Southwestern Bell Telephone Company et al v. V247 Telecom LLC et al
Filing
136
MEMORANDUM OPINION AND ORDER granting 75 Plaintiff's Motion for Partial Summary Judgment Against V247 Telecom LLC and Saving Call LLC. (Ordered by Judge Ed Kinkeade on 9/15/2016) (aaa)
IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
SOUTHWESTERN BELL
TELEPHONE COMPANY, et al.,
Plaintiffs,
v.
V247 TELECOM LLC, et al.,
Defendants.
§
§
§
§
§
§
§
§
§
§
Civil Action No. 3:14-CV-1409-K
MEMORANDUM OPINION AND ORDER
Before the Court is Plaintiffs’ Motion for Partial Summary Judgment Against
V247 Telecom LLC and Saving Call LLC (Doc. No. 75). After careful consideration
and review of the motion, the response, the supplemental response, the reply, the
supporting appendices, the applicable law, and summary judgment record, the Court
GRANTS Plaintiffs’ motion for the following reasons.
I.
Factual and Procedural Background
Southwestern Bell Telephone Company, BellSouth Telecommunications, LLC,
Illinois Bell Telephone Company, Indiana Bell Telephone Company, Incorporated,
Michigan Bell Telephone Company, The Ohio Bell Telephone Company, Nevada Bell
Telephone Company, Pacific Bell Telephone Company, and Wisconsin Bell, Inc.
ORDER – PAGE 1
(collectively “Plaintiffs”) filed this lawsuit against Defendants V247 Telecom, LLC,
Saving Call, LLC, EZ Fone, LLC, EZ Network, LP, LN Enterprises, LLC, Mr. Lan
Ngo, and Mr. Khai Ngo for allegedly failing to pay originating switched access service
charges for international and interstate long-distance telephone calls using Plaintiffs’
telecommunications network.
“Local exchange carriers” (“LECs”) are local telephone companies that provide
traditional land-line phone service. LECs typically serve a small local service area
covering a few local “exchanges,” which are designated by the first three numbers of a
seven-digit phone number. Plaintiffs are incumbent local exchange carriers
(“ILECs”), meaning they operated as monopolies in certain areas until the
Telecommunications Act of 1996 (“1996 Act”) opened the market to competition,
allowing different carriers to serve the same exchange area. These different carriers
are known as competitive local exchange carriers (“CLECs”) since they compete with
ILECs.
Land-line calls placed and received within a local service area are “local calls”.
When a local call involves two LECs, whether incumbent or competitive, both carriers
incur costs for the local call because the caller’s carrier originates the call and the
receiver’s carrier transports and terminates the call. Under the 1996 Act, carriers
must enter into “reciprocal compensation agreements” for these local calls. These
ORDER – PAGE 2
agreements require the caller’s carrier to compensate the recipient’s carrier for its
costs in transporting and terminating local calls.
In addition to facilitating local calls, local phone networks are also needed to
originate and terminate long-distance calls, whether interstate or international. For
traditional long-distance calls, a caller directly dials a long-distance number then the
LEC serving that caller routes it to the caller’s long-distance carrier. This process is
known as “originating access”. The caller’s long-distance carrier then routes the call
the LEC serving the recipient of that call, and that LEC completes the call by routing
it to the recipient of the call. This process is known as “terminating access”. Because
long-distance calls cannot normally be completed without originating and terminating
access from an LEC, the long-distance carriers must order “access services” from the
LEC, regardless of whether it is an incumbent or competitive carrier. The longdistance carrier incurs access charges from the LEC for this access services. The LEC
serving the caller is entitled to “originating switched access charges” from the longdistance carrier for that call. The LEC serving the recipient of the long-distance call is
entitled to “terminating switched access charges”. This case involved “originating
switched access charges.”
In addition to traditional direct dial, long-distance calls can also be made using
prepaid calling cards which function essentially the same way as traditional long-
ORDER – PAGE 3
distance calls. With prepaid calling cards, the caller typically dials a toll-free number
(also known as an 8YY number) to become connected to the prepaid calling card
provider’s platform, and then the provider transmits the call to the recipient in
another state or country. Use of the toll-free number alerts the originating LEC that
switched access charges are applicable. Defendants V247 Telecom LLC (“V247”)
and Saving Call LLC (“Saving Call”) provide long-distance phone service through
prepaid calling cards, which allow their customers to pay in advance for long-distance
calls. But the cards offered and sold by Defendants V247 and Saving Call use local
access numbers, instead of a toll-free number, to connect the caller to the prepaid
calling card’s platform. Once the customer is connected to the calling card platform
through the local access number, the customer then dials the actual long-distance
number he would like to reach. When a local access number is used, the LEC is
unaware that the destination of the call is a long-distance area, and that the call may
terminate in a long-distance area. Therefore, an LEC is not alerted that a switched
access charges applies when a prepaid calling card customer uses a local access
number, as it would be when a toll-free number is used.
Plaintiffs filed this suit against Defendants alleging a violation of federal tariffs.
Plaintiffs claim Defendants owe unpaid switched access charges to which Plaintiffs
are entitled by federal law and tariffs for the interstate and/or international calls
ORDER – PAGE 4
originating on Plaintiffs’ ILEC networks using the local access numbers provided on
Defendants’ prepaid calling cards. Plaintiffs contend Defendants are evading
payment of switched access charges by disguising the long-distance calls their
customers are making as local calls through the use of local access numbers. Plaintiffs
filed the instant motion for partial summary judgment against Defendants V247 and
Saving Call as to their liability for originating switched access charges on their
prepaid long-distance calls originating on Plaintiffs’ networks.
II.
Legal Standard and Applicable Law
A. Standards for Summary Judgment
Summary judgment is appropriate when the pleadings, affidavits and other
summary judgment evidence show that no genuine issue of material fact exists, and
the moving party is entitled to judgment as a matter of law. FED.R.CIV.P. 56(c);
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A dispute of a material fact is
“genuine” if the evidence is such that a reasonable jury could return a verdict in favor
of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
All evidence and reasonable inferences must be viewed in the light most favorable to
the nonmovant, and all disputed facts resolved in favor of the nonmovant. See United
States v. Diebold, Inc., 369 U.S. 654, 655 (1962); Boudreaux v. Swift Transp. Co., Inc..,
402 F.3d 536, 540 (5th Cir. 2005).
ORDER – PAGE 5
The moving party bears the burden of identifying those portions of the record it
believes demonstrate the absence of a genuine issue of material fact. Celotex, 477 U.S.
at 322-25. Once the movant satisfies his burden, the nonmovant must present
competent summary judgment evidence showing a genuine fact issue for trial exists.
Id. at 321-25; Anderson, 477 U.S. at 255-57. To meet this burden, the nonmovant
may not rest on the pleadings, but must designate specific facts in the record
establishing a genuine issue of material fact exists. Celotex, 477 U.S. at 325; Little v.
Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994)(en banc). The nonmovant may
satisfy this burden by providing depositions, affidavits, and other competent
evidence; not with “conclusory allegations, speculation, and unsubstantiated
assertions.” Douglass v. United Servs. Auto. Ass’n, 79 F.3d 1415, 1429 (5th Cir. 1996)
(en banc). Conclusory allegations, unsubstantiated assertions, or a mere scintilla of
evidence cannot defeat a motion for summary judgment. See Anderson, 477 U.S. at
249-52; Boudreaux, 402 F.3d at 540. If the nonmovant fails to make a sufficient
showing to prove the existence of an essential element to the case and on which the
nonmovant will bear the burden of proving at trial, summary judgment must be
granted. Celotex, 477 U.S. at 322.
“Even if there is a dispute regarding some material facts, a movant may obtain
summary judgment if he can prove there is no evidence to support one or more
ORDER – PAGE 6
essential elements of the non-moving party’s claim.” Walker v. Geithner, 400 F. App’x
914, 916 (5th Cir. 2010)(per curium)(citing Celotex, 477 U.S. at 323-25). However,
“[i]t is not sufficient to merely list the elements of the claims and state that there is
no evidence to support the elements.” Seastruck v. Darwell Integrated Tech.,
Civ. No. 3:05-CV-0531-BF, 2008 WL 190316, at *3 (N.D. Tex. Jan. 22, 2008)
(Stickney, M.J.). The movant must cite to the record to demonstrate a lack of
evidence that supports the nonmovant’s claims. Id.
B. Applicable Law
1. Telecommunications Act of 1996
The 1996 Act amended the Communications Act of 1934, and served to open
up local telephone markets to competitive local exchange carriers (“CLEC”).
Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56, at Part II
(1996). Prior to the 1996 Act, local telephone markets were monopolies of each
incumbent local exchange carrier (“ILEC”). The 1996 Act allowed CLECs to enter
the market and acquire new telephone numbers to distribute to their customers,
which gave customers the option to receive their local exchange service from CLECs
rather than just ILECs. See 47 U.S.C. § 251(b)(2); In re Implementation of the Local
Competition Provisions in the Telecomms. Act of 1996, Interconnection between Local Exch.
Carriers & Commercial Mobile Radio Serv. Providers, 11 F.C.C.R. 15499, 15509 ¶ 16, n.
ORDER – PAGE 7
11 (1996). This also applied to prepaid calling card providers, which enabled CLECs
to offer local telephone numbers to prepaid calling card providers so their customers
could initiate prepaid calling card calls on local numbers. Id.
The 1996 Act also ensured that a CLEC’s customer could make local calls to
an ILEC’s customer by requiring CLECs and ILECs to enter into interconnection
agreements to govern the mutual exchange of calls between their networks.
47 U.S.C. § 251(a)(1). This arrangement is referred to as “reciprocal compensation
agreement.” Section 251(b)(5) of the 1996 Act applies to the relationship among
both CLECs and ILECs and creates a ”duty to establish reciprocal compensation
arrangements for the transport and termination of telecommunications.” 47 U.S.C. §
251(b)(5). All traffic is subject to Section 251(b)(5) unless specifically carved out by
Section 251(g) which provides that telecommunications traffic is not governed by
reciprocal compensation if: (1) the traffic is to a long-distance carrier or information
access provider; and (2) the traffic was subject to an equal access and nondiscriminatory interconnection restriction or obligation that pre-dates the 1996 Act.
2. FCC 2006 Order
Acting under its powers vested by the Communications Act, the Federal
Communications Commission (“FCC”) issued a declaratory order on June 1, 2006
address which addressed, among other things, the applicability of access charges for
ORDER – PAGE 8
calls made using prepaid calling card services. In re Regulation of Prepaid Calling Card
Servs., 21 FCC Rcd. 7290, 7290 (2006), vacated in part on other grounds, Qwest Servs.
Corp. v. FCC, 509 F.3d 531 (D.C. Cir. 2007) (“2006 Order”). The 2006 Order
initially dealt with the classification of two types of “enhanced” prepaid calling
cards—menu-driven prepaid calling cards and prepaid calling cards that utilized
Internet Protocol technology. The issue before the FCC was whether the cards were
telecommunications services or information services. Id. at 7291. This distinction
would determine whether the prepaid calling card providers that sold these two types
of cards were required to pay access charges to the LECs that originated the calls, as
well as whether they would have to contribute to the Universal Service Fund
(“USF”). Id. at 7290. The FCC held that both types of prepaid calling cards were
telecommunications services so those providers were subject to access charges and
USF contributions. Id. at 7290. The FCC also stated that in light of these findings
and prior findings, all prepaid calling card providers would be treated as
telecommunications service providers. Id.
The FCC then went further and set forth rules applicable to all prepaid calling
providers. Id. at 7298. The FCC found interim rules necessary “to provide regulatory
certainty and ensure compliance with [the] existing access charge and USF
contribution requirements while [the FCC] consider[ed] broader reform of [the]
ORDER – PAGE 9
rules.” Id. If such rules were not in place, the FCC was concerned that it would
“create incentives for providers to reduce exposure to charges they may owe or evade
them altogether.” Id. at 7293.
3. Tariffs
To collect charges pursuant to a tariff, the party must demonstrate that: (1) it
operates under a federally filed tariff; and (2) it provided services to the customer
pursuant to that tariff. Advamtel, LLC v. AT&T Corp., 118 F.Supp.2d 680, 683 (E.D.
Va. 2000).
Under the Communications Act of 1934, later amended by the 1996 Act, every
common carrier must file “schedules” (hereafter “tariffs”) with the FCC “showing all
charges” and “showing the classifications, practices, and regulations affecting such
changes.” 47 U.S.C. § 203(a); see also Evanns v. AT&T Corp., 229 F.3d 837, 840 (9th
Cir. 2000). Further, a carrier may not lawfully “extend to any person any privileges
or facilities in such communication, or employ or enforce any classifications,
regulations, or practices affecting such charges, except as specified in such schedule.”
47 U.S.C. § 203(c)(3); see also Evanns, 229 F.3d at 840. Tariffs define the legal
relationship between a common carrier and its customers and consist of the terms
and conditions on file with the FCC. Am. Tel. & Tel. Co. v. City of N. Y., 83 F.3d 549,
552 (2nd Cir. 1996). Moreover, “federal tariffs are the law, not mere contracts.”
ORDER – PAGE 10
MCI Telecomms. Corp. v. Garden State Inv. Corp., 981 F.2d 385, 387 (8th Cir. 1992);
see also Am. Tel. & Tel., 83 F.3d at 552 (filed tariffs “have the force of law and are not
simply contractual.”); Carter v. Am. Tel. & Tel. Co., 365 F.2d 486, 496 (5th Cir.
1966)(“[A] tariff, required by law to be filed, is not a mere contract. It is the law.”).
Once a carrier’s tariff is approved by the FCC, the terms of the federal tariff are
considered to “conclusively and exclusively enumerate the rights and liabilities” as
between the carrier and the customer. Am. Tel. & Tel. Co. v. N.Y. City Human Res.
Admin., 833 F.Supp. 962, 970 (S.D.N.Y. 1993); see also Marcus v. AT&T Corp., 138
F.3d 46, 56 (2nd Cir. 1998). Customers are charged with notice of the terms and
rates on file with the FCC and “may not bring an action against a carrier that would
invalidate, alter or add to the terms of the filed tariff.” Evanns, 229 F.3d at 840.
Furthermore, tariffs properly filed with the FCC are public records. Katz v. MCI
Telecomms. Corp., 14 F. Supp.2d 271, 274 (E.D.N.Y. 1998).
III.
Analysis
Initially, the Court notes that this case is substantially similar to two previously
addressed by the Court: Southwestern Bell Tel. Co. v. Touch-Tel USA, LLC, Civil Action
No. 3:10-CV-1642-P (“Touch Tel case”) and Southwestern Bell Tel.Co. v. IDT Telecom,
Inc., Civil Action No. 3:09-CV-1268-P (“IDT case”). Although the arguments are
virtually identical, the Court will address the specific facts at issue in this case to
ORDER – PAGE 11
determine whether the traffic at issue renders Defendants V247 and Saving Call
liable for the switched access charges Plaintiffs seek.
1. Is V247 a Telecommunications Provider?
At the outset, the Court addresses Defendant V247’s argument that there is a
genuine issue of material fact as to whether V247 is even a telecommunications
provider. Defendant V247 argues “it was a marketing and customer service agent for
[Defendant] Saving Call” which was a telecommunications provider. The Court
disagrees and finds that the summary judgment record does not support V247’s
argument.
Plaintiffs met their summary judgment burden by identifying evidence in the
summary judgment record that shows the absence of a genuine issue of material fact
on this issue. See Celotex, 477 U.S. at 322-325. This competent summary judgment
evidence includes: (1) V247’s admissions in its original answer that it provides “long
distance phone service through prepaid calling card services, which allow, among
other things, a customer to pay in advance for long-distance calls”; (2) their website
which holds V247 out as a telecommunications provider operating with an FCC
license; and (3) a signed “Outsourcing Agreement” between V247 and Saving Call
which included, among other things, an agreement between Saving Call, which held
ORDER – PAGE 12
an FCC license, that V247 would operate as a prepaid calling card provider, although
it did not have an FCC license.
Defendant V247 was then required to present competent summary judgment
evidence establishing a genuine issue of material fact exists. Id. V247 asserts that
although there is a signed Outsourcing Agreement, that agreement “was never
implemented or followed.” There is nothing more than the conclusory statements
that this agreement was never followed. Furthermore, V247’s statement that it was
simply a “master distributor” or “marketing agent” does not, without more, create a
genuine issue of material fact as to whether V247 was a telecommunications provider.
V247 wholly fails to address the admission made in its original answer that it
provides telecommunications services or that its website holds V247 out as
telecommunications provider. The Court finds V247 did not satisfy its burden on
summary judgment to create a genuine issue of material fact as to whether it is a
telecommunication services provider such that it would be liable for access charges.
Douglass, 79 F.3d at 1429 (conclusory allegations and unsubstantiated assertions do
not satisfy this burden). The Court finds the summary judgment record
establishesV247 is a telecommunications provider.
The Court will address Plaintiffs’ motion for partial summary judgment as to
V247 as well as Saving Call.
ORDER – PAGE 13
2. The 2006 Order
In determining Defendants’ liability for access charges, the first issue to be
decided is whether the FCC’s 2006 Order governs the traffic at issue. As the Court
has previously noted in the Touch Tel and IDT cases, this determinative issue is a
purely legal question—more specifically, whether the FCC’s interim rules set forth in
the 2006 Order apply to prepaid calling card providers that use local numbers to
access their platforms, such as those sold by V247 and Saving Call, thereby entitling
Plaintiffs to switched access charges.
In its motion for partial summary judgment, Plaintiffs claim that the 2006 Order
applies to all prepaid calling cards, not simply the two types of calling cards
specifically mentioned (menu-driven prepaid calling cards and those using Internet
Protocol). This includes, according to Plaintiffs, the type of calling cards offered by
Defendants which use local numbers to access the provider’s platform, and which
qualify as telecommunications services. Because the 2006 Order recognizes access
charges apply to all prepaid calling card providers, Plaintiffs argue Defendants V247
and Saving Call are responsible for access charges.
Defendants argue that the language of the 2006 Order is narrow and addresses
only the two specific types of prepaid calling cards at issue in the 2006 Order, both of
which rely on toll-free numbers. V247 and Saving Call state that the 2006 Order
ORDER – PAGE 14
does not extended to “all” prepaid calling cards, despite Plaintiffs’ argument to the
contrary. Defendants also direct the Court to the Arizona Dialtone Petition as
evidence about the uncertainty about the application of the 2006 Order requirements
to locally dialed prepaid calling cards. V247 and Saving Call also contend that
reciprocal compensation controls the traffic at issue because this involves locally
dialed calling card traffic, and allowing Plaintiffs to recover access charges would be
compensating them twice.
The Court agrees with Plaintiffs’ interpretation of the 2006 Order, as it has done
twice before in both the IDT and Touch Tel cases. The Court again finds the language
used in the 2006 Order important to note. The FCC specifically found that two
specific types of prepaid calling cards (menu-driven and Internet Protocol) offer
telecommunications services, therefore “these providers are now subject to all of the
applicable requirements of the Communications Act and the Commission’s rules,
including requirements to contribute to the federal USF and to pay access charges.”
In re Regulation of Prepaid Calling Card Servs., 21 FCC Rcd. at 7298. The FCC also
stated that in light of these findings and prior findings, all prepaid calling card
providers would be treated as telecommunications service providers. Id. The FCC
then went further and set forth rules applicable to all prepaid calling providers. Id..
The FCC found interim rules necessary “to provide regulatory certainty and ensure
ORDER – PAGE 15
compliance with [the] existing access charge and USF contribution requirements
while [the FCC] consider[ed] broader reform of [the] rules.” Id. If such rules were
not in place, the FCC was concerned that it would “create incentives for providers to
reduce exposure to charges they may owe or evade them altogether.” Id. at 7293.
As the Court has twice previously determined, the 2006 Order provides courts
with interim rules applicable to “all prepaid calling card providers,” and until the FCC
provides further guidance, all prepaid calling card providers are to be treated as
telecommunication service providers and subject to access charges as detailed in the
2006 Order. Defendants V247 and Saving Call have presented no competent
summary judgment evidence to persuade the Court differently. Prepaid calling card
providers who rely on local numbers, such as Defendants V247 and Saving Call, are
responsible for access charges. The Court acknowledges that interested third-parties
have argued that the 2006 Order does not apply to the facts in this case and that
Arizona Dialtone, Inc. submitted a petition seeking guidance concerning the 2006
Order and its applicability to prepaid calling card using local numbers obtained by
the card provider from a CLEC. Arizona Dialtone Inc. Petition for Reconsideration, WC
Docket 05-68 (Aug. 31, 2006). As the Court has twice noted before, there has been
no action or further guidance issued by the FCC in relation to this issue. Therefore,
the Court finds this argument is without merit.
ORDER – PAGE 16
V247 and Saving Call’s argue that their prepaid calling cards involve only CLECserved calling card traffic, therefore access charges do not apply because these are
simply local calls. They argue that reciprocal compensation applies to this traffic.
This argument is also without merit. Simply because a third-party is placed in the
middle of the calling card traffic does not mean the end destination is within the local
area and not to a long distance area and that Defendants V247 and Saving Call
should not be held responsible for the access charges. Reciprocal compensation
usually controls the traffic between the LECs, whether incumbent or competitive;
but, just as the Court previously determined in the Touch Tel and IDT cases, the
traffic at issue here involves more than the traffic between Plaintiffs and CLECs. In
making their arguments to the Court, Defendants V247 and Saving Call look at the
traffic in isolated parts. The Court must examine the traffic as a whole in its analysis.
If the traffic was truly only between Plaintiffs and the designated CLECs used by
Defendants, then reciprocal compensation would govern. Again this traffic involves
more than local traffic. Defendants V247 and Saving Call allow their prepaid calling
card customers to make long-distance or international phone calls by dialing a local
access number V247 and/or Saving Call obtained from CLECs. The summary
judgment record establishes that the traffic at issue is clearly subject to access charges.
ORDER – PAGE 17
Simply because a third-party is placed in the middle of the calling card traffic does
not mean these Defendants should not be held responsible for the access charges,
The 2006 Order’s interim rules state “all” prepaid calling cards that provide
telecommunication services are subject to these rules. The calling cards at issue here,
just as in the IDT and Touch Tel cases, provide telecommunications services. The
summary judgment record establishes that Plaintiffs, unbeknownst to them, are
originating long-distance phone calls through the use of local numbers by Defendants’
customers, and Plaintiffs are not receiving the switched access charges to which they
are entitled. For this reason, the interim rules apply to the traffic at issue in this case.
Defendants also argue that Plaintiffs “may not overturn industry standards of
rating calls based on the telephone numbers dialed.” In other words, V247 and
Saving Call argue Plaintiffs may look only to the codes of the calling and called
parties (collectively, “NPA-NXX codes”) to determine the call’s destination, not the
actual geographic locations of the calling and called parties. Use of the industry
practice of comparing the NPA-NXX codes is made difficult by calling cards, such as
the ones at issue here, which use local numbers to allow the customer to access the
provider’s platform from which he then places the long-distance call. These types of
prepaid calling cards make it appear that the call is placed from and terminated in the
same local area when that is not what truly happens. In an attempt to find a solution
ORDER – PAGE 18
to this problem, the FCC provided for certification and reporting requirements that
compel the prepaid calling card provider to share the necessary information with the
LEC that it uses to transport traffic to and from the platform. Id. at 7300. So
Defendants’ arguments that Plaintiffs are attempting to overturn industry standards
is meritless.
Defendants V247 and Saving Call also argue that the “carve out” provision in
Section 251(g) of the 1996 Act does not apply to the traffic at issue in this case. The
Court disagrees. First, the Court has already determined that the traffic at issue is to
a long-distance provider since it is destined for long-distance or international
locations. Second, the 1996 Act provides that local exchange carriers shall “provide
exchange access . . . in accordance with the same equal access and non-discriminatory
interconnection restrictions and obligations (including receipt of compensation) that
apply” prior to the 1996 Act. 47 U.S.C. § 251(g). “Exchange access” is defined as
“the offering of access to telephone exchange services or facilities for the purpose of
the origination and termination of telephone toll services.” 47 U.S.C. § 153(20).
The 1996 Act defines “telephone toll service” as “telephone services between stations
in different exchange areas for which there is made a separate charge not included in
contracts with subscribers for exchange service.” 47 U.S.C. § 53(55). The Court has
already determined the nature of the traffic, which is that the traffic originates with
ORDER – PAGE 19
Plaintiffs through use of local access numbers then terminates in a different exchange
area. Further support of the true nature of this traffic is the fact that Defendants’
customers are using a prepaid calling card to make the call. The use of these prepaid
cards suggests, if not evidences, that the call truly is long-distance and is not covered
under their contracts with Plaintiffs which are their local carriers. Based on the
summary judgment record, the Court finds Section 251(g) clearly applies to this
traffic.
Defendants V247 and Saving Call argue that even if the traffic at issue could fall
within the Section 251(g) exception, Section 251(g) ultimately cannot apply because
they did not have “a specific compensation agreement with a long-distance carrier or
information service provider” prior to the 1996 Act. This same argument has been
rejected by the Court twice before, and is so rejected in this opinion. The traffic in
this case cannot be viewed in a vacuum of traffic simply between the ILEC to CLEC;
it must be viewed as the entire transaction. With traditional “basic” prepaid calling
cards, those card providers must pay the LECs who originate and terminate the call
access fees. In this case, when the entire call is examined, rather than simply one
part, it is clear that Plaintiffs are originating long-distance phone calls without
receiving the access charges to which they are entitled. And simply putting a third-
ORDER – PAGE 20
party, Defendants’ CLECs in this case, in the middle does not change Defendants’
obligation to pay those access charges.
Based on the forgoing analysis, the Court finds reciprocal compensation does not
govern this traffic, instead the 2006 Order applies.
3. Tariffs
“To collect charges pursuant to a tariff, Plaintiffs must demonstrate: (1) that they
operated under a federally filed tariff; and (2) that they provided services to a
customer pursuant to that tariff.” Advamtel, 118 F.Supp.2d at 683. There is no
dispute that Plaintiffs operate under a federally filed tariff. The parties do dispute
whether Plaintiffs provided services pursuant to their tariffs. Plaintiffs argue they
clearly provided Defendants V247 and Saving Call with the services set forth in their
filed tariffs. Defendants V247 and Saving Call contend the traffic at issue is not
covered by Plaintiffs’ tariffs and therefore, as a matter of law, the tariffs do not apply.
The Court disagrees with Defendants and, for the following reasons, finds that one or
more of Plaintiffs’ tariffs apply to the traffic at issue.
Plaintiffs allege Defendants V247 and Saving Call received services as detailed in
Section 6.1 of their Southwestern Bell Telephone interstate tariff (“SWBT Tariff”).
Section 6.1 of the SWBT Tariff addresses “switched access service” and substantially
similar versions of the tariff are found in all of Plaintiffs’ interstate tariffs. Switched
ORDER – PAGE 21
access service is defined as “a two-point communications path between a customer’s
premises through the use of common terminating, common switching, Switched
Transport facilities, and common subscriber plant of the Telephone Company.” The
access “customer” is “any” entity “which subscribes to the services offered under this
tariff, including . . . Interexchange Carriers.” An “end user” is defined as “any
customer of an interstate or foreign telecommunications service that is not a carrier.”
The summary judgment record establishes this SWBT Tariff covers Defendants
V247 and Saving Call’s conduct. Applying the SWBT Tariff to the facts at hand, the
access “customers” are Defendants V247 and Saving Call (the interexchange carrier)
and the “end user” is the customer of Defendants V247 and Saving Call who is using
the prepaid calling card. V247 and Saving Call obtained a “two-point
communications path” from its retail end users to Defendants’ “premises” in order to
send the call to its long-distance destination. Plaintiffs originated each call and took
the call from the end user to the CLEC designated by Defendants V247 and Saving
Call’s, which acted as the middleman. The CLEC’s network can be characterized as
the “premises” of Defendants V247 and Saving Call, because that was the designated
point for Plaintiffs to deliver its calls. If Plaintiffs did not provide this path,
Defendants V247 and Saving Call would have been unable to receive any calls
originating from the end user “premises” on Plaintiffs’ networks. Plaintiffs are an
ORDER – PAGE 22
essential part of the traffic and should be compensated for their role. Because of that,
the SWBT Tariff applies to this traffic at issue. It also appears that other tariffs may
apply to the conduct of Defendants V247 and Saving Call.
Defendants V247 and Saving Call allege that the SWBT Tariff does not apply to
this situation because they receive services from third-parties, the CLECs, and
because Defendants V247 and Saving Call are not an “end user” as referenced in
Plaintiffs’ tariffs. The Court rejects this argument, just as it did in the Touch Tel and
IDT cases. The Court is not persuaded by Defendants V247 and Saving Call’s
argument that the Plaintiffs’ tariffs cannot apply because the prepaid calling card
traffic is served by third-party CLECs from which Defendants V247 and Saving Call
receive local service. The use of third-party CLECs is simply an attempt to avoid
paying access charges. The summary judgment record supports a finding that the
“switched access services” tariff applies.
The Court must also determine whether Plaintiffs’ services were ordered by
Defendants V247 and Saving Call in order for them to be liable for access charges. A
party can “order” such service, thereby becoming a “customer” in two ways: (1) by
affirmatively ordering the service by pre-subscribing to the service; or (2) by
constructively ordering the service. Am. Tel. & Tel. Co., 83 F.3d at 553 (citing United
Artists Payphone Corp. v. N.Y. Tel. Co., 8 F.C.C.R. 5563, 5566 (1993)). There is no
ORDER – PAGE 23
dispute that Defendants V247 and Saving Call did not affirmatively order services.
Therefore, Defendants V247 and Saving Call can be held liable only if they
constructively ordered the access service described in Plaintiffs’ tariffs.
A party constructively orders a carrier’s services when “the receiver of the
services: (1) is interconnected in such a manner that it can expect to receive access
services; (2) fails to take reasonable steps to prevent the receipt of access services; and
(3) does in fact receive such services.” Advamtel, 118 F. Supp.2d at 685. “In order to
find that a service has been constructively ordered, the carrier must show ‘affirmative
action . . . to establish a [customer] relationship.’” Id. (citing Am. Tel. & Tel. Co., 83
F.3d at 553-54). This affirmative action includes the failure to “take reasonable
steps” to avoid receiving the carrier’s services. Id.
Defendants V247 and Saving Call contend that they have not constructively
ordered services. Defendants V247 and Saving Call argue that they are not
“interconnected” with Plaintiffs because that requires the physical linking of two
networks, not simply the transport and termination of traffic. Defendants V247 and
Saving Call also allege that by ordering services from CLECs, they affirmatively acted
to prevent receipt of access services by Plaintiffs.
The Court disagrees. Courts have found the constructive order doctrine may
be applicable to an interexchange carrier even when the interexchange carrier is not
ORDER – PAGE 24
directly connected to the LEC. See Alliance Comm’cns v. Global Crossing Telecomm., 690
F.Supp.2d 889, 894-95 (D.S.D. 2010). Furthermore, the Court finds that
Defendants V247 and Saving Call did not take reasonable and affirmative steps to
prevent receipt of the services despite their argument to the contrary. The Court
finds Defendants V247 and Saving Call appear to have simply added an additional
step by purchasing local access number services from CLECs in order to avoid access
fees. Ordering services from the CLECs does not suggest any affirmative action to
prevent receipt of services from Plaintiffs. This is especially true since Defendants
V247 and Saving Call must have known that not all calls placed by their prepaid
calling card customers would originate on CLEC-served phone lines and that CLECs
would not own all the facilities used to make the call. It seems reasonable that
Defendants V247 and Saving Call knew that other companies, such as Plaintiffs,
would be needed to originate some of the calls and, therefore, Defendants V247 and
Saving Call would be liable for access charges. Finally, Defendants V247 and Saving
Call did in fact receive the services specifically described in Plaintiffs’ tariffs.
Therefore, the Court finds the three elements of constructive ordering have been
established. The summary judgment record establishes that Defendants V247 and
Saving Call constructively ordered Plaintiffs’ services. See Advamtel, 118 F. Supp.2d
at 685.
ORDER – PAGE 25
A fact issue remains as to when Plaintiffs knew or should have known about
the traffic at issue here as well as whether Plaintiffs sustained damages. The issue of
damages and whether Plaintiffs are entitled to an injunction will be addressed at trial.
IV.
Conclusion
The Court finds Defendants V247 and Saving Call are liable for payment of
originating switched access charges to Plaintiffs for international and interstate longdistance telephone calls originated by Plaintiffs on their networks. For the foregoing
reasons, the Court GRANTS Plaintiffs’ motion for partial summary judgment.
SO ORDERED.
Signed September 15th, 2016.
______________________________________
ED KINKEADE
UNITED STATES DISTRICT JUDGE
ORDER – PAGE 26
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?