FCC Wins One Round in Industry Challenge to USF Rules
The U.S. Court of Appeals for the D.C. Circuit upheld the FCC in a challenge from competitive carriers, who argued that the FCC “put the cart before the horse” when it ordered that relinquished USF monies shouldn’t be redistributed among a state’s eligible telecom carriers. Instead, the FCC set aside the money to be used later to pay for broadband. The Rural Cellular Association, joined by the Universal Service for America Coalition, argued that the January 2010 order violated the Communications Act and FCC regulations and was arbitrary and capricious in that it fell short of explaining how it ensures the “sufficient” level of support for CETCs required by the act.
Sign up for a free preview to unlock the rest of this article
Communications Daily is required reading for senior executives at top telecom corporations, law firms, lobbying organizations, associations and government agencies (including the FCC). Join them today!
The case was argued in November (CD Nov 16 p2) before Judges Merrick Garland, David Tatel and Douglas Ginsburg. Ginsburg wrote for the panel. Arguments came only a few weeks after the FCC handed down its landmark USF/intercarrier compensation reform order. RCA previously lost a 2009 challenge to a May 2008 FCC order imposing an “interim, emergency cap” on universal service support payments to CETCs through the High-Cost Program.
"In sum, the Commission’s interpretation of the Act raises no significant constitutional concern, is a reasonable interpretation of an ambiguous statutory text, and is consistent with the Commission’s regulations,” the court held (http://xrl.us/bngru7). “Therefore, we hold the Commission acted within its statutory and regulatory authority” in the order.
"Although we're disappointed by the outcome, we are pleased that the court gave careful consideration to RCA’s arguments and upheld the FCC’s actions based only on the substantial deference that courts accord administrative agencies,” RCA President Steve Berry said Friday. “Many of our members plan for and rely upon USF support, and it’s unfortunate the FCC has left many carriers uncertain about their futures. Fewer competitive carriers means fewer choices for consumers and less jobs, and I hope the commission will recognize the significance of USF as it moves forward with the Fund."
FCC Chairman Julius Genachowski said he was pleased with the decision. “The Commission’s once-in-a-generation overhaul of the universal service fund created the Connect America Fund to deliver broadband access to unserved rural communities, which lack access to the benefits of broadband, including jobs, opportunities for small businesses, better education and quality healthcare,” he said. “Funding previously relinquished by some carriers has been used as a fiscally responsible down payment on those reforms. The Court’s opinion ensures that the FCC will continue to be able to use funds on hand to rapidly implement the Connect America Fund and spur billions of dollars in private investment, without increasing contributions paid by consumers and businesses."
Ginsburg dissected each of RCA’s claims, including arguments that the FCC violated Section 254 of the Communications Act. Ginsburg noted that RCA argues that the order assesses contributions to be used for a purpose not previously designated by the commission as a “service that is supported” and that the decision not to immediately redistribute the funds is not authorized by the “mandate [in § 254(d)] that the FCC assess contributions only for ’specific, predictable, and sufficient mechanisms established by the Commission to preserve and advance universal service.'"
"Both arguments ultimately turn upon the question whether there are temporal requirements implicit in the statute: Must the Commission amend the list of ’services that are supported’ prior to collecting contributions ultimately to be used to fund such a service?” Ginsburg wrote. “Similarly, must the agency ‘establish’ a universal service support mechanism prior to collecting contributions intended to fund that mechanism?” He found: “The Commission’s interpretation, under which it may collect contributions to support a program prior to that program either having been listed as a ’service that is supported’ or having been ‘established by the Commission,’ is a permissible interpretation of an ambiguous statute."
RCA also argued the order violates an FCC regulation that directs the Universal Service Administrative Co. to set the quarterly contribution factor based upon “the ratio of total projected quarterly expenses of the universal service support mechanisms to the total projected collected ... revenues.” The FCC’s interpretation is due deference under a 1997 case, Auer v. Robbins, Ginsburg wrote. “There is nothing in the text of the regulation limiting ‘demand’ to projected disbursements for the next quarter only or excluding from ‘demand’ a program the Commission has announced its intention to establish,” he said. “The Commission’s considered reading of ‘demand’ to include disbursements it anticipates making in subsequent quarters is not ‘plainly erroneous or inconsistent with the regulation.'”
Ginsburg also rejected arguments that the order was arbitrary and capricious. RCA contended the FCC “offers only ‘conclusory’ statements in lieu of a reasoned explanation how the ‘reduced’ cap ensures the ’sufficient’ support required by section 254(d) of the Act,” he wrote. “That is not quite correct,” Ginsburg wrote. “Insofar as the Order leaves undisturbed the level of support going to each CETC pursuant to the Interim Cap Order, the Commission need not have explained again why that level of support is sufficient.” In the order, “the Commission explained its preference for, rather than bestowing ... a windfall upon CETCs, husbanding those funds in order to subsidize broadband Internet service.”