NetworkIP Wins Payphone Case on Procedural Grounds
The FCC acted “arbitrarily and capriciously” in allowing an improperly filed American Public Communications Council complaint against NetworkIP to proceed, the Court of Appeals for the District of Columbia Circuit said. The decision’s overall effect is that NetworkIP no longer must pay a significant part of a sum the FCC said it owes three payphone providers for calls made using NetworkIP calling cards, said an official familiar with the case.
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NetworkIP challenged three FCC orders on a compensation dispute between the carrier and payphone service providers. The company collaborated with debit card providers to complete coinless calls from payphones. When the payphone providers tried to collect payment for the calls, NetworkIP refused, saying the debit card providers owed it money. The commission found NetworkIP liable on grounds that, unlike the debit card providers, it’s a facilities-based carrier with switching capabilities.
A group of PSPs including APCC Services, a PSP billing clearinghouse, sought reimbursement from NetworkIP in 2003. The FCC sided with the PSPs, ordering NetworkIP to pay $2,789,505.84, plus annual interest at 11.25 percent. NetworkIP contested both its fiscal liability and the damages themselves in federal court, cases that were consolidated into one. Judges David Sentelle, Brett Kavanaugh and Janice Brown heard the case in September and ruled Friday.
The judges found fault only with the FCC decision to allow the compliant, on procedural grounds. The court noted that the PSPs had two years in which to seek compensation and filed “on the absolutely last day it could be timely, May 19, 2003.” The problem was that APPC submitted a single check as a filing fee, not a check for each of the two defendants in the formal complaint, and the filing fee proffered for each defendant was $5.00 short.
The Enforcement Bureau agreed to accept a late filing and the proper fees from APPC. The FCC agreed, saying in an order that “strict enforcement” of the deadline “would unduly conflict with the public interest in ensuring the payment of compensation necessary to ‘promote the widespread deployment of payphone services to the benefit of the general public.'”
The court said with some reluctance that it had to overrule the agency. “As we explained in Northeast Cellular Telephone Co. v. FCC…, before the FCC can invoke its good cause exception, it both ‘must explain why deviation better serves the public interest, and articulate the nature of the special circumstances to prevent discriminatory application and to put future parties on notice as to its operation,'” the court said. Precedent is clear, it said: “Ad hoc departures from those rules, even to achieve laudable aims, cannot be sanctioned, for therein lie the seeds of destruction of the orderliness and predictability which are the hallmarks of lawful administrative action.”