Opinion ID: 185374
Heading Depth: 3
Heading Rank: 1

Heading: Reciprocal Compensation

Text: 2 Under Section 251(b) of the Telecommunications Act of 1996, local exchange carriers (LECs) are required to establish reciprocal compensation arrangements for the transport and termination of telecommunications. 47 U.S.C. 251(b)(5). This means that when a customer of Carrier X calls a customer of Carrier Y who is within the same local calling area, Carrier X pays Carrier Y for completing, or terminating, the call. The FCC interprets this requirement to apply only to local calls--that is, calls that originate and terminate within a local area. The reciprocal compensation requirement do[es] not apply to the transport or termination of interstate or intrastate interexchange traffic. In re Implementation of the Local Competition Provisions in the Telecom. Act of 1996, 11 F.C.C.R. 15,499, 16,013 p 1034 (1996) (subsequent history omitted). 3 Under the Act, carriers are expected to negotiate the rate and terms of reciprocal compensation. If the carriers are unable to reach agreement, they may submit the contested issues to arbitration by the relevant state public utility commission (PUC). 47 U.S.C. 252(e)(1). Once the PUC approves an interconnection agreement, it is charged with interpreting and enforcing the agreement, but the PUC's determinations are subject to review in federal court for consistency with the Act. See 47 U.S.C. 252(e)(6). 4 In February 1999, the FCC published an order holding that Internet-bound calls to Internet Service Providers (ISPs) are not local on the theory that such traffic does not originate and terminate in the same local calling area, and is therefore not covered by the reciprocal compensation obligation. See In re Implementation of the Local Competition Provisions in the Telecom. Act of 1996, Inter-carrier Compensation for ISP-Bound Traffic, 14 F.C.C.R. 3689 (1999) (Reciprocal Compensation Ruling). While the call to the ISP may be local, the FCC concluded that the terminating end of the call is actually the site reached by the Internet connection. The FCC noted that there was no federal rule governing intercarrier compensation for Internet-bound traffic, but held that carriers would be bound to provide compensation as provided under their respective interconnection agreements as interpreted by state PUCs. Id. at 3704 p 24. The FCC also initiated a rulemaking on an appropriate federal inter-carrier compensation mechanism. Id. at 3707 p 28. While this rulemaking was underway, the affected LECs petitioned this court for review of the FCC's decision. We vacated and remanded the order for the Commission's failure to provide an adequate explanation as to why Internet-bound calls were not treated as local calls. See Bell Atlantic Tel. Cos. v. FCC, 206 F.3d 1 (D.C. Cir. 2000).