ORAL ARGUMENT SCHEDULED FOR NOVEMBER 19, 2013 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 ____________ AMICUS BRIEF OF THE STATE MEMBERS OF THE FEDERAL-STATE JOINT BOARD ON UNIVERSAL SERVICE IN SUPPORT OF PETITIONERS ____________ JAMES H. CAWLEY 400 North Street, 3rd Floor Harrisburg, PA 17105-3265 Tel. 717.783.1197 JHC@pa.gov Counsel for Amici Curiae State Members of the Federal-State Joint Board on Universal Service July 17, 2013 Appellate Case: 11-9900 Document: 01019093314 Date Filed: 07/17/2013 Page: 1 i TABLE OF CONTENTS TABLE OF AUTHORITIES ............................................................... ii GLOSSARY .............................................................................................................. iv INTEREST OF AMICI CURIAE ............................................................. 1 ARGUMENT ................................................................................... 2 I. The Order Violates Dual Sovereignty .................................................. 2 II. Expansive Interpretation Of §251(b)(5) Overreaches ........................................................................................... 2 III. Due Process And APA §553 Notice Requirements Were Violated ........................................................................................ 3 A. Due Process Precluded Ex Parte Contacts ................................. 3 B. Opportunity For Comment Was Inadequate ............................... 4 C. Extensive Industry 11th Hour Ex Parte Contacts Prevented Comment ........................................... 5 Certificate of Compliance Appellate Case: 11-9900 Document: 01019093314 Date Filed: 07/17/2013 Page: 2 ii TABLE OF AUTHORITIES Page Cases Action for Children’s Television v. FCC, 564 F.2d 458 (D.C. Cir. 1977) ...................................................................................................... 6 American Bus Association v. Slater, 231 F.3d 1 (D.C. Cir. 2000) ...................................................................................................... 3 AT&T v. Iowa Utilities Board, 525 U.S. 366 (1999) ................................................. 3 Bates v. Dow Agrosciences LLC, 544 U.S. 431(2005) .............................................. 3 Gregory v. Ashcroft, 501 U.S. 452 (1991) ................................................................. 3 Home Box Office, Inc. v. FCC, 567 F.2d 9 (D.C. Cir. 1977) ...................................................................................................... 4 Morgan v. United States, 304 U.S. 1(1938) ............................................................... 4 National Federation of Independent Business v. Sebelius, 567 U.S. __,132 S. Ct. 2566 (2012) ........................................................ 2 Sangamon Valley Television Corp. v. United States, 269 F.2d 221(D.C. Cir. 1959) ................................................................................. 4 Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, Inc., 435 U.S. 519 (1978) ......................................... 4 Whitman v. American Trucking Association, 531 U.S. 457 (2001) ............................................................................................... 3 Statutes 5 U.S.C. § 551(6) ....................................................................................................... v 5 U.S.C. § 551(7) ....................................................................................................... v Appellate Case: 11-9900 Document: 01019093314 Date Filed: 07/17/2013 Page: 3 iii 5 U.S.C. § 553 ............................................................................................................ 4 47 U.S.C. § 251(b)(5)................................................................................................. 2 47 U.S.C. § 254(b) ..................................................................................................... 1 47 U.S.C. § 254(c)(1)(C) ........................................................................................... 1 47 U.S.C. § 254(c)(2) ................................................................................................. 1 Other Authorities In the Matter of Connect America Fund, A National Broadband Plan for Our Future, Establishing Just and Reasonable Rates for Local Exchange Carriers, High-Cost Universal Service Support, Developing an Unified Intercarrier Compensation Regime, Federal- State Joint Board on Universal Service, Lifeline and Link-Up, WC Docket No. 10-90, GN Docket No. 09-51, WC Docket No. 07-135, WC Docket No. 05-337, CC Docket No. 01-92, CC Docket No. 96-45, WC Docket No. 03-109, Notice of Proposed Rulemaking and Further Notice of Proposed Rulemaking, 26 FCC Rcd 4554 (2011) (NPRM) ...................................................................................... 4 Daniel A. Lyons, Tethering the Administrative State: The Case Against Chevron Deference for FCC Jurisdictional Claims, 36 J. Corp. L. 823 (2011) ................................................... 2 Appellate Case: 11-9900 Document: 01019093314 Date Filed: 07/17/2013 Page: 4 iv GLOSSARY ABC Plan “America’s Broadband Connectivity” Plan filed on July 29, 2011 by the USTelecom Association (sponsored by AT&T, Verizon, CenturyLink, Windstream, Frontier, FairPoint Communications, the National Telecommunications Cooperative Association (NTCA), OPASTCO, and the Western Telecommunications Alliance (WTA))1 APA The federal Administrative Procedure Act ARC Access Recovery Charge Board, Joint Board The Federal-State Joint Board on Universal Service consisting of three FCC commissioners, four State Members who are State regu- latory commissioners (currently from Pennsylvania, Ne- braska, South Carolina, and Vermont) nominated by the National Association of Regulatory Utility Commission- ers and approved by the FCC, and one State-appointed utility consumer advocate (currently the Colorado Con- sumer Counsel) nominated by the National Association of State Utility Consumer Advocates. 47 U.S.C. §254. CLEC Competitive Local Exchange Carrier ETC Eligible Telecommunications Carrier ICC Intercarrier Compensation IXC Interexchange (Long Distance) Carrier LEC Local Exchange Carrier 1 JA at 2986, 2988, 3002, 3006, 3034, 3068; 3137 & 3142. Appellate Case: 11-9900 Document: 01019093314 Date Filed: 07/17/2013 Page: 5 v Order2 The Report and Order and Further Notice of Proposed Rulemaking appealed from RLEC Plan A plan filed by the Joint Rural Associations (NECA, NTCA, OPASTCO, and WTA) on April 18, 20113 SLC Subscriber Line Charge State Members State Members of the Federal-State Joint Board on Uni- versal Service State Plan State Members’ Comments filed May 2, 20114 USF State or the federal Universal Service Fund 2 Connect America Fund, Report and Order and Further Notice of Proposed Rule- making, 26 FCC Rcd 17663 (2011) (JA at 390-1141). The FCC often promulgates rules by means of what it refers to as “orders” although the APA defines an “order” as “the whole or a part of a final disposition in a matter other than rule making but including licensing.” 5 U.S.C. §551(6); see also id. §551(7) (defining “adjudica- tion” as “agency process for the formulation of an order”). 3 JA at 2141-2273. 4 JA at 2654-2830. Appellate Case: 11-9900 Document: 01019093314 Date Filed: 07/17/2013 Page: 6 1 INTEREST OF AMICI CURIAE The State Members constitute a majority of the Joint Board, tasked by Congress to ensure federal universal service policies adhere to articulated princi- ples and to recommend redefinitions of supported services. 47 U.S.C. §§254(b), 254(c)(1)(C), 254(c)(2). Appellate Case: 11-9900 Document: 01019093314 Date Filed: 07/17/2013 Page: 7 2 ARGUMENT I. The Order Violates Dual Sovereignty. Contrary to dual sovereignty, the Order establishes a zero ICC rate for intra- state access charges and requires State implementation and enforcement.5 This “economic dragooning [of] the States with no real option but to acquiesce”6 is not enticement but direct and indirect coercion7 that “conscript[s] state [utility com- missions] into the [FCC’s] national bureaucratic army.”8 II. Expansive Interpretation Of §251(b)(5) Overreaches. Again overreaching,9 the FCC usurps intrastate access ratemaking, using §251(b)(5) to rationalize, “That which is not forbidden is permitted.”10 Agencies have no inherent powers, only those granted by Congress which “does not alter the 5 Order ¶813 (JA at 667). 6 Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. __, 132 S.Ct. 2566, 2605 (2012). 7 Id., 132 S.Ct. at 2602. 8 Id., 132 S.Ct. at 2607. 9 Lyons, Tethering the Administrative State: The Case Against Chevron Deference for FCC Jurisdictional Claims, 36 J. Corp. L. 823 (2011). 10 Order ¶765 (JA at 643). Appellate Case: 11-9900 Document: 01019093314 Date Filed: 07/17/2013 Page: 8 3 fundamental details of a regulatory scheme in vague terms or ancillary provi- sions.”11 Federal statutes must clearly and manifestly supplant state regulation.12 Section 251(b)(5) is neither jurisdiction-conferring nor FCC-empowering, obligating only LECs. The FCC may establish a “pricing methodology,”13 but States must “implement that methodology, determining the concrete result in par- ticular circumstances.”14 “Bill-and-keep” predetermines a zero rate. III. Due Process And APA §553 Notice Requirements Were Violated. A. Due Process Precluded Ex Parte Contacts. This rulemaking intended to cull small companies15 by depriving them of vital terminating access revenues, conferring a billion dollar annual windfall on wireless carriers and wireline IXCs and effectively forcing fire sale consolidations. 11 Whitman v. American Trucking Ass’n, 531 U.S. 457, 464 (2001); American Bus Ass’n v. Slater, 231 F.3d 1, 8 (statutory silence on granting a power is not an ambi- guity but a denial of that power) (Sentelle, J., concurring). 12 Bates v. Dow Agrosciences LLC, 544 U.S. 431, 449 (2005); Gregory v. Ashcroft, 501 U.S. 452, 460 (1991). 13 Order ¶773 (JA at 647). 14 AT&T v. Iowa Utilities Bd., 525 U.S. 366, 384 (1999). 15 “[I]t may not serve the public interest for consumers across the country to subsi- dize the cost of operations for so many very small companies,” NPRM at ¶217 (http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-11-13A1.pdf at 76). Appellate Case: 11-9900 Document: 01019093314 Date Filed: 07/17/2013 Page: 9 4 Not merely “valuable privileges”16 were at stake but property rights in “extremely compelling circumstances,”17 and pending adjudications.18 Ex parte contacts may be banned in informal proceedings “involv[ing] com- petitive interests of great monetary value [that] confer[] preferential advantages,”19 and where “the very existence of [owners is] in jeopardy attack[ing] them at a vital spot.”20 B. Opportunity For Comment Was Inadequate. The largest carriers filed the ABC Plan, including a sophisticated computer model made available only on the industry consultant’s computer in Cincinnati for compensation.21 16 Sangamon Valley Television Corp. v. United States, 269 F.2d 221, 224 (D.C. Cir. 1959). 17 Vt. Yankee Nuclear Corp. v. NRDC, 435 U.S. 519, 543 (1978). 18 Order ¶975 & n.2044; ¶1419 (JA at 757, 879). 19 Home Box Office, Inc. v. FCC, 567 F.2d 9, 62 (D.C. Cir. 1977) (Mackinnon, J., concurring). 20 Morgan v. United States, 304 U.S. 1, 20 (1938). 21 JA at 3780, 3842; 3775. Appellate Case: 11-9900 Document: 01019093314 Date Filed: 07/17/2013 Page: 10 5 Three days later, the FCC redirected the rulemaking by requesting,22 within only 34 days, without focusing the inquiry, comments on a divergent, factually- clashing panoply of complex proposals—principally the ABC Plan, and the RLEC and State Plans. “Paying-to-comment” in Cincinnati within the abbreviated period was intol- erable. The time allotted to assess and comment was grossly inadequate. On October 7, 17, and 19, 2011, FCC staff inundated the record with an astounding array of supplemental materials.23 The FCC relied on them to justify “bill-and-keep.”24 No real opportunity to reply was afforded because the important was indis- tinguishable from the merely peripheral. C. Extensive Industry 11th Hour Ex Parte Contacts Prevented Comment. Industry ex parte contacts intensified up to the Sunshine period (beginning October 21). For example: 22 JA at 349-368; JA at 377 (reply comments filing extension). 23 JA at 3847, 3918, 3947. 24 Order ¶¶742-743 & nn.1295-1296 (JA at 632-634); ¶744 & n.1304 (JA at 634- 635). Appellate Case: 11-9900 Document: 01019093314 Date Filed: 07/17/2013 Page: 11 6 Two October 21 Verizon ex parte filings revealed discussions with a Commissioner about the “reform order now circulating [and the ABC Plan].”25 The Order reflects Verizon’s October 20 ex parte26 giving holding compa- nies discretion to allocate ARC amounts,27 and AT&T’s five October 21 ex parte filings28 describing discussions about ICC, high-cost support through the USF mechanism, SLC upper limit, and ETC obligations. No one could react adequately and timely to these filings. The Commission voted only six days later, but Order drafting continued for 22 days, ample time to incorporate these one-sided suggestions.29 The rule should be vacated. 25 JA at 4004 & 4005 (emphasis added). 26 JA at 3980. 27 Order ¶910 (JA at 717). 28 JA at 3982, 3983, 3984, 3992; http://apps.fcc.gov/ecfs/document/view?id=7021716987. 29 Action for Children’s Television v. FCC, 564 F.2d 458, 476 (D.C. Cir. 1977) (ex parte contacts vitiate agency informal rulemaking if they may have materially in- fluenced the action ultimately taken). Appellate Case: 11-9900 Document: 01019093314 Date Filed: 07/17/2013 Page: 12 7 Respectfully submitted, /s/ JAMES H. CAWLEY 400 North Street, 3rd Floor Harrisburg, PA 17105-3265 Tel. 717.783.1197 JHC@pa.gov Counsel for Amici Curiae State Members of the Federal-State Joint Board on Universal Service July 17, 2013 Appellate Case: 11-9900 Document: 01019093314 Date Filed: 07/17/2013 Page: 13 CERTIFICATE OF COMPLIANCE Certificate of Compliance With Type-Volume Limitations, Typeface and Type Style Requirements, Authorship, Funding, Privacy Redaction Requirements, and Virus Scan 1. This filing complies with the type-volume limitation of the Court’s Order dated November 30, 2012, granting leave to file an amicus brief limited to 810 words because it contains 810 words, excluding the parts of the filing exempted by Fed. R. App. P. 32(a)(7)(B)(iii) and 10th Cir. R. 32(b). 2. Pursuant to Fed. R. App. P. 32(a)(7)(C), this brief complies with the type- face requirements of Fed. R. App. P. 32(a)(5)(A) 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 Times New Roman font. 3. Pursuant to Fed. R. App. P. Rule 29(c)(5), I certify that (1) the text of this brief was authored by me as the State Chairman of the Federal-State Joint Board on Universal Service; (2) no other party’s counsel authored this brief in whole or in part; and (3) no party or party’s counsel (or any other person) contributed money intended to fund preparation or submission of this brief. 4. All required privacy redactions have been made. 5. This filing was scanned for viruses using McAffee VirusScan Enterprise 8.8.0 (8.8.0.975), updated on December 5, 2012, and according to the program is free of viruses. /s/ James H. Cawley July 17, 2013 Appellate Case: 11-9900 Document: 01019093314 Date Filed: 07/17/2013 Page: 14 CERTIFICATE OF SERVICE I hereby certify that, on July 17, 2013, I caused the foregoing document to be sent electronically to FCC_briefs_only@ca10.uscourts.gov. I also certify this document will be furnished through ECF electronic service to all parties in this case through the Clerk’s Office of the 10th Circuit. This document is available for viewing and downloading on the CM/ECF system. /s/ James H. Cawley July 17, 2013 Appellate Case: 11-9900 Document: 01019093314 Date Filed: 07/17/2013 Page: 15