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New Cingular, et al. v. Edward Finley, et al., No. 10-2221 (4th Cir.)

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Released: October 20, 2011
Appeal: 10-2221 Document: 73 Date Filed: 10/20/2011 Page: 1 of 19
AMICUS BRIEF FOR THE FEDERAL COMMUNICATIONS COMMISSION
IN SUPPORT OF NEITHER PARTY
IN THE UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

NOS. 10-2221 (L) & 10-2243

NEW CINGULAR WIRELESS PCS, LLC, ET AL.,
PLANTIFFS-APPELLANTS,
V.
EDWARD S. FINLEY, JR., ET AL.,
DEFENDANTS-APPELLEES.

ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA


AUSTIN C. SCHLICK
GENERAL COUNSEL

PETER KARANJIA
DEPUTY GENERAL COUNSEL

RICHARD K. WELCH
DEPUTY ASSOCIATE GENERAL COUNSEL

JAMES M. CARR
COUNSEL

FEDERAL COMMUNICATIONS COMMISSION
WASHINGTON, D.C. 20554
(202) 418-1740


Appeal: 10-2221 Document: 73 Date Filed: 10/20/2011 Page: 2 of 19

TABLE OF CONTENTS

Table of Contents .............................................................................................. i
Table of Authorities.......................................................................................... ii
Background .......................................................................................................2
Discussion .........................................................................................................5
Conclusion.......................................................................................................12
i

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TABLE OF AUTHORITIES

CASES


Mountain Commc'ns, Inc. v. FCC, 355 F.3d 644
(D.C. Cir. 2004).............................................................................................8
Piney Run Pres. Ass'n v. County Comm'rs of
Carroll County, 268 F.3d 255 (4th Cir. 2001) ............................................12
Qwest Corp. v. FCC, 252 F.3d 462 (D.C. Cir. 2001) .......................................8
Reiter v. Cooper, 507 U.S. 258 (1993) ...........................................................12
Talk America, Inc. v. Michigan Bell Tel. Co., 131 S.
Ct. 2254 (2011)..............................................................................................9
United States v. Western Pac. R.R. Co., 352 U.S. 59
(1956) ..........................................................................................................12
Z-Tel Commc'ns, Inc. v. FCC, 333 F.3d 262 (D.C.
Cir. 2003).......................................................................................................6

ADMINISTRATIVE DECISIONS


Application by Verizon Maryland Inc., 18 FCC Rcd
5212 (2003) ...................................................................................................6
Application of Verizon Pennsylvania, Inc., 16 FCC
Rcd 17419 (2001), aff'd, Z-Tel Commc'ns, Inc. v.
FCC,
333 F.3d 262 (D.C. Cir. 2003).............................................................6
Implementation of the Local Competition
Provisions in the Telecommunications Act of
1996
, 11 FCC Rcd 15499 (1996) ....................................................... 8, 9, 10
Metrocall, Inc. v. Concord Tel. Co., 17 FCC Rcd
2252 (2002) ...................................................................................................7
Mountain Commc'ns, Inc. v. Qwest Commc'ns Int'l,
Inc., 17 FCC Rcd 15135 (2002), vacated in part,
Mountain Commc'ns, Inc. v. FCC,
355 F.3d 644
(D.C. Cir. 2004).............................................................................................7
Texcom, Inc. v. Bell Atlantic Corp., 17 FCC Rcd
6275 (2002) ...................................................................................................6
ii

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TSR Wireless, LLC v. U S West Commc'ns, Inc., 15
FCC Rcd 11166 (2000), petitions for review
denied, Qwest Corp. v. FCC,
252 F.3d 462 (D.C.
Cir. 2001).......................................................................................................7

STATUTES AND REGULATIONS


47 C.F.R. 51.505(b)........................................................................................3
47 U.S.C. 251(b)(5)........................................................................................3
47 U.S.C. 251(f)(2) ........................................................................................4
47 U.S.C. 252 .................................................................................................2
47 U.S.C. 252(d)(2)(A) ..................................................................................3

OTHERS


News Release, FCC Announces Tentative Agenda
for October Open Meeting (released Oct. 6,
2011), available at
http://transition.fcc.gov/Daily_Releases/Daily_
Business/2011/db1006/DOC-310258A1.pdf ..............................................11



iii

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IN THE UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

NOS. 10-2221 (L) & 10-2243

NEW CINGULAR WIRELESS PCS, LLC, ET AL.,
PLANTIFFS-APPELLANTS,
V.
EDWARD S. FINLEY, JR., ET AL.,
DEFENDANTS-APPELLEES.

ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA

AMICUS BRIEF FOR THE FEDERAL COMMUNICATIONS COMMISSION
IN SUPPORT OF NEITHER PARTY

By letter dated September 29, 2011, this Court invited the Federal
Communications Commission ("FCC") to file an amicus brief "setting forth
its views" on these cases "and how they ought to be resolved." In response to
the Court's invitation, the FCC respectfully submits this amicus brief. As
explained below, the FCC has not directly ruled on the precise issues raised
by these cases. No prior FCC order has addressed whether the originating
carrier or the terminating carrier is responsible for paying transit charges to an
intermediate carrier under the facts presented here. Nor has the FCC clearly
opined on whether the Communications Act authorizes state commissions to

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suspend or modify the application of federal pricing requirements to small
rural telephone companies.

BACKGROUND

This case concerns a dispute involving two providers of wireless
telecommunications service (AT&T Mobility and Verizon Wireless) and
three rural local exchange carriers ("RLECs") in North Carolina (Ellerbe
Telephone Company, Randolph Telephone Company, and Mebtel, Inc.). The
RLECs' networks are not directly interconnected with the networks of the
wireless service providers. Instead, the RLECs have opted for an indirect
interconnection arrangement. Under this arrangement, any telephone call
placed by an RLEC customer to a customer of AT&T Mobility or Verizon
Wireless is carried from the originating RLEC network to the terminating
wireless network via the network of an intermediary local exchange carrier
(in this case, AT&T). The primary question raised by this appeal is: When
such a call is made, which carrier the RLEC or the wireless service provider
pays AT&T's transit charges for conveying the call from the RLEC
network to the wireless network?
The parties presented this question to the North Carolina Utilities
Commission ("NCUC") in an arbitration proceeding pursuant to section 252
of the Communications Act, 47 U.S.C. 252. In 2008, the NCUC ruled that
2

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the terminating wireless carriers bear responsibility for paying AT&T's
transit charges for calls that originate on the RLECs' networks, traverse
AT&T's intermediate network, and terminate on the wireless carriers'
networks. Final Arbitration Order at 18-23 (JA 215-20). The NCUC further
concluded that the wireless providers could seek reimbursement from the
RLECs for these transit charges through reciprocal compensation
1
arrangements. Final Arbitration Order at 14 (JA 211).
The NCUC determined that the obligation to pay transit charges
depends on the location of the physical point of interconnection ("POI")
between the originating and terminating carriers. In assigning financial
responsibility to the wireless providers, the NCUC designated a single POI
"located on the RLECs' networks." Final Arbitration Order at 13 (JA 210).
For purposes of this analysis, the NCUC deemed the transit network a
"virtual part" of the wireless providers' own networks. Id.

1 Section 251(b)(5) of the Communications Act imposes on all
telecommunications carriers a "duty to establish reciprocal compensation
arrangements for the transport and termination of telecommunications." 47
U.S.C. 251(b)(5). "For the purposes of compliance by an incumbent local
exchange carrier with section 251(b)(5)," the statute establishes pricing
requirements in section 252(d)(2). 47 U.S.C. 252(d)(2)(A). And the FCC's
rules currently prescribe a cost-based methodology known as the "total
element long-run incremental cost" (TELRIC) to implement those pricing
requirements. See 47 C.F.R. 51.505(b).
3

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Pursuant to section 251(f)(2) of the Communications Act, 47 U.S.C.
2
251(f)(2), the NCUC also modified the requirement that the RLECs set
their reciprocal compensation rates in accordance with the statute's cost-
based pricing standard and the FCC's implementing rules. Notwithstanding
that requirement, the NCUC ruled that "the RLECs are not required to
perform strict TELRIC studies to establish reciprocal compensation rates, and
the rates proposed for reciprocal compensation do not have to comply with all
of the requirements set forth in Section 252(d) of the Act and related FCC
rules." Final Arbitration Order 27 (JA 224).
AT&T Mobility and Verizon Wireless sought review of the NCUC's
rulings in federal district court. Those wireless carriers contended that the
NCUC erred in requiring them to pay the transit charges associated with calls
that originate on the RLECs' networks, traverse AT&T's network, and
terminate on the wireless networks. They also argued that section 251(f)(2)
of the Communications Act does not authorize the NCUC to suspend or
modify the pricing requirements imposed on the RLECs by section 252(d)(2)
and the FCC's rules.

2 Under section 251(f)(2), certain rural carriers "may petition a State
commission for a suspension or modification of the application of a
requirement or requirements of [section 251(b) or (c)] to telephone exchange
service facilities specified in such petition." 47 U.S.C. 251(f)(2).
4

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On September 30, 2010, the district court rejected the wireless
providers' arguments and granted the motions of NCUC and the RLECs for
summary judgment. New Cingular Wireless PCS, LLC v. Finley, No. 5:09-
CV-123-BR (E.D.N.C. Sept. 30, 2010) (JA 412).
On appeal, AT&T Mobility and Verizon Wireless contend that the
district court erred in affirming the NCUC's determination that they must pay
the transit charges associated with phone calls that originate on the RLECs'
networks, traverse AT&T's facilities, and terminate on the wireless carriers'
networks. The appellants also assert that the NCUC lacks authority to relieve
the RLECs of the reciprocal compensation pricing requirements established
by section 252(d)(2) and the FCC's implementing rules.

DISCUSSION

1. As the district court noted (Slip Op. at 14-15 (JA 425-26)), the FCC
previously has observed that the point at which a carrier bears financial
responsibility for intercarrier compensation (in this case, the payment of
transit charges) may not necessarily be the physical POI between networks.
In a 2001 order, for example, the FCC concluded that Verizon did not violate
the Communications Act or the FCC's rules by "distinguish[ing] between the
physical POI and the point at which Verizon and an interconnecting
competitive LEC are responsible for the cost of interconnection facilities"
5

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because the "issue of allocation of financial responsibility for interconnection
facilities" was "an open issue" in the agency's intercarrier compensation
rulemaking docket. Application of Verizon Pennsylvania, Inc., 16 FCC Rcd
17419, 17474 100 (2001), aff'd, Z-Tel Commc'ns, Inc. v. FCC, 333 F.3d
262 (D.C. Cir. 2003). Similarly, in 2003, the FCC found that, for purposes of
"determin[ing] financial responsibility for inter-network calls," Verizon could
permissibly designate an "interconnection point" that "is different" from "the
physical point of interconnection." Application by Verizon Maryland Inc., 18
FCC Rcd 5212, 5273 103 (2003). These orders suggest that under current
law, the point of financial responsibility for intercarrier compensation can be
but need not be the same as the point of physical interconnection.
2. No FCC order, however, has ever addressed the question whether
the originating or terminating carrier must pay transit charges under the
factual scenario presented by this case. The district court correctly noted
(Slip Op. at 17 (JA 428)) that the FCC in a related context has determined
that a third-party transit provider "may charge a terminating carrier for the
portion of facilities used to deliver transiting traffic to the terminating
carrier," and that the terminating carrier "may seek reimbursement of these
costs from originating carriers through reciprocal compensation." Texcom,
Inc. v. Bell Atlantic Corp., 17 FCC Rcd 6275, 6277 4 (2002). But the
6

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dispute in Texcom was between the transit provider and a terminating carrier.
Furthermore, the terminating carrier in that case was a paging carrier i.e., a
3
carrier that only receives (and never originates) telecommunications traffic.
By contrast, this case involves a dispute between originating carriers and
terminating carriers; and the terminating carriers in this case are not paging
carriers, but providers of wireless voice and data services.
It is not clear from the FCC's decisions whether these distinctions
would lead the FCC to reach a result different from Texcom and related cases
if presented with the facts of this case. The FCC has yet to specifically
address whether the terminating or originating carrier is responsible for
paying transit charges when (as in this case) the terminating carrier's dispute
is with the originating carrier (rather than the transit provider), and the
terminating carrier is a provider of wireless voice and data services (as
opposed to a paging carrier). Accordingly, FCC counsel are unable to state

3 The same is true of the FCC orders cited in the RLECs' brief (at 39-42). To
the extent that those orders concerned the payment of transit charges, they
involved disputes between terminating carriers and transit providers in cases
where the terminating carrier was a paging carrier. See TSR Wireless, LLC v.
U S West Commc'ns, Inc.,
15 FCC Rcd 11166 (2000), petitions for review
denied, Qwest Corp. v. FCC,
252 F.3d 462 (D.C. Cir. 2001); Mountain
Commc'ns, Inc. v. Qwest Commc'ns Int'l, Inc.
, 17 FCC Rcd 15135 (2002),
vacated in part, Mountain Commc'ns, Inc. v. FCC, 355 F.3d 644 (D.C. Cir.
2004); Metrocall, Inc. v. Concord Tel. Co., 17 FCC Rcd 2252, 2257 11
(2002).
7

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how the Commission would analyze the carriers' financial responsibility for
transit charges under the facts of this case. Cf. Talk America, Inc. v.
Michigan Bell Tel. Co., 131 S. Ct. 2254, 2257 n.1 (2011) (noting that FCC's
amicus brief "reflect[ed] the Commission's considered interpretation of its
own rules and orders").
3. Likewise, we are unable to provide the Court with a definitive FCC
position on whether section 251(f)(2) authorizes state commissions to
suspend or modify the pricing requirements of section 252(d)(2) for certain
RLECs. Contrary to the district court's conclusion (Slip Op. at 27 (JA 438)),
we do not believe that the FCC's 1996 Local Competition Order clearly
resolves that question. See Implementation of the Local Competition
Provisions in the Telecommunications Act of 1996, 11 FCC Rcd 15499
(1996) ("Local Competition Order") (subsequent history omitted).
The district court held that the NCUC had authority under section
251(f)(2) to relieve the RLECs of their obligation to perform TELRIC cost
studies pursuant to section 252(d)(2) and the FCC's implementing rules. Slip
Op. at 26-28 (JA 437-39). In support of that ruling, the district court cited the
FCC's Local Competition Order. At the end of a section of that order
discussing the FCC's cost-based pricing methodology, the FCC addressed
some concerns expressed by small incumbent LECs. In particular, the FCC
8

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noted that "certain . . . small incumbent LECs may seek relief from their state
commissions from our rules under section 251(f)(2)." Local Competition
Order, 11 FCC Rcd at 16026 1059. The district court construed that
statement to reflect an "explicit[ ] recogni[tion]" by the FCC "that the general
rule requiring rates to be established based on TELRIC studies is subject to
an exception for small and rural LECs." Slip Op. at 27 (JA 438).
Unlike the district court, we do not read paragraph 1059 of the Local
Competition Order as clearly interpreting section 251(f)(2) to permit a state
commission to suspend or modify the TELRIC pricing requirements
established by section 252(d)(2) and the FCC's rules. Paragraph 1059 made
no mention of either section 252(d)(2) or the TELRIC pricing requirements.
Furthermore, when describing section 251(f)(2) in that paragraph, the FCC
did not specifically refer to its pricing rules; rather, it merely observed that
some "small incumbent LECs may seek relief from their state commissions
from our rules." Local Competition Order, 11 FCC Rcd at 16026 1059. In
that context, the FCC's reference to section 251(f)(2) reasonably could be
understood as a general description of the statutory remedies available to
small incumbent LECs, not a specific finding that state commissions may
suspend or modify the Act's pricing requirements. Indeed, in another
paragraph of the Local Competition Order, the FCC expressly "decline[d] . . .
9

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to adopt national rules or guidelines" regarding the specific implementation
of section 251(f), stating that it "may offer guidance on these matters at a
later date, if we believe it is necessary and appropriate." Id. at 16118 1263.
In sum, it is not clear whether the FCC determined in paragraph 1059
of the Local Competition Order that state commissions are authorized by
section 251(f)(2) to suspend or modify the pricing requirements of section
252(d)(2). Nor are we aware of any other order in which the FCC clearly
addressed this issue.
* * * *
Although the FCC's appellate counsel are unable to provide the Court
with a definitive answer to the questions raised by this case, we note that
there is a procedural mechanism through which the parties can request an
answer from the FCC. Under the doctrine of primary jurisdiction, the Court
could hold this case in abeyance (or dismiss it without prejudice) and direct
the parties to file a pleading at the FCC asking the agency to address these
questions in a declaratory ruling. See Reiter v. Cooper, 507 U.S. 258, 268
(1993); United States v. Western Pac. R.R. Co., 352 U.S. 59, 63-64 (1956);
see also Piney Run Pres. Ass'n v. County Comm'rs of Carroll County, 268
F.3d 255, 262 n.7 (4th Cir. 2001). When the FCC receives such a pleading
from a party or parties implementing a primary jurisdiction referral from a
10

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court, the FCC commences an administrative proceeding, seeks public
comment to build a record to facilitate its decision, and then issues a
declaratory ruling to resolve the relevant questions. This procedure enables
the FCC to offer its views on questions that it has not previously resolved
an option that is not available to the FCC's counsel when the FCC has not
4
previously spoken on an issue.

4 The FCC's Chairman recently announced that he is circulating to his fellow
Commissioners a proposed set of comprehensive reforms to overhaul and
modernize the agency's rules governing, among other things, the intercarrier
compensation system. These proposed rule changes have been scheduled for
a vote by the FCC on October 27, 2011. See News Release, FCC Announces
Tentative Agenda for October Open Meeting
(released Oct. 6, 2011),
available at
http://transition.fcc.gov/Daily_Releases/Daily_Business/2011/db1006/DOC-
310258A1.pdf. In the event that the rulemaking order released by the FCC
addresses any of the specific questions presented by this case before this
Court issues its decision, we will supplement this amicus brief with pertinent
information.
11

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CONCLUSION

For the foregoing reasons, FCC counsel are unable at this time to
present a position of the FCC on the questions presented by this case.

Respectfully
submitted,
Austin
C.
Schlick
General Counsel

Peter Karanjia
Deputy General Counsel

Richard K. Welch
Deputy Associate General Counsel

/s/ James M. Carr

James M. Carr
Counsel

Federal Communications Commission
Washington, D.C. 20554
(202) 418-1740
October 20, 2011
12

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IN THE UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT


NEW CINGULAR WIRELESS PCS, LLC, ET AL.,
PLANTIFFS-APPELLANTS,
NOS. 10-2221 (L) & 10-
v.
2243
E

DWARD S. FINLEY, JR., ET AL.,
DEFENDANTS-APPELLEES.



CERTIFICATE OF COMPLIANCE

Pursuant to the requirements of Fed. R. App. P. 32(a)(7), I hereby
certify that the accompanying "Amicus Brief for the Federal Communications
Commission in Support of Neither Party" in the captioned case contains
2,339 words.

/s/ James M. Carr
James M. Carr

Counsel
Federal Communications Commission
Washington, D.C. 20554
(202) 418-1740 (Telephone)
(202) 418-2819 (Fax)
October 20, 2011



Appeal: 10-2221 Document: 73 Date Filed: 10/20/2011 Page: 18 of 19
10-2221

IN THE UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT


New Cingular Wireless PCS, LLC, Plaintiff-Appellant

v.

Edward S. Finley, Jr., Defendant-Appellee.


CERTIFICATE OF SERVICE


I, James M. Carr, hereby certify that on October 20, 2011, I electronically
filed the foregoing Amicus Brief for the Federal Communications
Commission in Support of Neither Party with the Clerk of the Court for the
United States Court of Appeals for the Fourth Circuit by using the CM/ECF
system. Participants in the case who are registered CM/ECF users will be
served by the CM/ECF system.

Some of the participants in the case, denoted with asterisks below, are not
CM/ECF users. I certify further that I have directed that copies of the
foregoing document be mailed by First-Class Mail to those persons, unless
another attorney at the same mailing address is receiving electronic service.



Dennis Friedman
Gray Styers
Jeffrey M. Strauss
Styers & Kemerait, PLLC
Mayer Brown, LLP
Suite 101-C
71 South Wacker Drive
1101 Haynes Street
Chicago, IL 60606
Raleigh, NC 27604
Counsel for: New Cingular Wireless Counsel for: New Cingular Wireless
PCS, LLC

PCS, LLC


Appeal: 10-2221 Document: 73 Date Filed: 10/20/2011 Page: 19 of 19
10-2221
Brett Shumate
Margaret A. Force
Helgi C. Walker
North Carolina Department of
Wiley Rein, LLP
Justice
1776 K Street, N.W.
114 West Edenton Street
Washington, DC 20006
P.O. Box 629
Counsel for: Alltel Communications, Raleigh, NC 27602
LLC
Counsel for: Edward S. Finley, Jr.,
et al.

Daniel C. Higgins

*James J. Mills
Burns, Day & Presnell, PA
P.O. Box 10867
Raleigh, NC 27605
Counsel for: Ellerbe Telephone
Company, et al.





/s/ James M. Carr

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