D.C. Circuit Should Reject FCC Order Requiring Audio Bridging Services to Pay into USF, The Conference Group Says.

The Conference Group told a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit Monday it should reject an FCC order requiring audio bridging services to contribute directly into the USF. The agency had found in 2008 that InterCall, an audio bridging service provider, needed to pay into the USF because its services “are equivalent to teleconferencing services,” and thus would be considered “telecommunications” under the 1996 Telecom Act. The FCC also directed the Universal Service Administrative Co. to begin requiring other “similarly situated” audio bridging services to also pay into the USF (CD July 1/08 p6). InterCall didn’t file a request for reconsideration of the order, but The Conference Group, an audio conference service provider, did. The FCC said it denied that request for reconsideration in January 2012.

Cisco WebEx, a Cisco Systems subsidiary, argued in support of The Conference Group that the FCC had shifted from a “functional integration” standard for distinguishing between “telecommunications” and “information services,” to a “with or without accessing” standard. A “functional integration standard” distinguishes between telecommunications and information services based on whether a service’s telecommunications and advanced features are “functionally integrated,” Cisco said. A “with or without accessing” standard separates the two based on whether a service could be used “with or without accessing” all of the included features (http://bit.ly/16YIM8H). The FCC did not follow proper APA procedure in shifting that standard, Wiltshire & Grannis attorney Christopher Wright argued on behalf of Cisco.

The FCC argued its InterCall order occurred because of an adjudicatory ruling, which the APA’s requirements do not cover. The agency said it issued a public notice on The Conference Group’s petition for a full FCC review and invited public comment. The agency’s additional step of requiring other “similarly situated” audio bridging service providers to also begin contributing to the USF did not change the adjudicatory ruling into a rulemaking order -- it merely reflected that such an order creates a precedent for other “similarly situated” entities, FCC counsel Joel Marcus said. The agency could reasonably classify InterCall’s audio bridging service as “telecommunications” because the service enabled multiple users to participate in the same telephone call. Audio bridging facilitated telecommunications, rather than “altering its fundamental character,” the agency said in a brief (http://fcc.us/17C4rVq).

Verizon argued in support of the FCC, criticizing The Conference Group for being inconsistent on whether its services were similar enough to InterCall’s to give The Conference Group standing to challenge the FCC’s order. Buntrock argued in court that InterCall’s services were different from those offered by The Conference Group, but the company argued in its initial brief that the two companies’ services were similar. “They cannot have it both ways,” Wiley Rein attorney Helgi Walker argued for Verizon. “If they are similarly situated, then I suppose they have a reason to be here complaining about the order. But they can’t then turn around and say they're not similarly situated for the purposes of the merits functional integration test."

Chief Judge Merrick Garland and judges Judith Rogers and Laurence Silberman questioned The Conference Group and the FCC on the issue of standing. Garland asked Marcus whether the FCC didn’t raise the issue of standing because it believed The Conference Group was an affected party. Marcus said the FCC did not challenge standing because if The Conference Group is similarly situated, it “will be affected by this rule,” though he added the agency would not object if the court found The Conference Group lacked standing based on Verizon’s argument. The Conference Group is “clearly properly before the court and has standing to bring this appeal,” Buntrock told us. “[Marcus] acknowledged as much in response to questions from the panel, and noted that the commission didn’t ever raise standing as an issue.”