ORAL ARGUMENT SCHEDULED APRIL 15, 2013 BRIEF FOR RESPONDENTS IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT NO. 12-1124 THE CONFERENCE GROUP, LLC, PETITIONER, V. FEDERAL COMMUNICATIONS COMMISSION AND UNITED STATES OF AMERICA, RESPONDENTS. ON PETITION FOR REVIEW OF AN ORDER OF THE FEDERAL COMMUNICATIONS COMMISSION SEAN A. LEV GENERAL COUNSEL PETER KARANJIA DEPUTY GENERAL COUNSEL RICHARD K. WELCH DEPUTY ASSOCIATE GENERAL COUNSEL LAUREL R. BERGOLD COUNSEL RENATA B. HESSE ACTING ASSISTANT ATTORNEY GENERAL ROBERT B. NICHOLSON NICKOLAI G. LEVIN ATTORNEYS UNITED STATES DEPARTMENT OF JUSTICE WASHINGTON, D.C. 20530 FEDERAL COMMUNICATIONS COMMISSION WASHINGTON, D.C. 20554 (202) 418-1740 C E R T I FI C A T E AS TO PARTIE S , RULIN G S , AND RELATE D CASES A. Partie s and Amici All partie s and inter v e n o r s appea r i n g befor e the Federal Commissi o n and in this Court are listed in th e Brief for The C onferen c e Group. B . Ruling Under Revie w Request for Review by InterCall, Inc. of Decision of Universal Service Administrator, Order, 23 FCC Rcd 10731 (2008) (“ Order ”) (J.A. 195), recon. denied, 27 FCC Rcd 898 (2012) (“ Reconsideration Order”) (J.A. 313). C. Related Cases The order on revie w has not been befor e this Court previ o u s l y. Counsel are not aware of any relat e d ca ses pendi n g befor e this Court or any other Court. i TABLE OF CONTENTS Table of Au thorities......................................................................................... iii Glossa ry ........................................................................................................... ix STATEMENT OF ISSUES PRESENTED.......................................................1 STATUTES AND REGULATIONS ................................................................2 COUNTERSTATEMENT ................................................................................3 A. Backgrou nd ...............................................................................3 1. Statutor y and Regul ato r y Backgr ound .............................3 2. InterCall’s Audio Br idging Service ................................11 B. This Proceed ing ......................................................................12 1. Proceeding s Bef ore USAC .............................................12 2. Proceedi n g s Befor e The FCC.........................................13 a. Proceedi n g s Leadin g To The Order.......................13 b. Reconsid e r a t i o n Proceedi ngs .................................17 SUMMARY OF ARGUMENT ......................................................................20 ARGUMENT ..................................................................................................23 I. THE FCC’S ORDER IS REVIEWED UNDER DEFERENTIAL STANDARDS. ....................................................23 II. THE FCC ACTED WITHIN ITS AUTHORITY AND USED PROPER PROCEDURES IN RULING THAT THE AUDIO BRIDGING SERVICES AT ISSUE ARE TELECOMMUNICATIONS. ................................................26 A. The FCC Had Clear Au thori ty To Decide Whether InterCall’s Audio Bridging Service Is Teleco mmuni c a tions. ..............................................................27 i i B. Because The FCC’s Orders Were Adjudica t o r y, The APA’s Notice-And- Comment Requireme n t s For Rulemaki n g s Are Inapplicable. ........................................30 1. The Order Is An Adjudica t o r y Ruling. ..........................30 2. The FCC Did Not Enact A Substantive Rule. ................37 3. The FCC Used Proce dur e s That Both Complied With The APA And Gave Interest e d Parties Notice And A Full Opportuni t y To Participate .............................................41 III. THE FCC REASONABLY DETERMINED THAT INTERCALL PROVIDES TELECOMMUNICATIONS. .........................................................44 A. The FCC Reasonabl y Classifi e d InterCall’s Audio Bridging Service As Teleco mmuni cations. .................44 B. The FCC Reasonably Deter mi n ed That InterCall’s Informa t i o n Service s Were Not Functio n a ll y Integra te d With Its Audio Bridgin g Service.....................................................................................50 CONCLUSION ...............................................................................................59 i i i TAB L E OF AUTH O R I T I E S CASES Am. Airlines, Inc. v. DOT, 202 F.3d 788 (5th Cir. 2000)............................................................................................................35 Am. Trading Transp. Co., Inc. v. United States, 841 F.2d 421 (D.C. Ci r. 1988 ) ...........................................................................43 American Mining Cong. v. Mine Safety & Health Admin., 995 F.2d 1106 (D.C . Cir. 1993)..................................................... 38 * AT&T Co., v. FCC, 454 F.3d 329 (D.C. Cir. 2006) ....................... 6, 31, 34, 46 Brand X Internet Services v. FCC, 345 F.3d 1120 (9th Cir. 2003), rev’d, Nat’l Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967 (2005) ............................................................................................................6 British Caledonian Airways, Ltd. v. CAB, 584 F.2d 982 (D.C. Cir. 1978)............................................................................. 35, 36 Capital Network Sys. v. FCC, 28 F.3d 201 (D.C. Cir. 1994) .....................................................................................................25 CCIA v. FCC, 693 F.2d 198 (D.C. Cir. 1982), cert. denied, Nat’l Ass’n of Regulatory Util. Comm’rs v. FCC, 461 U.S. 938 (1983) .........................................................................6 Central Texas Tel. Co-op., Inc. v. FCC, 402 F.3d 205 (D.C. Cir. 2005)............................................................................... 3, 36 * Chevron USA, Inc. v. NRDC, 467 U.S. 837 (1984) ........................................24 Chisholm v. FCC, 538 F.2d 349 (D.C. Cir. 1976) ................................... 31, 36 Christopher v. SmithKline Beecham Corp., 132 S. Ct. 2156 (2012 )............................................................................... 25, 26, 41 FCC v. Fox Television Stations, Inc., 556 U.S. 502 (2009) ..........................................................................................................30 FCC v. Nat’l Citizens Comm. for Broadcasting, 436 U.S. 775 (1978) .............................................................................................4 * FCC v. Schreiber, 381 U.S. 279 ( 1965) ..................................................... 4, 41 Fertilizer Institute v. EPA, 935 F.2d 1303 (D.C. Cir. 1991)..................................................................................................... 37, 39 i v Funeral Consumer Alliance, Inc. v. FTC, 481 F.3d 860 (D.C. Ci r. 2007) ....................................................................................39 Gates & Fox Co. v. Occupational Safety and Health Review Comm’n, 790 F.2d 154 (D.C. Cir. 1986 ) ........................................26 General Am. Transp. Corp. v. ICC, 872 F.2d 1048 (D.C. Cir. 1989)...........................................................................................32 * Goodman v. FCC, 182 F.3d 987 (D.C. Ci r. 1999) ............................. 32, 34, 36 Harborlite Corp. v. ICC, 613 F.2d 1088 (D.C. Cir. 1979) ............................................................................................................31 Kidd Commc’ns v. FCC, 427 F.3d 1 (D.C. Cir. 2005)............................................................................................................36 Motor Vehicle Mfrs. Ass’n of the U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) ............................................24 Nat’l Ass’n of Regulatory Util. Comm’rs v. FCC, 461 U.S. 938 (1 983) ......................................................................................6 * Nat’l Cable & Telecomms. Ass'n v. Brand X Internet Servs., 545 U.S. 967 (2005)................ 3, 6, 8, 24, 29, 51, 54, 55, 58 Nat’l Tel. Co-op. Ass’n v. FCC, 563 F.3d 536 (D.C. Cir. 2009) .....................................................................................................23 New York State Comm’n on Cable Television v. FCC, 749 F.2d 804 (1984 )...........................................................................31 NLRB v. Bell Aerospace Co., 416 U.S. 267 (1974) ........................................32 NLRB v. Wyman-Gordon Co., 394 U.S. 759 (1969) .......................................32 Occidental Petroleum Corp. v. SEC, 873 F.2d 325 (D.C. Cir. 1989)...................................................................................... 5, 30 Paralyzed Veterans of Am. v. D.C. Arena, LP, 117 F.3d 579 (D.C. Ci r. 1997 ) ...........................................................................38 Pension Benefit Guar. Corp. v. LTV Corp., 496 U.S. 633 (1990 ) ...................................................................................................42 * Qwest Services Corp. v. FCC, 509 F.3d 531 (D.C. Cir. 2007)................................................................ 18, 32, 33, 34, 35, 36, 37 Star Wireless, LCC v. FCC, 522 F.3d 469 (D.C. Cir. 2008)............................................................................................................25 v Talk Am., Inc. v. Michigan Bell Tel. Co., 131 S. Ct. 2254 (2011) .................................................................................................25 Texas Office of Public Utility Council v. FCC, 183 F.3d 393 (5th Cir. 1999) ................................................................................ 9 Time Warner Entm’t Co., L.P. v. FCC, 240 F.3d 1126 (D.C. Ci r. 2001) ..................................................................................33 United States Telecom Ass’n v. FCC, 400 F.3d 29 (D.C. Cir. 2005)...........................................................................................30 * Vermont Yankee Nuclear Power Corp. v. Nat. Res. Def. Council, 435 U.S. 519 (1 978)....................................................... 41, 42 Virgin Islands Tel. Corp. v. FCC, 198 F.3d 921 (D.C. Cir. 1999).............................................................................................8 ADMI NISTRATI VE DECI SIONS Amendment of Section 64.702 of the Commission’s Rules and Regulations (Second Computer Inquiry), Final Decision, 77 FCC 2d 384 (1980), aff’d sub nom. CCIA v. FCC, 693 F.2d 198 (D.C. Cir. 1982), cert. denied, Nat’l Ass’n of Regulatory Util. Comm’rs v. FCC, 461 U.S. 938 (1983) ........................................................................................................6, 7 Appropriate Regulatory Treatment for Broadband Access to the Internet Over Wireless Networks, Declarato r y Ruling, 22 FCC Rcd 5901 (2007) ..........................................34 AT&T Corp. v. Jefferson Tel. Co., 16 FCC Rcd 16130 (20 01) ...............................................................................................40 Changes to the Board of Directors of the National Exchange Carrier Ass’n, Inc. Federal-State Joint Bd. on Universal Service, Report and Order and Second Order on Reconsid e r a t io n, 12 FCC Rcd 18400 (19 97) ...............................................................................................10 Federal-State Joint Board on Universal Service, 13 FCC Rcd 11830 (1998) .................................................................................6 v i Federal-State Joint Board on Universal Service, Report and Order, 12 FCC Rcd 8776 (1997), aff’d in part and rev’d in part, Texas Office of Public Utility Council v. FCC, 183 F.3d 393 (5th Cir. 1999)....................................................................................................... 9 In the Matter of AT&T Corp., Order and Notice of Proposed Rulemaki n g, 20 FCC Rcd 4826 (2005), aff’d sub nom. AT&T Co. v. FCC, 454 F.3d 329 (D.C. Cir. 2006).................................................................................... 34, 46 Inquiry Concerning High Speed Access to the Internet Over Cable and Other Facilities, Internet Over Cable De clarat o r y Ruling, 17 FCC Rcd 4798 (2002), aff’d in part & vacated in part sub nom. Brand X Internet Services v. FCC, 345 F.3d 1120 (9th Cir. 2003), rev’d, Nat’l Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967 (2005) ................................................................................ 6, 54, 55 * North Am. Telecomms. Ass’n, Memorand u m Opinion and Order, 101 FCC 2d 349 (1985), recon. denied, North Am. Telecomms. Ass’n, Memorand u m Opinion and Order, 3 FCC Rcd 4385 (1988) ................................................................................ 7, 45, 46, 57 North Am. Telecomms. Ass’n, Memorand u m Opinion and Order, 3 FCC Rcd 4385 (1988) ................................................7 Petition for Declaratory Ruling That Pulver.com’s Free World Dialup Is Neither Telecommunications Nor A Telecommunications Service, Memorand u m Opinion and Order, 19 FCC Rcd 3307 (2004) .................................................................................50 Qwest Commc’ns Corp. v. Farmers & Merchants Mutual Tel., 22 FCC Rcd 17973 (2007)............................................... 40, 49 * Regulation of Prepaid Calling Card Services, Declarat o r y Ruling and Report and Order, 21 FCC Rcd 7290 (2006), aff’d in part & vacated in part, Qwest Services Corp. v. FCC, 509 F.3d 531 (D.C. Cir. 2007).................................................................. 18, 34, 51, 54, 56 v i i Schools and Libraries Universal Service, Report and Order and Further Notice of Propose d Rulemaki n g, 25 FCC Rcd 6562 ( 2009).......................................................19 United Power Line Council’s Petition for Declaratory Ruling Regarding the Classification of Broadband over Power Line Internet Access Service as An Information Service, Memoran d u m Opinion and Order, 21 FCC Rcd 13281 (2006) ..........................................34 S T A T U T E S AND REGUL A T I O N S 5 U.S.C. § 553 ...................................................................................................4 5 U.S.C. § 553(b)...............................................................................................4 5 U.S.C. § 553( b)(A) .......................................................................................34 5 U.S.C. § 553(c)...............................................................................................4 5 U.S.C. § 554(a)...............................................................................................4 5 U.S.C. § 554( b)(3)..........................................................................................4 5 U.S.C. § 554( c)(1) ..........................................................................................4 5 U.S.C. § 554(e).............................................................................................29 5 U.S.C. § 557(c )(1) & (2 ) ................................................................................5 5 U.S.C. § 706( 2)(A) .......................................................................................23 28 U.S.C. § 2344 .............................................................................................29 * 47 U.S.C. § 151 .................................................................................... 3, 26, 29 47 U.S.C. § 153(24) ..........................................................................................6 * 47 U.S.C. § 153( 50) ........................................................... 5, 15, 40, 44, 45, 50 47 U.S.C. § 153(51) ..........................................................................................8 47 U.S.C. § 153(53) ..........................................................................................5 47 U.S.C. § 154(i) .............................................................................................3 * 47 U.S.C. § 154(j) ...................................................................................... 4, 41 47 U.S.C. § 155( c)(7) ......................................................................................29 47 U.S.C. § 201 .................................................................................................8 47 U.S.C. § 201(b).............................................................................................3 v i i i 47 U.S.C. § 254(d).............................................................................................8 47 C.F.R. § 54.701 .........................................................................................10 47 C.F.R. § 1.2 ................................................................................................29 * 47 C.F.R. § 54.706 (a) ........................................................................... 9, 28, 40 47 C.F.R. § 54.706(b)........................................................................................9 47 C.F.R. § 54.707 ..........................................................................................10 47 C.F.R. § 54.722 ..........................................................................................11 47 C.F.R. § 54.722(a) ......................................................................................28 47 C.F.R. § 54.723(b )......................................................................... 11, 28, 29 47 C.F.R. § 64.702(a ) ........................................................................................7 * Cases and other authorities principally relied upon are marked with asterisks. i x G L O S S A RY Act Communic a t i o n s Act of 1934, 47 U.S.C. §§ 151 et seq. APA Administrat i v e Procedure Act Cisco Cisco Systems, Inc. Commissi o n Federal Communi c a t i o n s Commiss i o n Communic a t i o n s Act Communic a t i o n s Act of 1934, 47 U.S.C. §§ 151 et seq. FCC Federal Communi c a t i o n s Commiss i o n IAN Internat i o n a l Audiotex t Network USAC Universal Service Administ r a t i v e Company USF Universa l Service Fund IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT NO. 12-1124 THE CONFERENCE GROUP, LLC, PETITIONER, V. FEDERAL COMMUNICATIONS COMMISSION AND UNITED STATES OF AMERICA, RESPONDENTS. ON PETITION FOR REVIEW OF AN ORDER OF THE FEDERAL COMMUNICATIONS COMMISSION BRIEF FOR RESPONDENTS S TAT E M E N T OF ISSUES PRES ENTE D InterCall, Inc. provid e s a teleph o n e confe r e n c e calli n g servi c e or “audio bridgi n g servic e ” that, among other funct i o n s, allows multi p l e calle r s to partici p a t e in the same telepho n e call. In an order issue d in an adjudi c a t i v e proce e d i n g arisi n g out of an audit of InterCall, the Federal Communicati o n s Commissi o n (“FCC” or “Commissio n ”) c onclu d e d that InterCall’s audio bridg i n g servi c e s are “telec o m m u n i c a t i o n s ” and thus InterCall must contri b u t e direct l y to the Universal Service Fund (“USF”). The Commiss i o n also made clear that the preced e n t i a l e ffec t of its decis i o n requir e s simil a r l y 2 situate d audio bridg in g comp a n i e s to contr i b u t e direc t l y to the USF. Request for Review by InterCall, Inc. of Decision of Universal Service Administrator, Order, 23 FCC Rcd 10731 (2008) (“ Order ”) (J.A. 195), recon. denied, 27 FCC Rcd 898 (2012) (“ Reconsideration Order ”) (J.A. 313). The specifi c subje c t of the FCC’s adjudi c a t o r y decis i o n, InterCall, does not seek judici a l review of the Order. Rather, The Conferenc e Gr oup, a self-descri b e d audio confe r e n c e servi c e provi d e r, has file d a petit i o n for revie w. The issues on revie w are as follo w s : 1. Whether the Commiss i o n prope r l y deter mi n e d that its order s were issue d in an adjud i c a t i o n and there f o r e were not subjec t to the notice-and- comme n t proce d u r e s for rulem a k i n g s under secti o n 4 of the Administ r a t i v e Procedur e Act (“APA”)? 2. Whether the Commissi o n acted withi n its discr e t i o n in deter mi n i n g that Intercal l ’ s audio bridgin g servic e s are teleco m m u n i c a t i o n s and theref o r e are subject to USF contribu t i o n obliga t i o n s ? S TATU T E S AND REGUL AT I O N S Pertinen t statu t e s and regul a t i o n s are set forth in the statu t o r y addend u m to this Brief. 3 C O U N T E R S TAT E M E N T A. B a c kg ro u n d 1. St a t u t o r y and Regul a t o r y Backg ro u n d FCC Powers and Procedur e s. The Communic a t i o n s Act of 1934, as amend e d (“Communic a t i o n s Act” or “Act”), 47 U.S.C. §§ 151, et seq., establ i s h e s a framew o r k for the regul a t i o n of inters t a t e teleco m mu n i c a t i o n s servi c e s. Congress entru s t e d the Commiss i o n with “the autho r i t y to ‘exec u t e and enfor c e ’ the Communic a t i o n s Act,” Nat’l Cable & Telecomms. Ass'n v. Brand X Internet Servs., 545 U.S. 967, 980 (2005) (quotin g 47 U.S.C. § 151) (“ Brand X”), and gave the FCC various regul a t o r y tools to perfo r m that respo n s i b i l i t y. 1 The Commissi on, for examp l e, has power to “p resc r i b e such rules and regu l a t i o n s as may be necess ar y in the public interes t.” 47 U.S.C. § 201(b). The FCC also has separ a t e autho r i t y to condu c t adjud i c a t i o n s and to issue adjud i c a t o r y order s. E.g., Central Texas Tel. Co-op., Inc. v. FCC, 402 F.3d 205, 210 (D.C. Cir. 2005). Section 4(j) of the Communic a t i o n s Act gives the FCC broad autho r i t y to “cond u c t its proce e d i n g s in such manner as will best conduc e 1 See, e.g., 47 U.S.C. § 154(i) (author i z i n g th e Commiss i o n to “perf o r m any and all acts, make such rules and regul a t i o n s, and issue such order s, not incon s i s t en t with this [Act], as may be neces s a r y in the execu t i o n of its functi o n s ”). 4 to the proper dispat c h of busine s s a nd to the ends of justic e.” 47 U.S.C. § 154(j). The Supreme Court has ch arac t e r i z e d sectio n 4(j) as a “dele g a t i o n of broad proce d u r a l autho r i t y,” FCC v. Schreiber, 381 U.S. 279, 289 (1965), and has speci f i c a l l y recog n i z e d th e Commiss i o n ’ s “subs t a n t i a l discr e t i o n as to wh eth e r to proce e d by rulem a k i n g or adjudi c a t i o n,” FCC v. Nat’l Citizens Comm. for Broadcasting, 436 U.S. 775, 808 n.29 (1978) (“ NCCB ”). Like all ag enci e s, the FCC must adhere to the proced u r a l requi r e m e n t s of the APA. Section 4 of the APA require s an agenc y to follow certai n proced u r e s before it a dopt s a “subst a n t i v e ” or “legi s l a t i v e ” rule. 5 U.S.C. § 553. For exampl e, the agenc y mu st publis h a “[g]e n e r a l notic e of propos e d rule making ” in th e Federal Register, 5 U.S.C. § 553(b), and “[mu s t ] give inter e s t e d perso n s an opport u n i t y to partic i p a t e in the rule makin g throu g h submi s s i o n [ s ],” id., § 553(c). Sections 5, 7, and 8 of the AP A establi s h diffe r e n t proce d u r a l requi r e m e n t s for formal trial-type adjud ic a t i o n s gener a l l y “requ i r e d by statu t e to be deter mi n e d on the r ecor d.” 5 U.S.C. § 554(a). The APA require s that parti e s to forma l adjud i c a t i o n s be given notic e of “the matte r s of fact and law assert e d,” id., § 554(b)(3), an oppor tun i t y for “the submi s s i o n and consi d e r a t i o n of facts [and] argume n t s,” id., § 554(c)(1), 5 and an oppor t u n i ty to submi t “prop o s e d findi n g s and concl u s i o n s ” or “excep t i o n s,” id., § 557(c)(1) & (2). In contras t to substa n t i v e rulema kings and formal ad judications, the APA contains no specifi c notice-a nd-comme n t requi r e m e n t s gover n in g inform a l agency adjudi c a t i o n. Occidental Petroleum Corp. v. SEC, 873 F.2d 325, 337 (D.C. Cir. 1989). Telecomm u n i c a t i o n s and USF Contribu t io n Obligat i o n s. “Telecommu n i c a t i o n s ” is “the tran s mi s s i o n, betwe e n or amon g poin ts speci f i e d by the user, of infor ma t i o n of the user’ s choos i n g, withou t change in the form or conten t of the infor m a t i o n as sent and recei v e d.” 47 U.S.C. § 153(50). A “teleco m m u n i c a t i o n s servic e ” is “the offeri n g of teleco mm u n i c a t i o n s for a fee di rectly to the public, or to such classe s of users as to be effect i v e l y availa b l e di rect l y to the public, regardl e s s of the facil i t i e s used.” 47 U.S.C. § 153( 53). In contrast with a teleco mm unications service, an “infor m a t i o n servic e ” is “the offeri n g of a capabi l i t y for genera t i n g, acquir i n g, st orin g, transf o r mi n g, proces s i n g, retrie v i n g, utiliz i n g, or maki n g avail a b l e infor ma t i o n via telec o m m u n i c a t i o n s, and inclu d e s elect r o n i c publi s h i n g, but does not includ e any use of any such cap abi l i t y for the man age m e n t, contro l, or opera t i o n of a telec o m m u n i c a t i o n s sy stem or the managem e n t of a 6 telec o m m u n i c a t i o n s servi c e.” 47 U.S .C. § 153(24). “T elecom m u n i c a t i o n s servic e s ” and “infor m a t i o n servic e s ” are “two mutu all y exclus i v e cat egor i e s of service.” Inquiry Concerning High Speed Access to the Internet Over Cable and Other Facilities, Internet Over Cable Declarat o r y Ruling, 17 FCC Rcd 4798, 4823 (¶ 41) (2002) (“ Cable Modem Order ”), aff’d in part & vacated in part sub nom. Brand X Internet Services v. FCC, 345 F.3d 1120 (9th Cir. 2003), rev’d, Brand X, 545 U.S. 967. The Commissio n interp r e t s the teleco m mu n i c a t i o n s servi c e / i n f o r ma t i o n servi c e dicho t o my in the Communic a t i o n s Act in essen c e as codif y i n g the regul a t o r y distin c t i o n that the ag ency had estab l i s h e d in its 1980 Computer II Order2 between “basic” co mmon carrier co mmunicati ons services and “en h anced ser v ices.” 3 The Commissi o n in the Computer II Order describ e d a basic servic e as a “pure trans mi s s i o n capab i l i t y over a co mmun i c a t i o n s path that is virtua l l y trans p a r e n t in terms of its inter a c t i o n with custo m e r-suppl i e d infor ma t i o n.” 2 Amendment of Section 64.702 of the Commission’s Rules and Regulations (Second Computer Inquiry), Final Decision, 77 FCC 2d 384 (1980) (“ Computer II Order ”), aff’d sub nom. CCIA v. FCC, 693 F.2d 198 (D.C. Cir. 1982), cert. denied, 461 U.S. 938 (1983). 3 See AT&T Co. v. FCC, 454 F.3d 329, 333 (D.C. Cir. 2006); see also Federal-State Joint Board on Universal Service, 13 FCC Rcd 11830, 11516 (¶ 33) (1998) (“[T]he diffe r e n t l y-worde d defin i t i o n s of ‘infor m a t i o n servi c e s ’ and ‘enhan c e d servi c e s ’ can and should be interp r e t e d to extend to the same funct i o n s.”) (citati o n and inte r n a l quota t i o n marks omitt e d) . 7 Computer II Order, 77 FCC 2d at 420 (¶ 96). In contra s t, an enhanc e d servic e “combi n e s basic servic e with co mpu t e r proce s s i n g appli c a t i o n s that act on the format, content, code, pr otoc o l or simil a r aspec t s of the subsc r i b e r ’ s trans mi t t e d infor ma t i o n, or provi d e the subsc r i b e r addit i o n a l, differ e n t, or restru c tu r e d inform a t i o n, or involv e subsc r i b e r inter a c t i o n with store d infor ma t i o n.” Id. at 387 (¶ 5). See 47 C.F.R. § 64.702(a). Even when a servi c e fit withi n th e “liter a l ” defini t i o n of enhanc e d servic e s, howeve r, the FCC under the Computer II r e g i m e clas sifi e d that service as basic if the objec t of the appli c a t i o n was to facil i t a t e the provis i o n of the basic servi c e witho u t alteri n g its fundam e n t a l charac t e r. North Am. Telecomms. Ass’n, Memorand u m Opinion and Order, 101 FCC 2d 349, 359-60 (¶¶ 24-28) (1985) (“ NATA Centrex Order ”), recon. denied, 3 FCC Rcd 4385 (1988). For exampl e, if the purpos e of an enhanc e d funct i o n (such as a compu t e r proce s s i n g funct i o n) was “simp l y to facil i t a t e the routing ” of a basic teleph o n e call so that “each call is no mo re than the creat i o n of trans mi s s i o n chann e l c hosen by the custome r,” the FCC deemed the enhanc e d functi o n to be an “adjun c t to a basic serv ic e ” and it did not classif y the service itsel f as an “en h anc e d ser v ice.” Id. a t 362 (¶ 31). Moreover, under the Computer II f r a me w o r k, the FCC classif i e d 8 “both basic and enhan c e d servi c e s by referenc e to how the co nsumer percei v e s the servic e being offer e d.” Brand X, 545 U.S. at 976. The classif i c a t i o n of a service as telec o m mu n i c a t i o n s or as a telec o m m u n i c a t i o n s servi c e has impor t a n t regul a t o r y conse q u e n c e s. Section 254(d) requir e s “[e]v e r y tel ec o m mu n i c a t i o n s carri e r that provi d e s interst a t e teleco m mu n i c a t i o n s s e r v i c e s ” t o contr i b u t e to the feder a l univers a l service program — a program that helps to suppo r t the provi s io n of certai n co mmun i c a t i o n s servic e s to schoo l s, librar i e s, and perso n s in rural and other high-cost servi c e areas. 47 U.S.C. § 254(d). A “teleco m m u n i c a t i o n s carrie r ” is, subject to except i o n s inappl i c a b l e here, defin e d as any “prov id e r of teleco m mu n i c a t i o n s servic e s,” id., § 153(51), and is subjec t to regula t i o n as a commo n carri e r under Title II of the Communic a t i o n s Act, 47 U.S.C. § 201 et seq. See Virgin Islands Tel. Corp. v. FCC, 198 F.3d 921, 926-927 (D.C. Cir. 1999). Section 254(d) also author i z e s the FCC to impose a univer s a l servi c e contr i b u t io n requi r em e n t upon “[a]n y othe r prov i d er of inter s tat e teleco mm unications” — i.e., those telec o m mu n i c a t i o n s provid e r s that do not qualif y as “telec o m m u n i c a t i o n s carri e r s ” — “ if the public inter e s t so requi r e s.” 47 U.S.C. § 254(d). Pursuant to that autho r i t y, the Commissi o n gener a l l y has impos e d that requi r e m e n t upon “prov id e r s of inter s t a t e 9 telec o m m u n i c a t i o n s for a fee on a non- common carrie r basis.” 47 C.F.R. § 54.706(a). Thus, with excep t i o n s not applic a b l e to this case, “any entity that provide s inters t a t e teleco m mu n i c a t i o n s to users . . . for a fee” must contri b u t e to the USF, whether it provid e s such telec o m mu n i c a t i o n s on a commo n carri e r basis or not. Federal-State Joint Board on Universal Service, Report and Order, 12 FCC Rcd 8776, 9178 (¶ 786) (1997) (“ Universal Service First Report and Order ”), aff’d in part and rev’d in part, Texas Office of Public Utility Council v. FCC, 183 F.3d 393 (5th Cir. 1999). Put differ e n t ly, an entit y can be requi r e d to contr ib u t e to USF as long as it provid e s tele c o m mu n i c a t i o n s , regard l e s s of wheth e r it provid e s a telec o m m u n i c a t i o n s service. The Commissi o n requi r e s telec o m mu n i c a t i o n s provi d e r s to contr ib u t e to the USF on the basis of the revenu e s they receiv e from end users of their intersta t e teleco mmu n i c a t i o n s services. See 47 C.F.R. § 54.706(b). The Commissi o n has estab l i s h e d a speci f i c method o l o g y for comput i n g those USF contri b u t io n s, and has adopt e d forms that telec o m mu n i c a t i o n s provid e r s must file to show their co mp l i a n c e with the USF require men t s. Changes to the Board of Directors of the National Exchange Carrier Ass’n, Inc. Federal- State Joint Bd. on Universal Service, Report and Order and Second Order on Reconsid e r a t i o n, 12 F CC Rcd 18400 (1997) (“ Second Order on 10 Reconsideration ”). See Reconsideration Order, 27 FCC Rcd at 899 (¶ 4) (J.A. 313-14).4 The Commissio n ’ s staff is author i z e d to perio d i c a l l y revis e these forms and their associ a t e d instru c t i o n s to reflec t Commissi o n change s and clarif i c a t i o n s in the contri b u t i o n oblig a t i o n s. Order, 23 FCC Rcd at 10733 (¶ 3) (J.A. 195); Second Order on Reconsideration, 12 FCC Rcd at 18442 (¶ 81). In 2002, the Commiss i o n ’ s st aff revis e d FCC Form 499-A and 499-Q to list “toll teleco n f e r e n c i n g ” as one of the illust r a t i v e ex amp l e s of teleco mm unications that are su bject to direc t USF contrib u t ion s. Order, 23 FCC Rcd at 10732 (¶ 4) (J.A. 196). See, e.g., Form 499-A Instruct i o n s at 20. The Commissi o n has desig n a t e d the Universal Service Administrative Company (“USAC”) as ad ministrato r of the FCC’s univers a l servic e progr a ms. 47 C.F.R. § 54.701. USAC is “sole l y respo n s ib l e ” for the billi n g and colle c t i o n proce s s, Second Order on Reconsideration, 12 FCC Rcd at 18424 (¶ 42), and is autho r i z e d to, inter alia, conduct audits of carrier s conce r n i n g their unive r s a l servi c e contr i b u t i o n s. See 47 C.F.R. § 54.707. Aggrieve d perso n s can appea l direc t l y to the Commissi o n any advers e 4 Contrib u t in g prov i d er s repo r t thei r reven u e s for direc t USF contrib u t ion purpo s e s using FCC Form 499-A (filed annua l l y) and FCC Form 499-Q (filed quart e r l y). See Reconsideration Order, 27 FCC Rcd at 899, n.11 (J.A. 314, 317). 11 decisio n s of USAC “that raise novel que sti o n s of fact, law or policy.” 47 C.F.R. § 54.722. The FCC conduct s de novo r e v i e w of those direct app eal s. 47 C.F.R. § 54.723(b). 2 . I n t e r C a l l ’s Audio Bridg i n g Servi c e InterCall’s audio bridg i n g servic e is a form of telep h o n e “conf e r e n c i n g servic e that allows multip l e end user s to commu n i c a t e ” with each other. InterCall Request for Review (Feb. 1, 2008) at 4 (J.A. 17). InterCall suppl i e s the confer e n c e call partic i p a n t s select e d by its custom e r with local or toll free teleph o n e servic e that InterCall first obtai n s from one or more telec o m m u n i c a t i o n s vendo r s. Id. a t 5 (J.A. 18). Like an ordin a r y telep h o n e servi c e, InterCall’s confe r e n c i n g se rvice enables persons to communi c a t e over teleph o n e lines witho u t chang e in th e form or conte n t of the infor ma t i o n as sent or receive d. See Order, 23 FCC Rcd at 10734 (¶ 11) (J.A. 197). However, inste a d of the two-way commu n i c a t i o n s of an ordina r y teleph o n e call, InterCall’s con f ere n c i n g service permi t s thre e or more pers o n s to commu n i c a t e simu l t a n e o u s l y. As InterCall descr i b e d its own conf ere n c e calling service, the service “empl o y [ s ] a device — an audio bridg e — that links [the] multi p l e commu n i c a t i o n s toget h e r.” InterCall Re quest for Review (Feb. 1, 2008) at 4 (J.A. 17). In additi o n to this linki n g of multi p l e parti c i p a n t s, Interca l l ’ s 12 audio bridg e “perf o r ms confe r e n c e va li d a t i o n func ti o n s ” (for examp l e, users must enter an ident i f i c a t i o n code to pa rti c i p a t e in a call), and “coll e c t s billi n g and parti c i p a n t infor m a t i o n for each bridge d call.” Id. InterCall also provid e s a numbe r of confe r e n c e contr o l f eatur e s, such as mut ing, recordi n g, erasin g and opera t o r assis t a n c e, Inter Call Request for Review at 4 (J.A. 17), but InterCall’s custom e r s can use the confe r e n c i n g servi c e “with or witho u t access i n g these featur e s.” Order, 23 FCC Rcd at 10735 (¶ 13) (J.A. 197). B. T h i s Procee d i n g 1. P ro c e e d i n g s Before USAC In 2007, USAC initiat e d an aud it of InterCall concer n i n g its oblig a t i o n s to make USF contrib u t io n s (and file the requi s i t e forms) based on the comp a n y ’ s provi s i o n of its audio bridg i n g servi c e. See Order, 23 FCC Rcd 10733 (¶ 5) (J.A. 197); Letter fr om USAC to Steven A. Augstino, Esq., counsel to InterCall, In c. at 1 (Jan. 15, 2008) at 1 (“ USAC Decision ”) (J.A. 6). InterCall’s predec e s s o r, ECI, Inc., had ack now l e d g e d that, in provid i n g audio bridg i n g servic e, it was actin g as a telec o m m u n i c a t i o n s provi d e r subje c t to the FCC Form 499 filin g requi r e m e n t s and assoc i a t e d USF contri b u t io n obli g a t i o n s. Id. a t 3 n.6 (J.A. 8). The company, however, stopp e d filin g Form 499 after it was acq ui r e d by InterCall on Decemb e r 1, 2004. Id. In front of USAC, InterCall ar gued that it was acting solel y as a 13 provid e r of infor ma t i o n servi c e s and th ere f o r e had no oblig a t i o n to regis te r as a USF contrib u to r or make assoc i a t e d contr ib u t ion s. Letter from Brad E. Mutschelk n a u s, Counsel to InterCall, Inc. to David Capozzi, Acting General Counsel, USAC (June 5, 2007) (J.A. 50). In a letter rulin g dated January 15, 2008, USAC held that InterCall’s audio bridg i n g servic e s are telec o m m u n i c a t i o n s, and thus InterCall was subjec t to USF obligat i o n s. USAC Decision at 1 (J.A. 6). USAC accordi n g l y direc t e d InterCall “to make all requi r e d Form 499 filin g s, inclu d i n g filin g any and all previ o u s FCC Form 499s that have come due since InterCall start e d provid i n g inters t a t e teleco m mu n i c a t i o n s.” Id. a t 3 (J.A. 8). 2 . P ro c e e d i n g s Before The FCC a. P ro c e e d i n g s Leadin g To The Order After InterCall sought FCC review of the USAC Decision, the Commiss i o n in Februar y 2008 invite d in ter e s t e d perso n s to file comme n t s and reply comme n t s on InterCall’s reque s t. Comment Sought on InterCall, Inc.’s Request for Review of a Decision by the Universal Service Administrative Company and Petition for Stay, Public Notice , 23 FCC Rcd 1895 (2008) (“ Public Notice I ”) (J.A. 170). In respon s e to that invita t i o n, eight parties filed comme n t s and/o r reply comme n t s. Order, App. (J.A. 14 200). The commen t s were divid e d on th e issue as to whethe r InterCall provid e s telec o m mu n i c a t i o n s that are subje c t to USF contri b u t i o n s. See, e.g., Premi er Global Services Comments at 5 (Feb. 25, 2008) (S.A. 005) (arguing that InterCall’s servic e s are infor m a t i o n servi c e s); Verizon Oppositi o n at 2-5 (Feb. 25, 2008) (J.A. 176-79) (arguin g that InterCall’s services ar e tel eco mmunications); Q w e s t Communic a t i o n s Interna t i o n a l Comments (Feb. 25, 2008) at 2 (S.A. 011) (taking no positi o n on whethe r InterCall’s servic e s are teleco m mu n i c a t i o n s or inform a t i o n servi c e s). On June 30, 2008, the Commissi o n re lea s e d an order denyi n g in part and grant in g in part Inter Call’s reques t for review. Order, 23 FCC Rcd 10731 (J.A. 195). The Commissi o n held that the audio bridg i n g servic e s provid e d by InterCall are teleco m m u n i c a t i o n s and thus are subjec t to the direc t USF contrib u t io n requi r em e n t s set forth in secti o n 254 of the Communic a t i o n s Act and the FCC’s impl em e n t i n g rule. Id. a t 10734-38 (¶¶ 10-22) (J.A. 197-99). 5 The Commissi o n explai n e d that InterCall’s servi c e fits the statu t o r y defin iti o n of “teleco mmuni cations”: “[it ] allows 5 The Commission ex plaine d that the re cor d did not show wheth e r InterCall provid e d telec o m mu n i c a t i o n s on a commo n carrie r or private carrie r bas is. Order, 23 FCC Rcd at 10734 (¶ 7) (J.A. 196) . The Commissio n conclu d e d, however, that InterCall has a direct U SF contrib u t ion obli g a t i o n whet h e r it is (a) a teleco m mu n i c a t i o n s carrie r that provi d e s telec o m mu n i c a t i o n s servic e s on a co mmon-carriag e basis, or (b) a private carrie r that offers telec o m m u n i c a t i o n s. Id. 15 end users to trans mi t a call (using tele ph o n e lines), to a point specif i e d by the user (the confer e n c e bridg e), withou t chang e in the form or conte n t of the infor ma t i o n as sent and recei v e d (voice trans mi s s i o n).” Id. a t 10734-35 (¶ 11) (J.A. 197). See 47 U.S.C. § 153(50). The Commissi o n expla i n e d that the purpos e and functi o n of InterCall’s au dio bridg e “is simp ly to facili t a t e the routing of ordinar y teleph o n e calls,” and thus does not affec t the statu s of InterCall’s offeri n g as teleco m m u n i c a t i o n s. Id. a t 10735 (¶ 11) (J.A. 197). The Commissio n also found that the ad diti o n a l funct i o n s and featur e s that InterCall provi d es in conju n c t i o n with its confe r e n c i n g servi c e do not trans f o r m its offer i n g into an infor ma t i o n servi c e. Id. a t 10735 (¶¶ 12-13) (J.A. 197). The Commissi o n point e d out th at all provider s that charge a fee for their servi c e s must colle c t billi n g -relat e d infor ma t i o n, such as data regar d i n g a custo me r ’ s usage, in order to provid e invoi c e s to its custo m e r s. Thus, the collec t i o n and storag e of such infor ma t i o n could not trans f o r m the offer i n g of telec o m m u n i c a t i o n s in to an infor ma t i o n servi c e. Id. a t 10735 (¶ 12) (J.A. 197). The Commissi o n furth e r deter mi n e d th at the other featur e s InterCall offer s in conju n c t i o n with its conf e r e n c i n g servi c e, such as mutin g, record i n g, erasin g, and acces s i n g opera t o r servi c e s, “are not suffi c i e n t l y 16 integr a t e d into the offer i n g to conve r t the offeri n g into an inform a t i o n service.” Id. a t 10735 (¶ 13) (J.A. 197). Thes e featu r e s, the Commissi o n expla i n e d, “do not alter the funda men t a l chara c t e r of InterCall’s telec o m m u n i c a t i o n s offer i n g.” Id. In that regard, the ag ency noted that these “sepa r a t e capab i l i t i e s are part of a packag e in which the custome r can still conduc t its confer e n c e call with or witho u t acces s i n g these featu r e s.” Id. a t 10735 (¶ 13) (J.A. 197). The Commissi o n there f o r e rejec t e d Intercal l ’ s argume n t that these distin c t enhance d feat ure s transfo r m e d the comp a n y ’ s audio bridg i n g servi c e into an infor ma t i o n servi c e. Id. Finally, the Commissi o n ma de clear that under the Order a l l “simi l a r l y situa t e d ” stand-alone audi o bridg i n g provid e r s must direc t l y contri b u t e to the USF. Id. a t 10737 (¶ 21) (J.A. 198). 6 The Commiss i o n expla i n e d that this would “promo t e the public intere s t by establ i s h i n g a level playi n g field and encou r a g i n g open comp e t i t i o n among [stan d-alone and integ r a t e d ] provid e r s of audio bridg in g servi c e s.” Id. a t 10739 (¶ 25) (J.A. 199). With respec t to the approp r i a t e remedy, the Comm iss i o n rever s e d USAC’s ruling that InterCall must dire c t l y contr i b u t e to the USF for past 6 Stand-alone audio bridg in g servi c e provid e r s are audio bridg in g servi c e provid e r s that purch a s e the under l y i n g telec o m mu n i c a t i o n s trans mi s s i o n servic e from anothe r entity. See Order, 23 FCC Rcd 10738 n.62 (J.A. 203). 17 periods. Observing that it had been uncl ea r prior to the issuan c e of the adjud i c a t o r y Order w h e t h e r stand-alone provid e r s of audio bridg in g servic e s were subject to direct USF contrib u t io n requi r e m e n t s, the Commiss i o n made an equit a b l e deter m i n a t i o n that InterCall was oblig a t e d to contri b u t e direct l y to the U SF only on a prosp e c t i v e basis. Id. a t 10738- 39 (¶¶ 24-25) (J.A. 199). In doing so, th e Commissio n made clear that th is oblig a t i o n likew i s e exten d e d to si mil a r l y situa t e d provi d e r s. See id. b . R e c o n s i d e r a t i o n Procee d i n g s InterCall did not seek recons i d e r a t i o n of the Order. On July 30, 2008, howeve r, the FCC receive d petit i o n s for recon s i d e r a t i o n of the Order from (1) Global Confere n c e Partner s (“GCP”) and (2) The Conferen c e Group, A+ Conferenc e Ltd, and Free Conferen c i n g Corporat i o n, filing jointly (collect i v e l y The Conferen c e Group). Global Conferen c e Partners Petitio n (July 30, 2008) (J.A. 204); Th e Conferen c e Group Petition (July 30, 2008) (J.A. 251). The Commissi o n invit e d publi c co mme n t on the petiti o n s, see Public Notice, DA 08-1875 (Aug. 8, 2008) (“ Public Notice II ”) (S.A. 015), and nine perso n s submi t t e d co mme n t s and/o r reply co mmen t s. For example, Cisco Syst ems, Inc. (“Cisco”) — the parent comp a n y of Cisco Webex, which has appeare d as an inter v e n o r in suppo r t of petiti o n e r in this case — expres s e d “supp o r t [ ]” for the Commiss i o n ’ s 18 “plainl y corre c t ” decis i o n which, in its view, “simp l y confi r ms that servic e s like Interca l l ’ s audio bridg i n g that share the same fundame n t a l charac t e r as tradit i o n a l teleco m mu n i c a t i o n s are subjec t to the same regul a t o r y oblig a t i o n s as tradi t i o n a l telec o m m u n i c a t i o n s.” Cisco Comments at 1, 3 (Sept. 8, 2008) (S.A. 018, 020). Cisco told the FCC that it was “clea r that the Commissi o n did not sub silentio n a r r o w or modif y its long-stand i n g tests ” for “[d]i s t i n g u i s h i n g betwe e n an infor ma t i o n servi c e and a teleco m mu n i c a t i o n s servic e.” Id. at 4 (S.A. 021). After consid e r i n g the petiti o n s and co mmen t s, the Commissi o n in January 2012 denied the recons i d e r a t i o n petit i o n s and reaff i r m e d that InterCall’s audio bridg i n g servic e is telec o m mu n i c a t i o n s. Reconsideration Order, 27 FCC Rcd 898 (J.A. 313). The Comm issi o n expla i n e d that wh eth e r a servic e is classi f i e d as “infor m a t i o n or telec o m m u n i c a t i o n s hinge s on wheth e r the trans mi s s i o n capab i l i t y is ‘suffic i e n t l y integr a t e d ’ with the infor ma t i o n servi c e capab i l i t i e s to make it reason a b l e to descri b e the two as a single, integr a t e d offer i n g.” Id. a t 903 (¶ 12) (J.A. 315) (quotin g Regulation of Prepaid Calling Card Services, Declarat o r y Ruling and Report and Order, 21 FCC Rcd 7290, 7296 (¶ 14) (2006) (“ Prepaid Calling Card Order”), aff’d in part & vacated in part, Qwest Services Corp. v. FCC, 509 F.3d 531 (D.C. Cir. 2007)). 19 The Commissi o n reiter a t e d that a provi d e r ’ s addit io n of enhan c e d featur e s to a teleco n f e r e n c i n g servi c e (such as funct i o n s enabl i n g calle r verif i c a t i o n, colle c t i o n of billin g a nd parti c i p a n t infor ma t i o n, opera t o r assist a n c e, and the ab ility to record, delete, play back, and mute) does not creat e a single integrated infor m a t i o n servi c e. Id. The FCC also clarif i e d that the bundl in g of “whit e b o a r d i n g 7 and other co mpu t e r capab i l i t i e s that may be used simul t a n e o u s l y with the voice tel eco nference [do not] tran s f o r m the servic e into an inform a t i o n servi ce ” because those service “ar e not suffic i e n t l y integ r a t e d with audio c onfe r e n c i n g servi c e s to be reason a b l y deter mi n e d a single produ c t.” Id. a t 904 (¶ 13) (J.A. 315). Indeed, the bridgi n g servi c e could be used “with or withou t ” those featur e s. See id. Consisten t with the Prepaid Calling Card Order, the Commissi o n held that a provid e r offer i n g a bundle d servi c e cont a i n i n g both telec o m mu n i c a t i o n s and infor ma t i o n servi c e s “may not treat the entire bundled servic e as an infor ma t i o n servi c e for purpo s es of U SF contrib u t ion asse s s m e n t, but must 7 “Whiteboa r d i n g ” permi t s confe r e n c e ca ll partic i p a n t s to intera c t with a screen on which a co mputer image (for ex amp l e, of other calle r s) appear s. See generally Schools and Libraries Universal Service, Report and Order and Further Notice of Proposed Rule mak i n g, 25 FCC Rcd 6562, 6577 n.118 (2009). 20 instea d appor t io n its end user reven u e s betwe e n telec o m mu n i c a t i o n s and non- teleco m m u n i c a t i o n s sourc e s.” Id. at 904, 905 (¶¶ 13, 16) (J.A. 316). The Commissio n reject e d the argume n t that the ag ency, in ruling that InterCall offer s telec o m mu n i c a t i o n s a nd thus must contr ib u t e to the USF — and that simil a r l y situa t e d audio brid g i n g servi c e provi d e r s likew i s e must do so — violat e d the APA by effect i v e l y i ssui n g a new subst a n t i v e rule witho u t prope r notic e and comme n t. Id. a t 904-05 (¶ 14) (J.A. 316). The Commiss i o n point e d out that it had not engag e d in rulemak i n g, but rathe r had issued an adjudi c a t o r y rulin g that “det er mi n e d the regula t o r y statu s of the servi c e in quest i o n based on exist i n g ru les and requi r e men t s and appli c a b l e preceden t.” Id. a t 905 (¶ 15) (J.A. 316). The Commiss i o n expla i n e d furth e r that the APA notice and co mment requi r e m e n t s do not apply when the FCC issues an adjudi c a t o r y rulin g. Id. a t 904 (¶ 15) (J.A. 316). S U M M A RY OF ARGUM E N T 1. The FCC indisp u ta b l y had autho r i t y to deter mi n e that InterCall’s audio bridg i n g servic e is an offer i n g of “telec o m m u n i c a t i o n s ” regar d l e s s of whethe r USAC likewis e had author i t y to rule on the regula t o r y class i f i c a t i o n of InterCall’s servi c e. Section 54. 722(a) of the FCC’s rules expli c i t l y authoriz e s the Commission to review de novo USAC rulings invol v in g novel questi o n s of law. More fundam e n t a l l y, Congress empow e r e d the 21 Commissi on to admi nis t e r and enfor ce the Commu n ications Act, and the FCC’s rulin g in this case is well within that deleg at e d author i t y. 2. The Order i s an adjudi c a t o r y ruling not subjec t to the APA require m e n t s for subst a n t i v e rulemak i n g. The Order a r o s e out of an audit of a specifi c co mpan y, InterCall, and the FCC based its rulin g that InterCall’s audio bridg i n g servic e was telec o m mu n i c a t i o n s on the speci f i c funct i o n s and featur e s of InterCall’s servic e. Th e FCC’s observ a t i o n that, like InterCall, simil a r l y situa t e d audio bridg in g servi c e provid e r s must contr i b u t e direc t l y to the USF does not transf o r m the FCC’s adjud i c a t o r y rulin g into a rulem a k i n g order. Instead, it merely reflec t s the fundam e n t a l ad mini s t r a t i v e law princi p l e that an adj udi c a t o r y order has preced e n t i a l effect on “simila r l y situat e d ” entities. The FCC’s ruling in this case also ha s none of the charact e r i s t i c s of a subst a n t ive rule. The FCC’s ruling neith e r creat e s any new rights or duties, nor does it amend any exist i n g rule or depar t from agenc y preced e n t. The FCC decided only that InterCall’s audio bridg in g servi c e is teleco m m u n i c a t i o n s as define d in the Communic a t i o n s Act, thus clarif y in g that InterCall and simil a r l y situa t e d provi d e r s are requi r e d by secti o n 254 of the Communic a t i o n s Act and secti o n 54.7 06 of the FCC’s rules to contr i b u t e directl y to the USF. That direct U SF contri b u ti o n requ i r e men t thus aris e s 22 from preex i s t i n g law (sectio n 254 and secti o n 54.706), and not from the Order o n revie w. Section 4(j) of the Communic a t i o n s Act gives the FCC broad discre t i o n to deter mi n e the proced u r e s it uses in its own procee d i n g s. Because the proced u r e s th e FCC used in the proceed i n g below co mpli e d with all appli c a b l e const i t u t i o n a l and st atu t o r y requi r e m e n t s for infor ma l adjudi c a t i o n, the Supreme Court’s decisi o n in Vermont Yankee r e q u i r e s the Court to defer to the agen cy ’ s choice of proced u r e s. The FCC reasona b l y classi f i e d Inte rCall’s audio bridg i n g servic e as teleco m m u n i c a t i o n s. InterCall offers ba sic trans mi s s i o n that enabl e s multi p l e caller s to partic i p a t e in the same telepho n e confer e n c e call. From the perspe c t i v e of the user, InterCall’s serv ic e essen t i a l l y is an ordina r y telep h o n e call (altho u g h it may invo l v e thre e or more partic i p a n t s). By linking the multi p l e calle r s toget h e r, the audio bridg e facil i t a t e s the provi s i o n of telec o m m u n i c a t i o n s witho u t alter i n g its fundam e n t a l charac t e r. Although InterCall also provid e s e nhan c e d servi c e ca pab i l i t i e s (such as mutin g, record i n g, and opera t o r assis t a n c e) in conju n c t i o n with its offer in g of teleco mm unications, the Commission re aso n a b l y deter mi n e d that those capab i l i t i e s are not suffic i e n t l y integ r a t e d with the confer e n c i n g servi c e to so as to trans f o r m the entir e offer i n g into an “info r mat i o n servi c e.” Applying 23 the functi o n a l integ r a t i o n test establ i s h e d in prior FCC cases and appli e d by the Supreme Court in Brand X, the Commissi o n reaso n a b l y took into accoun t wheth e r InterCall’s custo me r s condu c t c onfe r e n c e calls with or witho u t using any of those enhanc e d capabi l i t i e s. The agency found that, if custom e r s use a servic e withou t any of the enhanc e d functi o n a l i t i e s, the servic e is pure trans mi s s i o n and the telec o m m u n i c a t i o n s and inform a t i o n servic e el emen t s are not functi o n a l l y integr a t e d. The st anda r d appli e d by the Commissi o n was fully consi s t e n t with the agency ’ s prece d e n t and sound polic y. Communic a t i o n s provi d e r s shoul d no t be able to evade their USF contri b u t io n oblig a t i o n s (which hinge he re on class i f i c a t i o n of an offer i n g as “tele c o m mu n i c a t i o n s ”) by the simp l e expe d i e n t of repac k a g i n g their offer i n g to inclu d e add-ons that custo me r s may not use in order to acces s the basic telec o m m u n i c a t i o n s funct i o n. ARGUM ENT I. TH E FCC’S ORDER IS REVIEW E D UNDER DEFER E N T I A L STAND A R D S . 1. The Conferen c e Group bears a he avy burde n to estab l i s h that the Order o n revie w is “arbit r a r y, capric i o u s [or] an abuse of discre t i o n.” 5 U.S.C. § 706(2)(A). Under this “hi ghly defer e n t i a l ” stand a r d, the court presumes the validity of agency action. E.g., Nat’l Tel. Co-op. Ass’n v. FCC, 563 F.3d 536, 541 (D.C. Cir. 2009). The court must affir m unles s the 24 Commissi o n faile d to consi d e r relev a n t factor s or made a clear error in judgme n t. E.g., Motor Vehicle Mfrs. Ass’n of the U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). 2. Review of the Commissi o n ’ s inte r p r e tat i o n of the Communic a t i o n s Act is gover n e d by two-step analy s i s set forth in Chevron USA, Inc. v. NRDC, 467 U.S. 837 (1984). Under Chevron, the Court must determi n e “wheth e r Congress has direc t l y spoke n to the pr ecis e quest i o n at issue.” 467 U.S. at 843 n.9, 842. If it has, “the court, as well as the agen cy, must give effect to the unamb i g u o u s l y expre s s e d inten t of Congress.” Id. a t 842-43. When, as in this case, “the statut e is silen t or ambig u o u s with respe c t to the specif i c issue, the questi o n for the c ourt is whethe r the ag ency ’ s answe r is based on a permi s s i b l e const r u c t i o n of the statu t e.” Id. at 843. See Brand X, 545 U.S. at 984-85 (conclud i n g that th e defini t i o n of “telec o m m u n i c a t i o n s servi c e ” in the Communic a t i o n s Act is ambig u o u s). In such circu ms t a n c e s, “ Chevron r e q u i r e s a federa l court to ac cept the agency ’ s [reas o n a b l e ] const r u c t io n of the statu t e, even if th e agenc y ’ s readi n g di ffers from what the court believ e s is the best statut o r y inter p r e t a t i o n.” Brand X, 545 U.S. at 980. 3. “Reviewin g courts accor d ev en greater defere n c e to agen cy interp r e t a t i o n s of agency rules than they do to agenc y inter p r e t a t i o n s of ambig u o u s stat u t o r y terms.” Capital Network Sys. v. FCC, 28 F.3d 201, 206 25 (D.C. Cir. 1994). “The Commissi o n ’ s inter p r e t a t i o n of its own rules is ‘enti t l e d to contr o l l i n g weigh t unles s it is plain l y erron e o u s or incon s i s t en t with the regul a t i o n.’” Star Wireless, LCC v. FCC, 522 F.3d 469, 473 (D.C. Cir. 2008) (citati o n omitt e d); accord Talk Am., Inc. v. Michigan Bell Tel. Co., 131 S. Ct. 2254, 2261 (2011). Relying upon Christopher v. SmithKline Beecham Corp., 132 S. Ct. 2156 (2012), The Conferenc e Group cont e n d s that the Court should not accor d defer e n c e to the FCC’s interp r e t a t i o n of its own rules becau s e “the questi o n of whethe r defere n c e is due has,” accord i n g to petiti o n e r, “recent l y underg o n e a signif i c a n t shift,” Pet. Br. at 16. The Conferenc e Group is mista k e n. In Christopher, the Court expres s l y recogn i z e d that the “gener a l rule” “call s for [judi cial ] deference to an agency’s inter p r e t a t i o n of its own ambig u o u s regula t i o n.” Id. at 2166. The Court declin e d to apply that genera l rule becau se it would have “impose [ d ] poten t i a l l y massi v e liabi l i t y on [the] respo n d e n t for condu c t that occur r e d well befor e that inter p r e t a t i o n was announ c e d.” Id. a t 2167. The Court was conce r n e d that givin g defer e n c e to the agenc y ’ s inter p r e t a t i o n in such circu ms t a n c e s woul d “ser i o u s ly unde r m i n e the princi p l e that agenc i e s should provi d e regula t e d parti e s ‘fair warni n g of the condu c t [a regula t i o n ] prohib i t s or requir e s.’” Id. at 2167 (quotin g Gates & Fox Co. 26 v. Occupational Safety and Health Review Comm’n, 790 F.2d 154, 156 (D.C. Cir. 1986)). That is not the case here. To avoi d any risk of the “unfai r surpri s e ” (id.) t h a t conce r n e d the Court in Christopher, the FCC careful l y limit e d its adjud i c a t o r y rulin g to prosp e c t i v e-only effect and unders c o r e d that InterCall and simil a r l y situa t e d provid e r s had no USF contri b u t i o n oblig a t i o n for the time period before the Commis si o n issued its ruling. See Order, 23 FCC Rcd at 10738 (¶ 24) (J.A. 199). Thus, there is no reaso n for the Court to depar t from the “gene r a l rule” of defer e n c e to an agenc y ’ s reaso n a b l e under s t a n d i n g of its own regul a t i o n s. I I . T H E FCC ACTED WITHI N ITS AUTHORI T Y AND USED PROPER PROCE D U R E S IN RULIN G THAT THE AUDIO BRI DGIN G SERVI CE S AT ISSUE ARE TELECOMMUNI CATI ONS. As the expert agenc y entru s t e d by Congress to “execu t e and en forc e ” the Communic a t i o n s Act, 47 U.S.C. § 151, the FCC acted well withi n its autho r i t y in deter mi n i n g that Inter Call’s audio bridg i n g servi c e const i t u t e s “telec o m m u n i c a t i o n s.” And because it made that deter mi n a t i o n in the contex t of an inform a l adjud i c a t i o n (rather than a rulema k i n g) — a procee d i n g arisin g out of a specif i c a udit of a specif i c co mp an y — it properl y concl u d e d that the APA’s notice-and- comme n t requi r e men t s for rulem a k i n g s did not apply. 27 A. T h e FCC Had Clear A utho r i t y To Decid e Wheth e r Inter C a l l ’s Audio Bridg i n g Servi c e Is Telec o m m u n i c a t i o n s . The Conferenc e Group appear s to cont en d that the FCC, in review i n g USAC’s ruling, lacked autho r i ty to de ter mi n e that InterCall’s audio bridg i n g servi c e is “tele c o m mu n i c a t i o n s ” and thus provi d e r s of such servi c e s must make direct contri b u t i o n s to the USF. Pet. Br. at 19-25. The ration a l e for that clai m appear s to be that (a) USAC allege d l y excee d e d its au thor i t y in deter mi n i n g wheth e r InterCall’ s audio bridg i n g servic e is “tele c o m mu n i c a t i o n s ” witho u t first seeki n g the FCC’s guidan c e, and thus (b) the FCC, in revie w i n g USAC’s ruling, l acked aut ho r i t y itsel f to decid e wheth e r InterCall’s servi c e cons ti t u t e s “telec o m mu n i c a t i o n s.” Id. at 19. According to The Conferen c e Group, the FCC ha d “only one opti o n — [to] rever s e USAC’s determi n a t i o n . . . in total.” Id. That argume n t rests on a funda men t a l misun d e r s t a n d i n g of the FCC’s author i t y under the Communications Act. The Conferenc e Group has invoke d the Court’s juris d i c t i o n to revie w the FCC’s Order, not the under l y i n g USAC ruling (which in any event is not review a b l e in court). Thus, the releva n t issue is the FCC’s aut hori t y in the Order to adjudi c a t e wheth e r InterCall’s audio bridg i n g servi c e is “tele c o m mu n i c a t i o n s,” not wheth e r USAC in the earli e r rulin g had excee d e d 28 the autho r it y deleg a t e d to it by the FCC. 8 Here, the FCC’s rules do not support The Conferenc e Group’s positio n, and certa i n l y do not do so with the clarit y that would be necess ar y to overco m e the def ere n c e due the Commiss i o n in inter p r e t i n g its own regul a t i o n s. On the contra r y, sectio n 54.723(b) of the FCC’s rules author i z e s the Commissi o n to “cond u c t [a] de novo review ” of USAC rulings “that invol v e novel questi o n s of fact, law or polic y.” 47 C.F.R. § 54.723(b). See also 47 C.F.R. § 54.722(a) (“reque s t s for revie w [of USAC ruling s ] that raise novel quest i o n s of fact, law or policy shall be considered by the full Commissi o n.”) (emphas i s added). In conduc t i n g that de novo r e v i e w here, the Commissi o n indep e n d e n t l y evalu a t e d wheth e r Inte rCall’s audio bridg in g servi c e is telec o m m u n i c a t i o n s. Nothing in secti o n s 54.722 or 54.723 supports The 8 In challe n g i n g the lawfu l n e s s of USAC’s ruling, The Conference Group empha s i z e s that the “the plain langu a g e ” of 47 C.F.R. § 54.706(a) does not inclu d e audio bridg e servi c e s “in th e list of ‘teleco m m u n i c a t i o n s ’ that are subje c t to direc t USF contrib u t io n under 47 C.F.R. § 54.706(a).” Pet. Br. at 20. The Conferenc e Group, however, fa ils to ackno w l e d g e that the “plai n langua g e ” of that rule states that “[ i]n t e r s t a t e telec o m m u n i c a t i o n s inclu d e, but are not limited to ” the services enu merat ed in secti o n 54.706(a). 47 C.F.R. § 54.706(a) (emphas i s added). The fact that audio bridg i n g servi c e does not appear in the non-exhaus t i v e list of serv ic e s in sectio n 54.706(a) thus does not mean that the ser v ice is not teleco mm unications. 29 Conferen c e Group’s claim that the FCC’s “only . . . optio n” (Pet. Br. at 19) in revie w i n g an alleg e d l y ultra vires USAC’s ruling is summa r y rever s a l. 9 More fundam e n t a l l y, Congress entr u s t e d the Commiss i o n with the duty to “execu t e and enforc e ” the Communic a t i o n s Act, includ i n g secti o n 254. 47 U.S.C. § 151. See Brand X, 545 U.S. at 980. Thus, indepe n d e n t of the FCC’s jurisd i c t i o n to revie w USAC rulings und er 47 C.F.R. § 54.723(b), the FCC, in admin i s t e r i n g secti o n 254, has autho r i t y to issue a ruling clarif y i n g that InterCall must contr i b u t e direc t l y to the USF becaus e the audio bridg in g servic e it offers is “telec o mmu n i c a t i o n s ” withi n the meani n g of the Act and the agency ’ s implem e n t i n g rules. See also 47 C.F.R. § 1.2; 5 U.S.C. § 554(e). Indeed, the Supreme Court ha s explic i t l y held that the FCC is entitl e d to defere n c e in exerci s i n g its au tho r i t y to deter mi n e wheth e r or not a specif i c servi c e is an infor m a t i o n se rvi c e under the Communic a t i o n s Act. Brand X, 545 U.S. at 980-86. The Conferen c e Group’s sugges t i o n that the FCC lack ed authori t y to classif y In terCall’s audio bridg e servi c e as teleco m m u n i c a t i o n s is inconsi s t e n t with this precede n t. 9 The Conferen c e Group also cha lle n g e s the action of the FCC’s staff in revis i n g FCC Forms 499-A and 499-Q in 2002 to inclu d e provi d e r s of “toll telec o n f e r e n c i n g servi c e s ” as entit i e s that must contr i b u t e direc t l y to the USF. See Pet. Br. at 22-24. The Conferen c e Group’s pe tit i o n for revie w of the FCC’s Order, howeve r, d o e s not invok e the Court’s juris d i c t i o n to revie w that 10-year-old staff actio n. Nor could it do so. See, e.g., 28 U.S.C. § 2344; 47 U.S.C. § 155(c)(7). 30 B. B e c a u s e The FCC’s Orders Were Adjudic a t o r y, The APA’s N o t i c e - A n d - C o m m e n t Requi re m e n t s For Rul e m a ki n g s Are Inapp l i c a b l e . The Conference Group’s claim that the FCC in this infor ma l adjud i c a t i o n viola t e d the APA notice-and-commen t requi r e m e n t s for subst a n t ive rulem a k i n g has a funda m e n t a l defec t. The Conferen c e Group ignor e s a well-establ i s h e d propo s i t io n of admin i s t r a t i v e law that, in contr a s t to subst a n ti v e rulema k i n g s and forma l adjud i c a t i o n s, the APA contain s no speci f i c notic e-and-commen t requi r e men t s for inform a l agenc y adjud i c a t i o n s. Occidental Petroleum, 873 F.2d at 337; see also FCC v. Fox Television Stations, Inc., 556 U.S. 502, 529 n.8 (2009); United States Telecom Ass’n v. FCC, 400 F.3d 29, 34 n.9 (D.C. Cir. 2005). The Order o n review was a class i c infor ma l adjud i c a t i o n not subj ect to the APA’s notice-and-comment requi r e m e n t s for rule m a k i n g s, and th e Commissi o n acted well within its discr e t i o n in proce e d i n g via adjud i c a t i o n ra ther than rulema k i n g in this case. 1. The Order I s An Adjud i c a t o r y R u l i n g . The FCC reasonab l y deter mi n e d that the Order o n revi e w was an “adju d i c a t o r y decis i o n.” Reconsideration Order, 27 FCC Rcd at 905 (¶ 15) (J.A. 316). The admi ni s t r a t i v e proce e d i n g below invol v e d the FCC’s review of USAC’s audit rulin g of a specif i c comp a n y, InterCall. Based upon its revie w of the funct i o n s and featu r e s of InterCall’s audio bridg in g servi c e, the 31 FCC classi fi e d that offeri n g as “tel e c o m mu n i c a t i o n s,” and clari f i e d that InterCall is theref o r e subje c t to USF contrib u t i o n requi r e m e n t s. The procee d i n g below thus involv e d “a classi c case of agency adjudi c a t i o n, a cas e that invol v e s decis i o n m a k i n g conce r n i n g [a] specif i c perso n [ ], based on a deter mi n a t i o n of parti c u l a r fact s and th e appli c a t i o n of gener a l princ i p l e s to those facts.” Harborlite Corp. v. ICC, 613 F.2d 1088, 1093 n.11 (D.C. Cir. 1979). See AT&T Co., v. FCC, 454 F.3d 329, 333 (D.C. Cir. 2006) (FCC’s ruling s in classi f y i n g servi c e s as tel ec o m mu n i c a t i o n s or infor m a t i o n servi c e s “refl e c t a highly fact-specif i c, ca se-by-case style of adjudi c a t i o n.”). The Conferenc e Group acknowl e d g e s that the Order was issued as the culmi n a t i o n of an “info r mal adjud i c a t i o n. ” Pet. Br. at 1, 24, 35, 36. It maintai n s, however, that the FCC’s st at em e n t that “InterCall and simil a r l y situa t e d stand-alone audio bridg i n g serv ic e prov i d e r s [mus t ] cont r ib u t e direc t l y to the USF,” Order, 23 FCC Rcd at 10735 (¶ 14) (J.A. 197), transf o r me d the FCC’s adjud i c a t o r y rulin g into a rulema k i n g order. That argum e n t is incor r e c t. It is well-establ i s h e d that order s hande d down in adjudi c a t i o n s “may affect agency polic y and have ge nera l prospe c t i v e applica t i o n.” New York State Comm’n on Cable Television v. FCC, 749 F.2d 804, 814 (1984) (quotin g Chisholm v. FCC, 538 F.2d 349, 365 (D.C. Cir. 1976)). Indeed, “[m]os t norms that emerg e from a rulemak i n g are equal l y 32 capable of emergi n g (legitim a t e l y) from an adjudi c a t i o n.” Qwest Servs. Corp., 509 F.3d at 536 (citing NLRB v. Bell Aerospace Co., 416 U.S. 267, 294-95 (1974)). Because “basic tenet s of ad ministrative law require the Commissio n to apply its rules consi s t e n t l y in adjudi c a t o r y proce e d i n g s,” General Am. Transp. Corp. v. ICC, 872 F.2d 1048, 1060 (D.C. Cir. 1989) (emphas i s in origina l), the FCC’s classif i c a t i o n of Intercal l ’ s servic e as “tele c o m mu n i c a t i o n s ” and its rulin g that In tercall therefore mu st make direct USF contrib u t i o n s would have preced e n t i a l effect for simila r l y situat e d provi d e r s of audio bridg i n g servi c e s wheth e r or not the FCC had expli c i t l y stated so in the Order o n review . See also Bell Aerospace, 416 U.S. at 292 (agency may in an adjud i c a t i o n “pro mu l g a t e a new stand a r d that would gover n futu r e condu c t ” of non-partie s); NLRB v. Wyman-Gordon Co., 394 U.S. 759, 765-766 (1969) (plu ral i t y opini o n) (“[a]d j u d i c a t e d cases may and do . . . ser ve as vehi cl e s for the form ul a t i o n of agency polici e s, which are appli e d and annou n ce d there i n,” and such cases “gener a l l y provid e a guide to action that the agen cy may be exp ecte d to take in future cas es”); Goodman v. FCC, 182 F.3d 987, 994 (D.C. Cir. 1999) (“[T ]he natur e of adjud i c a t i o n is that simil a r l y situa t e d non-parti e s may be affec t e d by the polic y or prece d e n t appli e d, or even merely announc e d in dicta.”). 33 In sum, the FCC merely noted the obvio u s propo s i t io n that the agenc y ’ s adjud i c a t o r y rulin g as to InterCall, like any other adjud i c a t o r y decis i o n of the agenc y, has prece d e n t i a l ef fect for “other simil ar l y situat e d ” entit i e s — in this case, audio bridge servic e provid e r s. See Reconsideration Order, 27 FCC Rcd at 905 (¶ 15) (J.A. 316) . That unremarkab le — and corre c t — state m e n t of admin i s t r a t i v e law did not someh o w conve r t the procee d i n g from adj udi c a t i o n into rulema k i n g. Rather, it merely ensured that there was no confus i o n as to the effect of this prece d e n t on simil a r l y situa t e d parti e s. As in any other adjud i c a t o r y case, other entitie s are free to show that they are not simila r l y situat e d and that this prece d e n t there f o r e does not apply to them. The Conferenc e Group noneth e l e s s conte n d s that the FCC’s action fits within the broad defin i t i o n of a rule and thus the FCC must be deemed to have engag e d in rulem a k i n g. Pet. Br. at 29 (citing 5 U.S.C. § 551(4)). That argumen t likewi s e fai ls. The Commissi o n has “very broa d disc r e t i o n whet h e r to procee d by way of adjudi c a t i o n or rulema k i n g.” Qwest Corp., 509 F.3d at 536 (quotin g Time Warner Entm’t Co., L.P. v. FCC, 240 F.3d 1126, 1141 (D.C. Cir. 2001)). Although the FCC could have class i f i e d the audio bridg i n g servi c e s of InterCall and similarl y situated co mpanie s as telec o m m u n i c a t i o n s by adopt i n g an in terp r e t a t i v e rule — which, like 34 adjudic a t o r y order s are not subje c t to the notic e and comme n t requi r e m e n t s of secti o n 4 of the APA, see 5 U.S.C. § 553(b)(A) — it ha d discr e t i o n to take the same actio n in an adjud i c a t o r y rulin g. See Qwest Corp, 509 F.3d at 536 (reject i n g petit i o n e r ’ s argum e n t “that if it walks like a rule and talks like a rule, it mu st be a rule.”); Goodman, 182 F.3d at 993 (same). Indeed, the FCC in a long line of cases has used its adj udi c a t o r y autho r i t y to classi f y speci f i c servi c e s as teleco m m u n i c a t i o n s or infor ma t i o n servi ce s under the Communic a t i o n s Act and/o r the Commissio n ’ s rules. 10 See AT&T, 454 F.3d at 333. The Conferenc e Group mistak e n l y contend s that the FCC’s charac t e r i z a t i o n of its action as adj udi c a t i o n and not rulema k i n g “is accor d e d no defere n c e by a review i n g court.” See Pet. Br. at 29. The court s have long held that an agency ’ s charac t e r i z a t i o n of its decis i o n as an adjud i c a t o r y rulin g “in itself is entitl e d to a signif i c a n t degree of cred en c e.” British Caledonian 10 E.g., Appropriate Regulatory Treatment for Broadband Access to the Internet Over Wireless Networks, Declarat o r y Ruli ng, 22 FCC Rcd 5901 (2007); United Power Line Council’s Petition for Declaratory Ruling Regarding the Classification of Broadband over Power Line Internet Access Service as An Information Service, Memoran d u m Opinion and Order, 21 FCC Rcd 13281 (2006); Prepaid Calling Card Order, 21 FCC Rcd 7290; In the Matter of AT&T Corp., Order and Notice of Propose d Rulemaki n g, 20 FCC Rcd 4826 (2005), aff’d sub nom. AT&T Co., 454 F.3d 329 (D.C. Cir. 2006). 35 Airways, Ltd. v. CAB, 584 F.2d 982, 992 (D.C . Cir. 1978). See, e.g., Am. Airlines, Inc. v. DOT, 202 F.3d 788, 797 (5th Cir. 2000) (courts accor d “sign i f i c a n t defer e n c e to the agenc y ’ s charac t e r i z a t i o n of its own action [as adjud i c a t o r y ].”) Contrary to The Conferen c e Group’s assert i o n, the fact that, in the intere s t s of fairne s s, the FCC chose to limit its adjud i c a t o r y rulin g to prosp e c t i v e-only effec t does not conve r t that deter mi n a t i o n into a subst a n t i v e rule. As this Court has recogn i z e d, agen ci e s may declin e to give adjudi c a t i v e ruling s retroa c t i v e ef fect for eq uitab l e reason s, see generally Qwest, 509 F.3d 531, and any prece d e n t i a l imp a c t of the speci f i c rulin g here on simil ar l y situa t e d third parti e s natur a l l y woul d be on a prospe c t i v e-only basis. Equally flawed is The Conferen c e Group’s sugges t i o n that the Order i s not adjud ic a t o r y becau s e the agenc y ’ s ru lin g alleg e d l y appli e s broad l y to the entir e audio bridg i n g indus tr y. E.g., Pet. Br. at 19, 25, 33- 34. First, contra r y to The Conferen c e Group’s cont en t i o n, the Commissi o n ’ s Order did not decide that all audio bridg i n g comp a n i e s (regar d l e s s of the type of servic e they offer) must contr i b u t e to the USF. Rather, the Order s t a t e s only that InterCall and “ similarly situated stand-alone audio bridg i n g servi c e provid e r s ” are subje c t to a direc t contr i b u ti o n oblig a t i o n, Order, 23 FCC Rcd 36 at 10735 (¶ 14) (emp hasi s added) (J.A. 197), leavin g unaff e c t e d those audio brid g i n g comp a n i e s that do not provid e serv i c e s simila r to those of InterCall. Second, The Conferen c e Group is wrong in sugges ti n g that the Commiss i o n can only issue a broad l y ap plic a b l e order in a rulema k i n g. “Orders hande d down in adjud ic a t i o n s ma y estab l i s h broad legal princ i p le s,” Central Texas Tel. Co-op., 402 F.3d at 210, and “hav e general prospect i v e applica t i o n.” Chisholm, 538 F.2d at 365. See also Kidd Commc’ns v. FCC, 427 F.3d 1, 5 (D.C. Cir. 2005) (“An admi nis t r a t i v e agency can, of course, make legal-polic y throu g h rulem a k i n g or by adjud i cat i o n.”). It is well- establ i s h e d that “an adjud i c a t i o n can aff ec t a large group of [pers o n s ] witho u t becomi n g a rulema k i n g.” Goodman, 182 F.3d at 994. See British Caledonian Airways, 584 F.2d at 989 (reject i n g argu m e n t that rulemak i n g is requir e d becau s e the agency ’ s actio n “w ill have a signif i c a n t effec t on the entire airlin e indust r y.”). This Court’s decis i o n in Qwest, 509 F.3d 531, is instru c t i v e. In that case, the Court uphel d the FCC’s choice of adjud i c a t i o n in rulin g that two kinds of prepai d callin g cards are “telec o m m u n i c a t i o n s ” and that the provid e r s of such cards there f o r e are subje c t to a direc t USF contrib u t ion requi r e m e n t. Id. a t 536. The Court rejecte d petit i o n e r ’ s argum e n t that “such a broadl y applic a b l e order,” i.e., one that deter mi n e d the regul a t o r y 37 classifi c a t i o n of all such cards, “can only take the form of a rule.” Id. a t 536 . Noting that “[m]o s t norms that emerg e from a rulema k i n g are equall y capab l e of emerg i n g (legit i ma t e l y) from an adjud i c a t i o n,” the Court held that the FCC acted lawf ully in classify in g the servi c e s in quest i o n in an adjud i c a t o r y rulin g — notwi t h s t a n d i n g the broad sweep of the agenc y ’ s decis i o n. Id. Qwest t h u s forec l o s e s any argume n t that the FC C cannot procee d by adjudi c a t i o n in classify i n g a service as teleco mm u n i c a t i o n s becau s e its rulin g alleg e d l y has “indu s t r y-wide impli c a t i o n s .” Pet. Br. at 10. 2. T h e FCC Did Not Enact A Substa n t i v e Rule. The Conferenc e Group argues that the FCC in the Order e f f e c t i v e l y adopt e d a substa n t ive rule and that fa ilu r e to provid e forma l notic e seeki n g co mment violated the APA. That argumen t fails for two reaso n s. First, as shown in Section I.B.1, the Order o n revie w is a produ c t of infor ma l adjud i c a t i o n (to which notic e-and-comm en t requi r e m e n t s are inappl i c a b l e), not rulema k i n g. Second, as shown be low, the FCC’s rulin g has none of the charac t e r i s t i c s of a substa n t i v e rule in any event. A rule is consid e r e d substa n t i v e if the agency “‘inte n d s to create new law, rights, or duties,’” Fertilizer Institute v. EPA, 935 F.2d 1303, 1307-08 (D.C. Cir. 1991) (citati o n omitt e d), or “e ffec t i v e l y amend s a prior legis l at i v e rule.” American Mining Cong. v. Mine Safety & Health Admin., 995 F.2d 38 1106, 1112 (D.C. Cir. 1993). Here, th e FCC did neither. Rather it decid e d that Interca l l ’ s audio bridg in g se rvic e s are “telec o m m u n i c a t i o n s.” Order, 23 FCC Rcd at 10734-35 (¶¶ 10-13) (J.A. 197). To be sure, that ruling had the effect of clarif y i n g that InterCall (a nd entit i e s provi d i n g servi c e s simil a r to InterCall’s) must make direc t contr ib u t ion s to the USF as requi r e d by secti o n 54.706 of the FCC’s rules. The genesi s of that direc t contr i b u t io n requi r e m e n t, howeve r, is secti o n 54.706, a regula t i o n preda t in g the Order t h a t was not amende d in the Order on review. Because the Order m e r e l y “clari f i e d the existing o b l i g a t i o n s of InterCall — a nd othe r simil a r l y situ a t e d audio bridg e servi c e provid e r s — based upon exis t in g rule s and requir e m e n t s,” Reconsideration Order, 27 FCC Rcd at 905 (¶ 15) (J.A. 316) (emphasi s added), the FCC in the pro cee d i n g below did not effect i v e l y ad opt a substa n t i v e rule. The Conferenc e Group errs in claimi n g that the FCC’s rulin g must be a substa n t ive rule becaus e it has a “subs t a n t i v e adver s e impac t ” upon the affecte d in dust r y. See Pet. Br. at 26 (intern a l quota t i o n s omitt e d). As this Court has recogn i z e d, the agency ’ s select i o n of a parti c u l a r “inte r p r e t a t i o n of an ambig u o u s statu t e or rule,” “alw ay s ” has “real conseq u e n c e s.” Paralyzed Veterans of Am. v. D.C. Arena, LP, 117 F.3d 579, 588 (D.C. Cir. 1997). Notwiths ta n d i n g those conse q u e n c e s, an agency does not enact a substa n t i v e 39 rule when it “spel l s out a duty fairl y encomp a s s e d withi n the regul a t i o n that the interp r e t a t i o n purpor t s to constr u e.” Id. See also Fertilizer Inst., 935 F.2d at 1308 (“the prope r focus in deter mi n i n g wheth e r an agenc y ’ s act is legisl a t i v e is the source of the agency ’ s actio n, not the implic a t i o n s of [the] action.”). The Conferenc e Group also argues that the FCC effecti v e l y adopte d a substa n t ive rule becaus e the Order i s at odds with the “under s t a n d i n g ” of The Conferen c e Group and other audio bridg i n g comp a n i e s that the servi c e s they offer e d were not telec o m mu n i c a t i o n s s ubje c t to a direc t USF contrib u t ion oblig a t i o n. Pet. Br. 27. The Confer enc e Group, however, does not show that any such “unde r s t a n d i n g ” is based upon any FCC rule or author i t a t i v e order establ i s h i n g that the service s at issue are not teleco mmunications. See Funeral Consumer Alliance, Inc. v. FTC, 481 F.3d 860, 863 (D.C. Cir. 2007) (agency rule is substan t i v e if it “repu d i a t e s or is irreco n c i l a b l e with [a prior legisl a t i v e rule].”) (citatio n omitte d). Equally unavai l i n g is The Confer en c e Group’s sugge s t i o n of an incon s i s t en c y betwe e n the FCC’s identi f i c a t i o n in two prior cases of “stan d alone confer e n c e bridgi n g provid e r s ” as end-users and its ruling that InterCall offers teleco m mu n i c a t i o n s that is s ubje c t to a direc t USF contrib u t io n obliga t i o n. Pet. Br . at 31 & n.57 (citing Qwest Commc’ns Corp. v. Farmers 40 & Merchants Mutual Tel., 22 FCC Rcd 17973 (2007) (subseq u e n t histo r y omit t e d), and AT&T Corp. v. Jefferson Tel. Co., 16 FCC Rcd 16130 (2001)). In one of these cases, the end-user provid e d a chat-line servic e that was “mate r i a l l y diffe r e n t” from InterCall’s audio bridg in g servi c e s, Reconsideration Order, 27 FCC Rcd at 902 n.35 (J.A. 318). 11 The other case involv e d a tariff dispu t e, and the Commissi o n ’ s chara c t e r i z a t i o n “was premi s e d on [the carri e r ’ s ] asser t i o n that this was how they were defin e d in [its] tarif f.” Order, 23 FCC Rcd at 10737 (¶ 21) (J.A. 198). In any event, “a co mpany may be cl assifi e d as an e nd-user due to its role in obtai n i n g teleco mm unications services” yet also offer telec o m m u n i c a t i o n s with an obliga t i o n to direct l y contri b u t e to the USF. Id. at 10737 (¶ 22) (J.A. 199). 12 11 The chat-line servi c e offer e d by Interna t io n a l Audiote x t Network (“IAN”), “randoml y paire d calle r s ” a nd thus did not satis f y one the basic requi r e m e n t s of telec o m mu n i c a t i o n s, i.e., that the trans mi s s i o n be route d “betw e e n or among points speci f i e d by the user.” 47 U.S.C. § 153(50). See Reconsideration Order, 27 FCC Rcd at 902 n.35 (J.A. 318); Order, 23 FCC Rcd at 10737 (¶ 19) (J.A. 198). Moreover, in contras t to InterCall’s service s, which are “prov i d e d for a fee,” Order, 23 FCC Rcd at 10736 (¶ 17) (J.A. 198), “IAN did not impos e any charg e s on calle r s,” AT&T Inc., 16 FCC Rcd at 16131 (¶ 3). Only provi d e r s that offe r servic e “for a fee” are requir e d to contri b u t e direct l y to the U SF. 47 C.F.R. § 54.706(a). 12 The Conferen c e Group fares no bette r in argui n g that the FCC changed cours e based on an alleg e d “inco n s i s t e n c y ” betwe e n the Order a n d the lack of any previou s FCC enforcem e n t action ag ain s t an audio bridg i n g provi d e r for failu r e to make USF contrib u t io n s. Pet. Br. at 28, 31. As the Supreme Court has recen t l y point e d out, “an agenc y ’ s enfor c e m e n t decis i o n s are inform e d by 41 3 . T h e FCC Used Proced u re s That Both Compl i e d With The APA An d Gave Interes t e d Parti e s Notic e And A Full Opport u n i t y To Partic i p a t e Section 4(j) of the Communic a t i o n s Act authori z e s the Commissio n to “cond u c t its proce e d i n g s in such manne r as will bes t conduce to the proper dispa t c h of busin e s s and to the ends of justic e.” 47 U.S.C. § 154(j). Congress in Section 4(j) gave the Commi ssi o n “broa d discr e t i o n ” to prescr i b e proce d u r e s for use in its own procee d i n g s, becaus e it recogni z e d that the Commiss i o n is “in a bette r posit i o n than federal courts or Congress itself to desig n proce d u r a l rules adapt e d to th e peculi a r i t i e s of the indust r y and the tasks of the agency involv e d.” FCC v. Schreiber, 381 U.S. at 289, 290. Section 4(j) reflect s the “very basic ten e t of admini s t r a t i v e law that agen ci e s should be free to fashi o n their own rules of proce d u r e.” Vermont Yankee Nuclear Power Corp. v. Nat. Res. Def. Council, 435 U.S. 519, 544 (1978). As discus s e d above, the Order on review arose out of a classic adjud i c a t o r y proce e d i n g — a n audit of a specifi c comp any — a n d petitio n e r has raised no persua s i v e argum e n t that th e ag ency abused its discre t i o n in proce e d i n g by adjud i c a t i o n rathe r than notice-and-commen t rulema k i n g in this instan c e. The Supreme Court has long held that the APA establis h e s the a host of facto r s, some beari n g no rela t i o n to the agenc y ’ s views reg ar d i n g wheth e r a violat i o n has occur r e d.” Christopher, 132 S. Ct. at 2168. 42 maximu m proce d u r a l requi r e m e n t s a revi e w i n g cour t may impo s e on an ad minis t r a t i v e agency, except where the due process clause or the agen cy’ s gover n in g statu t e manda t e s other w i s e. Pension Benefit Guar. Corp. v. LTV Corp., 496 U.S. 633, 653-56 (1990); Vermont Yankee, 435 U.S. at 524-25. Because the FCC complied with all a ppli c a b l e const i t u t i o n a l and statu t o r y requir e m e n t s applic a b l e to inform a l adjudi c a t i o n s, the FCC’s choice of proced u r e s in the adjudi c a t i o n below were within its discre t i o n. In any event, The Confere n c e Group is wrong in claimi n g that the proced u r e s the FCC used “depri v e d Th e Conferen c e Group, along with other s in the confer e n c e bridgi n g servic e s i ndus t r y, of a meani n g f u l oppor tu n it y to parti c i p a t e and depri v e d the recor d of facts and legal argum e n t.” See Pet. Br. at 34. The FCC issued a Public Notic e invit in g the publi c to comme n t on the issue s raise d in InterCall’s reque s t for revie w of USAC’s ruling. Public Notice I (J.A. 170). A number of pe rso n s, recogn i z i n g the possi b l e preceden t i a l impact of a Commissi o n ad jud i c a t o r y rulin g on compa n i e s provid i n g audio bridg i n g servic e s simi l a r to those of InterCall, filed 43 commen t s and/o r reply comme n t s in respon s e to the FCC’s invita t i o n. 13 After the Order w a s relea s e d, the FCC accepte d two petit i o n s for recon s i d e r a t i o n, includ i n g one fro m The Conferenc e Group. The FCC notifie d the publi c of those petit i o n s and invit e d inter e s t e d perso n s again to submi t comme n t s and reply comme n t s. Public Notice II (S.A. 015). The four round s of comme n t s the FCC offered in two separ a t e pleadi n g cycles provid e d intere s t e d perso n s a full oppor tu n it y to prese n t their views to the agenc y. The Conferen c e Group comp l a i n s that the proce d u r e s the FCC used “depr i v e d the recor d of facts and legal argume n t,” Pet. Br. at 34, but it fails to ident i f y any relev a n t facts or legal argume n t s that were exclud e d from th e ad mini s t r a t i v e record. And The Conferen c e Group’s asser t i o n that it was someh o w “depr i v e d ” of a “meani n g f u l opport u n i t y to partic i p a t e,” id., rings hollow in light of its 13 Although The Conferen c e Group sugges t s that the eleven-day initia l comme n t perio d was inade q u a t e (Pet. Br. at 10), it provi d e s no suppo r t for that clai m. This Court has upheld much shorter agency time li mits for provid i n g comme n t s. See, e.g., Am. Trading Transp. Co., Inc. v. United States, 841 F.2d 421, 424 & n.4 (D.C. Cir. 1988) (holdin g that a three-day commen t perio d is “adequ a t e ”). Si gnific a n t l y, no party — includ i n g The Conferen c e Group — asked the FCC to exten d the time perio d for submi t t i n g initi a l comme n t s, and the fact that intere s t e d parti e s were able to submi t their initi a l comme n t s in a timel y fashi o n unde r mi n e s petit i o n e r ’ s sugge s t i o n that the allott e d time period was inadeq u a t e. In additi o n, the FCC establi s h e d a secon d plead i n g cycle for the submi s s i o n of comme n t s and reply comme n t s at the recons i d e r a t i o n stage, and The C onfere n c e Group does not even attem p t to show that the time limit s for f ilin g those plead i n g s was insuf f i c i e n t. 44 active partic i p a t i o n in the reco ns i d e r a t i o n phase of the admini s t r a t i v e procee d i n g s below. See The Conferen c e Group Petition (J.A. 251); Reply Comments in Support of Petition for Reconsid e r a t i o n by A+ Conferen c i n g, LTD., Fr ee Conferenc i n g Corp. a nd The Conferen c e Group (Sept. 22, 2008) (J.A. 280). I I I . T H E FCC REASON A B LY DETERM I N E D THAT INTER C A L L PROVI D E S TELECOMMUNI CATI ONS. As shown below, the Commiss i o n (1) reason a b l y class i f i e d InterCall’s audio bridg i n g servic e as telec o m mu n i c a t i o n s, and (2) reason a b l y deter mi n e d that the ad diti o n a l enhanc e d featur e s InterCall provi d e d in conju n c t i o n with its audio bridg in g servi c e were not suff ic i e n t l y integr a t e d with the audio bridg i n g servi c e so as to trans f o r m the servic e as a whole into an inform a t i o n service. A. The FCC Reasonably Cl ass i f i e d Inter C a l l ’s Audio Bri dgi n g Servic e As Telecom m u n i c a t i o n s . The Commissi o n reaso n a b l y deter m i n e d that InterCall’s audio bridg i n g servi c e s are telec o m m u n i c a t i o n s. Order, 23 FCC Rcd at 10734-35 (¶¶ 11-13) (J.A. 197). See 47 U.S.C. § 153(50). In e ssenc e, InterCall offer s trans mi s s i o n that enabl e s perso n s sel ected by its customer (the conferen c e host) to talk to each other over ordin a r y teleph o n e lines “witho u t change in the form or conten t of the inform a t i o n as sent or recei v e d.” See Order, 23 45 FCC Rcd at 10734 (¶ 10) (citing 47 U.S.C. § 153(50)) (J.A. 197). From the user’s perspe c t i v e, the essent i a l diffe r e n c e betwe e n Inter Call’s confe r e n c i n g servic e and an ordinar y teleph o n e ca ll is that InterCall’s confe r e n c i n g servi c e permi t s simu l t a n e o u s commu n i c a t i o n among three or more perso n s where a s a typic a l telep h o n e call invol v e s commu n i c a t i o n s betwe e n only two indiv i d u a ls. Because telec o m mu n i c a t i o n s invol v e s “tran s mi s s i o n [ ] between or among points speci f i e d by the user,” 47 U.S.C. § 153(50) (emphas i s added), howeve r, the numbe r of speak e r s does not affect the classi f i c a t i o n of InterCall’s service as teleco m m u n i c a t i o n s. Nor does the exist e n c e of the audio bridg e preve n t InterCall’s confe r e n c i n g servi c e from prope r l y being classif i e d as teleco m m u n i c a t i o n s. As the FCC pointed out, the funct i o n of the audio bridg e “is simp l y to facili t a t e the routin g of ordina r y te leph o n e calls . . . . [to ensure] ‘the creat i o n of the trans mi s s i o n chann e l chose n by the custo me r.’” Order, 23 FCC Rcd at 10735 (¶ 11) (quoting NATA Centrex Order, 101 FCC 2d at 362 (¶ 31)) (J.A. 197). By “link[ i n g ] multi p l e calle r s toget h e r,” id. a t 10734 (¶ 10) (J.A. 197), in a way that assur e s “tran s mi s s i o n betwe e n or among points speci f i e d by the user,” 47 U.S.C. § 153(50), the audio bridg e facili t a t e s the provis i o n of basic tran s mi s s i o n with o u t alte r i n g its funda men t a l chara c t e r. In this respe c t, the audio brid g e perf o r ms an 46 “adjun c t to basic” funct i o n that is incide n t a l to the underl y i n g teleco mm unications service. See AT&T Corp. Petition for Declaratory Ruling Regarding Enhanced Prepaid Calling Cards, Order and Notice of Proposed Rulemaki n g, 20 FCC Rcd 4826, 4831 (¶ 16) (2005), aff’d sub nom. AT&T Co., 454 F.3d 329; NATA Centrex Order, 101 FCC 2d at 362 (¶ 31). The Conferenc e Group conten d s that “the FCC premise d its findi n g that confer e n c e bridgi n g provid e r s ar e prov i d e r s of telec o m mu n i c a t i o n s servi c e s, as oppos e d to infor ma t i o n serv i ce s, on a signif i c a n t factu a l error : the confer e n c e bridge routes traffi c, essent i a l l y opera t i n g like a switc h or router.” Pet. Br. at 39. It is petit i o n e r ’ s own argum e n t — not the Order — t h a t conta i n s signif i c a n t error s. First, the Commissi o n did not find that audio bridg i n g comp a n i e s “a re provid e r s of telec o m mu n i c a t i o n s servi c e s, as oppos e d to infor ma t i o n servi c e s.” Pe t. Br. at 39. Th e Commiss i o n made clear that “the recor d does not permi t a clea r dete r mi n a t i o n ” as to wheth e r or not InterCall provi d es telec o m mu n i c a t i o n s servi c e s ( i.e., provi d e s telec o m m u n i c a t i o n s on a co mmo n carri e r basis), and thus deter mi n e d only that InterCall at a minimu m pr ovi d e d “tele c o m mu n i c a t i o n s.” Order, 23 FCC Rcd at 10734 (¶ 7) (J.A. 196) (emphas i s added). 47 Second, The Conferen c e Group errs in sugge s t i n g that the FCC found that the co nferen c e bridge itself “routes traff i c, essent i a l l y opera t i n g like a switch or router.” Pet . Br. at 39. In fact, the agen cy said precise l y the opposi t e — i.e., that it “did not conclud e that the a udio bridge . . . was a router or provid e d the functi o n a l i t y of a router.” Reconsideration Order, 27 FCC Rcd at 902 (¶ 9) (J.A. 314) (emphasi s added). Rather, the Commis sio n expla i n e d that it found the purpo s e and funct i o n of InterCall’s audio bridg e, by linki n g the confe r e n c e calle r s toget h e r, was to facilitate the provis i o n of basic telec o m mu n i c a t i o n s. Id.; see also Order, 23 FCC Rcd at 10735 (¶ 11) (J.A. 197) (“the purpo s e . . . of the bridg e is simp l y to facil i t a t e the routi n g of ordina r y teleph o n e calls.”). Thus, in arguin g that InterCall’s audio bridg e does not actual l y route teleph o n e calls , petiti o n e r challe n g e s a findin g the FCC never mad e. The Conferenc e Group also sugges t s th at the agenc y erred in notin g that the audio bridg e facilitates r o u t in g of calls becau s e those calls termi n a t e at the audio bridg e. Pet. Br. at 43. This misse s the point. The FCC used the phrase “faci l i t a t e routi n g ” only to denote that the au dio bridge facilit a t e s the provis i o n of basic teleco m mu n i c a t i o n s by linkin g togeth e r multip l e calls. The Commissi o n acknow l e d g e d that, as a techn i c a l ma tter, calls are 48 terminated at “a point [sel ect ed] by th e us er (the con f ere n c e bridge.”). Order, 23 FCC Rcd 10735 (¶ 11) (J.A. 197). The Conferenc e Group next conte nd s that the FCC erroneou s l y confl a t e d the trans mi s s i o n compo n e n t of InterCall’s servic e with the audio bridg i n g compo n e n t of that servi c e. Pet. Br. at 39, 44-46. Accordin g to petit i o n e r, the trans m i s s i o n that Inte rCall provi d e s to the indiv i d u a l confe r e n c e call er s to reach the audio brid ge is an “entire l y distin c t servic e ” from that of the audio bridg e, which links the confer e n c e call partic i p a n t s togeth e r. Id. a t 44. That argume n t also fails. InterCall’s confe r e n c i n g servi c e provi d e s the abili t y for “mult i p l e end users to communicate a n d colla b o r a t e with each other using telep h o n e lines.” InterCall Request for Review at 4 (J.A. 17) (emphasi s added). That service necess a r i l y entail s both the tran s mi s s i o n to the audio bridg e of the calls of indiv i d u a l conf erence call partici p ants and the linkag e of those separ a t e trans mi s s i o n paths to pe rmi t simul t a n e o u s commu n i c a t i o n betwe e n three or more partie s. Both the tr ans mi s s i o n and the linka g e are integ r a l eleme n t s of InterCall’s servic e. The Conferen c e Group is also wrong in sugges t i n g that the fact that InterCall “purc h a s e s ” the trans mi s s i o n us ed in its confer e n c i n g servic e fr om other telec o m mu n i c a t i o n s provid e r s someh o w shows that it does not provi d e 49 teleco m m u n i c a t i o n s. Pet. Br. at 39, 44. After InterCall procur e s that trans mi s s i o n, it “rese l l s [it] with its audio bridg in g servi c e to its telecon f e r e n c i n g custome r s.” Order, 23 FCC Rcd at 10735 n.31 (J.A. 202) (intern a l citat i o n and quota t i o n s omitt e d). InterCall unden i a b ly offer s transm i s s i o n as part of its confere n c i n g servi c e, and the parti c u l a r means by which it obtai n e d the capac i t y to provi d e its custo m e r s with that trans mi s s i o n is irrel e v a n t to the re gulat o r y classi f i c a t i o n of its service. 14 By petiti o n e r ’ s own accou n t, “the bundl e d long dista n c e trans p o r t comp o n e n t of InterCall’s service ” is a separa t e stand-alone offer i n g of “telec o m mu n i c a t i o n s.” Pet . Br. at 44 (emphas i s adde d). InterCall provi d e s that trans mi s s i o n to its custo m e r s as a part of its audio bridg in g servi c e (after procu r i n g the under l y i n g trans mi s s i o n capac i t y from other telec o m m u n i c a t i o n s provid e r s). T hus, under The Conferen c e Group’ own analy s i s, a portio n of InterCall’s servi c e is telec o m mu n i c a t i o n s. 14 Contrary to The Conferenc e Group’s sugge s t i o n, there is no incon s i s t en c y betwe e n the Order a n d the FCC’s stat em e n t in Qwest, 22 FCC Rcd at 17985-86 (¶ 32), that “users of the confer e n c e calli n g servi c e s make calls that ter min a t e at the confer e n c e bridg e, and are conne c t e d toget h e r at that point.” The FCC in the Order e x p l a i n e d both t h a t “InterCall’s service allow s end users to trans mi t a call (usi ng teleph o n e lines) to a point speci f i e d by the user (the confer e n c e bridg e)” and that the au dio bridg e “link s multi p l e call[s ] togeth e r.” Order, 23 FCC Rcd at 10734-35 (¶¶ 10-11 ) (J.A. 197). 50 The Conferen c e Group next comp la i n s that the Commissi o n in the Order “ f a i l e d to even mentio n ” its prior order in the Pulver.com procee d i n g. Pet. Br. at 53. It neglec t s to note, however, that the Commissi o n ’ s Reconsideration Order i n this case discu s s e d the Pulver.com Order extens i v e l y, and expla i n e d why that rulin g addre s s e d very diffe r e n t facts from those here. Reconsideration Order, 27 FCC Rcd at 902 (¶ 10) (J.A. 315). Chief among the diffe r e n c e s is that pulve r.com’ s Free World Dialup offer i n g — “a type of direc t o r y servi c e ” — “neit h e r offe r[ e d ] nor provid e [ d ] trans mi s s i o n.” Petition for Declaratory Ruling That Pulver.com’s Free World Dialup Is Neither Telecommunications Nor A Telecommunications Service, Memorand u m Opinion and Orde r, 19 FCC Rcd 3307, 3312 (¶ 9) (2004). Thus, in contra s t to InterCall’ s audio bridg e servi c e, the servi c e at issue in the Pulver.com Order did not even color a b l y satis f y the statu t o r y defini t i o n of teleco m mu n i c a t i o n s. See 47 U.S.C. § 153(50). B. T h e FCC Reasonab l y Determ i n e d That Inter C a l l ’s Infor m a t i o n Servi c e s Were Not Funct i o n a l l y Integ r a t e d With Its Audio Bridg i n g Service. InterCall bundle s severa l add-on confe r e n c i n g capab i l i t i e s (such as muting, record i n g, erasin g, and acce ss i n g opera t o r servi c e s) with its basic teleco n f e r e n c i n g servic e. Order, 23 FCC Rcd at 19735 (¶ 13) 51 (J.A. 197). In consid e r i n g wheth e r those capab i l i t i e s trans f o r me d InterCall’s confer e n c i n g servi c e as a whole from telec o m mu n i c a t i o n s to an infor ma t i o n servi c e, the FCC properl y appli e d the stand a r d estab l i s h e d in prior FCC decisio n s and endor s e d by the Supreme Court in Brand X: “whet h e r the trans mi s s i o n capab i l i t y is ‘suffic i e n t l y integr a t e d ’ with the infor ma t i o n servi c e capab i l i t i e s to make it reaso n a b l e to descr i b e the two as a single, integr a t e d offer i n g and cl assi f y the entire integr a t e d servic e as an infor ma t i o n servi ce.” Reconsideration Order, 27 FCC Rcd at 903 (¶ 12) (quotin g Prepaid Calling Card Order, 21 FCC Rcd at 7296 (¶ 14), in turn, quoti n g Brand X, 545 U.S. at 990) (J.A. 315). Petitione r incorr e c t l y states the Comm issi o n ’ s holdi n g in the InterCall order and thus focus es on the wrong quest i o n : the FCC did not requi r e confe r e n c e bridg e provi d e r s to contri b u t e to the USF “because such servic e constit u t e s a ‘teleco m m u n i c a t i o n s servi c e ’ as oppos e d to an ‘info r mat i o n servi c e.’” Pet. Br. at 2. As noted above, the FCC express l y decli n e d to resol v e — and was not requi r e d to resolve — wh ether InterCall and simila r l y situa t e d provi d e r s offer a “t elec o m m u n i c a t i o n s servic e ” or merely “teleco mmunications.” As the ag ency explain e d, in either ev ent, the provid e r must make USF contri b u ti o n s. See Order, 23 FCC Rcd at 10734 (¶ 7) (J.A. 196). The agency went on to explai n that the add-on featur e s 52 offered by InterCall in addit i o n to its call-trans mi s s i o n funct i o n (the core “tele c o m mu n i c a t i o n s ” eleme n t of its servi c e) did not conve r t the entir e offeri n g into an “infor m a t i o n servic e ” becaus e those additi o n a l featur e s did not create an integr a t e d servic e that was diffe r e n t from a pure offer i n g of telec o m m u n i c a t i o n s. Id. at 10735 (¶ 13) (J.A. 197); Reconsideration Order, 27 FCC Rcd at 903 (¶ 12) (J.A. 315). Because petit i o n e r mis a p p r e h e n d s the FCC’s actual holdi n g, it makes littl e e ffor t to refut e the well-suppor t e d findi n g that InterCall’s servi c e offer s teleco m mu n i c a t i o n s ; indeed, as shown above, petiti o n e r ’ s own analy s i s leads to that concl u s i o n. The Commiss i o n reaso n a b l y concl u d e d that the en hance d featur e s InterCall provi d e s in c onjun c t i o n with its confer e n c i n g servi c e are not “suffi c i e n t l y integr a t e d ” into Inter Call’s teleco m mu n i c a t i o n s offer i n g to transf o r m its entire offer i n g into an inform a t i o n servic e. Order, 23 FCC Rcd at 10735 (¶ 13) (J.A. 197). See Reconsideration Order, 27 FCC Rcd at 903 (¶ 12) (J.A. 315). As the Commissi o n expla i n e d, the enhanc e m e n t s “do not alter the fundam e n t a l chara c t e r ” of InterCall’s telec o m mu n i c a t i o n s servic e — the abilit y of more th an two peopl e to commu n i c a t e with each other. Id. Indeed, InterCall’s custo me r s can conduc t a confer e n c e call “with or witho u t acces s i n g these featu r e s.” Id. 53 The Conferenc e Group also conten d s that the FCC misappli e d the funct i o n a l servi c e s test by relyin g on th e fact that InterCall’s cu stomer s can conduc t a confer e n c e call “with or witho u t acces s i n g [the enhan c e d ] featur e s.” Id. See Pet. Br. at 47-52. It s suppo r ti n g inter v e n o r, Cisco Webex, goes furth e r, arguin g that cons id e r a t i o n of this fact ren d er s the FCC’s order so “vague ” that one that can not tell whethe r the FCC formula t e d an entir e l y new test — in poten t i a l confl i c t with prior agenc y deci s i o n s — for deter mi n i n g whet h e r a communi c a t i o n s service is an “info r mat i o n servi c e.” Cisc o Webex Br. at 13-14. The Commission in the Order o n revie w did not apply any new or modif i e d test, and th e hypot h e t i c a l confl i c t with prior agen cy preced e n t that Cisco Webex ident i f i e s is non-existe n t . Indeed, the vaguene s s that Cisco Webex purpo r ts to find in the Order stems from its own misu n d e r s t a n d i n g of the Commissi o n ’ s rulin g rathe r than a ny lack or clarit y or failur e by the agency to suffic i e n t l y expla i n its reason i n g. Rather, the Commissio n ’ s observ a t i o n that InterCall’s custom e r s can conduc t a conf er e n c e call “with or withou t acces s i n g [the enhanc e d ] featu r e s,” Order, 23 FCC Rcd 10735 (¶ 13) (J.A. 197), is simp l y an appli c a t i o n of the longs t a n d i n g funct i o n a l integ r a t i o n stand a r d previ ously used by the ag ency. See Cisco Webex Br. at 54 14 (concedi n g that langu a g e in th e Order “could be viewed as a straig h t f o r w a r d applic a t i o n of the existi n g funct i o n a l-integ r a t i o n standard.”). Under the functi o n a l integ r a t i o n te st, a provid e r does not create an integ r a t e d infor ma t i o n servi c e o ffer i n g merel y by bundl i n g enhan c e d functi o n a l i t i e s with teleco m mu n i c a t i o n s. See Brand X, 545 U.S. at 988; Prepaid Calling Cards Order, 21 FCC Rcd at 7295 (¶ 14). Telephon e servi c e packaged with voice mail, for exampl e, is not an integr a t e d inform a t i v e servi c e offer i n g becau s e the teleph o n e comp a n y “offe r s a transparent transmission path — telep h o n e servi c e — that trans mi t s infor m a t i o n indep e n d e n t of the infor ma t i o n stora g e capabil i t i e s provide d by voice mail.” Brand X, 545 U.S. at 998 (emphas i s added). With an integ r a t e d infor ma t i o n servi c e offer i n g, “[the] telec o m m u n i c a t i o n s input used to provid e an infor m a t i o n service [ s ] . . . is not ‘sepa r a b l e from the data-procee d i n g capabi l i t i e s of the servic e.’” Id. at 997 (quoti n g Cable Modem Order, 17 FCC Rcd at 4823 (¶ 39). It “is inste a d ‘part and parce l of [the infor m a t i o n servi c e ] an d is integ r a l to [the infor ma t i o n servi c e ’ s ] other capac i t i e s.’” Id. In other words, with an integ r a t e d infor ma t i o n servi c e, “the consu m e r uses the [tran s m i s s i o n compo n e n t ] always in connec t i o n with the infor m a t i o n-proces s i n g capab i l i t i e s.” Id. a t 988, 990 (emphas i s added). Thus, it was entir e l y appro p r i a t e for the Commissi o n, in 55 applyin g the funct i o n a l integ r a t i o n test in this case, to consid e r whethe r InterCall’s custo m e r s always use the enhanc e d pr oce s s i n g capab i l i t i e s when using the confe r e n c i n g servi c e or wheth e r that custo m e r can “cond u c t its confer e n c e call with or withou t a cces s i n g [the enhanc e d ] featu r e s.” Order, 23 FCC Rcd at 10735 (¶ 13) (J.A. 197). In arguin g that such consid e r a t i o n was improp e r, The Conferen c e Group and Cisco Webex rely upon — but take out of conte x t — the FCC’s statem e n t in its Cable Modem Order t h a t an offeri n g can be a single integr a t e d inform a t i o n servic e “reg a r d l e s s of whethe r subsc r i b e r s use all of the [enhan c e d ] functi o n s provid e d as part of the service.” Cable Modem Order, 17 FCC Rcd 4822 (¶ 38) (emphas i s added). That relian c e is unavai l i n g. When a custom e r invar i a b l y uses at least some (even if not all) of the enhan c e d featu r e s of a comm un i c a t i o n s servi c e along with the trans mi s s i o n comp o n e n t, those enhan c e d funct i o n a l i t i e s ma y be funct i o n a l l y integ r a t e d with the trans mi s s i o n compo n e n t — as the Commiss i o n has deter mi n e d with respe c t to broa d b a n d Interne t acces s servi c e. See Brand X, 545 U.S. at 990. But when a custo me r uses none o f those enhanc e d functi o n a l it i e s — or, stated differ e n t l y, when it may use the trans mi s s i o n co mpon e n t “with or withou t access i n g the[] [enhanc e d ] feature s,” Order, 23 FCC Rcd at 10735 (¶ 13) (J.A. 197); see also Reconsideration Order, 27 56 FCC Rcd at 904 (¶ 13) (J.A. 315) — the se rvic e is pure transm i s s i o n and the telec o m m u n i c a t i o n s and infor m a t i o n se rvi c e eleme n t s are not funct i o n a ll y integr a t e d. The Commission ’ s decisio n in the Prepaid Calling Cards Order, 21 FCC Rcd 7290, is fully consi s ten t. In that case, the Commis sio n classi f i e d certa i n types of prepa i d calli n g cards — essent i a l l y debit cards used to make ordina r y telep h o n e calls — as teleco m m u n i c a t i o n s, even thoug h the prepa i d cards at is sue in that case include d a me n u that permit t e d the user to access certai n types of inform a t i o n, such as sports, weathe r and entert a i n me n t infor ma t i o n. 21 FCC Rcd at 7294 (¶ 11 ). The Commiss i o n held that there was no funct i o n a l integ r a t i o n betwe e n the infor m a t i o n servi c e featu r e s an d the use of the telepho n e callin g capabi l i t y. Id. a t 7296 (¶ 15). In makin g this deter mi n a t i o n, the Commiss i o n found th at “the . . . transmi s s i o n capab i l i t y is co mp let e l y independent of the variou s other cap abi l i t i e s that the card makes avail a b l e,” point i n g out that “an indiv i d u a l may use [the prepa i d calli n g ] card to make a long distan c e call withou t . . . access i n g the infor ma t i o n made available with the card.” Id. (emphas i s added). The Commiss i o n made essent i a l l y the same analys i s in this case when observ e d that Interca l l ’ s custo m e r s could use the trans mi s s i o n functi o n of the comp a n y ’ s audio bridg i n g servi c e “with or withou t acce ss i n g ” enhanc e d servic e s such as 57 muting, record i n g, erasin g and opera t o r servi c e s. Order, 23 FCC Rcd at 10735 (¶ 13) (J.A. 197); see also Reconsideration Order, 27 FCC Rcd at 904 (¶ 13) (J.A. 315). The FCC’s conclus i o n also ac cords with co mmon sense. Communic a t i o n s provi d e r s shoul d no t be able to evade their USF contrib u t io n oblig a t i o n s (which hinge on classi f i c a t i o n of a servic e as “teleco m m u n i c a t i o n s ” or “teleco m m u n i c a t i o n s service”) by the si mple exped i e n t of repac k a g i n g their offer i n g to includ e add-ons that custom e r s need not use in order to access the basi c telec o m mu n i c a t i o n s funct i o n. Here, petiti o n e r and its interv e n o r do not seriou s l y dispu t e that InterCall’s custom e r s may partic i p a t e in confer e n c e calls withou t using such featur e s as mutin g, record i n g, erasin g, and opera t o r assis t a n c e. Nor does that resul t chang e becau s e caller s must en ter a code (as is commo n of any telec o n f e r e n c i n g serv i c e) in order to partic i p a t e in a conferen c e call. Pet. Br . a t 50-51. As shown at pages 45-46, that functi o n of the audio bridg e merel y facil i t a t e s the provis i o n of a basic tran s mi s s i o n servi c e witho u t alter in g its fundam e n t a l chara c t e r and ther ef o r e is not an enhanc e d servic e. NATA Centrex Order, 101 FCC 2d at 359-60. And becaus e it is not an enhanc e d servi ce, it cannot alone transfo r m the entire offeri n g into an inform a t i o n servic e. Indeed, the Commi ss i o n has held that 58 an offeri n g of access to a data base for the purpos e of obtain in g teleph o n e numbe r s (in that case, direc t o r y servi c e) may be offere d as an adjunc t to basic teleph o n e servic e, where that servic e provi d e s only the infor m a t i o n neces s a r y to allow the network place a ca ll to anothe r subsc r i b e r. Id. Similarly, the need for the data base dip for passw o r d verif i c a t i o n to facil i t a t e the estab l i s h m e n t of the trans mi s s i o n path to the bridge is an adjunc t to basic featu r e that does not transf o r m the whole servic e into an inform a t i o n servic e. In any event, at a mini mu m, the Commissi o n ’ s conc l u s i o n regar d i n g the basic chara c t e r of Interca l l ’ s servi c e offer i n g was well wit h in the agency’ s broad discr e t i o n. See Brand X, 545 U.S. at 980-86 (defere n c e due to FCC’s deter mi n a t i o n s regard i n g “infor m a t i o n servic e ” and “telec o m m u n i c a t i o n s service”). 59 C O N C L U S I O N The Court should affir m. Respectf u l l y submi t t e d, RENATA B. HESSE ACTING ASSISTANT ATTORNEY GENERAL ROBERT B. NICHOLSON NICKOLAI G. LEVIN ATTORNEYS UNITED STATES DEPARTMENT OF JUSTICE WASHINGTON, D.C. 20530 SEAN A. LEV GENERAL COUNSEL PETER KARANJIA DEPUTY GENERAL COUNSEL RICHARD K. WELCH DEPUTY ASSOCIATE GENERAL COUNSEL /s/ Laurel R. Bergold LAUREL R. BERGOLD COUNSEL FEDERAL COMMUNICATIONS COMMISSION WASHINGTON, D.C. 20554 (202) 418-1740 January 28, 2013 IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT THE CONFERENCE GROUP, LLC, PETITIONER, v. FEDERAL COMMUNICATIONS COMMISSION AND UNITED STATES OF AMERICA, RESPONDENTS. NO. 12-1124 CERTIFICATE OF COMPLIANCE Pursuant to the requi r e men t s of Fe d. R. App. P. 32(a)(7), I hereby certi f y that the acco m p a n y i n g Brief for Responde n t s in the capt i o n e d case conta i n s 12,207 words. /s/ Laurel R. Bergold Laurel R. Bergold Counsel Federal Communic a t i o n s Commissi o n Washingt o n, D.C. 20554 (202) 418-1740 (Telephon e) (202) 418-2819 (Fax) January 28, 2013 1 2 - 1 1 2 4 IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRI C T OF COLUMBI A CIRCUIT The Confer e n c e Group, LLC, Petiti o n e r , v. Federa l Commu n i c a t i o n s Commi s s i o n and Unite d State s of Ameri c a , Respon d e n t s . C E R T I FI C A T E OF SERVI CE I, Laurel R. Bergold, hereby certi f y th at on January 28, 2013, I electro n i c a l l y filed the forego i n g Final Brief for Res pond e n t s with the Clerk of the Court for the United States Court of Appeal s for the D.C. Circuit by using the CM/ECF system. Particip a n t s in the cas e who are registered CM/ECF users will be served by the CM/ECF system. Michael B. Hazzard Ross A. Buntrock Arent Fox LLP Seventh Floor 1050 Connectic u t Avenue, N.W. Washingto n, D.C. 20036-5339 Counsel for: The Conference Group, LLC Christoph e r J. Wright *Brita D. Strandbe r g Wiltshire & Grannis LLP 1200 18th Street, N.W. 12th Floor Washingt o n, D.C. 20036 Counsel for: Cisco WebEx LLC Michael E. Glover Christop h e r M. Miller Verizon 1320 North Courtho u s e Road Arlingto n, VA 22201 Counsel for: Verizon Helgi C. Walker Elbert Lin Wiley Rein, LLP 1776 K Street, N.W. Washingto n, D.C. 20006-2359 Counsel for: Verizon Nickolai G. Levin Robert B. Nicholson U.S. Department of Justice Antitrus t Division, Appellat e Section Room 3228 950 Pennsylv a n i a Avenue, NW Washingt o n, D.C. 20530 /s/ Laurel R. Bergold