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Response to Transcom Brief, In Re: FCC 11-161, No. 11-9900 (10th Cir.)

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Released: March 19, 2013

Appellate Case: 11-9900 Document: 01019021564 Date Filed: 03/19/2013 Page: 1
FEDERAL RESPONDENTS’ UNCITED RESPONSE TO THE TRANSCOM 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: 01019021564 Date Filed: 03/19/2013 Page: 2

TABLE OF CONTENTS


Table of Authorities.......................................................................................... ii 
Glossary ............................................................................................................. v 
Issue Presented .................................................................................................. 1 
Counterstatement ............................................................................................... 2 
A.  Regulatory Background ......................................................................... 2 
B.  The Halo/Transcom Business Arrangement ......................................... 4 
C.  The Order On Review ........................................................................... 7 
Summary of Argument .................................................................................... 10 
Argument ......................................................................................................... 12 
I. 
The FCC Reasonably Interpreted Its Rule Defining “Non-
Access” Wireless Calls For Purposes Of Intercarrier
Compensation. .......................................................................................... 12 
II.  The FCC Has Authority To Prohibit All “Intermediate
Providers” From Altering Caller Identification Information. .................. 20 
III.  The Court Lacks Jurisdiction To Review Transcom’s
Challenge To The FCC’s Ban On Call Blocking By VoIP
Providers. ................................................................................................. 24 
Conclusion ....................................................................................................... 26 
i

Appellate Case: 11-9900 Document: 01019021564 Date Filed: 03/19/2013 Page: 3

TABLE OF AUTHORITIES

CASES

 
Bell Atlantic Tel. Cos. v. FCC, 206 F.3d 1 (D.C.
Cir. 2000) ..................................................................................................... 18
Clapper v. Amnesty Int’l USA, 133 S. Ct. 1138
(2013) .......................................................................................................... 25
Comcast Corp. v. FCC, 600 F.3d 642 (D.C. Cir.
2010) ..................................................................................................... 22, 23
Copar Pumice Co. v. Tidwell, 603 F.3d 780 (10th
Cir. 2010) ..................................................................................................... 13
In re Halo Wireless, Inc., 684 F.3d 581 (5th Cir.
2012) ..........................................................................................................4, 7
Los Alamos Study Group v. U.S. Dep’t of Energy,
692 F.3d 1057 (10th Cir. 2012) ................................................................... 25
Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) ...................................... 25
Nat’l Cable & Telecomms. Ass’n v. Brand X
Internet Servs., 545 U.S. 967 (2005) ........................................................... 21
Nat’l Council for Improved Health v. Shalala, 122
F.3d 878 (10th Cir. 1997) ............................................................................ 25
Sorenson Commc’ns, Inc. v. FCC, 659 F.3d 1035
(10th Cir. 2011) ........................................................................ 11, 19, 21, 25
Texas v. United States, 523 U.S. 296 (1998) .................................................. 25
Thomas Jefferson Univ. v. Shalala, 512 U.S. 504
(1994) ................................................................................................... 10, 13
United States v. Midwest Video Corp., 406 U.S. 649
(1972) .......................................................................................................... 21
United States v. Southwestern Cable Co., 392 U.S.
157 (1968) ............................................................................................ 21, 23
WorldCom, Inc. v. FCC, 288 F.3d 429 (D.C. Cir.
2002) ............................................................................................................ 18

STATUTES

 
47 U.S.C. §152(a) ............................................................................................ 22
ii

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47 U.S.C. §153(40).......................................................................................... 23
47 U.S.C. §153(59).......................................................................................... 23
47 U.S.C. §154(i) ............................................................................................ 21
47 U.S.C. §251(b)(5) ................................................................................ 23, 24
47 U.S.C. §405(a) ......................................................................... 11, 19, 21, 24

REGULATIONS

 
47 C.F.R. §20.11(d) ........................................................................................... 4
47 C.F.R. §24.202(a) ......................................................................................... 4
47 C.F.R. §51.701(b)(2) ................................................................... 3, 8, 10, 13
47 C.F.R. §51.701(d) ....................................................................................... 14
47 C.F.R. §64.1600(f) .............................................................................. 10, 20
47 C.F.R. §64.1601(a)(2) ................................................................................ 20
47 C.F.R. §64.702(a) ....................................................................................... 16

ADMINISTRATIVE DECISIONS

 
Amendments of Part 69 of the Commission’s Rules
Relating to Enhanced Service Providers, 3 FCC
Rcd 2631 (1988) .......................................................................................... 16
BellSouth Telecomms., Inc. v. Halo Wireless, Inc.,
2012 WL 4481442 (N.C. Utils. Comm’n Sept.
27, 2012) ......................................................................................... 4, 5, 6, 18
BellSouth Telecomms., LLC v. Halo Wireless, Inc.,
2012 WL 4093711 (S.C. PSC Jul. 17, 2012) .............................................. 18
BellSouth Telecomms., LLC v. Halo Wireless, Inc.,
2012 WL 6643035 (Miss. PSC Dec. 10, 2012) ........................................... 18
BellSouth Telecomms., LLC v. Halo Wireless, Inc.,
2013 WL 121550 (Ky. PSC Jan. 7, 2013) ................................................... 18
Developing a Unified Intercarrier Compensation
Regime, 20 FCC Rcd 4855 (2005), pet. for review
pending
, Ronan Tel. Co. v. FCC, 9th Cir. No. 05-
71995 (oral argument scheduled May 7, 2013) ............................................ 4
Halo Wireless, Inc. v. Craw-Kan Tel. Coop., Inc.,
2012 WL 3544982 (Mo. PSC Aug. 1, 2012) ..................................... 5, 6, 18
iii

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Implementation of the Local Competition
Provisions in the Telecommunications Act of
1996
, 11 FCC Rcd 15499 (1996) .................................................................. 4
In re: Complaint and petition for relief against
Halo Wireless, Inc., 2012 WL 5384928 (Fla. PSC
Oct. 31, 2012) .............................................................................................. 18
In re: Complaint of Concord Telephone Exchange,
Inc., Docket No. 11-00108 (Tenn. Regulatory
Auth. Apr. 18, 2012) ................................................................................... 18
Palmerton Tel. Co. v. Global NAPs South, Inc.,
2010 WL 1259661 (Pa. PUC Mar. 16, 2010) ............................................. 18
Re Halo Wireless, Inc., 2012 WL 3068512 (Wisc.
PSC Jul. 27, 2012) .................................................................................. 5, 18
Re Illinois Bell Tel. Co. and Halo Wireless, Inc.,
2012 WL 5296140 (Ill. Commerce Comm’n Oct.
24, 2012) ...................................................................................................... 18
Re TDS Telecom, 2012 WL 3552699 (Ga. PSC Jul.
17, 2012) ...................................................................................................... 18


iv

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GLOSSARY

CMRS

Commercial Mobile Radio Service
ERTA

Eastern Rural Telecom Association
ESP
Enhanced
Service
Provider
FCC
Federal
Communications
Commission
ISP

Internet Service Provider
LEC
Local
Exchange
Carrier
MTA

Major Trading Area
NTCA
National Telecommunications Cooperative
Association
PSTN
Public
Switched Telephone Network
VoIP

Voice over Internet Protocol

v

Appellate Case: 11-9900 Document: 01019021564 Date Filed: 03/19/2013 Page: 7
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 TRANSCOM PRINCIPAL
BRIEF

ISSUE PRESENTED

1
In the Order on review, the Federal Communications Commission
(“FCC”) resolved a dispute over the proper interpretation of its rule defining
whether a call qualifies as a non-access or “local” wireless call for purposes
of intercarrier compensation. The dispute arose when Halo Wireless, Inc.
(“Halo”) claimed that the traffic it received from petitioner Transcom (its sole
customer) was locally originated wireless traffic (and was therefore exempt
from access charges). Order ¶1005 (JA____). The record showed, however,
that most of the phone calls Transcom handed off to Halo originated
elsewhere as long-distance calls (and were therefore subject to access

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

Appellate Case: 11-9900 Document: 01019021564 Date Filed: 03/19/2013 Page: 8
charges). The FCC rejected Halo’s assertion that the transmission “of a call
over a wireless link in the middle of the call path” somehow converted “a
wireline-originated call into a [wireless]-originated call” for purposes of
intercarrier compensation. Id. ¶1006 (JA____). Instead, the agency clarified
that, for purposes of its intercarrier compensation rules, “a call is considered
to be originated by a [wireless] provider” only if the “party initiating the call
has done so through a [wireless] provider.” Id.
Transcom, Halo’s business partner, challenges the FCC’s reading of its
own rule defining non-access wireless traffic. Transcom also challenges the
FCC’s authority to adopt certain rules regarding “phantom traffic” and call
blocking. The issue presented is whether Transcom’s challenges to the Order
are procedurally barred and/or substantively meritless.

COUNTERSTATEMENT

A. Regulatory Background

Historically, federal and state regulators generally have required
providers of long-distance telephone service to pay access charges to local
exchange carriers (“LECs”) that originate and terminate long-distance calls.
See FCC Preliminary Br. 4-5. By contrast, “non-access” (or “local”)
telephone calls have been subject to a different intercarrier compensation
regime. See id. at 11-12. Under the new intercarrier compensation rules
2

Appellate Case: 11-9900 Document: 01019021564 Date Filed: 03/19/2013 Page: 9
adopted in the Order, both access and non-access traffic will transition to a
“bill-and-keep” framework that will replace intercarrier compensation
obligations. See Order ¶¶736-737 (JA____). The changes the FCC adopted
in the Order “maintain, during the transition, distinctions in the compensation
available under the reciprocal compensation regime” for non-access calls
“and compensation owed under the access regime.” Id. ¶1004 (JA____).
In determining whether a service is subject to access or non-access
compensation under both the pre-Order and existing transitional regimes, the
FCC has applied a different intercarrier compensation rule to calls involving
common carriers that provide mobile wireless phone service (also known as
Commercial Mobile Radio Service or “CMRS”). Unlike calls between two
wireline carriers, calls between LECs and CMRS providers have been treated
as non-access calls – and are therefore not subject to access charges – if they
originate and terminate within the same Major Trading Area (“MTA”) – a
geographic designation. Order ¶1003 (JA____); see also 47 C.F.R.
§51.701(b)(2) (defining intraMTA calls between LECs and CMRS providers
3

Appellate Case: 11-9900 Document: 01019021564 Date Filed: 03/19/2013 Page: 10
2
as “Non-Access Telecommunications Traffic”). Under a rule adopted by the
FCC in 2005, LECs “may not impose compensation obligations for traffic not
subject to access charges upon [CMRS] providers pursuant to tariffs.” 47
C.F.R. §20.11(d); see also Developing a Unified Intercarrier Compensation
Regime, 20 FCC Rcd 4855 (2005), pet. for review pending, Ronan Tel. Co. v.
FCC, 9th Cir. No. 05-71995 (oral argument scheduled May 7, 2013). Under
this rule, LECs can receive no intercarrier compensation for “intraMTA”
wireless calls except through contractual arrangements with CMRS providers.

B. The Halo/Transcom Business Arrangement

Seeking to take advantage of the “intraMTA rule,” Halo and Transcom
entered into a controversial business arrangement that has generated intense
scrutiny by regulators and courts. Halo is a CMRS provider. In re Halo
Wireless, Inc., 684 F.3d 581, 584 (5th Cir. 2012). Transcom “is Halo’s only
paying customer and the source of 100% of Halo’s revenues nationwide.”

2 An MTA is the largest FCC-authorized license area for wireless carriers.
See Implementation of the Local Competition Provisions in the
Telecommunications Act of 1996
, 11 FCC Rcd 15499, 16014 ¶1036 (1996).
Typically, an MTA is much larger than a local calling area for wireline calls.
For example, in North Carolina, there are only two MTAs, but over 400
wireline local calling areas. BellSouth Telecomms., Inc. v. Halo Wireless,
Inc.
, 2012 WL 4481442, *3 (N.C. Utils. Comm’n Sept. 27, 2012) (“Halo
North Carolina
”); see also 47 C.F.R. §24.202(a) (defining MTAs).
4

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Halo Wireless, Inc. v. Craw-Kan Tel. Coop., Inc., 2012 WL 3544982, *7
(Mo. PSC Aug. 1, 2012) (“Halo Missouri”).
Transcom and Halo “have ‘overlapping’ ownership,” Halo Missouri
*7, and they operate “in concert.” Id. *9. Transcom sells a call “routing”
service to long-distance carriers – i.e., it serves as a link “in the middle of
long-distance calls” between the originating and terminating points of the
calls it handles. Id. *8. Transcom “aggregates third-party long distance
traffic” from its customers “and then hands the traffic off to Halo.” Id. *9.
“Halo takes these calls from Transcom in one MTA” and delivers them to the
terminating LEC “in that same MTA” via Halo’s wireless network. Re Halo
Wireless, Inc., 2012 WL 3068512, *2 (Wisc. PSC Jul. 27, 2012) (“Halo
Wisconsin”).
Under this arrangement, for example, when a teenager in California
uses her wireline phone to call her grandmother in Raleigh, North Carolina,
the call “would travel across the country, eventually hit Transcom’s
equipment at a Halo/Transcom tower site [in the vicinity of Raleigh], [and]
travel wirelessly to Halo for 150 feet.” Halo North Carolina *6. Halo would
then hand off the call “to AT&T, [the LEC that] would terminate the call in
Raleigh on its [wireline] network.” Id. The following diagram illustrates the
call’s path:
5

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Typically, this wireline long-distance call from California to North
Carolina would be subject to access charges under longstanding FCC rules.
Yet when LECs such as AT&T sought to collect terminating access charges
for the calls Halo sent to them, Halo asserted that Transcom “terminated
[each] call and then originated a new call.” Halo North Carolina *6.
According to Halo, this “new” call was a wireless-originated intraMTA call
and therefore not subject to access charges. Id.
Halo took this position even though Transcom “does not originate” any
of the calls it passes to Halo or “decide who will be called (the calling party
does).” Halo Missouri *10. “Transcom does not alter or add to the content
of any call.” Id. Rather, it “only tries to make the voice communications
6

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[clearer] by suppressing background noise and adding comfort noise” (a
feature that “other carriers normally provide … as an incidental part of voice
service”). Id. For each call that Transcom hands off to Halo, the parties at
either end of the call “place and receive calls in exactly the same way they
would if Transcom did not exist.” Id.
In response to Halo’s assertion that the calls it received from Transcom
were not subject to access charges, a number of LECs filed complaints
against Halo with state regulatory commissions throughout the nation,
seeking to collect payment for the termination of calls transmitted by Halo.
“Because of the numerous suits filed against Halo,” the company filed for
Chapter 11 bankruptcy in August 2011. Halo, 684 F.3d at 585. Thus far, the
state commissions that have adjudicated disputes involving Halo have
invariably ruled against Halo. See note 5 below.

C. The Order

On Review

As part of the rulemaking proceeding that led to the Order on review,
the FCC sought comment on “the proper interpretation” of its intraMTA rule
governing LEC-CMRS traffic. Order ¶1003 (JA____). In response, the
Eastern Rural Telecom Association (“ERTA”), a group of rural LECs, told
the FCC that Halo was engaging in a practice known as “phantom traffic” –
i.e., altering certain identifying information for the calls it delivered “to make
7

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the traffic appear to be wireless,” even though the calls were actually
wireline-originated. Letter from Jerry Weikle, ERTA, to Marlene Dortch,
FCC, Jul. 8, 2011, Attachment at 1 (JA____) (“July 8 ERTA Letter”); see
also Letter from Jerry Weikle, ERTA, to Marlene Dortch, FCC, Oct. 14,
2011, Attachment at 1 (JA____). ERTA and another group of rural LECs,
the National Telecommunications Cooperative Association (“NTCA”),
produced evidence “indicating that most of the calls” delivered by Halo
“either did not originate on a CMRS line or were not intraMTA.” Order
¶1005 (JA____); see also July 8 ERTA Letter, Attachment at 3 (JA____).
Halo contested these claims in a letter it submitted to the FCC in this
proceeding. It maintained that the traffic it sends to LECs for termination is
intraMTA wireless traffic because “[t]he origination point for Halo traffic is
the base station to which Halo’s customers connect wirelessly.” Letter from
W. Scott McCollough, Counsel for Halo, to Marlene Dortch, FCC, Aug. 12,
2011, Attachment at 9 (JA____).
In the Order, the FCC clarified that “a call is considered to be
originated by a CMRS provider for purposes of the intraMTA rule” only if
the “party initiating the call has done so through a CMRS provider.” Order
¶1006 (JA____) (discussing 47 C.F.R. §51.701(b)(2)). The FCC further
stated that “the ‘re-origination’ of a call over a wireless link in the middle of
8

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the call path does not convert a wireline-originated call into a CMRS-
originated call” for purposes of intercarrier compensation. Id. The agency
3
rejected “Halo’s contrary position.” Id.
In addition, to address complaints about “phantom traffic” generally,
the FCC adopted a rule to “prohibit service providers from altering or
stripping relevant call information.” Order ¶719 (JA____). The new rule
requires “all telecommunications providers” and providers of interconnected
Voice over Internet Protocol (“VoIP”) service “to pass the calling party’s
telephone number (or, if different, the financially responsible party’s
number), unaltered, to subsequent carriers in the call path.” Id. This rule is
designed to ensure that terminating carriers receive the information they need
to determine whether a call is subject to intercarrier compensation
obligations, and (if so) which carrier is responsible for payment. The rule
applies to any “intermediate provider” – that is, “any entity that carries or
processes traffic that traverses or will traverse” the public switched telephone

3 Because all telecommunications traffic will eventually be subject to a bill-
and-keep framework under the new intercarrier compensation rules, see
Order
¶¶736-737 (JA____), the intraMTA rule eventually will become
irrelevant. During the multi-year transition to bill-and-keep, however,
carriers will continue to collect access charges (albeit at transitional rates).
See id. ¶¶739, 933 (JA____, ____).
9

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network (“PSTN”) “at any point insofar as that entity neither originates nor
terminates that traffic.” Id. ¶720 (JA____); see also 47 C.F.R. §64.1600(f).

SUMMARY OF ARGUMENT

In the Order, the FCC adopted a reasonable interpretation of its
intraMTA rule. It also took sensible steps to guard against “phantom traffic”
and to prohibit call blocking by VoIP providers. Transcom’s challenges to
these actions are unavailing. Many of Transcom’s arguments are
procedurally barred, and all of them lack merit.
I. An agency’s interpretation of its own rule “must be given
controlling weight unless it is plainly erroneous or inconsistent with the
regulation.” Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994)
(internal quotation marks omitted). The FCC’s reasonable reading of its
intraMTA rule easily satisfies this deferential standard of review.
The rule in question defines as “Non-Access Telecommunications
Traffic” (i.e., local traffic that is not subject to access charges) any phone call
“exchanged between a LEC and a CMRS provider that, at the beginning of
the call, originates and terminates within the same [MTA].” 47 C.F.R.
§51.701(b)(2) (emphasis added). In construing this rule, the FCC reasonably
found that the transmission “of a call over a wireless link in the middle of the
call path does not convert a wireline-originated [long-distance] call into a
10

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CMRS-originated [local] call for purposes of [intercarrier] compensation.”
Order ¶1006 (JA____). Rather, the FCC reasonably concluded that “a call is
considered to be originated by a CMRS provider for purposes of the
intraMTA rule” only if the “party initiating the call has done so through a
CMRS provider.” Id. Hence, in the case of the hypothetical call described in
the Counterstatement, because the teenager in California initiated the call to
her grandmother in North Carolina as a wireline call, that call remains a
wireline call for purposes of intercarrier compensation.
Transcom maintains that the insertion of Transcom and Halo in the
middle of the call path transforms the call into an intraMTA wireless call and
thereby exempts the call from access charges. The FCC rightly rejected that
notion. Transcom and Halo seek to convert long-distance calls into “local”
wireless calls to avoid paying access charges. The FCC reasonably
interpreted its rule to prohibit such a scheme.
II. During the administrative proceeding, no party challenged the
FCC’s authority to prohibit non-carriers from altering call signaling
information concerning the caller’s phone number. Therefore, Transcom may
not raise any such challenge in this Court. See 47 U.S.C. §405(a); Sorenson
Commc’ns, Inc. v. FCC, 659 F.3d 1035, 1044 (10th Cir. 2011).
11

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In any event, there is no merit to Transcom’s contention (Br. 46-48)
that the FCC lacked authority to bar non-carriers from altering caller
identification information. The agency properly found that it had authority to
do so because this prohibition is necessary for the FCC to effectuate its duties
under Title II of the Communications Act.
III. For several reasons, Transcom is precluded from challenging the
ban on call blocking by VoIP providers. First, the issue has been waived
because no party presented it to the FCC. In addition, Transcom lacks
standing to challenge the ban on call blocking by VoIP providers. Transcom
cannot demonstrate that it is injured by – or even subject to – the ban because
it is not a VoIP provider. Furthermore, Transcom’s assertion that the FCC
may specifically ban Transcom from blocking calls someday is unripe for
review. In any event, as we explained in our response to the principal brief of
the Voice on the Net Coalition, the FCC acted well within its authority when
it banned call blocking by VoIP providers.

ARGUMENT

I.

THE FCC REASONABLY INTERPRETED ITS RULE
DEFINING “NON-ACCESS” WIRELESS CALLS FOR
PURPOSES OF INTERCARRIER COMPENSATION.

This Court’s “review of an agency’s interpretation of its own
regulations is substantially deferential.” Copar Pumice Co. v. Tidwell, 603
12

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F.3d 780, 794 (10th Cir. 2010) (internal quotation marks omitted). The
agency’s interpretation must be given “controlling weight unless it is plainly
erroneous or inconsistent with the regulation.” Id. (quoting Thomas Jefferson
Univ., 512 U.S. at 512). Under this highly deferential standard of review, the
FCC’s reading of its intraMTA rule easily passes muster.
The intraMTA rule defines as “Non-Access Telecommunications
Traffic” any phone call “exchanged between a LEC and a CMRS provider
that, at the beginning of the call, originates and terminates within the same
[MTA].” 47 C.F.R. §51.701(b)(2) (emphasis added). In resolving the dispute
between Halo and numerous rural LECs over the proper interpretation of this
rule, the FCC reasonably concluded that an entity could not create a “new”
intraMTA wireless call – and thereby avoid paying access charges – merely
by interjecting itself in the middle of a wireline long-distance call that
originated outside the MTA. As the agency explained, the transmission “of a
call over a wireless link in the middle of the call path does not convert a
wireline-originated call into a CMRS-originated call” for purposes of
intercarrier compensation. Order ¶1006 (JA____). Rather, “a call is
considered to be originated by a CMRS provider for purposes of the
intraMTA rule” only if the “party initiating the call has done so through a
CMRS provider.” Id.
13

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Consider, for example, the hypothetical described in the
Counterstatement, in which a teenager in California uses her wireline phone
to call her grandmother in North Carolina. Under the FCC’s reading of the
intraMTA rule, that call is a wireline-originated call because the calling party
(the granddaughter in California) used a wireline phone to place the call. The
agency rightly rejected the notion that the call somehow “re-originates” when
Transcom or Halo transmits the call (with the same calling party and
recipient) over a wireless link in the middle of the call path, and that the call
is somehow transformed into a “local” wireless call for purposes of
intercarrier compensation.

Transcom’s contrary position makes no sense, and it certainly provides
no reason to overturn the FCC’s reasonable reading of its own rule. Under
Transcom’s reading of the FCC’s rule, Transcom “terminates” the teenager’s
call to her grandmother and originates a “new” wireless call by handing off
the call to Halo in the North Carolina MTA where the grandmother lives.
That reading bears no resemblance to reality. There is a single call between
the granddaughter and the grandmother, and that call is terminated by the
LEC that serves the grandmother (not by Transcom or Halo). Cf. 47 C.F.R.
§51.701(d) (for purposes of non-access traffic, “termination” is defined as
“the switching” of traffic “at the terminating carrier’s end office switch, or
14

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equivalent facility, and delivery of such traffic to the called party’s
premises”) (emphasis added).
As one of the state regulatory commissions that rejected Halo’s
arguments explained, for each call that Transcom sends to Halo, the calling
party (e.g., the teenager in California who calls her grandmother) “[has] no
relationship with Transcom, [does] not dial Transcom’s number, [has] no idea
Transcom [is] even involved with the call, and [ends] up talking to the person
she dialed in the first place … without dialing any extra numbers or codes.”
Halo North Carolina *6. The parties at either end of these calls “place and
receive calls in exactly the same way they would if Transcom did not exist.”
Halo Missouri *10.
Transcom’s arguments in support of its odd reading of the FCC’s rule
are difficult to decipher, but Transcom appears to contend (Br. 12-23) that it
is an “end user” because it characterizes itself as an Enhanced Service
Provider (“ESP”). According to Transcom, because it is an “end user,” it
serves as an end point in the middle of the hypothetical call from California
to North Carolina – essentially breaking the call in two. This argument
suffers from multiple flaws.
15

Appellate Case: 11-9900 Document: 01019021564 Date Filed: 03/19/2013 Page: 22
To begin with, it is unclear whether Transcom qualifies as an ESP
4
under the FCC’s rules. In any event, the FCC made no finding as to
Transcom’s ESP status, and its reading of the intraMTA rule did not depend
on whether Transcom was an ESP. Even assuming that Transcom is an ESP,
the FCC has never ruled that ESPs in the middle of a call path originate or
terminate calls for purposes of the intraMTA rule. Therefore, contrary to
Transcom’s assertion (Br. 39-42), the agency’s interpretation of the
intraMTA rule in the Order is not inconsistent with any previous FCC order.
Transcom makes much of the FCC’s longstanding practice of
exempting ESPs from paying access charges. Br. 20. Under this exemption,
ESPs “are treated as end users” solely to permit them to pay end-user rates
(instead of access charges) when they “use local business lines for access.”
Amendments of Part 69 of the Commission’s Rules Relating to Enhanced
Service Providers, 3 FCC Rcd 2631, 2637 n.53 (1988). This “ESP
exemption” is irrelevant to the FCC’s interpretation of the intraMTA rule.

4 The FCC defines enhanced services as “services, offered over common
carrier transmission facilities used in interstate communications, which
employ computer processing applications that act on the format, content,
code, protocol or similar aspects of the subscriber’s transmitted information;
provide the subscriber additional, different, or restructured information; or
involve subscriber interaction with stored information.” 47 C.F.R.
§64.702(a). In its brief, Transcom does not describe what “enhanced” service
it provides.
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Even assuming that ESPs are treated as “end users” for purposes of the ESP
exemption, the intraMTA rule does not even use the term “end user.” Rather,
the rule focuses on the points at which a call originates and terminates.
Perhaps Transcom means to suggest that because it is supposedly an
“end user,” it serves as an origination and/or termination point with respect to
the calls it hands off to Halo. That is simply not true. No one who initiates
those calls is calling Transcom. And neither Transcom nor Halo is
“originating” another call when Transcom sends a call to Halo. They are
simply routing the call on its way to its ultimate destination. Neither the
calling party nor the call recipient is even aware of Transcom’s involvement.
Thus, in the case of our hypothetical example, when the grandmother answers
her phone in North Carolina, she of course understands that she is receiving a
call from her granddaughter in California, not from Transcom. For purposes
of the intraMTA rule, the call “originates” with the teenager and “terminates”
with the grandmother. Even if (as Transcom suggests) the concept of an “end
user” were relevant in this context, the “end users” in this scenario would be
the teenager and her grandmother, not Transcom.
After examining the circumstances surrounding the calls that Transcom
passes to Halo, the FCC properly rejected Halo’s contention that those calls
are “intraMTA” wireless calls exempt from access charges. It reasoned that,
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Appellate Case: 11-9900 Document: 01019021564 Date Filed: 03/19/2013 Page: 24
for purposes of the intraMTA rule, “a call is considered to be originated by a
CMRS provider” only if the “party initiating the call has done so through a
CMRS provider.” Order ¶1006 (JA____). All eleven state regulatory
commissions that have addressed this issue have reached the same
5
conclusion. This Court should do likewise.
Transcom claims (Br. 33-34, 51) that the FCC’s interpretation of its
intraMTA rule is somehow in tension with the D.C. Circuit’s decisions in
Bell Atlantic Tel. Cos. v. FCC, 206 F.3d 1 (D.C. Cir. 2000), and WorldCom,
Inc. v. FCC, 288 F.3d 429 (D.C. Cir. 2002). Those cases do not help
Transcom. They involved the intercarrier compensation rules governing calls
to Internet service providers (“ISPs”). Transcom does not purport to be an
ISP; hence, Bell Atlantic and WorldCom are inapposite. In the case of the

5 See Halo North Carolina **5-9; Halo Wisconsin **2-4; Halo Missouri
**14-32; Palmerton Tel. Co. v. Global NAPs South, Inc., 2010 WL 1259661
(Pa. PUC Mar. 16, 2010) (because Transcom does not provide “‘enhanced’
traffic under applicable federal rules,” the traffic it handles “cannot be
exempted from the application of appropriate jurisdictional carrier access
charges”); Re TDS Telecom, 2012 WL 3552699 (Ga. PSC Jul. 17, 2012);
BellSouth Telecomms., LLC v. Halo Wireless, Inc., 2012 WL 4093711 (S.C.
PSC Jul. 17, 2012); In re: Complaint and petition for relief against Halo
Wireless, Inc.
, 2012 WL 5384928 (Fla. PSC Oct. 31, 2012); Re Illinois Bell
Tel. Co. and Halo Wireless, Inc.
, 2012 WL 5296140 (Ill. Commerce Comm’n
Oct. 24, 2012); BellSouth Telecomms., LLC v. Halo Wireless, Inc., 2012 WL
6643035 (Miss. PSC Dec. 10, 2012); BellSouth Telecomms., LLC v. Halo
Wireless, Inc.
, 2013 WL 121550 (Ky. PSC Jan. 7, 2013); In re: Complaint of
Concord Telephone Exchange, Inc.
, Docket No. 11-00108 (Tenn. Regulatory
Auth. Apr. 18, 2012).
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ISP-bound phone calls at issue in those cases, the callers were in fact dialing
the local number assigned to their ISPs in order to receive dial-up Internet
access service. By contrast, with respect to the calls Transcom sends to Halo,
none of the parties who initiated those calls is calling Transcom.
As for the remainder of Transcom’s attacks on the FCC’s reading of its
intraMTA rule, Transcom never presented those claims to the agency.
Therefore, the claims are waived, and the Court should dismiss them. See 47
U.S.C. §405(a); Sorenson, 659 F.3d at 1044.
In any event, Transcom’s arguments lack merit. For example, there is
no basis for Transcom’s assertion (Br. 35) that it “can no longer directly
contract with an exchange carrier for telephone exchange service” after the
Order. Nothing in the Order precludes Transcom from purchasing telephone
exchange service from Halo or any other carrier. The FCC’s clarification of
the intraMTA rule simply means that Transcom may no longer claim to
“originate” or “terminate” a telephone call when it serves as an intermediate
provider of routing service in the middle of the call.
Finally, Transcom complains that the Order will result in a “massive
6
cost increase” for Transcom’s “LEC vendors” (such as Halo), which will

6 See Br. 3 (describing Halo as “one of Transcom’s exchange carrier
vendors”).
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Appellate Case: 11-9900 Document: 01019021564 Date Filed: 03/19/2013 Page: 26
“now pay access” charges for the traffic they receive from Transcom and
deliver to terminating LECs. Br. 42. But as a number of state regulators
have found, the only reason that Halo was not previously paying access
charges was that Transcom and Halo were improperly trying to avoid access
charges by misconstruing the intraMTA rule and purporting to convert long-
distance calls into “local” wireless calls. The FCC reasonably interpreted its
rule to prohibit such schemes.

II.

THE FCC HAS AUTHORITY TO PROHIBIT ALL
“INTERMEDIATE PROVIDERS” FROM ALTERING
CALLER IDENTIFICATION INFORMATION.

To guard against “phantom traffic” (the removal or alteration of call-
identifying information to avoid paying intercarrier compensation), Order
¶703 (JA____), the FCC adopted a new rule. It requires “[i]ntermediate
providers” within an interstate or intrastate call path that originates and/or
terminates on the PSTN to “pass unaltered to subsequent providers in the call
path signaling information identifying the telephone number, or billing
number, if different, of the calling party that is received with a call.” 47
C.F.R. §64.1601(a)(2); see also Order ¶¶719-720 (JA____-____). The rule
defines “Intermediate Provider” as “any entity that carries or processes traffic
that traverses or will traverse the PSTN at any point insofar as that entity
neither originates nor terminates that traffic.” 47 C.F.R. §64.1600(f); see also
20

Appellate Case: 11-9900 Document: 01019021564 Date Filed: 03/19/2013 Page: 27
Order ¶720 (JA____). This broad definition of “intermediate provider”
includes not only telecommunications carriers, which are subject to
regulation under Title II of the Communications Act, but also non-carriers.
Transcom argues that the FCC lacks authority to bar non-carriers from
altering information identifying a caller’s phone number. Br. 46-48. This
claim is procedurally barred because no party presented it to the FCC. 47
U.S.C. §405(a); Sorenson, 659 F.3d at 1044. It is also incorrect.
Even assuming that Transcom is not a common carrier subject to Title
II of the Act, as Transcom contends, the FCC has authority to bar non-carriers
from altering caller identification information “under its Title I ancillary
jurisdiction.” See Nat’l Cable & Telecomms. Ass’n v. Brand X Internet
Servs., 545 U.S. 967, 976, 996 (2005); see also Order n.1232 (JA____-____).
Title I of the Communications Act empowers the FCC to take measures that
are “reasonably ancillary to the effective performance of the [FCC’s] various
responsibilities” under the Act. United States v. Southwestern Cable Co., 392
U.S. 157, 178 (1968); see also United States v. Midwest Video Corp., 406
U.S. 649, 659-70 (1972). Moreover, section 4(i) of the Act authorizes the
FCC to “perform any and all acts, make such rules and regulations, and issue
such orders, not inconsistent with this [Act], as may be necessary in the
execution of its functions.” 47 U.S.C. §154(i). The FCC’s decision to bar
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Appellate Case: 11-9900 Document: 01019021564 Date Filed: 03/19/2013 Page: 28
non-carrier intermediate providers from altering call-identifying information
falls well within this Title I authority. The FCC cannot effectively regulate
intercarrier compensation under Title II if non-carriers can take action that
allows carriers to evade their payment obligations to other carriers.
Transcom contends that Title I does not give the FCC “untrammeled
freedom to regulate activities over which the statute fails to confer … [FCC]
authority.” Br. 47 (quoting Comcast Corp. v. FCC, 600 F.3d 642, 661 (D.C.
Cir. 2010)). But the D.C. Circuit acknowledged in Comcast that the FCC
could properly exercise ancillary authority if: (1) the agency’s “general
jurisdictional grant under Title I … covers the regulated subject”; and (2) “the
regulations are reasonably ancillary to the [FCC’s] effective performance of
its statutorily mandated responsibilities.” Comcast, 600 F.3d at 646 (internal
quotation marks omitted). The FCC’s action here satisfies Comcast’s two-
part test.
First, the phone calls to which the rule applies fall within the FCC’s
“general jurisdictional grant under Title I.” Order n.1232 (JA____) (quoting
Comcast, 600 F.3d at 646). FCC jurisdiction over interstate “communication
by wire or radio,” 47 U.S.C. §152(a), clearly encompasses telephone calls,
which involve “transmission of [voice] by aid of wire, cable, or other like
22

Appellate Case: 11-9900 Document: 01019021564 Date Filed: 03/19/2013 Page: 29
connection,” id. §153(59), and/or “transmission [of voice] by radio,” id.
§153(40).
Second, the FCC’s prohibition against alteration of call-identifying
information by non-carrier intermediate providers is “reasonably ancillary to
the [agency’s] effective performance of its statutorily mandated
responsibilities.” Order n.1232 (JA____) (quoting Comcast, 600 F.3d at
646); see also Southwestern Cable, 392 U.S. at 178. In the Order, the FCC
sought to fulfill its statutory mandate under 47 U.S.C. §251(b)(5) by moving
toward a “bill-and-keep” framework that will eventually phase out
intercarrier compensation obligations. Order ¶736 (JA____). To ensure a
measured transition to bill-and-keep, the agency prospectively adopted a
transitional intercarrier compensation framework for providers of wireline
and VoIP services. See id. ¶¶739, 933 (JA____, ____). The FCC found that
it could not effectively implement “the prospective intercarrier compensation
regime” it adopted “under section 251(b)(5)” unless it ensured that
terminating carriers received the caller identification information they needed
to collect transitional intercarrier compensation. Id. ¶718 (JA____). Without
such information, calls would “terminat[e] without [intercarrier]
compensation.” Id. The resulting “costs created by phantom traffic” would
need to be recovered through “end-user rates” or universal service subsidies,
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Appellate Case: 11-9900 Document: 01019021564 Date Filed: 03/19/2013 Page: 30
“undermining the transitional role for intercarrier compensation charges” that
the FCC envisioned when it comprehensively reformed intercarrier
compensation. Id.
To “address these concerns,” the FCC concluded that it was
“necessary” to prohibit all intermediate providers (including non-carriers)
from altering caller identification information. Order ¶718 (JA____). The
FCC explained that, if it barred only carriers from altering such information,
they could easily circumvent the ban by having a non-carrier agent perform
the task. To prevent such evasion, the agency reasonably applied the ban to
“any entity that carries or processes traffic that traverses or will traverse the
PSTN at any point insofar as that entity neither originates nor terminates that
traffic.” Id. ¶720 (JA____). This reasonable exercise of ancillary authority
was designed to ensure that the creation of “phantom traffic” would not
undermine the FCC’s transitional intercarrier compensation framework under
section 251(b)(5).

III. THE COURT LACKS JURISDICTION TO REVIEW

TRANSCOM’S CHALLENGE TO THE FCC’S BAN ON
CALL BLOCKING BY VOIP PROVIDERS.

Finally, Transcom challenges the FCC’s decision to extend its ban on
call blocking to VoIP providers. Br. 48-49 (citing Order ¶974 (JA____)).
This claim is barred by 47 U.S.C. §405(a) because neither Transcom nor any
24

Appellate Case: 11-9900 Document: 01019021564 Date Filed: 03/19/2013 Page: 31
other party presented the issue to the agency. See Sorenson, 659 F.3d at
1044; FCC Response to Voice on the Net Coalition Principal Brief, Section I.
Even if Transcom had not waived the claim, this Court lacks
jurisdiction to consider it. Transcom lacks Article III standing to challenge
the FCC’s decision to ban call blocking by VoIP providers. Transcom
maintains that it is not a VoIP provider (see Br. 2); therefore, the call
blocking decision to which it objects does not apply to it. Transcom has not
alleged a concrete “injury in fact” that is “certainly impending.” Clapper v.
Amnesty Int’l USA, 133 S. Ct. 1138, 1147 (2013) (internal quotation marks
omitted); see also Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 565 n.2
(1992). Indeed, Transcom itself acknowledges that the call blocking decision
“may not apply” to it. Br. 48. “Without an allegation of specific, concrete
harm, [Transcom does] not have standing.” Nat’l Council for Improved
Health v. Shalala, 122 F.3d 878, 884 (10th Cir. 1997).
Insofar as Transcom suggests that the FCC may someday bar
Transcom from blocking calls, that claim is plainly unripe. “A claim is not
ripe for adjudication if it rests upon contingent future events that may not
occur as anticipated, or indeed may not occur at all.” Los Alamos Study
Group v. U.S. Dep’t of Energy, 692 F.3d 1057, 1065 (10th Cir. 2012)
(quoting Texas v. United States, 523 U.S. 296, 300 (1998)).
25

Appellate Case: 11-9900 Document: 01019021564 Date Filed: 03/19/2013 Page: 32
In any event, as we explain in Section IV of the FCC Response to the
Voice on the Net Coalition Principal Brief, the FCC acted well within its
authority when it banned call blocking by VoIP providers.

CONCLUSION

Insofar as Transcom’s claims are procedurally barred, its petition for
review should be dismissed. In all other respects, the petition 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 19, 2013
26

Appellate Case: 11-9900 Document: 01019021564 Date Filed: 03/19/2013 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 Transcom Principal Brief was certified to be 9,033 words in length.
Therefore, the FCC may file a response brief up to 10,387 words in length. This
brief contains 5,311 words, excluding the parts of the brief exempted by Fed. R.
App. P. 32(a)(7)(B)(iii). If the words in the chart on p.6 were included, the total
would be 5,332 words.

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 18, 2013, and according to the program
is free of viruses.




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


March 19, 2013









Appellate Case: 11-9900 Document: 01019021564 Date Filed: 03/19/2013 Page: 34

CERTIFICATE OF SERVICE



I hereby certify that on March 19, 2013, I caused the foregoing Federal
Respondents’ Uncited Response to the Transcom 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 19, 2013 

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