Conference Group Loses Challenge of Audio Bridging USF Obligations

"We hold that The Conference Group has standing to challenge the Commission’s decision as procedurally unlawful rulemaking, but lacks standing to challenge the merits of the decision adopted in the InterCall Order if it was an adjudication,” said the 3-0 decision written by Judge Judith Rogers. Judge Merrick Garland and Senior Judge Laurence Silberman were also on the panel.

The Conference Group had argued that the commission turned an unlawful decision by the Universal Service Administrative Co. into an industry-wide legislative rule imposing new duties on all audio bridging service providers, in violation of notice and comment requirements of the Administrative Procedure Act. But the FCC’s order “was neither a legislative nor an interpretative rule,” the court said. “Rather it was simply an interpretation given in the course of an informal adjudication."

The Conference Group lacks “Article III standing” because there’s no actual injury, the court wrote. Potential precedential effect of an agency action doesn’t give a bystander to that action a basis for complaint, the court said. The Conference Group had argued it would be harmed by the potential effect of “the unfavorable precedent created by the InterCall Order."

"The mere fact that an adjudication creates a precedent that could harm a non-party does not create the injury-in-fact required for Article III standing,” the court said. “If the Commission applies its rule of decision for InterCall, Inc. to The Conference Group, The Conference Group can present its substantive arguments in its own adjudication."

"Based on the questioning that I received from the panel at the oral argument, it’s not entirely surprising that they came out where they came out with regards to the standing issue,” said Ross Buntrock, a partner at Arent Fox, who argued the case on behalf of The Conference Group. Buntrock expects the case to lead to “potentially some interesting results,” he said: Because the court said the FCC’s decision was not a rulemaking but rather a specific adjudication, other conference providers faced with unfavorable USAC rulings could attempt to distinguish themselves from InterCall. “I think that some folks might be of the mind that they could try to get another determination made on their particular circumstances,” he said.

"Today’s ruling means that the status quo will continue with respect to audio bridging services,” said Steve Augustino, a partner at Kelley Drye, who had represented InterCall before the FCC. “The court did not alter the FCC’s conclusion that audio bridging services involve the provision of ’telecommunications’ and are subject to USF assessments. Although the opinion allows individual service providers to contend that their services are different, I do not expect many to challenge the application of USF to their services because the potential liability from an adverse decision can be very significant."

The court also rejected a challenge by intervenor Cisco WebEx, saying it lacks standing because it’s not “similarly situated” to InterCall and has suffered no injury sufficient to give it Article III standing. Cisco itself had said the InterCall order addressed a service “that differs significantly from WebEx’s service,” the court wrote, quoting Cisco’s brief. Cisco’s brief is silent on the question of whether it has standing, and Cisco Systems’ previous comments emphasizing the FCC was “merely applying existing law, not rewriting it,” underscore the “speculative nature” of Cisco WebEx’s concern, the court said.

The decision leaves the FCC free to act on Cisco’s pending USF appeal “in order to ensure a level playing field for all audio bridging service providers,” Augustino told us. Cisco has petitioned the commission to overturn a USAC decision categorizing the audio communication portion of Cisco’s WebEx conferencing service as a telecommunications service that has to pay into the USF (CD May 20 p6).

The court also dismissed Verizon and Verizon Wireless’s case as intervenors on behalf of the FCC. “Because neither petitioner The Conference Group, nor Cisco WebEx as intervenor in support of petitioner, has standing to challenge the merits raised in another party’s case, it follows that defendant intervenor Verizon and Verizon Wireless, which seeks to appear only to defend the merits of the Commission’s decision in the InterCall Order, cannot have standing either.” A Verizon spokesman declined to comment. An FCC spokesman said the commission was “pleased” by the ruling.