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Before the
Federal Communications Commission
Washington, D.C. 20554
)
)
)
In the Matter of
)
FSH Communications, LLC,
)
Complainant,
)
v. File No. EB-09-MD-003
)
AT&T Corporation,
)
and Global Tel*Link Corporation,
)
Defendants.
)
)
)
MEMORANDUM OPINION AND ORDER
Adopted: December 20, 2012 Released: December 21, 2012
By the Commission:
I. INTRODUCTION
1. This Memorandum Opinion and Order denies a formal complaint filed by
FSH Communications, LLC ("FSH") against Defendants AT&T Corporation
("AT&T") and Global Tel*Link Corporation ("GTL") under section 208 of
the Communications Act of 1934, as amended ("Act"). FSH alleges that
Defendants are obligated, pursuant to the Commission's payphone
compensation orders released between 1996 and 2000, to compensate FSH
for 0+ calls placed from FSH's payphones at the "default" rate
applying under those orders when there is no compensation agreement.
FSH asserts that Defendants' failure to pay FSH this 0+ call default
compensation violates sections 201(b) and 276(b) of the Act. As
explained below, we find that FSH's reliance on the 1996 to 2000
Payphone Orders is misplaced. The calls at issue were made between
January 1, 2005 and December 31, 2008, and are governed by the
Commission's payphone compensation rules in effect at that time. We
find that the pertinent rules do not obligate carriers to pay default
compensation for 0+ calls. Accordingly, we further find that
Defendants' failure to pay 0+ default compensation does not violate
sections 201(b) or 276(b) of the Act.
II. BACKGROUND
A. Factual Background
2. FSH is a payphone service provider ("PSP"). In August, 2004, FSH
purchased from another PSP payphones located in various correctional
facilities for use by inmates. AT&T served as the presubscribed
interexchange carrier ("PIC") for these prison phones from January 1,
2005 to June 1, 2005, and GTL served as the PIC for the phones for the
remaining period at issue in the Complaint (June 1, 2005 through
December 31, 2008).
3. Most of the calls placed from FSH's prison phones were collect 0+
calls. Because 0+ payphone calls are routed to the payphone's PIC, the
0+ calls placed from these prison phones during the Complaint period
were routed to AT&T or GTL. At the time it purchased the prison
phones, certain of the phones were subject to contracts that did not
compensate the PSP for 0+ calls (the "Prison Payphones"). In its
Complaint, FSH seeks default compensation for the 0+ calls placed from
these Inmate Phones ("Inmate Calls"). FSH admits that it has a
contractual right to compensation for 0+ calls placed from the
remaining prison phones, and does not seek default compensation for
those calls.
A. Regulatory Background
4. Section 276(b)(1)(A) of the Act directs the Commission to "establish a
per call compensation plan to ensure that all [PSPs] are fairly
compensated for each and every completed . . . call using their
payphone . . . ." Section 276(d) of the Act defines "payphone" to
include inmate payphones for the purposes of section 276.
5. The Commission first addressed a section 276 payphone compensation
plan in the 1996 Payphone Order. In that order, the Commission
determined that "once competitive market conditions exist, the most
appropriate way to ensure that PSPs receive fair compensation for each
call is to let the market set the price for individual calls
originated on payphones." The Commission further decided that it would
"take affirmative steps to ensure fair compensation" only "where the
market does not or cannot function properly." Consequently, the
Commission required carriers to compensate PSPs for completed calls
"at a rate agreed upon by the parties by contract," but also
established a "default" compensation rate to be paid by carriers for
certain kinds of completed calls "in the absence of an agreement."
6. In addressing a payphone compensation plan for 0+ calls, the
Commission in the 1996 Payphone Order focused on completed 0+ calls
placed from Bell Operating Company ("BOC") payphones, because the BOCs
were subject to contracts, entered into prior to passage of the 1996
Act, that did not compensate them for 0+ calls ("Pre-existing
contracts"). The Commission specifically found it necessary to provide
0+ default compensation to BOC PSPs because, in the absence of a
contract providing for such compensation, BOCs might not otherwise
receive fair compensation for 0+ calls. The Commission did not make
such a finding with regard to non-BOC PSPs because these PSPs were
able to contract with their payphone's PIC for 0+ call compensation.
The Commission anticipated, however, that default compensation for BOC
0+ calls would not be indefinite because the Pre-existing contracts
would eventually lapse and be replaced with negotiated compensation
arrangements.
7. The payphone compensation rules promulgated by the 1996 Payphone Order
state in relevant part as follows:
[E]very carrier to whom a completed call from a payphone is routed shall
compensate the [PSP] for the call at a rate agreed upon by the parties by
contract.... In the absence of an agreement..., the carrier is obligated
to compensate the [PSP] at a per-call rate [established by the
Commission].
The 2001 Payphone Order amended the rule as follows:
[T]he first facilities-based interexchange carrier to which a completed
coinless access code or subscriber toll-free payphone call is delivered by
the local exchange carrier shall compensate the [PSP] for the call at a
rate agreed upon by the parties by contract.... In the absence of an
agreement..., the carrier is obligated to compensate the [PSP] at a
per-call rate [established by the Commission].
The 2003 Payphone Order further amended the rule, in language that remains
in effect to date, as follows:
[A] Completing Carrier that completes a coinless access code or subscriber
toll-free payphone call from a switch that the Completing Carrier either
owns or leases shall compensate the [PSP] for that call at a rate agreed
upon by the parties by contract.... In the absence of an agreement..., the
carrier is obligated to compensate the [PSP] at a per-call rate
[established by the Commission].
III. DISCUSSION
8. In its Complaint, FSH alleges that Defendants are obligated to pay FSH
default compensation for the Inmate Calls pursuant to the 1996 to 2000
Payphone Orders, and that Defendants' failure to do so violates the
Act. We find, however, that the Inmate Calls, which were all placed
between January 2005 and December 2008, are governed by the rules
that were in effect at the time the calls were placed, i.e., the rules
promulgated by the 2003 Payphone Order, not the rules promulgated by
the 1996 to 2000 Payphone Orders cited by FSH. The relevant rules
require carriers to pay default compensation solely for coinless
access code and subscriber toll-free payphone calls, but not for 0+
calls. Thus, the applicable rules, by their terms, do not obligate
Defendants to pay FSH default compensation for the Inmate Calls.
9. In seeking to have the Commission apply to this case rules and
requirements imposed in the 1996 to 2000 Payphone Orders, FSH argues
that the 2001 and 2003 Payphone Orders only address compensation for
access code and subscriber toll-free payphone calls, and that the
Commission did not intend to alter the obligation to pay default
compensation for 0+ calls imposed in the 1996 to 2000 Payphone Orders.
As support, FSH points to a statement in a footnote in the 2001
Payphone Order that 0+ calls were not at issue in that order. We
disagree, and find that FSH has misconstrued the Commission's intent
in those subsequent orders. The 2001 and 2003 Payphone Orders, and the
rules adopted in those orders, make clear that the default
compensation provisions no longer apply to calls other than coinless
access code and subscriber toll-free payphone calls. The footnote
cited by FSH does not override the clear statement of the Commission's
intent, as evidenced by the unambiguous language of the rules
promulgated by the 2001 and 2003 Payphone Orders, to limit default
compensation going forward to coinless access code and subscriber
toll-free calls. Thus, FSH's claim that the Commission intended for
calls other than coinless access code and subscriber toll-free
payphone calls to continue to be subject to default compensation is
not supported by the Commission's orders and rules.
10. FSH argues further that the 2001 and 2003 Payphone Orders, and the
rules promulgated therein, cannot be construed to eliminate 0+
compensation because they do not contain a reasoned explanation for
such a rule change. We find, however, that the time for raising this
type of procedural challenge to those orders and rules has long
passed. To the extent that FSH believes that the current rules are
deficient, then the appropriate course of action would be to file a
petition for rulemaking with the Commission.
11. Finally, while not determinative, FSH cannot claim to be unfairly
prejudiced by the Commission denying its Complaint. The default
compensation rates for 0+ calls were originally adopted as a
transition mechanism for BOC PSPs bound by Pre-existing Contracts; FSH
is not a BOC and does not argue that the Prison Payphones are subject
to Pre-existing Contracts. What is more, FSH purchased the Prison
Payphones in August 2004, long after the Commission ended that
transition in the 2001 and 2003 Payphone Orders.
12. Thus, we conclude that FSH has not demonstrated that Defendants
violated the Commission's payphone compensation rules by failing to
pay default compensation for the Inmate Calls, because the
Commission's rules in effect at the time the Inmate Calls were placed
do not provide for such compensation. We therefore also conclude that
FSH has not demonstrated that Defendants violated sections 201(b) or
276(b) of the Act.
IV. ORDERING CLAUSE
13. Accordingly, IT IS ORDERED, pursuant to sections 1, 4(i), 4(j), 201,
208, and 276 of the Communications Act of 1934, as amended, 47 U.S.C.
S:S: 151, 154(i), 154(j), 201, 208, 276, that the Complaint is DENIED,
and that THIS PROCEEDING IS TERMINATED.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary
Formal Complaint, File No. EB-09-MD-003 (filed Mar. 13, 2009)
("Complaint").
47 U.S.C. S: 208.
Implementation of the Pay Telephone Reclassification and Compensation
Provisions of the Telecommunications Act of 1996, Report and Order, 11 FCC
Rcd 20541 (1996) ("1996 Payphone Order"); Order on Reconsideration, 11 FCC
Rcd 21233 (1996) ("Reconsideration Order"); Second Report and Order, 13
FCC Rcd 1778 (1997) ("1997 Payphone Order"); Third Report and Order, and
Order on Reconsideration of the Second Report and Order, 14 FCC Rcd 2545
(1999) (subsequent history omitted) ("1999 Payphone Order") (collectively
referred to as the "1996 to 2000 Payphone Orders").
"A 0+ call occurs when the dialer dials `0' and then the desired telephone
number. 0+ calls include credit card, collect, and third-number billing
calls." 1999 Payphone Order, 14 FCC Rcd at 2569, P: 53 n.90 (citations
omitted).
47 U.S.C. S:S: 201(b), 276(b). See, e.g., Complaint at 2-3, P:P: 1-2 &
n.3, 5-6, P:P: 13-15, 14-15, P:P: 38-45, 23-24, P: 71; Reply of FSH
Communications, LLC, File No. EB-09-MD-003 (filed Aug. 26, 2009) ("Reply")
at 2-3 & n.4.
The Commission released a series of payphone compensation orders after the
1996 to 2000 Payphone Orders, which amended the Commission's payphone
compensation rules. See Implementation of the Pay Telephone
Reclassification and Compensation Provisions of the Telecommunications Act
of 1996, Second Order on Reconsideration, 16 FCC Rcd 8098 (2001)
(subsequent history omitted) ("2001 Payphone Order"); Fourth Order on
Reconsideration and Order on Remand, 17 FCC Rcd 2020 (2002) ("2002
Payphone Order"); Order on Remand and Notice of Proposed Rulemaking, 17
FCC Rcd 6347 (2002); Fifth Order on Reconsideration and Order on Remand,
17 FCC Rcd 21274 (2002); Report and Order, 18 FCC Rcd 19975 (2003) ("2003
Payphone Order"); Order on Reconsideration, 19 FCC Rcd 21457 (2004)
(subsequent history omitted) (collectively, with the 1996 to 2000 Payphone
Orders, referred to as the "Payphone Orders").
See, e.g., Joint Statement of FSH Communications, LLC, AT&T Corporation,
and Global Tel*Link Corporation, File No. EB-09-MD-003 (filed Nov. 18,
2009) ("Joint Statement") at 7, P: 1; Complaint at 7, P: 19.
See, e.g., Joint Statement at 7-8, P:P: 3-4; Complaint at 7-9, P:P: 20-24.
See Joint Statement at 8 P: 6; Complaint Ex. 4 (McGuane Dec'n) at 2, P: 2.
See 2002 Payphone Order, 17 FCC Rcd at 2028, P: 21.
See Joint Statement at 8, P: 6.
See Joint Statement at 8, P: 9 ("at some point AT&T ceased making
[payphone compensation] payments to FSH"); id. at 10, P: 17 (GTL did not
pay per-call compensation to FSH for [Inmate Calls] ...."). An inmate PSP
does not necessarily choose and contract directly with an inmate
payphone's PIC, and is not necessarily compensated on a per-call basis.
The governmental entity in charge of the correctional facility in which
inmate payphones are located usually controls the phones and awards a
contract to provide inmate payphone service to a prime contractor, which
may be a PSP, a platform service provider, an IXC, or other entity.
Compensation of the various parties involved in providing the inmate
payphone service may take any number of forms, including per-call
compensation or monthly commissions. See Reply of FSH Communications, LLC,
File No. EB-09-MD-003 (filed Aug. 26, 2009), Dubay Dec'n at 2-3, P:P: 3-
5.
See, e.g., Joint Statement at 9-10, P:P: 15-16; Joint Statement, Disputed
Facts to be Proven by FSH, at 11, P: 2; Complaint at 8-9, P:P: 22-23, 10,
P: 26; Reply at 6-9.
See Joint Statement at 9-10, P:P: 14-16; Complaint at 10, P: 26; Reply at
6-9, 13. AT&T alleges that, pursuant to a master contract between AT&T and
FSH, AT&T paid commissions to FSH compensating FSH for 0+ calls placed
from at least some of the Prison Payphones as to which FSH's Complaint
seeks 0+compensation. See Answer of AT&T, File No. EB-09-MD-003 (filed
June 29, 2009) at 23-24, 34, P: 7 ("AT&T Answer"). FSH disagrees, arguing
that, pursuant to the master contract, the commissions were paid to the
site owner, not FSH. Reply at 6-9, 32-33.
47 U.S.C. S: 276(b)(1)(A).
47 U.S.C. S: 276(d).
1996 Payphone Order, 11 FCC Rcd at 20567, P: 49.
Id.
See 1996 Payphone Order, 11 FCC Rcd at 20722 (Appendix E), S: 64.1300(a),
(c).
1996 Payphone Order, 11 FCC Rcd at 20569, P: 53.
See 1996 Payphone Order, 11 FCC Rcd at 29547, P: 11; Reconsideration
Order, 11 FCC Rcd at 21259, P: 51 n.209 ("[T]hese [pre-]existing contracts
will lapse in the years ahead and will be replaced with contracts under
which the BOCs [w]ill receive whatever compensation arrangement they
negotiated with the respective location providers.") The Commission also
determined in the 1996 Payphone Order that 0+ calls placed from inmate
payphones would be treated in the same manner as 0+ calls placed from
other payphones for the purposes of its payphone compensation plan. 1996
Payphone Order, 11 FCC Rcd at 20579, P: 74. Accord Reconsideration Order,
11 FCC Rcd at 21259-60, P: 52, 21269, P: 72; 1997 Payphone Order, 13 FCC
Rcd at 1780, P: 2.
1996 Payphone Order, 11 FCC Rcd at 20722 (App. E), S: 64.1300(a), (c); 47
C.F.R. S: 64.1300(a), (c) (1996) (emphasis added).
2001 Payphone Order, 16 FCC Rcd at 8111 (App. B), S: 64.1300(a); 47 C.F.R.
S: 64.1300(a), (c) (2001) (emphasis added). The 2001 Payphone Order was
vacated for failure to provide proper notice and opportunity for comment.
See Sprint Corp. v. FCC, 315 F.3d 369 (D.C. Cir. 2003). The Circuit Court
stayed its vacatur and mandate, however, through September 30, 2003. See
Sprint v. FCC, 2003 WL 1877308 (D.C. Cir. 2003). The Commission addressed
the Circuit Court's remand in the 2003 Payphone Order. See 2003 Payphone
Order, 18 FCC Rcd at 19976.
2003 Payphone Order, 18 FCC Rcd at 20018 (App. C), S: 64.1300(b); 47
C.F.R. S: 64.1300(b), (c) (2003 et seq.) (emphasis added).
See Complaint at 2-3, P: 1-2 & n. 3, 14-15, P:P: 38-45. See also Reply at
2-3 & n.4. The Commission has held that failure to pay payphone
compensation in accordance with the Commission's rules requiring such
payment constitutes a violation of section 201(b) of the Act. See, e.g.,
APCC Services, Inc. v. Radiant Telecom, Inc., Memorandum Opinion and
Order, 23 FCC Rcd 8962 (2008); Comtel of the South v. Operator
Communications, Inc., Memorandum Opinion and Order, 23 FCC Rcd 548 (2008).
47 C.F.R. S: 64.1300 (2003) - (2006).
See, e.g., Complaint at 6, P: 14, 16, n.18; Reply at 3, 24-26.
See Complaint at 6, P: 14 and Reply at 25 (citing 2001 Payphone Order, 16
FCC Rcd at 8104, P: 12 n.30 ("Other coinless payphone calls such as `0'
(operator) and `411' (directory assistance) are not at issue in this
clarification.")).
See para. 7 supra (comparing 47 C.F.R. S: 64.1300 (1996) (requiring
carriers to pay default compensation for all completed calls in the
absence of a compensation agreement) with 47 C.F.R. S: 64.1300 (2001 et
seq.) (requiring carriers to pay default compensation only for completed
coinless access code or subscriber toll-free payphone calls in the absence
of a compensation agreement)).
Reply at 3, 26 (citing Atchinson, Topeka & Santa Fe Rwy Co. v. Wichita Brd
of Trade, 412 U. S. 800 (1973) and NAACP v. FCC, 682 F.2d 993, 998 (D.C.
Cir. 1982)).
See, e.g., JEM Broadcasting Co. v. FCC, 22 F.3d 320 (D.C. Cir. 1994)
(procedural challenges to agency regulations will not be entertained
outside the statutory period for seeking direct judicial review of the
order adopting the regulation).
To the extent that FSH argues that the Commission's payphone compensation
plan for 0+ calls fails to fulfill the Commission's obligations under
section 271(d)(6) of the Act, see Reply at 25-26, FSH is incorrect. The
Commission did not, in the 2001 and 2003 Payphone Orders or elsewhere,
eliminate all compensation for 0+ calls. Rather, the Commission merely
changed its rules to eliminate default compensation for 0+ calls. See
supra para. 7. Nor does the fact that AT&T may have paid compensation for
certain 0+ calls placed from the Prison Payphones alter the Commission's
0+ compensation plan established in the Payphone Orders and rules. See
Reply at 26-27; Joint Statement at 8, P: 8.
See supra para. 6.
See Joint Statement at 7, P: 2. Although at the time FSH purchased them,
the Prison Payphones were subject to contracts providing no per-call
compensation, FSH presumably was aware of this fact at the time, and thus
could have (and, indeed, may have) protected itself by, for example,
paying a reduced purchase price. Moreover, FSH has not established that it
received no compensation for the Inmate Calls in place of per-call
compensation, such as commissions. See AT&T Answer at 23-24, 34, P: 7
(alleging that FSH received commissions for the Prison Payphones); Global
Tel*Link Corporation Answer File No. EB-09-MD-003 (filed June 29, 2009) at
27-28, P: 56 (alleging that FSH was aware that it would not receive
per-call 0+ compensation for certain Prison Payphones).
(. . . continued from previous page)
(continued . . .)
Federal Communications Commission FCC 12-162
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Federal Communications Commission FCC 12-162