No. 11-9900 __________________________________________________________ IN THE UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT ___________________________________________________________ IN RE: FCC 11-161 ___________________________________________________________ On Petitions for Review of an Order of The Federal Communications Commission ___________________________________________________________ NATIONAL ASSOCIATION OF STATE UTILITY CONSUMER ADVOCATES REPLY BRIEF ___________________________________________________________ Paula M. Carmody, NASUCA President Maryland People’s Counsel Office of People’s Counsel 6 St. Paul Street, Suite 2102 Baltimore, MD 21202 (410) 767-8150 FAX (410) 333-3616 paulac@opc.state.md.us David C. Bergmann Counsel for NASUCA 3293 Noreen Drive Columbus, OH 43221-4568 (614) 771-5979 david.c.bergmann@gmail.com (Additional counsel listed on inside cover) July 31, 2013 Appellate Case: 11-9900 Document: 01019101510 Date Filed: 07/31/2013 Page: 1 2 Additional counsel: Christopher J. White Deputy Rate Counsel New Jersey Division of Rate Counsel 140 E. Front Street, 4th Floor Trenton, NJ 08625 Phone (609) 633-9141 cwhite@rpa.state.nj.us Appellate Case: 11-9900 Document: 01019101510 Date Filed: 07/31/2013 Page: 2 i TABLE OF CONTENTS TABLE OF AUTHORITIES………………………………..ii GLOSSARY…………………………………………………..iv I. ARGUMENT………………………………………… 1 II. CONCLUSION……………………………………… 7 Certificate of Compliance…………………………………….9 Certificate of Service………………………………………...10 Appellate Case: 11-9900 Document: 01019101510 Date Filed: 07/31/2013 Page: 3 ii TABLE OF AUTHORITIES CASES PAGE Amer. Elec. Power Serv. Corp. v. FCC, No. 11-1146 (D.C. Cir., Feb. 26, 2013)………………………………………..1 Arlington v. FCC, ___ S.Ct. __ (May 20, 2013)……………….4 AT&T v. FCC, 363 F.3d 504, 511 (D.C. Cir. 2004)………….2 AT&T v. FCC, 974 F.2d 1351, 1354 (D.C. Cir. 1992)………1 AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366………………….4 Bechtel v. FCC, 10 F.3d 875 (D.C. Cir. 1993)………………….3 Diamond Int’l Corp. v. FCC, 627 F.2d 489 (D.C. Cir. 1980)……………………………………………………….7 Connecticut Office of Consumer Counsel v. FCC, 915 F.2d 75 (2nd Cir. 1990).………………………………………6 MCI Telecomms. Corp. v. FCC, 750 F.2d 135 (D.C. Cir. 1984)……………………………………………………….5 Nat’l Ass’n of State Regulatory Util. Comm’rs v. FCC, 737 F.2d 1095 (D.C. Cir 1984)………………………………………5 Nat’l Ass’n of State Util. Consumer Advocates v. FCC, DC Cir Case Nos. 08-1226 and 08-1353,………………………….2 Rural Cellular Ass’n, v. FCC, 588 F.3d 1095 (D.C. Cir. 2009)………………………………………………………….5 Sorenson Commc’ns Inc. v. FCC, 659 F.3d 1035 (10th Cir. 2011)………………………………………………………1, 5 Appellate Case: 11-9900 Document: 01019101510 Date Filed: 07/31/2013 Page: 4 iii Southwestern Bell Tel. Co. v. FCC, 180 F.3d. 307 (D.C. Cir. 1999) …………………………………………………….1 STATUTES 47 U.S.C. 201(b)……………………………………………………….4 47 U.S.C. §251(b)(4)…………………………………………………4 47 U.S.C. §251(b)(5)………………………………………………….4 47 U.S.C. §405(a)…………………………………………………..1, 6 AGENCY DECISIONS In the Matter of Connect America Fund, WC Docket No. 10-90, A National Broadband Plan for Our Future, GN Docket No. 09-51, Establishing Just and Reasonable Rates for Local Exchange Carriers, WC Docket No. 07-135, High-Cost Universal Service Support, WC Docket No. 05-337, Developing an Unified Intercarrier Compensation Regime, CC Docket No. 01-92, Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Lifeline and Link-Up, WC Docket No. 03-109, Universal Service – Mobility Fund, WT Docket No. 10-208, Report And Order And Further Notice of Proposed Rulemaking, FCC 11-161 (adopted October 27, 2011, released November 18, 2011) …………………………………..3, 5 Petition of US Telecom for Forbearance Under 47 U S.C. § 160(c) from Enforcement of Certain Legacy Telecommunications Regulations, Memorandum Opinion and Order and Report and Order and Further Notice of Proposed Rulemaking and Second Further Notice of Proposed Rulemaking, WC Docket No. 12-61, et al., FCC 13-69 (released May 17, 2013)…………………….2 Appellate Case: 11-9900 Document: 01019101510 Date Filed: 07/31/2013 Page: 5 iv GLOSSARY 1996 Act Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56, codified at 47 U.S.C. §§151-276 ARC Access Recovery Charge CAF Connect America Fund Commission or FCC Federal Communications Commission FCC Br. Federal Respondents’ Final Response to the Brief of the National Association of State Utility Consumer Advocates IB Brief of Intervenors Supporting Respondents in Response to the Brief of the National Association of State Utility Consumer Advocates ICC Intercarrier compensation ICC Br. Joint Intercarrier Compensation Principal Brief of Petitioners (Conformed) ICC Reply Br. Joint Intercarrier Compensation Reply Brief of Petitioners (Conformed) ILEC Incumbent Local Exchange Carrier LEC Local Exchange Carrier NASUCA National Association of State Utility Consumer Advocates Appellate Case: 11-9900 Document: 01019101510 Date Filed: 07/31/2013 Page: 6 v NASUCA Br. National Association of State Utility Consumer Advocates Principal Brief Order In the Matter of Connect America Fund, WC Docket No. 10-90, A National Broadband Plan for Our Future, GN Docket No. 09-51, Establishing Just and Reasonable Rates for Local Exchange Carriers, WC Docket No. 07-135, High-Cost Universal Service Support, WC Docket No. 05-337, Developing an Unified Intercarrier Compensation Regime, CC Docket No. 01-92, Federal- State Joint Board on Universal Service, CC Docket No. 96-45, Lifeline and Link-Up, WC Docket No. 03-109, Universal Service – Mobility Fund, WT Docket No. 10-208, Report And Order And Further Notice of Proposed Rulemaking, FCC 11-161 (adopted October 27, 2011, released November 18, 2011) Respondents FCC and the USA SLC Subscriber line charge USF Universal Service Fund Appellate Case: 11-9900 Document: 01019101510 Date Filed: 07/31/2013 Page: 7 1 I. ARGUMENT A. The FCC’s reliance on §405(a) is misplaced. Respondents argue that NASUCA’s issue was not raised below and is barred by §405(a). FCC Br. 4-5, 10. The authority cited by the FCC is from only the D.C. Circuit. The illegality of the holding- company ARC was in fact raised in the Petition for Reconsideration of the Public Service Commission of the District of Columbia (filed Dec. 29, 2011) (JA at 4046-4053). The argument need not have been raised by petitioners themselves to avoid the §405(a) bar. Amer. Elec. Power Serv. Corp. v. FCC, No. 11-1146, slip op. at 13 (D.C. Cir., Feb. 26, 2013). The agency had the “opportunity” to respond to this issue, which is all that §405(a) requires, and was the key factor in Sorenson Commc’ns Inc. v. FCC, 659 F.3d 1035, 1044 (10th Cir. 2011) cited by the FCC; see also, AT&T v. FCC, 974 F.2d 1351, 1354 (D.C. Cir. 1992). Indeed, the FCC asserts that the statutory basis for the ARC was “fully explained….” FCC Br. 3. Crucially, the D.C. Circuit has held that denial of reconsideration is not itself appealable. Southwestern Bell Tel. Co. Appellate Case: 11-9900 Document: 01019101510 Date Filed: 07/31/2013 Page: 8 2 v. FCC, 180 F.3d. 307, 311 (D.C. Cir. 1999); AT&T v. FCC, 363 F.3d 504, 511 (D.C. Cir. 2004). Finally, the FCC has not yet acted on the DC PSC’s Petition for Reconsideration. The FCC has delayed ruling on reconsiderations for years after asking for stays of pending appeals.1 1 On May 17, 2013, the FCC “dismissed or denied” Petitions for Reconsideration of an order for which NASUCA v. FCC, DC Cir Case Nos. 08-1226 and 08-1353 has been held in abeyance. See Petition of US Telecom for Forbearance Under 47 U S.C. § 160(c) from Enforcement of Certain Legacy Telecommunications Regulations, Memorandum Opinion and Order and Report and Order and Further Notice of Proposed Rulemaking and Second Further Notice of Proposed Rulemaking, FCC 13-69. Appellate Case: 11-9900 Document: 01019101510 Date Filed: 07/31/2013 Page: 9 3 B. The Order does not set forth FCC authority to adopt the ARC. The FCC’s assertion (FCC Br. 3) that the Order “fully explained the statutory basis for the ARC” is wrong. As NASUCA’s Brief pointed out (at 5), in the full discussion of access charges (Order, ΆΆ847-932; JA at 683-729), there was no mention of authority for the ARC; neither is there any such mention in the different 21 paragraphs now cited by the FCC. NASUCA is not asking that the Commission repeat its jurisdiction “incessantly”2 over time, but just once, in the course of adopting the unprecedented revenue transfer in the Order. The FCC cites (FCC Br. 6) first the Supreme Court’s confirmation of authority under §201(b) “to adopt rules implementing the Communications Act”; and second, its own determination — that §251(b)(5) covers intrastate communications. From those two premises, the FCC’s Brief concludes that “[b]ecause the ARC recovers some of the intrastate access revenues reduced by the Order pursuant to that federal authority, the ARC falls well within the FCC’s statutory powers.” FCC Br. 6. 2 See IB at 2, quoting Bechtel v. FCC, 10 F.3d 875, 878 (D.C. Cir. 1993). Appellate Case: 11-9900 Document: 01019101510 Date Filed: 07/31/2013 Page: 10 4 This assumption of enormous authority would validate any FCC action undertaken based on those two premises. As the Supreme Court recently found in Arlington v. FCC, ___ S.Ct. __ May 20, 2013), slip op. at 16-17, the FCC’s authority is substantial, but it must be tied to a specific statutory provision. And there is nothing in §§201 or 251(b)(5) allowing the FCC to create a new mechanism to collect lost intrastate carrier revenues from customers. States have primary authority over intrastate services, §152(b). In the absence of a specific Congressional directive, AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 378, there is no FCC intrastate authority. There is none here. The FCC asserts (FCC Br. 3) that AT&T gives it the authority to adopt the ARC. The FCC’s authority to assert jurisdiction over all telecommunications — intrastate and interstate — is one of the fundamental issues in this appeal. See ICC Br. and ICC Reply Br. Even accepting arguendo the FCC’s §251(b)(4) assertion, however, the FCC’s mere assertion on brief (FCC Br. 6) cannot stretch that authority far enough to allow turning carriers’ lost interstate and intrastate ICC revenues into an interstate charge on customers. Under the FCC’s current argument, the Commission “merely Appellate Case: 11-9900 Document: 01019101510 Date Filed: 07/31/2013 Page: 11 5 mentioned” its previous interstate ICC revenue recovery measures. FCC Br. 7. NASUCA’s discussion of these measures (NASUCA Br. 8-11) distinguished them from the ARC; the FCC effectively concedes the distinction. Intervenors assert that the FCC’s broad authority to create “interim” measures as part of its orders gives it the power to impose the ARC, citing the FCC’s own arguments in the Order. IB at 2-4. Neither the changes to interstate access charges approved in NARUC v. FCC, nor the tweaks to the interstate USF in Rural Cellular, nor the temporary separations freeze in MCI cited (id.), involved the inter/intrastate transfer here. Sorenson involved the setting of interim rates for interstate services, and does not help the Intervenors either. Intervenors wrongly assert (IB at 3) that NASUCA “does not dispute that the ARC is an interim measure that falls well within the FCC’s authority to transition to bill-and-keep.” The core of NASUCA’s argument on brief was that the FCC had no such authority — and cited none — to adopt the ARC. Appellate Case: 11-9900 Document: 01019101510 Date Filed: 07/31/2013 Page: 12 6 C. The FCC violated the law by allowing the ARC to be charged on a holding-company basis. With regard to the holding-company issue (NASUCA Br. 11- 13), the FCC trots out the §405(a) argument. But, as discussed in NASUCA’s Brief (n.8) and in Part a. above, the D.C. PSC did file a Petition for Reconsideration on precisely this issue (JA at 4046- 4053); the FCC has still not ruled on the Petition. The FCC then argues, FCC Br. 11, that requiring customers of an ILEC’s holding company in one state to pick up lost revenues from another state is neutral and rational, because it 1) minimizes the increase experienced by any one customer; and 2) limits the impact on the CAF. First, minimizing the impact on all the customers of one ILEC is accomplished by increasing the impact on customers in other states. Second, limiting the impact on the CAF prevents the burden from being spread to all customers nationwide, as the FCC admits, FCC Br. n.5. The FCC cannot have it both ways. This is neither neutral nor rational.3 3 The FCC’s argument (FCC Br. 12-13), Connecticut Office of Consumer Counsel v. FCC, 915 F.2d 75, 79 (2nd Cir. 1990) approved the FCC’s restraints on states’ “incentive to target telecommunications companies as sources of revenue, with the bulk of the tax incidence ultimately falling on out-of-state residents Appellate Case: 11-9900 Document: 01019101510 Date Filed: 07/31/2013 Page: 13 7 Even less rational is Intervenors’ argument (IB 4-5) that NASUCA’s challenge to the ARC on a holding company basis fails because holding companies are not common carriers. It is not the holding companies that are charging the ARC — the subject of NASUCA’s challenge — it is the holding-company-owned common carrier ILECs that will be charging customers for revenues lost by ILECs in other states.4 II. CONCLUSION Respondents’ and Intervenors’ arguments regarding the FCC’s authority for adopting an intrastate-revenue-replacing ARC, especially on a holding company basis, are unavailing. The ARC must be reversed. Respectfully submitted, through nationwide averaging….” Here the FCC simply shifted that incentive to the ILEC holding companies. 4 Diamond Int’l Corp. v. FCC, 627 F.2d 489, 493 n.7 (D.C. Cir. 1980), cited by Intervenors, addressed variations in intrastate tariffs, a different issue. Appellate Case: 11-9900 Document: 01019101510 Date Filed: 07/31/2013 Page: 14 8 Paula M. Carmody, NASUCA President Maryland People’s Counsel Office of People’s Counsel 6 St. Paul Street, Suite 2102 Baltimore, MD 21202 (410) 767-8150 FAX (410) 333-3616 paulac@opc.state.md.us David C. Bergmann Counsel for NASUCA 3293 Noreen Drive Columbus, OH 43221-4568 (614) 771-5979 david.c.bergmann@gmail.com Christopher J. White Deputy Rate Counsel New Jersey Division of Rate Counsel 140 E. Front Street, 4th Floor Trenton, NJ 08625 Phone (609) 633-9141 cwhite@rpa.state.nj.us Appellate Case: 11-9900 Document: 01019101510 Date Filed: 07/31/2013 Page: 15 9 CERTIFICATE OF COMPLIANCE Certificate of Compliance With Type-Volume Limitations, Typeface Requirements, Type Style Requirements, Privacy Redaction Requirements, and Virus Scan 1. This filing complies with the type-volume limitation of the Amended First Briefing Order because it contains words, excluding the parts of the filing exempted by Fed. R. App. P. 32(a)(7)(B)(iii). 2. This filing complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and 10th Cir. R. 32(a) and the type style requirements of Fed. R. App. P. 32(a)(6) because this filing has been prepared in a proportionally spaced typeface using Microsoft Word 2010 in 14-point Bookman Old Style font. 3. All required privacy redactions have been made. 4. This filing was scanned for viruses with Symantec Endpoint Protection, version 12.1, updated on July 9, 2013, and according to the program is free of viruses. /s/ Paula M. Carmody July 31, 2013 Appellate Case: 11-9900 Document: 01019101510 Date Filed: 07/31/2013 Page: 16 10 CERTIFICATE OF SERVICE I hereby certify that on July 31, 2013, I caused the foregoing document to be electronically filed with the Court by email per the June 3, 2013 Order. I also certify that upon submission, this document will be furnished through ECF electronic service to all parties in this case. This document is available for viewing and downloading on the CM/ECF system. /s/ Paula M. Carmody July 31, 2013 Appellate Case: 11-9900 Document: 01019101510 Date Filed: 07/31/2013 Page: 17