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Feature Group IP West, LLC v. FCC & USA, No. 10-1257 (D.C. Cir.)

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Released: May 27, 2011
USCA Case #10-1257 Document #1310254 Filed: 05/27/2011 Page 1 of 3
United States Court of Appeals


No. 10-1257

September Term, 2010

FILED ON: MAY 27, 2011




On Petition for Review of Orders
of the Federal Communications Commission

Before: TATEL and GRIFFITH, Circuit Judges, and RANDOLPH, Senior Circuit Judge


This appeal was considered on the record, the briefs, and the oral arguments of the
parties. The court has accorded the issues full consideration and has determined they do not
warrant a published opinion. See Fed. R. App. 36; D.C. Cir. R. 36(d). For the reasons stated
below, it is




that the petition for review be denied.

Petitioners, collectively referred to as Feature Group IP, challenge the Federal
Communications Commission's denial of their petition for forbearance under section 10 of the
Communications Act of 1934, as amended by the Telecommunications Act of 1996, 47 U.S.C.
160. Specifically, Feature Group IP asked the FCC to forbear from applying exchange access
charges under section 251(g) of the Communications Act, id. 251(g), and related rules to
"voice-embedded Internet communications" traffic--a subset of Voice over Internet Protocol or
"VoIP" traffic, see In re Feature Group IP Petition for Forbearance, 24 FCC Rcd. 1571, 1573
4 & n.13 (2009); see also Nuvio Corp. v. FCC, 473 F.3d 302, 303 (D.C. Cir. 2006) (describing
VoIP as a service that "allows a caller using a broadband Internet connection to place calls to and
receive calls from other callers using either VoIP or traditional telephone service"). In making

USCA Case #10-1257 Document #1310254 Filed: 05/27/2011 Page 2 of 3

this request, Feature Group IP argued that such traffic was not actually subject to exchange
access charges under existing law and that instead reciprocal compensation charges under section
251(b)(5) applied. But if the FCC disagreed, Feature Group asked the Commission to forbear
from applying the legal provisions that could result in the imposition of access charges.

As an initial matter, we conclude that at least one Feature Group IP petitioner has
standing to challenge the FCC's forbearance denial. See WorldCom, Inc. v. FCC, 246 F.3d 690,
696 (D.C. Cir. 2001) ("[T]he standing of one petitioner is enough."). Specifically, UTEX
Communications Corporation ("UTEX") does business in Texas, transferring communications
using Internet Protocol to local exchange carriers (LECs) who terminate the voice-embedded
Internet communications traffic. With respect to some of its traffic, UTEX has been assessed
exchange access charges by LECs in proceedings before the Texas state commission. Had the
FCC provided Feature Group IP the relief it sought and ruled that exchange access charges
should not apply to voice-embedded Internet communications traffic, it would have impacted the
charges LECs can legally require UTEX to pay. See generally 47 U.S.C. 252(c)(e). Therefore,
although Feature Group IP's statement in its opening brief establishing standing leaves much to
be desired, we conclude that UTEX's Article III standing is evident from the administrative
record. See Sierra Club v. EPA, 292 F.3d 895, 899900 (D.C. Cir. 2002).

Turning to the merits, we reject Feature Group IP's contention that the FCC acted
improperly by assuming for the purpose of its forbearance analysis that section 251(g) and related
Commission rules apply to the traffic at issue. Nothing in section 10 requires the FCC to
determine a party's existing legal obligations before ruling on a forbearance petition. Moreover,
our precedent makes clear that although the FCC must not deny a forbearance request "solely
because the petition seeks forbearance from uncertain or hypothetical regulatory obligations," the
Commission "may take into account [a petition's] conditional nature" when evaluating its merit.
AT&T Inc. v. FCC, 452 F.3d 830, 83637 (D.C. Cir. 2006). If the FCC may take the petition's
conditional nature into consideration, then it necessarily has discretion to leave the resolution of
existing legal duties for other proceedings, as it has elected to do here. See Notice of Proposed
Rulemaking, Connect Am. Fund; Developing a Unified Intercarrier Compensation, 76 Fed. Reg.
11,632, 11,645 145 (Mar. 2, 2011) (seeking comment on "the appropriate intercarrier
compensation framework for VoIP traffic"). To the extent Feature Group IP believes the FCC
has unreasonably delayed resolution of legal issues, it may petition for mandamus. See In re Core
Commc'ns, Inc., 531 F.3d 849, 855 (D.C. Cir. 2008).

Applying its assumption, the FCC explained that forbearing from rate regulation
preserved by section 251(g) and related rules would mean that no rate regulation at all would
govern voice-embedded Internet communications traffic, not, as Feature Group IP insisted, that
section 251(b)(5)'s reciprocal compensation rules would apply by default. See In re Feature
Group IP Petition for Forbearance, 24 FCC Rcd. at 157576 89. As a result, the FCC
concluded that Feature Group IP's request failed to satisfy the statutory criteria for forbearance
because enforcement of section 251(g) and related rules was necessary to prevent a regulatory
void that would have been inconsistent with the public interest, consumer protection, and the

USCA Case #10-1257 Document #1310254 Filed: 05/27/2011 Page 3 of 3

maintenance of just and reasonable charges and practices. See id. at 157678 1012; see also
47 U.S.C. 160(a)(1)(3). We find nothing arbitrary and capricious in that conclusion, and we
reject Feature Group IP's assertion that granting forbearance would make reciprocal
compensation charges automatically applicable. That argument is inconsistent with the plain
language of section 251(g), which provides that exchange access "restrictions and obligations"
for covered traffic remain in place until they "are explicitly superseded by regulations prescribed
by the Commission." 47 U.S.C. 251(g) (emphasis added).

Feature Group IP also claims the FCC erred by declining to consider its request for partial
forbearance. According to Feature Group IP, it asked the FCC to rule that even if voice-
embedded Internet communications are subject to exchange access charges, no LEC had the right
to bill Feature Group IP because it was acting as a joint provider LEC rather than an inter-
exchange carrier. In rejecting Feature Group IP's motion for reconsideration, the FCC
determined that Feature Group IP failed to raise adequately this partial forbearance request in its
initial petition. See In re Feature Group IP Petition for Forbearance, 25 FCC Rcd. 8867, 8875
14 (2010). Having reviewed the record, we agree. In any event, the FCC also provided reasons
for rejecting this partial forbearance request on the merits, and Feature Group IP forfeited any
challenge to those reasons by failing to address them in its opening brief.

We have considered Feature Group IP's remaining arguments and conclude they are
without merit.

The Clerk is directed to withhold issuance of the mandate herein until seven days after
resolution of any timely petition for rehearing or rehearing en banc. See Fed. R. App. P. 41(b);
D.C. Cir. R. 41.

Per Curiam


Mark J. Langer, Clerk

BY: /s/

Jennifer M. Clark
Deputy Clerk

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