[Federal Register Volume 79, Number 191 (Thursday, October 2, 2014)]
[Rules and Regulations]
[Pages 59444-59447]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-23515]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 20

[CC Docket No. 01-92; FCC 14-134]


Developing a Unified Intercarrier Compensation Regime; T-Mobile 
et al. Petition for Declaratory Ruling Regarding Incumbent LEC Wireless 
Termination Tariffs

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: This Order on Remand responds to the court's directive, and

[[Page 59445]]

specifically examines the interplay between the T-Mobile Order and the 
rural exemption rule. The Ninth Circuit found that the Commission's T-
Mobile Order did not adequately analyze the order's affects upon the 
rural exemption rule in of the Communications Act of 1934, remanding 
the order to the Commission for ``for further consideration.''

DATES: This Order is effective November 3, 2014.

ADDRESSES: Federal Communications Commission, 445 12th Street SW., 
Washington, DC 20554.

FOR FURTHER INFORMATION CONTACT: Victoria Goldberg, Wireline 
Competition Bureau, Pricing Policy Division, (202) 418-1540 or 
[email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Order 
on Remand CC Docket No. 01-92, FCC 14-134, adopted September 15, 2014 
and released September 17, 2014. This document does not contain 
information collection(s) subject to the Paperwork Reduction Act of 
1995 (PRA), Public Law 104-13. In addition, therefore, it does not 
contain any new or modified ``information collection burden for small 
business concerns with fewer than 25 employees,'' pursuant to the Small 
Business Paperwork Relief Act of 2002. As we are adopting no rules in 
this Order on Remand, no regulatory flexibility analysis is required. 
The full-text of this document may be downloaded at the following 
Internet address: http://www.fcc.gov/document/commission-finds-2005-t-mobile-order-not-odds-rural-exemption. The complete text may be 
purchased from Best Copy and Printing, Inc., 445 12th Street SW., Room 
Cy-B402, Washington, DC 20554. To request alternative formats for 
persons with disabilities (e.g., accessible format documents, sign 
language, interpreters, CARTS, etc.), send an email to [email protected] 
or call the Commissions Consumer and Governmental Affairs Bureau at 
(202) 418-0530 or (202) 418-0432 (TTY).

I. Introduction

    1. In response to claims by Commercial Mobile Radio Service (CMRS) 
providers that incumbent local exchange carriers (LECs) were filing 
state tariffs charging excessive rates for terminating wireless-
originated local traffic on their wireline networks, the Commission in 
its 2005 T-Mobile Order adopted a rule banning such wireless 
termination tariffs on a prospective basis. Two incumbent LECs sought 
judicial review, arguing that the rule conflicted with the ``rural 
exemption'' in section 251(f)(1) of the Communications Act of 1934 (the 
Act), which exempts rural incumbent LECs from certain market-opening 
requirements imposed on incumbent LECs by section 251(c) unless a state 
commission terminates that exemption according to specified criteria. 
Finding that the T-Mobile Order did not adequately analyze and explain 
the effects of its rule on the rural exemption in section 251(f)(1), 
the United States Court of Appeals for the Ninth Circuit last year 
``remand[ed]'' the T-Mobile Order to the FCC ``for further 
consideration.''
    2. This Order on Remand responds to the court's directive. 
Specifically, the Commission examines the interplay between the T-
Mobile Order and the rural exemption set forth in section 251(f)(1)(A). 
As explained below, the T-Mobile Order was based on the Commission's 
plenary authority under sections 201 and 332 of the Act, and the rural 
exemption contained in section 251(f)(1)(A) only relieves rural LECs 
from complying with obligations arising under an entirely separate 
statutory provision, i.e., section 251(c) of the Act. Accordingly, we 
conclude that the T-Mobile Order rule prohibiting the filing of 
wireless termination tariffs for non-access traffic is not at odds with 
the section 251(f)(1) rural exemption.

II. Background

A. Interconnection and Compensation Arrangements

    3. LEC/CMRS Interconnection Regime. The Commission established 
rules governing interconnection between LECs and CMRS providers in 
1994. Pursuant to its authority under sections 201(a) and 332 of the 
Act, the Commission adopted rules requiring LECs and CMRS carriers to 
negotiate in good faith the terms and conditions of interconnection, 
and pay mutual compensation for the exchange of traffic. As originally 
adopted, Sec.  20.11 of the Commission's rules required LECs to provide 
the type of interconnection reasonably requested and also required the 
originating carrier, whether LEC or CMRS provider, to pay reasonable 
compensation to the terminating carrier in connection with traffic that 
terminates on the latter's network facilities. As a general matter, 
early decisions addressing CMRS interconnection issues indicate that 
the Commission intended for these arrangements to be negotiated 
agreements between the parties and also reflect an expectation that 
tariffs would be filed only after carriers had negotiated agreements.
    4. Section 251 Duties. Adopted as part of the Telecommunications 
Act of 1996 (1996 Act), section 251 of the Act provides a graduated set 
of interconnection requirements and other obligations designed to 
foster competition in telecommunications markets. The nature and scope 
of these obligations vary depending on the type of service provider. 
Section 251(a) sets forth general duties applicable to all 
telecommunications carriers, including the duty ``to interconnect 
directly or indirectly with the facilities and equipment of other 
telecommunications carriers.'' Section 251(b) sets forth additional 
duties for LECs pertaining to resale of services, number portability, 
dialing parity, access to rights-of-way, and reciprocal compensation--
the duty of LECs to establish reciprocal compensation arrangements for 
the transport and termination of telecommunications (i.e., arrangements 
for exchange of traffic terminating on another carrier's network). 
Section 251(c) sets forth the most detailed obligations, which apply 
only to incumbent LECs. These section 251(c) obligations include, among 
other things, the duty to ``negotiate in good faith in accordance with 
section 252 the particular terms and conditions of agreements'' to 
fulfill the section 251(b) and (c) requirements.
    5. The Rural Exemption. Section 251(f)(1)(A), generally known as 
``the rural exemption,'' specifies that section 251(c) ``shall not 
apply to a rural telephone company'' until the rural telephone company, 
or rural LEC, has received a bona fide ``request for interconnection, 
services, or network elements,'' and the relevant state commission 
determines ``that the request is not unduly economically burdensome, is 
technically feasible, and is consistent with section 254 . . . . '' The 
Commission has stated that Congress intended exemption from the section 
251(c) requirements to be the exception rather than the rule, and to 
apply only to the extent, and for the period of time, that policy 
considerations justify such exemption.
    6. Section 252. Section 252 of the Act provides that incumbent 
LECs, upon receiving a request for interconnection under section 251, 
may seek to negotiate a voluntary interconnection agreement with the 
requesting carrier. Any party negotiating such an agreement may ask a 
state commission to mediate any differences. Additionally, section 
252(b) sets forth a mandatory arbitration scheme for the resolution of 
disputes. Further, the final agreement, whether arrived at by 
negotiation or arbitration, must be submitted for approval to the

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state commission. The Commission has declined to adopt rules advising 
the state commissions on how to conduct mediations and arbitrations, 
and has asserted that the states are in a better position to develop 
mediation and arbitration rules that support the objectives of the 1996 
Act.

B. The T-Mobile Order

    7. The T-Mobile Order dealt with certain issues that had arisen in 
the context of LEC-CMRS interconnection and traffic exchange. CMRS 
providers typically interconnect indirectly with incumbent LECs via 
tandems owned by third parties. In this scenario, a CMRS provider 
delivers the call to a tandem, which in turn delivers the call to the 
terminating incumbent LEC. The indirect nature of the interconnection 
enables the CMRS provider and incumbent LEC to exchange traffic even if 
there is no interconnection agreement or other compensation arrangement 
between the parties. This structure led to disputes about whether 
terminating compensation was due in the absence of a compensation 
arrangement, as well as the type of intercarrier compensation due. In 
response, incumbent LECs began filing state tariffs that included 
wireless termination charges, which some CMRS providers claimed were 
excessive. In 2002, T-Mobile USA, Inc., Western Wireless Corporation, 
Nextel Communications and Nextel Partners jointly filed a petition for 
declaratory ruling asking the Commission to reaffirm ``that wireless 
termination tariffs are not a proper mechanism for establishing 
reciprocal compensation arrangements for the transport and termination 
of traffic.''
    8. In the T-Mobile Order, the Commission determined that nothing in 
the 1996 Act or pre-1996 Act requirements specifically prohibited 
incumbent LECs from filing such state wireless termination tariffs. 
Given the clear preference for negotiated interconnection agreements 
reflected in both the 1996 Act and the Commission's past actions and 
policies under sections 201(a) and 332, however, the Commission found 
it in the public interest to preclude the filing of wireless 
termination tariffs in this context going forward. Accordingly, the 
Commission amended Sec.  20.11 of its rules to prohibit LECs from 
imposing non-access compensation obligations on CMRS providers pursuant 
to tariff. The Commission revised this section of the rules pursuant to 
its ``plenary authority under sections 201 and 332 of the Act.''
    9. Recognizing that CMRS providers may lack incentives to enter 
into agreements for compensation arrangements, the Commission also 
amended Sec.  20.11 to provide that an incumbent LEC may request 
interconnection from a CMRS provider and invoke the same negotiation 
and arbitration procedures that apply under section 252 of the Act to 
interconnection requests made by a CMRS provider to an incumbent LEC. 
This revision also was adopted pursuant to the Commission's authority 
under sections 201 and 332 of the Act. The Commission did not exempt 
rural incumbent LECs from the rules adopted in the T-Mobile Order nor 
did it expressly address how the new tariff prohibition and procedures 
related to rural incumbent LECs' exemption from section 251(c) under 
section 251(f)(1) of the Act. Shortly after the T-Mobile Order was 
released, Ronan Telephone Co. and Hot Springs Telephone Co. 
(Petitioners) filed a petition for review in the Ninth Circuit. The 
Ninth Circuit ordered the case held in abeyance until the Commission 
addressed pending reconsideration requests.
    10. In the 2011 USF/ICC Transformation Order, the Commission 
declined to reconsider, in the context of broader intercarrier 
compensation reform, certain aspects of the T-Mobile Order. Among the 
issues considered was whether the Commission had improperly extended 
the obligations contained in section 252 to providers that are not 
subject to that provision. The Commission clarified that it did not 
extend negotiation and arbitration requirements to non-incumbent LECs 
under section 252, but rather, acting pursuant to sections 201 and 332 
and authority ancillary to those provisions and sections 251(a)(1) and 
251(b)(5), applied duties ``analogous to the [section 252] negotiation 
and arbitration requirements.'' Thus, the Commission agreed with 
parties arguing that references to the negotiation and arbitration 
procedures in section 252 were intended merely to describe, in an 
abbreviated manner, duties similar to those applied under section 252.
    11. As part of its broader reforms, the Commission also adopted 
bill-and-keep as the immediately applicable default compensation 
methodology for non-access traffic between LECs and CMRS providers 
under Sec.  20.11 and the reciprocal compensation requirements in part 
51 of our rules. The Commission reasoned that a federal bill-and-keep 
methodology for such compensation would address growing confusion and 
litigation over the appropriate compensation rates for this traffic and 
eliminate the incentives for traffic stimulation and regulatory 
arbitrage. Significantly, the Commission did not abrogate existing 
agreements or otherwise adopt a ``fresh look'' in light of its reforms. 
Thus, carriers bound by an existing compensation agreement would 
continue to receive compensation pursuant to such agreements until the 
conclusion of the contract term. On reconsideration, however, the 
Commission acknowledged that these agreements often contain change of 
law provisions that would, as a practical matter, result in carriers 
moving to a bill-and-keep methodology upon the effective date of the 
rule rather than when the agreement expires. Accordingly, the 
Commission extended the effective date of the new default-bill-and-keep 
methodology from December 29, 2011 to July 1, 2012 for situations where 
carriers were exchanging non-access traffic pursuant to an agreement.
    12. Subsequent to the USF/ICC Transformation Order, the Ninth 
Circuit returned the appeal to the active calendar. In their opening 
brief to the court, Petitioners maintained that, under section 
251(f)(1), rural telephone companies are exempt from the negotiation 
and arbitration obligations set forth in section 251(c) unless the 
exemption is terminated by a state public utility commission. They 
argued that, under the T-Mobile Order, LECs are eligible for 
compensation for terminating CMRS provider traffic only if they enter 
into negotiated agreements with CMRS providers or submit to the 
arbitration process. Thus, they contended that the Commission 
unlawfully usurped the authority of state commissions by essentially 
terminating the rural exemption.
    13. On August 21, 2013, the Ninth Circuit granted the petition for 
review and remanded the T-Mobile Order. Specifically, the court 
observed that Congress had exempted rural telephone companies from 
certain section 251 obligations generally applicable to incumbent LECs 
but that, in the T-Mobile Order, the Commission had not included any 
exemption for rural carriers from the rule prohibiting wireless 
termination tariffs. Responding to arguments from the petitioners that 
the rule, effectively eliminated the rural exemption, the court 
remanded to the Commission to consider and explain this aspect of the 
issue. We now address that issue.
    14. We confirm that the Commission's T-Mobile Order did not 
terminate or otherwise affect operation of the rural exemption or rural 
carriers' rights under that provision. Nor did it affect the states' 
role in ruling on petitions to terminate the rural exemption in 
specific circumstances. Although the

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rural exemption adopted in 1996 excused rural LECs from specific new 
obligations under section 251, it did not excuse them from obligations 
established pursuant to other sections of the Act. As discussed above, 
LECs have long been required to negotiate interconnection agreements in 
good faith governing both the physical linking of networks and any 
associated charges. These obligations were adopted pursuant to sections 
201 and 332 of the Act, and predate the obligations contained in 
section 251 adopted as part of the 1996 Act. Like the pre-1996 Act 
orders adopting the LEC-CMRS interconnection regime, the Commission's 
actions with respect to that regime in the T-Mobile Order were based on 
the Commission's plenary authority under sections 201 and 332 of the 
Act.
    15. The adoption of the 1996 Act in general, and section 251 in 
particular, did not alter the relevant Commission authority under 
sections 201 and 332 of the Act with respect to the LEC-CMRS 
interconnection regime. Section 601(c) of the 1996 Act states that 
``[t]his Act and the amendments made by this Act shall not be construed 
to modify, impair, or supersede Federal, State, or local law unless 
expressly so provided in such Act or amendments.'' The 1996 Act was 
adopted against the backdrop of Commission regulation of LEC-CMRS 
interconnection, and nothing in section 251 expressly modified, 
impaired, or superseded the Commission's efforts. To the contrary, as 
to section 201, section 251(i) provides: ``Nothing in this section 
shall be construed to limit or otherwise affect the Commission's 
authority under section 201.'' Courts likewise have upheld the 
Commission's continued exercise of sections 201 and 332 authority 
notwithstanding the adoption of section 251 in the 1996 Act. Thus, 
sections 201 and 332 provide the basis for the LEC-CMRS interconnection 
and compensation rules adopted prior to the 1996 Act and an independent 
and sufficient basis for the modifications of those rules adopted in 
the T-Mobile Order.
    16. Moreover, the Section 251 rural exemption is limited to 
exempting rural incumbent LECs from obligations arising under a 
different statutory provision, i.e., section 251(c) of the Act. Because 
the amendments to the LEC-CMRS interconnection regime adopted in the T-
Mobile Order were supported by the Commission's authority under 201 and 
332, the Commission's T-Mobile Order did not terminate or otherwise 
affect operation or applicability of the rural exemption as to rural 
LECs. We also emphasize that the T-Mobile Order did not preempt the 
authority of a state commission under section 251(f)(1) to evaluate 
and, if appropriate, terminate a carrier's rural exemption.
    17. Some parties have contended that, by precluding, as a practical 
matter, a LEC from receiving compensation from a CMRS provider for 
providing call termination services unless it enters into an agreement 
with the CMRS provider, the Commission ``eviscerates the rural LEC's 
exemption from negotiating.'' This characterization of the rural 
exemption is incorrect in that it fails to acknowledge the limited 
scope of the rural exemption, given the specific reference in section 
251(f)(1) to section 251(c).
    18. Thus, even to the extent that the T-Mobile Order relied, as an 
alternate basis for authority, on section 251(b), it is not at odds 
with the section 251(f)(1) rural exemption. In particular, we disagree 
with Petitioners' claim that the rural exemption extends to obligations 
in section 251(b) by virtue of a reference to such section in section 
251(c). In the CRC/Time Warner Declaratory Ruling, the Commission 
clarified that rural incumbent LEC obligations under sections 251(a) 
and (b) can be implemented through the state commission arbitration and 
mediation provisions in section 252 of the Act independently of the 
251(c)(1) negotiation obligation.
    19. Finally, the LEC obligations under the LEC-CMRS regime are 
different from the obligations under the 251 regime. Specifically, the 
relevant ``duty'' in section 251(c)(1) is a legal obligation 
enforceable against the incumbent LEC to negotiate in good faith. To 
the extent that the T-Mobile Order framework gives a rural incumbent 
LEC some incentive to negotiate with CMRS providers, that incentive 
falls well short of a legal duty of the sort at issue in section 
251(c)(1). This is particularly true where the rural LEC has other 
possible options to seek revenues (e.g., from its end users if it can 
modify its local retail rates), and thus seeking compensation from the 
CMRS provider is but one alternative.

III. Conclusion

    20. For the reasons discussed above, we reject claims that the T-
Mobile Order ``eviscerates the rural LEC's exemption from 
negotiating.'' For those same reasons, we likewise reject arguments 
that the Commission's actions in the T-Mobile Order usurped the 
authority of state utility commissions to terminate the rural 
exemption. Thus, in response to the Ronan Remand, we conclude that the 
T-Mobile Order rule prohibiting the filing of wireless termination 
tariffs for non-access traffic is not at odds with the section 
251(f)(1) rural exemption.

IV. Procedural Matters

A. Final Regulatory Flexibility Act Certification

    21. As we are adopting no rules in this Order on Remand, no 
regulatory flexibility analysis is required.

B. Paperwork Reduction Act Analysis

    22. This Order does not contain proposed information collection(s) 
subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-
13. In addition, therefore, it does not contain any new or modified 
``information collection burden for small business concerns with fewer 
than 25 employees,'' pursuant to the Small Business Paperwork Relief 
Act of 2002.

C. Congressional Review Act

    23. The Commission will not send a copy of this Order on Remand in 
a report to Congress and the Government Accountability Office pursuant 
to the Congressional Review Act because no rules are being adopted.

V. Ordering Clauses

    24. Accordingly, it is ordered that, pursuant to the authority 
contained in sections 1-5, 7, 10, 201-05, 207-09, 214, 218-20, 225-27, 
251-54, 256, 271, 303, 332, 403, 405, 502 and 503 of the Communications 
Act of 1934, as amended, 47 U.S.C. 151-55, 157, 160, 201-05, 207-09, 
214, 218-20, 225-27, 251-54, 256, 271, 303, 332, 403, 405, 502, 503, 
and Sec.  1.1, 1.2 of the Commission's rules, 47 CFR 1.1, 1.2, this 
Order on Remand in CC Docket No. 01-92 is adopted.
    25. It is further ordered that this Order on Remand shall become 
effective November 3, 2014.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.y
[FR Doc. 2014-23515 Filed 10-1-14; 8:45 am]
BILLING CODE 6712-01-P