ORAL ARGUMENT NOT YET SCHEDULED BRIEF FOR RESPONDENTS IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT NO. 15-1414 UNITED STATES TELECOM ASSOCIATION, PETITIONER, V. FEDERAL COMMUNICATIONS COMMISSION AND UNITED STATES OF AMERICA, RESPONDENTS. ON PETITION FOR REVIEW OF ORDERS OF THE FEDERAL COMMUNICATIONS COMMISSION RENATA B. HESSE ACTING ASSISTANT ATTORNEY GENERAL ROBERT B. NICHOLSON NICKOLAI G. LEVIN ATTORNEYS UNITED STATES DEPARTMENT OF JUSTICE WASHINGTON, D.C. 20530 HOWARD J. SYMONS GENERAL COUNSEL DAVID M. GOSSETT DEPUTY GENERAL COUNSEL RICHARD K. WELCH DEPUTY ASSOCIATE GENERAL COUNSEL JAMES M. CARR COUNSEL FEDERAL COMMUNICATIONS COMMISSION WASHINGTON, D.C. 20554 (202) 418-1740 CERTIFICATE AS TO PARTIES, RULINGS, AND RELATED CASES 1. Parties. The petitioner is the United States Telecom Association. The respondents are the Federal Communications Commission and the United States of America. The intervenors are the Pennsylvania Public Utility Commission, ACN Communication Services, LLC, Access Point, Inc., BullsEye Telecom, Inc., Granite Telecommunications, LLC, INCOMPAS, Level 3 Communications, LLC, Manhattan Telecommunications Corp., Matrix Telecom, Inc., New Horizon Communications Corp., Windstream Services, LLC, Xchange Telecom, LLC, XO Communications, LLC, and Public Knowledge. 2. Rulings under review. Ensuring Customer Premises Equipment Backup Power for Continuity of Communications, 29 FCC Rcd 14968 (2014) (JA___) (Declaratory Ruling); Technology Transitions, 30 FCC Rcd 9372 (2015) (JA___) (Order). 3. Related cases. This case has not previously been before this Court or any other court. We are aware of no pending cases related to this one. i TABLE OF CONTENTS Table of Authorities......................................................................................... iii  Glossary ......................................................................................................... viii  Jurisdiction ........................................................................................................ 1  Questions Presented .......................................................................................... 2  Statutes and Regulations ................................................................................... 4  Counterstatement ............................................................................................... 4  A.  Statutory And Regulatory Background ................................................. 4  B.  The Transition To Internet Protocol ...................................................... 7  C.  The Orders On Review .......................................................................... 8  1.  The Declaratory Ruling .................................................................. 10  2.  The Order ........................................................................................ 14  Summary of Argument .................................................................................... 23  Standard of Review ......................................................................................... 28  Argument ......................................................................................................... 30  I.  The Commission Reasonably Adopted A Consumer- Oriented Functional Test For Determining When A Service Is Discontinued, Reduced, Or Impaired Under Section 214.................... 30  A.  The Functional Test Is Based On A Reasonable Reading Of Ambiguous Statutory Language. ................................................... 30  B.  The Functional Test Is Not Impermissibly Vague. ............................. 40  II.  The Commission Reasonably Interpreted Section 214 To Require FCC Approval For A Carrier To Discontinue, Reduce, Or Impair Service To Another Carrier If The Change In Wholesale Service Would Discontinue, Reduce, Or Impair A Carrier-Customer’s Retail Service ...................................... 44  ii III.  The Commission’s “Reasonably Comparable Wholesale Access” Condition Is Lawful ................................................................... 50  A.  The Commission Had Authority To Adopt The Condition. ............................................................................................ 50  B.  The Commission Had Good Reason To Adopt The Condition. ............................................................................................ 55  Conclusion ....................................................................................................... 60  iii TABLE OF AUTHORITIES CASES  ACS of Anchorage, Inc. v. FCC, 290 F.3d 403 (D.C. Cir. 2002) .............................................................................................. 57, 58 Action for Children’s Television v. FCC, 821 F.2d 741 (D.C. Cir. 1987) .................................................................................... 46 Ad Hoc Telecomms. Users Comm. v. FCC, 572 F.3d 903 (D.C. Cir. 2009) ....................................................................... 19, 51, 52 Adirondack Med. Ctr. v. Sebelius, 740 F.3d 692 (D.C. Cir. 2014) ........................................................................................... 34 Am. Family Ass’n, Inc. v. FCC, 365 F.3d 1156 (D.C. Cir. 2004) ........................................................................................... 46 AT&T Co. v. Central Office Tel., Inc., 524 U.S. 214 (1998) ................................................................................................... 38, 39 AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366 (1999) .......................................................................................................... 53 Atlantic Cleaners & Dyers, Inc. v. United States, 286 U.S. 427 (1932) .................................................................................... 38 * Cablevision Sys. Corp. v. FCC, 649 F.3d 695 (D.C. Cir. 2011) ..................................................................................................... 35 Cellco P’ship v. FCC, 357 F.3d 88 (D.C. Cir. 2004) ...................................... 29 Cellco P’ship v. FCC, 700 F.3d 534 (D.C. Cir. 2012) .............................................................................................................. 4 * Chevron USA, Inc. v. Natural Res. Def. Council, 467 U.S. 837 (1984) ....................................................................... 24, 28, 29 City of Arlington v. FCC, 133 S. Ct. 1863 (2013) ................................... 29, 35 Competitive Telecomms. Ass’n v. FCC, 309 F.3d 8 (D.C. Cir. 2002) .............................................................................. 28, 57, 58 Competitive Telecomms. Ass’n v. FCC, 87 F.3d 522 (D.C. Cir. 1996) ........................................................................................... 59 Competitive Telecomms. Ass’n v. FCC, 998 F.2d 1058 (D.C. Cir. 1993) .................................................................................. 39 iv Conference Group, LLC v. FCC, 720 F.3d 957 (D.C. Cir. 2013) ........................................................................................... 53 * Consumer Elecs. Ass’n v. FCC, 347 F.3d 291 (D.C. Cir. 2003) ..................................................................................................... 35 FCC v. Fox Television Stations, Inc., 132 S. Ct. 2307 (2012) ................................................................................................. 40 FERC v. Elec. Power Supply Ass’n, 136 S. Ct. 760 (2016) .......................................................................................................... 29 Freeman United Coal Mining Co. v. Fed. Mine Safety & Health Review Comm’n, 108 F.3d 358 (D.C. Cir. 1997) ........................................................................................... 41 Globalstar, Inc. v. FCC, 564 F.3d 476 (D.C. Cir. 2009) ............................................................................................................ 39 Grayned v. City of Rockford, 408 U.S. 104 (1972) ......................................... 43 Hush-A-Phone Corp. v. United States, 238 F.2d 266 (D.C. Cir. 1956) ........................................................................................... 40 Johnson v. United States, 135 S. Ct. 2551 (2015) .......................................... 40 MCI Telecomms. Corp. v. FCC, 750 F.2d 135 (D.C. Cir. 1984) ..................................................................................................... 57 Nat’l Ass’n of Regulatory Util. Comm’rs v. FCC, 737 F.2d 1095 (D.C. Cir. 1984) .................................................................. 51 * Nat’l Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967 (2005) ............................ 14, 15, 24, 29, 37, 38 * Nat’l Cable & Telecomms. Ass’n v. FCC, 567 F.3d 659 (D.C. Cir. 2009) ............................................................................. 35, 48 Nat’l Rifle Ass’n of America, Inc. v. Reno, 216 F.3d 122 (D.C. Cir. 2000) .................................................................................... 33 Natural Res. Def. Council v. EPA, 706 F.3d 428 (D.C. Cir. 2013) ........................................................................................... 35 Oncale v. Sundowner Offshore Servs., Inc., 523 U.S. 75 (1998) ...................................................................................... 35, 48 * Rural Cellular Ass’n v. FCC, 588 F.3d 1095 (D.C. Cir. 2009) .................................................................................. 28, 57, 58, 59 v Shea v. Kerry, 796 F.3d 42 (D.C. Cir. 2015) .................................................. 40 Tex. Mun. Power Agency v. EPA, 89 F.3d 858 (D.C. Cir. 1996) ..................................................................................................... 35 Throckmorton v. Nat’l Transp. Safety Bd., 963 F.2d 441 (D.C. Cir. 1992) .................................................................................... 43 Timpinaro v. SEC, 2 F.3d 453 (D.C. Cir. 1993) ............................................. 43 * United States Telecom Ass’n v. FCC, 2016 WL 3251234 (D.C. Cir. June 14, 2016), petitions for reh’g filed. .............................................................. 29, 34, 37, 38, 40, 41, 43 Verizon California, Inc. v. FCC, 555 F.3d 270 (D.C. Cir. 2009) ..................................................................................................... 37 Vill. of Hoffman Estates v. Flipside, Hoffman Estates, Inc., 455 U.S. 489 (1982) .............................................................. 40 Worldcom, Inc. v. FCC, 246 F.3d 690 (D.C. Cir. 2001) ....................................................................................................... 7, 10 ADMINISTRATIVE DECISIONS  * BellSouth Tel. Cos., 7 FCC Rcd 6322 (1992) .................................. 5, 6, 18, 45 Business Data Services in an Internet Protocol Environment, 31 FCC Rcd 4723 (2016)................................... 19, 20, 53, 59 Graphnet, Inc. v. AT&T Corp., 17 FCC Rcd 1131 (2002) ................................................................................... 6, 12, 18, 45, 49 Lincoln County Tel. Sys., Inc. v. Mountain States Tel. & Tel. Co., 81 FCC 2d 328 (1980) ...................................... 6, 18, 45, 49 Technology Transitions, 29 FCC Rcd 1433 (2014) ................................. 2, 8, 9 Use of the Carterfone Device in Message Toll Telephone Service, 13 FCC 2d 420 (1968) ................................................. 39 Western Union Tel. Co., 74 FCC 2d 293 (1979) .................. 5, 6, 12, 18, 45, 49 STATUTES  5 U.S.C. § 706(2)(A) ....................................................................................... 29 28 U.S.C. § 2342(1) .......................................................................................... 2 28 U.S.C. § 2344 ............................................................................................... 2 47 U.S.C. § 153(20) ........................................................................................ 54 vi 47 U.S.C. § 153(35) ........................................................................................ 51 47 U.S.C. § 153(53) ................................................................................. 36, 38 47 U.S.C. § 201 ............................................................................................... 52 47 U.S.C. § 201(b)........................................................................................... 53 47 U.S.C. § 202 ............................................................................................... 52 47 U.S.C. § 214 ................................................................................................. 1 * 47 U.S.C. § 214(a) .......................................... 3, 4, 8, 12, 15, 30, 31, 33, 36, 47 * 47 U.S.C. § 214(c) .......................................................................... 6, 27, 50, 52 47 U.S.C. § 251(a)(1) ...................................................................................... 51 47 U.S.C. § 251(c)(3) ...................................................................................... 51 47 U.S.C. § 251(c)(5) ............................................................................... 45, 47 47 U.S.C. § 251(g)........................................................................................... 54 47 U.S.C. § 251(h)........................................................................................... 10 47 U.S.C. § 271(c)(2)(B)(ii) ............................................................................ 51 47 U.S.C. § 402(a) ............................................................................................. 2 * 47 U.S.C. § 405(a) .............................................................................. 26, 39, 46 An Act to Amend the Communications Act of 1934, 57 Stat. 5 (1943) ............................................................................................ 5 REGULATIONS  47 C.F.R. § 1.3 ................................................................................................ 53 47 C.F.R. § 1.4(b)(1) ......................................................................................... 2 47 C.F.R. § 61.26(a)(1)-(2) ............................................................................. 54 47 C.F.R. §§ 63.60-63.601 ................................................................................ 5 47 C.F.R. § 63.71(c) ................................................................................. 19, 53 47 C.F.R. § 63.71(c)(1) ...................................................................... 19, 22, 58 47 C.F.R. § 63.71(c)(2)(ii) .............................................................................. 19 vii TREATISES  JONATHAN E. NUECHTERLEIN & PHILIP J. WEISER, DIGITAL CROSSROADS: TELECOMMUNICATIONS LAW AND POLICY IN THE INTERNET AGE 31 (2d ed. 2013) ........................................................................................................ 8 PETER W. HUBER, MICHAEL K. KELLOGG, & JOHN THORNE, FEDERAL TELECOMMUNICATIONS LAW § 3.12 (2d ed. Supp. 2016) ........................................................................5, 8 OTHER AUTHORITIES  David Gabel & Steven Burns, The Transition from the Legacy Public Switched Telephone Network to Modern Technologies, National Regulatory Research Institute Report No. 12-12 (Oct. 2012) ......................................... 7 FCC, CONNECTING AMERICA: THE NATIONAL BROADBAND PLAN 59 (2010) ........................................................................ 9 Letter from Christopher M. Heimann, AT&T, to Marlene H. Dortch, GN Docket Nos. 13-5, 12- 353 (filed Feb. 27, 2014) ............................................................................. 42 Letter from Frederick E. Moacdich, Verizon, to Marlene H. Dortch, FCC, WC Docket No. 13- 150 (filed June 7, 2013) ............................................................................... 10 NEWTON’S TELECOM DICTIONARY 435 (28th ed. 2014) ............................................................................................................ 19 Verizon New York Inc. and Verizon New Jersey Inc.’s Second Response to Information, Data, and Document Request, WC Docket No. 13-150 (filed Sept. 4, 2013) ..................................................................................... 11 * Cases and other authorities principally relied upon are marked with asterisks. viii GLOSSARY Act Communications Act of 1934 competitive LEC competitive local exchange carrier; a company that began providing local phone service after the Telecommunications Act of 1996 was enacted DS0 Digital Signal, level 0; a voice-grade channel with a transmission speed of 64,000 bits per second DS1 Digital Signal, level 1; a channel with a transmission speed of 1.544 million bits per second DVR digital video recorder incumbent LEC incumbent local exchange carrier; a company that was providing local phone service on the date the Telecommunications Act of 1996 was enacted IP Internet Protocol; a packet-switched technology used to transmit voice and data communications LEC local exchange carrier; provider of local phone service 1996 Act Telecommunications Act of 1996 USTelecom United States Telecom Association, the petitioner in this case VoIP Voice over Internet Protocol; an IP- based voice telephone service IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT NO. 15-1414 UNITED STATES TELECOM ASSOCIATION, PETITIONER, V. FEDERAL COMMUNICATIONS COMMISSION AND UNITED STATES OF AMERICA, RESPONDENTS. ON PETITION FOR REVIEW OF ORDERS OF THE FEDERAL COMMUNICATIONS COMMISSION BRIEF FOR RESPONDENTS JURISDICTION In 2014, the Federal Communications Commission issued a declaratory ruling clarifying its interpretation of section 214 of the Communications Act, 47 U.S.C. § 214. Ensuring Customer Premises Equipment Backup Power for Continuity of Communications, 29 FCC Rcd 14968 (2014) (JA___) (Declaratory Ruling). The United States Telecom Association (USTelecom) timely petitioned for administrative reconsideration of the Declaratory Ruling. In a 2015 order, the FCC denied USTelecom’s reconsideration petition and adopted new rules concerning the discontinuance of service under section 214. Technology 2 Transitions, 30 FCC Rcd 9372 (2015) (JA___) (Order). The Order was published in the Federal Register on October 19, 2015. 80 Fed. Reg. 63322. USTelecom timely petitioned for review of the Declaratory Ruling and the Order. See 28 U.S.C. § 2344; 47 C.F.R. § 1.4(b)(1). This Court has jurisdiction under 47 U.S.C. § 402(a) and 28 U.S.C. § 2342(1). QUESTIONS PRESENTED New technologies are fundamentally changing the way telecommunications carriers provide voice telephone services. Historically, carriers provided voice services over circuit-switched networks using copper wires. In recent years, however, carriers are increasingly providing voice and data services over packet- switched Internet Protocol (IP) networks “using copper, co-axial cable, wireless, and fiber.” Technology Transitions, 29 FCC Rcd 1433, 1435 ¶ 1 (2014) (Technology Transitions Order). Ultimately, every user of telecommunications service will be affected by this “technological revolution.” Declaratory Ruling ¶ 1 (JA___). During this technology transition, whenever carriers seek to discontinue their legacy circuit-switched services, they must comply with section 214 of the Communications Act, which provides: “No carrier shall discontinue, reduce, or impair service to a community, or part of a community, unless and until there shall first have been obtained from the [Federal Communications] Commission a 3 certificate that neither the present nor future public convenience and necessity will be adversely affected thereby.” 47 U.S.C. § 214(a). In applying section 214 during the IP transition, the FCC must carefully balance two policy objectives. While the agency seeks to promote technological innovation, it must also make sure that the transition to IP-based telecommunications services does not unduly disrupt the availability of affordable, dependable service to consumers who currently rely on legacy services. In an effort to strike the proper balance between these objectives, the FCC in the orders on review established a framework for applying section 214 to legacy services affected by the IP transition. This case presents three issues for review: (1) Whether the Commission reasonably found that section 214 applies to the discontinuance, reduction, or impairment of any telecommunications service that a carrier provides to end users, regardless of whether the service being altered is specifically identified in a tariff or contract. (2) Whether the Commission reasonably found that section 214 applies to any cutback in a carrier’s service to other carriers that would discontinue, reduce, or impair the other carriers’ service to their end users. (3) Whether the Commission reasonably exercised its authority under section 214(c) when it determined that, as a condition of granting certificates to discontinue certain wholesale services, it would require incumbent providers of 4 local telephone service to continue providing reasonably comparable wholesale access on reasonably comparable rates, terms, and conditions until the FCC promulgates new rules governing special access. STATUTES AND REGULATIONS Pertinent statutes and regulations are set forth in an addendum to this brief. COUNTERSTATEMENT A. Statutory And Regulatory Background Title II of the Communications Act of 1934 (the Act), as amended, authorizes the Federal Communications Commission “to regulate common carrier services, including telecommunications services like landline telephone services.” Cellco P’ship v. FCC, 700 F.3d 534, 537-38 (D.C. Cir. 2012). In particular, section 214 of the Act directs the FCC to review proposed cutbacks in “interstate or foreign [telecommunications] service” to ensure that they will not harm consumers. Declaratory Ruling ¶ 23 (JA___-___). Under section 214, a telecommunications carrier may not “discontinue, reduce, or impair service to a community, or part of a community, unless and until there shall first have been obtained from the Commission a certificate that neither the present nor future public convenience and necessity will be adversely affected thereby.” 47 U.S.C. § 214(a). “Section 214 requires advance FCC blessing” for “the discontinuation of 5 service.” 1 PETER W. HUBER, MICHAEL K. KELLOGG, & JOHN THORNE, FEDERAL TELECOMMUNICATIONS LAW § 3.12, at 3-78.11 – 3-79 (2d ed. Supp. 2016).1 The FCC has adopted rules to implement the section 214 discontinuance process. See 47 C.F.R. §§ 63.60-63.601. These rules “are designed to ensure that customers are fully informed of any proposed change that will reduce or end service, to ensure appropriate oversight by the Commission of such changes, and to provide an orderly transition of service.” Declaratory Ruling ¶ 23 (JA___). The Commission has construed section 214 to require FCC approval before a carrier can discontinue, reduce, or impair “the end service provided by a carrier to a community or part of a community, i.e., the using public.” Western Union Tel. Co., 74 FCC 2d 293, 296 ¶ 7 (1979). This requirement is not limited to carriers’ provision of retail service to end users. Wholesale services—such as carrier-to- carrier interconnection services—are also “subject to the requirements” of section 214(a) if “a [carrier’s] discontinuance, reduction, or impairment of [wholesale] service to [a] carrier-customer ultimately discontinues service to an end user.” BellSouth Tel. Cos., 7 FCC Rcd 6322, 6322 ¶ 5 (1992). 1 The provisions of section 214 governing discontinuance of service were added to the statute in 1943. See An Act to Amend the Communications Act of 1934, §§ 2, 4, 57 Stat. 5, 11-12 (1943). 6 In assessing whether a wholesale carrier must request discontinuance authority under section 214, the Commission focuses on “the ultimate impact” of a proposed change in wholesale service “on the community served” by retail carriers using the wholesale service. Graphnet, Inc. v. AT&T Corp., 17 FCC Rcd 1131, 1140 ¶ 29 (2002). A carrier need not seek the FCC’s permission to alter its offering of wholesale service if the change will cause “a discontinuance, reduction or impairment” of service “to only the [retail] carrier itself.” See Lincoln County Tel. Sys., Inc. v. Mountain States Tel. & Tel. Co., 81 FCC 2d 328, 332 ¶ 13 (1980). But if “a change in a carrier’s service offerings to another carrier will result in an actual discontinuance, reduction or impairment [of retail service] to the latter carrier’s customers,” the former carrier must obtain FCC approval before making the change. Western Union, 74 FCC 2d at 296 ¶ 7; see also BellSouth, 7 FCC Rcd at 6322-23 ¶ 5. Section 214 gives the FCC broad discretion to approve or reject discontinuance requests. The agency may grant or deny a certificate to discontinue, reduce, or impair service in whole or in part; and it also “may attach to the issuance of [a] certificate such terms and conditions as in its judgment the public convenience and necessity may require.” 47 U.S.C. § 214(c). 7 B. The Transition To Internet Protocol For most of the last century, carriers provided telephone service over circuit- switched networks using time-division multiplexing technology.2 With the rise of the internet, however, the telecommunications industry is undergoing a “technological revolution.” Declaratory Ruling ¶ 1 (JA___). A growing number of telecommunications services are now provided via Internet Protocol, “a packet- switched technology” that breaks up information “into packets that are transmitted individually and can take different routes to their common destination.” NRRI Report at 1 n.2. At first, Internet Protocol was used primarily to transmit data. In the 1990s, carriers routed “data traffic to a packet-switched data network,” but they continued to send “voice calls to the public, circuit-switched telephone network.” Worldcom, Inc. v. FCC, 246 F.3d 690, 692 (D.C. Cir. 2001). The use of circuit switching to provide voice telephony persisted because “packet-switching technology did not until recently lend itself easily to managing voice calls.” JONATHAN E. NUECHTERLEIN & PHILIP J. WEISER, DIGITAL CROSSROADS: TELECOMMUNICATIONS 2 Time-division multiplexing allows multiple voice signals to be “transmitted over a single circuit by taking turns in individual time slots created on that circuit.” David Gabel & Steven Burns, The Transition from the Legacy Public Switched Telephone Network to Modern Technologies, National Regulatory Research Institute Report No. 12-12, at 1 n.1 (Oct. 2012) (NRRI Report), available at http://nrri.org/download/nrri-12-12-telephone-transition/. 8 LAW AND POLICY IN THE INTERNET AGE 31 (2d ed. 2013). That changed with the advent of Voice over Internet Protocol (VoIP), “an IP-based service” that converts “voice conversations to exchanges of IP packets.” Id. at 173. Carriers have found it “cheaper to provide voice service to mass-market customers without the circuit switch.” 1 HUBER, KELLOGG, & THORNE, supra, § 1.10, at 1-56. As a result, VoIP has “become widespread” and “is now supplanting circuit-switched telephony.” NUECHTERLEIN & WEISER, supra, at 173. C. The Orders On Review The move from circuit-switched to IP-based services poses a challenge for the FCC. At some point, when the adoption of IP technology by consumers “reaches a critical mass,” carriers will “wish to cease offering [circuit-switched] services.” Technology Transitions Order, 29 FCC Rcd at 1436 ¶ 3. The Commission has a statutory duty to make sure that “neither the present nor future public convenience and necessity will be adversely affected” by the phase-out of circuit-switched telephone service. See 47 U.S.C. § 214(a). While the shift to IP-based service offerings “is a reflection of technological innovation and in that respect is a good thing,” this technology transition “also removes a choice from the marketplace” by eliminating “the legacy suite of services” that consumers have used for decades. Technology Transitions Order, 29 FCC Rcd at 1436 ¶ 3. Indeed, “many consumers continue to rely on the features 9 and functionalities of the legacy wireline networks.” Declaratory Ruling ¶ 9 (JA___). For example, consumers routinely use legacy services to operate fax machines, credit card readers, and home security systems. Because those devices were designed specifically to work with traditional voice services, they may not be compatible with IP-based services. See id. ¶ 116 (JA___-___). “[A]s IP-based services replace circuit-switched services,” the FCC must provide for “a smooth transition” for the millions of “Americans who use traditional phone service” by acting “to ensure that the transition does not dramatically disrupt communications.” FCC, CONNECTING AMERICA: THE NATIONAL BROADBAND PLAN 59 (2010), available at www.broadband.gov. In the FCC’s judgment, the success of this transition “depends upon the technologically-neutral preservation of principles embodied in the Communications Act that have long defined the relationship between those who build and operate networks and those who use them.” Declaratory Ruling ¶ 1 (JA___) (citing Technology Transitions Order, 29 FCC Rcd at 1435-36 ¶¶ 2-4). The Commission believes that promoting certain “core statutory values”— including competition, consumer protection, universal service, and public safety— “will accelerate customer adoption of technology transitions.” Order ¶ 1 (JA___). To “ensure that these fundamental values are not lost merely because technology changes,” Declaratory Ruling ¶ 1 (JA___), the FCC in the orders on 10 review made three decisions regarding its analysis of the discontinuance of legacy services under section 214. First, it said that it would apply a consumer-oriented “functional test” when analyzing whether a service is discontinued, reduced, or impaired. Id. ¶¶ 114-119 (JA___-___); Order ¶¶ 181-201 (JA___-___). Second, it stated that a carrier must obtain FCC approval to discontinue service to other carriers if the proposed change in wholesale service would discontinue, reduce, or impair the other carriers’ retail service. Order ¶¶ 102-130 (JA___-___). Third, the agency adopted an interim rule under which, as a condition of obtaining section 214 authorization to discontinue certain wholesale services, incumbent local exchange carriers (LECs) must provide competitive carriers with reasonably comparable wholesale access on reasonably comparable rates, terms, and conditions. Id. ¶¶ 131-180 (JA___-___).3 1. The Declaratory Ruling In 2013, Verizon applied for section 214 authorization to discontinue interstate wireline telecommunications service in sections of New York and New Jersey where Hurricane Sandy severely damaged its copper wireline network.4 3 An incumbent LEC is a carrier that provided local telephone service in a given area as of February 8, 1996, the date the Telecommunications Act of 1996 (1996 Act) was enacted. See 47 U.S.C. § 251(h); Worldcom, 246 F.3d at 693-95. 4 See Letter from Frederick E. Moacdich, Verizon, to Marlene H. Dortch, FCC, WC Docket No. 13-150, Attachment (filed June 7, 2013), available at https://ecfsapi.fcc.gov/file/7022424983.pdf. 11 Responding to a request from FCC staff for information concerning its application, Verizon stated that “certain third-party services or devices that were designed specifically to work with traditional voice services offered over copper facilities” were not “offered by Verizon” as a feature or capability “of its telecommunications services.”5 Verizon appeared to assume that if “access to third-party services and devices” is “not defined by [a] tariff as a part of [a] service offering, a move from a legacy-based service to an alternative service that does not support such third-party services or devices does not constitute a discontinuance, reduction, or impairment of a service” under section 214(a). Declaratory Ruling ¶ 114 (JA___). The FCC, however, did not share Verizon’s assumption. It issued a declaratory ruling in November 2014 to clarify that it “looks beyond the terms of a carrier’s tariff … when analyzing whether a service is discontinued, reduced, or impaired under section 214.” Id. ¶ 117 (JA___). The Commission explained that because section 214 governs the discontinuance of any telecommunications service that a carrier “actually provides to end users,” the carrier’s “tariff definition of its own service” is not necessarily 5 Verizon New York Inc. and Verizon New Jersey Inc.’s Second Response to Information, Data, and Document Request, WC Docket No. 13-150, at 11 (filed Sept. 4, 2013), available at https://ecfsapi.fcc.gov/file/7520942191.pdf. 12 “dispositive.” Declaratory Ruling ¶ 115 (JA___). Another relevant consideration is “what the ‘community or part of a community’ reasonably would view as the service provided by the carrier.” Id. Therefore, to determine whether a service is discontinued, reduced, or impaired under section 214, the FCC “applies a functional test that takes into account the totality of the circumstances from the perspective of the relevant community or part of a community.” Id. ¶ 117 (JA___). The Commission found that this functional approach was consistent with the statutory text. “Section 214(a) prohibits a carrier from discontinuing, reducing, or impairing service to ‘a community, or part of a community’ without prior Commission authorization.” Declaratory Ruling ¶ 115 (JA___) (quoting 47 U.S.C. § 214(a)). In construing this provision, the FCC has long maintained that “the primary focus should be on the end service provided by a carrier to a community or part of a community, i.e., the using public.” Id. (JA___-___) (quoting Graphnet, 17 FCC Rcd at 1140 ¶ 29); see also Western Union, 74 FCC 2d at 296 ¶ 7. The Commission rejected the notion that its discontinuance analysis under section 214 must be constrained by the terms of tariffs. It pointed out that “tariffs cannot define the reach of section 214” because the statute applies to both tariffed and detariffed services. Declaratory Ruling ¶ 115 (JA___). The agency found “no indication in the language of section 214(a) that Congress intended to allow the carrier to define the scope of ‘service’ via its tariff.” Id. 13 The Commission further observed that consumers can “use carriers’ services for purposes beyond those marketed by the carrier.” Declaratory Ruling ¶ 117 (JA___). It reasoned that if a service provided to a particular community (or part of a community) “includes features outside of the tariff definition, the Commission must under section 214(a) treat those features as part of the ‘service’ for which prior approval to discontinue must be sought.” Id. For example, when Verizon proposed to replace its legacy wireline voice service with a wireless alternative in parts of New York and New Jersey after Hurricane Sandy, “[m]any consumers raised concerns about the loss of certain third-party services or devices that were designed specifically to work with traditional voice services offered over copper facilities,” including fax machines, digital video recorders (DVRs), credit card readers, medical alert devices, and alarm systems. Id. ¶ 116 (JA___-___) (internal quotation marks omitted). In the FCC’s view, these consumers’ concerns about “the practical impact of the proposed service change” were “relevant to the analysis of Verizon’s section 214 discontinuance application,” even if Verizon’s tariffs did not mention the particular functionalities that concerned its customers. Id. (JA___). The FCC issued the Declaratory Ruling to “provide a transparent and public process to ensure that the public interest is not harmed” by the discontinuance of a “practical functionality provided by the network on which consumers have come to 14 rely.” Declaratory Ruling ¶ 118 (JA___). The Commission emphasized that the Declaratory Ruling did “not mean that every prior feature, no matter how little- used or old-fashioned, must be maintained in perpetuity,” or that “section 214(a) always will be triggered by proposed changes to such prior features.” Id. The agency explained: “Not every functionality supported by a network is de facto a part of a carrier’s ‘service.’ An important factor in this analysis is the extent to which the functionality traditionally has been relied upon by the community.” Id. ¶ 119 (JA___). 2. The Order a. In August 2015, the Commission denied USTelecom’s petition for reconsideration of the Declaratory Ruling. Order ¶¶ 181-201 (JA___-___). It rejected USTelecom’s claim that the term “service” in section 214 is “strictly ‘defined by the terms of [a] federal tariff, or in the case of telecommunications services that have been detariffed, in [a carrier’s] contracts with its customers.’” Order ¶ 190 (JA___) (quoting Petition for Reconsideration at 5 (JA___)). USTelecom claimed to find support for its position in National Cable & Telecommunications Association v. Brand X Internet Services, 545 U.S. 967 (2005) (Brand X). As the Commission noted, however, “in Brand X, neither the Court nor the Commission focused on the carrier’s tariff or other contractual language in defining the service” offered by the carrier; instead, the Commission 15 and the Court both “explicitly relied on the consumer’s point of view.” Order ¶ 190 (JA___) (citing Brand X, 545 U.S. at 988-89). Similarly, in section 214, Congress chose to “focus on community perception” by requiring prior approval of the discontinuance, reduction, or impairment of “service ‘to a community or part of a community.’” Order ¶ 198 (JA___) (quoting 47 U.S.C. § 214(a)). The Commission concluded that its “incorporation of consumer impact into the discontinuance analysis” was “entirely consistent with and necessary to accomplish the purposes of section 214.” Id. The agency found “nothing in section 214” to support USTelecom’s assertion that “Congress intended ‘service’ to mean ‘[service] as defined by the carrier.’” Id. The Commission also found no merit in USTelecom’s argument that “the filed rate doctrine somehow controls the scope of section 214(a).” Order ¶ 191 (JA___). The agency explained that “the filed rate doctrine only applies to tariffed offerings,” whereas section 214(a) applies to both tariffed and detariffed services. Id. In addition, the Commission found that section 214 neither “references section 203” (the Act’s tariff provision) nor “otherwise indicates” that the term “service” must be defined “to only include the written terms of a carrier’s offering.” Id. The Commission concluded that it was “reasonable to define ‘service’ differently for purposes of the filed rate doctrine and the market exit framework in section 214 because they serve different purposes.” Id. 16 Finally, the FCC disagreed with USTelecom’s assertion that the Declaratory Ruling was impermissibly vague. Order ¶¶ 196-201 (JA___-___). USTelecom maintained that carriers would “be unable to determine which relevant services and devices constitute the ‘service’ provided to consumers” under the FCC’s functional test because the test covers devices that “carriers … ‘may not even know exist.’” Id. ¶ 200 (JA___-___) (quoting Petition for Reconsideration at 4 (JA___)). The Commission did “not find” this claim “to be credible.” Id. (JA___). It observed that “the services identified in the Declaratory Ruling” (e.g., fax machines, medical monitoring devices, and home security systems) “are the very services for which carriers frequently market and sell additional lines to customers.” Id. (JA___) (citing Granite Opposition at 9 (JA___)). It also found that carriers are “well aware of many of the forms of terminal equipment in use by their customers on [circuit-switched] networks” as well as “the technical specifications of that equipment” because they “have access to a database of terminal equipment certified as compliant with” FCC regulations requiring “that terminal equipment not harm carriers’ networks.” Id. b. In addition to reaffirming the Declaratory Ruling, the FCC clarified that “a carrier must obtain Commission approval before discontinuing, reducing, or impairing a service used as a wholesale input” by other carriers if the proposed change in wholesale service would “discontinue, reduce, or impair service to … a 17 carrier-customer’s retail end users.” Order ¶ 102 (JA___). “In such cases,” the Commission said, “a [section] 214 application is necessary” to allow the FCC “to determine if the impairment of service to the carrier-customer’s end users will adversely affect the present or future public convenience or necessity.” Id. ¶ 113 (JA___). Under the FCC’s reading of section 214, “it is not enough for a carrier that intends to discontinue a service to look only at its own end user customers.” Order ¶ 102 (JA___). The carrier must also “undertake a meaningful evaluation of the impact” of its proposed change in service on its “carrier-customers’ end users” by “consult[ing] directly with affected carrier-customers.” Id. ¶ 114 (JA___). If this evaluation reveals that a wholesale carrier’s actions will discontinue, reduce, or impair service to its carrier-customers’ end users, “Commission approval is required.” Id. But if “the carrier can determine with reasonable certainty” that its actions will have “no such impact,” it “may proceed” without seeking FCC approval. Id. ¶ 115 (JA___).6 6 Previously, the Commission had proposed to adopt “a rebuttable presumption that where a carrier seeks to discontinue, reduce, or impair a wholesale service, that action will discontinue, reduce, or impair service to a community or part of a community such that approval is necessary pursuant to section 214(a).” Declaratory Ruling ¶ 103 (JA___). But after the agency clarified the extent to which section 214(a) applies to wholesale services, it decided that a rebuttable presumption was “unnecessary.” Order ¶ 107 (JA___). 18 The Commission based its interpretation of section 214 on the statute’s broad language: “By the plain terms of the statute, carriers must obtain Commission approval when their actions will discontinue, reduce, or impair service to a community or part of a community, not just when their actions will discontinue, reduce, or impair their own service to their own end users.” Order ¶ 108 (JA___). The Commission also concluded that its analysis of the discontinuance of wholesale services under section 214 “is consistent with and builds on” FCC precedent: “The Commission has consistently held that carrier-to-carrier relationships are subject to section 214(a), and that prior Commission approval [of a change in a wholesale service offering] is required [if the change] will discontinue, reduce, or impair service to [a] carrier-customer’s retail customers.” Order ¶ 108 (JA___).7 c. Having clarified that carriers must seek section 214 authorization to discontinue wholesale services in some cases, the FCC adopted an interim rule governing applications by incumbent LECs to discontinue, reduce, or impair 7 See id. ¶ 109 (JA___-___) (citing Western Union, 74 FCC 2d at 295-97 ¶¶ 6-9); id. ¶ 110 (JA___) (citing Lincoln County, 81 FCC 2d at 331-35 ¶¶ 11-14, 22); id. ¶ 111 (JA___) (citing Graphnet, 17 FCC Rcd at 1140 ¶ 29); id. ¶ 112 (JA___) (citing BellSouth, 7 FCC Rcd at 6322-23 ¶¶ 5-6). 19 “special access services at DS1 speed and above”8 and/or “commercial wholesale platform services.”9 Order ¶ 132 (JA___). As a condition of the FCC’s grant of any such application, the interim rule provides that an incumbent LEC must “provide competitive carriers” with “reasonably comparable wholesale access on reasonably comparable rates, terms, and conditions.” Id.; see 47 C.F.R. § 63.71(c). This temporary condition will expire when the FCC implements new “rules and/or policies” to ensure that “rates, terms, and conditions for special access services are just and reasonable.” Order ¶ 132 (JA___); see 47 C.F.R. § 63.71(c)(1). The agency expects to adopt such rules at the conclusion of its special access proceeding, which is well underway. See Order ¶¶ 131, 140 (JA___, ___-___); Business Data Services in an Internet Protocol Environment, 31 FCC Rcd 4723 (2016) (Special Access 2016 NPRM). The FCC’s Chairman has stated that his “goal” is for the Commission to complete the special access 8 “Special access is the non-switched dedicated transmission of voice and data traffic between two points.” Order n.448 (JA___); see also Ad Hoc Telecomms. Users Comm. v. FCC, 572 F.3d 903, 904-05 (D.C. Cir. 2009). “DS1” special access service has a transmission speed of 1.544 million bits per second. The standard speed for voice telephony is “DS0”—64,000 bits per second. See NEWTON’S TELECOM DICTIONARY 435 (28th ed. 2014). 9 Commercial wholesale platform service—which “includes last-mile service, local circuit switching, and shared transport”—is “used as a wholesale input” by competitive carriers “to provide end users with voice service.” 47 C.F.R. § 63.71(c)(2)(ii). 20 proceeding by the end of 2016. Special Access 2016 NPRM, 31 FCC Rcd at 5001 (statement of Chairman Wheeler).10 The Commission adopted the interim rule to ensure that “enterprise” (i.e., non-residential) customers—such as government offices, small and medium-sized businesses, hospitals, schools, and libraries—“continue to enjoy the benefits of competition” while the agency completes its examination of the special access market. Order ¶ 131 (JA___). Competitive LECs, which began providing local telephone service after the 1996 Act was passed, provide “the principal source of competition to incumbent LECs in the enterprise market.” Id. ¶ 137 (JA___). To compete effectively in that market, competitive LECs must have access to affordable high-speed special access and commercial wholesale platform services. See id. ¶¶ 134-135, 146-150 (JA___-___, ___-___). These carriers are concerned that “when incumbent LECs discontinue their legacy services … and replace them with packet-based services at different rates, terms, and conditions,” wholesale input prices could “materially increase.” Id. ¶ 135 (JA___). For example, Windstream complained that an incumbent LEC’s conversion to IP-based service in Kings Point, Florida “would result in an 800 percent input 10 The Commission sought comment on whether the wholesale access condition, as applied to commercial wholesale platform services, “should be extended beyond the completion of the special access proceeding.” Order ¶ 152 (JA___); see id. ¶¶ 242-244 (JA___-___). 21 price increase to Windstream.” Order ¶ 135 (JA___). Faced with this sort of spike in incumbent LECs’ wholesale rates, competitive LECs maintain that they would “be unable to serve their retail customers at competitive rates, terms, and conditions” because “there are no alternative sources for the necessary wholesale inputs” in most markets. Id. (JA___). The IP transition could thus lead to “higher communications costs and less competitive choice” for enterprise customers. Id. “The central issue” underlying competitive LECs’ concerns is “whether incumbent LECs are subject to substantial competition in the provision of the packet-based services that will replace the services being discontinued,” so that incumbents will continue to have the “incentive to price competitively to retain the wholesale business.” Order ¶ 131 (JA___). “The Commission is in the process of comprehensively evaluating” this issue in its special access proceeding “by analyzing data collected from both providers and users of special access services.” Id. ¶ 140 (JA___). Once the agency completes that analysis, it will be able to adopt “appropriate rules and policies to ensure access to critical wholesale inputs at just and reasonable rates, terms, and conditions” even as “technology changes.” Id. In the meantime, however, “in the absence of any interim protection, competition from competitive LECs could be irrevocably lost” if the adoption of packet-switched services by incumbent LECs leads to steep increases in wholesale 22 rates. Order ¶ 136 (JA___). To guard against this possibility, the FCC decided that if incumbent LECs wish to discontinue their circuit-switched offerings of high-speed special access and commercial wholesale platform services in favor of an IP replacement service before the special access proceeding is resolved, they must continue to “provide any requesting telecommunications carrier” with wholesale access that is “reasonably comparable to the level of wholesale access [they] previously provided on reasonably comparable rates, terms, and conditions.” 47 C.F.R. § 63.71(c)(1).11 The Commission concluded that this interim rule was within its “discretion” under section 214(c) “to condition a [section] 214 authorization … when necessary to protect the public interest.” Order ¶ 153 (JA___). The Commission found that the “reasonably comparable wholesale access” condition would help “ensure that technology transitions do not thwart the public policy objective, enshrined in the [1996 Act], to promote competition.” Id. ¶ 154 (JA___-___). Some parties argued that the FCC lacked authority under section 214 to take action to promote competition because other provisions of the Communications Act (such as section 251) were designed to serve that purpose. The Commission 11 The agency will evaluate compliance with this condition on a case-by-case basis, taking into account the totality of the circumstances, including variations among markets and services as well as disparities in price and quality. Order ¶¶ 159-177 (JA___-___). 23 disagreed: “The mere fact that the Act contains provisions designed to open markets to competition does not preclude the Commission from considering competition in the wholesale last-mile input market as part of its section 214 public interest analysis.” Order ¶ 155 (JA___). SUMMARY OF ARGUMENT As the agency entrusted with promoting the public interest in a rapid, efficient, and accessible telecommunications system, the FCC has an obligation to ensure that the transition from circuit-switched services to IP-based services goes smoothly. This task requires a delicate balancing of different policy goals. On the one hand, the Commission seeks to promote innovation and the swift deployment of new technologies. On the other hand, the agency must make sure that the shift to IP-based services does not unduly disrupt the availability of affordable, dependable service to consumers who have come to rely on legacy services. The FCC decisions at issue here strike the appropriate balance between these two objectives. Interpreting the broad and ambiguous language of section 214, the Commission established an analytical framework for reviewing the proposed discontinuance of legacy services. This framework will enable the agency to ensure that no discontinuance of a carrier’s service will deprive the public of access to reliable service at affordable prices. 24 USTelecom argues that the FCC’s actions were both unauthorized and unjustified. Neither claim has merit. I.A. For purposes of implementing section 214, the Commission reasonably decided to apply a “functional test” to determine whether a service is discontinued, reduced, or impaired. Declaratory Ruling ¶¶ 114-119 (JA___-___). Under this test, the agency “evaluates the totality of the circumstances,” including “what the ‘community or part of a community’ reasonably would view as the service provided by the carrier.” Id. ¶ 115 (JA___). This consumer-oriented functional test reflects a reasonable reading of the ambiguous phrase “service to a community or part of a community” in section 214(a). See Chevron USA, Inc. v. Natural Res. Def. Council, 467 U.S. 837, 842-43 (1984). USTelecom asserts that “the only plausible interpretation” of section 214(a) is to define “service” solely on the basis of a carrier’s tariff or contract. Br. 25. But “nothing in section 214 indicates” that “Congress intended ‘service’ to mean ‘[service] as defined by the carrier.’” Order ¶ 198 (JA___). Section 214 does not even mention tariffs or contracts. And the statute’s references to “service to a community, or part of a community” and “public convenience and necessity” show that Congress was not “solely fixated on the service provider’s viewpoint” as to what constitutes “service.” Id. Moreover, the Supreme Court held in Brand X, 545 U.S. at 988-89, that the FCC may reasonably consider the perspective of end users 25 when construing the Act’s definition of “telecommunications service.” The Commission followed the same reasonable approach here in interpreting the term “service” in section 214(a). I.B. The functional test provides carriers with fair notice of their obligations under section 214. The test “clarifies that a tariff” or contract “is not the end of the inquiry” into whether a service is discontinued. Order ¶ 197 (JA___). The Commission also considers “the extent to which [a] functionality traditionally has been relied upon by the community.” Declaratory Ruling ¶ 119 (JA___). Under the test, only commonly used functionalities are covered by section 214. The functionalities identified in the Declaratory Ruling—e.g., the capability to use fax machines, medical monitoring devices, and home security systems—“are the very services for which carriers frequently market and sell additional lines to customers,” even if those services are not mentioned in tariffs or contracts. Order ¶ 200 (JA___). In addition, because carriers have access to a database of terminal equipment, they “are well aware of many of the forms of terminal equipment in use by their customers on [circuit-switched] networks.” Id. For these reasons, USTelecom cannot persuasively claim that the functional test is impermissibly vague. Br. 35-39. II. The Commission reasonably construed section 214 to require FCC approval of any discontinuance, reduction, or impairment of wholesale service that 26 would result in discontinuance, reduction, or impairment of a carrier-customer’s retail service. Order ¶¶ 102-130 (JA___-___). The statute’s expansive language supports this interpretation. “By the plain terms of the statute, carriers must obtain Commission approval when their actions will discontinue, reduce, or impair service to a community or part of a community, not just when their actions will discontinue, reduce, or impair their own service to their own end users.” Id. ¶ 108 (JA___). The Commission’s reading of the statute is also consistent with longstanding FCC precedent. See id. ¶¶ 108-113 (JA___-___). And the agency reasonably found that the application of section 214 to wholesale services will protect consumers and preserve competition in the enterprise market. See id. ¶¶ 116-118 (JA___-___). USTelecom contends that when section 214 is read in tandem with section 251(c)(5), the Act makes clear that the discontinuance requirements of section 214 do not apply to wholesale services. Br. 39-42. That argument, however, was not preserved for appeal because it was never presented to the Commission. See 47 U.S.C. § 405(a). Even if the argument had not been waived, it is baseless. Section 251(c)(5) relates to incumbent LECs’ facilities. It has no bearing on the scope of section 214, which concerns carriers’ services. III.A. Section 214(c) grants the FCC broad discretion to “attach to the issuance of [any discontinuance] certificate such terms and conditions as in its 27 judgment the public convenience and necessity may require.” 47 U.S.C. § 214(c). The Commission reasonably exercised this discretion when it adopted an interim rule under which any incumbent LECs that obtain FCC approval to discontinue high-speed special access or commercial wholesale platform services must comply with a “reasonably comparable wholesale access” condition pending completion of the FCC’s special access proceeding. Order ¶¶ 131-180 (JA___-___). Contrary to USTelecom’s assertion (Br. 48), the interim rule does not “impose new unbundling obligations that deviate from the requirements of” sections 251(c)(3) and 271. Those provisions govern the unbundling of network facilities. The interim rule, by contrast, does not mandate the “unbundling” of any facilities. It simply requires incumbent LECs to provide “reasonably comparable” wholesale access services in place of the discontinued services. There also is no merit in USTelecom’s claim (Br. 51) that the FCC lacked authority to impose “an ex ante condition” on the grant of certain types of discontinuance applications “without considering the facts specific to [each] application.” Under section 214, the Commission has broad discretion to impose such conditions “as in its judgment the public convenience and necessity may require.” 47 U.S.C. § 214(c). The agency properly exercised this discretion when it decided that “an industry-wide rule” imposing the wholesale access condition on 28 the grant of future applications was “preferable to a case-by-case analysis,” especially given the condition’s limited scope and duration. Order ¶ 153 (JA___). III.B. The FCC was amply justified in adopting the interim rule. Until the agency adopts new special access rules, there is a risk that “competition from competitive LECs”—the primary source of competition in the enterprise market— “could be irrevocably lost” without some form of interim protection. Order ¶ 136 (JA___). The “reasonably comparable wholesale access” condition is designed to preserve existing competition “by bridging the gap until the Commission’s special access proceeding is complete.” Id. ¶ 137 (JA___-___). The condition ensures that during this interim period, critical wholesale inputs will remain available to competitive LECs at affordable rates. As this Court has repeatedly held, “[a]voidance of market disruption pending broader reforms is … a standard and accepted justification for a temporary rule.” Rural Cellular Ass’n v. FCC, 588 F.3d 1095, 1106 (D.C. Cir. 2009) (quoting Competitive Telecomms. Ass’n v. FCC, 309 F.3d 8, 14 (D.C. Cir. 2002) (CompTel)). STANDARD OF REVIEW USTelecom’s challenge to the FCC’s reading of the Communications Act is reviewed under the two-part Chevron framework. If “Congress has directly spoken to the precise question at issue,” the Court “must give effect to the unambiguously expressed intent of Congress.” Chevron, 467 U.S. at 842-43. But 29 “if the statute is silent or ambiguous with respect to the specific issue, the question” for the Court is whether the agency has adopted “a permissible construction of the statute.” Id. at 843; see also City of Arlington v. FCC, 133 S. Ct. 1863, 1874-75 (2013). If the implementing agency’s reading of an ambiguous statute is reasonable, the Court must “accept the agency’s construction of the statute, even if the agency’s reading differs from what the [Court] believes is the best statutory interpretation.” Brand X, 545 U.S. at 980. The Court must uphold the orders on review unless they are “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). “Under this highly deferential standard of review,” the Court “presumes the validity of agency action.” Cellco P’ship v. FCC, 357 F.3d 88, 93 (D.C. Cir. 2004) (internal quotation marks omitted). The Court “is not to ask whether [the challenged] regulatory decision is the best one possible or even whether it is better than the alternatives.” FERC v. Elec. Power Supply Ass’n, 136 S. Ct. 760, 782 (2016). “Provided that the Commission has articulate[d] … a rational connection between the facts found and the choice made,” the Court “will uphold [the agency’s] decision.” United States Telecom Ass’n v. FCC, 2016 WL 3251234, *14 (D.C. Cir. June 14, 2016) (USTelecom) (internal quotation marks omitted), petitions for reh’g filed. 30 ARGUMENT I. THE COMMISSION REASONABLY ADOPTED A CONSUMER-ORIENTED FUNCTIONAL TEST FOR DETERMINING WHEN A SERVICE IS DISCONTINUED, REDUCED, OR IMPAIRED UNDER SECTION 214 Section 214 requires a carrier to obtain FCC approval to “discontinue, reduce, or impair service to a community, or part of a community.” 47 U.S.C. § 214(a). The Commission reasonably construed the ambiguous term “service” in this context to mean “the service [a] carrier actually provides to end users.” Declaratory Ruling ¶ 115 (JA___) (emphasis added). Accordingly, the FCC decided that it should not rely exclusively on a carrier’s definition of its service in a tariff or contract when analyzing whether a service has been discontinued, reduced, or impaired. Instead, the agency adopted “a functional test that takes into account the totality of the circumstances from the perspective of the relevant community or part of a community.” Id. ¶ 117 (JA___). USTelecom challenges the FCC’s functional test on two grounds. First, it contends that the test is based on an unlawful reading of the statute. Br. 25-35. Second, it asserts that the test is impermissibly vague. Br. 35-39. USTelecom is wrong on both counts. A. The Functional Test Is Based On A Reasonable Reading Of Ambiguous Statutory Language. Under section 214, the FCC must authorize any discontinuance, reduction, or impairment of telecommunications “service to a community, or part of a 31 community.” 47 U.S.C. § 214(a). The Commission reasonably construed this ambiguous phrase to reflect “Congress’ focus on community perception and effects.” Order ¶ 198 (JA___). Therefore, for purposes of defining the “service” covered by section 214, the Commission “evaluates the totality of the circumstances,” including “what the ‘community or part of a community’ reasonably would view as the service provided by the carrier.” Declaratory Ruling ¶ 115 (JA___). Under this “functional test,” the terms of a tariff or contract do not mark “the end of the inquiry.” Order ¶ 197 (JA___). The service that a carrier provides to end users often includes functionalities that are not described in a tariff or contract (e.g., the capability to operate fax machines or home security systems). See Declaratory Ruling ¶ 116 (JA___-___). The FCC reasonably concluded that “those features” are “part of the ‘service’ for which prior approval to discontinue must be sought” under section 214. Id. ¶ 117 (JA___). Consistent with this reading of the statute, the FCC’s “functional test” takes account of consumers’ “traditional reliance on a given functionality.” Order ¶ 197 (JA___). The agency’s attention to “the impact” of a change in service “on the public” flows naturally from the statutory text, which refers to “service ‘to a community or part of a community.’” Id. ¶ 198 (JA___) (quoting 47 U.S.C. § 214(a)). The Commission’s “incorporation of consumer impact into the 32 discontinuance analysis is entirely consistent with and necessary to accomplish the purposes of section 214.” Id. Events in the wake of Hurricane Sandy confirmed the wisdom of the Commission’s pragmatic approach. After the hurricane “substantially destroyed Verizon’s circuit-switched copper telephone network in parts of Fire Island, New York and the New Jersey barrier islands, Verizon proposed to replace the destroyed network with a wireless alternative.” Declaratory Ruling ¶ 116 (JA___). Customers in the affected area complained that the discontinuance of Verizon’s legacy service could severely disrupt the operation of numerous devices that were designed specifically to work with traditional wireline voice service, including fax machines, DVRs, credit card readers, medical alert devices, and alarm systems. Id. (JA___-___). Verizon suggested that these customers’ complaints were irrelevant to the FCC’s analysis of the discontinuance application because the functionalities identified by these customers were not part of the service offered under Verizon’s tariff. See id. ¶ 114 (JA___). Rejecting Verizon’s suggestion, the Commission concluded: “Even if the carrier’s tariffs and other materials did not mention such functionalities, the practical impact of the proposed service change in Fire Island and the New Jersey barrier islands is relevant to the analysis of Verizon’s section 214 discontinuance application.” Id. ¶ 116 (JA___). 33 Building on Verizon’s premise, USTelecom contends that “the only plausible interpretation” of section 214(a) is to limit the definition of “service” to the terms prescribed in a carrier’s tariff or contract. Br. 25. That claim cannot withstand scrutiny. Nothing in the Act compels the Commission to read the term “service” in section 214 “to only include the written terms of a carrier’s offering.” Order ¶ 191 (JA___). Section 214 does not define the ambiguous term “service.” It merely refers broadly to “service to a community, or part of a community.” 47 U.S.C. § 214(a). By its terms, the statute focuses on the “community” receiving service, not on the service provider. Nothing in the statutory text suggests that Congress intended for the term “service” in section 214(a) to be defined by the terms of tariffs or contracts. Section 214 does not even mention tariffs or contracts. Nor does it refer to section 203 (the Act’s provision concerning tariffs). Order ¶ 191 (JA___). Although “nothing in section 214 indicates” that “Congress intended ‘service’ to mean ‘[service] as defined by the carrier,’” Order ¶ 198 (JA___), USTelecom insists that the FCC must read the statute that way. But “Congress did not write the statute that way.” Nat’l Rifle Ass’n of America, Inc. v. Reno, 216 F.3d 122, 130 (D.C. Cir. 2000) (internal quotation marks omitted). USTelecom’s interpretation of section 214(a) “necessarily contemplates adding a critical [phrase] 34 that Congress left out of the statute, an unpromising avenue for an argument about the meaning of the words Congress used.” USTelecom, 2016 WL 3251234, *23. The “need for such manipulation” of statutory text “creates strong doubts about whether [USTelecom’s] interpretation is correct, let alone unambiguously clear.” Adirondack Med. Ctr. v. Sebelius, 740 F.3d 692, 700 (D.C. Cir. 2014). Indeed, the language that Congress actually used refutes USTelecom’s premise that Congress was “solely fixated on the service provider’s viewpoint” as to what constitutes “service.” See Order ¶ 198 (JA___). The statute’s references to “service to a community, or part of a community” and “public convenience and necessity” reflect an overarching concern with the public’s perspective on the impact of a change in service. Id. USTelecom’s cramped construction of section 214 gives short shrift to this fundamental concern. USTelecom contends that its narrow reading of section 214 “gives full effect to Congress’s purpose, reflected in § 214(a)’s legislative history, to protect communities’ access to the nation’s telecommunications networks.” Br. 25. It notes that Congress added the discontinuance provisions to the statute “[t]o prevent a mid-war collapse of the nation’s telegraph system and to avoid some communities being stranded with no link to the outside world.” Br. 26. But “it is ultimately the provisions of our laws rather than the principal concerns of our legislators by which we are governed.” Nat’l Cable & Telecomms. Ass’n v. FCC, 35 567 F.3d 659, 663 (D.C. Cir. 2009) (NCTA) (quoting Oncale v. Sundowner Offshore Servs., Inc., 523 U.S. 75, 79 (1998)). “When Congress delegates broad authority to an agency to achieve a particular objective, agency action pursuant to that delegated authority may extend beyond the specific manifestations of the problem that prompted Congress to legislate in the first place.” Cablevision Sys. Corp. v. FCC, 649 F.3d 695, 707 (D.C. Cir. 2011). USTelecom bases its restrictive reading of section 214 primarily on the isolated statements of a few Congressmen during the floor debate on the 1943 amendment to the statute. See Br. 6, 26 n.11, 41. As this Court has long recognized, however, “judges must exercise extreme caution before concluding that a statement made in floor debate … may be taken as statutory gospel, in light of the endemic interplay, in Congress, of political and legislative considerations likely unrelated to the interpretive tasks of a court.” Natural Res. Def. Council v. EPA, 706 F.3d 428, 437 n.9 (D.C. Cir. 2013) (quoting Tex. Mun. Power Agency v. EPA, 89 F.3d 858, 875 (D.C. Cir. 1996)). Although Congress amended section 214 in 1943 to address a specific problem, the amendment was “written in broad, sweeping language,” so it “should be given broad, sweeping application.” Consumer Elecs. Ass’n v. FCC, 347 F.3d 291, 298 (D.C. Cir. 2003) (CEA); see also City of Arlington, 133 S. Ct. at 1868 (“Congress knows to speak in plain terms when it wishes to circumscribe, and in 36 capacious terms when it wishes to enlarge, agency discretion”). Consistent with the statute’s broad language, the Commission’s functional test properly ensures that no carrier will “discontinue, reduce, or impair service to a community, or part of a community,” unless and until the FCC determines that “neither the present nor future public convenience and necessity will be adversely affected thereby.” 47 U.S.C. § 214(a) (emphasis added). By contrast, USTelecom’s pinched interpretation fails to give full effect to the statute’s broad terms.12 USTelecom maintains that it was “unlawful” for the Commission to consider the perspective of end users when defining the “service” covered by section 214. Br. 25. To the contrary, both the Supreme Court and this Court have affirmed the FCC’s reliance on consumers’ perceptions in construing the Act’s definition of “telecommunications service”: “the offering of telecommunications for a fee directly to the public.” 47 U.S.C. § 153(53). In Brand X, the Supreme Court held that it was reasonable for the Commission to consider “the consumer’s point of 12 USTelecom mistakenly claims (Br. 27-28) that the functional test conflicts with section 214’s directive that “nothing in this section shall be construed to require a certificate or other authorization from the Commission for any installation, replacement, or other changes in plant, operation, or equipment, other than new construction, which will not impair the adequacy or quality of service provided.” 47 U.S.C. § 214(a) (emphasis added). To the contrary, under the FCC’s test, a carrier wishing to convert from copper to IP facilities needs section 214 authorization only if the proposed change will “impair the adequacy or quality of service” by disrupting consumers’ ability to use fax machines, alarm systems, or other commonly used devices. See Declaratory Ruling ¶¶ 116-117 (JA___-___). 37 view” in determining whether cable modem service included an “offering” of telecommunications because that question “turn[ed] on the nature of the functions the end user is offered.” Brand X, 545 U.S. at 988 (internal quotation marks omitted). And in USTelecom, this Court upheld the FCC’s decision to reclassify broadband internet access service as a telecommunications service—a decision based on “the consumer’s perspective” concerning the service offered by internet service providers. USTelecom, 2016 WL 3251234, *8. Thus, the Commission may reasonably take end users’ views into account when interpreting ambiguous statutory terms like “service” and “offering.” It need not define such terms solely on the basis of carriers’ tariffs or contracts. Contrary to USTelecom’s assertion (Br. 30-35), the FCC’s Declaratory Ruling does not conflict with the filed rate doctrine. Because “the filed rate doctrine and the market exit framework in section 214 … serve different purposes,” Order ¶ 191 (JA___), the FCC reasonably defined “service” differently in each context. Verizon California, Inc. v. FCC, 555 F.3d 270, 276 (D.C. Cir. 2009) (“it is not impermissible under Chevron for an agency to interpret an imprecise term differently in two separate sections of a statute which have different 38 purposes”) (internal quotation marks omitted); see also Atlantic Cleaners & Dyers, Inc. v. United States, 286 U.S. 427, 433 (1932).13 The “goal” of the filed rate doctrine is “preventing unreasonable and discriminatory charges.” AT&T Co. v. Central Office Tel., Inc., 524 U.S. 214, 222 (1998) (Central Office). The doctrine ensures that “all purchasers of services covered by [a] tariff will pay the same rate.” Id. at 229 (Rehnquist, C.J., concurring). The uniform rates paid by consumers of tariffed services will not change as a result of the Declaratory Ruling. USTelecom argues that the filed rate doctrine “extends as well to the terms and conditions of service.” Br. 34. It contends that insofar as the Declaratory Ruling defines “service” to include functionalities that are not identified in a tariff, such functionalities amount to “untariffed privileges.” Br. 32-33 (internal quotation marks omitted). Any such functionalities, however, do not violate the filed rate doctrine because they are available to anyone who purchases the tariffed 13 USTelecom argues that Congress used the term “service” throughout Title II “to denote the service that the carrier offers.” Br. 33. But Congress also defined the service governed by Title II—“telecommunications service”—as “the offering of telecommunications for a fee directly to the public.” 47 U.S.C. § 153(53). Both the Supreme Court and this Court have held that the Commission may reasonably construe this definition of “service” by considering the perspective of end users— just as the agency did here in the Declaratory Ruling. See Brand X, 545 U.S. at 988-89; USTelecom, 2016 WL 3251234, *8. 39 service.14 The filed rate doctrine prohibits “privileges” involving the provision of “an additional benefit at no additional charge” to some customers but not others. See Central Office, 524 U.S. at 223 (quoting Competitive Telecomms. Ass’n v. FCC, 998 F.2d 1058, 1062 (D.C. Cir. 1993)). The Declaratory Ruling neither endorses nor accommodates such discrimination. USTelecom also asserts (Br. 33 n.13) that the functional test conflicts with Use of the Carterfone Device in Message Toll Telephone Service, 13 FCC 2d 420 (1968) (Carterfone). Because no party raised this issue before the FCC, the claim has been waived. See 47 U.S.C. § 405(a); Globalstar, Inc. v. FCC, 564 F.3d 476, 483-85 (D.C. Cir. 2009). In any event, USTelecom misreads Carterfone. While the Commission there stated that “improvements to the telephone system” could require the adaptation of third-party devices to “revised [technical] standards,” 13 FCC 2d at 424, it did not address or interpret the scope of section 214. The principal holding of Carterfone was that carriers may not use tariffs to bar consumers from using third-party devices “in ways which are privately beneficial without being publicly detrimental.” Id. at 423 (quoting Hush-A-Phone Corp. v. 14 For example, all purchasers of Verizon’s tariffed service in New York and New Jersey obtain the capability to operate such commonly used devices as medical monitoring equipment, fax machines, and home security systems (even though such functionalities are not mentioned in Verizon’s tariff). Declaratory Ruling ¶ 116 (JA___-___). 40 United States, 238 F.2d 266, 269 (D.C. Cir. 1956)). That ruling supports the FCC’s decision to look beyond the terms of tariffs when defining the services covered by section 214. See Declaratory Ruling ¶ 117 (JA___-___). B. The Functional Test Is Not Impermissibly Vague. USTelecom contends that the functional test violates the Due Process Clause by failing to give carriers “fair notice” of their obligations under section 214. Br. 35 (quoting FCC v. Fox Television Stations, Inc., 132 S. Ct. 2307, 2317 (2012)). To prevail on this facial challenge, USTelecom must show that the functional test “is impermissibly vague in all of its applications.” Vill. of Hoffman Estates v. Flipside, Hoffman Estates, Inc., 455 U.S. 489, 495 (1982).15 Even if the “elevated bar for facial challenges” did not apply here, USTelecom’s vagueness claim is unavailing because the functional test “satisfies due process requirements.” USTelecom, 2016 WL 3251234, *39. Regulations governing business conduct “satisfy due process so long as they are sufficiently specific that a reasonably prudent person, familiar with the conditions the regulations are meant to address and the objectives the regulations 15 The Supreme Court recently “suggested some skepticism about that longstanding framework” for reviewing facial vagueness challenges. See USTelecom, 2016 WL 3251234, *39 (citing Johnson v. United States, 135 S. Ct. 2551, 2561 (2015)). But the Supreme Court has not overruled that framework. Therefore, this Court should apply it here. See Shea v. Kerry, 796 F.3d 42, 54 (D.C. Cir. 2015). 41 are meant to achieve, would have fair warning of what the regulations require.” USTelecom, 2016 WL 3251234, *39 (quoting Freeman United Coal Mining Co. v. Fed. Mine Safety & Health Review Comm’n, 108 F.3d 358, 362 (D.C. Cir. 1997)). The FCC’s functional test meets this standard. The test “simply clarifies” that if a service provided to end users “includes features outside of the carrier’s definition” of “service” in a tariff or contract, such “features are relevant to an evaluation of whether a ‘service’ has been discontinued.” Order ¶ 197 (JA___). While the terms of tariffs and contracts “remain a relevant data point in the discontinuance analysis,” they do not “end … the inquiry.” Id. The FCC also takes account of “the community and its traditional reliance on a given functionality.” Id. For example, if a service allowed customers to use fax machines, and if discontinuance of the service would render thousands of fax machines inoperable, the Commission would take this factor into account when conducting its discontinuance analysis—even if the carrier’s tariff made no mention of fax machines. See Declaratory Ruling ¶¶ 116-117 (JA___-___). The Commission emphasized that its functional test does not mean that any conceivable feature of a service, “no matter how little-used or old-fashioned,” triggers the discontinuance requirements of section 214. Declaratory Ruling ¶ 118 (JA___). The statute only “applies to the practical functionality provided by the network on which consumers have come to rely.” Id. The Commission explained: 42 “Not every functionality supported by a network is de facto a part of a carrier’s ‘service.’ An important factor in this analysis is the extent to which the functionality traditionally has been relied upon by the community.” Id. ¶ 119 (JA___). The functional test gives carriers adequate notice of their duties under section 214. As the test makes clear, the statute’s discontinuance requirements apply to functionalities of telecommunications service that are commonly used by the public—whether or not those functionalities are identified in tariffs or contracts. There is nothing mysterious about such commonly used functionalities. The services identified in the Declaratory Ruling—e.g., the capability to use fax machines, DVRs, credit card billing machines, medical alert devices, and alarm systems—“are the very services for which carriers frequently market and sell additional lines to customers.” Order ¶ 200 (JA___). AT&T has acknowledged that “alarm monitoring, medical alert and credit card validation applications” of its service “are vitally important to its customers.” Letter from Christopher M. Heimann, AT&T, to Marlene H. Dortch, GN Docket Nos. 13-5, 12-353, Operating Plan at 15 (filed Feb. 27, 2014) (cited in Declaratory Ruling n.235 (JA___)). Moreover, because USTelecom’s members “have access to a database of terminal equipment,” they are “well aware of many of the forms of terminal equipment in use by their customers” on their existing networks. Order ¶ 200 43 (JA___). USTelecom quibbles that “‘many’ is not ‘all.’” Br. 32. But the FCC’s rules need not provide “mathematical certainty” to satisfy due process. USTelecom, 2016 WL 3251234, *40 (quoting Grayned v. City of Rockford, 408 U.S. 104, 110 (1972)). “Fair notice in these circumstances demands ‘no more than a reasonable degree of certainty.’” Id. (quoting Throckmorton v. Nat’l Transp. Safety Bd., 963 F.2d 441, 444 (D.C. Cir. 1992)). That is what the functional test provides. USTelecom has no basis for claiming that the functional test “prevents a carrier from withdrawing service” that it “does not know exists.” Br. 32; see Order ¶ 200 (JA___) (concluding that such claims were not “credible”). USTelecom hypothesizes that a customer might “use her service in a new way with a brand-new third-party device.” Br. 32. Under the FCC’s test, however, a new use of telecommunications service would be subject to section 214 only if the new functionality became widely used by a substantial portion of the public. In applying the test, the Commission focuses on the public’s “reliance on a given functionality.” Order ¶ 197 (JA___). If large numbers of consumers come to rely on a particular capability of a carrier’s service, the carrier will surely know about it. Therefore, USTelecom cannot plausibly assert that carriers will be “hard pressed to know” which functionalities of their service are covered by section 214. Br. 35 (quoting Timpinaro v. SEC, 2 F.3d 453, 460 (D.C. Cir. 1993)). The 44 functional test is carefully tailored to identify functionalities that are widely used by the public (even if they are not described in tariffs or contracts). See Declaratory Ruling ¶ 116 (JA___-___). II. THE COMMISSION REASONABLY INTERPRETED SECTION 214 TO REQUIRE FCC APPROVAL FOR A CARRIER TO DISCONTINUE, REDUCE, OR IMPAIR SERVICE TO ANOTHER CARRIER IF THE CHANGE IN WHOLESALE SERVICE WOULD DISCONTINUE, REDUCE, OR IMPAIR A CARRIER-CUSTOMER’S RETAIL SERVICE Congress used expansive language to describe the discontinuance requirements of section 214. Carriers “must obtain Commission approval when their actions will discontinue, reduce, or impair service to a community or part of a community.” Order ¶ 108 (JA___). Consistent with the statutory text, the FCC reasonably concluded that this requirement does “not just” apply when carriers’ actions “will discontinue, reduce, or impair their own service to their own end users.” Id. It determined that “a carrier must obtain Commission approval” under section 214 “before discontinuing, reducing, or impairing a service used as a wholesale input when the carrier’s actions will discontinue, reduce, or impair service to … a carrier-customer’s retail end users.” Id. ¶ 102 (JA___). “In such cases,” the agency explained, a section 214 application “is necessary to determine if the impairment of service to the carrier-customer’s end users will adversely affect the present or future public convenience or necessity.” Id. ¶ 113 (JA___). 45 This interpretation of the scope of section 214 accurately reflects the breadth of the statute’s language. It is also consistent with almost four decades of FCC precedent. Since the 1970s, the FCC has repeatedly declared that “carrier-to- carrier relationships are subject to section 214(a), and that prior Commission approval is required” whenever a carrier’s discontinuance, reduction, or impairment of service to another carrier “will discontinue, reduce, or impair service to the carrier-customer’s retail customers.” Order ¶ 108 (JA___); see id. ¶¶ 109-112 (JA___-___) (discussing the Commission’s orders in Western Union, Lincoln County, Graphnet, and BellSouth). USTelecom does not claim that the text of section 214 expressly excludes wholesale service from these discontinuance requirements. Nonetheless, it argues that the FCC misread the statute to apply to wholesale services. In challenging the agency’s interpretation of section 214, USTelecom leans heavily on a separate, subsequently enacted provision requiring incumbent LECs to “provide reasonable public notice of changes in the information necessary for the transmission and routing of services using that [LEC’s] facilities or networks, as well as of any other changes that would affect the interoperability of those facilities and networks.” 47 U.S.C. § 251(c)(5). USTelecom maintains that the adoption of this “notice provision” in 1996 somehow “confirms” that Congress understood that “changes to 46 service offerings that affect carrier-customers … would not trigger the pre-existing approval requirement in § 214(a).” Br. 40. As a threshold matter, this argument is procedurally barred because no party raised the issue “with sufficient clarity before the FCC.” Am. Family Ass’n, Inc. v. FCC, 365 F.3d 1156, 1166 (D.C. Cir. 2004); see 47 U.S.C. § 405(a). To be sure, USTelecom and other parties argued in the proceeding below that some of the Act’s other provisions (including section 251) are “directed to competition between carriers,” and that “the Commission cannot impute [those] competition provisions into section 214.” Order ¶ 155 (JA___); see id. n.533 (JA___) (citing submissions on this subject from AT&T, ITTA, CenturyLink, and USTelecom). But no party argued below—as USTelecom does here (Br. 39-41)—that the enactment of section 251(c)(5) showed that Congress never intended for the discontinuance provisions of section 214 to apply to wholesale services. Given the parties’ silence on this issue, the FCC rightly rejected their general statutory arguments “without specifically addressing § 251(c)(5).” Br. 46 n.17. The Commission is “neither expected nor required to be clairvoyant” or “to anticipate [arguments] that might be raised in subsequent judicial proceedings.” Action for Children’s Television v. FCC, 821 F.2d 741, 748 (D.C. Cir. 1987). In any event, USTelecom’s argument regarding section 251(c)(5) lacks merit. According to USTelecom, “the new notice obligations in § 251(c)(5) would 47 make little sense if the FCC were correct about the breadth of § 214(a).” Br. 41. This assertion ignores the fundamental difference between the two provisions. Section 251(c)(5) pertains to incumbent LECs’ facilities, while section 214(a) concerns carriers’ services. Section 214 expressly does not require FCC approval of “any installation, replacement, or other changes in plant, operation, or equipment, other than new construction, which will not impair the adequacy or quality of service provided.” 47 U.S.C. § 214(a). While such changes in facilities are exempt from the pre-approval regime of section 214, they are subject to the notice requirements of section 251(c)(5). Thus, contrary to USTelecom’s claim (Br. 41), the Commission did not conflate these two provisions when it construed section 214 to apply to wholesale services. USTelecom also argues that the FCC improperly interpreted section 214(a) to require pre-approval of a discontinuance of wholesale service even when “other providers … will continue to offer [end users] the same service that one particular carrier-customer might cease offering.” Br. 41 (citing Order ¶ 116 (JA___)). But it was reasonable for the agency to read the statute to apply to any discontinuance, reduction, or impairment of a particular carrier’s retail service. USTelecom does not dispute that section 214 “requires all carriers … to seek permission from the FCC before they discontinue, reduce, or impair their own retail services.” Br. 39 (emphasis added). If the Commission were to interpret section 214 to apply only 48 when all “service to a community” was discontinued, reduced, or impaired, most carriers—including providers of retail service—could evade their obligation to seek FCC approval simply by citing the availability of alternative retail services. Such an interpretation would thwart the effective implementation of the statute.16 There is no basis for USTelecom’s contention (Br. 42-46) that FCC precedent does not support the application of section 214 to wholesale services. USTelecom is simply wrong when it says that “the FCC has never before actually held” that “a carrier has obligations under § 214(a) … to its carrier-customers’ retail customers.” Br. 43. To the contrary, as USTelecom concedes (Br. 44), the Commission held in 1992 that BellSouth was required to file a section 214 application because its proposed discontinuance of wholesale service would lead to discontinuance of service to its carrier-customers’ end users. BellSouth, 7 FCC Rcd at 6322-23 ¶¶ 5-6; see Order ¶ 112 (JA___). Furthermore, BellSouth is just one of a series of orders—dating back to the 1970s—in which the FCC repeatedly stated that “carrier-to-carrier relationships 16 While USTelecom argues that “Congress’s purpose in enacting § 214(a) was to ensure continuity of service to a community” (Br. 41), the statute’s broad language covers more than the specific problem Congress sought to address when it amended the statute in 1943. In construing section 214, the Commission properly focused on “the provisions of [the statute] rather than the principal concerns of [Congress].” See NCTA, 567 F.3d at 663 (quoting Oncale, 523 U.S. at 79). 49 are subject to section 214(a).” Order ¶ 108 (JA___).17 These orders all stand for the proposition that the Commission embraced in this proceeding: “[P]rior Commission approval is required” to discontinue, reduce, or impair wholesale service if the change in service “will discontinue, reduce, or impair service to the carrier-customer’s retail customers.” Id. USTelecom maintains that the application of section 214 to wholesale services is unnecessary because a competitive LEC that loses a wholesale input “will be required to seek approval under § 214(a) if such a change leads it to discontinue, impair, or reduce one of its own retail services.” Br. 46. Under those circumstances, however, the Commission may have no real choice but to allow the competitive LEC to leave the retail market. The record contained evidence that “in the majority of cases,” competitive LECs have “no alternative sources for the necessary wholesale inputs” they purchase from incumbent LECs. Order ¶ 135 (JA___). Recognizing that competitive carriers might be unable to continue providing retail service if they lost certain wholesale inputs, the Commission reasonably concluded that it could best guard against harm to the “public 17 See Western Union, 74 FCC 2d at 295-97 ¶¶ 6-9; Lincoln County, 81 FCC 2d at 331-35 ¶¶ 11-14, 22; Graphnet, 17 FCC Rcd at 1140 ¶ 29. In these orders, the Commission did not require the filing of a section 214 application because it determined, after reviewing the specific facts in each case, that the proposed discontinuance of wholesale service would not discontinue, reduce, or impair service to any carrier-customer’s end users. See Order ¶¶ 109-111 (JA___-___). 50 convenience and necessity,” 47 U.S.C. § 214(a), by requiring pre-approval of the discontinuance of wholesale services under section 214. USTelecom asserts that the FCC’s application of section 214 to wholesale services will protect only competitive carriers, not consumers. Br. 46-47. It is mistaken. As the Commission explained, consumers benefit greatly from the competition provided by competitive LECs that rely on incumbent LECs’ wholesale services. As a result of such competition, “an enormous number of small- and medium-sized businesses, schools, government entities, healthcare facilities, libraries, and other enterprise customers” enjoy “the benefits of additional choice,” including “lower prices, higher output, and increased innovation and quality.” Order ¶ 101 (JA___). The Commission’s reading of section 214 helps preserve these consumer benefits. III. THE COMMISSION’S “REASONABLY COMPARABLE WHOLESALE ACCESS” CONDITION IS LAWFUL A. The Commission Had Authority To Adopt The Condition. Section 214 authorizes the FCC to “attach to the issuance of [any discontinuance] certificate such terms and conditions as in its judgment the public convenience and necessity may require.” 47 U.S.C. § 214(c). The Commission reasonably exercised this authority when, pending the completion of its special access proceeding, it imposed a temporary “reasonably comparable wholesale access” condition on incumbent LECs that obtain FCC approval to discontinue 51 high-speed special access and commercial wholesale platform services. See Order ¶¶ 131-180 (JA___-___). USTelecom contends that the condition unlawfully imposes “new unbundling obligations that deviate from the requirements of” sections 251(c)(3) and 271. Br. 48. That claim is baseless. The “unbundling” provisions cited by USTelecom govern access to “network elements.” See 47 U.S.C. §§ 251(c)(3), 271(c)(2)(B)(ii). The Act defines a “network element” as “a facility or equipment used in the provision of a telecommunications service.” 47 U.S.C. § 153(35). Network elements are not services; rather, they are the facilities and equipment used to provide services. The statutory provisions governing the unbundling of network facilities have nothing to do with the FCC’s regulation of “special access services.” See Ad Hoc, 572 F.3d at 910 (emphasis added). The agency began regulating special access service more than a decade before Congress enacted the unbundling provisions. See Nat’l Ass’n of Regulatory Util. Comm’rs v. FCC, 737 F.2d 1095 (D.C. Cir. 1984). Even after the 1996 Act became law, the Commission continued to require providers of special access services “to comply with Title II common-carrier regulation generally applicable to all telecommunications carriers—most importantly, the requirements to allow interconnection” under 47 U.S.C. § 251(a)(1) “and to charge prices that are just, reasonable, and not unreasonably 52 discriminatory” under 47 U.S.C. §§ 201-202. Ad Hoc, 572 F.3d at 907. The Commission’s authority to regulate special access services—including its authority to adopt the wholesale access condition—is independent of the statutory provisions concerning the unbundling of network facilities. Moreover, the wholesale access condition does not mandate “unbundling” when it requires incumbent LECs to provide wholesale access service that is “reasonably comparable” to discontinued wholesale platform service. To comply with this requirement, carriers do not have to “unbundle” any particular network elements; they need only provide a wholesale access service that is reasonably comparable to the platform service they were already offering. USTelecom also claims that the FCC lacked authority to place “an ex ante condition” on the grant of certain types of discontinuance applications “without considering the facts specific to [each] application.” Br. 51. But nothing in section 214 “obligate[s]” the Commission “to consider the facts of each individual discontinuance application” before applying the wholesale access condition. Order n.529 (JA___). The statute authorizes the agency to “attach to the issuance of [any discontinuance] certificate such terms and conditions as in its judgment the public convenience and necessity may require.” 47 U.S.C. § 214(c) (emphasis added). In assessing how best to promote the public convenience and necessity, the FCC 53 reasonably determined that “an industry-wide rule” imposing the wholesale access condition on the grant of future applications was “preferable to a case-by-case analysis,” particularly given the limited scope and duration of the condition.18 Order ¶ 153 (JA___). In the Commission’s considered judgment, a rule will be “less administratively burdensome and clearer to the parties.” Id. The agency plainly had authority to codify the wholesale access condition in a rule: “The Commission may prescribe such rules and regulations as may be necessary in the public interest to carry out the provisions of [the Communications] Act.” 47 U.S.C. § 201(b); see also AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 377-85 (1999); Conference Group, LLC v. FCC, 720 F.3d 957, 965 (D.C. Cir. 2013) (“the Commission has very broad discretion to decide whether to proceed by adjudication or rulemaking”).19 Finally, there is no merit in USTelecom’s assertion that, “as applied to wholesale commercial platform services, both the condition itself and its duration are unlawful.” Br. 52. USTelecom argues that section 214, which “is limited to 18 The condition will expire when the Commission adopts and implements rules at the conclusion of its special access proceeding. See Order ¶ 132 (JA___). The agency has made substantial progress toward completing that proceeding. See Special Access 2016 NPRM, 31 FCC Rcd 4723. 19 The condition is codified at 47 C.F.R. § 63.71(c). If a carrier believes that enforcement of the condition is not warranted in a specific case, it may request a waiver of the rule. See 47 C.F.R. § 1.3. 54 interstate services,” does not apply to platform services, which carrier-customers use “to sell local telephone service to retail customers.” Id. But USTelecom is wrong to suggest that the FCC will use the wholesale access condition to regulate intrastate services under section 214. The Commission made clear that the condition will apply to wholesale platform services “only in the limited context of section 214(a) discontinuances.” Order n.504 (JA___). And the agency understood that section 214 governs only “interstate or foreign service.” Declaratory Ruling ¶ 23 (JA___). Consequently, the Commission will apply the condition to platform services only when the grant of an incumbent LEC’s application to discontinue such services will cause the discontinuance, reduction, or impairment of interstate or foreign service to a carrier-customer’s end users.20 As for the applicable timeframe, the FCC offered a reasoned justification for its decision to link the duration of the condition on platform services with the completion of the special access proceeding. While the agency recognized that “commercial wholesale platform services are not special access services,” it 20 In claiming that the condition is “a nullity” with respect to platform services (Br. 52), USTelecom assumes that such services are used by carrier-customers solely to provide intrastate service to end users. That assumption is unwarranted. Providers of local phone service also provide “exchange access” service to enable their customers to place and receive long-distance calls. See 47 U.S.C. §§ 153(20), 251(g); 47 C.F.R. § 61.26(a)(1)-(2). Interstate exchange access services indisputably fall within the FCC’s jurisdiction under section 214. 55 reasoned that the end of the special access proceeding marked “a foreseeable and definitive point in the future” when it could “reevaluate” the application of the condition to platform services. Order ¶ 152 (JA___). Rejecting arguments that it should take a more open-ended approach to enforcing the condition on platform services, the Commission found that “the lack of predictability inherent in [such an] approach risks deterring investment.” Id. In addition, the Commission reasonably concluded that it will be in a better position to “reassess the efficacy and necessity” of applying the condition to platform services after it completes “a comprehensive evaluation of competition” in the special access proceeding and adopts rules “that may have wide-ranging effects on telecommunications competition.” Id. B. The Commission Had Good Reason To Adopt The Condition. The Commission adopted the wholesale access condition in order to preserve “the competition that competitive LECs have brought to the enterprise market.” Order ¶ 134 (JA___). Competitive LECs “are the primary source of competition for wireline communications services purchased by enterprise customers,” including government offices, hospitals, schools, and libraries. Id. The record contained evidence that “competitive LECs will be unable to serve” these enterprise customers “at competitive rates, terms, and conditions without reasonable access to incumbent LEC last-mile inputs.” Id. ¶ 135 (JA____). It is 56 unclear, however, whether competitive LECs will still have reasonable access to critical wholesale inputs after incumbent LECs make the transition to IP-based services. Competitive LECs contend that incumbent LECs’ “rates for proposed replacement services are unreasonably high.” Id. And numerous enterprise customers—including Starbucks, Sears, Domino’s, YMCA of San Francisco, and Washington Metropolitan Area Transit Authority—have expressed “concern about the lack of competitive options if competitive LECs lose access to commercial wholesale platform service.” Id. ¶ 147 (JA___). The key question in assessing the future of competition in the enterprise market is “whether incumbent LECs are subject to substantial competition in the provision of the packet-based services that will replace” their legacy services. Order ¶ 131 (JA___). In other words, will there be enough “competitive alternatives” to give incumbent LECs the “incentive” to continue “to price competitively to retain the wholesale business” after the IP transition? Id. The FCC is currently studying this question in its special access proceeding. Once it answers the question, the agency intends to adopt appropriate “rules and/or policies” to ensure that “rates, terms, and conditions for special access services are just and reasonable.” Id. ¶ 132 (JA___). In the meantime, however, “in the absence of any interim protection, competition from competitive LECs could be irrevocably lost” before the FCC 57 adopts new special access rules. Order ¶ 136 (JA___). To guard against this risk, the Commission imposed a temporary wholesale access condition on incumbent LECs that discontinue high-speed special access and wholesale platform services. This condition was reasonably designed to ensure that “existing competition is not diminished by bridging the gap until the Commission’s special access proceeding is complete.” Id. ¶ 137 (JA___-___). Where (as here) the FCC “acts to maintain the status quo so that the objectives of a pending rulemaking proceeding will not be frustrated,” the agency is entitled to “[s]ubstantial deference.” Rural Cellular, 588 F.3d at 1105-06 (quoting MCI Telecomms. Corp. v. FCC, 750 F.2d 135, 141 (D.C. Cir. 1984)). This Court has “repeatedly held that ‘[a]voidance of market disruption pending broader reforms is … a standard and accepted justification for a temporary rule.’” Id. at 1106 (quoting CompTel, 309 F.3d at 14); see also ACS of Anchorage, Inc. v. FCC, 290 F.3d 403, 410 (D.C. Cir. 2002); MCI, 750 F.2d at 141. Therefore, the Court should uphold the FCC’s use of an interim wholesale access rule to preserve competition in the enterprise market pending completion of the special access proceeding. USTelecom contends that the interim rule at issue here “is not meaningfully ‘interim’” because it lacks a clearly “defined end point.” Br. 54. To the contrary, the Commission has specified an “end point”: the date it implements new rules at 58 the conclusion of its special access proceeding. Order ¶ 132 (JA___); 47 C.F.R. § 63.71(c)(1).21 USTelecom complains that the agency “has set no deadline for final action” in that proceeding. Br. 55. As this Court has recognized, however, a rule can be “interim” even if the precise date of its termination is unknown. For example, the “interim cap” on universal service subsidies that the Court upheld in 2009 had no specific expiration date; it was scheduled to “remain in place … until [the FCC] adopted comprehensive, high-cost universal service reform—reform on which the Commission planned to move forward in an expeditious manner.” Rural Cellular, 588 F.3d at 1100 (internal quotation marks omitted). Similarly, in 2002, when the Court upheld two different “interim” rules that were designed to avoid market disruption pending FCC reform of access charges, the agency’s plans for reform had no clearly defined end date. See CompTel, 309 F.3d at 14-16; ACS of Anchorage, 290 F.3d at 408-10. The sunset date of the interim rule in this case is no more “illusory” (Br. 54) than the end dates of the interim rules that the Court affirmed in Rural Cellular, CompTel, and ACS of Anchorage. The wholesale access condition will expire 21 The Commission has sought comment on whether it should “require reasonably comparable wholesale access for commercial wholesale platform services for a further interim period beyond completion of the special access proceeding.” Order ¶ 244 (JA___-___). Unless the agency takes further action, however, the condition vis-à-vis platform services is set to expire when the FCC implements new rules and/or policies at the end of the special access proceeding. 59 when the FCC implements new rules at the end of the special access proceeding. Order ¶ 132 (JA___).22 In May 2016, when the Commission issued a further notice of proposed rulemaking in the special access proceeding, the FCC’s Chairman announced that his “goal” was for the agency to “conclude this proceeding no later than the end of [2016].” Special Access 2016 NPRM, 31 FCC Rcd at 5001 (statement of Chairman Wheeler). Thus, here, as in Rural Cellular, the Commission plans to “move forward” with reform “in an expeditious manner.” 588 F.3d at 1100 (internal quotation marks omitted). 22 USTelecom likens the interim rule in this case to the rule that the Court remanded in Competitive Telecommunications Association v. FCC, 87 F.3d 522, 530-32 (D.C. Cir. 1996). Br. 54. The comparison is inapt. In Competitive Telecommunications, the Court concluded that the FCC’s “‘interim’ rate structure” governing access charges was not genuinely interim because it had been in place for 13 years, 87 F.3d at 530, and the agency had made “no discernible progress” toward adopting a new rate structure, id. at 532. In this case, by contrast, the interim wholesale access condition has been in effect for less than a year; and if the FCC meets its Chairman’s goal of completing the special access proceeding by the end of 2016, the interim condition will soon expire unless the agency acts to extend the condition with respect to commercial wholesale platform services. 60 CONCLUSION The petition for review should be denied. Respectfully submitted, Renata B. Hesse Acting Assistant Attorney GENERAL Robert B. Nicholson Nickolai G. Levin Attorneys United States Department of Justice Washington, D.C. 20530 Howard J. Symons General Counsel David M. Gossett Deputy General Counsel Richard K. Welch Deputy Associate General Counsel /s/ James M. Carr James M. Carr Counsel Federal Communications Commission Washington, D.C. 20554 (202) 418-1740 August 15, 2016 IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT UNITED STATES TELECOM ASSOCIATION, PETITIONER, v. FEDERAL COMMUNICATIONS COMMISSION AND UNITED STATES OF AMERICA, RESPONDENTS. NO. 15-1414 CERTIFICATE OF COMPLIANCE Pursuant to the requirements of Fed. R. App. P. 32(a)(7), I hereby certify that the accompanying Brief for Respondents in the captioned case contains 13,412 words. This brief also complies with the typeface 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 proportionally spaced typeface using Microsoft Word 2013 in 14-point Times Roman font. /s/ James M. Carr James M. Carr Counsel Federal Communications Commission Washington, D.C. 20554 August 15, 2016 (202) 418-1740 STATUTORY ADDENDUM Page 47 U.S.C. § 153(35) …………………………………………………………………. 1 47 U.S.C. § 153(53) …………………………………………………………………. 1 47 U.S.C. § 214 ……………………………………………………………………… 2 47 U.S.C. § 251 ……………………………………………………………………… 6 47 U.S.C. § 405(a) ………………………………………………………………….. 13 47 C.F.R. § 63.71 ………………………………………………………………….... 14 47 U.S.C. § 153 UNITED STATES CODE ANNOTATED TITLE 47. TELEGRAPHS, TELEPHONES, AND RADIOTELEGRAPHS CHAPTER 5 -- WIRE OR RADIO COMMUNICATION SUBCHAPTER I -- GENERAL PROVISIONS § 153. Definitions For the purposes of this chapter, unless the context otherwise requires-- * * * * * * (35) Network element The term “network element” means a facility or equipment used in the provision of a telecommunications service. Such term also includes features, functions, and capabilities that are provided by means of such facility or equipment, including subscriber numbers, databases, signaling systems, and information sufficient for billing and collection or used in the transmission, routing, or other provision of a telecommunications service. * * * * * * ( 53) Telecommunications service The term “telecommunications service” means the offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used. * * * * * * Stat. Add. 1 47 U.S.C. § 214 UNITED STATES CODE ANNOTATED TITLE 47. TELEGRAPHS, TELEPHONES, AND RADIOTELEGRAPHS CHAPTER 5. WIRE OR RADIO COMMUNICATION SUBCHAPTER II. COMMON CARRIERS PART I. COMMON CARRIER REGULATION § 214. Extension of lines or discontinuance of s ervice; certificate of public convenience and necessity (a) Exceptions; temporary or emergency service or discontinuance of service; changes in plant, operation or equipment No carrier shall undertake the construction of a new line or of an extension of any line, or shall acquire or operate any line, or extension thereof, or shall engage in transmission over or by means of such additional or extended line, unless and until there shall first have been obtained from the Commission a certificate that the present or future public convenience and necessity require or will require the construction, or operation, or construction and operation, of such additional or extended line: Provided, That no such certificate shall be required under this section for the construction, acquisition, or operation of (1) a line within a single State unless such line constitutes part of an interstate line, (2) local, branch, or terminal lines not exceeding ten miles in length, or (3) any line acquired under section 221 of this title: Provided further, That the Commission may, upon appropriate request being made, authorize temporary or emergency service, or the supplementing of existing facilities, without regard to the provisions of this section. No carrier shall discontinue, reduce, or impair service to a community, or part of a community, unless and until there shall first have been obtained from the Commission a certificate that neither the present nor future public convenience and necessity will be adversely affected thereby; except that the Commission may, upon appropriate request being made, authorize temporary or emergency discontinuance, reduction, or impairment of service, or partial discontinuance, reduction, or impairment of service, without regard to the provisions of this section. As used in this section the term “line” means any channel of communication established by the use of appropriate equipment, other than a channel of communication established by the interconnection of two or more existing channels: Provided, however, That nothing in this section shall be construed to require a certificate or other authorization from the Commission for any installation, replacement, or other changes in plant, operation, or equipment, other than new construction, which will not impair the adequacy or quality of service provided. (b) Notification of Secretary of Defense, Secretary of State, and State Governor Upon receipt of an application for any such certificate, the Commission shall cause notice thereof to be given to, and shall cause a copy of such application to be filed with, the Secretary of Defense, the Secretary of State (with respect to such applications involving service to foreign points), and the Governor of each State in which such line is proposed to be constructed, extended, acquired, or operated, or in which such discontinuance, reduction, or impairment of Stat. Add. 2 service is proposed, with the right to those notified to be heard; and the Commission may require such published notice as it shall determine. (c) Approval or disapproval; injunction The Commission shall have power to issue such certificate as applied for, or to refuse to issue it, or to issue it for a portion or portions of a line, or extension thereof, or discontinuance, reduction, or impairment of service, described in the application, or for the partial exercise only of such right or privilege, and may attach to the issuance of the certificate such terms and conditions as in its judgment the public convenience and necessity may require. After issuance of such certificate, and not before, the carrier may, without securing approval other than such certificate, comply with the terms and conditions contained in or attached to the issuance of such certificate and proceed with the construction, extension, acquisition, operation, or discontinuance, reduction, or impairment of service covered thereby. Any construction, extension, acquisition, operation, discontinuance, reduction, or impairment of service contrary to the provisions of this section may be enjoined by any court of competent jurisdiction at the suit of the United States, the Commission, the State commission, any State affected, or any party in interest. (d) Order of Commission; hearing; penalty The Commission may, after full opportunity for hearing, in a proceeding upon complaint or upon its own initiative without complaint, authorize or require by order any carrier, party to such proceeding, to provide itself with adequate facilities for the expeditious and efficient performance of its service as a common carrier and to extend its line or to establish a public office; but no such authorization or order shall be made unless the Commission finds, as to such provision of facilities, as to such establishment of public offices, or as to such extension, that it is reasonably required in the interest of public convenience and necessity, or as to such extension or facilities that the expense involved therein will not impair the ability of the carrier to perform its duty to the public. Any carrier which refuses or neglects to comply with any order of the Commission made in pursuance of this subsection shall forfeit to the United States $1,200 for each day during which such refusal or neglect continues. (e) Provision of universal service (1) Eligible telecommunications carriers A common carrier designated as an eligible telecommunications carrier under paragraph (2), (3), or (6) shall be eligible to receive universal service support in accordance with section 254 of this title and shall, throughout the service area for which the designation is received-- (A) offer the services that are supported by Federal universal service support mechanisms under section 254(c) of this title, either using its own facilities or a combination of its own facilities and resale of another carrier's services (including the services offered by another eligible telecommunications carrier); and Stat. Add. 3 (B) advertise the availability of such services and the charges therefor using media of general distribution. (2) Designation of eligible telecommunications carriers A State commission shall upon its own motion or upon request designate a common carrier that meets the requirements of paragraph (1) as an eligible telecommunications carrier for a service area designated by the State commission. Upon request and consistent with the public interest, convenience, and necessity, the State commission may, in the case of an area served by a rural telephone company, and shall, in the case of all other areas, designate more than one common carrier as an eligible telecommunications carrier for a service area designated by the State commission, so long as each additional requesting carrier meets the requirements of paragraph (1). Before designating an additional eligible telecommunications carrier for an area served by a rural telephone company, the State commission shall find that the designation is in the public interest. (3) Designation of eligible telecommunications carriers for unserved areas If no common carrier will provide the services that are supported by Federal universal service support mechanisms under section 254(c) of this title to an unserved community or any portion thereof that requests such service, the Commission, with respect to interstate services or an area served by a common carrier to which paragraph (6) applies, or a State commission, with respect to intrastate services, shall determine which common carrier or carriers are best able to provide such service to the requesting unserved community or portion thereof and shall order such carrier or carriers to provide such service for that unserved community or portion thereof. Any carrier or carriers ordered to provide such service under this paragraph shall meet the requirements of paragraph (1) and shall be designated as an eligible telecommunications carrier for that community or portion thereof. (4) Relinquishment of universal service A State commission (or the Commission in the case of a common carrier designated under paragraph (6)) shall permit an eligible telecommunications carrier to relinquish its designation as such a carrier in any area served by more than one eligible telecommunications carrier. An eligible telecommunications carrier that seeks to relinquish its eligible telecommunications carrier designation for an area served by more than one eligible telecommunications carrier shall give advance notice to the State commission (or the Commission in the case of a common carrier designated under paragraph (6)) of such relinquishment. Prior to permitting a telecommunications carrier designated as an eligible telecommunications carrier to cease providing universal service in an area served by more than one eligible telecommunications carrier, the State commission (or the Commission in the case of a common carrier designated under paragraph (6)) shall require the remaining eligible telecommunications carrier or carriers to ensure that all customers served by the relinquishing carrier will continue to be served, and shall require sufficient notice to permit the purchase or construction of adequate facilities by any remaining eligible telecommunications carrier. The State commission (or the Commission in the case of a common carrier designated under paragraph (6)) shall establish a time, not to Stat. Add. 4 exceed one year after the State commission (or the Commission in the case of a common carrier designated under paragraph (6)) approves such relinquishment under this paragraph, within which such purchase or construction shall be completed. (5) “Service area defined” The term “service area” means a geographic area established by a State commission (or the Commission under paragraph (6)) for the purpose of determining universal service obligations and support mechanisms. In the case of an area served by a rural telephone company, “service area” means such company's “study area” unless a nd until the Commission and the States, after taking into account recommendations of a Federal-State Joint Board instituted under section 410(c) of this title, establish a different definition of service area for such company. (6) Common carriers not subject to state commission jurisdiction In the case of a common carrier providing telephone exchange service and exchange access that is not subject to the jurisdiction of a State commission, the Commission shall upon request designate such a common carrier that meets the requirements of paragraph (1) as an eligible telecommunications carrier for a service area designated by the Commission consistent with applicable Federal and State law. Upon request and consistent with the public interest, convenience and necessity, the Commission may, with respect to an area served by a rural telephone company, and shall, in the case of all other areas, designate more than one common carrier as an eligible telecommunications carrier for a service area designated under this paragraph, so long as each additional requesting carrier meets the requirements of paragraph (1). Before designating an additional eligible telecommunications carrier for an area served by a rural telephone company, the Commission shall find that the designation is in the public interest. Stat. Add. 5 47 U.S.C. § 251 UNITED STATES CODE ANNOTATED TITLE 47. TELEGRAPHS, TELEPHONES, AND RADIOTELEGRAPHS CHAPTER 5. WIRE OR RADIO COMMUNICATION SUBCHAPTHER II. COMMON CARRIERS PART II. DEVELOPMENT OF COMPETITIVE MARKETS § 251. Interconnection (a) General duty of telecommunications carriers Each telecommunications carrier has the duty-- (1) to interconnect directly or indirectly with the facilities and equipment of other telecommunications carriers; and (2) not to install network features, functions, or capabilities that do not comply with the guidelines and standards established pursuant to section 255 or 256 of this title. (b) Obligations of all local exchange carriers Each local exchange carrier has the following duties: (1) Resale The duty not to prohibit, and not to impose unreasonable or discriminatory conditions or limitations on, the resale of its telecommunications services. (2) Number portability The duty to provide, to the extent technically feasible, number portability in accordance with requirements prescribed by the Commission. (3) Dialing parity The duty to provide dialing parity to competing providers of telephone exchange service and telephone toll service, and the duty to permit all such providers to have nondiscriminatory access to telephone numbers, operator services, directory assistance, and directory listing, with no unreasonable dialing delays. (4) Access to rights-of-way The duty to afford access to the poles, ducts, conduits, and rights-of-way of such carrier to Stat. Add. 6 competing providers of telecommunications services on rates, terms, and conditions that are consistent with section 224 of this title. (5) Reciprocal compensation The duty to establish reciprocal compensation arrangements for the transport and termination of telecommunications. (c) Additional obligations of incumbent local exchange carriers In addition to the duties contained in subsection (b) of this section, each incumbent local exchange carrier has the following duties: (1) Duty to negotiate The duty to negotiate in good faith in accordance with section 252 of this title the particular terms and conditions of agreements to fulfill the duties described in paragraphs (1) through (5) of subsection (b) of this section and this subsection. The requesting telecommunications carrier also has the duty to negotiate in good faith the terms and conditions of such agreements. (2) Interconnection The duty to provide, for the facilities and equipment of any requesting telecommunications carrier, interconnection with the local exchange carrier's network-- (A) for the transmission and routing of telephone exchange service and exchange access; (B) at any technically feasible point within the carrier's network; (C) that is at least equal in quality to that provided by the local exchange carrier to itself or to any subsidiary, affiliate, or any other party to which the carrier provides interconnection; and (D) on rates, terms, and conditions that are just, reasonable, and nondiscriminatory, in accordance with the terms and conditions of the agreement and the requirements of this section and section 252 of this title. (3) Unbundled access The duty to provide, to any requesting telecommunications carrier for the provision of a telecommunications service, nondiscriminatory access to network elements on an unbundled basis at any technically feasible point on rates, terms, and conditions that are just, reasonable, and nondiscriminatory in accordance with the terms and conditions of the agreement and the requirements of this section and section 252 of this title. An incumbent local exchange carrier shall provide such unbundled network elements in a manner that allows requesting carriers to combine such elements in order to provide such telecommunications service. Stat. Add. 7 (4) Resale The duty-- (A) to offer for resale at wholesale rates any telecommunications service that the carrier provides at retail to subscribers who are not telecommunications carriers; and (B) not to prohibit, and not to impose unreasonable or discriminatory conditions or limitations on, the resale of such telecommunications service, except that a State commission may, consistent with regulations prescribed by the Commission under this section, prohibit a reseller that obtains at wholesale rates a telecommunications service that is available at retail only to a category of subscribers from offering such service to a different category of subscribers. (5) Notice of changes The duty to provide reasonable public notice of changes in the information necessary for the transmission and routing of services using that local exchange carrier's facilities or networks, as well as of any other changes that would affect the interoperability of those facilities and networks. (6) Collocation The duty to provide, on rates, terms, and conditions that are just, reasonable, and nondiscriminatory, for physical collocation of equipment necessary for interconnection or access to unbundled network elements at the premises of the local exchange carrier, except that the carrier may provide for virtual collocation if the local exchange carrier demonstrates to the State commission that physical collocation is not practical for technical reasons or because of space limitations. (d) Implementation (1) In general Within 6 months after February 8, 1996, the Commission shall complete all actions necessary to establish regulations to implement the requirements of this section. (2) Access standards In determining what network elements should be made available for purposes of subsection (c)(3) of this section, the Commission shall consider, at a minimum, whether-- (A) access to such network elements as are proprietary in nature is necessary; and (B) the failure to provide access to such network elements would impair the ability of the telecommunications carrier seeking access to provide the services that it seeks to offer. Stat. Add. 8 (3) Preservation of State access regulations In prescribing and enforcing regulations to implement the requirements of this section, the Commission shall not preclude the enforcement of any regulation, order, or policy of a State commission that-- (A) establishes access and interconnection obligations of local exchange carriers; (B) is consistent with the requirements of this section; and (C) does not substantially prevent implementation of the requirements of this section and the purposes of this part. (e) Numbering administration (1) Commission authority and jurisdiction The Commission shall create or designate one or more impartial entities to administer telecommunications numbering and to make such numbers available on an equitable basis. The Commission shall have exclusive jurisdiction over those portions of the North American Numbering Plan that pertain to the United States. Nothing in this paragraph shall preclude the Commission from delegating to State commissions or other entities all or any portion of such jurisdiction. (2) Costs The cost of establishing telecommunications numbering administration arrangements and number portability shall be borne by all telecommunications carriers on a competitively neutral basis as determined by the Commission. (3) Universal emergency telephone number The Commission and any agency or entity to which the Commission has delegated authority under this subsection shall designate 9-1-1 as the universal emergency telephone number within the United States for reporting an emergency to appropriate authorities and requesting assistance. The designation shall apply to both wireline and wireless telephone service. In making the designation, the Commission (and any such agency or entity) shall provide appropriate transition periods for areas in which 9-1-1 is not in use as an emergency telephone number on October 26, 1999. (f) Exemptions, suspensions, and modifications (1) Exemption for certain rural telephone companies (A) Exemption Stat. Add. 9 Subsection (c) of this section shall not apply to a rural telephone company until (i) such company has received a bona fide request for interconnection, services, or network elements, and (ii) the State commission determines (under subparagraph (B)) that such request is not unduly economically burdensome, is technically feasible, and is consistent with section 254 of this title (other than subsections (b)(7) and (c)(1)(D) thereof). (B) State termination of exemption and implementation schedule The party making a bona fide request of a rural telephone company for interconnection, services, or network elements shall submit a notice of its request to the State commission. The State commission shall conduct an inquiry for the purpose of determining whether to terminate the exemption under subparagraph (A). Within 120 days after the State commission receives notice of the request, the State commission shall terminate the exemption if the request is not unduly economically burdensome, is technically feasible, and is consistent with section 254 of this title (other than subsections (b)(7) and (c)(1)(D) thereof). Upon termination of the exemption, a State commission shall establish an implementation schedule for compliance with the request that is consistent in time and manner with Commission regulations. (C) Limitation on exemption The exemption provided by this paragraph shall not apply with respect to a request under subsection (c) of this section, from a cable operator providing video programming, and seeking to provide any telecommunications service, in the area in which the rural telephone company provides video programming. The limitation contained in this subparagraph shall not apply to a rural telephone company that is providing video programming on February 8, 1996. (2) Suspensions and modifications for rural carriers A local exchange carrier with fewer than 2 percent of the Nation's subscrib er lines installed in the aggregate nationwide may petition a State commission for a suspension or modification of the application of a requirement or requirements of subsection (b) or (c) of this section to telephone exchange service facilities specified in such petition. The State commission shall grant such petition to the extent that, and for such duration as, the State commission determines that such suspension or modification-- (A) is necessary-- (i) to avoid a significant advers e economic impact on users of telecommunications services generally; (ii) to avoid imposing a requirement that is unduly economically burdensome; or (iii) to avoid imposing a requirement th at is technically infeasible; and Stat. Add. 10 (B) is consistent with the public interest, convenience, and necessity. The State commission shall act upon any petition filed under this paragraph within 180 days after receiving such petition. Pending such action, the State commission may suspend enforcement of the requirement or requirements to which the petition applies with respect to the petitioning carrier or carriers. (g) Continued enforcement of exchange access and interconnection requirements On and after February 8, 1996, each local exchange carrier, to the extent that it provides wireline services, shall provide exchange access, information access, and exchange services for such access to interexchange carriers and information service providers in accordance with the same equal access and nondiscriminatory interconnection restrictions and obligations (including receipt of compensation) that apply to such carrier on the date immediately preceding February 8, 1996 under any court order, consent decree, or regulation, order, or policy of the Commission, until such restrictions and obligations are explicitly superseded by regulations prescribed by the Commission after February 8, 1996. During the period beginning on February 8, 1996 and until such restrictions and obligations are so superseded, such restrictions and obligations shall be enforceable in the same manner as regulations of the Commission. (h) Definition of incumbent local exchange carrier (1) Definition For purposes of this section, the term ‘incumbent local exchange carrier’ means, with respect to an area, the local exchange carrier that-- (A) on February 8, 1996, provided telephone exchange service in such area; and (B)(i) on February 8, 1996, was deemed to be a member of the exchange carrier association pursuant to section 69.601(b) of the Commission's regulations (47 C.F.R. 69.601(b)); or (ii) is a person or entity that, on or after February 8, 1996, became a successor or assign of a member described in clause (i). (2) Treatment of comparable carriers as incumbents The Commission may, by rule, provide for the treatment of a local exchange carrier (or class or category thereof) as an incumbent local exchange carrier for purposes of this section if-- (A) such carrier occupies a position in the market for telephone exchange service within an area that is comparable to the position occupied by a carrier described in paragraph (1); (B) such carrier has substantially replaced an incumbent local exchange carrier described in paragraph (1); and Stat. Add. 11 (C) such treatment is consistent with the public interest, convenience, and necessity and the purposes of this section. (i) Savings provision Nothing in this section shall be construed to limit or otherwise affect the Commission's authority under section 201 of this title. Stat. Add. 12 47 U.S.C. § 405(a) UNITED STATES CODE ANNOTATED TITLE 47. TELEGRAPHS, TELEPHONES, AND RADIOTELEGRAPHS CHAPTER 5. WIRE OR RADIO COMMUNICATION SUBCHAPTER IV. PROCEDURAL AND ADMINISTRATIVE PROVISIONS § 405. Petition for reconsideration; procedure; disposition; time of filing; additional evidence; time for disposition of petition for reconsideration of order concluding hearing or investigation; appeal of order (a) After an order, decision, report, or action has been made or taken in any proceeding by the Commission, or by any designated authority within the Commission pursuant to a delegation under section 155(c)(1) of this title, any party thereto, or any other person aggrieved or whose interests are adversely affected thereby, may petition for reconsideration only to the authority making or taking the order, decision, report, or action; and it shall be lawful for such authority, whether it be the Commission or other authority designated under section 155(c)(1) of this title, in its discretion, to grant such a reconsideration if sufficient reason therefor be made to appear. A petition for reconsideration must be filed within thirty days from the date upon which public notice is given of the order, decision, report, or action complained of. No such application shall excuse any person from complying with or obeying any order, decision, report, or action of the Commission, or operate in any manner to stay or postpone the enforcement thereof, without the special order of the Commission. The filing of a petition for reconsideration shall not be a condition precedent to judicial review of any such order, decision, report, or action, except where the party seeking such review (1) was not a party to the proceedings resulting in such order, decision, report, or action, or (2) relies on questions of fact or law upon which the Commission, or designated authority within the Commission, has been afforded no opportunity to pass. The Commission, or designated authority within the Commission, shall enter an order, with a concise statement of the reasons therefor, denying a petition for reconsideration or granting such petition, in whole or in part, and ordering such further proceedings as may be appropriate: Provided, That in any case where such petition relates to an instrument of authorization granted without a hearing, the Commission, or designated authority within the Commission, shall take such action within ninety days of the filing of such petition. Reconsiderations shall be governed by such general rules as the Commission may establish, except that no evidence other than newly discovered evidence, evidence which has become available only since the original taking of evidence, or evidence which the Commission or designated authority within the Commission believes should have been taken in the original proceeding shall be taken on any reconsideration. The time within which a petition for review must be filed in a proceeding to which section 402(a) of this title applies, or within which an appeal must be taken under section 402(b) of this title in any case, shall be computed from the date upon which the Commission gives public notice of the order, decision, report, or action complained of. * * * * * * Stat. Add. 13 47 C.F.R. § 63.71 CODE OF FEDERAL REGULATIONS TITLE 47. TELECOMMUNICATION CHAPTER I. FEDERAL COMMUNICATIONS COMMISSION SUBCHAPTER B. COMMON CARRIER SERVICES PART 63. EXTENSION OF LINES, NEW LINES, AND DISCONTINUANCE, REDUCTION, OUTAGE AND IMPAIRMENT OF SERVICE BY COMMON CARRIERS; AND GRANTS OF RECOGNIZED PRIVAT OPERATING AGENCY STATUS DISCONTINUANCE, REDUCTION, OUTAGE AND IMPAIRMENT § 63.71 Procedures for discontinuance, reduction or impairment of service by domestic carriers. Any domestic carrier that seeks to discontinue, reduce or impair service shall be subject to the following procedures: (a) The carrier shall notify all affected customers of the planned discontinuance, reduction, or impairment of service and shall notify and submit a copy of its application to the public utility commission and to the Governor of the State in which the discontinuance, reduction, or impairment of service is proposed, and also to the Secretary of Defense, Attn. Special Assistant for Telecommunications, Pentagon, Washington, DC 20301. Notice shall be in writing to each affected customer unless the Commission authorizes in advance, for good cause shown, another form of notice. Notice shall include the following: (1) Name and address of carrier; (2) Date of planned service discontinuance, reduction or impairment; (3) Points of geographic areas of service affected; (4) Brief description of type of service affected; and (5) One of the following statements: (i) If the carrier is non-dominant with respect to the service being discontinued, reduced or impaired, the notice shall state: The FCC will normally authorize this proposed discontinuance of service (or reduction or impairment) unless it is shown that customers would be unable to receive service or a reasonable substitute from another carrier or that the public convenience and necessity is otherwise adversely affected. If you wish to object, you should file your comments as soon as possible, but no later than 15 days after the Commission releases public notice of the proposed discontinuance. You may file your comments electronically through the FCC’s Electronic Comment Filing System using the Stat. Add. 14 docket number established in the Commission’s public notice for this proceeding, or you may address them to the Federal Communications Commission, Wireline Competition Bureau, Competition Policy Division, Washington, DC 20554, and include in your comments a reference to the § 63.71 Application of (carrier’s name). Comments should include specific information about the impact of this proposed discontinuance (or reduction or impairment) upon you or your company, including any inability to acquire reasonable substitute service. (ii) If the carrier is dominant with respect to the service being discontinued, reduced or impaired, the notice shall state: The FCC will normally authorize this proposed discontinuance of service (or reduction or impairment) unless it is shown that customers would be unable to receive service or a reasonable substitute from another carrier or that the public convenience and necessity is otherwise adversely affected. If you wish to object, you should file your comments as soon as possible, but no later than 30 days after the Commission releases public notice of the proposed discontinuance. You may file your comments electronically through the FCC’s Electronic Comment Filing System using the docket number established in the Commission’s public notice for this proceeding, or you may address them to the Federal Communications Commission, Wireline Competition Bureau, Competition Policy Division, Washington, DC 20554, and include in your comments a reference to the § 63.71 Application of (carrier’s name). Comments should include specific information about the impact of this proposed discontinuance (or reduction or impairment) upon you or your company, including any inability to acquire reasonable substitute service. (b) The carrier shall file with this Commission, on or after the date on which notice has been given to all affected customers, an application which shall contain the following: (1) Caption—“Section 63.71 Application”; (2) Information listed in § 63.71(a)(1) through (4) above; (3) Brief description of the dates and methods of notice to all affected customers; (4) Whether the carrier is considered dominant or non-dominant with respect to the service to be discontinued, reduced or impaired; and (5) Any other information the Commission may require. (c)(1) If an incumbent LEC, as that term is defined in § 51.5 of this chapter, obtains authority to discontinue, reduce, or impair a time-division multiplexing (TDM) service listed in this paragraph (c)(1) and if the incumbent LEC offers an Internet Protocol (IP) service in the same geographic market(s) as the TDM service following the discontinuance, reduction, or impairment of such TDM service, then as a condition on such authority, the incumbent LEC shall provide any requesting telecommunications carrier wholesale access reasonably comparable to the level of wholesale access it previously provided on reasonably comparable rates, terms, and conditions. This condition shall expire when all of the following have occurred: Stat. Add. 15 (i) The Commission identifies a set of rules and/or policies that will ensure rates, terms, and conditions for special access services are just and reasonable; (ii) The Commission provides notice such rules are effective in the Federal Register; and (iii) Such rules and/or policies become effective. (2) The requirements of this paragraph apply to: (i) A special access service that is used as a wholesale input by one or more telecommunications carriers; and (ii) A service that is used as a wholesale input by one or more telecommunications carriers to provide end users with voice service and that includes last-mile service, local circuit switching, and shared transport. (d) Discontinuance applications and all related attachments to the application filed under this section shall be filed through the “Submit a Non–Docketed Filing” module of the Commission’s Electronic Comment Filing System. (e) The application to discontinue, reduce or impair service, if filed by a domestic, non-dominant carrier, shall be automatically granted on the 31st day after its filing with the Commission without any Commission notification to the applicant unless the Commission has notified the applicant that the grant will not be automatically effective. The application to discontinue, reduce or impair service, if filed by a domestic, dominant carrier, shall be automatically granted on the 60th day after its filing with the Commission without any Commission notification to the applicant unless the Commission has notified the applicant that the grant will not be automatically effective. For purposes of this section, an application will be deemed filed on the date the Commission releases public notice of the filing. (f) Procedures for discontinuance, reduction or impairment of international services are in § 63.19. Stat. Add. 16 IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT UNITED STATES TELECOM ASSOCIATION, Petitioner, V. FEDERAL COMMUNICATIONS COMMISSION, AND UNITED STATES OF AMERICA, Respondents. No. 15-1414 CERTIFICATE OF SERVICE I, James M. Carr, hereby certify that on August 15, 2016, I electronically filed the foregoing Brief for Respondents with the Clerk of the Court for the United States Court of Appeals for the District of Columbia Circuit by using the CM/ECF system. Participants in the case who are registered CM/ECF users will be served by the CM/ECF system. Scott H. Angstreich KELLOGG, HUBER, HANSEN, TODD, EVANS & FIGEL, PLLC 1615 M Street, NW Summer Square, Suite 400 Washington, DC 20036 Counsel for: US Telecom Association Nickolai G. Levin Robert B. Nicholson U.S. DEPARTMENT OF JUSTICE Antitrust Division 950 Pennsylvania Avenue, NW Washington, DC 20530 Counsel for: USA No. 15-1414 David E. Screven, Esq. PENNSYLVANIA PUBLIC UTILITY COMMISSION Rm 203, North Office Building P.O. Box 3265 Harrisburg, PA 17105 Counsel for: Pennsylvania Public Utility Commission Angela M. Woodley Kronenberg WILLKIE FARR & GALLAGHER LLP 1875 K Street, NW Washington, DC 20006 Counsel for: INCOMPAS Jeffrey A. Lamken MOLO LAMKEN LLP The Watergate 600 New Hampshire Avenue, NW Washington, DC 20037 Counsel for: Granite Telecommunications, LLC et al. Joseph C. Cavender HARRIS, WILTSHIRE & GRANNIS LLP 1919 M Street, NW Washinton, DC 20036 Counsel for: Level 3 Communications, LLC Lisa R. Youngers GENERAL COMMUNICATIONS, INC. 1130 17th Street, NW Suite 410 Washington, DC 20036 Counsel for: XO Communications, LLC Joshua M. Bobeck Eric. J. Branfman MORGAN, LEWIS & BOCKIUS LLP 2020 K Street, NW Washington, DC 20006 Counsel for: ACN Communications Services, LLC et al. Harold J. Feld PUBLIC KNOWLEDGE 1818 N Street, NW Suite 410 Washington, DC 20036 Counsel for: Public Knowledge /s/ James M. Carr