D.C. CIRCUIT AFFIRMS CAP INCREASES ON ILEC SLCs
The U.S. Appeals Court, D.C., affirmed the FCC’s June 2002 decision to allow increases in the cap on ILEC subscriber line charges (SLCs) to take effect as scheduled in the Commission’s CALLS order. Acting on the National Assn. of State Utility Consumer Advocates (NASUCA) v. FCC case (02- 1261) Tues., the D.C. Circuit denied NASUCA’s petition for review and held “the Commission acted reasonably and in conformity with the 1996 Act.”
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The Commission 2 years ago permitted ILECs to raise the charge for residential and single-line business customers to $6.50 per line from $5. The move was seen as the Commission’s latest attempt to phase out certain implicit subsidies the LECs charged long distance carriers to build and operate local loops. But NASUCA filed a petition for review, claiming the FCC approach violated the universal service provisions of the Telecom Act, resulted in rates that were “unjust and unreasonable” and was “arbitrary and capricious, in violation of the Administrative Procedures Act.” The SLC is a flat-rate charge imposed by LECs on end users to recover the interstate-allocated portion of loop costs.
The court rejected claims by NASUCA that the Commission’s decision: (1) Violated the requirement of the Telecom Act that implicit universal service subsidies be replaced with explicit ones. The court said that Sec. 254 of the Act didn’t require the immediate replacement of all implicit subsidies with explicit ones, but rather the adoption of a reasonable timetable for doing so. It found that the agency’s decision to increase the SLC caps was a reasonable step in the right direction. (2) Permitted telephone companies to charge SLC rates that weren’t “just and reasonable.” The court found that SLC rates would lawfully be constrained by the judicially-approved price cap system, and that permitting increases in the SLC cap wasn’t inconsistent with the regulatory regime established by the Commission in the CALLS order.
The court also disagreed with NASUCA that the FCC approach was “arbitrary” and “capricious,” saying the claim “for the most part… simply repackages [NASUCA’s] claims under the 1996 Act.” It said raising the SLC cap to $6.50 per line was supported by record evidence that 33 million residential and small business lines -- 30% of all such lines -- had forward-looking costs higher than $5.
A spokesman for the Office of Ohio Consumers’ Council said NASUCA was “very disappointed” by the court decision, which, he said “disproportionately hurts residential consumers throughout the country.” He said “the SLC shouldn’t have been $5 in the first place.” NASUCA had claimed no further increase in the SLC cap was necessary due to the explicit support provided by the Universal Service Fund (USF). But the court said the fund was “only one part of the Commission’s overall approach to eliminating implicit subsidies.” It said the FCC never indicated the USF “alone would be sufficient to achieve the Commission’s ultimate goal of eliminating all implicit subsidies. Accordingly, NASUCA’s invocation of the Fund does nothing to call into question the reasonableness of the Commission’s decision.”
The spokesman expressed concern that the court decision “could give a green light to even higher increases of the SLC.” He said the SLC should be calculated based on the forward looking model rather than on the embedded costs. He said 70% of residential consumers nationwide were overcharged based on the $5 SLC. For example, he said in Ohio, basic local service provided through SBC has been $14.25, with the SLC going “higher and higher. The charge is going out of control. That’s unfair.” He didn’t comment on NASUCA’s possible further actions, saying it was reviewing the order and considering its options.