**Before the**

**FEDERAL COMMUNICATIONS COMMISSION**

**Washington, D.C. 20554**

In the Matter of )

)

LDDS COMMUNICATIONS, INC., )

)

Complainant, )

)

v\. ) File No. E-94-71

)

UNITED TELEPHONE OF FLORIDA, )

)

)

Defendant. )

)

#########  MEMORANDUM OPINION AND ORDER

> Adopted: March 7, 2000 Released: March 8, 2000

By the Chief, Enforcement Bureau:

1.  Number range level1In this order, we dismiss for lack of
    jurisdiction a formal complaint filed by LDDS Communications, Inc.,
    against United Telephone of Florida.[^1] LDDS argues that United
    violated the applicable interstate tariff and Commission policy by
    retroactively adjusting LDDS\'s percentage of interstate use
    calculations and then backbilling LDDS for the concomitant increase
    in its liability for intrastate access services.[^2] LDDS asserts
    that United\'s actions amount to unjust and unreasonable practices
    in violation of Section 201(b) of the Act, and it seeks damages in
    the amount by which United retroactively increased its liability for
    intrastate access service. United has denied the allegations and has
    moved to dismiss the complaint, arguing, *inter alia*, that it falls
    outside of the jurisdiction of this Commission. For the reasons
    discussed below, we grant United\'s motion.

**I. BACKGROUND**

2.  Complainant LDDS is an interexchange carrier (IXC) that purchased
    local access service in Florida, for both its interstate and
    intrastate traffic, from United, a local exchange carrier (LEC).[^3]
    The regulatory scheme that has developed under the Act and the
    Commission's regulations requires that transmissions that use access
    service be identified as either interstate or intrastate.[^4] Once
    assigned to the appropriate category, charges for the transmissions
    are separately regulated under the dual regulatory regime prescribed
    by the Act.[^5] Thus, the two categories of traffic are regulated
    along two separate but parallel tracks by independent agencies --
    the FCC for interstate communications and the appropriate state
    commission for intrastate communications.

3.  Because of technical limitations, at least at the time relevant to
    this complaint, United was unable to distinguish between interstate
    and intrastate transmissions by IXCs for certain services. In order
    properly to bill for access service for the two categories of
    traffic, United therefore relied on the IXCs to compile percentage
    of interstate use (PIU) reports. These reports reflected the split
    of an IXC\'s traffic between the interstate and intrastate
    categories. These reports then allowed the LEC to charge the
    appropriate, tariffed rates for interstate and intrastate access
    service.[^6]

4.  During the period relevant to this complaint, the rates in Florida
    for intrastate access service were higher than the rates for
    interstate access.[^7] Accordingly, IXCs doing business in Florida
    had an incentive to overstate their percentage of interstate use,
    thereby reducing the fraction of their total traffic that was
    subject to the higher, intrastate access rates.

5.  LDDS purchased interstate access service from United pursuant to
    United\'s FCC Tariff No. 5.[^8] United\'s interstate tariff
    specifically refers to \"back-billing.\" The interstate tariff
    requires IXCs to file quarterly updates of their PIU reports and
    states: \"The revised report will serve as the basis for the next
    three months billing and will be effective on the bill date for that
    service. No prorating or back billing will be done based on the
    report.\"[^9] The tariff contains similar language in the section
    that requires an updated PIU report after an IXC has added new lines
    or trunks.[^10] Under the tariff, United also expressly reserves its
    right to inspect and audit the call detail records from which IXCs
    compile their PIU reports.[^11] In contrast to the portion of the
    tariff dealing with quarterly updates to the PIU *report*, the
    tariff is silent on whether United may retroactively bill an IXC
    based on the results of such a PIU *audit*.

6.  LDDS also purchased intrastate access service from United, under
    United\'s Florida Access Service Tariff.[^12] Like United\'s
    interstate tariff, the Florida tariff requires quarterly
    jurisdictional reports from the IXC,[^13] and permits United to
    audit these reports.[^14] Unlike the federal tariff, however, the
    Florida tariff expressly permits back-billing for up to one year if
    the PIU audit indicates that the IXC has underreported its
    intrastate usage:

If the percentage data thus provided shows that the reported intrastate
percentage was less than the audited percentage, the audited percentage
shall be applied to the current month\'s usage and to all usage reported
since a date 12 months earlier than the date on which the audit was
completed . . . . Prorating and backbilling will be permitted on the
basis of audited results for a period of 12 months . . . .[^15]

7.  Beginning in 1991, United audited the call detail records of ATC and
    TFN, the two carriers involved here that subsequently were acquired
    by LDDS.[^16] The audit of ATC\'s records took place in late 1991
    and covered the carrier\'s PIU reports for the operating period from
    September 1990 through October 1991.[^17] This audit concluded that
    the carrier\'s reports during the audit period had substantially
    understated its intrastate minutes of use, resulting in an
    underpayment of \$2,452,908.38 for intrastate access service.
    Consistent with the above provision of the Florida tariff, United
    retroactively increased LDDS's percentage of intrastate use for the
    year covered by the audit. This increase in the number of intrastate
    minutes resulted in an equivalent, off-setting reduction in the
    carrier\'s minutes of interstate use for that same period, which, in
    turn, caused a retroactive reduction in the amount the carrier owed
    for interstate access for that same period. Netting out the
    underpayment for intrastate access and the overpayment for
    interstate access, United billed the carrier for an additional
    \$1,223,520.47 in access charges.\" After further negotiation, LDDS
    paid United, in December 1992, \$860,500.[^18]

8.  In 1992, United performed a similar audit of TFN, the other carrier
    that LDDS subsequently acquired. This audit covered the operating
    period from September 1991 to August 1992[^19] and also concluded
    that the carrier\'s PIU reports had understated its minutes of
    intrastate use. Adjusting for the underreporting of intrastate use
    resulted in an increase in the charge for intrastate access service
    of \$212,425.68. Here again, the retroactive increase in minutes of
    intrastate use resulted in a corresponding reduction in the amount
    due for interstate access service during the audit period. The net
    effect of this audit was to cause an increase of \$117,343.85 in the
    amount that the carrier owed for access service during the audit
    period. LDDS paid this amount in full in April 1993.[^20]

9.  On July 7, 1994, LDDS filed this complaint asserting that it is
    entitled to recover, with pre-judgment interest, the amounts it paid
    United for the retroactive adjustments in access charges.[^21]
    LDDS\'s complaint alleges that United violated both its own
    interstate tariff and Commission policy by adjusting LDDS\'s
    percentage of interstate use after the fact and by retroactively
    billing for the resultant net increase in charges for intrastate
    access. Specifically, LDDS contends that the silence of United\'s
    federal tariff on the issues of retroactive PIU adjustment and
    back-billing should be construed to prohibit United\'s actions in
    this case. United responds that its retroactive adjustments to
    LDDS\'s access-charge liability were accomplished pursuant to the
    terms of the intrastate tariff and that they were therefore
    consistent with the governing tariffs and with Commission policy. By
    way of affirmative defense, United argues that this complaint
    focuses on calculations performed under the intrastate tariff and
    therefore falls outside of the Commission\'s jurisdiction.[^22]

#########  II. DISCUSSION

10. LDDS argues that the back-billing of which it complains constituted
    a single, unified transaction to which the Commission\'s
    jurisdiction necessarily attaches in light of the involvement of
    United\'s federal tariff. In an apparent effort to avoid the fact
    that the retroactive billing involved calculations under both the
    Florida and the federal tariffs, LDDS contends that it is actually
    the retroactive adjustment of the PIU figure of which it complains.
    Thus LDDS contends that, given the reciprocal relationship between
    interstate and intrastate minutes of use, \"any change to the
    intrastate PIU automatically affects change to the interstate
    PIU.\"[^23] It contends that, regardless of the terms of the
    intrastate tariff on the question, the interstate tariff prohibits
    back-billing.[^24] To effectuate this prohibition fully, LDDS then
    asserts, it must be extended to prohibit the retroactive adjustments
    to intrastate minutes of use that United accomplished in this case.

11. The difficulty with LDDS\'s argument is that it conflates what were
    actually separate (albeit related) transactions, which were
    independently subject to the restrictions in two separate tariffs.
    The relationship between interstate and intrastate minutes of use
    does not subject to federal law, and the terms of the interstate
    tariff, all changes in a carriers\' minutes of intrastate use.
    Rather, the traffic measurements process identifies the jurisdiction
    to which an IXC\'s traffic is assigned. Once that assignment has
    been accomplished, it is the appropriate tariff, as construed and
    applied by the proper regulatory authority, that governs the process
    of charging for minutes of use. In light of this regulatory
    structure, LDDS\'s complaint is properly viewed as challenging the
    two separate calculations -- performed under two different tariffs
    -- that resulted in United\'s retroactive adjustment of the
    access-charge liability.

12. The first transaction is the reduction of the carriers\' interstate
    access-charge liability. To the extent that LDDS challenges this
    transaction, it challenges an access-charge calculation made under a
    tariff filed with the FCC and over which the Commission certainly
    has jurisdiction.[^25] On the other hand, the second transaction is
    plainly outside of the Commission\'s jurisdiction. In calculating
    the new intrastate access charges, United applied the terms of its
    intrastate tariff to the revised figure for intrastate minutes of
    use. Under the Act\'s dual-track system, this transaction falls
    squarely within the jurisdiction of the Florida PSC; as such, it is
    beyond the jurisdiction of the Commission.

13. This raises the question of which of these two related, but
    separate, transactions it is that LDDS challenges in this action.
    There can be little question that the focus of LDDS\'s claim is on
    the calculation of its liability for intrastate access service. LDDS
    does not challenge the *credit* it received in connection with the
    recalculation of its interstate access bill. Rather, it objects to
    the retroactive *increase in liability* for intrastate access.[^26]
    As noted above, this is a matter governed by United\'s Florida
    tariff and one over which the Florida PSC, not this Commission, has
    jurisdiction. Although this Commission unquestionably would have the
    authority to decide issues arising under United\'s federal tariff,
    we conclude that LDDS\'s complaint, fairly read, presents no such
    issues. The Act creates clear jurisdictional lines which we are
    bound to observe.[^27] Given these restrictions on our authority,
    the relationship between percentage of interstate and intrastate use
    provides an insufficient basis for us to exercise jurisdiction over
    the retroactive adjustment of LDDS\'s intrastate access charge
    liability.

**III. CONCLUSION AND ORDERING CLAUSES**

14. We conclude that we have no jurisdiction over this matter because
    the gravamen of LDDS's complaint, the retroactive adjustment of its
    intrastate access charges, presents an issue falling solely within
    the jurisdiction of the Florida Public Service Commission. Because
    we dismiss this matter for lack of jurisdiction, we do not address
    the parties' other arguments in this case.

15. Accordingly, IT IS ORDERED, pursuant to sections 1, 2(b), 201 and
    208 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151,
    152(b), 201, 208, and the authority delegated in Sections 0.111 and
    0.311 of the Commission\'s rules, 47 C.F.R. §§ 0.111, 0.311, that
    the above-captioned complaint filed by LDDS Communications, Inc., IS
    DISMISSED FOR LACK OF JURISDICTION.

16. IT IS FURTHER ORDERED that this proceeding IS TERMINATED.

FEDERAL COMMUNICATIONS COMMISSION

David H. Solomon

Chief, Enforcement Bureau

[^1]: ^?^ LDDS filed its complaint pursuant to Sections 206 through 209
    of the Communications Act of 1934, as amended (the Act), 47 U.S.C.
    §§ 206-209. During the pendency of this action, LDDS was acquired
    and changed its name to LDDS Worldcom. Complainant\'s Brief at 1.

[^2]: ^?^ Complaint at 7. Complainant\'s Memorandum in Support of LDDS\'
    Formal Complaint at 3 (Complainant\'s Memorandum In Support). PIU
    calculations are discussed in *In re Determination of Interstate and
    Intrastate Usage of Feature Group A and Feature Group B Access
    Service*, 4 FCC Rcd 8448, 8449 (1989), and *In re Bell South
    Telecommunications, Inc., Revisions to Tariff FCC No. 1*, 8 FCC Rcd
    1403, 1403 n.1 (1993)(\"*Bell South*\").

[^3]: ^?^ Complaint at 1-2. The access services at issue here were
    actually purchased by Advanced Telecommunications Corporation
    (\"ATC\") and Tele-Fibernet Corporation (\"TFN\"), two IXCs that
    were subsequently acquired by LDDS. ATC merged with LDDS in December
    1992, and TFN was acquired by LDDS in August 1992. *Id*. at 1. For
    purposes of this order, we treat LDDS as the entity that purchased
    the relevant services.

[^4]: ^?^ *See, e.g.*, *Smith v. Illinois Bell Tel. Co.*, 282 U.S. 133,
    148-49 (1930) (requiring "separation of the intrastate and
    interstate property, revenues and expenses" of LECs); 47 C.F.R. §§
    69.2(b), 69.3(a) (in combination, requiring filing of interstate
    access tariffs at FCC).

[^5]: ^?^ *See, e.g.*, 47 U.S.C. § 151 (assigning to FCC the regulation
    of "interstate and foreign commerce in communication by wire and
    radio"); *id.* § 152(b) (excluding from FCC jurisdiction matters
    relating to "intrastate communication service by wire or radio").

[^6]: ^?^ The Commission previously has recognized that LECs are not
    able accurately to measure interstate and intrastate usage of
    Feature Group A (FGA), Feature Group B (FGB), 700, 800, and 900
    switched access services. *See* *Determination of Interstate and
    Intrastate Usage*, 4 FCC Rcd at 8448-49 (adopting *Joint Board
    Recommended Decision and Order*, 4 FCC Rcd 1966 (1989)). These
    orders addressed measurement and verification of interstate and
    intrastate usage of FGA and FGB services by IXCs for interstate and
    intrastate access charge billing and cost separation. *See* *also
    Bell South*, 8 FCC Rcd at 1403 n.1.

[^7]: ^?^ Florida Public Service Commission\'s Amicus Memorandum in
    Support of United\'s Position at 1.

[^8]: ^?^ Complaint at 2.

[^9]: ^?^ United Tariff FCC No. 5 § 2.3.14.(A)(7).

[^10]: ^?^ *See id.* § 2.3.14.(A)(6) (\"The revised report will serve as
    the basis for future billing and will be effective on the next bill
    date. No prorating or back billing will be done based on the
    report.\").

[^11]: ^?^ *Id.* § 2.3.14(B).

[^12]: ^?^ Complaint at 2; and Attachment 2 ("Florida Intrastate
    Tariff\").

[^13]: ^?^ Florida Intrastate Tariff § E2.3.14(A)(7).

[^14]: ^?^ *Id.* § E2.3.14(B).

[^15]: ^?^ *Id*.

[^16]: ^?^ *See supra* note 3.

[^17]: ^?^ Complaint at 5.

[^18]: ^?^ The parties disagree over whether this payment represented a
    settlement of the matter or was extracted by United under threat of
    service termination. *Compare* Initial Brief of United at 9 *and*
    Initial Brief of LDDS at 9-10.

[^19]: ^?^ Complaint at 6.

[^20]: ^?^ *Id.*

[^21]: ^?^ *Id.* at 7.

[^22]: ^?^ *See* Answer at 6. Additionally, United alleges that LDDS\'s
    partial payment of the bill for ATC\'s access charges represents an
    accord and satisfaction, which bars LDDS\'s claims relating to that
    charge. *See id.*

[^23]: ^?^ *See* Initial Brief of LDDS at 8.

[^24]: ^?^ We express no opinion on, and our decision in this matter
    should not be construed to address, the issue of whether the
    interstate tariff would allow a retroactive increase in a carrier\'s
    interstate access liability.

[^25]: ^?^ *See, e.g.*, 47 U.S.C. §§ 151, 201, 203 (giving Commission
    authority to regulate interstate communications).

[^26]: ^?^ We note that, at one point, LDDS questions in passing
    United\'s authority retroactively to revise the interstate access
    charges. *See, e.g.*, Initial Brief of LDDS at 5. However, the
    gravamen of LDDS\'s claims in this action clearly is the
    recalculation, under the Florida tariff, of the intrastate access
    liability.

[^27]: ^?^ *See* note Error: Reference source not found *supra*; *see
    also* note Error: Reference source not found *supra*.