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In Re: FCC 11-161, No. 11-9900 (10th Cir.)

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Released: July 13, 2012
IN THE UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT






)
IN
RE:
FCC
11-161 ) No.
11-9900





)

OPPOSITION OF FEDERAL COMMUNICATIONS COMMISSION TO

MOTION FOR STAY OF ADMINISTRATIVE ORDER OR, IN THE

ALTERNATIVE, FOR A WRIT OF MANDAMUS


INTRODUCTION

Respondent Federal Communications Commission (the “FCC” or
“Commission”) opposes the motion for stay or, in the alternative, a writ of
mandamus, filed by the National Telecommunications Cooperative Association
(“NTCA”). NTCA asks this Court to stay implementation of an Order issued by
the Commission’s Wireline Competition Bureau (“Bureau”) that adopted a
methodology for imposing limits on the capital and operating expenses that rate-of-
return regulated local exchange carriers (“LECs”) may recover through the federal
universal service fund. Connect America Fund, 27 FCC Rcd 4235 (WCB 2012)
(“Regression Order”). The Commission’s prior rules gave rate-of-return LECs the
incentive to incur excessive costs to maximize their universal service subsidies.
The new methodology addresses that problem by reducing subsidies to LECs with
excessive costs and redistributing that support to promote broadband deployment –
both of which will benefit consumers.
1

NTCA has satisfied none of the criteria for a stay, much less a stay in the
context of this request for extraordinary mandamus relief. NTCA asks this Court
to grant it relief on the grounds that rate-of-return LECs are entitled to recover all
of their expenditures – irrespective of whether they were prudently made – through
the federal universal service fund. That premise has been soundly rejected by the
courts, which have held that universal service subsidies are to benefit customers,
not carriers. Alenco Commc’ns, Inc. v. FCC, 201 F.3d 608, 620 (5th Cir. 2000);
Rural Cellular Ass’n v. FCC, 588 F.3d 1095, 1103 (D.C. Cir. 2009).
At least as important, NTCA’s speculative and conclusory claims fail to
demonstrate irreparable harm. Two waiver procedures enable rate-of-return LECs
to request reinstatement of any subsidies lost as a result of the Regression Order.
Notably, although NTCA relies on declarations asserting alleged harm for
individual carriers, none of those carriers has sought a waiver. Even beyond that,
NTCA does not contend that the economic harm caused by the modest reductions
in support resulting from the benchmarks, which are being phased-in over 18
months, imminently threaten the existence of any carrier.
Finally, the interests of other parties and the public in reforming high-cost
universal service support weighs against a stay. Staying implementation of the
Regression Order would perpetuate the problematic incentives and funding
2

inequities associated with the Commission’s existing rules and delay much-needed
reforms intended to benefit consumers.

BACKGROUND

1. The availability of reasonably priced telecommunications services in all
parts of the nation, known as “universal service,” is a longstanding goal of
telephone regulation. See 47 U.S.C. § 151. Pursuant to that goal, federal universal
service programs have, among other things, subsidized service in rural and insular
areas. See, e.g., Federal-State Joint Board on Universal Service, 18 FCC Rcd
22559, 22573 (¶ 25) (2003).
2. “Rural LECs face special obstacles” because “[r]ural areas where
telephone customers are dispersed and terrain is unaccommodating are … the most
expensive to serve.” Alenco, 201 F.3d at 617. Thus, for decades, the Commission
has “subsidize[d] high-cost rural LECs to reduce the rates they must charge their
1
customers.” Id. High cost loop support (“HCLS”) – a subsidy mechanism for
rural, rate-of-return LECs – “helps offset the non-usage based costs associated with
the local loop in areas where the cost to provide voice service is relatively high

1 “Loop costs include the costs of the depreciated cable, wire, and circuit
equipment used to provide local service, the depreciation and maintenance
expenses associated with that local plant, and the corporate operations expenses
related to the provision of local service.” Alenco, 201 F.3d at 617.
3

compared to the national average cost per line.” Connect America Fund, 26 FCC
Rcd 17663, 17743 n.347 (2011) (“Transformation Order”).
3. HCLS comes from the federal universal service fund (“USF”). The USF
is financed primarily by assessments paid by providers of interstate
telecommunications services. See 47 C.F.R. § 54.706. Such contributions are to
be made on “an equitable and nondiscriminatory basis” to support “the specific,
predictable, and sufficient mechanisms established by the Commission to preserve
and advance universal service.” 47 U.S.C. § 254(d). Fund “assessments are
calculated by applying a quarterly ‘contribution factor’ to the contributors’
interstate revenues, and contributors almost always pass their contribution
assessments through to their customers.” Rural Cellular Ass’n, 588 F.3d at 1099.
4. On November 18, 2011, the Commission released the Transformation
Order. That order comprehensively overhauls universal service funding for high-
cost, rural areas “to preserve and advance voice and broadband service while
ensuring fairness for consumers who pay into the universal service fund.”
Regression Order ¶ 1. Among many reforms, the Commission adopted a new rule
designed to “provide better incentives for carriers to invest prudently and operate
efficiently” with universal service support. Transformation Order ¶ 219. Pursuant
to the new rule, the Commission will use regression analysis to establish
4

“benchmarks,” or caps, that limit the reimbursable capital and operating expenses
in the formula used to determine HCLS for rate-of-return LECs. Id. ¶ 214.
The Commission found the benchmarking rule necessary because “[u]nder
[the] current HCLS rules, a company receives support when its costs are relatively
high compared to a national average – without regard to whether a lesser amount
would be sufficient to provide supported services to its customers.” Id. ¶ 219. As
a consequence, “[t]he current rules fail to create incentives to reduce
expenditures.” Id. Worse still, “because of the operation of the overall cap on
HCLS, carriers that take prudent measures to cut costs … may actually lose HCLS
support to carriers that significantly increase their costs in a given year.” Id. The
benchmarking rule addresses these problems by “plac[ing] limits on the HCLS
provided to carriers whose costs are significantly higher than other companies that
are similarly situated,” and by redistributing any support that is relinquished “to
those carriers whose … cost[s are] not limited by operation of the benchmark
methodology.” Id. 220. “To the extent costs above the benchmark are
disallowed under this new rule,” however, “companies are free to file a petition for
waiver to seek additional support.” Id. ¶ 222, citing id. ¶¶ 539-544 (establishing a
waiver process for carriers that can demonstrate that universal service support
reductions would threaten their financial viability and imperil service to
consumers).
5

While the Commission adopted the benchmarking rule in the
Transformation Order, it sought additional public comment on how best to
implement it. Id. ¶ 216. In a Further Notice of Proposed Rulemaking (“FNPRM”),
the Commission solicited feedback on “a specific methodology for capping
recovery for capital expenses and operating expenses using quantile regression
techniques and publicly available cost, geographic and demographic data.” Id.; see
also App. H. The Commission directed its Wireline Competition Bureau to
finalize the benchmarking methodology by July 1, 2012, after considering the
record compiled in response to the FNPRM. Id. ¶ 217.

5. On April 25, 2012, the Bureau adopted a benchmarking methodology that
“builds on the analysis proposed” in the FNPRM “but also includes several
changes in response to … comments from two peer reviewers[,] … interested
parties[,] and … further analysis by the Bureau.” Regression Order ¶ 4. “These
changes significantly improve the methodology while redistributing funding to a
greater number of carriers to support continued broadband investment.” Id. In this
regard, while “support to approximately 100 study areas with very high costs
relative to similarly situated peers will be limited,” the Bureau predicted that
“approximately 500 study areas will receive additional, redistributed support to
fund new broadband investment.” Id.
6

The benchmarking methodology relies on publicly available data. See id.
¶ 11. In particular, study area boundaries are based on data from “Tele Atlas …, a
widely-used commercially available comprehensive source.” Id. ¶ 24. In addition,
to address any concerns with the accuracy of that data, the Bureau established a
“streamlined, expedited waiver process for carriers affected by the benchmarks to
correct any errors in their study area boundaries.” Id. ¶ 27.

With the Order, the Bureau released a Public Notice describing the
company-specific capped values that will be used in the HCLS formula. Id. ¶ 5 &
App. B. Those values will be used from July 1, 2012 through December 31, 2012
to calculate HCLS for LECs whose costs exceed the benchmarks. Id. The Bureau
further determined that it should “phase-in the application of these limits” to
mitigate the impact on rate-of-return LECs. Id. ¶ 5. Between July 1, 2012 and
December 31, 2012, HCLS will only be reduced by 25 percent of the difference
between (1) the support calculated using a LEC’s reported costs and (2) the LEC’s
support as limited by the benchmarks, unless that reduction would exceed 10
percent of the LEC’s support as calculated absent the benchmarking rule. Id.
Beginning on January 1, 2013, support will be reduced by 50 percent of that
difference. Id. Rate-of-return LECs will not face the full impact of any reductions
in HCLS under the new benchmarking rule until January 1, 2014.
7


6. The Bureau’s Regression Order is subject to review by the Commission
itself. See 47 C.F.R. § 1.104(b); 47 U.S.C. § 155(c)(4). Under established law, a
petition for review cannot be filed in federal court until a party has sought such
review and the Commission has acted. Int’l Telecard Ass’n v. FCC, 166 F.3d 387,
388 (D.C. Cir. 1999). Consistent with those requirements, on May 25, 2012,
NTCA sought Commission review of the Regression Order. That application
remains pending.
7. On May 25, 2012, East Ascension Telephone Company, Silver Star
Telephone Company, and a group of trade associations representing rural LECs
(including NTCA) each filed a petition requesting an administrative stay of the
Regression Order until the full Commission considers their applications for review
of that Order. On June 22, 2012, Blue Valley Tele-Communications, Inc. filed a
petition requesting the same relief.
2
The Bureau denied the stay requests on June 26, 2012. Connect America
Fund, 2012 WL 2457343 (WCB June 26, 2012) (“Stay Denial Order”). The
Bureau found that the petitioners had not demonstrated that they were likely to
succeed on the merits of a judicial challenge to the Regression Order (¶¶ 11-14)
and that, because of the opportunity for waivers, they would not suffer irreparable

2 The Bureau may deny a request for an administrative stay under authority
delegated to it by the Commission. See 47 C.F.R. § 0.291 (delegation of authority
to Wireline Competition Bureau).
8

injury under the benchmarks (¶¶ 7-10). The Bureau also determined that a stay
would harm other parties (¶¶ 15-16) – notably, the rate-of-return LECs that will be
the beneficiaries of redistributed HCLS – and that the public interest is not served
by delaying much-needed universal service reform that will promote broadband
deployment (¶ 17).

ARGUMENT

NTCA seeks a stay of the Regression Order or, in the alternative, a writ of
mandamus directing the Commission to rule on its pending Application for Review
before implementing that Order. Mot. 1, 3-4. At the outset, we note that this Court
lacks jurisdiction to review the Regression Order, because that Order was issued
by the Wireline Competition Bureau on delegated authority. See 47 U.S.C.
§ 155(c)(7) (“The filing of an application for review … shall be a condition
precedent to judicial review of any order, decision, report or action made or taken
pursuant to a delegation” of authority to FCC staff); Int’l Telecard Ass’n, 166 F.3d
at 388. Until the Commission rules on NTCA’s pending Application for Review,
NTCA’s motion for a judicial stay pending review of the Bureau Order is
“incurably premature.” Int’l Telecard Ass’n, 166 F.3d at 388; see also Desktop
Direct Inc. v. Digital Equipment Corp., 993 F.2d 755, 760 (10th Cir. 1993)

(denying stay when court lacked jurisdiction over the underlying appeal).
9

NTCA incorrectly claims that “this Court’s jurisdiction over the appeal of
the Transformation Order … permits it to stay implementation of the Regression
Order.” Mot. 4. The Regression Order was issued after the Transformation
Order, and it is based on a different rulemaking record. See Transformation Order
¶¶ 216-217; Regression Order ¶¶ 4, 11. That record is not before this Court and,
as discussed above, a party cannot petition for judicial review of FCC Bureau
decisions. Moreover, NTCA’s motion clearly seeks a stay of the benchmarking
methodology adopted in the Regression Order, not the benchmarking rule adopted
in the Transformation Order, because it is the implementation of the rule through
the Regression Order’s methodology that allegedly harms NTCA’s members. See,
e.g, Mot. 10-14 (arguing that the methodology produces inaccurate and
unpredictable results).
Thus, this Court must treat NTCA’s motion as a petition for a writ of
mandamus under the All Writs Act, 28 U.S.C. § 1651. Reynolds Metal Co. v.
FERC, 777 F.2d 760, 762 (D.C. Cir 1985). “Mandamus is a drastic remedy, and is
‘to be invoked only in extraordinary situations.’” Barclaysamerican Corp. v.
Kane, 746 F.2d 653, 654 (10th Cir. 1984), quoting Allied Chem. Corp. v. Daiflon,
Inc., 449 U.S. 33, 34 (1980). “Although a simple showing of error may suffice to
obtain reversal on direct appeal, a greater showing must be made to obtain a writ of
10

mandamus.” Id. at 655. This Court has held that “[t]hree conditions must be met
before a writ of mandamus may issue”:
First, … the party seeking issuance of the writ must have no other
adequate means to attain the relief he desires. Second, the petitioner
must demonstrate that his right to the writ is clear and indisputable.
Finally, the issuing court, in the exercise of its discretion, must be
satisfied that the writ is appropriate under the circumstances.
In re Cooper Tire & Rubber Co., 568 F.3d 1180, 1187 (10th Cir. 2009) (internal
citation and quotation marks omitted).
In addition, because NTCA asks the Court to direct the Commission to stay
implementation of the Regression Order, NTCA must separately show that: (1) it
will likely prevail on the merits; (2) it will suffer irreparable harm unless a stay is
granted; (3) other interested parties will not be harmed if a stay is granted; and
(4) a stay will serve the public interest. See Pacific Frontier v. Pleasant Grove
City, 414 F.3d 1221, 1231 (10th Cir. 2005). Where, as here, “a preliminary
injunction seeks to stay governmental action taken in the public interest pursuant to
a statutory or regulatory scheme,” the Court must evaluate the movant’s likelihood
of success on the merits, and “the less rigorous fair-ground-for-litigation standard
11

should not be applied.” Heideman v. South Salt Lake City, 348 F.3d 1182, 1189
3
(10th Cir. 2003) (internal citation and quotation marks omitted).
Finally, it is well-established that the Commission may rely on its predictive
judgment to impose purely prophylactic “caps,” like the Regression Order’s
benchmarks, “to avoid excessive expenditures that will detract from universal
service.” Alenco, 201 F.3d at 620; see also Rural Cellular Ass’n, 588 F.3d at 1105.

I.

NTCA HAS NOT SHOWN THAT IT IS LIKELY TO SUCCEED
ON THE MERITS.

A. NTCA Has Failed To Demonstrate That The Benchmarking

Methodology Is Unpredictable.

NTCA contends that the Regression Order’s benchmarking methodology
fails the statutory requirement that federal universal service mechanisms to be
“specific and predictable.” Mot. 10.
While the Act requires federal universal service mechanisms to be “specific,
predictable, and sufficient,” 47 U.S.C. § 254(b)(5), this Court has emphasized that
“the FCC may exercise its discretion to balance th[ose] principles … against one
another when they conflict.” Qwest Corp. v. FCC, 258 F.3d 1191, 1200 (10th Cir.
2001) (“Qwest I”) (subsequent history omitted). In adopting the benchmarking
rule – which “reduces HCLS only to the extent that a carrier over-spends relative

3 Insofar as NTCA asks this Court to direct the Commission to act on its pending
Application for Review, Mot. 1, 4, the application was filed only on May 25, 2012,
so there is no “unreasonable Commission delay” warranting a writ of mandamus.
See Telecomms. Res. & Action Ctr. v. FCC, 750 F.2d 70, 75 (D.C. Cir. 1984).
12

to its peers” – the Commission balanced the principles of sufficiency and
predictability “to ensure that carriers as a whole receive a sufficient (but not
excessive) amount of HCLS.” Regression Order ¶¶ 41-42.
NTCA complains that the benchmarking methodology is unpredictable
because “RLECs will find it difficult, if not impossible, to accurately predict the
effects of annual changes to the caps.” Mot. 10. But in putting forth that
contention, NTCA has made clear that what it seeks “is not merely predictable
funding mechanisms, but predictable market outcomes” – something to which the
Act does not entitle rate-of-return LECs. Alenco, 201 F.3d at 622. To satisfy
section 254(b)(5), “the methodology governing subsidy disbursements” need only
be “plainly stated and made available to LEC’s.” Id. The Regression Order easily
satisfies that standard: it provides a detailed technical appendix explaining the
benchmarking methodology (in Appendix A), and a companion Public Notice (in
Appendix B) describing the company-specific capped values that will be used from
July 1, 2012 through December 31, 2012 to determine HCLS amounts. Moreover,
the Bureau posted on the FCC website additional information explaining the
4
benchmarking methodology – including links to all data sources relied upon.

4 See http://transition.fcc.gov/wcb/iatd/neca.html

13

Beyond that, NTCA’s argument, even on its own terms, fails to demonstrate
that the benchmarking methodology injects uncertainty into HCLS disbursements.
See Mot. 10-12. It has always been the case that carriers do not know how much
they will receive in future periods. As the Commission explained, “the fact that an
individual company will not know how the benchmarks affect its support levels
until after investments are made is no different from the current operation of high-
cost loop support, in which a carrier receives support based on where its own cost
per loop falls relative to a national average that changes from year to year.”
Transformation Order ¶ 220.; see also Regression Order ¶ 41; Stay Denial Order
¶ 13. “If anything, support will now be more predictable for most carriers because
the new rule discourages companies from exhausting the fund by over-spending
relative to their peers.” Regression Order ¶ 41; see also Transformation Order
¶ 220.
Contrary to NTCA’s argument, the benchmarks will not “change quickly or
unexpectedly,” or by a large order of magnitude. Stay Denial Order ¶ 13. While
NTCA claims that “individual HCLS recipients must … guess how model-
specified caps may shift based upon all other RLECs’ actions,” Mot. 11, the
Bureau found that this allegation was “unfounded.” Stay Denial Order ¶ 13. The
Bureau explained that “even if carriers with expenses greater than the benchmarks
reduce their costs to the benchmarks, the benchmarks will remain the same.” Id.
14

Nor does the methodology constitute an “opaque, moving process.” Mot. 11. The
Bureau has already announced the company-specific caps that will be used from
July 1, 2012 through December 31, 2012, see Regression Order, Appendix B, and
“to provide carriers with more certainty regarding the impact of the fifty-percent
phase-in in 2013,” the Bureau will use those same caps in 2013, “which enables
carriers to estimate their 2013 support now.” Id. ¶ 45.

B. NTCA Has Failed To Demonstrate That The Benchmarking

Methodology Produces Inaccurate Results.

NTCA further contends that the benchmarking methodology contains
“material errors” because it relies on study area boundary data that “contain
inaccuracies.” Mot. 12. Under this Court’s precedent, that allegation – without
more – would not warrant a remand, let alone the “drastic remedy” of mandamus.
Barclaysamerican Corp., 746 F.2d at 654.
At the outset, the Regression Order’s benchmarking methodology “is in the
nature of rate-making and deserves strong deference to agency expertise.” Qwest
I, 258 F.3d at 1206; cf. Sorenson Commc’ns v. FCC, 659 F.3d 1035, 1046 (10th
Cir. 2011). It “is meant to estimate the costs of providing service,” so “[i]t need
not reflect physical reality in all respects if it produces reasonably accurate
estimates.” Qwest I, 258 F.3d at 1206 (internal quotation marks omitted). See
Humana of Aurora, Inc. v. Heckler, 753 F.2d 1579, 1582 (10th Cir. 1985) (“an
agency need not await perfect data before taking regulatory action”). Nor can
15

NTCA demonstrate that, “overall,” the benchmarking methodology “produces
such inaccurate results that it cannot form the basis of rational decision-making.
Qwest I, 258 F.3d at 1206. Indeed, one of the benefits of the model design chosen
by the Bureau is that any inaccurate information for individual carriers is unlikely
to affect the resulting benchmarks that affect all carriers. Stay Denial Order ¶ 15.
In any event, while the Bureau is in the process of updating the study area
boundaries used in the model, it has made available a “streamlined, expedited
waiver process” to correct any errors in an individual LEC’s study area boundaries.
Regression Order ¶ 27. If a carrier successfully obtains a waiver, its support
amounts will be adjusted (“trued-up”) if necessary to the amount to which the
carrier was entitled before the Regression Order methodology went into effect. Id.
¶ 27 n.79. Carriers will thus be made whole if they demonstrate a material error.
Using the waiver process, the Commission has already granted waivers to two rate-
of-return LECs. Stay Denial Order ¶ 10. This waiver process, which will address
any errors affecting individual carriers, undermines NTCA’s legal argument. See,
e.g., Vermont Pub. Serv. Bd. v. FCC, 661 F.3d 54 (D.C. Cir. 2011) (finding a
waiver process provided a reasonable means to update stale line count data used in
a model for determining universal service support); Rural Cellular Ass’n, 588 F.3d
at 1104 (discussing, with approval, a waiver process used to provide certain
wireless carriers additional support should an interim cap render universal service
16

funding insufficient); Alenco, 201 F.3d at 622 (finding a single carrier’s reduced
rate of return under an operating expenses cap “at most … presents an anomaly
that can be addressed by a request for a waiver”). Even more clearly, there is no
reason to grant NTCA’s request (Mot. 13) for extraordinary interim relief until the
Commission compiles new study area boundary data. See Stay Denial Order ¶ 15
(“a waiver for the individual carrier affected – rather than a stay of the benchmarks
altogether – is the appropriate remedy where data inaccuracies occur”).

C. The Benchmarking Methodology Does Not Constitute

Retroactive Rulemaking.

Finally, NTCA claims that applying the benchmarks to limit HCLS
payments constitutes retroactive rulemaking. Mot. 14-15. That is incorrect. As
both the Bureau and the Commission explained, “[t]here is no statutory provision
or Commission rule that provides companies with a vested right to continue to
receive support at particular levels or through the use of a particular methodology.”
Regression Order ¶ 38; see also Transformation Order ¶¶ 221, 293.
The courts agree. In rejecting a challenge to an earlier cap on HCLS, the
Fifth Circuit explained that “[t]he Act does not guarantee all local telephone
service providers a sufficient return on investment.” Alenco, 201 F.3d at 620.
Rather, “[t]he Act only promises universal service, and that is a goal that requires
sufficient funding of customers, not providers.Id.; see also Rural Cellular Ass’n,
588 F.3d at 1103. Because LECs are not entitled to universal service subsidies, the
17

benchmarks do not “alter[] the past legal consequences of past actions,” Bowen v.
Georgetown Univ. Hosp., 488 U.S. 204, 219 (1988) (Scalia, J., concurring), and
the presumption against retroactivity does not apply. See, e.g., DIRECTV, Inc. v.
FCC, 110 F.3d 816, 825-26 (D.C. Cir. 1997).
NTCA responds that the Bureau’s view “sidesteps the fundamental concern
of applying a new rule to limit recovery of expenses already incurred. Nothing in
the statute permits the FCC to so upset settled expectations.” Mot. 15. But a rule
is not retroactive “merely because it … upsets expectations based in prior law.”
Landgraf v. USI Film Prods., 511 U.S. 244, 269 (1994). Rather, a rule “may
nonetheless be sustained in spite of such retroactivity if it is reasonable.” Bowen,
488 U.S. at 220 (Scalia, J., concurring); see also DIRECTV, 110 F.3d at 826. The
benchmarking methodology (which takes account of “age of plant”) “address[es]
‘retroactivity’ concerns” by “rais[ing] the cost limits for carriers that have invested
recently.” Regression Order ¶ 40. And as the Bureau explained, providing rate-
of-return LECs with a “blanket exception” from its rules for past investments
“would have made it impossible to reform the system over any reasonable time
period.” Id. ¶ 39. That determination was plainly reasonable.

II.

NTCA HAS NOT SHOWN IRREPARABLE INJURY.

Wholly apart from its failure to demonstrate a likelihood of success on the
merits, NTCA has failed to show that its members will suffer irreparable harm if
18

the Regression Order is not stayed. “To constitute irreparable harm, an injury
must be certain, great, actual and not theoretical.” Heideman, 348 F.3d at 1189,
quoting Wisconsin Gas Co. v. FERC, 758 F.2d 669, 674 (D.C. Cir. 1985). A
movant “must show that the injury complained of is of such imminence that there
is a clear and present need for equitable relief to prevent irreparable harm.” Id.
(internal citation and quotation marks omitted).
NTCA’s speculative, contingent, and unsubstantiated claims do not come
close to meeting these stringent standards. “[E]conomic loss usually does not, in
and of itself, constitute irreparable harm,” Heideman, 348 F.3d at 1189, and
“[r]ecoverable monetary loss may constitute irreparable harm only where the loss
threatens the very existence of the movant’s business.” Wisconsin Gas, 758 F.2d
at 674. NTCA nowhere asserts that the modest HCLS reductions caused by the
benchmarks, which are being phased-in over 18 months, imminently threaten the
existence of any rate-of-return LEC. In fact, “two of the three declarations
submitted [by NTCA] come from carriers that have costs well below – and thus not
affected by – the initial set of benchmarks.” Compare Stay Denial Order ¶ 9 n.26
with NTCA Mot. Ex. D.
Instead, NTCA contends that the Regression Order will make it difficult for
rate-of-return LECs to finance long-term investment in new infrastructure. Mot.
15-17. This claim is speculative and does not establish irreparable harm.
19

Moreover, while NTCA hypothesizes that “RLECs’ inability to predict present and
future caps will paralyze investment activities and obstruct access to capital,” Mot.
17, it fails to explain why other forms of relief, such as waivers or review in the
ordinary course, would not be sufficient to address this alleged concern.
Likewise, NTCA’s contention that the benchmarks will “result in lost
customer goodwill and jobs” (Mot. 15-16) relies on a hypothetical chain of events
that may or may not occur, and in all events have not been shown to be imminent.
See, e.g., Mot. 17 (if rate-of-return LECs face a reduction in HCLS, they “will be
forced to forego routine plant upgrades and maintenance and charge higher prices”
resulting in “[d]eclining service quality and higher prices” that will “anger
consumers and injure [their] business reputations”). Such chains of inference as to
what may occur over some unspecified amount of time fall far short of
demonstrating any imminent harm, much less harm that is “certain, great, actual
and not theoretical.” Heideman, 348 F.3d at 1189 (internal citation and quotation
marks omitted).
In any event, there can be no irreparable harm “given the availability of two
separate waiver provisions.” Stay Denial Order ¶ 10. First, carriers can avail
themselves of the waiver process established by the Bureau to “correct any errors
in their study area boundaries.” See Regression Order ¶ 27. “Importantly, if such
a waiver request is granted and a true-up is required, a carrier’s support amounts
20

will be trued-up back to the date that the benchmarks became effective.” Stay
Denial Order ¶ 10. In addition, rate-of-return LECs “may avail themselves of the
waiver process adopted in the [Transformation Order] by demonstrating that
‘reductions in current support levels would threaten [their] financial viability,
imperiling service to consumers in the areas they serve.’” Id., citing
Transformation Order ¶¶ 539-44. Finally, the Bureau’s decision to phase in the
impact of benchmarks over 18 months “provide[s] companies adequate time to
make adjustments and, if necessary, demonstrate that an individual waiver is
warranted.” Id. ¶ 11. Because NTCA has an “adequate means to attain the relief
[it] desires,” it will suffer no irreparable injury, and relief by way of mandamus is
unwarranted. Cooper Tire & Rubber Co., 568 F.3d at 1187.

III. A STAY WOULD HARM OTHER PARTIES AND THE PUBLIC

INTEREST.

As the Commission explained in the Transformation Order (¶¶ 211, 219),
the benchmarks are a response to a significant problem. The prior HCLS rules
gave rate-of-return LECs an incentive to incur costs with little regard to efficiency
or the burden placed on the ratepayers who subsidize those excessive costs through
USF assessments on their monthly bills.
NTCA attempts to downplay that finding by arguing that “a stay in 2012
would place no strain on the USF ‘budget’” because “a pre-existing cap on HCLS
constrain[s] support” such that any savings from the implementation of the
21

benchmarks would be only “$10 million per year.” Mot. 18-19. NTCA misses the
point. Because of the longstanding cap on HCLS, “carriers that did take measures
to reduce costs to operate more efficiently lost support to their peers that increased
costs.” Stay Denial Order ¶ 18; see also Transformation Order ¶ 219. The
benchmarks resolve that inequity by identifying rate-of-return LECs with excessive
costs so that the Commission may reduce their HCLS and redistribute any
relinquished support to other LECs. See Transformation Order ¶ 220. Indeed,
while “[o]nly about 20% of … study areas … will see their support limited[,] …
approximately 80% of the study areas will receive some of the freed-up support.”
Stay Denial Order ¶ 16. NTCA has no response to the Bureau’s finding (id.) that
granting its stay request would harm LECs that would otherwise receive additional
funding for broadband investment.

The public interest likewise strongly favors denial of a stay. The
benchmarks are intended to address longstanding problems resulting from the prior
HCLS rules, which “gave carriers incentives to increase loop costs with little
regard to efficiency or the burden on the Fund,” and caused “carriers that did take
measures to reduce costs to operate more efficiently” to “los[e] support to their
peers that increased costs.” Regression Order ¶ 2. “Staying implementation of
this rule would perpetuate these problematic incentives and inequities and delay
reforms intended to benefit consumers.” Stay Denial Order ¶ 18.
22

CONCLUSION

The Court should deny the motion for stay.
Respectfully
submitted,

SEAN A. LEV
GENERAL COUNSEL

JACOB M. LEWIS
ASSOCIATE GENERAL COUNSEL

/s/ Maureen K. Flood

JAMES M. CARR
MAUREEN K. FLOOD
COUNSEL
FEDERAL COMMUNICATIONS
COMMISSION
445 12TH STREET S.W.
WASHINGTON, DC 20554
202-418-1753
MAUREEN.FLOOD@FCC.GOV

July 12, 2012

23

11-9900


IN THE UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT


In re: FCC 11-161, Petitioners

v.

Federal Communications Commission
and United States of America, Respondents.


CERTIFICATE OF COMPLIANCE



Pursuant to the requirements of the Order Governing Motion Practice dated
March 13, 2012, I hereby certify that the accompanying Opposition of Federal
Communications Commission to Motion for a Stay of Administrative Order Or, In
the Alternative, for Writ of Mandamus, contains 4,990 words.








/s/ Maureen K. Flood

Maureen
K.
Flood

Counsel
Federal
Communications
Commission
Washington,
D.C.
20554
(202)

418-1753


July 12, 2012




CERTIFICATE OF DIGITAL SUBMISSION



I, Maureen K. Flood, hereby certify that with respect to the foregoing:


(1) there are no required privacy redactions to be made per 10th Cir. R. 25.5;

(2) if required to file additional hard copies, that the ECF submission is an
exact copy of those documents;

(3) the digital submissions have been scanned for viruses with the most
recent version of a commercial virus scanning program, Symantec Endpoint
Protection version 11.0.5002.333, and according to the program are free of
viruses.



/s/ Maureen K. Flood


Maureen K. Flood
Counsel
Federal Communications Commission
Washington, D.C. 20554
(202) 418-1750


July 12, 2012

11-9900


IN THE UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT


In re: FCC 11-161, Petitioners

v.

Federal Communications Commission and United States of America,
Respondents.


CERTIFICATE OF SERVICE



I, Maureen K. Flood, hereby certify that on July 12, 2012, I electronically filed the
foregoing Opposition of Federal Communications Commission to Motion for a
Stay of Administrative Order Or, In the Alternative, for Writ of Mandamus with
the Clerk of the Court for the United States Court of Appeals for the Tenth Circuit
by using the CM/ECF system. Participants in the case who are registered CM/ECF
users will be served by the CM/ECF system.


Joseph K. Witmer
Charles A. Zdebski
Kathryn G. Sophy
James C. Falvey
Bohdan R. Pankiw
Jennifer E. Lattimore
Pennsylvania PUC
Eckert Seamans Cherin & Mellott
P.O. Box 3265
1717 Pennsylvania Avenue, N.W.
Harrisburg, PA 17105-3265
12th Floor
Counsel for: Pennsylvania PUC
Washington, D.C. 20006
Counsel for: Core Communications,
Inc.



Ernest C. Cooper
David Bergmann
Robert G. Kidwell
3293 Noreen Drive
Howard J. Symons
Columbus, OH 43221-4568
Mintz Levin Cohn Ferris Glovsky &
Counsel for: NASUCA
Popeo PC

701 Pennsylvania Avenue, N.W.
Suite 900
Washington, D.C. 20004
Counsel for: NCTA



Paula Marie Carmody
Christopher J. White
MD Office of People’s Counsel
New Jersey Division of Rate Counsel
Suite 2102
P.O. Box 46005
6 St. Paul Street
Newark, NJ 07101
Baltimore, MD 21202
Counsel for NASUCA
Counsel for NASUCA



Russell M. Blau
David A. LaFuria
Tamar Finn
Russell D. Lukas
Bingham & McCutchen, LLP
Todd B. Lantor
2020 K Street, N.W.
David L. Nace
Washington, D.C. 20006
Lukas, Nace, Gutierrez & Sachs,
Counsel for: NTCA and OPASTCO
LLP
Suite 1200
8300 Greensboro Drive
McLean, VA 22102
Counsel for: Cellular South, Inc.,et
al.


2




John H. Jones
Benjamin H. Dickens
Office of the Ohio Attorney General
Gerard J. Duffy
150 E. Gay Street, 16th Floor
Mary J. Sisak
Columbus, OH 43215
Robert M. Jackson
Counsel for: PUC of Ohio
Blooston & Mordkofsky
2120 L Street, N.W., Suite 300
Washington, D.C. 20037
Counsel for: Choctaw Telephone
Company, et al.




Craig S. Johnson
David R. Irvine
Johnson & Sporleder
Jenson Stavros & Guelker
304 E. High Street
747 East South Temple, Suite 130
P.O. Box 1606
Salt Lake City, UT 84102
Jefferson City, MO 65102
Counsel for: Direct
Counsel for: Choctaw Telephone
Communications Cedar Valley, LLC,
Company
et al.


David H. Solomon
Donna N. Lampert
Craig E. Gilmore
Mark J. O’Connor
Charles L. Keller
Jennifer P. Bagg
Wilkinson Barker Knauer, LLP
E. Ashton Johnston
2300 N Street, N.W., Suite 700
Joseph Bissonnette
Washington, D.C. 20037
Helen E. Disenhaus
Counsel for: T-Mobile USA, Inc.
Justin L. Faulb
Lampert, O’Connor & Johnston, PC
1776 K Street, N.W., Suite 700
Washington, D.C. 20006
Counsel for: Transcom Enhanced
Services, Inc ., et al.


3





William S. McCollough
Christopher M. Heimann
McColloughHenry, PC
Gary L. Phillips
1250 South Capital of Texas
Paul K. Mancini
Highway
AT&T Inc.
Suite 2-235
1120 20th Street, N.W., Suite 1000
West Lake Hills, TX 78746
Washington, DC 20036
Counsel for: Halo Wireless, Inc.
Counsel for: AT&T



Jonathan E. Nuechterlein
Bridget Asay
Elvis Stumbergs
State of Vermont office of the
Heather M. Zachary
Attorney General
Daniel Deacon
109 State Street
Wilmer Cutler, et al.
Montpelier, VT 05609
1875 Pennsylvania Avenue, N.W.
Counsel for: Vermont PSB
Washington, D.C. 20006-1420
Counsel for: AT&T Inc.


Nancy C. Garrison
Scott H. Angstreich
Robert B. Nicholson
Brendan J. Crimmins
U.S. Department of Justice
Kellogg, Huber, Hansen, Todd,
Antitrust Division, Appellate Section Evans & Figel, PLLC
950 Pennsylvania Avenue, N.W.
1615 M Street, N.W., Suite 400
Washington, D.C. 20530
Washington, D.C. 20036
Counsel for: USA
Counsel for: Verizon



Christopher J. Wright
Glenn Richards
Wiltshire & Grannis LLP
Pillsbury Winthrop Shaw Pittman
1200 18th Street, N.W.
2300 N Street, N.W.
Washington, D.C. 20036
Washington, D.C. 20037-1122
Counsel for: Level 3
Counsel for: The Voice on the Net
Communications, LLC and Sprint
Coalition
Nextel Corporation


4




Thomas Jones
Robert A. Long, Jr.
David Paul Murray
Gerald J. Waldron
Nirali Patel
Yaron Dori
Willkie, Farr & Gallagher LLP
Enrique Armijo
1875 K Street, N.W.
Covington & Burling LLP
Washington, D.C. 20006
1201 Pennsylvania Avenue, N.W.
Counsel for: tw telecom, inc.
Washington, D.C. 20004-2401
Counsel for: CenturyLink, Inc.


David E. Mills
Clare E. Kindall
J.G. Harrington
Assistant Attorney General
Dow Lohnes PLLC
Department Head-Energy
1200 Ner Hampshire Avenue, N.W.
Office of the Attorney General
Suite 800
Ten Franklin Square
Washington, D.C. 20036-6802
New Britain, CT 06051
Counsel for: Cox Communications,
Counsel for Connecticut PURA
Inc.



Genevieve Morelli
Craig S. Johnson
ITTA
Johnson & Sporleder, LLP
1101 Vermont Avenue, N.W.
304 E High Street, Suite 200
Suite 501
P.O. Box 1670
Washington, D.C. 20005
Jefferson City, MO 65102
Counsel for: ITTA
Counsel for: Choctaw Telephone
Company




Carl W. Northrop
Mark A. Stachiw
Telecommunications Law
MetroPCS Communications, Inc.
Professionals PLLC
2250 Lakeside Blvd.
875 15th Street, N.W., Suite 750
Richardson, TX 75082
Washington, D.C. 20005
Counsel for: MetroPCS
Counsel for: MetroPCS
Communications, Inc.
Communications, Inc.

5




Gregory J. Vogt
Paul M. Schudel
Law Offices of Gergory J. Vogt,
Thomas J. Moorman
PLLC
Woods & Aitken LLP
2121 Eisenhower Avenue, Suite 200
301 South 13th Street, Suite 500
Alexandria, VA 22314
Lincoln, Nebraska 68508
Counsel for: National Exchange
Counsel for: Nebraska Rural
Carriers Association, Inc.
Independent Companies


Matthew A. Brill
Steven H. Thomas
Latham & Watkins
McGuire Craddock & Strother, PC
555 11th Street, Suite 1000
2501 N. Harwood, Suite 1800
Washington, D.C. 20004
Dallas, TX 75201
Counsel for: Rural Cellular
Counsel for: Halo Wireless
Association



Sidney Powell
Walter H. Sargent
Torrence E. Lewis
1632 N. Cascade Avenue
3831 Turtle Creek Blvd. #5B
Colorado Springs, CO 80907
Dallas, TX 75219
Counsel for Transcom Enhanced
Counsel for: Transcom Enhanced
Services, Inc., et al..
Services, Inc.


Michael B. Wallace
Caressa D. Bennet
Rebecca Hawkins
Kenneth C. Johnson
Wise Carter Child & Caraway, P.A.
Daryl A. Zakov
401 E. Capitol Street
Anthony K. Veach
Heritage Building, Suite 600
Bennet & Bennet, PLLC
Jackson, MS 39201
4350 East West Highway, Suite 201
Counsel for: Cellular South, Inc.
Bethesda, MD 20814
Counsel for: Rural
Telecommunications Group, Inc. and
Central Texas Telephone
Cooperative, Inc.


6




Samuel L. Feder
John B. Messenger
Elaine J. Goldenberg
5700 Georgia Avenue
Jenner & Block LLP
West Palm Beach, FL 33405
1099 New York Avenue, N.W.
Counsel for: YMax Communications
Washington, D.C. 20001
Corp.
Counsel for: Comcast Corporation


Robert A. Fox
Patricia A. Millett
1500 SW Arrowhead Road
Kevin Amer
Topeka, KS 66604
Sean Conway
Counsel for The State Corporation
Akin Gump Strauss Hauer & Feld
Commission of the State of Kansas
LLP
1333 New Hampshire Avenue, N.W.
Washington, D.C. 20036
Counsel for: Gila River Indian
Community, et al.




Don L. Keskey
Ivan C. Evilsizer
505 N. Capitol Avenue
Evilsizer Law Office, PLLC
Lansin, MI 48933
2301 Colonial Drive, Suite 2B
Counsel for: Allband
Helena, MT 59601-4995
Communications Cooperative
Counsel for: Ronan Telephone
Company, et al.



Alan L. Smith
Roger D. Dixon, Jr.
1169 East 4020 South
Law Offices of Dale Dixon
Salt Lake City, UT 84124
7316 Esfera Street
Counsel for Direct Communications
Carlsbad, CA 92009
Cedar Valley, LLC, et al.
Counsel for: North County
Communications Corporation


7




David Cosson
H. Russell Frisby, Jr.
2154 Wisconsin Avenue, N.W.
Dennis Lane
Washington, D.C. 20007
Harvey L. Reiter
Counsel for: Eastern Nebraska
Stinson Morrison Hecker
Telephone Company
1775 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Counsel for: Eastern Nebraska
Telephone Company



Robin K. Lunt
Maureen A. Scott
James B. Ramsay
Janet F. Wagner
NARUC 1101 Vermont Avenue,
Wesley C. Van Cleve
N.W., Suite 200
Arizona Corporation Commission
Washington, D.C. 20005
Legal Division
Counsel for: NARUC
1200 West Washington

Phoenix, AZ 85007
Counsel for: Arizona Corporation
Commission



Raymond L. Doggett, Jr.
Rick Chessen
D. Mathias Roussy, Jr.
Neal M. Goldberg
Virginia State Corporation
Jennifer McKee
Commission
Steven F. Morris
Office of General Counsel
NCTA
P.O. Box 1197
25 Masschusetts Avenue, N.W.
Richmond, VA 23218-1197
Suite 100
Counsel for: Virginia State
Washington, D.C. 20001
Corporation Commission
Counsel for: NCTA





/s/ Maureen K. Flood


8

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