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Joint ICC Reply Brief - In Re: FCC 11-161 (10th Cir.)

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Released: May 30, 2013
Appellate Case: 11-9900 Document: 01019063481 Date Filed: 05/29/2013 Page: 1

In The United States Court Of Appeals

FOR THE TENTH CIRCUIT

____________

NO. 11-9900
____________

IN RE: FCC 11-161
____________

ON PETITIONS FOR REVIEW OF AN ORDER OF THE
FEDERAL COMMUNICATIONS COMMISSION
____________

UNCITED JOINT INTERCARRIER COMPENSATION

REPLY BRIEF OF PETITIONERS

(DEFERRED APPENDIX APPEAL)
____________












Counsel for Petitioners Listed in Alphabetical Order
on Following Pages

May 29, 2013


Appellate Case: 11-9900 Document: 01019063481 Date Filed: 05/29/2013 Page: 2

Allband Communications Cooperative


By Its Counsel

Don L. Keskey
Public Law Resource Center PLLC
139 W. Lake Lansing Rd, Suite 210
East Lansing, MI 48823
Tel: 517-999-7572
donkeskey@publiclawresourcecenter.com

Arizona Corporation Commission


By Its Counsel

Maureen A. Scott
Wesley Van Cleve
Janet F. Wagner
Arizona Corporation Commission
Legal Division
1200 West Washington
Phoenix, AZ 85007
Tel: 602-542-3402
mscott@azcc.gov
wvancleve@azcc.gov
jwagner@azcc.gov

Direct Communications Cedar Valley, LLC, Totah

Communications, Inc., H & B Communications, Inc., The

Moundridge Telephone Company of Moundridge, Pioneer

Telephone Association, Inc., Twin Valley Telephone, Inc., and

Pine Telephone Company*


By Its Counsel

Alan L. Smith
Attorney and Counselor at Law
1169 East 4020 South
Salt Lake City, Utah 84124
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Appellate Case: 11-9900 Document: 01019063481 Date Filed: 05/29/2013 Page: 3

Tel: 801-262-0555
Alanakaed@aol.com

David R. Irvine
Attorney and Counselor at Law
747 East South Temple Street, Suite 130
Salt Lake City, Utah 84102.
Tel: 801-579-0802
Alanakaed@aol.com.

*Direct Communications et al. do not join in Part IV. of the Brief.

CenturyLink*


By Its Counsel

Robert Allen Long, Jr.
Gerard J. Waldron
Yaron Dori
Mark W. Mosier
Covington & Burling
1201 Pennsylvania Avenue, NW
Washington, DC 20004
Tel: 202-662-6000
rlong@cov.com
gwaldron@cov.com
ydori@cov.com
mmosier@cov.com

*CenturyLink joins Part II. of the brief.

Choctaw Telephone Company


By Its Counsel

Benjamin H. Dickens, Jr.
Mary J. Sisak
Blooston, Mordkofsky, Dickens, Duffy & Prendergast, LLP
2120 L Street, NW, Suite 300

ii

Appellate Case: 11-9900 Document: 01019063481 Date Filed: 05/29/2013 Page: 4

Washington, DC 20037-0000
Tel: 202-659-0830
bhd@bloostonlaw.com
mjs@bloostonlaw.com

Craig S. Johnson
Johnson & Sporleder, LLP
304 E High St. Suite 200
P.O. Box 1670
Jefferson City, MO 65102
Tel: 573-659-8734
cj@cjaslaw.com

Connecticut Public Utilities Regulatory Authority, Intervenor


By Its Counsel

Clare E. Kindall
Assistant Attorney General
Department Head, Energy
Office of the Attorney General
10 Franklin Square
New Britain, CT 06051
Tel: 860-927-3682
Clare.Kindall@ct.gov

Core Communications, Inc.


By Its Counsel

James C. Falvey, Esq.
Charles A. Zdebski, Esq.
Eckert Seamans Cherin & Mellott, LLC
1717 Pennsylvania Ave., NW
12th Floor
Washington, D.C. 20006
Tel: 202-659-6655
jfalvey@eckertseamans.com


iii

Appellate Case: 11-9900 Document: 01019063481 Date Filed: 05/29/2013 Page: 5

Gila River Indian Community and Gila River

Telecommunications, Inc.*


By Their Counsel

Michael C. Small
Akin Gump Strauss Hauer & FELD LLp
2029 Century Park E. Suite 2400
Los Angeles, CA 90067
Tel: 310-229-1000
msmall@AKINGUMP.com

Sean T. Conway
Akin Gump Strauss Hauer & FELD LLp
1333 New Hampshire Avenue, N.W.
Washington, DC 20036
Tel: 202-887-4000
sconway@AKINGUMP.com

*Gila River Indian Community and Gila River Telecommunications,
Inc. join in Section II.A. and IV.B. and take no position on the
balance of the issues included in this brief.

Montana Public Service Commission, Intervenor


By Its Counsel

Justin Kraske
Chief Legal Counsel
Montana Public Service Commission
1701 Prospect Avenue
PO Box 202601
Helena MT 59620-2601
Tel: 406-444-6376
JKraske@mt.gov

National Association of Regulatory Utility Commissioners


By Its Counsel

James Bradford Ramsay
General Counsel

iv

Appellate Case: 11-9900 Document: 01019063481 Date Filed: 05/29/2013 Page: 6

Holly Rachel Smith
Assistant General Counsel
National Association of Regulatory Utility Commissioners
1101 Vermont Avenue, Suite 200
Washington, DC 20005
Tel: 202-898-2207
jramsay@naruc.org
hsmith@naruc.org

National Association of State Utility Consumer Advocates


By Its Counsel

Paula M. Carmody, NASUCA President
Maryland People’s Counsel
Office of People’s Counsel
6 St. Paul Street, Suite 2102
Baltimore, MD 21202
Tel: 410-767-8150
paulaC@opc.state.md.us

David C. Bergmann
Counsel for NASUCA
3293 Noreen Drive
Columbus, OH 43221-4568
Tel: 614-771-5979
david.c.bergmann@gmail.com

Christopher J. White
Deputy Rate Counsel
New Jersey Division of
Rate Counsel
140 E. Front Street, 4th Floor
Trenton, NJ 08625
Tel: 609-633-9141
cwhite@rpa.state.nj.us




v

Appellate Case: 11-9900 Document: 01019063481 Date Filed: 05/29/2013 Page: 7

North County Communications Corporation


By its counsel

R. Dale Dixon, Jr.
Law Offices of Dale Dixon
1155 Camino Del Mar, #497
Del Mar, CA 92014
Tel: 858-925-6074
dale@daledixonlaw.com

Consolidated Communications Holdings, Inc., National

Telecommunications Cooperative Association, and U.S.

TelePacific Corp.*


By Their Counsel

Russell Blau
Tamar Finn
Bingham McCutchen LLP
2020 K Street, NW
Washington, DC 20006
Tel: 202-373-6000
russell.blau@bingham.com
tamar.finn@bingham.com

*Consolidated Communications Holdings, Inc., National
Telecommunications Cooperative Association, and U.S. TelePacific
Corp do not join Part IV. of the Brief.

Pennsylvania Public Utility Commission


By Its Counsel

Bohdan R. Pankiw
Kathryn G. Sophy
Joseph K. Witmer
Shaun A. Sparks
Pennsylvania Public Utility Commission

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Appellate Case: 11-9900 Document: 01019063481 Date Filed: 05/29/2013 Page: 8

400 North Street, 3rd Floor
Harrisburg, PA 17120
Tel: 717-783-3190
bpankiw@state.pa.us
ksophy@pa.gov
joswitmer@pa.gov
shsparks@pa.gov

Public Utilities Commission of Ohio*


By Its Counsel

John H. Jones
Office of the Ohio Attorney General
Public Utilities Section
180 East Broad Street, 6th Floor
Columbus, OH 43215-3793
Tel: 614-466-4395
john.jones@puc.state.oh.us

*Ohio joins Parts I. A, B, C, E, II. A, and III. and takes no position
on Parts I. D, II. B, and IV.

Rural Telephone Service Company, Inc.; Adak Eagle Enterprises

LLC, Adams Telephone Cooperative, Alenco Communications,

Inc., Arlington Telephone Company, Bay Springs Telephone

Company, Inc., Big Bend Telephone Company, Inc., The Blair

Telephone Company, Blountsville Telephone LLC, Blue Valley

Telecommunications, Inc., Bluffton Telephone Company, Inc.,

BPM, Inc., Brantley Telephone Company, Inc., Brazoria

Telephone Company, Brindlee Mountain Telephone LLC, Bruce

Telephone Company, Bugs Island Telephone Cooperative,

Cameron Telephone Company, LLC, Chariton Valley Telephone

Corporation, Chequamegon Communications Cooperative, Inc.,

Chickamauga Telephone Corporation, Chickasaw Telephone

Company, Chippewa County Telephone Company, Clear Lake

Independent Telephone Company, Comsouth

Telecommunications, Inc., Copper Valley Telephone

Cooperative, Cordova Telephone Cooperative, Crockett


vii

Appellate Case: 11-9900 Document: 01019063481 Date Filed: 05/29/2013 Page: 9

Telephone Company, Inc., Darien Telephone Company,

Deerfield Farmers' Telephone Company, Delta Telephone

Company, Inc., East Ascension Telephone Company, LLC,

Eastern Nebraska Telephone Company, Eastex Telephone

Coop., Inc., Egyptian Telephone Cooperative Association,

Elizabeth Telephone Company, LLC, Ellijay Telephone

Company, Farmers Telephone Cooperative, Inc., Flatrock

Telephone Coop., Inc., Franklin Telephone Company, Inc.,

Fulton Telephone Company, Inc., Glenwood Telephone

Company, Granby Telephone LLC, Hart Telephone Company,

Hiawatha Telephone Company, Holway Telephone Company,

Home Telephone Company (St. Jacob, Ill.), Home Telephone

Company (Moncks Corner, SC), Hopper Telecommunications

Company, Inc., Horry Telephone Cooperative, Inc., Interior

Telephone Company, Kaplan Telephone Company, Inc., KLM

Telephone Company, City Of Ketchikan, Alaska, Lackawaxen

Telecommunications Services, Inc., Lafourche Telephone

Company, LLC, La Harpe Telephone Company, Inc., Lakeside

Telephone Company, Lincolnville Telephone Company, Loretto

Telephone Company, Inc., Madison Telephone Company,

Matanuska Telephone Association, Inc., McDonough Telephone

Coop., Inc., MGW Telephone Company, Inc., Mid Century

Telephone Coop., Inc., Midway Telephone Company, Mid-Maine

Telecom LLC, Mound Bayou Telephone & Communications,

Inc., Moundville Telephone Company, Inc., Mukluk Telephone

Company, Inc., National Telephone of Alabama, Inc.,

Ontonagon County Telephone Company, Otelco Mid- Missouri

LLC, Otelco Telephone LLC, Panhandle Telephone Cooperative,

Inc., Pembroke Telephone Company, Inc., People's Telephone

Company, Peoples Telephone Company, Piedmont Rural

Telephone Cooperative, Inc., Pine Belt Telephone Company,

Pine Tree Telephone LLC, Pioneer Telephone Cooperative, Inc.,

Poka Lambro Telephone Cooperative, Inc., Public Service

Telephone Company, Ringgold Telephone Company, Roanoke
Telephone Company, Inc., Rock County Telephone Company,

Saco River Telephone LLC, Sandhill Telephone Cooperative,

Inc., Shoreham Telephone LLC, The Siskiyou Telephone

Company, Sledge Telephone Company, South Canaan

Telephone Company, South Central Telephone Association,


viii

Appellate Case: 11-9900 Document: 01019063481 Date Filed: 05/29/2013 Page: 10

Star Telephone Company, Inc., Stayton Cooperative Telephone

Company, The North-Eastern Pennsylvania Telephone

Company, Tidewater Telecom, Inc., Tohono O'Odham Utility

Authority, SD, Unitel, Inc., War Telephone LLC, West Carolina

Rural Telephone Cooperative, Inc., West Tennessee Telephone

Company, Inc., West Wisconsin Telcom Cooperative, Inc.,

Wiggins Telephone Association, Winnebago Cooperative

Telecom Association, and Yukon Telephone Co., Inc.*


By Their Counsel

David Cosson
2154 Wisconsin Avenue, N.W.
Washington, DC 20007
Tel: 202-333-5275
dcosson@klctele.com

H. Russell Frisby, Jr.
Dennis Lane
Harvey Reiter
Stinson Morrison Hecker LLP
1775 Pennsylvania Ave., NW
Suite 800
Washington, DC 20006
Tel: 202-785-9100
rfrisby@stinson.com
dlane@stinson.com
hreiter@stinson.com

*Rural Telephone Service Co., Inc. et al. does not join Part IV. of the
brief

Rural Independent Competitive Alliance*


By Its Counsel

David Cosson
2154 Wisconsin Avenue, N.W.
Washington, DC 20007

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Appellate Case: 11-9900 Document: 01019063481 Date Filed: 05/29/2013 Page: 11

Tel: 202-333-5275
dcosson@klctele.com

H. Russell Frisby, Jr.
Dennis Lane
Harvey Reiter
Stinson Morrison Hecker LLP
1775 Pennsylvania Ave., NW
Suite 800
Washington, DC 20006
Tel: 202-785-9100
rfrisby@stinson.com
dlane@stinson.com
hreiter@stinson.com

*RICA does not join in Part IV. of the brief

tw telecom inc.*

By Its Counsel

David P. Murray
Thomas Jones
Nirali Patel
Willkie Farr & Gallagher LLP
1875 K Street, NW
Washington, DC 20006
Tel: 202-303-1000
DMurray@Willkie.com
TJones@Willkie.com
NPatel@Willkie.com

*tw telecom joins only in Part II. A of this Brief.







x

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Vermont Public Service Board


By Its Counsel

Bridget Asay
Assistant Attorney General
Office of the Attorney General
for the State of Vermont
109 State Street
Montpelier, VT 05609-1001
Tel: 802-828-3181
basay@atg.state.vt.us

*Vermont signs on to all but Part IVA.

Virginia State Corporation Commission, Intervenor*


By Its Counsel

Raymond L. Doggett, Jr., Senior Counsel
Office of General Counsel
Virginia State Corporation Commission
P.O. Box 1197
Richmond, Virginia 23218
Tel: 804-371-9671
Raymond.Doggett@scc.virginia.gov

*Virginia joins Part I. A, C, & D and Part II. B and takes no position
on the balance of the issues included in this brief.



xi

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Table of Contents:


Table of Contents








xii

Table
of
Authorities
xiii

Glossary
xvii

Argument









1

I.
Respondent’s §251 claims are





irreconcilable with the Act and the facts.


2




A. Preemption is not to be implied.



3


B.
The Order illegally requires interstate



costs to be recovered through local
service rates over which Respondent has
no jurisdiction.






5




C. Section
251(d)(3)
preserves State access


charge authority.






7

D. The Act differentiates access charges



and reciprocal compensation.



8

E.
Congress specified States arbitrate




specific intrastate §251 rates.



14

II.
Respondent lacks authority to mandate



bill-and-keep or regulate intrastate
originating
access.


17

A.
A zero rate is arbitrary and inconsistent


With
the
Act.

17

B.
FCC lacks authority over intrastate



originating
access.

22



xii

Appellate Case: 11-9900 Document: 01019063481 Date Filed: 05/29/2013 Page: 14

III. Respondent’s efforts to pre-judge ILEC



avenues for relief specified in 252(f) must
be
vacated.

24

IV. The Constitutional and due process




violations
warrant
vacatur.

25

A.
The Order unlawfully conscripts State



Commissions.






25

B.
Respondents failed to provide adequate


due
process.
27

Certificate
of
Compliance
33

Certificate
of
Service
34




xiii

Appellate Case: 11-9900 Document: 01019063481 Date Filed: 05/29/2013 Page: 15

Table of Authorities

Cases

 
AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366 (1999) ............................... 24
Chevron, U.S. A., Inc. v. NRDC, 467 U.S. 837 (1984) ............................... 1
City of Arlington v. FCC, 569 U.S. __ (2013) ................................................ 2
Core Communications v. FCC, 592 F3d 139 (D.C. Cir. 2010) .............. 12
Dolan v. United States Postal Service, 546 U.S. 481 (2006) ................... 1
Farina v. Nokia Inc., 625 F.3d 97 (3d Cir. 2010) ....................................... 4
FCC v. Fox TV Stations, Inc., 556 U.S. 502 (2009) .................................. 19
Global NAPs, Inc. v. Verizon New England, Inc.,
444 F.3d 59 (1st Cir., 2006) ........................................................................ 11
Home Box Office v. FCC, 567 F.2d 9 (D.C. 1977) ............................. 27, 28
Iowa Utilities Board v. FCC, 219 F.3d 744 (8th Cir. 2000) ............. 15, 16
Kennecott v. EPA, 684 F.2d 1007 (D.C. Cir. 1982) ................................. 30
Louisiana Public Service Commission v. FCC,
476 U.S. 355 (1986) .............................................................................. 1, 2, 25
Motor Vehicle Manufacturers Ass’n v. v. State Farm Mutual Auto
Insurance Co., 463 U.S. 29 (1983) .............................................................. 7
National Federation of Independent Business v. Sebelius,
132 S.Ct. 2566 (2012) ............................................................................ 25, 26
New Cingular Wireless v. Finley, 674 F.3d 225 (4th Cir. 2012) ......... 24
New York v. United States, 505 U.S. 144 (1992) ..................................... 26
North American Coal v. O.W.C.P., 854 F.2d 386 (10th 1988) ......... 25, 27
Owners v. Fed. Motor Carrier Administration,
494 F.3d 188 (D.C. Cir. 2007) .................................................................... 28
Pacific Bell v. Cook Telecom, Inc., 197 F.3d 1236 (9th Cir. 1999) ...... 10
Printz v. United States, 521 U.S. 898 (1997) ............................................. 26
Prometheus Radio Project v. FCC, 652 F.3d 431 (3rd Cir. 2011) .. 25, 27
Qwest Corp. v. Minnesota PUC, 684 F.3d 721 (8th Cir. 2012) .............. 4
Sangamon Valley Television Corp. v. United States,
269 F.2d 221 (D.C. 1959) ............................................................................ 27
Secretary of Labor v. Excel Mining, LLC, 334 F.3d 1 (D.C. Cir. 2003) 1
Sierra Club vs. Costle, 657 F.2d 298 (D.C. 1981) ............................. 27, 31
Smith v. Illinois Bell Tel. Co., 282 U.S. 188 (1980) ................................5, 6
U.S. v. Lachman, 387 F.3d 42 (1st Cir 2004) ............................................... 1
United States Telecom Ass’n v. FCC, 359 F.3d 554 (D.C. Cir. 2004) 24
US West v. FCC, 182 F.3d 1224 (10th Cir 1999) ...................................... 25
Vermont Yankee vs. NRDC, 435 U.S. 519 (1978) ..................................... 27
Worldcom Inc. v FCC, 288 F.3d 429 (D.C. Cir. 2002) ............................. 11

xiv

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Statutes


47 U.S.C §252(c)(2) ...................................................................... 16
47 U.S.C. §153(22). ...................................................................... 22
47 U.S.C. §201 .......................................................... 12, 21, 22, 24
47 U.S.C. §251 2, 3, 6, 7, 8, 9, 10, 11, 12, 13, 14, 19, 21, 22, 23, 24
47 U.S.C. §251(b)(5) ........ 2, 3, 6, 8, 9, 10, 11, 12, 14, 19, 21, 22, 23
47 U.S.C. §251(c) ......................................................................... 24
47 U.S.C. §251(d)(2) ................................................................. 7, 17
47 U.S.C. §251(d)(3) ......................................................... 2, 7, 8, 13
47 U.S.C. §251(f)(2) ...................................................................... 24
47 U.S.C. §251(g) ..................................................... 2, 8, 12, 13, 14
47 U.S.C. §252 ............................................................................ 15
47 U.S.C. §252(d) ................................................... 2, 4, 7, 8, 13, 14
47 U.S.C. §252(d)(2) ................................................. 2, 9, 17, 18, 21
47 U.S.C. §252(e)(5) ..................................................................... 15
47 U.S.C. §252(e)(6) ..................................................................... 14
47 U.S.C. §271 ............................................................................. 4
5 U.S.C. §553 .............................................................................. 28
66 Pa. C.S. §2251.1 ..................................................................... 26
66 Pa.C.S. §3012 ......................................................................... 26
Telecommunications Act of 1996, Pub. L. 104-104, §601(c)(1), 110
Stat. 56 (1996) ................................................................ 3, 12, 13

Other Authorities

 
Conference Report, H.R. Rep. No. 104-458, 117, 123 (1996) ............. 11
William E. Thro, That Those Limits May Not Be Forgotten: An
Explanation of Dual-Sovereignty, 12 Widener L.J. 567 (2003) ........ 25

Agency Decisions


BellSouth Telecommunications Inc. Request for Declaratory Ruling, 20
FCC Rcd 6830 (2005) ................................................................. 8
Connect America Fund et al., Report and Order and Further Notice
of Proposed Rulemaking, 26 FCC Rcd 17663 (2011) .. 2, 3, 5, 6, 11,
15, 16, 17, 18, 19, 23, 24, 25, 26, 28, 29, 30, 31
Developing a Unified Intercarrier Compensation Regime, 24 FCC
Recd 6475 (2008) ...................................................................... 11
Further Inquiry into Certain Issues in the Universal Service-
Intercarrier Compensation Transformation Proceeding, 76 Federal
Register 49401 (August 10, 2011) ............................ 27, 28, 29, 30

xv

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In the Matter of Implementation of the Local Competition Provisions in
the Telecommunications Act of 1996, et al., First Report and Order,
11 F.C.C.R. 15499 (1996) .......................... 8, 9, 10, 18, 19, 22, 23
Intercarrier Compensation for ISP Bound Traffic. 16 FCC Rcd 9151
(2001) (ISP Remand Order) ......................................................... 11



xvi

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Glossary

Access Charges
Fees charged to IXCs by LECS for exchange
access,
i.e.,
charged

for toll calls that “begin




and end in different calling areas.”
1996 Act

Telecommunications Act of 1996
Act, or 1934 Act
Communications Act of 1934, as amended
ARC

Access
Recovery
Charge
Board, Joint Board Federal-State Joint Board on Separations
BOC


Bell Operating Company
CLEC


Competitive Local Exchange Carrier
CMRS


Commercial Mobile Radio Service
FCC, Commission Federal Communications Commission
ICC
Intercarrier
Compensation
ILEC
Incumbent
Local
Exchange
Carrier
IRB
Uncited
Intervenor
Brief
Supporting






Respondent
ISP
Internet
Service
Provider
IXC
Interexchange
(or
Long
Distance)
Carrier
LEC
Local
Exchange
Carrier
PB
Petitioners
Uncited
Joint
Intercarrier

Compensation
Principal
Brief
RB


Uncited Response of Respondents to the Joint
Intercarrier
Compensation
Brief
RLEC Rate-of-Return
ILEC
Respondent

FCC, Federal Communications Commission
TELRIC

Total Element Long-Run Incremental Cost
USF
Universal
Service
Fund
VoIP
Voice
over
Internet
Protocol


xvii

Appellate Case: 11-9900 Document: 01019063481 Date Filed: 05/29/2013 Page: 19

ARGUMENT


Respondent’s Brief (RB), at 10-41, disregards the Act’s
structure1 and text,2 precedent, and a specific instruction to avoid
preemptive constructions. As Chevron, U.S.A., Inc. v. NRDC, 467
U.S. 837, 843 n.9 (1984) states:

The judiciary is the final authority on issues of statutory
construction and must reject administrative
constructions which are contrary to clear congressional
intent. If a court, employing traditional tools of statutory
construction, ascertains that Congress had an intention .
. . that intention is the law.

Respectfully, this Court: “cannot accept . . . argument[s] that
the FCC may . . . take action which it thinks will best effectuate a

1
“[I]nterpretation of a word or phrase depends upon reading
the whole statutory text, considering the purpose and context.”
Dolan v. United States Postal Service, 546 U.S. 481, 486 (2006). The
purpose of the 1996 Act was to open “local” markets, not to open
already competitive toll markets.
2
Secretary of Labor v. Excel Mining, LLC, 334 F.3d 1, 7 (D.C.
Cir. 2003) (Court prefers agency interpretations made “when the
origins of both the statute and the finding were fresh . . . over a
subsequent interpretation.”); Louisiana Public Service Commission v.
FCC
, 476 U.S. 355, 371-2 (1986) (“[T]echnical terms of art should
be interpreted by reference to the trade or industry to which they
apply.”) U.S. v. Lachman, 387 F.3d 42, 53 (1st Cir 2004) (There “are
instances where a statutory or regulatory term is a technical term of
art, defined more appropriately by reference to a particular industry
usage.”)
1 | P a g e


Appellate Case: 11-9900 Document: 01019063481 Date Filed: 05/29/2013 Page: 20

federal policy. An agency may not confer power upon itself.”3 The
issue is “whether the statutory text forecloses the agency’s assertion
of authority, or not.” City of Arlington v. FCC, 569 U.S. __ (2013)
confirms, slip op. at 9. Respondent lacks authority. The Order4
must be vacated.

I. Respondent’s


§251(b)(5)
claims are irreconcilable with

the Act and the facts.


Respondent invents a construction that cannot be squared
with the plain text because (1) §251(b)(5) is limited to traffic
exchanged between two carriers and excludes toll service; (2)
§251(d)(3) preserves State intrastate access and interconnection
authority; (3) §252(d)(2) sets a pricing standard States must use to
set rates when carriers cannot agree so Respondent cannot set a
“default” rate; and (4) §251(g) cannot justify preemption of
intrastate access rates because they were not subject to FCC
authority in 1996.



3
Louisiana, 476 U.S. at 374-5; Petitioners’ Brief (PB) at 19.
4
Connect America Fund et al., Report and Order and Further
Notice of Proposed Rulemaking, 26 FCC Rcd 17663 (2011) (Order).
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Appellate Case: 11-9900 Document: 01019063481 Date Filed: 05/29/2013 Page: 21


No authority exists for the Order’s ICC-related preemption of
State authority to set intrastate rates (access and local service) and
specific §251(b)(5) rates.5 The Order, on these issues, must be
vacated.

A. Preemption is not to be implied.



Congress imposes an explicit rule of statutory construction in
§601(c)(1): where a provision can be read in several ways, it must be
construed to avoid preemption. The FCC’s prior construction of
§251(b)(5), which predates the Order by 15+ years, reconciles
§251(b)(5) with State authority over intrastate access and complies
with §601. RB at 28-29 (1) contends that no party raised §601
below and (2) cites two inapplicable cases.
The applicability of §601(c) was raised below. See, e.g.,
Comments of the Pennsylvania Public Utilities Commission, (Aug. 24,
2011) Legal Memorandum at 20; Reply Comments of the Nebraska
Rural Independent Companies (Sept. 6, 2011) at 33; Comments of
the Nebraska Rural Independent Companies (Aug. 14, 2011), at 17;

5 Respondent’s claim Petitioners “do not challenge the need for
ICC reform or dispute the benefits of …bill-and-keep,” RB at 5, is
wrong. Petitioners and the record dispute both. But agreement on
need says nothing about what reforms are legal.
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Appellate Case: 11-9900 Document: 01019063481 Date Filed: 05/29/2013 Page: 22

Initial Comments of the National Association of Regulatory Utility
Commissioners (Apr. 18, 2011), at 13. Moreover, both cited cases
are distinguishable. Qwest Corp. v. Minnesota PUC, 684 F.3d 721,
731 (8th Cir. 2012) involved the interplay between §271 and
§601(c), where Congress granted Respondent exclusive jurisdiction
under §271, specifying no State role in setting prices, and there was
no pre-existing State law to preserve because the 1996 Act created
§271 elements. Id. at 729-30. But Congress assigned States the
responsibility to set §252(d) reciprocal compensation rates and
State access charges predate the 1996 Act, so §601(c) applies to
preserve State authority. Farina v. Nokia Inc., 625 F.3d 97, 116 (3d
Cir. 2010) started “with the basic assumption that Congress did not
intend to displace state law,” but refused to construe §601(c) to
preserve State law that was in direct conflict with existing FCC
standards. Id. at 131. No direct conflict exists here. Intrastate
access charge regimes have been in place since the mid-1980s with
no conflict with the 1934 or 1996 Act. This is precisely the
circumstance where §601(c) applies to forestall any FCC attempt to
preempt authority Congress reserved to States.


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B. The


Order

illegally requires interstate costs to be
recovered through local service rates over which
Respondent has no jurisdiction.


Respondent “sidesteps” Smith v. Illinois Bell Tel. Co., 282 U.S.
188 (1980), by contending that the Order complies with
jurisdictional separations and federal mechanisms permit carriers
to recover lost revenues. RB at 48-49. These arguments fail. The
Order requires local end-user rates for non-access services to
recover interstate costs. Respondent fails to square the
requirements of Smith and related precedent -- that cost recovery be
effectuated for amounts subject to separation -- with the Order’s
requirement that ultimately no interstate cost recovery will be
allowed.
First, the Order requires local end-user rate increases
(“benchmarks”) to obtain revenues from the federal mechanism. RB
at 47. Intercarrier compensation (ICC) costs assigned to the
interstate jurisdiction and formerly recovered through federal ICC
charges are reduced to zero. Under the new regime, with recovery
mechanisms that decline automatically over time, carriers
ultimately must recover costs assigned to the interstate jurisdiction
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through local end-user rates. Because those rates are subject to
the intrastate jurisdiction, the effect of the ICC rules is the same as
the result invalidated in Smith. Interstate costs subject to the
FCC's exclusive jurisdiction must be recovered through State rates
for intrastate services.6

Second, Respondent’s attempt to construe Smith as merely
requiring jurisdictional separations is incorrect. Smith and related
precedent link separated costs and recovery of these costs. PB at
49-53. The Order does not permit such recovery because the new
federal mechanisms are “truly temporary in nature”, Order ¶905,
and the recovery mechanism is to be eliminated “in its entirety.” Id.

Third, Respondent lacks authority to direct interstate cost
recovery through local end-user rates. Relying on §251’s grant of
federal jurisdiction over “local telecommunications competition,” RB
at 26-27, Respondent argues it may adopt a “methodology” that
requires recovery of §251(b)(5) costs through end-user rates rather
than intercarrier charges. RB at 38-39. But the dual regulatory
regime that governs local competition between carriers does not

6
The ARC presents a similar Smith violation as intrastate costs
are collected via an interstate surcharge.
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grant Respondent jurisdiction to mandate Local Exchange Carrier
(LEC) recovery of costs arising from the exchange of traffic through
local telephone rate increases.

C. Section 251(d)(3) preserves State access charge


authority.


Respondent claims the reference in §251(d)(3) to “access and
interconnection standards” is limited to unbundling of network
elements addressed in §251(d)(2). RB at 29-30. Section 251(d)(2)
“Access Standards” references “subsection (c)(3)” related to network
unbundling requirements for incumbent LECs (ILECs). In contrast,
§251(d)(3) references the “requirements of this section” (§251 in its
entirety), meaning that the reference to “access and interconnection
obligations of [LECs]” (a class of carriers larger than just ILECs) in
§251(d)(3)(A) cannot be limited to unbundling elements.
Moreover, as Respondent did not rely on this argument below,
it cannot do so now. Motor Vehicle Manufacturers Ass’n v. v. State
Farm Mutual Auto Insurance Co., 463 U.S. 29, 50 (1983).

Respondent’s reliance on a single declaratory ruling is also
misplaced. See RB at 29. The cited ruling held only that §251(d)(3)
does apply to State regulation of network elements (BellSouth
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Telecommunications, 20 FCC Rcd 6830 (2005) at ¶23) but nowhere
addresses the question of the overall scope of “access and
interconnection obligations” §251(d)(3) reserves to States.7
Respondent
claims
because
intrastate access involves
“telecommunications” exchanged with a LEC, “the statute itself
preempts states’ intrastate access charge regimes, except as
temporarily preserved by [§]251(g) .”8 This circular “argument”
effectively writes §251(d)(3)’s reservation of authority out of the
statute.

D. The Act differentiates access charges and reciprocal


compensation

Respondent’s arguments why §251(b)(5) encompasses local
and exchange access traffic must be rejected. Respondent, RB at 6,
ignores its prior interpretation,9 and contends the Court should
ignore the obvious “historical distinctions based on the interstate or
intrastate nature of the traffic.” Although Respondent argues the

7
Petitioners explained why State regulations comply with the
second and third prongs of §251(d)(3). PB at 16-19.
8
Section 251(g) does not make any reference to intrastate
access regimes.
9
In the Matter of Implementation of the Local Competition
Provisions in the Telecommunications Act of 1996, et al., First Report
and Order, 11 F.C.C.R. 15499, at 16013 ¶1034 (1996) (Local
Competition Order
).
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term “telecommunications,” is, “in no way limited to local traffic,”
RB at 13, §251(b)(5) is so limited - as confirmed repeatedly by the
FCC, Courts, and State Commissions.10 Respondent urges this
Court to ignore other terms in §251(b)(5) and overlook the fact that
a toll call does not “originate on the network facilities of the other
carrier,” (§252(d)(2)(A)(i))(emphasis added)) since the “other carrier”
is the LEC providing exchange access to the IXC providing the toll
service to the calling customer. Moreover, unlike a local call, toll
calls have three distinct parts often provided by distinct carriers:
originating access, transport, and terminating access. Unlike
reciprocal compensation, the FCC has determined that exchange
access charges were “developed to address a situation in which
three carriers … collaborate to complete a long-distance call” and in
which the IXC compensates the originating and terminating LECs.
Local Competition Order, ¶1034.
RB at 14-15 also contends that “reciprocal compensation” does
not have to be “reciprocal”, e.g., that traffic and compensation

10 The term “telecommunications” limits - not expands - the
universe of traffic subject to §251(b)(5), distinguishing
“telecommunications” from other types of traffic (e.g., information
services traffic).
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obligations do not have to flow in both directions between carriers.
However, the cited Local Competition Order did not discuss that
paging traffic can be one-way, finding only that carriers are entitled
to reciprocal compensation if they offer telephone exchange service
and exchange access, both “telecommunications.” Id., ¶¶34, 1008.
Likewise, the Ninth Circuit determined that one-way paging carriers
“terminate” traffic locally within the meaning of §251(b)(5) and then-
current FCC rules and “[t]he Act forbids originating carriers from
refusing to pay compensation to terminating carriers.” Pacific Bell
v. Cook Telecom, Inc., 197 F.3d 1236, 1241-42, 1245 (9th Cir.
1999).
Respondent, RB at 15, effectively concedes the term
“reciprocal compensation” was widely used by State regulators
before, and the FCC after 1996, to cover only local traffic exchanged
by local competitors that terminated locally. Respondent suggests
the accepted meaning of “reciprocal compensation” at enactment
should be ignored. Courts disagree.11 That accepted meaning
cannot be ignored, since it is clear from both the statute and

11
See citations, supra, n.2.
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legislative history that Congress understood the difference between
access charges and reciprocal compensation.12

Respondent erroneously claims, RB at 16-17, to have “fully
explained that change[] [departing from its prior statutory analysis]
more than a decade ago” in the 2001 ISP Remand Order. In
remanding the cited 2001 FCC order in 2002 because of its flawed
legal analysis, the Court did not “decide the scope of the
‘telecommunications’ covered by §251(b)(5).” Worldcom Inc. v FCC,
288 F.3d 429, 434 (D.C. Cir. 2002). Subsequent decisions affirmed
State jurisdiction to set rates for calls that terminate outside the
local calling area, but within the State.13

The conflicting legal analyses of ISP traffic that culminated in
Respondent’s 2008 decision,14 cannot support the action taken in
the Order. The Court found dial-up internet traffic was
jurisdictionally interstate and because it involves interstate

12 See, PB at 11 n.8 quoting Conference Report, H.R. Rep. No.
104-458, 117, 123 (1996) (Senate explanation of its §251 proposal
covered reciprocal compensation and explained “nothing in this
section is intended to affect the Commission's access charge rules.”)
13
See, e.g., Global NAPs, Inc. v. Verizon New England, Inc., 444
F.3d 59, 72 (1st Cir. 2006) (“ambiguity is not enough to preempt
state regulation here.”)
14
Developing a Unified Intercarrier Compensation Regime, 24 FCC
Recd 6475 (2008).
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communications delivered through local calls “terminating” locally;
internet traffic simultaneously implicates the regimes of “both §201
and of §§251–252.” 15 Unlike dial-up internet traffic, intrastate toll
calls are jurisdictionally intrastate and not “delivered” though local
calls otherwise subject to reciprocal compensation. Also unlike
dial-up internet traffic, intrastate toll calls do not originate and
terminate in the same local calling area. Under Core, intrastate toll
(and associated access charge regimes) fall outside of the
intersection between §§251-52 and §201.
Finally,
RB at 18, before instructing the Court it should treat
§601(c)(1) as a nullity, Respondent argues Petitioners’ “narrow
reading” of §251(b)(5) renders §251(g) a nullity. But Petitioners’
reading does not make §251(g) superfluous. Indeed, the DC Circuit
rejected this same FCC argument “finding that §251(g) was ‘worded
simply as a transitional device’ and thus could not be relied on for
authority to promulgate new regulations.”16 Any examination of
§251(g) shows it preserves only the specified requirements that
applied to carriers “on the date immediately preceding the date of

15
Core Communications v. FCC, 592 F3d 139, 143-44 (D.C. Cir.
2010.
16
Id. at 142.
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enactment . . . under any court order, consent decree, or regulation,
order, or policy of the Commission.” (Emphasis added). Respondent
claims that the “very existence of [§]251(g)” suggests that Congress
envisioned interstate and intrastate reform.” RB at 18. But the
reference to the “Commission’s” regulations, orders, or policies
suggests that only interstate reform was anticipated.

Before passage of the 1996 Act, Respondent did not set
reciprocal compensation rates, nor have they ever had a role in
intrastate rate design as States oversaw implementation of
intrastate exchange access rates. LECs, whether subject to any
antitrust consent decrees (See PB at 23 n. 21) or not, do not pay
intrastate access charges “under” any such decree. State access
charge regimes are products of State law expressly preserved at
§251(d)(3) and elsewhere in the 1996 Act. Under Respondent’s
interpretation, §251(d)(3) is both superfluous and violates
§601(c)(1). As Core states,17 §251(g) is, on its face, a reservation of
existing federal authority, not a grant of new.

Respondent contends “if the absence of an express reference to
intrastate access in [§]251(g) were read to imply anything, it would

17
Id. at 142.
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be that Congress intended the broad language of [§]251(b)(5) to
displace the intrastate access regime immediately – without a
transitional period.” RB at 19. This post hoc and illogical
construction rests on the flawed assumption that §251(b)(5) is as
broad as the agency chooses which conflicts with the specific text of
§251(g).

E. Congress specified States arbitrate specific


intrastate §251(b)(5) rates.

Respondent erroneously suggests, RB at 88, that adoption of
bill-and-keep is consistent with the pricing requirements of §252(d).
But Congress directed that rates for §251(b)(5) traffic are set
through carrier negotiations, and if such negotiations fail, pursuant
to State arbitration.18 Section 252(d) unequivocally applies “[f]or
the purposes of compliance by an [ILEC] with [§]251(b)(5).” A State
may not find arbitrated rates just and reasonable unless they are
reciprocal and meet the pricing standard.
Respondent attempts to evade this jurisdictional limitation by
claiming it only established a methodology, not specific rates. RB at
14. This characterization places form over substance. Respondent

18 These arbitration decisions are appealable to a U.S. district
court, not to the FCC. 47 U.S.C. §252(e)(6).
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established a series of interim rates with an end-rate of zero. Under
the Order, there is nothing left for companies to negotiate or for
States to arbitrate as required by §252. If Congress intended to
allow the Order’s preemptive approach, it would not have limited
Respondent’s rate-setting role to where States “fail to act.” 47
U.S.C. §252(e)(5). While Respondent assumes, with no explicit
record justification, that “most” of the traffic is not controlled by
subsection 252(c) and (d), RB at 44-45, the Court cannot ignore
§252’s pricing requirements for traffic that is subject to §252.
Claims these “interpretations” are necessary to avoid “absurd
consequences/balkanization” (IRB at 13-14) are policy arguments
that can be made to Congress but have no bearing on interpreting
the existing statute. Nothing in the Act supports finding that
Congress intended to require uniform intercarrier compensation
rates.
Nor can the agency avoid application of Iowa Utilities Board v.
FCC, 219 F.3d 744 (8th Cir. 2000) (Iowa). IRB at 15-16. The Eighth
Circuit vacated the proxy prices set by the FCC – including the
transitional reciprocal compensation rates pending final rates to be
set by States – for several reasons, including because they were
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unlawful under the Supreme Court’s holding that reserved to States
the ability to regulate interconnection prices under §252(c)(2). Id. at
757 (vacating 51.707). Iowa precludes the FCC’s bill-and-keep
prescription.
Respondent also claims that the statute’s “reciprocity”
provision does not require that rates be paid by the interconnecting
carrier, but can instead be recovered from end-users. RB at 33-34.
“Reciprocal end-user rates” is an oxymoron; end-users by definition
do not “reciprocate” traffic. Moreover, the logical consequence of
Respondent’s argument is that States “arbitrate” such
arrangements, a concept both impractical and obviously not the
procedure Congress intended. Instead, the FCC arrogates to itself
the power to regulate the end-user “Access Recovery Charge” (ARC)
which includes a local rate floor requirement that intrudes on
States’ reserved authority to set end-user local service rates. Order,
¶852.



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II. Respondent lacks authority to mandate bill-and-keep or


regulate intrastate originating access.


Assuming arguendo the FCC has authority to adopt a uniform
ICC regime that includes intrastate traffic, a zero rate is unlawful
and the FCC cannot regulate intrastate originating access.
A.

A zero rate is arbitrary and inconsistent with the Act.




Respondent’s invocation of §252(d)(2)(B)(i) to justify a zero rate
is contrary to the evidence in the record and inconsistent with the
statutory text. RB at 33; IRB at 8. Respondent seeks to dismiss
concerns about its zero rate for potentially imbalanced traffic with a
blithe assurance that the difference in incremental19 termination
costs is “very near $0,” yet the record shows costs are above zero
and significant. Respondent’s selective quote of §252(d)(2)(B), RB at
33, cannot supplant the fact that bill-and-keep arrangements are
limited by the Act to those “that afford the mutual recovery of
costs through the offsetting of reciprocal obligations, including
arrangements that waive mutual recovery (such as bill-and-keep
arrangements).” §252(d)(2)(B)(i) (emphasis added). Until the Order,

19
For smaller ILECs, just using “incremental costs” is
inconsistent with Respondent’s Part 69 rules.

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Respondent correctly interpreted §252(d)(2)(B) to permit bill-and-
keep only when balanced traffic flows ensure “the mutual recovery
of costs through the offsetting of reciprocal obligations.” Local
Competition Order, ¶1116 and n.2721. Congress meant “bill-and-
keep” to mean that one carrier could recover costs from another
through the mutual exchange of equal and “offsetting” amounts of
termination services in lieu of compensation.20 But the Order
defines “bill-and-keep” to mean something radically different—a
prohibition on one carrier collecting compensation from another
carrier, regardless of whether one carrier would be imposing costs
on the other through unequal traffic flows.
In
the
Local Competition Order, at ¶1112, Respondent
recognized what the statute unambiguously provides: “when States
impose symmetrical rates for the termination of traffic, payments
from one carrier to the other can be expected to be offset by
payments in the opposite direction when traffic from one network to
the other is approximately balanced.” Respondent found

20 “As Congress recognized, bill-and-keep arrangements allow
each carrier compensation “in-kind” in the form of access to the
other carrier's network.” Local Competition Order, ¶ 1116 and n.
2721.

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mandatory bill-and-keep arrangements in asymmetrical traffic
settings were not consistent with §252(d)(2)(A). Id. Respondent now
rejects this analysis by claiming carriers can recover these costs
from end-users. RB at 33-35. But that fails to rebut the analysis,
supra, and in PB at 33-35. Bill-and-keep fails the statutory
requirement that costs be recovered in an equal amount and
exchanged. See also PB at 19-21. While the Commission can
change its mind, it must identify sound reasons to do so. FCC v.
Fox TV Stations, Inc., 556 U.S. 502, 515 (2009). The agency fails to
provide any sound reasons for its actions.

Respondent would then render §251(b)(5) a nullity by setting a
termination rate of zero, even when traffic is imbalanced.

Respondent concedes the incremental cost is positive21 but claims it
is “very near $0.” RB at 35-36. This “conclusion,” based on a
“hypothetical calculation” from “one study” (Order, ¶752), glosses
over substantial record evidence that incremental costs are above
zero. See, e.g., Reply Comments of the Wisconsin PSC (May 19,

21 Respondent previously stated that “as long as the cost of
terminating traffic is positive, bill-and-keep arrangements are not
economically efficient because they distort carriers' incentives.”
Local Competition Order, ¶1112.
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2011) at 4; Comments of XO Communications (Aug. 25, 2011) at 5-6;
Comments of U.S. TelePacific (Apr. 1, 2011) at 38-42 (summarizing
evidence that termination costs exceeds $0.0007/minute). One
proposal endorsed a $.0007 rate.22 Many pre-Order State-set rates
were higher.23 Given the massive volume of traffic exchanged
(315.7 billion ILEC interstate switched access minutes in 2008)24
that rate is commercially and legally significant. Respondent’s
declaration of a zero rate is arbitrary. It cannot ignore record
evidence that such rates are clearly above zero and significant.

Additionally, Respondent erroneously claims bill-and-keep is
consistent with “models used for wireless and IP networks.” RB at
35. First, this policy argument is irrelevant to statutory
interpretation. Second, the record rebuts Respondent’s conclusion
that bill-and-keep is widely used in IP and wireless networks where
traffic is imbalanced. Verizon, a leading IP network provider, stated
that "networks generally enter into settlement-free arrangements for

22
Letter from Robert W. Quinn, Jr., AT&T, et al. to Marlene Dortch,
FCC, WC Docket 10-90 et al., at 9 (July 29, 2011) (ABC Plan);
Comments of CTIA-The Wireless Trade Association
, WC Docket 10-90
et al., at 3, 13 (Feb. 24, 2012)(supporting the $0.0007 proposal).
23
Letter from Brad Mutschelknaus, Counsel to NuVox, to Marlene
Dortch, FCC, WC Docket 10-90 et al., (Oct.2, 2008) Exh. 2.
24
ABC Plan, White Paper Attachment at 23.
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Internet traffic only where the traffic flows between the networks are
roughly in balance" and that where traffic is "significantly
asymmetrical, it is common for one provider to pay for the exchange
of traffic, either through paid peering or transit."25 Wireless carriers
similarly do not always rely on bill-and-keep arrangements because
of traffic imbalances.26 In the wireline context, traffic imbalance is
well documented.27

Intervenors claim Respondent has authority to regulate ICC
charges for everything but “the narrow category of intrastate traffic”
subject to §252(d)(2). IRB at 10-13. That claim understates the
scope of §252(d)(2), which under Respondent’s view of §251(b)(5)
necessarily includes local and intrastate access charges.


25
See Comments of Verizon and Verizon Wireless, WC Docket 10-
90 et al., at 14 (April 18, 2012) see also Reply Comments of
Windstream Communications, Inc.
, WC Docket 10-90 et al., at 23
(Mar. 30, 2012) (discussing commercial arrangements for IP traffic
exchange in the typical situation where traffic is or becomes
imbalanced).
26
See, e.g., Reply Comments of Verizon and Verizon Wireless, WC
Docket 10-90 et al., at 15 (Apr. 18, 2011) (Verizon Wireless “entered
into a number of publicly filed interconnection agreements that
established terminating rates at or below $0.0007 per minute”).
27
See Comments of NTCA, WC Docket 10-90 et al., at 40 (Oct.
26, 2008) (a single rate structure cannot account for out-of-balance
traffic).
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Regardless, §201 demands “just and reasonable” rates but a zero
rate where traffic is imbalanced fails that test.28

B. FCC lacks authority over intrastate originating

access.




Respondent’s efforts to expand §251(b)(5) to preempt
originating intrastate access charges also conflicts with the
sections’ explicit reference to “transport” and “termination.” The
Local Competition Order, at ¶1039-40, defined both transport and
termination “for purposes of §251(b)(5)” explicitly in terms of
terminating traffic. “[T]ransport” means “the transmission of
terminating traffic subject to §251(b)(5) from the interconnecting
point between the two carriers to the terminating carrier’s end office
switch that directly serves the called party.” Id., ¶1039.

“[T]ermination” means “the switching of traffic that is subject to
§251(b)(5) at the terminating carrier’s end office switch . . . and
delivery of that traffic from that switch to the called party’s
premises.” Id., ¶1040.



28 Section 201 by definition only applies to traffic that meets the
47 U.S.C. §153(22) definition of “interstate communications.”
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Respondent now asserts those definitions were not intended
“to narrow the scope of §251(b)(5) traffic.” RB at 22. Yet neither
“transport” nor “termination,” as so defined can refer to originating
traffic if Respondent is correct that “[n]either in form nor substance
does the Order repeal those definitions.” RB at 22. Which means
§251(b)(5) cannot confer authority to eliminate intrastate originating
access charges.

Respondent previously acknowledged that §251(b)(5) “does not
address charges payable to a carrier that originates traffic.” Local
Competition Order, ¶1042; Order, ¶817. There, the FCC interpreted
this silence to indicate that an originating LEC may not charge a
CMRS provider or other carrier for LEC-originated local traffic.
Courts accepted that interpretation within the existing ICC
paradigm premised on Respondent’s prior view that §251(b)(5) was
limited to local traffic. See IRB at 16-17. However, given the FCC’s
new interpretation, the cases cited by Intervenors lose
persuasiveness when divorced from the FCC’s prior finding: that the
originating LEC recovers the costs of origination in a local call flow
from its end-user customer that places the call. Neither the Order
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nor the briefs explain how §251(b)(5) confers authority to prohibit
originating access charges.

III. Respondent’s efforts to pre-judge ILEC avenues for relief


specified in 252(f) must be vacated.


Regardless of whether Respondent possesses §201 authority to
promulgate “rules to guide State judgments,” the §251(f)(2)
judgment belongs to States. AT&T Corp. v. Iowa Utils. Bd., 525 U.S.
366, 385 (1999). Yet the Order goes beyond providing guidance,
warning States that modifying the FCC’s pricing formula is
inconsistent with the “public interest.” Order, ¶824. The United
States Telecom Ass’n v. FCC, 359 F.3d 554 (D.C. Cir. 2004) (USTA II)
decision is inapplicable, RB at 56-57, since that decision concerned
the FCC’s §251(c) impairment findings and afforded parties the
right to petition the FCC for a declaratory ruling preempting a State
unbundling rule. The Court found the FCC had only predicted a
result as being “‘unlikely’ to be found consistent with the Act,” but
had taken no preemptive action, USTA II, 359 F.3d at 594.

That Court’s finding rested on the proposition that the FCC
could overrule a State unbundling decision. The duty to decide
§251(f)(2) petitions, in contrast, falls exclusively to States. PB at 48.
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The statement in ¶824 is more than mere guidance as it strips away
State §251(f)(2) authority to modify the FCC’s pricing formula. New
Cingular Wireless v. Finley, 674 F.3d 225, 249-50 (4th Cir. 2012).
This “warning” is an overreach to dissuade States from exercising
the authority delegated by Congress and should be vacated.

IV. The Constitutional and due process violations warrant
vacatur.




Federalism29 limits Congress and agency action.30
Constitutional and due process challenges are reviewed de novo.31
Rules violating due process are vacated.32

A.


The Order unlawfully conscripts State Commissions.



Respondent asserts plenary authority over all
telecommunications notwithstanding federalism limits in statute
and precedent. Petitioners challenge more than just the Order’s
infidelity to the Act: the Order constitutes coercion and imposes
regulatory mandates violating federalism. Compare RB at 2, 12 and

29 William E. Thro, That Those Limits May Not Be Forgotten: An
Explanation of Dual-Sovereignty,
12 Widener L.J. 567 (2003)
30
National Federation of Independent Business v. Sebelius, 132
S.Ct. 2566, 2601-09 (2012) (NFIB).
31
North American Coal v. O.W.C.P., 854 F.2d 386, 388 (10th
Cir.1988); US West v. FCC, 182 F.3d 1224, 1231 (10th Cir 1999).
32
Prometheus Radio Project v. FCC, 652 F.3d 431, n. 25 (3rd Cir.
2011).
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65 with NFIB, 132 S. Ct. at 2602-06 and Louisiana, 476 U.S. at
368-79.

Respondent unlawfully “conscript[s] states into the [agency’s]
national bureaucratic army” and “require[s] the states to regulate”
by (1) replacing State laws with federal rules and rates, Compare RB
at 64 and Order, ¶¶35, 575, 609 and 776 with New York v. United
States, 505 U.S. 144, 174-75 (1992) (New York) and 66 Pa. C.S.
§2251.1; (2) requiring States to certify carrier compliance with
federal requirements, Compare Order, ¶¶609, 880, and 896 with
Printz v. United States, 521 U.S. 898, 933 (1997); (3) divorcing
intrastate rates-setting from political accountability, Compare
Order, ¶776 with NFIB, 132 S.Ct. at 2601-2609; (4) mandating
State-set network edges, Compare Order, ¶771 with New York, 505
U.S. at 178; and (5) imposing a zero rate on intrastate
telecommunications. Compare Order, ¶¶35, 94, 788, 951, and 975
with 66 Pa.C.S. §§3012; 66 Pa.C.S. §2251.1. The Order is ultra
vires because it constitutes coercion akin to undue influence using
federal spending portrayed as conditions for support that are
actually mandates States and carriers have no choice but to follow.
Compare RB at 2-3 with NFIB, 132 S.Ct at 2604-05.
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Appellate Case: 11-9900 Document: 01019063481 Date Filed: 05/29/2013 Page: 45


B.


Respondent failed to provide due process

.


Respondent fails to rebut Petitioner’s argument that it violated
due process by pointing to the large record as if due process were
measured in pounds. RB at 58-59. Due process consists of notice
and a meaningful opportunity to be heard. Vermont Yankee vs.
NRDC, 435 U.S. 519 (1978). Ex Parte is prohibited in adjudications
but permitted in rulemakings. Sierra Club v. Costle, 657 F.2d 298,
400 (D.C. 1981) (Sierra). Statements are not adequate public
notice. North American Coal v. O.W.C.P., 854 F.2d 386, 388 (10th
1988); Prometheus Radio v. FCC, 652 F.3d 431, 446 (3rd 2011).
Prior FCC administrative practices have earned appellate reproach.
Sangamon Valley Television Corp. v. United States, 269 F.2d 221,
224 (D.C. 1959); Home Box Office v. FCC, 567 F.2d 9, 53, 55-56
(D.C. 1977).

Respondent points to 650 filings and 400 meetings as if
quantity establishes adequate notice. RB at 58-59. Petitioners
challenge the adequacy of the August 3, 2011 FCC Further Inquiry
into Certain Issues in the Universal Service-Intercarrier Compensation
Transformation Proceeding, 76 Federal Register 49401 (August 10,
2011)(ABC Notice). The industry’s July 29th ABC Plan was noticed
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Appellate Case: 11-9900 Document: 01019063481 Date Filed: 05/29/2013 Page: 46

August 3rd. However, that notice offered no proposed rules and no
statement of agency views. Compare Owners v. Fed. Motor Carrier
Administration, 494 F.3d 188, 209 (D.C. Cir. 2007); Home Box Office
v. FCC, 567 F.2d 9, 36 (D.C. 1977).

Respondent cites four notices in defense. But, that three
notices issued before the ABC Notice cannot cure the ABC Notice
deficiencies. The
ABC Notice required comments in 21 days
(August 24) and replies 14 days later (September 6). Routinely, on
complex items, the agency sets 30 and 45-day comment cycles. The
FCC and others then inundated the record with ex parte
submissions up to, and on, the blackout date of October 21. The
FCC adopted the Order October 27th but the text was not released
until November 18.
Assuming
arguendo the ABC Notice was adequate, the
truncated filing periods and ex parte practice precluded any
meaningful opportunity to be heard. Respondent’s exculpatory ex
parte rules, which allow limited responses a day or two after the
“sunshine” blackout for filings made near that deadline, cannot
remedy these violations. RB at 61-62. The frequency, intensity and
scope of ex parte submissions increased as the October 21 blackout
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Appellate Case: 11-9900 Document: 01019063481 Date Filed: 05/29/2013 Page: 47

loomed. The plethora of filings on the October 21 blackout, just six
days before the Order’s adoption October
27 provided no
meaningful opportunity to be heard.

From the end of the comment period (September 7) to the
blackout (October 21), there were about 680 filings. Carriers and
associations filed hundreds, often containing significant
quantitative or policy analysis. Some were confidential and only
redacted versions were publicly available. Approximately 354 were
filed the last week before blackout, i.e., between October 14th and
21st. Over 100 were filed on October 21st alone. No affected
stakeholder could possibly have addressed all those ex partes in the
time allowed. Nor is it likely the FCC decision-makers would have
given all the responses equal attention. The submission of 100
filings on October 21, the failure to post 8 until October 24, and
timing of the adoption of the October 27 Order precluded a
meaningful opportunity to be heard. Given the volume and
complexity of the filings, the truncated period from ABC Notice
(August 3) to the end of comment period (September 7) and up to
the blackout (October 21) provided no meaningful opportunity to be
heard.
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Stakeholder submissions aside, the agency itself violated due
process by inserting over 100 items into the record, including an
analysis of mobile service, just before the blackout deadline: 35 on
October 7, 63 on October 17, and 16 more items two days before
the October 21 blackout. See, Kennecott v. EPA, 684 F.2d 1007,
1019 (D.C. Cir. 1982). (Placing economic forecast data in the record
one week before final regulations issue is reversible error.)

The FCC also violated due process by relying on ex parte
ratemaking and holding company submissions filed just before
October 21 in the Order. Some stakeholders apparently had
foreknowledge of the Order on circulation sufficient to file
responsive alternatives that the Order adopts. For example, an
October 20 Verizon ex parte addressed ARC surcharges by holding
companies. Holding company surcharges are not mentioned in the
ABC Notice but were included in the Order. ARCs are surcharges on
consumers that fund partial recovery of lost revenues for some
carriers but deny it to others. Compare ABC Notice and Order at
¶910 with Letter from Chris Miller, Verizon to Marlene Dortch, FCC,
WC Docket 10-90 et al. (October 20).
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Other appellees engaged the FCC on rates/preemption based
on the similar foreknowledge. Verizon addressed VoIP jurisdiction,
a matter under adjudication in Docket No. 10-60, in October 18
and 21 filings. See, e.g., Letter from Chris Miller, Verizon to Marlene
Dortch, FCC, WC Docket 10-90 et al. (October 18, 2011) (Verizon
October 18 Ex Parte). An AT&T ex parte posted October 20 also
addressed the legality of FCC regulation of VoIP and rates, matters
under adjudication in Docket No. 10-60.33 The October 27 decision
adopted these October 21 ex partes virtually in toto. Only vacatur
can remedy this disregard for due process.

Respondent erred in allowing ex parte submissions in this
rulemaking addressing issues disputed in open adjudicatory
proceedings. Compare Sierra, 657 F.2d at 400 nn. 500-502 (D.C.
Cir 1981) with Order, ¶975. Ex parte submissions filed close to the
blackout date addressed preemption and rates, including the
disputed VoIP preemption. Compare RB at 61-63 and Verizon
October 18 Ex Parte, AT&T Ex Parte, and another Verizon filing

33
Letter from Heather Zachary, for Verizon et al., to Marlene
Dortch, FCC, WC Docket 10-90 et al. (October 19, 2011) (AT&T Ex
Parte
).
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October 20th34 with Order, ¶951 (preemption with new VoIP rules
and rates) and 975 (adjudication between Global Naps and three
states involving VoIP) and Sierra, 657 F.2d at 400 and nn. 500-02.

Such error must be corrected or it will become standard
practice and produce more arbitrary decisions. No incentives will
exist to disclose positions in formal filings. Instead, filers can wait
until just before the blackout and inundate the record with ex
partes. This denies due process. It is detrimental to judicial review
because no Court can determine if the agency’s actions were
reasonable or provided proper protections to stakeholders. Vacatur
is the only proper remedy. Respectfully submitted,


On behalf of Joint Petitioners and Intervenors listed inside
the
cover.



BY: /s/ James Bradford Ramsay

James
Bradford
Ramsay
General
Counsel
National
Association
of
Regulatory Utility Commissioners


1101 Vermont Avenue, Suite 200
Washington,
DC
20005
Tel.
202.898.2207
jramsay@naruc.org

May 29, 2013

34
Letter from Chris Miller, Verizon to Marlene Dortch, FCC, WC
Docket 10-90 et al. (October 20, 2011)
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Appellate Case: 11-9900 Document: 01019063481 Date Filed: 05/29/2013 Page: 51

CERTIFICATE OF COMPLIANCE


Certificate of Compliance With Type-Volume Limitations,

Typeface Requirements, Type Style Requirements, Privacy

Redaction Requirements, and Virus Scan


1. This filing complies with the type-volume limitation of the
Amended First Briefing Order because it contains 5951, excluding
the parts of the filing exempted by Fed. R. App. P. 32(a)(7)(B)(iii).

2. This filing complies with the typeface requirements of Fed. R.
App. P. 32(a)(5) and 10th Cir. R. 32(a) and the type style
requirements of Fed. R. App. P. 32(a)(6) because this filing has been
prepared in a proportionally spaced typeface using Microsoft Word
2010 in 14-point Bookman Old Style font.

3. All required privacy redactions have been made.

4. This filing was scanned for viruses with Symantec Endpoint
Protection, version 11.0.6200.754, updated on May 29, 2013 r3 and
according to the program is free of viruses.


/s/ James Bradford Ramsay


May 29, 2013


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Appellate Case: 11-9900 Document: 01019063481 Date Filed: 05/29/2013 Page: 52

CERTIFICATE OF SERVICE



I hereby certify that, on May 29, 2013, consistent with the
Court’s October 17, 2012 filed “Order Governing Procedures for the
Electronic Filing of All Briefs in the Consolidated Proceeding,” I
caused the foregoing document to be sent electronically to
FCC_briefs_only@ca10.uscourts.gov in Adobe format with the
subject line containing the 11-9900 case number and specifying
that this is the Joint Uncited Intercarrier Compensation Reply Brief
of Petitioners. I also certify, that, consistent with that October
order, this document will be furnished through ECF electronic
service to all parties in this case through a registered CM/ECF
user. This document is available for viewing and downloading on
the CM/ECF system.

/s/ James Bradford Ramsay

May 29, 2013



34 | P a g e


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