Parties Challenge FCC’s Carrier’s Carrier Clarification Order


Global Crossing Bandwidth, Inc. (“Global Crossing”), XO Communications Services, LLC (“XO”),  and TelePacific Communications (“TelePacific”) have each raised challenges to the FCC’s 2012 Wholesaler-Reseller Clarification Order (FCC 12-134), an order that affects the decisions and practices of all companies either purchasing and consuming or purchasing and reselling telecommunications services.  Each challenge raises seemingly simple issues, but if successful could disrupt the FCC’s and USAC’s past enforcement of the carrier’s carrier rule as embodied in the 499 Instructions.  The common theme among each petition is that the FCC has been making what amount to significant substantive rule changes for years without proper notice and an opportunity for affected parties to participate and comment.

On December 19, 2012, Global Crossing, a wholesale telecommunications provider, filed a petition for review in the D.C. Circuit, arguing that the FCC unlawfully “affirmed” a definition of reseller that developed over time through changes to the Form 499 instructions without notice or the opportunity for affected parties to comment.  In the Order, the FCC stated that the definition of “reseller” has been established since 1997 as an entity that “not only (1) incorporates purchased telecommunications into its own service offerings; but also (2) contributes to the [Universal Service] Fund based on revenues from those offerings.”

On December 5, 2012, XO and TelePacific each filed petitions for partial reconsideration with the FCC.  XO is seeking clarification or reconsideration of the evidentiary standards set forth in the Order.  Specifically, XO challenges the FCC’s directions to USAC for reviewing whether XO had a reasonable expectation that customers would contribute directly to the Fund.  XO had relied on confirmatory certificates obtained for the relevant time period but after contributions were made.  These certificates contained the sample language from the Form 499 Instructions.   The FCC placed the burden on XO to demonstrate by “clear and convincing” evidence that certain customers contributed directly to the Fund.  XO argues that this heightened evidentiary standard is unprecedented, arbitrary and capricious, and that the FCC has promulgated what is tantamount to a “legislative rule” without the notice and opportunity for comment required by the Administrative Procedure Act.

TelePacific seeks reconsideration concerning the assessment of revenues of broadband Internet service providers.  TelePacific states that the FCC has adopted a new requirement that reseller certification would be required on a “service-by-service” basis, not an “entity-by-entity” basis.  The effect of this change, the company argues, is to impose indirect contribution obligations on upstream providers such as TelePacific on the cost of broadband transmission service they lease from an ILEC to provide retail broadband Internet service, whereas the ILEC/owner of the transmission facilities does not bear this obligation when providing nearly identical retail services.  This inequity, TelePacific argues, violates the principles of competitive neutrality imbedded in Section 254.

The Wireline Competition Bureau is seeking comment on both petitions.  Comments on the TelePacific petition are due January 9, 2013, and comments on the XO petition are due January 10.

In addition, although the FCC styled its 2012 Wholesaler-Reseller Clarification Order as a “clarification” of existing rules, the FCC nonetheless is seeking comments on proposed modifications to its Form 499 related to the Order, such as deleting the instruction advising wholesale carriers to rely upon the FCC’s online database to determine a reseller customer’s Universal Service Fund contribution status.  Comments are due January 11, 2013.

Should you have questions, please contact the primary Attorney assigned to your account.

ATTORNEY ADVERTISING DISCLAIMER: This information may be considered advertising in some jurisdictions under the applicable law and ethical rules. The determination of the need for legal services and the choice of a lawyer are extremely important decisions and should not be based solely upon advertisements or self-proclaimed expertise. No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers

Sign Up To Receive Our
Advisories and Compliance Alerts

Sign up for our email list to receive notifications regarding new advisories and news