Reciprocal Compensation Rules Apply to ISP-Bound CLEC Exchanges, 9th Circuit Rules
The FCC’s 2001 rules on reciprocal compensation apply to ISP-bound traffic exchanged by CLECs, the U.S. Court of Appeals for the Ninth Circuit held. In a dispute with Pac West over ISP-bound traffic exchanged by the two carriers, AT&T argued that ISP remand order applies to CLEC exchanges as well as CLEC-ILEC exchanges. That order sets rates at $0.007 per minute, the so-called “triple zero” option currently being argued over in the commission’s intercarrier compensation proceeding. AT&T, a CLEC in California, lost its case before state regulators and at a lower federal court.
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The appellate decision is a victory for advocates of the triple zero option, a CLEC lawyer said. It essentially validates another subset in the intercarrier compensation regime where triple-zero is the mandated rate, the lawyer said.
A three-judge panel of the 9th Circuit ruled that the commission order’s use of terms like “carrier” and “LEC” should be interpreted broadly. “In sum, in adopting an interim compensation regime for ISP-bound traffic, the FCC was primarily concerned with arbitrage opportunities created by traffic of a particular nature; we therefore measure the scope of the FCC’s intent with regard to the reach of the ISP Remand Order on the same basis,” Judge Marsha Berzon wrote for herself and Judges Stephen Reinhardt and Louis Pollak.
"It is true that the FCC was also concerned with how its new rules would play out in a regulatory environment in which ILECs dominated the marketplace,” Berzon wrote in the 37-page decision, which was filed Tuesday. “But this concern for new arbitrage opportunities that ILECs were uniquely positioned to exploit was a corollary to the FCC’s overriding concern for the arbitrage opportunities created by ISP traffic generally. And as this case demonstrates, arbitrage related to ISP-bound traffic in no way depends on the participation of an ILEC."
The 9th Circuit had invited an amicus brief from the commission. The judges thought the FCC’s brief “strongly bolster[ed] our conclusion” that the remand order applies to CLEC-CLEC traffic, Berzon wrote. “The FCC accepted the invitation and answered in the affirmative, explaining that ’the regulatory language, the FCC’s description of the scope of its compensation regime, and the regulatory purpose demonstrate that the new markets rule (until forborne from on October 18, 2004) and the rate caps … apply to CLEC-to-CLEC ISP-bound traffic,” she wrote.
PacWest “is disappointed with the decision,” Vice President Jim Falvey said. “But the 9th Circuit’s ruling allows Pac-West’s collections complaint against AT&T to carry forward at the [state regulatory authority] where Pac-West expects to receive a positive financial outcome in the case.” AT&T had no comment. The dispute with AT&T involved a total of a few hundred thousand dollars, a CLEC official said.
Voice on the Net Coalition Executive Director Glenn Richards is satisfied with the commission’s actions, he said. “The Commission rules appear to be consistent with the implementing legislation, the Truth in Caller ID Act,” he said in a written statement. “From the VON Coalition perspective, we are pleased that the Commission used the existing definition of interconnected VoIP in Section 9.3 of its rules and did not adopt a more expansive definition as some parties proposed.”