Northern Valley Communications , LLC v. Federal Communications Commission and United States of America

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 5, 2012 Decided June 7, 2013
No. 11-1467
NORTHERN VALLEY C OMMUNICATIONS , LLC,
P ETITIONER
v.
FEDERAL C OMMUNICATIONS C OMMISSION AND U NITED
S TATES OF AMERICA,
R ESPONDENTS
AT&T C ORPORATION , ET AL.,
INTERVENORS
Consolidated with 11-1468
On Petitions for Review of Orders of
the Federal Communications Commission
Ross A. Buntrock argued the cause for petitioner. With
him on the briefs was G. David Carter.
Joel Marcus, Counsel, Federal Communications
Commission, argued the cause for respondents. With him on
the brief were Joseph F. Wayland, Acting Assistant Attorney
General, U.S. Department of Justice, Robert B. Nicholson and
Nickolai G. Levin, Attorneys, and Austin C. Schlick, General

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Counsel, Federal Communications Commission, Peter
Karanjia, Deputy General Counsel, and Richard K. Welch,
Deputy Associate General Counsel. Jacob M. Lewis,
Associate General Counsel, entered an appearance.
David H. Solomon argued the cause for intervenors.
With him on the brief were Russell P. Hanser, Marc
Goldman, James C. Cox, Scott H. Angstreich, Gregory G.
Rapawy, Michael B. Fingerhut, Gary L. Phillips, Michael E.
Glover, and Christopher M. Miller.
Before: GARLAND , Chief Judge, KAVANAUGH , Circuit
Judge, and R ANDOLPH, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge
KAVANAUGH .
KAVANAUGH , Circuit Judge: When you make a long-
distance telephone call, the call travels from your local
exchange carrier, known as a LEC, to a long-distance carrier.
The long-distance carrier routes the call to the call recipient’s
LEC. That LEC then completes the call to the recipient.
LECs are classified as either competitive (CLECs) or
incumbent (ILECs). Subject to FCC approval, CLECs may
impose tariffs on long-distance carriers for access to CLECs’
customers. In recent years, the FCC has grown concerned
that some CLECs have engaged in what is known as “traffic
pumping” or “access stimulation.” What’s happened is that
some CLECs with high access rates apparently have entered
into agreements with high-volume local customers, such as
conference call companies. CLECs greatly increase their
access minutes – but do not reduce their access rates to reflect
lower average costs – and share a portion of the increased
access revenues with the conference call companies. In many

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cases, the CLECs charge the conference call companies
nothing for phone service. It’s a win-win for the CLECs and
the conference call companies, while the long-distance
carriers, who have to pay the tariffed access rates, pay
significant amounts to the CLECs.
This case involves a tariff filed by Northern Valley, a
CLEC in South Dakota. The FCC ruled that Northern Valley
could not tariff long-distance carriers for calls to Northern
Valley’s non-paying customers (for example, to conference
call companies that obtained service from Northern Valley for
no charge). The FCC explained that, by regulation, CLECs
may tariff long-distance carriers only for access to the
CLECs’ “end users.” See Access Charge Reform, 19 FCC
Rcd. 9108, 9114, ¶ 13 (2004); 47 C.F.R. § 61.26(a). In the
related context of ILECs, an “end user” has been defined by
the FCC to mean the recipient of a “telecommunications
service.” See 47 C.F.R. § 69.2(m). The FCC here stated that
identical terms used in different but related rules should be
construed to have the same meaning; therefore, a CLEC’s
“end user” likewise means the recipient of a
“telecommunications service.” In turn, “telecommunications
service” is defined by the Communications Act of 1934 as
service provided for a fee. See 47 U.S.C. § 153(53).
Following that chain of logic, the FCC concluded that a
CLEC may tariff long-distance service only if the CLEC’s
end user is a paying customer – that is, a customer paying “a
fee.”
In challenging the FCC’s decision, Northern Valley
contends that the FCC’s ruling contradicts two previous FCC
orders that allowed CLECs to charge long-distance carriers
for calls to a CLEC’s non-paying customers. But in both
orders, the FCC construed only the terms of the tariff at issue
in those cases, not FCC regulations. In those cases, the FCC

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did not construe its regulations to allow CLECs to charge
long-distance carriers for calls to a CLEC’s non-paying
customers. See Qwest Communications Corp. v. Farmers &
Merchants Mutual Telephone Co., 22 FCC Rcd. 17,973,
17,987, ¶¶ 35, 37-38 (2007); Qwest Communications Corp. v.
Farmers & Merchants Mutual Telephone Co., 24 FCC Rcd.
14,801, 14,085, ¶ 10 (2009).
On another tack, Northern Valley points out that the FCC
has previously refrained from directly regulating the
relationship between the CLEC and the end user. But the
flaw in that argument is that the FCC is not here regulating
the relationship between the CLEC and the end user; rather,
the FCC is regulating the relationship between the CLEC and
the long-distance carrier.
In short, we conclude that the FCC reasonably interpreted
and applied the relevant regulations. Moreover, nothing in
the Communications Act precludes the FCC’s approach in
this case, as Northern Valley’s counsel appropriately
acknowledged at oral argument. See Tr. of Oral Arg. at 6.
Therefore, we uphold the FCC’s decision that CLECs may not
rely on tariffs to charge long-distance carriers for access to
CLECs’ non-paying customers.
In a separate aspect of its decision in this case, the FCC
disapproved a provision in Northern Valley’s tariff that
required long-distance carriers to dispute a charge in writing
within 90 days if the carrier wanted to preserve a legal
challenge. The FCC concluded that the 90-day provision
conflicted with the two-year statute of limitations set forth in
the statute. See 47 U.S.C. § 415(b). In our view, the FCC
permissibly interpreted the statute to preclude the 90-day
provision of the tariff. Although contracts may shorten
statutes of limitation, CLEC tariffs are unilaterally imposed.

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Therefore, contractual principles that permit the shortening of
a statute of limitations do not apply here. The Fourth Circuit,
the only other court of appeals to examine that issue in the
context of the Communications Act, has reached the same
conclusion. See MCI Worldcom Network Services, Inc. v.
Paetec Communications, Inc., 204 F. App’x 271, 272 (4th
Cir. 2006). Under other statutes, courts have likewise
disallowed analogous tariff provisions. See, e.g., Kraft Foods
v. Federal Maritime Commission, 538 F.2d 445, 446 (D.C.
Cir. 1976) (Shipping Act); Shortley v. Northwestern Airlines,
104 F. Supp. 152, 155 (D.D.C. 1952) (Civil Aeronautics Act
of 1938). Therefore, we uphold the FCC’s decision that
Northern Valley’s 90-day provision violated the two-year
statute of limitations set forth in the statute.
* * *
We have considered all of Northern Valley’s arguments.
We deny the petitions for review.
So ordered.

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