## Facts

- Congress, through 47 U.S.C. § 276, directed the FCC to ensure payphone service providers (PSPs) are compensated for certain payphone-originated “dial-around” coinless calls (e.g., calls using access codes or 800/10XXX numbers).
- The FCC implemented § 276 through rules requiring interexchange carriers and other covered entities to pay PSPs per dial-around coinless call.
- NetworkIP, LLC and Network Enhanced Telecom, LLP (NET) provided long-distance services and was treated by the FCC as responsible for payphone compensation for certain payphone-originated coinless calls.
- APCC Services, Inc. (APCC), acting for PSPs, alleged NET failed to make required per-call payments and filed an informal complaint with the FCC.
- APCC attempted to file a formal complaint by the deadline but submitted an incorrect filing fee; the correct fee was submitted about two weeks after the deadline.
- The FCC allowed APCC to cure the defect and treated the formal complaint as timely, then issued (1) a Liability Order finding NET liable and (2) a Damages Order awarding roughly $2.8 million.
- NET petitioned for review, challenging both the FCC’s interpretation of the compensation regime (liability) and the FCC’s waiver of its formal-complaint filing deadline (damages).

## Issues

1. Whether the FCC reasonably interpreted its payphone-compensation regulations and prior orders in finding NET liable for dial-around payphone compensation.
2. Whether the FCC acted arbitrarily and capriciously under the APA by excusing APCC’s late/defective formal complaint based on an incorrect filing fee and allowing correction after the deadline.

## Decision

- The court denied the petition as to liability, holding the FCC reasonably interpreted its own payphone-compensation rules and prior orders.
- The court granted the petition in part as to damages, holding the FCC’s failure to enforce its filing deadline (by allowing a late cure of the incorrect fee) was arbitrary and capricious.
- The court set aside or remanded the damages determination to the extent it depended on the improper deadline waiver.

## Legal Principles

- An agency’s reasonable interpretation of its own ambiguous regulations and prior orders receives substantial judicial deference.
- Under the APA, an agency acts arbitrarily and capriciously when it departs from established procedural requirements or practices without a reasoned explanation.
- When an agency conditions timely filing on compliance with fee and deadline requirements, selective relaxation of those requirements must be justified and consistently applied.

## Conclusion

The D.C. Circuit upheld the FCC’s determination that NET was liable to PSPs under the payphone-compensation regime, but rejected the FCC’s ad hoc waiver of a formal-complaint filing deadline and therefore vacated or remanded the damages award tied to that waiver.


NetworkIP, LLC v. FCC, 548 F.3d 116 (D.C. Cir. 2008)