886 F.3d 1236
D.C. Cir.2018Background
- FCC redefined universal service in 2011 to include broadband and cellular and began a transition from state-based, landline-focused ETC designations to census-block–based, broadband-capable ETCs with new funding mechanisms.
- Incumbent landline ETCs (AT&T, CenturyLink, USTelecom) retained residual landline-only obligations in a small percentage of high-cost or extremely high-cost census blocks pending selection of replacement ETCs (many to be chosen by auction July 24, 2018).
- Petitioners sought blanket forbearance or statutory reinterpretation to eliminate those interim obligations and to compel higher funding; FCC granted partial forbearance in 2014 for certain blocks but left residual obligations in many high-cost blocks for further review.
- In the 2015 Order, FCC denied forbearance for the remaining high-cost blocks, retained incumbent obligations at frozen funding levels during the transition, and preserved case-by-case relief (forbearance or supplemental funding) where carriers can show need.
- Petitioners challenged the 2014 and 2015 Orders as beyond the FCC’s statutory authority and as arbitrary and capricious; the D.C. Circuit denied the petitions, upholding the FCC’s interim regime and deference to its transitional judgments.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court should ignore the 2015 Order as post-hoc justification for the 2014 Order | The 2015 Order supplies ex post rationales for a de facto rule adopted in 2014, so review should be limited to 2014 reasons | FCC: 2014 acted only in part and explicitly left remaining issues for later disposition within statutory time | Court accepted FCC view and reviewed both Orders together |
| Whether the interim regime violates 47 U.S.C. § 214(e)(1) (ETCs must offer “services that are supported”) | Petitioners: "services that are supported" means funding must cover specific services in each location; frozen support is insufficient | FCC: phrase refers to types of services that are designated as universal (e.g., voice), and ETCs remain eligible for support under interim scheme | Court upheld FCC’s reasonable interpretation under Chevron; interim eligibility/funding satisfies § 214(e)(1) |
| Whether the interim use of old statewide "service areas" contravenes § 214(e)(5) | Petitioners: service areas must be redefined for the new support calculations, so incumbents cannot be kept to statewide-funded obligations | FCC: frozen funding and some funding computations still reference prior statewide areas; those remain relevant for interim support | Court held that continuing to reference statewide areas for interim funding is permissible |
| Whether the FCC acted arbitrarily/capriciously or violated § 254(b) principles (universal access, competitive neutrality, sufficient funding) | Petitioners: FCC prioritized universal access improperly, violated competitive neutrality, and failed to ensure sufficient funding | FCC: retained obligations temporarily to avoid coverage gaps; considered competitive neutrality and provided case-by-case relief and supplemental funding mechanisms; sufficiency need be assessed in balance with other principles | Court found FCC adequately reasoned, owed deference for interim measures, and that case-by-case relief/supplemental funding made the scheme reasonable |
Key Cases Cited
- Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (agency interpretation owed deference when statute ambiguous)
- Rural Cellular Ass’n v. FCC, 588 F.3d 1095 (D.C. Cir. 2009) (substantial deference to interim universal-service measures)
- MCI Telecommunications Corp. v. FCC, 750 F.2d 135 (D.C. Cir. 1984) (permitting agencies to maintain status quo during rulemakings)
- Motor Vehicle Manufacturers Ass’n v. State Farm, 463 U.S. 29 (arbitrary-and-capricious review requires reasoned explanation)
- Vermont Public Service Board v. FCC, 661 F.3d 54 (D.C. Cir. 2011) (agency need not expend undue resources on soon-to-be-replaced regime)
- Auer v. Robbins, 519 U.S. 452 (agency interpretations of its own rules are entitled to deference)