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 )
Qwest Communications Corporation, )
Complainant, )
v. ) File No. EB-07-MD-001
Farmers and Merchants Mutual Telephone )
Company,
)
Defendant.
)
)
)
)
Second order on reconsideration
Adopted: November 24, 2009 Released: November 25, 2009
By the Commission:
I. introduction
1. In this Order, we reconsider our October 2, 2007 Order in this case,
and grant Counts II and III of the formal complaint that Qwest
Communications Corporation ("Qwest") filed against Farmers and
Merchants Mutual Telephone Company ("Farmers") under section 208 of
the Communications Act of 1934, as amended ("Act"). We find that the
evidence brought to light by Qwest's Petition for Reconsideration
warrants a change of our earlier ruling and compels the conclusion
that Farmers violated sections 203(c) and 201(b) of the Act. Farmers,
accordingly, is liable to Qwest for damages suffered as a result of
Farmers' violations. Qwest elected in its Complaint to have the amount
of any damages determined in a separate proceeding; Qwest may file a
supplemental complaint for damages within sixty days of the release of
this order.
II. background
2. Qwest is an interexchange carrier, serving customers throughout the
United States. Farmers is the incumbent local exchange carrier in
Wayland, Iowa, serving approximately 800 access lines for local
residents. Farmers provides local exchange and exchange access
services. Qwest purchases tariffed access service from Farmers, which
enables Qwest's long distance customers to terminate calls to
customers located in Farmers' exchange.
3. In 2005 and 2006, Farmers entered into a number of commercial
arrangements with conference calling companies for the purpose of
increasing its interstate switched access traffic and revenues. Under
the agreements, conference calling companies sent their traffic to
numbers located in Farmers' exchange and, in return, Farmers paid the
companies money or other consideration. The agreements resulted in a
substantial increase in the number of calls bound for Farmers'
exchange. As a result, the amounts of Farmers' monthly bills to Qwest
for terminating access charges rose precipitously.
4. Qwest filed a Complaint with the Commission on May 2, 2007, alleging
that Farmers had violated section 201(b) of the Act by earning an
excessive rate of return on switched access services (Count I). In the
October 2 Order, we found that Farmers' agreements with the conference
calling companies, which were entered into contemporaneously with
Farmers' exit from the traffic-sensitive cost and revenue pool
administered by the National Exchange Carrier Association ("NECA"),
resulted in Farmers vastly exceeding the prescribed rate of return in
violation of section 201(b) of the Act. The October 2 Order further
found that Farmers' tariff had "deemed lawful" status, however, and
accordingly held that Qwest could not recover damages from Farmers.
5. The Complaint also alleged that Farmers' imposition of interstate
access charges was inconsistent with its tariff (Counts II and III).
Specifically, Qwest argued that the tariff did not allow Farmers to
assess terminating access charges on calls to the conference calling
companies because the service provided did not constitute switched
access as defined in Farmers' tariff. The tariff then in effect
provided that switched access service allows the customer "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." The tariff defined an "end user" as "any
customer of an interstate or foreign telecommunications service that
is not a carrier," and a "customer" as any entity that "subscribes to
the services offered under this tariff." Qwest asserted that the
conference calling companies were not Farmers' customers, because they
did not pay Farmers for any services offered under Farmers' tariff.
Thus, Qwest argued, delivering calls to the conference calling
companies did not constitute terminating access service for which
Qwest could be billed. Farmers responded that the conference calling
companies were end users because they purchased interstate End User
Access Service from Farmers' tariff and paid the federal subscriber
line charge ("SLC").
6. The October 2 Order denied Counts II and III of the Complaint. Citing
Farmers' representations that the conference calling companies
purchased tariffed access service and paid the SLC, the October 2
Order found that the conference calling companies were Farmers'
customers and, therefore, "end users," as defined in the tariff.
Accordingly, because the conference calling companies were determined
to be end users based upon these facts, the October 2 Order further
concluded that Farmers had imposed access charges on Qwest in
accordance with Farmers' tariff.
7. On November 1, 2007, Qwest filed the Petition for Reconsideration and
a Motion to Compel Production of Documents, arguing that
newly-available information called into question the veracity of
Farmers' evidence that the conference calling companies were customers
of its tariffed service. In particular, Qwest argued that Farmers had
back-dated contracts and invoices to make it appear that the
conference calling companies had been purchasing tariffed services.
Qwest asked the Commission to reconsider the October 2 Order and find
that the conference calling companies were not customers under
Farmers' tariff, but rather were "business partners working together
with Farmers in its deliberate scheme to manipulate the Commission's
rules and exceed the authorized rate of return."
8. On January 29, 2008, we granted the Petition for Reconsideration in
part by initiating additional proceedings that would allow us to rule
on the merits of Qwest's arguments concerning the newly-identified
evidence. We found that the questions raised about the integrity of
our process, and about the reliability of Farmers' representations,
warranted additional discovery. We therefore granted Qwest's Motion to
Compel, and directed Farmers to produce certain documents that had
been submitted in a proceeding before the Iowa Utilities Board. We
also permitted Qwest to supplement its Petition for Reconsideration at
the conclusion of the additional discovery.
9. Qwest filed its Second Supplement to Petition for Partial
Reconsideration on May 29, 2008. In that filing, Qwest offered
evidence that the conference calling companies had never, in fact,
taken tariffed services from Farmers. According to Qwest, once
Farmers' activities came under legal scrutiny:
Farmers realized that it would not be entitled to the access revenues that
its plan was designed to generate unless it could persuade the Commission
that the [conference calling companies] were its customers under tariff.
It thus undertook to fabricate evidence of a tariffed customer-carrier
relationship that did not in fact exist, sending back-dated bills to the
[conference calling companies] and executing contract "addenda" purporting
to have taken effect months or years earlier. Farmers then selectively
submitted some of these documents into the record in this proceeding
without any indication that they had not been issued contemporaneously
with the provision of service, while withholding other contemporaneous
documents that showed the nature of the fabrication.
The new evidence produced in this proceeding substantiates Qwest's
allegations.
III. Discussion
New Evidence Demonstrates that the Conference Calling Companies Were Not
End Users Under Farmers' Switched Access Service Tariff, and thus Farmers
Was Not Entitled to Charge Qwest Tariffed Switched Access Rates.
10. The central question in this reconsideration proceeding is whether the
conference calling companies were "end users" within the meaning of
the switched access provisions of Farmers' tariff. The answer to that
inquiry is key because it, in turn, determines whether the service
that Farmers provided to Qwest was tariffed switched access service
for which Farmers could charge tariffed rates. Under Farmers' tariff:
* Switched access service allows a customer "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."
* An "end user" is "any customer of an interstate or foreign
telecommunications service that is not a carrier."
* A "customer" is any entity that "subscribes to the services offered
under this tariff."
The tariff's definition of the term "customer" is critical to our analysis
because a person or entity is not an "end user" unless the person or
entity is also a "customer." The tariff requires that to be a customer,
the person or entity must subscribe to the services offered under the
tariff. In this case, the record demonstrates that the conference calling
companies did not subscribe, nor did they seek to subscribe, to the
services offered under the tariff. To the contrary, the evidence
demonstrates that the conference call companies and Farmers expressly
structured their telecommunications service contracts to avoid strict
adherence to the terms of Farmers' filed tariff. Therefore, we conclude
that these companies were neither "customers" nor "end users" within the
meaning of the tariff. Thus, Farmers was not entitled to charge Qwest
switched access charges under the terms of Farmers' tariff.
11. The October 2 Order's finding that the conference calling companies
were "end users" was based entirely on Farmers' then-uncontested
averment that the companies "subscribed to Farmers' interstate
service, specifically, interstate End User Access Service, and were
billed the federal subscriber line charge." However, new evidence that
Farmers previously withheld contradicts that claim and demonstrates
that the conference calling companies and Farmers structured their
business arrangements pursuant to contracts and not the terms and
conditions set forth in the tariff. As a result, the parties failed to
establish a carrier/customer relationship under the terms of the
tariff.
12. Nothing in the contracts between the conference calling companies and
Farmers, or in the parties' business dealings, suggests that the
conference calling companies were customers as defined under Farmers'
tariff. Under the contracts, the conference calling companies
established a free service accessed via toll calls placed over
long-distance networks and delivered to the conference calling
companies over Farmers' network. In return, Farmers agreed to provide
a host of services to support the conference calling companies'
business venture, and significantly, to pay the conference calling
companies a per-minute fee for the traffic generated through their
mutual relationship. Further, nothing in the contracts suggests that
the conference calling companies would subscribe to any tariffed
Farmers' service or pay Farmers for their connections to the
interexchange network, as would ordinary end-user customers under the
tariff.
13. Moreover, Farmers provided connections to the conference calling
companies in a manner that differed from those made available to
customers of its tariffed service. For example, Farmers provided the
conference calling companies with high-capacity DS3 trunks that fed
into trunk-side connections, to a brand new "soft switch" that Farmers
purchased specifically to handle traffic bound for the conference
calling companies rather than the Nortel DMS-10 circuit switch used to
serve all of Farmer's other customers. That soft-switch was connected
directly to the conference calling companies' conference bridges,
which were located in Farmers' end office.
14. Additionally, Farmers' agreements with the conference calling
companies did not resemble traditional agreements for the provision of
its tariffed switched access services. For example, the first
agreement between Farmers and a conference calling company expressly
stated that Farmers was prohibited from providing the services
involved to any competitor. Such an exclusivity clause is antithetical
to the notion of tariffed service. Although Farmers later entered into
contracts with three conference calling companies that it considered
not to be competitors of the first conference calling company, Farmers
nonetheless turned away other companies with which it could have
entered into service arrangements. Moreover, each of the contracts
that Farmers did sign contained unique terms not available under its
tariff, further supporting our conclusion that the parties never
established a carrier/customer relationship under the terms of the
filed tariff. For example, while each agreement required Farmers to
pay the conference calling companies a given sum per minute of traffic
that Farmers delivered, that figure differed among the companies.
Further, the contracts obligated each conference calling company to
generate different amounts of traffic. In addition, the duration of
the contracts varied, as did the notice periods for cancellation of
service during the contracts' terms. Before each of the contracts was
signed, the Farmers board of directors had to approve its particular
terms, and the provisions of the agreements were kept confidential.
15. The conclusion that the conference calling companies were not
customers within the meaning of the tariff language at issue here is
further bolstered by the parties' actions in implementing their
agreements. Stated simply, the parties in no way behaved as if they
were operating under tariff until after Farmers became embroiled in
litigation over the traffic stimulation plan. Even then, the parties'
conduct belies the conclusion that Farmers was providing the services
offered under its tariff to the conference calling companies.
16. Qwest has convincingly demonstrated that Farmers never intended to
treat the conference calling companies as customers of any of Farmers'
tariffed services. When it began conducting business with the
conference calling companies, Farmers did not enter their account
information into its customer billing systems in accordance with its
standard business practices for tariffed services. Thus, contrary to
Farmers' representation in the underlying proceeding, its regular
business records did not indicate that the companies were purchasing
the End User Access Service offered in Farmer's tariff. And, despite
the tariff requirement that Farmers bill and collect on a monthly
basis for tariffed services, Farmers did not contemporaneously bill
the conference calling companies for any services that it provided
them, including the outbound traffic generated by them. Indeed,
Farmers took no steps to bill the conference calling companies until
shortly before discovery was due in the underlying proceeding in this
case. [Redacted confidential information regarding Farmers' billing
practices with the conference calling companies.]
17. Faced with this (previously undisclosed) proof that it issued
backdated bills on the eve of submitting its answer and supporting
documents in this case, Farmers asserts that such backdating is merely
standard practice and that it issued backdated invoices at that point
"in order to comply with [its] interstate End User Access Service
tariff, section 69.104 of the Commission's rules, and the filed rate
doctrine." But this assertion is unpersuasive given Farmers' conduct
throughout its business relationships with the conference calling
companies. [Redacted confidential information regarding Farmers'
business dealings with a conference calling company.] This conduct is
inconsistent with the provision of tariffed services, and further
evidences Farmers' and conference calling companies' apparent intent
from the very beginning to operate in a manner that did not comport
with Farmers' tariffed services offering. The evidence overwhelmingly
demonstrates that Farmers willingly incurred all of the expenses
associated with providing the underlying services to the conference
calling companies, including the payment of a fee to these companies,
in exchange for these companies directing the "free service" they
offered to the public to Farmers' exchange.
18. In addition, [Redacted confidential information regarding Farmers'
billing practices with the conference calling companies.] [Redacted
confidential information regarding Farmers' billing practices with the
conference calling companies.], [Redacted confidential information
regarding Farmers' billing practices with the conference calling
companies.] These actions persuade us that Farmers had no intention of
operating in accordance with its tariff, at tariffed rates, in its
dealings with the conference calling companies. In the midst of
litigation, Farmers generated backdated invoices to create the
appearance of compliance with its tariff provisions.
19. Similarly, after litigation commenced, [Redacted confidential
information regarding Farmers' efforts to backdate and amend its
agreements with the conference calling companies.] [Redacted
confidential information regarding Farmers' efforts to backdate and
amends its agreements with the conference calling companies.] Again,
however, we are unconvinced that these contract amendments were mere
clarifications of the parties' original intent.
20. Instead, it appears that Farmers undertook to persuade the conference
calling companies to sign the contract amendments as part of its
litigation strategy. [Redacted confidential information regarding
Farmers' efforts to backdate and amend its agreements with the
conference calling companies after Qwest initiated litigation.]
[Redacted confidential information regarding Farmers' efforts to
backdate and amend its agreements with the conference calling
companies after Qwest initiated litigation.] Moreover, the manner in
which Farmers unsuccessfully attempted to clarify its agreement with
[Redacted confidential information regarding the identity of a
conference calling company.] resembled more of a negotiation than
simply the documentation of a pre-existing understanding between them.
Perhaps most telling, even the contract amendments did not change the
way in which Farmers conducted business with the conference calling
companies - [Redacted confidential information regarding Farmers'
communications with the conference calling companies.] Farmers'
after-the-fact attempt to document a different business relationship
with the conference calling companies is not sufficient to counter the
evidence of how they actually conducted business.
21. Despite this extensive evidence, Farmers argues that the application
of the "filed rate doctrine" to the relationship between itself and
the conference calling providers compels a finding that the service it
provided to the conference calling companies was pursuant to its
tariff and, as a result, we should impute the status of tariffed
"customers" to the conference calling companies even if they were
taking services under terms that were wholly outside the scope of the
tariff. We disagree. The purpose of the filed rate doctrine is to
prevent unreasonable and unjust discrimination among
similarly-situated customers of a particular common carrier's service,
and to ensure that carriers impose like charges for like services. But
here, the facts developed on reconsideration show a purposeful
deviation from the tariff's terms that allowed the conference calling
companies to reap benefits from a free service offered only to them,
which thereby enabled Farmers to dramatically increase its access
charge billing to Qwest. These facts make apparent that Farmers and
the conference calling companies never established - - and in fact
purposefully avoided - - a "customer" relationship cognizable under
the tariff.
22. Therefore the filed rate doctrine offers Farmers no refuge in its
dispute with Qwest and cannot rescue Farmers from its decision to
circumvent the tariff. The record demonstrates that the service that
the conferencing companies received under their unique arrangement
with Farmers bore little resemblance to the services described in the
tariff. Because the conference calling companies did not subscribe to
the services offered under Farmers' filed tariff, they were not
"customers" or "end users." In turn, the service Farmers provided to
Qwest for calls of the conference calling companies was not "switched
access service" as defined in the tariff. We therefore find that the
filed rate doctrine does not require Farmers to charge Qwest its
tariffed switched access charges, nor does it require Qwest to pay
Farmers such charges, for terminating the conference calling
companies' calls.
23. Farmers also argues that it could properly charge Qwest for switched
access under its tariff even if the conference calling companies were
not end users. We disagree. As explained above, section 6.1 of
Farmers' tariff establishes that Switched Access Service is used to
terminate traffic to end users:
Switched Access Service, which is available to customers for their use in
furnishing their services to end users, provides a two-point
communications path between a customer designated premises and an end
user's premises.
Farmers argues that, notwithstanding this provision, "[t]here are hundreds
of pages in the Kiesling and NECA tariffs that must be construed as a
whole to determine the terms and conditions that apply to the provision of
`exchange access.'" Farmers, however, identifies "only a few examples." In
particular, Farmers points to NECA tariff sections 6.1.1(A) (Terminating
Calling), 6.1.3(A) (Tandem Switched Transport and Local Transport), and
6.1.3(B)(1) (Local Switching), as describing particular access services
without specific reference to "end users." Each of these provisions,
however, is a subsection of section 6.1, which limits the scope of the
tariff to traffic transmitted to end users. It is a well settled rule that
"[t]ariffs are to be interpreted according to the reasonable construction
of their language." Under such a rule of construction, if a service does
not constitute "switched access" within the meaning of tariff section 6.1,
then it cannot constitute "switched access" within the meaning of a
subordinate subsection. The tariff itself confirms that this is the proper
reading. In describing the tariff section numbering system, the "Tariff
Users Guide" section of NECA Tariff FCC No. 5 states that "[a]n
alpha-numeric numbering plan is used to number tariff regulations and
rates. Each level is subordinate to and dependent on its next higher
level." Thus, section 6.1's limitations on the scope of "switched access"
must be read into the subsections cited by Farmers, even if not repeated
in each of those subsections.
24. Farmers also turns to the Act and Commission rules to bolster its
theory of what constitutes switched access under its tariff. Farmers
argues that the service it provided Qwest constitutes "switched
access" within the meaning of the Act and Commission rules, even if
the conference calling companies are not end users. Farmers then
asserts that the scope of its tariff "should be construed consistently
with the definition of `exchange access' under federal law." The fact
remains, however, that the relevant tariff defines switched access
service as providing a communications path to an end user. Whether or
not this definition is narrower than that used for purposes of the Act
and Commission rules, it is nonetheless the definition to which
Farmers is bound for purposes of determining whether its charges are
in compliance with its tariff. We will not expand the term "switched
access" as used in the tariff before us to encompass more than the
tariff itself delineates. The unusual facts of this case (i.e., the
relationship between Farmers and the conference calling companies) do
not alter the fact that Farmers is bound by the terms of its tariff.
25. In sum, Farmers sought to organize its business relationship with the
conference calling companies through individualized contracts that
involved an exchange of services and business relationship quite
distinct from Farmers' tariffed switched access service. And Farmers
did not offer the same terms of service to others that requested it.
Notwithstanding the back-dated contract amendments that Farmers cites
as evidence of the parties' intent that the conference calling
companies would purchase service under Farmers' tariff, we find that
the evidence of the parties' actual course of dealing demonstrates
that there was no purchase of tariffed services. Farmers has not
offered any explanation as to why it failed to enter the conference
calling companies into its customer systems in the normal course of
its business. Nor does it offer any persuasive explanation as to why
it failed to bill the conference calling companies and collect payment
as required under its tariff over its two year relationship with them.
The facts that Farmers sent no bills until shortly before the first
round of discovery in this case, and then sent no further bills until
the Commission ordered additional discovery, constitute very strong
evidence that Farmers neither believed that it was providing, nor
intended to provide, tariffed services to the conference calling
companies. Accordingly, based upon the totality of the circumstances
and facts of this case, we conclude that the conference calling
companies do not constitute "end users" within the meaning of the
tariff provisions at issue.
26. Because we find that the conference calling companies were not "end
users" within the meaning of Farmers' tariff, Farmers' transport of
traffic to them did not constitute "switched access" under the tariff.
We therefore conclude that Farmers' practice of charging Qwest
tariffed switched access rates for its termination of traffic from the
conference calling companies is unjust and unreasonable in violation
of section 201(b) of the Act.
IV. ordering clauses
27. 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 Qwest's Petition for Partial Reconsideration IS GRANTED IN
PART to the extent indicated herein.
28. 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 section 1.106 of the Commission's rules, 47 C.F.R. S: 1.106, that
Counts II and III of the Complaint ARE GRANTED to the extent indicated
herein.
29. 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 section 1.106 of the Commission's rules, 47 C.F.R. S: 1.106, that
Farmers' Motion for Leave to File Surreply is GRANTED.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary
Qwest Commc'ns Corp. v. Farmers and Merchants Mut. Tel. Co., Memorandum
Opinion and Order, 22 FCC Rcd 17973 (2007) ("October 2 Order").
Formal Complaint of Qwest Communications Corp., File No. EB-07-MD-001
(filed May 2, 2007) ("Complaint").
Qwest Communication Corp.'s Petition for Partial Reconsideration, File No.
EB-07-MD-001 (filed Nov. 1, 2007) ("Petition for Reconsideration").
47 U.S.C. S:S: 203(c), 201(b). Section 203(c) prohibits carriers from
imposing any charge not specified in their tariffs ("no carrier shall . .
. charge, demand, collect, or receive a greater or less or different
compensation . . . than the charges specified in the schedule then in
effect"). 47 U.S.C. S: 203(c). Section 201(b) requires that "all charges,
practices, classifications, and regulations for and in connection with . .
. communication service shall be just and reasonable, and any such charge,
practice, classification or regulation that is unjust or unreasonable is
hereby declared to be unlawful." 47 U.S.C. S: 201(b).
Complaint at 27, P: 59.
See 47 C.F.R. S: 1.722(e).
This Order contains an abbreviated background section. A full recitation
of the facts appears in paragraphs 3 through 13 of the October 2 Order,
which we incorporate by reference. October 2 Order, 22 FCC Rcd at
17974-77, P:P: 3-13.
Complaint at 4, P: 4; Joint Statement, File No. EB-07-MD-001 (filed June
6, 2007) ("Joint Statement") at 1, P: 2.
Joint Statement at 1-2, P: 4.
Joint Statement at 2, P: 5.
Joint Statement at 1-2, P: 4.
Joint Statement at 4, P: 13.
Joint Statement at 4, P: 13.
Joint Statement at 4, P:P: 12-13.
Complaint at 13-14, P: 22.
Complaint at 20-22, P:P: 37-41.
October 2 Order, 22 FCC Rcd at 17974-76, P:P: 4-11, 25. See October 2
Order, 22 FCC Rcd at 17974-75, P:P: 4-6 for a more detailed discussion of
the relevant rate of return regulations.
See 47 U.S.C. S: 204(a)(3).
October 2 Order, 22 FCC Rcd at 17983-84, P:P: 26-27.
October 2 Order, 22 FCC Rcd at 17987-88, P:P: 38-39.
October 2 Order, 22 FCC Rcd at 17985-87, P:P: 30, 35.
Farmers' tariff incorporates National Exchange Carrier Association Tariff
F.C.C. No. 5 ("NECA Tariff" or "Farmers' FCC Tariff") terms with respect
to switched access services. See Complaint, Exhibit 9, Kiesling Associates
LLP Tariff F.C.C. No. 1 ("Kiesling Tariff") at S: 6. The quoted language
appears in the NECA Tariff. See Complaint, Exhibit 7, NECA Tariff at S:
6.1.
Response to Enforcement Bureau Request for Additional Briefing, File No.
EB-07-MD-001 (Aug. 1, 2008) ("Qwest Additional Briefing Response"),
Appendix, NECA Tariff at 2.6 (pp. 2-65.1, 2-68).
October 2 Order, 22 FCC Rcd at 17985, P: 37.
See October 2 Order, 22 FCC Rcd at 17987-88, P:P: 35-38.
See October 2 Order, 22 FCC Rcd at 17987, P: 37.
October 2 Order, 22 FCC Rcd at 17987, P: 37.
October 2 Order, 22 FCC Rcd at 17987-88, P: 38.
October 2 Order, 22 FCC Rcd at 17987-88, P: 38. The October 2 Order also
rejected Qwest's argument that Farmers had improperly imposed terminating
access charges for traffic that it did not terminate. See October 2 Order,
22 FCC Rcd at 17985-86, P:P: 31-34. Qwest does not challenge that
determination in its Petition for Reconsideration.
Motion to Compel Production of Documents, File No. EB-07-MD-001 (filed
Nov. 1, 2007) ("Motion to Compel").
Petition for Reconsideration at 9.
Petition for Reconsideration at 9-13.
Petition for Reconsideration at 2, 9, 13-14.
Qwest Commc'ns Corp. v. Farmers and Merchants Mut. Tel. Co., Order on
Reconsideration, 23 FCC Rcd at 1617, P: 6 ("Order on Reconsideration").
Order on Reconsideration, 23 FCC Rcd at 1619-20, P: 11.
Order on Reconsideration, 23 FCC Rcd at 1618-20, P:P: 8, 11. A related
case was initiated before the Iowa Utilities Board. See Qwest v. Superior
Telephone Cooperative, et al., Docket No. FCU-07-2 (Complaint filed Feb.
20, 2007).
Order on Reconsideration, 23 FCC Rcd at 1619-20, P: 11. Additional
discovery was ordered by letter ruling dated March 7, 2008. Letter from
Lisa B. Griffin, Deputy Chief, MDRD, EB, FCC, to David H. Solomon, Counsel
for Qwest, and James U. Troup, Counsel for Farmers, File No. EB-07-MD-001
(rel. Mar. 7, 2008).
Second Supplement to Petition for Partial Reconsideration, File No.
EB-07-MD-001 (filed May 29, 2008) ("Second Supplement").
Second Supplement at 4-15.
Second Supplement at 2.
NECA Tariff at S: 6.1 (emphasis added).
NECA Tariff at S: 2.6 (emphasis added).
Id. (emphasis added).
Consequently, Farmers' reliance on the October 2 Order's description of
"free subscriptions," October 2 Order, 22 FCC Rcd at 17987, P: 38, is
unavailing, because we find that the conference calling companies did not
subscribe to a service offered under Farmers' interstate tariff.
Cf. Qwest Commc'n Corp. v. Superior Tel. Coop., Final Order, Docket No.
FCU-07-2 (Iowa Util. Bd. issued Sept. 21, 2009) at 34 (finding that "free
calling service companies" ("FCSCs") were not end users of rural LECs for
purposes of intrastate access tariffs, because the FCSCs "did not
subscribe to the [LECs'] access or local service tariffs and the FCSCs did
not expect to pay for and did not pay for any of the [LECs'] local
exchange service offerings").
Answer at vii; see October 2 Order, 22 FCC Rcd at 17987, P: 37.
See Deposition of Rex McGuire in Iowa Utilities Board Docket No. FCU-07-2
(Jan. 11, 2008) (submitted into EB-07-MD-001 record on Apr. 10, 2008)
("McGuire Deposition") at 27.
Farmers provided all inbound and outbound telephone lines and services,
collocation space, rack space, digital subscriber line services and other
dedicated Internet access, electrical power, fire protection, generator
and/or battery backup, switch technician labor, switch programming, and
dedicated DS3 trunks to its switches. Farmers also incurred the costs
associated with installation charges, monthly recurring charges, and
referral message fees. See Farmers Documents 0654, 0660, 0662, 0666-67,
and 0673; McGuire Deposition at 239-40. Farmers agreed to pay the
companies a fee for both inbound as well as outbound traffic. See McGuire
Deposition at 196-98; Farmers' Documents 0650, 0654, 0656, 0661-62, 0668,
and 0674.
See discussion infra at paragraph 19. In fact, one agreement expressly
states that there would be no charge for any of the services that Farmers
provided the conference calling company. [Redacted confidential
information regarding the terms of Farmers' contract with a conference
calling company.] The newly presented evidence of back-dated documents,
including invoices and contract "addenda," has changed our understanding
of the dealings between the parties and causes us to revise the
Commission's earlier conclusion that "The question of whether the
conference calling companies paid Farmers more than Farmers paid them is
thus irrelevant to their status as end users." October 2 Order, 22 FCC
Rcd at 17988, P: 38. To the contrary, the flow of money between these
parties is essential to analyzing their relationship because the tariff
expressly contemplates and requires payments to Farmers, not payments that
flow in the reverse direction.
McGuire Deposition at 99-107. Farmers also purchased a new stand-by
generator to accommodate the increased traffic Farmers handled as a result
of its business relationships with the conference calling companies.
McGuire Deposition at 102. The total cost for all of the additional
equipment provided by Farmers to support this business relationship was
approximately $430,000. McGuire Deposition at 107. Prior to this
litigation, Farmers did not bill the conference calling companies for any
of this equipment, facilities, power, or services that it provided.
McGuire Deposition at 124, 171, 206, 219-20.
McGuire Deposition at 30-33, 49-50.
Farmers Document No. F0666. Farmers subsequently attempted to renegotiate
the exclusivity clause, but the company involved refused to do so.
[Redacted confidential information regarding communications between
Farmers and a conference calling company regarding the exclusivity terms
in the parties' agreement.]
"Only common carrier services can be tariffed." MTS and WATS Market
Structure, Third Report and Order, 93 FCC 2d 241, 313-14, P: 244 (1982).
One of the hallmarks of a common carrier service is that the carrier
offering the service "holds [itself] out to serve indifferently all
potential users." U.S. Telecom Ass'n v. FCC, 295 F.3d 1326, 1329 (D.C.
Cir. 2002) (citing Nat'l Ass'n of Regulatory Util. Comm'rs v. FCC, 525
F.2d 630, 640-41 (D.C. Cir. 1976) ("NARUC I"), cert. denied, 96 S. Ct.
2203 (1976)); Nat'l Ass'n of Regulatory Util. Comm'rs v. FCC, 533 F.2d
601, 608-09 (D.C. Cir. 1976). In other words, the carrier does not make
individualized decisions regarding "whether and on what terms to deal."
NARUC I, 525 F.2d at 641. See also Federal-State Joint Board on Universal
Service, Report and Order, 12 FCC Rcd 8776, 9177-78 P:P: 785-86 (1997)
(subsequent history omitted). We note that Farmers and the conference
calling providers appear to have deliberately structured their
relationships in a manner that is contrary to a traditional tariff
offering.
McGuire Deposition at 139.
[Redacted confidential information regarding Farmers' decision not to
implement agreements with certain conference calling companies.]
[Redacted confidential information regarding the volume commitments agreed
to by conference calling companies and the amounts Farmers agreed to pay
each for their volume commitments.]
[Redacted confidential information regarding the volume commitments made
by conference calling companies.]
[Redacted confidential information regarding the cancellation notice terms
in Farmers' contracts with various conference calling companies.]
See Second Supplement at 20 (citing McGuire Deposition at 191-92). See
McGuire Deposition at 59.
Farmers Document Nos. 0649, 0661, 0667, and 0674.
[Redacted confidential deposition citations.]
Answer at vii, 27; Answer Exhibit B, Declaration of Rex McGuire at 3, P:
6.
Farmers' Iowa Tariff, Part II, Section K.1.b (Mar. 17, 2006). See also
Farmers' FCC Tariff at S: 2.4.1 (B)(1).
[Redacted confidential deposition citations.] There is no evidence in the
record that Farmers provided free outbound calling services to anyone
other than the free conferencing companies who purportedly received the
same tariffed services from Farmers.
[Redacted confidential deposition citations.] Regarding late charges,
[Redacted confidential information. See accompanying text.] Regarding
collection efforts, see Second Supplement Opposition at 18; Responses to
Qwest's Interrogatories, File No. EB-07-MD-001 (filed Apr. 7, 2008)
("Farmers' Interrogatory Responses") at 3, 4, 6, and 8 ("Farmers has not
attempted to collect unpaid revenues owed to Farmers by any of the
conference calling companies").
Farmers' Interrogatory Responses at 2-8. Farmers' reliance upon FCC
96-430, a sealed, unreleased Commission order does not justify its efforts
to backbill the conference calling companies. See Second Supplement
Opposition at 21-22. Contrary to Farmers' contention, moreover, the
Commission has not established specific standards regarding the justness
and reasonableness of carrier backbilling practices. See Opposition to
Petition for Reconsideration at 18-19; Second Supplement Opposition at 17.
Rather, the Commission determines the justness and reasonableness of a
carrier's backbilling practices based upon a review of the specific
circumstances on a case-by-case basis. Kenneth E. Brooten vs. AT&T,
Memorandum Opinion and Order, 12 FCC Rcd 13343, 13350, P: 13 (Com. Car.
Bur. 1997); American Network, Inc., Petition for Declaratory Ruling
Concerning Backbilling of Access Charges, Memorandum Opinion and Order, 4
FCC Rcd 550, 552, P: 19 (Com. Car. Bur. 1989). There is no question that
the facts relating to Farmers' back billing are very different from the
facts that gave rise to the Commission orders relied upon by Farmers.
[Redacted confidential information. See accompanying text.]
[Redacted confidential information regarding Farmers' expectations from
its business arrangements with the conference calling companies.]
Second Supplement at 13.
[Redacted confidential information. See accompanying text.]
See Second Supplement at 13.
Second Supplement Opposition at 22.
See Petition for Reconsideration Opposition at 19; Second Supplement
Opposition at 17, 22-23. [Redacted confidential information. See
accompanying text.]
[Redacted confidential information. See accompanying text.] Nor has
Farmers provided any evidence that the contract addenda reflected the
actual understanding of the conference calling companies' relationship
with Farmers.
Second Supplement Opposition at 17. See McGuire Deposition at 266-71
(acknowledging Farmers' efforts to obtain signed addendum prior to its
attorney's meeting with the FCC).
[Redacted confidential information. See accompanying text.]
[Redacted confidential information. See accompanying text.]
McGuire Deposition at 133.
Farmers and Merchants Mutual Telephone Company Opposition to Petition for
Reconsideration, File No. EB-07-MD-001 (filed Nov. 13, 2007) at 16-17
("Petition for Reconsideration Opposition"); Second Supplement Opposition
at 16.
For a general description of the filed rate doctrine see, e.g., AT&T Co.
v. Central Office Tel., Inc., 524 U.S. 214 (1998); Maislin Industries,
U.S., Inc. v. Primary Steel, Inc., 497 U.S. 116 (1990); Arkansas Louisiana
Gas Co. v. Hall, 453 U.S. 571 (1981); Petition for Declaratory Ruling on
Issues Contained in Thorpe v. GTE, Memorandum Opinion and Order, 23 FCC
Rcd 6371, 6388, P: 31 (2008). We decline to formally resolve the issue of
the application of the filed rate doctrine between Farmers and the
conference calling providers because it does not affect the outcome of
this case, for the reasons described below. Moreover, binding a third
party such as Qwest by the application of the filed rate doctrine between
Farmers and the conference calling providers would in no way advance the
purpose of the filed rate doctrine.
The facts on reconsideration, as noted, show that the service Farmers
provided to the conference calling companies did not conform to Farmers'
filed tariff and thus did not create a "customer" relationship under that
tariff. Therefore, even if the filed rate doctrine applies between those
companies (a question we do not resolve today), the doctrine would not
retroactively render the conference calling companies "customers" within
the meaning of the tariff because the parties operated outside the
tariff's purview. See Nordlicht v. New York Telephone Co., 617 F. Supp.
200, 227-28 (S.D.N.Y. 1985) aff'd, 799 F.2d 859 (2d Cir. 1986) cert.
denied, 479 U.S. 1055 (1987) (observing, in dicta, that "[t]he filed
tariff doctrine is designed to protect utilities charging filed rates for
lawfully provided service. It is of no help to a defendant which
fraudulently induces a plaintiff to pay a filed rate [that he should not
have had to pay] or which otherwise exacts payment by fraud. There is
nothing in the policy underpinnings of the doctrine which would cause it
to protect a defendant which unlawfully exacts payment, even at a lawful
rate.").
See supra paras. 12-14.
Farmers' tariff defines "customer" as any entity that "subscribes to the
services offered under this tariff." NECA Tariff S:2.6; see also supra,
S:[10] (providing relevant tariff definitions). Farmers conveniently
ignores this critical definition when arguing for an overbroad definition
of "end user." See Farmers and Merchants Mutual Tel. Co. Opposition to
Second Supplement to Qwest's Petition for Partial Reconsideration, File
No. EB-07-MD-001 (filed June 12, 2008), at 18. Moreover, although we find
the definitions of "customer" and "end user" as used in the filed tariff
to be unambiguous, we note that "it is well established that any ambiguity
in a tariff is interpreted against the party filing the tariff." Halprin,
Temple, Goodman & Sugrue v. MCI, Order on Reconsideration, 14 FCC Rcd
21092, 21100, P: 19 n. 50 (1999) (citing The Associated Press Request for
Declaratory Ruling, File No. TS-11-74, Memorandum Opinion and Order, 72
FCC 2d 760, 764-65, P: 11 (1979) (quoting Commodity News Services v.
Western Union, 29 FCC 1208, 1213, aff'd, 29 FCC 1205 (1960)). Thus,
construing the language in the filed tariff against Farmers, we find that
Farmers has not demonstrated that the conference calling companies, in
this instance, constitute customers or end users under its filed tariff.
Second Supplement Opposition at 4-10. Because Farmers raised new arguments
in this filing, Commission staff permitted Qwest to file a response. Email
from Suzanne Tetreault, Special Counsel, EB, MDRD, FCC, to David Solomon,
Russell Hanser, Counsel for Qwest, and James U. Troup, Tony S. Lee,
Counsel for Farmers, File No. EB-07-MD-001 (dated July 23, 2008). See
Qwest Additional Briefing Response. On August 7, 2008, Farmers filed a
Motion for Leave to File a Surreply, with a copy of its Surreply attached.
Motion for Leave to File Surreply, File No. EB-07-MD-001 (filed Aug. 7,
2008). That motion is granted.
NECA Tariff, S: 6.1 (emphasis added).
Second Supplement Opposition at 6.
Second Supplement Opposition at 6-10.
See Commodity News Services, Inc. v. Western Union Telegraph Co., Initial
Decision, 29 FCC 1208, 1213, aff'd, 29 FCC 1205 (1960).
Under Commission rules, a carrier may include a tariff user's guide
explaining how to use its tariff. 47 C.F.R. S: 61.54(e).
NECA Tariff at 30 (emphasis added).
Second Supplement Opposition at 6-10.
Second Supplement Opposition at 10.
Second Supplement Opposition at 6-7.
See n.85 supra.
Farmers also asserts that the tariff cannot be read to limit the
definition of "end users" to purchasers of tariffed services because it
has purportedly used that term in a contrary manner in other parts of the
tariff. Second Supplement Opposition at 11. This does not, however,
overcome the explicit tariff definition of "end user" as an entity that
subscribes to services under Farmers' tariff.
This is not to say that Farmers is precluded from receiving any
compensation at all for the services it has provided to Qwest. See, e.g.,
New Valley Corp. v. Pacific Bell, Memorandum Opinion and Order, 15 FCC Rcd
5128, 5133, P: 12 (2000) (fact that a carrier's tariff did not include
rates or terms governing the service provided did not mean that the
customer was entitled to damages equal to the full amount billed; rather
"where, as here, the carrier had no other reasonable opportunity to obtain
compensation for services rendered . . . a proper measure of the damages
suffered by a customer as a consequence of a carrier's unjust and
unreasonable rate is the difference between the unlawful rate the customer
paid and a just and reasonable rate"), aff'g New Valley Corp. v. Pacific
Bell, Memorandum Opinion and Order, 8 FCC Rcd 8126, 8127, P: 8 (Com. Car.
Bur. 1993) (finding no basis in the Supreme Court's "Maislin [decision] or
any other court or Commission decision for the conclusion that a customer
may be exempt from paying for services provided by a carrier if those
services were not properly encompassed by the carrier's tariff"). See also
America's Choice, Inc. v. LCI Internat'l Telecom Corp., Memorandum Opinion
and Order, 11 FCC Rcd 22494, 22504, P: 24 (Com. Car. Bur. 1996) (holding
that "a purchaser of telecommunications services is not absolved from
paying for services rendered solely because the services furnished were
not properly tariffed"). Qwest has bifurcated its claim for damages in
this case, and thus the precise amount of any damages due will be
calculated in a separate proceeding.
We note, moreover, that if Farmers had been providing interstate end-user
telecommunications services to Qwest or the conference calling companies,
then Farmers should have timely reported revenues from those end-user
services and paid universal service contributions based on them. 47 C.F.R.
S: 54.706. [Redacted confidential information regarding Farmers' Form 499
filings.]
As Qwest points out, in a factually similar case involving calls to a chat
line, the Commission held that a sham arrangement "designed solely to
extract inflated access charges from IXC's" constituted an unreasonable
practice in connection with access service that violated section 201(b) of
the Act. Total Telecomms. Servs., Inc., and Atlas Tel. Co. v. AT&T Corp.,
Memorandum Opinion and Order, 16 FCC Rcd 5726, 5733, P: 16 (2001), aff'd
in relevant part, 317 F.3d 227 (D.C. Cir. 2003). Here it also appears that
Farmers sought to inflate the access charges to Qwest by paying the
conference calling companies for their traffic, rather than charging them
for those minutes as the tariff requires. We also uphold the Commission's
previous finding that Farmers earned an excessive rate of return. See
October 2 Order, 22 FCC Rcd at 17980-83. Although the October 2 Order held
that Farmers had violated section 201(b) of the Act by virtue of its
overearnings, the Commission nevertheless ruled that Qwest could not
recover damages because the Farmers tariff at issue was "deemed lawful"
pursuant to section 204(a)(3) of the Act. 47 U.S.C. S: 204(a)(3); October
2 Order, 22 FCC Rcd at 17983-84, P:P: 25-27. In its Petition for
Reconsideration, Qwest also asked the Commission to rule that Farmers'
tariff was not deemed lawful in light of what Qwest refers to as "Farmers'
furtive manipulation designed to conceal its rate of return violation." We
note that our earlier finding that Farmers' tariff was deemed lawful does
not preclude Qwest from collecting damages based on the conclusions in
this 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. Accordingly, it
is not necessary to resolve that portion of Qwest's Petition for
Reconsideration that asks us to reconsider whether the tariff was deemed
lawful.
(Continued from previous page)
(continued ...)
Federal Communications Commission FCC 09-103
6
9
Federal Communications Commission FCC 09-103