Disputes Resolution Division, Enforcement Bureau, to Gilbert E.
Geldon, Verizon counsel, and Lisa R. Youngers and Lisa B. Smith,
WorldCom counsel, File No. E-98-49 (dated Jan. 18, 2002) at 1.
19 Complainants' Memorandum on the Reseller Issue, File No. E-98-
49 (filed Jan. 25, 2002) (``Verizon Brief'') at 8. See
Complainants' Reply Memorandum on the Reseller Issue, File No. E-
98-49 (filed Feb. 20, 2002) (``Verizon Reply Brief'') at 1-4.
20 Bell Atlantic Order, 16 FCC Rcd at 8119, ¶ 14. The Coding
Digit Waiver Order refers to the Common Carrier Bureau's decision
in Implementation of the Pay Telephone Reclassification and
Compensation Provisions in the Telecommunications Act of 1996:
AT&T Request for a Limited Waiver of the Per-Call Compensation
Obligation, Memorandum Opinion and Order, 13 FCC Rcd 10893 (Com.
Car. Bur. 1998), Petition for Reconsideration and Application for
Review pending on other grounds (``Coding Digit Waiver Order'').
21 Defendant's Memorandum on the Reseller Issue, File No. E-98-49
(filed Feb. 6, 2002) (``WorldCom Brief'') at 3-4.
22 WorldCom Brief at 4-5.
23 Bell Atlantic Order, 16 FCC Rcd at 8119, ¶ 14.
24 Bell Atlantic Order, 16 FCC Rcd at 8119, ¶ 14.
25 Bell Atlantic Order, 16 FCC Rcd at 8118, ¶ 13 (``[T]he Coding
Digit Waiver Order makes clear that a first facilities-based
carrier need only identify the switch-based reseller responsible
for paying compensation.'').
26 Bell Atlantic Order, 16 FCC Rcd at 8119, ¶ 15 (``[O]nce a PSP
issues a written request for payment, the facilities-based IXC
must provide tracking information.'').
27 Moreover, it is consistent with earlier Commission orders
holding that carriers with switching capability must pay per-call
compensation. See note 11, supra.
28 Bell Atlantic Order, 14 FCC Rcd at 8113, ¶ 1.
29 Bell Atlantic Order, 14 FCC Rcd at 8121, ¶ 20.
30 See Verizon Brief at 7-9. In addition, we reject WorldCom's
assertion that paragraph 14 of the Bell Atlantic Order is
``merely dicta.'' WorldCom Brief at 6. As noted in paragraph 9
of this Order, we find that the proper interpretation of
paragraph 14 is consistent with the rest of the Bell Atlantic
Order, and therefore constitutes part of the holding of that
Order. Similarly, we reject Verizon's argument that the
Commission's orders subsequent to the Bell Atlantic Order
contradict our holding in this case. See Verizon Brief at 3, 7-
8; Verizon Reply Brief at 1-2.
31 WorldCom also must indicate whether it and the SBR to which it
is handing off calls have entered into a contract requiring the
SBR to compensate Verizon. To the extent WorldCom and an SBR
have formed such a contract, Verizon could attempt to enforce the
contract (under a third-party beneficiary theory) if the SBR
fails to fulfill its payment obligation. Verizon could not
assert such a claim in this proceeding, however, because it would
be beyond the scope of the damages complaint. Alternatively,
WorldCom could have agreed contractually with an SBR that
WorldCom will pay per-call compensation on behalf of the SBR.
Again, however, any claim by Verizon against WorldCom seeking to
enforce such a contract would transcend the allegations of the
damages complaint.
32 Cf. First Payphone Order, 11 FCC Rcd at ____, ¶ 110 (IXC must
send to each PSP a statement indicating the number of toll-free
and access code calls that the IXC has received from each PSP's
payphone).