No. 17-819 In the Supreme Court of the United States AMEREN CORPORATION, ET AL., PETITIONERS v. FEDERAL COMMUNICATIONS COMMISSION, ET AL. ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT BRIEF FOR THE FEDERAL RESPONDENTS IN OPPOSITION THOMAS M. JOHNSON, JR. General Counsel DAVID M. GOSSETT Deputy General Counsel JACOB M. LEWIS Associate General Counsel MAUREEN K. FLOOD Counsel Federal Communications Commission Washington, D.C. 20554 NOEL J. FRANCISCO Solicitor General Counsel of Record Department of Justice Washington, D.C. 20530-0001 SupremeCtBriefs@usdoj.gov (202) 514-2217 (I) QUESTION PRESENTED Section 224 of Title 47 of the United States Code au- thorizes the Federal Communications Commission (FCC) to require “just and reasonable” rates, terms, and conditions for “pole attachments”—i.e., wires and other equipment that cable companies and telecommu- nications carriers attach to a utility’s poles. 47 U.S.C. 224(b)(1), (d)(1), and (e)(2)-(3). Historically, FCC regu- lations implementing Section 224 allowed pole owners to charge telecommunications carriers a higher rate for pole attachments than they charged cable companies. After finding that this discrepancy deterred the deploy- ment of new services and network investment, the FCC amended its regulations so that cable companies and telecommunications carriers would pay equivalent rates. The question presented is as follows: Whether the FCC lawfully exercised its authority under Section 224 to establish just and reasonable rates for pole attachments by modifying a formula for deter- mining the “cost” of providing space on a utility pole to align the rates paid by telecommunications carriers and cable companies. (III) TABLE OF CONTENTS Page Opinions below .............................................................................. 1 Jurisdiction .................................................................................... 1 Statement ...................................................................................... 1 Argument ..................................................................................... 10 Conclusion ................................................................................... 20 TABLE OF AUTHORITIES Cases: Alabama Power Co. v. FCC, 311 F.3d 1357 (11th Cir. 2002) .............................................................. 16, 17 American Elec. Power Serv. Corp. v. FCC, 708 F.3d 183 (D.C. Cir.), cert. denied, 134 S. Ct. 118 (2013) .................................................................4, 5, 13, 15, 18 Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984) ................................... 10, 11, 14, 16 Entergy Corp. v. Riverkeeper, Inc., 556 U.S. 208 (2009) .................................................................................... 11 FCC v. Florida Power Corp., 480 U.S. 245 (1987) .............. 19 Georgia Power Co. v. Teleport Commc’ns Atlanta, Inc., 346 F.3d 1033 (11th Cir. 2003) ............................ 16, 17 National Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967 (2005) ........................ 5, 13, 16 National Cable & Telecomms. Ass’n v. Gulf Power Co., 534 U.S. 327 (2002) ............................... 1, 2, 5, 13, 16, 19 Smiley v. Citibank (South Dakota), N.A., 517 U.S. 735 (1996) ....................................................................... 13, 14 Verizon Commc’ns, Inc. v. FCC, 535 U.S. 467 (2002) .................................................................. 11, 12, 13, 16 IV Constitution, statutes, and regulations: Page U.S. Const. Amend. V (Just Compensation Clause) .....................................................................16, 17 Act of Feb. 21, 1978, Pub. L. No. 95-234, § 6, 92 Stat. 35 .............................................................................. 2 Communications Act of 1934, 47 U.S.C. 151 et seq. .............. 5 Telecommunications Act of 1996, Pub. L. No. 104-104, § 703(2), 110 Stat. 150 ............................................ 2 47 U.S.C. 224 ................................................................. passim 47 U.S.C. 224(a)(4) ................................................................... 2 47 U.S.C. 224(b)(1) ................................................................... 2 47 U.S.C. 224(c) .................................................................. 8, 19 47 U.S.C. 224(d) ..................................................... 5, 12, 14, 15 47 U.S.C. 224(d)(1) ............................................ 2, 3, 4, 9, 12, 15 47 U.S.C. 224(e) ............................................................ passim 47 U.S.C. 224(e)(2) ................................................................... 4 47 U.S.C. 224(e)(2)-(3) ....................................................... 3, 15 47 U.S.C. 224(e)(3) ................................................................... 4 47 U.S.C. 1302(a) ................................................................... 13 47 C.F.R.: Section 1.1409 .................................................................... 7 Section 1.1409(e)(1) ........................................................... 2 Section 1.1409(e)(2)(i) ........................................................ 4 Section 1.1417(c) ................................................................ 6 Miscellaneous: Alabama Cable Telecomms. Assoc. v. Alabama Power Co., 16 FCC Rcd 12,209 (2001) .............................. 17 Implementation of Section 224 of the Act; A National Broadband Plan for Our Future, In re: 26 FCC Rcd 5240 (2011) ......................................... 3, 4, 15 30 FCC Rcd 13,731 (2015) ................................................ 7 V Miscellaneous—Continued: Page Protecting and Promoting the Open Internet, In re, 30 FCC Rcd 5601 (2015), aff?’d, United States Telecom Ass’n v. FCC, 825 F.3d 674 (D.C. Cir. 2016), petition for cert. pending, No. 17-498 (filed Sept. 27, 2017) ......................................................... 5, 6 Restoring Internet Freedom, In re, No. 17-108, 2018 WL 305638 (Jan. 14, 2018) .................................. 10, 19 (1) In the Supreme Court of the United States No. 17-819 AMEREN CORPORATION, ET AL., PETITIONERS v. FEDERAL COMMUNICATIONS COMMISSION, ET AL. ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT BRIEF FOR THE FEDERAL RESPONDENTS IN OPPOSITION OPINIONS BELOW The opinion of the court of appeals (Pet. App. 1-11) is reported at 865 F.3d 1009. The order of the Federal Communications Commission (Pet. App. 12-85) is re- ported at 30 FCC Rcd 13,731. JURISDICTION The judgment of the court of appeals was entered on July 31, 2017. On October 20, 2017, Justice Gorsuch ex- tended the time within which to file a petition for a writ of certiorari to and including November 28, 2017, and the petition was filed on that date. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). STATEMENT 1. Cable companies have long found it “convenient, and often essential, to lease space for their cables on telephone and electric utility poles.” National Cable & 2 Telecomms. Ass’n v. Gulf Power Co., 534 U.S. 327, 330 (2002). In 1978, to prevent utility-pole owners from “charg[ing] monopoly rents” when leasing such space, ibid., Congress enacted what is known as the Pole Attachment Act. See Act of Feb. 21, 1978, Pub. L. No. 95-234, § 6, 92 Stat. 35; see also 47 U.S.C. 224. In States that do not regulate pole attachments, that statute re- quires the Federal Communications Commission (FCC or Commission) to “regulate the rates, terms, and con- ditions for pole attachments to provide that such rates, terms, and conditions are just and reasonable.” 47 U.S.C. 224(b)(1). As originally enacted, Section 224 applied only to at- tachments by cable companies. Section 224(d)(1) estab- lishes upper and lower bounds for a “just and reasona- ble” rate for cable company attachments (the cable rate). At the upper bound, the cable rate cannot be greater than “the sum of the operating expenses and ac- tual capital costs of the utility attributable to the entire pole,” multiplied by “the percentage of the total usable space” occupied by the attachment. 47 U.S.C. 224(d)(1). At the lower bound, the rate cannot be “less than the additional costs of providing pole attachments.” Ibid. To set the upper-bound rate for cable company attach- ments, the FCC uses a formula that multiplies three values: the space factor (the space occupied by an at- tachment divided by the total usable space on the pole), the net cost of a bare pole, and a carrying charge. 47 C.F.R. 1.1409(e)(1). 2. In 1996, Congress expanded Section 224’s cover- age to encompass “providers of telecommunications ser- vice[s].” 47 U.S.C. 224(a)(4). See Telecommunications Act of 1996, Pub. L. No. 104-104, § 703(2), 110 Stat. 150. A new provision, Section 224(e), established a formula 3 for determining the “just and reasonable” rate for pole attachments used by telecommunications carriers (the telecom rate). Unlike the cable rate formula in Section 224(d)(1), which delimits the “cost” used to determine the upper- and lower-bound rates, the telecom rate for- mula in Section 224(e) does not define “cost.” Instead, it specifies only how cost should be allocated between the pole owner and telecommunications company at- tachers. In addition to apportioning the cost of the us- able space on a pole among attachers based on the amount of space “required” for each attachment, the telecom rate apportions to each attacher two-thirds of the pro rata cost of the unusable space on a pole, i.e., the space on the pole, including the portion under- ground, that cannot be used for attachments. See 47 U.S.C. 224(e)(2)-(3). Until 2011, the FCC calculated the telecom rate based on the “cost” used to calculate the upper-bound cable rate. That approach resulted in telecom rates that generally exceeded cable rates. In re Implementation of Section 224 of the Act; A National Broadband Plan for Our Future, 26 FCC Rcd 5240 ¶ 131 & n.399 (2011 Order). The discrepancy stemmed from the way that the two statutory formulas allocate the cost of the unus- able space on the pole. The cable rate formula allocates that cost based on the fraction of the usable space that an attachment occupies. Id. ¶ 131 n.397. The telecom rate formula, by contrast, requires all entities with at- tachments on the pole to share, on a proportionate ba- sis, two-thirds of the cost of the unusable space. Ibid. 3. In 2011, the FCC adopted new rules to implement Section 224. See 2011 Order. The FCC found that the discrepancy between the cable rate and the telecom rate 4 had deterred cable operators’ investment in new, ad- vanced services because of the “financial impact” that could result from application of the higher telecom rate. Id. at 5317 (¶ 174). The FCC further found that unifying the cable and telecom rates would “eliminate competi- tive disadvantages” that arise when providers of similar services pay different rates for functionally identical pole attachments. Id. at 5318 (¶ 176). Accordingly, the Commission determined that the telecom rate formula would no longer incorporate the “cost” used to determine the upper-bound cable rate. Instead, the agency adopted an approach that defined the cost of telecommunications carrier attachments “in terms of a percentage of the fully allocated costs” of the pole—specifically, 66% of fully allocated costs in urban areas and 44% of costs in non-urban areas. 2011 Order at 5304 (¶ 149); see 47 C.F.R. 1.1409(e)(2)(i). The FCC intended for this new measure of cost to produce a tele- com rate that “will, in general, approximate the cable rate,” 2011 Order at 5304 (¶ 149), thereby allowing cable and telecommunication companies that provide service using attachments placed on utility poles “to compete on a level playing field,” id. at 5303 (¶ 147). 4. Utilities (including one of the petitioners here) sought review of the 2011 Order in the United States Court of Appeals for the D.C. Circuit. The court re- jected petitioners’ argument that “cost” in Section 224(e)(2) and (3) “must necessarily refer to the pole’s fully allocated cost”—essentially, the same “cost” used in the Section 224(d)(1) formula for calculating cable rates. American Elec. Power Serv. Corp. v. FCC, 708 F.3d 183, 188-190 (D.C. Cir.), cert. denied, 134 S. Ct. 118 (2013). The court explained that Section 224(e) “is in important respects less specific than [Section] 224(d)” 5 because, “while [Section] 224(e) prescribe[d] the appor- tionment criteria rather specifically, it nowhere defines the term ‘cost.’?” Id. at 188-189. The court concluded that “the term ‘cost,’ without more, is open to a wide range of reasonable interpretations,” providing the FCC significant discretion to define that term in Sec- tion 224(e). Id. at 189. The court held that the FCC had reasonably exercised that discretion in defining the “cost” used in the telecom rate formula as percentages of the fully allocated cost of a utility pole. In the court’s view, reducing the disparity between cable and telecom rates in order to “eliminate [market] distortion” was a reasonable “policy justification” for the FCC’s “chosen methodology.” Id. at 190. 5. In Gulf Power, supra, this Court held that the FCC has authority to regulate attachments that cable companies use to offer “commingled” video and broad- band Internet access services, and to set the “just and reasonable” rate for those attachments at the Section 224(d) cable rate. 534 U.S. at 333-339. At the time, the FCC classified broadband Internet access service pro- vided by a cable company as an “information service” under the Communications Act of 1934, 47 U.S.C. 151 et seq. See National Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967, 975 (2005). On February 26, 2015, the Commission adopted an order that classified “retail broadband Internet access service” as “an offering of a ‘telecommunications ser- vice.’?” In re Protecting and Promoting the Open Inter- net, 30 FCC Rcd 5601, 5734 (¶ 308) (2015) (Open Inter- net Order), aff?’d, United States Telecom Ass’n v. FCC, 825 F.3d 674 (D.C. Cir. 2016), petition for cert. pending, No. 17-498 (filed Sept. 27, 2017). The FCC recognized 6 that the Open Internet Order gave pole owners an in- centive to demand that cable companies providing broadband Internet access service pay the telecom rate for pole attachments—which, despite the Commission’s adoption of different formulas for urban and non-urban areas, was still generally higher than the cable rate. Id. at 5833 (¶ 484). Expressing concern that the Open In- ternet Order could inadvertently lead to increases in pole attachment rates that would stifle future invest- ment in broadband infrastructure, the FCC stated that it would “promptly take further action” regarding pole attachment rates “if warranted.” Id. at 5833 (¶ 483). 6. While litigation over the 2011 Order was pending, the National Cable and Telecommunications Associa- tion (NCTA), a trade association representing cable companies, filed a petition with the FCC seeking admin- istrative reconsideration or clarification of that order. The NCTA petition asserted that the 66% and 44% cost allocators adopted in the 2011 Order produce telecom rates that replicate cable rates when applied in tandem with the presumption in the FCC’s rules that there are, on average, five attachers on a pole in an urban area and three attachers on a pole in a non-urban area. Pet. App. 26-28; see 47 C.F.R. 1.1417(c). The NCTA petition fur- ther asserted, however, that urban poles typically have fewer attachments (2.6 on average) than the Commis- sion’s rules presume, and that the mismatch between the presumptive number of attachers and the actual number of attachers had resulted in telecom rates that frequently exceeded cable rates. Pet. App. 26-27. NCTA therefore asked the FCC either to clarify that the 66% and 44% allocators “are mere illustrations of the new rule,” or to add cost allocators for poles with 7 two or four attachers, to ensure that cable and telecom pole attachment rates are comparable. Id. at 27. 7. On November 24, 2015, the FCC released the or- der that is the subject of the petition for a writ of certi- orari in this case. In response to the NCTA petition, the FCC “broaden[ed] the use of cost allocators in the telecom rate formula” by introducing cost allocators for poles with two attachers (31% of fully allocated cost) or four attachers (56% of fully allocated cost), based on the average number of attachers in a service area. In re Implementation of Section 224 of the Act; A National Broadband Plan for Our Future, 30 FCC Rcd 13,731, 13,738 ¶¶ 2, 16 (2015) (2015 Order) (Pet. App. 29-30).* The FCC found that this “multiple cost-allocator ap- proach” would “fulfill[] [the agency’s] intent * * * to bring cable and telecom rates for pole attachments into parity at the cable-rate level,” Pet. App. 30, consistent with the Commission’s finding in the 2011 Order that “[l]ower pole rental rates serve to encourage broadband investment,” id. at 36. Three considerations motivated the agency’s deci- sion. First, the FCC found “widespread agreement” in the record before it “that the real average number of attaching entities” on a pole “is regularly far lower than” the presumptive number of attachers contem- plated by the FCC’s rules —a disparity that the record showed “causes rates calculated with the telecom rate formula to be around 70 percent higher than rates cal- culated with the cable rate formula.” Pet. App. 31. Second, the FCC predicted that the flawed presump- tions underlying the cost definition in the 2011 Order, * The 2015 Order also provided for “interpolated [cost] allocators” where the average number of attachers on a utility pole is not a whole number (e.g., 2.6). Pet. App. 33; 47 C.F.R. 1.1409. 8 in combination with the Open Internet Order, could have the “unintended consequence” of increasing pole attachment rates for cable companies that also offer broadband Internet access services. Pet. App. 37-39, 52-53. The Commission observed that cable companies “are responsible for the substantial majority of pole at- tachments,” and that subjecting them to the telecom rate would give utilities “increased incentives” to rebut the FCC’s presumptions. Id. at 38 & n.83. Third, the FCC found that perpetuating the unin- tended disparity between cable and telecom rates could “deter[] investment” in some States relative to others. Pet. App. 39. The record showed that many States that had elected to regulate pole attachments under Section 224(c) had set the telecom rate at the cable-rate level. The FCC was concerned that broadband Internet ac- cess service providers would be more likely to invest in those States than in States subject to higher FCC- established pole attachment rates. Id. at 39-40. Utilities opposed the FCC’s further refinement of the telecom rate formula, arguing that it would “un- fairly reduce their revenue from pole attachments.” Pet. App. 46. The FCC found that argument “unper- suasive,” noting that before the Open Internet Order, only about ten percent of all pole attachments had been used by telecommunications carriers. Ibid. The FCC concluded that, because most existing pole attachments were subject to the cable rate when the order at issue here was entered, reducing the telecom rate to the cable rate would “disrupt[] settled expectations far less” than raising the cable rate to the telecom rate. Ibid. 8. Petitioners filed a petition for review in the United States Court of Appeals for the Eighth Circuit, which upheld the agency’s order. Pet. App. 1-11. 9 The court of appeals rejected petitioners’ argument that Section 224 requires cable companies and telecom- munications carriers to pay different pole attachment rates. Pet. App. 8-10. The court “conclude[d] that the term ‘cost’ in [Section] 224 is ambiguous.” Id. at 7. It observed that, “while the Cable Rate under [Section] 224(d) must fall within a range defined by two different, specified types of ‘cost,’ [Section] 224(e) does not spec- ify what type of ‘cost’ must be used to determine the Telecom Rate.” Id. at 8. The court found that, because the term “cost” in Section 224(e) is undefined, “the same ‘cost’ definition need not be used” to calculate rates un- der Section 224(d)(1) and Section 224(e). Ibid. “Accord- ingly,” the court held, “the statute permits, but does not require, the Cable Rate and the Telecom Rate to di- verge.” Ibid. The court of appeals also rejected petitioners’ argu- ment that the FCC’s interpretation of the statute ren- ders Section 224(e) superfluous. Pet. App. 9-10. The court explained that, “[w]hether or not the rates di- verge, * * * the Telecom Rate must be calculated accord- ing to the formula set forth in [Section] 224(e).” Id. at 9. The court of appeals further held that the FCC’s re- fined definition of “cost” reflected “a reasonable inter- pretation” of Section 224(e). Pet. App. 9. The court rec- ognized that, by relying on flawed presumptions about the number of attachers on a pole, the FCC’s 2011 cost definition had inadvertently perpetuated the disparity between cable and telecom rates. Id. at 10. The court therefore concluded that the Commission had made a “?‘reasonable policy’ choice” when, to “avoid subjecting cable providers offering broadband service to the higher Telecom Rate,” and to “avoid rate disparity be- 10 tween [S]tates,” it had adopted additional cost alloca- tion percentages for poles with two and four attachers. Id. at 9-10 (citation omitted). Finally, the court of appeals found “the D.C. Cir- cuit’s decision in American Electric Power to be per- suasive” and petitioners’ attempt to distinguish it una- vailing. Pet. App. 10. The court acknowledged that the 2011 Order and the 2015 Order differed in some re- spects. See ibid. The court noted in particular that, un- der the 2011 Order, “the Telecom Rate did not vary based on the number of attachers”; that there were “only two definitions of the term ‘cost’?”; and that “it was at least possible for the Cable and Telecom Rates to di- verge.” Ibid. The court concluded, however, that “those distinctions are of no significance.” Ibid. The court explained that the D.C. Circuit in American Elec- tric Power had concluded both that “the term ‘cost’ was ambiguous” and that “the FCC’s choice to define ‘cost’ so as to equalize the Cable and Telecom Rates was rea- sonable.” Id. at 10-11. The court found that the D.C. Circuit’s “reasoning applie[d] with equal force” in the case before it. Id. at 11. 9. On January 4, 2018, the FCC released the Restor- ing Internet Freedom Order. When that order takes effect, it will “reverse” the Open Internet Order by “restor[ing] broadband Internet access service to its Ti- tle I information service classification.” In re Restoring Internet Freedom, No. 17-108, 2018 WL 305638, ¶ 2 (Jan. 14, 2018). ARGUMENT Petitioners contend (Pet. 18-31) that the 2015 Order is not entitled to deference under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 11 837 (1984), because it reflects an unreasonable interpre- tation of the term “cost” in Section 224. The court below correctly rejected that argument, and its decision does not conflict with any decision of this Court or another court of appeals. In addition, the dispute in this case is of diminishing ongoing significance because the Restor- ing Internet Freedom Order, when it takes effect, will require cable providers to pay the cable rate for attach- ments used to provide commingled video and broadband Internet access services, which will significantly reduce the percentage of pole attachments that are subject to the telecom rate. For all of those reasons, further re- view is not warranted. 1. a. Under the familiar two-part framework set forth in Chevron, a court must first determine “whether Congress has directly spoken to the precise question at issue.” 467 U.S. at 842. If it has, the court “must give effect to the unambiguously expressed intent of Con- gress.” Id. at 843. If the statute is silent or ambiguous with respect to the specific issue that is the subject of the parties’ dispute, the question for the court is whether the agency’s answer is based on a permissible construction of the statute. Ibid. The agency’s view will “govern[] if it is a reasonable interpretation of the stat- ute—not necessarily the only possible interpretation, nor even the interpretation deemed most reasonable by the courts.” Entergy Corp. v. Riverkeeper, Inc., 556 U.S. 208, 218 (2009). b. The court of appeals correctly applied the estab- lished Chevron framework to the facts of this case. Con- sistent with this Court’s recognition that the term “cost” standing alone “is ‘a chameleon,’ a ‘virtually meaningless term,’?” Verizon Commc’ns, Inc. v. FCC, 535 U.S. 467, 500 (2002) (citations omitted), the court of 12 appeals concluded that “the term ‘cost’ in [Sec- tion] 224(e) is ambiguous,” Pet. App. 7. The court ex- plained that, even within Section 224(d), the term “cost” is used in two different ways. Ibid. Section 224(d) iden- tifies as the lower bound for the cable rate the “addi- tional costs” of providing pole attachments, and it iden- tifies as the upper bound a rate equal to the percentage of the pole’s usable space occupied by the attachment multiplied by operating expenses and “actual capital costs” of the utility attributable to the entire pole. 47 U.S.C. 224(d)(1). In contrast, Section 224(e) “does not specify what type of ‘cost’ must be used to determine the Telecom Rate.” Pet. App. 8. The court correctly held that the same definition of “cost” “need not be used to de- termine the upper bound for cable rates under [Section] 224(d) and the rate for telecommunications providers under [Section] 224(e).” Ibid. The statute thus “permits, but does not require, the Cable Rate and the Telecom Rate to diverge.” Ibid. The court of appeals also correctly upheld the FCC’s resolution of the ambiguity in Section 224(e). Pet. App. 9. The court recognized that the agency had “sought to eliminate” the cable-telecom rate “disparity” in order “to avoid subjecting cable providers offering broadband service to the higher Telecom Rate,” and “to avoid rate disparity between [S]tates whose pole attachment rates are regulated by the FCC and those [S]tates that * * * us[e] the Cable Rate even for telecommunications pro- viders.” Id. at 9-10. The court correctly held that the agency’s 2015 Order on telecom rates reflected “a ‘rea- sonable policy’ choice.” Id. at 10 (quoting Verizon, 535 U.S. at 523). 13 2. Petitioners contend (Pet. 18-31) that the 2015 Or- der is not entitled to Chevron deference because it re- flects an unreasonable interpretation of Section 224(e). Petitioners acknowledge that, “to the extent there is ambiguity in the term ‘cost’?” in Section 224(e), “the FCC has discretion to interpret that term.” Pet. 18. They contend, however, that the agency “went well be- yond the bounds of that discretion” in the 2015 Order. Ibid. That argument lacks merit. a. Petitioners contend that the court of appeals per- mitted the FCC “to rewrite [Section] 224 * * * to ac- complish [its policy] objectives.” Pet. 19; see Pet. 18-21. But under Chevron, an agency may rely on policy ra- tionales to choose among otherwise permissible inter- pretations of an ambiguous statutory term. See Veri- zon, 535 U.S. at 523; American Elec. Power Serv. Corp. v. FCC, 708 F.3d 183, 188-190 (D.C. Cir.), cert. denied, 134 S. Ct. 118 (2013). In National Cable & Telecommu- nications Ass’n v. Gulf Power Co., 534 U.S. 327 (2002), this Court held that the Commission may interpret Sec- tion 224 in light of “Congress’ general instruction to the FCC to ‘encourage the deployment’ of broadband Inter- net capability.” Id. at 339 (quoting 47 U.S.C. 1302(a)). b. Petitioners further contend (Pet. 20-21) that the FCC’s interpretation of “cost” in Section 224(e) should have been accorded less deference because it was incon- sistent with the agency’s earlier interpretation of that statutory term. This Court has made clear, however, that “[a]gency inconsistency is not a basis for declining to analyze the agency’s interpretation under the Chev- ron framework.” National Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967, 981 (2005); see Smiley v. Citibank (South Dakota), N.A., 517 U.S. 735, 742 (1996) (“[C]hange is not invalidating, since the 14 whole point of Chevron is to leave the discretion pro- vided by the ambiguities of a statute with the imple- menting agency.”). Indeed, Chevron itself involved a change in an agency’s interpretation of a statute. 467 U.S. at 857-858. A change in agency interpretation can be reasonable if the agency adequately explains the reasons for its policy shift, Smiley, 517 U.S. at 742, which the FCC did here. c. Finally, petitioners repeat (Pet. 18-19, 24-31) the statutory-construction arguments they made in the court of appeals. They contend (Pet. 18-19) that, after the court of appeals concluded that the term “cost” was ambiguous, it “rubberstamped approval of the FCC’s interpretation of that term” without conducting the analysis required under Chevron. Pet. 18. The court of appeals’ opinion does not support that characterization. The court examined the language of Section 224(d) and (e) and applied accepted tools of statutory construction to conclude that the FCC’s interpretation of Section 224 is reasonable. The court correctly rejected petitioners’ assertion, repeated here (Pet. 19, 24-25), that the 2015 Order renders Section 224(e) superfluous by interpret- ing the Section 224(e) formula for telecom rates so that it approximates the cable rate under Section 224(d). The court explained that, however the term “cost” is de- fined, Section 224(e) performs an independent function by prescribing how costs are apportioned among the pole owner and the attaching entities. Pet. App. 9. Petitioners further contend (Pet. 19, 25-27) that Con- gress must have intended that the rates for cable and telecom attachments would be different because it pro- vided different formulas for determining the rate. But different rate formulas can produce the same rate where, as here, one subsection of the statute defines the 15 “cost” used in the rate formula, 47 U.S.C. 224(d)(1), and other subsections do not, 47 U.S.C. 224(e)(2)-(3). Be- cause Section 224(e) does not contain its own definition of the term “cost” for purposes of that provision, “the statute permits, but does not require,” the cable and tel- ecom rates to diverge. Pet. App. 8. Petitioners argue (Pet. 25) that, if Congress had in- tended for cable and telecommunications companies to pay the same pole attachment rate, it could have achieved that result by simply adopting the Section 224(d) rate for telecommunications carriers. That ap- proach, however, would have required the FCC to en- sure that the two rates are the same in all circum- stances. By including two distinct rate formulas in Sec- tion 224, Congress allowed the FCC to establish differ- ent cable and telecom rates, but it did not obligate the agency to do so. Petitioners further contend that the FCC’s interpre- tation of the term “cost” in Section 224(e) is unreasona- ble because, “[r]ather than ‘cost’? being allocated based upon the number of attaching entities * * *, the FCC defined the term ‘cost’ based upon the number of at- taching entities.” Pet. 28; see Pet. 27-31. To be sure, under the 2015 Order, the cost of an attachment on a particular pole can depend on the number of entities that have contracted for attachments on that pole. But the agency reasonably preferred that approach to the prior regime, which had forced competitors with the same attachments on the same pole to pay different rates. That prior outcome, the FCC explained, had dis- torted end-user choices between broadband technolo- gies, erected a barrier to the deployment of new ser- vices, and discouraged network investment. 2011 Order at 5303 (¶ 147); American Elec. Power, 708 F.3d at 190. 16 The FCC made a “?‘reasonable policy’ choice” when it interpreted “cost” in Section 224(e) to eliminate that rate disparity. Pet. App. 10 (quoting Verizon, 535 U.S. at 523). Under well-settled principles, when Congress leaves a gap in a statute that is administered by an agency, it vests the agency with the authority to fill in the gap by means of reasonable interpretation. Chevron, 467 U.S. at 843-844; accord Brand X, 545 U.S. at 980; Gulf Power, 534 U.S. at 339. The court of appeals correctly held that the FCC’s interpretation of the undefined term “cost” in Section 224(e) was consistent with the statutory text and would reasonably advance important policy objectives. Pet. App. 9-11. 3. Petitioner contends (Pet. 14-17) that the decision below conflicts with the Eleventh Circuit’s decisions in Alabama Power Co. v. FCC, 311 F.3d 1357 (2002), and Georgia Power Co. v. Teleport Commc’ns Atlanta, Inc., 346 F.3d 1033 (2003). Petitioner’s reliance on those de- cisions is misplaced. The Eleventh Circuit did not hold in either of those cases that Section 224 bars the FCC from requiring cable companies and telecommunica- tions carriers to pay equivalent pole-attachment rates. In Alabama Power Co., a utility company argued that the FCC’s cable-rate methodology violated the Just Compensation Clause of the Fifth Amendment. 311 F.3d at 1367-1371. The Eleventh Circuit held that, unless a utility’s poles are at full capacity, the utility re- ceives just compensation if the cable rate is above the marginal cost of the pole attachment. Id. at 1370-1371. Because the FCC-imposed rate was well above the mar- ginal cost and the utility company had not shown that its poles were full, the court held that no Fifth Amend- ment violation had occurred. Id. at 1370. In Georgia 17 Power Co., the Eleventh Circuit similarly rejected a Just Compensation Clause challenge to an FCC-imposed telecom rate. 346 F.3d at 1038. The court explained that, “[i]f the cable rate provided more than just com- pensation in Alabama Power, then the higher [telecom] rate set by FCC in this case provides just compensa- tion.” Id. at 1047. Although the Eleventh Circuit in Georgia Power Co. observed that the telecom rate was higher than the ca- ble rate under the then-existing regulatory scheme, it did not decide whether Section 224 mandated that dis- parity. Similarly in Alabama Power Co., the court noted the existence of the rate differential without de- termining whether the statute required it. In holding that payment of the cable rate provided the utility in that case with just compensation, the court in Alabama Power Co. explained that, “[s]ince marginal cost pro- vides just compensation * * * , it is irrelevant that the Telecom Rate provided in [Section] 224(e) yields a higher rate for telecommunications attachments than the Cable Rate provides for cable attachments.” 311 F.3d at 1371 n.23. The court attributed the difference be- tween the two rates to the FCC’s then-current interpre- tation of Section 224. Ibid. (citing Alabama Cable Tele- comms. Assoc. v. Alabama Power Co., 16 FCC Rcd 12,209 (¶ 49) (2001)); see Georgia Power Co., 346 F.3d at 1047 (observing that, at the time of the court’s decision in Ala- bama Power Co., the FCC had set the telecom rate above the cable rate). In both Alabama Power Co. and Georgia Power Co., the court briefly discussed whether and in what way the existence of the cable-telecom rate differential was rel- evant to the court’s Just Compensation Clause analysis. 18 For purposes of that Fifth Amendment inquiry, how- ever, it was irrelevant whether that disparity was man- dated by statute or instead resulted from the FCC’s ex- ercise of regulatory discretion. In neither case did the Eleventh Circuit have occasion to address whether the FCC could change its interpretation of Section 224. The only other court of appeals that has examined the FCC’s interpretation of “cost” in Section 224(e) reached the same conclusion as the court below. In American Electric Power, the D.C. Circuit upheld the FCC’s authority to define “cost” in Section 224(e) to eliminate disparity between the cable and telecom rates. 708 F.3d at 188-190. The court emphasized that “the term ‘cost,’ without more, is open to a wide range of reasonable interpretation,” id. at 189, and that “arti- ficial, non-cost-based differences in the prices of inputs among competitors are bound to distort competition,” id. at 190. The court held that, “[b]ecause the Commis- sion’s methodology is consistent with the unspecified cost terms contained in [Section] 224(e), and the Com- mission’s justifications are reasonable,” the agency’s ef- forts in 2011 to align the cable and telecom rates were lawful. Ibid. 4. Petitioners contend (Pet. 31-38) that this is a case of exceptional importance because “the FCC’s approach on pole attachment rents is effecting a wealth transfer of hundreds of millions of dollars annually from electric utility ratepayers to communications company share- holders.” Pet. 35. That argument lacks merit. The 2015 Order largely maintained the status quo, under which cable companies—which “are responsible for the sub- stantial majority of pole attachments”—will continue to pay the same rate for the same pole attachments that they paid before the order. Pet. App. 32 n.65; see id. at 19 46-47. This Court concluded more than three decades ago that the cable rate is just, reasonable, and not con- fiscatory. FCC v. Florida Power Corp., 480 U.S. 245, 254 (1987). The only thing petitioners “lost” was the op- portunity to take advantage of the flawed presumptions underlying the FCC’s 2011 rules, and the reclassifica- tion of broadband Internet access service in the Open Internet Order, to raise the rates for millions of existing pole attachments. The FCC reasonably denied petition- ers that “windfall,” which would have come at the ex- pense of broadband deployment. Pet. App. 57-58. Petitioners further contend (Pet. 36) that the 2015 Order raises “federalism issues regarding the ability of the FCC * * * to impact the rates set by state regula- tors for electric service.” But Section 224 allows States to regulate pole attachment rates, and it authorizes the Commission to require just and reasonable rates for pole attachments only in States that decline to exercise that authority. 47 U.S.C. 224(c). The 2015 Order there- fore creates no meaningful federalism concern. 5. Finally, the significance of the 2015 Order has been diminished by subsequent regulatory develop- ments. As explained above (see p. 10, supra), when the FCC’s recent Restoring Internet Freedom Order takes effect, broadband Internet access service will be reclas- sified as an “information service” rather than as a “tel- ecommunications service.” In re Restoring Internet Freedom, No. 17-108, 2018 WL 305638, ¶ 2 (Jan. 14, 2018). When that occurs, there will no longer be a basis for contending that pole attachments used by cable pro- viders to offer broadband Internet access are subject to the telecom rate. Instead, consistent with this Court’s decision in Gulf Power, 534 U.S. at 337-339, cable pro- viders will pay the cable rate for attachments used to 20 provide commingled video and broadband Internet ac- cess services. Only about ten percent of all pole attach- ments are used by telecommunications carriers. Pet. App. 46. The FCC’s interpretation of Section 224(e), and the telecom rate in the 2015 Order, therefore will affect considerably fewer pole attachments in the future than it did when the court below issued its decision. CONCLUSION The petition for a writ of certiorari should be denied. Respectfully submitted. THOMAS M. JOHNSON, JR. General Counsel DAVID M. GOSSETT Deputy General Counsel JACOB M. LEWIS Associate General Counsel MAUREEN K. FLOOD Counsel Federal Communications Commission NOEL J. FRANCISCO Solicitor General MARCH 2018