No. 11-9900 IN THE United States Court of Appeals FOR THE TENTH CIRCUIT IN RE: FCC 11-161 On Petition for Review of an Order of the Federal Communications Commission UNCITED WINDSTREAM REPLY BRIEF Jeffrey A. Lamken Counsel of Record Lucas M. Walker MOLOLAMKEN LLP The Watergate, Suite 660 600 New Hampshire Avenue, N.W. Washington, D.C. 20037 (202) 556-2000 Counsel for Windstream Corporation and Windstream Communications, Inc. Appellate Case: 11-9900 Document: 01019071758 Date Filed: 06/12/2013 Page: 1 i TABLE OF CONTENTS Page ARGUME NT .............................................................................................................2 A. The FCC Failed To Justify Its Decision To Reduce Originating Access Rates for Intrastate VoIP .................................................................................2 B. The FCC’s Failure To Provide a Revenue Recovery Mechanism Was Arbitrary and Inconsistent w ith Reasoned Decisionmaking ........................... 9 CONCLUSIO N........................................................................................................15 Appellate Case: 11-9900 Document: 01019071758 Date Filed: 06/12/2013 Page: 2 ii TABLE OF AUTHORITIES Page(s) CASES Am. Min. Cong. v. Thomas , 772 F.2d 617 (10th Cir. 1985) ....................................13 Chamber of Commerce of U.S. v. SEC , 412 F.3d 133 ( D.C. Cir. 2005) .................10 City of Brookings Mun. Tel. Co. v. FCC , 822 F.2d 1153 (D.C . Cir. 1987).............11 Decker v. Nw. Envtl. Def. Ctr. , 133 S. Ct. 1326 (2013) ............................................ 8 Gen. Chem. Corp. v. United States , 817 F.2d 844 (D.C. Cir. 1987) .......................15 Graphic Commc’ns Int’l Union, Local 554 v. Salem-Gravure Div. of World Color Press , 843 F.2d 1490 ( D.C. Cir. 1988) .........................................11 M V M A v. State Farm Mut. Auto. Ins. Co. , 463 U.S. 29 (1983)...............................15 Sekula v. FDIC , 39 F.3d 448 (3d Cir. 1994).............................................................. 8 Sorenson Commc’ns, Inc. v. FCC , 567 F.3d 1215 (10th Cir. 2009) .........................3 United Gas Improvement Co. v. Callery Props., Inc. , 382 U.S. 223 (1965)...........15 STATUTE 47 U.S.C. § 251 (b)(5) ................................................................................................. 8 REGULATION 47 C.F.R. § 51.913(a) ................................................................................................. 8 OTHER MATERIALS Missoula Plan for Intercarrier Compensation Reform (Jul. 18, 2006), http://apps.fcc.gov/ecfs/doc ument/view?id =6518404 368 ....................................5 Windstream Corp. 10-Q for Q2 2012 (Aug. 9, 2012) .............................................13 Appellate Case: 11-9900 Document: 01019071758 Date Filed: 06/12/2013 Page: 3 iii GLOSSARY ABC Plan America’s Broadband Connectivity Plan APA Administrative Procedure Act ARC Access Recovery Charge CAF Connect America Fund FCC or Commission Federal Communications Commission FCC Br. Federal Respondents’ Response to the Windstream Principal Brief (filed Mar. 27, 2013) FNPRM Further Notice of Proposed Rulemaking ICC Intercarrier Compensation ILEC Incumbent Local Exchange Carrier Intervenors Br. Brief of Interv enors Supporting Respondents in Response to the Windstream Principal Brief (filed Apr. 24, 2013) IP Internet Protocol IXC Interexchange Carrier LEC Local Exchange Carrier NPRM Notice of Proposed Rulemaking and Further Notice of Proposed Rulemaking, FCC No. 11-13, 26 FCC Rcd. 4554 (2011) Order USF/ICC Transformation Order, FCC Order No. 11-161, 26 FCC Rcd. 17663 (2011) PSTN Public Switched Telephone Network Appellate Case: 11-9900 Document: 01019071758 Date Filed: 06/12/2013 Page: 4 iv PUC Public Utility Commission Second Reconsideration Second Order on Reconsideration, Order FCC Order No. 12-47, 27 FCC Rcd. 4648 (2012) TDM Time-Division Multiplexing USF Universal Service Fund VoIP Voice over Internet Protocol (also called VoIP-PSTN) Windstream Br. Windstream Principal Brief (filed Dec. 10, 2012) Appellate Case: 11-9900 Document: 01019071758 Date Filed: 06/12/2013 Page: 5 Time and again, the FCC’s rulemaking emphasized two policies integral to intercarrier compensation (“ICC”) reform: Avoiding disruptive flash-cuts in rates, and deferring originating access charge reductions given the insufficiency of the data. But when it came to originating access for VoIP calls, the FCC abandoned both principles without any reasoned expl anation, slashing rates without offering any realistic analysis of that flash-cut’s financial impact or providing a revenue re- covery mechanism like that establishe d to cushion reductions in terminating access rates. The FCC attempts to fill that gap on appeal by re-purposing its rationales for reducing terminating access for VoIP calls to ju stify reductions in VoIP originat- ing access. But those rationales do not make sense for originating access. For example, although the FCC now claims fl ash-cutting VoIP originating access was necessary to prevent arb itrage, the agency acknowledged below that it actually creates arbitrage risks. The FCC’s other expl anations for radically different treat- ment between traditional and VoIP origina ting access likewise fail: They were not offered below; defy reason; and have no foundation in evidence. The FCC’s refusal to provide a revenue recovery mechanism and phased-in transition fares even worse. The FCC offered no explanation for that decision below. And its new explanation on app eal—that purported increases in VoIP ter- minating access revenues will offset lost originating revenues—is unsupported. Appellate Case: 11-9900 Document: 01019071758 Date Filed: 06/12/2013 Page: 6 2 The FCC never attempted to quantify the supposed increase in terminating revenues. In fact, that increase comes nowhere near offsetting lost originating revenues, and scheduled reductions in VoIP terminating rates only further deplete whatever scant “recovery” those charges might provide. Nor does the FCC’s suspension of its flash-cut on reconsideration justify denying a recovery mechanism. Carriers will still suffer an abr upt rate reduction next year, contrary to the FCC’s avowed policy of providing gradual transitions. The suspension, more- over, does nothing to remedy the six-month flash-cut the Order already imposed without any explanation. ARGUMENT A. The FCC Failed To Justif y Its D ecision To Reduce Originating Access Rates for Intrasta t e VoIP The FCC identifies nothing in the Order that explains why it cut originating access charges for intrastate VoIP calls while preserving intrastate originating rates for traditional calls. Instead, the FCC urges that the reasons it gave for reducing terminating access charges for VoIP calls also apply to originating access for VoIP calls: Because the Order defined “VoIP- PSTN traffic” as “traffic exchanged over PSTN facilities that originates and/or terminates in IP format,” Order ¶ 940(JA____), the FCC insists that “[e]very use of that term throughout the VoIP section of the Order . . . necessarily referred to originating access ” as well as terminating access. FCC Br . 16 (emphasis added). That argument permeates the Appellate Case: 11-9900 Document: 01019071758 Date Filed: 06/12/2013 Page: 7 3 FCC’s brief. See id. at 9, 10, 16, 20-21, 22. But it is verbal sleight of hand. And it underscores the arbitrariness of the FCC’s decision: The stated rationales make no sense for originating access. 1. The FCC contends that, whenever it offered a justification for reduc- ing VoIP terminating access rates—the only context it discussed—it really meant all VoIP access charges. But defining Vo IP as traffic that “originates and/or terminates in IP” means only that a call is classified as VoIP if IP is used at either end of the call. It says nothing about how VoIP is regulated , much less that originating and terminating access are regulated identically for VoIP (they are not for traditional calls). Nor does it say what rates apply to VoIP terminating and originating access, let alone that those rates are the same (they are not for tradition- al calls). The FCC’s efforts to re-purpo se rationales offered for terminating access to justify flash-cutting originati ng access for VoIP calls are mere “ post hoc ration- alizations of counsel” this Court must “disregard.” Sorenson Commc’ns, Inc. v. FCC , 567 F.3d 1215, 1221 (10th Cir. 2009). 2. The FCC’s new explanations also defy reason. The FCC conceded on reconsideration that a primary rationale for reforming VoIP terminating access— “significant billing disputes and litigation”—did not apply to VoIP originating access, where such disputes did not exist. Second Reconsideration Order ¶ 32(JA____); see Order ¶ 937(JA____-____). The FCC thus abandons that Appellate Case: 11-9900 Document: 01019071758 Date Filed: 06/12/2013 Page: 8 4 rationale on appeal. FCC Br. 27-28. It nonetheless re-embraces the error by urging that allowing intrastate originating rates for VoIP would have required it to “extend” the existing access regime “int o a new area.” FCC Br. 24 (citing Order ¶ 948). But that assumes LECs were not already receiving intrastate rates for originating VoIP calls—an assumption the FCC has conceded to be false. See Second Reconsideration Order ¶ 32(JA____) ; Windstream Br. 22-24. The question before the FCC was thus whether to main tain the originating-access status quo for some calls (traditional calls) but disrupt it for others (VoIP). None of the FCC’s rationa les justifies that differe ntial treatment. The FCC asserts that cutting originating access for VoIP calls will “ ‘guard against new forms of arbitrage’ ” by establishing “ ‘sy mmetrical’ VoIP rules that apply equally to both originating and terminating traffi c.” FCC Br. 24-25 (quoting Order ¶ 941). That rationale appears nowhere below. The Order discussed arbitrage only with respect to VoIP terminating access, which could arise if different terminating rates applied depending on the technology used for the call (“IP-originated” versus “IP- terminated”). Order ¶ 942(JA____). Th e Order never claimed that “addressing only terminating access charges and not originating charges” would create arbitrage opportunities. FCC Br. 25 (empha sis added). Nor could it: A carrier cannot exploit differences between origin ating and terminating access charges, because it cannot control whether it is on th e sending or receiving end of the call. Appellate Case: 11-9900 Document: 01019071758 Date Filed: 06/12/2013 Page: 9 5 If such arbitrage were possible, the Order’s treatment of non-VoIP traffic— reducing terminating but not originati ng access charges—would be irrational. The FCC’s decision to cut originating access for VoIP calls while preserving originating access for non-VoIP actually creates arbitrage risks. Having different originating access rates for VoIP and non-VoIP traffic provides “incentives for IXCs to misidentify the technology the terminating LECs use to terminate their calls—something that the originating LEC has no ability to veri fy.” Windstream Petition for Reconsideration Reply 12-13(JA____-____). The FCC never disputed that. Indeed, when confronted with the issue, the agency disclaimed arbitrage as a rationale, denying “that the Order should be interpreted ca tegorically to preclude any individual rules that could preserve incentives for any form of arbitrage.” Sec- ond Reconsideration Order ¶ 32 n.89 (JA____). The FCC’s invocation of arbitrage here is thus an improper post hoc rationalization—and an e rroneous one at that. An agency cannot defend its actions by claiming its chosen course redresses evils that it concededly exacerbates .1 1 The FCC notes that, years ago in a different proceeding, Windstream stated that “maintaining a disparity in originating and terminating rates does not make eco- nomic sense.” FCC Br. 25 n.5. Windst ream, however, was supporting an earlier proposal, the Missoula Plan, which provided for measured reform of terminating and originating access—including opportunitie s to recover lost revenue for both. See Missoula Plan for Intercarrier Compensation Reform 4, 12 (Jul. 18, 2006), http://apps.fcc.gov/ecfs/document/vie w?id=6518404368 (PDF pages 86, 94). Windstream does not oppose rational ICC reform, including originating access Appellate Case: 11-9900 Document: 01019071758 Date Filed: 06/12/2013 Page: 10 6 Finally, the FCC argues that maintaining current originating rates for VoIP calls would “ ‘create incentives to retain old voice technologies’ ” and “ ‘hinder[ ] progress to all IP networks.’ ” FCC Br. 25-26 (quoting NPRM ¶ ¶ 495, 506(JA____, ____)). But the quoted stat ements from the NPRM were explaining ICC reform generally—they appear in the NPRM’s general discussion of ICC reform, not the “specific section” “d edicated uniquely to VoIP,” see FCC Br. 26. They thus cannot support treating Vo IP and non-VoIP differently. More important, the FCC’s distinction betwee n VoIP and non-VoIP originating access actually discourages upgrading to IP technology. LECs that convert from older TDM technology to IP guarantee that they will receive lower interstate originating access rates for all traffic, whereas LECs that stick with TDM preserve the right to higher intrastate rates for originating traffic that terminates in TDM. The FCC nowhere explains how rewarding upgrades w ith a guaranteed rate cut (and no reve- nue recovery) promotes investment in IP networks.2 reform. But reform must have real, stated justifications and allow reasonable tran- sitions. The Missoula Plan did that; the Orders under review do not. 2 Quoting the ABC Plan proponents’ Join t Comments, the FCC asserts that “Wind- stream itself suggested that the FCC ‘tr eat VoIP traffic differently from non-VoIP traffic.’ ” FCC Br. 27. But that addressed only VoIP terminating access. The Comments state that “distinct treatment of VoIP will la st for only the first 18 months of the transition, after which exis ting [non-VoIP] intras tate rates will have been reduced to interstate rates.” Jo int Comments 35(JA____). That could not have referred to originating access, be cause “[t]he ABC Plan d[id] not call for reductions in originating access charges.” Id. at 26(JA____). The Plan was explicit, stating that the VoIP traffic ma de “subject to current interstate access Appellate Case: 11-9900 Document: 01019071758 Date Filed: 06/12/2013 Page: 11 7 3. None of the FCC’s proffered rati onales supports its flash-cut of VoIP originating access because none was offered for that purpose—until this appeal. The FCC does not deny that each example the Order gave regarding VoIP dealt with terminating access. Windstream Br . 12. The FCC nonetheless claims that both originating and terminating access were necessarily covered because the Order stated that “all long-distance VoIP traffic ‘will be subject to charges not more than originating and terminating interstate access rates.’ ” FCC Br. 21 (quot- ing Order ¶ 961(JA____)) (em phasis added). But the FCC omits footnote 1976, appended to the word “originating.” That footnote made clear that the FCC was distinguishing between originating and te rminating access for VoIP: It provided that “originating access charges” will be addre ssed “pursuant to a transition to be specified in response to the FNPRM.” Order ¶ 961 n.1976(JA____) (emphasis added). And the FNPRM confirmed that, “seek[ing] comment on that final tran- sition for all originating access charges.” Id. ¶ 1298 (JA____-____). The FCC urges that footnote 1976 “doe s not address VoIP calls specifical- ly.” FCC Br. 23. But the footnote appear ed in what the FCC repeatedly describes as the “specific section” of the Order “dedicated uniquely to VoIP.” Id. at 26; see id. at 8, 11, 17, 20, 23, 27. Nowhere doe s the FCC explain why a footnote in the rates” would be “incorporated in the overall transition as rates for terminating interstate access traffic are reduced.” ABC Plan Framework 10(JA____) (empha- sis added). Neither filing, moreover, advocated indefinite discrimination between VoIP and non-VoIP like that ordered here. Appellate Case: 11-9900 Document: 01019071758 Date Filed: 06/12/2013 Page: 12 8 dedicated VoIP section should be read to exclude VoIP calls. That the footnote discusses “section 251(b)(5) traffic”—which includes traditional and VoIP traffic, id. at 23—confirms that originating acc ess for VoIP and non -VoIP was to be treated alike. The FCC’s plea for deference (at 20) fall s short. Courts must still “ ‘inde- pendently insure that the agency’s interpre tation’ ” of its Order “ ‘comports with the language it has adopted.’ ” Sekula v. FDIC , 39 F.3d 448, 453 ( 3d Cir. 1994). The FCC’s construction does not. For preser vation purposes, moreover, Windstream maintains that deference is inappropriate and violates separation of powers. See Decker v. Nw. Envtl. Def. Ctr. , 133 S. Ct. 1326, 1339-42 (2013) (Scalia, J., con- curring in part and dissenting in part). 4. Ultimately, the FCC argues that the language of the Rule the Order adopted “plainly applies to both originating and terminating traffic.” FCC Br. 22. But that again confuses how VoIP is defined with how VoIP is regulated . The quoted language addresses the traffic “the VoIP access charge regime applies to,” not the substance of that regime; none mentions originating access charges. Id. By contrast, the revised Rule does explicitly address origin ating access. 47 C.F.R. § 51.913(a). Besides, whatever the Ru les mean, the FCC failed to provide reasoned explanations for adopting th em. They cannot be sustained. Appellate Case: 11-9900 Document: 01019071758 Date Filed: 06/12/2013 Page: 13 9 B. The FCC’s Failure To Provide a Revenue Recovery Mechanism Was Arbitra r y and Inconsisten t with Reasoned Decisionmakin g The FCC does not dispute that, throughout these proceedings, it emphasized its “commitment to a gradual transition” a nd “glide paths,” its opposition to “flash cuts,” and the corresponding need for a recovery mechanism to offset revenue losses. Order ¶ ¶ 870, 890(JA____, ____); NPRM ¶17(JA____). Consistent with that commitment, the FCC paired terminating access reductions with a recovery mechanism. Order ¶ ¶ 847-932(JA____-__ __). But when the FCC cut VoIP originating access charges, it refused to do so. The FCC’s entire rationale for that about-face was one sentence: “Our rec onsideration here does not adopt the Frontier-Windstream Petition’s proposal that , ‘the Commission, at the very least, would need to permit LECs to use the recovery mechanism to recover lost originating access revenues.’ ” Second Reconsideration Order ¶ 35 n.97(JA____). 1. The FCC urges that, in fact, it “d iscussed the issue and explained that explicit replacement revenue was unnecessary” because of “offsetting compensa- tion”—namely “ ‘additional revenues for pr eviously disputed terminating VoIP calls’ ” and “ ‘savings associated with re duced litigation and disputes.’ ” FCC Br. 29-30 (quoting Second Reconsideration Orde r ¶ 35). The FCC claims to have “predict[ed] that increases in terminating access revenue would make up for” lost originating access revenue. Id. at 31 (emphasis added). Appellate Case: 11-9900 Document: 01019071758 Date Filed: 06/12/2013 Page: 14 10 The record belies that argument. The paragraph the FCC cites does not address a recovery mechanism. See Second Reconsideration Order ¶ 35(JA____- ____); FCC Br. 29-30. It ad dresses the FCC’s decision not to “indefinitely per- mit[ ] [VoIP] origination charges at the level of intrastate access.” Second Recon- sideration Order ¶ 35(JA____). Declining to maintain current ICC charges is not the same as refusing some means of recovering lost revenue. A statement made to support one agency decision cannot sustain a different decision. See Chamber of Commerce of U.S. v. SEC , 412 F.3d 133, 143 (D.C. Cir. 2005) (refusing to consid- er statement that SEC “was not aware of any costs associated with the hiring of staff ” because agency “made that observati on . . . in regard not to the independent chairman condition [under re view] but to a condition not challenged here”). The point of a recovery mechanism is to facilitate a “gradual transition away from ICC revenues ” by providing “ alternative revenue sources.” Order ¶ 847(JA____) (emphasis added); see Second Reconsideration Order ¶ 35(JA____) (expressing “overall polic y goal” of “moving away from reliance on ICC revenues”). The notion that there shoul d be no recovery mechanism for VoIP ori- ginating access (one form of ICC) because LECs could rely more heavily on termi- nating access (another form of ICC) thus does not merely violate the rule against post hoc rationalizations; it also violates th e “overall policy goal” undergirding the Orders on review. The FCC nowhere explains that inconsistency. Appellate Case: 11-9900 Document: 01019071758 Date Filed: 06/12/2013 Page: 15 11 2. The FCC’s new rationale fails both the reasoned decisionmaking and the substantial evidence requirements. Th e FCC asserts that “increases in termi- nating access revenue would make up for the (eventual) fall in originating access revenue.” FCC Br. 31. But it “points to no data to support this claim.” City of Brookings Mun. Tel. Co. v. FCC , 822 F.2d 1153, 1171 (D.C. Cir. 1987). Nor could it. “The record does not quantify th e net effect of the revenue reduction and cost savings” of the transitional VoIP I CC regime. Order ¶ 948 n.1914(JA____). Absent any analysis, the FCC’s newly mi nted “predictive judgment” is unsupport- ed assertion. Such “conjecture cannot substitute for a reasoned explanation.” Graphic Commc’ns Int’l Union, Local 554 v. Salem-Gravure Div. of World Color Press , 843 F.2d 1490, 1494 (D.C. Cir. 1988). 3 That conjecture is also mathematically implausible. Intr astate access rates can be more than ten cents per minute, whereas interstate rates can be a fraction of a cent per minute. NPRM ¶ 494 (JA____). Even assuming (unrealistically) that LECs previously received nothing for Vo IP terminating access, an extra penny per minute for terminating access nowhere approaches the loss of a dime per minute on 3 The FCC errs in claiming (at 31) that “Windstream does not challenge the FCC’s prediction that increases in terminating access revenue would make up for the (eventual) fall in originating access revenue.” That “pre diction,” first asserted on appeal, is unsupported and unsupportable. Appellate Case: 11-9900 Document: 01019071758 Date Filed: 06/12/2013 Page: 16 12 VoIP originating access. 4 Moreover, terminating access for VoIP calls will be cut still further on July 1, 2014—the same day VoIP originating access rates are flash- cut. Order ¶ 801(JA____-____), Second Reconsideration Order ¶ 35(JA____). The FCC nowhere reconciles its new theory with basic math. The FCC also double-counts the supposed benefits from VoIP terminating access. The original Order invoked that same justification—“more certain reve- nue” and “reduced litigation and administra tive expense associated with VoIP”—in connection with reducing non-VoIP terminating access. See Order ¶ 930(JA____). The FCC offers nothing to show those putative benefits will cover both terminating and originating losses. The Order, moreover, identified those supposed benefits in connection with terminating access only as factors to consider where carriers request additional recovery beyond that available under the mechanism the FCC established. See id. ¶ ¶ 924-930(JA____-____). The FCC’s Order thus posits that any increase in VoIP termina ting revenue is so slight as to matter only in indi- vidual cases where a recovery mechanism falls short; but in its a ppellate brief, that purported increase is so great as to justify denying any recovery mechanism when originating access charges are pared to a fraction of their former amount. That inconsistency is unexplained and inexplicable. 4 Rates vary by State, and there are othe r complicating factors. But the FCC did not attempt even a rudimentary estimate, much less a reasoned estimate based on record evidence. Appellate Case: 11-9900 Document: 01019071758 Date Filed: 06/12/2013 Page: 17 13 3. The FCC likewise errs in characterizing its two-year suspension of the cut as a gradual transition because carrier s may “charge rates for intrastate toll VoIP traffic in excess of interstate access rates for longer than the approximately eighteen months . . . that the Commi ssion permitted for terminating access .” Second Reconsideration Order ¶ 36 n.10 4(JA____-____) (empha sis added); FCC Br. 32-33. A flash-cut is still a flash- cut whether imposed today or deferred; abrupt financial changes do not cease to be abrupt (and disruptive) simply because they are scheduled two years out. On June 30, 2014, originating LECs will be compensated at intrastate levels; on July 1, they will receive a fraction of that, with nothing to narrow the gap. Nor is the originating access cut gradual compared to reductions in terminating rates. FCC Br. 32-33. Reduc tions in terminating access do start earlier, but those reductions are paired with a revenue recovery mecha- nism. That calibrated transition cannot be co mpared to a flash-cut imposed without any revenue recovery.5 5 Seeking to downplay the flash-cut’s imp act, Intervenors invoke materials outside the administrative record. Intervenors Br . 6-7 nn. 2-3. But an “agency’s action must be reviewed on the basis articulat ed by the agency a nd on the evidence and proceedings before the agency at the time it acted.” Am. Min. Cong. v. Thomas , 772 F.2d 617, 626 (10th Cir. 1985). Besides , those materials are unsupportive. A company offering many services can suffer great losses in a single line of business before it becomes “material” to the co mpany as a whole. Windstream’s 10-Q confirms that ICC reform will result in “numerous disputes,” some “significant,” over “the proper amount of intercarrier compensation.” Wi ndstream Corp. 10-Q for Q2 2012, at 55. And Windstream’s le tter to the Texas PUC reflects one such dispute (instigated by Verizon). Appellate Case: 11-9900 Document: 01019071758 Date Filed: 06/12/2013 Page: 18 14 4. The FCC’s theory that “carriers do not have the same reliance inter- ests in [VoIP originating access] revenue” that they have in traditional call reve- nue, FCC Br. 31, fares no better. It is undi sputed that, before the Order, LECs con- sistently received intrastate originating access rates for intrastate VoIP traffic, at least where that traffic originated in TDM. That VoIP is “a relatively new technol- ogy that the FCC had never previously determined to be subject to the access charge regime,” id. at 24, did not matter. LECs c ould not tell how calls terminated, so all traffic originating in TDM was treated the same. See Verizon White Paper 7(JA____). The FCC, moreover, never made an unquestioned entitlement to access charges a condition for revenue recovery. Terminating access for VoIP calls (unlike originating access) was subject to dispute. Yet the FCC made VoIP terminating access eligible for the Order’s r ecovery mechanism—in fact, the agency declined to adopt immediate b ill-and-keep for VoIP terminating access specifically to “limit the initial burden th at the intercarrier compensation reform recovery mechanism places on the Univer sal Service Fund.” Order ¶ 952(JA____- ____). Even if differing re liance interests might explain treating originating access for VoIP and non-VoIP calls differently—and they do not—they cannot justify affording a recovery mechanism to offset cuts to terminating access for VoIP calls but none for originating access for VoIP calls. That “internally inconsistent and Appellate Case: 11-9900 Document: 01019071758 Date Filed: 06/12/2013 Page: 19 15 inadequately explained” decision cannot stand. Gen. Chem. Corp. v. United States , 817 F.2d 844, 846 (D.C. Cir. 1987). 5. The FCC cannot salvage the Order’s immediate six-month flash-cut of VoIP originating access charges, which wa s imposed without considering a recov- ery mechanism. Windstream Br. 29. Because the FCC “e ntirely failed to consider an important aspect of the problem,” that flash-cut was arbitrary and capricious. M V M A v. State Farm Mut. Auto. Ins. Co. , 463 U.S. 29, 43 (1983). While the FCC makes noises about retroactiv e rates (at 33-34), it does not deny it has authority to reverse the effects of any order overturned on judicial review. See United Gas Im- provement Co. v. Callery Props., Inc. , 382 U.S. 223, 229-30 ( 1965) (agency may order refund of money paid under invalidated order b ecause “[a]n agency, like a court, can undo what is wrongfully done by virtue of its order”). CONCLUSION This Court should vacate the FCC’s rule reducing intrastate VoIP originating access. Appellate Case: 11-9900 Document: 01019071758 Date Filed: 06/12/2013 Page: 20 June 12, 2013 Respectfully submitted, /s/ Jeffrey A. Lamken Jeffrey A. Lamken Counsel of Record Lucas M. Walker MOLOLAMKEN LLP The Watergate, Suite 660 600 New Hampshire Ave., N.W. Washington, D.C. 20037 (202) 556-2000 Counsel for Windstream Corporation and Windstream Communications, Inc. Appellate Case: 11-9900 Document: 01019071758 Date Filed: 06/12/2013 Page: 21 CERTIFICATE OF COMPLIANCE 1. This brief complies with the type-vol ume limitations of Fed. R. App. P. 32(a)(7)(B)(ii) and this C ourt’s October 1, 2012 Order establishing a briefing schedule in Windstream’s case because th is brief contains 3,497 words, excluding the parts of the brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii). 2. This brief complies with the typef ace requirements of Fed. R. App. P. 32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because this brief has been prepared in a proportiona lly spaced typeface using Microsoft Word 2003 in Times New Roman 14-point font. June 12, 2013 /s/ Jeffrey A. Lamken Jeffrey A. Lamken Appellate Case: 11-9900 Document: 01019071758 Date Filed: 06/12/2013 Page: 22 CERTIFICATE OF SERVICE I hereby certify that, on June 12, 2013, pe r this Court’s order of October 17, 2012, I caused the foregoing document to be electronically filed with the Court via e-mail. This document will be served on all parties in this case by the Notice of Docket Activity upon the Court’s docketi ng of the brief in the CM/ECF system. June 12, 2013 /s/ Jeffrey A. Lamken Jeffrey A. Lamken Appellate Case: 11-9900 Document: 01019071758 Date Filed: 06/12/2013 Page: 23 ECF CERTIFICATION I hereby certify that with respect to the foregoing: 1. All required privacy redac tions have been made. 2. Hard copies of this Uncited Brief are not required to be submitted to the Clerk’s office. 3. This ECF submission was scanned fo r viruses with the most recent version of Windows Intune Endpoint Protection (version 1.151.2103.0, updated June 12, 2013) and, according to the program, is free of viruses. June 12, 2013 /s/ Jeffrey A. Lamken Jeffrey A. Lamken Appellate Case: 11-9900 Document: 01019071758 Date Filed: 06/12/2013 Page: 24