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AT&T v. Alpine

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Released: September 12, 2012

Federal Communications Commission

FCC 12-110

Before the

Federal Communications Commission

Washington, D.C. 20554

In the Matter of
)
)

AT&T Corp.,
)
)

Complainant,
)
)

v.
)
File No.: EB-12-MD-003
)
Alpine Communications, LLC, Clear Lake
)
Independent Telephone Co., Mutual Telephone
)
Co. of Sioux Center, Iowa, Preston Telephone
)
Co., and Winnebago Cooperative Telephone
)
Association,
)
)

Defendants.
)

MEMORANDUM OPINION AND ORDER

Adopted: September 11, 2012

Released: September 12, 2012

By the Commission:

I.

INTRODUCTION

1.
In this complaint proceeding, AT&T Corp. (AT&T) asks the Commission to find that
five Iowa local exchange carriers—Alpine Communications, LLC (Alpine), Clear Lake Independent
Telephone Company (Clear Lake), Mutual Telephone Company of Sioux Center, Iowa (Mutual), Preston
Telephone Company (Preston), and Winnebago Cooperative Telecom Association (Winnebago)
(collectively, the Iowa LECs)—have violated Sections 201(b) and 203 of the Communications Act of
1934, as amended (Act).1 AT&T alleges that the Iowa LECs have engaged in an unlawful “mileage-
pumping” scheme that has allowed them to impose over one hundred miles of distance-sensitive charges
for the transport of traffic that the Centralized Equal Access (CEA) provider in Iowa, Iowa Network
Services (INS), is required to provide at a flat, distance-insensitive rate. For the reasons explained below,
we grant Counts I and II of the Complaint.2


1 47 U.S.C. §§ 201(b), 203; Formal Complaint of AT&T Corp., File No. EB-12-MD-003 (filed Apr. 13, 2012)
(Complaint).
2 In accordance with Section 1.722(d) of the Commission’s rules, AT&T requests that the Commission determine
damages in a separate proceeding. Complaint at 29, para. 75, 31, para. 83 (citing 47 C.F.R. § 1.722(d) (setting forth
the requirements a complainant must satisfy if it “wishes a determination of damages to be made in a proceeding
that is separate from and subsequent to the proceeding in which the determinations of liability and prospective relief
are made”). Because this Order finds in AT&T’s favor on liability, AT&T may file with the Commission a
supplemental complaint for damages in accordance with 47 C.F.R. § 1.722(e) (“If a complainant proceeds pursuant
to paragraph (d) of this section . . . the complainant may initiate a separate proceeding to obtain a determination of
(continued…)

Federal Communications Commission

FCC 12-110

II.

BACKGROUND

A.

The Parties

2.
AT&T is a New York corporation with its principal place of business in Bedminster,
New Jersey.3 Among other things, AT&T is an interexchange carrier (IXC) providing
telecommunications services that enable customers from one local exchange area to call customers in
other local exchange areas.4
3.
Alpine, Clear Lake, Mutual, and Preston are Iowa corporations, with principal places of
business in Elkader, Clear Lake, Sioux Center, and Preston, Iowa, respectively.5 Winnebago is a
cooperative association incorporated under Iowa law, with its principal place of business in Lake Mills,
Iowa.6 These five entities—the Iowa LECs—are incumbent local exchange carriers (ILECs) that provide
local exchange telecommunications services in rural areas of Iowa.7
4.
Like other IXCs, AT&T does not have facilities extending to end user customers.8 As a
result, AT&T relies upon local exchange carriers (LECs), which have such facilities, to provide “switched
access service” for the origination, transport, or termination of calls to or from customers in a local
exchange area.9 Generally speaking, IXCs pay originating access charges to LECs that serve customers
who initiate long-distance calls within their local calling area and terminating access charges to LECs that
serve customers who receive long-distance calls within their local calling area.10

B.

Iowa Network Services

5.
In states in which there are multiple rural LECs each serving a separate rural area, the
Commission sometimes has approved and ordered centralized equal access (CEA) arrangements.11 CEA
service provides presubscription and equal access capabilities through a centralized switching system
rather than through each end office switch.12 The Commission first approved such a CEA arrangement in
(Continued from previous page)


damages by filing a supplemental complaint . . . . ”).
3 Complaint, Ex. 3 (Stipulations with Regard to Referred Matters in Alpine et al. v. AT&T (Stipulations)) at 2,
para. 6.
4 Stipulations at 2, para. 9.
5 Stipulations at 1-2, paras. 1-4.
6 Stipulations at 2, para. 5.
7 Stipulations at 2, para. 8.
8 Stipulations at 2, para. 10.
9 Stipulations at 2-3, paras. 11-13.
10 Stipulations at 3, para. 15, 18, para. 114.
11 Stipulations at 4, para. 21.
12 See Coon Valley Telephone Company, et al., Petitions for Waiver of the Four Digit Carrier Identification Code
(CIC) Implementation Schedule
, Order, 13 FCC Rcd 17490, 17494, para. 8 (Com. Car. Bur., Network Services
Div. 1998).
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1986, for the state of Indiana.13
6.
In order to implement a CEA arrangement to carry long-distance traffic efficiently to
remote local exchanges in Iowa, about 135 rural Iowa carriers formed a CEA provider called Iowa
Network Services (INS) that would own and operate a centralized switch in Des Moines and a fiber
“ring” that connects the centralized switch to points of interconnection (POIs) located throughout Iowa.14
They developed this arrangement in part because the costs of hauling long-distance traffic to and from
each of the many small rural carriers were high, and competing IXCs found it too “expensive . . . to
provide their own facilities to each of these small exchanges, given the relatively low amount of [long-
distance] traffic they generate.”15 The Commission approved the CEA arrangement for Iowa in 1988.16
With the exception of Alpine, the Iowa LECs in this case were among the carriers that formed INS, and
they remain INS shareholders.17
7.
Today, INS is a statewide fiber-optic network and switching system that “offers and
provides” CEA telecommunication services used to facilitate the delivery of interstate (and intrastate)18
calls in Iowa.19 Its central access tandem switching system is in Des Moines.20 Under the INS CEA
arrangement, IXCs must deliver their traffic to INS, and IXCs generally do so by interconnecting with the
INS access tandem in Des Moines.21 INS then delivers the long-distance traffic received from IXCs over
its fiber ring to one of sixteen POIs located across the state.22 At the POIs, the Iowa LECs connect with
the INS network and transport interstate switched access traffic between their POIs and their end office
switches.23 In short, IXCs and the Iowa LECs are indirectly connected to each other through the facilities
of INS.24


13 Stipulations at 4, para. 22. See Application of Indiana Switch Access Div., Memorandum Opinion & Order, 1
FCC Rcd 634 (1986) (Indiana Switch).
14 Stipulations at 4, para. 25.
15 Stipulations at 5, para. 34 (citing Application of Iowa Network Access Division, Memorandum Opinion, Order,
and Certificate, 3 FCC Rcd 1468, 1468, para. 3 (Com. Car. Bur. 1988) (INAD Application Order)).
16 Stipulations at 4, para. 22. See INAD Application Order.
17 Stipulations at 4, paras. 23-24.
18 No intrastate calls – i.e., calls originated and terminated in the same state—are at issue in this proceeding.
Stipulations at 4, para. 20.
19 Stipulations at 5, paras. 27-28. INS is a single legal entity with three divisions: netINS, which provides
internet access services; the Interexchange Carrier Division (INICD), which owns the INS facilities; and the
Access Division (INAD), which leases digital switching, fiber optic transmission capacity, and certain related
services from INICD to provide CEA service. Stipulations at 6, para. 37.
20 Stipulations at 5, para. 29.
21 Stipulations at 6, para. 38.
22 Stipulations at 5, para. 33, 6, para. 39, 25, para. 156. INS will deliver traffic to any of the sixteen POIs, which
include Cedar Rapids, Clarinda, Creston, Davenport, Des Moines, Fort Dodge, Grinnell, Knoxville, Mason City,
Mount Ayr, Mount Pleasant, Newton, Osceola, Omaha, Sioux City, and Spencer. Stipulations at 7, paras. 44-45.
23 Stipulations at 5, para. 32, 6, para. 41, 25, para. 157.
24 Stipulations at 6, para. 41.
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FCC 12-110

C.

The Relevant Tariffs and Traffic Agreements

8.
This case concerns two tariffs.25 The first tariff is NECA Tariff F.C.C. No. 5 (NECA
Tariff), under which the Iowa LECs provide switched access service to IXCs (such as AT&T) and bill the
IXCs for such service.26 In the NECA Tariff, “Switched Access Service” consists of three rate categories:
“End Office,” “Local Transport,” and “Chargeable Optional Features.”27 The type of Local Transport at
issue in this litigation is “Tandem Switched Transport.”28
9.
The second tariff is the Iowa Network Access Division Tariff F.C.C. No. 1 (INAD
Tariff), under which INS provides CEA services to IXCs and bills IXCs for such service.29 The terms of
the INAD Tariff require IXCs to pay INS a flat, non-distance-sensitive charge for every minute of traffic
transported on the INS fiber ring to the sixteen POIs throughout Iowa.30 “Point of Interconnection” under
the INAD Tariff “denotes the demarcation point or network interface, on an Iowa Network premises at
which Iowa Network’s responsibility for the provision of [CEA] ends.”31 The INAD Tariff imposes no
charges on the Iowa LECs.
10.
All five of the Iowa LECs participate in the INS CEA arrangement.32 Individual Traffic
Agreements govern the services INS provides to them in connection with originating and terminating
long distance traffic.33 The Traffic Agreements obligate the Iowa LECs to use INS’s CEA service for all


25 As explained below in section III.A.1, the parties disagree about whether and how the tariffs interrelate
regarding the right of the Iowa LECs to determine the POI.
26 Stipulations at 3-4, paras. 14, 19. The Iowa LECs do not file individual tariffs. Rather, they utilize tariffs
administered by the National Exchange Carrier Association (NECA). Qualifying carriers are permitted to
participate in the traffic-sensitive cost and revenue pool that NECA administers on behalf of the vast majority of
small telephone companies. See 47 C.F.R. §§ 69.601-69.610. NECA files tariffed access rates that apply
whenever an IXC uses any pool member’s NECA-tariffed access services. See 47 C.F.R. § 69.3(d).
27 Complaint, Ex. 6 (NECA Tariff § 6.1.3, 4th Rev. Page 6-5).
28 Stipulations at 3, para. 14. See Complaint, Ex. 6 (NECA Tariff § 6.1.3, 4th Rev. Page 6-5). AT&T originally
challenged the Iowa LECs’ practices and charges relating to an additional element of Local Transport called
“Tandem Switched Termination.” Complaint at 20-22, paras. 51-54 & n.58. However, AT&T subsequently
moved to sever these claims and convert them into an informal complaint, which it requested be stayed. See
Motion of AT&T Corp. to Sever Claims Relating to Multiple Termination Charges, File No. EB-12-MD-003 (filed
May 31, 2012). Defendants did not oppose AT&T’s motion, and we granted it. See Defendants’ Response to
Motion of AT&T Corp. to Sever Claims Relating to Multiple Termination Charges, File No. EB-12-MD-003 (filed
June 7, 2012); see also Letter from Rosemary McEnery, FCC, to Counsel for the Parties, File No. EB-12-MD-003
(filed June 11, 2012).
29 Stipulations at 5, para. 26.
30 Complaint at 2-3, paras. 4-5; Defendants’ Answer to Formal Complaint of AT&T Corp., File No. EB-12-MD-
003 (filed May 3, 2012) (Answer) at 4, paras. 4-5. See Iowa Network Access Div. Tariff F.C.C. No. 1., Order, 4
FCC Rcd. 3947, paras. 2, 5 (1989).
31 Reply, Legal Analysis at 7 (citing INAD Tariff § 2.5, 1st Rev. Page 62).
32 Stipulations at 7, para. 48.
33 Stipulations at 7, paras. 47-48. Because Alpine is not an INS shareholder, its agreement with INS is titled
“Traffic Agreement.” Stipulations at 8, para. 49. See Complaint Conf. Ex. 19 (Alpine agreement). The other
Iowa LECs’ agreements with INS are titled “Shareholder Traffic Agreements.” Stipulations at 7, para. 47. See
Complaint Conf. Exs. 20, 21, 22, and 23 (agreements of Clear Lake, Mutual, Preston, and Winnebago). The
Traffic Agreement does not differ in any material way from the Shareholder Traffic Agreements. Stipulations at
(continued…)
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interexchange traffic bound to or from the Iowa LECs’ customers.34 The Traffic Agreements do not limit
the amount of interexchange traffic that INS will carry for the Iowa LECs under the CEA arrangement,35
nor do they impose any charge on the Iowa LECs for traffic carried to their POI on the INS ring,
regardless of the distance INS carries the traffic.36 The Traffic Agreements define “Point of
Interconnection” in an identical manner to the INAD Tariff.37

D.

The Iowa LECs’ Effort to Increase Transport Charges

11.
The Iowa LECs initially established POIs with the INS network at toll centers in close
physical proximity to their operating territories.38 Then, between 2001 and 2005, each of the Iowa LECs
changed its POI with INS from the original location to Des Moines where the INS access tandem is
located.39 The Iowa LECs began billing AT&T mileage-based transport charges for carrying the traffic
between their local exchanges and Des Moines.40 This created a significant increase in the transport
mileage used to calculate the Iowa LECs’ switched access charges. In particular, before the POI changes,
none of the Iowa LECs billed more than 65 miles of transport, and one billed only 9 miles of transport;
after the POI changes, each Iowa LEC billed over 100 miles of transport charges.41 The additional
transport mileage that the Iowa LECs billed AT&T varied from a low of 79 additional miles to a high of
135 additional miles, as depicted in the following chart:42

Iowa LEC

Principal Place of Closest POI In

Miles To Closest

Miles To Des

Business

LATA

POI In LATA

Moines

Alpine
Elkader
Cedar Rapids

POI in LATA

65
144
Clear Lake
Clear Lake
Mason City
9
107
Mutual
Sioux Center
Sioux City
42
166
Preston
Preston
Davenport
38
173
Winnebago
Lake Mills
Mason City
25
126
12.
The Iowa LECs did not build or deploy their own transport facilities to Des Moines.43
Rather, they entered into what they characterize as “leases” of virtual capacity on the INS fiber ring
(Continued from previous page)


8, paras. 49-50.
34 Stipulations at 8, para. 51.
35 Stipulations at 8, paras. 54-55.
36 Stipulations at 8, para. 55.
37 Stipulations at 8, para. 56 (citing Traffic Agreements, § 1(D) and INAD Tariff F.C.C. No. 1 § 2.6). The NECA
Tariff does not define the term POI.
38 Stipulations at 9, para. 57. Specifically, the initial POIs were as follows: Alpine – Cedar Rapids – established
in 1997; Clear Lake – Mason City – established in 1989; Mutual – Sioux City – established in 1989; Preston –
Davenport – established in 1989; Winnebago – Mason City – established in 1987. Stipulations at 9, para. 58.
39 Stipulations at 9, paras. 60-61.
40 Stipulations at 9, para. 60.
41 Stipulations at 9, para. 61, 19, para. 120.
42 Stipulations at 9, para. 61, 19, para. 120.
43 Stipulations at 14, para. 84, 15-17, paras. 92, 94-96, 98-99.
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facilities.44 Two of the Iowa LECs (Alpine and Preston) maintain that their leases with INS are oral.45
The other three Iowa LECs (Clear Lake, Mutual, and Winnebago) have written agreements with INS
titled “Agreement for Services,” which list services and corresponding prices.46 The Iowa LECs and INS
did not negotiate terms in any of the five purported leases, including with respect to price. Rather, they
derived the price for the capacity leases from a pricing schedule established by INS for participating
telephone companies.47 INS sent bills to the Iowa LECs for the virtual fiber capacity, and the Iowa LECs
paid them.48
13.
The leases did not alter the functionality of INS’s or the Iowa LECs’ networks.49 The
traffic has continued to flow over precisely the same facilities and routes as it did prior to the Iowa LECs’
purported POI changes, and INS has remained responsible for the maintenance and operation of the
leased facilities.50 In fact, the Iowa LECs have no knowledge about what happened to the traffic while it
was on the INS leased facilities other than that it reached the desired destinations, and they depended on
INS to ensure that the traffic was delivered between Des Moines and their local exchanges.51
14.
The Iowa LECs entered into the lease arrangements and purported to change their POIs
with INS because, in part, they determined that doing so would increase their net revenues and
profits.52 And, in fact, the leases have resulted in significant net increases in the access charges that the
Iowa LECs billed.53 The leases brought about no benefits for the Iowa LECs’ end user customers and
no benefits for IXCs.54

E.

The Parties’ Dispute and the Primary Jurisdiction Referral

15.
The Iowa LECs billed AT&T for, among other things, transport service charges between
Des Moines and their local exchanges.55 Beginning in April 2007, AT&T contacted each of the Iowa
LECs objecting to the increased mileage charges and, pursuant to the provisions in the NECA Tariff,


44 See Stipulations at 55, para. 91.
45 Stipulations at 12, para. 74.
46 Stipulations at 11, para. 73.
47 Stipulations at 12, para. 77.
48 Stipulations at 12, para. 77, 15, para. 88. The one exception is that INS did not bill Preston for its purported
lease from its inception in November 2005 until April 2009, and has never charged Preston for those prior months.
Stipulations at 12, paras. 75-76, 15, para. 88.
49 Stipulations at 14, para. 84.
50 Stipulations at 16, paras. 94-95.
51 Stipulations at 16-17, paras. 98-99.
52 Stipulations at 11, para. 71.
53 Stipulations at 19, para. 120.
54 Stipulations at 17, para. 100. Indeed, INS continues to bill AT&T its flat, distance-insensitive charge, which
covers transport to any point on the INS ring, regardless of distance. Stipulations at 17, para. 101. Although INS
stated that, after entering into the lease arrangements with the Iowa LECs, it excluded from the costs used by the
Commission to determine INS’s CEA rate the internal costs associated with the leases, INS has not quantified any
resulting actual reduction in the rates paid by IXCs. Stipulations at 18, para. 109.
55 Stipulations at 22, para. 142.
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notified the Iowa LECs that it was withholding amounts that it claimed had been improperly billed as a
result of the purported move of the POIs to Des Moines.56 Until about April 2008, AT&T paid these
invoices in full.57 AT&T subsequently began withholding payment for transport services,58 and it
continues to do so.59
16.
On December 5, 2008, the Iowa LECs filed a complaint against AT&T in the United
States District Court for the Northern District of Iowa, seeking recovery of the access charges AT&T
refused to pay.60 AT&T subsequently filed counterclaims, alleging, among other things, that the Iowa
LECs have violated Sections 201(b) and 203 of the Act.61 The parties engaged in discovery and filed
cross-motions for summary judgment.62 In response to these motions, the District Court issued an order
referring “this matter . . . to the FCC for resolution of the issues herein to the full extent of the FCC’s
jurisdiction.”63 At the Commission’s instruction, the parties prepared an agreed List of Issues that they
believe the Court’s referral encompasses.64 They also submitted an extensive statement of Stipulations.65
17.
As the Commission requested, AT&T filed the Complaint in response to the Court’s
referral.66 In Count I of the Complaint, AT&T alleges that the Iowa LECs have violated Sections 203 and
201(b) of the Act by billing AT&T mileage charges not authorized under the NECA Tariff. In Count II of
the Complaint, AT&T alleges that Iowa LECs have violated Section 201(b) of the Act because the NECA
Tariff, if construed as they propose, is unreasonable and because they operate under “sham”
arrangements.


56 Stipulations at 22, para. 143.
57 Stipulations at 22, para. 144.
58 Stipulations at 22-23, paras. 144-46.
59 Stipulations at 23, para. 147.
60 Complaint, Ex. 10 (Complaint, Alpine Commc’ns, LLC, et al. v. AT&T Corp., No. 08-1042 (N.D. Iowa filed
Dec. 5, 2008)).
61 Complaint, Ex. 2 (AT&T Counterclaims, Alpine Commc’ns, LLC, et al. v. AT&T Corp., No. 08-1042 (filed
Jan. 15, 2009)).
62 See Complaint at 9, paras. 21-22; Answer at 10-11, paras. 21-22; Order, Alpine Commc’ns, LLC, et al. v. AT&T
Corp.
, No. 08-1042 (N.D. Iowa Dec. 16, 2010) (Alpine Primary Jurisdiction Order) at 4.
63 Alpine Primary Jurisdiction Order at 5.
64 Complaint Ex. 5, Alpine v. AT&T – Issues List Re FCC Referral (Joint List of Issues). The Joint List of Issues
identifies three issues (the first of which contains seven subparts) that the parties agree were the subject of the
Court’s referral. The first two issues ask whether the Iowa LECs violated the terms of the NECA Tariff and/or
Section 203 of the Act. The third issue inquires whether the Iowa LECs engaged in unjust and unreasonable
practices in violation of Section 201(b) of the Act.
65 Complaint Ex. 3, Stipulations.
66 Complaint at 4, para. 8. See Reply and Reply Legal Analysis of AT&T Corp., File No. EB-12-MD-003 (filed
May 10, 2012), Ex. 1 (Letter from Lisa B. Griffin, FCC, to Counsel for the Parties, File No. EB-12-MD-003 (Jan.
17, 2012) (January 17th Letter Ruling)).
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III.

DISCUSSION

A.

The Iowa LECS Have Violated Sections 203 and 201(b) of the Act.

18.
In this section, we address the tariff violations alleged by AT&T. First, AT&T claims
that the Iowa LECs violated the NECA Tariff by billing for mileage charges not authorized by the tariff.67
Second, AT&T alleges that the defendants Mutual, Alpine, and Preston violated the NECA Tariff by
charging AT&T for transport outside their LATAs.68 And third, AT&T contends that the Iowa LECs
violated the NECA Tariff by failing to give AT&T reasonable notice of the POI change.69
1.

The Iowa LECs Billed AT&T Mileage Charges That Are Not Authorized
Under the NECA Tariff.

19.
According to AT&T, the Iowa LECs do not have unfettered discretion under the NECA
Tariff to select a POI.70 Rather, the NECA Tariff expressly incorporates the INAD Tariff’s provisions
regarding location of the POI.71 In AT&T’s view, under the INAD Tariff, the location of the POI turns on
where “responsibility” for the traffic shifts from INS to the Iowa LECs, and AT&T asserts that the Iowa
LECs never assumed responsibility for the traffic at Des Moines.72 AT&T argues that INS was
responsible for providing transport between Des Moines and the original POIs,73 and that the Iowa LECs
thus violated Sections 203 and 201(b) of the Act by billing AT&T mileage charges associated with the
changed POIs.74 Alternatively, AT&T argues that, even if the tariff provisions are ambiguous, the
Commission should construe them in AT&T’s favor.75
20.
As discussed below, we find that the NECA Tariff does not provide the Iowa LECs an
unqualified right to select a POI, but rather incorporates the INAD Tariff’s terms regarding POI selection.
We further find that the term “responsibility” in the INAD Tariff is ambiguous, thereby rendering the
NECA Tariff ambiguous as well.76 Accordingly, we construe the tariff language against the Iowa LECs.
a.

The NECA Tariff Provides that the INAD Tariff Establishes the
POI.

21.
AT&T argues that Section 6.1.3(A) of the NECA Tariff “specifies the POI[s] by
referencing the INAD Tariff,”77 and that no other provision of the NECA Tariff addresses the Iowa LECs’


67 Complaint at 4-5, paras. 10-11, 27-28, paras. 67-72; Reply at 6-7.
68 Complaint at 5, para. 12, 27-28, paras. 67-71, 73; Reply at 22-23.
69 Complaint at 5-6, para. 13, 27-28, paras. 67-71, 74; Reply at 23-24.
70 Complaint at 5, para. 10, 6, para. 15, 45, para. 111, 47, para. 114, 53, para. 128, 54-5, paras. 130-31.
71 Complaint at 41-42, para. 106.
72 Complaint at 36-40, paras. 93-103
73 Complaint 38, para. 98, 40, para. 102.
74 Complaint at 32-49, paras. 86-118; Reply, Legal Analysis at 6.
75 Complaint at 5, para. 11, 45-49, paras. 112-18.
76 See footnote 101 below.
77 Complaint, Legal Analysis at 33, para. 88, 41-42, para. 106 (citing NECA Tariff § 6.1.3(A), Original Page 6-7.3);
Reply, Legal Analysis at 7. In its entirety, the relevant paragraph of Section 6.1.3(A) of the NECA Tariff states:
(continued…)
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POIs with INS or otherwise authorizes the Iowa LECs to bill for transport provided over INS’s fiber
ring.78 According to AT&T, the third sentence of the relevant paragraph in Section 6.1.3(A) applies and
states that:
[w]hen service is provided in cooperation with a non telephone company
provider of Centralized Equal Access, the SWC will be that wire center
which would normally provide dial tone to the telephone company point
of interconnection with the non telephone company provider of
Centralized Equal Access specified in the tariff of the Centralized Equal
Access provider
.79
22.
The Iowa LECs argue that AT&T improperly ignores the first sentence of the relevant
paragraph of Section 6.1.3(A), which states that “where the Telephone Company elects to provide equal
access through a Centralized Equal Access arrangement, the Telephone Company will designate the
serving wire center
.”80 This sentence, the Iowa LECs maintain, gives them the right to designate the POI,
because the SWC and the POI “will be at the same place.”81 We agree with AT&T that the first sentence
of this Section is not applicable, however, given the parties’ stipulation that INS is a “non telephone
company” provider of CEA.82 Thus, we find that, in order to determine the location of the POI under the
NECA tariff, we must look to the language of the INAD Tariff.
(Continued from previous page)


Unless otherwise ordered by the F.C.C., where the Telephone Company elects to provide equal
access through a Centralized Equal Access arrangement, the Telephone Company will designate
the serving wire center. The designated SWC will normally be that wire center which provides
dial tone to the telephone company Centralized Equal Access tandem office identified in
NATIONAL EXCHANGE CARRIER ASSOCIATION, INC. TARIFF F.C.C. NO. 4. When
service is provided in cooperation with a non telephone company provider of Centralized Equal
Access, the SWC will be that wire center which would normally provide dial tone to the telephone
company point of interconnection with the non telephone company provider of Centralized Equal
Access specified in the tariff of the Centralized Equal Access provider. Those Telephone
Company offices providing equal access through centralized arrangements are identified in
NATIONAL EXCHANGE CARRIER ASSOCIATION, INC. TARIFF F.C.C. NO. 4.
78 Complaint, Legal Analysis at 33, para. 88, 41-42, paras. 105-06; Reply, Legal Analysis at 9.
79 Complaint, Legal Analysis at 33, para. 88, 41-42, para. 106 (citing NECA Tariff § 6.1.3(A), Original Page 6-7.3
(emphasis added)).
80 Answer, Legal Analysis at 35, paras. 106-07 (citing NECA Tariff § 6.1.3(A), Original Page 6-7.3 (emphasis
added)), 36, para. 108.
81 Answer, Legal Analysis at 36, para. 108.
82 Stipulations at 21, para. 129. The Iowa LECs further maintain that sections 6.4.7 and 6.8.3 of the NECA Tariff,
which state that the “Telephone Company will designate the . . . routing to be used where equal access traffic is
provided through a centralized equal access arrangement,” give them discretion to select any POI. Answer, Legal
Analysis at 34, para. 105. Routing of calls referenced in those sections describes only the call path and not the
designation of the POI. Indeed, the Iowa LECs appear to have conceded as much by stipulating that, regardless of
whether the POIs were the original POIs or Des Moines, the traffic “has continued to flow over precisely the same
. . . route.” Stipulations at 16, para. 94.
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b.

We Construe the INAD Tariff’s Definition of POI Against the Iowa
LECs.

23.
The INAD Tariff does not describe how the POI should be selected, but rather provides,
by way of definition, that “Point of Interconnection” denotes:
the demarcation point or network interface, on an Iowa Network
premises at which Iowa Network’s responsibility for the provision of
[CEA] ends.83
Thus, under the INAD Tariff, the POI is where “responsibility” for handling traffic shifts between INS
and the Iowa LECs. According to AT&T, the “most natural and straightforward reading of the INS
Tariff’s definition of POI is that INS’s responsibility ends when the traffic is handed off by INS from its
fiber ring to the facilities of another carrier.84 For the Iowa LECs, AT&T says, that is not at Des Moines
but at the Iowa LECs’ “traditional” POIs (which were located close to their operating territories).85
24.
Although they repeatedly note in their Answer that the INAD Tariff lists sixteen potential
POIs (including Des Moines),86 the Iowa LECs accept AT&T’s proposition that ascertaining which carrier
has responsibility for handling traffic is key to determining the actual POI.87 In other words, they
acknowledge that if the Commission finds that INS retained responsibility for the traffic between Des
Moines and the former POIs, the Iowa LECs’ POIs cannot be in Des Moines.88 Where the Iowa LECs
differ with AT&T is in their interpretation of the term “responsibility.”
25.
Relying upon the leases they entered into with INS, the Iowa LECs contend that
“responsibility” means “accountability” for CEA service.89 The Iowa LECs maintain that, by virtue of the
leases, they had “exclusive” use of fiber and therefore acquired the means to transport the traffic.90
Leased facilities, the Iowa LECs say, are a telecommunication carrier’s facilities for purposes of imposing
charges under a tariff.91 They further note that AT&T itself does not own all the facilities it uses to
conduct its business and that AT&T leases facilities and recovers a portion of its leased costs in its pricing
to its customers.92 Thus, the Iowa LECs argue that they assumed “responsibility” when they entered into


83 Reply, Legal Analysis at 7 (citing INAD Tariff § 2.5, 1st Rev. Page 62).
84 Complaint, Legal Analysis at 35, para. 91.
85 Complaint, Legal Analysis at 35, para. 91.
86 Answer, Legal Analysis at 27, para. 90, 28, para. 91, 35, para. 106, 43-44, para. 129, 45, para. 132.
87 Answer, Legal Analysis at 27-33, paras. 90-101, 36, para. 108. In light of this acknowledgement, we find other
evidence regarding LECs’ POI selections and the views of third party “experts” to be irrelevant. See Answer,
Legal Analysis at 34, para. 105; Answer Ex. H, Affidavit of Burnie E. Snoddy at 2, paras. 3-4.
88 See Answer, Legal Analysis at 25, para. 86 & n.24, 27-28, para. 90.
89 Answer, Legal Analysis at 25, para. 86, 28, para. 91, 29-33, paras. 93, 96-98, 100. In other words, “if AT&T
[had] an issue with the traffic,” it would contact the Iowa LECs. Answer, Legal Analysis at 29-30, paras. 93, 94.
See Stipulations at 16-17, paras. 94-99.
90 Answer at 6, para. 10, 21, para. 72, 25, para. 86, 27, para. 90, 29-30, para. 93-94, 31, para. 97, 33-34, paras. 103-
04
91 Answer, Legal Analysis at 25, para. 86.
92 Answer, Legal Analysis at 25, para. 86 & n.24.
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the leases within INS, and they are entitled to impose access charges.93 In their view, whether they
physically maintained the network facilities is irrelevant.94
26.
In contrast, AT&T argues that construing the term “responsibility” to mean strictly legal
“accountability” is too narrow.95 According to AT&T, it would be an “unnatural reading of the tariff
provision to contend that INS has ‘end[ed]’ its responsibility for the provision of CEA services even
though INS . . . continues to own, control, operate, and maintain the facilities that are used to provide the
CEA service.”96 AT&T asserts that the leases between INS and the Iowa LECs neither ended INS’s
“responsibility” for the provision of CEA service nor provided the Iowa LECs with responsibility and
control of INS’s network.97 The oral leases, AT&T argues, were merely “paper changes” supported by
only vague evidence that the Commission should discount,98 and the written leases expressly provided
that ownership and control of the INS network remained with INS.99
27.
We find that both the Iowa LECs and AT&T have presented reasonable constructions of
the term “responsibility.” On the one hand, the Iowa LECs make a valid point that it is not uncommon
for carriers to use leased facilities and impose charges for traffic sent over them.100 On the other hand,
AT&T plausibly asserts that, notwithstanding the leases, INS retained control of its facilities, and INS
handled the traffic in the same manner.101 Thus, we find the term “responsibility” to be ambiguous in this
context. In such circumstances, it is “well-established . . . that any ambiguity in a tariff is construed


93 Answer, Legal Analysis at 27-30, paras. 90, 93-94, 33-34, para. 103.
94 Answer, Legal Analysis at 30-33, paras. 96-98, 100, 101.
95 Reply, Legal Analysis at 17.
96 Reply, Legal Analysis at 17. See also Reply, Legal Analysis at 16-17 (the INS Tariff’s reference to
“responsibility” is “most naturally and sensibly read to mean that [INS] has ‘responsibility’ for the provision of
CEA service whenever the underlying facilities used to provide the service are owned, controlled, operated, and
maintained by any part of INS.”). The Iowa LECs spend considerable time in the Answer making distinctions
between two divisions of INS—INICD and INAD. Specifically, they argue that INAD “removed the facilities
leased by the Iowa LECs from their facilities leased from” INICD, and thus that INAD no longer has responsibility
for the services provided between Des Moines and the “traditional” POIs. See Answer at 3, para. 2, 6-7, para. 10,
17-19, paras. 59-62, 21, para. 72, 25-31, paras. 86, 89-96, 33-34, paras. 103-04, 47-49, para. 43. The Iowa LECs
further claim that their leases with INICD provide them with “responsibility” over the INS facilities and the
authority to bill for transport. See Answer at 5-7, paras. 7, 10, 10, para. 18, 16-18, paras. 57-58, 60, 61, 24, para.
83, 25, para. 86, 26-27, paras. 89-90, 30-31, para. 96, 33-34, para. 103, 38, para. 113, 51-52, paras. 154-55.
Because this Order analyzes whether the Iowa LECs, as opposed to any part of INS, exercised “responsibility” (as
used in the INAD Tariff), we agree with AT&T that there is no need to focus extensively on the relationship
between INICD and INAD. See Reply, Legal Analysis at 13 (“the Iowa LECs place far too much weight on the
existence of INS’ internal divisions and the use of leases between those divisions”).
97 Reply, Legal Analysis at 13.
98 Complaint, Legal Analysis at 37, para. 85; Reply, Legal Analysis at 20-21, n.28.
99 Reply, Legal Analysis at 18-20. AT&T claims that the leases actually were “agreements for services.” Reply,
Legal Analysis at 20.
100 Answer at 18 & Answer Ex. F., Supplement Expert Witness Report of Burnie Snoddy at 2 (noting that the
leasing of network capacity and facilities is a standard industry practice). See also Joint Statement at 14-15,
Stipulations 85-87, Reply at 21 (noting the use of leases to provide “wholesale transport service”).
101 Complaint, Legal Analysis at 36-40; Reply at 5, 18-22.
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against the party who filed the tariff.”102 Consequently, we construe the language in the INAD Tariff and,
in turn, the NECA Tariff, against the Iowa LECs.
28.
In this instance, then, the POI is the point at which the Iowa LECs connect with INS.
The parties stipulated that the “leases” did not alter the functionality of INS’s or the Iowa LECs’
networks,103 and traffic continued to flow over precisely the same facilities as it did prior to the Iowa
LECs purported POI changes.104 INS remained responsible for the maintenance and operation of the lease
facilities105 and, indeed, the Iowa LECs have no knowledge about what happened to the traffic while it
was on the leased facilities.106 Just as before the purported POI change, the Iowa LECs relied entirely
upon INS to deliver traffic between Des Moines and their local exchanges.107 Any notion that the Iowa
LECs validly changed their POIs by virtue of these “leases” is further belied by the fact that INS
continued to charge AT&T a flat rate that covers switching and transport.108
29.
Moreover, tariffs should be construed to avoid “unfair, unusual, absurd or improbable
results”109 and should be interpreted to “advance the purpose for which the tariff was imposed.”110 We
find that this principle has applicability here. As explained in more detail below, the Iowa LECs stipulate
that moving their POIs to Des Moines had no benefits for their end user customers or IXCs, yet
substantially increased access charges billed to IXCs.111 This outcome is directly contrary to the purpose
of the Iowa CEA arrangement. That is, the Commission approved the creation of INS in order to lower
the cost of transporting traffic from Des Moines to the various remote rural exchanges, and thus
encourage more IXCs to compete in those areas.112 Accordingly, the ambiguous tariff provisions should
be construed against the Iowa LECs.
30.
For all of the foregoing reasons, we grant Count I of the Complaint because the Iowa


102 AT&T Corp. v. Ymax Communications Corp., Memorandum Opinion and Order, 26 FCC Rcd 5742, 5755, para.
33 (2011) (citing Associated Press v. FCC, 452 F.2d 1290, 1299 (D.C. Cir. 1971); Qwest Commc'ns Corp. v.
Farmers & Merchants Mut. Tel. Co.
, Memorandum Opinion and Order, 24 FCC Rcd 14801, 14810, n.83 (2009),
recon. denied, 25 FCC Rcd 3422 (2010), pet. for review denied, Farmers & Merchants Mut. Tel. Co. v. FCC, 668
F.3d 714 (D.C. Cir. 2011); American Satellite Corp. v. MCI Telecommunications Corp., Memorandum Opinion
and Order, 57 FCC2d 1165, 1167, para. 6 (1976)).
103 Stipulations at 14, para. 84.
104 Stipulations at 16, para. 94.
105 Stipulations at 16, para. 95.
106 Stipulations at 16, para. 98.
107 Stipulations at 17, para. 99.
108 Stipulations at 17, para. 101. As a result, AT&T is being billed twice for transport—once under the INAD Tariff
(via the CEA flat, non-distance-sensitive charge) and once under the NECA Tariff (via the mileage-based transport
charges). See also discussion below in paragraph 48.
109 See Penn. Cent. Co. v. General Mills, 439 F.2d 1338, 1341 (8th Cir. 1986); Carrier Serv., Inc. v. Boise Cascade,
795 F.2d 640, 642 (8th Cir. 1986); see also Complaint at 45-49; Reply at 10-12.
110 See Consol. Gas Trans. Corp. v. FERC, 771 F.2d 1536, 1545 (D.C. Cir. 1985); Nat’l Van Lines, Inc. v. U.S.,
355 F.2d 326, 333 (7th Cir. 1966) (“[A]n interpretation which is reasonable and consistent with the purposes of the
tariff should be preferred to a construction which is impractical or which leads to absurd consequences”).
111 See discussion supra Section II.B.2; Stipulations at 17, para. 100, and 19, para. 120.
112 See Application of Iowa Network Access Division, 3 FCC Rcd 1468 (C.C.B. 1989) at para. 3.
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LECs’ billed mileage charges are not authorized under the NECA Tariff.
2.

Mutual, Alpine, and Preston Violated the NECA Tariff by Charging AT&T
for Transport Service Outside Their LATAs.

31.
AT&T contends that defendants Mutual, Alpine, and Preston violated the NECA Tariff
by charging for transport service outside their local access and transport areas (LATA).113 AT&T
maintains that two independently dispositive clauses of the NECA Tariff support its contention that the
billing of transport services outside a LEC’s LATA falls outside the scope of the tariff. According to
AT&T, the NECA Tariff authorizes charges only for access “within a LATA,” yet these three defendants
have billed AT&T for transport to and from Des Moines, which is outside the LATAs in which they serve
their local customers (and have local exchanges).114
32.
First, AT&T argues that the title page of the NECA Tariff expressly circumscribes the
area in which the access service (including transport) may be provided, stating that the tariff governs “the
provision of Access Services within a Local Access and Transport Area (LATA) or equivalent Market
Area
.”115 AT&T maintains that, by its plain terms, the NECA Tariff does not apply to services like the
transport services provided by Mutual, Alpine, and Preston, that extend beyond their LATA boundaries.116
Mutual, Alpine, and Preston have stipulated that Des Moines is outside the LATAs in which they serve
their local customers.117 Although they disagree with AT&T’s interpretation of this tariff language, the
Iowa LECs have offered nothing to counter its argument.118
33.
Second, AT&T relies upon Section 6.1 of the tariff, which states:
Switched Access Service provides for the ability to originate calls from
an end user’s premises to a customer designated premises, and to
terminate calls from a customer designated premises to an end user’s
premises in the LATA where it is provided.119
34.
AT&T argues that this provision requires switched access services to be provided in the
same LATA as the end user’s premises where the calls originate or terminate.120 The Iowa LECs contend
that this sentence does not require them to provide access facilities in a single LATA.121 Rather,
according to the Iowa LECs, the LATA reference in Section 6.1 is limited to the location of the LECs’


113 Complaint at 28-29, para. 73; Complaint, Legal Analysis at 49-50, paras. 119-21; Reply, Legal Analysis at 22-
23.
114 Complaint, Legal Analysis at 49, para. 119; Stipulations at 22, para. 137.
115 Complaint at 9, para. 12; Complaint Legal Analysis at 19, para. 49; Reply at 23; Complaint Ex. 6, Tariff FCC
No. 5, Original Title Page 1, Access Service (emphasis added).
116 Complaint Legal Analysis at 49-50; Reply at 22-23.
117 Stipulations at 22, para. 137.
118 See Answer at 7, para. 12, 15, para. 49; Answer Legal Analysis at 39-40, paras 119-21.
119 Complaint Ex. 6, NECA Tariff No. 5, § 6.1, Original Page 6-1 (emphasis added); Reply Legal Analysis at 22-
23.
120 Complaint Legal Analysis at 50; Reply at 22-23.
121 Answer at 15, para. 49, 7, para. 12, 39, para. 119.
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local exchange customers.122 On its face, however, Section 6.1 provides that Switched Access Service
(which includes transport) entails the ability to originate and terminate calls “to an end user’s premises in
the LATA where it is provided.”123 “It” refers to the switched access service, which must be provided in
the same LATA as the end user’s premises where the calls originate or terminate. As noted above, the
parties stipulate that Des Moines is outside the LATAs in which Mutual, Alpine, and Preston service their
end users.124 Thus, they are charging AT&T for access services (transport) that they provide, in part,
outside the LATA of their end users. Therefore, we agree with AT&T that the disputed mileage charges
for transport outside the LATA by these three LECs are not authorized by the language in the NECA
Tariff and thus are unlawful.
3.

The Iowa LECs Also Violated the NECA Tariff by Failing to Provide AT&T
with Reasonable Notice of Any Purported POI Changes.

35.
AT&T also argues that the Iowa LECs failed to abide by the NECA Tariff’s requirements
that they provide reasonable notice to AT&T of POI changes.125 Section 2.1.9, entitled “Notification of
Service-Affecting Activities,” states:
The Telephone Company will provide the customer reasonable
notification of service-affecting activities that may occur in the normal
operation of its business. Such activities may include, but are not limited
to the following:
- equipment or facilities additions,
- removals or rearrangements,
- routine preventative maintenance, and
- major switching machine change-out.
Generally, such activities are not individual customer service specific,
but may affect many customer services. No specific advance notification
period is applicable to all service activities. The Telephone Company
will work cooperatively with the customer to determine reasonable
notification requirements.126
36.
AT&T claims that the change of POIs is necessarily a “service-affecting activity” under
the NECA Tariff.127 We agree. The NECA Tariff provides examples of service-affecting activities.
Although “change of POI” is not one of them, the list includes “rearrangements,” which we believe
applies.128 The Iowa LECs characterize the POI as the “location where the facilities of INAD meet the


122 Answer at 15, para. 49 & Ex. C, Affidavit of Norman St. Laurent (St. Laurent Affidavit) at 7-8, para. 35.
123 Complaint Ex. 6, NECA Tariff No. 5, § 6.1.
124 Stipulations at 22, para. 137.
125 Complaint at 29, para. 74; Complaint Legal Analysis at 50-52, paras. 122-25 n.130; Reply at 23-24.
126 Complaint Ex. 6, NECA Tariff No. 5, § 2.1.9.
127 Reply at 23.
128 Complaint Ex. 6, NECA Tariff No. 5, § 2.1.9.
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facilities of the LEC.”129 A change in that location—especially when accompanied by a significant
increase in mileage charges—is tantamount to a “rearrangement” affecting service.130 Consequently, the
NECA Tariff obligated the Iowa LECs to provide reasonable notice to AT&T when they changed their
POIs.
37.
AT&T argues that it did not receive actual notice of the POI changes.131 However, two of
the Iowa LECs contend that they in fact gave actual notice of the changes to AT&T in the form of
correspondence.132 Specifically, Winnebago asserts that it notified AT&T by including a letter with its
October 2, 2001, bill that stated: “Winnebago Cooperative Telephone Association will be changing its
POP location from Mason City, Iowa to Des Moines, Iowa. This will become effective on October 11,
2001 and the carrier access bills for usage after that date starting with the December 1, 2001 CABS bill
will reflect the change in the transport facility.”133 Although the letter was not signed, addressed, or
accompanied by proof of delivery, AT&T does not deny receiving it,134 and we find that it adequately
alerted AT&T to the POI change. Preston asserts that it sent a letter to AT&T apprising AT&T of the
POI change, but Preston could not produce a copy of the purported letter or any specific information
about the letter.135 Rather, Preston relied exclusively upon the deposition testimony of Roger Kilburg136
who, without the benefit of any documentary evidence, claimed to have detailed recollection about
mailing the letter more than eight years earlier.137 Given the lack of documentary evidence supporting
Mr. Kilburg’s assertion, we decline to credit his testimony, and we find no basis to conclude that there
was a letter providing notice to AT&T.
38.
Further, we find that the adjustments that the Iowa LECs made to the Local Exchange
Routing Guide (LERG)138 and to another NECA tariff139 did not provide constructive notice to AT&T.
The Commission’s formal complaint rules require parties to plead all facts in support of their claims and


129 Answer, Legal Analysis at 30, para. 93.
130 Cf. Reply at 23 (characterizing as a “remarkable admission” the Iowa LECs’ contention that the POI changes
did not affect service because the traffic continued to flow over the same routes and facilities as before (citing
Answer at 8, para. 13, 19-20, para. 63).
131 Complaint at 50-51, para. 122; Reply at 23-24.
132 Answer at 7, para. 13, 40-42, paras. 122-25. See Complaint Ex. 26, Deposition of Terry Wegener (Wegener
Deposition) at page 89, Answer Ex. D (sample notice setter), Answer Ex. U, Deposition of Roger Kilburg (Kilburg
Deposition) at pages 42-43.
133 Complaint Ex. 25, Wegener Deposition at 89, Answer Ex. D (sample notice letter).
134 See Reply, Legal Analysis at 24, n.35.
135 Answer Ex. U, Kilburg Deposition at pages 42-43.
136 Answer at 8, para. 13.
137 Answer Ex. U, Kilburg Deposition at pages 42-43.
138 The LERG is an industry guide generally used by carriers in their network planning and engineering and
numbering administration. It contains information regarding all North American central offices and end offices.
See Answer, Ex. C, St. Laurent Affidavit at 7.
139 Answer at 19-20, para. 63 & n.15. Specifically, the Iowa LECs contend that NECA F.C.C. Tariff No. 4 (Tariff
4), which describes, among other things, the location and technical capabilities of wire centers providing interstate
access telecommunications service, was modified via some unspecified adjustments. Answer at 19-20, n.15.
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defenses fully and with specificity.140 The Iowa LECs, however, did not specify the language in the
LERG or the tariff that they claim satisfies their notice obligations.141 In the absence of any specific
evidence/explanation by the Iowa LECs, we cannot find that updates to the LERG and revisions to NECA
Tariff No. 4 constitute “reasonable” notice. Thus, even if the Iowa LECs changed their POIs, those
changes were done in violation of the NECA Tariff because, with the exception of Winnebago, the Iowa
LECs failed to provide AT&T with reasonable notice of the changes as required by the Tariff.

B.

Alternatively, The Iowa LECs Have Violated Section 201(b) of the Act
Because the NECA Tariff is Unreasonable to the Extent It Allows the Iowa
LECs to Change Their POIs for the Sole Purpose of Inflating Mileage
Charges Paid by IXCs.

39.
In Count II of the Complaint, AT&T alleges that if the NECA Tariff is interpreted to
grant the Iowa LECs an “unqualified” right to change POIs, and thereby authorize billing vastly increased
mileage charges without corresponding benefit to customers, the Iowa LECs have violated Section 201(b)
of the Act because the Tariff is unreasonable.142 AT&T further alleges that the Iowa LECs have violated
Section 201(b) by engaging in “sham arrangements” designed to inflate mileage charges.143 We agree
that, if the NECA Tariff were to be interpreted (contrary to our findings in part III.A) to allow the Iowa
LECs to change their POIs as proposed, the NECA Tariff would be unreasonable in the respect AT&T
identifies. Because this determination affords AT&T all the relief it seeks in Count II, we do not reach
the “sham arrangements” allegations.
1.

The Section 201(b) Claims Are Properly Before the Commission.

40.
Before reaching the merits of Count II, we address the Iowa LECs’ contention that the
Section 201(b) claims that are the subject of Count II of the Complaint are not properly before the
Commission.144 Specifically, the Iowa LECs maintain that the federal courts do not have authority to
determine the reasonableness of a tariff that has been approved by the Commission, as have both the
NECA Tariff and the INAD Tariff.145 The tariff of a telecommunications carrier, they assert, becomes
“legal” when it is filed with an agency and becomes effective,146 and a carrier cannot be said to have
engaged in unjust and unreasonable practices if it was exercising rights afforded to it under a legal
tariff.147 In the Iowa LECs’ view, the Court on referral accordingly has not sought guidance on the


140 See 47 C.F.R. §§ 1.720(a), (c), (h), 1.721(a)(5), (a)(11), 1.724(b), (g), 1.726(e) (noting, among other things, that a
party must attach copies of all documents it intends to rely upon to support facts alleged and legal arguments made
by it). See also Implementation of the Telecommunications Act of 1996, Amendment of Rules Governing Procedures
to Be Followed When Formal Complaints Are Filed Against Common Carriers
, Report and Order, 12 FCC Rcd
22497, 22534-37, paras. 81-88 (1997).
141 Answer at 7-8, para. 13, 19-20, para. 63 & n.15. The Iowa LECs did not include a copy of the relevant pages
from NECA Tariff No. 4 or the LERG with their Answer.
142 Complaint, Legal Analysis at 52-57.
143 Complaint, Legal Analysis at 61-67.
144 Answer at 10, para. 20, 22-23, paras. 78-79; Answer, Legal Analysis at 42-43, paras. 126, 128, 44-45, para.
132, 47, para. 138.
145 Answer, Legal Analysis at 42, para. 125, 45, para. 132, 46, para. 135.
146 Answer, Legal Analysis at 42, para. 126.
147 Answer, Legal Analysis at 42, para. 126.
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reasonableness of the tariffs,148 and the scope of this proceeding is limited to issues of tariff
interpretation.149
41.
This argument fails in several respects. To begin, under Section 206 of the Act, the
federal courts have subject matter jurisdiction over claims that common carriers have committed any “act,
matter or thing in this Act prohibited or declared to be unlawful.”150 Thus, AT&T properly brought its
Section 201 claims in federal court, and the court was within its discretion to refer them to the
Commission under the primary jurisdiction doctrine.151 The Commission, too, has authority under
Section 208 of the Act to resolve formal complaints alleging violations of Section 201(b).152
42.
Moreover, the scope of the issues referred included AT&T’s Section 201(b) claims.
Although it denied summary judgment, the district court noted that AT&T had sought referral of its
counterclaims, “including” (i.e., not limited to) “interpretation of a number of technical terms within
tariffs.”153 The court stayed the case and stated that the “matter is referred to the FCC for resolution of the
issue herein to the full extent of the FCC’s jurisdiction.”154 The parties’ Joint List of Issues included Issue
3, which broadly asked whether the LECs are “engaged in unjust and unreasonable practices in violation
of Section 201(b) of the Act in connection with the furnishing of interstate communication services.”155
The parties did not limit Issue 3 to Section 201(b) violations arising from billing in violation of the NECA
Tariff, and the Commission instructed AT&T simply to “file a formal complaint against the LECs that
raises issues 1 and 3 above.”156


148 Answer, Legal Analysis at 42, para. 125.
149 Answer, Legal Analysis at 42, para. 125, 43, para. 128, 44, para. 132, 46, para. 135, 47, para. 138, 53, para.
157, 53 (Prayer for Relief), 54 (Second Affirmative Defense).
150 47 U.S.C. § 206. Cahnmann v. Sprint Corp., 133 F.3d 484, 488 (7th Cir. 1998), cited by the Iowa LECs, is
inapposite. That case held that the Act extinguishes the right of a party to bring suit for breach of contract under
state law
when the effect of the suit would be to challenge a federal tariff. Similarly, the filed-rate cases cited by
the Iowa LECs—see Answer at 43, n.52—are inapplicable because they do not concern a challenge to the justness
or reasonableness of the tariffs at issue in those cases.
151 See Reiter v. Cooper, 506 U.S. 258, 268 (1993) (the primary jurisdiction doctrine is “specifically applicable to
claims properly cognizable in court that contain some issue within the special competence of an administrative
agency”).
152 47 U.S.C. § 208.
153 Alpine Primary Jurisdiction Order at 4.
154 Alpine Primary Jurisdiction Order at 5.
155 January 17th Letter Ruling at 3.
156 January 17th Letter Ruling at 3. The Iowa LECs read too much into a statement in the January 17th Letter
Ruling that AT&T’s “motion to refer the matter to the FCC was limited to ‘issues of tariff interpretation.’” January
17th Letter Ruling at 4. That statement, which drew a distinction between the preemption question and the other
matters that had been referred to the Commission, was merely quoting from the heading of AT&T’s argument
beginning on page 18 of its brief in support of its summary judgment motion. See Defendant’s Brief in Support of
Motion for Summary Judgment (AT&T’s Summary Judgment Brief) at 18. The statement cited to the entirety of
AT&T’s argument at pages 18-20 of that brief, however, which clearly encompassed all of AT&T’s section 201(b)
claims. See AT&T’s Summary Judgment Brief at 19-20 (“Fina1ly, if the Court does decide to refer issues of tariff
interpretation to the FCC, then the referral should also include AT&T's counterclaims arising under Section 201.
In Count II of its counterclaims, AT&T alleges that Plaintiffs have committed an unreasonable practice . . .
(continued…)
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43.
Finally, in asserting that the NECA tariff is immune from review for reasonableness
because it is “legal,” the Iowa LECs confuse “legality” and “lawfulness”:
“Legality” mainly addresses procedural validity. . . . A particular rate
. . . becomes “legal” when it is filed with an agency and becomes
effective. But a rate’s legality is not enough to establish its substantive
reasonableness or “lawfulness.” . . . A carrier charging a merely legal
rate may be subject to refund liability if customers can later show that the
rate was unreasonable. . . . Should an agency declare a rate to be lawful,
however, refunds are thereafter impermissible as a form of retroactive
ratemaking.157
What’s more, although tariffs that are “deemed” lawful are not subject to refunds, if a “later
reexamination shows them to be unreasonable,” the Commission may afford prospective relief.158
2.

The Uncontroverted Evidence Demonstrates that the Iowa LECs’ Purported
POI Changes Significantly Increased AT&T’s Operating Costs Without
Providing Any Enhanced Service Choices or Benefits to Customers.

44.
Should the Commission interpret the NECA Tariff to permit the Iowa LECs to change
their POIs to Des Moines, AT&T argues that “a tariff that provides a LEC with an ‘unqualified’ or
‘absolute’ right to select a POI with a CEA provider directly contravenes the Commission’s orders
authorizing CEA arrangements.”159 Specifically, AT&T relies upon the Commission’s statements in
Indiana Switch rejecting AT&T’s challenge to the ability of independent LECs (ITCs) to “control . . . the
designation of [POIs].”160 The Commission stated:
[T]he cost increases ISAD’s proposed arrangement imposes on AT&T
are outweighed by the proposal’s benefits to thousands of subscribers in
Indiana. . . . If in some future case an IXC demonstrates that an ISAD-
like proposal significantly increases IXCs’ operating costs without
significant increases in service choices or benefits to subscribers, or
unreasonably designates ITC points of interconnection with IXCs, we
may reach a different result. In other words, our decision permitting
ISAD to proceed should not be interpreted as unbounded authority on the
part of ITCs, or their affiliates, to determine points of interconnection
with IXCs.161
(Continued from previous page)


[because] . . . the tariffs are unreasonable under Section 201 . . . [and] Plaintiffs have engaged in a sham
transaction”).
157 ACS of Anchorage, Inc. v. FCC, 290 F.3d 403, 410-11 (D.C. Cir. 2002) (ACS of Anchorage) (citations omitted).
158 ACS of Anchorage, 290 F.3d at 411.
159 Complaint, Legal Analysis at 53, para. 129.
160 Indiana Switch, 1 FCC Rcd at 635, para. 5.
161 Indiana Switch, 1 FCC Rcd at 635, para. 5.
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According to AT&T, the NECA Tariff cannot reasonably authorize the Iowa LECs to change POIs and
increase costs on the IXCs unless there are also significant increases in service choices or other
benefits.162 AT&T further asserts that there are no such benefits in this case.163 The undisputed evidence
confirms AT&T’s assertion.
45.
The Iowa LECs make several important admissions in this case. To begin, they concede
that they “entered into the lease agreements and purported to change their POIs with INS because, in part,
they determined that they would increase their net revenues and profits.”164 Moreover, the relocated POIs
and leases with INS admittedly have “resulted in net increases in the access charges” they billed.165
Indeed, the Iowa LECs acknowledge that, as a result of their conduct, IXCs’ local transport costs have
increased by as much as seven times.166 Finally, the Iowa LECs admit that their relocated POIs and leases
“brought about no benefits for the[ir] end user customers … and no benefits for IXCs.”167 In other words,
the stipulated record demonstrates that the Iowa LECs’ conduct is precisely the type of future
questionable behavior that the Commission contemplated in Indiana Switch.168 We conclude that the
NECA Tariff is unjust and unreasonable in violation of Section 201(b) to the extent it allows the Iowa
LECs’ admitted manipulation of POIs undertaken with the intent and effect of “pumping” mileage
charges.169
46.
Citing interrogatory responses filed in the underlying litigation, the Iowa LECs make a
fleeting attempt at the end of the Answer to identify “various advantages” they accrued from changing
their POI to Des Moines.170 Specifically, the Iowa LECs posit that these advantages include: “cost
savings; more efficient aggregation of traffic; the ability to provide a wider variety of increased, future
service, redundancy and the ability to interface with the networks of other telecommunications
providers.”171 Having reviewed the interrogatory answers, as well as deposition testimony of the Iowa
LECs concerning the purported “advantages” of relocating their POIs, we conclude that their strained
attempts to manufacture other reasons for moving the POI utterly lack credibility and do not support the
merits of their contention. Indeed, most of the purported “advantages” touted by the Iowa LECs relate to
improvements on the LEC side of the POI—i.e., efficiencies that have nothing to do with the


162 Complaint at 6, para. 16, 13-14, para. 35.
163 Complaint at 6, para. 16.
164 Stipulations at 11, para. 71.
165 Stipulations at 19, para. 120.
166 Complaint, Legal Analysis at 21, para. 53; Answer, Legal Analysis at 16, para. 53.
167 Stipulations at 17, para. 100.
168 See paragraph 44 & n.160 above.
169 Because we find that a carrier changing POIs for the sole purpose of inflating mileage charges is an unjust and
unreasonable practice, we would have similar concerns regarding, and thus examine closely, any tariff revisions that
appear to permit this practice.
170 Answer, Legal Analysis at 51-52, paras. 155-56. The Iowa LECs made these assertions in response to AT&T’s
“sham arrangements” argument, which we do not reach in this Order. Nonetheless, given the potential subject
matter overlap, we consider the Iowa LECs’ contentions in deciding AT&T’s tariff illegality argument. See
discussion supra Section III.A.1.b.
171 Answer, Legal Analysis at 51-52, paras. 155-56.
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facilities/services that are the subject of the leases between INS and the Iowa LECs.172
47.
The Iowa LECs’ remaining defenses fare no better. First, the Iowa LECs protest that
Indiana Switch does not represent a Commission “blanket policy” concerning CEA arrangements and the
rights of LECs to designate POIs.173 We agree. Our decision today rests not upon an overarching rule,
but upon the particular stipulated record in this case. The Iowa LECs further argue that, “[w]hile the
specific costs do increase on these routes, there is no indication that the cost of CEA in Iowa is greater
than if all the IXCs had to make connection with all the LECs in Iowa.”174 Even if true, that does not
justify a tariff provision that allows the Iowa LECs to change their POIs solely to inflate mileage charges.
A justification for imposing costs on IXCs without corresponding benefits to consumers undermines the
goal of the Iowa CEA arrangement, which was to “speed the availability of high quality, varied
competitive services to small towns and rural areas.”175
48.
Second, the Iowa LECs contend that INS reduced its cable and wire facility expenses to
reflect the reduction in its transport facilities in circumstances where the transport service is provided by
the Iowa LECs.176 The parties stipulated, however, that “INS has not quantified any resulting actual
reduction in the rates paid by IXCs.”177 Moreover, INS’s flat rate still covers both tandem switching and
transport, INS has continued to bill AT&T that CEA rate, and the Iowa LECs are also billing AT&T for
transport.178 Finally, any reduction in INS’s rate does not offset the substantial increases in billed
transport.179


172 Alpine is the only Defendant that even purports to demonstrate cost savings in its interrogatory answer, yet its
own deposition testimony refutes the claimed savings. In fact, Alpine admits that it could have gained the
improvements it sought in its network without moving the POI to Des Moines, but that it would not have gained
the increased mileage charges from the IXCs. Complaint, Exhibit 28, Deposition of Christopher James Hopp
(Alpine) at 63-67.
173 Answer, Legal Analysis at 43-45, paras. 129, 132.
174 Answer at 45-46, paras. 134, 136.
175 INAD Application Order, 3 FCC Rcd at 1468, para. 4.
176 Answer, Legal Analysis at 47, para. 142, 52, para. 156 (citing Stipulations at 19, para. 109).
177 Stipulations at 19, para. 109.
178 Stipulations at 17, para. 101, 18, paras. 107, 109.
179 Stipulations at 17, para. 101, 18, paras. 107, 109-10.
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IV.

ORDERING CLAUSES

49.
Accordingly, IT IS ORDERED, pursuant to Sections 1, 4(i), 4(j), 201, 203, 206, and 208,
of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151, 154(i), 154(j), 201, 203, 206, 208,
that Count I of the Complaint is GRANTED to the extent indicated herein.
50.
IT IS FURTHER ORDERED, pursuant to Sections 1, 4(i), 4(j), 201, 203, 206, and 208,
of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151, 154(i), 154(j), 201, 203, 206, 208,
that Count II of the Complaint is GRANTED to the extent indicated herein.
FEDERAL COMMUNICATIONS COMMISSION

Marlene H. Dortch

Secretary
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