Paging Cooks in Court

The paging industry closed 1999 with a major victory against LECs that could mean as much as $60 million in annual savings for paging companies.

The Telecom Act requires carriers to pay other carriers for completing or terminating calls made by their subscribers. Pacific Bell argued that these reciprocal compensation agreements don't apply to calls that terminate on a paging carrier's network, specifically Cook Telecom's.

In August 1996, an arbitrator ruled that because Cook doesn't send traffic to Pacific Bell's network, it shouldn't charge Pacific Bell for terminating calls to Cook pagers. California regulators overturned that decision in May 1997 by ruling that Cook is entitled to compensation under the Telecom Act.

Meanwhile, Pacific Bell continued to levy facilities charges on Cook for its traffic sent over the Pacific Bell network. Rob Hoggarth, PCIA senior vice president of messaging, said that the majority of paging carriers' LEC-related complaints at the FCC focus on facilities charges. Although illegal under the Telecom Act, "a number of the LECs not only continued to charge but also threatened to stop provisioning due service to the paging carriers that were behind in their payments," Hoggarth said.

In December 1999, the 9th U.S. Circuit Court of Appeals overturned the arbitrator's interpretation by ruling that the FCC's definition of reciprocal compensation includes paging. As a result, Cook no longer has to pay the facilities charges and now can charge Pacific Bell for terminating its calls.

David Wilson, Cook's lawyer, said that the charges amount to about 0.2 cents per local paging call, with the average pager receiving around 60 pages per month. The monthly tab can run six figures or more because Cook has millions of units.

Bill Mashek, Pacific Bell spokesperson, is disappointed with the court's ruling and concerned with the vagueness of the Telecom Act.

"In what they write, there's a sense that there's a lot of uncertainty," Mashek said. "From our perspective, reciprocal compensation is compensation going both ways. With paging traffic, it is all going one way. There is nothing reciprocal about it."

The court's ruling could affect similar cases over interconnection agreements. Mark Stachiw, AirTouch Paging vice president & senior counsel, called the court's decision to defer to the FCC in the Cook case encouraging news for his company's suit against US West that seeks relief from facilities charges. Wilson noted that BellSouth and GTE recently entered into new agreements with paging carriers in the wake of the Cook decision.

Pacific Bell hasn't decided whether to appeal the ruling, but Mashek said that "the issue of reciprocal compensation is not, in our view, fully resolved." Their decision might come after the FCC makes a follow-up ruling on reciprocal compensation sometime in the next few months.

Wilson believes Pacific Bell and/or other ILECs will try to persuade the FCC to change its mind.

"But I think that it would be very difficult for the FCC to do that after such a long time," he said. "I don't think the eggs could ever be unscrambled."