AT&T Challenges FCC VoIP Symmetry Ruling Favoring CLECs, Over-the-Top VoIP
The FCC impermissibly changed its VoIP symmetry rule to allow competitive LECs partnering with over-the-top (OTT) VoIP providers to charge interexchange carriers (IXCs) end-office switching fees for connecting long-distance calls to customers, AT&T argued Thursday in a brief asking a court to overturn a commission declaratory ruling. Alternatively, AT&T asked the U.S. Court of Appeals for the D.C. Circuit to disallow the FCC’s decision to require AT&T to retroactively pay CLECs for charges it withheld while their regulatory dispute was pending. The case is AT&T v. FCC, No. 15-1059.
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AT&T said the FCC violated the Administrative Procedure Act (APA) by effectively changing its prior rule through informal adjudication without proper notice and comment. AT&T also said the FCC’s retroactive application of charges unfairly exposed the company to “substantial liability” for reasonably relying on the “Commission’s prior and consistent rulings” regarding LEC collection of access charges.
The FCC instituted its VoIP symmetry rule in its 2011 USF and intercarrier compensation overhaul order. The rule allowed LECs to collect appropriate charges for functions performed by them and/or VoIP partners regardless of whether the functions (or technology) correspond precisely to those employed under a traditional TDM architecture. Level 3 and other CLECs complained AT&T and Verizon (the largest IXCs) were violating that rule by withholding end-office switching charges when the CLECs and OTT VoIP partners connected long-distance calls to customers. AT&T and Verizon said the CLECs and OTT VoIP providers were providing neither end-office switching nor its “functional equivalence.” But the CLECs/VoIP partners said they did provide a functionally equivalent service by working together, and Level 3 and Bandwidth.com asked the FCC to make the IXCs pay retroactively as well.
The FCC’s Feb. 11 order, approved by a 3-2 vote along party lines, sided with the CLECs, declaring the rule didn’t require CLECs or VoIP partners to provide the physical last-mile connection to the VoIP providers' end-user customers in order to provide the functional equivalence of end-office switching and collect the associated access charges. The FCC also found retroactive payments were appropriate, given that “retroactivity is the norm in agency adjudications” and that its clarification didn’t upset settled law on which the IXCs had reasonably relied.
AT&T disagreed, saying the FCC purportedly “interpreted” a regulation but instead “dramatically altered its clear and well-established meaning,” creating an “unjustified exception to a decades-old regulatory principle.” The “Commission’s ‘interpretation’ is in fact an impermissible attempt to amend a binding rule without engaging in the notice-and-comment rulemaking required by the [APA],” AT&T said. “The Commission then gave impermissible retroactive effect to its new ‘interpretation.’”
AT&T said VoIP providers have partnered with LECs to access their phone-numbering resources for VoIP customers and to connect to the public telephone network. It said end-office switching charges are traditionally high because the costs of locating such offices and equipment serving relatively small populations were high. The FCC allowed LECs and facilities-based VoIP partners -- most often cable companies -- to collect the end-office switching charges because the cable company provides a physical line to the customer over which calls are delivered, AT&T said.
But AT&T said when LECs partner with OTT VoIP providers, they connect calls to customers by delivering them “in bulk to the Internet,” often at distant interconnection points, where the calls could be routed over various networks before reaching a local ISP, which then delivers the call to its customer. In a separate 2011 order, the FCC ruled that neither an OTT VoIP provider nor its LEC partner could assess end-office switching charges for these calls, AT&T said.
Nonetheless, the FCC in February “purported to ‘clarify’ that what it really meant to say was that over-the-top VoIP providers may collect end office switching charges merely for transferring calls in undifferentiated fashion from a high-capacity trunk onto the Internet,” AT&T said. “Claiming that its rule on intercarrier compensation for VoIP calls embodied an unprecedented (and unstated) ‘holistic’ approach to determining ‘functional equivalence,’ the Commission announced -- without conducting any formal rulemaking or even acting on a formal complaint -- that a LEC’s delivery of over-the-top VoIP calls in bulk to the Internet is functionally equivalent to end office switching.” AT&T said the FCC order clearly amended its regulation without APA notice-and-comment, and therefore should be vacated.
Even if the court finds for the FCC, AT&T said it should revoke the retroactive application of the charges. “It violates the most basic principles of fair notice for the Commission to give its dramatic about-face retroactive effect, thereby exposing AT&T to substantial retroactive liability for charges that AT&T reasonably believed it would not have to pay,” the telco said.