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United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 18, 2003 Decided January 16, 2004
No. 02-1255
MOUNTAIN COMMUNICATIONS, INC.,
PETITIONER
v.
FEDERAL COMMUNICATIONS COMMISSION AND
UNITED STATES OF AMERICA,
RESPONDENTS
T–MOBILE USA, INC., ET AL.,
INTERVENORS
On Petition for Review of an Order of the
Federal Communications Commission
Benjamin J. Aron argued the cause for petitioner. With
him on the briefs was Robert H. Schwaninger, Jr.
Charles W. McKee argued the cause for Wireless Carrier
intervenors T–Mobile USA, Inc., et al., in support of petition-
Bills of costs must be filed within 14 days after entry of judgment.
The court looks with disfavor upon motions to file bills of costs out
of time.
2
er. With him on the briefs were Luisa A. Lancetti, Doanne
F. Kiechel, Thomas J. Sugrue, David M. Wilson, Laura R.
Handman, Jonathan E. Canis, and Douglas I. Brandon.
Stewart A. Block, Counsel, Federal Communications Com-
mission, argued the cause for respondents. On the briefs
were R. Hewitt Pate, Assistant Attorney General, U.S. De-
partment of Justice, Catherine G. O’Sullivan and Nancy C.
Garrison, Attorneys, John A. Rogovin, General Counsel,
Federal Communications Commission, John E. Ingle, Deputy
Associate General Counsel, and Laurel R. Bergold, Counsel.
Robert B. McKenna, Jr. argued the cause for intervenors
Qwest Communications International Inc., et al., and amici
curiae Verizon Telephone Companies. With him on the brief
were Michael E. Glover, John M. Goodman, and Edward H.
Shakin.
Before: SENTELLE and GARLAND, Circuit Judges, and
SILBERMAN, Senior Circuit Judge.
Opinion for the Court filed by Senior Circuit Judge
SILBERMAN.
SILBERMAN, Senior Circuit Judge: Mountain Communica-
tions, Inc. is a paging carrier that petitions for review of an
FCC order dismissing its complaint against Qwest–the local
exchange carrier (LEC) serving the areas where Mountain
operates–for charging petitioner two types of fees. The
dispute between the carriers as to one of the fees evaporated
at oral argument, but we hold that the FCC’s decision as to
the other was arbitrary and capricious.
I.
Mountain serves customers in three Colorado local calling
areas: Colorado Springs, Walsenburg, and Pueblo. All three
local calling areas are within the same Local Access and
Transport Area (LATA), and Qwest is the provider of local
service within each of those local calling areas. Calls from a
Qwest customer to another Qwest customer in the same local
calling area are local calls, but if a Qwest customer were to
3
call from one of these local calling areas to another, he or she
would incur a toll.
Though Mountain services all three local calling areas, it
uses a single point of interconnection (POI) with Qwest, as it
is entitled by statute. See 47 U.S.C. § 251(c)(2)(B) (providing
that LECs must provide interconnection facilities with other
carriers ‘‘at any technically feasible point within the [incum-
bent local exchange] carrier’s network’’); see also 47 C.F.R.
§ 51.321(a); In re: Developing a Unified Intercarrier Com-
pensation Regime, 16 FCCR 9610, 9650–51 ¶ 112 (2001). The
POI is located in Pueblo. Customers in each of the three
calling areas have pager numbers associated with their indi-
vidual local calling areas. It is therefore the paging custom-
er’s residence that correlates with the paging number, and a
call from a telephone in a local calling area to a pager
associated with the same local calling area will seem to the
calling party to be a local call. But Mountain’s maintenance
of a single POI in Pueblo, however, means that every call to a
Mountain customer, regardless of the place where the call
originated, must pass through Pueblo before Qwest hands it
off to Mountain and Mountain delivers it to the pager. Thus,
a Colorado Springs resident attempting to page a Colorado
Springs Mountain customer dials a Colorado Springs ex-
change, but the call is first routed to Pueblo before being re-
routed to Colorado Springs.
Qwest has sought to collect fees from Mountain for these
types of calls–calls that originate and terminate in Colorado
Springs or Walsenburg but go through Mountain’s POI in
Pueblo. Qwest considers these calls to be toll calls, but does
not charge its own customer–the caller–for placing such calls,
perhaps because it lacks the technological ability to do so.
See Starpower Communications, LLC v. Verizon South, Inc.,
2003 FCC LEXIS 6245, at *23 ¶ 17(Nov. 7, 2003) (attributing
such a technological incapacity to Verizon). Instead, Qwest
determines whether a customer’s call is a toll call by compar-
ing the number of the caller with the number of the person
receiving the call. If both are Colorado Springs numbers,
Qwest does not charge the customer a toll even if the call is
routed to Pueblo and then back to Colorado Springs.
4
Qwest claimed in response to Mountain’s complaint before
the FCC that it was entitled to charge Mountain for the tolls
it was unable to charge its own customers. According to
Qwest, Mountain could avoid the toll charges by establishing
a POI in each of the three local calling areas–doubtless at an
increased cost. Then, if a paging call were placed from a
local number to another local number, no toll would be
charged to anyone. If, on the other hand, a paging call were
made from one local calling area to another, Qwest would
transport the call to Mountain’s POI–without crossing a local
calling area boundary–at which time Mountain would assume
responsibility for delivering the call across the local calling
areas, presumably at Mountain’s expense.
Mountain claimed before the FCC that the Commission’s
regulations, specifically 47 C.F.R. § 51.703(b), which states
that LECs such as Qwest ‘‘may not assess charges on any
other telecommunications carrier for telecommunications traf-
fic that originates on the LEC’s network,’’ prohibit Qwest
from charging for transmitting calls from Qwest customers to
Mountain’s POI. Mountain also relied on a recent FCC
decision, TSR Wireless, LLC v. US West Communications,
Inc., 15 FCCR 11166, 11184 ¶ 31 (2000), which interpreted
that regulation and rejected a similar effort on the part of an
LEC to charge a paging carrier for transmitting calls to the
paging carriers’ POI, where the POI and the caller are in the
same LATA but different local calling areas.
The Commission rejected Mountain’s contention. The
FCC said that in its TSR decision it had cautioned,
nothing prevents [the LEC] from charging its end
users for toll calls completed [between local calling
areas]. Similarly, section 51.703(b) does not pre-
clude [the paging carrier and the LEC] from enter-
ing into wide area calling or reverse billing arrange-
ments whereby [the paging carrier] can ‘buy down’
the cost of such toll calls to make it appear to end
users that they have made a local call rather than a
toll call.
5
15 FCCR at 11184 ¶ 31 (emphasis added). This buy-down
arrangement is the same concept behind conventional 800
numbers, where the called party is billed for the toll ordinari-
ly incurred by the calling party.
The Commission concluded that here, by establishing a POI
in Pueblo and then asking Qwest for lines to connect local
customer numbers in Walsenburg, Colorado Springs, and
Pueblo to the POI, Mountain made it appear to Qwest
customers that they were making local calls from Colorado
Springs numbers to Colorado Springs paging numbers–even
though they passed through a Pueblo POI. ‘‘By configuring
its interconnection arrangement in this manner, Mountain
prevents Qwest from charging its customers for what would
ordinarily be toll calls to access Mountain’s network.’’ Moun-
tain Communications, Inc. v. Qwest Communications Int’l,
Inc., 17 FCCR 15135, 15138 ¶ 5 (2002). The Commission
determined that Mountain had obtained a wide area calling
service, which is similar to a wide area calling arrangement,
and therefore Qwest was entitled to charge Mountain for that
service.
II.
Although petitioner does not quarrel with the Commission’s
caveat in TSR–that the regulation does not prohibit a wide
area calling arrangement–it insists that this case is no differ-
ent than TSR; the Commission has simply turned 180 de-
grees without explanation, and adopted a position at odds
with its own regulation and the statutory provision allowing
Mountain to make use of one POI within a LATA. We are
befuddled at the Commission’s efforts to explain away its
TSR decision; the facts seem–and are conceded to be–identi-
cal, but the results are opposite. In TSR, the FCC prohibit-
ed US West, the LEC, from charging TSR, the paging
carrier, for the costs of transporting calls from US West
customers to TSR’s POI.1 In that case, just as in the present
situation, the paging carrier served separate local calling
1 US West was the predecessor company to Qwest, the LEC
involved in the present dispute.
6
areas (Yuma and Flagstaff, Arizona), both of which were
within the same LATA and served by the same LEC. TSR
used a single POI, and a US West customer wishing to page a
TSR customer within the same local calling area would have
to place a call that would be routed across local calling area
boundaries. US West attempted, as Qwest attempts here, to
charge the paging carrier a fee for transporting those calls to
the paging carrier’s POI. The FCC ruled that such a charge
would violate 47 C.F.R. § 51.703(b), because the calls origi-
nated on US West’s network, and an LEC may not charge
another carrier for traffic originating on the LEC’s network.
See TSR, 15 FCCR at 11176 ¶ 18, 11181 ¶ 25, 11184 ¶ 31.2
The FCC concedes that the facts of TSR are identical to
those presented here, but argues that the present network
configuration nevertheless may be considered wide area call-
ing, even if the same configuration in TSR was not so
considered.
The Commission’s attempt to stretch the concept of a wide
area calling arrangement (essentially an agreement) to a wide
area calling ‘‘service’’ is logically inconsistent with its TSR
decision.3 The premise, according to the Commission’s TSR
2 In the words of the Commission, ‘‘[s]ection 51.703(b), when read
in conjunction with Section 51.701(b)(2), requires LECs to deliver,
without charge, traffic to [wireless] providers anywhere within the
MTA [Major Trading Area] in which the call originatedTTTT’’ TSR,
15 FCCR at 11184 ¶ 31. An MTA is the area within which wireless
providers offer service, and within which the FCC’s reciprocal
compensation rules apply. All three local calling areas at issue here
are within the same MTA. Section 51.701(b)(2), to which the
Commission referred, defines ‘‘telecommunications traffic’’ as that
traffic ‘‘exchanged between a LEC and a [wireless] provider that, at
the beginning of the call, originates and terminates within the same
Major Trading Area, as defined in § 24.202(a) of this chapter.’’
3 Mountain argues that under Qwest’s tariffs, wide area calling
services exist only where the wireless carrier uses an interconnec-
tion known as Type 2. Mountain uses a Type 1 interconnection,
which differs from Type 2 in that Mountain’s customers have
telephone numbers associated with their individual local calling
7
reasoning, of a wide area calling arrangement is that the
LEC can charge a toll call to its customers. In that event the
paging carrier has an incentive to ‘‘buy down’’ that charge so
that Qwest’s customer is not deterred by the toll from making
a paging call. Here, for reasons not entirely clear to us,
Qwest does not charge its customers for what it regards as a
toll call if the originating number and the paging number are
in the same local calling area. See generally Starpower
Communications, 2003 FCC LEXIS 6245 at *23 ¶ 17 (Nov. 7,
2003) (noting that ‘‘industry practice among local exchange
carriers TTT appears to have been that calls are designated as
either local or toll by comparing the [phone numbers] of the
calling and called parties’’).4 Accordingly, Mountain has no
incentive to enter into a wide area calling arrangement with
Qwest. Mountain’s system of interconnection provides it no
advantages other than those to which, presumably, it is
entitled for free.5 The Commission nevertheless chooses to
areas instead of having numbers associated with the location of the
POI, here, Pueblo. Before us, the FCC denies that there is any
distinction between Type 1 and Type 2 interconnections for the
purpose of establishing whether there is a wide area calling ar-
rangement. We need not decide whether there can be a wide area
calling arrangement in a Type 1 system, and our analysis does not
turn on a conception of wide area calling being limited to Type 2
systems.
4 Mountain further argues that Qwest would not legally be per-
mitted to charge for calls by Qwest customers to paging customers
with numbers in the same local calling area as the caller. See 47
U.S.C. § 153(48) (allowing a ‘‘separate charge’’ beyond that re-
quired for local service for ‘‘telephone service between stations in
different exchange areas’’) (emphasis added); 47 C.F.R. § 51.701(d)
(defining a call’s termination as the point at which the call is
delivered to the called party). We need not decide whether the
FCC could reasonably interpret the statute and regulation to allow
a toll where a call begins and ends within a single local calling area
but passes through a different one.
5 Neither in TSR nor in this case has the Commission suggested,
or has Qwest claimed, that Qwest had any right to refuse to allow
8
term what Mountain has ordered from Qwest as wide area
calling ‘‘service,’’ which presto becomes a reasonable facsimile
of a wide area calling agreement. The FCC’s characteriza-
tion of Mountain’s arrangement as a wide area calling ‘‘ser-
vice,’’–sort of a constructive agreement–is rendered even
more dubious by the fact that there are no additional services
provided by wide area calling. The only difference between
wide area calling and traditional telephony is the entity billed
for the tolls.
Unfortunately for the Commission, the exact same analysis
could have been applied in TSR–but was implicitly rejected.
Therefore the Commission has, just as Mountain has claimed,
changed direction without explanation, indeed without even
acknowledging the change.
Perhaps more fundamental, by abandoning the concept of a
buy-down agreement between the parties and simply desig-
nating the service Mountain obtained as a wide area calling
service, the Commission seemingly comes into direct conflict
with its own regulation. See MCImetro Access Transmission
Servs. v. BellSouth Telecomms, Inc., No. 03–1238, 2003 U.S.
App. LEXIS 25782, at *24 (4th Cir. Dec. 18, 2003) (holding
that 47 C.F.R. § 51.703(b) ‘‘unequivocal[ly] prohibit[s] LECs
from levying charges for traffic originating on their own
networks, and, by its own terms, admits of no exceptions’’).
In TSR, the Commission had interpreted its regulation
51.703(b), which prohibits LECs from assessing charges on
other carriers for delivering traffic originating on the LEC’s
network, as not applying to a voluntary agreement that a
paging carrier enters into with the LEC to compensate the
LEC for foregoing its option to charge its customers. In
other words, the Commission implicitly construed such an
agreement as not a ‘‘charge’’ for telecommunications traffic
but rather compensation for a separate benefit. The Com-
mission described ‘‘wide area calling’’ as ‘‘a service in which a
Mountain to obtain paging numbers associated with each local
calling area. See In re: Numbering Resource Optimization, 15
FCCR 7574, 7577 n.2 (2000) (‘‘A carrier must obtain a central office
code [the first three digits of a seven-digit phone number] for each
rate center in which it provides service in a given area code.’’).
9
LEC agrees with an interconnector not to assess toll charges
on calls from the LEC’s end users to the interconnector’s end
users, in exchange for which the interconnector pays the
LEC a per-minute fee to recover the LEC’s toll carriage
costs.’’ TSR, 15 FCCR at 11167 n.6 (emphasis added). But
in this case the Commission abandoned that construction,
instead allowing Qwest to charge Mountain for the wide area
calling service it was deemed to enjoy, though there was no
agreement. By shifting its characterization of the exception
to § 51.703(b)’s prohibition on charges from an agreement to
compensate LECs for a foregone opportunity, to a charge for
the telecommunications traffic, the FCC decision appears to
run afoul of § 51.703(b)’s prohibition on charges.
The Commission, moreover, has not even tried to explain
how its position can be reconciled with the statutory provi-
sion, 47 U.S.C. § 251(c)(2)(B), which, it will be recalled,
obliges an LEC to provide interconnection facilities with any
other carrier at a single ‘‘technically feasible’’ POI. Mountain
maintains that that statutory provision implicitly precludes an
LEC from charging for such an interconnection, and the
Commission has not responded to that argument. We do not,
therefore, decide whether the Commission could reasonably
interpret the statute to allow for such charges.
We therefore rather easily conclude that the Commission’s
decision on this issue is arbitrary and capricious. See gener-
ally, e.g., Ramaprakash v. FAA, 346 F.3d 1121, 1124–25 (D.C.
Cir. 2003).
III.
In addition to the charges Qwest has assessed for deliver-
ing Qwest-originated calls to Mountain’s POI, Qwest has also
assessed ‘‘transit’’ charges for the delivery of calls originated
by a customer of an entirely different network. If a non-
Qwest customer wishes to page a Mountain customer, the call
is routed to Qwest. Qwest then carries the call on its
network–in like manner as if a Qwest customer had placed
the call–to Mountain’s POI. Mountain then assumes respon-
10
sibility for delivering the call to the Mountain customer.
Qwest incurs costs for switching and routing these calls over
the Qwest network, and Qwest charged Mountain for the last
of five parts of those expenses–the cost of delivering the call
from the Qwest end office switch to Mountain’s POI. The
FCC allowed Qwest to charge for this service, but indicated
that Mountain could seek reimbursement from the originating
carrier for whatever charges it paid to Qwest. See Mountain
Communications, 17 FCCR at 15137 n.13. Mountain’s peti-
tion challenged this FCC decision as well, claiming that the
charge is arbitrary and capricious because it does not follow
the standard practice of charging the cost of calls to the
network of the party initiating the call. Mountain insisted
that the prospect of reimbursement from the originating
carrier was illusory, because Mountain never receives infor-
mation from Qwest about which carrier initiates any individu-
al call, and it is therefore impossible for Mountain to seek
reimbursement from a third carrier.
It is undisputed that Qwest need not absorb these costs;
the only question is whether Qwest can charge Mountain for
one of the five portions of this cost or must instead look to the
originating carrier for all of the costs. It might well be
reasonable for the Commission to authorize Qwest to appor-
tion those costs, but we do not understand why the Commis-
sion did so. It did not explain why it rejected Mountain’s
contention that the originating carrier should be charged for
all the costs. In any event, by indicating that Mountain could
charge the originating carrier, it suggested that Mountain
was essentially correct in claiming that the originating carrier
should bear all the transport costs. At oral argument,
Qwest’s counsel obviated any need for us to decide this issue
by indicating that Qwest would provide Mountain with the
information necessary so that Mountain could charge the
originating carrier for reimbursement. Under those circum-
stances, Mountain dropped that part of its petition.
*****
Accordingly, the Commission’s order is vacated in part and
the case is remanded.