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Case number 15-1064, Great Lakes Commnet, Inc.

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at L Petitioners versus Federal Communications Commission at L. Mr. Olive for the petitioners, Ms.

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Sundaev-Reason for the respondent, and Mr. Hunt-Sider for the intervener.

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Good morning, Your Honors.

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May it please the Court?

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Great Lakes Commnet is currently in Chapter 11.

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It has not been paid by AT&T nor any of the other intervening inter-exchange carriers since early 2012.

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It is forced to continue to provide those services to them because it cannot lawfully block or refuse to take that service.

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In the bankruptcy proceeding, it contends that AT&T owes it approximately $22 million.

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The amounts that it claims to be owed by the other IACs is roughly equal to that amount.

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under the order that is under appeal today.

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Excuse me, but does that affect the issue before us today?

[00:01:06] Speaker 06:
Well, whether or not Great Lakes is entitled to charge those rates and collect them is implicit in the order before you today.

[00:01:15] Speaker 04:
Right, I understand that, but the fact that it's in bankruptcy is not relevant to the issue we have, right?

[00:01:21] Speaker 06:
Not directly, no, Your Honor.

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Your point is it really needs money.

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It needs the money.

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There's no question about that.

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Under the order under appeal today, by July 2018, at the latest, when AT&T Michigan is required under the Connect America Fund to transition its excess rates to zero under the bill and keep regime,

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The order under appeal today forces Great Lakes to also reduce its rates to zero as well.

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But why is that question, isn't the only question before us the legality of the rates during the period of issue in this case?

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What does the future bill and keep arrangement have to do with the issue before us?

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Because the

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I don't understand.

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The FCC's adoption of the Bill and Keep regime is the overall regulatory framework in which this court has to understand and interpret.

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But it wasn't in effect at the time of the rates at issue in this case.

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The full portions of it are the transition to Bill and Keep is in steps over time.

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The ultimate transition to Bill and Keep

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where rates go completely to zero is in July 2018 or earlier because NEIXC can transition earlier than that rate, that time.

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getting to the immediate impact, the first issue I'm going to deal with is out of the order that we deal with in our briefs, which is that if Great Lakes is a CLEC, a competitive CLEC, which we contend it is not, then it is clearly a rural CLEC under the unequivocal definition of rural CLEC contained in

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rule 6126A6.

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The rule is absolutely clear and unequivocal.

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A rural SELEC is a SELEC that does not serve, i.e., originate or terminate traffic to end users in an urban area.

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It's undisputed that Great Lakes does not originate or terminate traffic to end users in an urban area.

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Well, if you're wrong about the end user argument, then what?

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Suppose you're wrong.

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Your basic argument is, Great Leaves doesn't serve end users.

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Therefore, it's not a SEAL Act.

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But suppose you're wrong about that.

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The commission says, by definition, there are end users all over the country using this 800 service.

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And some of them must be in urban areas.

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That's not the standard in the rule.

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The rule is, do you serve end users?

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Directly.

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If the FCC... Wasn't that rejected in the ACE order and in the regulation that followed the ACE report in the right?

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No, we don't believe it did, Your Honor, and here specifically talking about serving the rural exemption.

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My question was, I think Judge Wilkins and I are both asking the same question.

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If you're wrong about the end user point,

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then we're still correct about being a rural seat.

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How can that be?

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I don't understand it.

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Because if the FCC were to prevail in its argument that service to any customer, and every call goes to some end user at some point, that if calls are originating or terminating with an end user in an urban area somewhere, then no rural

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then there is no rural exemption.

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The rural exemption is null and void because a purely rural telephone company that serves only end users directly in rural areas still gives those customers the ability to receive calls from

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or place calls to an urban area through another carrier.

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So to use an old example, if the phone rings in Mayberry and Sheriff Taylor picks up the phone and it's the operator Sarah excitingly saying there's a long distance telephone call from the state police in Raleigh that does not render the Mayberry telephone company a non-rural telephone company serving only Mayberry.

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The regulation looked at, to the extent that it looked at end users, it looked at end users, the end user who originated the call.

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Well, the definition in the rule is does it originate or terminate?

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Go ahead.

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Please.

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No.

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But in the footnote of the order where the commission spells out its rationale, it says the wireless traffic by its very nature originates from locations throughout the country.

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So as Judge Wilkins was saying, the focus is on where the calls, the end user originate, not

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the other end of the call.

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That's an observation that the FCC made in the footnote.

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But as I point out, that means there is no rural exemption because every telephone company, even the smallest rural telephone company, gives its customers the ability to receive calls from an urban area through another carrier.

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But I thought it was where the calls originated.

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So if it's a company that only deals with rural customers who originate calls from rural areas, then wouldn't that qualify?

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No.

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Because?

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Because they're saying if you are receiving calls from, the input note says if you are receiving calls from an urban area,

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then you're not entitled to the rural exemption.

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So in my example, if the state police in Raleigh call Sheriff Andy Taylor in Mayberry, the FCC is saying to the Mayberry telephone company, you're not entitled to the rural exemption.

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Even though you don't serve Raleigh, all your customers are in Mayberry

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Maybe a few in Mount Piley.

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Just so that I'm clear, the way that these regulations work, you can't be a rural SELEC for some purposes and a non-rural SELEC for other purposes.

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You're either one or the other.

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For purposes of this particular rule, that is correct.

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But, Your Honor, there are definitions of

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rural telephone company contained in the federal telecommunications act.

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There are also definitions of local exchange carrier contained in the communications act and incumbent local exchange carrier contained in the communications act.

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The FCC in promulgating rule 6126 decided it did not want to follow those definitions.

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And specifically, initially, as it admits, the initial version of Rule 6126, adopted in 2001, was intentionally intended to exclude any intermediate carriers, even if they were otherwise local exchange carriers under the Communications Act.

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Can I get one point of clarification?

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So if we're not talking about intermediate carriers, so maybe I've got the technology wrong, but if we're not talking about intermediate carriers who are one level up, but we're talking about a carrier who only directly serves end users?

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Yes.

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Are you saying it's impossible to have a carrier that only serves, directly serves end users, all of whom are located in rural areas?

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That is correct.

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It's impossible.

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Well, given what the FCC has said in this order,

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A rural telephone company that is serving only end users in a rural area is still not entitled to the rural exemption because someone in the city could pick up a telephone and call that rural telephone company, call someone living in that service area.

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But with respect to those rural customers, the CLAC is only originating or terminating calls to them.

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They're all rural.

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That's correct.

[00:10:07] Speaker 04:
OK, so they meet the standard.

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Well, that's not what the standard says.

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The standard says nothing about the carrier being required to serve anyone.

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It's stated in the negative, that you do not serve

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you do not serve directly by originating or terminating calls in an urban area.

[00:10:40] Speaker 03:
I guess what I'm not understanding and I'm not sure if this is the same question.

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Judge Taylor was just asking is, but let's suppose you are serving end users in Mayberry.

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Yes.

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And you get a call from New York City.

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Yes.

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You were terminating that call, right?

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You're terminating the call in a rural area.

[00:11:01] Speaker 03:
In a rural area, okay.

[00:11:02] Speaker 03:
So Mayberry calls back to New York City.

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So you are the CLEC and you are originating that call.

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That's correct.

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It's being terminated in New York City, but it's not being terminated by you in New York City, right?

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That's correct.

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So if that's all you're doing, why aren't you still a rural SELEC?

[00:11:23] Speaker 03:
Because you're not terminating that call into urban area.

[00:11:27] Speaker 06:
Because in the first example you gave, this FCC order says Great Lakes does not qualify as a rural SELEC because a call originated in New York that it handled.

[00:11:48] Speaker 03:
Maybe that's in the unique circumstance where you are not serving end users, but you're being this intermediate.

[00:12:02] Speaker 03:
I mean, why should there be, I guess I'm not understanding, I mean, it just seems like that's part of what you sign up for when you agree to be an intermediary.

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If there are policy reasons to say to intermediaries in that circumstance that if you're an intermediary, you cannot qualify for the rural exemption, then that is something to be addressed in a rulemaking proceeding on a going forward perspective basis only.

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But that is not what this rule says by any stretch of the imagination.

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It's not what is in the language of the rule.

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It can't be reasonably inferred from the rule.

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And the FCC's arguments in its order that either because Great Lakes owns some lines that are in urban areas, that it serves.

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That's contrary to the language of the rule that says service means originating or terminating.

[00:13:16] Speaker 03:
But wasn't there a second part of that footnote where they said, moreover?

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Correct.

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The second part is, and some of these calls originated in urban areas.

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Actually, some of them probably, there are two 800 numbers, presumably some of them terminated to urban areas as well, wherever the 800 center was.

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Can I ask you a technical question about these 800 calls?

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Yes.

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I don't think that my question has anything to do with a legal issue.

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I just don't understand this business.

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If I use my cell phone to call an 800 number, and if I have an unlimited package, it's not going to cost me anything even if it's an 800 number, right?

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That's correct.

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even though it's an 800 number, correct?

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So why would, just explain to me, why would a business pay for 800 service from cell phones?

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Well, what are they getting for it?

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The way the 800 service works is that if I'm running a service center to take calls for 800 numbers, I pay AT&T or pay one of the IXCs to provide the 800 service.

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And I pay for that service at a negotiated rate.

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The rack rate is roughly $1 a minute.

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And so when I, as a customer, am trying to call that service center, the 800 Center is paying for the cost of that call.

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But the cost.

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And that's what I said before.

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If I make, if I call my bank's 800 number on my cell phone, it doesn't cost me anything.

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So why would the bank pay for it?

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What's the bank paying for?

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It's just receiving the call.

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The bank is paying for receiving the 800 service.

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You're not paying a per minute charge on your cell phone for calling that long distance number because the cost of providing the cellular service is buried into your monthly rate.

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Right.

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And if I call from my landline, I get it.

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I won't get a long distance charge.

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That's great.

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So I understand why my bank wouldn't want to pay for that call.

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But I don't understand why they wouldn't pay for it.

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Well, your local cell phone provider, when you make a place to call on your cell phone, it goes from your phone to a tower.

[00:16:02] Speaker 04:
I understand that.

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And then connected to a central office.

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And then if it's a long distance call, it's then going to go over a long distance carrier.

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I believe the situation then is that your cellular carrier is not having to pay

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AT&T or the long-distance service to then take that call to the call center.

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The call center is paying for them doing that.

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I'll reserve the remainder of my time for rebuttal here.

[00:16:31] Speaker 04:
Okay, thank you.

[00:16:47] Speaker 02:
Good morning, may it please the court?

[00:16:48] Speaker 02:
My name is Thaila Sundaresan and I represent the Federal Communications Commission.

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The basic issue in this case is that Great Lakes seeks a blanket exemption to the benchmark rule on grounds that it is not a competitive local exchange carrier or CLEC.

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But over a decade ago, in its eighth report in order, the commission stated clearly that it was adopting a new rule for intermediate carriers.

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The commission determined, and I quote, the rates that a competitive LAC charges for access components when it is not serving the end user should be no higher than the rate charged by the competing ILAC.

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In other words, intermediate carriers that do not directly serve end users, like Great Lakes, are subject to the benchmark rule.

[00:17:31] Speaker 01:
Can you address the rural, sea-like question?

[00:17:34] Speaker 01:
Because I'm a little confused about the Commission's rationale.

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So as I understand your response to their argument, it's that their argument can't be right.

[00:17:43] Speaker 01:
Because if their argument was right, then every intermediate carrier would be rural.

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And that seems absurd.

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And as I understand your position, as the commission's position, at least in footnote 96 of the order, it seems to suggest that no intermediate care can be a rural select because the commission said the rural exemption does not apply to carriers that serve no end users whatsoever, which could be every intermediate carrier.

[00:18:10] Speaker 02:
That's correct, Your Honor.

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6126F is the applicable provision for intermediate carriers that do not serve end users.

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Intermediate carriers cannot qualify for the rule exemption in 6126E, and as we say that in footnote 96, the rule exemption does not apply to carriers that serve

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no end users whatsoever.

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So no intermediate care can ever qualify.

[00:18:35] Speaker 01:
And I guess what seems to be the step that at least may or may not be on the face of the regulation is that the rural C-like regulation only applies to entities that serve end users.

[00:18:49] Speaker 01:
And then you go, if that's an assumption that's embedded in the regulation, then one would go on and see, well, OK, then the only ones that can qualify to be rural are those that serve no urban users.

[00:19:00] Speaker 01:
But that assumption, that's what I'm wondering, is that that assumption is stated in the footnote, to be sure, in the order.

[00:19:06] Speaker 01:
But where would I know that the only entities that could conceivably fit within the rural CLE are those that serve end users at all to begin with?

[00:19:15] Speaker 02:
So, Your Honor, I would point you to the plain language of 6126E, which begins with accept as provided in paragraph G of the section and notwithstanding paragraphs B through D of the section.

[00:19:29] Speaker 02:
What that means is that the notwithstanding B through D language means that the rule exemption is an exclusion from the general benchmark rate in B through D. But it does not say notwithstanding paragraphs B through D and F. E pointedly excludes F. So from that language, it can be deduced that

[00:19:54] Speaker 02:
intermediate carriers cannot qualify for the rule exemption.

[00:19:58] Speaker 04:
I'll also add that when the commission added- The order, by the way, doesn't say that, does it?

[00:20:02] Speaker 04:
I'm sorry- The order we're reviewing doesn't say that.

[00:20:05] Speaker 02:
The order does not explicitly say that, Your Honor.

[00:20:08] Speaker 04:
Well, it doesn't say it at all.

[00:20:10] Speaker 02:
It does not say that.

[00:20:11] Speaker 04:
It gives two reasons, one of which is clearly wrong, right?

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That Great Lakes doesn't qualify because it has equipment in Chicago.

[00:20:18] Speaker 04:
That can't be right.

[00:20:19] Speaker 04:
Your Honor, the- The other reason is where its end users are,

[00:20:24] Speaker 04:
But you're telling us that a rural, an intermediate COEC can't ever qualify, right?

[00:20:35] Speaker 02:
That's correct.

[00:20:35] Speaker 02:
Intermediate carriers cannot qualify for the rule exemption.

[00:20:39] Speaker 02:
The analysis included in the order, there are two points.

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One is that they cannot, that Great Lakes cannot qualify because they handle traffic from end users nationwide, including urban areas.

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And they have transport facilities in urban areas, including Chicago and Detroit.

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And in the eighth report in order, we say that the rule exemption should be determined based upon the availability of the entire service area.

[00:21:08] Speaker 02:
And we don't define what service area means, but it was reasonable for the commission to conclude that because

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Great Lakes service is transporting traffic.

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They don't operate lines that serve end users.

[00:21:20] Speaker 02:
It would make sense to look at the location of their transport facilities.

[00:21:23] Speaker 02:
That's the service they provide.

[00:21:25] Speaker 02:
It's transporting traffic.

[00:21:26] Speaker 02:
So it's reasonable for the Commission to conclude that because their transport facilities were located in urban areas, they could not qualify for the exemption.

[00:21:34] Speaker 02:
That's consistent with the reason why the exemption was crafted.

[00:21:38] Speaker 02:
back in 2001, it was always designed to be an extremely narrow exemption that should apply to only a small number of carriers.

[00:21:45] Speaker 01:
The commission didn't need to say any of that if it's true that intermediate carriers per se can't qualify for the rural exemption.

[00:21:54] Speaker 01:
Right, then none of the other stuff matters.

[00:21:57] Speaker 01:
And that seems to me to be the critical first step, but tell me if I'm wrong.

[00:22:01] Speaker 01:
That seems to me to be the critical first step.

[00:22:03] Speaker 01:
And that's embedded in footnote 96, where you say, where the commission said, but the rural exemption does not apply to carriers that serve no end users whatsoever.

[00:22:11] Speaker 01:
It's buried in a footnote, and it doesn't specifically then go on to say, that means, by the way, no intermediate carrier can ever qualify for the rural exception.

[00:22:19] Speaker 01:
But that's what you're saying that that footnote means.

[00:22:21] Speaker 02:
I would also point you to JA9 paragraph 25 where we say that the applicable provision for intermediate carriers that do not have their own end users is 6126F.

[00:22:34] Speaker 02:
So that's also another citation to the order where we

[00:22:39] Speaker 02:
make clear that 6126F is the only applicable provision for intermediate carriers.

[00:22:44] Speaker 01:
So could you have stopped right there then?

[00:22:46] Speaker 01:
Because if it's true that no intermediate carrier can ever qualify as a rural, under the rural exemption, then it doesn't matter where transit facilities are located.

[00:22:55] Speaker 01:
It doesn't matter where calls originate.

[00:22:57] Speaker 01:
We're done.

[00:22:58] Speaker 02:
That's true, Your Honor.

[00:22:59] Speaker 02:
The first step is, are they an intermediate carrier?

[00:23:03] Speaker 02:
If the answer to that is yes, then 6126E does not apply.

[00:23:08] Speaker 02:
The power of the commission wanted to provide additional analysis on the location of the open areas.

[00:23:13] Speaker 04:
Well, maybe I was just going to ask the question you're going to ask.

[00:23:16] Speaker 04:
We review, I mean, we're reviewing the decision that's before us.

[00:23:22] Speaker 04:
The decision that's before us doesn't say what you just said.

[00:23:26] Speaker 04:
It says it turns on where their facilities are and where the end users are.

[00:23:31] Speaker 04:
It doesn't say that intermediate CLECs cannot qualify.

[00:23:39] Speaker 04:
You've made that argument here.

[00:23:42] Speaker 04:
So what do we do as a reviewing court?

[00:23:45] Speaker 04:
Do we have to send it back to the commission to see if the commission agrees with what you've told us today?

[00:23:53] Speaker 02:
No, Your Honor, I would point you back to footnote 96, J-9, where we say the rule exemption does not apply to carriers that serve no end users.

[00:24:04] Speaker 02:
And that language makes clear that intermediate carriers that don't have end users cannot qualify for the rule exemption.

[00:24:14] Speaker 01:
But it's just that language does appear to say that.

[00:24:17] Speaker 01:
I mean, I have to say, I don't think your brief says that.

[00:24:19] Speaker 04:
I didn't even understand this until today.

[00:24:22] Speaker 01:
It's just something that was divine from the footnote, but your brief never makes that point explicitly.

[00:24:28] Speaker 01:
Your brief talks about the location of transit facilities and then secondarily where calls originate.

[00:24:33] Speaker 02:
The brief does say that 6126F is the applicable provision for intermediate carriers.

[00:24:41] Speaker 01:
Yes, that's true.

[00:24:42] Speaker 01:
But then it doesn't go on to make what seems to me to be a pretty important point, which is that the upshot of focusing on 6126F is that no intermediate carrier can ever qualify for the rural exemption, which is

[00:24:57] Speaker 01:
If you read footnote 96 very carefully, maybe you come to that conclusion, you're telling us that that is in fact the conclusion that emerges from that footnote.

[00:25:04] Speaker 01:
But neither the brief nor the order specifically say that.

[00:25:07] Speaker 01:
And then the order, I think in some sense, might complicate matters by then going on to explain other criteria that tell us why this particular CLEC doesn't qualify for the rural exemption when we're already out of that box to begin with.

[00:25:21] Speaker 02:
Yes, Your Honor, the brief doesn't explicitly make that argument that 6126-80 doesn't apply.

[00:25:27] Speaker 02:
But if you look at the language of the order and put that 96, the only conclusion, and perhaps it could have been stated more explicitly, but the only conclusion is that intermediate carriers that do not have end users cannot qualify for it.

[00:25:40] Speaker 01:
Period.

[00:25:41] Speaker 01:
They can't.

[00:25:41] Speaker 01:
That's the position that you have.

[00:25:43] Speaker 01:
That's correct.

[00:25:43] Speaker 01:
Just to be clear.

[00:25:44] Speaker 01:
OK.

[00:25:44] Speaker 01:
All right.

[00:25:45] Speaker 01:
That's helpful.

[00:25:46] Speaker 02:
Your Honor, I want to turn to the threshold matter, which is whether or not Great Lakes is a SEALAC.

[00:25:53] Speaker 02:
I would point you to the plain language of 6126A1.

[00:25:56] Speaker 02:
The only part of the definition that's in dispute between the parties is whether Great Lakes, quote, provides some or all of the interstate exchange access services

[00:26:06] Speaker 02:
used to send traffic to or from an end user, and Great Lakes comfortably falls within this definition.

[00:26:12] Speaker 02:
According to its own tariff, they provide some interstate exchange access services, and these services are in turn used to send traffic to or from an end user.

[00:26:22] Speaker 02:
Now notably, if you accept Great Lakes interpretation, it requires you to rewrite the rule and insert the word directly, but that's not how the rule is crafted.

[00:26:30] Speaker 02:
The Commission deliberately adopted a broader definition which encompassed intermediate carriers,

[00:26:36] Speaker 02:
that provide some interstate exchange access services used to send traffic to or from an end user and that's made explicit by the language in the eighth report in order where the commission concluded that we're adopting a new rule to apply to intermediate carriers and we said that

[00:26:52] Speaker 02:
The rates that a competitive let charges for access components when it's not serving the end user should be no higher than the rate charged by the competing ILEC.

[00:27:01] Speaker 02:
And Great Lakes notably does not even address that language either in their brief or in their reply.

[00:27:08] Speaker 03:
What does it mean to serve an end user?

[00:27:12] Speaker 03:
Anyone who provides intermediate services, I mean the whole point of the phone line is that it's connecting some user on one end to a user on the other end.

[00:27:27] Speaker 03:
So wouldn't there always be some end user who's being served by your services?

[00:27:39] Speaker 03:
I mean, why do you even need the word served?

[00:27:42] Speaker 03:
I mean, if you just aren't providing intermediate services, then I guess I don't understand how the definition that you're pressing upon us adds anything or gives any meaning to that phrase.

[00:28:03] Speaker 02:
Well, the language in 6126A1 does not use the term serve.

[00:28:11] Speaker 02:
It says use to send traffic to or from an end user and does not fall within the definition of an incumbent local exchange carrier.

[00:28:19] Speaker 02:
So here, intermediate carriers, like Great Lakes, they transport traffic.

[00:28:25] Speaker 02:
So here,

[00:28:26] Speaker 02:
The traffic was aggregated.

[00:28:28] Speaker 02:
It was handed off to LECME, which owns and operates an end office switch in Southfield, Michigan.

[00:28:35] Speaker 02:
And from there, the traffic was handed off to Great Lakes Tandem Switch in Westphalia.

[00:28:40] Speaker 02:
Great Lakes then directed the traffic to AT&T to complete the call.

[00:28:44] Speaker 02:
So Great Lakes was in the middle of this chain of transporting traffic, but they did not

[00:28:51] Speaker 02:
terminate or originate traffic.

[00:28:54] Speaker 01:
Just because 6126A1 doesn't use the term serve, but it uses the term services.

[00:28:59] Speaker 01:
And it says interstate exchange access services used to send traffic to or from an end user.

[00:29:07] Speaker 01:
So I guess your point is that

[00:29:10] Speaker 01:
you can be engaged in services used to send traffic to or from an end user at the higher level of an intermediate carrier, but you're not then serving, i.e., terminating traffic to or originating traffic from any end user within the meaning of the language of the rural exemption, that the first one is a higher, one level of generality higher than directly serving end users, is that what?

[00:29:34] Speaker 02:
That's correct, Your Honor, and that's made clear by the language in the eighth report in order where we say that the benchmark rule applies even to those that don't directly serve the end user.

[00:29:46] Speaker 04:
Do you, just a quick question.

[00:29:48] Speaker 04:
In the reply brief, Great Lakes asked us to vacate the part of the discussion dealing with the statute of limitations.

[00:29:55] Speaker 04:
I understood your brief to say

[00:29:57] Speaker 04:
nothing the Commission has said so far prejudges the question of how much of this period of time is actually covered under the statute, right?

[00:30:07] Speaker 04:
That's an open question.

[00:30:08] Speaker 02:
That's correct, Your Honor.

[00:30:10] Speaker 02:
AT&T bifurcated the liability and damage claims in the complaint, but the damages phase has not yet occurred.

[00:30:16] Speaker 02:
The Commission has not ruled on this issue.

[00:30:18] Speaker 04:
And so that question's totally open on remit, right?

[00:30:21] Speaker 02:
That's right.

[00:30:21] Speaker 02:
This will be determined at the damages phase.

[00:30:23] Speaker 04:
Okay, thank you.

[00:30:25] Speaker 02:
Thank you very much.

[00:30:26] Speaker 02:
We ask that the court affirm the commission's order.

[00:30:28] Speaker 04:
Thanks.

[00:30:28] Speaker 07:
Good morning, Your Honors.

[00:30:40] Speaker 07:
May it please the court.

[00:30:41] Speaker 07:
I'm Michael Hunsetter.

[00:30:42] Speaker 07:
I'm representing my client AT&T and the other interveners.

[00:30:45] Speaker 07:
I'd like to focus this morning on the rural exemption, most particularly here.

[00:30:51] Speaker 07:
First, we agree clearly with the textual analysis in the order and that the FCC's counsel just explained that this is an F case.

[00:31:03] Speaker 07:
And the commission explained, not just in the footnote 96, but in the order in paragraphs 20 to 21, it said, look, when we first promulgated this benchmark rule, it didn't address intermediate care gestalt.

[00:31:15] Speaker 07:
It didn't intentionally exclude it.

[00:31:17] Speaker 07:
We didn't think about it at the time.

[00:31:18] Speaker 07:
And all of a sudden, then there was a bunch of controversies about how to treat intermediate select.

[00:31:24] Speaker 07:
So they adopted what they said in 2004, a new rule.

[00:31:28] Speaker 07:
And the first clause of subsection F clearly says, if you are a SEALAC and you're providing some of the services, then this is the rule that you're subject to, subsection F. This is a subsection F case.

[00:31:44] Speaker 07:
It's not a rural exemption case for many reasons.

[00:31:47] Speaker 07:
And the ordinance is overwhelming.

[00:31:49] Speaker 07:
On the textual issue, it's not an E case.

[00:31:52] Speaker 07:
Because again, one, the rural exemption is an exemption from B through D, not F. And indeed, it would make no sense to interpret it any other way, because essentially what the commission would be saying in F is, well, if you're a C-LAC and you serve some end users, but sometimes you operate as an intermediate C-LAC, well, when you're operating as an intermediate C-LAC, you're clearly subject F. That's

[00:32:18] Speaker 01:
So, let me ask you, from your perspective as AT&T, when you read the commission's order, and the commission's order then goes on to talk about particular attributes of this SEALAC that render it non-rural, was your question, well, why are we talking about that at all?

[00:32:35] Speaker 07:
Well, no, I mean, I think it was our duty as the complainants to bring all the evidence to bear on why we were being overcharged by the petitioners under this rural exemption.

[00:32:44] Speaker 07:
And the FCC, when it put in place the rural exemption in 2001 and when it reaffirmed it exactly as it had written in 2001 and 2004, it clearly said, look, the rural exemption is very narrow.

[00:32:57] Speaker 07:
And it's only, the reason we're doing it is because the people that are serving

[00:33:03] Speaker 07:
the rural end users in the rural areas have these high loop costs.

[00:33:09] Speaker 07:
Loop costs are the lines that connect the LEC to the end user.

[00:33:15] Speaker 07:
So that was the entire purpose of the rural exemption.

[00:33:18] Speaker 07:
So obviously, again, in 2001, they weren't thinking about rural exemption.

[00:33:23] Speaker 07:
They were thinking about rural exemption, not intermediate carers.

[00:33:29] Speaker 07:
And then when they add F, it's clear that F applies to the intermediate carriage only.

[00:33:36] Speaker 07:
And the rural exemption is only designed for those rural carriers serving.

[00:33:41] Speaker 01:
Directly serving end users.

[00:33:42] Speaker 07:
Directly serving the end users.

[00:33:44] Speaker 07:
And there's no other purpose for.

[00:33:47] Speaker 04:
And where do we find that analysis in the order we're reviewing?

[00:33:51] Speaker 07:
Well, I think in the order where it is, again, it's saying that this is an F case in 20 to 21.

[00:33:58] Speaker 04:
But in the discussion of why the rural exemption does not apply here, the commission just gives two reasons.

[00:34:04] Speaker 04:
One is that they have facilities in Chicago, right?

[00:34:09] Speaker 04:
That's one reason.

[00:34:10] Speaker 04:
And the other reason is that by definition, at least some of the end users must be urban.

[00:34:16] Speaker 04:
But that sounds to me like this particular intermediate carrier does not qualify for the rule exemption.

[00:34:27] Speaker 04:
And that's the analysis that's before us.

[00:34:29] Speaker 07:
No, and I think, though, they also did say in the footnote 96 that if you are a intermediate SELEC that serves no end users, you can never be a rural SELEC.

[00:34:39] Speaker 07:
So I think they said that.

[00:34:40] Speaker 07:
But then in response to Judge Srinivas's question, like you said, as complainants, we felt obliged.

[00:34:46] Speaker 07:
And indeed, the commission's rules obliged you as a complaint to bring all of the evidence that they had.

[00:34:49] Speaker 01:
Right.

[00:34:50] Speaker 01:
So I'm not suggesting that it wasn't incumbent upon you or didn't behoove you to introduce all the evidence you possibly can to say, look,

[00:34:56] Speaker 01:
these folks, they serve urban users in some measure.

[00:35:00] Speaker 01:
I don't deny that I would have done that, too.

[00:35:03] Speaker 01:
I guess my question, though, is just as a matter of analytical approach.

[00:35:06] Speaker 01:
If there is this threshold categorical rule that says that intermediate carriers just don't fit within the rural exemption period, then it just, going on to explain why this particular intermediate carrier does serve urban users, I mean, maybe it adds color to some extent, but it just looks analytically beside the point.

[00:35:25] Speaker 07:
I think it adds color.

[00:35:27] Speaker 07:
And again, I mean, again, it's complainants.

[00:35:29] Speaker 07:
We don't know which of the rationales, the many rationales.

[00:35:32] Speaker 04:
We understand exactly why you argued it the way you did.

[00:35:36] Speaker 04:
We're asking you an administrative law question from our perspective.

[00:35:41] Speaker 04:
We have to decide whether the order we're reviewing satisfies the Administrative Procedures Act.

[00:35:51] Speaker 04:
And your answer is we can rely on footnote 96, right?

[00:36:05] Speaker 07:
You can rely on footnote 96.

[00:36:07] Speaker 07:
You can rely on the text of the regulation that was applied to GLC.

[00:36:13] Speaker 07:
And you can rely on the clear evidence.

[00:36:17] Speaker 07:
I mean, it's JA 370.

[00:36:20] Speaker 07:
That's a map of this petitioner's facilities.

[00:36:23] Speaker 07:
The map shows there are facilities in Chicago.

[00:36:27] Speaker 07:
It's in Ann Arbor.

[00:36:28] Speaker 07:
It's in Grand Rapids, all urban areas.

[00:36:30] Speaker 07:
And again, when you read the rules,

[00:36:33] Speaker 07:
and the order that promulgated the rural exemption, it's impossible.

[00:36:38] Speaker 01:
I guess the question is, though, if you're an intermediate carrier out there and you want to figure out whether you fit within the rural exemption, that matters to you, because it affects rates.

[00:36:47] Speaker 01:
So you're trying to assay everything that you can see to get a read on whether you qualify.

[00:36:52] Speaker 01:
You look at the order, and you think, well, I better take a look at where my transit facilities are located.

[00:36:57] Speaker 01:
And then it turns out, I think, that that doesn't matter, actually, because the fact that you're an intermediate carrier just renders you categorically ineligible for the rural exemption at all.

[00:37:07] Speaker 01:
So that's the question about the way the order is framed.

[00:37:10] Speaker 01:
There may be things that are in there that are extraneous, and somebody who is well-versed in this would understand that they're extraneous.

[00:37:16] Speaker 07:
Well, and I think the people that are reading those rules are particularly well-versed in this, to be honest.

[00:37:22] Speaker 07:
And I do think that you're correct that, again, it's incumbent upon the left, if they want to file a tariff.

[00:37:35] Speaker 07:
I mean, they don't have to file tariffs.

[00:37:36] Speaker 07:
They can always negotiate a contract with us.

[00:37:38] Speaker 07:
They didn't do that because they wanted, in our view, to abuse the rural exemption scheme.

[00:37:44] Speaker 07:
But if they want to file a tariff, they have to read the rules and the promulgating orders.

[00:37:49] Speaker 07:
And like I said, I think in this case, there's overwhelming evidence.

[00:37:54] Speaker 07:
Like I say, I understand your point that, yeah, they could have stopped at point one.

[00:38:01] Speaker 07:
And perhaps that would be more definitive.

[00:38:05] Speaker 07:
But again, when they promulgated those orders in 2001 and 2004 about the rural exemption, they also said that the service area does matter.

[00:38:14] Speaker 07:
And so I think if you're a SELEC trying to figure out, well, am I subject to the borough exemption or not, you obviously would want to read.

[00:38:21] Speaker 07:
I mean, these are orders that were issued after notice and comment rulemaking.

[00:38:25] Speaker 01:
Well, a service area definitely matters if you directly serve end users.

[00:38:28] Speaker 01:
The point is that if you're an intermediate carrier, by definition, you're not directly serving end users.

[00:38:32] Speaker 01:
And therefore, the rural extension just isn't even in play.

[00:38:34] Speaker 07:
No, right.

[00:38:35] Speaker 07:
I think that's right.

[00:38:36] Speaker 07:
And I think that, frankly, this order will help clarify that.

[00:38:38] Speaker 07:
But at the same time, I don't think that it also, nor does it eliminate the need to look at your service territory either.

[00:38:47] Speaker 07:
Thank you for your time.

[00:38:48] Speaker 07:
Thank you.

[00:38:49] Speaker 04:
Did counsel have any time left?

[00:38:58] Speaker 04:
I used up most of your time with one question about 800 calls.

[00:39:02] Speaker 05:
You can have your two minutes back.

[00:39:04] Speaker 05:
That's quite all right.

[00:39:11] Speaker 06:
with respect to the arguments that have been made about subsection f of rule 61-26.

[00:39:19] Speaker 06:
I wanted to make a couple of observations.

[00:39:21] Speaker 06:
First of all, the argument that subsection f is a justification for excluding intermediate carriers from the definition of a rural carrier begs the question of what's a CLEC in the first place, because

[00:39:39] Speaker 06:
subsection F says SELEC's which provide only a portion of the service.

[00:39:45] Speaker 06:
So we have to start with the question of are you a SELEC within the scope of 6126 to start with.

[00:39:54] Speaker 06:
Secondly, as the FCC and AT&T, the other interveners,

[00:40:04] Speaker 06:
are basically misapplying subsection F entirely.

[00:40:07] Speaker 06:
It is absolutely clear from the eighth report in order, including in particular Commissioner Powell's statement in that order, that what that was intended to address was that there were some carriers who were only providing a portion of the services covered by the benchmark rule, but were charging the full benchmark rate.

[00:40:28] Speaker 06:
And the purpose was to say, if you're only providing a portion of the service, you can only charge a portion of the benchmark.

[00:40:36] Speaker 06:
Secondly, to underscore how arbitrary and capricious the FCC's order is, in paragraph 29, it says, Great Lakes tariff was void ab initio when filed because it violated subsection F. GLC's tariff was filed two years before subsection F was adopted.

[00:40:58] Speaker 06:
It can't possibly have violated a rule adopted two years later and given perspective for us only.

[00:41:06] Speaker 04:
Thank you.

[00:41:07] Speaker 06:
Thank you, Your Honor.

[00:41:09] Speaker 04:
Case is submitted.

[00:41:09] Speaker 04:
Thank you.