Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-95-01566/USCOURTS-caDC-95-01566-0/pdf.json

Parties Involved:
American Public Communications Council
Petitioner
Federal Communications Commission
Respondent
United States of America
Respondent

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 2, 1997 Decided October 31, 1997 

No. 95-1563

C.F. COMMUNICATIONS CORPORATION, ET AL.,

PETITIONERS

v.

FEDERAL COMMUNICATIONS COMMISSION AND 

UNITED STATES OF AMERICA,

RESPONDENTS

CENTURY TELEPHONE OF WISCONSIN, INC., ET AL.,

INTERVENORS

Consolidated with

No. 95-1566

On Petitions for Review of Orders of the 

Federal Communications Commission

-

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Albert H. Kramer argued the cause for petitioners, with 

whom Robert F. Aldrich and Andrew J. Phillips were on the 

briefs.

Aaron J. Rappaport, Attorney, Federal Communications 

Commission, argued the cause for respondents. William E. 

Kennard, General Counsel, Daniel M. Armstrong, Associate 

General Counsel, John E. Ingle, Deputy Associate General 

Counsel, and Carl D. Lawson, Counsel, Federal Communications Commission, Joel I. Klein, Acting Assistant Attorney 

General, United States Department of Justice, Robert B. 

Nicholson and Robert J. Wiggers, Attorneys, were on the 

brief. Susan L. Fox, Counsel, Federal Communications 

Commission, entered an appearance.

M. Edward Whelan, III, argued the cause for intervenors, 

with whom Benjamin H. Dickens, Jr., Susan J. Bahr, and 

David L. Nace were on the brief. David J. Gudino entered 

an appearance.

Before: EDWARDS, Chief Judge, SENTELLE and RANDOLPH, 

Circuit Judges.

Opinion for the court filed by Circuit Judge SENTELLE.

SENTELLE, Circuit Judge: These petitions seek review of a 

Federal Communications Commission decision permitting local telephone companies (known as "local exchange carriers" 

or "LECs") to assess End User Common Line ("EUCL") 

charges on an independent payphone provider. Petitioners

the independent payphone provider and a trade association of 

independent payphone providersargue that the Commission 

misinterpreted its rules to arrive at its decision. We agree, 

and grant the petitions for review.

I. Background

A.

When a telephone customer places a call, a "loop" links the 

telephone to the central office of a local exchange carrier, 

where switching equipment routes the call to a local or longdistance telecommunications network. Most of the LECs' 

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costs in operating their facilities do not vary depending on 

how often the facilities are used; such costs are known as 

"nontraffic sensitive" ("NTS") costs. The cost of installing 

the loop is an NTS cost, for example, because that cost 

remains the same whether a customer uses the loop to make 

one call or one hundred calls. See National Ass'n of Regulatory Util. Comm'rs v. F.C.C., 737 F.2d 1095, 1104 (D.C. Cir. 

1984). In contrast, the cost of the switching equipment tends 

to increase with use, and is considered to be traffic-sensitive. 

Id. 

In 1983, the Commission released rules governing the 

charges through which LECs would be compensated for 

providing long-distance carriers (known as "interexchange 

carriers" or "IXCs") with access to their local exchange 

facilities. In re MTS and WATS Market Structure, Third 

Report and Order, 93 F.C.C.2d 241, 242-43 (1983) ("Access 

Charge Order"), modified on recon., 97 F.C.C.2d 682 (1983) 

("Access Charge Reconsideration"), modified on further recon., 97 F.C.C.2d 834 (1984), aff'd and remanded in part sub 

nom. National Ass'n of Regulatory Util. Comm'rs v. F.C.C.,

737 F.2d 1095 (D.C. Cir. 1984). The Commission decided 

that, as a general matter, "end users" placing interstate calls 

should bear the cost of the access charges. Therefore, the 

Commission's rules provided that most subscribers were assessed a monthly, flat-rate charge for the "end user common 

line" element, permitting LECs to recover a significant 

amount of the NTS costs associated with the subscribers' 

loops.

In crafting its rules, the Commission faced a dilemma: how 

to permit LECs to recover their investment in the public 

payphones (and payphone lines) that they owned and operated. Payphones required special treatment, reasoned the 

Commission, because the end users of payphones consisted of 

the "transient general public," rather than the subscribers, as 

in the case of private business or residential telephones. See 

In re C.F. Communications Corp. v. Century Telephone of 

Wisconsin, Inc., 8 F.C.C.R. 7334, 7335 ¶ 10 (Com. Car. Bur. 

1993) ("Bureau Order"). At first, the Commission determined that LECs would recover their payphone investments 

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solely through coin calls placed by end users. Access Charge 

Order at 280. Under this solution, however, LECs were not 

able to recover their investment from the many end users 

who used payphones to make non-coin calls, such as collect, 

credit card or third-party calls, causing either an inadequate 

recovery for the LECs or a disproportionate burden on end 

users paying by coin. Access Charge Reconsideration at 705.

On reconsideration, the Commission decided not to assess 

any charge on end users of public payphones. Rather, the 

Commission decided that LECs would recover the NTS costs 

of operating their payphones and payphone lines from a 

carrier common line element, which in turn was recovered 

from the switched access charges imposed on IXCs and 

interstate calls in general. Id. In other words, the Commission decided that public payphone users would no longer pay 

for the NTS costs of operating public payphones, but that 

those costs would in effect be subsidized by all interstate 

callers.

The Commission, however, did not exempt all payphones 

from EUCL charges. Although it excused "public" payphones from the charge, it determined that "semi-public" 

payphones would be subject to the charge. When it originally announced the public/semi-public distinction, the Commission explained that "[a] pay telephone is used to provide 

semipublic telephone service when there is a combination of 

general public and specific customer need for the service, 

such as at a gasoline station or pizza parlor. [Local telephone 

companies] provide directory listing with this service." Id. at 

704 n.40. By contrast, "[a] pay telephone is used to provide 

public telephone service when a public need exists, such as at 

an airport lobby, at the option of the telephone company and 

with the agreement of the owner of the property on which the 

phone is placed." Id. at 704 n.41. The Commission determined that NTS costs associated with semi-public payphones 

should be "recovered from subscribers to that service in the 

same manner that costs associated with an ordinary business 

subscriber line are recovered" because "[t]hose fixed costs 

can be recovered from an identifiable business end user 

through flat charges." Id. at 706.

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At the time the Commission developed this scheme for 

payphone access charges, the only existing payphones were 

owned by LECs. LEC-owned payphones are connected by 

special "coin lines" to an LEC central office. A processor 

located at the central office then does most of the work: 

determining the cost of the call, timing the call, telling the 

user how much money to deposit, and performing additional 

tasks. Because they are not capable of processing and 

supervising calls on their own, LEC-owned payphones are 

considered to be "dumb."

In 1984, the Commission permitted payphones not owned 

by LECs to enter the market. Unlike LEC-owned payphones, the new independent payphones were "smart," capable of processing and supervising calls by means of a 

microprocessor located inside the phone. These "smart" 

payphones were attached to ordinary telephone lines; because they were self-sufficient, there was no need for special "coin lines" to link them to an LEC central office. 

Callers encounter independent payphones in the same 

places where they would find LEC-owned payphones, such 

as street corners, airports, shopping malls, and rural "mom 

and pop" stores. Since callers are not able to tell whether 

a given payphone is "smart" or "dumb," from a caller's 

point of view, independent payphones are indistinguishable 

from those owned and operated by LECs.

B.

Petitioner C.F. Communications Corporation ("CFC") operates independent payphones in Wisconsin, Michigan, Minnesota and Iowa. On May 10, 1989, CFC filed a complaint with 

the Commission challenging several LECs' imposition of 

EUCL charges on CFC's independent payphones. Petitioner 

American Public Communications Council, Inc., a trade association of the independent payphone industry, intervened in 

and participated in the complaint proceeding on CFC's behalf.

In its complaint, CFC argued that it should be excused 

from EUCL charges because it did not qualify as an "end 

user" under the Commission's rules. CFC also argued that 

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its payphones should be classified as "public"and therefore 

exempt from EUCL chargesbecause they were located in 

public places and accessible to all members of the public. 

Accordingly, CFC sought damages from the LECs in the 

amount of the EUCL payments it had made to them.

The FCC's Common Carrier Bureau rejected CFC's arguments, and held that the LECs had properly assessed EUCL 

charges on CFC's independent payphones. See Bureau Order. In the Order challenged in this case, the Commission 

affirmed the Bureau's decision. See In re C.F. Communications Corp. v. Century Telephone of Wisconsin, Inc., 10 

F.C.C.R. 9775 (1995) ("Order"). The Commission found that 

CFC was an "end user" under its rules, and thus subject to 

EUCL charges. Specifically, the Commission found that 

CFC met the regulatory definition of "end user" because it 

"offers telecommunications services exclusively as a reseller" 

and that all such resale transactions "originate on [CFC's] 

premises." See 47 C.F.R. § 69.2(m).

The Commission further concluded that CFC's independent 

payphones did not qualify for the "public telephone" exemption from the EUCL charges. Relying on an FCC rule 

defining "public telephone" as being "provided by a telephone 

company," 47 C.F.R. § 69.2(ee), the Commission reasoned 

that CFC's payphones were not "public" because CFC is not 

a "telephone company" under the applicable rules. See 47 

C.F.R. § 69.2(hh). In addition, the Commission deemed 

CFC's payphones to be "semi-public" becauseregardless of 

how they were actually usedthey were capable of private 

use. Order at 9780, ¶ 21.

C.

The Telecommunications Act of 1996 became law on February 8, 1996. Pursuant to the Act, the Commission initiated a 

rulemaking proceeding to revise its rules governing payphones. On September 20, 1996, and in several subsequent 

orders on reconsideration, the Commission required the prospective application of EUCL charges to both independent 

payphones and to LEC-owned payphones. The Commission's 

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decision had no effect on the challenged EUCL charges that 

CFC incurred prior to the effective date of the new rules.

II. Discussion

As a liminal matter, we note that we accord great deference 

to an agency's interpretation of its own rules. Our deference 

under these circumstances has sometimes been described as 

even greater than our deference to an agency's interpretation 

of ambiguous statutory terms. See Capital Network System, 

Inc. v. F.C.C., 28 F.3d 201, 206 (D.C. Cir. 1994) (citing Udall 

v. Tallman, 380 U.S. 1, 16 (1965)). An agency's interpretation of its own rule " 'becomes of controlling weight unless it 

is plainly erroneous or inconsistent with the regulation.' " Id. 

(quoting United States v. Larionoff, 431 U.S. 864, 872 (1977)).

Here, the Commission interpreted its rules to find that (1) 

CFC is an "end user" subject to EUCL charges; and (2) 

CFC's payphones are not "public telephones" and therefore 

do not qualify for the "public telephone" exemption from 

EUCL charges. Keeping in mind our great deference to the 

Commission's interpretation of its rules, we review the Commission's interpretations below.

A.

As its name implies, the End User Common Line charge is 

assessed on an "end user." 47 C.F.R. § 69.5(a) ("End user 

charges shall be computed and assessed upon end 

users...."). Under the Commission's access charge rules, an 

"end user" is defined as:

[A]ny customer of an interstate or foreign telecommunications service that is not a carrier except that a carrier 

other than a telephone company shall be deemed to be an 

"end user" when such carrier uses a telecommunications 

service for administrative purposes and a person or 

entity that offers telecommunications services exclusively 

as a reseller shall be deemed to be an "end user" if all 

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resale transmissions offered by such reseller originate on 

the premises of such reseller.

47 C.F.R. § 69.2(m).

It is not disputed that CFC, a reseller of LEC services, 

qualifies as a "carrier" under this rule. Bureau Order at 

7336, ¶ 12; Order at 9777, ¶ 10. As a "carrier," CFC is 

deemed to be an "end user" if it meets one of the two 

conditions listed above. According to the Commission, CFC 

is an "end user" because it meets the second condition: it 

"offers telecommunications services exclusively as a reseller," 

and "all resale transmissions offered by such reseller originate on the premises of such reseller." 47 C.F.R. § 69.2(m).

To determine if all of CFC's transmissions originate "on 

the premises of [CFC]," the Commission analyzed the word 

"premises," which is not defined in the Commission's rules. 

Observing that the word "does not have a single fixed meaning" and is "defined according to its context," Order at 9778, 

¶ 13, the Commission found that in the context of Section 

69.2(m), "premises" means "the place where, in most cases, 

the equipment of the reseller is located and where the use of 

the resold telecommunications services must originate." Id.

at 9779, ¶ 17. Under this reading, every location where CFC 

contracts to place a payphone would be considered CFC's 

"premises."

While the Commission is correct that the word "premises" 

"does not have a single fixed meaning," accord Gibbons v. 

Brandt, 170 F.2d 385, 387 (7th Cir. 1948); O'Connor v. Great 

Lakes Pipe Line Co., 63 F.2d 523, 525-26 (8th Cir. 1933), this 

fact does not convert the word into a sort of Rorschach test, 

permitting the Commission to read into the word anything it 

pleases. We find that the Commission's interpretation of the 

word "premises" is so far removed from any established 

definition of that word that we must reject its interpretation 

as plainly erroneous.

CFC's payphones are the personal property of CFC. An 

agreement between CFC and the Central Wisconsin Airport 

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ments with other location owners, Skrypczak Affidavit ¶ 5, 

explicitly states that CFC owns the payphones, and that the 

"[t]elephones, booths and equipment are ... personal property."

The term "premises," as used in this context, traditionally 

refers to real property and its appurtenances. BLACK'S LAW 

DICTIONARY 1062-63 (5th ed. 1979). Black's Law Dictionary 

defines the term as "[a] distinct and definite locality, and may 

mean a room, shop, building, or other definite area, or a 

distinct portion of real estate." No matter how flexible the 

meaning of "premises" may be, an item of personal property 

may not sensibly be construed to be a "locality," a "definite 

area," or a "distinct portion of real estate." Assuming a 

payphone could be considered "premises" as appurtenant to 

land, that would not make CFC's payphones the premises of 

the company as CFC neither owns nor controls the land or 

buildings on which its payphones are sited. The Commission 

has provided no definition under which personal property 

located on real property owned by another is considered to be 

"premises," and we are aware of none.

The Commission, alternatively, suggests that "premises" 

means the land or buildings on which CFC's payphones are 

located. Order at 9778, ¶¶ 14-15. Recognizing that others 

actually own the land or buildings on which the payphones 

are located, the Commission found it significant that CFC had 

what it termed "limited legal control" over the land or 

buildings on which its payphones were located. The Commission did not explain the nature or source of this limited 

control, but found that its existence justified treating the land 

or buildings as CFC's "premises," even if CFC did not own 

the land. Id. In other words, the Commission decided to 

treat land owned by someone else as the "premises" of CFC 

on the theory that CFC acquired an interest in the property 

by contracting to place its payphone there. In so doing, the 

Commission has not only distorted the plain meaning of 

"premises" beyond any reasonable interpretation of the word, 

but has rendered the phrase "originate on the premises of the 

reseller" virtually meaningless. If any location in which a 

"reseller" has the capacity to originate a call becomes its 

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premises, that requirement of the rule excludes nothing. The 

Commission's interpretation, then, violates the familiar principle of statutory interpretation which requires construction "so 

that no provision is rendered inoperative or superfluous, void 

or insignificant." Mail Order Ass'n of America v. United 

States Postal Service, 986 F.2d 509, 515 (D.C. Cir. 1993) 

(internal quotations and citations omitted).

We do not suggest that the Commission could not amend 

its rules to render "premises" a term of art encompassing 

telephone equipment or land owned and controlled by a third 

party on which telephone equipment is located. But to do so, 

it must use the notice and comment procedure of the Administrative Procedure Act. It may not bypass this procedure by 

rewriting its rules under the rubric of "interpretation." See 

Indiana Michigan Power Co. v. Dept. of Energy, 88 F.3d 

1272, 1276 (D.C. Cir. 1996) ("The [agency's] treatment of this 

statute is not an interpretation but a rewrite."). In this case, 

the Commission's interpretation of Section 69.2(m) does not 

comport with the plain meaning of the term "premises" and 

must be rejected.1

B.

In addition to our conclusion that the Commission erred in 

determining that CFC was an "end user," we also hold that 

petitioners are entitled to the relief sought for the alternate 

reason that the Commission improperly discriminated between similarly situated phone services without a rational 

basis. As we noted earlier, public telephones are not subject 

to EUCL charges under the Commission's Access Charge 

Reconsideration decision. In determining that CFC's payphones were not subject to the "public telephone" exclusion, 

the Commission relied on the following definition of "public 

telephone": a "telephone provided by a telephone company

through which an end user may originate interstate or foreign 

__________

1 Having determined that the Commission's interpretation of 

"premises" fails to pass muster, we need not address its conclusion 

that CFC "offers telecommunications services exclusively as a reseller" under Section 69.2(m). Order at 9779, ¶ 18.

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telecommunications for which he pays with coins or by credit 

card, collect or third number billing procedures." 47 C.F.R. 

§ 69.2(ee) (emphasis added). Finding that CFC is not a 

"telephone company," the Commission determined that CFC's 

payphones did not qualify for the EUCL fee exemption. 

Order at 9779-80, ¶¶ 19-20.

CFC concedes that it is not a "telephone company" under 

Section 69.2(ee), but argues that the Commission improperly 

applied that definition in this context. It observes that 

Section 69.2(ee) was promulgated without explanation several 

years after the Commission adapted its access charge rules, 

and further observesand the Commission does not disputethat the Commission drafted this definition with another purpose in mind: clarifying the rules on allocation of 

LECs' own investments in payphone equipment to particular 

access charge elements.

We agree that the Commission's reliance on the definition 

of "public telephone" in Section 69.2(ee) does not provide 

sufficient justification for its distinction between CFC's payphones and those operated by LECs. See Corporate Telecom 

Services, Inc. v. F.C.C., 55 F.3d 672, 677 (D.C. Cir. 1995) 

(rejecting the FCC's citation of "rules [which] appear to have 

been designed with completely different purposes in mind"). 

When considered in its intended context, Section 69.2(ee) 

makes sense: the Commission defined "public telephone" to 

exclude independent payphones to clarify that, under the 

rules governing LECs' recovery of their investment in payphone equipment, LECs were not entitled to recover independent payphone costs. In other words, Section 69.2(ee) makes 

it plain that LECs may recover only their investment in 

"public telephones" which they own and control, not in independent telephones which are owned by others. However, 

the Commission has shown no rational connection between 

Section 69.2(ee) and the public/semi-public telephone distinction in its Access Charge Reconsideration decision. As explained earlier, the Commission exempted public payphones 

from EUCL charges because it recognized that there was no 

practical way to ensure that NTS costs were being shared 

equally by all interstate end users of those payphones. In 

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light of the Commission's reasons for introducing the 

public/semi-public distinction, we find that it has not shown 

any legally significant difference between "public" payphones 

owned by an LEC and those of the independent payphone 

providers.

The Commission simplyand, we think, unreasonably

ignored context and stated that "we must apply our rules as 

they are now codified." Order at 9780, ¶ 20. The Commission put on blinders after it found that CFC did not meet its 

definition of "public telephone," not acknowledging that the 

definition had been adopted in a different context; that the 

"public telephone" exemption to the EUCL charges was 

introduced in a Commission order, not in its rules; and that 

the Section 69.2(ee) definition of "public telephone" was inconsistent with the original rationale for introducing the exemption in the Access Charge Reconsideration decision. We find 

that the Commission's interpretation is not "reasoned," see 

Corporate Telecom Services, 55 F.3d at 675 (rejecting FCC's 

rule interpretation as inconsistent with the "values the provision is supposed to embody"), and therefore reject its conclusion that CFC's payphones are not "public telephones" for 

purposes of the exclusion from EUCL charges.

C.

Having found that CFC's payphones did not qualify for the 

exclusion because they were not "public telephones," the 

Commission declared that CFC's payphones were ineligible 

because they were "semi-public." Order at 9780, ¶ 21. Rejecting petitioners' request that it should decide if the payphones were public or semi-public by examining how the 

payphones were used, the Commission found it "more relevant to examine how [CFC's] payphone lines can be used." 

Id. (emphasis in original). The Commission then found that 

CFC's payphones were capable of private use because, like 

conventional telephones, they were connected to regular subscriber business lines. This technical pointthat CFC's payphones were connected to regular subscriber business lines as 

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opposed to the coin lines attached to LEC-owned payphoneswas the Commission's sole reason for finding that 

CFC's payphones were semi-public and not qualified for the 

EUCL charge exemption. Bureau Order at 7336, ¶ 13; Order at 9780, ¶ 21. The Commission attempts to justify its 

distinction by arguing that under the Access Charge Reconsideration decision the existence of an "identifiable subscriber" was the most important factor in determining that payphones were public rather than semi-public.

The Commission has not adequately justified the distinction 

it has drawn between CFC's payphones and LEC-owned 

payphones. First, the Commission improperly relies on the 

Access Charge Reconsideration decision. In that decision, 

the Commission rejected its earlier approach of assessing a 

per-call charge on payphone callers to recover the interstate 

NTS costs of the payphone line, observing that it would be 

inequitable for those who used coins to make payphone calls, 

representing "only a fraction of those using pay telephones," 

to bear the cost of the EUCL charges. Access Charge 

Reconsideration at 704. Recognizing that the "ideal solution" 

of recovering NTS costs of public payphones from "end users 

who rely upon pay phones to originate their interstate calls" 

was not technologically feasible, the Commission decided 

instead to eliminate the per-call charge on public payphone 

users entirely. Id. at 705. The Commission, then, created an 

exemption for public payphones because, due to the transient 

nature of payphone users, there was no ultimate end user 

from whom the charge could be recovered equitably. Thus, 

notwithstanding the Commission's argument to the contrary, 

the existence of an identifiable subscriber was not the controlling factor in its decision to exempt public payphones from 

the EUCL charge, as the caller, not the subscriber, is the 

ultimate end user in any event.

More importantly, even if the Commission had originally 

justified its distinction between public and semi-public payphones on the ground that semi-public payphones are subject 

to EUCL charges because of the existence of an identifiable 

subscriber, such an approach does not adequately explain why 

the Commission exempted LEC-owned payphones from the 

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EUCL charge, but treated CFC's payphones as subject to the 

charge. After all, the Commission's express reason for exempting public payphones from EUCL charges applies to 

CFC's payphones as well as to LEC-owned payphones. Furthermore, the record reflects that CFC's payphones are 

indistinguishable from LEC's payphones from a consumer's 

point of view; at oral argument, counsel for the Commission 

conceded that a consumer making a call from a bank of 

payphones would have no idea whether that phone was independently owned or owned by an LEC. And the Commission 

does not dispute that CFC's payphones are indeed held out 

for use by the general public. See Order at 9780, ¶ 21 ("[W]e 

recognize that it is not CFC's intent to provide private service 

via its payphones.").

We also hold that the Commission erred when it focused on 

how CFC's payphones could be used, as opposed to how they 

were used. As we explained above, this test led the Commission to conclude that CFC's payphones were "semi-public" 

because they were connected to ordinary business subscriber 

lines, as opposed to special coin lines. The Access Charge 

Reconsideration decision, which introduced the distinction 

between "public" and "semi-public" for purposes of the 

EUCL charge, does not mention this "capability of use" 

distinction, and further suggests that the key distinction was 

meant to be actual use. See Access Charge Reconsideration 

at 704 n.40 ("[A] pay telephone is used to provide semipublic 

telephone service when there is a combination of general 

public and specific customer need for the service, such as at a 

gasoline station or pizza parlor.") (emphasis added). Further, 

since the record does not indicate that the loop costs of LECowned payphones are significantly different from those of 

CFC's payphonesand indeed, under the current regime, 

both types of payphones are subject to the EUCL charge

the technical distinction drawn by the Commission here has 

no apparent relevance to the access charge at issue.

D.

We note that the Communications Act provides that "[i]t 

shall be unlawful for any common carrier to make any unjust 

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or unreasonable discrimination in charges ... for ... like 

communication service." 47 U.S.C. § 202(a). To determine if 

a carrier is discriminating in violation of this provision, the 

Commission asks: (1) whether the services are "like"; (2) if 

they are, whether there is a price difference between them; 

and (3) if there is, whether that difference is reasonable. 

Competitive Telecommunications Ass'n v. F.C.C., 998 F.2d 

1058, 1061 (D.C. Cir. 1993). To determine if services are 

"like" under this provision, the Commission must "look to the 

nature of the services offered and ascertain whether customers view them as performing the same functions." Id. (internal quotations and citation omitted).

Here, the Commission never explicitly considered whether 

CFC's payphones and LEC-owned payphones provided "like" 

services. Rather, it found that the LECs which had assessed 

EUCL charges against CFC had not discriminated in violation of Section 202(a) because the LECs had followed FCC 

rules when assessing these charges. Order at 9780, ¶ 23. 

Given our conclusion that the Commission misinterpreted its 

rules, it appears that the Commission's Order may have 

compelled LECs to discriminate in violation of Section 202(a): 

consumers view CFC's payphones and LEC-owned payphones as performing the same functions, and only LECowned payphones are exempted from the EUCL charges. 

Because we vacate the Commission's Order and remand for 

further proceedings, however, we need not resolve whether 

the Commission's interpretation compelled LECs to discriminate under Section 202(a), or the precise consequences if it 

did.

Joined by Intervenor LECs Century Telephone of Wisconsin, North-West Telephone Company and GTE North Incorporated, the Commission argues that CFC may not recover 

the EUCL charges it has already paid because the LECs 

which collected those charges did so in compliance with 

Commission rules. Although we recognize the importance of 

this issue, we need not resolve it here in light of our holding 

that the Commission misinterpreted its own rules.

USCA Case #95-1566 Document #306303 Filed: 10/31/1997 Page 15 of 16
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III. Conclusion

The Commission has articulated a difference between 

CFC's payphones and LEC-owned payphones: CFC's 

"smart" payphones are connected to ordinary business subscriber lines and LEC-owned "dumb" payphones are connected to special coin lines. It has not, however, sufficiently 

explained why this difference justifies its decision to assess 

EUCL charges on the "smart" payphones but not the "dumb" 

payphones. For this reason, and because the Commission's 

interpretation of its rules was clearly erroneous, we vacate 

the Commission's Order and remand for further proceedings 

consistent with this opinion.

USCA Case #95-1566 Document #306303 Filed: 10/31/1997 Page 16 of 16