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Universal Service Fund Principal Brief - In Re: FCC 11-161 (10th Cir.)

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Released: October 31, 2012
Appellate Case: 11-9900 Document: 01018937286 Date Filed: 10/23/2012 Page: 1

IN THE UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

____________

NO. 11-9900

_____________

IN RE: FCC 11-161

____________

ON PETITIONS FOR REVIEW OF AN ORDER OF THE

FEDERAL COMMUNICATIONS COMMISSION

____________

UNCITED JOINT UNIVERSAL SERVICE FUND PRINCIPAL BRIEF

(DEFERRED APPENDIX APPEAL)
____________
[Counsel for Petitioners Listed on Following Pages]

October 23, 2012

DB04/0832545.0002/7137923.1 PF01

Appellate Case: 11-9900 Document: 01018937286 Date Filed: 10/23/2012 Page: 2
Adak Eagle Enterprises LLC, Adams Telephone Cooperative, Alenco
Communications, Inc., Arlington Telephone Company, Bay Springs
Telephone Company, Inc., Big Bend Telephone Company, Inc., The
Blair Telephone Company, Blountsville Telephone LLC, Blue Valley
Telecommun ications, Inc., Bluffton Telephone Company, Inc., BPM,
Inc., Brantley Telephone Company, Inc., Brazoria Telephone
Company, Brindlee Mountain Telephone LLC, Bruce Telephone
Company, Bugs Island Telephone Cooperative, Cameron Telephone
Company, LLC, Chariton Valley Telephone Corporation,
Chequamegon Communications Cooperative, Inc., Chickamauga
Telephone Corporation, Chickasaw Telephone Company, Chippewa
County Telephone Company, Clear Lake Independent Telephone
Company, Comsouth Telecommunications, Inc., Copper Valley
Telephone Cooperative, Cordova Telephone Cooperative, Crockett
Telephone Company, Inc., Darien Telephone Company, Deerfield
Farmers' Telephone Company, Delta Telephone Company, Inc., East
Ascension Telephone Company, LLC, Eastern Nebraska Telephone
Company, Eastex Telephone Coop., Inc., Egyptian Telephone
Cooperative Association, Elizabeth Telephone Company, LLC, Ellijay
Telephone Company, Farmers Telephone Cooperative, Inc., Flatrock
Telephone Coop., Inc., Franklin Telephone Company, Inc., Fulton
Telephone Company, Inc., Glenwood Telephone Company, Granby
Telephone LLC, Hart Telephone Company, Hiawatha Telephone
Company, Holway Telephone Company, Home Telephone Company
(St. Jacob, Ill.), Home Telephone Company (Moncks Corner, SC),
Hopper Telecommunications Company, Inc., Horry Telephone
Cooperative, Inc., Interior Telephone Company, Kaplan Telephone
Company, Inc., KLM Telephone Company, City Of Ketchikan, Alaska,
Lackawaxen Telecommunications Services, Inc., Lafourche Telephone
Company, LLC, La Harpe Telephone Company, Inc., Lakeside
Telephone Company, Lincolnville Telephone Company, Loretto
Telephone Company, Inc., Madison Telephone Company, Matanuska
Telephone Association, Inc., McDonough Telephone Coop., Inc., MGW
Telephone Company, Inc., Mid Century Telephone Coop., Inc.,
Midway Telephone Company, Mid-Maine Telecom LLC, Mound Bayou
Telephone & Communications, Inc., Moundville Telephone Company,
Inc., Mukluk Telephone Company, Inc., National Telephone of
Alabama, Inc., Ontonagon County Telephone Company, Otelco Mid-
Missouri LLC, Otelco Telephone LLC, Panhandle Telephone
Cooperative, Inc., Pembroke Telephone Company, Inc., People’s


Appellate Case: 11-9900 Document: 01018937286 Date Filed: 10/23/2012 Page: 3
Telephone Company, Peoples Telephone Company, Piedmont Rural
Telephone Cooperative, Inc., Pine Belt Telephone Company, Pine Tree
Telephone LLC, Pioneer Telephone Cooperative, Inc., Poka Lambro
Telephone Cooperative, Inc., Public Service Telephone Company,
Ringgold Telephone Company, Roanoke Telephone Company, Inc.,
Rock County Telephone Company, Saco River Telephone LLC,
Sandhill Telephone Cooperative, Inc., Shoreham Telephone LLC, The
Siskiyou Telephone Company, Sledge Telephone Company, South
Canaan Telephone Company, South Central Telephone Association,
Star Telephone Company, Inc., Stayton Cooperative Telephone
Company, The North-Eastern Pennsylvania Telephone Company,
Tidewater Telecom, Inc., Tohono O’Odham Utility Authority, SD,
Unitel, Inc., War Telephone LLC, West Carolina Rural Telephone
Cooperative, Inc., West Tennessee Telephone Company, Inc., West
Wisconsin Telcom Cooperative, Inc., Wiggins Telephone Association,
Winnebago Cooperative Telecom Association, and Yukon Telephone
Co., Inc. (Rural Telephone Service Company et al.)

By Their Counsel

David Cosson

H. Russell Frisby, Jr.

2154 Wisconsin Avenue, NW

Harvey L. Reiter

Washington, DC 20007
Stinson Morrison Hecker LLP
Tel: 202-333-5275
1775 Pennsylvania Avenue, NW
dcosson@klctele.com
Suite 800
Washington, DC 20006
Tel: 202-785-9100
rfrisby@stinson.com
dlane@stinson.com
hreiter@stinson.com

Appellate Case: 11-9900 Document: 01018937286 Date Filed: 10/23/2012 Page: 4
Allband Communications Cooperative
Arizona Corporation Commission
By Its Counsel
By Its Counsel

Don L. Keskey

Maureen A. Scott

Public Law Resource Center PLLC

Wesley Van Cleve

139 W. Lake Lansing Road, Suite 210

Janet F. Wagner

East Lansing, MI 48823
Arizona Corporation Commission
Tel: 517-999-7572
Legal Division
donkeskey@publiclawresourcecenter.com 1200 West Washington
Phoenix, AZ 85007
Tel: 602-542-3402
mscott@azcc.gov
wvancleve@azcc.gov
jwagner@azcc.gov
Cellular South, Inc.
Choctaw Telephone Company
d/b/a C Spire Wireless
By Its Counsel
By Its Counsel

Benjamin H. Dickens, Jr.

Michael B. Wallace

Mary J. Sisak

Rebecca Hawkins

Blooston, Mordkofsky, Dickens,
401 E. Capitol Street
Duffy & Prendergast, LLP
Heritage Bldg., Suite 600
2120 L Street, NW, Suite 300
Jackson, MS 39201
Washington, DC 20037-000
Tel: 601-968-5500
Tel: 202-659-0830
mbw@wisecarter.com
bhd@bloostonlaw.com
rwh@wisecarter.com
mjs@bloostonlaw.com

Craig S. Johnson

Johnson & Sporleder, LLP
304 E. High Street, Suite 200
P.O. Box 1670
Jefferson City, MO 65102
Tel: 573-659-8734
cj@cjaslaw.com

Appellate Case: 11-9900 Document: 01018937286 Date Filed: 10/23/2012 Page: 5
Direct Communications Cedar Valley,
Gila River Indian Community and
LLC, Totah Communications, Inc.,
Gila River Telecommunications, Inc.
H & B Communications, Inc., The
By Their Counsel
Moundridge Telephone Company of

Patricia A. Millett

Moundridge, Pioneer Telephone

James E. Tysse

Association, Inc., Twin Valley Telephone,

Sean Conway

Inc., and Pine Telephone Company, Inc.
Akin Gump Strauss Hauer & Feld LLP
By Their Counsel
1333 New Hampshire Avenue, NW

David R. Irvine

Washington, DC 20036
747 East South Temple, Suite 130
Tel: 202-887-4000
Salt Lake City, UT 84102
rmillett@akingump.com
Tel: 801-579-0802
jtysse@akingump.com
drirvine@aol.com
sconway@akingump.com

Alan Lange Smith

Michael C. Small

1169 East 4020 South
Akin Gump Strauss Hauer & Feld LLP
Salt Lake City, UT 84124
2029 Century Park E. Suite 2400
Tel: 801-262-0555
Los Angeles, CA 90067
alanakaed@aol.com
Tel: 310-229-1000
msmall@akingump.com

John B. Capehart

Akin Gump Strauss Hauer & Feld LLP
1700 Pacific Avenue, Suite 4100
Dallas, TX 75201
Tel: 214-969-2800
jcapehart@akingump.com

Appellate Case: 11-9900 Document: 01018937286 Date Filed: 10/23/2012 Page: 6
National Association of Regulatory
National Association of State Utility
Utility Commissioners
Consumer Advocates
By Its Counsel
By Its Counsel

James Bradford Ramsay

David Bergmann

National Association of Regulatory
3293 Noreen Drive
Utility Commissioners
Columbus, OH 43221-4586
1101 Vermont Avenue, NW
Tel: 614-771-5979
Suite 200
david.c.bergmann@gmail.com
Washington, DC 20005
Tel: 202-898-2200

Paula Marie Carmody

jramsay@naruc.org
Maryland Office of People’s Counsel
6 St. Paul Street, Suite 2102
Baltimore, MD 21202
Tel: 410-767-8150
paulac@opc.state.md.us

Christopher J. White

New Jersey Division of Rate Counsel
31 Clinton Street, 11th Floor
Newark, NJ 07101
Tel: 973-648-7575
cwhite@rpa.state.nj.us

Appellate Case: 11-9900 Document: 01018937286 Date Filed: 10/23/2012 Page: 7
National Telecommunications
Pennsylvania Public Utility
Cooperative Association, U.S. TelePacific Commission
Corp., and Consolidated Communications
By Its Counsel
Holdings, Inc.

Bohdan R. Pankiw

By Their Counsel

Kathryn G. Sophy

Russell Blau

Joseph K. Witmer

Tamar Finn

Shaun A. Sparks

Bingham McCutchen LLP
Pennsylvania Public Utility
2020 K Street, NW
Commission
Washington, DC 20006
400 North Street, 3rd Floor
Tel: 202-373-6000
Harrisburg, PA 17120
russell.blau@bingham.com
Tel: 717-783-3190
tamar.finn@bingham.com
bpankiw@state.pa.us
ksophy@pa.gov
joswitmer@pa.gov
shsparks@pa.gov
Rural Independent Competitive Alliance,
Vermont Public Service Board
Rural Telephone Service Company, Inc.
By Its Counsel
By Their Counsel

Bridget Asay

David Cosson

Office of the Attorney General for the
2154 Wisconsin Avenue, NW
State of Vermont
Washington, DC 20007
109 State Street
Tel: 202-333-5275
Montpelier, VT 05609-1001
dcosson@klctele.com
Tel: 802-828-3181
basay@atg.state.vt.us

H. Russell Frisby, Jr.
Dennis Lane
Harvey L. Reiter

Stinson Morrison Hecker LLP
1775 Pennsylvania Avenue, NW
Suite 800
Washington, DC 20006
Tel: 202-785-9100
rfrisby@stinson.com
dlane@stinson.com
hreiter@stinson.com

Appellate Case: 11-9900 Document: 01018937286 Date Filed: 10/23/2012 Page: 8

TABLE OF CONTENTS

TABLE OF CONTENTS........................................................................................... i
TABLE OF AUTHORITIES ................................................................................... iv
GLOSSARY...............................................................................................................x
STATEMENT OF ISSUES .......................................................................................1
STANDARD OF REVIEW .......................................................................................4
SUMMARY OF ARGUMENT .................................................................................4
ARGUMENT ...........................................................................................................11
I.
THE COMMISSION'S BROADBAND CONDITION EXCEEDED
ITS SECTION 254 AUTHORITY. ...............................................................11
A.
Section 254 Unambiguously Bars The Commission From
Conditioning USF Support On Recipients’ Agreement To
Provide Broadband Internet Access Services .....................................12
B.
Section 254 Expressly Bars The Commission From Providing
USF Support To Entities That Do Not Provide
Telecommunications Services.............................................................17
C.
There Is No Statutory Ambiguity Entitling The Commission’s
New Interpretations Of Its Authority To Chevron Deference ...........19
1.
The Commission cannot bootstrap its prior order
authorizing carriers to use USF to build dual use facilities
capable of supporting broadband as justification to
mandate that USF recipients offer broadband information
services......................................................................................20
2.
As the FCC itself previously held, Section 706 is not an
independent grant of agency authority to impose a
broadband condition..................................................................24
II.
THE COMMISSION’S USF CUTBACKS ARBITRARILY
DISREGARDED MANDATORY CRITERIA. ...........................................29
A.
The Order Does Not Ensure USF Support Sufficient To
Preserve And Advance Universal Service. .........................................30
B.
The Order Does Not Ensure Service And Rate Comparability
Between Rural And Urban Areas........................................................33
i
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C.
The Order’s Establishment Of A Budget Cap Without
Widening The Contribution Base Neither Protects Affordability
Nor Ensures Equitable Fund Contributions. .......................................34
D.
The Agency’s “Regression Rule” Is Vague And Unbounded,
And Thus Violates Section 254’s Predictability Criterion. ................36
III.
THE FCC’S USE OF AUCTIONS TO DISTRIBUTE USF
VIOLATES SECTION 214(e), WHICH LEAVES EXCLUSIVELY
TO STATES DETERMINATION OF WHO SHOULD RECEIVE
USF SUPPORT .............................................................................................39
IV.
THE DECISION TO REDUCE USF SUPPORT IN AREAS WITH
“ARTIFICIALLY LOW” END USER RATES WAS BOTH
UNLAWFUL AND ARBITRARY...............................................................40
V.
THE RULES UNLAWFULLY DEPRIVE RURAL CARRIERS OF
A REASONABLE OPPORTUNITY TO RECOVER THEIR
PRUDENTLY-INCURRED COSTS. ...........................................................42
VI.
THE RULES HAVE UNLAWFUL RETROACTIVE EFFECTS. ..............45
VII. THE COMMISSION DISREGARDED EVIDENCE THAT
ALLOCATING USF TO RURAL PRICE CAP CARRIERS BY
COMPETITIVE BIDDING WOULD REDUCE SERVICE
QUALITY BECAUSE CARRIERS WOULD BID ONLY TO MEET
FCC MINIMUM QUALITY STANDARDS INADEQUATE TO
ENSURE SYSTEM UPGRADEABILITY...................................................48
VIII. ELIMINATING UNIVERSAL SERVICE SUPPORT FOR THE
HIGHEST-COST AREAS DEFEATS THE VERY PURPOSE OF
UNIVERSAL SERVICE...............................................................................52
IX.
ELIMINATING SUPPORT TO AREAS WHERE AN
UNSUBSIDIZED COMPETITOR OFFERS VOICE AND
BROADBAND ARBITRARILY IGNORES THAT ONCE THE
INCUMBENT CARRIER LOSES USF SUPPORT, THE
UNSUBSIDIZED CARRIER HAS NO OBLIGATION TO
CONTINUE OFFERING SERVICES ..........................................................53
X.
THE COMMISSION ARBITRARILY FAILED TO EXPLAIN HOW
ITS NEW DEFINITION OF SUPPORTED INFORMATION
SERVICES TOOK INTO ACCOUNT THE FOUR FACTORS IT
WAS REQUIRED TO CONSIDER UNDER SECTION 254(c)(1).............56
ii
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XI.
THE FCC ARBITRARILY DISREGARDED COMMENTS THAT
THE ORDERS INCREMENTAL USF SUPPORT PROVISIONS
WOULD DUPLICATE OR UNDERMINE STATE-INITIATED
PLANS FOR BROADBAND DEPLOYMENT. ..........................................56
XII. THE ORDER UNLAWFULLY MADE CHANGES NOT
CONTAINED IN ITS PROPOSED RULE THAT COULD NOT
REASONABLY HAVE BEEN ANTICIPATED BY
COMMENTERS............................................................................................57
CONCLUSION........................................................................................................60
CERTIFICATE OF COMPLIANCE.......................................................................61
CERTIFICATE OF SERVICE ................................................................................62
iii
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TABLE OF AUTHORITIES

Page(s)

CASES

Alenco Commc’ns, Inc. v FCC,
201 F.3d 608 (5th Cir. 2000 ) .............................................................................31
Arkema, Inc. v. EPA,
618 F.3d 1 (D.C. Cir. 2010)................................................................................47
Bloate v. United States,
130 S. Ct. 1345 (2010)..................................................................................16, 27
Bowen v. Georgetown Univ. Hosp.,
488 U.S. 204 (1988)......................................................................................45, 47
Burlington Truck Lines, Inc. v. United States,
371 U.S. 156 (1962)............................................................................................33
Chevron U.S.A., Inc. v. Natural Res. Defense Council, Inc.
467 U.S. 837 (1984)......................................................... 4, 14, 15, 18, 19, 20, 28
City of Arlington, Tex. v. FCC,
2012 U.S. Lexis 7807 (Oct. 5, 2012)....................................................................4
City of Waukesha v. EPA,
320 F.3d 228 (D.C. Cir. 2003)............................................................................58
Colorado Springs. v. Solis,
589 F.3d 1121 (10th Cir. 2009) ..........................................................................37
Comcast Corp. v. FCC,
600 F.3d 642 (D.C. Cir. 2010)......................................................................19, 24
Council Tree Commc’ns, Inc. v FCC,
619 F.3d 235 (3d Cir. 2010) ...............................................................................57
Direct TV, Inc. v. FCC,
110 F.3d 816 (D.C. Cir. 1997)............................................................................47
Duquesne Light Co. v. Barasch,
488 U.S. 299 (1989)............................................................................................43
iv
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FDA v. Brown & Williamson Tobacco Corp.,
529 U.S. 120 (2000)......................................................................................14, 28
FPC v. Hope Natural Gas Co.,
320 U.S. 591 (1944)............................................................................................42
FPC v. Texaco, Inc.,
417 U.S. 380 (1974)............................................................................................33
General Dynamics Land Sys. v. Cline,
540 U.S. 581 (2004)......................................................................................15, 27
Home Box Office, Inc. v. FCC,
567 F.2d 9 (D.C. Cir. 1977)................................................................................33
Langraf v. USI Film Products et al,
511 U.S. 244 (1994)............................................................................................46
Maryland Peoples’ Counsel v. FERC,
761 F.2d 768 (D.C. Cir. 1985)............................................................................36
Morton v. Mancari,
417 U.S. 535 (1974)............................................................................................27
Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co.,
463 U.S. 29 (1983) .................................................................................42, 47, 49
Nat’l Cable & Telecomm. Ass’n v. Brand X Internet Servs.,
545 U.S. 967 (2005)......................................................................................14, 23
New England Legal Found. v. Mass. Port Auth.,
883 F. 2d 157 (1st Cir. 1989)...............................................................................24
Permian Basin Area Rate Cases,
390 U.S. 747 (1968)............................................................................................45
Prometheus Radio Project v FCC,
652 F.3d 431 (3d Cir. 2011) ...............................................................................57
PSEG Energy Res. & Trade LLC et al. v FERC,
665 F.2d 203 (D.C. Cir. 2011)............................................................................57
v
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Qwest Commc’ns Int’l v FCC,
398 F.3d 1222 (10th Cir. 2005) ..................................................19, 29, 30, 32, 34
Qwest Commc’ns Int’l v. v. FCC,
258 F.3d 1191 (10th Cir. 2001) ..............................................................19, 30, 36
SEC v. Chenery,
332 U.S. 194 (1947)............................................................................................51
Texas Office of Pub. Util. Counsel v. FCC,
183 F.3d 393 (5th Cir. 1999) ..................................................................15, 16, 30
Time Warner Telecomm., Inc. v. FCC,
507 F.3d 205 (3d Cir. 2007) ...................................................................11, 14, 23
U.S. Telecomm. Ass’n v. FCC,
359 F.3d 554 (D.C. Cir. 2004)............................................................................45
U.S. Telecomm. Ass’n v. FCC,
400 F.3d 29 (D.C. Cir. 2005)..............................................................................39
Verizon Commc’ns, Inc. v. FCC,
535 U.S. 469 (2002)......................................................................................42, 43
Via Christi Med. Ctr. v. Leavitt,
509 F.3d 1259 (10th Cir. 2007) ..........................................................................18

AGENCY DECISIONS

Connect America Fund,
26 F.C.C.R. 17663 (2011)............................................................................passim
Connect America Fund,
26 F.C.C.R. 4554 (2011).............................................................13, 32, 55, 58, 59
Federal-State Joint Board on Universal Service,
16 F.C.C.R. 11244 (2001)...................................................................................21
In re Deployment of Wireline Servs. Offering Advanced Telecomms.
Capability,
13 F.C.C.R. 24012 (1998)...................................................................................24
vi
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National Broadband Plan, FCC,
2010 WL 972375 (2010).....................................................................................19
USF Contribution Further Notice of Proposed Rulemaking, WC Docket No.
06-122, 27 F.C.C.R. 5357 (2012) .................................................................34, 35

STATUTES

5 U.S.C. §551(4) ......................................................................................................37
5 U.S.C. §553.................................................................................................3, 10, 60
5 U.S.C. §553(b) ......................................................................................................57
5 U.S.C. §553(c) ......................................................................................................57
47 U.S.C. §152(b) ....................................................................................................41
47 U.S.C.§153(24) .............................................................................................11, 12
47 U.S.C. §153(51) ............................................................................................17, 18
47 U.S.C. §153(53) ..................................................................................................11
47 U.S.C. §214(e) ............................................................................1, 2, 7, 39, 40, 46
47 U.S.C. §214(e)(1)..............................................................................17, 18, 39, 54
47 U.S.C. §214(e)(2)................................................................................................39
47 U.S.C. §214(e)(3)................................................................................................39
47 U.S.C. §214(e)(6)................................................................................................39
47 U.S.C. §254................................ 5, 6, 8, 11, 12, 20, 24, 27, 31, 36, 39, 43, 46, 60
47 U.S.C. §254(b) ..............................................................................1, 29, 30, 51, 54
47 U.S.C. §254(b)(1)......................................................................................1, 29, 34
47 U.S.C. §254(b)(3)..............................................................................29, 33, 34, 52
47 U.S.C. §254(b)(4)................................................................................................35
47 U.S.C. §254(b)(5)..........................................................................................29, 36
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47 U.S.C. §254(c) ..................................................................................13, 21, 22, 27
47 U.S.C. §254(c)(1)..................................................... 1, 3, 5, 10, 12, 13, 14, 15, 56
47 U.S.C. §254(c)(3)..........................................................................................15, 16
47 U.S.C. §254(e) ................................................................... 1, 5, 17, 18, 20, 27, 30
47 U.S.C. §254(e)(1)................................................................................................18
47 U.S.C. §1302.......................................................................................................26
Broadband Data Improvement Act,
Pub. L. No. 110-385, 122 Stat. 4096 (2008) ......................................................27
Telecommunications Act of 1996,
Pub. L. No. 104-104, Title VII, § 706,
110 Stat. 56 (1996)....................................................... 5, 6, 20, 24, 25, 26, 27, 28

REGULATIONS

47 C.F.R. §0.291(2)(e).............................................................................................37
47 C.F.R. §36.621(a)(5)...........................................................................................38
47 C.F.R. §36.611 ....................................................................................................46
47 C.F.R. §54.101 ....................................................................................................18
47 C.F.R. §54.901 ....................................................................................................43
47 C.F.R. §69.104 ....................................................................................................44

LEGISLATIVE MATERIALS

Reviewing the National Broadband Plan: Hearing before the Senate Comm.
on Commerce, Science, and Transportation,
111th Cong. 44 (2010) ........................................................................................20
Broadband Data Improvement Act, Report of the Comm. on Commerce,
Science and Technology
S. Rep. 110-204 (2007).......................................................................................28
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COURT RULES

Fed. R. App. P. 32(a)(5)...........................................................................................61
Fed. R. App. P. 32(a)(6)...........................................................................................61
Fed. R. App. P. 32(a)(7)(B)(iii) ...............................................................................61
ix
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GLOSSARY

1996 Act or Act
Telecommunications Act of 1996
APA
Administrative Procedure Act
ARC
Access Recovery Charge
Board
Federal-State Joint Board on Universal Service
CAF
Connect America Fund
CLEC
Competitive Local Exchange Carrier
CMRS
Commercial Mobile Radio Service
COLR
Carrier of Last Resort
Communications Act
Communications Act of 1934
ETC
Eligible Telecommunications Carrier
FCC or Commission
Federal Communications Commission
HCLS
High Cost Loop Support
HCMS
High Cost Model Support
IAS
Interstate Access Support
ICC
Intercarrier Compensation
NTCA
National Telecommunications Cooperative
Association
RUS
Rural Utilities Service
SNA
Safety Net Additive
USF
Universal Service Fund
x
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STATEMENT OF ISSUES

Section 254(c)(1) of the Act, 47 U.S.C. §254(c)(1), defines “universal
service” as “an evolving level of telecommunications services” and limits universal
service fund (USF) support to telecommunications services. In Connect America
Fund, 26 F.C.C.R. 17663 (2011) (“Order”), the FCC concluded that broadband
Internet access (bundled broadband and Internet access) is an “information
service,” not a common carrier telecommunications service. Did the FCC exceed
its authority in requiring telecommunications carriers to provide broadband
Internet access “on reasonable request” as a condition of receiving USF support?
Section 254(e) of the Act, 47 U.S.C. §254(e), specifies that “only an eligible
telecommunications carrier [ETC] designated under Section 214(e) … shall be
eligible to receive specific federal universal service support” and shall use it only
for USF-supported services. Did the FCC exceed its authority in extending USF
support to non-ETCs for provision of broadband Internet access, a non-
telecommunications service?
The Commission capped, limited or eliminated rural carrier high-cost USF
support, but failed to quantify whether these restrictions would enable fulfillment
of the statutory universal service mandate and the new performance mandates it
imposed, including the broadband mandate. Did the Commission violate the
requirements of 47 U.S.C. §254(b) that USF support be sufficient to ensure that
1
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supported services and rates are affordable and reasonably comparable between
urban and rural customers?
Section 214(e) of the Act, 47 U.S.C. §214(e), provides that only ETCs may
receive USF support and that only states may designate ETCs and their service
areas. Did the FCC’s determination to distribute USF through auctions unlawfully
preempt states from determining which entities should qualify for USF support?
Was the Commission’s directive reducing USF support in areas with
“artificially low end user rates” tantamount to federal regulation of local service
rates, thereby unlawfully preempting states from regulating such rates?
In ruling that high cost support to carriers with low basic rates unnecessarily
burdened the USF, did the Commission arbitrarily ignore evidence that such rates
were supported by state funds or were low for other reasons?
Did the Commission unlawfully deprive rural carriers of reasonable
opportunities to recover their costs when it reduced USF support?
The Commission reduced RLEC recovery of costs previously incurred and
found reasonable. Did its rule have arbitrary retroactive effect?
Did the Commission arbitrarily disregard evidence that use of competitive
bidding to distribute USF support would degrade, not advance, universal service?
Did the Commission act arbitrarily in denying USF support to carriers
serving the highest cost areas?
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Did the Commission act arbitrarily in denying RLECs USF support where
unsubsidized non-ETC competitors with no universal service obligation offer
service?
Section 254(c)(1) of the Act requires the FCC to consider four specific
factors in establishing its definition of supported telecommunications services. Did
the FCC act arbitrarily in failing to explain how its new definition addressed these
factors?
Several states have developed and initiated broadband deployment plans. In
determining that USF support should be used to support broadband Internet access,
did the FCC arbitrarily disregard comments from states that its Order would
impede their efforts?
Provisions in the Order implementing the access recovery charge (“ARC”),
eliminating the price adjustment mechanism for exogenous events, establishing a
dual process for ICC revenue recovery for price cap carriers and rate-of-return
carriers, and giving price cap carriers an exclusive right of first refusal to certain
USF support were not part of the FCC’s proposed rule. Did their inclusion in the
Order violate Section 553 of the APA, 5 U.S.C. §553, by denying parties a
reasonable opportunity for notice and comment on proposed agency rules?
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STANDARD OF REVIEW

Sections I and III of the brief are governed by the Chevron standard of
review set out at pp. 39-40 of the Preliminary Joint Brief.1 Sections II, IV-XII are
governed by the arbitrary and capricious standard of review set out at pp. 41-42 of
that brief.

SUMMARY OF ARGUMENT

1.
A central feature of the Order is the condition placed on USF support
recipients, that they provide broadband Internet access to consumers on reasonable
request. This unlawful condition is of immense consequence both to state
commissions and consumer advocates responsible for protecting consumers,
preserving affordable communications services and promoting their own in-state
broadband efforts and to the rural carriers subject to the condition. Coupled with
other restructuring changes under the Order discussed in Section II below,
particularly limitations on ICC and cutbacks on USF support, the added unfunded
burden of satisfying the broadband condition threatens the viability of rural carriers
and the vital services they provide to rural consumers.
1 Chevron U.S.A., Inc. v. Natural Res. Defense Council, Inc., 467 U.S. 837 (1984).
Subsequent to the filing of the Joint Preliminary Brief, the Supreme Court granted
certiorari to address whether Chevron applies at all where the issue concerns an
agency's determination of its own jurisdiction. City of Arlington, Tex. v. FCC,
2012 U.S. LEXIS 7807 (Oct. 5, 2012).
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The Order’s requirement that USF recipients must provide broadband
Internet access services has two fundamental flaws: (1) in violation of Section
254(c)(1) of the Act it conditions receipt of USF support statutorily limited to
supporting “telecommunications services” on the recipient’s agreement to provide
on “reasonable request” broadband Internet access, a non-telecommunications
“information service” and (2) in violation of Section 254(e), it distributes USF
support to entities that are not telecommunications carriers and provide no
telecommunications services.
In the face of these unambiguous statutory limitations, the FCC states that,
under Section 254 it has previously authorized the use of USF support to build
facilities dually capable of providing telecommunications and broadband services.
But the agency’s own order merely authorizing the use of USF support to build
dual capability facilities self-evidently cannot establish a mandate for using USF
support to provide unsupported information services, much less give it power to
distribute USF to entities who provide no telecommunications services.
The FCC also claims Section 7062 authority to impose its broadband
condition, but that provision, as the FCC itself previously held, grants no
substantive authority; by its express terms it simply authorizes the Commission to
2 1996 Act, Pub. L. No. 104-104, Title VII, §706(a), 110 Stat. 56, 153 (1996).
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“encourage” broadband deployment and to “remove barriers” to infrastructure
development. Even assuming some ambiguity in that Section, the FCC’s reversal
of its earlier longstanding Section 706 interpretation reduces any deference its new
interpretation might otherwise be due and its rationale in any event unreasonably
interprets Section 706(b)’s general directive to reduce barriers to broadband
deployment to override Section 254’s explicit provisions limiting USF support to
ETCs and limiting supported services to telecommunications services.
2.
Carriers providing voice services in costly-to-serve areas historically
received USF support through several mechanisms. The Order either caps, reduces
or eliminates these mechanisms, while also reducing ICC revenues: (1) without
quantifying whether carriers can then fulfill the statutory universal service
mandate; and (2) while simultaneously requiring these carriers to fulfill a new
obligation to provide broadband services, the cost of which the FCC admittedly
does not know.
3.
Section 254 of the Act directs that any federal USF program: (1) allow
customers in high-cost areas to receive services reasonably comparable to other
Americans at reasonably comparable rates, (2) ensure that carriers’ USF support is
“sufficient” to this task, (3) assure that carriers making investments to serve high-
cost areas will receive a “predictable” level of support, and (4) meet standards of
equity. The Commission never analyzed whether its USF support cuts and caps
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would in fact leave rural carriers able to carry out the universal service mandate by
providing “sufficient” support to ensure delivery of reasonably comparable
services at reasonably comparable rates. Nor did it attempt to determine the added
cost of meeting new broadband “conditions.” In short, the agency simply does not
and cannot know whether the reduced support under its revised USF mechanism
meets its statutory obligations. Its regression rule for limiting support levels
compounds the error by rendering wholly unpredictable even the reduced USF
support levels available to rural carriers for their expanded obligations.
4.
The Order utilizes auctions to distribute USF support, which may go
to non-telecommunications carriers. But Section 214(e) provides that only ETCs
may receive USF support and that, with narrow exceptions, only states may
designate ETCs and their service areas. The Order, therefore, unlawfully usurps
the states’ delegated role to decide who would receive universal service support
and where supported services should be provided.
5.
The Order’s reduction in USF support in areas with what it termed
“artificially low end user rates” has the de facto effect of setting local rates. Since
local rate setting is exclusively the province of state commissions under the Act,
the Order unlawfully usurps state authority. The Order’s perverse result is that to
avoid depriving rural carriers of needed USF support, states must raise some local
rates above levels they would have deemed reasonable. This support reduction also
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arbitrarily ignores that (1) the services at issue may not be comparable (e.g., the
local calling area covered by the “low” basic service rate may be much smaller
than that in urban areas) and (2) these rates may have been kept low by state funds,
placing no burden on the federal USF fund.
6.
Carriers subject to the Commission’s rate jurisdiction, while not
guaranteed recovery, are guaranteed a reasonable opportunity to recover their
prudently incurred investments and related operating expenses. The same USF
support caps, reductions and eliminations that violate Section 254 also deprive
rural carriers of this right. Universal service support mechanisms are intended to
ensure rural consumers can obtain services that would otherwise be far too costly if
they bore “full freight.” If carrier USF support used to maintain affordable rates is
cut or carriers' costs are increased by an expanded broadband obligation, these
carriers have, by definition, been deprived of a reasonable opportunity to recover
these costs. That carriers may seek a waiver is irrelevant since waiver mechanisms
cannot salvage an unlawful or arbitrary rule (even assuming the waiver provisions
were reasonable, which they are not).
7.
The USF support reductions also operate retroactively to deny rural
carriers recovery of costs that were previously incurred under, and actually
required or encouraged by, then-effective federal rules and policy. Absent clear
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Congressional intent to bestow such power on the agency, however, impairment of
investments made in reliance on prior regulatory policies is arbitrary.
8.
Evidence below indicated that use of competitive bidding to allocate
USF to rural price cap carriers would reduce service quality because carriers would
only bid to meet FCC minimum standards inadequate to protect service reliability
or ensure system upgradability. The agency’s failure to address arguments that its
auction mechanism would harm, not promote, universal service was arbitrary.
Equally arbitrary was the agency’s dismissal of concerns that the auction would
unduly favor large carriers. Its assertion that a well-designed auction would
address that problem is not subject to meaningful review since the Order contains
no auction mechanism.
9.
The FCC arbitrarily denies any high cost support in the areas with the
highest cost to serve, saying that it has a limited budget and promising only the
possibility of a Remote Areas Fund it has yet to design. But the agency failed to
consider reasonable alternatives presented on the record, and its decision denying
high cost support to the highest cost areas is inconsistent with the agency’s
statutory obligation and the very objective of universal service.
10.
The Order’s directive that RLEC high cost support be phased out
where unsubsidized competitors serve the same area is unsupported by substantial
evidence. It ignores that unsubsidized competitors can “take or leave” each
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customer as they choose – they have no obligation either to continue providing
voice or broadband service to existing customers or to serve new ones, much less
any obligation to provide services that are reasonably comparable in quality and
price to those enjoyed by urban consumers.
11.
Section 254(c)(1) requires the FCC to consider four specific factors in
establishing its definition of supported telecommunications services. Other than
passing references to three of these, however, the Order arbitrarily fails to discuss
how its new “voice telephony service” definition considers any of these factors.
12.
The Order limits “incremental” USF support to areas with no current
broadband services. Several states argued that this limitation would hamper their
own plans for broadband deployment, which their carriers have begun to
implement. The FCC’s failure to address their objection was arbitrary.
13.
Key provisions in the Order (1) implementing the ARC, (2)
eliminating the price adjustment mechanism for exogenous events, (3) limiting its
right of first refusal to price cap carriers and (4) establishing a dual process for
revenue recovery for bill and keep for price cap carriers and rate-of-return carriers
were not included in the proposed rule that preceded the Order. Because these
aspects of the Order were not the “logical outgrowth” of the proposed rule,
petitioners were deprived of the reasonable notice and opportunity to comment
required by Section 553 of Administrative Procedure Act.
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ARGUMENT

I.

THE COMMISSION’S BROADBAND CONDITION EXCEEDED ITS
SECTION 254 AUTHORITY.

A central feature of the Order is the condition placed on USF support
recipients, that they provide broadband Internet access to consumers on reasonable
request. The Commission’s continued classification of broadband Internet access
service as an “information service”3 is fatal to this broadband condition in two
respects. First, the Act expressly provides that USF support is to go exclusively to
telecommunications carriers for the purpose of providing “telecommunications
services.”4 But the Order unlawfully gives USF support to entities that are not
telecommunications carriers to provide non-telecommunications services.
Second, the statute also expressly dictates that supported services are limited to an
“evolving level of telecommunications services.” But the Order unlawfully
3 The Commission construes Internet access to be an "information service" under
the Act. When Internet access is combined with a broadband telecommunications
capability, the Commission treats the entire bundled service as an “information
service” exempt from the common carrier obligations associated with
“telecommunications service.” Time Warner Telecomm., Inc. v. FCC, 507 F.3d
205, 214 (3d Cir. 2007). The distinctions between these services are discussed
infra.
4 “Telecommunications service” is “the offering of telecommunications for a fee
directly to the public, or to such classes of users as to be effectively available
directly to the public, regardless of the facilities used.” 47 U.S.C.§153(53).
"Information service" is defined, in relevant part, as the “offering of a capability
for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or
making available information via telecommunications.” 47 U.S.C.§153(24).
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mandates that carriers provide non-supported information services to receive USF
support. These points are discussed in more detail below.

A.

Section 254 Unambiguously Bars The Commission From
Conditioning USF Support On Recipients’ Agreement To Provide
Broadband Internet Access Services.

The range of services eligible for universal service support under the Act is
neither fixed nor infinite. Section 254(c)(1) explicitly defines “universal service”
as “an evolving level of telecommunications services” the Commission is to
establish, “taking into account advances in telecommunications and information
technologies and services.” It requires that in deciding which telecommunications
services should receive Federal universal service support, the FCC “shall consider
the extent to which such telecommunications services” advance several statutory
goals related to (a) protecting “education, public health or public safety,” (b)
whether the services are widely sought by residential customers, (c) whether the
services are being deployed on “public telecommunications networks” and (d) are
consistent with the public interest.” Section 254(c)(1)(A-D). (Emphasis added).
Critical here, and not in dispute, “telecommunications services” are common
carrier services under Title II of the Act, distinct from “information services”
defined in 47 U.S.C. §153(24), and the agency has declined to classify services
such as Voice over Internet Protocol (“VoIP”), as telecommunications services.
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Order, ¶63, ¶954.5 The FCC further concedes that its “determinations that
broadband services may be offered as information services have had the effect of
removing such services from the scope of the explicit reference to ‘universal
service’ in Section 254(c).” Id., ¶71.
Although the FCC acknowledges both that Section 254(c) gives it “express
authority to support telecommunications services we have designated as eligible
for support,” Order, ¶62, and that it has declined to “add broadband to the list of
supported services,” id., ¶65, it finds that consumers are increasingly obtaining
voice services, not by using supported telecommunications services, but through
services like VoIP. Id., ¶63. “[I]n this context,” the FCC concludes, its “authority
to promote universal service … does not depend on whether VoIP services are
telecommunications services or information services.” Id.6 And, based on this
conclusion, it lumps supported telecommunications services with VoIP to create a
new “voice telephony service” classification (id., ¶62) and orders USF recipients to
5 What the FCC calls “interconnected VoIP services” allows real-time voice calls
utilizing “packet-switched” broadband networks interconnected to traditional
public switched telephone networks. Id., ¶63.
6 Tellingly, the Commission earlier recognized that “[i]f [it] were to classify
interconnected VoIP as a telecommunications service, this would enable the
Commission to support networks used to provide interconnected VoIP including
broadband networks.” Connect America Fund, 26 F.C.C.R. 4554, ¶73 (2011)
(“NPRM).
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provide bundled broadband Internet access, an information service, “on reasonable
request” as a condition of continued USF support. Id., ¶¶26, 1090.
The short answer to the agency’s position is that Section 254(c)(1)’s limits
are unambiguous and deny the FCC the authority it claims. Having declined to
define broadband Internet access or VoIP as telecommunications services,7 the
Commission is not then empowered to include them on the list of supported
services simply because advancing the availability of broadband is a desirable
goal. “Regardless of how serious the problem an administrative agency seeks to
address, however, it may not exercise its authority ‘in a manner that is inconsistent
with the administrative structure that Congress enacted into law.”’ FDA v. Brown
& Williamson Tobacco Corp., 529 U.S. 120, 125 (2000) (rejecting argument that
7 The Commission’s constraint is largely of its own making. Its determination that
bundled broadband internet access is an “information service,” not a
“telecommunications service” was upheld as a permissible choice under Chevron.
See Nat’l Cable & Telecomm. Ass’n v. Brand X Internet Servs., Inc., 545 U.S. 967
(2005); Time Warner Telecomm., Inc. v. FCC, supra. Indeed, Time Warner upheld
the agency's reversal of its prior interpretation that would have treated the
telecommunications component of broadband internet access as a
telecommunications service. Commission adherence to that interpretation not only
undermines its broadband condition, but classifying bundled broadband Internet
access and VoIP as federal “information services” may preempt state treatment of
the bundled transmission component as an intrastate telecommunications service
for purposes of state universal service funds.
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the well-recognized health dangers of tobacco could give the FDA power to
regulate it as a drug).
Any doubt on this score is dispelled by subsection (3) of Section 254(c).
Assuming Chevron applies (see fn.1, supra), in applying Chevron to ascertain
whether a statute is ambiguous (and thus whether the agency’s interpretation is
entitled to deference), courts first employ the traditional tools of judicial
interpretation. See General Dynamics Land Sys. v. Cline, 540 U.S. 581, 600
(2004). Section 254(c)(3) states that “[i]n addition to the services included in the
definition of universal service under paragraph (1),” the FCC “may designate
additional services for support mechanisms for schools, libraries and health care
providers” to carry out the purposes of subsection (h) (related to service to schools,
libraries and hospitals). 47 U.S.C. § 254(c)(3) (emphasis added). Interpreting the
term “additional services,” as the FCC has, to mean services in addition to
telecommunications services,8 leads, inescapably, to the conclusion that Section
254(c)(3) creates a limited “schools, libraries and hospitals” exception to the
requirement that USF be used only to support “telecommunications services.”
Under the doctrine of expressio unius est exclusio alterius (“the express mention of
one thing excludes all others”), the inclusion of this authorization in Section
8 See, e.g., Texas Office of Pub. Util. Counsel v. FCC, 183 F.3d 393, 440-41 (5th
Cir. 1999).
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254(c)(3) to support non-telecommunications services in specified circumstances
precludes an interpretation authorizing the FCC to compel use of USF support to
provide broadband Internet access, a non-telecommunication service, in others.
Finally, the Act’s “aspirational language” in Section 254(b)(2)9 that “access
to advanced telecommunications and information services should be provided in
all regions of the Nation,” is a principle governing the FCC’s exercise of powers
granted to it elsewhere in the statute, not “a grant of plenary power overriding
other portions of the Act.”10 It cannot reasonably be construed to grant the
Commission substantive authority to condition the use of USF support on the
recipient’s agreement to offer broadband Internet access. Again employing
traditional judicial tools of statutory interpretation, the specific governs the
general. Bloate v. United States, 130 S.Ct. 1345, 1354 (2010). In this case the
explicit limitation in Section 254(c) on using USF support solely to support
telecommunications services overrides any general goal of promoting wider access
to information services contained in Section 254(b).
9 Texas Office of Pub. Util. Counsel, supra, 183 F.3d at 424.
10 Id. at 422.
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B.

Section 254 Expressly Bars The Commission From Providing USF
Support To Entities That Do Not Provide Telecommunications
Services.

A “telecommunications carrier” is defined under the Act as “any provider of
telecommunications services.” 47 U.S.C. §153(51). Section 214(e)(1), in turn,
specifically limits USF support to those telecommunications carriers designated as
“eligible telecommunications carrier[s]” (ETCs) by state commissions under
Section 214. Section 254(e), 47 U.S.C. § 254(e), contains a similar specific
limitation; it provides that only “eligible telecommunications carriers,” i.e, those
telecommunications carriers designated under Section 214, “shall be eligible to
receive specific Federal universal service support.” To ensure that USF support is
limited to telecommunications carriers providing telecommunications service,
Section 254(e) continues, “[a] carrier that receives such support shall use that
support only for the provision, maintenance, and upgrading of facilities and
services for which the support is intended.” These limitations are explicit and
unambiguous.
The Commission’s broadband condition is unlawful because it does not limit
support to telecommunications carriers or require that USF be used for
telecommunications services. Instead, it provides USF support for “voice
telephony service,” Order, ¶¶76-77, which it called “a technically neutral
approach, allowing companies to provision voice service over any platform,
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including the PSTN and IP networks,” and amends 47 C.F.R. §54.101 “to specify
that the functionalities of eligible voice telephony services include voice grade
access to the public switched network or its functional equivalent[.]Order, ¶78
(emphasis added).
While recipients must provide “voice telephony service,” id., ¶62, they are
not required to provide telecommunications service subject to common carrier
regulation under Title II of the Communications Act. Instead, a recipient may
provide voice telephony service as VoIP, which the FCC has declined to classify as
a telecommunications service, although, under § 153(51), an ETC remains a
telecommunications carrier “only to the extent that it is engaged in providing
telecommunications services.”
Because Congress made plain in Sections 214(e)(1) and 254(e) that only
carriers providing telecommunications services are eligible for USF support and
because the Order authorizes non-telecommunications carriers to use USF support
for unregulated information services, the Order violates the statute. And because
the Act makes these limitations plain, the FCC’s contrary interpretation is not
entitled to deference under Chevron. Via Christi Med. Ctr. v. Leavitt, 509 F.3d
1259, 1271 (10th Cir. 2007).
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C.

There Is No Statutory Ambiguity Entitling The Commission’s
New Interpretations Of Its Authority To Chevron

Deference.

The FCC claimed it had statutory authority to impose its broadband
condition, notwithstanding the provisions discussed in the previous sections,
because of supposed ambiguities in the Act, which it interpreted to authorize it to
direct USF support to non-telecommunications services and to compel recipients to
provide non-telecommunications services.
This Court should approach the FCC’s newfound claims that it has such
authority with some skepticism. The FCC’s USF restructuring efforts foundered
for over a decade,11 with no suggestion during that time that it could impose
broadband conditions. It was not until issuance of the National Broadband Plan in
2010 that the FCC staff first proposed using “comprehensive reform” of USF to
promote broadband deployment. 2010 WL 972375, at *117. That Plan was issued
in response to provisions of the American Recovery and Reinvestment Act of 2009
(“ARRA”), see Prelim. Brief at 21, but ARRA itself gives the FCC no power to
use USF support for broadband deployment. Tellingly, even after the Broadband
Plan’s release, the FCC’s Chairman acknowledged before Congress that Comcast
Corp. v. FCC, 600 F.3d 642, 644-47, 651-61 (D.C. Cir. 2010), cast “serious doubt”
11 See, e.g., Qwest Commc’ns Int’l v FCC, 258 F.3d 1191, 1200 (10th Cir. 2001)
(“Qwest I”);Qwest Commc’ns Int’l v FCC, 398 F.3d 1222, 1234 (10th Cir. 2005)
(“Qwest II”).
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on the FCC’s ability to implement the staff’s Broadband Plan
recommendations. Reviewing the National Broadband Plan: Hearing before the
Senate Comm. on Commerce, Science, and Transportation, 111th Cong. 44, 49, 50,
69, 73, 95 (2010).
The FCC seeks to spin ambiguity out of references to “facilities” in Section
254(e) and to “removing barriers to infrastructure development” in Section 706(b)
that would give it Chevron cover to impose the broadband mandate. The FCC,
however, seeks to rely not on Section 254(e), but on its own, unreviewed prior
decisions authorizing use of USF for building facilities dually capable of providing
telecommunications and broadband services, as a bootstrap to support a broadband
service mandate. And its new Section 706 interpretation not only departs from its
long-held opposite view, but flies in the face of unambiguous statutory text.
1.

The Commission cannot bootstrap its prior order
authorizing carriers to use USF to build dual use facilities
capable of supporting broadband as justification to
mandate that USF recipients offer broadband information
services.

The linchpin of the FCC’s argument that Section 254 supports its broadband
Internet access condition is that the statute allows it to support not only “voice
telephony service” but also “the facilities over which it is offered.” Order, ¶64
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(emphasis added).12 Specifically, the FCC relies on Section 254(c), which states
that “[a] carrier that receives such [universal service] support shall use that support
only for the provision, maintenance, and upgrading of facilities and services for
which the support is intended.” 47 U.S.C. §254(c) (emphasis added). Reading the
statute’s use of the terms “facilities” and “services” as distinct items for which
federal USF may be used, it concludes that Congress granted it flexibility not only
to designate the types of telecommunications services for which support would be
provided, but also to encourage the deployment of the types of facilities to best
achieve the universal service principles it adopted. Id.
In support of this new interpretation, the FCC engages in pure bootstrapping,
citing its own prior order holding that USF recipients can use their funding to
deploy facilities dually “capable of providing access to advanced services’ as well
as supported voice services.” Order, ¶64 (citing Federal-State Joint Board on
Universal Service, 16 F.C.C. R. 11244, 11322, ¶200 (2001)). From the conclusion
that carriers may use USF support for dual capability facilities, the agency leaps to
the conclusion that it can “require carriers receiving federal universal service
12 To this end, the FCC adopted a new rule restating the Section 254(e) restriction
that support be used “only for … facilities and services for which the support is
intended,” but added that support can be used for “investments in plant that
can…provide access to advanced telecommunications and information services.
Id. Appendix A (Section 54.77).
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support to invest in modern broadband-capable networks” Order, ¶65 (emphasis
added), apparently independent of whether the recipients have to use these
facilities to offer supported telecommunications services. The Order cannot
plausibly carry the statutory weight the FCC asks it to bear.
It is one thing to suggest, as the FCC has previously, that recipients can use
USF support to build facilities dually capable of delivering broadband Internet
access and supported telecommunications services. The statute, after all, defines
“telecommunications services” in terms of functions performed, not the technology
used to perform them, so the FCC may permit a telecommunications carrier to use
USF support to install and operate broadband facilities that it uses to provide
services properly classified as telecommunications services under Title II. It is
quite another thing, however, and preposterous at that, to suggest that the recipient
either need not use USF for telecommunications services at all or can be forced to
use USF to provide non-telecommunications services.
The FCC’s strained interpretation of Section 254(c) ignores that “facilities
and services” is modified by the clause “for which the support is intended.” USF
support is expressly intended for an “evolving level of telecommunications
services that the Commission shall establish periodically under this section, taking
into account advances in telecommunications and information technologies and
services.” Tellingly, the Commission itself notes that it defines “facilities” as “any
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physical components of the telecommunications network that are used in the
transmission or routing of services that are designated for support.” Order, ¶64
n.69 (emphasis added). Yet the FCC has classified broadband Internet access
service as an information service, which does not fall within the class of “services
that are designated for support.”
To the extent the Commission seeks refuge in the notion that it is only
allowing use of USF for broadband-capable facilities, but is not ordering recipients
to provide unsupported services, the Order cannot plausibly support that claim.
The Order goes far beyond designating the facilities for which the support is
intended. It requires USF recipients to offer broadband Internet access “on
reasonable request,” Order, ¶¶26, 1090, essentially forcing them to offer an
information service as a common carrier service, even though the agency has
asserted, successfully, that bundled broadband Internet access is an information
service, so entities providing it do not have to offer it to all comers. Time Warner
Telecomm., Inc., supra, 507 F.3d at 213-15; Nat’l Cable & Telecomm. Ass’n v.
Brand X Internet Servs., 545 U.S. 967 (2005).13 This is a classic example of an
agency attempting improperly to do indirectly (through its broadband condition)
13 The common carrier-like obligations imposed on USF recipients go beyond
offering broadband Internet service on reasonable request; they are also required to
offer the service at reasonably comparable rates and to meet performance
standards. Order, ¶86.
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what it cannot do directly. New England Legal Found. v. Mass. Port Auth., 883 F.
2d 157, 174 (1st Cir. 1989).
The FCC’s legal authority under Section 254 is limited to supporting
telecommunications services. In funding facilities used to provide supported
services, the Commission may well thereby promote the deployment of broadband
capabilities used in providing telecommunications services. But only a rewrite by
Congress could allow the FCC to divert the federal USF from promoting the
universal availability of telecommunications services to supporting a non-common
carrier information service that is not even included within the definition of
universal service.
2.

As the FCC itself previously held, Section 706 is not an
independent grant of agency authority to impose a
broadband condition.

Two years after passage of the Act, in what the D.C. Circuit recently found
was a “still-binding order,” the Commission “ruled that Section 706 ‘does not
constitute an independent grant of authority.’” Comcast Corp. v. FCC, supra, 600
F.3d at 658 (quoting In re Deployment of Wireline Servs. Offering Advanced
Telecomms. Capability, 13 F.C.C.R. 24,012, 24,047, ¶77 (1998)) (“Wireline
Deployment Order”). The Order finds just the opposite, declaring, over
Commissioner McDowell’s dissent, that Section 706 is “independent authority
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…to fund the deployment of broadband networks.” Order, ¶66.14 Conceding that
Section 706(a) (which imposes only a general duty on the FCC to “encourage,” not
mandate, broadband development) gives it no such authority, Order, ¶70, the FCC
claims to find shelter in Section 706(b).
“[W]e read Section 706(b),” it stated, “as conferring on the Commission the
additional authority, beyond what the Commission possesses under Section 706(a)
or elsewhere in the Act.” Id. Subsection (b), it added, would be redundant “if it is
not an independent source of statutory authority.” Id.
Subsection (b), however, is not redundant at all, a conclusion that follows
directly from the language of the Act. The Order properly recognized that
subsection (a) “imposes a general duty,” id., without mandating any specific
action. Subsection (b) mandates “immediate action” if the FCC reaches a negative
determination on “whether advanced telecommunications capability is being
deployed to all Americans in a reasonable and timely fashion.” Subsection (b)
14 The Commission’s reversal of position was presaged by a more limited ruling in
December, 2010 in which it first announced reversal of its long-held view. In
Preserving the Open Internet Broadband Industry Practices
, GN Docket No. 09-
191 (rel. Dec. 23, 2010), review pending sub nom Verizon v. FCC, No.11-1355
(filed D.C. Cir. Sept. 30, 2011), it declared that, while bounded by the canon of
construction that the specific governs the general, Section 706 did give it a
specific, albeit “not unfettered” affirmative grant of authority to “encourage the
deployment of advanced services” under subsection (a) (id., ¶¶118-21) and a
similar affirmative grant under subsection (b) to take actions to accelerate
broadband deployment by removing barriers to its development. Id., ¶123.
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describes that action as “removing barriers to infrastructure investment and …
promoting competition in the telecommunications market.”
This language tells the FCC to put the powers it has to “immediate action”
but does not purport to grant any new powers. There are many “barriers to
infrastructure investment,” including those imposed by securities and banking
regulators, but subsection (b) confers no power to remove them. Likewise, there
are many ways of “promoting competition in the telecommunications market,” but
subsection (b) on its face adds nothing to the powers conferred elsewhere in the
Act. Subsection (b) actually specifies the ways that the FCC is to consider to
promote broadband deployment, i.e., “price cap regulation, regulatory forbearance,
measures that promote competition in the local telecommunications market, or
other regulating methods that remove barriers to infrastructure investment.” All of
the means expressly provided were within the agency’s powers when the section
was enacted in 1996. There is no mention of expanding the USF to include support
for broadband information services.
One further point underscores the fallacy in the Commission’s interpretation.
Section 706 was part of the public law that became the 1996 Act, 15 but it was not
codified until 2008 as 47 U.S.C. §1302 under the Broadband Data Improvement
15 1996 Act, Pub. L. No. 104-104, Title VII, §706(a), 110 Stat. 56, 153 (1996).
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Act (“BDIA”).16. This history does not make Section 706 fall outside the 1996Act,
but even treating Section 706 as a subsequent and different enactment gets the
agency nowhere.
Section 254 expressly limits the availability of USF support to
telecommunications carriers and defines “telecommunications services” as the only
services eligible for support. To construe Section 706(b) as overriding the Section
254 limitations violates two canons of construction. First, it ignores the canon that
“[a] specific provision [i.e, the limitations in Section 254(c) and (e)] … controls
one[] of more general application [i.e, Section 706(b)].” Bloate, supra, 130 S.Ct.
at 1354. To construe Section 706(b) as overriding Section 254 limitations is also to
imply a partial repeal of the latter. Again, however, employing the traditional tools
of judicial construction to ascertain congressional intent to detect ambiguity,
General Dynamics Land Sys., 540 U.S. at 600, there is none. “The courts [and
agencies] are not at liberty to pick and choose among congressional enactments,
and when two statutes are capable of co-existence, it is the duty of the courts,
absent a clearly expressed congressional intention to the contrary, to regard each as
effective.” Morton v. Mancari, 417 U.S. 535, 551 (1974). There is no such conflict
here, as the agency is free to continue to take actions to remove barriers to
16 Pub. L. No. 110-385, 122 Stat. 4096 (2008).
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deployment of broadband facilities without commandeering USF support for that
purpose.
Even if Section 706 were ambiguous, the same rules of construction that
make the statutory limitations of Section 706 clear also make the Commission’s
contrary interpretation unreasonable under the second prong of Chevron. In other
words, the Commission has given no reason why, having disregarded the ordinary
tools of statutory construction, its revised interpretation should be found
reasonable.
Finally, the Commission suggests that the 2008 Farm Bill and the 2008
BDIA, which bestow no substantive powers on the agency17 and which, by the
FCC’s own account simply “reaffirmed [Congress’s] strong interest in ubiquitous
deployment of “broadband communications networks,” somehow provided
additional and independent authority for its new rules. Order, ¶60. The short
answer to this argument is that an agency derives no authority to act simply
because it believes its action in the public interest. Brown & Williamson, supra,
529 U.S. at 161.
17 The Senate Report’s Section-by-Section Analysis of Section 6(k) of the BDIA,
for example, states that it “does not grant public or private entities established or
affected by this Act any regulatory jurisdiction or oversight authority over
providers of broadband services or information technology.” S. Rep. 110-204 at
1717.
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II.

THE COMMISSION’S USF CUTBACKS ARBITRARILY
DISREGARDED MANDATORY CRITERIA.

A central feature of the Order is the requirement that rural
telecommunications providers long dependent on universal service funds to
provide basic voice services at affordable prices in high-cost areas now must also
offer broadband Internet access to all comers “on reasonable request” or lose their
access to those critical funds. Order , ¶¶26, 208, 589. Not only is the condition
unlawful (as shown in Section I.A, supra), but the FCC’s “reforms” impose this
additional mandate in the face of a net reduction to USF and related intercarrier
compensation revenues for rural carriers. This “do more with less” directive flies in
the face of Congress’s interrelated requirements under Section 254(b) that the FCC
use USF to keep quality service “affordable,” that consumers in high cost areas
receive services comparable to those available to their urban counterparts at
“reasonably comparable” rates, that USF support mechanisms be “predictable and
sufficient” to preserve and advance universal service, and that telecommunications
service providers contribute equitably to achieve that objective. 47 U.S.C.
§§254(b)(1),(3),(5). As this Court has held, and as the FCC has effectively
acknowledged, the inherent difficulty of carrying out these mandates does not
relieve the agency of the obligation to try; it must “take[ ] into account the full
range of principles.” Qwest II, supra, 398 F.3d at 1234. “[T]he FCC may exercise
its discretion to balance the [universal service] principles against one another when
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they conflict, but may not depart from them altogether to achieve some other goal.”
Qwest I, supra, 258 F.3d at 1200.
The Order, however, variously caps, reduces or eliminates high cost support
previously afforded rural carriers in ways discussed in the preliminary brief (pp.
26-31), and reduces their ICC revenues, without ever quantifying the substantial
added cost of satisfying the broadband condition. Whether it is the fixed budget for
support tied to historic levels or the various reductions to specific forms of high
cost support – HCL, LSS, ICLS, or SNA – the FCC’s imposition of all of these
adjustments suffers from the same infirmity. The agency made no attempt to
measure whether reduced support, coupled with the added costs of the broadband
obligation, will allow carriers to meet the universal service objectives of Section
254(b). Qwest II, 398 F.3d at 1237.

A.

The Order

Does Not Ensure USF Support Sufficient To Preserve
And Advance Universal Service.

At the heart of Section 254(b) is the requirement that USF provide
“sufficient” support to achieve Congress’s goals. Congress considered this
important enough to include “sufficient” support as a “direct statutory command”
in Section 254(e). Texas Office of Pub. Util. Counsel, supra, 183 F.3d at 412. The
FCC failed to heed this command. Its attempted justification of its fixed budget
simply ignored whether the resulting support would be sufficient to meet the
statutory goals; instead, it explained that the cap served to “address long-standing
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inefficiencies and wasteful spending.” Order, ¶125. It similarly reasoned that other
“limits on recovery,” such as HCLS, would provide “incentives for carriers to
invest prudently and operate efficiently.” Id., ¶219. These reforms, it stated, would
“eliminat[e] inefficiencies and clos[e] gaps in our system, not [make]
indiscriminate industry-wide reductions.” Id., ¶287. The flaws in this explanation
are multifold.
The overarching problem is that the Commission improperly limited its
analysis to whether, without reform, USF support would be excessive. Id., ¶194
n.315 (emphasis added). Certainly, consideration of sufficiency “includes the
decision … to avoid excessive expenditures[.]” Alenco Commc’ns, Inc. v FCC, 201
F.3d 608, 620 (5th Cir. 2000) (emphasis supplied). But Section 254’s sufficiency
test must also consider whether too little support is being provided. The Act, in
other words, intended “a reasonable balance between the Commission’s mandate to
ensure sufficient support for universal service and the need to combat wasteful
spending.” Id. The FCC, irrationally, only considered one side of this equation.
The Order leaves unanalyzed whether reduced USF support will be
sufficient to preserve and enhance traditional voice services. It claims support
reductions will “root[] out inefficiencies[,]” Order, ¶289, but has shown no
correlation, much less a direct relationship, between its Order and the alleged
inefficiencies it seeks to root out. Instead, even if some carriers were inefficient,
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the cuts fall indiscriminately on most high-cost carriers, untethered to evidence that
any particular company’s support level was actually due to inefficiency rather than
the intrinsically high cost of serving particular areas.
Compounding this error, the FCC disregards the substantial additional costs
of complying with the new obligation that, to receive USF support, rural carriers
must provide minimum broadband capability of 4 Mbps download and 1 Mbps
upload speeds (i.e. “4/1”). See, e.g., id., ¶206. Yet NTCA estimates that in 2010
more than 75% of its rural carrier members provided Internet access service at
speeds of only 1.5 to 3.0 Mbps down. NPRM, ¶170. Since these services mostly
utilize DSL technology, which cannot reach the mandated speeds over longer rural
loops, NTCA members must make significant new investments to satisfy the
broadband condition. Even assuming arguendo that USF cutbacks were justified
by inefficiencies in delivering voice services, the Order makes no effort to quantify
whether the resulting USF support can cover the “efficient” cost of providing voice
service plus the added cost of satisfying the broadband mandate. That failure of
analysis alone is fatal. Qwest II, 398 F.3d at 1235.
The FCC’s further justifications that only 10 %of support recipients will see
their support drop by more than 20%, id., ¶290, and that adversely affected carriers
can seek waiver, Order, ¶293, do nothing to demonstrate that those recipients will
receive “sufficient” support in the future. The Act “does not say ‘a little
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unlawfulness is permitted,’” FPC v. Texaco, Inc., 417 U.S. 380, 399 (1974), nor
can a waiver justify an otherwise unreasonable rule. Home Box Office, Inc. v. FCC,
567 F.2d 9, 50-51 (D.C. Cir. 1977).
Finally, even where the agency recognized that the overhead expense
component of its HCLS cost formula was outdated, did not reflect the “ongoing
evolution of the voice network into a broadband network[,]” and should be revised
to reflect more recent cost data, Order, ¶230, it incongruously used only voice
services cost data to update this formula. Its conclusion thus reflected an arbitrary
disconnect between the facts found and the choice made by the agency. Burlington
Truck Lines, Inc. v. United States, 371 U.S. 156, 168 (1962).
In short, the FCC has failed even to address, much less quantify or explain,
how its decision would provide support needed both to preserve and advance
universal service.

B.

The Order

Does Not Ensure Service And Rate Comparability
Between Rural And Urban Areas.

The Commission acknowledges it has not investigated what broadband
service or rate levels are offered in either rural or urban areas. Order, ¶113. This
information gap is a critical flaw; the Commission cannot possibly confirm that its
policies enable rural carriers to provide broadband service “at rates reasonably
comparable to rates charged for similar services in urban areas,” Section 254(b)(3),
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if it has failed to determine the urban rate and service levels to which rural rates
and service are to be compared.
This is more than an academic concern. As previously noted, rural carriers
will have to make significant new investments to satisfy the broadband condition.
But, because they do not know – nor does the FCC – at what speeds or rates their
urban counterparts offer broadband, the FCC, by definition, cannot know what
level of USF support is needed to give Section 254(b)(3) effect. Qwest II, 398 F.3d
at 1237.

C.

The Order

s

Establishment Of A Budget Cap Without Widening
The Contribution Base Neither Protects Affordability Nor
Ensures Equitable Fund Contributions.

The FCC maintains that capping the USF budget promotes “affordability”
under Section 254(b)(1) by “ensur[ing] that individual consumers will not pay
more in contributions due to the reforms we adopt today.” Order, ¶124. Without
widening the contribution base, however, a budget cap will do nothing to ensure
affordability. It is a truism, but utterly irrelevant, that consumers, in total, “will not
pay more in contributions” with a fixed budget cap. The problem is that
telecommunications voice revenues are declining. USF Contribution Further
Notice of Proposed Rulemaking, WC Docket No. 06-122, 27 F.C.C. R. 5357, ¶20
(2012)(“Contribution FNPRM”). Even a fixed budget will have to be recovered
from fewer customers, whose individual charges will go up (become less
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affordable), unless the contribution base is widened. In rejecting or deferring
proposals to do that, the FCC not only failed in its responsibility to adopt a
universal service mechanism that would preserve affordability, but ignored its
responsibilities under Section 254(b)(4) as well.
Section 254(b)(4) demands that telecommunications providers contribute
equitably to universal service support. Assuming arguendo that the Commission
has authority to mandate that universal service funds be used to support
broadband,18 it is inequitable to exempt telecommunications providers who also
offer broadband from being required to contribute to universal service from the
revenues they receive for such services, particularly since rural carriers assuming a
broadband obligation will incur added costs. Limiting the contribution base in the
face of added broadband costs would harm, not promote affordability.
It is no answer to this concern, moreover, that the Commission promised to
decide at some unspecified future date in another proceeding whether to expand its
contribution base.19 Its “we’ll deal with it later” approach ignores comments that
this issue could not logically be dealt with later. Imposing broadband obligations
on ETCs while delaying consideration of additional contribution sources to fund
18 As discussed in Section I, supra, the Commission lacks that authority.
19 See Contribution FNPRM.
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the added costs of that obligation (and to keep contribution levels of individual
customers affordable), as the Montana Public Service Commission put it, was
“incomprehensible.” (Montana PSC Reply Comments, WC Docket No. 10-90 et
al., at 6 (filed May 23, 2011). See also Comments of RICA, WC Docket No. 10-
90, et al., 7-8 (filed Apr. 18, 2001), and Google, WC Docket No. 10-90, et al., at
27 (filed Aug. 24, 2011). “While there may well be circumstances where a
particular objection is more properly deferred to a later proceeding, that is
assuredly not the case where the objection goes to the heart of the public interest
determination immediately to be made.” Maryland Peoples’ Counsel v. FERC, 761
F.2d 768, 778 (D.C. Cir. 1985) (internal citation omitted).

D.

The Agency’s “Regression Rule” Is Vague And Unbounded, And
Thus Violates Section 254’s predictability criterion.

The Section 254(b)(5) mandate that universal service support be
“predictable” is intended to promote investment in networks that provide services
supported by universal service policies, Order, ¶858, ensuring that consumers have
access to affordable supported services. The mandate, as this Court has held, is one
the agency is not free to ignore. Qwest I, supra, 258 F.3d at 1199-1200. The
Order’s regression rule, however, contravenes this mandate in three respects: (1) it
delegates authority to devise a rule limiting USF support to its Wireline
Competition Bureau (“WCB”) in violation of its own rules and then compounds
the uncertainty thereby created by (2) leaving the WCB unbounded discretion to
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devise the rule and subsequently (3) to revise it without abiding by APA notice and
comment procedures.
“Agencies are under an obligation to follow their own regulations,
procedures, and precedents, or provide a rational explanation for their departures.”
Colorado Springs. v. Solis, 589 F.3d 1121, 1132 (10th Cir. 2009). In this case,
however, the Commission has delegated to the WCB the authority to finalize the
methodology for setting USF reimbursements. Since WCB’s actions will have
general applicability and future effect they amount to a rulemaking, 5 U.S.C.
§551(4). The delegation, therefore, is in violation of 47 C.F.R. §0.291(2)(e), which
expressly prohibits rulemaking by the WCB.
The FCC does not even acknowledge the impropriety of its delegation and
the resulting dubious validity of the WCB process creates substantial uncertainty
about the applicability of any future regression rule it may produce.
This predictability problem is compounded by the nature of the delegation
itself. The formula for determining the interstate expense adjustment is spelled out
in detail, 47 C.F.R. §36.631, but the new rule states, in its entirety, that “[s]tudy
area unseparated loop cost may be limited annually pursuant to a schedule
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announced by the Wireline Competition Bureau.” 47 C.F.R. §36.621(a)(5).20 The
WCB is given no substantive limitation on how it is to adjust support amounts,
what procedures to use, or how companies are expected to know what the
limitations will be before they are adopted and implemented. It is instructed to
develop mathematical formulas for maximum allowable costs using coefficients
that will be recalculated frequently, resulting in unpredictable changes in the
results of the computations. Under this vague rule, a carrier simply cannot know
from year to year which investment or expenses will be supported and which will
not. As a consequence, a carrier is at a loss as to how to make business plans for
the future.21 The Commission’s response to this objection is that USF caps
imposed under the prior rules likewise created some uncertainty. Order, ¶220.
Putting aside the far greater uncertainty the new rule poses, this amounts to the
defense that “two wrongs make a right.”
Finally, the Order exacerbates unpredictability by allowing WCB to modify
its regression methodology annually (47 C.F.R. §36.621(a)(5)) – effectively to
20
The WCB published its first annual exclusions pursuant to the “regression
rule” in Connect America Fund, WC Docket No. 10-90, DA 12-646 (WCB, rel.
Apr. 25, 2012) (“Benchmark Order”), application for rev. pending.
21
Petitioners recognize WCB’s implementation methods are under FCC
review. What is at issue here is the rule itself and its conformity to section 254’s
“predictability” principle.
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change the regression rule itself, without following the notice and comment
procedures required for proposed rule changes under the APA. See, e.g., U.S.
Telecomm. Ass’n v. FCC, 400 F.3d 29, 34 (D.C. Cir. 2005).
Because it is vague, open-ended, and subject to change without required
notice, the regression rule violates the “predictability” prong of Section 254.

III.

THE FCC’S USE OF AUCTIONS TO DISTRIBUTE USF VIOLATES
SECTION 214(e), WHICH LEAVES EXCLUSIVELY TO STATES
DETERMINATION OF WHO SHOULD RECEIVE USF SUPPORT.

Section 214(e) of the Act, 47 U.S.C. §214(e), provides that only ETCs may
receive USF support and that, with narrow exceptions,22 only states may designate
ETCs and their service areas. Once an ETC is designated by a state commission to
serve a particular service area under Section 214(e)(2), it is eligible to receive
funding and must offer and advertise the supported services throughout its service
area. 47 U.S.C. §214(e)(1).
The Order contravenes this express statutory scheme in two respects. First, it
adopted various competitive bidding mechanisms to distribute USF support,
22
There are two limited exceptions to State commission designation of ETCs.
First, for unserved areas where no common carrier will provide supported services,
the FCC may designate an ETC with respect to interstate services. The state
commission would then be responsible for ETC designations only with respect to
intrastate services. 47 U.S.C. §214(e)(3). Second, carriers not subject to a state
commission’s jurisdiction may seek designation as an ETC for a service area
designated by the FCC “in accordance with applicable Federal and State law.” 47
U.S.C. §214(e)(6).
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Preliminary Br. at 27 n.11, 30; Order, ¶¶166, 1189-90, and provided that the
Commission will define the geographic service areas to be auctioned off. Order,
¶179. Second, the FCC created an entirely new “conditional designation,” nowhere
mentioned in the statute, that will require state commissions to conditionally
designate “ETCs” before auctions to distribute Mobility Fund support are
concluded. Order, ¶439. Since Congress expressly gave State commissions the job
of deciding who would receive universal service support and where supported
services would be advertised and provided by the carrier, the use of federal auction
processes to distribute the funds usurps the role expressly reserved to the states.
The conditional designation process is similarly at odds with Section 214(e)
because state commissions will designate “conditional ETCs” that will never
provide supported services. Section 214 unambiguously places the job of
determining which carriers are eligible for universal service funds squarely in the
hands of state commissions. The Commission’s auction process unlawfully strips
them of that role.

IV.

THE DECISION TO REDUCE USF SUPPORT IN AREAS WITH
“ARTIFICIALLY LOW” END USER RATES WAS BOTH
UNLAWFUL AND ARBITRARY.

Putatively to prevent giving support unneeded to keep rural basic residential
rates reasonably comparable to urban ones and hence placing an “undue burden”
on the universal service fund (Order, ¶237), the Order reduces HCL support to
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both rural price cap and rate of return LECs if their basic residential rates are
below benchmark levels of “reasonableness” (Order, ¶235), currently $10.00, but
to be set in the future by nationwide survey. Order, ¶239. Essentially, the Order
establishes an annual national floor on what it termed “artificially low end user
rates,” Order, ¶859, – rates typically regulated by the states. If a carrier’s rates are
set by state regulators below the floor in any given year, there will be an offsetting
reduction of federal USF support. Order, ¶¶234 – 247. Although not directly
setting local rates, that is the de facto effect of the Order. And, since local rate
setting is exclusively the province of state commissions under the Act, 47 U.S.C.
§152(b), the Order unlawfully usurps a power reserved to the states.
The Commission’s interference with state regulation of local rates is a
function of its national benchmark mechanism, which disregards whether “low”
rate levels in particular areas may be reflective of lower costs or small service
areas. The only evidence the FCC apparently relied was data which showed that
“there are a number of carriers with local rates that are significantly lower than
rates that urban consumers pay. Order at ¶235 (footnote omitted). The perverse
result of the Order is that to avoid depriving rural carriers of needed USF support,
states must raise some local rates above levels they would have deemed
reasonable. The coercive effect of Order is to set floors for local rates that should
be determined by the states.
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The “low rate” floor is also arbitrary and capricious in two respects. The
Order fails to give adequate consideration to (1) comments explaining that the
rural and urban basic services at issue may not be comparable (e.g., the rural rates
may be “low” because the local calling areas are much smaller than in urban
areas), Missouri Small Telephone Group Comments at 10, April 18, 2011, and (2)
the fact that rate may have been kept low by state funds, placing no burden on the
federal USF fund.23 The FCC’s rate benchmark will penalize these LECs for
complying with state law. The failure to address these concerns was a fatal defect
in the Order. Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463
U.S. 29, 43 (1983) (“State Farm”).

V.

THE RULES UNLAWFULLY DEPRIVE RURAL CARRIERS OF A
REASONABLE OPPORTUNITY TO RECOVER THEIR
PRUDENTLY-INCURRED COSTS.

“The traditional regulatory notion of the ‘just and reasonable’ rate was
aimed at navigating the straits between gouging utility customers and confiscating
utility property.” Verizon Commc’ns, Inc. v. FCC, 535 U.S. 467, 481 (2002). While
carriers are not guaranteed they will recover their prudently-incurred costs, FPC v.
Hope Natural Gas Co., 320 U.S. 591, 603 (1944), just and reasonable rates set by
23 Comments of Consolidated Communications Holdings, WC Docket No. 10-90 et
al.,
at 14 (filed Aug. 24, 2011). The State of Texas, for example, uses its state-
generated funds to hold down the local rates of small LECs. Texas Utility Code
Annotated, Sec. 56.021.
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the Commission must not deprive them of a reasonable opportunity to do so.
Duquesne Light Co. v. Barasch, 488 U.S. 299, 307-8 (1989). This opportunity
must be afforded regardless of whether carriers are subject to rate of return or price
cap regulation or operate as CLECs. Verizon, supra, 535 U.S. at 486-89.
Universal service policy is intended to protect costly-to-serve rural
consumers from prices that are not reasonably comparable to urban rates for
similar services by spreading cost recovery among all network users. By limiting
support and prohibiting rate increases in other areas, the same rules that deprive
carriers of revenues needed to satisfy the sufficiency, predictability and
comparability standards of Section 254 also deny them the reasonable opportunity
to recover their costs.
That rural carriers cannot recover their costs under the Order is not subject
to serious dispute. As noted earlier, they are required to continue to provide current
services and, at considerable additional expense, to provide broadband service as
well. At the same time, their ICC revenue streams are being narrowed and their
USF support will be capped, reduced or eliminated outright (depending on their
regulatory status).
As an example of this problem, FCC rules currently assign certain “common
line” costs to the interstate jurisdiction for recovery from end users and the
Interstate Common Line Support (“ICLS”) mechanism. 47 C.F.R. §§54.901et seq.
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The Commission’s rules have long limited end user charges, see, e.g., 47 C.F.R.
§69.104, and the Order imposes new limits on ICLS. Order, ¶229. ILECs are thus
required under Commission rules to allocate costs to specific rate elements, and
simultaneously prohibited from recovering those costs from available sources. See
generally, Joint ICC Brief Section II. The Order, therefore, as the evidence shows,
places rural carriers' financial viability at serious risk. See Comments of Rural
Associations, WC Docket No. 10-90 et al., at 35 (filed Apr. 18, 2011); Comments
of CenturyLink, WC Docket No. 10-90 et al., at 19-21 (filed Apr. 18, 2011);
Comments of ITTA, WC Docket No. 10-90 et al., at 8-13 (filed Apr. 18, 2011);
Comments of TDS, WC Docket No. 10-90 et al., at 4-8 (filed Apr. 18, 2011).
It would be one thing if the agency had tied the reductions in USF support to
a determination that the individual carriers had imprudently incurred costs, or that
they were recovering the costs of investments not “used and useful” in delivering
regulated services, or that these costs could somehow be recovered from end users
without violating the statutory universal service principle calling for rural service
rates to be reasonably comparable with those in urban areas. See Petitioners’ Joint
Intercarrier Compensation Brief, Section II. But the FCC made none of these
findings.
Nor is it an answer to rural carriers’ objections that carriers believing
themselves undercompensated for their legitimate costs can seek waiver. Order,
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¶294. An agency can set uniform rates based on average industry costs, providing
those in need of exceptions with “special relief” waivers. Permian Basin Area Rate
Cases, 390 U.S. 747, 764, 770 (1968). But the Order generally places rural carriers
in financial jeopardy and thus cannot be salvaged by a waiver provision. See U.S.
Telecomm. Ass’n v. FCC, 359 F.3d 554, 571 (D.C. Cir. 2004) (“[T]he mere
existence of a safety valve does not cure an irrational rule.”)
Finally, the waiver provision itself does not prevent confiscation even where
the applicant can demonstrate that it will be unable to recover its prudently
incurred expenses. On the contrary, the Order makes waivers available “only in
those circumstances in which the petitioner can demonstrate that the reduction in
existing high-cost support would put consumers at risk of losing voice services,
with no alternative terrestrial providers available ….” Order, ¶540. The
constitutional test is whether the carrier has been afforded a reasonable opportunity
to recover its costs, not whether consumers may be able to obtain service
elsewhere.

VI.

THE RULES HAVE UNLAWFUL RETROACTIVE EFFECTS.

In addition, by limiting recovery of costs lawfully incurred pursuant to
federal and state law before the Order was adopted, the FCC’s regression and SNA
rules violate the strong judicial presumption against retroactive rulemaking. See
Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 208-09 (1988). Absent express
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statutory authorization for an agency to promulgate retroactive rules, fairness
dictates that entities be able to conform their conduct to known law and that settled
expectations not be lightly disrupted. Langraf v. USI Film Products et al, 511 U.S.
244, 265 (1994).
Nothing in Section 254 or elsewhere in the Act gives the FCC express
authority to adopt a regression mechanism that retroactively precludes carriers
from recovering reasonable and prudent capital and operating expenses24 they
previously made to comply with the ETC provisions of Section 214(e) of the Act,
Rural Utilities Service (“RUS”) loan covenants and/or state Carrier of Last Resort
(“COLR”) requirements. See Letter from Rural Utils. Serv. to FCC, WC Docket
No. 10-90, Attachment, at 14 (Aug. 1, 2011). Likewise, the FCC’s retroactive
elimination of SNA for investments made after 2009 destroys the reasonable
expectations and business plans of carriers that applied for and received stimulus
loan-grants from the RUS Broadband Initiatives Program (“BIP”) for construction
to begin in 2010.
24 The federal High Cost Loop Support (“HCLS”) program limited by the
regression model provides federal support for high operating expenses incurred
two years previously and for high depreciation expenses arising from capital
expenditures made two or more years previously. 47 CFR § 36.611 requires
carriers to report to NECA on July 31st of each year their cost data as of the
preceding December 31st. That data is the basis for support received beginning the
following January 1st, meaning there is as much as two years between expenditure
and recovery.
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The regression and SNA rules violate the presumption against retroactive
rulemaking because each “takes away or impairs vested rights” or “attaches new
legal consequences to events completed before its enactment.” Arkema, Inc. v.
EPA, 618 F.3d 1, 16 (D.C. Cir. 2010). However, even if reasonable and prudent
expenditures made pursuant to federal and state law are not deemed to entail a
vested right to federal support, they render the regression and SNA rules invalid as
arbitrary and capricious under the “secondary retroactivity” standard discussed in
Bowen because they “alter[] future regulation in a manner that makes worthless
substantial past investment incurred in reliance upon the prior rule.” Bowen, supra,
488 U.S. at 220 (Scalia, concurring). See also, Direct TV, Inc. v. FCC, 110 F.3d
816, 826 (D.C. Cir, 1997).
Secondary retroactivity is inconsistent with reasoned decision making; the
FCC may not abruptly change direction from its previous rules, policies and/or
pronouncements without providing a reasoned explanation for the change. State
Farm, supra, 463 U.S. at 42. In the case of HCLS support, the FCC has been
allowing interstate access tariffs to become effective and providing high-cost
support for many years25 without questioning the reasonable and prudent nature of
25 The HCLS was established in 1997 during the implementation of the 1996 Act
and was substantially similar to the Universal Service Fund established during the
1980s.
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the investments and expenses upon which they were based. The FCC has not
reasonably explained why, suddenly in 2012, the pre-2011 capital expenditures
and/or 2010 operating expenses of approximately 10% of rate-of-return RLECs are
no longer reasonable and prudent. The Order made no attempt to consider whether
these prior investments and expenses were reasonable and prudent responses to
investment cycles, customer needs, terrain, climate and other factors that affect
costs. Likewise, the Order made no attempt to explain why a program intended to
provide additional support for carriers making substantial network upgrades should
be terminated just before carriers that relied upon SNA support when participating
in the BIP program would become eligible for SNA support.

VII. THE COMMISSION DISREGARDED EVIDENCE THAT

ALLOCATING USF TO RURAL PRICE CAP CARRIERS BY
COMPETITIVE BIDDING WOULD REDUCE SERVICE QUALITY
BECAUSE CARRIERS WOULD BID ONLY TO MEET FCC
MINIMUM QUALITY STANDARDS INADEQUATE TO ENSURE
SYSTEM UPGRADEABILITY.

Following a five year phase out period, 26 USF support to any provider in
price cap study areas will be awarded by competitive bidding. Order, ¶179. In
adopting an auction mechanism, the FCC has arbitrarily either ignored entirely or
26
Prior to the phase out, price cap carriers have a “right of first refusal” to USF
support that would exclude competing ETCs, the reasonableness of which is an
issue addressed in Additional Universal Service Fund Issues Principal Brief to be
filed October 23, 2012. See also Section XII, infra.
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failed adequately to address arguments and evidence that the auction approach
would result in a “race to the bottom,” where bidders need only meet minimum
service standards inadequate to ensure satisfy future customer needs.
Bidders in an auction system will face significant cost pressure to construct
facilities meeting minimal performance specifications, without regard to the long
term effect on carrier reliability, or their ability to upgrade rudimentary systems to
meet increased demand or regulatory requirements. (RICA Comments, WC
Docket No. 05-337 at 4 (Oct. 10, 2006)). Commenters also warned that an auction
system would unduly favor large carriers over smaller carriers the Commission had
professed a desire to protect. Order, ¶326.
The Commission twice recounted these arguments (Order, ¶¶179, 325-26),
but never tackled them.
Its terse one sentence “explanation” that assigning CAF funds by auction
“should enable us to identify those providers that will make most effective use of
the budget funds, thereby extending services to as many consumers as possible,”
Order, ¶179, is only a restatement of the agency’s conclusion, not a reasoned
response to objections. It does not even claim to grapple with the well-documented
concerns discussed above, a hallmark of arbitrary agency action. See State Farm,
supra, 463 U.S. at 43.
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Its response to concerns that auctions would push carriers to skimp on
service quality, that it has adopted or will adopt and enforce “clear performance
standards,” Order, ¶325, is equally deficient. Making performance standards
“clear” – even assuming perfect compliance – does not ensure the standards are
adequate to protect either service reliability or system upgradability. The
Commission identified three putatively “clear standards” – that bidders (1) offer
minimum 4 Mbps speeds, (2) assure latency low enough for real-time applications
such as VoIP, and (3) offer capacity usage limits reasonably comparable to usage
limits for comparable broadband offerings in urban areas. Order, ¶¶90, 96, 98. But
it ignored record evidence that these standards did not ensure system upgradability
and that rational communications network buyers would demand specifications far
more comprehensive than these minimal standards. See RICA Comments, WC
Docket. No. 05-337, at 3-5 (filed Oct. 10, 2006). It also ignored evidence that the
standards do not clearly define comparability. The FCC, for example, did not find
that the 4/1 Mbps speed standard was “reasonably comparable to those services
provided in urban areas,” only that it would enable rural and urban subscribers to
“use” broadband comparably. Order, ¶94. But the statute references services
“provided,” and urban subscribers are provided much greater speed. National
Broadband Plan, pp 20-23. The capacity standard is no standard at all; the
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Commission expressly declined to determine what capacity is offered urban
subscribers.
The FCC’s assertion that the one-time auction payment of Phase I of the
Mobility Fund satisfies the “sufficiency” test under Section 254(b) (Order, ¶311) is
equally non-responsive to petitioners’ objections with respect to Phase II of the
CAF. It ignores the concern that auctions will not produce support “sufficient” to
ensure long term reliability, upgradability, etc. The FCC’s silence in the face of
that concern is fatal.
Finally, the Order acknowledges that auctions can and have favored larger
carriers, but says that the “natural advantages of carriers with existing investments
in networks in rural areas should provide opportunities for smaller providers to
compete effectively at auction,” Order, ¶326. This overlooks the obvious. If a
carrier with “existing networks in rural areas” is a large one, then that carrier, by
the FCC’s definition, will have the “natural advantages.” Id. As to the conceded
large bidder bias posed by reverse auctions, the FCC says only that it can be
avoided if the reverse auction is “well-designed and executed.” Id., ¶326. Since
such an auction was not part of the Order, it is not susceptible to judicial review
and cannot form a basis to sustain the Order. See SEC v. Chenery, 332 U.S. 194,
196 (1947) (an agency’s order can only be sustained on the basis of explanations
offered in the order itself).
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VIII. ELIMINATING UNIVERSAL SERVICE SUPPORT FOR THE

HIGHEST-COST AREAS DEFEATS THE VERY PURPOSE OF
UNIVERSAL SERVICE.

Citing a need to stay within its budget, Order, ¶169, the Commission
mandated an “extremely high-cost” threshold above which no support will be paid,
pending further rulemaking to determine how to deploy $100,000,000 in CAF
funds to high-cost areas. Order, ¶168. By denying support indefinitely to service
areas that are, by definition, in greatest need of it, the Commission has not merely
acted arbitrarily, it has taken action antithetical to the stated purpose of the Order,
to advance affordable universal service.
Congress has directed that “[c]onsumers in all regions of the Nation
should have access to telecommunications and information services ….” 47 U.S.C.
§254(b)(3) (emphasis added). The Order, however, denies support, not because the
carrier’s costs are excessive, but simply because costs in a particular region are
“extremely high.” But the very premise for universal service support is that rural
and remote areas are typically more costly to serve, Order, ¶2, and that customers
in “all regions” should have access to affordable service. The Order arbitrarily
disregards all legitimate reasons why service costs in a particular region are
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“extremely high,” ignores alternative proposals27 and denies customers in those
regions any chance at obtaining “reasonably comparable” services.
It is no answer to these concerns that the Commission may, at some future
date, design a Remote Areas Fund. Order, ¶534. Nor can support to extremely high
cost areas be denied simply because the budget for universal service must be
limited. On the contrary, it makes no sense to cut off USF support to the regions
most in need of support. The Commission’s failure to consider that point was self-
evidently arbitrary.

IX.

ELIMINATING SUPPORT TO AREAS WHERE AN UNSUBSIDIZED
COMPETITOR OFFERS VOICE AND BROADBAND ARBITRARILY
IGNORES THAT ONCE THE INCUMBENT CARRIER LOSES USF
SUPPORT, THE UNSUBSIDIZED CARRIER HAS NO OBLIGATION
TO CONTINUE OFFERING SERVICES.

The Order’s directive that high cost support to RLECs be phased out as
unnecessary where unsubsidized competitors offer voice and broadband to all of an
RLEC’s residential and business customers in the same study area is unlawful and
unsupported by substantial evidence. The Commission’s rationale is that it is
inefficient to provide USF support “in areas of the country where another voice
and broadband provider is offering high-quality service without government
27 Comments of Consolidated Communications Holdings, WC Docket No. 10-90 et
al., at 15-16 (filed Aug. 24, 2011).
.
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assistance ….” Order, ¶281. But this explanation ignores both Section 254(b) and
the Commission’s own finding that incumbent carriers are “in a unique position to
deploy broadband networks rapidly and efficiently” and that most have “a
preexisting obligation to ensure service to customers who request it.” Id., ¶177 and
n.290. By contrast, unsubsidized competitors have no obligation either to continue
providing voice or broadband service to existing customers or to serve new ones
once the RLEC’s support is eliminated, much less an obligation to provide services
comparable in quality and prices to those enjoyed by customers of urban
telecommunications carriers.
Consistent with the statutory principle requiring “reasonably comparable”
service in rural areas, the Commission requires ETCs to offer voice telephony
service “on a standalone basis, at rates that are reasonably comparable to urban
rates.”28 As common carriers, moreover, ETCs have a number of other affirmative
obligations intended to protect service to existing and new customers, including
low income customers.29 These obligations on ETCs significantly increase their
28 Order, ¶81.
29 Section 214(e)(1)(B) requires ETCs to advertise the availability of all supported
services throughout their service areas (NPRM, ¶88) and to seek FCC authorization
before discontinuing service (id., ¶73); ETCs, inter alia, must demonstrate the
ability to remain functional in emergencies, meet service quality standards (id.,
¶71) and state carrier of last resort obligations (id., ¶90-91); offer service to low
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costs.30 By contrast, an unsubsidized competitor that triggers the cut-off of the
ETC’s USF support is not required to be a common carrier and is not required to
provide telecommunications service or broadband at all, much less to serve all
comers on a continuing basis; nor to provide these services at rates reasonably
comparable to those of its urban counterparts.
The Order disregards entirely evidence that the moment the rural carrier
loses its USF support (because there is an unsubsidized competitor offering to
serve all its customers), consumers are at risk. They become increasingly
dependent on a competing carrier with no obligation to continue serving them or to
incur the additional costs associated with meeting ETC obligations. Meanwhile,
the incumbent may very well continue to bear carrier of last resort obligations
without any support available for doing so. Far from promoting efficient use of
USF support, the Order puts universal service at risk. The Commission’s failure to
consider the evidence documenting this concern with its rules renders the Order
arbitrary.
income customers (id., ¶94) and offer standalone voice service at affordable rates
(id. ¶99).
30 See, e.g., NPRM, ¶94; Comments of Rural Independent Competitive Alliance,
RM-11584, at 3 (filed Jan. 7, 2010); Rural ILEC Associations Comments at 10;
Joint Comments of NECA/NTCA/OPASTCO/WTA/Rural Alliance, WC Docket
No. 10-90, at 31 (filed July 12, 2010).
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X.

THE COMMISSION ARBITRARILY FAILED TO EXPLAIN HOW
ITS NEW DEFINITION OF SUPPORTED INFORMATION
SERVICES TOOK INTO ACCOUNT THE FOUR FACTORS IT WAS
REQUIRED TO CONSIDER UNDER SECTION 254(c)(1).

Section 254(c)(1) of the Act requires the FCC, in consultation with the Joint
Board, to consider four specific factors in establishing its definition of supported
telecommunications services, namely the extent to which such telecommunications
services (a) are essential to education, public health, or safety, (b) have been freely
purchased by a substantial majority of residential customers, (c) are actually being
publicly deployed by telecommunications carriers and (d) are in the public interest.
But, with the exception of brief references at ¶¶14, 39 and 74 to the first, third and
fourth factors, the Order fails to discuss how its new “voice telephony service”
definition takes any of these factors into account. That failure was arbitrary.

XI.

THE FCC ARBITRARILY DISREGARDED COMMENTS THAT THE
ORDER’S

INCREMENTAL USF SUPPORT PROVISIONS WOULD
DUPLICATE OR UNDERMINE STATE-INITIATED PLANS FOR
BROADBAND DEPLOYMENT.

Several states have enacted laws promoting broadband deployment. Some of
the requirements under these laws may differ from the broadband deployment
criteria that must be met by USF recipients under the Order, such as the 4 and 1
Mbps downstream and upstream bandwidth requirements. Pennsylvania, for
example, requires 128 Mbps upstream and 1.5 Mbps downstream broadband. 66
Pa.C.S. § 3010, et seq. Many carriers serving high-cost areas have already made, or
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completed, broadband commitments under these laws. But the Order precludes
such price cap carriers from receiving incremental Phase I USF support, which it
confines to areas not currently served by broadband. Order, ¶136-7.
Assuming arguendo that requiring carriers to provide broadband Internet
access as a condition of USF support were within the FCC’s authority (which it is
not), it cannot implement that condition arbitrarily. Petitioners argued below that it
was arbitrary and discriminatory to distribute USF support only to carriers in states
who did nothing to promote broadband, while carriers in states with extensive
broadband development commitments (in Pennsylvania’s case about $1B dollars)
get nothing to upgrade what they have done. The Commission, however, arbitrarily
failed to consider this argument. PSEG Energy Res. & Trade LLC, et al. v FERC,
665 F.2d 203 (D.C. Cir. 2011).

XII. THE ORDER

UNLAWFULLY MADE CHANGES NOT CONTAINED

IN ITS PROPOSED RULE THAT COULD NOT REASONABLY
HAVE BEEN ANTICIPATED BY COMMENTERS.

Key provisions in the Order were not part of the proposed rule. As discussed
below, because Petitioners had no reasonable opportunity to comment on these rule
changes the Order violated Sections 553(b) and (c) of the APA.31
31 See Prometheus Radio Project v FCC, 652 F.3d 431, 449,450 (3d Cir. 2011);
Council Tree Commc’ns, Inc. v FCC, 619 F.3d 235, 250 (3d Cir. 2010).
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The APA requires agencies to provide notice of a proposed rulemaking that
contains either the express terms or substance of the proposed rule or a description
of the subjects and issues involved. 5 U.S.C. § 553(b). While a final rule obviously
need not be identical to the proposed one, it must be a “logical outgrowth” of the
proposed rule. If it is not, affected parties have been denied the reasonable
opportunity to comment guaranteed under the APA. City of Waukesha v. EPA, 320
F.3d 228, 245 (D.C. Cir. 2003). None of the rule changes discussed below,
however, were the “logical outgrowth” of the FCC’s proposed rule.
Take first the ARC rules (Order, Appendix A, Final Rule 51.915 at 517-530
(price cap carriers); id., Final Rule 51.917 at 530-537 (rate-of-return carriers),
which were neither discussed nor foreshadowed by the NPRM. The failure to
provide notice that those rules, or something like them, might be part of the final
rule violated the APA.
Under FCC price cap rules in existence prior to the Order, adjustments to
access rates were permitted to reflect changes resulting from exogenous events. 47
C.F.R. §§ 69.3 and 61.45. The Order announced for the first time, without any
opportunity for comment by affected parties, that it was eliminating these
adjustments because their adjudication would be burdensome. Order, ¶890.
The Order also established a dual process for ICC revenue recovery for
price cap carriers and rate-of-return carriers. Order, ¶¶891-983 and 900-904. This,
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too was not presaged by the proposed rule as required by the APA. While the
Commission sought comment on proposals addressing universal service, and ICC
issues (FCC Public Notice, DA-11-1348 (Aug. 3, 2011), it did not address a dual
process for ICC revenue recovery.
Finally, the Order gives price cap carriers an exclusive right of first refusal
(“ROFR”) to receive $300 million in CAF Phase I funding for unserved areas. But
the ROFR was originally proposed as an alternative to using reverse auctions in
CAF Phase I for all carriers of last resort. NPRM, ¶¶287,288. The limitation was
not reasonably foreseeable from the proposed rule and parties, therefore, were
arbitrarily deprived of an opportunity to comment.
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CONCLUSION

As discussed above, the Order contravenes Sections 214, 253 and 254 of the
Telecommunications Act and Section 553 of the APA and should be vacated in its
entirety. Further, the FCC’s failures of reasoned decisionmaking are significant
enough that the Order, if not reversed as in violation of the Telecommunications
Act, should be vacated in its entirety and remanded to the agency.
Respectfully submitted,
/s/ Harvey L. Reiter
Harvey L. Reiter
H. Russell Frisby, Jr.
Stinson Morrison Hecker LLP
1775 Pennsylvania Avenue, NW #800
Washington, DC 20006
202-728-3016
hreiter@stinson.com
On behalf of the Joint Petitioners
Listed on the cover of this filing32
October 23, 2012
32 Consolidated Communications, NTCA, RICA, Rural Telephone, et al. and the
Vermont Public Service Board do not join in Section XII of this brief. NASUCA
does not join in Sections III, V, VII, VIII and XI. Gila River Indian Community
and Gila River Telecommunications, Inc. do not join in Sections I, III, IV.A-B or
XI.
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CERTIFICATE OF COMPLIANCE

Certificate of Compliance With Type-Volume Limitations,

Typeface Requirements, Type Style Requirements, Privacy

Redaction Requirements, and Virus Scan

1.
This filing complies with the type-volume limitation of the Amended
First Briefing Order because it contains 13,190 words, excluding the parts of the
filing exempted by Fed. R. App. P. 32(a)(7)(B)(iii).
2.
This filing complies with the typeface requirements of Fed. R. App. P.
32(a)(5) and 10th Cir. R. 32(a) and the type style requirements of Fed. R. App. P.
32(a)(6) because this filing has been prepared in a proportionally spaced typeface
using Microsoft Word 2010 in 14-point Times New Roman font.
3.
All required privacy redactions have been made.
4.
This filing was scanned for viruses with Sophos Anti-Virus Program,
last updated on October 23, 2012, and according to the program is free of viruses.
/s/ Harvey L. Reiter
October 23, 2012
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CERTIFICATE OF SERVICE

I hereby certify that, on October 23, 2012, per the Court’s order of October
17, 2012, I caused the foregoing document to be electronically filed with the Court
via e-mail. I also certify this document was furnished through ECF electronic
service to all parties in this case through a registered CM/ECF user. This document
is available for viewing and downloading on the CM/ECF system.
/s/ Harvey L. Reiter
October 23, 2012
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