APPEALS COURT REMANDS FCC RECIPROCAL COMPENSATION ORDER
U.S. Appeals Court, D.C., Fri. remanded FCC’s latest reciprocal compensation order, adopted April 27, 2001, to replace earlier one that also had been remanded by court. Court didn’t vacate new order, however, which means it will remain in place for now. This is latest chapter in FCC’s long effort to exempt ISP-bound traffic from Telecom Act’s reciprocal compensation requirements. This time, court said agency erred in relying on Sec. 251(g) of Act to accomplish its purpose.
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In oral argument in Feb. (CD Feb 13 p1), judges indicated concern about FCC’s use of Sec. 251(g) as basis of its order, saying that section appeared to be little more than grandfathering clause, assuring that current policies weren’t adversely effected by Telecom Act. However, in first major common carrier decision in Powell administration, Commission said it read section differently as giving it jurisdiction to exempt information access services from reciprocal compensation. FCC had determined in order that ISP-bound traffic was information access rather than telecom traffic.
Judge Stephen Williams wrote in Fri.’s decision that Sec. 251(g) couldn’t be used to bypass requirement in Sec. 251(b) that carriers pay reciprocal compensation. He said Sec. 251(g) “is worded simply as a transitional device, preserving various LEC duties that antedated the 1996 Act” and couldn’t be used for forward-looking purposes. Williams said that for FCC to use Sec. 251(g) as basis for its order, there would have to be some pre-Telecom Act obligations related to reciprocal compensation for ISP-bound traffic -- and there aren’t.
Court said that because it had determined that FCC’s order was based on inappropriate reading of Telecom Act, it didn’t address other complaints by petitioners, which included WorldCom and other CLECs as well as some state regulators concerned that FCC had preempted their authority. For example, Williams wrote: “We do not decide petitioners’ claims that the interim pricing limits imposed by the Commission are inadequately reasoned. Because we can’t yet know the legal basis for the Commission’s ultimate rules, or even what those rules may prove to be, we have no meaningful context in which to assess these explicitly transitional measures.”
Despite turning down 2 FCC efforts to end reciprocal compensation for ISP traffic, court did indicate view that bill-and-keep might ultimately be solution: “Many of the petitioners themselves favor bill-and-keep, and there is plainly a nontrivial likelihood that the Commission has authority to elect such a system.”
Verizon spokesman said company didn’t read that as setback because court left current rules in place and, in essence, asked FCC to come up with better legal justification. BellSouth spokesman said that “while disappointed” in court’s decision, carrier was “pleased that the court recognized that it is likely that the Commission has the authority to mandate bill-and-keep.” USTA Senior Vp Daniel Phythyon also said court didn’t overturn FCC’s decision, “just how they got there.” NARUC Gen. Counsel Brad Ramsay said he was “pretty happy with this result” although he would have preferred that court vacate FCC order. Primary concern of NARUC and state regulators was settled, he said. Regulators were concerned that use of Sec. 251(g) set precedent for FCC to have “virtually unbounded authority and did violence to the Act,” Ramsay said. Basically court said FCC reliance on that section was “precluded,” he said.