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Windstream Brief of Intervenors Supp. Respondents, In Re: FCC 11-161

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Released: April 25, 2013
Appellate Case: 11-9900 Document: 01019041721 Date Filed: 04/24/2013 Page: 1

IN THE UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

No. 11-9900
IN RE: FCC 11-161
On Petitions for Review of Orders of the
Federal Communications Commission

UNCITED BRIEF OF INTERVENORS SUPPORTING RESPONDENTS IN

RESPONSE TO THE WINDSTREAM PRINCIPAL BRIEF

DAVID E. MILLS
SCOTT H. ANGSTREICH
J.G. HARRINGTON
BRENDAN J. CRIMMINS
DOW LOHNES PLLC
JOSHUA D. BRANSON
1200 New Hampshire Avenue, N.W.
KELLOGG, HUBER, HANSEN, TODD,
Suite 800
EVANS & FIGEL, P.L.L.C.
Washington, D.C. 20036-6802
1615 M Street, N.W., Suite 400
(202) 776-2000
Washington, D.C. 20036
(202) 326-7900
Counsel for Cox Communications, Inc.
MICHAEL E. GLOVER
HOWARD J. SYMONS
CHRISTOPHER M. MILLER
ROBERT G. KIDWELL
CURTIS L. GROVES
ERNEST C. COOPER
VERIZON
MINTZ LEVIN COHN FERRIS
1320 North Courthouse Road, 9th Floor
GLOVSKY AND POPEO, P.C.
Arlington, Virginia 22201
701 Pennsylvania Avenue, N.W.
(703) 351-3071
Suite 900
Washington, D.C. 20004
Counsel for Verizon and Verizon
(202) 434-7300
Wireless
Counsel for NCTA
(additional counsel listed on inside cover)
April 24, 2013

Appellate Case: 11-9900 Document: 01019041721 Date Filed: 04/24/2013 Page: 2
RICK CHESSEN
NEAL M. GOLDBERG
STEVEN MORRIS
JENNIFER MCKEE
THE NATIONAL CABLE &
TELECOMMUNICATIONS ASSOCIATION
25 Massachusetts Avenue, N.W.
Suite 100
Washington, D.C. 20001
(202) 222-2445
Counsel for NCTA

Appellate Case: 11-9900 Document: 01019041721 Date Filed: 04/24/2013 Page: 3

CORPORATE DISCLOSURE STATEMENTS

Pursuant to Federal Rule of Appellate Procedure 26.1, intervenors Cox
Communications, Inc., the National Cable & Telecommunications Association
(“NCTA”), Verizon, and Verizon Wireless respectfully submit the following
corporate disclosure statements:

Cox Communications, Inc.

Cox Communications, Inc. (“Cox”) is a
privately held corporation, formed under the laws of the State of Delaware. Cox
Enterprises, Inc., a privately held corporation, owns Cox through a direct majority
interest and through a minority interest held by an intermediate holding company,
Cox DNS, Inc. Cox has no other parent companies within the meaning of Rule
26.1, and no publicly held company has a 10 percent or greater ownership interest
in Cox.

NCTA.

NCTA is the principal trade association of the cable industry in the
United States. Its members include owners and operators of cable television
systems serving over ninety (90) percent of the nation’s cable television customers
as well as more than 200 cable program networks. NCTA’s cable operator
members also provide high-speed Internet service to more than 50 million
households, as well as telephone service to more than 26 million customers.
NCTA also represents equipment suppliers and others interested in or affiliated

Appellate Case: 11-9900 Document: 01019041721 Date Filed: 04/24/2013 Page: 4
with the cable television industry. NCTA has no parent companies, subsidiaries or
affiliates whose listing is required by Rule 26.1.

Verizon and Verizon Wireless.

The Verizon companies participating in
this filing are Cellco Partnership, d/b/a Verizon Wireless, and the regulated, wholly
owned subsidiaries of Verizon Communications Inc. Cellco Partnership, a general
partnership formed under the laws of the State of Delaware, is a joint venture of
Verizon Communications Inc. and Vodafone Group Plc. Verizon Communications
Inc. and Vodafone Group Plc indirectly hold 55 percent and 45 percent partnership
interests, respectively, in Cellco Partnership. Both Verizon Communications Inc.
and Vodafone Group Plc are publicly traded companies. Verizon Communications
Inc. has no parent company. No publicly held company owns 10 percent or more
of Verizon Communications Inc.’s stock. Insofar as relevant to this litigation,
Verizon’s general nature and purpose is to provide communications services,
including broadband Internet access services provided by its wholly owned
telephone-company and Verizon Online LLC subsidiaries and by Verizon
Wireless.
ii

Appellate Case: 11-9900 Document: 01019041721 Date Filed: 04/24/2013 Page: 5

TABLE OF CONTENTS

Page
CORPORATE DISCLOSURE STATEMENTS ........................................................ i
TABLE OF AUTHORITIES .................................................................................... iv
STATEMENT OF RELATED CASES ..................................................................... v
GLOSSARY ............................................................................................................. vi
INTRODUCTION AND SUMMARY OF ARGUMENT ........................................ 1
ARGUMENT ............................................................................................................. 2
I.
THE ORDER MADE CLEAR THAT ITS VoIP RULE APPLIED
FEDERAL RATES TO ORIGINATING VoIP TRAFFIC ............................. 2
II.
THE ORDER REACHED A RESULT CONSISTENT WITH THE
JURISDICTIONAL CLASSIFICATION WINDSTREAM AND
OTHER CARRIERS HAD PROPOSED ........................................................ 4
III.
WINDSTREAM’S COMPLAINTS ABOUT A “FLASH CUT” AND
LOST REVENUE ARE ERRONEOUS AND UNSUPPORTED .................. 5
CONCLUSION .......................................................................................................... 7
iii

Appellate Case: 11-9900 Document: 01019041721 Date Filed: 04/24/2013 Page: 6

TABLE OF AUTHORITIES

Page

REGULATIONS

47 C.F.R. § 51.913 ..................................................................................................... 3
47 C.F.R. § 51.913(a) ................................................................................................. 3

OTHER MATERIALS

Letter from Windstream to Texas PUC (Mar. 6, 2012), available at
http://interchange.puc.state.tx.us/WebApp/Interchange/Documents/
27385_7575_720105.PDF ............................................................................... 6
Windstream Corp. Form 10-Q for Q2 2012 (SEC filed Aug. 9, 2012),
available at http://www.sec.gov/Archives/edgar/data/1282266/
000128226612000030/a201263010q.htm ....................................................... 7
iv

Appellate Case: 11-9900 Document: 01019041721 Date Filed: 04/24/2013 Page: 7

STATEMENT OF RELATED CASES

Intervenors adopt the Statement of Related Cases set forth in the Federal
Respondents’ Uncited Response to the Joint Preliminary Brief of the Petitioners.
v

Appellate Case: 11-9900 Document: 01019041721 Date Filed: 04/24/2013 Page: 8

GLOSSARY

FCC Federal
Communications
Commission
FCC Br.
Federal Respondents’ Response to the
Windstream Principal Brief (filed Mar. 27, 2013)
ICC Intercarrier
Compensation
LEC Local
Exchange
Carrier
Order
Report and Order and Further Notice of Proposed
Rulemaking, Connect America Fund, 26 FCC
Rcd 17663 (2011)
PSTN
Public Switched Telephone Network
Second Reconsideration
Second Order on Reconsideration, Connect
Order
America Fund, 27 FCC Rcd 4648 (2012)
VoIP
Voice over Internet Protocol
Windstream
Windstream Corporation, Windstream
Communications, Inc., and Windstream
Corporation’s wholly owned regulated
subsidiaries
vi

Appellate Case: 11-9900 Document: 01019041721 Date Filed: 04/24/2013 Page: 9

INTRODUCTION AND SUMMARY OF ARGUMENT

In the Order, the FCC adopted new, prospective rules authorizing LECs to
charge their federally tariffed access charges to other carriers for originating or
terminating VoIP calls that begin or end on a traditional telephone network
(referred to as “VoIP-PSTN” calls). In the Second Reconsideration Order, the
FCC partially granted Windstream’s petition for reconsideration of that
determination and concluded that, for two years (until June 30, 2014), LECs would
also be permitted to charge their (generally higher) state tariffed access charges for
originating intrastate VoIP-PSTN calls, before moving to the (lower) federal rates.
Even though the FCC granted Windstream substantial relief on
reconsideration, Windstream seeks this Court’s review, claiming that the FCC
failed adequately to explain its treatment of originating charges for VoIP-PSTN
calls. The FCC’s brief ably refutes that claim. Intervenors write separately to
emphasize three points.

I.


The FCC demonstrates that the rule it adopted in the Order
unambiguously authorized LECs, prospectively, to bill for originating and
terminating VoIP-PSTN traffic at no higher than their federally tariffed rates.
Contrary to Windstream’s claim (at 16), the Second Reconsideration Order
amended that rule not to make the original rule clearer, but to codify the additional
relief the FCC granted to Windstream in that order.

Appellate Case: 11-9900 Document: 01019041721 Date Filed: 04/24/2013 Page: 10

II.


Windstream’s assertion that the FCC could not have intended, in the
Order, to apply interstate access rates to originating VoIP-PSTN traffic ignores
Windstream’s own proposal (in conjunction with other carriers) urging the FCC to
treat all VoIP-PSTN traffic as interstate for jurisdictional purposes. The FCC
expressly noted in the Order that the compensation rule for VoIP traffic it adopted
in the Order is the same one that would have applied had the FCC agreed that all
VoIP-PSTN traffic is jurisdictionally interstate — state tariffed rates do not apply
to originating or terminating VoIP-PSTN traffic.

III.


The FCC, in the Second Reconsideration Order, established a multi-
year transition for originating VoIP traffic, not a “flash cut.” Windstream’s
complaints about that transition — and the eventual reduction to federally tariffed
rates for originating traffic — ignore the additional revenue it will receive from the
new rules. They are also inconsistent with Windstream’s own SEC disclosures.

ARGUMENT

I. THE

ORDER

MADE CLEAR THAT ITS VoIP RULE APPLIED

FEDERAL RATES TO ORIGINATING VoIP TRAFFIC

The FCC’s rule for VoIP traffic, promulgated in the Order, unambiguously
applied federally tariffed rates to all ICC charges for VoIP traffic — originating
and terminating. Specifically, that rule provided that “Access Reciprocal
Compensation . . . between a local exchange carrier and another
telecommunications carrier” for “originat[ing] and/or terminat[ing]” VoIP-PSTN
2

Appellate Case: 11-9900 Document: 01019041721 Date Filed: 04/24/2013 Page: 11
traffic would “be subject to a rate equal to the relevant interstate access charges
specified by this subpart [of the FCC’s regulations].” Order, 26 FCC Rcd at
18178-79 (promulgating 47 C.F.R. § 51.913(a)) (JA___-__). As the FCC explains,
that language “plainly applies to both originating and terminating traffic.” FCC
Br. 22; see Second Reconsideration Order ¶ 31 (the Order’s “text and the
implementing rules demonstrate that the intercarrier compensation framework for
toll VoIP traffic limits both default origination and termination charges to the level
of interstate access rates”) (JA___).
Windstream is thus wrong to claim repeatedly (at 16, 20, 28) that the FCC,
in the Second Reconsideration Order, “amended” and “revise[d]” the FCC’s
“rules” to make that initial decision clear. Instead, the FCC amended the rule to
codify the substantial relief given to Windstream on reconsideration — namely,
a two-year period in which LECs such as Windstream are authorized to charge
higher state tariffed rates for originating intrastate VoIP-PSTN calls. See Second
Reconsideration Order, 27 FCC Rcd at 4671 (amending 47 C.F.R. § 51.913 to
divide subsection (a) into paragraphs, with paragraph (1) defining the ICC rules for
terminating VoIP-PSTN traffic and originating interstate VoIP-PSTN traffic and
paragraph (2) specifying the transition period for originating intrastate VoIP-PSTN
traffic) (JA___).
3

Appellate Case: 11-9900 Document: 01019041721 Date Filed: 04/24/2013 Page: 12
No different from the rule promulgated in the Order, the FCC’s amended
rule expressly authorizes the charging of federally tariffed rates for all VoIP traffic.
The only substantive difference between the two rules is that the old rule made the
change effective immediately, whereas the new rule provides a two-year transition
period (until June 2014) in which LECs such as Windstream are expressly
authorized to bill for originating intrastate VoIP traffic at their (generally higher)
state tariffed rates.

II. THE

ORDER

REACHED A RESULT CONSISTENT WITH THE

JURISDICTIONAL CLASSIFICATION WINDSTREAM AND
OTHER CARRIERS HAD PROPOSED

As the FCC shows (at 8-10), Windstream’s challenges to the Order’s
treatment of VoIP traffic are based on portions of the order addressing traditional
telecommunications traffic rather than the separate section of the order specific to
VoIP traffic.
Moreover, as the FCC explained in the Order, the compensation rule it
adopted for all VoIP traffic was consistent with an industry proposal that
Windstream joined. As the FCC noted, Windstream and others urged the FCC to
find that “all VoIP-PSTN traffic should be treated as interstate” for jurisdictional
purposes. Order ¶ 959 (JA___-__). In the Order, the FCC did not adopt that
jurisdictional classification of VoIP traffic, but it expressly recognized that the
compensation rule it adopted would produce the same outcome — default rates for
4

Appellate Case: 11-9900 Document: 01019041721 Date Filed: 04/24/2013 Page: 13
VoIP traffic “equal to interstate access rates” — as if it had classified all VoIP-
PSTN traffic as jurisdictionally interstate. Id.; see also Second Reconsideration
Order ¶ 31 n.88 (noting that the industry proposal contained “no explanation of
how the [FCC] would (or could) both classify all VoIP traffic as interstate and
nonetheless adopt intrastate originating access rates” for that traffic) (JA___).
The FCC’s discussion in the Order of the industry proposal that Windstream
joined thus provides further refutation of its assertion (at 21) that the FCC’s clear
treatment of originating charges for VoIP-PSTN traffic in the Order was not
“conscious[ ]” or was merely a “linguistic possibilit[y].”

III.

WINDSTREAM’S COMPLAINTS ABOUT A “FLASH CUT” AND
LOST REVENUE ARE ERRONEOUS AND UNSUPPORTED

Windstream’s repeated complaints about a “flash cut” (at 2, 17, 20-21, 24)
are wrong. Windstream ignores the relief it was granted in the Second
Reconsideration Order: it now has an express authorization through June 30,
2014, to charge its state tariffed rates for originating intrastate VoIP-PSTN traffic.
See Second Reconsideration Order ¶¶ 34-35 (JA___-__). It did not have that
express authorization before the Second Reconsideration Order.1 Moreover, two
years’ advance notice that Windstream’s rate for originating intrastate VoIP traffic

1 Nor did Windstream previously have an express FCC rule authorizing
interstate rates for originating interstate VoIP-PSTN traffic (or terminating any
VoIP-PSTN traffic).
5

Appellate Case: 11-9900 Document: 01019041721 Date Filed: 04/24/2013 Page: 14
will be no greater than its federal tariffed rate is not a “flash cut.” It is a lengthy,
generous transition period that the agency reasonably predicted will give
Windstream and other LECs ample time to adjust their business plans. See id. ¶ 36
(JA___).
Windstream also complains (at 29) about the six-month gap between the
Order and the effective date of the relief granted in the Second Reconsideration
Order. But Windstream offers no basis to conclude that it lost any revenue during
that period. It points to no record evidence about the rates it charged (or the
amounts it collected) during that period. And there is some evidence that
Windstream continued to charge its state rates based on its erroneous argument that
the Order’s VoIP rule did not apply to originating charges.2
Finally, Windstream’s suggestion (at 27) that it will suffer “significant
revenue losses” once the transition occurs in 2014 ignores the agency’s reasonable
predictive judgment about the benefits of clear, prospective VoIP rules — which
expressly authorize Windstream to charge federal tariffed rates for VoIP traffic (an
area previously subject to much dispute). See Order ¶ 930 (predicting that the new
rules “may increase the proportion of traffic for which intercarrier compensation

2 See Letter from Windstream to Texas PUC (Mar. 6, 2012) (acknowledging
that Windstream’s 2012 tariff revisions did not limit access charges on originating
intrastate VoIP-PSTN traffic to interstate rates), available at
http://interchange.puc.state.tx.us/WebApp/Interchange/Documents/27385_7575_7
20105.PDF.
6

Appellate Case: 11-9900 Document: 01019041721 Date Filed: 04/24/2013 Page: 15
can be collected,” “will provide LECs, including incumbent LECs, with more
certain revenue throughout the transition, and will also allow them to avoid the
litigation expense associated with attempts to collect access charges for VoIP
traffic”) (JA___). Indeed, Windstream’s claims here conflict with its own
disclosures to regulators and investors, where it has stated that it does “not believe
the Order’s reform of intercarrier compensation will have a material impact on [its]
results of operation, cash flows or [its] financial condition.”3

CONCLUSION

For the foregoing reasons, and those set forth in the FCC’s brief, the Court
should deny Windstream’s petition for review.

3 Windstream Corp. Form 10-Q for Q2 2012, at 55 (SEC filed Aug. 9, 2012),
available at http://www.sec.gov/Archives/edgar/data/1282266/
000128226612000030/a201263010q.htm.
7

Appellate Case: 11-9900 Document: 01019041721 Date Filed: 04/24/2013 Page: 16
Respectfully submitted,
/S/ David E. Mills
/s/
Scott H. Angstreich
DAVID E. MILLS
SCOTT H. ANGSTREICH
J.G. HARRINGTON
BRENDAN J. CRIMMINS
DOW LOHNES PLLC
JOSHUA D. BRANSON
1200 New Hampshire Avenue, N.W.
KELLOGG, HUBER, HANSEN, TODD,
Suite 800
EVANS & FIGEL, P.L.L.C.
Washington, D.C. 20036-6802
1615 M Street, N.W., Suite 400
(202) 776-2000
Washington, D.C. 20036
dmills@dowlohnes.com
(202) 326-7900
sangstreich@khhte.com
Counsel for Cox Communications, Inc.
MICHAEL E. GLOVER
CHRISTOPHER M. MILLER
/S/ Howard J. Symons
CURTIS L. GROVES
HOWARD J. SYMONS
VERIZON
ROBERT G. KIDWELL
1320 North Courthouse Road, 9th Floor
ERNEST C. COOPER
Arlington, Virginia 22201
MINTZ LEVIN COHN FERRIS
(703) 351-3071
GLOVSKY AND POPEO, P.C.
701 Pennsylvania Avenue, N.W.
Counsel for Verizon and Verizon Wireless

Suite 900
Washington, D.C. 20004
(202) 434-7300
hjsymons@mintz.com
RICK CHESSEN
NEAL M. GOLDBERG
STEVEN MORRIS
JENNIFER MCKEE
THE NATIONAL CABLE &
TELECOMMUNICATIONS ASSOCIATION
25 Massachusetts Avenue, N.W.
Suite 100
Washington, D.C. 20001
(202) 222-2445
Counsel for NCTA
April
24,
2013

8

Appellate Case: 11-9900 Document: 01019041721 Date Filed: 04/24/2013 Page: 17

CERTIFICATE OF COMPLIANCE

Certificate of Compliance With Type-Volume Limitations, Typeface

Requirements, Type Style Requirements, Privacy Redaction

Requirements, and Virus Scan

1.
This brief contains 1,418 words of the 21,400 words the Court allocated for
the briefs of intervenors in support of the FCC in its October 1, 2012 Order
Consolidating Case No. 12-9575 with Other FCC 11-161 Cases, Establishing
Windstream Briefing Schedule, and Modifying Intervenor Participation. The
intervenors in support of the FCC have complied with the type-volume limitation
of that order because their briefs, combined, contain a total of fewer than 21,400
words, excluding the parts of those briefs 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 brief has been prepared in a proportionally spaced typeface
using Microsoft Word 2007 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 12.1.671.4971, updated on April 24, 2013) and, according to the program,
is free of viruses.
/s/ Scott H. Angstreich
Scott H. Angstreich
April 24, 2013

Appellate Case: 11-9900 Document: 01019041721 Date Filed: 04/24/2013 Page: 18

CERTIFICATE OF SERVICE

I hereby certify that, on April 24, 2013, I caused the foregoing Uncited Brief
of Intervenors Supporting Respondents in Response to the Windstream 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/ Scott H. Angstreich
Scott H. Angstreich
April 24, 2013

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