FCC DEFENDS PAYPHONE RULE REVISIONS IN APPEALS COURT

“Nobody in this courtroom wishes more than I that we had filed in the Federal Register,” Commission Attorney Joel Marcus told Chief Judge Douglas Ginsburg and Judge David Tatel. Nonetheless, lapse isn’t enough to vacate rules because parties understood FCC was considering revisions, Marcus said. Third member of panel, Judge Judith Rogers, was unable to attend oral argument because of snowstorm in Washington area and planned to listen to it on tape.

At issue were rules on how coinless payphone providers receive compensation for handling calls, particularly by interexchange carrier (IXC) customers. FCC realized its 1996 rules didn’t work and tried to fix them, which should be viewed as “exemplary,” Albert Kramer, attorney for payphone providers and intervenor in case, told judges. It’s not question of whether agency fixed rules, Judge Tatel said. “The question is, did they follow proper procedure.” Sprint, as well as AT&T and WorldCom, appealed FCC’s reconsideration order because agency hadn’t issued NPRM or make appropriate call for comments before issuing order. Sprint also raised several concerns about actual changes agency made in order, but judges appeared to be much more concerned about procedural problems than substantive ones.

Sprint attorney David Murray said agency’s Common Carrier Bureau asked for comments on “clarification” proposed by coalition of Bell companies, and based on that, Commission ended up changing rules, which was much broader action than just clarifying something. Murray also said bureau’s call for comments wasn’t published in Federal Register and was released by a bureau, which didn’t have authority to issue NPRMs. Thus, there was no indication to parties that they were expected to comment on issues beyond limited Bell proposal, Murray said. Bureau comment request can’t be viewed as sufficient under Administrative Procedure Act, Murray said. “There was nothing that could be viewed as adequate notice” that major changes were contemplated, he said.

Marcus said word “clarification” was used because that’s what Bell coalition called its proposal. “No one should have read the notice and not thought changing the payment [arrangements] was not on the table,” he said. “Would you say at least it was ambiguous?” Tatel asked. “There might be a tiny bit of ambiguity,” Marcus replied. Ginsburg also questioned fact that agency’s notice referred to clarification of rules rather than changing them. “Isn’t it at least fair to say that when an agency sets out to clarify a rule, the scope would be narrower?” he asked. When Marcus said proceeding wasn’t really clarification, Tatel responded that FCC “used the word twice.”

Judges also questioned another issue raised by Sprint -- how FCC could reconsider rules issued more than 4 years earlier. Payphone attorney Kramer told court that that proceeding had been open since original 1996 order was adopted and there had been 2-3 rulings each year. “This notion that this was a dormant proceeding is simply wrong,” Kramer said. “This has been an active, ongoing proceeding.”

On substantive issues, Sprint complained that resulting revision was “unworkable” because it required IXCs to determine whether payphone calls had been completed. Sprint argued that if call went through 2nd switch controlled by reseller, IXC couldn’t follow path any longer. Murray said FCC’s plan for IXCs and payphone service providers (PSPs) entering private agreements didn’t work either. “After assigning all call-tracking duties to the IXCs, the FCC said we should voluntarily enter agreements,” which he said “creates nightmares” for IXCs. In addition, he said, rules give no standards for call completion data.