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Federal Communications Commission FCC 17-148
Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of
AT&T Corp.,
Complainant,
v.
Iowa Network Services, Inc. d/b/a
Aureon Network Services,
Defendant.
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)
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Proceeding Number 17-56
Bureau ID Number EB-17-MD-001
MEMORANDUM OPINION AND ORDER
Adopted: November 7, 2017 Released: November 8, 2017
By the Commission:
I. INTRODUCTION
1. Complainant AT&T Corp. (AT&T) alleges that Iowa Network Services, Inc. d/b/a
Aureon Network Services (Aureon) violated Sections 201(b) and 203 of the Communications Act of
1934, as amended (Act), in charging AT&T for Centralized Equal Access (CEA) service on traffic
destined for competitive local exchange carriers (CLECs) engaged in “access stimulation.”1 In this
Memorandum Opinion and Order, we grant AT&T’s Complaint in part. We conclude that Aureon is
subject to the Commission’s rate cap and rate parity rules and that it violated those rules by filing tariffs
containing rates exceeding those prescribed by the Commission. We will determine in the damages phase
of this proceeding what Aureon’s rates should have been and whether refunds to AT&T are warranted.2
We further order Aureon to revise its tariff to file rates that comply with the Commission’s rules. We
otherwise disagree with AT&T’s assertions that Aureon acted unlawfully.
II. BACKGROUND
A. Parties
2. AT&T provides communications and other services, including interexchange or long
distance services.3 As a long distance telephone company—otherwise known as an interexchange carrier
1 Formal Complaint of AT&T Corp., Proceeding Number 17-56, Bureau ID Number EB-17-MD-001 (filed June 8,
2017) (Complaint). See paragraph 10 below.
2 Under Section 1.722(d) of the Commission’s rules, AT&T elected to bifurcate its liability and damages claims.
Complaint at 9, para. 20 (citing 47 CFR § 1.722(d)).
3 Complaint at 12, para. 25, Iowa Network Services, Inc. d/b/a Aureon Network Services Answer to the Formal
Complaint of AT&T Corp., Proceeding Number 17-56, Bureau ID Number EB-17-MD-001 (filed June 28, 2017)
(Answer) at 15, para. 25.
Federal Communications Commission FCC 17-148
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(IXC)—AT&T provides telecommunications services enabling customers from one local exchange area
to call customers in other local exchange areas.4 In general, AT&T offers its long distance telephone
service to the public for a fee, collects revenue from the customers that place calls, and in some
circumstances, pays a charge to other carriers for the use of their facilities.5
3. One such carrier is Aureon. AT&T is a customer of Aureon and uses Aureon’s network
to complete certain calls for AT&T’s customers.6 A group of small, rural incumbent local exchange
carriers (ILECs) founded Aureon in 1988 to provide CEA service.7 Aureon’s various divisions provide a
wide variety of telecommunications, advanced, and other services.8 Aureon provides its CEA service
through its Access Division.9
B. CEA Service
4. Local exchange carriers have traditionally been required to provide “equal access”
service to long distance carriers.10 “Equal access” refers to a “class of service whereby all long distance
service providers receive equivalent connections to the local exchange carrier’s network.”11 “1+ dialing”
is an equal access feature that automatically directs all long distance numbers to the customer’s chosen (or
“presubscribed”) long distance carrier.12 Historically, equal access was not available because all 1+ calls
were routed to AT&T, the then-dominant long distance provider.13 Imposed as part of the 1982
divestiture of AT&T, equal access obligations promoted long distance competition by enabling customers
to reach AT&T’s competitors by dialing the same number of digits needed to reach AT&T.14
5. In the 1980s, many switches of small, rural ILECs could not provide service to more than
one long distance carrier on a 1+ basis.15 These small, rural ILECs claimed that they lacked the financial
ability to upgrade or replace their existing switches to provide equal access.16 They further maintained
that, because of the low volume of traffic from each individual ILEC, IXCs would be unwilling to incur
high costs to construct the facilities needed to interconnect long distance networks directly to ILECs’ end
4 Joint Statement of Stipulated Facts, Disputed Facts, and Key Legal Issues, Proceeding Number 17-56, Bureau ID
Number EB-17-MD-001 (filed July 20, 2017) (Joint Statement) at 2, Stipulated Fact 2.
5 Joint Statement at 2, Stipulated Fact 3.
6 Joint Statement at 2, Stipulated Fact 5.
7 Joint Statement at 2, Stipulated Facts 6, 7.
8 Joint Statement at 3, Stipulated Facts 10, 11. These services include (a) voice services (VoIP, IP Fax, hosted
PBX); (b) dedicated Internet access; (c) cloud and data storage; (d) IT support (technology planning, help desk,
disaster recovery, IT security); (e) human resources (administrative services, staffing, leadership development,
senior living services); and (f) call centers. Id. at 3, Stipulated Fact 11.
9 Joint Statement at 2, Stipulated Fact 6.
10 See United States v. Am. Tel. & Tel. Co., 552 F. Supp. 131, 196 (D.D.C. 1982), aff’d sub nom. Maryland v. United
States, 460 U.S. 1001 (1983) (U.S. v. AT&T); see also 47 U.S.C. § 251(g).
11 See Complaint, Exh. 10, FCC, Distribution of Equal Access Lines and Presubscribed Lines, 1997 WL 677407
(C.C.B. Nov. 3, 1997).
12 Complaint at 13, para. 31; Answer at 17, para. 31.
13 See In re Applications of Iowa Network Access Div., Memorandum Opinion, Order and Certificate, 3 FCC Rcd
1468 (1988) (INS Section 214 Order), para. 3.
14 See U.S. v. AT&T, 552 F. Supp. at 196-98.
15 Joint Statement at 4, Stipulated Fact 18.
16 Id.
Federal Communications Commission FCC 17-148
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office switches.17 In some states, groups of small, rural ILECs sought to address these issues by forming
entities to provide CEA service.18 CEA service enables IXCs to complete their customers’ long distance
telephone calls, without building their own networks, by connecting the IXCs’ facilities to a centralized
switch and network operated by the CEA provider.19 The CEA provider, in turn, connects with local
exchange carrier (LEC) networks at various points of interconnection (POIs).20
6. In 1988, the Commission authorized Aureon to provide CEA service for both originating
and terminating traffic in Iowa.21 Aureon does not serve end users.22 Rather, it serves IXCs, enabling
them to deliver long distance traffic to approximately 200 LECs that subtend Aureon’s network.23 In
accordance with routing guidelines provided by LECs, AT&T sends traffic to Aureon’s network for
routing to LECs connected to Aureon’s network.24 Not every LEC operating in Iowa subtends Aureon’s
network, however.25 Where a LEC does not subtend Aureon’s network, AT&T sends calls to that LEC’s
Iowa customers through a network provider other than Aureon.26
C. The Commission’s Access Tariff Regime and Intercarrier Compensation Reforms
7. The Commission’s tariff regime for switched access charges differs for dominant carriers
and non-dominant carriers, ILECs and CLECs.27 ILECs, as dominant carriers,28 are required to file and
maintain tariffs either as rate-of-return or price-cap carriers.29 Rate-of-return dominant carriers can
participate either in the traffic-sensitive tariff filed annually by the National Exchange Carriers
Association (NECA)30 or file their own tariffs under rule 61.38 or 61.39.31 Historically, such carriers
17 Joint Statement at 4, Stipulated Fact 19.
18 Joint Statement at 4, Stipulated Fact 20.
19 Joint Statement at 4, Stipulated Fact 21.
20 Id.; Complaint at 14-15, para. 33.
21 Joint Statement at 4, Stipulated Fact 22; INS Section 214 Order. The Commission also has authorized the
provision of CEA service in Indiana, South Dakota, and Minnesota. Complaint at 15, para. 34.
22 Joint Statement at 4, Stipulated Fact 26.
23 Joint Statement at 4, Stipulated Fact 25.
24 Joint Statement at 5, Stipulated Fact 29.
25 Joint Statement at 4, Stipulated Fact 27.
26 Joint Statement at 5, Stipulated Fact 28.
27 Compare 47 CFR §§ 61.19-61.26, with 61.31-61.59. See All Am. Tel. Co., Inc. v. FCC, 867 F.3d 81, 84 (D.C. Cir.
2017) (“When it comes to determining the amount of that access charge, however, not all local carriers are the same
… federal law divides local carriers into ‘incumbent local exchange carriers’ and ‘competitive local exchange
carriers.’”).
28 The Commmision developed the dominant/nondominant dichotomy in the Competitive Carrier First Report &
Order, designating AT&T, independent telephone companies, Western Union, domestic satellite carriers (Domsats),
Domsat resellers, and what were known as miscellaneous common carriers (providers of relay video signals and
their corresponding audio components by terrestrial microwave links) as dominant. Policy and Rules Concerning
Rates for Competitive Common Carrier Services and Facilities Authorizations Therefor, First Report and Order, 85
FCC 2d 1, 10-11, para. 26 (1980) (Competitive Carrier First Report & Order). All other carriers were classified as
nondominant. Id., 85 FCC 2d at 11, para. 27.
29 See 47 U.S.C. § 203.
30 Establishing Just and Reasonable Rates for Local Exchange Carriers, Notice of Proposed Rulemaking, 22 FCC
Rcd 17989, 17992, para. 6 (2007).
31 See 47 CFR §§ 61.38-61.39.
Federal Communications Commission FCC 17-148
4
have set their tariffed interstate switched access rates at a level designed to give carriers an opportunity to
recover their operating costs plus an authorized rate of return on the regulated rate base (plant in service
minus accumulated depreciation).32 Competitive access providers were classified as nondominant,33 and,
as such, are not required to file cost support.34
8. The Telecommunications Act of 1996 created its own dichotomy of local exchange
carriers—ILECs and CLECs.35 Carriers (including all ILECs) that were subject to dominant carrier
regulation remained as such and new entrants in the exchange access market (including most CLECs)
were subject to nondominant regulation.36 Responding to substantial disputes regarding nondominant
carrier switched access charges, the Commission in 2001 held that non-dominant CLECs could provide
an IXC with, and charge for, interstate switched access services in one of two ways.37 First, a CLEC may
tariff interstate switched exchange access charges if its rates are no higher than the rates charged for such
services by the competing ILEC (the benchmark rule).38 Second, as an alternative to tariffing switched
exchange access services, a CLEC may negotiate and enter into an agreement with an IXC to charge rates
higher than those permitted under the benchmark rule.39
9. In 2011, the Commission comprehensively reformed and modernized its intercarrier
compensation regime to facilitate the transition to Internet Protocol-based networks and curtail wasteful
arbitrage.40 In particular, the Commission adopted a uniform national bill-and-keep framework as the
ultimate end state for all telecommunications traffic exchanged with a LEC.41 Under a bill-and-keep
arrangement, carriers look first to their subscribers to cover the costs of the network, then to explicit
universal service support where necessary.42 The Commission immediately capped all interstate switched
access rates, as well as many intrastate rates, effective as of the date of the rules,43 and mandated that
32 Connect America Fund et al., Report and Order, Order and Order on Reconsideration and Further Notice of
Proposed Rulemaking, 31 FCC Rcd 3087, 3215, para. 337 (2016) (Rate-of-Return Reform Order).
33 See Competitive Carrier First Report and Order, 85 FCC 2d at 11, para. 27; Tariff Filing Requirements for Non-
Dominant Common Carriers, Memorandum Opinion and Order, 8 FCC Rcd 6752, 6754 (1993), vacated and
remanded in part on other grounds, Southwestern Bell Corp. v. FCC, 43 F.3d 1515 (D.C. Cir. 1995).
34 Our rules requiring the filing of cost support, such as Rules 61.38 and 61.39, apply only to dominant carriers. 47
CFR §§ 61.38, 61.39.
35 See Access Charge Reform, Reform of Access Charges Imposed by Competitive Local Exchange Carriers,
Seventh Report and Order and Further Notice of Proposed Rulemaking, 16 FCC Rcd 9923, 9926, para. 8 (2001)
(CLEC Access Charge Reform Order).
36 See Access Charge Reform, Notice of Proposed Rulemaking, Third Report and Order, and Notice of Inquiry, 11
FCC Rcd 21354, 21475-76, para. 278 (1996).
37 See CLEC Access Charge Reform Order, 16 FCC Rcd at 9925, para. 3.
38 See 47 CFR § 61.26(b), (c). The Commission exempts a narrow class of rural CLECs from its benchmark rule
permitting qualifying carriers to file tariffs containing rates “at the level of those in the NECA access tariff.” 47
CFR § 61.26(a)(6) and (e).
39 CLEC Access Charge Reform Order, 16 FCC Rcd at 9925, para. 3, 9938, para. 40.
40 Connect America Fund et al., Report and Order and Further Notice of Proposed Rulemaking, 26 FCC Rcd 17663
(2011) (USF/ICC Transformation Order), pets. for review denied, In re FCC 11-161, 753 F.3d 1015 (10th Cir.
2014).
41 USF/ICC Transformation Order, 26 FCC Rcd at 17904-956, paras. 736-846.
42 See USF/ICC Transformation Order, 26 FCC Rcd at 17904, para. 737.
43 USF/ICC Transformation Order, 26 FCC Rcd at 17932-34, paras. 798, 800-01 (“We also take measures today to
start reforming other elements as well by capping all interstate switched access rates in effect as of the effective date
(continued ….)
Federal Communications Commission FCC 17-148
5
LECs reduce their terminating intrastate access rates to the level of their interstate rates by July 1, 2013.44
For CLECs, the Commission reaffirmed benchmarking as the main means of ensuring reform.45 The
Commission also established a schedule by which many interstate and intrastate terminating access rates
would be reduced to bill-and-keep.46 The Commission imposed these caps and prescribed reductions
regardless of the resulting rate of return on investment relating to the affected services.47
10. In addition, the Commission promulgated new rules to address access stimulation.48
Access stimulation occurs when a LEC with high switched access rates (1) enters into an arrangement
with a provider of high call volume operations—typically, “free” chat line or conference calling
companies (FCPs)—to stimulate the access minutes terminated to the LEC; and (2) shares a portion of the
increased access revenues resulting from the increased demand, or some other benefit, with the FCP.49
The Commission concluded that access stimulation is an arbitrage scheme that is wasteful, imposes undue
costs on consumers, and harms competition.50 To curtail this practice, the Commission adopted a rule that
prohibits CLECs engaged in access stimulation from filing a tariff for their interstate exchange access
services above the rate prescribed in the access tariff of the price cap ILEC with the lowest switched
access rates in the state.51
D. Aureon’s CEA Tariff and Proposed High-Volume Tariff
11. Aureon’s Access Division provides CEA service and, as to that service, Aureon is
classified as a dominant carrier.52 Aureon filed its tariffed rates for CEA service under Section 61.38 of
the Commission’s rules.53 Specifically, INAD Tariff F.C.C. No. 1 (Tariff) is captioned “Centralized
Equal Access Service” and contains the “regulations, rates and charges applicable to the provision of
Switched Access Services and other miscellaneous services … provided by [Aureon] … to customers.”54
Although the Tariff capitalizes the phrase “Centralized Equal Access Service” and uses it on the title page
and as a caption on each page of the Tariff, the Tariff does not define the term.55 Aureon charges for
(Continued from previous page)
of the rules, including originating access and all transport rates.”), 17934, para. 801 (“Thus, at the outset of the
transition, all interstate switched access and reciprocal compensation rates will be capped at rates in effect as of the
effective date of the rules. We cap these rates as of the effective date of the rules.”).
44 USF/ICC Transformation Order, 26 FCC Rcd at 17936-37, para. 805 (“The transition imposes a cap on all
intrastate rates for price cap carriers [and CLECS that benchmark access rates to price cap carriers], and all
terminating intrastate access rates for rate-of-return carriers [and CLECS that benchmark access rates to rate-of-
return carriers]). The Commission also required LECs to reduce their intrastate originating dedicated transport rates
to interstate levels. See USF/ICC Transformation Order, 26 FCC Rcd 17934-35, para. 801.
45 USF/ICC Transformation Order, 26 FCC Rcd at 17937, para. 807 (“Application of our access reforms will
generally apply to competitive LECs via the CLEC benchmarking rule.”).
46 USF/ICC Transformation Order, 26 FCC Rcd 17934-36, para. 801, Figure 9.
47 See Rate-of-Return Reform Order, 31 FCC Rcd at 3129, para. 229 n.500.
48 47 CFR § 61.26(g); USF/ICC Transformation Order, 26 FCC Rcd at 17874-90, paras. 656-701.
49 USF/ICC Transformation Order, 26 FCC Rcd at 17874, para. 656. See Joint Statement at 6, Stipulated Fact 47;
see generally All American Tel. Co., Inc. v. FCC, 867 F.3d 81, 85 (D.C. Cir. 2017).
50 USF/ICC Transformation Order, 26 FCC Rcd at 17676, para. 33, 17873, para. 649, 17875-77, paras. 663-66.
51 47 CFR § 61.26(g)(1); USF/ICC Transformation Order, 26 FCC Rcd at 17886, para. 690.
52 Joint Statement at 4, Stipulated Fact 24.
53 Id.
54 Joint Statement at 5, Stipulated Fact 34. See Complaint, Exh. 3, INAD Tariff F.C.C. No. 1, § 1.1, 2nd Revised
Page 16 (issued Oct. 27, 2000).
55 Joint Statement at 5, Stipulated Fact 35.
Federal Communications Commission FCC 17-148
6
interstate CEA service using a single tariff rate called the “switched transport rate,” which is non-distance
sensitive and recovers the costs of both transport and tandem switching.56 When Aureon first filed the
Tariff on August 10, 1988,57 the switched transport rate was $0.0117 per minute.58 On December 29,
2011, when the Commission’s rate cap went into effect, the switched transport rate was $0.00819 per
minute.59 Aureon reduced the per-minute rate to $0.00623 in June 2012, and increased the rate to its
current level of $0.00896 in June 2013.60
12. In April 2017, Aureon proposed providing a separate, high-volume contract tariff
service.61 This service would be subject to a lower rate ($0.00649 per minute), and purchasers would be
required to sign a separate contract with Aureon and agree not to challenge any of Aureon’s rates.62
According to Aureon’s filing, “additional terms and conditions that are not applicable to [CEA service]”
would govern the high-volume service.63 Aureon delayed the effective date of its proposed high-volume
tariff filing until the Commission could review the proposal.64 One month later, Aureon filed an
application for special permission to withdraw the proposed service and to substitute a new “volume
discount” plan that would have the same rate as the proposed high-volume contract service and similarly
would require execution of a separate service agreement.65 The volume discount plan became effective
on May 20, 2017.66 Aureon has not negotiated an access services agreement with AT&T, however.67
E. The Parties’ Dispute
13. AT&T provides long-distance services to customers in Iowa and purchases Aureon’s
services to complete calls.68 In recent years, AT&T has seen a greatly increasing amount of alleged
access stimulation traffic traverse its network in Iowa, for which it must pay access charges both to
56 Joint Statement at 5, Stipulated Fact 37. The Commission recently requested that parties refresh the record
regarding tandem switching and transport services in the intercarrier compensation reform proceedings. See Parties
Asked to Refresh the Record on Intercarrier Compensation Reform Related to the Network Edge, Tandem Switching
and Transport, and Transit, Public Notice, DA 17-863, 2017 WL 3953397 (Sept. 8, 2017). Specifically, the
Commission sought comments on “what steps [it] should take to transition the remaining elements associated with
tandem switching and transport to bill-and-keep.” Id. This request implicates carriers such as Aureon that provide
tandem switching and transport, but are not terminating carriers.
57 Joint Statement at 5, Stipulated Fact 34.
58 Joint Statement at 9, Stipulated Fact 80.
59 Joint Statement at 8, Stipulated Fact 59.
60 Joint Statement at 8, Stipulated Facts 60, 61. Aureon’s present tariffed intrastate rate is $0.0114 per minute for
CEA switching services plus $0.003 per minute, per mile for transport, and it has been at the level since the early
1990s. Joint Statement at 8, Stipulated Fact 69.
61 Joint Statement at 5, Stipulated Fact 38.
62 Id.
63 Joint Statement at 6, Stipulated Fact 39.
64 Joint Statement at 6, Stipulated Fact 40.
65 Joint Statement at 6, Stipulated Fact 41.
66 Joint Statement at 6, Stipulated Fact 42.
67 Id.
68 Joint Statement at 9, Stipulated Facts 73, 74. Depending on the choices made by the end user’s provider (i.e.,
whether it subtends Aureon’s network), AT&T must connect to that provider through Aureon. See 47 U.S.C.
§ 251(a) (“Each telecommunications carrier has the duty … to interconnect directly or indirectly with the facilities
and equipment of other telecommunications carriers.”).
Federal Communications Commission FCC 17-148
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Aureon (for tandem and transport services to the subtending LECs’ POIs),69 and to the subtending LECs
(for transport from their POIs to their switches and for end office switching services)70 that terminate the
calls.71 Aureon estimates that, over time, traffic owing to its subtending LECs engaged in access
stimulation has amounted to roughly [BEGIN CONFIDENTIAL] [END CONFIDENTIAL] of its
total switched access service traffic.72
14. Aureon has sent monthly invoices to AT&T for access service.73 AT&T fully paid
Aureon’s August 2013 invoice and previous invoices for access service.74 In October 2013, AT&T
disputed Aureon’s billed access service charges and began withholding payment on access charges it
claims were being improperly billed by Aureon.75 AT&T has not fully paid Aureon’s September 2013
invoice and subsequent invoices.76
15. On May 30, 2014, Aureon filed a complaint against AT&T in the United States District
Court for New Jersey alleging that AT&T breached Aureon’s federal and state tariffs.77 AT&T filed
counterclaims against Aureon alleging various violations of the Act.78 On July 6, 2015, AT&T filed a
letter with the District Court raising the issue of the primary jurisdiction doctrine.79 In an Order dated
October 14, 2015, the District Court stayed the case and referred it to the Commission pursuant to that
doctrine.80 In August 2016, the parties notified the Commission of the District Court’s referral.81 In a
September 27, 2016, Letter Ruling, the Commission ordered AT&T to file a Formal Complaint to
effectuate the District Court’s referral.82
69 Joint Statement at 5, Stipulated Fact 37.
70 See AT&T Corp. v. Alpine Communications, LLC, Memorandum Opinion and Order, 27 FCC Rcd 11511, 11513-
14, paras. 6-8. See also AT&T Corp. v. Great Lakes Communication Corp, Proceeding No. 16-170, Bureau ID No.
EB-16-MD-001 (filed Aug. 16, 2016), Complaint, Legal Analysis at 13 (AT&T v. Great Lakes Complaint).
71 Principal among these access-stimulating LECs is Great Lakes Communication Corporation, against which AT&T
has filed a formal complaint that is pending before the Commission. See footnote 70 above; see also Joint Statement
of Stipulated Facts, Disputed Facts, Key Legal Issues, and Discovery and Scheduling, Proceeding Number 16-170,
Bureau ID Number EB-16-MD-001 (filed Oct. 17, 2016) at 4, Stipulated Fact 24 (“GLCC is engaged in “access
stimulation” as defined under the Commission’s rules.”).
72 Joint Statement at 6-7, Stipulated Fact 48.
73 Joint Statement at 9, Stipulated Fact 75.
74 Id.
75 Joint Statement at 9, Stipulated Fact 76.
76 Joint Statement at 9, Stipulated Fact 77.
77 Joint Statement at 3, Stipulated Fact 12.
78 Complaint at 29, para. 60; Complaint, Exh. 45, Defendant’s Answer and Counterclaims, Iowa Network Services v.
AT&T Corp., No. 14-3439 (D.N.J. Aug. 4, 2014); Answer at 32, para. 60.
79 Joint Statement at 3, Stipulated Fact 13.
80 Joint Statement at 3, Stipulated Fact 14. On October 28, 2015, Aureon filed a motion asking the District Court to
reconsider its October 14, 2015, Order. Joint Statement at 3, Stipulated Fact 15. The District Court denied
Aureon’s motion for reconsideration on December 8, 2015. Joint Statement at 3, Stipulated Fact 16.
81 Letter to Marlene H. Dortch, Secretary, FCC, from James U. Troup, Counsel for Aureon (Aug. 5, 2016); Letter to
Christopher Killion, Chief, Market Disputes Resolution Division, FCC Enforcement Bureau, from Michael J.
Hunseder, Counsel for AT&T (Aug. 12, 2016).
82 Joint Statement at 3, Stipulated Fact 17. See Letter from Lisa B. Griffin, Deputy Chief, Markets Dispute
Resolution Division, FCC Enforcement Bureau, to James F. Bendernagel, Counsel for AT&T, and James U. Troup,
Counsel of Aureon, Proceeding Number 17-56, Bureau ID Number EB-17-MD-001 (Sept. 27, 2016).
Federal Communications Commission FCC 17-148
8
16. On June 8, 2017, AT&T filed its Complaint with the Commission.83 The Complaint
asserts two counts: Count I, for violation of Section 201 of the Act,84 and Count II, for violation of
Section 203 of the Act.85 Specifically, AT&T argues that (1) the Tariff applies only to CEA service,
which it argues does not include access stimulation traffic;86 (2) Aureon violated the Commission’s rate
cap and rate parity rules by raising its CEA tariffed rate in 2013 and by not ever lowering its intrastate
CEA rate;87 (3) Aureon is engaged in access stimulation but has not filed revised tariffs to conform its
rates to the lower levels that the Commission has required for such traffic;88 and (4) Aureon manipulated
its CEA rates through a variety of improper accounting measures.89 Aureon filed an answer on June 28,
2017, denying the allegations of wrongdoing and asserting various affirmative defenses.90 AT&T
submitted a Reply to the Answer on July 5, 2017.91
III. DISCUSSION
A. Aureon Did Not Violate Sections 203 and 201(b) of the Act by Billing at its CEA
Tariff Rate for Traffic Terminating with Access Stimulators.
17. AT&T contends that Aureon violated Section 203 of the Act and committed an
unreasonable practice in contravention of Section 201(b) of the Act by billing AT&T for access
stimulation traffic, because access stimulation traffic is not CEA traffic under the Tariff.92 The Tariff is
titled “Centralized Equal Access Service,” and that phrase appears as a caption throughout the Tariff.93
Nonetheless, the Tariff does not define the term.94 AT&T argues that the Commission should infer the
83 Consistent with the September 27, 2016, Letter Ruling, the Complaint addressed the affirmative defenses and
counterclaims that AT&T raised in the District Court and that the District Court referred to the Commission. The
District Court did not refer Aureon’s collection action claims against AT&T, and they remain pending with the
Court. Although Aureon requests that the Commission address its claims against AT&T, we decline to do so in this
proceeding. See Initial Brief of Iowa Network Services, Inc. d/b/a Aureon Network Services, Proceeding Number
17-56, Bureau ID Number EB-17-MD-001 (filed Aug. 21, 2017) (Aureon Initial Brief) at 1-4. Aureon’s claims
against AT&T would be “cross-complaints” in this case, which the Commission’s formal complaint rules prohibit.
47 CFR § 1.725 (prohibiting cross-complaints—including counterclaims—seeking relief against a carrier that is a
party to a proceeding).
84 Complaint at 64-68, paras. 134-46.
85 Complaint at 68-70, paras. 147-54.
86 Complaint, at 30-40, paras. 62-80; Complaint, Legal Analysis at 4-28; AT&T’s Reply to the Answer, Response to
Affirmative Defenses, and Information Designation, Proceeding Number 17-56, Bureau ID Number EB-17-MD-001
(filed July 5, 2017) (Reply), Legal Analysis at 5-22.
87 Complaint at 44-51, paras. 86-101; Complaint, Legal Analysis at 28-38; Reply, Legal Analysis at 22-31.
88 Complaint at 51-57, paras. 102-17; Complaint, Legal Analysis at 38-48; Reply, Legal Analysis at 31-38.
89 Complaint at 57-64, paras. 118-33; Complaint, Legal Analysis at 48-62; Reply, Legal Analysis at 38-58; Final
Brief of AT&T Corp., Proceeding Number 17-56, Bureau ID Number EB-17-MD-001 (filed Aug. 21, 2017) (AT&T
Initial Brief) at 3-9; Final Reply Brief of AT&T Corp., Proceeding Number 17-56, Bureau ID Number EB-17-MD-
001 (filed Aug. 28, 2017) at 5-10 (AT&T Reply Brief).
90 See footnote 78 above.
91 See Reply.
92 Complaint at 30-43, paras. 62-85, at 64-70, paras. 134-54; see, e.g., Complaint, Legal Analysis at 1-2, 13-15;
Reply, Legal Analysis at 5-22. AT&T has paid Aureon’s charges for traffic that transits to and from LECs that
AT&T does not contend are access stimulators. Joint Statement at 9, Stipulated Facts 76 and 77; AT&T Answer to
Interrogatory No. 4; Aureon Initial Brief at 2; AT&T Initial Brief at 3-4.
93 Joint Statement at 5, Stipulated Facts 34, 35.
94 Joint Statement at 5, Stipulated Fact 35.
Federal Communications Commission FCC 17-148
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term’s definition from other authority, and that the definition must exclude the provision of access
services on access stimulation traffic.95 We are unpersuaded by AT&T’s arguments. As discussed below,
we conclude that the service Aureon provided to AT&T is the service that the Tariff describes.
Therefore, Aureon appropriately billed AT&T under the Tariff.96
18. Section 1 of the Tariff states that it contains the “regulations, rates and charges applicable
to the provision of Switched Access Services and other miscellaneous services … provided by [Aureon]
… to customers.”97 The Tariff provides that “Switched Access Service, when combined with the services
offered by Exchange Telephone Companies, is available to Customers.”98 The Tariff later describes the
technical characteristics of Switched Access Service as follows:
[Aureon] provides a two-point electrical communications path between a
point of interconnection with the transmission facilities of an Exchange
Telephone Company at a location listed in Section 8 following and Iowa
Network’s central access tandem where the Customer’s traffic is
switched to originate or terminate its communications. It also provides
for the switching facilities at [Aureon’s] central access tandem.99
Although the provisions of Section 1 of the Tariff are captioned “Application of Tariff,” AT&T contends
that they “do not address the scope of [Aureon’s] Tariff.”100 Rather, AT&T says that Section 1 “merely
confirms that CEA service is a type of switched access service and describes the functions that [Aureon]
will perform in connection with legitimate CEA traffic.”101 However, nothing in the language of the
Tariff restricts its application to what AT&T calls “legitimate” CEA traffic (i.e., access traffic that is not
bound for access stimulators).102 Indeed, there is no mention at all of traffic being categorized in the way
AT&T suggests. Nor do the references to “Centralized Equal Access Service” on the Tariff’s title page
and on the individual pages of the Tariff render the scope of the Tariff any different from that described
with particularity in the “Application of Tariff” provisions. The specific provisions of the Tariff prevail
95 Complaint at 31-75, paras. 63-75; see, e.g., Complaint, Legal Analysis at 6-7 (citing AT&T Corp. v. YMax
Commc’ns Corp., 26 FCC Rcd 5742, 5748, para. 12 (2011) (AT&T v. YMax)); Reply, Legal Analysis at 5-15.
96 See, e.g., AT&T Corp. v. All Am. Tel. Co., Memorandum Opinion and Order, 28 FCC Rcd 3477, 3492-96, at
paras. 34–41 (2013); AT&T v. YMax, 26 FCC Rcd at 5748, para. 12 (“Consistent with these statutory provisions [in
Section 203], a carrier may lawfully assess tariffed charges only for those services specifically described in its
applicable tariff.”); MCI WorldCom Network Servs. v. PaeTec Commc’ns, Inc., 204 Fed. Appx. 271, 272 n.2 (4th
Cir. 2006) (“[A] carrier is expressly prohibited from collecting charges for services that are not described in its
tariff.”); CoreTel Va., LLC v. Verizon Va., LLC, 752 F.3d 364, 374 (4th Cir. 2014) (A carrier “must provide its
services in exactly the way the carrier describes them in th[e] tariff.” (emphasis added)).
97 See Complaint, Exh. 3, INAD Tariff F.C.C. No. 1, § 1.1, 2nd Revised Page 16 (issued Oct. 27, 2000). The Tariff
also states that “[s]witched access services provided under this tariff cover only the use of [Aureon’s] central access
tandem, the switched transport between an [Aureon] premises and such central access tandem, and the use of the
[Aureon]/ONVOY Common Channel Signaling Access Network.” Id.
98 See Complaint, Exh. 3, INAD Tariff F.C.C. No. 1, § 6.1, 4th Revised Page 88 (issued Jan. 18, 2012).
99 See id.
100 Reply, Legal Analysis at 8.
101 See Reply, Legal Analysis at 8.
102 Nor did the Commission find in the USF/ICC Transformation Order that “traffic directed to access stimulators
should not be subject to tariffed access charges in all cases.” USF/ICC Transformation Order, 26 FCC Rcd at
17879, para. 672 (rejecting arguments that the Commission should prohibit the collection of switched access charges
for traffic sent to access stimulators). Rather, the Commission chose to adopt a specific set of access stimulation
rules as part of comprehensive intercarrier compensation reform to “address remaining incentives to engage in
access stimulation.” Id.
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over general provisions and headings.103 Aureon indisputably provided Switched Access Service in the
manner delineated in the Tariff when it routed the calls AT&T sent to the LECs that subtend Aureon’s
network.104 Consequently, Aureon did not violate Section 201(b) or 203 of the Act when it charged
AT&T under the Tariff for the traffic Aureon delivered.105
19. AT&T argues that CEA service “was approved for the limited purpose of facilitating the
provision of equal access service to small, rural LECs carrying very low traffic volumes”106 and that
“access stimulation traffic has virtually nothing in common with legitimate CEA traffic.”107 As an initial
matter, AT&T overstates its claim concerning the “limited purpose” of the CEA service. The order
authorizing a CEA network in Iowa states—and subsequent authority reaffirms—that Aureon’s CEA
network also would serve to “speed the availability of high quality varied competitive services to small
towns and rural areas.”108 Further, AT&T’s allegation that CEA networks were intended to carry low
traffic volumes is of little weight since, as a Section 61.38 carrier, Aureon’s calculated rates should
decrease to reflect the increase in the volume of traffic.109 In any event, we acknowledge that, at the time
the Commission authorized Aureon to operate its CEA network, the Commission could not have
anticipated the subsequent emergence and rapid growth of access stimulation arrangements. But in this
adjudication, we must evaluate Aureon’s conduct under existing rules and orders, along with the terms of
its Tariff. Regardless of how access stimulation traffic compares in character and volume to the types of
traffic that were originally anticipated for CEA service, we find that Aureon has acted lawfully and
consistently with its Tariff in transporting access stimulation traffic. AT&T claims that Aureon’s recent
filing of a proposed high-volume traffic contract tariff shows that the Tariff does not cover access
stimulation traffic.110 But, as AT&T acknowledges, Aureon withdrew this filing,111 and we will not rely
on its language to circumscribe the scope of Aureon’s existing Tariff. In any event, Aureon’s proposed
tariff did not purport to apply to high volumes of access traffic except in specific circumstances not
present here. For example, the proposed tariff required the presence of a contract and a buyer who had
103 CoreTel Virginia, LLC v. Verizon Virginia, LLC, 752 F.3d 364, 375 (4th Cir. 2014) (holding that the more
specific usage of language in a tariff prevails over general usage); Associated Press v. FCC, 452 F.2d 1290, 1296
(D.C. Cir. 1971) (referring to “the accepted principle that provisions under a specific tariff designation prevail over
those included under a more general heading”).
104 Joint Statement at 5, Stipulated Facts 29-31.
105 Because Aureon’s tariff applies to access stimulation traffic, it did not violate Section 203 of the Act by not filing
a new tariff or modifying its existing Tariff to specifically cover access stimulation traffic. Cf. Complaint, Legal
Analysis at 6-15; Reply, Legal Analysis at 14-15, 21-22.
106 Complaint, Legal Analysis at 7 (capitalization omitted).
107 Id. at 10 (capitalization omitted).
108 INS Section 214 Order, 3 FCC Rcd. at 1468, para 4; id. at 1474, para 38; Answer, Exh. 28, Iowa Network Access
Division, Final Decision and Order, Docket No. RPU-88-2, 1988 Iowa PUC Lexis 1, slip op. at 10 (IUB Oct. 18,
1988); Nw. Bell Tel. Co. v. Iowa Utils. Bd., 477 N.W.2d 678, 681 (Iowa 1991).
109 See 47 CFR § 61.38; Answer, Exh. B, F. Hilton Decl. at 12, para. 19. Cf. In re FCC 11-161, 753 F.3d 1015,
1144-45 (10th Cir. 2014) (quoting USF/ICC Transformation Order, 26 FCC Rcd at 17874, para. 657).
110 See Complaint at 35-36, paras. 74-75; Complaint, Legal Analysis at 13-15; Reply, Legal Analysis at 10, n.8;
AT&T Initial Brief 14-15; Complaint, Exh. 46, INS April 2017 Revised Tariff Filing, § 7.1.1, Original Page 146.1
(filed Apr. 14, 2017).
111 Complaint, Legal Analysis at 13 n.18; Joint Statement at 6, Stipulated Fact 41. On May 17, 2017, the Wireline
Competition Bureau granted Aureon special permission to withdraw the filing. See Iowa Network Access Division
Application for Special Permission No. 8 (filed May 16, 2017), and granted under Special Permission No. 17-06
(May 17, 2017).
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not previously purchased CEA service.112 Here, neither AT&T nor Aureon alleges that a relevant contract
exists between them, and AT&T has purchased CEA service from Aureon for many years.
20. Contrary to AT&T’s contention, changes in the nature of Aureon’s network traffic and
customer base over time have not exceeded the scope of Aureon’s Section 214 authorization.113 Aureon’s
original Section 214 authorization required Aureon to obtain “Section 214 authority prior to acquiring and
operating any interstate lines of communications” and denied Aureon’s general request for “Section 214
authority to serve ITCs [independent telephone companies] that may choose to utilize its services in the
future.”114 In 1999, however, the Commission enacted revised rules conferring Section 214 authorization
for new lines of all domestic carriers, so that no applications need be filed, and “codif[ied] the statutory
exemptions” from Section 214 requirements for line extensions.115 The Section 214 Blanket Certification
Order expressly permitted Aureon to operate new domestic lines, regardless of the type of traffic that
transits them.116 The breadth of the blanket authority conferred on all carriers, expressly restricted only
with regard to radio services not at issue here, rendered unnecessary the prior requirement that Aureon
file an application to enter and provide service to ITCs. It follows, a fortiori, that as a result of the
Section 214 Blanket Certification Order, Aureon similarly could use its existing, authorized lines to
transmit any type of traffic, including access stimulation traffic.117
21. AT&T also argues that Aureon’s billing of CEA rates for access stimulation traffic is
unreasonable because it “is not economically justifiable” and because other transport methods exist that
are significantly more efficient.118 We are not persuaded by AT&T’s arguments. We have found that
Aureon properly billed for services under the terms of the Tariff, and none of the alternatives that AT&T
suggests are services that the Tariff offers.119 In any event, AT&T’s real dispute is that it wants to bypass
Aureon completely and directly interconnect with the subtending CLECs engaged in access
112 See Complaint, Exh. 46, INS April 2017 Revised Tariff Filing (filed Apr. 14, 2017), Transmittal No. 33,
Description and Justification Cost Support Material, Introduction, (stating that the tariff “is based upon a contract
that was negotiated with and voluntarily agreed to by an interexchange carrier that has not previously purchased
centralized equal access [] service” and that INS is thereby “making the same contract rate, terms, and conditions
generally available to similarly situated interexchange carriers that execute the same contract”).
113 See Complaint, Legal Analysis at 7-9, 20, n. 33; Reply, Legal Analysis at 14; see also Complaint at 13-17, paras
31-36.
114 See INS Section 214 Order, 3 FCC Rcd at 1469, para. 9, at 1468, para. 2 & n.6. Independent telephone
companies are telephone companies that are not affiliated with the Bell operating companies. See MTS and WATS
Market Structure, Phase III, Notice of Proposed Rulemaking, 94 FCC 2d 292, 304 (1983), para. 27.
115 See In the Matter of Implementation of Section 402(B)(2)(A) of the Telecommunications Act of 1996, Report and
Order and Memorandum Opinion and Order, 14 FCC Rcd 11364, 11372, para. 12, 11377, para. 23 (1999) (Section
214 Blanket Certification Order).
116 See Section 214 Blanket Certification Order, 14 FCC Rcd at 11372, para. 12. The Commission stated, “blanket
authority for domestic telecommunications carriers is a deregulatory measure that allows carriers to construct,
operate, or engage in transmission over lines of communication without filing an application with the Commission
for ‘entry’ certification under section 214.” Implementation of Further Streamlining Measures for Domestic Section
214 Authorizations, Report and Order, 17 FCC Rcd 5517, 5520, para. 4 and n.7 (2002). The Commission codified
this authority in Section 63.01 of its rules, which states that “any party that would be a domestic interstate
telecommunications common carrier is authorized to provide domestic, interstate services to any domestic point and
to construct or operate any domestic transmission line, as long as it obtains all necessary authorizations from the
Commission for use of radio frequencies.” 47 CFR § 63.01 (emphasis added).
117 Cf. Complaint, Legal Analysis at 14, nn.21, 20.
118 Complaint at 37-40, paras. 76-80, at 65-66, para. 138; Complaint, Legal Analysis at 43-48.
119 See paragraphs 17-18 above.
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stimulation.120 In fact, AT&T has filed with the Commission a complaint against the most prominent
access stimulator, Great Lakes Communication Corporation (GLCC), alleging that GLCC has violated
Section 201(b) of the Act by unreasonably refusing to provide AT&T a direct connection to GLCC at
rates charged by CenturyLink, which has the lowest rates for switched access service of any price-cap
ILEC in Iowa.121
22. Finally, we reject AT&T’s assertion that Aureon’s Section 214 authorization does not
apply to access stimulation traffic, which is predominantly interstate, because its Section 214 application
assumed that the majority of Aureon’s costs would be recovered from intraLATA toll calls.122 Aureon’s
original Section 214 approval was contingent on Aureon obtaining state agency approval without change
to the fundamental assumption that Aureon would substantially recover its costs through revenue from
intraLATA toll calls.123 But this condition was satisfied, and Aureon did in fact obtain Section 214
approval.124
B. Aureon Violated Sections 201(b) and 203 of the Act by Raising Its CEA Tariffed
Rate in 2013 and by not Lowering Its Intrastate CEA Rate.
23. AT&T argues that Aureon violated Sections 201(b) and 203 of the Act by raising its
interstate access rates and by not reducing its intrastate access rates in contravention of the Commission’s
rate cap and rate parity rules, respectively.125 We agree. In the USF/ICC Transformation Order, the
Commission capped “all interstate switched access rates in effect as of [December 29, 2011], including
originating access and all transport rates.”126 Rule 51.905(b) caps interstate “tariff rates [at] no higher
than the default transitional rate,”127 i.e., the interstate rates effective December 31, 2011. In addition, “to
reduce the disparity between intrastate and interstate terminating end office rates,” the Commission
required that the rates be brought “to parity within two steps, by July 2013.”128 Specifically, the
Commission promulgated Rule 51.911, which requires a “Competitive LEC” (1) to cap its intrastate rates
that were in effect on December 29, 2011; (2) beginning on July 3, 2012, to move those intrastate rates
halfway to the level of its capped interstate rates; and (3) beginning on July 1, 2013, to reduce its
intrastate and interstate rates to those of the competing ILEC, which would be at parity at such time.129
120 See Complaint at 37, para. 77.
121 See AT&T v. Great Lakes Complaint at 40-41, para. 86.
122 See Complaint at 35, para. 73; Complaint, Legal Analysis at 8, nn.10, 12, 25, 57.
123 See INS Section 214 Order, 3 FCC Rcd. at 1473, para. 32.
124 See In re the Application of Iowa Network Access Division, Memorandum Opinion and Order, 4 FCC Rcd 2201,
2201, para. 7 (1989) (“[W]e conclude INAD’s [the Access Division’s] state authority satisfies our condition.”).
Indeed, the assumption concerning intraLATA toll calls remained valid until 20 years after the INS Section 214
Order. See Complaint, Rhinehart Decl. para. 29, Table G (showing that, prior to 2008, intrastate CEA service
supplied most of the Access Division’s overall revenue requirement). It was only after the Section 214 Blanket
Certification Order, which imposed no conditions concerning intraLATA cost recovery, that Aureon’s interstate
traffic began to exceed intrastate traffic. See id.
125 Complaint at 44-51, paras. 86-101.
126 USF/ICC Transformation Order, 26 FCC Rcd at 17933, para. 800 (emphasis added). The Commission declined
to adopt a “future date” for carriers to comply with the rate cap directive “to ensure that carriers cannot make
changes to rates or rate structures to their benefit in light of the reforms adopted in this Order.” Id., 26 FCC Rcd at
17934-35, para. 801.
127 47 CFR § 51.905(b).
128 USF/ICC Transformation Order, 26 FCC Rcd at 17676-77, para. 35.
129 47 CFR §§ 51.911(a)-(c).
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24. We find that Aureon violated the interstate rate cap requirement when, in June 2013, it
raised its interstate switched access rate from to $0.00896 per minute—$0.00077 above its $0.00819
cap.130 We further conclude that Aureon violated Rule 51.911(b) because it did not lower its intrastate
switched access rates halfway to the level of its interstate rates. Aureon’s intrastate rate for CEA
switching services has remained unchanged since the early 1990s at $0.0114 per minute plus $0.0003 per
minute, per mile for transport, well above its interstate rate.131 In light of these violations, we find the
rates contained in Aureon’s 2013 tariff filing and in Aureon’s intrastate tariff to be unlawful. We do not
reach the issue of whether Aureon’s rates violate Rule 51.911(c) because we do not have an adequate
record to determine the pertinent benchmark rate. To the extent that Aureon’s rates exceed this
benchmark, however, the rates in Aureon’s intrastate or interstate tariff would also be unlawful under
Rule 51.911(c).132
25. Aureon claims it did not violate the rate cap and rate parity requirements for several
reasons, none of which we find convincing. To begin, Aureon claims that it is not subject to the
Transitional Access Service Pricing rules because it is a dominant carrier under Rule 61.38. Aureon
characterizes the statement in the USF/ICC Transformation Order capping all interstate switched access
rates as “words of inordinately general connotation” that do not supersede “regulations dealing with a
narrow, precise, and specific subject, such as the dominant carrier rate regulations in Section 61.38.”133
According to Aureon, the rules the Commission enacted in the USF/ICC Transformation Order capped
only the rates of ILECs and CLECs. Aureon contends it is neither. But that is incorrect. For purposes of
the USF/ICC Transformation Order and the attendant rules,134 Aureon is a CLEC. First, Aureon is a LEC
under Rule 51.5 because it “provi[des] . . . exchange access.”135 And Aureon has conceded as much.136
Second, Aureon is not an ILEC under Rule 51.5 because it neither provided “telephone exchange service”
on February 8, 1996, nor was it a member of NECA on February 8, 1996, (or a successor to a member).137
Nor does Aureon anywhere claim it is an ILEC. Third, Aureon must therefore be a CLEC for purposes of
the rules adopted by the USF/ICC Transformation Order because a “competitive local exchange carrier is
130 Joint Statement at 8, Stipulated Facts 59, 61.
131 Joint Statement at 8, Stipulated Fact 69. It is not possible, based on the current record, to calculate the precise
cap on Aureon’s intrastate rates under Rule 51.911(b) due to the difference in intrastate and interstate rate structures
– that is, the separation of switching and transport rate elements. Nevertheless, because Aureon’s intrastate
switching rate, alone, is so far above its all-inclusive interstate rate, we can determine with certainty that some
reduction in the rates for one or both of Aureon’s intrastate rate elements was necessary.
132 We intend to develop such facts in the damages phase of this proceeding. Because Rule 51.911(b) concerns the
initial step toward rate parity, our reference to the rate parity requirement pertains to both subsections (b) and (c) of
Rule 51.911. See 47 CFR § 51.911(b), (c).
133 Answer, Legal Analysis at 16-19.
134 See 47 CFR §§ 51.901-51.919.
135 47 CFR § 51.5. See 47 U.S.C. § 153(20).
136 See Complaint, Exh. 53, Letter from James U. Troup and Brian D. Robinson (Counsel for Aureon) to Sherly
Todd (FCC), dated Apr. 30, 1998 (“INS provides exchange access services to interexchange carriers and therefore
meets the definition of a local exchange carrier.”) (emphasis added); Complaint, Exh. 55, Opening Brief of Plaintiff
Iowa Network Services, Inc. In Opposition to Motion of Qwest Corporation for Summary Judgment, Iowa Network
Servs., Inc. v. Qwest Corp., No. 02-40156, at 7 (S.D. Iowa Aug. 11, 2004) (“INS provides exchange access in
conjunction with the many rural LECs which formed INS . . . . Because INS provides exchange access, it is a
LEC.”). See also Iowa Network Servs. v. Qwest Corp., 385 F. Supp. 2d 850, 897 (S.D. Iowa 2005) (“INS is,
however, a LEC”).
137 47 CFR § 51.5.
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any local exchange carrier, as defined in [Section] 51.5, that is not an incumbent local exchange
carrier.”138
26. Aureon argues that the rate cap and rate parity rules “must give way” to Section 61.38,139
because the two sets of rules are inconsistent.140 We disagree. The two sets of rules do not conflict;
rather, they complement each other. To begin, a dominant carrier such as Aureon must comply with
Section 61.38 and supply “supporting … material” justifying its rates.141 If the underlying cost studies
and other material support the rate filed in a dominant carrier’s tariff, then the tariff usually will go into
effect. Aureon acknowledges that it is subject to this obligation,142 and, in fact, it has consistently filed
cost support for its tariffed rates.143 Next, like all LECs, Aureon is subject to additional obligations. As a
CLEC, Aureon must comply with the rate cap and rate parity rules, which apply “[n]otwithstanding any
other provision of the Commission’s rules.”144 Under those rules, regardless of how a CLEC calculates its
rates (e.g., via a non-dominant carrier’s benchmarking or the procedures of Section 61.38), the rates may
not exceed the specified cap.145 Stated differently, Aureon must comply with the 61.38 rules to support its
rates at or below the cap and therefore Section 61.38 is not superfluous.146 But if the rates it calculates
exceed the rate caps, as they did in Aureon’s June 2013 tariff filing, Aureon must lower them.
27. Nothing in the Commission’s 2016 Technology Transitions Order alters this
conclusion.147 In that Order, the Commission stated in a footnote that “non-dominant status does not
extend to [CEA] providers because such carriers do not provide service to end users.”148 Aureon claims
that the Commission’s rate caps do not apply to CEA providers because the Commission has declined to
extend non-dominant status to CEA providers.149 As explained above, however, Aureon’s status as a
dominant carrier does not excuse it from the Commission’s rate cap obligations—the rate caps depend on
whether Aureon is a LEC and a CLEC, not non-dominance. In any event, Aureon misconstrues the
Technology Transitions Order. A non-dominance determination (i.e., a determination that a carrier lacks
market power) involves an examination of many factors concerning the market for the services in
question.150 Consistent with this approach, in the Technology Transitions Order, the Commission
138 47 CFR § 51.903(a).
139 Answer, Legal Analysis at 14.
140 See Answer, Legal Analysis at 10-14.
141 47 CFR § 61.38.
142 Joint Statement at 4, Stipulated Fact 24.
143 Joint Statement at 15, Aureon Disputed Fact 36.
144 47 CFR § 51.905.
145 See USF/ICC Transformation Order, 26 FCC Rcd at 17932-936, paras. 798-801; 47 CFR §§ 51.911(a)-(c).
146 We note that Aureon’s reliance on legal precedent relating to the “implied repeal” of statutes (see Answer, Legal
Analysis at 10) is misplaced, as those cases do not address the lawfulness of an agency’s discretion to interpret its
own orders and rules. See Global NAPs, Inc. v FCC, 247 F.3d 252, 257-58 (D.C. Cir. 2001) (Global NAPs v. FCC),
Capital Network System, Inc. v FCC, 28 F.3d 201, 206 (D.C. Cir. 1994).
147 See Technology Transitions, Declaratory Ruling, Second Report and Order, and Order on Reconsideration, 31
FCC Rcd 8283 (2016) (Technology Transitions Order).
148 See Technology Transitions Order, 31 FCC Rcd at 8290, para. 19 n.43.
149 Answer, Legal Analysis at 6-7 (“The rate caps were the sole reason the Commission reclassified ILECs as non-
dominant.”).
150 See, e.g., Technology Transitions Order, 31 FCC Rcd at 8287, para. 11 (“To determine whether a carrier
possesses market power and is thus dominant, the Commission historically has examined ‘clearly identifiable market
features’ such as ‘the number and size distribution of competing firms, the nature of barriers to entry, and the
availability of reasonably substitutable services.’”).
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analyzed evidence about market demand in the context of its transition rules.151 The Commission did not
make a non-dominance finding as to Aureon and other CEA providers because there was no record
concerning them. Neither Aureon nor any other CEA providers participated in the proceeding. In other
words, there was no basis on which the Commission could find that CEA providers lacked market power.
Thus, Aureon is reading into the Commission’s sentence in footnote 43 of the Order a determination
about rate caps that simply is not there. In fact, the Technology Transitions Order reaffirmed that “[a]ll
interstate switched access rate elements are capped.”152 That includes when those elements are offered by
CEA providers.
28. Aureon further maintains that the rate cap and rate parity rules do not apply to it, because
it does not directly serve end users and, consequently, cannot directly offset any decrease in revenue from
increased charges on end users.153 However, nothing in the USF/ICC Transformation Order suggests that
the Commission intended to exclude CEA providers from its scope.154 On the contrary, the Order stated
broadly that the Commission was “abandon[ing] the ‘calling party-network-pays’ model that dominated
ICC regimes of the last century.”155 As part of the intercarrier compensation reform, the Commission
took the initial step of adopting rate caps to “ensure[] that no rates increase during reform” and to
“combat potential arbitrage and other efforts designed to increase or otherwise maximize sources of
intercarrier revenues during the transition.”156 That is why the Commission recently rejected a similar
argument made by another intermediate transport provider that also served no end users, concluding that
there is “no ‘longstanding [Commission] policy of not imposing rate caps on carriers that do not serve
end-users,’” and that the carrier “must comply with existing rules during the transition to ‘bill and
keep.’”157 In upholding the Commission’s decision, the D.C. Circuit emphasized that the “issue here is
not what Great Lakes may charge once the transition to bill-and-keep is complete in 2018, but rather
whether Great Lakes was subject to the Commission’s benchmark rule in the years prior to AT&T’s 2014
complaint … [t]he Commission reasonably concluded that it was.”158 Whatever additional transition steps
the Commission ultimately may decide apply to CEA providers such as Aureon (or other entities that do
151 Technology Transitions Order, 31 FCC Rcd at 8287-98, paras. 13-39.
152 Technology Transitions Order, 31 FCC Rcd at 8288-89, para. 15 (emphasis added).
153 Answer at 99; Answer, Legal Analysis at 11-12, 15-16. Aureon’s argument that because it has no end users, it
cannot recover its costs if its tariff rates must be reduced is not correct. As a result of the Commission’s decision to
move all switched access services to a bill-and-keep regime, without regard to the impact on a carrier’s rate of
return, all access service providers must find new ways to recover their costs. CEA providers may, for example,
need to revise their business model and consider recovering a portion of their costs from the LECs who subtend their
networks. Those LECs have available all of the cost recovery options adopted by the Commission and affirmed by
the Tenth Circuit. This alternative likely could have the additional benefit of discouraging access stimulating LECs
from subtending CEA networks.
154 [BEGIN CONFIDENTIAL]
[END CONFIDENTIAL]
155 USF/ICC Transformation Order, 26 FCC Rcd at 17676, para. 34.
156 USF/ICC Transformation Order, 26 FCC Rcd at 17932-33, para. 798; id. at 17933-34, para. 800, n.1494.
157 See AT&T Servs. Inc. v. Great Lakes Comnet, Inc. and Westphalia Tel. Co., 30 FCC Rcd 2586, para. 22 (2015)
(AT&T v. Great Lakes Comnet), aff’d in relevant part, Great Lakes Comnet, Inc. v. FCC, 823 F.3d 998 (D.C. Cir.
2016) (Great Lakes Comnet v. FCC).
158 Great Lakes Comnet v. FCC, 823 F.3d at 1003-04.
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not directly serve end users) in the future has no relevance to Aureon’s current duty to comply with
existing law.159
29. Finally, Aureon contends that the CEA rate contained in its June 17, 2013, interstate tariff
filing took effect on July 2, 2013, because the Commission neither suspended nor investigated the rate
increase, and therefore it is “deemed lawful.”160 We disagree. Aureon’s Tariff was not “deemed lawful”
when filed. Nothing in Section 204(a)(3) of the Act transforms rates, terms, or conditions that are
unlawful when filed into “deemed lawful” status. “[T]ariffs still must comply with the applicable
statutory and regulatory requirements,” and “[t]hose that do not may be declared invalid.”161 Where the
Commission, as here, has prohibited the filing of a tariff with rates above the transitional default rate,162
such a tariff cannot benefit from “deemed lawful” status. As of December 29, 2011, Aureon’s interstate
switched access rates should not have exceeded $0.00819 per minute. Aureon’s 2013 tariff filing raising
the interstate rates above that level (as well as its subsequent tariff filings containing rates above $0.00819
per minute) consequently was unlawful when filed and void ab initio.163
30. AT&T argues that Aureon’s CEA rates also are unlawful because Aureon engaged in
improper accounting practices.164 We need not reach this issue, because we have decided that Aureon’s
interstate Tariff is void ab initio. Nevertheless, Aureon is subject to Section 61.38 of the Commission’s
rules, and AT&T has raised a number of significant questions about Aureon’s CEA practices and rates
that deserve further exploration. These include Aureon’s treatment of network investment, its cost
allocations, and the role of lease costs involving the regulated entity and a competitive services
affiliate.165 We will consider these arguments in the damages phase of this proceeding, where we will
establish what the appropriate tariff rate should have been beginning June 17, 2013.166
C. Aureon Did Not Violate the Commission’s Access Stimulation Rules.
31. AT&T alleges that Aureon violated Sections 201(b) and 203 by engaging in access
stimulation and failing to file revised tariffs.167 AT&T argues that Aureon satisfies the two “conditions”
that “identify when an access stimulating LEC must refile its interstate access tariffs.”168 To begin,
AT&T contends that Aureon’s ratio of terminating minutes to originating minutes in a calendar month is
well above the 3-1 ratio specified in the Commission’s rules.169 The parties’ stipulations support this
assertion.170 Next, AT&T maintains that Aureon has implied revenue sharing agreements with the
subtending CLECs, which inure to the benefit of the CLECs’ FCP partners.171 We disagree on the last
point.
32. Our rule requires that an access stimulator be party to an “access revenue sharing
agreement . . . that, over the course of the agreement, would directly or indirectly result in a net payment
159 AT&T v. Great Lakes Comnet, 30 FCC Rcd at 2592-93, para. 22 (how the transition will occur in the future when
a tandem owner does not own the end office has “no bearing” on how the Commission’s rules “presently appl[y]”).
160 Answer, Legal Analysis at 33-34.
161 Global NAPs v FCC, 247 F.3d at 260.
162 47 CFR 51.905(b).
163 See AT&T v. Great Lakes Comnet, 30 FCC Rcd at 2595, at paras. 28-29.
164 See, e.g., Complaint at 57-64, paras. 118-33; Complaint, Legal Analysis at 48-63.
165 See Complaint, Legal Analysis at 48-63; AT&T Initial Brief at 3-9; AT&T Reply Brief at 5-10.
166 See Complaint at 70-71, para. 155(c) (requesting that the Commission find that Aureon “must refund amounts it
improperly billed to AT&T, and which AT&T paid, in amounts to be determined in a subsequent proceeding), (d)
(asking the Commission to conduct “a detailed review of [Aureon’s] CEA rates in order to determine … whether
[Aureon] engaged in ‘furtive concealment’ of violations of the Commission’s rules by using improper accounting
methods, thus allowing access customers to pursue refunds”). See also Verizon v. FCC, 269 F.3d 1098, 1104-06
(D.C. Cir. 2001) (holding that Section 208(b) of the Act applies to a finding of liability).
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to the other party.”172 The problem for AT&T is that Aureon has provided an affidavit from an officer
attesting that Aureon is not a party to any revenue sharing agreement,173 and AT&T has not proven
otherwise.
33. AT&T instead contends that Aureon’s traffic agreements with “access stimulating
CLECs fall within the parameters of the Commission’s rule regarding revenue sharing” [BEGIN
CONFIDENTIAL]
[END CONFIDENTIAL] However, Aureon has always charged IXCs—not subtending LECs—for its
CEA switched access service, which facilitates the switching and transport of calls from the IXCs’
customers to customers of Aureon’s subtending LECs.176 Although Aureon has traffic agreements with
the subtending LECs, these agreements pertain to Aureon’s ability to provide CEA service to IXCs and
the mandatory termination requirement of its Section 214 authorization.177 They have remained
unchanged since 1989.178 AT&T can identify no change in Aureon’s practices indicating that its traffic
agreements are intended to facilitate access stimulation beyond noting that certain CLECs and their FCP
(Continued from previous page)
167 See footnote 88 above.
168 Complaint at 52-56, paras. 105-114, Complaint, Legal Analysis at 38-43. See USF/ICC Transformation Order,
26 FCC Rcd at 17877, para. 667.
169 Complaint at 53, para. 107; Complaint, Legal Analysis at 38-39 (citing 47 CFR §§ 61.3(bbb)(1)(i)-(ii)).
170 Joint Statement at 8, Stipulated Fact 71.
171 Complaint at 53-56, paras. 108-14; Complaint, Legal Analysis at 40-43.
172 47 CFR § 61.3(bbb)(1)(i).
173 See Answer, Exh. 25, Affidavit of Frank Hilton, INS’ Reply to AT&T’s Opposition to Motion for Summary
Judgment of Tariff Claims, at 7-8, para. 12; Answer, Legal Analysis at 26; see also USF/ICC Transformation Order,
26 FCC Rcd at 17889, para. 699.
176 Joint Statement at 4, Stipulated Fact 25; See Complaint, Exh. 3, INAD Tariff F.C.C. No. 1, Section 1.2, at 2nd
Revised Page 16; Answer at 28-29, paras. 51-52; Answer, Exh. B, F. Hilton Decl. at 12, para. 21.
177 See Answer at 27; Answer, Exh. B, F. Hilton Decl. at 11-12, paras. 20-21. See also INS Section 214 Order, 3
FCC Rcd at 1473, paras. 33-34 (“We do not believe that the mandatory termination requirement for interstate traffic
is unreasonable or differs substantially from the normal way access is provided, as both an originating and
terminating service …”); Answer, Exh. 29, In re: Iowa Network Access Division, Division of Iowa Network
Services, Order Granting Rehearing for the Limited Purpose of Modification and Clarification and Denying
Intervention, Iowa Utilities Board Docket No. RPU-88-2 (issued Dec. 7, 1988) at 4-5 (“[p]ursuant to their
participation agreements with [Aureon], the PTCs [participating telephone companies] will be allowed to require at
their option that all terminating traffic be routed over the [Aureon] network and [Aureon] will be allowed to charge
its CEA rate for all such terminating traffic”) (emphasis added).
178 See Answer at 27-29, paras. 50-51; Answer, Exh. B, F. Hilton Decl. at 11-12, paras. 20-21. We disagree with
AT&T’s contention that the traffic agreements are anti-competitive. See Complaint at 40-45, paras. 81-85;
Complaint, Legal Analysis at 16-19. These agreements have long been accepted as an integral aspect of Aureon’s
ability to terminate traffic, and neither the Commission nor the Iowa Utilities Board have determined differently
since the agreements were first authorized in 1988. See footnote 139 above. See also Northwestern Bell Telephone
Company v. Iowa Utilities Board, 477 N.W.2d 678 (1991) (“[W]e conclude that the board’s rationales for allowing
INS to enter into exclusive contracts with the [subtending LECs] for the provision of terminating access is
adequately supported by the evidence.).
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partners now engage in access stimulation.179 As we held above, Aureon’s handling of the traffic destined
for access stimulating CLECs is consistent with its Section 214 authorization and the Tariff. 180
34. AT&T requests that, in the event there is not an access stimulation agreement within the
meaning of the Commission’s rules, we nonetheless find that Aureon’s conduct is an unreasonable
practice under Section 201(b) because Aureon “facilitated access stimulation schemes by entering into
traffic agreements to carry CLECs’ access stimulation traffic that [otherwise] would have been subject to
the pricing requirements of the access stimulation rules.”181 We decline to so rule in this adjudication.
The premise of this argument is that the CLECs are required to “price their switched access services,
including transport, at rates that do not exceed the rates for functionally equivalent service offered by the
lowest-priced price cap LEC in the state, which is CenturyLink” and to offer a direct transport service like
CenturyLink.182 AT&T appropriately raised this assertion in another formal complaint proceeding against
GLCC, , described above, and that is where the Commission will decide the issue.
IV. CONCLUSION
35. We have found above that Aureon violated Sections 201(b) and 203 of the Act because
its rates were not just and reasonable. We therefore grant Counts I and II of AT&T’s Complaint in part
consistent with the findings in this Order. In the damages phase of this proceeding, we will conduct a
detailed review of Aureon’s rates to determine what the appropriate tariff rates should have been.183 We
also order Aureon to file a revised interstate tariff with rates that comply with this Order, as well as all
necessary cost studies and support as required by Section 61.38 of the Commission’s rules for its revised
rates within 60 days of the date of this Order.184
179 Whether the CLECs engaged in access stimulation are abiding by the Commission’s benchmarking rules is
beyond the scope of this complaint proceeding involving AT&T and Aureon.
180 AT&T advocates treating Aureon as a CLEC for purposes of the Commission’s access stimulation rules, because
(1) Aureon provides “some” of the interstate exchange access services that are used to send traffic to the FCPs, and
(2) Aureon “stands in the shoes” of the access stimulating CLECs that would provide transport if Aureon did not.
Complaint at 56, para. 114; Complaint, Legal Analysis at 44-45; Reply, Legal Analysis at 32-33. Alternatively,
AT&T contends that Aureon is subject to the access stimulation rules as a rate-of-return carrier. Reply, Legal
Analysis at 33, n.23. Because we find that Aureon has not entered into a revenue sharing agreement, we need not
reach the issue of which, if any, of the Commission’s access stimulation rules apply to intermediate carriers, such as
CEA providers.
181 Complaint at 56, para. 114; Complaint, Legal Analysis at 38, 45-48.
182 Complaint, Legal Analysis at 46-48.
183 See paragraph 30 above. Consequently, we deny as moot AT&T’s Motion to Strike Portions of INS’s Final
Reply Brief and Supporting Declarations. See AT&T’s Motion to Strike Portions of INS’s Final Reply Brief and
Supporting Declarations, Proceeding Number 17-56, Bureau ID Number EB-17-MD-001 (filed Aug. 31, 2017). In
the context of the damages proceeding, the parties will have the opportunity to raise and address issues relating to
Aureon’s accounting practices.
184 See 47 CFR § 61.38. The Commission may determine at such time whether to initiate an investigation of
Aureon’s proposed rates pursuant to Sections 204 and 205 of the Act. 47 U.S.C. §§ 204, 205. See also Complaint at
70-71, para. 155(d). In addition, pursuant to the outcome of the damages phase of this proceeding regarding the
correct intrastate rate, the parties should work with the Iowa Utilities Board to ensure Aureon files a revised
intrastate tariff containing lawful intrastate switched access rates.
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V. ORDERING CLAUSES
36. Accordingly, IT IS HEREBY ORDERED, pursuant to Sections 1, 4(i), 4(j), 201, 203, and
208 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151, 154(i), 154(j), 201, 203, 208,
and Sections 1.720-1.736, 61.26, and 61.38 of the Commission’s Rules, 47 CFR §§ 1.720-1.736, 61.26,
61.38, that Count I is GRANTED IN PART as described herein.
37. IT IS FURTHER ORDERED, pursuant to Sections 1, 4(i), 4(j), 201, 203, and 208 of the
Communications Act of 1934, as amended, 47 U.S.C. §§ 151, 154(i), 154(j), 201, 203, 208, and Sections
1.720-1.736, 61.26 and 61.38 of the Commission’s Rules, 47 CFR §§ 1.720-1.736, 61.26, and 61.38 that
Count II is GRANTED IN PART as described herein.
38. IT IS FURTHER ORDERED, pursuant to Sections 1, 4(i), 4(j), 201, 203, and 208 of the
Communications Act of 1934, as amended, 47 U.S.C. §§ 151, 154(i), 154(j), 201, 203, 208, and Sections
1.720-1.736, 61.26 and 61.38 of the Commission’s Rules, 47 CFR §§ 1.720-1.736, 61.26 and 61.38 that
Aureon is directed to file a revised interstate tariff within 60 days from the date of this Order, and that
such revised tariff is to be compliant with the Commission’s rate cap requirements, and must include
required cost support.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary