Before the

Federal Communications Commission

Washington, D.C. 20554

+----------------------------------+----+------------------------------+
| In the Matter of                 | )  | File No. EB-003-MD-011       |
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| APCC Services, Inc.,             | )  |                              |
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| Data Net Systems, LLC,           | )  |                              |
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| Davel Communications, Inc.,      | )  |                              |
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| Jaroth, Inc. d/b/a Pacific       | )  |                              |
| Telemanagement                   |    |                              |
|                                  | )  |                              |
| Services, and                    |    |                              |
|                                  | )  |                              |
| Intera Communications Corp.,     |    |                              |
|                                  | )  |                              |
| Complainants,                    |    |                              |
|                                  | )  |                              |
| v\.                              |    |                              |
|                                  | )  |                              |
|                                  |    |                              |
|                                  | )  |                              |
|                                  |    |                              |
|                                  | )  |                              |
+----------------------------------+----+------------------------------+

)

Network IP, LLC, and )

Network Enhanced Telecom, LLP, )

)

Defendants. )

memorandum opinion and order

Adopted: January 31, 2005 Released: February 1, 2005

By the Chief, Enforcement Bureau:

# Introduction

1.  In this Memorandum Opinion and Order, we largely grant a formal
    complaint[^1] filed by APCC Services, Inc., Data Net Systems, LLC,
    Davel Communications, Inc., Jaroth, Inc. d/b/a Pacific
    Telemanagement Services, and Intera Communications Corp.
    (collectively, "Complainants") against Network IP, LLC, and Network
    Enhanced Telecom, LLP (collectively, "NIP") pursuant to section 208
    of the Communications Act of 1934, as amended ("Act").[^2]
    Complainants claim that NIP violated sections 201(b), 276, and
    416(c) of the Act[^3] by failing to pay Complainants the
    compensation required by section 64.1300 of the Commission's
    rules[^4] for certain payphone calls completed during the period
    October 7, 1997 through November 23, 2001 (the "Relevant
    Period").[^5] For the reasons explained below, we find that NIP's
    failure to pay compensation to Complainants violates section 64.1300
    of the rules and thus sections 201(b) and 276 of the Act. Because we
    grant Complainants' claims under sections 201(b) and 276 of the Act,
    and such grant will afford Complainants all the relief to which they
    would be entitled under section 416(c) of the Act, we dismiss
    without prejudice Complainants' claims under section 416(c).[^6]

# Background

## The Parties

2.  APCC Services, Inc., Data Net Systems, LLC, Davel Communications,
    Inc., and Intera Communications Corp. are billing and collection
    agents for payphone service providers ("PSPs").[^7] Jaroth, Inc.
    d/b/a Pacific Telemanagement Services is itself a PSP and also a
    billing and collection agent for other PSPs.[^8] NIP is a
    telecommunications carrier that owns switches and that offers other
    companies a package of telecommunications services that enables
    those companies to provide prepaid calling cards to end-user
    customers.[^9] End-user customers can use those prepaid calling
    cards to make "coinless" calls from payphones.[^10] In this
    proceeding, Complainants seek compensation from NIP for such
    "coinless" calls placed from payphones owned by Complainants' PSP
    principals.

## The Rules Governing Compensation for Coinless Payphone Calls

3.  Section 276 of the Act and the Commission's implementing orders
    determine PSPs' rights to compensation for calls made from their
    payphones. Section 276(b)(1)(A) of the Act directs the Commission to
    "establish a per call compensation plan to ensure that all payphone
    service providers are fairly compensated for each and every
    completed intrastate and interstate call using their
    payphone . . . ."[^11]

4.  Two kinds of calls may be placed from a payphone. The first kind is
    the "coin call," in which the caller initiates the call by
    depositing coins into the payphone and then dialing the call
    recipient's number.[^12] With respect to these calls, the caller
    directly compensates the PSP for use of the payphone, and thus
    section 276 does not require the Commission to "establish a per call
    compensation plan." The second kind of call is the "coinless call,"
    in which the caller initiates the call not by depositing coins, but
    rather by dialing a special access number that triggers a specific
    service (which may or may not then require the dialing of additional
    numbers), such as directory assistance, operator service, toll-free
    (*e.g*., "800") service, and calling card service (either pre-paid
    or credit).[^13] With respect to these calls, the caller does not
    directly compensate the PSP for use of the payphone, and thus
    section 276 does require the Commission to "establish a per call
    compensation plan."

5.  Complicating the Commission's task of establishing a per call
    compensation plan for coinless payphone calls is the fact that
    several entities may be involved, in one way or another, in a
    particular coinless payphone call. The local exchange carrier
    ("LEC") serving the payphone transports the call to the switching
    facilities of an interexchange carrier ("IXC").[^14] In some
    instances, this IXC then transports the call to the LEC serving the
    call recipient.[^15] In other instances, however, the IXC transports
    the call to a "reseller," and the call may then be transported to
    one or more additional resellers before arriving at the LEC serving
    the call recipient.[^16]

6.  Some of these resellers possess the switching equipment required to
    perform the function of transmitting the call; some resellers lack
    such equipment (*i.e*., "switchless resellers") however, so they
    only resell the telecommunications service (*i.e.*, the ability to
    place a coinless payphone call), and rely on other carriers to
    perform the actual switching and transmission functions required to
    complete the call.[^17] In other words, only a reseller that
    possesses switching equipment can physically receive the call and
    route it onward, either to the LEC serving the call recipient or to
    the switch of another reseller.[^18] In a quite separate function,
    however, any reseller may resell only the telecommunications service
    to the public, or to a switchless reseller. Such a switchless
    reseller may, in turn, resell the service to another switchless
    reseller, or may sell the service to the public, often in the form
    of prepaid calling cards.[^19]

7.  Thus, with respect to each coinless payphone call, there may be
    *two* daisy-chains of carriers: one transporting the *call* toward
    the call recipient, and a separate one conveying only the *service*
    to the end-user consumer who pays for placing the call.[^20] And
    each of these chains can be lengthy.

8.  Faced with this complex array, the Commission had a number of
    options in establishing a plan under section 276 of the Act to
    ensure that PSPs receive compensation for each coinless payphone
    call. During the Relevant Period, the Commission chose the following
    plan: with respect to each coinless payphone call, the party
    responsible for paying the PSP is the last identified
    "*facilities-based*" carrier that physically routes the call to the
    recipient's LEC.[^21] The Commission determined that establishing
    such a bright-line test for allocation of payment responsibility
    would be easier to administer, and reasoned that
    non-facilities-based resellers, who often sell services in advance,
    would be harder to locate than facilities-based entities.[^22]

## The Coinless Payphone Calls at Issue

9.  The coinless payphone calls at issue here were made by end-user
    customers with prepaid calling cards. When the card-holder placed a
    coinless call from a payphone owned by one of Complainants'
    principals, the LEC serving the payphone transported the call to the
    IXC that NIP had engaged to provide transport services.[^23] The IXC
    transported the call to one of three switches owned by NIP; that NIP
    switch then routed the call to the terminating LEC (*i.e.*, the LEC
    serving the call recipient) for completion.[^24]

10. The prepaid calling cards used to make the coinless payphone calls
    at issue here were sold to end-user customers by entities ("Debit
    Card Providers") to which NIP sold a package of telecommunications
    services that enabled the Debit Card Providers to offer prepaid
    calling cards to the public.[^25] NIP's package included (i)
    internet access to traffic and billing records specific to the Debit
    Card Provider, (ii) call routing by NIP, and (iii) resold transport
    services of the underlying IXC.[^26] The Debit Card Providers played
    no role in actually transporting the coinless payphone calls at
    issue here.

11. NIP's relationship with the Debit Card Providers was set forth in
    detailed contracts.[^27] These contracts bear the title
    "[prepaid]{.smallcaps} [calling card services
    agreement"]{.smallcaps} or "[usage-based universal pin services
    agreement]{.smallcaps}" ("Service Contract").[^28] The Service
    Contracts describe the services that NIP provided to the Debit Card
    Providers, such as internet access to account information (including
    traffic and billing records), custom branding, and technical
    support.[^29] Moreover, many of the Service Contracts specify that
    the "\[Debit Card Provider\] shall be responsible for all applicable
    taxes or assessments . . . (including Universal Service Fund and
    Payphone Compensation) relating to the Services."[^30]

12. The Service Contracts do not suggest any intent for NIP to lease its
    switching equipment to the Debit Card Providers. For example, the
    Service Contracts contain no provision describing NIP's switch or
    switches, or specifying the switch type, manufacturer, or serial
    number.[^31]

13. This dispute began when, during the Relevant Period, end users used
    prepaid calling cards sold by Debit Card Providers to make coinless
    calls on payphones owned by principals of Complainants. Upon
    learning which carriers were involved in transporting those calls,
    Complainants sought per-call compensation from NIP, arguing that NIP
    was the last identified facilities-based carrier within the meaning
    of the Commission's orders.[^32] NIP declined to pay, asserting that
    Complainants should look, instead, to the various Debit Card
    Providers for compensation because, *inter alia*, the Debit Card
    Providers, not NIP, were the last identified facilities-based
    carriers within the meaning of the Commission's rules.[^33]
    Complainants ultimately filed the instant Complaint alleging that
    NIP's failure to pay compensation violated the Commission orders
    implementing section 276 of the Act, and thus violated sections 276,
    201(b), and 416(c) of the Act.

# Discussion

14. NIP effectively acknowledges, as it must, that whichever entity is
    the last identified "facilities-based" carrier with respect to the
    coinless payphone calls at issue here owes Complainants compensation
    for the use of their payphones to place those calls.[^34] Therefore,
    the task presented is deciding which entity is the last identified
    "facilities-based" carrier, NIP or a Debit Card Provider. For the
    following reasons, we conclude that NIP, and not a Debit Card
    Provider, is the last "facilities-based" carrier, and thus is the
    entity responsible for paying payphone compensation to Complainants.

## The Debit Card Providers Are Not "Facilities-Based," Because They Lack a Possessory Interest in Relevant Equipment.

15. The adjective "facilities-based" is a term of art in the
    telecommunications industry. It is commonly understood -- in
    payphone contexts and non-payphone contexts -- to mean a carrier
    with some form of *possessory* interest in at least some of the
    equipment (such as a switch) used to complete calls.[^35]

16. Here, the Debit Card Providers plainly fail to qualify as
    "facilities-based" carriers within the commonly understood meaning
    of that term of art: the Debit Card Providers do not have any
    possessory interest in any of the telecommunications equipment used
    to complete the coinless payphone calls at issue, *i.e.*, they do
    not own or lease a switch.[^36] Consequently, we have little
    difficulty in concluding that the Debit Card Providers are not
    "facilities-based" carriers for purposes of the payphone
    compensation rules, and that NIP is the facilities-based carrier
    responsible for paying compensation to Complainants during the
    relevant period. As a result, NIP's failure to pay compensation
    violates rule 64.1300(c) and thus sections 276 and 201(b) of the
    Act.[^37]

17. NIP contends that, in the payphone compensation context, the
    Commission has essentially carved out an exception to the
    Commission's own explanations, and the industry's common
    understanding, of the meaning of "facilities-based" carrier.[^38] In
    particular, according to NIP, the Commission has held that an entity
    may be considered a "facilities-based" carrier under the payphone
    compensation rules, even if the entity has no possessory interest in
    any telecommunications equipment, as long as the entity somehow
    manages in some other way to "maintain its own switching
    capability."[^39] To support this contention, NIP relies on one
    sentence in one Commission order, to wit:

> "In \[a prior Order\], we concluded that the underlying
> facilities-based carrier should be required to pay compensation to the
> PSP in lieu of a non-facilities-based carrier that resells services .
> . . . *We clarify that a carrier is required to pay compensation and
> provide per-call tracking for the calls originated by payphones if the
> carrier maintains its own switching capability, regardless if the
> switching equipment is owned or leased by the carrier . . . .* If a
> carrier does not maintain its own switching capability, then, as set
> forth in the \[prior Order\] and consistent with our clarification
> here, the underlying carrier remains obligated to pay compensation to
> the PSP in lieu of its customer that does not maintain a switching
> capability."[^40]

In NIP's view, the sentence emphasized above means that a carrier may
qualify as "facilities-based" if it "maintain\[s\] its own switching
capability" by some mechanism other than owning or leasing a switch. NIP
is mistaken.

18. First, even when read in isolation, the sentence emphasized above
    can reasonably be interpreted to mean precisely the opposite of
    NIP's proffered construction: in order to be "facilities-based," a
    carrier may "maintain its own switching capacity" in two ways -- by
    either owning or leasing switching equipment -- but it does not
    matter which of those two ways the carrier chooses. In other words,
    rather than rejecting a possessory interest requirement, the
    sentence simply clarifies the kinds of possessory interests that
    will suffice.[^41]

19. Second, NIP's construction fatally ignores the context in which the
    Commission made the statement emphasized above. Specifically, NIP's
    construction fails to account for the fact that, when the Commission
    made that statement, the pre-existing regulatory context reflected
    the prevailing industry understanding that a "facilities-based"
    carrier is one that has some form of *possessory* interest in
    equipment.[^42] Read in that context, NIP's construction of the
    sentence emphasized above is wholly implausible. Specifically, if
    the Commission had intended to depart so significantly from
    precedent and industry usage by eliminating altogether the
    possessory interest requirement for "facilities-based" carriers, the
    Commission surely would have done so expressly. Indeed, what the
    Commission did do expressly, instead, was clarify that, in the
    payphone compensation context, the possessory interest requirement
    for "facilities-based" carriers may be satisfied not just by
    outright ownership of facilities, but by *leasing* of facilities, as
    well. Subsequent Commission orders confirm the correctness of this
    interpretation (and the incorrectness of NIP's interpretation) by
    reiterating that, to be "facilities-based," a carrier must own or
    lease equipment. [^43]

20. Finally, read in the context of the principal purpose of the
    Commission's payphone compensation rules -- to ensure that PSPs
    receive compensation for every completed coinless payphone call --
    NIP's contention that "facilities-based" does not require a
    possessory interest is not persuasive. It may be true, as NIP
    asserts and as discussed below, that the Service Contracts purport
    to enable Debit Card Providers to track calls, which the Commission
    has recognized is an important component of ensuring that PSPs
    receive payment.[^44] However, just because an entity has
    call-tracking ability does not mean that the entity can be easily
    traced down the potentially long chain of entities with a financial
    interest in the completion of the call, or that, if found, the
    entity will likely have assets sufficient to permit recovery of
    payphone compensation.[^45] By contrast, an entity with a possessory
    interest in the telecommunications equipment used to complete the
    calls is more likely to be found and capable of paying its bills.
    Moreover, the possessory interest requirement creates a bright-line,
    easily administrable test for determining the identity of the
    responsible party. NIP's "maintaining switching capability" test, on
    the other hand, eliminates the key distinction between entities that
    actually route calls, and entities that merely resell services, and
    is therefore vague, ambiguous, and ripe for confusion and
    litigation.[^46] That NIP found it desirable to try to disperse the
    payment responsibility among the numerous Debit Card Providers,
    whose "own switching capability" consisted of nothing more than
    access to data via an internet web site, demonstrates the prudence
    of locating the compensation responsibility squarely on carriers who
    have a possessory interest in the relevant equipment.

21. Perhaps sensing the weakness of its argument that "facilities based"
    does not require a possessory interest in switching equipment, NIP
    argues alternatively that we should take a broad view of what
    constitutes such a possessory interest.[^47] According to NIP, the
    Commission has, in various circumstances, recognized novel forms of
    conveying assets, including indefeasible rights of use
    ("IRUs"),[^48] Switch Partitioning,[^49] unbundled network elements
    ("UNEs"),[^50] and Virtual Collocation.[^51] NIP appears to
    analogize its contractual relationship with the Debit Card Providers
    to these forms of conveyance. Other than a vague assertion about
    switch partitioning,[^52] however, NIP does not describe any
    resemblance between its Service Contracts and any such arrangements,
    and we find none.[^53]

## Call Tracking Ability Does Not Equate to Switching Capability.

22. Even assuming, *arguendo*, that NIP is correct that a company need
    not own or lease a switch to be considered "facilities-based" under
    the payphone compensation rules, NIP must still establish that a
    carrier "maintains its own switching capability" in order for such a
    carrier to bear payment responsibility. NIP fails here, as well. NIP
    observes that, in deciding which entity should bear the
    responsibility of compensating PSPs, the Commission examined the
    question of which entity had the ability to track payphone
    calls.[^54] In NIP's view, therefore, an entity that can track
    payphone calls is an entity that "maintains its own switching
    capability" within the meaning of the Commission's orders.[^55] We
    disagree.

23. Contrary to NIP's suggestion, the Commission never treated the terms
    "call tracking ability" and "switching capability" as synonymous in
    the relevant orders.[^56] Moreover, as evidenced by definitional
    rules that the Commission adopted in an analogous context,
    "switching capability" involves the possession of facilities, not
    just the ability to perform certain functions.[^57] Moreover,
    regarding functions, "switching capability" includes, at a minimum,
    the basic switching function of receiving and routing calls.[^58]
    Thus, even assuming the Debit Card Providers had call tracking
    ability, this ability, standing alone, hardly equates to the full
    range of facilities and functions that, in combination, constitute
    "switching capability."

## The Terms of the Service Contracts Do Not Warrant Shifting the Payment Obligation to the Debit Card Providers Under The Rules. 

24. NIP further asserts that the Commission should give effect to the
    parties' contractual intentions, and should not redraft or reform
    the provision of the Service Contracts that makes the Debit Card
    Providers responsible for payment of per-call payphone
    compensation.[^59] NIP explains that it has structured its business
    in reliance upon its reading of the *Order on Reconsideration*[^60]
    and that it has never billed or collected from the Debit Card
    Providers any charges with which to pay payphone compensation.[^61]
    For these reasons, NIP argues, we should honor NIP's and the Debit
    Card Providers' intent,[^62] and not hold the Service Contracts to
    "unreasonable standards of technical legal precision."[^63]

25. We disagree. First, as discussed above, NIP's scheme conflicts with
    the Commission's reasoned decision to place responsibility on
    facilities-based carriers only. Second, in holding that NIP is
    liable to Complainants, we do not "redraft" or "reform" NIP's
    Service Contracts with the Debit Card Providers. Our holding does
    not concern what recourse NIP may have under the Service Contracts
    regarding Debit Card Providers that agreed but failed to pay
    payphone compensation.[^64] We hold only that, pursuant to the
    Commission's orders implementing section 276 of the Act, the duty to
    compensate PSPs remains with the facilities-based carrier, here
    NIP.[^65]

26. In sum, under the payphone compensation rules, a carrier is
    "facilities-based" only if it has a possessory interest in the
    switching equipment used to transmit the calls at issue. Somehow
    "maintaining" a switching capability by means other than having a
    possessory interest in the switch is not enough, even if the
    "maintaining" involves having call-tracking capabilities.
    Accordingly, NIP, and not the Debit Card Providers, is the
    "facilities-based" carrier that has the payphone compensation
    obligations in dispute here. Consequently, NIP's failure to pay
    payphone compensation to Complainants violated section 64.1300(c) of
    the rules and thus sections 276 and 201(b) of the Act.

    \* \* \* \*

27. With respect to Complainants' claim under section 416(c) of the Act,
    our ruling under sections 201(b) and 276 of the Act will afford
    Complainants all of the relief to which they would be entitled were
    we to rule in their favor on this remaining claim. Accordingly, we
    need not address this claim, and we hereby dismiss it without
    prejudice.

# Ordering Clauses

28. Accordingly, IT IS ORDERED, pursuant to sections 1, 4(i), 4(j),
    201(b), 208 and 276 of the Communications Act of 1934, as amended,
    47 U.S.C. §§ 151, 154(i), 154(j), 201(b), 208, and 276, sections
    1.720-1.736 and 64.1300-64.1320 of the Commission's rules, 47 C.F.R.
    §§ 1.720-1.736, 64.1300-64.1320, and the authority delegated
    pursuant to sections 0.111 and 0.131 of the Commission's rules, 47
    C.F.R. §§ 0.111, 0.131, that Complainants' claims under sections
    201(b) and 276 of the Act are GRANTED.

29. IT IS FURTHER ORDERED, pursuant to sections 4(i), 4(j), 208, and 416
    of the Communications Act of 1934, as amended, 47 U.S.C. §§ 154(i),
    154(j), 208, and 416, sections 1.720-1.736 and 64.1300-64.1320 of
    the Commission's rules, 47 C.F.R. §§ 1.720-1.736, 64.1300-64.1320,
    and the authority delegated pursuant to sections 0.111 and 0.131 of
    the Commission's rules, 47 C.F.R. §§ 0.111, 0.131, that
    Complainants' claim under section 416 of the Act is DISMISSED
    WITHOUT PREJUDICE.

    FEDERAL COMMUNICATIONS COMMISSION

    David H. Solomon

    Chief, Enforcement Bureau

[^1]: Formal Complaint, File No. EB-03-MD-011 (filed June 3, 2003)
    ("Complaint").

[^2]: 47 U.S.C. § 208.

[^3]: 47 U.S.C. §§ 201(b), 276, and 416(c).

[^4]: 47 C.F.R. § 64.1300. Unless otherwise indicated, all C.F.R.
    references to Part 64 of the Commission's rules refer to the rules
    in effect during the Relevant Period.

[^5]: Although the Complaint does not specifically allege a violation of
    section 276 of the Act, the Complaint does repeatedly assert that
    NIP violated the Commission's orders implementing section 276. *See,
    e.g.*, Complaint at 4-6, 10, ¶¶ 4, 7, 16. Given that the Complaint
    expressly links section 276 and the relevant Commission orders, we
    construe Complainants' allegations that NIP violated the orders
    implementing 276 to be tantamount to an allegation that NIP violated
    section 276.

[^6]: This Order addresses only whether NIP violated the Act, and not
    whether Complainants are entitled to damages, because Complainants
    exercised their right under rule 1.722, 47 C.F.R. § 1.722, to
    bifurcate a damages determination from the liability determination.
    Complaint at 1-2.

[^7]: Complaint at 2-3, ¶ 1; Revised Joint Statement, File No.
    EB-03-MD-011, at 6, ¶ 9 (filed Oct. 22, 2003) ("Revised Joint
    Statement"). Although most sections of the Revised Joint Statement
    have numbered paragraphs, some do not. In instances where the
    Revised Joint Statement has paragraph numbers, we have cited to both
    the page and paragraph number, and in the remaining instances we
    have cited only to the page number.

[^8]: Complaint at 2, ¶ 1; Revised Joint Statement at 6, ¶ 9.

[^9]: Revised Joint Statement at 5, 6, ¶¶ 2, 8.

[^10]: *See. e.g*., Revised Joint Statement at 6, ¶ 8;
    *Telecommunications Relay Services and the Americans with
    Disabilities Act of 1990, Coin Sent-Paid TRS Call from Payphones,*
    Public Notice, 19 FCC Rcd 14104, 14105 (Com. Car. Bur. 2004).

[^11]: 47 U.S.C. § 276(b)(1)(A). *See, e.g.*, *Sprint Corp. v. FCC*, 315
    F.3d 369 (D.C. Cir. 2003) ("*Sprint v. FCC"*); *Implementation of
    the Pay Telephone Reclassification and Compensation Provisions of
    the Telecommunications Act of 1996*, Report and Order, 11 FCC Rcd
    20541 (1996) ("*First Report and Order*") (some subsequent history
    omitted); Order on Reconsideration, 11 FCC Rcd 21233 ("*Order on
    Reconsideration*") (some subsequent history omitted); Third Report
    and Order, and Order on Reconsideration of the Second Report and
    Order, 14 FCC Rcd 2545 (1999) (*Third Report and Order*) (subsequent
    history omitted).

[^12]: *See, e.g., Third Report and Order*, 14 FCC Rcd at 2548, ¶ 4
    (discussing methods of placing calls at payphones); *Sprint v. FCC*,
    315 F.3d at 370 (distinguishing "coin calls" from "coinless calls").

[^13]: *See, e.g.*, *Third Report and Order*, 14 FCC Rcd at 2549, ¶ 6
    (discussing long-distance payphone calls not using the
    pre-subscribed long-distance carrier); *First Report and Order*, 11
    FCC Rcd at 20551-52, ¶ 21 (listing types of payphone calls); *Sprint
    v. FCC*, 315 F.3d at 370 (describing coinless payphone calls).

[^14]: Revised Joint Statement at 6, ¶ 8.

[^15]: *See, e.g.,* *Bell Atlantic-Delaware Inc., v. Frontier
    Communications Services, Inc.,* 16 FCC Rcd 8112, 8118 at ¶ 13 (2001)
    ("*Bell Atlantic I*") ("\[T\]he first facilities-based carrier
    (*i.e*., the IXC handling the traffic) compensate\[s\] PSPs for
    calls that it transfers directly to the terminating LEC."); *Bell
    Atlantic-Delaware Inc., v. MCI Telecommunications Corp.*, Memorandum
    Opinion and Order, 17 FCC Rcd 15918, 15922, at ¶ 9 (Com. Car. Bur.
    2002) ("*Bell Atlantic II*") ("A first facilities-based carrier must
    compensate PSPs for calls that the facilities-based carrier
    transfers directly to a terminating LEC"); *The Pay Telephone
    Reclassification and Compensation Provisions of the
    Telecommunications Act of 1996*, Report and Order, 18 FCC Rcd 19975,
    19978 at ¶ 6 (2003) (noting that first facilities-based carrier
    sometimes transmits calls directly to terminating LEC) ("*Tollgate
    Remand Order*") (subsequent history omitted).

[^16]: *See. e.g., Bell Atlantic I*, 16 FCC Rcd at 8118, ¶ 13; *Bell
    Atlantic II*, 17 FCC Rcd at 15918, ¶ 5; *Tollgate Remand Order*, 18
    FCC Rcd at 19979, ¶ 8. The foregoing description applies only to a
    long-distance coinless payphone call, which is the only kind of call
    at issue here. Revised Joint Statement at 6-7, ¶¶ 8, 10.

[^17]: *See, e.g.,* *Order on Reconsideration*, 11 FCC Rcd at 21277, ¶
    92 (holding responsible resellers that maintain their own switching
    capability); *Bell Atlantic I*, 16 FCC Rcd at 8114, n.8 ("Resellers
    can be divided into two categories -- 'switchless' and
    'switch-based.' Switchless resellers simply rename the underlying
    IXC service. Switch-based (or 'facilities-based') resellers install
    their own switch to handle traffic.); *Bell Atlantic II*, 17 FCC Rcd
    at 15920, ¶ 5 ("Resellers can be divided into two categories --
    "switchless" and "switch-based." Switchless resellers simply rename
    the underlying IXC service. Switch-based resellers . . ., on the
    other hand, install their own switch to handle traffic."); *AT&T
    Request for Limited Waiver of the Per-call Compensation Obligation,
    Me*morandum Opinion and Order, 13 FCC Rcd 10893, 10915-16, at ¶ 38,
    (Com. Car. Bur. 1998) ("*Coding Digit Waiver Order*") (clarifying
    obligations of switch-based resellers); *Tollgate Remand Order*, 18
    FCC Rcd at 19978-79, ¶¶ 7-8 (noting differing responsibilities of
    switchless- and switch-based resellers).

[^18]: *Id*.

[^19]: *See, e.g.,* *First Report and Order*, 11 FCC Rcd at 20586, ¶ 86
    ("\[T\]elecommunications services are often sold in advance,
    particularly in the debit card context, and resold more than once
    before a caller ultimately uses the service."); *Order on
    Reconsideration*, 11 FCC Rcd at 21270-71, ¶ 75 (paraphrasing
    language quoted above from the *First Report and Order*); *Coding
    Digit Waiver Order*, 13 FCC Rcd at 10915-16, ¶ 38 (paraphrasing
    language quoted above from the *First Report and Order*).

[^20]: *See, e.g. Bell Atlantic I*, 16 FCC Rcd at 8114, ¶ 3 ("\[A\]n IXC
    and several resellers may carry a single payphone *call* before the
    call is transferred to a LEC for completion.") (emphasis added);
    *First Report and Order*, 11 FCC Rcd at 20586, ¶ 86
    ("\[T\]elecommunications *services* are often sold in advance,
    particularly in the debit card context, and resold more than once
    before a caller ultimately uses the service.") (emphasis added).

[^21]: *First Report and Order*, 11 FCC Rcd at 20586, ¶ 86; *Order on
    Reconsideration*, 11 FCC Rcd at 21270-71, 21277, ¶¶ 75, 92; *Bell
    Atlantic I*, 16 FCC Rcd at 8118-19, ¶¶ 13-14; *Bell Atlantic II*, 16
    FCC Rcd at 15920-22, ¶ 9 (all promulgating or construing 47 C.F.R. §
    64.1300(c)). 47 C.F.R. § 64.1300(c) provides: "In the absence of an
    agreement as required by subsection (a) herein, the carrier
    obligated to compensate the payphone service provider shall do so at
    a per-call rate equal to its local coin rate at the payphone in
    question." Although the codified rule did not specifically mention
    the term "facilities-based," it is clear when read in conjunction
    with the relevant orders that the rule imposed the payment
    obligations on facilities-based carriers only. Further, this
    allocation of payment responsibility to facilities-based carriers
    was expressly stated in the Federal Register summaries and thus is
    binding. *See, e.g.,* *In Re Applications of Nelson Broadcasting
    Corporation*, Memorandum Opinion and Order, 6 FCC Rcd 1765 (1991)
    (requirement in text of a rulemaking order but not in rule is
    binding if requirement is included in Federal Register summary).
    *See also* 44 U.S.C. § 1507 (publication in Federal Register
    generally serves as constructive notice of agency action).

[^22]: *First Report and Order*, 11 FCC Rcd at 20586, ¶ 86

[^23]: Revised Joint Statement at 6, ¶ 8.

[^24]: Revised Joint Statement at 6, ¶ 8.

[^25]: Revised Joint Statement at 5, ¶¶ 2-3. Some of the Debit Card
    Providers did not, in fact, sell calling cards directly to end
    users, but rather resold NIP's services to other entities, which
    then sold calling cards directly to end users. *Id*. Some provided
    "PIN-based services." *Id*. These nuances have no bearing on the
    issues here.

[^26]: Revised Joint Statement at 5-6, ¶¶ 2, 4, 8.

[^27]: Revised Joint Statement at 5, ¶ 1; Answer, File No. EB-03-MD-011,
    Exh. B. (filed Sept. 13, 2003) ("Answer").

[^28]: Revised Joint Statement at 8, ¶ 18. *See, e.g.,* the opening
    words of the [Prepaid Calling Card Services Agreement]{.underline}
    between NIP and Alltel Communications, Inc. (Sept. 22, 2000):

    > A. Provider \[*i.e.*, NIP\] is in the business of providing
    > Services . . .; and
    >
    > B. Customer desires to purchase Prepaid Calling Services from
    > Provider for resale to Card Holders.

    Such language describing the parties' relationship does not differ
    materially among the Service Contracts.

[^29]: *See* Revised Joint Statement at 5-6, ¶ 4; Service Contracts at
    3.7 (custom branding) and 4.0 or 4.1 (technical support).

[^30]: Revised Joint Statement at 7-8, ¶ 16.

[^31]: Revised Joint Statement at 9, ¶¶ 20-21. *See* *generally* Uniform
    Commercial Code § 2A-103 (stating that identification of the goods
    to be let is the *sine qua non* of a lease).

[^32]: *APCC Services et al. v. NetworkIP*, Informal Complaint, File No.
    EB-02-MDIC-0017, at 2-4 (filed Mar. 29, 2002); *APCC Services et al.
    v. NetworkIP*, Informal Complaint, File No. EB-02-MDIC-0071, at 1-2
    (filed Sept. 30, 2002); Complaint at 12-13, ¶¶ 25, 28. *See*
    Complaint Attach. 6 (e-mail from Greg Haledjian, Manager of
    Regulatory Affairs, APCC, to Toni Van Burkleo, Chief Financial
    Officer, NIP (Aug. 18-21, 2000)). *See generally* Complaint at 11,
    17, ¶¶ 19-20, 40-42; Reply to Defendant's Answer, File No.
    EB-03-MD-011, at 3, 4, 7 (filed Sept. 24, 2003) ("Reply");
    Complainants' Reply Brief, File No. EB-03-MD-011, at 2-6 (filed Jan.
    12, 2004) ("Complainants' Brief").

[^33]: Complaint, Attach. 2, Letter from Anthony S. Doria, Chief
    Operating Officer, Network Operator Services, to Vincent R.
    Sandusky, APCC, (Jan. 14, 2000); Complaint, Attach. 4, Letter from
    Toni Van Burkleo, Chief Financial Officer, NIP, to Vince Sandusky,
    President, APCC (Jan. 26, 2000); Complaint, Attach. 6, e-mail from
    Toni Van Burkleo, NIP, to Greg Haledjian, APCC (Aug. 17-19, 2000).
    *See* Complaint at 9-11, ¶¶ 15, 17, 19. At least some of the Debit
    Card Providers have not paid the per-call payphone compensation that
    Complainants seek. Revised Joint Statement at 4, 8, ¶ 17.

[^34]: Answer at iv, 2-3, 8-10, ¶¶ 40-41; Answer, Proposed Conclusions
    of Fact and Law, 19-20, ¶¶ 7-8, 11-13; Answer, Affidavit of Ronald
    Hutchison, ¶¶ 1, 5; Brief of NIP, File No. EB-03-MD-011, at 3-6,
    9-12, nn.9, 18, 24. (filed Dec. 19, 2003) ("NIP's Brief").

[^35]: Although context-specific variations exist, the term
    "facilities-based" always denotes having some form of possessory
    interest in equipment or capacity. *See, e.g*., 47 U.S.C. §
    271(c)(1)(A) (defining "facilities-based competitors" as carriers
    providing service "either exclusively over their own telephone
    exchange service facilities or predominantly over their own
    telephone exchange service facilities in combination with the resale
    of the telecommunications services of another carrier.");
    *Federal-State Joint Board on Universal Service*, Order on
    Reconsideration, FCC 04-237, 2004 WL 2709589 ¶ 9 (rel. Nov. 29,
    2004) (holding that a carrier must be "facilities-based" to be
    eligible for universal service support under section 214(e)(1)(A) of
    the Act, 47 U.S.C. § 214(e)(1)(A), which itself requires that an
    eligible carrier use "its own facilities."); 47 C.F.R. § 63.09(a)
    ("Facilities-based carrier means a carrier that holds an ownership,
    indefeasible-right-of-user, or leasehold interest in bare capacity .
    . . ."); *Verizon Communications Inc. v. FCC*, 535 U.S. 467, 491
    (2002) ("\[T\]o engage in pure facilities-based competition \[is\]
    to build its own network to replace or supplement the network of the
    incumbent."); *Implementation of the Local Competition Provisions of
    the Telecommunications Act of 1996*, First Report and Order, 11 FCC
    Rcd 15499, 15508 at ¶ 10 (1996) ("*Local Competition Order*") ("An
    incumbent LEC's existing infrastructure enables it to serve new
    customers at a much lower incremental cost than a facilities-based
    entrant that must install its own switches, trunking and loops to
    serve its customers.") (subsequent history omitted); *Clarification
    of Section 43.61 International Traffic Data Reporting Requirements*,
    Public Notice, 13 FCC Rcd 12809, 12810 (Int. Bur. 1998) (defining
    "facilities-based" service as a service provided using channels of
    communication that the carrier owns, or in which the carrier has
    some other possessory interest, such as an indefeasible right of use
    (IRU) or a lease); *Reporting Requirements For U.S. Providers Of
    International Telecommunications Services Amendment of Part 43 of
    the Commission\'s Rules*, Notice of Proposed Rulemaking, 19 FCC Rcd
    6460, 6488, at ¶ 74 (2004) (proposing revision of "facilities-based"
    definition that would continue to require "ownership,
    indefeasible-right-of-user, or leasehold interest"); *Bell Atlantic
    I*, 16 FCC Rcd at 8114, n.8 ("Switch-based (or 'facilities based')
    resellers install their own switches to handle traffic."); *Bell
    Atlantic II,* 17 FCC Rcd 15918, 15920, n.12 ("Switch-based resellers
    also are known as 'facilities-based' resellers."); *Tollgate Remand
    Order*, 18 FCC Rcd at 19976, ¶ 1 ("\[F\]acilities-based long
    distance carrier is the switch-based reseller (SBR) or interexchange
    carrier that completes the call on a switch that it owns or
    leases."); Harry Newton, Newton's Telecom Dictionary, 340 (16th ed.
    2000) (defining "Facilities Based Carrier" as a "telecommunications
    carrier which owns most of its own facilities . . . such as
    switching equipment and transmission lines . . . . Non facilities
    based long distance carriers are known as switchless resellers.").

[^36]: NIP's Answer seems to contend that the Service Contracts conveyed
    to the Debit Card Providers a leasehold interest in NIP's switches.
    Answer 3, 9-10, 19-20; ¶¶ 40-41, 7-9, 11-13; Answer, Affidavit of
    Ronald Hutchison at 2, 4, ¶ 4-6, 10 ("Hutchison Affidavit").
    However, by failing to mention that contention again in its
    subsequent Brief, NIP appears to concede, wisely, that the Service
    Contracts do not convey to the Debit Card Providers any leasehold
    interest in NIP's switches. In all material respects, the Service
    Contracts do nothing more than create fee-for-service arrangements.
    Nothing in the Service Contracts suggests an intention to lease,
    such as a provision describing NIP's switch or switches, or
    identifying the switch type, manufacturer, or serial number. *See*
    Revised Joint Statement at 9, ¶¶ 20-21. The Service Contracts
    contain no provisions covering insurance, or stating that NIP
    reserves title to its switching equipment. *See* Revised Joint
    Statement at 9, ¶¶ 22-23. The words "lessor" and "lessee" never
    appear in the Service Contracts, and the word "lease" appears only
    once, in an unrelated context. *See* Complainants' Reply at 8;
    Revised Joint Statement at 9, ¶ 19. The Contracts' pricing
    provisions are not based on flat monthly fees, but rather on
    per-minute-usage. *See* Revised Joint Statement at 9, ¶ 20; Bruce E.
    Fritch, Equipment Leasing -- Leveraged Leasing, 57 (3d ed. 1988)
    ("Equipment Leasing Treatise") ("Most leases provide for equal
    monthly or quarterly rental payments over the fixed term of the
    lease.") (Fritch). Finally, the Service Contracts -- which the
    parties stipulate "are true, accurate, and speak for themselves" --
    identify themselves as "Services Agreement" in their titles. Revised
    Joint Statement at 8-9, ¶¶ 18, 24. *See* Complainants' Reply Exh. 4,
    Fritch Appendix A at 1303-1316, Lease Agreement (reviewing terms
    typical of a lease agreement).

[^37]: 47 U.S.C. §§ 201(b), 267; 47 C.F.R. § 64.1300.

[^38]: NIP's Brief at 3-7, 9-11.

[^39]: NIP's Brief at 3-7.

[^40]: *Order on Reconsideration*, 11 FCC Rcd at 21277, ¶ 92 (emphasis
    added) (footnote and quotation marks omitted).

[^41]: *See* *Sprint v. FCC*, 315 F.3d at 375 ("\[In\] the *First
    Reconsideration Order*, . . . the Commission simply clarified the
    definition of a phrase that it had used in the initial rule. 11
    F.C.C.R. at 21,277 ¶ 92.").

[^42]: *See* n.35, *supra*.

[^43]: *Id*. NIP further argues that, if we limit "facilities-based"
    carriers to carriers with a possessory interest in equipment, then
    we can apply that holding prospectively only, because such a holding
    was not sufficiently predicable from existing precedent. NIP's Brief
    at 1, 12-13; *see generally* Answer at 9, ¶ 40. We disagree. If NIP
    is referring to the Commission's orders, then the possessory
    interest requirement was clearly established therein, for the
    reasons explained above. *See* *Report and Order*, 11 FCC Rcd at
    20586, at ¶ 86; *Order on Reconsideration*, 11 FCC Rcd at 21271-72,
    21277, ¶¶ 75, 92; *Bell Atlantic I*, 16 FCC Rcd at 8114, 8118, n.8,
    ¶ 13. If NIP is referring to the rule itself, which does not
    specifically mention the term "facilities-based," it is
    well-established that where, as here, a requirement in the text of
    an order is not included, the requirement is nevertheless binding if
    it is included in the Federal Register summary. *See* n.21, *supra*.

[^44]: Answer at 9; NIP's Brief at 3-7 (citing *Order on
    Reconsideration*, 11 FCC Rcd at 21277, ¶ 92; *The Pay Telephone
    Reclassification and Compensation Provisions of the
    Telecommunications Act Of 1996*, Second Order On Reconsideration, 16
    FCC Rcd 8098, 8101, at ¶ 5 (2001) (subsequent history omitted)).

[^45]: *See generally First Report and Order*, 11 FCC Rcd at 20586-20592
    ¶ 86.

[^46]: In this regard, the Commission has found debit card providers as
    a class particularly unsuited to bear the payphone compensation
    responsibility. *First Report and Order*, 11 FCC Rcd at 20586, ¶ 86
    ("\[T\]elecommunications services are often sold in advance,
    *particularly in the debit card context*, and resold more than once
    before a caller ultimately uses the service. In such situations, it
    would be difficult to identify the party that is liable for the
    per-call compensation.") (emphasis added); *Coding Digit Waiver
    Order*, 13 FCC Rcd at 10915-16, ¶ 38 (paraphrasing the language
    quoted above). *See generally Flying J, Inc., and Ton Services,
    Inc., Petition for Expedited Declaratory Ruling Regarding a Primary
    Jurisdiction Referral from the United States District Court for the
    District of Utah, Northern Division*, Memorandum Opinion and Order,
    18 FCC Rcd 10311, 10315 at ¶ 10 (2003) (declining to find that
    credit card-based platforms constitute switches under current
    technology and Commission rules).

[^47]: NIP's Brief at i, 10, 18.

[^48]: NIP's Brief at 11-12.

[^49]: NIP's Brief at 15-16.

[^50]: NIP's Brief at 16-17.

[^51]: NIP's Brief at 17-18.

[^52]: NIP contends that its relationship with its Debit Card Providers
    might be "viewed" as switch partitioning, but does not argue that
    such partitioning in fact occurred. NIP's Brief at 16. Switch
    partitioning arose as an alternative to the single-user private
    branch exchange ("PBX"). *Policies Governing the Provision of Shared
    Telecommunications Service*, Report and Order, 3 FCC Rcd 6931, 6931
    at ¶ 4 (1988). In a "partitioned switch," software and special
    hardware treat certain lines as dedicated. *Id*. In contrast, an
    "unpartitioned switch" uses the minimum number of shared lines
    required to meet overall system needs. *Id*. In the instant
    proceeding, nothing suggests that NIP's Debit Card Providers'
    traffic used the same switch consistently, much less traveled via
    dedicated lines or ports. Thus, NIP's arrangement bears no relation
    to partitioning.

[^53]: NIP itself states that UNEs are "leased," NIP's Brief at 16; that
    virtual collocation is "designated equipment . . . dedicated to the
    use of a particular interconnector," *id.* at 17; and that an IRU
    involves "conveying assets," *id*. at 11. No such circumstances
    exist here.

[^54]: NIP's Brief at 3-4, 6, 10 (citing *Report and Order*, 11 FCC Rcd
    at 20586, at ¶ 86; *Order on Reconsideration*, 11 FCC Rcd at 11 FCC
    Rcd 21277, ¶ 92; *The Pay Telephone Reclassification and
    Compensation Provisions of the Telecommunications Act Of 1996*,
    Second Order On Reconsideration, 16 FCC Rcd 8098, 8101, at ¶ 5
    (2001) (quoting ¶ 92 of the *Order on Reconsideration*.).

[^55]: To support this argument, NIP points out that the Service
    Contracts purport to give Debit Card Providers the ability to track,
    in real time, the number of completed calls made through the use of
    a NIP switch and a Debit Card Provider's prepaid calling card.
    Answer at 9, 20; NIP's Brief at 3-7, 14-15. For the purposes of this
    Order only, we accept as true, *arguendo*, NIP's assertion that the
    Debit Card Providers "can track \[calls\] and pay payphone
    compensation to the exact extent as can \[NIP\]." NIP's Brief at 5.
    NIP's assertion is not supported in the record, however, and
    Complainants credibly suggest that, at times during the Relevant
    Period, the Debit Card Providers' call-tracking ability may not have
    equaled NIP's. *See* Complainants' Reply at 12, n.23.

[^56]: *First Report and Order*, 11 FCC Rcd 20586-20592, ¶¶ 88-101;
    *Order on Reconsideration*, 11 FCC Rcd at 21278-79, ¶¶ 93-96
    (sections in both orders titled *Ability of Carriers to Track Calls
    From Payphones* and not discussing payment obligation). NIP cites to
    no Commission statement concluding or opining that "call tracking"
    and "switching capability" refer to the same functions.

[^57]: *See* 47 C.F.R. § 51.319(c) (All our C.F.R. references to Part 51
    of the Commission's rules refer to the rules in effect during the
    Relevant Period ).

[^58]: *See generally id*.

[^59]: NIP's Brief at 8-9. Answer 3, 9-10, 19-20; ¶¶ 40-41, 8, 13;
    Hutchison Affidavit at 2, ¶ 4.

[^60]: NIP's Brief at 3-4.

[^61]: NIP's Brief at 5.

[^62]: Revised Joint Statement at 7-8, ¶ 16; Answer at 3, 9, 19, 21, 22;
    NIP's Brief at 8-9.

[^63]: NIP's Brief at 11. In its Answer, NIP describes the Service
    Contracts as written evidence of the Debit Card Providers' switching
    capability. Answer at 10, ¶ 41.

[^64]: *See generally* *First Report and Order*, 11 FCC Rcd at 20586, ¶
    86 (observing that facilities-based carriers may recover expense of
    payphone per-call compensation from reseller customers as they deem
    appropriate, including negotiating future contract provisions
    requiring reseller to reimburse facilities-based carrier for
    payphone compensation amounts associated with that particular
    reseller).

[^65]: Complainants exercised their right under section 1.722(d) of the
    rules, 47 C.F.R. § 1.722(d), to bifurcate this proceeding and
    address only liability first. Complaint at 1-2. In its Answer, NIP
    raised various affirmative defenses that the parties subsequently
    stipulated "would be more appropriately decided in the damages phase
    of this proceeding." Answer at 14-17; Revised Joint Statement at 4.
    We concur with the parties' stipulation.