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FCC Acts On Payphone Petitions

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Released: February 27, 2013

Federal Communications Commission

FCC 13-24

Before the

Federal Communications Commission

Washington, D.C. 20554

In the Matter of
)
)

Implementation of the Pay Telephone
)
Reclassification and Compensation Provisions of
)
CC Docket No. 96-128
the Telecommunications Act of 1996
)
)

Illinois Public Telecommunications Association’s
)
Petition for a Declaratory Ruling
)
Regarding the Remedies Available for Violations
)
of the Commission’s Payphone Orders
)
)

The Southern Public Communication
)
Association’s Petition for a Declaratory Ruling
)
Regarding the Remedies Available for Violations
)
of the Commission’s Payphone Orders
)
)

Petition of the Independent Payphone Association )
of New York, Inc. to Pre-empt Determinations of
)
the State of New York Refusing to Implement the
)
Commission’s Payphone Orders, and For a
)
Declaratory Ruling
)
)

Petition of the Florida Public Telecommunications )
Association, Inc. for a Declaratory Ruling and for
)
an Order of Preemption Concerning the Refund of )
Payphone Line Rate Charges
)
)

Petition of the Payphone Association of Ohio to
)
Preempt the Actions of the State of Ohio Refusing )
to Implement the FCC’s Payphone Orders,
)
Including the Refund of Overcharges to Payphone )
Providers in Ohio, and for a Declaratory Ruling
)
)

The Michigan Pay Telephone Association’s
)
Petition for Declaratory Ruling Regarding
)
The Prices Charged by AT&T Michigan
)
For Network Access Services Made
)
Available to Payphone Providers in Michigan
)

DECLARATORY RULING AND ORDER

Adopted: February 20, 2013

Released: February 27, 2013

By the Commission: Commissioner Clyburn dissenting and issuing a statement.

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TABLE OF CONTENTS

Heading
Paragraph #
I.
INTRODUCTION .................................................................................................................................. 1
II. BACKGROUND .................................................................................................................................... 3
A. Payphone Services ........................................................................................................................... 3
B. Petitions for Declaratory Ruling.................................................................................................... 12
1. Illinois Public Telecommunications Association (IPTA) Petition for a Declaratory
Ruling ...................................................................................................................................... 13
2. The Southern Public Communication Association (SPCA) Petition for Declaratory
Ruling ...................................................................................................................................... 17
3. Petition of the Independent Payphone Association of New York, Inc. (IPANY) for an
Order of Pre-Emption and Declaratory Ruling ....................................................................... 19
4. Petition of the Florida Public Telecommunications Association, Inc. (FPTA) for a
Declaratory Ruling and for an Order of Preemption............................................................... 25
5. Payphone Association of Ohio (PAO) Petition for Preemption and Declaratory
Ruling ...................................................................................................................................... 28
6. Michigan Pay Telephone Association (MPTA) Petition for Declaratory Ruling................... 32
C. Other Requests for Commission Action ........................................................................................ 35
III. DISCUSSION....................................................................................................................................... 37
A. Preemption of State Commission Orders Regarding Refunds in This Proceeding Is Not
Warranted....................................................................................................................................... 37
B. Refunds in Other Proceedings Should Be Decided on a State-by-State Basis .............................. 47
C. Resolution of the MPTA Petition .................................................................................................. 50
IV. ORDERING CLAUSES....................................................................................................................... 56
APPENDIX—LIST OF COMMENTS ON PETITIONS

I.

INTRODUCTION

1.
In this order, the Commission provides further guidance to state commissions and
payphone service providers (PSPs) regarding the requirements of section 276 of the Communications
Act, as amended (the Act) and the Commission’s interpretation of that provision.1 We reinforce that
section 276 of the Act requires Bell Operating Companies (BOCs) to have cost-based rates for payphone
access lines, that the Commission has determined that rates that comply with the new services test (NST)
meet this statutory requirement, and that BOCs that did not have NST-compliant rates in effect could be


1 47 U.S.C. § 276. See 47 C.F.R. § 64.1300 et seq. See also Implementation of the Pay Telephone Reclassification
and Compensation Provisions of the Telecommunications Act of 1996
, CC Docket No. 96-128, Report and Order, 11
FCC Rcd 20541 (Sept. 20, 1996) (Initial Payphone Order), Order on Reconsideration, 11 FCC Rcd 21233 (Nov. 8,
1996) (Payphone Reconsideration Order), aff’d in part and remanded in part, Illinois Pub. Telecomms. Ass’n v.
FCC
, 117 F.3d 555 (D.C. Cir. 1997); Second Report and Order, 13 FCC Rcd 1778 (Oct. 9, 1997) (Second Payphone
Order
), vacated and remanded, MCI Telecomms. Corp. v. FCC, 143 F.3d 606 (D.C. Cir. 1998); Third Report and
Order and Order on Reconsideration of the Second Report and Order, 14 FCC Rcd 2545 (Feb. 4, 1999) (Third
Payphone Order
), aff’d, American Pub. Communications Council v. FCC, 215 F.3d 51 (D.C. Cir. 2000); Wisconsin
Pub. Serv. Comm’n; Order Directing Filings
, Bureau/CPD No. 00-01, Memorandum Opinion and Order, 17 FCC
Rcd 2051, 2064, para. 42 (2002) (Wisconsin Payphone Order), aff’d New England Pub. Comms. Council, Inc. v.
FCC
, 334 F.3d 69 (D.C. Cir. 2003). (The Initial Payphone Order and the Payphone Reconsideration Order are
collectively known as the Payphone Orders.)
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required to issue refunds. Also, we deny five petitions for declaratory ruling filed by PSP associations2
because we find that the state commissions acted within the scope of the Commission’s delegation of
authority to determine whether payphone rates are tariffed in accordance with section 276 of the Act.
We also find that the requirements in the state commissions’ decisions were not inconsistent with the
Commission’s regulations, and therefore we decline to grant any requests for preemption of the
requirements imposed in those decisions.3 We further clarify that a state commission may order refunds
for any time period after April 15, 1997 if it concludes that a BOC was charging PSPs a rate that was not
NST-compliant, as a number of states have.4 Finally, we reject the PSPs’ assertion that the April 1997
Second Bureau Waiver Order requires the refunds they seek. We note, however, that the Second Bureau
Waiver Order
does not limit states’ ability to reconsider prior actions denying refunds and to order
refunds based on their own analysis of state and federal law and the application of those laws to the
particular facts in the cases before them.5
2.
This order also responds to a petition for declaratory ruling filed by the Michigan Pay
Telephone Association (MPTA) by determining that the current payphone usage rate in Michigan is not
NST-compliant.6 As such, we remand to the Michigan Public Service Commission (Michigan
Commission), and direct them to require the carrier to establish a new, NST-compliant payphone usage
rate consistent with the guidance in this order, and the Commission’s Payphone Orders.


2 See Illinois Public Telecommunications Association Petition for a Declaratory Ruling, CC Docket No. 96-128
(filed July 30, 2004) (IPTA Petition); The Southern Public Communication Association Petition for a Declaratory
Ruling, CC Docket No. 96-128 (filed Nov. 9, 2004) (SPCA Petition); Petition of the Independent Payphone
Association of New York, Inc. for an Order of Pre-Emption and Declaratory Ruling, CC Docket No. 96-128 (filed
Dec. 29, 2004) (IPANY Petition); Petition of the Florida Public Telecommunications Association, Inc. for
Declaratory Ruling and for an Order of Preemption, CC Docket No. 96-128 (filed Jan. 31, 2006) (FPTA Petition);
Petition of the Payphone Association of Ohio to Preempt the Actions of the State of Ohio Refusing to Implement the
FCC’s Payphone Orders, Including the Refund of Overcharges to Payphone Providers in Ohio, and for a Declaratory
Ruling, CC Docket No. 96-128 (filed Dec. 28, 2006) (PAO Petition). Both SPCA and IPANY filed motions to
consolidate their petitions with the other pending petitions. See Motion of the Southern Public Communication
Association to Consolidate its Petition for a Declaratory Ruling with the Petition for a Declaratory Ruling of the
Illinois Public Communications Association, CC Docket No. 96-128 (filed Nov. 9, 2004); Motion of the Independent
Payphone Association of New York, Inc. to Consolidate its Petition for an Order of Pre-emption and a Declaratory
Ruling with (1) the Petition for a Declaratory Ruling of the Illinois Public Communications Association and (2) the
Southern Public Communication Association Petition for a Declaratory Ruling, CC Docket No. 96-128 (filed Dec.
29, 2004) (IPANY Motion to Consolidate). In this order, we grant the SPCA and IPANY Motions to Consolidate.
3 See Payphone Reconsideration Order, 11 FCC Rcd at 21308, para. 163.
4 See infra para. 48.
5 See Implementation of the Pay Telephone Reclassification and Compensation Provisions of the
Telecommunications Act of 1996
, CC Docket No. 96-128, Order, 12 FCC Rcd 21370 (CCB rel. Apr. 15, 1997)
(Second Bureau Waiver Order).
6 See The Michigan Pay Telephone Association’s Second Petition for Declaratory Ruling Regarding The Prices
Charged by AT&T Michigan for Network Access Services Made Available to Payphone Providers in Michigan, CC
Docket No. 96-128 (filed May 22, 2006) (MPTA Petition). As explained below, MPTA had filed a previous petition
for declaratory ruling in this proceeding in 1999. See infra para. 34.
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II.

BACKGROUND

A.

Payphone Services

3.
Congress enacted section 276 to “promote competition among payphone service providers
and promote the widespread deployment of payphone service to the benefit of the general public.”7 To
advance these pro-competitive statutory goals, Congress directed the Commission to “terminat[e] the
current system of payphone regulation” and “eliminate all discrimination between BOC and independent
payphones and all subsidies or cost recovery for BOC payphones.”8 In addition, section 276 required the
Commission 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”9 and
to discontinue “all intrastate and interstate payphone subsidies”10 in favor of the per-call compensation
plan.
4.
In its 1996 Initial Payphone Order, the Commission concluded that, in order for a BOC to
be eligible for dial-around compensation, it must offer individual central office coin transmission service
to PSPs under nondiscriminatory, public, tariffed offerings if the BOC provided those services for its
own payphone operations.11 The Commission also concluded that BOCs must provide coin service so
competitive payphone providers can offer payphone services using either “smart payphones” or “dumb
payphones” that utilize central office coin services.12 Because the Commission recognized that BOCs
may have an incentive to charge their competitors unreasonably high prices for these services, it
concluded that “the [NST] is necessary to ensure that central office coin services are priced
reasonably.”13 The NST requires a BOC to provide cost studies for its payphone service rates sufficient
to establish that such charges will not recover more than a just and reasonable portion of its overhead
costs from a particular service.14
5.
The Commission concluded in the Initial Payphone Order that tariffs for payphone
services should be filed with the Commission as part of the BOC’s access services to ensure that the


7 47 U.S.C. § 276(b)(1).
8 H.R. Rep. No. 104-204, at 88 (1995), reprinted in 1996 U.S.C.C.A.N. 10, 54.
9 47 U.S.C. § 276(b)(1)(A).
10 47 U.S.C. § 276(b)(1)(B).
11 Initial Payphone Order, 11 FCC Rcd at 20614-15, para. 146. We note that, in the Initial Payphone Order and the
Payphone Reconsideration Order, the Commission referred to “incumbent [local exchange carrier] LEC”
obligations, not “Bell Operating Company” or BOC obligations. In the Wisconsin Payphone Order, however, the
Commission clarified that section 276 requires only BOCs, and not incumbent LECs generally, to provide payphone
lines at cost-based rates. The Commission stated that, “[b]ecause sections 276(a) and (b)(1)(C) apply only to BOCs,
we do not find that Congress has expressed with the requisite clarity its intention that the Commission exercise
jurisdiction over the intrastate payphone prices of non-BOC LECs.” Wisconsin Payphone Order, 17 FCC Rcd at
2064, para. 42. The court of appeals agreed. New England Pub. Comms. Council, Inc. v. FCC, 334 F.3d at 78.
12 See Initial Payphone Order, 11 FCC Rcd at 20614-15, para. 146.
13 Id.
14 “Each tariff filing submitted by a price cap LEC that introduces a new loop-based service, as defined in § 61.3(pp)
of this part – including a restructured unbundled basic service element (BSE), as defined in § 69.2(mm) of this
chapter, that constitutes a new loop-based service – that is or will later be included in a basket, must be accompanied
by cost data sufficient to establish that the new loop-based service or unbundled BSE will not recover more than a
just and reasonable portion of the carrier’s overhead costs.” 47 C.F.R. § 61.49(f)(2).
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services are reasonably priced and do not include subsidies.15 The Commission also concluded that
BOCs must file revised carrier common line (CCL) tariffs with the Commission no later than January 15,
1997 “to reduce their interstate CCL charges by an amount equal to the interstate allocation of payphone
costs [that were] currently recovered through those charges, scheduled to take effect April 15, 1997.”16
In discussing tariffing requirements, the Commission stated that section 276 does not refer to, or require,
the application of sections 251 and 252 to incumbent LEC payphone services, and it instead concluded
that Computer III tariff procedures and pricing are more appropriate for basic payphone services
provided by BOCs to other payphone providers.17 The Commission stated that any inconsistent state
requirements with regard to pricing of payphone services are preempted.18
6.
In the Payphone Reconsideration Order, the Commission modified the federal tariffing
requirements of payphone services and provided additional guidance for BOC tariff filings.19 In that
order, the Commission specified the appropriate cost methodology for payphone lines and expressly
required that the tariffs for LEC payphone services be: “(1) cost based; (2) consistent with the
requirements of section 276 with regard, for example, to the removal of subsidies from exchange and
exchange access services; and (3) nondiscriminatory.”20 The Commission also required that tariffs for
payphone access lines be filed with the states, rather than the Commission, and it directed that state
commissions apply the appropriate cost methodology and the Computer III guidelines for tariffing such
intrastate services. The Commission also permitted states to ask the Commission to review these tariffs
if they were unable to do so themselves.21 The Commission explained that it “will rely on the states to
ensure that the basic payphone line is tariffed by the LECs in accordance with the requirements of
section 276” as articulated by the Commission.22 A subsequent order made clear, however, that “[a]ny
party who believes that a particular LEC’s intrastate tariffs fail to meet [the Commission’s] requirements
has the option of filing a complaint with the Commission.”23 The Commission required tariffing in both
the federal and state jurisdiction of any basic network services or unbundled payphone features used by
the BOC’s payphone operations.24


15 Initial Payphone Order, 11 FCC Rcd at 20615, para. 147.
16 Id. at 20633, para. 183.
17 Id. at 20615, para. 147.
18 Id. See also 47 U.S.C. § 276(c).
19 See Payphone Reconsideration Order, 11 FCC Rcd 21233. The Commission reiterated its conclusion from the
Initial Payphone Order that BOCs must provide tariffed, nondiscriminatory basic payphone services that enable
independent providers to offer payphone services using either “smart payphones” or “dumb payphones” or some
combination of the two in a manner similar to the BOCs. See id. at 21307-08, para. 162.
20 Id. at 21308, para. 163.
21 See id.
22 Id.
23 Implementation of the Pay Telephone Reclassification and Compensation Provisions of the Telecomms. Act of
1996
, CC Docket No. 96-128, Order, 12 FCC Rcd 20997, para. 30 n.93 (CCB rel. Apr. 4, 1997) (First Bureau
Waiver Order
). To file a complaint, “[a]ny person, any body politic, or municipal organization, or State
commission, complaining of anything done or omitted to be done by any common carrier subject to [common carrier
regulation], in contravention of the provisions thereof, may apply to said Commission by petition which shall briefly
state the facts, whereupon a statement of the complaint thus made shall be forwarded by the Commission to such
common carrier, who shall be called upon to satisfy the complaint or to answer the same in writing within a
reasonable time to be specified by the Commission.” 47 U.S.C. §208(a).
24 See Payphone Reconsideration Order, 11 FCC Rcd at 21307-08, para. 162.
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7.
In the Payphone Reconsideration Order, the Commission further concluded that, where the
BOCs had already filed intrastate tariffs for these services, no further tariff filings would be required if
the states determined that those previously filed tariffs were consistent with the Commission’s Payphone
Orders
.25 The Commission also permitted the BOCs to begin receiving dial-around compensation if they
were able to self-certify compliance with the requirement that their rates be NST complaint.26
8.
On April 4, 1997, and April 15, 1997, the Common Carrier Bureau (Bureau)27 granted
limited waivers to the BOCs, which allowed them additional time to file interstate and intrastate tariffs
for payphone services in compliance with the guidelines contained in the Payphone Orders.28 In the
waiver orders (one for federal tariffs and one for state tariffs), the Bureau extended until May 19, 1997,
the deadline for BOCs to file NST-compliant interstate and intrastate tariffs and remain eligible to
receive dial-around compensation as of April 15, 1997, as long as they were in compliance with all of the
other requirements set forth in the Payphone Reconsideration Order.29 The Bureau ruled, however, that
a BOC that seeks to rely on the waiver “must reimburse their customers or provide credit, from April 15,
1997, in situations where the newly tariffed rates are lower than the existing tariffed rates.”30
9.
On March 2, 2000, the Bureau released the Wisconsin Bureau Order, which directed the
four largest incumbent local exchange carriers in Wisconsin to submit to the Commission copies of their
tariffs for intrastate payphone services that set forth the rates, terms and conditions associated with
payphone services.31 The Wisconsin Bureau Order responded to a letter order from the Wisconsin
Commission, which concluded that it “lacks jurisdiction under state law to ensure that the rates, terms,
and conditions applicable to providing basic payphone services comply with the requirements of section
276 of the Act and the Commission’s implementing rules.”32 The Wisconsin Bureau Order also required
the carriers to provide supporting documentation in compliance with the requirements of section 276 and
the Commission’s implementing rules, including the NST.33 Finally, the Wisconsin Bureau Order
provided additional guidance as to what the BOCs needed to demonstrate to satisfy the NST.34


25 See id. at 21308, para. 163.
26 See id. at 21293, para. 131 (dial-around compensation is the payment carriers make to PSPs when the carrier’s
customers use payphones to make calls that do not directly compensate PSPs, such as access code calls, subscriber
800 calls, and other toll-free calls). See id. at 21238, para. 7.
27 The Common Carrier Bureau became the Wireline Competition Bureau in 2002 as part of organizational changes
at the Commission. See generally Establishment of the Media Bureau, the Wireline Competition Bureau and the
Consumer and Governmental Affairs Bureau
, Order, 17 FCC Rcd 4672 (2002).
28 See First Bureau Waiver Order, 12 FCC Rcd 20997 (1997) (regarding interstate tariffs); Second Bureau Waiver
Order
, 12 FCC Rcd 21370 (1997) (regarding intrastate tariffs).
29 See Second Bureau Waiver Order, 12 FCC Rcd at 21379, para. 19.
30 See id. at 21379-80, para. 20.
31 Wisconsin Pub. Serv. Comm’n; Order Directing Filings, CCB/CPD No. 00-01, Order, 15 FCC Rcd 9978 (CCB
rel. Mar. 2, 2000) (Wisconsin Bureau Order) (the Wisconsin Bureau Order and the Wisconsin Payphone Order will
be collectively referred to as the Wisconsin Payphone Orders).
32 Id. at 9979, para. 3.
33 See id. at 9980, para. 5.
34 See id. at 9981-82, paras. 9-12.
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10.
On application for review, the Commission, in the Wisconsin Payphone Order, affirmed in
part and modified in part the Wisconsin Bureau Order.35 The Commission provided states more specific
guidance regarding the calculation of BOC payphone line rates pursuant to the NST. Specifically, the
Commission determined that: (1) states should use an appropriate forward-looking economic cost
methodology, such as TELRIC or TSLRIC; (2) states may use overhead loading factors applicable to
unbundled network elements (UNE) or may establish ceilings for loading factors using the methodology
from either the Physical Collocation Tariff Order or the ONA Tariff Order; (3) BOCs must reduce the
monthly per-line charge determined under the NST by the amount of the applicable federally tariffed
subscriber line charge (SLC); and (4) the NST applies to usage-sensitive as well as flat-rate elements of
the charges for services offered to PSPs.36
11.
Subsequent to the release of the Wisconsin Payphone Order, a number of state
commissions required the BOCs to lower the payphone line rates being charged to PSPs, and in some
states the BOCs voluntarily lowered their payphone line rates to ensure compliance with the NST, as
clarified by the Commission.37

B.

Petitions for Declaratory Ruling

12.
There are five petitions for declaratory ruling pending before the Commission in this
docket, all regarding whether various state commissions erred in failing to provide refunds to PSPs. As
discussed below, although all the petitions raise similar questions and request similar relief, each petition
presents unique procedural facts. There is an additional petition filed by the MPTA requesting relief
based on the local usage service rate established by the Michigan Commission. The MPTA petition
raises a different but related issue to the other petitions and is also resolved in this order.
1.

Illinois Public Telecommunications Association (IPTA) Petition for a
Declaratory Ruling

a.

The Petition

13.
On July 30, 2004, the IPTA filed a petition for declaratory ruling claiming that Illinois Bell
Telephone Company d/b/a SBC Illinois (SBC), Verizon North, Inc. and Verizon South, Inc. (collectively
Verizon) violated the Commission’s requirements that rates for local telephone network services
provided to competing PSPs meet the NST.38 The petition requests a ruling that: (1) the PSP members of
the IPTA are entitled to refunds from SBC and Verizon for the time periods in which BOC payphone
rates and charges in Illinois exceeded the NST; (2) the Illinois Commerce Commission (ICC) decision
denying the IPTA members refunds is inconsistent with the Commission’s Payphone Orders; and (3)
SBC and Verizon were ineligible to receive dial-around compensation for the period of time in which


35 See Wisconsin Payphone Order, 17 FCC Rcd at 2051.
36 See id. at 2067-71, paras. 51-65; see also Local Exchange Carriers’ Rates, Terms, and Conditions for Expanded
Interconnection Through Physical Collocation for Special Access and Switched Transport
, CC Docket No. 93-162,
Second Report and Order, 12 FCC Rcd 18730 (1997); Open Network Architecture Tariffs of Bell Operating
Companies
, CC Docket No. 92-91, Order, 9 FCC Rcd 440 (1993).
37 See, e.g., Mississippi Pub. Serv. Comm’n, Complaint of the Southern Pub. Communication Ass’n for Refund of
Excess Charges by BellSouth Telecommunications, Inc. Pursuant to its Rates for Payphone Line Access, Usage and
Features, Order, Docket No. 2003-AD-927, at 2 (rel. Sept. 1, 2004) (MPSC Refund Order); Petition for Expedited
Review of BellSouth Telecommunications, Inc.’s Intrastate Tariffs for Pay Telephone Access Services (PTAS) Rate
With Respect to Rates for Payphone Line Access, Usage, and Features, by Florida Public Telecomms. Ass’n, Final
Order on Arbitration of Complaint, Order No. PSC-04-0974-FOF-TP, at 5 (rel. Oct. 7, 2004) (FLPSC Payphone
Order).
38 See IPTA Petition at 3.
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their rates were in excess of the NST.39 The Bureau issued a public notice requesting comments on
IPTA’s petition on August 6, 2004.40
b.

State Procedural History

14.
In 1995, prior to this Commission’s Payphone Orders, SBC and the IPTA agreed to a
discounted rate schedule for payphone usage, to extend through June 30, 2005, which was approved by
the ICC.41 Similarly, prior to release of the Payphone Orders, the ICC approved Verizon’s payphone
rates.42 In response to the Commission’s Payphone Orders, SBC did not file any new tariffs with the
ICC.43 Instead, SBC relied upon the tariffs already on file and submitted additional cost documentation
on May 15, 1997, which was accepted by the ICC.44 Pursuant to the Payphone Orders, however, Verizon
filed supplemental documentation and reduced certain payphone rates on May 19, 1997.45 The ICC
declared Verizon’s rates competitive on October 7, 1997 and did not act to suspend the tariffs.46
15.
On May 8, 1997, the IPTA filed a petition with the ICC asserting that SBC and Verizon
were charging network service rates to IPTA payphone service providers in excess of the cost-based rates
required by the NST.47 IPTA requested, among other things, that the ICC order refunds to its members of
any amounts that SBC or Verizon charged in excess of cost-based rates that complied with the NST. On
December 17, 1997, the ICC initiated an investigation into SBC’s and Verizon’s compliance with the
NST.48 On November 12, 2003, the ICC issued an order which concluded that: (1) SBC’s rates for
payphone services did not satisfy the NST; (2) Verizon’s rates for payphone services did not satisfy the
NST; and (3) refunds to PSPs were prohibited by federal and Illinois law and should not be issued.49
IPTA appealed the ICC’s decision to the Appellate Court of Illinois.
16.
On November 23, 2005, the Appellate Court of Illinois affirmed the ICC’s decision.50 The
court agreed with the ICC’s decision that, because it had previously approved the payphone rates being


39 See id.
40 Comments Sought on Illinois Pub. Telecomms. Association’s Petition for a Declaratory Ruling Concerning
Refund of Payphone Line Rate Charges
, CC Docket No. 96-128, Public Notice, 19 FCC Rcd 14939 (WCB 2004).
A list of parties who filed comments and reply comments on this petition is in the attached Appendix.
41 Illinois Commerce Comm’n, Investigation Into Certain Payphone Issues as Directed in Docket 97-0225, ICC
Docket No. 98-0195, at 5-6 (rel. Nov. 12, 2003) (ICC Payphone Order).
42 See BOC IPTA Comments at 5.
43 See id.
44 See id.
45 See id. at 6.
46 See ICC Payphone Order at 6.
47 See IPTA Petition at 5.
48 See ICC Payphone Order at 2.
49 See id. at 42-43. The ICC reasoned that, because it had already approved SBC’s and Verizon’s rates, the filed
tariff doctrine barred refunds. Moreover, the ICC noted that “from the time that the FCC established its NST
through today, there had been no complaint to formally challenge the rates at issue in this case.” Id. (emphasis in
original).
50 Illinois Pub. Telecomms. Ass’n v. Illinois Commerce Comm’n, Illinois Bell Telephone Company d/b/a/ SBC
Illinois, Verizon North, Inc., and Verizon South, Inc.,
ICC Docket No. 98-0195, Order, Case No. 1-04-0225 (Ill.
App. Ct. 2005).
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charged, SBC and Verizon were entitled to rely on those rates for as long as they were in effect.51
Accordingly, the court held “that the subsequent reduction in those rates in November 2003 afford[ed] no
right of action for a refund of the difference between the old and new rates” based on the doctrine
prohibiting retroactive ratemaking.52 The Illinois Supreme Court subsequently denied IPTA’s petition
for leave to appeal the state court decision.53
2.

The Southern Public Communication Association (SPCA) Petition for
Declaratory Ruling

a.

The Petition

17.
On November 9, 2004, the SPCA filed a petition for declaratory ruling with the
Commission.54 The petition seeks a ruling that: (1) SPCA members are entitled to refunds of the tariffed
payphone line rate charges they paid to BellSouth Telecommunications, Inc. (BellSouth) from April 15,
1997 to October 1, 2003 to the extent those charges exceeded rates that comply with the NST; (2) the
Mississippi Public Service Commission (MPSC) did not properly follow and apply the Commission’s
NST; (3) the MPSC should not have dismissed the SPCA’s complaint without an evidentiary hearing;
and (4) MPSC should re-evaluate its dismissal of the claims in the complaint. The petition also asked the
Commission to determine whether or not BellSouth was eligible to receive dial-around compensation on
or before October 1, 2003.55 The Bureau issued a public notice requesting comments on SPCA’s petition
on November 19, 2004.56
b.

State Procedural History

18.
On May 19, 1997, BellSouth filed with the MPSC a monthly, flat pay telephone access
service rate of $46.00 per-line per-month.57 In an order dated July 14, 1997, the MPSC approved the
BellSouth tariff to be effective as of April 15, 1997, which the SPCA did not appeal.58 In 2003, pursuant
to a settlement agreement between BellSouth and SPCA, BellSouth agreed to lower the pay telephone
access rate from $46.00 per-line per-month to $24.99 per-line per-month and to reduce the line rate by
the amount of the SLC, which further reduced the rate to $17.86 per-line per-month.59 This rate became
effective on October 1, 2003.60 On December 19, 2003, SPCA filed a complaint with the MPSC


51 See id. at 8.
52 See id.
53 Illinois Pub. Telecomms. Ass’n v. Illinois Commerce Comm’n, No. 102166, 219 Ill.2d 565 (2006).
54 See SPCA Petition. “The SPCA is a Louisiana not-for-profit trade association representing 14 independent
payphone providers in Mississippi.” Id. at 5.
55 See id. at 4-5.
56 Comments Sought on Southern Public Telecomms. Association’s Petition for a Declaratory Ruling Concerning
Refund of Payphone Line Rate Charges; Pleading Cycle Established
, CC Docket No. 96-128, Public Notice, 19
FCC Rcd 22796 (WCB 2004). A list of parties who filed comments and reply comments on this petition is in the
attached Appendix.
57 SPCA Petition at 7. See also id. at Exhibit C.
58 Mississippi Pub. Serv. Comm’n, BellSouth Telecommunications, Inc., In re: Notice of Tariff Filing for Flat Rate
Options Customer Provided Public Telephones and Smartline Service for Public Telephones
, Order, Docket 97-UN-
0302 (rel. July 14, 1997) (MPSC Payphone Order).
59 SPCA Petition at 8. See also SPCA Petition at Exhibit F.
60 Id.
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requesting refunds of excess payphone line charges by BellSouth.61 SPCA claimed that the MPSC did
not properly evaluate BellSouth’s rates in 1997, and that BellSouth’s subsequent lowering of the rate in
2003 indicates that the rate was never compliant with the NST.62 On September 1, 2004, the MPSC
denied SPCA’s request and granted BellSouth’s motion to dismiss.63 The MPSC concluded that issuing
refunds would violate the prohibition against retroactive ratemaking, as well as the filed rate doctrine.64
The MPSC also rejected SPCA’s claim that the Wisconsin Payphone Order preempted the MPSC’s order
approving the BellSouth tariffs.65 The SPCA’s petition for judicial review of the MPSC’s decision is
currently pending in federal court.
3.

Petition of the Independent Payphone Association of New York, Inc.
(IPANY) for an Order of Pre-Emption and Declaratory Ruling

a.

The Petition

19.
On December 29, 2004, the IPANY filed a petition for declaratory ruling and order of
preemption with the Commission.66 IPANY’s petition requests that the Commission: (1) preempt rulings
of the State of New York, which it claims conflict with the Commission’s various Payphone Orders; and
(2) require Verizon to give refunds to PSPs where rates were not compliant with the NST.67 The Bureau
issued a public notice requesting comments on IPANY’s petition on January 7, 2005.68
b.

State Procedural History

1. In December 1996, the New York Public Service Commission (NYPSC) instituted a
proceeding in which it directed Verizon and other LECs in New York to file any tariff revisions that
would be necessary to comply with the Payphone Orders.69 Verizon filed new payphone tariffs for its
smart-line services but did not file new tariffs for its public access lines (PAL), or “dumb” payphone
lines.70 Verizon claimed that no changes were required to the existing PAL rates for the rates to comply
with the NST.71 The NYPSC approved the tariffs on a temporary basis on March 31, 1997.72 Verizon


61 See MPSC Refund Order at 1.
62 See id. at 2.
63 See generally, MPSC Refund Order.
64 See id. at 3.
65 See id.
66 See IPANY Petition. “IPANY is a not-for-profit trade association representing over 80 IPPs in the State of New
York.” Id. at 7.
67 See id. at 1-2. Verizon was formerly known as New York Telephone.
68 Independent Payphone Ass’n of New York’s Petition for Pre-Emption and Declaratory Ruling Concerning Refund
of Payphone Line Rate Charges; Pleading Cycle Established
, CC Docket No. 96-128, Public Notice, 20 FCC Rcd
476 (WCB 2005). See also, Implementation of the Pay Telephone Reclassification and Compensation Provisions Of
the Telecomms. Act of 1996
, CC Docket No. 96-128, Order Extending Time For Reply Comments, 20 FCC Rcd
1609 (WCB 2005). A list of parties who filed comments and reply comments on this petition is in the attached
Appendix.
69 IPANY Petition at 7. See also BOC IPANY Comments at 4.
70 See IPANY Petition at 7.
71 See BOC IPANY Comments at 4.
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filed tariff revisions on May 19, 1997 for certain additional features for its smart payphone lines but did
not file any new rates for the PALs.73
20.
On July 30, 1997, the NYPSC sought comment on the tariffs submitted by the incumbent
LECs.74 IPANY filed comments arguing that Verizon’s rates were excessive and unlawful and did not
comply with the NST.75 The NYPSC kept the proceeding open but took no action for more than two
years.76 On December 2, 1999, IPANY filed a petition with the NYPSC urging it to take final action on
its proceeding, to determine that the pre-existing tariffs are unlawful, and to order refunds.77 The
NYPSC instead instituted a second proceeding on these issues.78
21.
In an October 12, 2000 order, the NYPSC ruled that Verizon’s payphone rates, including
the PAL rates, were reasonable and satisfied the NST.79 The NYPSC concluded that, with regard to the
PALs, the current rates for Verizon’s payphone services recover direct-embedded cost plus a reasonable
contribution toward common costs and overhead.80 However, the NYPSC noted that traditionally, under
the NST, the Federal Communications Commission allowed rates one to two times above direct-
embedded costs, and Verizon’s payphone rates included common costs and overhead at 30% above
direct-embedded cost.81 Although IPANY had submitted the Wisconsin Bureau Order during the course
of the proceeding to argue that rates should be set using a TELRIC type methodology, the NYPSC found
that IPANY’s reliance on the Wisconsin Bureau Order was misplaced.82 The NYPSC concluded that the
Wisconsin Bureau Order only applied to the named Wisconsin LECs, and that the approach used in the
order did not preclude the methodology used by the NYPSC in evaluating Verizon’s rates.83 IPANY
filed a petition for rehearing of the NYPSC’s order, which was denied on September 21, 2001.84
(Continued from previous page)


72 New York Pub. Serv. Comm’n, Proceeding on Motion of the Comm’n to Review Regulation of Coin Telephone
Services Under Revised Federal Regulations Adopted Pursuant to the Telecomms. Act of 1996, Order Approving
Tariff on a Temporary Basis, Case No. 96-C-1174 (rel. Mar. 31, 1997).
73 See BOC IPANY Comments at 5.
74 See IPANY Petition at 8.
75 See id.
76 See id.
77 See id. at 8-9.
78 See New York Pub. Serv. Comm’n, Petition filed by the Independent Payphone Ass’n of New York, Inc. that the
Comm’n Modify New York Telephone Company’s Wholesale Payphone Service Rates and Award Refunds;
Proceeding on Motion of the Commission to Review Regulation of Coin Telephone Services Under Revised Federal
Regulations Adopted Pursuant to the Telecommunications Act of 1996, Order Approving Permanent Rates and
Denying Petition for Rehearing, Case Nos. 99-C-1684, 96-C-1174 at 6 (rel. Oct. 12, 2000) (NYPSC Payphone
Order).
79 See NYPSC Payphone Order at 7-8.
80 See id. at 6.
81 See id.
82 See id. at 6-7.
83 Id. at 7.
84 New York Pub. Serv. Comm’n, Petition filed by the Independent Payphone Ass’n of New York, Inc. that the
Comm’n Modify New York Telephone Company’s Wholesale Payphone Service Rates and Award Refunds;
Proceeding on Motion of the Commission to Review Regulation of Coin Telephone Services Under Revised Federal
(continued . . .)
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22.
IPANY then appealed the NYPSC’s decision to the Supreme Court of New York, New
York’s trial-level court. Rejecting IPANY’s argument that the Wisconsin Payphone Orders had to be
considered by the NYPSC, the Supreme Court concluded that neither of the Wisconsin Payphone Orders
was applicable to the proceeding, because IPANY had failed to exhaust its administrative remedies and
should have filed a petition with the NYPSC asking for Verizon’s rates to be modified prospectively
based on the Wisconsin Payphone Orders. 85 Accordingly, the court considered the state of the law as of
December 1996. The court expressed concern that Verizon’s pre-existing PAL rates apparently were
based on embedded costs, which are historical and would not necessarily comply with the NST, and it
remanded the issue to the NYPSC to determine whether the rates complied with the NST.86 The court
also concluded that IPANY would be entitled to refunds should the NYPSC conclude that Verizon’s rates
did not comply with the NST.87
23.
Both Verizon and IPANY appealed the Supreme Court decision to the State Supreme
Court, Appellate Division. The Appellate Division agreed that the Supreme Court did not have to
consider the Wisconsin Payphone Orders in making its decision, because IPANY could have petitioned
the NYPSC to change Verizon’s rates in response to the Wisconsin Payphone Orders, but did not, and,
therefore, failed to exhaust its administrative remedies.88 Moreover, the Appellate Division concluded
that, even if the NYPSC lowered Verizon’s rates, IPANY would not be entitled to refunds because the
Commission’s refund orders only contemplated refunds for the period between April 15, 1997 and May
19, 1997.89 IPANY’s requests for rehearing and permission to appeal were denied.90
24.
On June 30, 2006, pursuant to complaints from PSPs regarding Verizon’s PAL rates, the
NYPSC reduced the rates Verizon could charge PSPs on a prospective basis.91 The NYPSC based its
decision on a white paper proposed by its advisory staff which estimated costs on the basis of a long-run
incremental cost analysis. The NYPSC also sought comment as to whether it should further review the
propriety of the rates that were in effect prior to the June 2006 Rate Order. 92 On May 24, 2007, the
NYPSC noted the existing IPANY Petition before the Commission and concluded that, pending a
Commission decision, it would not investigate whether the prior PAL rates complied with the NST
(Continued from previous page)


Regulations Adopted Pursuant to the Telecommunications Act of 1996, Order Denying Petition for Rehearing of
October 12, 2000 Order, Case Nos. 99-C-1684, 96-C-1174 (rel. Sept. 21, 2001).
85 Independent Payphone Ass’n of New York, Inc., and Teleplex Coin Communications, Inc. v. Pub. Serv. Comm’n
of the State of New York and Verizon New York, Inc.,
Decision and Order, Index No. 413-02, RJI No. 01-02-
ST2369, at 17-18 (State of New York Supreme Court rel. July 31, 2002) (NY Supreme Court Order).
86 See id. at 19.
87 See id. at 21-22.
88 Independent Payphone Ass’n of New York, Inc., et al. v. Pub. Serv. Comm’n of the State of New York and Verizon
New York, Inc.,
Memorandum and Order, 5 A.D.3d 960, at 4 (New York, Supreme Court, Appellate Division, Third
Judicial Department, rel. Mar. 25, 2004) (NY Appellate Court Order).
89 See id. at 5.
90 See IPANY Petition at 13.
91 See New York Pub. Serv. Comm’n, Complaint of Phone Management Enterprises, Inc. and Other Pay Telephone
Operators Against Verizon New York, Inc. for Refunds Relating to Unlawful Underlying Payphone Services Rates;
Complaint of American Payphone Communications, Inc. Against Verizon New York Inc. Concerning Alleged
Refunds Relating to Unlawful Underlying Payphone Service Rates, Order Resolving Complaints and Inviting
Comments Regarding Public Access Line Rates, Case Nos. 03-C-0428, 03-C-0519 (rel. June 30, 2006) (June 2006
Rate Order).
92 Id. at 14.
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before they were superseded.93 The NYPSC concluded that the Commission’s ruling on the IPANY
petition might render the remand proceeding unnecessary or affect the relief provided in that proceeding,
and therefore that the prudent course would be to refrain from conducting further proceedings until the
Commission had issued a final decision.94
4.

Petition of the Florida Public Telecommunications Association, Inc. (FPTA)
for a Declaratory Ruling and for an Order of Preemption

a.

The Petition

25.
On January 31, 2006, the FPTA filed a petition for declaratory ruling and order of
preemption with the Commission.95 The petition asks the Commission to: (1) find that, from April 15,
1997 to November 10, 2003, BellSouth collected end user common line (EUCL) charges in addition to
unadjusted local payphone access line charges in contravention of section 276 of the Communications
Act; (2) order BellSouth to refund to the relevant PSPs the payphone line charges those providers paid to
BellSouth from April 15, 1997 to November 10, 2003 with interest, to the extent those charges exceeded
rates that complied with section 276 of the Act, including any EUCL charge amounts collected during
that time period; and (3) preempt the Florida Public Service Commission (FLPSC) ruling that
BellSouth’s rates were legally sustainable.96 The Bureau issued a public notice requesting comments on
FPTA’s petition on February 8, 2006.97
b.

State Procedural History

26.
On August 11, 1998, the FLPSC issued an order, which concluded that the existing
BellSouth tariffs for payphone line services were cost-based, consistent with section 276 of the
Communications Act, and non-discriminatory.98 FPTA protested the order but subsequently withdrew its
protest, and the order became final on January 19, 1999.99 On March 26, 2003, subsequent to the release
of the Wisconsin Payphone Order, FPTA filed a petition with the FLPSC, requesting an expedited review
of BellSouth’s tariffs that included payphone line rates.100 In its petition before the FLPSC, FPTA
argued that BellSouth’s payphone rates did not meet the NST, because the rates included the amount of


93 New York Pub. Serv. Comm’n, Complaint of Phone Management Enterprises, Inc. and Other Pay Telephone
Operators Against Verizon New York, Inc. for Refunds Relating to Unlawful Underlying Payphone Services Rates;
Complaint of American Payphone Communications, Inc. Against Verizon New York Inc. Concerning Alleged
Refunds Relating to Unlawful Underlying Payphone Service Rates, Order Denying Rehearing and Addressing
Comments, Case Nos. 03-C-0428, 03-C-0519 (rel. May 24, 2007).
94 Id. at 17, 24.
95 See FPTA Petition. “The FPTA is a trade association that serves the legal, regulatory and legislative interests of
independent PSPs and related public telecommunications providers in Florida.” Id. at 1-2.
96 See id. at 2.
97 Pleading Cycle Established for Florida Pub. Telecomms. Ass’n, Inc. Petition for Declaratory Ruling and Order of
Preemption
, CC Docket No. 96-128, Public Notice, 21 FCC Rcd 1373 (WCB 2006). A list of parties who filed
comments and reply comments on this petition is in the attached Appendix.
98 See Fl. Pub. Serv. Comm’n, Establishment of Intrastate Implementation Requirements Governing Federally
Mandated Deregulation of Local Exchange Company Payphones, Notice of Proposed Agency Action Order
Approving Federally Mandated Intrastate Tariffs For Basic Payphone Services, Order No. PSC-98-1088-FOF-TL
(rel. Aug. 11, 1998).
99 See FLPSC Payphone Order at 4.
100 See id.
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the EUCL.101 FPTA also argued that Florida independent PSPs were entitled to refunds for the rates that
exceeded the Commission’s NST from April 15, 1997 to November 10, 2003, “because these rates failed
to reflect any reduction or provide any credit for the collection of the EUCL charge.”102 On October 27,
2003, BellSouth filed a revision to its General Subscriber Services Tariff to reduce its approved and
effective payphone rates by the amount of the federal EUCL charge.103 The rate reduction became
effective on November 10, 2003.104
27.
On October 7, 2004, the FLPSC issued an order which concluded that BellSouth’s
payphone line rates between April 15, 1997 and November 10, 2003 were legally sustainable, and were
consistent with BellSouth’s tariffs and the FLPSC’s controlling orders.105 The FLPSC further concluded
that refunds were not appropriate because FPTA withdrew its protest of the FLPSC’s order approving
BellSouth’s initial rates, did not challenge the state commission’s orders in any forum, and for years its
members paid the rates set forth in BellSouth’s tariffs.106 On December 6, 2004, the Supreme Court of
Florida dismissed the FPTA’s appeal of the FLPSC Payphone Order as not timely filed.107
5.

Payphone Association of Ohio (PAO) Petition for Preemption and
Declaratory Ruling

a.

The Petition

28.
On December 28, 2006, PAO filed a petition for preemption and declaratory ruling with
the Commission.108 The petition asks the Commission to: (1) establish the rights of PAO members to
refunds of payphone access line rate overcharges dating back to April 15, 1997; (2) preempt the actions
of the Public Utilities Commission of Ohio (PUCO) that PAO alleges are inconsistent with this
Commission’s regulations and the NST; and (3) order SBC to disgorge itself of dial-around
compensation collected pursuant to section 276 of the Act and the Commission’s rules and orders
promulgated under it.109 The Bureau issued a public notice requesting comments on PAO’s petition on
January 12, 2007.110
b.

State Procedural History

29.
On December 9, 1996, the PUCO initiated a proceeding to implement the requirements of
section 276 of the Act and the Commission’s Payphone Orders.111 By entry issued December 19, 1996,


101 See FPTA Petition at 9-11.
102 Id. at 8.
103 See id. at 5.
104 See id.
105 See FLPSC Payphone Order at 14.
106 See id. at 13.
107 Florida Public Telecomms. Ass’n, Inc. v. J. Terry Deason, Case No. SC04-2271 (rel. Dec. 6, 2004) (unpublished
decision).
108 See PAO Petition. “The PAO is a not-for-profit corporation organized under the laws of the State of Ohio and is
comprised of independent payphone providers operating therein.” Id. at 3.
109 See id. at 1-2.
110 Pleading Cycle Established for Payphone Association of Ohio Petition to Preempt the Actions of the State of
Ohio, and for a Declaratory Ruling
, CC Docket No. 96-128, Public Notice, 22 FCC Rcd 296 (WCB 2007). A list of
parties who filed comments and reply comments on this petition is in the attached Appendix.
111 PAO Petition at 4.
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the PUCO directed all incumbent LECs operating within Ohio to file by January 15, 1997, tariffs with the
requisite access line provisions for “smart” and “dumb” payphones.112 The PUCO issued another entry
on May 22, 1997, in which it noted the requirement for incumbent LECs to remove from their intrastate
rates, any charges that recover the costs of the payphones.113 To ensure that requirement was satisfied,
the PUCO required all incumbent LECs to file by June 12, 1997, “case information detailing all 1996
payphone revenues and expenses, and payphone plant, reserve, and other payphone related items in rate
base as of December 31, 1996.”114 The PUCO also instructed each incumbent LEC to review its
respective payphone tariff to ensure it is consistent with the requirements of section 276 of the Act, the
Commission’s regulations and the PUCO investigation, and to file any proposed tariff amendments by
June 22, 1997.115 On September 25, 1997, the PUCO issued an entry approving SBC’s tariff as
consistent with the Act, the Commission’s decisions in this docket and the PUCO’s May 22, 1997
entry.116
30.
On June 30, 1997, PAO filed a motion to conduct an evidentiary hearing to determine if
incumbent LECs are in compliance with section 276 of the Act.117 By entry dated January 28, 1999, the
PUCO granted PAO’s motion for an evidentiary hearing.118 The PUCO concluded that there was
insufficient evidence at that time to satisfy it that the payphone tariffs of SBC fully comply with the
requirements of section 276 of the Act and the Commission’s rules.119 However, the PUCO noted that
SBC had approved payphone tariffs in effect, and its decision to investigate “does not relieve any person
from the terms and conditions of those tariffs pending a Commission order once the investigation is
completed.”120
31.
On June 17, 2002, PAO filed a motion to expand the scope of the proceeding and to
compel the incumbent LECs to comply with the NST as set forth by the Wisconsin Payphone Order.121
By entry dated November 26, 2002, the PUCO revisited and revised the issues relevant to the proceeding


112 Public Utilities Comm’n of Ohio, Commission’s Investigation into the Implementation of Section 276 of the
Telecommunications Act of 1996 Regarding Pay Telephone Services, Entry, Case No. 96-1310-TP-COI (rel. Dec.
20, 1996).
113 Public Utilities Comm’n of Ohio, Commission’s Investigation into the Implementation of Section 276 of the
Telecommunications Act of 1996 Regarding Pay Telephone Services, Entry, Case No. 96-1310-TP-COI at 4 (rel.
May 22, 1997).
114 Id.
115 Id. at 7.
116 Public Utilities Comm’n of Ohio, Commission’s Investigation into the Implementation of Section 276 of the
Telecommunications Act of 1996 Regarding Pay Telephone Services, Entry, Case No. 96-1310-TP-COI at 2-3 (rel.
Sept. 25, 1997).
117 PAO Petition at 4-5.
118 Public Utilities Comm’n of Ohio, Commission’s Investigation into the Implementation of Section 276 of the
Telecommunications Act of 1996 Regarding Pay Telephone Services, Entry, Case No. 96-1310-TP-COI (rel. Jan.
28, 1999).
119 Id. at 5.
120 Id.
121 Public Utilities Comm’n of Ohio, Commission’s Investigation into the Implementation of Section 276 of the
Telecommunications Act of 1996 Regarding Pay Telephone Services, Entry, Case No. 96-1310-TP-COI at 1 (rel.
Nov. 26, 2002).
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in light of the Wisconsin Payphone Order.122 The PUCO dismissed the non-RBOCs from the proceeding
and concluded that the core issue was whether SBC was providing payphone services at forward-looking,
cost based rates.123 In addition, the PUCO imposed an interim, forward-looking rate for payphone
services that was to be subject to a true-up.124 On January 16, 2003, the PUCO issued an entry on
rehearing, which ordered SBC to file tariff revisions incorporating the interim rates.125 On September 1,
2004, the PUCO issued an opinion and order in its proceeding.126 The PUCO concluded that the
overhead loading factors SBC proposed were not compliant with the NST, and therefore reduced the
rates for payphone services.127 Although the PUCO did require a true-up between the interim rates and
the permanent rates, it did not address PAO’s claim that refunds were required back to April 15, 1997.128
However, in its October 27, 2004 entry on rehearing, the PUCO rejected PAO’s claims for refunds back
to April 1, 1997.129 The PUCO agreed with SBC’s arguments that such refunds would constitute
retroactive ratemaking and PAO inappropriately relied on documents that were previously stricken from
the record.130 The Supreme Court of Ohio affirmed the PUCO’s decision on June 28, 2006.131 The court
concluded that the PUCO’s refusal to address the issue of refunds for any period before the interim tariff
rates were approved in 2003 was not manifestly against the weight of the evidence, and therefore,
rejected PAO’s claim.132
6.

Michigan Pay Telephone Association (MPTA) Petition for Declaratory
Ruling

a.

The Petition

32.
On May 22, 2006, the MPTA filed a petition for declaratory ruling with the
Commission.133 MPTA asks the Commission to “resolve an outstanding legal controversy with respect to


122 Id. at 11.
123 Id.
124 Id. at 11-12.
125 Public Utilities Comm’n of Ohio, Commission’s Investigation into the Implementation of Section 276 of the
Telecommunications Act of 1996 Regarding Pay Telephone Services, Second Entry On Rehearing, Case No. 96-
1310-TP-COI (rel. Jan. 16, 2003).
126 Public Utilities Comm’n of Ohio, Commission’s Investigation into the Implementation of Section 276 of the
Telecommunications Act of 1996 Regarding Pay Telephone Services, Opinion and Order, Case No. 96-1310-TP-
COI (rel. Sept. 1, 2004)(PUCO Payphone Order).
127 Id. at 30.
128 Id.
129 Public Utilities Comm’n of Ohio, Commission’s Investigation into the Implementation of Section 276 of the
Telecommunications Act of 1996 Regarding Pay Telephone Services, Entry on Rehearing, Case No. 96-1310-TP-
COI (rel. Oct. 27, 2004)(PUCO Rehearing Order).
130 Id. at 16-17.
131 Payphone Association of Ohio v. Public Utilities Commission of Ohio, 849 N.E.2d 4 (Ohio 2006).
132 Id. at 9-10.
133 See generally MPTA Petition. “The [MPTA] is a Michigan nonprofit corporation organized for the purpose of
promoting and advancing the interests of Independent Payphone Providers (“IPPs”) operating in the state of
Michigan.” Id. at n.1. The MPTA had filed a previous petition with the Commission in which it argued that the
Michigan Commission had filed to set rates according to the NST, which the Commission granted and remanded
(continued . . .)
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the Commission’s directives regarding intrastate payphone access line rates, and to preempt a decision by
the Michigan Public Service Commission that is inconsistent with 47 U.S.C. § 276.”134 In its state
proceedings reviewing AT&T Michigan’s payphone line rates, the Michigan Commission adopted two
separate, non-uniform overhead allocations for two parts of the payphone line rate, one for the fixed
recurring rate and one for the local usage service rate.135 MPTA contends that this use of non-uniform
overhead allocations without justification makes the local usage service rate not NST compliant.136 The
Bureau issued a public notice requesting comments on MPTA’s petition on June 2, 2006.137
b.

Procedural History

33.
On May 8, 1999, the Michigan Commission issued an order denying in part a complaint
filed by the MPTA challenging the rates charged by Ameritech and GTE138 in response to the
Commission’s Payphone Orders.139 The Michigan Commission found, among other things, that the
MPTA did not meet its burden to prove that the BOCs’ payphone service rates were not NST
compliant.140 The Michigan Court of Appeals affirmed the Michigan Commission’s determinations.141
MPTA applied for leave to appeal to the Michigan Supreme Court142 and also sought this Commission’s
review of the Michigan Commission’s decision in a petition for declaratory ruling filed November 10,
1999.143 Shortly after this Commission released the Wisconsin Payphone Orders providing additional
clarification to the industry, the Common Carrier Bureau released an order granting the MPTA First
Petition.144 Specifically, the order found that the decision of the Michigan Commission appeared “to be
(Continued from previous page)


back to the Michigan Commission. See Michigan Payphone Association Petition for Declaratory Ruling, CCB/CPD
No. 99-35, Order, 17 FCC Rcd 4275 (CCB 2002) (MPTA 2002 Order).
134 Id. at 1.
135 See MPTA Petition at 2.
136 See generally MPTA Petition. The MPTA Petition is different than the five other petitions for declaratory ruling
discussed in this order because it asks the Commission to address the appropriate application of the new services test,
whereas the other five petitions for declaratory ruling request that the Commission address a controversy involving
the appropriateness of refunds when charges are allegedly in excess of NST-compliant rates.
137 See Pleading Cycle Established for Michigan Pay Telephone Association Petition for Declaratory Ruling, CC
Docket No. 96-128, 21 FCC Rcd 6289 (WCB 2006). A list of parties who filed comments and reply comments on
this petition is in the attached Appendix.
138 “At the time of initiating the underlying proceeding at the Michigan Public Service Commission, Michigan Bell
Telephone Company was an affiliate of Ameritech Corporation. Through various corporate transactions in the
interim years, Michigan Bell Telephone Company is now an subsidiary of AT&T, Inc.” See MPTA Petition at n.2.
139 See In the matter of the complaint of the Michigan Pay Telephone Association, et al. v. Ameritech Michigan and
GTE North Incorporated, MPSC Case No. U-11756, Order (rel. Mar. 8, 1999) (Michigan Commission 1999 Order).
140 See id. at 8.
141 See In the matter of the complaint of the Michigan Pay Telephone Association, et al. v. Ameritech Michigan and
GTE North Incorporated, MPSC Case No. U-11756, Order, at 2 (rel. Mar. 16, 2004) (Michigan Commission 2004
Order).
142 See id. at 3.
143 See Michigan Pay Telephone Association’s Petition for Declaratory Ruling Regarding The Prices Charged by
Ameritech Michigan And GTE North, Inc. for Network Access Services Made Available to Payphone Providers in
Michigan, CC Docket No. 96-128 (filed Nov. 10, 1999) (MPTA First Petition).
144 See generally MPTA 2002 Order. After the Commission’s order was released, the MPTA and the Michigan
Commission “filed a joint motion before the Michigan Supreme Court to remand this matter back to the [Michigan]
(continued . . .)
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inconsistent with the Wisconsin Order”145 and remanded the proceeding back to the state commission to
re-evaluate its decision “concerning the pricing of BOCs’ intrastate payphone line rates and overhead
ratios to ensure compliance with the Wisconsin Order.”146
34.
On May 26, 2006, MPTA filed this petition for declaratory ruling with the Commission.147
MPTA argues that on remand the Michigan Commission “failed to implement this Commission’s
mandates with respect to one of the largest cost components the payphone providers face in their monthly
billing—AT&T Michigan’s usage rates.”148 MPTA says that the Michigan Commission “adopted a
separate overhead allocation for usage, and not only failed to identify what the overhead allocation was,
but reached its conclusion by merely comparing local usage rates with the rates charged for toll usage to
business customers, which is not a cost-based service.”149 By comparing “local usage to the non-cost-
based toll usage service” the Michigan Commission’s actions were “antithetical to the specific mandates
of the new services test and Section 276.”150 The MPTA asks that the Commission grant the MPTA
Petition and find “that the [Michigan Commission] failed to properly interpret and follow the
Commission’s New Services Test with respect to AT&T’s local usage overhead allocation service and
rate.”151

C.

Other Requests for Commission Action

35.
In addition to the six petitions for declaratory ruling discussed above, the Commission
received other requests for guidance or clarification with regard to the implementation of the NST. The
Supreme Judicial Court of the Commonwealth of Massachusetts sent the Commission a letter requesting
the Commission’s guidance as to the appropriateness of ordering refunds when a state commission
subsequently determined that payphone rates were not NST compliant, but had earlier allowed the
existing rates to remain in effect based upon the incumbent LEC’s certification that the rates were NST
compliant.152 The court sent this letter several weeks after it issued an order staying for six months from
February 16, 2006, an appeal by the New England Public Communications Council, Inc., so relevant
questions could be presented in letter format to the Commission.153 The Bureau issued a public notice on
(Continued from previous page)


Commission for further consideration in light of the Wisconsin Order. On June 24, 2002, the Michigan Supreme
Court vacated the Court of Appeals’ decision and remanded this case back to the [Michigan] Commission.”
Michigan Commission 2004 Order at 3.
145 See MPTA 2002 Order, 17 FCC Rcd at 4276, para. 3.
146 See id.
147 See generally MPTA Petition.
148 MPTA Petition at 2.
149 Id. at 3.
150 Id.
151 See Letter from Henry T. Kelly, Counsel, Michigan Pay Telephone Association to Marlene H. Dortch, Secretary,
Federal Communications Commission, CC Docket No. 96-128, at Attach., p. 12 (filed Jan. 28, 2010).
152 See Letter from Maura S. Doyle, Clerk, Commonwealth of Massachusetts, Supreme Judicial Court, to Kevin J.
Martin, Chairman, Federal Communications Commission, CC Docket No. 96-128 (filed Mar. 15, 2006)
(Massachusetts Letter).
153 See New England Public Communications Council, Inc. v. Department of Telecommunications and Energy and
Verizon Communications of New England, Inc.
, Order, No. SJ-2004-0327 (Mass. Sup. Jud. Ct. Mar. 6, 2006).
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the court’s order and letter and announced that it would consider the court’s request in conjunction with
the PSP petitions for declaratory ruling pending before it.154
36.
The Oregon Public Utility Commission also sent a letter to the Commission requesting
prompt action on the pending petitions for declaratory ruling and specifically asking whether the Second
Bureau Waiver Order
requires refunds of a portion of payphone access line rates back to April 15, 1997
if those rates do not comply with the Commission’s NST.155

III.

DISCUSSION

A.

Preemption of State Commission Orders Regarding Refunds in This Proceeding Is
Not Warranted

37.
We deny the IPTA, SPCA, IPANY, FPTA, and PAO petitions. As discussed more fully
below, section 276(c) states that “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.”156 Because we conclude that the requirements in the state commission decisions before us
are not inconsistent with the Commission’s regulations, we do not preempt those decisions.157
38.
In its Payphone Reconsideration Order, the Commission charged the states with the
responsibility to ensure that BOC intrastate payphone line rates comply with the NST and provided the
states with general guidance regarding compliance.158 The Commission stated that rates must be:
(1) cost-based; (2) consistent with the requirements of section 276 with regard, for example, to the
removal of subsidies from exchange and exchange access services; and (3) nondiscriminatory.159 The
Commission further stated that states must apply these requirements and the Computer III guidelines for
tariffing such intrastate services, but that they may ask the Commission to review these tariffs if they are
unable to do so themselves.160 Moreover, the Commission permitted the BOCs to self-certify compliance
with the NST and to begin collecting dial-around compensation as of April 15, 1997.161 The Commission


154 New England Public Communications Council, Inc. Filing of Letter from Supreme Judicial Court of
Massachusetts Regarding Implementation of the Pay Telephone Compensation Provisions of the
Telecommunications Act of 1996
, CC Docket No. 96-128, Public Notice, 21 FCC Rcd 3519 (WCB 2006).
155 See Letter from Lee Beyer, Chairman, and John Savage and Ray Baum, Commissioners, Oregon Public Utility
Commission, to Kevin Martin, Chairman, Federal Communications Commission, CC Docket No. 96-128 (filed Nov.
23, 2005) (Oregon Letter).
156 47 U.S.C. § 276(c).
157 Because we conclude that the state commission decisions are not inconsistent with the Commission’s orders, we
decline to order reparations as requested by the PSPs. See, e.g., IPTA Petition at 3; Letter from Robert F. Aldrich,
Attorney, APCC, to Marlene H. Dortch, Secretary, Federal Communications Commission, CC Docket No. 96-128 at
2-8 (filed Oct. 25, 2006) (APCC Oct. 25th Ex Parte Letter).
158 See Payphone Reconsideration Order, 11 FCC Rcd at 21308, para. 163.
159 See Id.
160 See Id.
161 Id. at 21293, paras. 130-31. We reject PSP arguments that the Commission should determine that the BOCs were
not entitled to begin collecting dial-around compensation as of April 15, 1997. See IPTA Petition at 3; SPCA
Petition at 12; PAO Petition at 25. The petitioners have not submitted any evidence that the BOCs’ self-
certifications were defective or fraudulent, or that the BOCs knew when the self-certifications were submitted that
their payphone rates were not NST-compliant. See Ameritech Illinois, US West Communications Inc., et al., v. MCI
Telecommunications Corporation, and Ameritech Illinois, Pacific Bell, et al., v. Frontier Communications Services,
Inc. et al.
, Memorandum Opinion and Order, 14 FCC Rcd 18643 (CCB 1999) (finding that certification letters were
(continued . . .)
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did not specifically address whether refunds should be issued if a subsequent proceeding determined that
the rates the BOCs self-certified were not consistent with the NST. Like other tariff and rate-setting
procedures, the issue of refunds was properly administered by the states.162 Significantly, however, the
Commission made clear that NST-compliant rates were a quid pro quo for receiving dial-around
compensation.163 To the extent that states ultimately determine that BOC rates were not NST-compliant
while the BOC was receiving dial-around compensation at any time after April 15, 1997, the date on
which the BOC obligation to have NST-compliant rates took effect, we clarify that states may consider
that fact when determining whether refunds are appropriate.
39.
In the Wisconsin Payphone Order, the Commission provided states with more specific
guidance on how to implement the NST. Specifically, the Commission stated that, in applying the NST:
(1) states should use an appropriate forward-looking economic cost methodology, such as TELRIC or
TSLRIC; (2) states may use overhead loading factors applicable to unbundled network elements or may
establish ceilings for loading factors using the methodology from either the Physical Collocation Tariff
Order
or the ONA Tariff Order; (3) BOCs must reduce the monthly per-line charge determined under the
NST by the amount of the applicable federally tariffed subscriber line charge (SLC); and (4) states
should apply the NST to usage-sensitive as well as flat-rate elements of the services offered to PSPs.164
40.
Pursuant to the guidance provided in these orders, the state commissions at issue held
proceedings on whether payphone rates were NST-compliant and thus met the requirements of section
276 of the Act. Each state commission, after considering the specific facts before them, concluded that
refunds for the differences in rates were not appropriate. The orders resulting from these proceedings are
the subject of the petitions addressed in this order.165 Based on the evidence submitted in the record, we
conclude that these state commissions followed the Commission’s orders and fulfilled the duties with
which the Commission charged them in the Payphone Orders and the Wisconsin Payphone Order.166
Indeed, each state commission analyzed whether refunds were appropriate, and determined, for different
(Continued from previous page)


satisfactory certification of compliance with the prerequisites to receiving payphone compensation outlined in the
Payphone Orders). Nonetheless, should a state determine that a particular BOC’s rates were not NST-compliant,
even though the BOC had certified that they were and that the BOC had been collecting payphone compensation, this
would present a strong argument that refunds should be ordered.
162 “[M]any of the FCC’s orders specify LECs bear the burden of demonstrating or justifying their tariff rates to state
regulators and are responsible for ensuring their rates are NST compliant.” TON Services, Inc. v. Qwest Corp., 493
F.3d 1225, 1241 (10th Cir. 2007) (TON v. Qwest) (internal citations omitted).
163 See Initial Payphone Order, 11 FCC Rcd at 20605, para. 127; see also First Bureau Waiver Order, 12 FCC Rcd
at 21011-12, para. 30. We note that, in order to receive dial around compensation, Qwest (then US West) certified,
by letters to IXCs, to state commissions, and to the Commission, that, as of May 20, 1997, it had met all
requirements necessary to receive payphone compensation in all of its states except for New Mexico. Qwest
certified its compliance for New Mexico on November 12, 1997. See Letter from Lynn Starr, Vice President, Qwest,
to Marlene H. Dortch, Secretary, Federal Communications Commission, CC Docket No. 96-128 at Attachment 3
(filed May 17, 2007) (Qwest Certification Letters). Thus, any state commission proceeding considering Qwest’s
compliance with section 276 may properly consider whether Qwest’s certifications of compliance alone satisfy its
obligations to comply with the Payphone Orders and section 276, or whether an affirmative demonstration of NST-
compliant rates is required to resolve issues of refund liability.
164 Wisconsin Payphone Order, 17 FCC Rcd at 2065-71, paras. 45-65.
165 See generally ICC Payphone Order; MPSC Refund Order; NYPSC Payphone Order; FLPSC Payphone Order;
PUCO Payphone Order; PUCO Rehearing Order.
166 “We will rely on the states to ensure that the basic payphone line is tariffed by the LECs in accordance with the
requirements of Section 276.” Payphone Reconsideration Order, 11 FCC Rcd at 21308, para. 163.
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reasons, that they were not.167 Nothing in the record here persuades us that the state commissions
misapplied federal or state law or regulations, or established requirements that are inconsistent with the
Commission’s regulations. Accordingly, we conclude that preemption is not warranted under these
circumstances.
41.
In reaching this conclusion, we reject the PSPs’ arguments that section 276 provides them
with an absolute right to refunds in the cases before us.168 Although section 276 establishes requirements
for payphone rates, it does not dictate whether refunds are due under any given set of circumstances.
Notably, no party to this proceeding is contending today that the payphone line rates are currently out of
compliance with the NST or otherwise inconsistent with federal law; rather, the sole question is whether
certain states improperly denied refunds. Nothing in section 276 requires that the Commission be the
arbiter of specific refund disputes. Thus, in deciding whether to award refunds, the state commissions
properly looked to applicable state and federal law and regulations, and decided, for reasons specific to
each state’s analysis, not to order refunds. In Illinois, the ICC based its rejection of refunds on the
Illinois filed tariff doctrine and the IPTA’s failure to file a formal complaint.169 In Mississippi, the
MPSC concluded that refunds would violate the filed tariff doctrine and the prohibition against
retroactive ratemaking.170 The courts in New York ruled that IPANY was not entitled to refunds in part
because it failed to properly raise the Wisconsin Payphone Order before the state commission, and
therefore failed to exhaust its administrative remedies.171 In Florida, the FLPSC concluded that refunds
were not appropriate, in part because the FPTA did not challenge the FLPSC’s orders approving
BellSouth’s rates.172 Finally, in Ohio, the PUCO concluded that refunds were not appropriate because of
the state prohibition against retroactive ratemaking and the filed rate doctrine.173 Although these
decisions deny refunds in situations where a BOC’s rates were not NST-compliant by April 15, 1997,
they are not inconsistent with the Commission’s orders and regulations implementing section 276 of the
Act. Consequently, preemption is not warranted.174


167 See generally ICC Payphone Order; MPSC Refund Order; NYPSC Payphone Order; FLPSC Payphone Order;
PUCO Payphone Order; PUCO Rehearing Order.
168 See, e.g., IPTA Petition at 9-13; IPANY Petition at 15-17; SPCA Petition at 12-15.
169 ICC Payphone Order at 42-43.
170 MPSC Refund Order at 4.
171 NY Appellate Court Order at 4.
172 FLPSC Payphone Order at 13-14.
173 PUCO Rehearing Order at 16-17; PUCO Comments at 14-16.
174 We reject APCC’s argument that the Verizon New England case requires the Commission to preempt the state
actions here. See Letter from Albert H. Kramer and Robert F. Aldrich, Attorneys, APCC, to Marlene H. Dortch,
Secretary, Federal Communications Commission, CC Docket No. 96-128, pp. 2-3 (filed Oct. 1, 2007); Verizon New
England, Inc. v. Maine Public Utilities Commission
, 2007 WL 2509863 (1st Cir., No. 06-2151, Sept. 6. 2007)
(Verizon New England). In Verizon New England, the court noted a clear conflict between the Commission
interpretation of the requirements of federal law and the states’ implementation of the Commission’s direction.
Specifically, the states required Verizon to make certain network elements available that the Commission said no
longer need be made available, and the states applied a pricing methodology, TELRIC, that the Commission held
was inapplicable in the relevant circumstances. Verizon New England at 6-7. The court found that before the district
court in Maine could resolve the dispute between Verizon and the state public utility commission, the question of
whether line sharing and dark fiber are required to be unbundled should be referred to the Commission. Here, the
Commission provided guidance to the states regarding how payphone rates should be set, but was silent as to the
circumstances that would justify refunds. No party suggests that the states misapplied the Commission’s pricing
(continued . . .)
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42.
Further, we reject APCC’s argument that the Commission must order refunds for
overcharges for payphone line rates because any failure to do so would result in an improper
subdelegation of our authority to the states.175 Consistent with the statute, the Commission created a
flexible regulatory framework under which states administer intrastate payphone line rates, with recourse
being tariff review by the Commission should the states be unable to do that themselves.176 Under this
framework, BOCs tariff their payphone line rates at the states; the states review those rates consistent
with the NST methodology adopted by the Commission; and the states order reductions as appropriate.
In turn, the Commission has retained oversight to ensure that payphone access lines are NST-compliant,
and more broadly, that the requirements of section 276 are followed.177 The Commission’s
implementation of section 276(a) reflects this dual regulatory structure, and both the states and the
Commission have significant roles. We find that states, as part of their tariff review responsibilities, are
well-positioned to resolve refund disputes arising from the tariffs they review. In fact, the states that
have reviewed the tariffs and/or cost support filed by BOCs, or that have considered whether existing
BOC tariffs were NST-compliant, are better positioned than we are to decide related refund disputes,
because they are more familiar with the specific details of each case. In the instant proceedings, the state
commissions were able to decide the refund disputes before them, and we find that they acted in a
manner not inconsistent with the statute and the approach the Commission formulated in the Payphone
Reconsideration Order
.178 Thus, no improper delegation resulted from the states deciding refund issues.
43.
We also reject arguments from the PSPs that the state commissions should have known
that payphone rates must be established using forward-looking costs.179 Prior to the clarification
provided by the Wisconsin Payphone Order, it is evident that some state commissions believed that
payphone rates based on historical costs were consistent with the NST. We note that the Commission
initially created the NST in the Price-Cap Proceeding to encourage the introduction of new services while
preventing the avoidance of price-cap rules.180 The Commission required carriers seeking to introduce a
new service to meet a “net revenue test” which relied on a forecast increase in demand reflected in the
(Continued from previous page)


guidance, nor is there any basis for reviewing, much less preempting, the states’ refund decisions, beyond any further
direction states may find in this order.
175 See APCC Oct. 25th Ex Parte Letter at 8-14; Letter from Albert H. Kramer and Robert F. Aldrich, Attorneys,
APCC, to Marlene H. Dortch, Secretary, Federal Communications Commission, CC Docket No. 96-128 (filed Dec.
22, 2006) (APCC Dec. 22nd Ex Parte Letter); see also Letter from Robert F. Aldrich, Attorney, APCC, to Marlene
H. Dortch, Secretary, Federal Communications Commission, CC Docket No. 96-128 (filed Feb. 23, 2007) (APCC
Feb. 23rd Ex Parte Letter).
176 See supra paras. 5-7.
177 See Second Bureau Waiver Order, 12 FCC Rcd at 21379, n.60 (noting that the Commission “retains jurisdiction
under Section 276 to ensure that all requirements of that statutory provision[,] . . . including the intrastate tariffing of
payphone services, have been met”); see also Wisconsin Payphone Order, 17 FCC Rcd at 2060, para. 31 (retaining
jurisdiction over the intrastate component of payphone line rates).
178 In other words, neither section 276 nor our orders and regulations implementing section 276 requires a state to
order refunds to PSPs if it later determines that a filed tariff overcharged PSPs. Rather than adopt a single, federal
policy in this area, the Commission has delegated to the states authority to consider whether refunds are appropriate.
See infra section III.B.
179 See, e.g., Letter from Robert F. Aldrich, Attorney, APCC, to Marlene H. Dortch, Secretary, Federal
Communications Commission, CC Docket No. 96-128 (filed Oct. 12, 2006) (APCC Oct. 12th Ex Parte Letter).
180 See Policy and Rules Concerning Rates for Dominant Carriers, CC Docket No. 87-313, Further Notice of
Proposed Rulemaking, 3 FCC Rcd 3195, 3320-22, paras. 232-36 (1988) (Further Notice); see also Policy and Rules
Concerning Rates for Dominant Carriers
, Second Report and Order, 5 FCC Rcd 6786, 6824-25, paras. 312-21
(1990) (Second Report and Order).
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annual access filing, and would in essence establish a “price floor” for the new service.181 Although the
Commission discussed and applied the NST in subsequent orders, it was not until the Wisconsin
Payphone Order
that the Commission clearly explained that, with regard to payphone rates, states should
apply a forward-looking methodology consistent with TELRIC or TSLRIC.182
44.
Moreover, our conclusion with regard to the pending petitions seeking refunds is consistent
with the Wisconsin Reconsideration Order, in which the Commission denied the Wisconsin Pay
Telephone Association’s request for the Commission to evaluate all cost support materials submitted by
Ameritech and Verizon and determine an appropriate payphone line rate for the state of Wisconsin.183
The Commission found that the Wisconsin Commission had initially decided that it did not have
jurisdiction over payphone rates, which resulted in the request for Commission review of the state
filings.184 Following the Commission’s Wisconsin Payphone Order, the state commission reconsidered
its decision and reviewed the BOC payphone rates.185 The Commission found that there was no reason to
interfere with the state proceeding.186 Likewise, there is no justification for the Commission to interfere
with the state commission proceedings at issue here.
45.
Finally, we clarify the refund obligation established in the Second Bureau Waiver Order.187
That order granted a narrow and limited waiver to the BOCs to permit them a short additional period of
time—from April 15, 1997 until May 19, 1997—to file tariffs for payphone lines that comply with the
Commission’s orders implementing section 276 of the Act. With regard to refunds, the Second Bureau
Waiver Order
states, “[a] LEC who seeks to rely on the waiver granted in the instant Order must
reimburse its customers or provide credit from April 15, 1997 in situations where the newly tariffed rates,
when effective, are lower than the existing tariffed rates.”188 Thus, in conjunction with granting a limited
extension of time for the BOCs to file NST-compliant rates, the order held the PSPs harmless by
requiring refunds in situations where the newly tariffed rates are lower than the existing tariffed rates.189
In this way, the refund mechanism confirmed the date upon which the Commission had required that
NST-compliant rates must be in effect. Accordingly, if a BOC filed a tariff after April 15, 1997, but on
or before May 19, 1997, that lowered payphone rates, we find that once that tariff was effective, the


181 Further Notice, 3 FCC Rcd at 3376-77, paras. 323-24. Specifically, the “net revenue test” would require a new
service to “generate a net revenue increase in the following time periods: within the lesser of a 24-month period
after an annual price cap tariff becomes effective that incorporates the new service or 36 months from the date the
new service becomes effective.” Id. at 3377, para. 323. The Commission also stated that “the net revenue increase
be measured against revenues generated from services in the same price cap basket, and should be calculated based
on present value.” Id. at 3377, para. 324.
182 See Wisconsin Payphone Order, 17 FCC Rcd at 2065-67, para. 43-50.
183 Wisconsin Public Service Commission, Order Directing Filings, CCB/CPD No. 00-1, Order on Reconsideration,
21 FCC Rcd 7724 (2006) (Wisconsin Reconsideration Order).
184 See id. at 7726-27, para. 6.
185 Id.
186 Id.
187 Thus we reject the petitioners’ argument that the Second Bureau Waiver Order requires open-ended refunds. See
IPTA Petition at 11-12; SPCA Petition at 12-14; IPANY Petition at 23-29; FPTA Petition at 4-5; PAO Petition at
12-15.
188 Second Bureau Waiver Order, 12 FCC Rcd at 21382, para. 25; see also id. at 21371, para. 2 (also discussing the
terms upon which a LEC may rely on the waiver request).
189 See Second Bureau Waiver Order, 12 FCC Rcd at 21379, para. 19.
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Second Bureau Waiver Order requires that refunds be paid from April 15, 1997, to the effective date of
the tariff. The Second Bureau Waiver Order did not specifically discuss the applicability of refunds
where a carrier filed tariffs after May 19, 1997, or did not file new tariffs, but instead relied on existing
rates, or only filed cost studies for existing rates.190 We find that this would raise very different issues
with regard to potential liability for refunds. Under the Reconsideration Order, we expressly required
that tariffs setting forth compliant rates be filed with the states by April 15, 1997. This tariff filing
obligation was mandatory, except where the states acted to exempt the carriers from the necessity of a
new filing.191 Nothing in the Second Bureau Waiver Order modified this Commission requirement; it
merely extended the filing date to May 19, 1997, for those carriers availing themselves of the waiver.
Accordingly, we reject Qwest’s contention that BOCs that relied on existing tariffs for payphone services
were not required to make further filings with the states on or before May 19, 1997.192 Therefore, absent
a state exemption, a BOC that filed tariffs after May 19, 1997, or that simply relied on existing rates or
filed cost studies for existing rates, would have been in violation of our orders.193 A state commission
may well find refunds to be appropriate pursuant to section 276, Commission regulations, and relevant
state laws if the rates in such cases were challenged under state regulatory procedures and found to be
non-compliant.
46.
Our conclusion that the Second Bureau Waiver Order did not impose an open-ended
refund obligation is not “inconsistent with the clear purpose of the . . . [Second Bureau Waiver Order] to


190 See, e.g., FPTA Petition at 8; TON v. Qwest, 493 F.3d at 1232 (“The Commission ordered the states to ‘act on the
tariffs filed pursuant to this Order within a reasonable period of time,’ but was silent as to whether the LECs, PSPs,
or the Commission itself should take action if the states failed to conduct the inquiry required by the Payphone
Orders and was similarly silent on a suggested process for regulators or PSPs to follow if LECs failed to submit the
required tariffs and supporting documentation.”) (internal citation omitted).
191 Payphone Reconsideration Order, 11 FCC Rcd at 21308, para. 163. This order created a limited exception to the
filing requirement that could be triggered only by affirmative action by the states: “Where LECs have already filed
intrastate tariffs for these services, states may, after considering the requirements of this order, the Report and Order, and
Section 276, conclude: 1) that existing tariffs are consistent with the requirements of the Report and Order as revised
herein; and 2) that in such case no further filings are required.” Id.; see also Second Bureau Waiver Order, 12 FCC Rcd at
21373, para. 8 (reiterating that states could exempt LECs from the tariff filing requirement under these limited
circumstances).
192 Letter from Lynn Starr, Vice-President, Federal Regulatory, Qwest, to Marlene H. Dortch, Secretary, Federal
Communications Commission, CC Docket No. 96-128, at 2-3 (filed Sept. 26, 2007) (Qwest September 2007 Ex
Parte
Letter). Qwest argues that the Bureau had explicitly rejected a request from APCC that the Commission order
all payphone tariffs to be refiled, without exception. Although the Bureau did reject “the various alternatives to
granting a waiver that were suggested by APCC,” see Second Bureau Waiver Order, 12 FCC Rcd at 21380, para. 21,
the Bureau did not—and indeed could not—eliminate the tariff filings required by the Commission’s orders. Instead,
it appears that APCC sought, and the Bureau rejected, tariff filing obligations more stringent than those previously
mandated by the Commission. APCC’s letter failed to mention that the Commission’s order allowed states, at their
discretion, to determine that no further tariff filings were necessary and thus to exempt particular LECs from filing
new tariffs, and the Bureau declined to eliminate this option. As already noted, in paragraph 8 of the Second Bureau
Waiver Order
, the Bureau explained that “no further filings are required” only where the states, after review,
concluded that existing tariffs satisfied the Commission’s requirements.
193 We also reject Qwest’s argument that subsequent orders addressing the Wisconsin payphone filings somehow
modified the Commission’s previous tariff filing requirements. Qwest September 2007 Ex Parte letter at 3. See
Wisconsin Bureau Order
, 15 FCC Rcd 9978. In that case, the Bureau ordered Wisconsin LECs to file payphone
tariffs and cost support for review by this Commission because the Wisconsin Commission had concluded that it
lacked jurisdiction to determine whether the rates at issue satisfied the NST. Nothing in that order, or the subsequent
Commission order largely affirming it, speaks to the separate and distinct question of when tariffs or cost support had
to be filed with the states. See Wisconsin Payphone Order, 17 FCC Rcd 2051.
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‘bring the . . . [BOCs] into compliance’ and to ‘mitigate any delay’ in establishing NST-compliant
rates.”194 As we explain below, the Second Bureau Waiver Order imposed a limited refund obligation on
the BOCs, but, importantly, did not in any way divest the state commissions of their authority to review
payphone line tariffs for compliance with section 276 and Commission orders and to order refunds where
appropriate. The Bureau’s order notes repeatedly that the payphone line tariffs are subject to review by
state commissions.195 The refund provision in that order leaves both the BOCs and the PSPs subject to
precisely the same rights and obligations, including the obligation for BOC payphone services tariffs to
be NST-compliant, that applied had the April 15, 1997 deadline for NST-compliance not been
extended.196 If the BOCs failed to file NST-compliant rates, the PSPs could (and in many cases did)
invoke state procedures to remedy the non-compliance, and in many such cases the PSPs received
refunds. Given the availability of these remedies, denying refunds in those cases where the PSPs did not
exercise their rights on a timely basis, failed to exhaust their administrative remedies, or otherwise failed
to show they were legally entitled to refunds is in no way inconsistent with the Second Bureau Waiver
Order
.

B.

Refunds in Other Proceedings Should Be Decided on a State-by-State Basis

47.
We confirm that, consistent with section 276 and the Commission’s Payphone Orders,
states may, but are not required to, order refunds for any period after April 15, 1997 that a BOC does not
have NST-compliant rates in effect. Further, we find that the Second Bureau Waiver Order was intended
to provide only a limited extension of time within which the BOCs could file NST-compliant rates.
Nothing in the Second Bureau Waiver Order affected a state commission’s authority and obligation to
apply relevant law and regulations to determine whether a BOC’s rates were NST-compliant, including
whether refunds are appropriate for periods where it finds a BOC’s rates were not NST-compliant.197 For
this reason, we reject BOC claims that the Second Bureau Waiver Order prohibits refunds for periods
after May 19, 1997.198 Section 276 requires that any BOC providing payphone service “(1) shall not
subsidize its payphone service directly or indirectly from its telephone exchange operations or its
exchange access operations, and (2) shall not prefer or discriminate in favor of its payphone service.”199
To meet these statutory requirements, the Commission’s Payphone Orders required that BOC payphone
rates be NST-compliant. Consistent with the statute and these Commission decisions, states can find that
refunds are necessary for any period of time after April 15, 1997 during which BOCs’ rates were not
NST compliant. The states that are involved in the pending petitions are at various points in the
procedural processes. Although they concluded, based upon the facts of the particular proceedings and


194 See, e.g., Letter from Robert F. Aldrich, Attorney, APCC, to Marlene H. Dortch, Secretary, Federal
Communications Commission, CC Docket No. 96-128, at 17 (filed Sept. 12, 2006) (APCC Sept. 12th Ex Parte
Letter).
195 See, e.g., Second Bureau Waiver Order, 12 FCC Rcd at 21374 n.20 (“The Commission provided guidelines
pursuant to which the states are to review the state tariffs . . . .”); id. at 21379 n.60 (“The states must act on the tariffs
filed pursuant to this Order within a reasonable period of time.”).
196 See Payphone Reconsideration Order, 11 FCC Rcd at 21308, para. 163.
197 We believe this analysis provides the guidance the Oregon Commission requested in its letter to us. See supra
para. 37.
198 See, e.g., BOC IPTA Reply Comments at 7 (“In fact, the language of the [RBOC Coalition] letter and the
surrounding circumstances make absolutely clear that the commitment referred to in the [Second Bureau Waiver
Order
] is of limited scope and cannot be read to mean that the LECs agreed to provide refunds whenever state
commissions determine that payphone line rates should be lowered.”).
199 47 U.S.C. § 276(a).
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the relevant laws, that refunds were not required, states in these and other proceedings may well find that
refunds are appropriate.
48.
Indeed, the Commission is aware that several other state commissions have ordered
refunds, and we do not question those conclusions in this order.200 For example, in the Indiana Payphone
Order
, the Indiana Utility Regulatory Commission in 2000 found that the BOC payphone tariffs should
only be approved on an interim basis, retroactive to April 15, 1997, and subject to refund pending further
review. Accordingly, once the review was complete, the Indiana Commission required the BOCs to
lower their payphone rates and ordered refunds retroactive to April 15, 1997.201 Similarly, in the South
Carolina Payphone Order
, in 1999, the South Carolina Public Service Commission initiated an
investigation into BellSouth’s rates and confirmed that any rate reductions resulting from the proceeding
would be applied retroactively. Accordingly, once the proceeding was concluded and the rates lowered,
BellSouth was required to pay PSPs refunds back to April 15, 1997.202
49.
Refund determinations should be made by the various state commissions based on the
specific facts of the case before them. We recognize that each individual proceeding involves its own
unique set of facts, procedural postures, and relevant state and federal statutes. With regard to similar
proceedings and consistent with our previous direction to the states regarding their administration of
intrastate payphone rates pursuant to section 276, we therefore leave to the states the responsibility for
deciding whether refunds are appropriate.203 Because we conclude that the refund issue may properly be
adjudicated by the states, we do not reach other issues raised by the parties, and find that those issues
also may be considered by the states in their proceedings.204


200 See, e.g., Indiana Utility. Reg. Comm’n, Indiana Payphone Association, Cause No. 40830, Order on Less Than
All of the Issues (rel. Sept. 6, 2000) (Indiana Payphone Order); South Carolina Pub. Serv. Comm’n, BellSouth
Telecommunications, Inc., Docket No. 97-124-C, Order Setting Rates for Payphone Lines and Associated Features
(rel. Apr. 19, 1999) (South Carolina Payphone Order); Letter from Robert F. Aldrich, Attorney, APCC, to Marlene
H. Dortch, Secretary, Federal Communications Commission, CC Docket No. 96-128 at Tab 2, page 2 (filed Dec. 23,
2005).
201 Indiana Payphone Order at 5. This decision of the Indiana Commission was recently upheld in part. See Indiana
Bell Telephone Company, Inc., et al. v. Indiana Utility Regulatory Commission, Office of Utility Consumer
Counselor, et al.
, 855 N.E.2d 357 (Ind. Ct. App. 2006).
202 South Carolina Payphone Order at 12.
203 Accordingly, we advise the Oregon Commission and the Commonwealth of Massachusetts Supreme Judicial
Court to apply this guidance in considering the refund issues in their respective pending cases.
204 For example, the BOCs raised defenses such as res judicata, collateral estoppel, filed rate doctrine, and the ban on
retroactive ratemaking, which the PSPs argued were not applicable. See, e.g., BOC IPANY Comments at 10-16
(raising defenses of res judicata and collateral estoppel); Implementation of the Local Competition Provision in the
Telecommunications Act of 1996; No Federal Rule Preempts State Procedural Rules Governing the Availability of
Refunds for State Payphone Line Rates, CC Docket No. 96-128 (filed Mar. 23, 2009); Implementation of the Local
Competition Provision in the Telecommunications Act of 1996; Illinois Public Telecommunications Association
Reply to AT&T and Verizon Preemption Comments of March 23, 2009, CC Docket No. 96-128 (filed Dec. 31,
2009); Implementation of the Local Competition Provision in the Telecommunications Act of 1996; Reply of the
Independent Payphone Association of New York, Inc. to AT&T and Verizon Preemption Comments of March 23,
2009 (filed Jan. 21, 2010); BOC IPTA Comments at 15-17 (raising defense of filed rate doctrine); BOC SPCA
Comments at 8 (raising defense of retroactive ratemaking); BOC FPTA Comments at 12-13 (arguing that ratemaking
is a legislative function and any change would have to be prospective); IPTA Petition at 8-11 (raising the issue of the
unlawful receipt of dial-around compensation); see also Letter from Brooks Harlow, Attorney, Northwest Public
Communications Council (NPCC), to Marlene H. Dortch, Secretary, Federal Communications Commission, CC
Docket No. 96-128 (filed Sept. 19, 2006) (arguing against the application of laches and res judicata to NPCC’s claim
(continued . . .)
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C.

Resolution of the MPTA Petition

50.
As an initial matter, similar to our decision regarding the five petitions above, we decline
to preempt the Michigan Commission’s orders in response to the MPTA Petition.205 Although we
conclude that the Michigan Commission has erred in its finding that a payphone usage rate is consistent
with the NST, we find that the Michigan Commission erred by failing to explain how its usage rate is
consistent with the NST and the Commission’s Payphone Orders. Therefore, we remand to the
Michigan Commission and direct it either to provide an adequate explanation of how its usage rate is
consistent with the NST and the Commission’s Payphone Orders or to require the carrier to justify a
payphone usage rate consistent with the NST and the Commission’s Payphone Orders.
51.
The Commission’s Payphone Orders established the requirement that payphone line rates
be established in compliance with the NST to ensure the just and reasonable pricing of payphone
services.206 In the Wisconsin Payphone Order, the Commission confirmed that LEC tariffs should
“comply with section 276 as implemented by the Commission and, as such, [the rates] should be cost-
based, nondiscriminatory, and consistent with both section 276 and our Computer III tariffing guidelines.
Thus, rates assessed by LECs for payphone services tariffed at the state level should satisfy the new
services test.”207 The NST is a “cost-based test that sets the direct cost of providing the new service as a
price floor and then adds a reasonable amount of overhead to derive the overall price of the new
service.”208 In the Wisconsin Payphone Order the Commission clarified how states should implement the
Payphone Orders, the Act, and the Commission’s rules, confirming that “our pricing requirements do not
mandate uniform overhead loading, provided that the loading methodology as well as any deviation from
it is justified.”209 As such, “under the new services test and our precedent, BOCs bear the burden of
affirmatively justifying their overhead allocations.”210
52.
The Wisconsin Payphone Orders hold that “cost study inputs and assumptions used to
justify payphone line rates should be consistent with the cost inputs used in computing rates for
comparable services offered to competitors.”211 We note, however, that the Wisconsin Payphone Orders
did not provide a specific methodology by which LECs could determine “a just and reasonable portion of
overhead costs to be attributed to services offered to competitors,” but allowed for a “flexible approach
to calculating BOCs’ overhead allocation for intrastate payphone line rates” as long as the allocation is
properly justified.212
(Continued from previous page)


against Qwest); APCC Oct. 25th Ex Parte Letter at 15-20 (arguing that the filed rate doctrine and prohibition against
retroactive ratemaking does not preclude refunds).
205 See supra paras. 38-41.
206 See Initial Payphone Order, 11 FCC Rcd at 20614-15, paras. 146-47; see also Payphone Reconsideration Order,
11 FCC Rcd at 21308, para. 163.
207 Wisconsin Payphone Order, 17 FCC Rcd at 2055-56, para. 14 (internal citations omitted).
208 Id. at 2054, para. 12. It has been established that payphone service is a new service subject to the NST. See id. at
2065-66, paras. 46-47.
209 Id. at 2067, para. 52.
210 Id. at 2069, para. 56.
211 Id. at 2058, para. 24 (citing Wisconsin Bureau Order, 15 FCC Rcd at 9981-82, para. 10).
212 See Wisconsin Bureau Order, 15 FCC Rcd at 9982, para. 11; Wisconsin Payphone Order, 17 FCC Rcd at 2069,
para. 58.
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53.
We find that on remand the Michigan Commission chose to use the comparable service
standard for applying the NST but erred in its application when it used two separate, non-uniform
overhead allocations for AT&T Michigan’s payphone rates’ without justification and in choosing a
service that was not comparable.213 Specifically, the Michigan Commission adopted a cost-based
overhead allocation rate for the monthly fixed recurring rate for AT&T Michigan’s payphone service and
a non-cost based overhead allocation for the payphone local usage rate.214 AT&T Michigan has the
burden to explain any departure from non-uniform overhead allocations, and AT&T Michigan has not
justified the use of non-cost based overhead allocations for usage rates and cost-based overhead
allocations for fixed monthly charges as was done by the Michigan Commission. This non-cost based
overhead allocation for the usage rate was not requested by AT&T Michigan and thus was also not
justified by AT&T Michigan.215 The Michigan Commission erred in using a non-cost based overhead
allocation for the payphone local usage rate without justification as required by the Wisconsin Payphone
Order
.216
54.
In addition, the Michigan Commission found “that toll service is an appropriate
competitive comparable service for local usage” without providing any justification as to why it accepted
toll service, a service not subject to cost studies, and a service with which MPTA claims payphone
providers do not compete, as a comparable service for purposes of establishing an overhead allocation for
AT&T Michigan’s payphone local usage rate.217 Accordingly, we find that this lack of explanation
renders the Michigan Commission’s findings in violation of the NST.218
55.
As such, we find that the payphone local usage rate in Michigan at issue in the MPTA’s
Petition is not compliant with the NST. We remand this proceeding to the Michigan Commission and
direct it either to justify how using two different overhead allocations is consistent with the NST or to
determine a proper payphone local usage rate in the state of Michigan consistent with this order.219 We
agree with the MPTA and do not find that this Commission needs to initiate a cost study for the state of


213 Pursuant to the MPTA Petition, only the appropriateness of the overhead allocation for AT&T Michigan’s
payphone local usage rate is before this Commission. See MPTA Petition at 2-3.
214 See MPTA Petition at 2-3.
215 The Wisconsin Payphone Order clarifies that it is the BOC that bears the “burden of affirmatively justifying their
overhead allocations.” Id. at 2069, para. 56. MPTA states that AT&T Michigan did not request, nor advocate for, a
separate non-cost based overhead allocation for local usage service. See MPTA Petition at 3. We agree with the
MPTA that in this proceeding the Michigan Commission proffered the use of toll service as a comparable service,
resulting in the application of non-uniform overhead allocation factors. “However, the [Michigan Commission]
ultimately created its own application of the new services test that approved a non-uniform, bifurcated rate structure
applying a much higher, non-cost-based overhead allocation factor to be applied only to AT&T Michigan’s usage
services.” MPTA Reply Comments at 9. Use of this non-cost based overhead allocation factor was not justified by
AT&T Michigan, as we require, or by the Michigan Commission.
216 See supra para. 52.
217 Michigan Commission 2004 Order at 18.
218 See id. “[T]he ‘comparable competitive service’ test requires comparison of overhead loadings for the local
exchange service under review with a BOC service with which the competitive service provider competes.” See
APCC MPTA Comments at 5-6 (citing Wisconsin Payphone Order, 17 FCC Rcd at 2067-68, para. 53).
219 We note that the Michigan Commission was correct in establishing a cost-based overhead allocation rate for the
monthly fixed recurring rate for payphone services in Michigan. A similar, singular overhead allocation could be
used to establish the per minute rate for local usage services in Michigan. See MPTA Petition at 2-3.
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Michigan.220 We also agree with parties to this proceeding that it is not appropriate for the Commission
to address the question of any potential refunds in the state of Michigan, leaving that decision to the
Michigan Commission upon its completion of this remand proceeding.221

IV.

ORDERING CLAUSES

56.
ACCORDINGLY, IT IS ORDERED that, pursuant to the authority contained in sections
4(i), 201, 202, and 276 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 4(i), 201, 202, and
276, and sections 1.1 and 1.2 of the Commission’s rules, 47 C.F.R. §§ 1.1 and 1.2, the Petition filed by
the Illinois Public Telecommunications Association IS DENIED as set forth herein.
57.
IT IS FURTHER ORDERED that, pursuant to the authority contained in sections 4(i), 201,
202, and 276 of the Communications Act of 1934, as amended 47 U.S.C. §§ 4(i), 201, 202, and 276, and
sections 1.1 and 1.2 of the Commission’s rules, 47 C.F.R. §§ 1.1 and 1.2, the Petition filed by the
Southern Public Communication Association IS DENIED as set forth herein.
58.
IT IS FURTHER ORDERED that, pursuant to sections 4(i), 201, 202, and 276 of the
Communications Act of 1934, as amended 47 U.S.C. §§ 4(i), 201, 202, and 276, and sections 1.1 and 1.2
of the Commission’s rules, 47 C.F.R. §§ 1.1 and 1.2, the Petition filed by the Independent Payphone
Association of New York, Inc. IS DENIED as set forth herein.
59.
IT IS FURTHER ORDERED that, pursuant to sections 4(i), 201, 202, and 276 of the
Communications Act of 1934, as amended 47 U.S.C. §§ 4(i), 201, 202, and 276, and sections 1.1 and 1.2
of the Commission’s rules, 47 C.F.R. §§ 1.1 and 1.2, the Petition filed by the Florida Public
Telecommunications Association, Inc. IS DENIED as set forth herein.
60.
IT IS FURTHER ORDERED that, pursuant to sections 4(i), 201, 202, and 276 of the
Communications Act of 1934, as amended 47 U.S.C. §§ 4(i), 201, 202, and 276, and sections 1.1 and 1.2
of the Commission’s rules, 47 C.F.R. §§ 1.1 and 1.2, the Petition filed by the Payphone Association of
Ohio IS DENIED as set forth herein.
61.
IT IS FURTHER ORDERED that, pursuant to section 1.41 of the Commission’s rules, 47
C.F.R. § 1.41, the SPCA and the IPANY motions to consolidate ARE GRANTED.
62.
IT IS FURTHER ORDERED that, pursuant to sections 4(i), 201, 202, and 276 of the
Communications Act of 1934, as amended 47 U.S.C. §§ 4(i), 201, 202, and 276, and sections 1.1 and 1.2
of the Commission’s rules, 47 C.F.R. §§ 1.1 and 1.2, the Petition filed by the Michigan Pay Telephone
Association IS GRANTED in part, DENIED in part and REMANDED to the Michigan Commission as
set forth herein.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary


220 “[T]he MPTA is not asking the FCC to analyze the underlying cost studies to determine what the direct cost of
the local usage service should be, or to determine what the overhead allocation may be under any other cost
methodology or alternative theories. The MPTA only requests that the Commission determine whether the
[Michigan Commission] may adopt, without justification, a non-uniform overhead allocation for strictly the local
usage service made available to IPPs in Michigan.” MPTA Reply Comments at 3.
221 See BOC MPTA Comments at 8.
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APPENDIX

List of Comments on Petitions

Comments regarding the IPTA Petition for a Declaratory Ruling.
American Public Communications Council
Atlantic Payphone Association, Inc.
BellSouth Telecommunications, Inc., SBC Communications Inc., and the Verizon Telephone
Companies (Bell Operating Companies – BOC) (BOC IPTA)
Florida Public Telecommunications Association, Inc.
Illinois Commerce Commission
Independent Payphone Association of New York, Inc.
New England Public Communications Council, Inc.
Payphone Association of Ohio
Reply comments regarding the IPTA Petition for a Declaratory Ruling.
American Public Communications Council
Atlantic Payphone Association, Inc.
BellSouth Telecommunications, Inc., SBC Communications Inc., and the Verizon Telephone
Companies (BOC IPTA)
Illinois Public Telecommunications Association
New England Public Communications Council, Inc.
Public Utilities Commission of Ohio
Comments regarding the SPCA Petition for a Declaratory Ruling.
American Public Communications Council
BellSouth Telecommunications, Inc., SBC Communications Inc., and the Verizon Companies (BOC
SPCA)
Mississippi Public Service Commission
Payphone Association of Ohio
Public Utilities Commission of Ohio
Reply comments regarding the SPCA Petition for a Declaratory Ruling.
Evercom Systems, Inc.
Payphone Association of Ohio
Southern Public Communication Association
Comments regarding the Petition of IPANY for an Order of Pre-Emption and Declaratory Ruling.
American Public Communications Council
BellSouth Telecommunications, Inc., SBC Communications Inc., and the Verizon Telephone
Companies (BOC IPANY)
Illinois Public Telecommunications Association
New York State Department of Public Service
Northwest Public Communications Council and the Minnesota Independent Payphone Association
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Reply comments regarding the Petition of IPANY for an Order of Pre-Emption and Declaratory Ruling.
American Public Communications Council
BellSouth Telecommunications, Inc., SBC Communications Inc., and the Verizon Telephone
Companies (BOC IPANY)
Illinois Public Telecommunications Association
Independent Payphone Association of New York, Inc.
Northwest Public Communications Council and the Minnesota Independent Payphone Association
Comments regarding the Petition of the FPTA for a Declaratory Ruling and for an Order of Preemption.
AT&T, Inc., BellSouth Telecommunications, Inc. and the Verizon Telephone Companies (BOC
FPTA)
American Public Communications Council
Florida Public Service Commission
Illinois Public Telecommunications Association
Independent Payphone Association of New York, Inc.
Northwest Public Communications Council and Minnesota Independent Payphone Association
Reply comments regarding the Petition of the FPTA for a Declaratory Ruling and for an Order of
Preemption.
AT&T, Inc., BellSouth Telecommunications, Inc. and the Verizon Telephone Companies
Florida Public Telecommunications Association, Inc.
Independent Payphone Association of New York, Inc.
Illinois Public Telecommunications Association
Northwest Public Communications Council and Minnesota Independent Payphone Association
Comments regarding the PAO Petition for Preemption and Declaratory Ruling.
AT&T, Inc., and the Verizon Telephone Companies
Public Utilities Commission of Ohio (PUCO)
Reply comments regarding the PAO Petition for Preemption and Declaratory Ruling.
Payphone Association of Ohio
Comments regarding the Michigan Pay Telephone Association Petition for Declaratory Ruling
American Public Communications Council (APCC MPTA)
AT&T, Inc.
AT&T, Inc., BellSouth Telecommunications, Inc. and the Verizon Telephone Companies (BOC
MPTA)
Reply comments regarding the Michigan Pay Telephone Association Petition for Declaratory Ruling
American Public Communications Council
AT&T, Inc.
Michigan Pay Telephone Association
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DISSENTING STATEMENT OF

COMMISSIONER MIGNON L. CLYBURN

Re:

Implementation of the Pay Telephone Reclassification and Compensation Provisions of the
Telecommunications Act of 1996

, CC Docket No. 96-128.
Pay telephones (now commonly referred to as “payphones”) continue to be a vital link for
consumers during public safety events, such as Super Storm Sandy, and when mobile service is otherwise
unavailable. Not all low-income consumers have had the opportunity to obtain phone service through the
Commission’s Lifeline program, so for them the availability of payphones remains a necessity in order to
stay connected to employers, healthcare providers, friends, and family. Congress set forth a federal
mandate for the Commission to ensure that the payphone market is competitive and that these telephones
are widely available, and because I believe that the majority’s decision is contrary to the pro-competitive,
federal policy encapsulated in Section 276 of the Communications Act and the Commission’s prior
Orders implementing that policy, I respectfully dissent.
Historically, payphone services were provided by the local telephone company and regulated by
the states. With the passage of the Telecommunications Act of 1996, Congress opened up the local
telephone markets for competition and included the payphone market in its provisions. Specifically, in
Section 276, Congress provided that the regional Bell operating companies (the “RBOCs”) would no
longer subsidize their payphone service with their other operations; that they would not discriminate
against third party operators offering payphone service; and that the Commission would establish the
necessary regulations to implement regulations “[i]n order to promote competition among payphone
service providers and promote the widespread deployment of payphone services to the benefit of the
general public.” 47 U.S.C. § 276 (a) & (b)(1). Furthermore, in order to advance competition and ensure
widespread deployment of payphones, Congress directed the Commission to “take all actions necessary
(including any reconsideration) to prescribe regulations that—establish a per call compensation plan to
ensure that all payphone service providers are fairly compensated for each and every call . . . discontinue
all intrastate and interstate payphone subsidies . . . [and] prescribe a set of nonstructural safeguards for
[the RBOCs] . . . [that] at a minimum, include the nonstructural safeguards equal to those adopted in the
Computer Inquiry-III (CC Docket No. 90-623) proceeding . . . .” Id. § 276(b)(1)(A)-(C). Finally,
Congress prioritized this new federal policy for payphones by stating 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).
In response to this new federal mandate, the Commission, through a series of Orders,
implemented new payphone service policies to allow independent service providers to purchase
payphone access lines from incumbents at reasonable prices so that competition would be promoted in
the marketplace. In addition, the Commission instituted per call compensation requirements so that all
payphone providers would be compensated when consumers use a payphone to reach third party
providers. The FCC’s Initial Payphone Order directed that all payphone tariffs be filed with the FCC
and be treated “as a new service under the Commission’s price cap rules” which is “necessary to ensure
that central office coin services are priced reasonably” and “do not include subsidies.” Initial Payphone
Order
, 11 FCC Rcd 20541, 20614 ¶ 146. The Commission further stated that “Section 276 specifically
refers to the application of Computer III and ONA requirements, at a minimum for BOC provision of
payphone services. Accordingly, we conclude that Computer III tariff procedures and pricing are more
appropriate for basic payphone services provided by LECs to other payphone providers.” Id. Similar to
the statute, the Order provided that state requirements inconsistent with these regulations are superseded
by the Commission’s regulations. Id. at 20615 ¶ 147.
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In the Payphone Reconsideration Order, the Commission directed carriers to file their intrastate
payphone tariffs with state utility commissions, and it further explained how carriers should comply with
the new services test. Payphone Reconsideration Order, 11 FCC Rcd 21233, 21308 ¶ 163. They must
be “(1) cost-based; (2) consistent with the requirements of Section 276 with regard, for example, to the
removal of subsidies from exchange and exchange access services; and (3) nondiscriminatory.” Id. The
Payphone Reconsideration Order further stated that “[s]tates must apply these requirements and the
Computer III guidelines for tariffing such intrastate tariffs,” citing FCC rule 61.49(g)(2), which requires
forward-looking cost supportive data, and the Commission’s Open Network Architecture Order that also
describes forward-looking cost requirements. See id. at 21308 ¶ 163 & n. 492.1 The Commission
explicitly retained its jurisdiction to review intrastate tariffs where a state could not do so. Id. at 21308 ¶
163. In a separate section of the Payphone Reconsideration Order, the Commission provided for dial-
around compensation once a carrier was able to certify it had completed the requirements for
implementing the new federal Section 276 regulatory scheme. Id. at 21293 ¶ 131. As part of its
certification obligation, a carrier must certify its tariff rates were compliant with the new services test,
i.e., that they “reflect[ed] the removal of charges that recover the costs of payphones and any intrastate
subsidies.” Id. The Order on Reconsideration delegated authority to the Common Carrier Bureau to
determine whether a LEC has complied with all the requirements for receiving dial-around
compensation.
As the due date for compliance with the new requirements neared, the Common Carrier Bureau
issued two consecutive waiver orders that extended the filing deadlines for the new tariffs. In both, the
Bureau stressed the linkage between the dial-around compensation with incumbent carriers’ compliance
with the tariff requirements, and it reiterated the requirements for the tariffs. For example, in the First
Bureau Waiver Order
, it said “state tariffs for payphone services must be cost based, consistent with the
requirements of Sections 276, nondiscriminatory, and consistent with the Computer III guidelines.” First
Bureau Waiver
Order, 12 FCC Rcd. 20997, 21012, ¶ 31. It further stated that “the guidelines for state
review of intrastate tariffs are essentially the same as those included in the [Initial] Payphone Order for
federal tariffs.” Id. 21012, ¶ 32. Also, the Bureau emphasized that “[t]he intrastate tariffs for payphone
services, including unbundled features, and the state tariffs removing payphone equipment costs and
subsidies must be in effect for a LEC to receive compensation in a particular state.” Id. 21012, ¶ 33. In
the Second Bureau Waiver Order, the Bureau extended the state tariff deadline beyond the dial-around
compensation date, so that tariffs would be due on May 19, 1997, but dial-around compensation would
begin on April 15. Second Bureau Waiver Order, 12 FCC Rcd 21370, 21374 ¶10. Again, the Bureau
emphasized the requirement that the tariffs comply with the Section 276 and the Commission’s
requirements, although it had “delegated some of the tariffing requirements to the state jurisdiction.” Id.
21374, ¶ 11. Relying upon the RBOC Coalition’s commitment to reimburse or credit independent
payphone providers where their rates would be lowered between April 15 and May 19 in order to come
into compliance, the Bureau held that carriers “must reimburse it customers or provide them credit from
April 15, 1997.” Id. 21379-80, ¶ 20.
Specifically noting the concern of MCI that the subsidies from payphone services will not have
been removed before the incumbents receive dial-around compensation beginning April 15, 1997, the
Bureau noted that the waiver does not waive the requirement that subsidies be removed, and again stated
that carriers will be required to reimburse their customers from the date when dial-around compensation


1 If carriers’ tariffs already met these requirements, then they had the option to rely upon them.
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begins. Id. 21379-80, ¶ 20. Rather than showing proof of the subsidy removal, the Commission
permitted the carriers to certify to IXCs that they had done so. The Commission ordered the states to
“act on the tariffs filed pursuant to this Order within a reasonable period of time,” id. at 21379 ¶ 19 n. 60,
but was silent as to whether the LECs, payphone service providers, or the Commission itself should take
action if the states failed to conduct the inquiry required by the Payphone Orders and was similarly silent
on a suggested process for regulators or payphone service providers to follow if carriers failed to submit
the required tariffs and supporting documentation. Additional Orders dealing with intrastate tariffs in
Wisconsin were released—the first one by the Bureau in 2000, and then the Commission in 2002.
Wisconsin Pub. Serv. Comm’n; Order Directing Filings, CCB/CPD No. 00-01, Order, 15 FCC Rcd 9978
(CCB rel. Mar. 2, 2000); Wisconsin Pub. Serv. Comm’n; Order Directing Filings, Bureau/CPD No. 00-
01, Memorandum Opinion and Order, 17 FCC Rcd 2051 (2002) (collectively, the “Wisconsin Payphone
Orders”
). Both provided more specific information for states in their review of the intrastate payphone
tariffs. After that additional guidance was provided, payphone rates were decreased in the five
jurisdictions at issue in the case before us, and the question presented is whether Section 276 and/or the
Commission’s policies require refunds between April 15, 1997 when the incumbents began receiving
dial-around compensation and the lowering of their rates after May 19, 1997.
The majority finds that based on the evidence before us, the Commission’s Orders were followed
and that refunds are not required, although it permits that the states may find that refunds are warranted
based on their own reviews. In doing so, the majority believes that the states may rely on their own
analysis and if under state law, refunds are not due then they are not required to issue them under federal
law. The majority holds that there is a dual regulatory scheme under the statute, with both the
Commission and states having roles, and declares that instead of one federal policy, the Commission
delegated to the states the authority to consider whether refunds are appropriate. The majority also
rejects the argument that the Commission’s decisions clearly established the requirement that the
intrastate tariffs be based on forward-looking cost methodologies. I disagree with these conclusions as
discussed below.
Congress established a new federal policy for the payphone marketplace in the 1996 Act and
directed the Commission to ensure that it was pro-competitive, including that the implicit subsidies in the
RBOC phone rates would be extracted. With respect to intrastate payphone rates, the Commission
delegated its tariffing responsibilities to the states, but Congress clearly contemplated one federal
policy—not a dual regulatory scheme—to promote competition and the widespread deployment of
payphones. The Commission has a responsibility to ensure that the state proceedings comply with the
Section 276 and the federal policy for a pro-competitive market and widespread deployment of
payphones. Overseeing its delegation is critical for ensuring compliance with Congress’ directive. At no
time, until the instant Declaratory Ruling and Order, has the Commission determined that it should not
review the outcome of state proceedings when compliance issues have been raised. Indeed, the
Commission’s decision here to not review the state actions from 1997 to 2003 is troublesome in that
regard, but also on several other scores. First, the Commission’s Orders are clear that not only did the
incumbents have to file their tariffs, but they had to comply with the statute, and the Commission’s
requirements that they be cost-based, nondiscriminatory, and consistent with Computer III. While the
majority is satisfied with that compliance, I am not—(more on that point in a moment.) Second, many
states followed the new federal policy and implemented the statutory and Commission requirements
faithfully, ensuring that in those states the pro-competitive requirements Congress directed and that the
Commission required, were met. By abdicating its responsibility to oversee its delegation and to ensure
the state proceedings are consistent with the statute and the Commission’s requirements, the Commission
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cannot ensure that there is one federal policy that is fulfilling Congress’ pro-competitive goals in
payphone marketplace.2
I believe the Commission’s Initial Payphone Order and Order on Reconsideration were clear
that in filing cost-based tariffs that such tariffs had to meet the new services test and be based on
forward-looking cost methodologies. First, the Computer III and ONA proceeding requirements are cited
in both Orders. Second, in the Order on Reconsideration, the Commission cites both FCC rule
61.49(g)(2) and the Open Network Architecture Order. Third, the Second Bureau Waiver Order states
that the filing guidelines for state tariffs “are essentially the same” as federal tariffs. All of these
proceedings and rule cited relied upon forward-looking cost supportive data. Where RBOCs did not file
cost-based tariffs using forward-looking cost methodologies by May 19, 1997, they were not in
compliance with the Commission’s Orders. No RBOC should be excused from this requirement at this
late date by this Commission or any state regulatory commission. Not only is that outcome inequitable
for independent payphone operators and consumers, it is a disservice to those states that followed the
Commission’s requirements. The fact that carriers adjusted their rates after the Commission’s 2002
Wisconsin Payphone Order is evidence that these carriers’ tariffs were not cost-based and did not rely
upon forward-looking cost methodologies by May 19, 1997. While the Commission provided more
specific guidance about the types of forward-looking cost methodologies that would be appropriate and
how they should be used in the Wisconsin Payphone Orders, incumbents’ earlier obligations were not
altered so that they no longer had to comply with the Commission’s previous Payphone Orders.
Those not in compliance with the new services test by May 19, 1997 benefitted from receiving
dial-around compensation, contrary to the Commission’s stated policy that such compensation is only
available once carriers complied with the market-opening provisions of Section 276. In both Waiver
Orders, the Bureau determined that it was not waiving the requirement that the tariffs meet the new
services test, only that it was allowing additional time for the tariff filings. In fact, it stated in those
Orders that the incumbents’ tariffs must still meet the other requirements to remove subsidies, be
nondiscriminatory, and consistent with Computer III. Moreover, in the Second Bureau Waiver Order,
the Bureau gave assurances to competitors that refunds would be forthcoming where the tariffed rate is
lowered. Today’s decision finds that the Second Bureau Waiver Order was time-limited to when the
tariffs were filed on May 19, and by doing so, removes the condition that the tariffs actually comply with
the statute and the Commission’s requirements as of May 19. I cannot agree that we should interpret the
Second Bureau Waiver Order in this manner. The obligation to refund did not cease on May 19, which is
why other states, including the South Carolina PSC, ordered refunds after that date when they completed
their reviews of the tariff filings to ensure that they complied with the Commission’s new services test.
Moreover, I disagree that it is appropriate for states to consider whether other principles, such as
the filed rate doctrine, trump the underlying tariff requirements in Section 276 and the Commission’s


2 The majority asserts that their decision is consistent with the Wisconsin Reconsideration Order, “in which the
Commission denied the Wisconsin Pay Telephone Association’s request for the Commission to evaluate all cost
support materials submitted by Ameritech and Verizon and determine an appropriate payphone line rate for the state
of Wisconsin.” See para. 45, citing Wisconsin Public Service Commission, Order Directing Filings, CCB/CPD No.
00-1, Order on Reconsideration, 21 FCC Rcd 7724 (2006) . That Order is inapposite, as the state regulatory body
had reversed its initial decision and found that it had the jurisdiction to review the intrastate tariffs and was in
process of doing so, and the Commission said it would not interfere with that process. Here, the petitioners are
asking that the Commission review the state decisions with respect to payphone rates and whether refunds are
warranted under Section 276 and the Commission’s Payphone Orders.
35

Federal Communications Commission

FCC 13-24

requirements. As discussed above, it is the Commission’s responsibility to ensure that the statute and the
FCC’s requirements have been met. It is appropriate for the Commission to consider these other issues
itself. Indeed, several courts have held that the filed rate doctrine cannot be used as a defense to the tariff
filing requirements themselves. See, e.g., TON v. Qwest, 493 F.3d 1225, 1236-37 (10th Cir. 2007); Davel
Communications, Inc. v. Qwest Corp.
, 460 F.3d 1075, 1085 (9th Cir. 2006). We have no assurances that
consideration of these issues will result in a satisfactory outcome that is consistent with Congress’
direction in Section 276 and judicial precedent; thus, I do not agree with the majority on this point.
To the extent that states are reviewing compliance and considering the majority opinion and my
opinion, which I hope they will, and should they disagree with my interpretation of the statute and the
Commission’s Orders, I would like them to consider the equities. The incumbents clearly were
instructed to remove the implicit subsidies in their payphone rates in order to obtain dial-around
compensation in 1997. Where they did not do so for five years, it is inequitable and unjust that they
received both dial-around compensation and unreasonable rates from independent payphone providers.
Accordingly, they should be required to refund excessive rates.
Finally, I think it is important for us to consider why the implementation of the 1996 Act’s pro-
competitive goals are important—even at this late date of February 2013. Consumers benefit when there
is competition. In this instance, where carriers can avoid the market opening provisions of the Act by
keeping rates high and hampering their competitors, consumers are not served and the pro-competitive
goals of the Act are unfulfilled. For five years in these five states, the marketplace for payphones was
impacted, and consumers did not receive all the benefits that Congress intended.
36

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