Case Study

INTRODUCTION: Core Communications, a Washington, D.C.-area telecommunications and Internet provider, found itself embroiled in a nearly decade-long battle with the Federal Communications Commission (FCC) over dial-up Internet reimbursement rates. The company believed FCC rules did not provide appropriate, fair reimbursements from incumbent phone companies to carriers such as Core Communications.

In July, 2008, Core Communications, represented by Womble Carlyle attorney Mike Hazzard, obtained a rare writ of mandamus against the FCC, giving the company a long-awaited breakthrough in the case. A writ of mandamus is a court order compelling a government agency to perform certain duties correctly.

AT ISSUE: The dispute began in 1999 when the FCC created rules governing payments for dial-up Internet calls. Under the rules, so-called “competitive local exchange carriers” such as Core Communications were reimbursed at a lower rate for dial-up Internet calls than for standard phone calls. These reimbursements are paid by “incumbent local exchange carriers,” the primary phone company within a geographic area. The lower reimbursement rates have cost Core Communications tens of millions of dollars over the past decade.

Core Communications argued those separate sets of rules were unfair and in 2002, the D.C. Circuit agreed. The FCC promised to revise its compensation rules. However, six years later, no changes had yet been made.

SUMMARY: Core Communications challenged the FCC’s lack of action in the Court of Appeals for the DC Circuit. Hazzard argued the case, with Womble Carlyle attorneys Sean Andrussier and Joseph Bowser helping develop the legal theories argued in the case.

Hazzard and Core Communications said the FCC had had more than enough time to comply with the 2002 ruling and the delays amounted to simply foot-dragging. Core Communications was losing millions of dollars in potential revenue each year the rules went unrevised.

The Court of Appeals agreed with Core Communications and issued an extraordinary writ of mandamus forcing the FCC’s hand. This particular court had not issued a writ of mandamus in several years before the Core Communications case.

IMPLICATION/RESULT: The writ of mandamus issued by the Court of Appeals compels the agency to come forward with the legal justification for “interim” compensation rules established in 2001. If they do not provide an adequate explanation by November 5th, 2008, those 2001 interim rules will be thrown out.

The ruling not only has a tremendous impact on Core Communications, but the entire competitive telecommunications industry, as it applies to all competitive local exchange carriers who receive dial-up Internet reimbursements from incumbent local exchange carriers.

Core Communications believes it will receive retroactive reimbursement as a result of this ruling. More importantly, the company finally will get some relief from rules it has long considered unfair.

ABOUT THE ATTORNEY: Michael B. Hazzard represents communications companies in a variety of adjudicatory, regulatory, corporate, and e-commerce matters. He has worked with emerging and established companies in virtually all sectors of the industry, including competitive local exchange carriers, VoIP providers, wireless carriers, cable operators, international carriers, Internet service providers, large end users of telecommunications services, and private equity firms.

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