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AT&T Corp. v. Federal Communications Commission

United States Court of Appeals, District of Columbia Circuit

November 18, 2016

AT&T Corp., Petitioner
v.
Federal Communications Commission and United States of America, Respondents Bandwidth.com, Inc., et al., Intervenors

          Argued September 8, 2016

         On Petition for Review of an Order of the Federal Communications Commission

          Joseph Guerra, argued the cause for petitioner. With him on the briefs were Peter D. Keisler, James P. Young, Kwaku A. Akowuah, Gary L. Phillips, and David L. Lawson.

          Sarah E. Citrin, Counsel, Federal Communications Commission, argued the cause for respondents. On the brief were William J. Baer, Assistant Attorney General, Robert B. Nicholson and Robert J. Wiggers, Attorneys, Jonathan B. Sallett, General Counsel, Federal Communications Commission, David M. Gossett, Deputy General Counsel, Jacob M. Lewis, Associate General Counsel, Richard K. Welch, Deputy Associate General Counsel, and Lisa S. Gelb, Counsel. James M. Carr, Counsel, entered an appearance.

          Christopher J. Wright, argued the cause for intervenors. With him on the brief were John T. Nakahata, Timothy J. Simeone, Stephen W. Miller, Joshua M. Bobeck, Charles A. Zdebski, and Jeffrey P. Brundage. John R. Grimm entered an appearance.

          Before: Rogers, Circuit Judge, and Williams and Randolph, Senior Circuit Judges.

          OPINION

          Williams, Senior Circuit Judge

         This case arises from the ongoing transition of American telephony to the Internet. The process creates challenges to a regulatory system designed for the pre-Internet world, the familiar "public switched telephone network" or "PSTN." We deal here with the fees that local exchange carriers ("LECs") can charge inter-exchange carriers ("IXCs") for certain services they provide, in coordination with providers of Voice over Internet Protocol ("VoIP"), for the completion of "inter-exchange" calls. Resolution of the dispute turns on how the disputed services are to be classified. The Federal Communications Commission says that they are end-office switching services. Petitioner AT&T says that they are tandem switching services. The prescribed rates for the latter have generally been lower; AT&T has no objection to paying them.

         Two decisions of the Commission are critical. First, in 2011 the Commission made a broad effort to update its system for regulating intercarrier compensation. In re Connect America Fund, 26 FCC Rcd. 17663 (2011) (the "Transformation Order"). That order produced definitions of "End Office Access Service" and "Tandem-Switched Transport Access Service, " stated in subsections (d) and (i), respectively, of 47 C.F.R. § 51.903. The parties focus on subsection (d), providing:

End Office Access Service means:
(1) The switching of access traffic at the carrier's end office switch and the delivery to or from of such traffic to the called party's premises;
(2) The routing of interexchange telecommunications traffic to or from the called party's premises, either directly or via contractual or other arrangements with an affiliated or unaffiliated entity, regardless of the specific functions provided or facilities used; or
(3) Any functional equivalent of the incumbent local exchange carrier access service provided by a non-incumbent local exchange carrier.

§ 51.903(d). Subsection (i), governing tandem switching access service, employs similar "functional equivalent" language.

         The Transformation Order recognized that LECs partnered with VoIP providers to supply these services. It therefore specified that a LEC could collect for provision of access services "regardless of whether the [LEC] itself delivers such traffic to the called party's premises or delivers the call . . . via contractual or other arrangements with an affiliated or unaffiliated provider of interconnected VoIP service." § 51.913(b). In short, the Transformation Order allowed a VoIP provider and its LEC partner (collectively, "VoIP-LEC") to charge ...


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