The Front Lines - August 1, 2006

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Advancing The Cause of Competition in the Telecommunications Industry


On July 11, 2006, the Federal Communications Commission ("FCC") released an Order clarifying the audit information sharing provisions of its Tollgate rules in the context of a complaint proceeding involving payphone aggregator, American Public Communications Council (APCC), and completing carrier, IDT.

The FCC's Tollgate rules ensure that PSPs are fairly compensated for coinless calls originated from their payphones. These rules require that the last facilities-based long distance carrier in a call path, the "completing carrier," compensate PSPs for coinless calls that are completed by that carrier. The Tollgate rules also provide for detailed procedures to ensure that calls are tracked in a way that allows for compensation, review of these procedures by a third party auditor, and sharing of the audit information with the FCC and PSPs for which they complete calls.

The provision requiring the sharing of audit information (such as work papers) was the focal point of the APCC-IDT dispute which gave rise to the FCC's Order. The Tollgate rules require that, "subject to protec- tions safeguarding the auditor's and the Completing Carrier's confidential and proprietary information, the Completing Carrier shall provide, upon request, to the payphone service provider for inspection any documents, including working papers, underlying the System Audit Report."

In July 2004, IDT filed its first System Audit Report with the FCC. Two months later APCC (on behalf of its PSP clients) requested "all documents underlying [IDT's] system audit report." This request prompted a dialogue regarding the terms of the information exchange. IDT questioned which PSPs APCC was requesting the information for, requested documentation of APCC's authority to request the information of their behalf, and wanted to produce the information at its New Jersey office, while APCC demanded that copies be sent to their attorney's Washington, D.C. office.

While the parties were still discussing the production of the documents, on February 1, 2005, APCC filed an informal Section 208 complaint with the FCC. The APCC complaint alleged that IDT violated the Communications Act by engaging in a "dilatory and obstructive pattern of conduct" in response to APCC's request for documents underlying the System Audit Report, and by failing to provide those documents. The complaint asked that the FCC to find IDT in violation of Rule 64.1320(g) and the Act. The only relief sought by APCC was an FCC order requiring IDT to either deliver copies of the Underlying Documents (work papers) to their attorneys, or alternatively, to allow APCC to inspect the documents in Washington, D.C., and to request and receive copies of such documents, subject to the condition that Complainants reasonably compensate IDT for such copies.

APCC and IDT reached an agreement regarding the terms of disclosure before the FCC resolved the pending complaint. IDT thereafter filed a motion to dismiss the complaint. APCC, however, opposed the motion on grounds that: (1) IDT could evade review again in the future; (2) APCC was harmed by the delay in obtaining the documents; and (3) IDT may have failed to produce all of the documents.

In its July 11th Order, the FCC granted IDT's motion to dismiss, but in doing so provided official guidance to the industry in order to facilitate prompt production of audit documents in the future.

The FCC's Order clarified a Completing Carrier's duties to produce, as follows:

1 "We believe that it is reasonable to expect that a party requesting documents under rule 64.1320(g) will specifically identify on whose behalf it makes the request."

  1. "We note that rule 64.1320(g) effectively requires the Completing Carrier to permit payphone service providers to copy the audit documents, at the payphone service providers' expense, not merely to examine them. To the extent that copying raises greater issues of safeguarding confidential information than does on-site inspection, we expect parties to be able to address this in their nondisclosure agreements."

  2. "We note that this rule effectively requires Completing Carriers to ensure that their auditors are contractually obligated to provide the documents covered by the rule if a payphone service provider requests them. This obligation can readily be imposed when the auditor is engaged; if the Completing Carrier fails to take this step, then any 'impossibility' of compliance will be of its own making. If the auditor failed to live up to its contractual obligation, we would consider whether the Completing Carrier had taken all reasonable steps to enforce compliance before we would excuse its failure to provide the documents as 'impossible.'"

Clients seeking assistance with rule 64.1320(g) and other Tollgate requirements may contact Jonathan S. Marashlian at or 703-714-1313.


On July 21, 20006, Voice over IP provider, Vonage, filed a Petition for Review with the U.S. Court of Appeals for the District of Columbia Circuit asking the court to review the FCC's Report and Order altering the methodology for assessing contributions to the federal Universal Service Fund ("USF"). At issue is the FCC's decision to apply registration requirements and USF contribution obligations on "interconnected VoIP" providers, such as Vonage. The case is docketed as Vonage Holdings Corporation v. Federal Communications Commission,



On July 16, 2006, Qwest Services Corporation ("Qwest") filed a Petition for Review asking the U.S. Court of Appeals for the District of Columbia Circuit to review the FCC's June 30, 2006, Declaratory Ruling and Report and Order, In the Matter of Regulation of Prepaid Calling Card Services, WC Docket No. 05-68, FCC 06-79. In the Order the FCC determined it will treat all prepaid calling card service providers as telecommunications service providers. Such providers are required to, among other things, pay interstate access charges on interexchange calls that originate and terminate in different states, and to contribute to the universal service fund based on their interstate revenues. Qwest argues that the FCC's Order is arbitrary and capricious, contrary to the record and otherwise not in accordance with law.


In the past several weeks, incumbent local exchange providers BellSouth, AT&T, Qwest and Embarq (formerly Sprint) all filed Petitions requesting FCC forbearance from the application of common carrier regulations, such as Title II and Computer Inquiry rules, to their "broadband" offerings.

BellSouth asks the Commission to grant BellSouth and similarly situated carriers forbearance from Title II and the Computer Inquiry rules to certain specified broadband services.

Qwest and AT&T also filed separate Forbearance Petitions. In its petition, Qwest asks the FCC to forbear from applying Title II and the Computer Inquiry rules to any broadband services Qwest does or may offer to the extent those services are not offered as part of an Internet access service.

AT&T, in its petition, asks the Commission to forbear from applying Title II and the Computer Inquiry rules to non-time division multiplex (non-TDM) based broadband transmission services offered by AT&T and other Bell Operating Companies.

On July 26, 2006, the Embarq Local Operating Companies asked the FCC to forbear from applying Title II and Computer Inquiry rules to certain broadband services offered by Embarq and similarly situated independent incumbent local exchange carriers (independent incumbent LECs). Specifically, Embarq seeks relief from Title II requirements regarding tariffs, prices, cost support, price caps, and pricing flexibility for certain broadband services. Embarq also seeks relief from the Computer Inquiry requirements to the extent they require independent incumbent LECs to tariff and offer the transport component of their broadband services on a stand-alone basis.

Reacting to the spate of Forbearance Petitions by the RBOCs, CompTel and Embarq asked the FCC to extend the comment and reply comment deadlines. On July 28, 2006, the FCC granted in part and denied in part the motions filed by CompTel and Embarq. The FCC agreed to extend the comment date until August 17, 2006, and the reply comment date until August 31, 2006 on the three RBOC petitions. The same filing deadlines apply to the Embarq petition.

The Front Lines is a free publication of The Helein Law Group, P.C., providing clients and interested parties with valuable information, news, and updates regarding regulatory and legal developments primarily impacting companies engaged in the competitive telecommunications industry.

The Front Lines does not purport to offer legal advice nor does it establish a lawyer-client relationship with the reader. If you have questions about a particular article, general concerns, or wish to seek legal counsel regarding a specific regulatory or legal matter affecting your company, please contact our firm at 703-714-1313 or visit our website:

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Jonathan Marashlian
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