FIFTH CIRCUIT UPHOLDS FEDERAL ACCESS CHARGES ON VoIP-ORIGINATING CALLS
July 24, 2017
On June 27th, the U.S. Court of Appeals for the Fifth Circuit affirmed the ruling of the District Court for the Western District of Louisiana, which required Sprint to pay $12.5 million in access fees after Sprint refused to pay traditional access tariffs for VoIP calls. The Circuit Court upheld the District Court’s finding that Sprint was required to pay pursuant to both interstate and intrastate telecommunications access tariffs on calls that originated as VoIP transmissions. The court did not consider whether the VoIP calls were “information services” or “telecommunications services.”
The case was initiated in 2009, after Sprint stopped paying CenturyLink tariffed access rates on all VoIP-originated calls. Sprint instead paid the considerably lower rate that applied to ISP-bound traffic, and stated that it would continue to pay this rate until the FCC determined the “applicable inter-carrier compensation for VoIP traffic.” Sprint also retroactively applied this rate to all VoIP-originated calls it transferred to CenturyLink from 2007 to 2009, and deducted the amount that it believed it overpaid from later payments it made to CenturyLink. In 2016, the District Court held that the VoIP-originated calls were subject to both state and federal access tariffs. The District Court also found that Sprint’s effort to recoup the money it believed it overpaid was improper “self-help” in violation of the 1996 Telecommunications Act, and ordered Sprint to pay CenturyLink’s attorney’s fees.
The 5th Circuit upheld the application of the traditional state and federally tariffed access rates on VoIP-originated calls. The 5th Circuit found that Sprint had failed to raise the issue of state access charges on appeal, and consequently, only considered the federal charges. The Court noted that it was bound by the District Court’s finding that Sprint had acted as an interexchange carrier when it transmitted the VoIP calls, and consequently applied the tariffed rates required of IXCs. Consequently, the 5th Circuit found that the District Court was right to order Sprint to pay CenturyLink $7.6 million for state tariffed rates and $1.1 million for federally tariffed rates, plus $3.2 million in late fees.
The 5th Circuit also found that Sprint’s retroactive subtractions from later payments to CenturyLink were unreasonable practices in violation of Section 201 of the Communications Act. The 5th Circuit found that: “Sprint took the extraordinary measure of acting on its own to recoup money it had already paid without any judicial or administrative intervention.” The Circuit Court also noted that Sprint’s calculations of what it had “overpaid” were unreasonable. Consequently, the Circuit Court upheld the District Court’s ruling that Sprint must pay CenturyLink’s attorney’s fees. The Fifth Circuit’s decision was consistent with a recent 8th Circuit decision finding that access charges apply to VoIP-originated intrastate traffic.
This Utilities and Telecommunications Alert is intended to keep readers current on matters affecting businesses and is not intended to be legal advice. If you have any questions regarding the above, please contact Rob Gastner at 202.659.6674.