ATTENTION!!!  IF YOUR COMPANY CONTRACTS WITH OUTBOUND CALL TERMINATING CARRIERS AND, IN PARTICULAR, FOCUS ON “LEAST COST ROUTING” METHODOLOGIES, PLEASE PAY CLOSE ATTENTION TO THE ISSUES RAISED IN THIS ADVISORY.  CONTACT ROB JACKSON OR YOUR PRIMARY ATTORNEY WITH QUESTIONS OR CONCERNS ABOUT THE RURAL CALL COMPLETION RULES AND HOW THEY MAY IMPACT YOUR OPERATIONS AND RISK EXPOSURE.

In an earlier Client Advisory on the FCC’s Rural Call Completion (“RCC”) rules, we discussed the FCC’s proposed stricter rules to ensure calls made to consumers, businesses and government entities in rural markets are completed.  Those rules have now been adopted and will have a significant effect on those carriers using Least Cost Routing (“LCR”) services.[1]  We note below the existing rules, the new rules and other changes adopted in April 2018 and additional proposed rules.  We also discuss the potential risks for FCC-imposed fines, FCC complaints or civil lawsuits for those carriers that are found to have violated the rules.  These risks are, as a practical matter, greater for carriers and service providers using LCR services because those arrangements do not ensure immediate delivery of calls to end users, but can easily windup in an endless loop or cause other service quality problems.

The Existing Rules

The FCC’s existing RCC rules are found at 47 C.F.R. §§ 64.2101-2109 and 64.2201.  They will be modified in part once the recently adopted changes are published in the Federal Register.

• Starting in 2015, long distance and wireless carriers that are “covered providers”[2] have been required to collect data on all long distance calls attempted to end user customers served by more than 1,300 rural telephone companies
• The FCC expected covered providers would monitor the performance and control the use of intermediate providers[3]
• Downstream carriers are forbidden to enter a ring tone on a call
• Enforcement of call quality standards occurs through the complaint process and any subsequent FCC investigation of rural call routing practices

In addition, the FCC believes its phase-down of most types of intercarrier compensation (e.g., access charges) will decrease the cost of terminating calls to rural customers and, as such, reduce the economic incentives for the use of LCR techniques in those situations.

The Improving Rural Quality and Reliability Act

On February 26, 2018, President Trump signed into law the Improving Rural Quality and Reliability Act (“2017 Act”) that had been introduced by Senator Klobachar (D-MN).  FCC Chairman Ajit Pai commended passage of the 2018 Act and acknowledged the FCC’s ongoing role in addressing the problem.  Many of the telecommunications trade associations have also come out to voice approval for the law.  The 2017 Act’s purpose is to ensure the integrity of voice communications and to prevent unjust or unreasonable discrimination against rural areas.

This law will increase the reliability of intermediate providers by bringing transparency and standards to the market.  The FCC has been charged with creating these standards within 180 days (August 27, 2018).

Action at the April 17, 2018 Open Meeting

At its April 17, 2018 Open Meeting, the FCC took two actions with respect to RCC in its Second Report & Order and Third Further Notice of Proposed Rulemaking.  First, it adopted new and revised rules, some of which were under consideration before the 2017 Act was signed into law.  Second, it adopted a new further notice of proposed rulemaking that seeks comments on additional rules that would implement the 2017 Act.

New Rules

• Eliminate reporting requirements to reduce data reporting burdens on covered providers in favor of more effective monitoring
• Adopt requirements for covered providers to monitor the performance of intermediate providers as they hand off calls to the next carrier in line
• Covered providers must retain records for each call attempt to rural markets, noting the calling and receiving parties, date, time, and use of intermediate provider
• Covered providers will be held liable for call completion compliance when downstream providers’ decisions result in call quality that does not meet FCC standards
• Retrospective investigation for any rural call completion issues.  According to the FCC, “Evidence of poor performance warranting investigation includes but is not limited to: persistent low answer or completion rates; unexplained anomalies in performance reflected in the metrics used by the covered provider; repeated complaints to the Commission, state regulatory agencies, or covered providers by customers, rural incumbent LECs and their customers, competitive LECs, and others; or as determined by evolving industry best practices, including the ATIS RCC Handbook.”[4]
• Require removal of intermediate providers if and when they are determined to be ineffective in call completion requirements

Proposed Rules

The FCC’s newly adopted further notice of proposed rulemaking seeks comments (June 4, 2018) and reply comments (June 19, 2018) on the following:

• Rules to implement registry provisions for intermediate providers
• Interpretation of the prohibition on use of unregistered intermediate providers
• A framework to implement service quality standards for intermediate providers
• Suggestions for alternate proposals for service quality standards
• Enforcement against intermediate providers failing to register as required by the new law
• Exceptions to service quality standards

FCC Enforcement, Fines, Commission Complaints and Civil Suits

What are the legal and regulatory standards governing situations where an operator fails to follow the RCC rules?  How has the FCC treated violators in the past; and what can an operator expect in the future?  Finally, is there a risk of civil liability, either in court or in an FCC complaint?

Section 201(b) of the Communications Act of 1934, as amended (“Communications Act”), states that “all charges, practices, classifications, and regulations for and in connection with [interstate or foreign] communication service [by wire or radio], shall be just an reasonable, and any such charge, practice, classification, or regulation that is unjust or unreasonable is declared to be unlawful.”  And no less than the United States Supreme Court has recognized that a violation of a regulation that “lawfully implements §201(b)’s requirements is to violate the statute” itself.  Global Crossing Telecomms., Inc. v. Metrophones Telecomms., Inc., 550 U.S. 45, 54 (2007).

In the case of AT&T Corp. v. Voice Stream Network, Inc., No. 15-CV-8155 (LLS)(SN), slip op. (S.D.N.Y. Feb. 2, 2017) a magistrate judge concluded that Voice Stream’s altering of “signaling information and calling party numbers between December 2014 and January 2015 and again between May 2015 and June 2015” constituted a violation of FCC rule 64.1601, 47 C.F.R. § 64.1601, and was also a violation of Section 201(b) of the Communications Act.

In 2012, Wireline Competition Bureau issued a declaratory ruling clarifying that:  [I]t is an unjust and unreasonable practice in violation of section 201 of the [Communications] Act for a carrier that knows or should know that it is providing degraded service to certain areas to fail to correct the problem or to fail to ensure that intermediate providers, least-cost routers, or other entities acting for or employed by the carrier are performing adequately.  This is particularly the case when the problems are brought to the carrier’s attention by customers, rate-of-return carriers serving rural areas, or others, and the carrier nevertheless fails to take corrective action that is within its power.  Developing a Unified Intercarrier Compensation Regime, Declaratory Ruling, 27 FCC Rcd 1351, at ¶ 12 (emphasis added) (footnote omitted).

The FCC has concluded it has statutory authority[5] to require long distance carriers to “to respond in a timely and complete manner to Commission inquiries initiated outside the complaint process.”  Enforcement Advisory, Rural Call Completion, 28 FCC Rcd 10347 (2013) (“RCC Advisory”).

The RCC Advisory also reminded carriers they must respond to complaints by customers or by any other person “alleging a violation of a provision of the [Communications] Act, a Commission order, or a Commission Rule or Regulation,” without regard to status as a customer.”  Id., citing American Satellite Corp. v. Southwestern Bell Tel. Co., Memorandum Opinion and Order, 64 F.C.C. 2d 503, at ¶ 6a (1977) and interpreting Section 207 of the Act, 47 U.S.C. § 207, among others.[6]  Thus, a business located in a small town not receiving calls could file a complaint against the caller’s local, wireless or long distance carrier, including VoIP providers, when it is a covered provider for failing to comply with the FCC’s rural call completion rules.  Or a VoIP provider operating in rural Montana could likely file a complaint against an intermediate provider that failed to follow the FCC’s rules, such that the VoIP provider’s customers were not receiving phone calls.  See, e.g., United Artists Payphone Corp. v. New York Tel. Co., 8 FCC Rcd 5563 (1993) (allowing a non-customer of AT&T to challenge that carrier’s attempt to bill and collect for long distance charges for services not ordered by the complainant); accord, Ascom Communications, Inc. v. Sprint Communications Co., 15 FCC Rcd. 3223 (2000).  It is also critical to note that non-customers who can prove they were harmed by a carrier’s failure to comply with the Communications Act or a related FCC rule can seek damages in federal court.

Also, the FCC has statutory authority under Section 503 of the Communications Act, 47 U.S.C. § 503, to impose a monetary forfeiture against any person who willfully fails to follow the directives of the Act or of a Commission order.  This would include a failure of a carrier or service provider to respond to Commission inquiries initiated outside the complaint process based on Sections 4(i), 4(j), 218, 308, and 403 of the Communications Act that “vest the Commission with broad power to compel the production of information from regulated entities.”  See 47 U.S.C. §§ 154(i), 154(j), 218, 308, 403.

These investigations can result in notices of apparent liability,[7] forfeiture orders[8] or consent decrees[9]resolving a rural call completion investigation.  Until the recent consent decree with T-Mobile, the most well-known rural call completion enforcement proceeding was Verizon, Order & Consent Decree, 30 FCC Rcd 245 (2015).  In that proceeding, Verizon agreed to pay a $2 million civil forfeiture and spend an additional $3 million to (1) implement a company-wide plan to ensure compliance with the rural call completion rules; and (2) lead efforts to advance an industry solution to rural call completion problems.  Id. at ¶¶18, 25.

However, the T-Mobile settlement, T-Mobile USA, Inc. Order, File No.:  EB-IHD-16-00023247, DA 18-373 (rel. April 16, 2018), broke new ground in RCC enforcement.  Accused of failing to “correct ongoing problems with delivery of calls to rural consumers and … inserting false ring tones with respect to hundreds of millions of calls,” T-Mobile agreed to make a $40 million payment to the U.S. Treasury and to submit to a rigorous compliance plan.

Other significant FCC orders imposing sanctions, including through consent decrees, on rural call completion violations include:  Level 3 Comm’ns, LLC, 28 FCC Rcd 2272 (2013) ($975,000); Windstream Corp., 29 FCC Rcd 1646 (2014) ($2.5 million); and Matrix Telecom, Inc., 29 FCC Rcd 5709 (2014) ($875,000).

Strategies for Consideration

This is not the time for any carrier or VoIP service provider to bury its head in the sand.  Rather, prudence dictates a review of network operations and relationships with downstream carriers.  A number of common sense steps are appropriate for implementation.  Any covered provider that uses LCR arrangements or that delivers calls to an intermediate provider that itself uses LCR should review its traffic routing protocols and all associated traffic agreements.  A traffic agreement should require intermediate providers to disclose their use of LCR, including an up-to-date listing of all LCR carriers used by the first intermediate provider and the identity of further LCR arrangements and participating carriers and, quite possibly, a contractual limitation on the number of downstream intermediate providers that can be used.  Limiting the use of downstream carriers as provided in Section 64.2107 is worthy of consideration.

Traffic agreements should also include an agreement by the intermediate provider to follow the FCC’s RCC rules and to provide the sending carrier with all information required by FCC rules on a timely basis.  Covered providers will likely need to assign employees or hire third-party contractors to manage downstream traffic to rural markets and RCC compliance.

If you have questions about RCC rules and obligations or are interested in commenting on the FCC’s proposed new rules, please contact Robert H. Jackson at rhj@commlawgroup.com or 7803-714-1316.

*Disclaimer: This article is intended for informational purposes only and is not for the purpose of providing legal advice. You should not act upon the information in this article without seeking professional counsel.