WIRELESS INDUSTRY, FCC SPAR ON STANDARD FOR RETAINING LNP

The case is seen as having potentially broad implications in areas such how the FCC vets forbearance requests in terms of whether the burden of proof lies with the agency or with a company raising a challenge. Comr. Martin had dissented in part on last year’s LNP order because of how the forbearance standard should be applied under Sec. 10, saying he was troubled by the item’s failure to clarify that the burden of rejecting a forbearance petition rested with the Commission. Judge David Tatel quizzed Andrew McBride, counsel for Verizon Wireless and CTIA, on his argument that a regulation deemed “necessary” under Sec. 10 forbearance analysis meant essential. “What you have done is maintained a higher burden on the Commission to retain a regulation than to implement it,” he said.

The challenge by CTIA and Verizon Wireless marks the first time the D.C. Circuit has been asked to examine how a standard involving “necessary in the public interest” applies since that court backed off a ruling in Fox TV Stations v. FCC last year. In its en banc decision in Fox, the court had concluded it was better to leave unresolved its interpretation of “necessary in the public interest” under Sec. 11 biennial review requirements used to assess whether rules on media ownership caps should be kept. The industry challenged an FCC decision last year to grant an extension on wireless LNP but to reject a Verizon request for forbearance. McBride told the court the FCC lacked statutory authority to implement LNP, had “grossly” misinterpreted the deregulatory provisions of Sec. 10 and had issued an order that was arbitrary and capricious “under any standard.” Sec. 10 requires forbearance if a challenged regulation isn’t “necessary” to ensure just and reasonable charges, is found not necessary for the protection of consumers and is in the public interest, including the question of whether it would promote competitive market conditions, he said.

FCC attorney John Ingle told the court that in such cases courts had held “necessary” to mean “not absolutely essential, but useful or appropriate to the achievement of certain ends.” The Commission had argued that denying Verizon’s forbearance request was within its statutory purview and that LNP was needed as a procompetitive step that industry wouldn’t take on its own.

But McBride said the forbearance standard under Sec. 10 requires that “necessary” be read as essential. He contended the FCC decision to not forbear wasn’t based on current consumer benefits, but on speculation LNP might create benefits for subscribers in the future. The carriers have argued that such decisions must be based on current market conditions. The industry said the Communications Act imposed number portability on landline carriers, but excluded wireless carriers from the LEC definition unless the FCC deemed they should be included. The FCC adopted wireless LNP based on the general provisions of the Act.

“So what you are saying is that even though Congress required number portability, the Commission must now forbear unless it can show it’s essential?” Tatel asked McBride: “That’s what your argument is.” He raised the hypothetical of what would happen if an FCC decision were upheld as not arbitrary or capricious but 6 months later a landline company filed a forbearance petition. “Now the Commission must forbear if it can’t show that it’s essential to the protection of consumers?” Tatel asked.

Judge Raymond Randolph, who participated by speakerphone, questioned the timing of the challenge and why the industry didn’t seek to overturn the requirements in court within 60 days of the order denying forbearance. McBride said the industry did, but then voluntarily withdrew the appeal after the Commission signed a stipulation that it wouldn’t oppose the statutory authority issue’s being raised on appeal. “Every time a petition for forbearance is filed is the validity of the underlying rules subject to challenge?” Randolph asked.

Some of the judges’ questions, before a packed courtroom, centered on at what point the court had jurisdiction to hear the case. Judge Harry Edwards asked whether the order could be challenged when it actually was enforced by the FCC, which would be the Nov. 24 implementation deadline. Ingle described it as “at least a passing strange situation” in which the agency could adopt a rule one day based on a standard of necessary and in the public interest and a company later could file a forbearance petition and “force the Commission to defend the retention of that rule under a much higher standard.”

NARUC Gen. Counsel Brad Ramsay told reporters that it didn’t appear from the arguments that the court was likely to vacate the decision on wireless LNP. NARUC had intervened in support of the FCC. Ramsey said the worst outcome that was likely would be a remand of the case to the FCC, which would mean that the Nov. 24 deadline still would remain. “I'm a happy camper,” he said.

Others agreed that while decisions were impossible to predict, the court appeared to lean toward the FCC. Legg Mason said in a research report it doubted the industry “will be able to convince the court or the FCC to repeal the agency’s wireless local number portability requirement.” Speaking with reporters later, analyst Rebecca Arbogast said the Commission would have to win on 3 main issues to keep the Nov. 24 deadline intact -- jurisdiction, the correct legal standard and whether wireless LNP was needed to protect consumers. She said that on the first issue, Randolph and Tatel appeared more willing to embrace the idea that the court lacked jurisdiction to decide whether the FCC had jurisdiction to impose wireless LNP. Legg Mason said there were several possible outcomes, including that the FCC lacked jurisdiction to impose wireless LNP, although it said that didn’t appear likely. The firm also said the court could decide the FCC used too low a standard in considering Verizon’s forbearance petition, which would result in a remand under another standard of review. The most likely outcome, Legg Mason said, was a finding that the FCC had applied the proper standard and had met it when deciding to keep LNP intact.

The judges “directed most of their fire at the industry, as opposed to the FCC,” said Schwab Washington Research Group analyst Paul Glenchur. “They seemed to be struggling with what the potential boundaries would be of the decision and whether it could create unanticipated difficulty with the enforcement of the regulations that may be undesirable.” One question is whether there’s enough here to trigger the usual deference accorded by courts to federal agencies implementing statutes that are within their authority, Glenchur said. “Here we are dealing with things that are part of the Communications Act,” he said: “There is a stronger case to be made for some deference to the way the FCC views its own authority. The court would need to say that the FCC’s view is so unreasonable that it can’t sustain its approach to forbearance.”

Citing the number of acronyms such as LNP and CTIA in the industry brief, Randolph chided McBride, an attorney with Wiley Rein & Fielding, for not filing the industry brief in conformity with court rules that require plain language. “You would be well-advised to check out the rules before you file another brief,” Randolph said.