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Northern Valley Commc'ns, LLC v. FCC & USA, No. 11-1467 (D.C. Cir.)

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Released: July 23, 2012
ORAL ARGUMENT NOT YET SCHEDULED
BRIEF FOR RESPONDENTS
IN THE UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT

NO. 11-1467

NORTHERN VALLEY COMMUNICATIONS, LLC
PETITIONER,
V.
FEDERAL COMMUNICATIONS COMMISSION
AND UNITED STATES OF AMERICA,
RESPONDENTS.

ON PETITIONS FOR REVIEW OF ORDERS OF THE
FEDERAL COMMUNICATIONS COMMISSION

JOSEPH F. WAYLAND
PETER KARANJIA
ACTING ASSISTANT ATTORNEY GENERAL
DEPUTY GENERAL COUNSEL


ROBERT B. NICHOLSON
RICHARD K. WELCH
NICKOLAI G. LEVIN
DEPUTY ASSOCIATE GENERAL COUNSEL
ATTORNEYS


JOEL MARCUS
UNITED STATES
COUNSEL
DEPARTMENT OF JUSTICE

WASHINGTON, D.C. 20530
FEDERAL COMMUNICATIONS COMMISSION

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


CERTIFICATE AS TO PARTIES, RULINGS, AND RELATED CASES



1. Parties.
Petitioner: Northern Valley Communications, LLC
Respondents: Federal Communications Commission and United States of
America
Intervenors: AT&T Corp.; Sprint Communications Co. LP.; Qwest
Communications Co., LLC; Verizon.
Before the Commission, Aventure Communication Technology, LLC also
filed a petition for reconsideration.
2. Rulings under review.
Qwest Communications Co. v. Northern Valley Communications, 26 FCC
Rcd 8332 (2011) (JA 199);

Qwest Communications Co. v. Northern Valley Communications, 26 FCC
Rcd 14520 (2011) (JA 365);

Sprint v. Northern Valley Communications, 26 FCC Rcd 10780 (2011) (JA
671);

Sprint v. Northern Valley Communications, 26 FCC Rcd 16549 (2011) (JA
742).

3. Related cases.
This case has not previously been before this Court or any other court.
Litigation related to the subject matter involved here is pending between
petitioner and several of the intervenors in the cases listed at pages iii-iv of
petitioner’s brief.



TABLE OF CONTENTS


Table of Authorities......................................................................................... iii
Glossary......................................................................................................... viii
Jurisdiction ........................................................................................................1
Questions Presented ..........................................................................................2
Statutes and Regulations ...................................................................................3
Counterstatement...............................................................................................3
1.
Interstate Access Charges And Their Abuse.....................................4
2.
ILEC And CLEC Access Charge Regulation. ..................................8
3.
The Orders On Review....................................................................11
a.
The Qwest Order.........................................................................13
b.
The Sprint Order. ........................................................................15
c.
The Reconsideration Orders........................................................16
Summary Of Argument ...................................................................................18
Argument.........................................................................................................22
I.
The Standard Of Review Is Highly Deferential.......................................22
II. The Commission Reasonably Interpreted Its Access Charge
Rules and Orders. .....................................................................................24
A. The Commission Reasonably Determined That Rule
61.26 Allows The Imposition Of Tariffed Charges Only
For Service To An “End User” Who Is A Paying
Customer. ............................................................................................25
1.
The Commission Reasonably Determined That Rule
61.26 Establishes A Paying “End User” Requirement. ..................26
i

2.
The Commission’s Reading Of Rule 61.26 Supports
Important Policy Goals. ..................................................................28
3.
The Commission’s Reading Of Rule 61.26 Is
Consistent With Traditional Concepts Of Common
Carriage. ..........................................................................................30
B. Northern Valley’s Arguments Are Unavailing. ..................................32
1.
Northern Valley Is Wrong That The Communications
Act Allows The Tariffing Of Charges To Non-Paying
Customers........................................................................................33
2.
Northern Valley Is Wrong That The Commission
Improperly Failed To Respond To One Of Its Claims. ..................35
3.
Northern Valley’s Remaining Arguments Regarding
The “End User” Definition Are Procedurally Barred
And, In Any Event, Meritless. ........................................................37
a.
Northern Valley’s Contentions That The
Commission Acted Inconsistently With Its Rules
and Precedents Are Barred By FCC Rule 1.106(c). ...................37
b.
Northern Valley Is Wrong That The FCC Acted
Inconsistently With The Access Charge Orders And
Rule 61.26. ..................................................................................38
c.
The Commission’s Holding Is Consistent With Its
Farmers Precedent. .....................................................................44
4.
The Court Lacks Jurisdiction Over Northern Valley’s
Claim That The Commission Has Improperly Invaded
State Authority, Which Is Wrong In Any Event.............................47
III. The Commission Acted Within Its Discretion In
Invalidating Northern Valley’s Tariff Provision Requiring
Waiver Of Billing Dispute Claims Filed Within The
Statutory Limitations Period. ...................................................................48
Conclusion.......................................................................................................51
ii

TABLE OF AUTHORITIES

CASES


American Council on Educ. v. FCC, 451 F.3d 226
(D.C. Cir. 2006)...........................................................................................30
AT&T Corp. v. FCC, 349 F.3d 692 (D.C. Cir. 2003) .....................................34
AT&T Corp. v. FCC, 448 F.3d 426 (D.C. Cir. 2006) .....................................22
* Auer
v.
Robbins, 519 U.S. 452 (1997) ..................................................... 22, 28
Bartholdi Cable v. FCC, 114 F.3d 274
(D.C. Cir. 1997)...........................................................................................48
Cable & Wireless P.L.C. v. FCC, 166 F.3d 1224
(D.C. Cir. 1999)...........................................................................................40
Farmers & Merchants Mutual Tel. Co. v. FCC,
668 F.3d 714 (D.C. Cir. 2011) ................................................... 4, 11, 12, 23
Global NAPs, Inc. v. FCC, 247 F.3d 252
(D.C. Cir. 2001).................................................................................... 23, 24
Global NAPs, Inc. v. Verizon New England, Inc.,
454 F.3d 91 (2d Cir. 2006) ..........................................................................35
Hi-Tech Furnace Sys., Inc. v. FCC, 224 F.3d 781
(D.C. Cir. 2000)...........................................................................................24
Hutchins v. District of Columbia, 188 F.3d 531
(D.C. Cir. 1999)...........................................................................................50
Kisser v. Cisneros, 14 F.3d 615 (D.C. Cir. 1994) ...........................................24
*
Kraft Foods v. Federal Maritime Comm’n,
538 F.2d 445 (D.C. Cir. 1976) ....................................................................49
MCI v. AT&T, 512 U.S. 218 (1994) ................................................................31
MCI WorldCom Network Services, Inc. v.
Paetec Communications, Inc., No. 04-1479
slip op. (E.D. Va. Mar. 16, 2005), aff’d
204 Fed. Appx. 271, 272 (4th Cir. 2006) ....................................................49
MFS International, Inc. v. International Telecom,
Ltd., 50 F. Supp. 2d 517 (E.D. Va. 1999) ...................................................50
MobileTel, Inc. v. FCC, 107 F.3d 888
(D.C. Cir. 1997)...........................................................................................43
iii

NARUC v. FCC, 737 F.2d 1095 (D.C. Cir. 1984),
cert. denied, 469 U.S. 1227 (1985) ...............................................................4
Paetec Communications, Inc. v. MCI
Communications Services, Inc.,
712 F. Supp. 2d 405 (E.D. Pa. 2010) ..........................................................50
Powers Law Offices v. Cable & Wireless USA,
Inc., 326 F. Supp. 2d 190 (D. Mass 2004) ..................................................50
Radio-Televisión S.A. de C.V. v. FCC,
130 F.3d 1078 (D.C. Cir. 1997) ..................................................................40
Railway Labor Executives’ Ass’n v. U.S. R.R.
Retirement Bd., 749 F.2d 856 (D.C. Cir. 1984) ..........................................50
Southwestern Bell Tel. Co. v. FCC, 19 F.3d 1475
(D.C. Cir. 1994)...........................................................................................31
Southwestern Elec. Co-op., Inc. v. FERC,
347 F.3d 975 (D.C. Cir. 2003) ....................................................................43
*
Talk Am., Inc. v. Michigan Bell Tel. Co.,
131 S. Ct. 2254 (2011) ................................................................... 19, 23, 28
Tennessee Gas Pipeline Co. v. FERC, 972 F.2d 376
(D.C. Cir. 1992)...........................................................................................46
U.S. West Commc’ns, Inc. v. FCC, 177 F.3d 1057
(D.C. Cir. 1999), cert. denied, 528 U.S. 1188 (2000).......................... 46, 47
*
United States v. L.A. Tucker Truck Lines, Inc.,
344 U.S. 33 (1952) ......................................................................................37
Viking Communications, Inc. v. AT&T Corp.,
2006 WL 1128723 (D. N.J. 2006)...............................................................50
Virgin Islands Tel. Corp. v. FCC, 444 F.3d 666
(D.C. Cir. 2006).............................................................................................9
Woodford v. Ngo, 548 U.S. 81 (2006).............................................................37

ADMINISTRATIVE DECISIONS


Access and Divestiture Related Tariffs,
55 Rad. Reg. 2d 869 (1984) ..........................................................................5
Access and Divestiture Related Tariffs,
97 FCC 2d 1082 (1984).................................................................................5
iv

Access Charge Reform, 12 FCC Rcd 15982 (1997) ........................................5
* Connect
America
Fund, 26 FCC Rcd 17663 (2011).......... 7, 29, 30, 35, 46, 47
Developing A Unified Intercarrier Compensation
Regime, NPRM, 16 FCC Rcd 9610 (2001)...................................................5
Establishing Just and Reasonable Rates for Local
Exchange Carriers, 22 FCC Rcd 11629 (WCB
2007)..............................................................................................................5
Establishing Just and Reasonable Rates for Local
Exchange Carriers, 22 FCC Rcd 17989 (2007)............................................6
Implementation of Section 254(g) of the Communications
Act of 1934, 11 FCC Rcd 9564 (1996)..........................................................5
*
In the Matter of Access Charge Reform, Eighth
Report and Order On Reconsideration
(Access Charge Reconsideration Order)
,
19 FCC Rcd 9108 (2004) ................................................... 10, 11, 14, 26, 42
*
In the Matter of Access Charge Reform, Seventh
Report and Order (Access Charge Reform
Order)
, 16 FCC Rcd 9923 (2001) ........................ 6, 9, 10, 11, 24, 29, 40, 41
Petitions of Sprint PCS and AT&T Corp. for
Declaratory Ruling Regarding CMRS Access
Charges
, 17 FCC Rcd 13192 (2002), petitions
for review dismissed
, AT&T Corp. v. FCC,
349 F.3d 692 (D.C. Cir. 2003) ....................................................................34
Policy and Rules Concerning Rates for Dominant
Carriers, 5 FCC Rcd 6786 (1990) ................................................................6
Qwest v. Farmers & Merchants Mutual Tel. Co.,
22 FCC Rcd 17973 (2007) ..........................................................................37
Qwest v. Farmers & Merchants Mutual Telephone
Co., 24 FCC Rcd 14801 (2009)............................................................ 12, 45
S&L Teen Hosp. Shuttle, 17 FCC Rcd 7899 (2002) .......................................16

STATUTES AND REGULATIONS


5 U.S.C. § 706(2)(A) .....................................................................................24
28 U.S.C. § 2342(1) ..........................................................................................1
v

47 U.S.C. § 152(a)...........................................................................................48
47 U.S.C. § 152(b)...........................................................................................47
47 U.S.C. § 153(11) ........................................................................................31
47 U.S.C. § 153(20) ........................................................................................33
*
47 U.S.C. § 153(53) ..................................................................... 13, 14, 27, 35
47 U.S.C. § 153(55) ........................................................................................33
47 U.S.C. § 160 ...............................................................................................10
47 U.S.C. § 160(a).............................................................................................9
47 U.S.C. § 201(b).............................................................................................9
47 U.S.C. § 203(a).............................................................................................9
47 U.S.C. § 203(c)(2) ......................................................................................46
47 U.S.C. § 204(a)(3) ........................................................................................9
47 U.S.C. § 208 ...............................................................................................12
47 U.S.C. § 208(b)(3)........................................................................................1
47 U.S.C. § 251(h).............................................................................................8
47 U.S.C. § 253(a).............................................................................................8
47 U.S.C. § 402(a).............................................................................................1
47 U.S.C. § 405(a)...........................................................................................48
47 U.S.C. § 415(b).............................................................................. 15, 48, 50
47 C.F.R. § 1.106(b)(2)(ii) ..............................................................................38
* 47
C.F.R.
§ 1.106(c) ........................................................................................17
47 C.F.R. § 1.106(c)(1) ...................................................................................38
47 C.F.R. § 1.106(c)(2) ...................................................................................38
47 C.F.R. § 20.15(c) ........................................................................................34
47 C.F.R. § 22.99 ............................................................................................31
47 C.F.R. § 25.103(a) ......................................................................................31
47 C.F.R. § 32.9000 ........................................................................................31
47 C.F.R. § 51.5 ..............................................................................................31
47 C.F.R. § 54.5 ..............................................................................................31
vi

47 C.F.R. § 54.706(a) ......................................................................................32
47 C.F.R. § 54.706(b)......................................................................................32
47 C.F.R. § 61.2 ..............................................................................................16
* 47
C.F.R.
§
61.26 ....................................................................................... 2, 10
47 C.F.R. § 61.26(a)(1) .................................................................. 8, 10, 11, 26
47 C.F.R. § 61.26(a)(3) ................................................................ 10, 11, 13, 26
47 C.F.R. § 61.26(c) – (e) ...............................................................................10
47 C.F.R. § 61.26(f) ........................................................................................25
47 C.F.R. § 61.3(ss).........................................................................................30
47 C.F.R. § 64.604(c)(5)(iii)(A)......................................................................32
47 C.F.R. § 69.104 ............................................................................................8
47 C.F.R. § 69.152 ............................................................................................8
47 C.F.R. § 69.2(m).........................................................................................27
47 C.F.R. § 69.4(a) ..................................................................................... 8, 43
47 C.F.R. § 69.5(b)..........................................................................................43
47 C.F.R. §§ 69.1 et seq ....................................................................................9

OTHERS


Amicus Brief of FCC in Paetec Communications
Inc. v. MCI Communications Servs. Inc.,
Third Cir. No. 11-2268 (filed March 14, 2012) ..........................................43


* Cases and other authorities principally relied upon are marked with
asterisks.

vii

GLOSSARY

CLEC Competitive
Local
Exchange Carrier. A local
telephone company that entered the market after
1996 to compete with an ILEC.
ILEC
Incumbent Local Exchange Carrier. A local
telephone company that had an exclusive franchise
to provide service prior to 1996.
IXC Interexchange
Carrier.
A long distance telephone
company.
LEC Local
Exchange
Carrier. A local telephone
company.
SLC Subscriber
Line
Charge. A charge imposed by
LECs on their local exchange customers to recover
a portion of the costs incurred by the LEC in
completing interstate calls to local exchange
customers.



viii

IN THE UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT

NO. 11-1467

NORTHERN VALLEY COMMUNICATIONS, LLC
PETITIONER,
V.
FEDERAL COMMUNICATIONS COMMISSION
AND UNITED STATES OF AMERICA,
RESPONDENTS.

ON PETITIONS FOR REVIEW OF ORDERS OF THE
FEDERAL COMMUNICATIONS COMMISSION

BRIEF FOR RESPONDENTS

JURISDICTION

The Court has subject matter jurisdiction over final orders of the FCC
involving the investigation of tariffs under 47 U.S.C. §§ 208(b)(3) & 402(a)
and 28 U.S.C. § 2342(1). Petitioner’s challenge is timely. As set forth at
pages 37-38, the Court should not reach several arguments presented by
Northern Valley because they were not properly preserved below; and as set
forth at pages 47-48, the Court lacks jurisdiction over one argument because
it was not raised at all below.

QUESTIONS PRESENTED

Access charges are fees collected by local telephone companies from
long distance companies for completing long-distance calls to their recipients.
Competitive local telephone companies, such as petitioner, Northern Valley
Communications, may impose interstate switched access charges by tariff
only to the extent the tariff complies with FCC Rule 61.26, 47 C.F.R.
§ 61.26; access charges that are inconsistent with that rule may not be tariffed
but instead must be negotiated individually with long distance companies. In
the orders on review, the Commission interpreted Rule 61.26 to allow tariffed
access charges only for calls completed to a paying customer of the local
telephone company. Because Northern Valley’s tariff sought to impose
access charges for calls delivered to non-paying recipients, the Commission
required it to withdraw the tariff and refile it without the unlawful condition.
The Commission also declared unlawful a provision in Northern
Valley’s tariff that required a long distance carrier to waive any disputes over
charges if the carrier did not bring the matter to Northern Valley’s attention
within 90 days.
The questions presented are:
1) Whether the Commission acted within its discretion in interpreting
its rule, 47 C.F.R. § 61.26, to prohibit Northern Valley from imposing access
2

charges by tariff for calls placed to a recipient that receives service free of
charge; and
2) Whether the Commission acted within its discretion in concluding
that the provision in Northern Valley’s tariff requiring waiver after ninety
days of a party’s statutory right to dispute charges is inconsistent with the
two-year statute of limitations specified in the Communications Act for
disputes over tariffed charges.

STATUTES AND REGULATIONS

Pertinent materials are attached to this brief.

COUNTERSTATEMENT

This case involves the FCC’s rule governing interstate access tariffs
filed by competitive local exchange carriers (CLECs). Such tariffs compel
long distance companies (interexchange carriers or IXCs) to pay access
charges, which are per-minute fees assessed on interstate calls placed to
customers of the CLEC. The Commission regulates interstate access tariffs
because CLECs have exclusive control over access to their customers, and
IXCs, which are obligated to transport long-distance calls to the CLEC’s
customers, are captive to tariffed access charges. The access charge regime
therefore is prone to abuse, such as when a CLEC sets its rates too high or, as
in this case, inflates its revenues above the level assumed in the rate-setting
3

process by taking steps that dramatically increase the amount of calls placed
to its facilities. The second practice is called “traffic pumping” or “access
stimulation.” See generally Farmers & Merchants Mutual Tel. Co. v. FCC,
668 F.3d 714 (D.C. Cir. 2011). Such practices cause IXCs – and ultimately
the general public – to bear unfair charges.
In the orders on review, the Commission interpreted the CLEC
interstate access tariff rule, FCC Rule 61.26, to mean that a CLEC may
impose tariffed interstate access charges only for calls completed to the
CLEC’s own “end users,” which the Commission interpreted – in keeping
with a long-established understanding – to mean a customer paying the CLEC
for service. If a CLEC wishes to provide interstate access service free of
charge to call recipients, it may enter into contracts with IXCs for negotiated
access charges.
1. Interstate Access Charges And Their Abuse.
When a telephone user places a long-distance call, the call travels from
the facilities of the user’s local exchange carrier (LEC) to those of an IXC.
The IXC then transports the call to the facilities of the recipient’s LEC, which
connects the call to its destination. See NARUC v. FCC, 737 F.2d 1095,
1103-1104 (D.C. Cir. 1984), cert. denied, 469 U.S. 1227 (1985). Both LECs
have traditionally recovered a part of the costs of providing interstate
4

switched access service (hereafter, “access service”) by charging the IXC per-
minute interstate switched access charges (hereafter, “access charges”) for
originating and terminating the call – i.e., for providing access to the LEC’s
facilities. See Access Charge Reform, 12 FCC Rcd 15982, 15991 (1997).
With the breakup of the Bell System, the FCC began to closely regulate
the access charge tariffs. See Access and Divestiture Related Tariffs, 97 FCC
2d 1082, 1192 (1984); Access and Divestiture Related Tariffs, 55 Rad. Reg.
2d 869, 870 (1984); 47 C.F.R. Part 69. Regulation is necessary because IXCs
are captive to a LEC’s tariffed rates. IXCs may not block calls placed by
their customers to specific numbers, see Establishing Just and Reasonable
Rates for Local Exchange Carriers, 22 FCC Rcd 11629 (WCB 2007), and
may not pass through to individual callers the access charges incurred in any
specific call, see Implementation of Section 254(g) of the Communications
Act of 1934, 11 FCC Rcd 9564, 9568-9569 (1996). Moreover, with respect to
any given call recipient, the LEC serving that person holds a “terminating
access monopoly,” and the IXC has little or no bargaining power to achieve
lower access rates. Developing A Unified Intercarrier Compensation Regime,
NPRM, 16 FCC Rcd 9610, 9616-9617 (2001).
The Commission has identified two major access charge abuses. First,
because the IXC cannot choose which LEC to use for termination, LECs may
5

(in the absence of regulation) set their rates above cost, thereby earning
excess profits on every minute of service. See Access Charge Reform, 16
FCC Rcd at 9934-9936 ¶¶28-32. The Commission has explained that
excessive access rates “shift an inappropriate share of the carriers’ costs onto
the IXCs and, through them, the long distance market in general.” Id. ¶22.
That cost-shifting can “promote economically inefficient entry into the local
markets.” Id. ¶33.
Second, the per-minute fee structure gives some LECs the incentive to
engage in traffic pumping schemes that greatly increase the number and
duration of long-distance calls delivered to their facilities. Regulated access
rates generally are grounded in the historical costs of providing service. See
generally Policy and Rules Concerning Rates for Dominant Carriers, 5 FCC
Rcd 6786 (1990). If call volumes rise without a proportionate increase in
costs, however, average costs fall and each minute of service becomes more
profitable. The Commission has explained that average costs usually fall
with increasing volume because whereas “there is a large fixed cost to
purchasing a local switch,” the “incremental cost of increasing the capacity of
a local switch is low” and perhaps even zero. Establishing Just and
Reasonable Rates for Local Exchange Carriers, 22 FCC Rcd 17989, 17996
(2007).
6

Those economics of telephone costs and rate structures thus cause
some LECs to look for ways to generate higher call volumes. As the
Commission has described it:
Access stimulation occurs when a LEC with high switched
access rates enters into an arrangement with a provider of high
call volume operations such as chat lines, adult entertainment
calls, and ‘free’ conference calls. The arrangement inflates or
stimulates the access minutes terminated to the LEC, and the
LEC then shares a portion of the increased access revenues
resulting from the increased demand with the ‘free’ service
provider, or offers some other benefit to the ‘free’ service
provider. The shared revenues received by the service provider
cover its costs, and it therefore may not need to, and typically
does not, assess a separate charge for the service it is offering.

Connect America Fund, 26 FCC Rcd 17663, 17874 ¶656. The Commission
has found that such “wasteful arbitrage schemes,” id. at 17873, result in
hundreds of millions of dollars in costs imposed on IXCs that ultimately are
1
borne by all telephone users, id. at 17875-17876 ¶¶663-665. They also
“almost uniformly make the LEC’s interstate switched access rates unjust and
unreasonable.” Id. at 17874 ¶657.

1 In the Connect America Fund order, the Commission took steps to reduce
incentives to engage in traffic pumping in the short term, 26 FCC Rcd at
17884-17890, and ultimately to eliminate the access charge system and
replace it with an approach in which carriers recover their costs from their
own customers and not other carriers, id. 17904-17914.
7

2. ILEC And CLEC Access Charge Regulation.
Prior to 1996, only a single local carrier typically served any given
market, and it held an exclusive franchise granted by the state. In 1996,
Congress opened up the local exchange marketplace to competition, banning
exclusive franchises, 47 U.S.C. § 253(a), and creating a distinction between
ILECs, the incumbent carriers, see 47 U.S.C. § 251(h) (defining ILEC), and
CLECs, the new, competitive providers, see 47 C.F.R. § 61.26(a)(1) (defining
CLEC).
ILEC access charges remain regulated in nearly every respect. The
FCC’s detailed rules at 47 C.F.R. Parts 61 and 69 prescribe the contents of
ILEC tariffs and the rates that ILECs may charge to IXCs. The Commission
also requires ILECs to impose a “subscriber line charge” (SLC) – a charge to
the ILEC’s customer that represents the customer’s share of the costs of
providing interstate access service. The SLC is capped at an amount
established by the FCC. 47 C.F.R. §§ 69.4(a); 69.104; 69.152.
By contrast, CLEC access charges at first were unregulated. The
Commission believed at the time that competition between CLECs and
ILECs would discipline rates and avoid abuse of access charges by CLECs.
Thus, CLECs were free to set their access rates and practices as they wished
and were not subject to the detailed Part 69 tariff regulations imposed on
8

ILECs. Access Charge Reform, 16 FCC Rcd at 9926-9927. CLECs also
were free to charge their customers more for access service than ILECs.
During the time CLEC access charges were unregulated, CLECs were
free to set their rates and terms of service in tariffs filed publicly with the
FCC. See 47 U.S.C. § 203(a). Tariffs, which are meant to keep rates just and
reasonable under 47 U.S.C. § 201(b), are binding on anyone that uses the
service. They are backed up by mechanisms such as a statutory “deemed
lawful” status, 47 U.S.C. § 204(a)(3), that protects the carrier from having to
make retroactive refunds even if the carrier is later found to have earned an
unjust rate of return, see Virgin Islands Tel. Corp. v. FCC, 444 F.3d 666, 669
(D.C. Cir. 2006). ILEC access charges generally must be tariffed. See 47
C.F.R. §§ 69.1 et seq. In 1996, Congress authorized the Commission to
forbear from applying any provision of the Communications Act, including
the tariff provisions. 47 U.S.C. § 160(a). As explained below, the FCC has
partially exercised that authority with respect to CLEC tariffs.
Until 2001, CLECs could file tariffs with the FCC but were “largely
unregulated in the manner that they set their access rates.” Access Charge
Reform, 16 FCC Rcd at 9931 ¶21. In a pair of orders issued in 2001 and
2004, the Access Charge Reform Order, 16 FCC Rcd 9923, and the Access
9

Charge Reconsideration Order, 19 FCC Rcd 9108 (together, the Access
Charge Orders), the Commission restricted the use of CLEC access tariffs.
After finding that some CLECs were abusing the tariff process to
“impose excessive access charges on IXCs and their customers,” Access
Charge Reform Order at 9924-9925; see also id. at 9934, the Commission
decided in the 2001 Access Charge Reform Order to “limit the application of
[its] tariff rules to CLEC access services,” and to regulate more strictly CLEC
interstate access tariffs. Id. at 9924 ¶2.
Specifically, the Commission promulgated Rule 61.26, 47 C.F.R.
§ 61.26, entitled “[t]ariffing of competitive interstate switched exchange
access services.” The Rule sets forth the terms of a permissible CLEC access
tariff, including the maximum allowed access rate (pegged to the rate of the
competing ILEC) that a CLEC may tariff. 47 C.F.R. § 61.26(c) – (e).
Central to this case, the Rule defines “CLEC” and the services that a CLEC
may tariff. 47 C.F.R. § 61.26(a)(1) & (3). The Commission detariffed CLEC
access service except as set forth in the Rule. Access Charge Reform Order,
16 FCC Rcd at 9925 ¶3, 9938 ¶40 (“mandatorily detariff[ing]” CLEC
interstate switched access); 47 U.S.C. § 160. Thus, a CLEC may now file an
interstate access tariff only if the tariff is consistent with Rule 61.26. To the
extent that a CLEC wishes to provide access service on terms that are
10

inconsistent with that Rule, it must do so pursuant to a contract that it has
negotiated individually with the IXC outside of the FCC’s tariff regime.
Access Charge Reform Order, 16 FCC Rcd at 9925 ¶3.
As relevant here, Rule 61.26 defines “CLEC” to mean a LEC that
“provides some or all of the interstate exchange access services used to send
traffic to or from an end user” and is not an ILEC. 47 C.F.R. § 61.26 (a)(1).
The Rule defines “interstate switched exchange access services” to mean
“[t]he functional equivalent of the ILEC interstate exchange access services.”
47 C.F.R. § 61.26(a)(3). The Commission explained in its 2004 Access
Charge Reconsideration Order that a CLEC provides the “functional
equivalent” of ILEC access service when it “originates or terminates traffic to
its own end-users.” Access Charge Reconsideration Order, 19 FCC Rcd at
9114 ¶13; accord id. at 9115 ¶15 (a CLEC “that provides access to its own
end-users is providing the functional equivalent of” ILEC access).
3. The Orders On Review.
Northern Valley is a CLEC located in South Dakota. Pet. Br. 5. Like
other LECs that engage in “traffic pumping (or access stimulation)
scheme[s],” Farmers, 668 F.3d at 717, Northern Valley serves conference
calling companies that generate high incoming call volumes. Northern
Valley Legal Analysis (Qwest) at 3 (JA 141). Northern Valley imposes
11

access charges on IXCs pursuant to a tariff filed with the FCC. Prior to the
events leading to this case, Northern Valley’s tariff entitled it to impose
access charges for calls delivered to an “end user,” which the tariff defined in
pertinent part to mean “any Customer of an Interstate or Foreign
Telecommunications Service that is not a carrier.”
In a 2009 decision involving traffic pumping by an ILEC, the
Commission determined that under the definition of end user contained in the
carrier’s tariff, the recipient of a call must be required to pay a charge for
interstate service. See Qwest v. Farmers & Merchants Mutual Telephone
Co., 24 FCC Rcd 14801 (2009), aff’d Farmers, 668 F.3d 714. After the
Farmers order, Northern Valley amended its tariff, which had used the same
definition of “end user” as the tariff in Farmers, to provide: “An End User
need not purchase any service provided by [Northern Valley].” Tariff at 8
(JA 62).
Qwest and Sprint, IXCs that are subject to Northern Valley’s access
tariff, filed complaints with the Commission under 47 U.S.C. § 208
challenging the revised definition of “end user” in Northern Valley’s tariff.
Qwest Complaint (JA 1); Sprint Complaint (JA 375). They argued that the
new definition was unlawful because, as a matter of law, an end user must be
12

a paying customer of a CLEC in order for the CLEC to impose access
charges by tariff.
In the two principal orders resolving the dispute, which the agency
described as “the latest chapter in the ongoing dispute … involving access
stimulation,” the Commission held unlawful Northern Valley’s revised
definition of “end user” and required Northern Valley to refile its tariff
without that definition. Qwest Communications Co. v. Northern Valley
Communications, 26 FCC Rcd 8332 ¶1 (2011) (Qwest Order) (JA 199);
accord Sprint Communications Co. v. Northern Valley Communications, 26
FCC Rcd 10780 (2011) (Sprint Order) (JA 671). The Commission ruled that
its “access service rules and orders establish that a CLEC may tariff access
charges only if those charges are for transporting calls to or from an
individual or entity to whom the CLEC offers service for a fee.” Qwest
Order ¶7 (JA 203); see also id. ¶9 (citing 47 U.S.C. § 153(53)) (JA 204).
a. The Qwest Order.
The Commission explained that Rule 61.26 permits CLECs to file
tariffs for “interstate switched exchange access services.” The rule defines
that term to mean services that are “the functional equivalent” of ILEC
interstate switched access services. 47 C.F.R. § 61.26(a)(3); see Qwest Order
¶8 (JA 203). In the Access Charge Reconsideration Order, 19 FCC Rcd at
13

9114, the Commission had determined that a CLEC “provides the functional
equivalent” of ILEC switched access service when a CLEC “originates or
terminates traffic to its own end-users” as that term is defined in the ILEC
access charge rules. Qwest Order ¶8 (citing 19 FCC Rcd at 9114, 9115) (JA
203).
Under the ILEC access charge rules, the agency explained, “‘end user’
has been defined … for more than 25 years as a ‘customer of an interstate or
foreign telecommunications service,’” which in turn is defined in the
Communications Act to mean “the offering of telecommunications for a fee.”
Qwest Order ¶9 (citing 47 U.S.C. § 153(53)) (JA 203). Thus, the
Commission explained, “under the … ILEC access charge regime, an ‘end
user’ is a customer of a service that is offered for a fee.” Qwest Order ¶9 (JA
204). Under the corresponding CLEC rule, end user therefore “do[es] not
include entities that receive free services.” Id. (JA 203). By defining “end
user” to mean something other than a paying customer, the agency ruled,
Northern Valley’s tariff “violates the Commission’s CLEC access charge
rules as clarified by” the Access Charge Reconsideration Order. Qwest
Order ¶9 (JA 204). That violation of Rule 61.26 constitutes an unjust and
unreasonable practice under 47 U.S.C. § 201(b). Ibid. If Northern Valley
“wishes to charge IXCs for terminating calls to entities that pay no fees,” the
14

Commission emphasized, it may not do so through a tariff, but only “through
a negotiated contract.” Id. ¶11 (JA 205).
The Commission explained that the requirement of a paying end user
“furthers the … goal of ensuring that neither IXCs nor end users are charged
an unfair share of the LEC’s costs in transporting interstate calls.” Qwest
Order n.38 (JA 204). In order for both entities to bear a portion of the cost,
the end user must pay a share.
b. The Sprint Order.
Because Sprint’s complaint against Northern Valley turned, in large
part, on the same tariff provision (defining “end user”) that the Commission
had found unlawful in its order in the Qwest proceeding, the agency granted
Sprint’s complaint for the reasons set forth in the Qwest Order. Sprint Order
¶7 (JA 674-675). The Commission also invalidated the “Billing Disputes”
provision, section 3.1.7.1(a) (JA 86) of Northern Valley’s tariff, which
required an IXC to dispute a bill within 90 days or waive any claims with
respect to the bill. That requirement is “unreasonable,” the Commission
explained, because it “contravenes the two-year statute of limitations in the
Communications Act [47 U.S.C. § 415(b)] and, by its terms, purports
unilaterally to bar a customer from exercising its statutory right to file a
complaint within that limitation period.” Sprint Order ¶14 (JA 677-678).
15

The Commission also held that Northern Valley’s tariff was not “clear
and explicit” as required by 47 C.F.R. § 61.2 because the definition of “end
user” was self-contradictory. By defining an end user as the customer of a
“telecommunications service,” a fee-based service, the tariff necessarily
required a paying customer. At the same time, however, the tariff stated that
an end user could receive service free of charge. The definition thus was
“internally inconsistent” and therefore violated the rule requiring “clear and
explicit” terms. Sprint Order ¶9 (JA 675-676).
c. The Reconsideration Orders.
The Commission dismissed Northern Valley’s requests for
reconsideration. Qwest Communications Co., 26 FCC Rcd 14520 (2011)
(Qwest Reconsideration) (JA 365); Sprint Communications Co., 26 FCC Rcd
16549 (2011) (Sprint Reconsideration) (JA 742). Relying on “settled
Commission policy that petitions for reconsideration are not to be used for
the mere reargument of points previously advanced and rejected,” the agency
dismissed several of Northern Valley’s arguments as repetitive. Qwest
Reconsideration ¶5 (citing S&L Teen Hosp. Shuttle, 17 FCC Rcd 7899
(2002)) (JA 367).
The Commission dismissed the remainder of Northern Valley’s
arguments because Northern Valley could have raised them earlier in the
16

proceeding but failed to do so. Qwest Reconsideration ¶6 (JA 367-368).
Under the FCC’s rules, a petition for reconsideration may raise new
arguments only if there has been an intervening change of circumstances, if
the party was unable to raise the argument initially, or if the public interest
requires consideration of the new arguments. 47 C.F.R. § 1.106(c). Northern
Valley did not claim to have satisfied any of those criteria. Qwest
Reconsideration ¶6 (JA 368).
In the alternative, the Commission addressed the merits of the
arguments that were procedurally barred. It rejected Northern Valley’s claim
that Rule 61.26 requires only that an “end user” be the intended recipient of a
call, without regard to payment. The Commission again explained that for
more than 25 years it has defined “end user” to mean a fee-paying customer,
Qwest Reconsideration ¶8 (JA 368-369), and that the term has “a clear and
established meaning in the context of the … access charge regime,” id. ¶10
(JA 370). “[I]dentical terms used in different but related … rules,” the
Commission observed, “should be construed to mean the same thing.” Id. ¶8
(JA 369). The Commission also noted its “longstanding policy” that “users
of the local telephone network for interstate calls should be responsible for a
reasonable portion of the costs that they cause,” and that policy is advanced
by construing “end user” to mean a paying customer. Id. ¶11 (JA 370).
17

The Commission also rejected Northern Valley’s claim that the
agency’s interpretation of “end user” amounts to impermissible regulation of
the CLEC-local exchange customer relationship. That claim fails, the
Commission explained, because Northern Valley has options that allow it to
“offer its services … for any fee (or no fee).” Qwest Reconsideration ¶12 (JA
370). As the Commission underscored, the Qwest Order held only that if
Northern Valley “chooses to assess access charges upon IXCs by tariff, the
individual or entities who [receive] access must be [paying] ‘end users.’”
Ibid. Northern Valley may negotiate terms for service with IXCs if it wishes
not to charge end users.
The Commission denied reconsideration of the Sprint Order “[f]or the
same reasons.” Sprint Reconsideration, 26 FCC Rcd 16549-16550 ¶2 (JA
742-743).
Northern Valley now asks the Court to vacate the orders on review.

SUMMARY OF ARGUMENT


After years of abuse of FCC access charge tariffs by CLECs that
engaged in regulatory arbitrage, the Commission in 2001 reformed its access
charge regime by issuing Rule 61.26. That rule limits the circumstances
under which a CLEC may file an interstate switched access tariff with the
Commission. If a CLEC wishes to provide access service without complying
18

with Rule 61.26, it may not rely on a tariff to impose access charges on IXCs
that are obligated to transport calls to the CLEC’s customers. The CLEC
may, however, collect those charges pursuant to a private contract it has
negotiated with the IXC outside of the tariff system.

In this case, the agency interpreted Rule 61.26 consistently with the
text of the rule and the agency’s policy that traffic pumping is an
economically inefficient and abusive practice that should be discouraged.
Rule 61.26 allows an access tariff to be filed only when a CLEC is providing
the “functional equivalent” of ILEC switched access service. The
Commission previously had determined that functional equivalence means
the provision of service to an “end user.” Further, a longstanding
Commission switched access rule provides that “end user” means a paying
customer. Thus, the agency explained in the orders on review, a CLEC may
not tariff access service for calls placed to non-paying customers – such as
the conference calling companies that facilitate Northern Valley’s traffic
pumping scheme. The Commission’s reasonable construction of its own rule
is “controlling.” Talk Am., Inc. v. Michigan Bell Tel. Co., 131 S. Ct. 2254,
2261 (2011).

Northern Valley does not dispute that calls must be delivered to end
users or that the Commission has defined “end user” to mean a paying
19

customer, nor does it dispute that it may not file an access tariff except under
Rule 61.26. Rather, Northern Valley contends that “functional equivalence”
means only that a CLEC is providing the same physical function as an ILEC
when it switches a call to its recipient. Northern Valley waived that claim,
however, by failing to timely raise it before the Commission. The claim fails
on its merits in any event because it is inconsistent with the Access Charge
Reconsideration Order, in which the Commission explained that functional
equivalence means the completion of a call to a CLEC’s “end user,” a term
that has a longstanding specific meaning as a paying customer.

Equally unavailing is Northern Valley’s contention that the
Commission’s interpretation of Rule 61.26 improperly subjects the CLEC-
local exchange customer relationship to regulation that the agency had earlier
disavowed. That claim, too, is procedurally barred. It is also without merit.
The orders on review do not regulate the CLEC-local exchange customer
relationship. Instead, they specify when a CLEC may lawfully file a tariff
that imposes access charges on an IXC. The CLEC remains free to define its
relationship with its local exchange customers in a manner unrestricted by
Rule 61.26 – by specifying, for example, that conference calling companies
will receive free services – provided that it assesses its associated access
charges under private contracts executed outside of the FCC tariff system.
20

For the same reason, Northern Valley is wrong in contending that the
Commission intruded on state regulatory prerogatives by regulating the
intrastate relationship between CLECs and local exchange customers – a
claim that also is not properly before the Court because Northern Valley
never presented it to the Commission.

Nor is Northern Valley’s position advanced by the claim that it
provides its conference calling company customers with “exchange access
service” as defined in the Communications Act. The statutory definition of
“exchange access service” does not create a right to charge an IXC for the
provision of that service by tariff, without also charging an end user for
interstate service. The filing of a CLEC access tariff is addressed solely by
Rule 61.26, which precludes the tariffing of access service for calls delivered
to non-paying recipients.

Contrary to Northern Valley’s claim, the Commission responded to its
argument that the relevant payment under Rule 61.26 is from the IXC’s
customer and not from the CLEC’s own customer. The Commission
explained in detail that the CLEC access tariff regime requires that the
CLEC’s own end user be a paying customer. That reasoning adequately
disposed of Northern Valley’s argument.
21


Like several of its other arguments, Northern Valley’s contention that
the Commission’s decisions in this case were inconsistent with its earlier
decisions in the Farmers matter is not properly before the Court and is in any
event misconceived. As in this case, the Commission in Farmers held that
there must be payments from the end user to the carrier for a LEC to collect
access charges from an IXC. Thus, the orders on review were fully consistent
with the agency’s Farmers precedent.

Finally, the Commission acted well within its discretion in concluding
that Northern Valley could not, consistent with the applicable two-year
statute of limitations, require a carrier to forfeit its right to complain to the
FCC about a bill if it failed to dispute the bill with Northern Valley within 90
days of receipt. This Court has found a substantially similar provision to
violate an equivalent statute of limitations, and other courts have invalidated
the same type of provisions in FCC tariffs.

ARGUMENT

I.

THE STANDARD OF REVIEW IS HIGHLY
DEFERENTIAL.

The Commission’s “interpretation of its own orders and rules,” is
“entitled to substantial deference,” AT&T Corp. v. FCC, 448 F.3d 426, 431
(D.C. Cir. 2006), and is “controlling” unless it is “plainly erroneous or
inconsistent with the regulation,” Auer v. Robbins, 519 U.S. 452, 461 (1997);
22

accord Talk America, Inc. v. Michigan Bell Tel. Co., 131 S.Ct. 2254, 2261
(2011).
Northern Valley is wrong in contending that the deferential standard is
inapplicable here. Br. 16. It relies on a concurring opinion in Talk America,
131 S.Ct. at 2265-2266, in which the concurring Justice questioned whether
the Court should continue to adhere to the deferential standard of review set
forth in Auer. See Br. 16 & nn.35, 115. The majority, however, reaffirmed
the principle in Auer that courts “defer to an agency’s interpretation of its
regulations, even in a legal brief, unless the interpretation is ‘plainly
erroneous or inconsistent with the regulation[s]’ or there is any other ‘reason
to suspect that the interpretation does not reflect the agency’s fair and
considered judgment on the matter in question.’” 131 S.Ct. at 2261 (citations
omitted). Indeed, Northern Valley acknowledges as much elsewhere in its
brief. Br. 36 n.76.
Judicial review of the Commission’s interpretation of a tariff is
similarly deferential. The Court “will uphold the Commission’s
interpretation where it is ‘reasonable [and] based upon factors within the
Commission's expertise.’” Farmers, 668 F.3d at 719, quoting Global NAPs,
Inc. v. FCC, 247 F.3d 252, 258 (D.C. Cir. 2001). “Reversing an FCC tariff
interpretation should only occur where it is not supported by substantial
23

evidence, or the [Commission] has made a clear error in judgment.” Global
NAPS, 247 F.3d at 258 (quotation marks and citation omitted).
Review of the Commission’s resolution of complaints under 47 U.S.C.
§ 208 is equally deferential. Hi-Tech Furnace Sys., Inc. v. FCC, 224 F.3d
781, 790 (D.C. Cir. 2000). Under the Administrative Procedure Act, the
Court may reverse the Commission only if its decision was “arbitrary,
capricious, an abuse of discretion, or otherwise not in accordance with law.”
5 U.S.C. § 706(2)(A). The Court will “presume the validity” of the agency’s
decision and will overturn it only if the Commission “has made a clear error
in judgment.” Kisser v. Cisneros, 14 F.3d 615, 619 (D.C. Cir. 1994).

II.

THE COMMISSION REASONABLY INTERPRETED ITS
ACCESS CHARGE RULES AND ORDERS.

ILECs must file tariffs under a comprehensive regulatory framework,
but the Commission has “mandatorily detariffed” CLECs, except as provided
for by Rule 61.26. Access Charge Reform, 16 FCC Rcd 9925 ¶3. As
explained below, the Commission correctly determined that Rule 61.26 does
not allow the filing of a tariff that imposes access charges on IXCs for calls
delivered to recipients that pay nothing to the CLEC for service. The
24

Commission therefore properly held that Northern Valley’s tariff, which
2
defined “end user” to include a non-paying customer, violated Rule 61.26.

A. The Commission Reasonably Determined That Rule

61.26 Allows The Imposition Of Tariffed Charges Only
For Service To An “End User” Who Is A Paying
Customer.

The Commission construed Rule 61.26 in four steps. First, the rule
defines interstate access service subject to a CLEC tariff to mean the
“functional equivalent” of ILEC access service. Second, in the Access
Charge Orders, the Commission defined “functional equivalent” to mean
service provided to an “end user.” Third, “end user” is defined by
longstanding Commission rules to mean the recipient of a “telecommuni-
cations service.” Fourth, the Communications Act defines
“telecommunications service” as a service provided for a fee. Applying that
logical progression of established definitions, the FCC reasonably construed
its own rule to mean that a CLEC may tariff service only if a call is delivered
to a paying end user. Qwest Order ¶¶8-9 (JA 203-204). That reading of

2 Rule 61.26(f), 47 C.F.R. § 61.26(f), addresses a CLEC’s providing some,
but not all, of the sub-elements of switched access service in order to
complete a call to another CLEC’s end user. Neither that provision nor the
situation to which it pertains is at issue here. The only relevant end user in
this case would be Northern Valley’s own end user. See Qwest
Reconsideration Order
¶16 (JA 372).
25

Rule 61.26 is consistent with its language, the traditional understanding of
common-carriage tariffs, and longstanding Commission policy.
1. The Commission Reasonably Determined That Rule
61.26 Establishes A Paying “End User” Requirement.
Rule 61.26 defines “interstate switched exchange access service”
eligible for tariffing by a CLEC as “the functional equivalent of the ILEC
interstate exchange access services.” 47 C.F.R. § 61.26(a)(3). In the Access
Charge Reconsideration Order, the Commission ruled that the “functional
equivalent” of ILEC access service is the provision of “access to the
competitive LEC’s own end-users.” Access Charge Reconsideration, 19 FCC
Rcd at 9112 ¶¶9, 15 (“a competitive LEC that provides access to its own end-
users is providing the functional equivalent” of ILEC access service). Thus, a
CLEC may tariff interstate access service only for calls that are completed to
an “end user.”
That interpretation is firmly supported by the text of section
61.26(a)(1). For purposes of the tariffing rule, that provision defines a CLEC
as a LEC that (a) “provides some or all of the interstate exchange access
services used to send traffic to or from an end user,” and (b) is not an ILEC.
47 C.F.R. § 61.26(a)(1) (emphasis added); see Qwest Reconsideration ¶8 (JA
368). Indeed, Northern Valley itself told the Commission that for tariffed
26

access charges to apply, “the call must be originated or terminated to an “end
user.” Northern Valley Legal Analysis (Sprint) at 16 (JA 561).
The Commission reasonably interpreted “end user” to mean a paying
customer of the CLEC. The only definition of “end user” established by the
Commission, Rule 69.2(m), which appears in the provisions governing ILEC
tariffs, defines that term as “any customer of an interstate or foreign
telecommunications service that is not a carrier.” 47 C.F.R. § 69.2(m)
(emphasis added). “Telecommunications service” is, in turn, defined by the
Communications Act to mean “the offering of telecommunications for a fee
directly to the public.” 47 U.S.C. § 153(53) (emphasis added). Qwest Order
¶¶7-8 (JA 202-203). Thus, the Commission reasonably found that an “end
user” of a CLEC is a customer of the CLEC that pays a fee for an interstate
service.
The Commission correctly determined that “end user” has the same
meaning for CLECs that it does for ILECs, as set forth in Rule 69.2(m).
Northern Valley does not – and cannot – identify any Commission rule or
order that defines that term differently for CLECs than ILECs. The
Commission explained that, had it “intended the term to have a meaning [in
the CLEC] rule other than” its traditional one, it would have “specifically
redefine[d] ‘end user’” in Rule 61.26. Qwest Reconsideration ¶10 (JA 369).
27

But “there is no indication that the term … as used in [the CLEC context] was
intended to incorporate any different meaning than that which the
Commission has given it for more than 25 years” in the ILEC context. Ibid.
Any other reading, the Commission stated, would “def[y] logic.” Ibid.
Because the Commission’s construction of its own rule reflects its “fair
and considered judgment” and is not “plainly erroneous or inconsistent with
the regulation,” its construction is “controlling.” Talk Am., 131 S. Ct. at 2261
(quoting Auer, 519 U.S. at 461-462).
2. The Commission’s Reading Of Rule 61.26 Supports

Important Policy Goals.

Requiring an end user to be a paying customer under an interstate
access tariff promotes two important Commission policies. First, as the
Commission explained, “defining ‘end user’ as a customer of a service
offered for a fee furthers the … goal of ensuring that neither the IXCs nor end
users are charged an unfair share of the LEC’s costs in transporting interstate
calls.” Qwest Order n.38 (JA 204-205). If a LEC does not recover part of its
costs from an end user, it will have an incentive to seek a disproportionate
share from the IXC. It has been “a longstanding policy of the Commission
that users of the local telephone network for interstate calls should be
responsible for a reasonable portion of the costs that they cause.” Qwest
Reconsideration ¶11 (JA 370). Indeed, when the Commission first imposed
28

regulation on CLEC access charges, it expressed its concern that CLECs not
be able to “shift an inappropriate share of [their] costs onto the IXCs and,
through them, the long distance market in general.” Access Charge Reform,
16 FCC Rcd 9931 ¶22.
Second, requiring a paying end user supports the Commission’s efforts
to combat access charge abuse by traffic pumping. Traffic pumping presents
a slew of policy harms. It relies on an economic model in which LECs vastly
increase their minutes of use, but do not reduce their per-minute rates to
reflect lower average costs. “The combination of significant increases in
switched access traffic with unchanged access rates results in a jump in
revenues and thus inflated profits that almost uniformly make the LEC’s
interstate switched access rates unjust and unreasonable.” Connect America
Fund, 26 FCC Rcd at 17874 ¶657. The result is a “wasteful arbitrage
practice[],” id. at 17676 ¶33, that “imposes undue costs on consumers,
inefficiently diverting … away from more productive uses” hundreds of
millions of dollars annually, id. ¶¶663-664. Because scarce resources are
siphoned off into unproductive uses, more socially useful projects such as
deployment of broadband facilities suffer. Id. ¶663-664. Moreover, all users
of the interstate telephone system are effectively forced to “support
businesses designed to take advantage of … above-cost” switched access
29

rates. Ibid. The conference companies that take advantage of traffic pumping
also gain an unfair competitive edge over companies that are not parties to
arbitrage practices. Id. ¶665.
The Commission has taken steps to reduce the incentives to engage in
traffic pumping, Connect America Fund ¶¶679-691, and ultimately to
eliminate access charges entirely, id. ¶¶736-759. As the Commission
recognized, this case is “the latest chapter in the ongoing dispute” between
IXCs and LECs over such practices. Qwest Order ¶1 (JA 199). A reduction
in access stimulation will itself further the Commission’s policy that both
IXCs and end users of access service bear the cost of service and implement
the statutory mandate that interstate rates and practices be just and reasonable.
See 47 U.S.C. § 201(b). The FCC’s interpretation of Rule 61.26 thus
represents a “reasonable policy choice” that the Court should uphold.
American Council on Educ. v. FCC, 451 F.3d 226, 232 (D.C. Cir. 2006).
3. The Commission’s Reading Of Rule 61.26 Is

Consistent With Traditional Concepts Of Common
Carriage.

The Commission’s logical reading of “end user” is consistent with the
traditional understanding of tariffs and common carriers. FCC rules define
“tariff” to mean a “[s]chedul[e] of rates and regulations filed by [a] common
carrier[].” 47 C.F.R. § 61.3(ss). As relevant here, the Communications Act
30

defines a “common carrier” as a “person engaged as a common carrier for
hire.” 47 U.S.C. § 153(11) (emphasis added). Thus, a tariff is filed by an
entity that (a) otherwise qualifies as a common carrier, and (b) provides
service for a fee. That understanding is reflected throughout the
Commission’s rules. See 47 C.F.R. § 22.99 (defining “telecommunications
common carrier” as an entity “engaged in rendering radio telecommuni-
cations services to the general public for hire”); 47 C.F.R. § 25.103(a) (same
definition for “communications common carrier”); 47 C.F.R. § 32.9000
(same); 47 C.F.R. § 51.5 (“A telecommunications carrier shall be treated as a
common carrier under the Act only to the extent that it is engaged in
providing telecommunications services.”); 47 C.F.R. § 54.5 (same).
Indeed, the Supreme Court has recognized that the filing of tariffs and
the provision of common carriage are intimately linked: “[t]he tariff-filing
requirement is … the heart of the common-carrier section of the
Communications Act.” MCI v. AT&T, 512 U.S. 218, 229 (1994). This Court
has recognized the corollary proposition that “[a]ll of the described regulation
of tariffs under title II of the Act … hinges upon the premise that the
regulated entity is a common carrier.” Southwestern Bell Tel. Co. v. FCC, 19
F.3d 1475, 1480 (D.C. Cir. 1994). Thus, inherent in the very nature of a
31

tariffed service offered by a common carrier is that the users of the service
will pay for it.
Several FCC programs are predicated on a similar understanding of
“end user” to mean a paying customer. For example, universal service
contributions are assessed on the basis of “end-user telecommunications
revenues.” 47 C.F.R. § 54.706(b); see also 47 C.F.R. § 54.706(a) (“[e]ntities
that provide interstate telecommunications to the public … for a fee will be
considered telecommunications carriers providing interstate telecommuni-
cations services”). Likewise, contributions to the Telecommunications Relay
Services fund that provides communications services for the hearing and
vision impaired are calculated “on the basis of interstate end-user revenues.”
47 C.F.R. § 64.604(c)(5)(iii)(A). The premise of those regulations is that a
carrier will charge – and an end user will pay – for interstate services, so that
regulatory fees may be calculated from the payments to the service providers.

B. Northern Valley’s Arguments Are Unavailing.

All of Northern Valley’s challenges to the Commission’s interpretation
of Rule 61.26 fail on their merits; in addition, two of them should not be
considered by this Court because they were not properly preserved before the
Commission.
32

1. Northern Valley Is Wrong That The Communications

Act Allows The Tariffing Of Charges To Non-Paying
Customers.

Northern Valley first contends that, whether or not it charges call
recipients for service, it provides IXCs with “exchange access service” within
the meaning of 47 U.S.C. § 153(20) and thus may tariff that service. Br. 17-
18. According to Northern Valley, the Communications Act unambiguously
provides that no charge to the call recipient is required for a service to
constitute exchange access service, and the Commission’s contrary
determination was “clear error.” Br. 19-20.
Even if Northern Valley’s understanding of the term “exchange access
3
service” were correct, its argument fails. The statutory definition of
“exchange access service” says nothing about a CLEC’s right to charge an
IXC for the provision of that service, by tariff or otherwise. Under the
Commission’s detariffing policy, however, CLECs may file interstate access
tariffs only in conformance with Rule 61.26. Thus, as the Commission
observed, Northern Valley “must comply not only with the Act, but also with

3 The Act defines “exchange access” to mean the offering of access to a
telephone exchange “for the purpose of origination or termination of
telephone toll services.” 47 U.S.C. § 153(20). It defines “telephone toll
service” as service between stations in different local exchanges “for which
there is made a separate charge not included in contracts with subscribers for
exchange service.” 47 U.S.C. § 153(55). The reference to a “separate
charge” implies that exchange service would be a fee-based service.
33

the Commission’s rules and orders.” Qwest Order ¶11 (JA 205). Under Rule
61.26, “a CLEC may not impose switched access charges pursuant to tariff
unless it is providing interstate switched exchange access services to its own
end users,” which do not include non-paying customers. Ibid. Thus, if
Northern Valley chooses to provide service to a non-paying call recipient, the
Commission ruled, it may collect access fees from IXCs only “through a
negotiated contract” outside of the tariff framework. Qwest Order ¶11 (JA
205).
The essence of Northern Valley’s claim is that it is entitled to collect
access charges by tariff for switching calls to any recipients. In a deregulated
market such as the one for CLEC services, however, no such right exists.
Access charges for cellular telephone companies, for example, have been
mandatorily detariffed entirely, see 47 C.F.R. § 20.15(c), and those
companies may collect access charges from an IXC only if both parties agree
by contract. See Petitions of Sprint PCS and AT&T Corp. for Declaratory
Ruling Regarding CMRS Access Charges, 17 FCC Rcd 13192, 13198 ¶12
(2002), petitions for review dismissed, AT&T Corp. v. FCC, 349 F.3d 692
(D.C. Cir. 2003). The absence of a right to collect switched access charges
from IXCs is underscored by the Commission’s eventual elimination of
34

tariffed access charges (and thus access tariffs), Connect America Fund, 26
FCC Rcd at 17904-17914.
2. Northern Valley Is Wrong That The Commission

Improperly Failed To Respond To One Of Its Claims.

Northern Valley next asserts that the agency improperly ignored its
argument that the relevant “fee” for purposes of determining whether a
“telecommunications service” has been provided is not that paid by the call
recipient, but rather by the call originator. Br. 20-22. Not so.
As the Commission pointed out on reconsideration, that argument had
been “advanced and rejected.” Qwest Reconsideration ¶5 & n.20 (JA 367)
(emphasis added). The Commission cited paragraphs 9-11 of the underlying
Qwest Order, in which the agency explained in detail the basis for its
conclusion that the CLEC access tariff regime requires that a CLEC’s end
user be a paying customer. That reasoning disposed of Northern Valley’s
contrary argument. As the Commission observed, under the access charge
regime, “an ‘end user’ is a customer of a service that is offered for a fee.”
4
Qwest Order ¶9 (citing 47 U.S.C. § 153(53)) (JA 204).

4 Global NAPs, Inc. v. Verizon New England, Inc., 454 F.3d 91, 98 (2d Cir.
2006), is not to the contrary. The issue in that case was whether telephone
calls were local or long distance; it had nothing to do with the meaning of
“end user” or the Commission’s CLEC tariff rules.
35

Here, the “customer” to which Northern Valley completes calls is the
conference calling company, which therefore must be charged for service to
qualify as an end user. Indeed, Northern Valley’s tariff indicates as much – it
defined an “end user” as the “Customer of an Interstate or Foreign
Telecommunications Service that is not a carrier;” i.e., not the IXC. Tariff at
8 (JA 62). The tariff further makes clear Northern Valley’s understanding
that the “end user” in this context refers to its own customers – the conference
calling companies – because it maintained that they need not purchase any
services from Northern Valley to fall within that regulatory definition. See
Br. 17 (noting that “[t]here is also no dispute that a conferencing service
provider can be an ‘end user’”); see also id. at 19 (“Northern Valley’s Tariff
… simply mirrors the plain language of the Act, which does not make the
payment of a fee by an End User part of the analysis”). In short, it does not
matter if the call placed to the conference company was made by a fee-paying
caller, because that caller is not the relevant “end user” of Northern Valley’s
service.
36

3. Northern Valley’s Remaining Arguments Regarding

The “End User” Definition Are Procedurally Barred
And, In Any Event, Meritless.

a. Northern Valley’s Contentions That The

Commission Acted Inconsistently With Its Rules
and Precedents Are Barred By FCC Rule 1.106(c).

Northern Valley argues that the Commission acted inconsistently with
Rule 61.26 and the Access Charge Orders (Br. 23-38), and that the
Commission erroneously ignored its earlier decision in Qwest v. Farmers &
Merchants Mutual Tel. Co., 22 FCC Rcd 17973 (2007) (Br. 38-45). Because
Northern Valley raised those claims for the first time in its petition for
reconsideration before the agency, the Commission properly dismissed them.
Northern Valley is now precluded from presenting the claims to this Court.
“Simple fairness to those who are engaged in the tasks of
administration … requires as a general rule that courts should not topple over
administrative decisions unless the administrative body not only has erred but
has erred against objection made at the time appropriate under its practice.”
United States v. L.A. Tucker Truck Lines, Inc., 344 U.S. 33, 37 (1952)
(emphasis added); accord Woodford v. Ngo, 548 U.S. 81, 90 (2006). The
“time appropriate” for a defendant to raise its legal arguments in a complaint
proceeding before the FCC is its response to the complaint. In keeping with
the Tucker principle, FCC Rule 1.106(c) bars arguments raised for the first
37

time in petitions for reconsideration, with exceptions not pertinent here. 47
C.F.R. §§ 1.106(b)(2)(ii), (c)(1), (c)(2); see Qwest Reconsideration ¶6 (JA
367-368).
Northern Valley did not raise its arguments concerning Rule 61.26, the
Access Charge Orders, or the Farmers decision in response to either Qwest’s
or Sprint’s complaint, Qwest Reconsideration n.23 (JA 367). The
Commission thus properly dismissed those portions of the petition for
reconsideration as procedurally improper. Northern Valley does not
challenge the validity of that procedural ruling, and the Court should not
address its forfeited arguments.
b. Northern Valley Is Wrong That The FCC Acted

Inconsistently With The Access Charge Orders

And
Rule 61.26.

Even if Northern Valley’s arguments concerning the Access Charge
Orders and Rule 61.26 were not procedurally barred, they lack merit.
Northern Valley contends that in the Access Charge Orders the Commission
deregulated the relationship between a CLEC and its local exchange
customers, but that by requiring a paying end-user customer as a prerequisite
to filing an access tariff, the Commission unlawfully subjected the
relationship between the CLEC and its local exchange customer to the very
regulation the agency had disavowed. Br. 24-26; 28-29; 30-32; 37-38.
38

Northern Valley’s argument rests on the faulty premise that the orders
on review regulate the relationship between the CLEC and its local exchange
customer. In fact, they specify when a CLEC may lawfully file a tariff that
imposes access charges on an IXC. As the Commission pointed out,
“Northern Valley may offer its services to individuals and businesses for any
fee (or no fee).” But “if Northern Valley chooses to assess access charges
upon IXCs by tariff” – rather than by negotiated contract – there must be a
paying end user. Qwest Reconsideration ¶12 (JA 370). Northern Valley’s
reliance on statements in prior Commission orders that the agency would not
regulate end user charges, Br. 31, 33, 38, is thus misplaced: nothing in the
orders on review is inconsistent with that policy. Indeed, the orders make
clear that CLECs are free to negotiate contracts with IXCs that define the
specific nature of their end-user relationships; what they may not do,
however, is rely on the FCC’s tariff regime and its associated benefits (see
p.9, supra) to impose access charges on IXCs in the absence of a paying end
user.
Northern Valley does not claim that under the Access Charge Orders
the FCC may not regulate the CLEC-IXC relationship. Indeed, such
regulation is at the heart of those orders. The Access Charge Orders were
prompted by the abuse of tariffs by then-unregulated CLECs that unfairly
39

shifted costs onto IXCs and the public. 16 FCC Rcd at 9924-9925, 9934. In
light of such abuse, the Commission “limit[ed] the application of [its] tariff
rules to CLEC access services,” and regulated more strictly CLEC interstate
access tariffs. Id. at 9924 ¶2. An essential part of that limitation was the
agency’s exercise of its forbearance authority to detariff CLEC access
charges except as set forth in Rule 61.26. That approach, the Commission
determined, would allow both parties that benefit from access service – the
IXC and the end user – to share the costs fairly. 16 FCC Rcd at 9931 ¶22,
9938 ¶38; see Qwest Reconsideration Order ¶11 (JA 370).
To be sure, the Commission’s decision may discourage some CLECs
from providing free, subsidized service to companies that generate large
volumes of incoming calls. But that effect does not amount to regulation of
the CLEC-customer relationship. Regulation of matters within the
Commission’s reach is not rendered impermissible because it affects matters
that it has declined to regulate. For example, where the Commission granted
a spectrum permit to a domestic television station conditioned upon the
provision of certain types of programming by a foreign station, the Court held
that the Commission had not regulated the foreign station. Radio-Televisión
S.A. de C.V. v. FCC, 130 F.3d 1078, 1082 (D.C. Cir. 1997). Similarly, in
Cable & Wireless P.L.C. v. FCC, 166 F.3d 1224, 1230 (D.C. Cir. 1999), the
40

Court held that despite “the practical effect” of the Commission’s order on
unregulated foreign entities, “the Commission does not exceed its authority
simply because a regulatory action has extraterritorial consequences.” Here
too, the FCC has not impermissibly regulated the relationship between
CLECs and their local exchange customers merely because its rules
governing CLEC access tariffs may cause CLECs to charge end users in
order to obtain the benefits of filing an FCC tariff that governs their
relationship with IXCs.
Moreover, the Access Charge Orders did not determine that CLECs
could tariff access charges for services provided free of charge. Rather, those
orders contemplated that deregulation of the CLEC-customer relationship
would allow CLECs to charge their local exchange customers more for
interstate service than ILECs were allowed to. CLECs had contended that
their costs were higher than those of ILECs, and the Commission declined to
“stand in the way of their recovering those costs. … CLECs remain free to
recover from their end users any greater costs that they incur in providing
either originating or terminating access services.” Access Charge Order, 16
FCC Rcd at 9938 ¶39. Contrary to Northern Valley’s contention, in
deregulating the CLEC-customer relationship the Commission still assumed a
paying customer.
41

Northern Valley is also mistaken in asserting that the Commission
misinterpreted the term “functional equivalence” in Rule 61.26. According to
Northern Valley, a CLEC provides “interstate switched access service” under
the rule as long as it performs the same physical function – the switching of a
call to its intended recipient – as an ILEC, without regard to the existence of a
paying customer. Br. 33-38.
That claim conflicts with the Access Reform Reconsideration Order,
where the Commission made clear that, as used in Rule 61.26, functional
equivalence between CLEC and ILEC access service exists “only when a
competitive LEC provides an IXC with access to the competitive LEC’s own
end-users.” 19 FCC Rcd at 9114 ¶15; see also id. at 9115 ¶13 (“[w]hen a
competitive LEC originates or terminates traffic to its own end-users, it is
providing the functional equivalent of” ILEC switched access services within
the meaning of Rule). See Qwest Order ¶8 (JA 203); Qwest Reconsideration
Order ¶8 (JA 368). As explained at page 26 above, under the functional
equivalence test, a CLEC may tariff the same types of charges that an ILEC
may tariff – and an ILEC must have a paying end user. The agency thus
reasonably interpreted its rules and orders to discourage Northern Valley’s
economically inefficient arbitrage scheme and to further its policies
promoting the fair sharing of access costs and disfavoring traffic pumping.
42

See MobileTel, Inc. v. FCC, 107 F.3d 888, 896 (D.C. Cir. 1997) (upholding
interpretation of regulation that “was reasonable and consistent with several
of the Commission's relevant policies”); Southwestern Elec. Co-op., Inc. v.
FERC, 347 F.3d 975, 984 (D.C. Cir. 2003) (upholding interpretation that was
5
reasonable and “paid heed to public policy priorities”).
Similarly, there is no merit to Northern Valley’s argument (Br. 34) that
the orders on review are undermined by FCC Rule 69.5(b), 47 C.F.R.
§ 69.5(b), which does not use the phrase “end user” in requiring ILECs to
tariff all use of local switching facilities. It is not surprising that Rule 69.5(b)
does not mention a paying end user – ILECs are required to charge each
customer a SLC and thus will always have a paying end user. See 47 C.F.R.
§ 69.4(a).

5 Northern Valley’s reliance on an FCC amicus brief in Paetec
Communications Inc. v. MCI Communications Servs. Inc.
, Third Cir. No. 11-
2268 (filed March 14, 2012), is misplaced. The FCC’s brief did not address
the meaning of “end user” and focused instead on an issue that has no bearing
here: the type of services for which a CLEC could recover payment from an
IXC (specifically, whether a CLEC that does not provide “tandem switching”
may nevertheless charge for that service). Nothing in the FCC’s brief
suggests that switching a call to a non-paying customer amounts to a service
functionally equivalent to switched access within the meaning of Rule 61.26.
43

c. The Commission’s Holding Is Consistent With Its

Farmers

Precedent.

Even if Northern Valley had not waived its argument (Br. 38-45) that
the Qwest and Sprint orders are inconsistent with the Commission’s decision
in Farmers, 22 FCC Rcd 17973 (see pp 37-38, supra), the claim is wrong.
Farmers involved a traffic pumping scheme in which Farmers &
Merchants, an ILEC, filed a tariff that entitled it to collect access charges
from “end users” as defined in the tariff. Farmers initially falsely informed
the Commission that it had billed conference calling companies (with which
it was splitting the proceeds from its inflated access charges) for the SLC and
other charges. 22 FCC Rcd 17973 (Farmers I). On the basis of that
misrepresentation, the agency initially determined that Farmers was entitled
to collect access charges for calls delivered to the conference companies
because they were “end users” under the relevant tariff definitions. 22 FCC
Rcd 17973. The Commission found further that the conference companies
could be end users even if they did not make net payments to Farmers. Id.
¶38.
Once the truth emerged that Farmers had not billed the conference
companies for the SLC or any other service, and thus were not end users as
defined in the tariff, the Commission reversed its earlier determination, which
was “based entirely” on the premise that the end users had been billed for
44

service and the SLC. Qwest v. Farmers, 24 FCC Rcd 14801, 14805 ¶11
(2009) (Farmers II). The Commission ruled instead that “the flow of money
… is essential to analyzing their relationship because the tariff expressly
contemplates and requires payments to Farmers, not payments that flow in
the reverse direction.” Farmers II n.49.
Northern Valley’s reliance on the outcome in Farmers I is mistaken
because – as it concedes (Br. 40) – that decision was reversed after the
agency discovered the true facts. Just as Farmers II held that there must be
payments from the end user to the carrier, so here Northern Valley’s end user
must be responsible for payment if Northern Valley wishes to tariff its access
service. There is thus no inconsistency between the two decisions. See
Qwest Order ¶14 (JA 207-208).
Furthermore, Farmers involved the interpretation and application of a
tariff, whereas this case involves the interpretation and application of the
agency’s own rule governing when a CLEC may file a tariff. The
Commission had no need in Farmers to consider whether its rules permit any
LEC to define “end user” to mean a non-paying customer, and it had no need
here to look to Northern Valley’s tariff in interpreting Rule 61.26. Contrary
to Northern Valley’s contention, the Commission in Farmers did not
establish a generally applicable principle that “a customer’s ‘end user’ status
45

depends on the language of the carrier’s tariff.” Br. 41. The terms of
Farmers’ tariff resolved that dispute, while Rule 61.26 resolves this one.
Northern Valley is also wrong in claiming (Br. 41) that the
Commission’s access charge regime turns on the “formalism” of “whether an
end user remits some fee … just so that the CLEC can return it to that same
customer.” The Commission specifically declined to decide whether the
Qwest Order created a “net payments” requirement because Northern Valley
6
charged nothing for service. Qwest Reconsideration ¶16 (JA 372). Nor has
the Commission addressed the amount of payment that would render a call
recipient a legitimate end user. The Commission has approached all such
questions through case-by-case resolutions of specific disputes before it.
That approach is well within the agency’s discretion to “make reasonable
decisions” about how best to structure its decision-making processes to “deal
with an actual problem.” Tennessee Gas Pipeline Co. v. FERC, 972 F.2d
376, 381 (D.C. Cir. 1992); see also U.S. West Commc’ns, Inc. v. FCC, 177
F.3d 1057, 1061 (D.C. Cir. 1999) (approving FCC’s decision to “proceed

6 We note that 47 U.S.C. § 203(c)(2) forbids carriers from “refund[ing] or
remit[ting] by any means or device any portion of the charges” set forth in a
tariff. The Commission has not addressed directly how that provision applies
to traffic pumping, but has indicated that it may apply. Connect America
Fund
, 26 FCC Rcd at 17889 n.1183.
46

through case-by-case judgments of a questioned action’s likely effect”), cert.
denied, 528 U.S. 1188 (2000).
Finally, that the Commission has declined to prohibit revenue sharing
between LECs and their customers does not support Northern Valley’s
position. Br. 42-45. The Commission has recognized that there may be some
circumstances in which such an arrangement could be beneficial. Connect
America Fund, 26 FCC Rcd at 17879 ¶672. The Commission has decided,
however, that traffic pumping schemes like Northern Valley’s are unfair and
economically wasteful and ordinarily result in outcomes that are unjust and
unreasonable. Id. at 17875 ¶662. The Commission may properly interpret its
rules and orders to deter such practices.
4. The Court Lacks Jurisdiction Over Northern Valley’s

Claim That The Commission Has Improperly Invaded
State Authority, Which Is Wrong In Any Event.

Northern Valley argues that because the Commission has “regulated
the relationship between CLECs and their end users,” Br. 45, it has violated
47 U.S.C. § 152(b), which forbids the FCC from regulating intrastate
communication services.
At the outset, Northern Valley never raised that claim before the
Commission and it is now statutorily barred. Section 405(a) of the
Communications Act makes it a “condition precedent to judicial review” that
47

a party give the Commission an “opportunity to pass” on any “question of
fact or law.” 47 U.S.C. § 405(a). Under that provision, the Court lacks
jurisdiction over arguments not raised before the agency. Bartholdi Cable v.
FCC, 114 F.3d 274 (D.C. Cir. 1997).
Even if the Court were to reach the issue, the argument is meritless
because it rests entirely on the false premise that the Commission has
regulated intrastate service. As shown at pages 39-41 above, the Commission
has regulated only the switched access charges that CLECs may impose upon
IXCs for the CLEC’s completion of interstate long-distance calls; it has not
regulated the relationship between CLECs and their local customers. Thus,
the Commission has regulated interstate access service over which Congress
has expressly granted it jurisdiction. 47 U.S.C. § 152(a).

III. THE COMMISSION ACTED WITHIN ITS DISCRETION

IN INVALIDATING NORTHERN VALLEY’S TARIFF
PROVISION REQUIRING WAIVER OF BILLING
DISPUTE CLAIMS FILED WITHIN THE STATUTORY
LIMITATIONS PERIOD.

Congress has established that “[a]ll complaints against carriers … shall
be filed with the Commission within two years from the time the cause of
action accrues.” 47 U.S.C. § 415(b). Notwithstanding that statutory two-year
limitations period, Section 3.1.7.1(a) of Northern Valley’s tariff required that
IXCs dispute any charge in writing within 90 days of the bill or be “deemed
48

to have waived any and all rights and claims with respect to both the bill and
the underlying dispute.” JA 86 (emphasis added). The Commission found
that the tariff “contravene[d]” the two-year statutory limitations period and
thus was unlawful. Sprint Order ¶14 (JA 678).
Northern Valley’s contrary arguments lack merit. Northern Valley first
asserts that the notification provision is necessary and reasonable because in
its absence, “IXCs could remain silent for two years” before starting
litigation. Br. 53. But that is precisely what a statute of limitations allows.
Northern Valley may believe that Congress should have chosen a shorter
limitation period, but that policy argument should be addressed to the
Legislature and not a court
Courts, including this one, have struck down similar tariff provisions
for violating statutory limitations periods. In Kraft Foods v. Federal
Maritime Comm’n, 538 F.2d 445, 447 (D.C. Cir. 1976), for example, this
Court struck down a similar tariff condition in the face of an equivalent
statute of limitations. In MCI WorldCom Network Services, Inc. v. Paetec
Communications, Inc., No. 04-1479 slip op. (E.D. Va. Mar. 16, 2005), aff’d
204 Fed. Appx. 271, 272 (4th Cir. 2006), the court struck down as
inconsistent with section 415 the same type of notification and waiver term at
issue here. In doing so, the court explained that carriers may not “unilaterally
49

void federally codified consumer protections simply by filing a tariff.” Id. 2-
3; see Paetec Communications, Inc. v. MCI Communications Services, Inc.,
712 F. Supp. 2d 405, 416-417 (E.D. Pa. 2010) (giving earlier Paetec case
preclusive effect); see also Sprint Order n.47 (JA 678).
Northern Valley is wrong in contending that courts “have regularly
upheld” such notification and cut-off requirements. Br. 54. In Viking
Communications, Inc. v. AT&T Corp., 2006 WL 1128723 (D. N.J. 2006), and
Powers Law Offices v. Cable & Wireless USA, Inc., 326 F. Supp. 2d 190 (D.
Mass 2004), the courts applied such a provision, but there was no challenge
to its lawfulness under 47 U.S.C. § 415(b) and the court did not address the
matter. In MFS International, Inc. v. International Telecom, Ltd., 50 F. Supp.
2d 517 (E.D. Va. 1999), the notification and cutoff provision was established
7
by mutually agreed private contract, not by tariff.

7 Northern Valley suggests – at page 13 of its brief in the discussion of
standing and at footnote 94 – that it challenges the Commission’s finding that
the tariff was not “clear and explicit.” See p. 16, supra. Such perfunctory
and undeveloped references to an argument, however, are insufficient to
preserve it for appellate review. See Railway Labor Executives’ Ass’n v. U.S.
R.R. Retirement Bd.
, 749 F.2d 856, 859 n.6 (D.C. Cir. 1984) (three sentences
in brief do not preserve claim); Hutchins v. District of Columbia, 188 F.3d
531, 539 n.3 (D.C. Cir. 1999) (en banc) (“cursory arguments made only in a
footnote” do not preserve claim).
50


CONCLUSION

For the foregoing reasons, the petitions for review should be denied.
Respectfully
submitted,
JOSEPH F. WAYLAND
PETER KARANJIA
ACTING ASSISTANT ATTORNEY
DEPUTY GENERAL COUNSEL
GENERAL


RICHARD K. WELCH
ROBERT B. NICHOLSON
DEPUTY ASSOCIATE GENERAL
NICKOLAI G. LEVIN
COUNSEL
ATTORNEYS


/s/ Joel Marcus
UNITED STATES

DEPARTMENT OF JUSTICE
JOEL MARCUS
WASHINGTON, D.C. 20530
COUNSEL


FEDERAL COMMUNICATIONS
COMMISSION
WASHINGTON, D.C. 20554
(202) 418-1740
July 23, 2012
51

IN THE UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT


NORTHERN VALLEY COMMUNICATIONS, LLC
PETITIONER,
v.
NO. 11-1467
F

EDERAL COMMUNICATIONS COMMISSION AND
UNITED STATES OF AMERICA,
RESPONDENTS.



CERTIFICATE OF COMPLIANCE

Pursuant to the requirements of Fed. R. App. P. 32(a)(7), I hereby
certify that the accompanying Brief for Respondents in the captioned case
contains 10,879 words.

/s/ Joel Marcus
Joel Marcus

Counsel
Federal Communications Commission
Washington, D.C. 20554
(202) 418-1740 (Telephone)
(202) 418-2819 (Fax)
July 23, 2012





















STATUTORY AND

REGULATORY APPENDIX













47 U.S.C. § 153(11)
47 U.S.C. § 153(53)
47 U.S.C. § 201(b)
47 U.S.C. § 203(c)

47 C.F.R. § 1.106(a)-(c)
47 C.F.R. § 61.3(ss)
47 C.F.R. § 61.26
47 C.F.R. § 69.2(m)







UNITED STATES CODE ANNOTATED
TITLE 47. TELEGRAPHS, TELEPHONES, AND
RADIOTELEGRAPHS
CHAPTER 5 -- WIRE OR RADIO COMMUNICATION
SUBCHAPTER I -- GENERAL PROVISIONS


§ 153. Definitions

For the purposes of this chapter, unless the context otherwise requires--

* * * * *
(11) Common carrier

The term “common carrier” or “carrier” means any person engaged as a
common carrier for hire, in interstate or foreign communication by wire or
radio or interstate or foreign radio transmission of energy, except where
reference is made to common carriers not subject to this chapter; but a
person engaged in radio broadcasting shall not, insofar as such person is so
engaged, be deemed a common carrier.

* * * * *

(53) Telecommunications service

The term “telecommunications service” means the offering of
telecommunications for a fee directly to the public, or to such classes of
users as to be effectively available directly to the public, regardless of the
facilities used.

* * * * *


47 U.S.C. § 201(b)




UNITED STATES CODE ANNOTATED
TITLE 47. TELEGRAPHS, TELEPHONES, AND
RADIOTELEGRAPHS
CHAPTER 5. WIRE OR RADIO COMMUNICATION
SUBCHAPTER II. COMMON CARRIERS
PART I. COMMON CARRIER REGULATION


§ 201. Service and charges

* * * * * *

(b) All charges, practices, classifications, and regulations for and in
connection with such communication service, shall be just and reasonable,
and any such charge, practice, classification, or regulation that is unjust or
unreasonable is declared to be unlawful: Provided, That communications by
wire or radio subject to this chapter may be classified into day, night,
repeated, unrepeated, letter, commercial, press, Government, and such other
classes as the Commission may decide to be just and reasonable, and
different charges may be made for the different classes of communications:
Provided further, That nothing in this chapter or in any other provision of
law shall be construed to prevent a common carrier subject to this chapter
from entering into or operating under any contract with any common carrier
not subject to this chapter, for the exchange of their services, if the
Commission is of the opinion that such contract is not contrary to the public
interest: Provided further, That nothing in this chapter or in any other
provision of law shall prevent a common carrier subject to this chapter from
furnishing reports of positions of ships at sea to newspapers of general
circulation, either at a nominal charge or without charge, provided the name
of such common carrier is displayed along with such ship position reports.
The Commission may prescribe such rules and regulations as may be
necessary in the public interest to carry out the provisions of this chapter.



47 U.S.C. § 203(c)



UNITED STATES CODE ANNOTATED
TITLE 47. TELEGRAPHS, TELEPHONES, AND
RADIOTELEGRAPHS
CHAPTER 5. WIRE OR RADIO COMMUNICATION
SUBCHAPTER II. COMMON CARRIERS
PART I. COMMON CARRIER REGULATION

§ 203. Schedules of charges

* * * * * *

(c) Overcharges and rebates

No carrier, unless otherwise provided by or under authority of this chapter,
shall engage or participate in such communication unless schedules have
been filed and published in accordance with the provisions of this chapter
and with the regulations made thereunder; and no carrier shall (1) charge,
demand, collect, or receive a greater or less or different compensation for
such communication, or for any service in connection therewith, between the
points named in any such schedule than the charges specified in the schedule
then in effect, or (2) refund or remit by any means or device any portion of
the charges so specified, or (3) extend to any person any privileges or
facilities in such communication, or employ or enforce any classifications,
regulations, or practices affecting such charges, except as specified in such
schedule.


* * * * *



47 C.F.R. § 1.106(a)-(c)




CODE OF FEDERAL REGULATIONS
TITLE 47. TELECOMMUNICATION
CHAPTER I. FEDERAL COMMUNICATIONS COMMISSION
SUBCHAPTER A. GENERAL
PART 1. PRACTICE AND PROCEDURE
SUBPART A. GENERAL RULES OF PRACTICE AND
PROCEDURE
RECONSIDERATION AND REVIEW OF ACTIONS TAKEN
BY THE COMMISSION AND PURSUANT TO DELEGATED
AUTHORITY; EFFECTIVE DATES AND FINALITY DATES
OF ACTIONS


§ 1.106 Petitions for reconsideration in non-rulemaking proceedings

(a)(1) Except as provided in paragraphs (b)(3) and (p) of this section,
petitions requesting reconsideration of a final Commission action in non-
rulemaking proceedings will be acted on by the Commission. Petitions
requesting reconsideration of other final actions taken pursuant to delegated
authority will be acted on by the designated authority or referred by such
authority to the Commission. A petition for reconsideration of an order
designating a case for hearing will be entertained if, and insofar as, the
petition relates to an adverse ruling with respect to petitioner's participation
in the proceeding. Petitions for reconsideration of other interlocutory actions
will not be entertained. (For provisions governing reconsideration of
Commission action in notice and comment rulemaking proceedings, see §
1.429. This § 1.106 does not govern reconsideration of such actions.)

(2) Within the period allowed for filing a petition for reconsideration, any
party to the proceeding may request the presiding officer to certify to the
Commission the question as to whether, on policy in effect at the time of
designation or adopted since designation, and undisputed facts, a hearing
should be held. If the presiding officer finds that there is substantial
doubt, on established policy and undisputed facts, that a hearing should
be held, he will certify the policy question to the Commission with a

statement to that effect. No appeal may be filed from an order denying
such a request. See also, §§ 1.229 and 1.251.

(b)(1) Subject to the limitations set forth in paragraph (b)(2) of this section,
any party to the proceeding, or any other person whose interests are
adversely affected by any action taken by the Commission or by the
designated authority, may file a petition requesting reconsideration of the
action taken. If the petition is filed by a person who is not a party to the
proceeding, it shall state with particularity the manner in which the person's
interests are adversely affected by the action taken, and shall show good
reason why it was not possible for him to participate in the earlier stages of
the proceeding.

(2) Where the Commission has denied an application for review, a
petition for reconsideration will be entertained only if one or more of the
following circumstances are present:

(i) The petition relies on facts or arguments which relate to events which
have occurred or circumstances which have changed since the last
opportunity to present such matters to the Commission; or

(ii) The petition relies on facts or arguments unknown to petitioner until
after his last opportunity to present them to the Commission, and he
could not through the exercise of ordinary diligence have learned of the
facts or arguments in question prior to such opportunity.

(3) A petition for reconsideration of an order denying an application for
review which fails to rely on new facts or changed circumstances may be
dismissed by the staff as repetitious.

(c) In the case of any order other than an order denying an application for
review, a petition for reconsideration which relies on facts or arguments not
previously presented to the Commission or to the designated authority may
be granted only under the following circumstances:

(1) The facts or arguments fall within one or more of the categories set
forth in § 1.106(b)(2); or


(2) The Commission or the designated authority determines that
consideration of the facts or arguments relied on is required in the public
interest.

* * * * * *

47 C.F.R. § 61.3(ss)




CODE OF FEDERAL REGULATIONS
TITLE 47. TELECOMMUNICATION
CHAPTER I. FEDERAL COMMUNICATIONS COMMISSION
SUBCHAPTER B. COMMON CARRIER SERVICES
PART 61. TARIFFS
SUBPART A. GENERAL


§ 61.3 Definitions

* * * * * *

(ss) Tariff. Schedules of rates and regulations filed by common carriers.

* * * * * *



47 C.F.R. § 61.26




CODE OF FEDERAL REGULATIONS
TITLE 47. TELECOMMUNICATION
CHAPTER I. FEDERAL COMMUNICATIONS COMMISSION
SUBCHAPTER B. COMMON CARRIER SERVICES
PART 61. TARIFFS
SUBPART C. GENERAL RULES FOR NONDOMINANT
CARRIERS


§ 61.26 Tariffing of competitive interstate switched exchange access
services.

(a) Definitions. For purposes of this section, the following definitions shall
apply:

(1) CLEC shall mean a local exchange carrier that provides some or all of
the interstate exchange access services used to send traffic to or from an
end user and does not fall within the definition of “incumbent local
exchange carrier” in 47 U.S.C. 251(h).

(2) Competing ILEC shall mean the incumbent local exchange carrier, as
defined in 47 U.S.C. 251(h), that would provide interstate exchange
access services, in whole or in part, to the extent those services were not
provided by the CLEC.

(3) Switched exchange access services shall include:

(i) The functional equivalent of the ILEC interstate exchange access
services typically associated with the following rate elements: Carrier
common line (originating); carrier common line (terminating); local end
office switching; interconnection charge; information surcharge; tandem
switched transport termination (fixed); tandem switched transport facility
(per mile); tandem switching;



47 C.F.R. § 61.26 (cont’d)


(ii) The termination of interexchange telecommunications traffic to any
end user, either directly or via contractual or other arrangements with an
affiliated or unaffiliated provider of interconnected VoIP service, as
defined in 47 U.S.C. 153(25), or a non-interconnected VoIP service, as
defined in 47 U.S.C. 153(36), that does not itself seek to collect
reciprocal compensation charges prescribed by this subpart for that
traffic, regardless of the specific functions provided or facilities used.

(4) Non-rural ILEC shall mean an incumbent local exchange carrier that
is not a rural telephone company under 47 U.S.C. 153(44).

(5) The rate for interstate switched exchange access services shall mean
the composite, per-minute rate for these services, including all applicable
fixed and traffic-sensitive charges.

(6) Rural CLEC shall mean a CLEC that does not serve (i.e., terminate
traffic to or originate traffic from) any end users located within either:

(i) Any incorporated place of 50,000 inhabitants or more, based on the
most recently available population statistics of the Census Bureau or

(ii) An urbanized area, as defined by the Census Bureau.

(b) Except as provided in paragraphs (c), (e), and (g) of this section, a CLEC
shall not file a tariff for its interstate switched exchange access services that
prices those services above the higher of:

(1) The rate charged for such services by the competing ILEC or

(2) The lower of:

(i) The benchmark rate described in paragraph (c) of this section or

(ii) In the case of interstate switched exchange access service, the lowest
rate that the CLEC has tariffed for its interstate exchange access services,
within the six months preceding June 20, 2001.


47 C.F.R. § 61.26 (cont’d)


(c) The benchmark rate for a CLEC's switched exchange access services will
be the rate charged for similar services by the competing ILEC. If an ILEC
to which a CLEC benchmarks its rates, pursuant to this section, lowers the
rate to which a CLEC benchmarks, the CLEC must revise its rates to the
lower level within 15 days of the effective date of the lowered ILEC rate.

(d) Except as provided in paragraph (g) of this section, and notwithstanding
paragraphs (b) and (c) of this section, in the event that, after June 20, 2001, a
CLEC begins serving end users in a metropolitan statistical area (MSA)
where it has not previously served end users, the CLEC shall not file a tariff
for its exchange access services in that MSA that prices those services above
the rate charged for such services by the competing ILEC.

(e) Rural exemption. Except as provided in paragraph (g) of this section, and
notwithstanding paragraphs (b) through (d) of this section, a rural CLEC
competing with a non-rural ILEC shall not file a tariff for its interstate
exchange access services that prices those services above the rate prescribed
in the NECA access tariff, assuming the highest rate band for local
switching. In addition to that NECA rate, the rural CLEC may assess a
presubscribed interexchange carrier charge if, and only to the extent that, the
competing ILEC assesses this charge. Beginning July 1, 2013, all CLEC
reciprocal compensation rates for intrastate switched exchange access
services subject to this subpart also shall be no higher than that NECA rate.

(f) If a CLEC provides some portion of the switched exchange access
services used to send traffic to or from an end user not served by that CLEC,
the rate for the access services provided may not exceed the rate charged by
the competing ILEC for the same access services, except if the CLEC is
listed in the database of the Number Portability Administration Center as
providing the calling party or dialed number, the CLEC may, to the extent
permitted by § 51.913(b) of this chapter, assess a rate equal to the rate that
would be charged by the competing ILEC for all exchange access services
required to deliver interstate traffic to the called number.


47 C.F.R. § 61.26 (cont’d)


(g) Notwithstanding paragraphs (b) through (e) of this section:

(1) A CLEC engaging in access stimulation, as that term is defined in §
61.3(bbb), shall not file a tariff for its interstate exchange access services
that prices those services above the rate prescribed in the access tariff of
the price cap LEC with the lowest switched access rates in the state.

(2) A CLEC engaging in access stimulation, as that term is defined in §
61.3(bbb), shall file revised interstate switched access tariffs within forty-
five (45) days of commencing access stimulation, as that term is defined
in § 61.3(bbb), or within forty-five (45) days of [date] if the CLEC on
that date is engaged in access stimulation, as that term is defined in §
61.3(bbb).



47 C.F.R. § 69.2(m)




CODE OF FEDERAL REGULATIONS
TITLE 47. TELECOMMUNICATION
CHAPTER I. FEDERAL COMMUNICATIONS COMMISSION
SUBCHAPTER B. COMMON CARRIER SERVICES
PART 69. ACCESS CHARGES
SUBPART A. GENERAL


§ 69.2 Definitions.

* * * * * *

(m) End user means any customer of an interstate or foreign
telecommunications service that is not a carrier except that a carrier other
than a telephone company shall be deemed to be an “end user” when such
carrier uses a telecommunications service for administrative purposes and a
person or entity that offers telecommunications services exclusively as a
reseller shall be deemed to be an “end user” if all resale transmissions
offered by such reseller originate on the premises of such reseller.

* * * * * *



11-1467 AND 11-1468

IN THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT


Northern Valley Communications, LLC,

Petitioner,


v.

Federal Communications Commission
and United States of America,

Respondents.


CERTIFICATE OF SERVICE



I, Joel Marcus, hereby certify that I directed that, the foregoing Brief for
Respondents be electronically filed on July 23, 2012, with the Clerk of the
Court for the United States Court of Appeals for the D.C. Circuit by using
the CM/ECF system. All counsel in this case are registered CM/ECF users
and will be served by the CM/ECF system.


Ross A. Buntrock
David H. Solomon
George D. Carter, Jr.
Russell P. Hanser
Arent Fox LLP
Wilkinson Barker Knauer, LLP
Seventh Floor
2300 N Street, N.W.
1050 Connecticut Avenue, N.W.
Suite 700
Washington, DC 20036
Washington, D.C. 20037
Counsel for: Northern Valley
Counsel for: Qwest
Communications, LLC
Communications Company, LLC


Scott H. Angstreich
Michael E. Glover
Gregory G. Rapawy
Christopher M. Miller
Kellogg, Huber, Hansen, Todd,
Verizon
Evans & Figel, P.L.L.C.
1320 North Courthouse Road
1615 M Street, N.W., Suite 400
Ninth Floor
Washington, D.C. 20036
Arlington, VA 22201
Counsel for Verizon, Verizon
Counsel for: Verizon
Wireless and AT&T Corp.




Marc A. Goldman
Gary L. Phillips
James C. Cox
AT&T Inc.
Jenner & Block LLP
1120 20th Street, N.W., Suite 1000
1099 New York Avenue, N.W.
Washington, D.C. 20036
Suite 900
Counsel for: AT&T Corp.
Washington, D.C. 20001
Counsel for: Sprint Communications
Company, L.P.


Michael B. Fingerhut
Nickolai G. Levin
Sprint Nextel Corporation
Robert B. Nicholson
Government Affairs
U.S. Department of Justice
900 7th Street, N.W., Suite 700
Antitrust Division, Appellate Section
Washington, D.C. 20001
950 Pennsylvania Avenue, N.W.
Counsel for: Sprint Communications Room 3224
Company, L.P.
Washington, D.C. 20530
Counsel for: USA



/s/ Joel Marcus
Joel Marcus

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