CLECs Challenge FCC’s 2019 Access Stimulation Rules

Briefing is now complete at the D.C. Circuit in the latest appeal involving the FCC’s rules on access stimulation schemes.  Access stimulation (or traffic pumping) refers to a practice in which a local telephone company partners with entities that generate large amounts of terminating long-distance traffic, such as “free” conference calling providers and chat lines.  This allows the local telephone company to generate large revenues from the access charges that long-distance carriers must pay to terminate the calls through the local telephone company.  The revenues are then shared with the conferencing or chat line entities, which allows the services to be “free” to the end users.

In 2011, the FCC declared access stimulation a “wasteful arbitrage scheme” and adopted rules to curb the practice, primarily through requiring companies engaged in traffic pumping to reduce their rates to those of the large, urban carriers.  Connect America Fund, 26 FCC Rcd 17663, ¶¶ 656-201 (2011), aff’d, In re FCC 11-161, 753 F.3d 1015 (10th Cir. 2014).  However, those rules did not reduce the practice as much as hoped.  For instance, some traffic pumpers  adjusted their schemes by including intermediate carriers (tandem and transport providers) in the call flow, which increased the overall charges.

Continue reading “CLECs Challenge FCC’s 2019 Access Stimulation Rules”

Tenth Circuit Holds There is No Limitations Period for FCC Debt Collections

In a decision issued this week, the Tenth Circuit held that when the FCC acts to collect debts to the United States, rather than impose a fine or punishment, its actions are governed by the Debt Collection Improvements Act (DCIA), 31 U.S.C. §§ 3711-17, which means there is no limitations period.  Blanca Tel. Co. v. FCC, Nos. 20-9510 and 20-9524 (10th Cir Mar. 15, 2021).

The Universal Service Fund (USF) provides subsidies to telephone companies to promote universal availability of telephone service.  The FCC administers and enforces the rules governing the distribution of USF support to carriers.  During the relevant period (2005-2010) the FCC’s rules required incumbent local exchange carriers (incumbent LECs) to use accounting that allocated costs between regulated and unregulated activities, because those carriers could not receive USF support for unregulated activities or for service outside their designated “study area.”  Cellular service is an unregulated service for USF purposes (except for “basic” cellular service).  Blanca Telephone Co. was an incumbent LEC but did not separate its costs for regulated and unregulated service (such as cellular service), which resulted in Blanca receiving more than $6 million in USF support for non-basic cellular service and service outside its study area.

The FCC sought to recover that money in 2016 and eventually issued an order requiring repayment.  Blanca challenged the order, arguing the FCC was time-barred under either 47 U.S.C. § 503(b)(6) (one-year limitations period) or 28 U.S.C. § 2462 (five years). The FCC, however, said it acted under the DCIA, which expressly provides there is no limitations period.  31 U.S.C. §§ 3716(e)(1).  In deciding which statute applied, the first key issue was whether the FCC was imposing a penalty (and thus governed by one of the statutes Blanca cited) or engaged in debt collection.  The court held that even though Blanca violated a public law and the public was being protected by the FCC’s actions, including by deterrence of others, the action was best treated as debt collection because the FCC’s core purpose was to recover its overpayment of USF support to Blanca. The second key issue was whether the collection was of funds “owed to the United States” per 31 U.S.C. § 3701(b)(1).  The court held it was, as the FCC was collecting amounts “disallowed by audits performed by the Inspector General of the agency administering the program,” as allowed by 31 U.S.C. § 3701(b)(1)(c).  The decision is notable because, although it is tied to the specific facts of the case, it allows FCC recovery for potentially very old regulatory violations if they involve a true debt to the government.

If you have any questions regarding this post or other telecommunications issues, please contact Ty Covey (jtcovey@duanemorris.com) or Brian McAleenan (bamcaleenan@duanemorris.com).

FCC Emphasizes Limits On Local Fees For Small-Cell Facilities

Wireless telecom providers have been deploying new small-cell technology and equipment for 5G service across the nation.  Deployment often requires the providers to obtain access to public rights of way to put their small-cell equipment on cities’ or municipalities’ utility poles (or use underground ducts or conduit).  Cities and municipalities, of course, seek compensation for allowing this access to public equipment and rights-of-way.  The FCC addressed this compensation issue in 2018, setting safe-harbor caps on local fees but allowing higher charges if they meet certain requirements.  Accelerating Wireless Broadband Deployment by Removing Barriers to Infrastructure Investment, 33 FCC Rcd 9088 (2018).  The Ninth Circuit upheld that decision in relevant part.  City of Portland v. FCC, 969 F.3d 1020 (9th Cir. 2020).

Clark County, Nevada (home of Las Vegas) adopted an ordinance with annual fees well above the FCC’s safe harbors.  The ordinance required holder of a Master Use License Fee to pay 5% of gross revenues each calendar quarter, plus a Wireless Site License Fee of $700 to $3,960/year/facility (with annual increases of 2%), plus an Annual Inspection Fee of $500 per Small Wireless Facility in county rights-of-way.  Verizon challenged that ordinance at the FCC as being preempted by 47 U.S.C. 253(d) because it effectively prohibited Verzon from providing service.  The FCC, through its Wireless Telecommunications Bureau, recently dismissed Verizon’s complaint without prejudice in light of Clark County having adopted a new ordinance.  Petition for Declaratory Ruling That Clark County, Nevada Ordinance No. 4659 is Unlawful Under Section 253 of the Communications Act as Interpreted by the Federal Communications Commission and is Preempted, WT Docket No. 19-230, DA 21-59 (rel. Jan. 14, 2021).   In doing so, however, the FCC emphasized three key aspects of its rules that certainly will bear on any pending or future disputes between wireless providers and other municipalities that seek to impose fees above the FCC’s safe harbors.  These points appear directed at preventing other state or local authorities from making some of the same arguments Clark County was making.

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California Net Neutrality Law Put On Hold Pending Federal Litigation

California recently passed what some argue to be the most robust net neutrality state law in the United States. That law has not yet gone into effect.

The very same day that California Governor Jerry Brown signed the net neutrality bill into law, the US Department of Justice was quick to filed a federal lawsuit, among other goals, to block implementation of the law. And last week, the Department of Justice and California Attorney General Xavier Becerra entered into an agreement to further postpone implementation of the California net neutrality law until the federal lawsuit is concluded.

So, what is at stake here? Continue reading “California Net Neutrality Law Put On Hold Pending Federal Litigation”

FTC, FCC Flex Muscles

Duane Morris partner Joseph Burton was featured in a video on Bank Info Security  on the impact of regulators involved in cybersecurity.

The Federal Trade Commission and the Federal Communications Commission are among U.S. regulators now starting to flex their muscles when it comes to enforcing cybersecurity standards, says Burton. What enforcement trends might we expect to see in 2017?

To view the video, please visit the Bank Info Security website.