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Response to AT&T Brief, In Re: 11-161, No. 11-9900 (10th Cir.)

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Released: March 18, 2013

Appellate Case: 11-9900 Document: 01019020706 Date Filed: 03/18/2013 Page: 1
FEDERAL RESPONDENTS’ UNCITED RESPONSE TO THE AT&T PRINCIPAL BRIEF
IN THE UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT

NO. 11-9900

IN RE: FCC 11-161

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

WILLIAM J. BAER
SEAN A. LEV
ASSISTANT ATTORNEY GENERAL
GENERAL COUNSEL


ROBERT B. NICHOLSON
PETER KARANJIA
ROBERT J. WIGGERS
DEPUTY GENERAL COUNSEL
ATTORNEYS


RICHARD K. WELCH
UNITED STATES
DEPUTY ASSOCIATE GENERAL COUNSEL
DEPARTMENT OF JUSTICE

WASHINGTON, D.C. 20530
LAURENCE N. BOURNE

JAMES M. CARR
MAUREEN K. FLOOD
COUNSEL

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


Appellate Case: 11-9900 Document: 01019020706 Date Filed: 03/18/2013 Page: 2

TABLE OF CONTENTS


Table of Authorities.......................................................................................... ii 
Glossary ........................................................................................................... iv 
Issue Presented .................................................................................................. 1 
Counterstatement ............................................................................................... 2 
A.  Regulatory Background ......................................................................... 2 
B.  The Order On Review ........................................................................... 6 
Summary of Argument .................................................................................... 10 
Argument ......................................................................................................... 13 

The FCC Reasonably Explained The Rationale For Its
Interim Rule Governing Intercarrier Compensation For
CLEC-VoIP Partnerships ......................................................................... 13 
A.  The FCC Reasonably Distinguished Between CLEC-
VoIP Partnerships And CLEC-Wireless Partnerships. ....................... 16 
B.  The Interim Rule Preserves The Proper Incentives For
Deployment Of IP Networks. .............................................................. 18 
C.  The FCC Reasonably Explained That The Interim Rule
Allows VoIP Providers To Make A Gradual Transition
To Bill-and-Keep. ................................................................................ 23 
Conclusion ....................................................................................................... 27 
i

Appellate Case: 11-9900 Document: 01019020706 Date Filed: 03/18/2013 Page: 3

TABLE OF AUTHORITIES

CASES

 
Arkansas v. Oklahoma, 503 U.S. 91 (1992) .................................................... 23
AT&T Corp. v. FCC, 349 F.3d 692 (D.C. Cir. 2003) ....................................... 3
Aviva Life & Annuity Co. v. FDIC, 654 F.3d 1129
(10th Cir. 2011) ........................................................................................... 18
Citizens’ Comm. to Save Our Canyons v. United
States Forest Serv., 297 F.3d 1012 (10th Cir.
2002) ............................................................................................................ 18
Competitive Telecomms. Ass’n v. FCC, 309 F.3d 8
(D.C. Cir. 2002) ........................................................................................... 25
IMC Kalium Carlsbad, Inc. v. Interior Bd. of Land
Appeals, 206 F.3d 1003 (10th Cir. 2000) .................................................... 23
MCI Telecomms. Corp. v. FCC, 750 F.2d 135 (D.C.
Cir. 1984) ..................................................................................................... 24
Nat’l Ass’n of Regulatory Util. Comm’rs v. FCC,
737 F.2d 1095 (D.C. Cir. 1984) .................................................................. 25
Nuvio Corp. v. FCC, 473 F.3d 302 (D.C. Cir. 2006) ........................................ 9
Rural Cellular Ass’n v. FCC, 588 F.3d 1095 (D.C.
Cir. 2009) ..................................................................................................... 25
Sorenson Commc’ns, Inc. v. FCC, 659 F.3d 1035
(10th Cir. 2011) ........................................................................................... 13
Verizon California, Inc. v. FCC, 555 F.3d 270 (D.C.
Cir. 2009) ....................................................................................................... 5

STATUTES

 
47 U.S.C. §153(51)..................................................................................... 5, 17
47 U.S.C. §251(a)(1) ......................................................................................... 5

REGULATIONS

 
47 C.F.R. §20.15(c) ........................................................................................... 3

ii

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ADMINISTRATIVE DECISIONS

 
Access Charge Reform, 19 FCC Rcd 9108 (2004) ................ 3, 5, 9, 15, 16, 21
Implementation of Sections 3(n) and 332 of the
Communications Act, 9 FCC Rcd 1411 (1994) ............................................. 3
IP-Enabled Services, 20 FCC Rcd 10245 (2005),
pet. for review denied, Nuvio Corp. v. FCC, 473
F.3d 302 (D.C. Cir. 2006) ...................................................................... 9, 16
MTS and WATS Market Structure, 93 FCC 2d 241
(1983) ............................................................................................................ 8
Petitions of Sprint PCS and AT&T Corp. For
Declaratory Ruling Regarding CMRS Access
Charges
, 17 FCC Rcd 13192 (2002), pets. for
review dismissed, AT&T Corp. v. FCC
, 349 F.3d
692 (D.C. Cir. 2003) ...................................................................................... 3
Time Warner Cable Request for Declaratory
Ruling, 22 FCC Rcd 3513 (Wireline Comp. Bur.
2007) .............................................................................................................. 5



iii

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GLOSSARY

CLEC
Competitive
Local
Exchange
Carrier
FCC
Federal
Communications
Commission
ILEC


Incumbent Local Exchange Carrier
IP
Internet
Protocol
LEC
Local
Exchange
Carrier
PSTN
Public
Switched Telephone Network
VoIP


Voice over Internet Protocol

iv

Appellate Case: 11-9900 Document: 01019020706 Date Filed: 03/18/2013 Page: 6
IN THE UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT

NO. 11-9900

IN RE: FCC 11-161

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

FEDERAL RESPONDENTS’ UNCITED RESPONSE TO THE AT&T PRINCIPAL BRIEF

ISSUE PRESENTED

Some providers of voice telephone service (including many cable
operators) use Voice over Internet Protocol (“VoIP”) technology. They often
partner with competitive local exchange carriers (“CLECs”) to connect their
customers to the public switched telephone network (“PSTN”). In the Order
1
on review, the Federal Communications Commission (“FCC”) permitted
CLECs in such circumstances, on a transitional basis, to collect access
charges for functions that they or their retail VoIP partners perform. After a
transition period, this interim compensation rule – like all other forms of
“intercarrier compensation” addressed by the Order – will be replaced by a
“bill-and-keep” framework under which carriers recover their network costs

1 Connect America Fund, 26 FCC Rcd 17663 (2011) (“Order”) (JA____).

Appellate Case: 11-9900 Document: 01019020706 Date Filed: 03/18/2013 Page: 7
from their subscribers (and, where necessary, explicit universal service
subsidies), not from other carriers.
AT&T generally supports the transition to bill-and-keep. But it seeks
to have this Court second-guess the interim rule governing CLEC-VoIP
partnerships. AT&T notes that this transitional rule differs from the
compensation rule that the FCC historically has applied when a CLEC
partners with a wireless carrier. AT&T maintains that the agency offered no
reasoned explanation for treating VoIP providers differently from wireless
carriers in this regard. AT&T’s petition for review presents a single issue:
Whether the FCC adequately explained the rationale for its interim
intercarrier compensation rule governing CLEC-VoIP partnerships.

COUNTERSTATEMENT

Although this case involves a narrow application of settled principles
of administrative law, the factual and legal background is complex. We
describe that background in detail below.

A. Regulatory Background

Historically, providers of long-distance telephone service have paid
“access charges” to compensate local exchange carriers (“LECs”) for the cost
of originating or terminating long-distance calls over the LECs’ wireline
2

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networks. See FCC Preliminary Br. 4-5. Wireline LECs generally collect
these access charges pursuant to tariffs.
By contrast, for almost two decades, wireless telecommunications
carriers have been barred from filing access charge tariffs. See
Implementation of Sections 3(n) and 332 of the Communications Act, 9 FCC
Rcd 1411, 1479-80 ¶¶178-179 (1994); 47 C.F.R. §20.15(c). Rather, they may
collect access charges only pursuant to a contract with the carrier being
2
charged. In the absence of such a contract, a CLEC that partners with a
wireless carrier to provide access service “has no right to collect access
charges for the portion of the service provided by the [wireless carrier].”
Access Charge Reform, 19 FCC Rcd 9108, 9116 ¶16 (2004).
Given these regulatory constraints on their ability to collect intercarrier
compensation, wireless carriers “have long been operating pursuant to what
are essentially bill-and-keep arrangements.” Order ¶737 (JA____). As a
matter of longstanding “industry practice,” wireless carriers recover their
network costs “from their end users,” not from other carriers. Sprint
Declaratory Ruling, 17 FCC Rcd at 13199 ¶15.

2 Petitions of Sprint PCS and AT&T Corp. For Declaratory Ruling
Regarding CMRS Access Charges, 17 FCC Rcd 13192, 13196-98 ¶¶8-12
(2002) (“Sprint Declaratory Ruling”), pets. for review dismissed, AT&T
Corp. v. FCC
, 349 F.3d 692 (D.C. Cir. 2003).
3

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In recent years, a growing number of consumers have subscribed to
VoIP service. This service, which is provided via Internet Protocol (“IP”)
networks, allows users to “make real-time [phone] calls to, and receive calls
from,” users of traditional telephone service. Order ¶63 (JA____). To offer
these capabilities, VoIP providers (including cable operators that provide
telephone service) must connect their customers to the PSTN (i.e., the
network that LECs and wireless carriers use to provide telephone service).
VoIP service currently is offered in two different ways. Some VoIP
providers voluntarily submit to common carrier regulation; they obtain state
certification as LECs, interconnect directly with the PSTN, and offer VoIP to
subscribers on a common carrier basis. These carriers thus become regulated
LECs subject to Title II of the Communications Act. See Cox Comments,
Apr. 1, 2011, at 3 (JA____); FCC Principal USF Br. 26-27. Other VoIP
3
providers do not hold themselves out as regulated LECs. A “non-LEC”
VoIP provider typically partners with a CLEC, which interconnects with the
facilities of other carriers and delivers calls from the PSTN to the non-LEC
VoIP provider (and vice versa). See Comcast Comments, Aug. 24, 2011, at 5

3 The FCC has not yet decided whether the VoIP services at issue here are
“telecommunications services” (subject to common carrier regulation under
Title II of the Communications Act) or “information services” (which are
covered by Title I of the Act). See Order ¶974 & n.2042 (JA____).
4

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(JA____); Time Warner Cable Request for Declaratory Ruling, 22 FCC Rcd
3513, 3519 ¶13 (Wireline Comp. Bur. 2007).
The partnerships between CLECs and VoIP providers are
fundamentally different from the “partnerships” that wireless carriers formed
with CLECs in the early 2000s in an effort “to overcome their ineligibility to
tariff access charges.” See AT&T Br. 6. Wireless carriers entered into those
arrangements “to do indirectly” what FCC rules forbade them to “do directly”
(i.e., to collect tariffed access charges). Access Charge Reform, 19 FCC Rcd
at 9116 n.57.
By contrast, CLEC-VoIP partnerships are essential to the provision of
VoIP service by non-LEC VoIP providers. Unlike wireless carriers, non-
LEC VoIP providers have not been classified as “telecommunications
carrier[s]” as defined by the Communications Act, 47 U.S.C. §153(51).
Therefore, they cannot perform certain functions that are integral to providing
4
VoIP service – including interconnection with the PSTN. Without
interconnection, VoIP providers would be unable to connect calls from their

4 The Communications Act does not require incumbent local exchange
carriers (“ILECs”) like Verizon and AT&T to interconnect with non-LEC
VoIP providers. Telecommunications carriers are only obligated to
interconnect “with the facilities and equipment of other telecommunications
carriers.” 47 U.S.C. §251(a)(1); see also Verizon California, Inc. v. FCC,
555 F.3d 270, 275 (D.C. Cir. 2009).
5

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subscribers to users of traditional telephone service. Non-LEC VoIP
providers must “rely on [their CLEC] partners” to obtain not only
interconnection, but also “access to [telephone] numbers” for new customers
and “compliance with 911 obligations.” Order ¶970 (JA____).
Until this proceeding, the FCC had “declined to explicitly address the
intercarrier compensation obligations associated with VoIP traffic.” Connect
America Fund, 26 FCC Rcd 4554, 4745 ¶610 (2011) (“2011 NPRM”)
(JA____, ____). These unresolved questions, which led to “billing disputes
and litigation,” appeared to “be deterring innovation” and the “introduction of
new IP services.” Id. ¶608 (JA____); see also id. nn.913-914 (JA____). To
address this uncertainty, the FCC sought comment on “a range of
approaches” concerning “the appropriate treatment of interconnected VoIP
traffic for purposes of intercarrier compensation.” Id. ¶609 (JA____).

B. The Order

On Review
In the Order, the FCC defined “the prospective intercarrier
compensation obligations associated with VoIP-PSTN traffic.” Order ¶939
5
(JA____). Under the agency’s new intercarrier compensation rules, such

5 The agency defined “VoIP-PSTN traffic” as “traffic exchanged over
PSTN facilities that originates and/or terminates in IP format.” Order ¶940
(JA____) (internal quotation marks omitted). The Order “does not address
intercarrier compensation payment obligations for VoIP-PSTN traffic for any
prior periods.” Id. n.1874 (JA____).
6

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traffic “ultimately will be subject to a bill-and-keep framework,” and
intercarrier compensation obligations will be eliminated. Id. ¶933 (JA____).
AT&T “fully supports this aspect of the FCC’s decision.” Br. 9.
Before bill-and-keep takes effect, however, transitional rules will
govern intercarrier compensation for VoIP-PSTN traffic. During the multi-
year transition period, VoIP-PSTN traffic will be subject to intercarrier
compensation at rates prescribed by the FCC’s interim rules. Order ¶933
(JA____).
When a non-LEC VoIP provider and its CLEC partner team up to
transmit a telephone call to a VoIP subscriber, they provide services that are
functionally indistinguishable from the service an ILEC provides when
delivering a call from a VoIP user to a wireline service subscriber. The FCC
concluded that, in these circumstances, CLEC-VoIP partnerships “should be
entitled to charge the same intercarrier compensation as [ILECs] do” under
6
the interim rules for VoIP-PSTN traffic. Order ¶970 (JA____).

6 AT&T asserts that the challenged rule does not apply to certain types of
VoIP service arrangements. Br. 2 n.2. The FCC has not yet ruled on this
issue.
7

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7
Unlike ILECs, non-LEC VoIP providers cannot file tariffs. They must
“rely on [their CLEC] partners to charge tariffed intercarrier compensation
charges.” Order ¶970 (JA____). To accommodate “these distinct
circumstances,” and to ensure that CLEC-VoIP partnerships can collect the
same intercarrier compensation as ILECs receive for providing comparable
services, the FCC’s interim rules “permit a LEC to charge the relevant
intercarrier compensation for functions performed by it and/or by its retail
VoIP partner.” Id. (JA____-____).
The FCC explained that it adopted this “symmetric approach to VoIP-
PSTN intercarrier compensation” because it did “not want to disadvantage
providers that already have made … investments” in IP networks. Order
¶968 (JA____). This approach was consistent with one of the Order’s
principal goals: “to promote investment in and deployment of IP networks.”
Id. The interim rules ensure that VoIP providers will have “the same
opportunity, during the transition, to collect intercarrier compensation” for
VoIP-PSTN traffic as providers that use traditional telecommunications
infrastructure. Id.

7 “Only common carrier services can be tariffed.” MTS and WATS Market
Structure, 93 FCC 2d 241, 314 ¶244 (1983). Non-LEC VoIP providers do
not hold themselves out as common carriers.
8

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The FCC rejected AT&T’s claim that “there is no basis for
distinguishing the historical treatment of [wireless] providers” from the
agency’s treatment of CLEC-VoIP partnerships under the interim rule. Order
n.2024 (JA____). The agency noted that it had long prohibited wireless
carriers from using CLEC “partners” to collect tariffed access charges for
work performed by wireless carriers. Id.; see also Access Charge Reform, 19
FCC Rcd at 91115-16 ¶16 & n.57. By contrast, the agency had previously
“endorsed” the formation of CLEC-VoIP partnerships. Order ¶970
(JA____). In particular, in 2005, it stated that VoIP providers could comply
with 911 service obligations by partnering with CLECs to obtain
interconnection with the PSTN. IP-Enabled Services, 20 FCC Rcd 10245,
10267 ¶38 (2005), pet. for review denied, Nuvio Corp. v. FCC, 473 F.3d 302
(D.C. Cir. 2006).
Moreover, the record showed that some non-LEC VoIP providers –
unlike wireless carriers – had recently received intercarrier compensation
9

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8
payments. In light of this evidence, the FCC determined that the “immediate
adoption of bill-and-keep for all VoIP-PSTN traffic would appear to be, in
the aggregate, a … significant departure from the intercarrier compensation
payments for VoIP traffic that have been made in the recent past.” Order
¶952 (JA____). The FCC crafted the interim VoIP-PSTN compensation rules
to provide for a “measured transition” away from intercarrier compensation.
Id. This sort of gradual transition to bill-and-keep, however, was unnecessary
for wireless carriers, which have long operated under “bill-and-keep
arrangements.” Id. ¶737 (JA____).

SUMMARY OF ARGUMENT

AT&T contends that the FCC’s interim intercarrier compensation rule
arbitrarily distinguishes between CLEC-VoIP partnerships and CLEC-
wireless partnerships. AT&T’s challenge rests on mischaracterizations of law
and fact.

8 See Order n.1917 (JA____-____); Bright House Comments, Apr. 1, 2011,
at 1, 7 (JA____, ____) (Verizon had previously made “substantial access
charge payments” to CLECs that provide VoIP in partnership with cable
operators like Bright House); Letter from Daniel Brenner, Counsel for Bright
House, to Marlene Dortch, FCC, Sept. 28, 2011, at 2 (JA____) (Bright House
estimated that an ILEC proposal for transitional intercarrier compensation for
VoIP traffic would result in “a 90% reduction in intrastate access” revenues
for cable operators that partner with CLECs to provide VoIP).
10

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With respect to the law, AT&T claims that the FCC modified “settled”
legal principles to favor cable VoIP providers over wireless carriers. To the
contrary, the law governing intercarrier compensation for CLEC-VoIP
partnerships was unsettled before the FCC issued the Order. Indeed, there
was considerable dispute as to what intercarrier compensation rules (if any)
applied to VoIP traffic generally.
With respect to the facts, AT&T asserts that VoIP providers, like
wireless carriers, historically had not collected intercarrier compensation.
The record showed, however, that unlike wireless carriers, some VoIP
providers have previously received intercarrier compensation payments
through their CLEC partners.
Against this legal and factual backdrop, the FCC reasonably explained
that its interim rule treats CLEC-VoIP partnerships differently from CLEC-
wireless partnerships because, in three important respects, VoIP and wireless
service are not similarly situated.
First, unlike wireless carriers, whose primary reason for “partnering”
with CLECs in most cases is to evade the FCC’s prohibition on tariffed
wireless access charges, non-LEC VoIP providers must partner with
telecommunications carriers (such as CLECs) in order to provide voice
telephone service on the PSTN. Because of the different purposes underlying
11

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these arrangements, the FCC historically has treated them differently –
forbidding CLECs from collecting tariffed access charges for work done by
wireless carriers pursuant to revenue sharing arrangements, while endorsing
the formation of CLEC-VoIP partnerships. The agency reasonably made the
same sort of distinction when crafting its transitional intercarrier
compensation rules for VoIP-PSTN traffic.
Second, unlike conventional wireless voice service, VoIP service uses
IP facilities. One of the Order’s prime objectives is “to promote investment
in and deployment of IP networks.” Order ¶968 (JA____). Consistent with
that goal, the interim rules give VoIP providers – which provide service via
IP networks – “the same opportunity” to collect intercarrier compensation for
VoIP-PSTN traffic as carriers that provide service over traditional wireline
networks. Id. The FCC explained that it did not want to penalize providers
that have already deployed IP networks. Id. This rationale for the interim
rules does not apply to conventional wireless voice service, which is not
provided over IP facilities.
Third, unlike wireless carriers (which have been operating under bill-
and-keep arrangements since the 1980s), some non-LEC VoIP providers have
received intercarrier compensation payments over the years. The FCC
12

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explained that the interim rule is designed to ensure a “measured transition”
away from intercarrier compensation. Order ¶935 (JA____).
Ultimately, in deciding how to handle VoIP-PSTN traffic for purposes
of intercarrier compensation, the FCC confronted a choice. It could treat
VoIP providers like wireless carriers and preclude them from collecting
access charges indirectly via a CLEC partner. Or it could treat VoIP
providers like wireline carriers and adopt a framework for a measured
transition away from the compensation that some providers are receiving.
The agency chose the latter course. It reasoned that this approach would best
promote the deployment of IP networks. AT&T disagrees with the agency’s
approach, but that policy disagreement provides no legal basis for the Court
to disturb the FCC’s reasonable policy judgment.

ARGUMENT

THE FCC REASONABLY EXPLAINED THE
RATIONALE FOR ITS INTERIM RULE GOVERNING
INTERCARRIER COMPENSATION FOR CLEC-VOIP
PARTNERSHIPS.

The FCC explained why its interim rule governing CLEC-VoIP
partnerships treats VoIP providers differently from wireless carriers.
AT&T’s claim to the contrary (Br. 16-23) is baseless. Because the rule
challenged by AT&T is “merely transitional, [the Court’s] review is
especially deferential.” Sorenson Commc’ns, Inc. v. FCC, 659 F.3d 1035,
13

Appellate Case: 11-9900 Document: 01019020706 Date Filed: 03/18/2013 Page: 19
1046 (10th Cir. 2011) (internal quotation marks omitted). Applying this
deferential standard of review, the Court should deny AT&T’s petition.
AT&T’s argument rests on two fundamentally flawed premises. First,
AT&T maintains that “wireless carriers and cable VoIP providers occupied”
the same “bill-and-keep” position “for many years.” Br. 13. That is
incorrect. While wireless carriers “have long been operating” under “bill-
and-keep arrangements” that provided for no intercarrier compensation,
Order ¶737 (JA____), some VoIP providers have received intercarrier
compensation payments in the past. Id. n.1917 (JA____).
Second, AT&T wrongly asserts that pre-existing FCC rules barred
CLECs from collecting intercarrier compensation for services rendered by
their retail VoIP partners. Br. 11 n.7, 19. Contrary to AT&T’s contention
(Br. 11), FCC rules were not “settled on this point.” Indeed, before the FCC
issued the Order in this proceeding, it had “declined to explicitly address the
intercarrier compensation obligations associated with VoIP traffic.” 2011
NPRM ¶610 (JA____). Because the agency had not previously resolved
whether VoIP providers may collect access charges under FCC rules, it had
never decided whether CLECs could collect intercarrier compensation for
work done by their retail VoIP partners. By contrast, because FCC rules do
not authorize wireless carriers to file access tariffs or impose access charges,
14

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the FCC has expressly precluded CLECs from collecting tariffed access
charges for services provided by their wireless carrier partners. Access
Charge Reform, 19 FCC Rcd at 9116 n.57 (“We will not interpret our rules or
prior orders in a manner that allows [wireless] carriers to do indirectly that
which we have held they may not do directly.”).
Simply put, AT&T mistakenly assumes that before the Order, VoIP
providers and wireless carriers were similarly situated. The FCC recognized
that they were not. It reasonably explained that its interim compensation rule
for CLEC-VoIP partnerships treats VoIP service differently from wireless
service for three reasons: (1) non-LEC VoIP providers – unlike wireless
carriers – must partner with telecommunications carriers (such as CLECs) in
order to provide voice telephone service; (2) VoIP service – unlike
conventional wireless service – is provided over IP facilities, and a primary
goal of the Order is to promote the deployment of such facilities; and (3)
VoIP providers – unlike wireless carriers – have recently received intercarrier
compensation payments, and therefore would be adversely affected by a
sudden transition to bill-and-keep. These considerations fully justified the
FCC’s distinction between VoIP and wireless service for purposes of
transitional intercarrier compensation.
15

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A. The FCC Reasonably Distinguished Between CLEC-

VoIP Partnerships And CLEC-Wireless Partnerships.

There is no merit to AT&T’s claim that the FCC provided “no coherent
rationale” for treating CLEC-VoIP partnerships differently from CLEC-
wireless partnerships. Br. 23. In the Order, the agency pointed out the
fundamental differences between those two types of arrangements, and
explained why those differences supported distinct approaches. As the FCC
explained, CLEC-wireless “partnerships” are often created solely to evade
FCC rules and collect access charges, while CLEC-VoIP partnerships are
vital to the effective provision of telephone service by non-LEC VoIP
providers.
The FCC has long “prohibited [wireless] providers from partnering
with [CLECs] to collect access charges in the absence of a contract” with the
carrier being charged. Order n.2024 (JA____). In most cases, the principal
purpose of such arrangements is to circumvent the longstanding FCC rule
barring wireless carriers from filing access tariffs. See Access Charge
Reform, 19 FCC Rcd at 9116 ¶16 & n.57.
In stark contrast, the agency “has endorsed” CLEC-VoIP partnerships.
Order ¶970 (JA____) (citing IP-Enabled Services, 20 FCC Rcd at 10267
¶38). Without such partnerships, VoIP providers that are not LECs would be
unable to provide VoIP service. Because those providers are not
16

Appellate Case: 11-9900 Document: 01019020706 Date Filed: 03/18/2013 Page: 22
“telecommunications carrier[s],” 47 U.S.C. §153(51), they cannot perform
certain functions that are essential to providing VoIP service – including
interconnection with the PSTN. See note 4 above. Non-LEC VoIP providers
must “rely on [their CLEC] partners” to obtain “interconnection, access to
[telephone] numbers [for new customers], and compliance with 911
obligations.” Order ¶970 (JA____).
Wireless carriers do not need a CLEC partner to perform these
functions. Because wireless carriers are telecommunications carriers, they
can obtain interconnection directly. Thus, AT&T ignores the “relevant
distinction … between wireless and VoIP providers” in this context: Non-
LEC VoIP providers must use a “LEC middleman” to interconnect; wireless
carriers need not. See Br. 20. Furthermore, as AT&T concedes, wireless
carriers “typically address” numbering and 911 compliance issues
“themselves.” Id. That is not an option for non-LEC VoIP providers; they
must rely on their CLEC partners to handle those matters.
The Court should reject AT&T’s assertion that the Order must be
remanded because the FCC failed to acknowledge or address AT&T’s
concern about “competitive bias.” Br. 18. When AT&T opposed adoption of
the interim rules, it argued that they would “arbitrarily tilt the regulatory
playing field” in favor of VoIP providers by making an “arbitrary distinction”
17

Appellate Case: 11-9900 Document: 01019020706 Date Filed: 03/18/2013 Page: 23
between VoIP and wireless service. Br. 17 (quoting Letter from Robert
Quinn, Jr., AT&T, to Marlene Dortch, FCC, Oct. 21, 2011, at 2, 4 (JA____,
____)). The FCC explained, however, that the differences between CLEC-
VoIP partnerships and CLEC-wireless partnerships justified the distinction
drawn by the interim VoIP compensation rule. Order ¶970 & n.2024
(JA____) (citing AT&T’s October 21, 2011 letter). That explanation fully
satisfies the applicable standard of review, even though the agency made no
specific reference to AT&T’s claim of “competitive bias.” As this Court has
held, even when an agency does not “expressly” analyze a particular issue, a
reviewing court must “uphold a decision of less than ideal clarity if the
agency’s path may reasonably be discerned.” Citizens’ Comm. to Save Our
Canyons v. United States Forest Serv., 297 F.3d 1012, 1034 (10th Cir. 2002)
(internal quotation marks omitted); see also Aviva Life & Annuity Co. v.
FDIC, 654 F.3d 1129, 1133 & n.3 (10th Cir. 2011).

B. The Interim Rule Preserves The Proper Incentives For

Deployment Of IP Networks.

Broadband services that provide high-speed Internet access “have
become crucial to our nation’s economic growth, global competitiveness, and
civic life.” Order ¶3 (JA____). Thus, one of the Order’s primary goals “is to
promote investment in and deployment of IP networks.” Id. ¶968 (JA____).
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Consistent with that goal, the FCC sought to ensure that its transitional
intercarrier compensation rules for VoIP-PSTN traffic would not
“disadvantage” providers that use IP facilities. Order ¶968 (JA____). This
rationale for transitional intercarrier compensation does not apply to wireless
carriers, which do not use IP facilities to originate or terminate conventional
wireless service.
To preserve the appropriate incentives for deployment of IP networks,
the agency reasonably decided that all VoIP providers (LECs and non-LECs
alike) should have the same opportunity to benefit from intercarrier
compensation as wireline service providers during the transition to bill-and-
keep. Accordingly, the agency adopted “a symmetric approach to VoIP-
PSTN intercarrier compensation.” Order ¶968 (JA____). In particular, the
Order makes clear that an entity that “uses [IP] facilities to transmit [VoIP-
PSTN] traffic” from the caller’s premises or to the called party’s premises
may impose “origination [or] termination charges … under [the] transitional
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Appellate Case: 11-9900 Document: 01019020706 Date Filed: 03/18/2013 Page: 25
intercarrier compensation framework.” Id. ¶969 (JA____) (internal quotation
9
marks omitted).
The FCC recognized that non-LEC VoIP providers “are not carriers
that can tariff intercarrier compensation charges.” Order ¶970 (JA____).
Those VoIP providers must “rely on [their CLEC] partners to charge tariffed
intercarrier compensation charges.” Id. To ensure that non-LEC VoIP
providers were not disadvantaged relative to providers of non-IP wireline
services, the FCC decided to “permit a LEC to charge the relevant intercarrier
compensation for functions performed by it and/or by its retail VoIP partner.”
Id. (JA____-____).
This decision did not represent “an abrupt change” from “settled” law,
as AT&T claims (Br. 11). The FCC had not previously addressed whether a
CLEC could collect intercarrier compensation for services provided by its
retail VoIP partner. Furthermore, the sort of joint billing arrangement
authorized by the interim rule was not unprecedented. The FCC has long
recognized that “a [CLEC] may bill [a long-distance carrier] on behalf of
itself and another carrier for jointly provided access services” so long as

9 AT&T claims to find the FCC’s symmetrical approach “perplexing”
because the agency has not classified VoIP as a Title II common carrier
service. Br. 22 n.9. But it made perfect sense for the FCC to create sufficient
incentives for deployment of IP networks by all providers of voice telephone
service, whether or not those providers are subject to Title II.
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Appellate Case: 11-9900 Document: 01019020706 Date Filed: 03/18/2013 Page: 26
“each carrier” in the partnership charges “only what it is entitled to collect
from the [long-distance carrier] for the [access] service it provides.” Access
10
Charge Reform, 19 FCC Rcd at 9115-16 ¶16 (emphasis added).
To be sure, the FCC for years has barred CLECs from collecting
tariffed access charges on behalf of wireless carriers. But the agency based
that prohibition on the fact that wireless carriers – which have long been
barred from filing access charge tariffs – “had no independent right to
collect” access charges absent a contract with the carrier being charged.
Access Charge Reform, 19 FCC Rcd at 9116 ¶16.
The FCC has never made any such finding with respect to VoIP
providers. To the contrary, in this proceeding, the agency made clear that
VoIP providers are prospectively entitled to intercarrier compensation during
the transition to bill-and-keep. Order ¶¶968-970 (JA____-____). If VoIP
providers are LECs (i.e., if they provide VoIP service on a common carrier
basis), they may file their own intercarrier compensation tariffs. If VoIP
providers do not hold themselves out as LECs, their CLEC partners may levy

10 In the past, the agency had expressed concern that joint billing
arrangements “could result in double billing,” but the new intercarrier
compensation rules “include measures to protect against double billing.”
Order ¶970 (JA____-____).
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charges to obtain intercarrier compensation for services rendered by non-LEC
VoIP providers. Id. ¶970 (JA____-____).
In short, the FCC determined that VoIP providers are prospectively
eligible to receive intercarrier compensation, including compensation for
access traffic, even if they have no contract with the carrier paying
compensation. The agency has never made a similar finding for wireless
carriers.
AT&T complains that the interim rule governing CLEC-VoIP
partnerships created an “asymmetry” between VoIP providers and wireless
carriers. Br. 19. But if the FCC had adopted the approach advocated by
AT&T (i.e., treating VoIP providers like wireless carriers), it would have
created an asymmetry between VoIP providers and wireline carriers – the
very sort of asymmetry that bill-and-keep (which AT&T generally supports)
is designed to eliminate. Under that scenario, wireline carriers would collect
more intercarrier compensation than CLEC-VoIP partnerships (because such
partnerships could not collect tariffed access charges for any service provided
by the retail VoIP partner). By providing for less compensation for IP-based
services, AT&T’s proposed framework would dampen incentives for the
deployment and use of modern IP networks.
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Appellate Case: 11-9900 Document: 01019020706 Date Filed: 03/18/2013 Page: 28
Because the FCC historically has treated wireline carriers differently
from wireless carriers for purposes of intercarrier compensation, any interim
mechanism short of a flash-cut transition to bill-and-keep for all telephone
service providers must inevitably result in some “asymmetry.” The question
for the FCC was: Which approach would best serve the agency’s policy
objectives? The FCC reasonably explained that it could most effectively
promote the deployment of IP networks during the transition to bill-and-keep
by giving VoIP providers “the same opportunity … to collect intercarrier
compensation” for VoIP-PSTN traffic as carriers that provide service over
traditional wireline networks. Order ¶968 (JA____). The Court should not
disturb this reasonable policy judgment. See IMC Kalium Carlsbad, Inc. v.
Interior Bd. of Land Appeals, 206 F.3d 1003, 1012 (10th Cir. 2000) (the
Court’s role is not “to decide which policy choice is the better one, for it is
clear that Congress has entrusted such decisions to the [agency]”) (quoting
Arkansas v. Oklahoma, 503 U.S. 91, 114 (1992)).

C. The FCC Reasonably Explained That The Interim Rule

Allows VoIP Providers To Make A Gradual Transition To
Bill-and-Keep.

Unlike wireless carriers, both wireline carriers and VoIP providers
have received intercarrier compensation. Indeed, notwithstanding the
uncertainty surrounding compensation obligations for VoIP traffic, the record
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Appellate Case: 11-9900 Document: 01019020706 Date Filed: 03/18/2013 Page: 29
contained evidence that some non-LEC VoIP providers recently received
11
intercarrier compensation payments. This evidence refutes AT&T’s
assertion (Br. 13) that VoIP providers, like wireless carriers, have been
operating under a “bill-and-keep” regime “for many years.”
In light of this evidence, the FCC reasonably determined that the
“immediate adoption of bill-and-keep for all VoIP-PSTN traffic would appear
to be, in the aggregate, a … significant departure from the intercarrier
compensation payments for VoIP traffic that have been made in the recent
past.” Order ¶952 (JA____). To avert the disruption that such a sudden
change might cause, the agency explained that it would provide for a
“measured transition away from carriers’ reliance on intercarrier
compensation as a significant revenue source.” Id.
In crafting its interim rules for VoIP intercarrier compensation, the
FCC properly took into account “the ability of [VoIP providers] to adjust
financially to changing policies” and “the unfairness of abruptly shifting
policies.” MCI Telecomms. Corp. v. FCC, 750 F.2d 135, 141 (D.C. Cir.
1984). The interim rules – including the rule governing CLEC-VoIP

11 See note 8 above. On reconsideration, the FCC found additional
evidence that VoIP providers collected originating access charges before the
Order was issued. Connect America Fund, 27 FCC Rcd 4648, 4661 ¶33 &
nn.92-93 (2012) (JA____, ____).
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Appellate Case: 11-9900 Document: 01019020706 Date Filed: 03/18/2013 Page: 30
partnerships – are sensibly designed to minimize “upheaval in the industry.”
Id.
The FCC’s desire to avoid “market disruption pending broader
reforms” justified its adoption of the interim rules to ensure a smooth
transition to bill-and-keep for VoIP providers. See Rural Cellular Ass’n v.
FCC, 588 F.3d 1095, 1106 (D.C. Cir. 2009); Competitive Telecomms. Ass’n
v. FCC, 309 F.3d 8, 14 (D.C. Cir. 2002). The agency reasonably concluded
that the move to bill-and-keep should “be accomplished gradually to permit
[VoIP providers] to adjust to the new pricing system, thus preserving the
efficient operation of the interstate telephone network during the interim.”
See Nat’l Ass’n of Regulatory Util. Comm’rs v. FCC, 737 F.2d 1095, 1135-36
(D.C. Cir. 1984).
There was no need to provide for such a gradual transition for wireless
carriers, which already operate under “bill-and-keep arrangements.” Order
¶737 (JA____). The FCC’s ultimate objective is to move all telephone
service providers from the current intercarrier compensation system to the
sort of bill-and-keep framework that wireless carriers have been using for
years. See id. ¶¶736-737 (JA____). It would have been entirely
counterproductive for the FCC to move wireless carriers in the opposite
direction – replacing their existing bill-and-keep arrangements with the sort
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Appellate Case: 11-9900 Document: 01019020706 Date Filed: 03/18/2013 Page: 31
of intercarrier compensation regime that the agency is in the process of
reforming. Nor was the FCC required to move to the other extreme –
mandating an immediate transition to bill-and-keep for VoIP providers, even
though the record shows that at least some VoIP providers (unlike wireless
carriers) were receiving intercarrier compensation.
In sum, the FCC made a reasonable policy judgment regarding
transitional intercarrier compensation. That judgment should be upheld.
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CONCLUSION

AT&T’s petition for review should be denied.
Respectfully
submitted,
WILLIAM J. BAER
SEAN A. LEV
ASSISTANT ATTORNEY GENERAL
GENERAL COUNSEL


ROBERT B. NICHOLSON
PETER KARANJIA
ROBERT J. WIGGERS
DEPUTY GENERAL COUNSEL
ATTORNEYS


RICHARD K. WELCH
UNITED STATES
DEPUTY ASSOCIATE GENERAL
DEPARTMENT OF JUSTICE
COUNSEL
WASHINGTON, D.C. 20530


/s/ James M. Carr

LAURENCE N. BOURNE
JAMES M. CARR
MAUREEN K. FLOOD
COUNSEL

FEDERAL COMMUNICATIONS
COMMISSION
WASHINGTON, D.C. 20554
(202) 418-1740
March 18, 2013
27

Appellate Case: 11-9900 Document: 01019020706 Date Filed: 03/18/2013 Page: 33

CERTIFICATE OF COMPLIANCE

Certificate of Compliance With Type-Volume Limitations, Typeface

Requirements, Type Style Requirements, Privacy Redaction

Requirements, and Virus Scan


1.
This brief complies with the type-volume limitation of the Second Briefing
Order. It does not exceed 15% of the size of the brief to which it is responding. The
Uncited AT&T Principal Brief was certified to be 5,050 words in length.
Therefore, the FCC may file a response brief up to 5,807 words in length. This
brief contains 4,893 words, excluding the parts of the brief exempted by Fed. R.
App. P. 32(a)(7)(B)(iii).

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

3.
All required privacy redactions have been made.

4.
This brief was scanned for viruses with Symantec Endpoint Protection,
version 11.0.7200.1147, updated on March 17, 2013, and according to the program
is free of viruses.




/s/ James M. Carr
James M. Carr
Counsel


March 18, 2013









Appellate Case: 11-9900 Document: 01019020706 Date Filed: 03/18/2013 Page: 34

CERTIFICATE OF SERVICE



I hereby certify that on March 18, 2013, I caused the foregoing Federal
Respondents’ Uncited Response to the AT&T Principal Brief to be filed by
delivering a copy to the Court via e-mail at FCC_briefs_only@ca10.uscourts.gov. I
further certify that the foregoing document will be furnished by the Court through
(ECF) electronic service to all parties in this case through a registered CM/ECF
user. This document will be available for viewing and downloading on the
CM/ECF system.




/s/ James M. Carr
James M. Carr
Counsel


March 18, 2013 

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