Payphone Providers Seek at D.C. Circuit to End Nearly Two Decades-Old Dispute
Payphone service providers (PSP) in three states argued in the U.S. Court of Appeals for the D.C. Circuit on Friday that the FCC erred by refusing to overturn public utility commission decisions to enforce Telecom Act provisions intended to promote competition for payphone service. The PUCs had denied PSP petitions for tens of millions of dollars in refunds. In Illinois Public Telecommunications Association v. FCC, IPTA, the Independent Payphone Association of New York and the Payphone Association of Ohio are asking the D.C. Circuit to mandate that AT&T and Verizon be ordered to pay the refunds as well as potentially hundreds of millions to the U.S. Treasury.
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
The case is the latest in a dispute that has raged before PUCs, state courts and the FCC for nearly two decades, according to court filings. In implementing Telecom Act provisions barring former Bell operating companies (BOCs) from charging discriminatory rates, the FCC ordered (http://bit.ly/1siasB2) basic phone service rates to meet new national standards, and entrusted the state commissions to determine compliance. The 1996 act also required that PSPs be compensated for completed calls made from their payphones, including those made through an interexchange carrier (IXC). Under a system established by the FCC, BOCs could receive the so-called dial-around compensation only if they complied with the competitive pricing test.
The dispute arose after BOCs requested an extension to an April 15, 1997, deadline to show compliance with the price standards. In return for letting existing rates continue for a time, a coalition of BOCs said if the rates were later deemed to be too high, the BOCs would refund the difference to the PSPs, the FCC brief said. PSPs rate challenges in Illinois, New York and Ohio led to PUC rulings that the BOCs’s rates were too high, but for varying reasons, the commissions did not order refunds be paid to the PSPs, the FCC brief said. The commissions also did not order the BOCs to pay back the dial-around compensation for the time they were not in rate compliance.
After the PSPs pressed the FCC for years to intervene, the commission, in its Feb. 27, 2013, refund declaratory ruling and order, said states should decide whether to order refunds. “Neither the [FCC] nor the states have done anything to enforce the statute,” said Michael Ward, representing the Illinois association and arguing on behalf of the PSPs in Friday’s oral argument. The PSP said in its brief the FCC decision not to intervene was “capricious” and arbitrary.” FCC Counsel Sarah Citrin argued in court, “The states are better positioned than the FCC to decide refund disputes” and the decision was reasonable.
Judge Laurence Silberman prodded Ward why PSPs cared about the dial-around compensation, because the money would not go to the companies. Silberman concluded the PSPs just wanted to make the BOCs pay. Judge Robert Wilkins said that prior to the Telecom Act, Verizon would not receive any payments if someone made a call on one of its payphones using another company’s long-distance card. After the act, the payphone company would receive a dial-around payment for the call. It was a “quid pro quo” arrangement, he said, in which companies’ rates had to meet competitive standards in order to receive the payments. Wilkins wondered why the companies should receive the “quid without the quo."
AT&T and Verizon, as interveners in the case, said in their brief that the states are the proper authority to decide on refunds, saying the 1996 act allowed state rates to remain in place unless they were shown to be not in compliance with the national standards. The act did not specify any specific remedies, including refunds, to implement the act, the AT&T and Verizon brief said.