UNITED STATES TELECOM ASSOCIATION AND CENTURYTEL, INC., PETITIONERS v. FEDERAL COMMUNICATIONS COMMISSION AND UNITED STATES OF AMERICA, RESPONDENTS CELLULAR TELECOMMUNICATIONS & INTERNET ASSOCIATION, ET AL., INTERVENORS
No. 03-1414
United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT
Decided March 11, 2005
Argued November 18, 2004
Consolidated with 03-1443
Aaron M. Panner argued the cause for petitioners. With him on the briefs were Michael K. Kellogg, David E. Frulla, Andrew D. Herman, L. Marie Guillory, Jill Canfield, and Michael T. McMenamin.
Ivan C. Evilsizer was on the brief for amicus curiae Hot Springs Telephone Co. in support of petitioners.
Joel Marcus, Counsel, Federal Communications Commission, argued the cause for respondents. With him on the brief were R. Hewitt Pate, Assistant Attorney General, U.S. Department of Justice, Catherine G. O‘Sullivan and Andrea Limmer, Attorneys, John A. Rogovin, General Counsel, Federal Communications Commission, Richard K. Welch, Associate General Counsel, John E. Ingle, Deputy Associate General Counsel, and Rodger D. Citron, Counsel.
Theodore C. Whitehouse, David M. Don, John J. LoCurto, Luisa L. Lancetti, Charles W. McKee, Michael F. Altschul, Robert J. Aamoth, and Todd D. Daubert were on the brief for intervenors Cellular Telecommunications & Internet Association, et al. in support of respondents.
Before: SENTELLE, RANDOLPH, and GARLAND, Circuit Judges.
Opinion for the Court filed by Circuit Judge GARLAND.
GARLAND, Circuit Judge: The petitioners in these consolidated petitions for review challenge an order of the Federal Communications Commission (FCC) that sets forth the conditions under which wireline telecommunications carriers must transfer telephone numbers to wireless carriers. The petitioners argue that the FCC‘s order is a legislative rule that requires notice and comment under the Administrative Procedure Act (APA),
We conclude that the order is a legislative rule because it constitutes a substantive change in a prior rule. Although this rendered the order subject to the APA‘s notice-and-comment requirements, we find that the FCC effectively complied with those requirements (notwithstanding its view that it was not required to do so), and that any deviations were at most harmless error. There is no dispute, however, that the FCC failed to comply with the RFA‘s requirement to prepare a final regulatory flexibility analysis regarding the order‘s impact on small entities.
In light of these conclusions, we grant the petitions in part and deny them in part, remanding the order to the FCC to prepare a final regulatory flexibility analysis. Until that analysis is complete, we stay the effect of the order solely as it applies to those carriers that qualify as small entities under the RFA.
I
The Telecommunications Act of 1996 imposes numerous duties on local exchange carriers (LECs), which, for purposes of this case, are wireline carriers -- companies that provide telephone service over telephone wires. See
On July 2, 1996, shortly after the 1996 Telecommunications Act became law, the FCC released its first order regarding number portability. See First Report and Order and Further Notice of Proposed Rulemaking, Telephone Number Portability, 11 F.C.C.R. 8352 (1996) (First Order). The First Order was issued pursuant to APA notice-and-comment procedures, and contained the regulatory flexibility analysis required by the RFA. Id. ¶ 1, at 8353-54, app. C, at 8486. In the First Order, the FCC recognized two kinds of portability that are relevant to this case: “service provider portability” and “location portability.” Id. ¶¶ 172, 174, at 8443.
The First Order required all carriers to provide service provider portability, which it made “synonymous with” the statutory definition of number portability: “the ability of users of telecommunications services to retain, at the same location, existing telecommunications numbers . . . when switching from one telecommunications carrier to another.” Id. ¶ 27, at 8366-67. Compare
The FCC enlisted a federal advisory committee, the North American Numbering Council (NANC), to make recommendations regarding the implementation of number portability. See First Order ¶¶ 94-95, 11 F.C.C.R. at 8401-02. The FCC also established a phased schedule requiring LECs to complete implementation of number portability in the 100 largest metropolitan areas by December 31, 1998. See id. ¶ 77, at 8393. As a result of subsequent postponements, the carriers’ intermodal porting duty did not commence until November 24, 2003 in large metropolitan areas, and until six months later in other areas. See Verizon Wireless’ Petition for Partial Forbearance from the Commercial Mobile Radio Services Number Portability Obligation ¶ 31, 17 F.C.C.R. 14,972, 14,985-86, ¶ 34, at 14,986-87 (2002).
In 1997, the FCC received the NANC‘s recommendations regarding wireline-to-wireline service provider portability and issued a second order that adopted those recommendations. See
The Second Order was limited to wireline-to-wireline portability and did not resolve any issues relating to intermodal portability. Instead, the FCC once again enlisted the NANC to develop standards necessary to provide for wireless carriers’ participation in number portability. See Second Order ¶ 91, 12 F.C.C.R. at 12,333. In particular, the FCC asked the NANC to consider “how to account for differences between service area boundaries for wireline versus wireless services.” Id. ¶ 91, at 12,334. (The “service area” of a wireless carrier is typically considerably larger than the rate center of a LEC. See FCC Br. at 7.) But the NANC was unable to reach a consensus on
[B]ecause wireline service is fixed to a specific location the subscriber‘s telephone number is limited to use within the rate center within which it is assigned. By contrast, . . . because wireless service is mobile . . . while the wireless subscriber‘s number is associated with a specific geographic rate center, the wireless service is not limited to use within that rate center.
Intermodal Order ¶ 11, 18 F.C.C.R. at 23,701 (discussing NANC Report).
On January 23, 2003, the Cellular Telecommunications & Internet Association (CTIA) petitioned the FCC for a declaratory ruling that “wireline carriers have an obligation to port their customers’ telephone numbers to a [wireless] provider whose service area overlaps the wireline carrier‘s rate center” associated with the requested number. See Petition for Declaratory Ruling of the CTIA, Telephone Number Portability, CC Docket No. 95-116 (Jan. 23, 2003), at 1. CTIA asked the FCC to reject the view of certain LECs that portability was required only when a wireless provider had a physical presence in the wireline rate center from which the customer sought to port the number. Id. at 3. The FCC issued a public notice seeking comments on CTIA‘s proposed rule. See Petition for Declaratory Ruling That Wireline Carriers Must Provide Portability to Wireless Carriers Operating Within Their Service Areas, 68 Fed. Reg. 7323 (Feb. 13, 2003). Numerous members of the wireline industry, including several of the petitioners here,2 submitted comments.
On November 10, 2003, the FCC released the order at issue in this case, known as the Intermodal Order. 18 F.C.C.R. 23,697 (2003). The Intermodal Order adopted the rule proposed in the CTIA petition. It requires wireline carriers to “port numbers to wireless carriers where the requesting wireless carrier‘s ‘coverage area’ overlaps the geographic location of the rate center in which the customer‘s wireline number is provisioned,” so long as “the porting-in carrier maintains the number‘s original rate center designation following the port.” Id. ¶ 22, at 23,706. A wireless carrier‘s “coverage area” is defined as the “area in which wireless service can be received from the wireless carrier.” Id. ¶ 1, at 23,698.7
The FCC insisted that the Intermodal Order had merely adopted “clarifications” of the wireline carriers’ existing obligation under prior orders, and hence did not require a new rulemaking. Id. ¶ 26, at 23,708. The Commission rejected the contention that it had imposed a duty of location portability. Because the number has to retain its original rate center
The U.S. Telecom Association and other entities, principally advancing the interests of wireline carriers, now petition for review of the Intermodal Order. They do not challenge the merits of the order. Rather, they contend that it is invalid solely because it is a legislative rule issued without adherence to the procedural requirements of the APA and RFA.8
II
The Administrative Procedure Act imposes notice-and-comment requirements (the specifics of which we discuss in Part III) that must be followed before a rule may be issued. See
The petitioners contend that the Intermodal Order constitutes a legislative rule because it effectively amends the FCC‘s previous legislative rule -- the First Order. See, e.g., American Mining Cong. v. Mine Safety & Health Admin., 995 F.2d 1106, 1112 (D.C. Cir. 1993) (stating that a rule that “effectively amends a prior legislative rule” is “a legislative, not an interpretative rule“).11 Our cases have formulated this “effective amendment” test in a number of ways. We have, for example, held that “new rules that work substantive changes,” Sprint Corp. v. FCC, 315 F.3d 369, 374 (D.C. Cir. 2003) (emphasis added), or “major substantive legal addition[s],” Appalachian Power Co. v. EPA, 208 F.3d 1015, 1024 (D.C. Cir. 2000) (emphasis added), to prior regulations are subject to the APA‘s procedures.12 Enunciating a similar test, the Supreme
We agree with the petitioners that the Intermodal Order effects a substantive change in the First Order. The First Order required carriers to ensure “the ability of users of telecommunications services to retain, at the same location, existing telecommunications numbers . . . when switching from one telecommunications carrier to another.” First Order ¶ 27, 11 F.C.C.R. at 8366-67 (emphasis added);
The Intermodal Order, by contrast, requires carriers to provide users with the ability to retain their existing numbers regardless of physical location. Under that order, a wireline carrier must port whenever “the requesting wireless carrier‘s ‘coverage area’ overlaps the geographic location of the rate center in which the customer‘s wireline number is provisioned,” provided that the porting-in carrier maintains the number‘s original rate center designation. Intermodal Order ¶ 22, 18 F.C.C.R. at 23,706. Because wireless carriers’ coverage (service) areas are often quite expansive -- in some cases encompassing much of the United States -- the Intermodal Order effectively requires carriers to provide their subscribers with the ability to retain their numbers “when moving from one physical location to another,” notwithstanding the First Order‘s declaration that such location portability would not be mandated.
Nor can the Intermodal Order derive support from the Second Order -- another prior legislative rule, also issued pursuant to notice and comment. In the Second Order, which established the requirements for number portability in the wireline-to-wireline context, the FCC provided that such portability was “limited to carriers with facilities or numbering resources in the same rate center . . . .” Intermodal Order ¶ 7, 18 F.C.C.R. at 23,700. But the Intermodal Order rejects a similar limitation for wireline-to-wireless portability, and instead requires wireline carriers to port numbers to wireless carriers that do “not have a point of interconnection or numbering resources in the same rate center as the ported number . . . .” Id. ¶ 26, at 23,708; see id. ¶ 1, at 23,698
In short, the Intermodal Order requires wireline carriers to port telephone numbers without regard to the physical location of the subscriber, the equipment, or the carrier, and thus effectively requires location portability -- a requirement that the First Order had foresworn. Under the Intermodal Order, a wireline subscriber can move from New York to California -- 3000 miles from his original residence, from the wire attached to his original wireline telephone, from the geographic boundaries of the original rate center, and from the original wireline company‘s point of interconnection -- and yet keep his telephone number provided that he switches to a wireless company with service overlapping the original rate center. Everything physical -- the person, the residence, the telephone, the point of interconnection -- is at a new location, yet porting is nonetheless required. Hence, by adopting the Intermodal Order, the FCC removed its prior “physical location” limitation on the duty to port.
The FCC makes three arguments in support of the contrary contention. First, it points to a single sentence in the First Order that, it maintains, provided notice of the interpretation later adopted in the Intermodal Order. That sentence, which comes directly after one that defines “location portability,” reads as follows: “Today, telephone subscribers must change their telephone numbers when they move outside the area served by their current central office.” First Order ¶ 174, 11 F.C.C.R. at 8443.
This point is further driven home by examining the notice of proposed rulemaking that preceded the First Order. That notice contained the same sentence that would later appear in the First Order. But it also contained a succeeding sentence that made the Commission‘s meaning unmistakable by explaining what location portability would enable subscribers to do:
Today, telephone subscribers must change their telephone numbers when they move outside the area served by their current central office. Location
portability would enable subscribers to keep their telephone numbers when they move to a new neighborhood, a nearby community, across the state, or even, potentially, across the country.
Notice of Proposed Rulemaking, Telephone Number Portability ¶ 26, 10 F.C.C.R. 12,350, 12,360 (1995) (emphasis added). And that is precisely what the Intermodal Order now enables subscribers to do.
Second, the FCC argues that “porting from a wireline to a wireless carrier that does not have a point of interconnection or numbering resources in the same rate center as the ported number does not, in and of itself, constitute location portability, because the rating of calls to the ported number stays the same.” Intermodal Order ¶ 28, 18 F.C.C.R. at 23,708 (emphasis added). The rating remains the same because the FCC added that requirement as a proviso: a wireline carrier must port to a wireless carrier if the latter‘s service area overlaps the rate center associated with the subscriber‘s number, “provided that the porting-in carrier maintains the number‘s original rate center designation following the port.” Id. ¶ 22, at 23,706. The FCC insists that under this proviso, “the number does not leave the rate center,” and hence “it has not been subject to location porting.” FCC Br. at 25-26 (emphasis in original) (citing Intermodal Order ¶ 28).
But this focus on the “location” of the telephone number, based solely on its rating, is at best metaphysical. It surely is not the physical location discussed in the First Order.14 Moreover,
Third, the FCC argues that the Intermodal Order did not substantively change the First Order, but instead merely curtailed the unlimited portability requirement imposed in the First Order. The First Order, the FCC contends, “imposed no limitations on the LECs’ duty of wireline-to-wireless porting.” FCC Br. at 20. And in the Commission‘s view, the petitioners have no reason to complain about a rule that merely reduced their preexisting obligations.
But it is simply wrong to say that the First Order “imposed no limitations” on a wireline carrier‘s duty to port numbers to a wireless carrier. To the contrary, the order expressly limited that obligation by declaring that wireline carriers were not obligated to provide location portability. First Order ¶ 6, 11 F.C.C.R. at 8356. Accordingly, the petitioners have every reason to complain about a rule (if promulgated without notice and comment) that jettisoned the First Order‘s promise regarding location portability.
In short, this is not a case in which an interpretative rule merely “supplies crisper and more detailed lines than the authority being interpreted,” American Mining Cong., 995 F.2d at 1112, or simply provides “a clarification of an existing rule,” Sprint Corp., 315 F.3d at 374. Rather, it is one in which the rule at issue substantively changes a preexisting legislative rule. Such a rule is a legislative rule, and it can be valid only if it satisfies the notice-and-comment requirements of the APA.
There is another reason, specific to the 1996 Telecommunications Act, to regard the rule at issue here as legislative. The 1996 Act mandates number porting “in accordance with requirements prescribed by the Commission,”
Of course, even when a statute requires an agency to proceed by implementing regulations, it need not develop legislative rules to “address every conceivable question.” Shalala v. Guernsey Mem‘l Hosp., 514 U.S. 87, 96 (1995). But the question of what Congress meant by “at the same location” in its definition of number portability is not just any “conceivable question.” Rather, it is a crucial statutory element of the portability requirement itself, at least as far as wireline-to-wireless porting is concerned. Accordingly, the First Order did not satisfy the FCC‘s statutory obligation to “establish regulations” to implement number portability when it merely required “service provider portability,” and then defined that phrase by parroting the definition of number portability already contained in the statute. See supra Part I; cf. Pearson v. Shalala, 164 F.3d 650, 660 (D.C. Cir. 1999) (“[W]e are quite unimpressed with the government‘s argument that the agency is justified in employing this standard without definition because Congress used the same standard . . .“). Something more was necessary,15 and that something was provided by the specifics of the wireline-to-wireless regulations contained in the Intermodal Order.
Finally, the FCC complains that technological disparities require a different interpretation of the statutory term “location” in the intermodal context than in the wireline-to-wireline context, and that the Commission‘s regulations should reflect that difference. The Commission may well be correct. We are
But in declaring that it was not requiring location portability, and in using the adjective “physical” in the definition of that term, the First Order made clear that it did regard location as a physical concept. Moreover, at least in the intermodal context, where one side of the porting transaction involves a wireline telephone, physical location is a quite meaningful concept.17 Accordingly, however physical location is measured -- whether by the residence or geographic rate center of the wireline user, the coordinates of the landline
For the foregoing reasons, we conclude that the Intermodal Order was a legislative rule, and that the FCC therefore had to issue it pursuant to the notice-and-comment requirements of
III
The Administrative Procedure Act requires that “[g]eneral notice of proposed rule making shall be published in the Federal Register,”
Although the FCC does not raise the point, it appears that the Commission satisfied each of these requirements when it issued the Intermodal Order.20 The FCC published notice in the Federal Register. See 68 Fed. Reg. 7323.21 The notice sought comments on CTIA‘s proposal “that wireline carriers are obligated to provide portability of their customers’ telephone numbers to [wireless] providers whose service area overlaps the wireline carriers’ rate centers.” Id. The Commission received and considered comments on that proposal from, among others, the petitioners in this case. See supra note 2. It then adopted essentially the same rule proposed in the notice, in an order that explained the rule‘s basis and purpose, and published that order. See 18 F.C.C.R. 23,697; see generally supra Part I.
Nonetheless, because the FCC does not press it, we do not reach a final decision as to whether the procedures attending issuance of the Intermodal Order fully conformed to the APA. But we do address the question -- raised in the petitioners’ own brief -- of whether any procedural error that might have occurred was harmless. Pet‘rs Br. at 17, 27-30; see
In any event, we have no uncertainty that if there was a procedural failure, it was harmless. The petitioners contend that by “proceeding without issuing a notice, the FCC constrained the industry‘s ability to propose solutions to technical and
Nor did the FCC “constrain[] the industry‘s ability to propose solutions.” Id. Again to the contrary, the Commission invited and received comment from the industry on intermodal portability. Nor was the industry misled by the fact that the notice was labeled a request for comment on CTIA‘s petition for a declaratory ruling, rather than as a notice of proposed rulemaking. Indeed, as the petitioners conceded at oral argument, every challenge to the Intermodal Order that they have raised in their appellate briefs was also made during the comment period. Oral Arg. Tape at 19:33-19:42.24 And they cannot identify a single additional comment that they would have made but for the labeling of the notice, nor any other deficiency in the rulemaking process. Id.; see New York State Comm‘n, 749 F.2d at 815 (declining to remand an FCC order,
Under these circumstances, any error -- if error there was -- was plainly harmless. Accordingly, although we conclude that the Intermodal Order was a legislative rule requiring adherence to the procedures specified in
IV
The Regulatory Flexibility Act also imposes procedural requirements on agency rulemaking, in particular the preparation of a “final regulatory flexibility analysis” regarding the effect of
By contrast to the notice-and-comment requirements, there is no dispute that the FCC utterly failed to follow the RFA when it issued the Intermodal Order. Nor is there an argument that the Commission‘s failure was harmless, as it is impossible to determine whether a final regulatory flexibility analysis -- which must include an explanation for the rejection of alternatives designed to minimize significant economic impact on small entities, see
The RFA outlines the remedies available for its violation as follows:
In granting any relief in an action under this section, the court shall order the agency to take corrective action . . . including, but not limited to--
(A) remanding the rule to the agency, and
(B) deferring the enforcement of the rule against small entities unless the court finds that continued enforcement of the rule is in the public interest.
The petitioners contend that the order will have a serious impact on small rural carriers, which will have to impose the initial cost of implementation and the continuing cost of transporting calls to ported numbers on a narrow base of rural subscribers. Those costs, the petitioners argue, “bring[] no benefit to the vast majority of rural subscribers that are unwilling to give up their wireline service, yet must bear the cost burden nonetheless.” Pet‘rs Br. at 18. The petitioners do not seek to undo any porting of numbers that has already occurred; they ask only to stay the mandatory obligation to accede to new porting requests. Oral Arg. Tape at 57:15-57:55.
The FCC does not contest the petitioners’ argument, and it gives no reasons why continued enforcement of the order with respect to small entities pending a final regulatory flexibility analysis would be in the public interest.28 Rather, it stands on its contention that no regulatory flexibility analysis was required at all. See FCC Br. at 30. Under these circumstances, we have no basis for finding that continued enforcement against statutorily defined small entities during the remand would be in the public interest.
V
For the foregoing reasons, we deny the petitions with respect to the APA claim, and grant the petitions with respect to the RFA claim. We remand the Intermodal Order to the FCC for the purpose of preparing a final regulatory flexibility analysis, and we stay future enforcement of the order against carriers that are “small entities” under the RFA until the FCC prepares and publishes that analysis.
So ordered.