The rates charged by BTI Telecom Inc. (www.btitele.com), a Raleigh, N.C.-based CLEC, for switched access to and from the telephone lines of its end-user customers were unlawfully high under section 201(b) of the Communications Act of 1934, the FCC has ruled.
“This is an extraordinary order, in which the FCC creates new law, and ignores years of established precedent,” according to a memo released yesterday by Kelley Drye & Warren (www.kelleydrye.com), a law firm watching the case closely for its clients.
The FCC’s (www.fcc.gov) order in AT&T v. BTI is the first in a series of 14 rate cases referred by Judge Ellis out of a complaint pending in the Federal District Court for the Eastern District of Virginia. In that case, 14 CLECs are suing AT&T Corp. (www.att.com) and Sprint Communications (www.sprint.com) for withholding payment of tariffed access charges. When AT&T and Sprint argued that the CLEC plaintiffs’ rates were too high, Judge Ellis referred that matter to the FCC.
Because the FCC is not capable of handling 14 simultaneous rate cases, all of the parties agreed that one plaintiff would be selected as the first case, according to Kelley Drye.
AT&T and Sprint chose BTI and informal complaints were filed against the remaining 13 plaintiffs, with the understanding that these cases would be heard in turn unless the case was settled, according to Kelley Drye.
Under a provision of the Communications Act, the FCC must conclude formal complaints involving tariffed rates within five months of the date the complaints are filed. The FCC concluded the BTI case and released an order May 30, two weeks before the statutory deadline. The order was issued by the full commission, not by the Enforcement Bureau and was approved by three commissioners – Gloria Tristani, Susan Ness and Chairman Michael K. Powell. Commissioner Harold Furchtgott-Roth dissented and issued a separate statement condemning the order.
Essentially, the order resolves two formal complaints filed by AT&T and Sprint against BTI.
The IXCs contended that during 1998, 1999, and 2000, BTI charged AT&T and Sprint approximately 7.2 cents per minute for switched access services, pursuant to tariffs that BTI filed with the FCC. Comparing this rate to the rates charged by BTI for similar services, the average access rates of other carriers and the access rates charged by the ILECs serving the areas in which BTI operates, the FCC determined that BTI’s 7.2 cents per minute rate was “unlawfully high.”
The access rates that BTI and other CLECs may lawfully charge in the future also are the subject of the commission’s April 27 CLEC Access Charge Order.
Kelley Drye said that the FCC’s order “ignores 60 years of established precedent.” The firm also said that the order concludes that the CLEC’s past rates were excessive, found that the CLEC should have been charging the same rates as some rural carriers, and found that the CLEC must pay damages that amount to a refund of the difference.
The implications for CLECs that have set their rates at or below 3.8 cents, 3 cents and 2.7 cents over the last few years, aren’t bad. For CLECs that have not been paid access charges, it strengthens their ability to negotiate or litigate to obtain payment of their tariffed rates.
But for CLECs that have set their rates above that level during the last few years, this order presents potential problems, Kelley Drye says.
While the order resolves a complaint involving a single CLEC, the type of analysis done by the FCC could be read broadly to apply to other CLECs, Kelley Drye says. The fact that the FCC did not base its analysis on BTI’s unique costs, but rather looked to NECA rates to establish a retroactive benchmark could easily apply to other CLECs, the firm notes.
“The FCC’s express finding that it does not need to examine an individual CLEC’s costs makes its decision look less like one premised on the unique facts of a single carrier’s case, and more like a prescription formula that could apply industry-wide,” according to Kelley Drye.
The broad language of the FCC’s order also may prompt other IXCs to seek retroactive refunds of rates paid in excess of the NECA rates.
Because the case was decided as a formal complaint between AT&T, Sprint and BTI, Kelley Drye also said that it’s likely that only those parties have standing to appeal or seek stay of the order.
And if other CLECs are not able to appeal the decision in AT&T v. BTI, they may have additional incentive to seek stay and reversal of the FCC’s April 27 order prescribing prospective rates for CLEC access charges, according to Kelley Drye.
This would directly challenge the FCC’s method of setting rates for CLECs without any reference to CLEC costs, the firm noted.
