Skip Navigation

Federal Communications Commission

English Display Options

Commission Document

Court Opinion - Illinois Pub. Telecomm. Assoc. v. FCC (D.C. Cir.)

Download Options

Released: June 13, 2014
image01-00.jpg612x792

USCA Case #13-1059 Document #1497401 Filed: 06/13/2014 Page 1 of 20

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 4, 2014 Decided June 13, 2014

No. 13-1059

ILLINOIS PUBLIC TELECOMMUNICATIONS ASSOCIATION,

PETITIONER

v.

FEDERAL COMMUNICATIONS COMMISSION AND UNITED

STATES OF AMERICA,

RESPONDENTS

AT&T, INC. AND VERIZON,

INTERVENORS

Consolidated with 13-1083, 13-1149

On Petitions for Review of an Order of

the Federal Communications Commission

Michael W. Ward argued the cause for petitioners Illinois

Public Telecommunications Association and Payphone

Association of Ohio, Inc. Keith J. Roland argued the cause

for petitioner Independent Payphone Association of New

York. With them on the briefs were Albert H. Kramer,

Donald J. Evans, and Daniel S. Blynn.

image02-00.jpg612x792

USCA Case #13-1059 Document #1497401 Filed: 06/13/2014 Page 2 of 20

2

Sarah E. Citrin, Counsel, Federal Communications

Commission, argued the cause for respondents. With her on

the brief were William J. Baer, Assistant Attorney General,

U.S. Department of Justice, Robert B. Nicholson and Shana

M. Wallace, Attorneys, Suzanne M. Tetreault, Deputy General

Counsel, Federal Communications Commission, Jacob M.

Lewis, Associate General Counsel, and Richard K. Welch,

Deputy Associate General Counsel. Joel Marcus, Attorney,

Federal Communications Commission, entered an

appearance.

Aaron M. Panner argued the cause for intervenors. With

him on the brief were Gary L. Phillips, Michael E. Glover,

and Christopher M. Miller.

Before: KAVANAUGH and WILKINS, Circuit Judges, and

SILBERMAN, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge

KAVANAUGH.

KAVANAUGH, Circuit Judge: Once upon a time, the only

way to call home from a roadside rest stop or neighborhood

diner was to use a payphone. Some payphones were owned

by independent payphone providers. Other payphones were

owned by Bell Operating Companies. The Bell Operating

Companies also happened to own the local phone lines. To

ensure fair competition in the payphone market, Congress

prohibited Bell Operating Companies from exploiting their

control over the local phone lines to discriminate against other

payphone providers in the upstream payphone market.

Specifically, Congress prohibited Bell Operating Companies

from subsidizing their own payphones or charging

discriminatory rates to competitor payphone providers. See

47 U.S.C. § 276. This case concerns the remedies available

image03-00.jpg612x792

USCA Case #13-1059 Document #1497401 Filed: 06/13/2014 Page 3 of 20

3

for violations of that prohibition – in particular, whether

independent payphone providers who were charged excessive

rates by Bell Operating Companies are entitled to refunds or

instead are entitled only to prospective relief in the form of

lower rates.

We conclude that Congress granted discretion to the

Federal Communications Commission to determine whether

refunds would be required in those circumstances and that the

Commission reasonably exercised that discretion here.

I

Petitioners are trade associations representing

independent payphone providers in Illinois, New York, and

Ohio. Since the mid-1980s, independent payphone providers

have competed with Bell Operating Companies in the

consumer payphone market. At first, Bell Operating

Companies had a built-in advantage. In addition to operating

some payphones, Bell Operating Companies owned the local

phone lines that provide service to all payphones. An

independent payphone provider was thus “both a competitor

and a customer” of the local Bell Operating Company. Davel

Communications, Inc. v. Qwest Corp., 460 F.3d 1075, 1081

(9th Cir. 2006). And that Bell Operating Company could

exploit its control over the local phone lines by charging

lower service rates to its own payphones or higher service

rates to independent payphone providers. See New England

Public Communications Council, Inc. v. FCC, 334 F.3d 69,

71 (D.C. Cir. 2003).

To prevent unfair competition in the payphone market,

Congress included a payphone services provision in the

Telecommunications Act of 1996. See Pub. L. No. 104-104,

§ 151(a), 110 Stat. 56, 106. That provision, codified as a new

image04-00.jpg612x792

USCA Case #13-1059 Document #1497401 Filed: 06/13/2014 Page 4 of 20

4

Section 276 of the Communications Act of 1934, states that a

Bell Operating Company may not “subsidize its payphone

service directly or indirectly” or “prefer or discriminate in

favor of its payphone service.” 47 U.S.C. § 276(a). To

implement those statutory proscriptions, Congress directed

the FCC to prescribe regulations governing Bell Operating

Company rates. See id. § 276(b)(1)(C). And to ensure that

state laws would not undermine the statutory proscriptions,

Congress provided that “[t]o the extent that any State

requirements are inconsistent with the Commission’s

regulations, the Commission’s regulations on such matters

shall preempt such State requirements.” Id. § 276(c).1

The FCC and the payphone industry have traveled a long

and winding road in implementing Section 276. We recount

here only those developments relevant to this case.2

In 1996, the FCC issued an initial set of orders

implementing Section 276. Those orders required Bell

Operating Companies to file tariffs demonstrating that the

rates they charged to independent payphone providers

complied with the requirements of Section 276. The FCC

directed Bell Operating Companies to file those tariffs with

state regulatory commissions by January 1997. The FCC

1 The full text of Section 276 is reprinted as an appendix to this

opinion.

2 Our prior Section 276 cases describe the implementation of

the provision in greater detail. See AT&T Corp. v. FCC, 363 F.3d

504 (D.C. Cir. 2004); New England Public Communications

Council, Inc. v. FCC, 334 F.3d 69 (D.C. Cir. 2003); Global

Crossing Telecommunications, Inc. v. FCC, 259 F.3d 740 (D.C.

Cir. 2001); American Public Communications Council v. FCC, 215

F.3d 51 (D.C. Cir. 2000); MCI Telecommunications Corp. v. FCC,

143 F.3d 606 (D.C. Cir. 1998); Illinois Public Telecommunications

Association v. FCC, 117 F.3d 555 (D.C. Cir. 1997).

image05-00.jpg612x792

USCA Case #13-1059 Document #1497401 Filed: 06/13/2014 Page 5 of 20

5

directed the state regulatory commissions to review the tariffs

for compliance with Section 276 based on a pricing standard

known as the “new services test.” State commissions that

were unable to review the tariffs could order Bell Operating

Companies in their states to instead file tariffs with the FCC.

See Order on Reconsideration, Implementation of the Pay

Telephone Reclassification and Compensation Provisions of

the Telecommunications Act of 1996, 11 FCC Rcd. 21,233,

21,308 ¶ 163 (1996); Report and Order, Implementation of the

Pay Telephone Reclassification and Compensation Provisions

of the Telecommunications Act of 1996, 11 FCC Rcd. 20,541,

20,614-15 ¶¶ 146, 147 (1996).

In Wisconsin, independent payphone providers

challenged the rates charged by Bell Operating Companies as

unlawful under Section 276. In 2002, in response to the

Wisconsin litigation, the FCC issued additional guidance on

the pricing standard that state commissions must apply in

determining whether Bell Operating Company rates comply

with Section 276. See Order Directing Filings, Wisconsin

Public Service Commission, 17 FCC Rcd. 2051, 2065-71

¶¶ 43-65 (2002). The FCC’s new guidance led a number of

states to conclude that Bell Operating Companies had been

charging excessive rates. Bell Operating Companies in those

states thus had to (and did) reduce their rates going forward.

But the independent payphone providers sought more than

just prospective relief. They argued that they were entitled to

refunds dating back to 1997. Some state regulatory

commissions and courts agreed and granted full refunds.

Other states granted partial refunds. Some states granted no

refunds. See Declaratory Ruling and Order, Implementation

of the Pay Telephone Reclassification and Compensation

Provisions of the Telecommunications Act of 1996, 28 FCC

Rcd. 2615, 2621 ¶ 11 & n.37 (2013) (Refund Order).

image06-00.jpg612x792

USCA Case #13-1059 Document #1497401 Filed: 06/13/2014 Page 6 of 20

6

Three state proceedings are relevant here. In Illinois, the

state commission and state courts declined to order refunds

primarily because of the filed-rate doctrine, which prohibits

retroactive revisions to rates that a government regulatory

body has approved. See Illinois Public Telecommunications

Association v. Illinois Commerce Commission, No. 1-04-0225

(Ill. App. Ct. Nov. 23, 2005). In New York, the state

commission and state courts have thus far declined to grant

refunds but have left the question open pending resolution of

the independent payphone providers’ petition in this case. See

Independent Payphone Association of New York, Inc. v.

Public Service Commission of New York, 774 N.Y.S.2d 197

(N.Y. App. Div. 2004). And in Ohio, the state commission

awarded partial refunds but the state commission and state

courts denied the request for refunds back to 1997 based on

the filed-rate doctrine and state procedural grounds. See

Payphone Association of Ohio v. Public Utilities Commission

of Ohio, 849 N.E.2d 4 (Ohio 2006).

Having failed to gain retrospective relief through state

regulatory or judicial proceedings, independent payphone

providers from Illinois, New York, and Ohio sought a

declaratory ruling from the FCC. See 47 C.F.R. § 1.2

(authority to issue declaratory rulings). They asked the

Commission to declare that Section 276 created an absolute

entitlement to refunds dating back to 1997 and that the state

commissions and courts had violated federal law by denying

relief. The Commission rejected that position. After

considering the text, history, and purpose of Section 276, the

Commission concluded that states “may, but are not required

to, order refunds” for periods dating back to 1997 in which a

image07-00.jpg612x792

USCA Case #13-1059 Document #1497401 Filed: 06/13/2014 Page 7 of 20

7

Bell Operating Company did not have compliant rates in

effect. Refund Order, 28 FCC Rcd. at 2639 ¶ 47.3

The independent payphone providers filed petitions for

review in this Court. See 28 U.S.C. § 2342(1); 47 U.S.C.

§ 402(a). We assess the FCC’s ruling under the

Administrative Procedure Act. We must determine whether

the decision was “arbitrary, capricious, an abuse of discretion,

or otherwise not in accordance with law.” 5 U.S.C.

§ 706(2)(A).

II

The independent payphone providers challenge the

FCC’s decision on three primary grounds. They contend that

the Refund Order violates Section 276(a), violates Section

276(c), and constitutes an arbitrary and capricious exercise of

the FCC’s discretion. We consider those arguments in turn.

A

The independent payphone providers first contend that

the FCC’s Refund Order unambiguously violates Section

276(a). That provision says that a Bell Operating Company

“shall not subsidize its payphone service directly or indirectly

from its telephone exchange service operations or its

3 The dispute here concerns only retrospective relief. As the

FCC noted, “no party to this proceeding is contending today that

the payphone line rates are currently out of compliance with”

Section 276 “or otherwise inconsistent with federal law; rather, the

sole question is whether certain states improperly denied refunds.”

Declaratory Ruling and Order, Implementation of the Pay

Telephone Reclassification and Compensation Provisions of the

Telecommunications Act of 1996, 28 FCC Rcd. 2615, 2635 ¶ 41

(2013) (Refund Order).

image08-00.jpg612x792

USCA Case #13-1059 Document #1497401 Filed: 06/13/2014 Page 8 of 20

8

exchange access operations” and “shall not prefer or

discriminate in favor of its payphone service.” 47 U.S.C.

§ 276(a). In the independent payphone providers’ view,

Section 276(a) establishes an absolute entitlement to refunds

for periods in which the statute was violated.

The problem for the independent payphone providers is

that Congress said nothing of the sort. In cases where a Bell

Operating Company violates the proscriptions established by

Section 276(a), the statute does not say whether only

prospective relief is in order, or whether retrospective relief is

also required. In particular, Section 276(a) does not say that

refunds are required, or that refunds are not required, or

anything at all about refunds. Rather, as this Court has

previously recognized, Section 276(a) is “silent regarding the

mechanism the FCC should adopt to ensure that the statute’s

requirements are carried out.” Global Crossing

Telecommunications, Inc. v. FCC, 259 F.3d 740, 744 (D.C.

Cir. 2001).

Section 276(a)’s silence on refunds is telling given that

Congress has expressly specified refund remedies in other

sections of the Communications Act of 1934 and related

statutes. See 47 U.S.C §§ 228(f)(1), 543(c)(1)(C); see also

15 U.S.C. § 5711(a)(2)(I). Indeed, several of those provisions

originated in statutes enacted shortly before the

Telecommunications Act of 1996, an indication that Congress

in 1996 was fully capable of specifying a refund remedy when

it wanted to require one. See Telephone Disclosure and

Dispute Resolution Act, § 101, Pub. L. No. 102-556, 106 Stat.

4181, 4185 (1992); Cable Television Consumer Protection

and Competition Act of 1992, § 3(a), Pub. L. No. 102-385,

106 Stat. 1460, 1468. Congress’s decision not to include a

refund remedy in Section 276 thus suggests that it intended to

leave remedial discretion with the Commission. That

image09-00.jpg612x792

USCA Case #13-1059 Document #1497401 Filed: 06/13/2014 Page 9 of 20

9

interpretation is consistent with the general principle that

agencies ordinarily have wide discretion to shape remedies for

statutory violations. See AT&T Co. v. FCC, 454 F.3d 329,

334 (D.C. Cir. 2006).

In sum, Section 276(a) does not speak to the refund

question. And one of the first principles of administrative law

is that “if the statute is silent or ambiguous with respect to the

specific issue,” the only question for the court is whether the

agency’s interpretation of that statute is reasonable. City of

Arlington v. FCC, 133 S. Ct. 1863, 1868 (2013) (quoting

Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 843 (1984)).

Whatever the policy virtues of the independent payphone

providers’ position, we will not read into the statute a

mandatory provision that Congress declined to supply. See

ANTONIN SCALIA & BRYAN A. GARNER, READING LAW: THE

INTERPRETATION OF LEGAL TEXTS 93 (2012) (omitted-case

canon). We instead conclude that FCC has discretion to fill

Section 276’s gap with a reasonable approach to the refund

question. Cf. Global Crossing, 259 F.3d at 744-45; Illinois

Public Telecommunications Association v. FCC, 117 F.3d

555, 567-68 (D.C. Cir. 1997). And for reasons explained in

greater depth below, the Commission’s decision was

reasonable.4

4 In their reply brief, the independent payphone providers

contend that the FCC’s discretion is constrained by Section 206 of

the Communications Act, which provides that a carrier violating the

Act “shall be liable to the person or persons injured thereby for the

full amount of damages sustained.” 47 U.S.C. § 206. By failing to

raise this issue until their reply brief, the independent payphone

providers forfeited the argument. We therefore do not consider it.

See Lake Carriers’ Association v. EPA, 652 F.3d 1, 10 n.9 (D.C.

Cir. 2011).

image10-00.jpg612x792

USCA Case #13-1059 Document #1497401 Filed: 06/13/2014 Page 10 of 20

10

B

The independent payphone providers next contend that

the Refund Order contravenes Section 276(c). That provision

says that “[t]o the extent that any State requirements are

inconsistent with the Commission’s regulations, the

Commission’s regulations on such matters shall preempt such

State requirements.” 47 U.S.C. § 276(c). The independent

payphone providers argue that the FCC’s 2013 Refund Order

permits refunds dating back to April 1997, and that any state

decision denying refunds is “inconsistent with the

Commission’s regulations” and preempted. Id.

That argument rests on a misreading of the FCC’s Refund

Order. The Commission repeatedly explained that states

may, but are not required to, order refunds” for any period in

which Bell Operating Companies charged non-compliant

rates. Refund Order, 28 FCC Rcd. at 2639 ¶ 47 (emphases

added); see id. at 2636 ¶ 42 n.178 (same); id. at 2640 ¶ 49

(same). Put differently, the fact that states may order refunds

does not mean that states must order refunds. Therefore, a

state commission or state court decision that considers a

Section 276 claim and denies refunds – as happened in the

three states at issue here – is not inconsistent with the FCC’s

regulations and is not preempted. See id. at 2634-35 ¶¶ 40-

41. That conclusion is further buttressed by the deference that

this Court affords to the FCC’s reasonable interpretations of

its own regulations. See Auer v. Robbins, 519 U.S. 452, 461

(1997); Global Crossing, 259 F.3d at 746.

In a twist on their Section 276(c) preemption argument,

the independent payphone providers contend that the FCC’s

reliance on state refund determinations constitutes an

unlawful subdelegation of federal authority to the States. As

an initial matter, states do not require any subdelegation of

image11-00.jpg612x792

USCA Case #13-1059 Document #1497401 Filed: 06/13/2014 Page 11 of 20

11

authority from the FCC to adjudicate federal statutory claims.

In our federal system, state tribunals have the constitutional

authority and duty to apply federal statutes and determine

statutorily appropriate remedies. See U.S. Const. art. VI, cl.

2; Burt v. Titlow, 134 S. Ct. 10, 15 (2013) (“State courts are

adequate forums for the vindication of federal rights.”);

Tafflin v. Levitt, 493 U.S. 455, 470 (1990) (Scalia, J.,

concurring) (“As Congress made no provision concerning the

remedy, the federal and the state courts have concurrent

jurisdiction.”) (alteration omitted). Indeed, the independent

payphone providers do not contest the FCC’s decision to have

state regulatory commissions determine whether Bell

Operating Company rates comply with Section 276 in the first

instance. See Oral Arg. at 3:41-4:07. They object only to the

FCC’s decision not to override state decisions denying

refunds in particular cases. But Congress said nothing about

who should decide whether to award refunds for violations of

Section 276. That statutory silence sets this case apart from

United States Telecom Association v. FCC, 359 F.3d 554

(D.C. Cir. 2004), the leading example of an unlawful

subdelegation relied upon by the independent payphone

providers. In the statutory provision at issue in that case,

Congress had expressly directed “the Commission” to make

certain determinations. 359 F.3d at 565 (emphasis added).

As the FCC correctly explained here, “Nothing in section 276

requires that the Commission be the arbiter of specific refund

disputes.” Refund Order, 28 FCC Rcd. at 2635 ¶ 41. We

therefore reject the subdelegation claim.

C

Because the FCC’s interpretation in the Refund Order is

not inconsistent with Section 276(a) or Section 276(c), the

only remaining question is whether the Commission’s

approach was arbitrary or capricious. See Chevron, 467 U.S.

image12-00.jpg612x792

USCA Case #13-1059 Document #1497401 Filed: 06/13/2014 Page 12 of 20

12

at 844. That is not a high bar for the FCC to clear. As this

Court explained in another Section 276 case: “Although the

enforcement regime chosen by the Commission may not be

the only one possible, we must uphold it as long as it is a

reasonable means of implementing the statutory

requirements.” Global Crossing, 259 F.3d at 745.

Here, the FCC readily satisfied that deferential standard.

The Commission reasonably concluded that “states, as part of

their tariff review responsibilities, are well-positioned to

resolve refund disputes arising from the tariffs they review.”

Refund Order, 28 FCC Rcd. at 2636 ¶ 42. The FCC

recognized that it was not adopting a “single, federal policy”

governing refunds and that some state-to-state variation

would naturally result. Id. at 2636 ¶ 42 n.178; see id. at 2640

¶ 48. Moreover, an independent payphone provider can opt

for a federal decisionmaker by suing a Bell Operating

Company for a Section 276 violation in federal court. See 47

U.S.C. § 207. And of course, a party who believes that a state

court has misapplied federal law can ultimately seek review

of the state court judgment in the U.S. Supreme Court. See

U.S. Const. art. III, §§ 1, 2; 28 U.S.C. § 1257. The Illinois

independent payphone providers unsuccessfully sought to do

just that. See 549 U.S. 1205 (2007) (denying certiorari).

The independent payphone providers contend that the

FCC’s approach is arbitrary and capricious because it leads to

refund determinations that vary from state to state. But there

is nothing inherently arbitrary or capricious about state-to-

state variation, especially in the administration of a statute

based in part on cooperative federalism – that is, a statute that

relies in part on states to implement federal law. See

generally Heather K. Gerken, Federalism as the New

Nationalism: An Overview, 123 YALE L.J. 1889 (2014); Abbe

R. Gluck, Our [National] Federalism, 123 YALE L.J. 1996

image13-00.jpg612x792

USCA Case #13-1059 Document #1497401 Filed: 06/13/2014 Page 13 of 20

13

(2014). As this Court has explained, the Communications Act

establishes a “system of dual state and federal regulation over

telephone service” that recognizes states’ traditional role in

the rate regulation process. New England Public

Communications Council, Inc. v. FCC, 334 F.3d 69, 75 (D.C.

Cir. 2003) (quoting Louisiana Public Service Commission v.

FCC, 476 U.S. 355, 360 (1986)); see 47 U.S.C. §§ 151,

152(b); see also City of Rancho Palos Verdes v. Abrams, 544

U.S. 113, 128 (2005) (Breyer, J., concurring)

(Communications Act based on “cooperative federalism”

framework). The Act authorizes the FCC to preempt state

law in certain areas, and the FCC has exercised that authority

by requiring states to review Bell Operating Company tariffs

under a uniform national pricing standard. See New England

Public, 334 F.3d at 75-78. But there is nothing arbitrary or

capricious about the FCC’s decision not to further exercise its

preemptive power to dictate a uniform national answer to the

refund question, especially given the backdrop of state

involvement in the ratemaking process. Cf. Batterton v.

Francis, 432 U.S. 416, 430 (1977) (federal agency can defer

to local definition of “unemployment” in administering joint

federal-state welfare program).

The independent payphone providers object in particular

to states’ invocation of the filed-rate doctrine – the prohibition

on retroactively changing approved rates. But the filed-rate

doctrine has long been “a central tenet of telecommunications

law,” so it hardly seems unreasonable or arbitrary for the FCC

to allow states to invoke that doctrine. TON Services, Inc. v.

Qwest Corp., 493 F.3d 1225, 1236 (10th Cir. 2007); see

Arizona Grocery Co. v. Atchison, Topeka & Santa Fe Railway

Co., 284 U.S. 370, 390 (1932). Moreover, the filed-rate

doctrine does not present an insuperable barrier to refunds or

otherwise negate the FCC’s position that refunds are

permitted in individual cases. Indeed, the FCC expressly

image14-00.jpg612x792

USCA Case #13-1059 Document #1497401 Filed: 06/13/2014 Page 14 of 20

14

recognized that several states have granted refunds

notwithstanding the filed-rate doctrine. See Refund Order, 28

FCC Rcd. at 2640 ¶ 48 (citing Indiana and South Carolina

commission decisions).

In sum, we see nothing unreasonable about how the FCC

filled the statutory gap and exercised its discretion.

III

As an alternative, the independent payphone providers

have sought refunds through a less direct route. They asked

the FCC to order Bell Operating Companies to disgorge

certain payments that those companies had received from

long-distance carriers (not from independent payphone

providers). The independent payphone providers would not

benefit directly from such a disgorgement order. But they

believed that such an order would induce Bell Operating

Companies to pay refunds to the independent payphone

providers as a way to avoid complying with the disgorgement

order. The FCC declined to issue the requested order. The

independent payphone providers renew the claim in this

Court. But they lack Article III standing to pursue their claim

in this Court.

In Section 276, Congress ordered the FCC to “establish a

per call compensation plan to ensure that all payphone service

providers are fairly compensated for each and every

completed intrastate and interstate call using their payphone.”

47 U.S.C. § 276(b)(1)(A). That provision responded to the

development of long-distance access codes and 800 numbers

that allowed callers to use payphones without depositing

coins, thereby depriving payphone operators of revenue. The

FCC issued a rule requiring the long-distance carriers who

benefited from such “dial-around” calls to compensate

image15-00.jpg612x792

USCA Case #13-1059 Document #1497401 Filed: 06/13/2014 Page 15 of 20

15

payphone providers. Sprint Communications Co. v. APCC

Services, Inc., 554 U.S. 269, 271-72 (2008); see also 47

U.S.C. § 226; 47 C.F.R. § 64.1300.

Of relevance here, the FCC stated that the eligibility of

Bell Operating Companies to receive “dial-around”

compensation from long-distance carriers depended on the

Bell Operating Companies’ compliance with Section 276.

See Refund Order, 28 FCC Rcd. at 2633-34 ¶ 38. Bell

Operating Companies, believing their rates compliant with

Section 276, began collecting dial-around compensation from

long-distance carriers in 1997. But as explained above, some

states later concluded that Bell Operating Companies’ rates

had not actually been compliant with Section 276 in the

several years after 1997. The independent payphone

providers asked the FCC to order Bell Operating Companies

to forfeit the payments they had received from the long-

distance carriers during those years to the Government. The

Commission declined to issue such an order. See id. at 2633-

34 ¶ 38 n.161.

We do not reach the merits of the independent payphone

providers’ petitions for review on that issue because they lack

Article III standing to challenge that aspect of the

Commission’s decision. To establish standing, the

independent payphone providers must show an injury-in-fact

caused by the Commission’s conduct and redressable by this

Court. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-

61 (1992). Here, the independent payphone providers assert

an injury-in-fact: “paying years of excessive charges caused

by” the Bell Operating Companies’ “failure to have . . .

compliant rates.” Pet’rs Br. 34; see Oral Arg. at 14:37-14:40

(“the injury is the overcharging of rates”). But that injury is

not redressable by this Court. Even if we ordered the FCC to

do exactly what the independent payphone providers seek –

image16-00.jpg612x792

USCA Case #13-1059 Document #1497401 Filed: 06/13/2014 Page 16 of 20

16

order Bell Operating Companies to disgorge the payments

they received from long-distance carriers – the independent

payphone providers would not receive any of that money.

Rather, Bell Operating Companies would forfeit the money to

the Government. See App. 847; Oral Arg. at 13:37-13:39.

That would do nothing to redress the injury suffered by the

independent payphone providers as a result of the allegedly

excessive rates charged to them by Bell Operating

Companies. Cf. Steel Co. v. Citizens for a Better

Environment, 523 U.S. 83, 106 (1998) (no standing where

plaintiff “seeks not remediation of its own injury” that has

abated but rather general “vindication of the rule of law”).

The independent payphone providers respond with a

rather creative theory of redressability. They suggest that Bell

Operating Companies would rather accede to their demand for

refunds than disgorge the supposedly larger amount of dial-

around compensation collected from long-distance carriers.

Thus, in the independent payphone providers’ view, an FCC

disgorgement order would in turn induce Bell Operating

Companies to resolve their refund dispute with the

independent payphone providers and thereby redress the

independent payphone providers’ injury. The independent

payphone providers offer nothing beyond sheer speculation to

support their bank-shot approach. And it is well-established

that a “merely speculative” theory of redressability does not

suffice to create Article III standing. Sprint, 554 U.S. at 273

(internal quotation marks omitted); see Lujan, 504 U.S. at

560-61; Linda R.S. v. Richard D., 410 U.S. 614, 617-18

(1973); cf. Illinois Public Telecommunications Association v.

Illinois Commerce Commission, No. 1-04-0225 (Ill. App. Ct.

Nov. 23, 2005) (same conclusion on state law).

Because the independent payphone providers have not

demonstrated Article III standing with respect to their dial-

image17-00.jpg612x792

USCA Case #13-1059 Document #1497401 Filed: 06/13/2014 Page 17 of 20

17

around compensation claim, we lack jurisdiction to adjudicate

that portion of their petitions for review.

* * *

We have carefully considered all of the independent

payphone providers’ arguments. We deny the petitions in part

and dismiss the remainder for lack of jurisdiction.

So ordered.

image18-00.jpg612x792

USCA Case #13-1059 Document #1497401 Filed: 06/13/2014 Page 18 of 20

18

APPENDIX

§ 276. Provision of payphone service

(a) Nondiscrimination safeguards

After the effective date of the rules prescribed pursuant to

subsection (b) of this section, any Bell operating company

that provides payphone service –

(1) shall not subsidize its payphone service directly

or indirectly from its telephone exchange service

operations or its exchange access operations; and

(2) shall not prefer or discriminate in favor of its

payphone service.

(b) Regulations

(1) Contents of regulations

In order to promote competition among payphone

service providers and promote the widespread

deployment of payphone services to the benefit of the

general public, within 9 months after February 8, 1996,

the Commission shall take all actions necessary

(including any reconsideration) to prescribe regulations

that –

(A) establish a per call compensation plan to ensure

that all payphone service providers are fairly

compensated for each and every completed intrastate and

interstate call using their payphone, except that

emergency calls and telecommunications relay service

calls for hearing disabled individuals shall not be subject

to such compensation;

(B) discontinue the intrastate and interstate carrier

access charge payphone service elements and payments

in effect on February 8, 1996, and all intrastate and

interstate payphone subsidies from basic exchange and

image19-00.jpg612x792

USCA Case #13-1059 Document #1497401 Filed: 06/13/2014 Page 19 of 20

19

exchange access revenues, in favor of a compensation

plan as specified in subparagraph (A);

(C) prescribe a set of nonstructural safeguards for

Bell operating company payphone service to implement

the provisions of paragraphs (1) and (2) of subsection (a)

of this section, which safeguards shall, at a minimum,

include the nonstructural safeguards equal to those

adopted in the Computer Inquiry-III (CC Docket No. 90-

623) proceeding;

(D) provide for Bell operating company payphone

service providers to have the same right that independent

payphone providers have to negotiate with the location

provider on the location provider’s selecting and

contracting with, and, subject to the terms of any

agreement with the location provider, to select and

contract with, the carriers that carry interLATA calls

from their payphones, unless the Commission determines

in the rulemaking pursuant to this section that it is not in

the public interest; and

(E) provide for all payphone service providers to

have the right to negotiate with the location provider on

the location provider’s selecting and contracting with,

and, subject to the terms of any agreement with the

location provider, to select and contract with, the carriers

that carry intraLATA calls from their payphones.

(2) Public interest telephones

In the rulemaking conducted pursuant to paragraph

(1), the Commission shall determine whether public

interest payphones, which are provided in the interest of

public health, safety, and welfare, in locations where

there would otherwise not be a payphone, should be

maintained, and if so, ensure that such public interest

payphones are supported fairly and equitably.

image20-00.jpg612x792

USCA Case #13-1059 Document #1497401 Filed: 06/13/2014 Page 20 of 20

20

(3) Existing contracts

Nothing in this section shall affect any existing

contracts between location providers and payphone

service providers or interLATA or intraLATA carriers

that are in force and effect as of February 8, 1996.

(c) State preemption

To the extent that any State requirements are inconsistent

with the Commission’s regulations, the Commission’s

regulations on such matters shall preempt such State

requirements.

(d) “Payphone service” defined

As used in this section, the term “payphone service”

means the provision of public or semi-public pay telephones,

the provision of inmate telephone service in correctional

institutions, and any ancillary services.

Note: We are currently transitioning our documents into web compatible formats for easier reading. We have done our best to supply this content to you in a presentable form, but there may be some formatting issues while we improve the technology. The original version of the document is available as a PDF, Word Document, or as plain text.

close
FCC

You are leaving the FCC website

You are about to leave the FCC website and visit a third-party, non-governmental website that the FCC does not maintain or control. The FCC does not endorse any product or service, and is not responsible for, nor can it guarantee the validity or timeliness of the content on the page you are about to visit. Additionally, the privacy policies of this third-party page may differ from those of the FCC.