Court Opinion

ID: 185374
Source: CourtListenerOpinion
Date Created: 2011-02-05 02:31:16+00
Date Added: 2024-06-11T17:26:15.353888
License: Public Domain

247 F.3d 252 (D.C. Cir. 2001)
Global NAPs, Inc., Petitionerv.Federal Communications Commission and United States of America, RespondentsVerizon Delaware, Inc., et al., Intervenors
No. 00-1136
United States Court of Appeals  FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 20, 2001Decided April 27, 2001

On Petition for Review of Orders of the Federal Communications Commission
Christopher W. Savage argued the cause and filed the  briefs for petitioner. John D. Seiver entered an appearance.
Lisa E. Boehley, Counsel, Federal Communications Commission, argued the cause for respondents. With her on the  brief were Christopher J. Wright, General Counsel, John E.  Ingle, Deputy Associate General Counsel, A. Douglas Melamed, Assistant Attorney General, U.S. Department of Justice, Catherine G. O'Sullivan and Robert J. Wiggers, Attorneys.  Laurel R. Bergold, Counsel, Federal Communications Commission, and Nancy C. Garrison, Attorney, U.S. Department of Justice, entered appearances
Aaron M. Panner argued the cause for intervenors Verizon  Telephone Companies.  With him on the brief were Mark L.  Evans, Michael E. Glover, Edward H. Shakin and Lawrence  W. Katz.
Before:  Williams, Sentelle and Rogers, Circuit Judges.
Opinion for the Court filed by Circuit Judge Sentelle.
Sentelle, Circuit Judge:

1
Petitioner Global NAPs, Inc.  ("GNAPs") seeks review of a Federal Communications Commission ("FCC") ruling that GNAPs' tariff for Internet-bound  traffic was facially invalid under FCC regulations.  GNAPs  raises both procedural and substantive challenges to the  FCC's order.  Specifically, GNAPs contends that the FCC  violated its own rules and due process requirements in voiding the tariff, misconstrued the tariff terms, and improperly  invalidated the tariff retroactively.  We hold that the FCC  did not deprive GNAPs of due process, did not exceed its  authority by invalidating the tariff, and reasonably declared  GNAPs' tariff unlawful.  Therefore we uphold the FCC's  order and deny the petition for review.

I. Background
A. Statutory & Regulatory Context
1. Reciprocal Compensation

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).

2. Tariff Requirements

5
Under Section 201(b) of the Telecommunications Act, all  interstate communications "charges, practices, classifications,  and regulations" must be "just and reasonable."  47 U.S.C.   201(b).  Carriers must publish rate tariffs before they go  into effect.  Published tariffs "must contain clear and explicit  explanatory statements regarding the rates and regulations." 47 C.F.R.  61.2 (a).  Tariffs may not "make reference to any  other tariff publication or to any other document or instrument."  Id. at  61.74(a).  Tariffs filed by nondominant carriers, such as GNAPs, take effect on only one day's notice. Such tariffs receive streamlined review and are presumed lawful by the Commission.  Failure to comply with the relevant regulatory provisions "may be grounds for rejection" of  the tariff.  Id. at  61.1(b).

B. Relevant Facts

6
GNAPs is a competitive local exchange carrier ("CLEC") in  several states.  GNAPs and Intervenor Verizon, an LEC  formerly known as Bell Atlantic, have interconnection agreements in several states.  In April 1997, the two carriers  entered into an interconnection agreement including a provision that "[r]eciprocal compensation only applies to the transport and termination of Local Traffic" defined as "a call which  is originated and terminated within a given [Local Access and  Transport Area or "LATA"]" in Massachusetts.  The parties  did not agree as to whether the agreement's reciprocal compensation provisions covered Internet-bound traffic, but  agreed to abide by the interpretation of the Massachusetts  Department of Telecommunications and Energy ("DTE")-the Massachusetts PUC--of either the GNAPs-Verizon  agreement or identical language in other agreements to which  Verizon was a party.

7
On October 21, 1998, DTE ruled that Verizon was required  to pay reciprocal compensation for the delivery of Internetbound traffic by MCI WorldCom.  Complaint of MCI WorldCom, Inc., D.T.E. 97-116 (Mass. D.T.E. Oct. 21, 1998).  At  the time, DTE directed Verizon to pay reciprocal compensation to other LECs with which it had similar agreements within the state.  Shortly thereafter, however, the FCC published the Reciprocal Compensation Ruling declaring that  Internet-bound traffic is interstate, not local.  DTE responded on May 19, 1999 by vacating its October decision and  declaring that Verizon was not required to pay reciprocal  compensation for Internet-bound traffic, but may be required  to pay compensation under the interconnection agreement. Complaint of MCI WorldCom, Inc., D.T.E. 97-116-C (Mass.  D.T.E. May 19, 1999).  On February 25, 2000, after this  Court vacated the FCC's order, DTE reaffirmed its May 1999  ruling, but this ruling is the subject of ongoing litigation. Complaint of MCI WorldCom, Inc., D.T.E. 97-116-D (Mass.  D.T.E. Feb. 25, 2000).

8
On April 14, 1999, while the DTE proceedings were underway (and before the DTE vacated its initial decision) GNAPs  filed a tariff imposing an $0.008 per minute charge on the  delivery of all Internet-bound calls for which GNAPs "does  not receive compensation ... under the terms of an interconnection agreement."  The tariff further provided that a carrier's "[f]ailure ... to actually compensate [GNAPs] for ISPbound traffic as local traffic under the terms of an Interconnection Agreement shall constitute an election to compensate  [GNAPs] under the terms of this Tariff."  On May 27, 1999,  GNAPs billed Verizon under this tariff over $1.7 million for  fifteen days of service.  Verizon refused to pay.

C. The FCC Proceedings

9
On July 8, 1999 Verizon filed a complaint against GNAPs'  tariff under Section 208 of the Communications Act.  Verizon  alleged that 1) the tariff was inconsistent with FCC rules  insofar as the FCC exempted ISPs from access charges and  provided for joint provision of access service to interexchange  carriers, 2) the tariff preempted state determination of intercarrier compensation for interstate Internet-bound traffic, 3)  the tariff made Verizon an involuntary GNAPs customer, and  4) the tariff imposed excessive rates.  Specifically, Verizon  alleged "GNAPs has no right to circumvent the negotiation  and arbitration process that the DTE and this Commission have directed it to follow by unilaterally filing a federal tariff."  After a status conference, the FCC directed briefing  on ten issues concerning the legality of the tariff and the  applicability of specific FCC rules, including "why Global  NAPs filed a federal tariff and whether that was reasonable." In re Bell Atlantic-Delaware, Inc., E-99-22 (Aug. 19, 1999).

10
On December 2, 1999, the FCC declared GNAPs' tariff  unlawful under section 201(b) and void ab initio.  In re Bell  Atlantic-Delaware, Inc., et al. v. Global NAPs, Inc., Memorandum Opinion and Order, 15 F.C.C.R. 12,946 (1999) ("Order").  The FCC found that the challenged tariff provisions  violated the requirement of 47 C.F.R.  61.2 that tariffs be  "clear and explicit" because "those tariff provisions condition  the imposition of charges on circumstances that were indeterminate when the tariff took effect and remain indeterminate  today."  Id. p 2.  Additionally, the FCC found that the tariff  impermissibly cross-referenced another document--in this  case the interconnection agreement between GNAPs and  Verizon--in violation of 47 C.F.R.  61.74(a).  The Commission noted that at the time the tariff was filed, the parties did  not know whether GNAPs would receive reciprocal compensation from Verizon for Internet-bound traffic because the  DTE proceedings were still underway.

11
On January 3, 2000, GNAPs petitioned for reconsideration  of the FCC's order.  GNAPs raised several arguments. First, GNAPs argued that in basing its decision on grounds  not raised by Verizon or briefed by either party, the FCC  denied GNAPs its right to notice and due process and illegally relieved Verizon of its burden of proof.  GNAPs further  argued that the FCC, by voiding the tariff retroactively,  illegally denied GNAPs just compensation for the interstate  services it provided to Verizon.  Finally, GNAPs claimed that  the FCC's order was wrong on the merits and the tariff was  legal under the Act and applicable FCC regulations.

12
The FCC denied GNAPs' petition on March 22.  In re Bell  Atlantic-Delaware, Inc., et al. v. Global NAPs, Inc., Order on  Reconsideration, 15 F.C.C.R. 5,997 (2000) ("Reconsideration  Order").  The FCC rejected GNAPs procedural claims, explaining that its initial Order was based on issues that were  antecedent to those raised by Verizon's complaint, and therefore could be considered.  The FCC further rejected GNAPs'  contentions that the tariff was lawful and that GNAPs was  due compensation for services rendered to Verizon.

13
On March 24, 2000, GNAPs petitioned for review of both  orders.

II. Notice

14
Petitioner GNAPs contends the FCC violated both its own  rules and GNAPs' due process rights by basing its ruling on  legal arguments that were not presented by either party nor  raised by the FCC in its August 1999 briefing order.  According to GNAPs, only those issues pled to the Commission are  properly before it.  Therefore, GNAPs claims, the Commission was precluded from basing its decision on any other  grounds.  By doing otherwise, GNAPs claims the FCC violated its due process rights and the Order must be set aside.

15
The FCC's rules require that a petitioner plead "[a]ll  matters concerning a claim ... fully and with specificity."  47  C.F.R.  1.720(a).  As interpreted by the FCC, these rules  bar a complainant from amending or otherwise "introducing  new issues late in the development of the case."  In re  Implementation of the Telecom. Act of 1996, 12 F.C.C.R.  22,497, 22,597 p 241 (1997). GNAPs claims that any departure from those rules violates GNAPs' due process rights. Specifically, GNAPs alleges that the FCC's conduct contradicts the Administrative Procedure Act's ("APA") requirement that a party "shall be timely informed of ... the  matters of fact and law asserted."  5 U.S.C.  554(b).  See  Amoco Prod. Co. v. Fry, 118 F.3d 812, 819 (D.C. Cir. 1997)  ("Notice and a meaningful opportunity to challenge the agency's decision are the essential elements of due process."). The lack of notice, GNAPs claims, made it impossible for it to  respond to the arguments upon which the FCC ultimately  made its decision.  Proper notice, GNAPs claims, would have  enabled it "to cut its losses early on by amending its tariff." Brief for Petitioner at 27.

16
The FCC responds to GNAPs' procedural claims by arguing that it voided GNAPs' tariff based on legal theories that  were "antecedent" to those raised by Verizon.  The FCC  could not determine the reasonableness of the tariff without  determining what it covered, and that question was indeterminate given the ongoing DTE proceedings.  We agree. Though the precise legal theories relied upon by the Commission were different than those raised by Verizon, GNAPs  cannot credibly argue that the effect of the ongoing state  proceeding on GNAPs' tariff and Verizon's payment obligations was not squarely before the agency.  GNAPs cites  Virginia State Corp. Comm'n v. MCI, 14 F.C.C.R. 4744  (1999), for the proposition that in a Section 208 proceeding,  the FCC may only consider those issues briefed by the  complainant.  While the FCC declined to consider issues  raised sua sponte by Commission staff in Virginia State  Corp., it was not because the Commission lacked the authority to do so.  Rather, the FCC concluded that "[i]n the  particular circumstances" of that case the unbriefed issues  "raised difficult and important issues warranting extensive  analysis by the parties and the Commission."  Id. at 4753 p 24  n.65.  It was these "particular circumstances," and not the  complainant's failure to raise particular issues standing alone,  that would have deprived the parties "a full and fair opportunity" to address the issues.  Id.

17
There is no dispute that the FCC declared GNAPs' tariff  unlawful "for reasons other than those asserted" by Verizon. Order at p 14.  This does not, however, mean that GNAPs  was deprived due process.  Even assuming that the FCC  violated its own rules, GNAPs had adequate opportunity to  meet the charges on reconsideration.  GNAPs addressed the  substance of the FCC's findings in its petition for reconsideration (while claiming not to), and identified no significant  evidence that might have changed the FCC's conclusions. Unless we are given concrete reason to believe otherwise, we  will trust that an agency properly discharged its obligation to  reconsider those issues presented in a petition for reconsideration;  "we cannot consider the reconsideration to have been a  sham."  U.S. Satellite Broad. Co. v. FCC, 740 F.2d 1177, 1186 (D.C. Cir. 1984).  We therefore proceed to review the merits  of the FCC's decision.

III. Merits
A. Standard of Review

18
Under the APA, a reviewing court must uphold an FCC  order unless it is found to be "arbitrary, capricious, an abuse  of discretion, or otherwise not in accordance with law."  5  U.S.C.  706(2)(A).  This is a "deferential standard" that  "presume[s] the validity of agency action."  Southwestern  Bell Tel. Co. v. FCC, 168 F.3d 1344, 1352 (D.C. Cir. 1999). The FCC is due substantial deference in its implementation  of the Communications Act, and "even greater deference"  when interpreting its own rules and regulations.  Capital  Network Sys. v. FCC, 28 F.3d 201, 206 (D.C. Cir. 1994).  A  similar standard applies to the FCC's interpretation of tariffs. Such interpretations should be upheld where they are "reasonable [and] based upon factors within the Commission's  expertise."  American Message Centers v. FCC, 50 F.3d 35,  39 (D.C. Cir. 1995) (citation omitted).  Reversing an FCC  tariff interpretation should only occur where it "is not supported by substantial evidence, or the [Commission] has made  a clear error in judgment."  Id. (citation omitted).

B. The Tariff

19
The FCC found GNAPs' tariff to be ambiguous and to  contain an impermissible cross-reference.  Either is a sufficient ground to declare the tariff illegal.  GNAPs maintains  that a proper reading of its tariff shows that it is not  ambiguous and does not contain an impermissible crossreference.  Whereas the FCC and Verizon contend that the  tariff is conditional on another document--the referenced  interconnection agreement--GNAPs maintains that the tariff  is conditional on whether GNAPs was actually paid for carrying the traffic, irrespective of the reason.  GNAPs claims the  tariff is not unclear or ambiguous, as carriers will know  whether they paid GNAPs and therefore will know whether  the tariff applies.  For the same reason, GNAPs claims, the tariff should not be read to contain an impermissible crossreference in violation of 47 C.F.R.  61.74(a).

20
The FCC clearly has the better of this argument.  47  C.F.R.  61.74(a) provides that "no tariff publication filed  with the Commission may make reference to any other tariff  publication or to any other document or instrument."  The  relevant portion of the tariff reads:  "This tariff applies to all  ISP-bound traffic for which [GNAPs] does not receive compensation from the Delivering LEC under the terms of an  interconnection agreement."  (Emphasis added.)  From  these words it is unmistakable that the application of the  tariff is contingent upon whether GNAPs is paid "under the  terms of an interconnection agreement."  If GNAPs receives  payment for some other reason, this would not satisfy the  condition, and payment would still be due under the tariff. The tariff, on its face, violates the FCC's rule.  Any reasonable construction of the tariff's language would require a  customer to consult the interconnection agreement to determine whether the tariff applied.

21
The FCC also reasonably concluded that the tariff violates  47 C.F.R.  61.2(a) which provides that tariffs must be clear  and explicit "[i]n order to remove all doubt as to their proper  application."  When GNAPs filed the tariff, the DTE proceedings were still underway.  As a result, it remained unclear whether the GNAPs-Verizon interconnection agreement  required compensation for Internet-bound traffic.  If a party  could not know whether compensation was due under the  agreement, it could not know whether any payment to  GNAPs was "under the terms of an interconnection agreement."  If a party could not reasonably ascertain the "proper  application" of the tariff at the time it was filed, the tariff was  unclear and therefore was invalid.

22
DTE's subsequent dismissal of GNAPs' claim for compensation under the agreement did not "cure" its ambiguity for  several reasons.  First, the FCC's Order focused on whether  the tariff was valid at the time it was filed.  GNAPs revised  its tariff on February 14, 2000, eliminating the provisions  found unlawful by the FCC.  DTE's subsequent ruling could not retroactively cure the deficiency of the tariff in effect  prior to February 14 or affect the validity of charges GNAPs  sought to assess Verizon prior to that point.  In addition,  because GNAPs appealed the DTE finding, that matter was  not resolved when the FCC made its determination.  Finally,  even had the DTE ruling cured the tariff's indeterminacy, it  did not eliminate the impermissible cross-reference.

C. Statutory Structure

23
In a final effort to avoid the inevitable, GNAPs argues that  the FCC does not have the authority to invalidate tariffs  under Section 208, but only acts as an "adjudicator of private  rights."  AT&T v. FCC, 978 F.2d 727, 732 (D.C. Cir. 1992). In GNAPs' view, it would be proper for the FCC to award  damages to one party or another, but not to declare a tariff  unlawful on its face.  Challenges to tariffs themselves,  GNAPs claims, must proceed under Sections 204 and 205,  which relate to modifying or invalidating tariffs.

24
This argument is no more successful than GNAPs' creative  reading of its own tariff.  As we noted just last year, Section  204 grants the FCC "quasi-legislative authority to evaluate a  carrier's proposals for new or revised rates."  Hi-Tech Furnace Sys., Inc. v. FCC, 224 F.3d 781, 786 (D.C. Cir. 2000).  Section 208, on the other hand, grants "authority, upon  complaint by an injured party, to adjudicate the lawfulness of  a carrier's past and present rates and practices."  Id.  It is  difficult to conceive of this case as other than an adjudication  of "the lawfulness of a carrier's ... present rates and practices."

D. Relief

25
GNAPs argues, in the alternative, that even if the FCC was  correct to declare the tariff unlawful, the FCC erred by  "retroactively invalidating" the tariff.  Whatever the deficiencies of the tariff in this case, GNAPs argues, it is not so  deficient as to justify retroactive invalidation under the standards set forth in ICC v. American Trucking Assn's, 467 U.S. 354 (1984).  The retroactive invalidation is not, in GNAPs'  view, "legitimate, reasonable, and direct[ly] adjunct to the  Commission's explicit statutory power."  Id. at 365 (internal quotation omitted).  While acknowledging that the FCC has  the authority to order a complete refund of tariff overcharges,  GNAPs argues that the Commission must consider the equities before ordering such a result.  See Virgin Islands Tel.  Co. v. FCC, 989 F.2d 1231, 1240 (D.C. Cir. 1993);  Las Cruces  TV Cable v. FCC, 645 F.2d 1041, 1047-48 (D.C. Cir. 1981). Not only did the FCC not award GNAPs any compensation,  but it did not even bother to consider whether to exercise its  discretion.  Thus, even if the Court sides with the FCC on  the merits, GNAPs argues that a remand is necessary for the  FCC to consider whether payment to GNAPs for services  rendered is due.

26
GNAPs' argument that relief under Section 208 of the Act  cannot be retroactive in effect is clearly wrong.  Section 208  is designed to enable parties to obtain redress for a carrier's  violation of the Act or the FCC's regulations.  Yet insofar as  Section 208 authorizes the award of damages or other remedies, it is always "retroactive" in its application in that it will  always be changing the economic consequences of a carrier's  prior conduct.  The remedy here--complete invalidation of  GNAPs' tariff--may be more severe than consequential damages, but it is no more backward-looking.

27
The FCC notes that it may be inappropriate for GNAPs to  have filed its tariff in the first place.  The FCC has not  authorized, let alone required, carriers to file tariffs for local  Internet-bound traffic.  Instead, the Commission expected  carriers to enter into interconnnection agreements that would  set compensation subject to state commission approval. Merely because a tariff is presumed lawful upon filing does  not mean that it is lawful.  Such tariffs still must comply with  the applicable statutory and regulatory requirements.  Those  that do not may be declared invalid.  Indeed, GNAPs acknowledges that "[a] tariff that is so plainly defective as to be  a legal nullity may be declared retroactively invalid--void ab  initio--in order to ensure that an injustice is not worked on  the affected customers."  Brief for Petitioner at 36.  That  was the case here.  The FCC found that the tariff, on its face,  violated the plain meaning of the FCC's tariff regulations and  therefore was unlawful from the date of issuance.  This is sufficient to satisfy the test laid out in American Trucking  Ass'ns as the FCC voided a tariff in furtherance of a "specific  statutory mandate" to which the action was "directly and  closely tied." 467 U.S. at 367.  The other cases cited by  GNAPs--Virgin Islands Tel. Co. and Las Cruces TV Cable- are distinguishable, as they involved refunds for unreasonable  rates, and not a patently unlawful tariff.

28
While we uphold the FCC's conclusion that the tariff was  void ab initio and invalid from the date it was published, we  have not left GNAPs without opportunity to seek redress. Our holding today does not foreclose GNAPs' ability to seek  compensation under the interconnection agreement before the  DTE as well as to seek a negotiated compensation settlement  with Verizon.  If this route is unsuccessful or impractical, and  the FCC's rules make it difficult for GNAPs and other  carriers to obtain compensation for Internet-bound traffic,  they may petition the FCC for a change in the Commission's  rules.  That GNAPs sought to game the existing rules, and  lost, does not mean the FCC was arbitrary and capricious in  its application of its own rules.

IV. Conclusion

29
For the foregoing reasons, the petition for review is

30
Denied.