Regulatory News – Appeals Court Remands Wireless Rate Order

Posted:  09/2000

Appeals Court Remands Wireless Rate Order
By Kim Sunderland

The U.S. Court of Appeals for the D.C. Circuit
(www.cadc.uscourts.gov) wants the FCC
(www.fcc.gov) to take another look at requiring wireless carriers to integrate their rates and charge the same long-distance rates to each subscriber, regardless of their location.

Rate integration has existed for long-distance carriers since the 1970s. When the Telecommunications Act of 1996 became law, the FCC decided that wireless carriers had to integrate as well, citing Section 254(g) of the act.

That interpretation created an uproar among competitors getting into the wireless space. They challenged the ruling in court asking: whether a telecommunications provider is required to integrate its rates across all commonly owned or controlled affiliates that provide interstate inter-exchange services; and, whether requirement of rate integration applies to providers of commercial mobile radio service (CMRS), that is, wireless technologies such as cellular and PCS.

In remanding the FCC’s 1997 decision, the appeals court says it was unclear whether Congress intended rate integration to apply to wireless carriers and that further consideration by the commission is necessary.

The court upheld the FCC’s requirement that telecom providers integrate rates on a company-wide basis instead of affiliate by affiliate. Currently, the rules applying rate integration to wireless carriers are stayed pending final resolution of this issue.

Depending on what the FCC does now, and whether the appeals court agrees, a revenue boon may be in wireless carriers’ future, because they charge varying rates depending on a subscriber’s location, sources say. If that happens, it could hurt some industry competitors.

“As the decision directs the FCC to go back and shore up its arguments as to why its interpretation of the act applying rate integration to CMRS providers is the correct one, the portion of the decision dealing with wireless service providers will have no immediate impact on the wireless industry,” says Dena
Alo-Colbeck, director of public policy for regulatory consultants Miller Isar (www.millerisar.com).

“However, if the FCC persists in applying rate integration to wireless carriers, wireless resellers could face increased expenses, as wholesale providers often charge higher rates for calls to noncontiguous states and U.S. territories than calls in the continental U.S.,” she adds.

The FCC must determine whether rate integration is applicable to CMRS, and if CMRS is included in the phrase “inter-exchange telecommunications service,” explains Mitchell F. Brecher, partner with the law offices of Greenberg Traurig (www.gtlaw.com).

“If so, the FCC then has discretion to adopt an interpretation of the statute which would exclude CMRS from rate integration,” Brecher says. “In my view, the proper interpretation of the statute would be that the rate integration requirement is applicable to all inter-exchange services, including those provided by companies which are CMRS providers.”

Some CMRS providers offer customers long-distance calling services on a resale basis using the underlying services of other carriers, he says. In these circumstances, those CMRSs act as inter-exchange resellers, i.e., as inter-exchange telecommunications carriers. That means Section 254(g) would be applicable to them.

Whether Section 254(g) rate integration should apply to CMRS is a very different question than whether rate integration is sound public policy, Brecher adds.

“I am of the view that it is internally inconsistent for a statute whose primary policy objectives are promotion of competition and deregulation to have within the statute a provision which dictates to competitive, otherwise largely deregulated providers, how to price their services,” he says.

Brecher adds that at some point, the FCC may decide not to apply or enforce the rate integration provision, at least in some circumstances.

“Until that happens, I believe that the correct view is that the requirements of Section 254(g) are applicable to all providers of inter-exchange services. That includes resellers who are themselves telecommunications carriers, despite the fact that they do not own or operate their own transmission facilities.”