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Communications Vending Corp. of Arizona, Inc. v. Federal Communications Commission

April 30, 2004


On Petitions for Review of an Order of the Federal Communications Commission

Before: Sentelle, Randolph, and Tatel, Circuit Judges.

The opinion of the court was delivered by: Tatel, Circuit Judge

Argued February 20, 2004

Katherine J. Henry argued the cause for IPP petitioners. With her on the briefs was Albert H. Kramer.

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.

In these consolidated cases, we consider challenges to the Federal Communications Commission's ruling that local telephone companies unreasonably imposed certain end-user charges on independent payphone providers from 1986 to 1997. One set of petitioners, local telephone companies, argues that the Commission had no basis for finding them liable. Another set of petitioners, independent payphone providers, challenges the Commission's application of the Communications Act's statute of limitations to limit their recovery to charges paid during the two years prior to the filing of their complaints. Concluding that both decisions are consistent with law and neither arbitrary nor capricious, we affirm the Commission in all respects.


This dispute between local telephone companies (known as local exchange carriers or LECs) and independent payphone providers (IPPs) has a long pedigree in this court. Two prior opinions describe the background in detail. See Verizon Tel. Cos. v. FCC, 269 F.3d 1098 (D.C. Cir. 2001); C.F. Communications Corp v. FCC, 128 F.3d 735 (D.C. Cir. 1997).

The history begins in 1983, when the Commission issued access charge rules authorizing LECs to recover certain nontraffic sensitive costs (such as the cost of installing phone lines) through flat monthly charges called End User Common Line (EUCL) charges. In re MTS and WATS Market Structure, Third Report and Order, 93 F.C.C.2d 241, 242–43 (1983), modified on recons., 97 F.C.C.2d 682 (1983) ( Access Charge Recons. ), modified on further recons., 97 F.C.C.2d 834 (1984), aff'd in part and remanded in part sub nom. Nat'l Ass'n of Regulatory Util. Comm'rs v. FCC, 737 F.2d 1095 (D.C. Cir. 1984). Under those rules, LECs could assess EUCL charges only on ''end users,'' defined by the Commission's rules as ''any customer of TTT telecommunications service TTT [or] a person or entity that offers telecommunications services exclusively as a reseller TTT if all resale transmissions TTT originate on the premises of such reseller.'' 47 C.F.R. § 69.2(m) (2003).

Of particular significance to the issue we face here, the access charge rules applied differently to public and semipublic payphone service. The Commission explained: ''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.'' Access Charge Recons., 97 F.C.C.2d at 704 n.41 (emphasis added). By contrast, ''[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.'' Id. at 704 n.40 (emphasis added). Because end users of public payphones are the transient general public, rather than identifiable subscribers, the Commission's rules exempted public payphone service from EUCL charges and instead allowed LECs to recover public payphone costs from long distance carriers. See id. at 705, ¶ 58. Semi-public payphone service, however, was subject to EUCL charges because the LECs' ''fixed costs [could] be recovered from an identifiable business end user through flat charges.'' Id. at 706, ¶ 60.

At the time the Commission issued its access charge rules, all payphones were owned and operated by LECs. In 1984, the Commission allowed IPPs to enter the market and compete with LEC payphones. Because the access charge rules were established at a time when only LECs provided payphone service, the rules said nothing about how EUCL charges would apply to IPP-owned payphones. Acting entirely on their own, however, the LECs began assessing EUCL charges on all IPP payphones, both public and semipublic, as soon as IPPs entered the market. The IPPs objected, and in 1989 their trade association filed a petition with the Commission challenging the lawfulness of the charges. Also in 1989, one IPP, C.F. Communications Corporation (CFC), filed a complaint with the Commission, arguing that its payphones should be exempt from EUCL charges because it was not an ''end user'' and because it provided public payphone service.

Denying CFC's complaint, the Commission ruled that the LECs had properly assessed EUCL charges under the access charge rules. CFC, the Commission explained, met the regulatory definition of ''end user'' because it was a ''reseller'' whose resale transmissions ''originate[d] on [its] premises.'' In re C.F. Communications Corp. v. Century Tel. of Wisc., Inc., 10 F.C.C.R. 9775, 9778–79, ¶¶ 12–17 (1995) (quoting 47 C.F.R. § 69.2(m)) (internal quotation marks omitted). The Commission also found that CFC's payphones were not ''public telephones'' but rather semi-public payphones subject to EUCL charges. See id. at 9779–80, ¶¶ 20–21. Relying on that order, the Commission denied complaints filed by several other IPPs challenging the imposition of EUCL charges.

In C.F. Communications v. FCC, however, we reversed the Commission's CFC decision, concluding that the Commission ''erred in determining that CFC was an 'end user' '' within the meaning of its rules. 128 F.3d at 740. We found ''the Commission's interpretation of the word 'premises,' '' a ''real property'' term, to encompass IPP payphones, items of ''personal property,'' to be ''so far removed from any established definition of that word'' that it was ''plainly erroneous.'' Id. at 739. We also found the Commission's decision ''not reasoned'' because by permitting EUCL charges on IPP-owned but not LEC-owned public payphones even though both provided indistinguishable telephone service, the Commission ''improperly discriminated between similarly situated phone services without a rational basis.'' Id. at 740.

Following our lead, the Commission reversed itself on remand, concluding that the LECs had imposed an unreasonable charge in violation of agency regulations and 47 U.S.C. § 201(b) (2000), which requires that charges for communications services be ''just and reasonable.'' See In re C.F. Communications Corp. v. Century Tel. of Wisc., Inc., 15 F.C.C.R. 8759, 8768, ¶ 24 (2000) ( CFC Remand Order ). According to the Commission, ''CFC and the other IPPs [could not] be considered 'end users' '' under the definition of that term because they owned the payphones but not the ''premises'' from which payphone calls were made. Id. The Commission went on to state, however, that ''irrespective of whether CFC was an 'end user,' TTT the primary determination the Commission should have made was whether CFC's payphones were 'public' or 'semi-public.' '' Id. at 8768, ¶ 25. Viewing the rules this way, the Commission concluded that LECs had unreasonably imposed EUCL charges on IPP public payphones. See id. at 8766, ¶ 20.

The LECs then petitioned for review, arguing that liability was unfounded because they had acted in reliance on the Commission's prior ruling approving the charges. Observing that the Commission's decision was ''under unceasing challenge before progressively higher legal authorities'' until ultimately being ...

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