DC Circuit Upholds FCC’s 2019 Order Revising Access Stimulation Rules

July 9, 2021 – The U.S. Court Of Appeals for the District Of Columbia Circuit has issued an opinion in Great Lakes Communication Corp v. FCC which upholds the FCC’s access stimulation rules.[1]

In September 2019, the FCC adopted an Order which revised the existing access stimulation rules by: (i) making access-stimulating local exchange carriers (LECs) – rather than interexchange carriers (IXCs) – financially responsible for the tandem switching and transport service access charges associated with the delivery of traffic from an IXC to the access-stimulating LEC end office or its functional equivalent; (ii) modifying the definition of access stimulation to include two alternative traffic triggers without a revenue sharing component; and (iii) adopting different alternative triggers for competitive LECs and rate-of-return LECs in light of the different incentives each has to engage in access stimulation.[2]

A number of competitive providers that offer conference calling services challenged the new rules adopted in the Order. These Petitioners made three primary arguments challenging the FCC’s access stimulation rules: they exceed the FCC’s statutory authority; the rules are arbitrary and capricious; and the FCC violated the Administrative Procedure Act because the rules are not a logical outgrowth of the Notice of Proposed Rulemaking (NPRM).

First, the Court examined the Petitioners’ statutory arguments, and concluded they were unpersuasive. The Court found Section 201(b) of the Communications Act gives the FCC broad authority to declare access stimulation an unreasonable practice, and that authority is not limited by Sections 251(b)(5) or 252(d)(2).

Second, the Court concluded the FCC’s decision “to treat the rate-of-return carriers more leniently than the competitive carriers” was not arbitrary and capricious. The Court said the FCC’s justification for the action was reasonable because “rate-of-return carriers lack the same ability to pursue conference call centers as customers and game the access charge regime,” and “they have a relatively defined geographic footprint that prevents the aggressive selling practices and rate arbitrage that competitive carriers can employ.”

Finally, as for the APA logical outgrowth argument, the Court said the FCC’s “differential treatment of rate-of-return carriers and competitive carriers” was foreseeable. The Court explained that the FCC’s NPRM explicitly asked whether the FCC should modify the ratios or triggers used in the definition of access stimulation, which warned parties “that the prior 3:1 ratio could be modified.” Because the change was foreseeable, the Court concluded, the changes to the access stimulation definition “were a logical outgrowth” of the NPRM.

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[1] Great Lakes Communication Corp v. FCC, No. 19-1233 (D.C. Cir. July 9, 2021), https://www.cadc.uscourts.gov/internet/opinions.nsf/D7C8F911D4356AB88525870D0050CB41/$file/19-1233-1905627.pdf.

[2] Updating the Intercarrier Compensation Regime to Eliminate Access Arbitrage, WC Docket No. 18-155, Report And Order And Modification Of Section 214 Authorizations, FCC 19-94 (Sep. 27, 2019), https://docs.fcc.gov/public/attachments/FCC-19-94A1.pdf.