United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 5, 2000 Decided October 27, 2000

No. 99-1531

Qwest Communications International Inc.,

Petitioner

v\.

Federal Communications Commission and

United States of America,

Respondents

MCI WorldCom, Inc. and

AT&T Corporation,

Intervenors

On Petition for Review of an Order of the

Federal Communications Commission

William R. Richardson, Jr. argued the cause for petitioner. With him on
the briefs were William T. Lake, Patrick J. Carome, Julie A. Veach, Dan
L. Poole, and Robert B. McKenna.

Lawrence E. Sarjeant, Linda Kent, John Hunter, Julie E. Rones, William
F. Maher, Jr., Stephen L. Goodman, and Richard White, Jr. were on the
brief for amicus curiae in support of petitioner.

Joel Marcus, Counsel, Federal Communications Commission, argued the
cause for respondents. With him on the brief were Christopher J. Wright,
General Counsel, Daniel M. Armstrong, Associate General Counsel, Joel I.
Klein, Assistant Attorney General, U.S. Department of Justice, Robert B.
Nicholson, and Christopher Sprigman, Attorneys. John E. Ingle, Deputy
Associate General Counsel, Federal Communications Commission, entered an
appearance.

Anthony C. Epstein argued the cause for intervenors WorldCom, Inc. and
AT&T Corp. With him on the brief were Thomas F. O\'Neil, III, William
Single, IV, Mark C. Rosenblum, Peter H. Jacoby, Judy Sello, and David
Lawson. James P. Young entered an appearance.

Before: Williams, Sentelle, and Rogers, Circuit Judges.

Opinion for the Court filed by Circuit Judge Rogers.

Rogers, Circuit Judge: Qwest Communications Interna-tional, Inc.
(\"Qwest\") petitions for review of a decision by the Federal
Communications Commission (\"Commission\") to disclose raw audit data to
competitors in connection with a notice of inquiry concerning the
validity and reasonableness of statistical sampling for equipment not
found or not verifiable during a field audit.[^1] See In re Ameritech
Corporation Telephone Operating Companies\' Continuing Property Records
Audit et al., Memorandum Opinion and Order, 15 F.C.C.R. 1784 (1999)
(\"Order\"). Qwest contends that the Order is contrary to § 1905 of the
Trade Secrets Act, 18 U.S.C. § 1905 (1994), because nothing in § 220(f)
of the Communications Act of 1934, 47 U.S.C. § 220(f) (1994), authorizes
the Commission to release otherwise protected information. Qwest further
contends that the Commission\'s Order violates its own longstanding
policy to provide special protection to audit information. We hold that
§ 220(f) provides sufficient authorization for disclosure of trade
secrets, but that the Commission has failed to explain how its Order is
consistent with its policy regarding the treatment of confidential
information. Accordingly, we remand the case to the Commission for
further proceedings.[^2]

**I.**

Under Part 32 of the Commission\'s regulations, the Regional Bell
Operating Companies (\"RBOCs\") are required to maintain detailed
accounting records of property used in their local telephone operations,
including the property\'s description, location, and cost. See 47 C.F.R.
§§ 32.2000(e)-(f). The records, which serve various regulatory
functions, including the setting of rates and the assessment of charge
allocations, must conform to a uniform accounting system prescribed by
the rules and must be sufficiently detailed to allow the property\'s
physical existence to be confirmed during a spot check conducted by the
Commission. See id.

In 1997, the Commission\'s Common Carrier Bureau\'s Accounting
Safeguards Division (\"Bureau\") began an audit of the RBOCs\' records
for hard-wired central office equipment in order \"to determine if their
records were being maintained in compliance with the Commission\'s rules
and to verify that property recorded in the accounts represented
equipment used and useful for the provision of telecommunications
services.\"[^3] During the audit, each piece of equipment was
categorized or \"scored\" as \"(1) found \[as described\]; (2) found in
another location; (3) not found/missing; or (4) unverifiable.\" The
Commission explained that part of the audit included \"statistical
sampling techniques so that the findings for the sample could be
extended as representative of all of the equipment in the category
audited, i.e., hard-wired central office equipment.\" After reviewing
the RBOCs\' comments on draft reports, the Bureau\'s final audit reports
revealed that the RBOCs may have overstated their book costs by as much
as five billion dollars.[^4] The RBOCs filed objections, in the words of
one Commissioner, \"aggressively attack\[ing\] the audits, the
competence of the auditors, and the credibility of the audit
design.\"[^5] Qwest challenged the Bureau\'s final audit report,
claiming that it failed to reflect additional data accounting for a
majority of items scored as \"not found,\" and reaffirming its
conclusion that the audit was fatally flawed for statistical and other
reasons.[^6] In support of the latter point, Qwest submitted an analysis
by Deloitte & Touche\'s \"quantitative techniques expert,\" who raised
doubts about the auditors\' sampling methodology and their evaluation
techniques.

The Commission, in turn, issued a notice of inquiry in April 1999,
seeking public comment on ten criticisms relating to the audits. See In
re Ameritech Corporation Telephone Operating Companies\' Continuing
Property Records Audit et al., Notice of Inquiry, 14 F.C.C.R. 7019,
7021-22 ¶ 6 (1999) (\"NOI\"). The only issue relevant here is Issue 2:
namely, \"\[t\]he validity and reasonableness of the methodology used by
the Bureau\'s auditors in determining whether to rescore or to modify a
finding during a field audit that equipment was \'not found.\' \"[^7]
Previously, in February 1999, the Commission determined, over the
dissent of two Commissioners, that pursuant to the RBOCs\' waivers of
confidentiality, the release of the audit reports and the RBOCs\'
responses to them was in the public interest.[^8] MCI thereafter filed a
Freedom of Information Act request, pursuant to 47 C.F.R. § 0.461,
seeking public release of the RBOCs\' explanations and supporting
documentation regarding their equipment not found, the Bureau\'s audit
workpapers showing the scoring of particular items, and the continuing
property records themselves.[^9]

Qwest opposed the release of the raw audit data on three principal
grounds: First, releasing the requested information is barred by §
220(f) of the Communications Act and previous Commission rulings and
would be an unjustified departure from the Commission\'s established
practice of not releasing audit-related materials, except in exceptional
cases; second, the requested information is confidential commercial
information, voluntarily submitted, and thus exempt from release under
Exemption 4 of the Freedom of Information Act, 5 U.S.C. § 552(b)(4); and
third, the requested information constitutes pre-decisional
deliberations and as such, is protected by Exemption 5 of the Freedom of
Information Act, 5 U.S.C. § 552(b)(5), and § 0.457(e) of the
Commission\'s rules, 47 C.F.R. § 0.457(e). Qwest indicated that it was
opposing only the request for release of data submitted regarding the
\"not found\" and \"unverifiable\" audit items, explaining that these
items \"contain\[ed\] detailed information including pricing
in-formation on specific items used in the provision of
telecommunications services\....\" These items, in Qwest\'s view, were
comprised of \"highly sensitive business information which MCI could use
to unfairly improve its competitive position\" relative to Qwest and
other market competitors.

The Bureau ordered release of the requested raw audit data to parties
under a protective order. The Bureau relied on §§ 154(j) and 220(f) of
the Communications Act as providing the Commission with explicit
authorization for the discretionary release of audit materials otherwise
protected from release under the Freedom of Information Act and the
Trade Secrets Act. Relying also on \"the Commission\'s duty to ensure
that parties are given a reasonable opportunity to make informed comment
on Issue No. 2,\" the Bureau viewed \"the unique situation\" created by
the question posed in Issue 2 to require the release of information that
is \"not routinely made available to the public, even under protective
orders.\" The Bureau concluded that the question regarding the
\"auditors\' rescoring process can only be answered by allowing parties
interested in filing comments to review this \[raw data\] material.\"
The Bureau\'s protective order limited access to the requested materials
to (1) counsel for a party participating in the NOI proceeding and (2)
technical advisors or other persons authorized by such counsel. In the
Bureau\'s opinion, the protective order \"reasonably ameliorated\" any
potential competitive harm to the RBOCs. All of the RBOCs except Bell
Atlantic appealed to the Commission.

The Commission affirmed the Bureau\'s decision to release the raw audit
data subject to a protective order, relying principally on the
Commission\'s explicit authority under § 220(f): \"\[G\]iven the
importance of Commission audits to the effective performance of the
Commission\'s statutory responsibilities with respect to carriers, \[the
Commission\] believe\[s\] the \[Communications\] Act\'s statutory scheme
fully envisions that, in some cases, disclosures of carrier-supplied
audit information might become necessary in the course of carrying out
the Commission\'s enforcement and regulatory policymaking
functions.\"[^10] Order, 15 F.C.C.R. at 1789 ¶ 8. The Commission also
imposed \"more stringent\" terms for access to audit materials,
modifying the protective order (1) to restrict access to the audit
materials to \"persons without decision making authority or influence
regarding competitive issues,\" (2) to redact \"vendor-specific pricing
information,\" and (3) to limit the materials to be released to those
relating to Issue 2.[^11] Id. at 1790-91 ¶ ¶ 13-14. The Commission also
provided that the RBOCs could suggest, for Bureau approval, other
redactions to the auditors\' workpapers and the RBOCs\' comments. Qwest
petitioned for review of the Order.[^12]

**II.**

Qwest contends that the Commission\'s decision to release protected
confidential information violates the Trade Secrets Act because the
Commission is not \"authorized by law\" to disclose otherwise protected
information. Section 220(f) of the Communications Act, Qwest maintains,
is \"a nondisclosure statute that itself prohibits agency employees from
releasing information obtained during audits\....\" Because § 220(f) is
\"wholly silent as to the power of the Commission to issue \[ \]
directions\" for release of such material, Qwest continues, the
statute\'s \"logic and purposes reflect no \[Congressional\] intention
to authorize the Commission to disclose confidential information based
solely on the exercise of its own unbounded \'discretion.\"

The parties agree that the material ordered disclosed by the Commission
is covered by the Trade Secrets Act. Hence, the question is whether the
Communications Act vests the Commission with authority to disclose
information covered by the Trade Secrets Act, or more specifically,
whether, for purposes of § 1905 of the Trade Secrets Act, the Commission
was authorized under § 220(f) of the Communications Act to allow
Qwest\'s competitors access to Qwest\'s raw audit data.

The parties disagree about our standard of review. We agree with the
Commission that our principal inquiry of the meaning of § 220(f) follows
the familiar two-part test under Chevron, U.S.A., Inc. v. NRDC, 467 U.S.
837, 842-43 (1984): The court \"must give effect to the unambiguously
expressed intent of Congress\" or in the absence of such intent,
consider whether the agency\'s interpretation is a \"permissible
construction of the statute.\" Id. at 843. Necessarily, however, we must
first examine what Congress intended by § 1905 of the Trade Secrets Act,
and in this regard, as Qwest contends, our review is de novo. Hence, we
look first to the language of § 1905 and seek guidance from its
structure and history. See Chrysler v. Brown, 441 U.S. 281, 296 (1979).
We then do much the same in examining § 220(f) of the Communications
Act, reaching the Commission\'s interpretation of its enabling statute
only if Congressional intent is unclear.

Section 1905 of the Trade Secrets Act prohibits the unauthorized release
of trade secrets and commercial information, unless \"authorized by
law,\" subject to punishment by fine and imprisonment and removal from
office or employment. See 18 U.S.C. § 1905.[^13] The history of the Act,
which was originally enacted in 1864, traces back to Congressional
concern over disclosures of business information by \"feckless or
corrupt revenue agents.\" Chrysler, 441 U.S. at 296. When Congress in
1948 consolidated three statutes barring or limiting the release of such
information, it sought to address the demands of the new administrative
state and thereby broadened the reach of the Trade Secrets Act. See CNA
Fin. Corp. v. Donovan, 830 F.2d 1132, 1149 n.122 (D.C. Cir. 1987). As
the court has previously recounted, Congress \"recogni\[zed\] that
increased governmental access to financial records and commercial
operations of individuals and entities \... had to be accompanied by
some restraint on the freedom of governmental employees to disseminate
such data to third parties.\" Id.

The limits established by the Trade Secrets Act, however, are not
inconsistent with authorizations granted to federal agencies to release
data when necessary for the carrying out of the agencies\' statutory
responsibilities. In National Parks and Conservation Ass\'n v. Kleppe,
547 F.2d 673 (D.C. Cir. 1976), the court noted that the Trade Secrets
Act is \"merely a general prohibition against unauthorized disclosures
of confidential commercial or financial information.\" Id. at 687 n.50.
The court in CNA, continuing to explore the nature of the statute,
observed that the Trade Secrets Act:

seems to embody a congressional judgment that private

commercial and financial information should not be re-

vealed by agencies that gather it, absent a conscious

choice in favor of disclosure by someone with power to

impart the force of law to that decision. The Act at-

tempts to forestall casual or thoughtless divulgence\--

disclosure made without first going through a delibera-

tive process\--with an opportunity for input from con-

cerned parties.

CNA, 830 F.2d at 1141 (emphasis added).

In the leading case on the question of the authorization required by §
1905 for release of trade secrets, the Supreme Court interpreted the
phrase \"authorized by law\" not to have \"a special, limited meaning.\"
Chrysler, 441 U.S. at 298. Instead, the Supreme Court instructed that
the exercise by an agency of quasi-legislative power \"must be rooted in
a grant of such power by the Congress and subject to limitations which
that body imposes.\" Id. at 302. More directly, the Court stated that
\"\[w\]hat is important\" is whether the reviewing court could
reasonably conclude that the statutory grant of authority contemplated
the regulations providing for release of information. Id. at 308. Thus,
in rejecting the contention that an Executive Order directing the
Secretary of Labor to adopt regulations as are \"necessary and
appropriate\" meant that all regulations so promulgated have the full
\"force and effect of law,\" the Court focused on whether there was a
\"nexus between the regulations and some delegation of the requisite
legislative authority by Congress.\" Id. at 304. Looking at the
statutory sources for the Executive Order,[^14] the Court concluded that
\"it is clear that when it enacted these statutes, Congress was not
concerned with public disclosure of trade secrets or confidential
business information\....\" Id. at 306. By way of illustration, the
Court contrasted the situation in NBC v. United States, 319 U.S. 190,
217 (1943), where, based on the language and logic of the Communications
Act, which vested comprehensive powers in the Commission, the Court
upheld Commission regulations that extended beyond technical,
engineering requirements. See Chrysler, 441 U.S. at 308. A mere
housekeeping statute, on the other hand, whose history indicated that it
was \"simply a grant of authority to the agency to regulate its own
affairs,\" would not suffice to authorize disclosure of confidential
business information because it was not intended to provide authority
for limiting the scope of the Trade Secrets Act. Id. at 309.

Under § 220(a) of the Communications Act, the Commission is authorized
to direct the kind of financial books and records that carriers must
maintain so that the Commission can fulfill its mandate of ensuring that
carriers\' rates and practices are just and reasonable. See 47 U.S.C. §
220(a). In establishing a uniform system of accounts, the Commission is
charged with \"ensur\[ing\] a proper allocation of all costs to and
among telecommunication services, facilities, and products\....\" Id. §
220(a)(2). Under § 220(c), the Commission \"shall at all times have
access to and the right of inspection and examination of all accounts,
records, and memoranda\" maintained by the carrier pursuant to § 220. In
addition, the Commission may use public accounting services. In this
connection, subsection (c) provides an exception to nondisclosure laws
as well as a nondisclosure limitation on persons having access to
information submitted to the Commission. Subsection (c) provides that
\"\[a\]ny provision of law prohibiting the disclosure of the contents of
messages or communications shall not be deemed to prohibit the
disclosure of any matter in accordance with the provisions of this
section.\" Id. § 220(c). The statute further provides that any person
con-ducting a Commission audit shall have the powers of the Commission
under subsection (c) and shall be subject to subsection (f) \"in the
same manner as if that person were an employee of the Commission.\"
Id.[^15] Section 220(f), in turn, provides:

No member, officer, or employee of the Commission shall

divulge any fact or information which may come to his

\[or her\] knowledge during the course of examination of

books or other accounts, as hereinbefore provided, except

insofar as he \[or she\] may be directed by the Commission

or by a court.

Id. § 220(f) (emphasis added).

Subsection (f), first mentioned in § 220(c) after a sentence that
removes any legal obstacles to the disclosure of information submitted
to the Commission in accordance with § 220, places nondisclosure burdens
on all persons having access to confidential information submitted to
the Commission. Thus, its strict limitation on how confidential
information is to be handled arises in a context in which the Commission
will have access to information that is otherwise protected by law from
disclosure. Nevertheless, Congress alluded to the possibility of
disclosure by the Commission (and the court). Qwest\'s contention that §
220(f) is \"an integral part of a nondisclosure statute\" is correct so
far as it goes. However, viewing § 220(f) as directed to nondisclosure
does not mean that its last clause has no role to perform, much less
nothing to do with the conditions under which disclosures may occur.
Under Chrysler, § 1905 is satisfied without a provision of law that
expressly refers to trade secrets. See Chrysler, 441 U.S. at 308.

Congressional intent to allow an exception to nondisclosure seems
implicit in the statutory scheme. In the Communications Act of 1934,
Congress delegated broad authority to the Commission in carrying out its
responsibilities for oversight of licensing, rate making, and carrier
practices. See 47 U.S.C. § 151 et seq.; NBC, 319 U.S. at 217-20.
Significantly, in § 220, Congress placed in the Commission the
responsibility to \"ensure a proper allocation of all costs.\" 47 U.S.C.
§ 220(a)(2). With the additional provisions authorizing audits, it
reasonably follows that Congress contemplated that the Commission would
be reviewing the type of data at issue here. Thus, unlike the statutes
that were considered by the Supreme Court in Chrysler, see 441 U.S. at
304-09, § 220 focuses on the need for the Commission to have access to
confidential information regarding licensees and others, and to
determine how such information is to be protected when the Commission
carries out its responsibilities. The former is addressed in § 220(c),
the latter in § 220(f). When Congress consolidated various statutes on
trade secrets in 1948, it gave no indication that federal agencies\'
interpretation of their authority to release confidential data was in
error, much less no longer of force and effect.[^16] Nothing in Chrysler
suggests that a comparable situation existed with respect to the
statutes considered in that case. See Chrysler, 441 U.S. at 308.

To the extent Qwest contends that § 220(f) is too broad an
authorization, in its view leaving the Commission with unfettered
discretion, we offer two responses. First, contrary to Qwest\'s
contention, Chrysler does not require that the statutory authorization
under § 1905 be directed, or limited, to trade secrets.[^17] Rather, as
the Supreme Court emphasized in Chrysler, the important question is
whether the reviewing court can reasonably conclude that the grant of
authority contemplates the regulations issued. See Chrysler, 441 U.S. at
308. Chrysler\'s test is, in one sense at least, a non-demanding one
with respect to the purpose of the Trade Secrets Act\--namely, to ensure
that Congress has authorized release of covered information and that any
such release occurs only after deliberation by appropriate officials.
See CNA, 830 F.2d at 1141-42. Section 220(f) is consistent with the
restraint that Congress sought to impose in the Trade Secrets Act
because it permits release only on order of the Commission (or the
court) where, as the Supreme Court noted, such release would be
consistent with the purposes of the Communications Act. See Chrysler,
441 U.S. at 307-08. As we discuss in Part III, the Commission has
adopted a Confidential Information Policy and regulations for release
decisions to be made upon consideration of certain factors by
appropriate officials.

Second, other circuits have concluded that, under Chrysler, a broadly
stated grant of authority to disclose confidential information suffices
for purposes of § 1905. Thus, the Fourth Circuit in Humana, Inc. v. Blue
Cross, 622 F.2d 76 (4th Cir. 1980), upheld the Secretary of Health,
Education, and Welfare\'s \"broad discretion to permit disclosure\"
where the statute, 42 U.S.C. § 1306(a), provided that \"\[n\]o
disclosure \... shall be made except as the Secretary \... may by
regulations prescribe \....\" Id. at 78 (emphasis added). Relying on
Chrysler\'s test, that \"\[t\]he grant of authority relied upon by a
federal agency in promulgating regulations need not be specific; it is
only necessary \'that the reviewing court reasonably be able to conclude
that the grant of authority contemplates the regulations issued,\' \"
id. (quoting Chrysler, 441 U.S. at 308), the court concluded with
respect to the disclosure of cost reports, that \"absent any action by
the Secretary, disclosure would be prohibited. Such material, however,
is not exempt from disclosure for by its very terms the statute
contemplates the issuance of regulations by the Secretary permitting
such disclosure.\" Id. at 79. In St. Mary\'s Hospital, Inc. v. Harris,
604 F.2d 407 (5th Cir. 1979), the Fifth Circuit had reached the same
conclusion about a regulation authorizing disclosure of cost reports,
stating that \"\[s\]ection 1306 bars the disclosure of Medicare
providers\' costs reports unless the Secretary in his discretion
promulgates a regulation like \[the one being challenged\] ordering
disclosure of these reports\.... At the very least § 1306 may reasonably
be construed to contemplate the promulgation of \[a regulation such as
is at issue\].\" Id. at 410. The Sixth Circuit agreed in Parkridge
Hospital, Inc. v. Califano, 625 F.2d 719 (6th Cir. 1980), interpreting
the statute to be \"a broad grant of authority to the Secretary
specifically to enact regulations providing for the release of
information filed with the agency, at least when such disclosure serves
the purposes described in the statute.\" Id. at 724.

While Qwest would distinguish the statute in Humana, Parkridge, and St.
Mary\'s as reflecting Congress\' clear intent to permit disclosure of
trade secrets, the effect of the last clause of § 220(f) of the
Communications Act is essentially the same. That is, in both types of
statutes Congress has alluded in an \"except\" clause to the possibility
of disclosure of protected information, and in both circumstances
assured that the Secretary and the Commission must reach a considered
determination about releasing protected information. The different
statutory treatment by Congress can be said to reflect not a difference
in congressional intent but the fact that the Secretary is an individual
decision-maker, and by requiring the promulgation of regulations,
Congress con-strained the Secretary\'s decision-making authority
regarding the release of protected information. Comparable constraint
inheres in the statutory requirements that the Commission may act only
as a deliberative body, when there is a quorum, when parties may be
heard, and when its actions are made on the record. See generally 47
U.S.C. §§ 154(h), (j). Accordingly, we hold that the Communications Act,
and specifically, § 220(f), does not clearly rule out the Commission\'s
interpretation, which we find reasonable.

**III.**

The question remains whether the Commission has acted arbitrarily and
capriciously in ordering the release of Qwest\'s raw audit data to some
of its competitors.[^18] See Chrysler, 441 U.S. at 318; Bartholdi, 114
F.3d at 279. Qwest contends that the release order is \"flatly
inconsistent\" with the Commission\'s prior assurance that raw audit
data would be protected. More particularly, Qwest contends that the
Commission\'s Order is contrary to its precedents on the treatment of
confidential information.[^19] Qwest calls attention to the
unprecedented nature of the release, maintaining that \"whatever
authority the Commission may have to disclose trade secrets in other
kinds of proceedings in order to vindicate rights to public
participation, the logic and purposes of the statutory provisions
governing confidential agency audits are quite different.\" The Order
constitutes, in Qwest\'s view, a \"standardless \'discretionary\'
exemption from disclosure\" justified solely on the Commission\'s
unprecedented step of opening audits to public comment.

The Commission\'s Confidential Information Policy includes three
paragraphs regarding audits that are pertinent here. See In re
Examination of Current Policy Concerning the Treatment of Confidential
Information Submitted to the Commission, Report and Order, 13 F.C.C.R.
24816, 24847-49 ¶ ¶ 53-55 (1998), amended by 14 F.C.C.R. 20128 (1999)
(\"Confidential Information Policy\"). Paragraph 53 provides that only
summary audit data will be released, and only under special
circumstances. See id. at 24847-48 ¶ 53. Those special circumstances
arise when: \"(i) the summary nature of the data therein is not likely
to cause the submitter substantial competitive injury; (ii) the release
of the summary data and information is not likely to impair \[the
Commission\'s\] ability to obtain information in future audits; and
(iii) overriding public interest concerns favor release of the report.\"
Id.

Paragraph 54 explains the Commission\'s view of audit reports:

The Commission has a longstanding policy of treating

information obtained from carriers during audits as con-

fidential\.... Carriers have a legitimate interest in pro-

tecting confidential information, and we agree that disclo-

sure could result in competitive injury to those who

provide such information to the Commission. This policy

is also designed to enhance the efficiency and integrity of

our audit process by encouraging carriers to comply in

good faith with Commission requests for information.

Moreover, the Commission considers the audit reports to

be internal agency documents that, consistent with FOIA

Exemption 5, generally should not be disclosed to the

extent they present staff findings and recommendations

to assist the Commission in pre-decisional deliberations.

Id. at 24848 ¶ 54. Paragraph 54 also states that the Commission \"will
amend Section 0.457 of \[its\] rules to indicate that information
submitted in connection with audits \... will not routinely be made
available for public inspection.\" Id.

. In paragraph 55, the Commission identified the standards that it would
apply were confidential audit information to be released. Observing that
it has \"only rarely departed from the general policy of withholding
audit information from public disclosure,\" the Commission advised
nonetheless that,

\[p\]arties should note, however, that as in the past, we

may publicly disclose audit information in rare cases

where the underlying concerns that normally lead us to

withhold audit information from public disclosure are

diminished by the minimal risk posed by the release of

aggregate data or, where the data is otherwise not highly

commercially sensitive and disclosure is justified by sig-

nificant public interest factors.

Id. at 24848-49 ¶ 55 (emphasis added). Thus, § 0.457 of the
Commission\'s regulations provides, in part, that \"\[t\]he records in
this section are not routinely available for public inspection,\" 47
C.F.R. § 0.457, and in subsection (d) that \"\[t\]rade secrets \... are
not routinely available for public inspection\.... A persuasive showing
as to the reasons for inspection will be required in requests for
inspection of such materials submitted under § 0.461.\" Id. § 0.457(d).

Numerous cases reflect the Commission\'s application of Paragraphs 53
and 54 of its Confidential Information Policy and § 0.457 of its
regulations.[^20] None Qwest maintains, until now, involved the release,
pursuant to Paragraph 55, to a competitor of raw audit data in an audit
or audit-related proceeding. In applying its Confidential Information
Policy, the Commission has heretofore acknowledged a distinction between
summary audit data and raw audit data:

\[T\]he release of commercial and financial information of

only a summary nature does not present the concerns

about competitive harm that normally lead us to withhold

audit-derived information from public disclosure\....

The Summary contains no detailed underlying commer-

cial or financial information submitted by the BOCs;

rather it presents a brief analysis of the aggregated

underlying data. The summary nature of this informa-

tion significantly diminishes the likelihood that the BOCs

will suffer any competitive harm.

In re Bell Telephone Operating Companies, Memorandum Opinion and Order,
10 F.C.C.R. 11541, 11542 ¶ 6 (1995).

Thus, the Commission has explained that it \"withholds \... raw
financial data obtained from carriers during audits as well as audit
workpapers compiled by Commission staff\" in accord with its \"general
policy \[ \] to withhold from public disclosure audit reports prepared
by Commission staff.\" In Re GTE Telephone Operating Companies,
Memorandum Opinion and Order, 9 F.C.C.R. 2588, 2588 ¶ 4 (1994). See also
BellSouth, 8 F.C.C.R. at 8129 ¶ 8. \"\[A\]udit reports \[that\] contain
substantial raw data and other information provided by various \[Local
Exchange Carriers\] that has not been summarized, reformatted, or
otherwise edited,\" the Commission has explained, \"\[are\] not
routinely available for inspection.\" Platt, 5 F.C.C.R. at 5742 ¶ 6. The
Commission\'s view has been that the release of raw audit data \"would
likely impair the Commission\'s ability to obtain necessary information
in the future.\" Rafferty, 5 F.C.C.R. at 4138 ¶ 2. Where the Commission
has ordered the release of confidential financial information even if
there is the possibility of competitive harm as a result, the occasions
appear to have been confined to an adjudication, rulemaking, or a rate
proceeding in which a party has placed its financial condition at
issue.[^21]

Qwest and amicus United States Telecom Association point out that audits
\"are not voluntary, afford no statutory right of public participation,
and have historically involved\" only the Commission and the entity
being audited. Consistent with these concerns, the Commission, has
applied its Confidential Information Policy strictly, allowing
exceptions in audits and related proceedings only for release of
summaries of audit data that do not reveal \"competitively sensitive
materials.\" Confidential Information Policy, 13 F.C.C.R. at 24824 ¶ 9.
While the Commission states that its Order establishes no \"precedent
that compromises the integrity of the audit process,\" Order, 15
F.C.C.R. at 1790 ¶ 11, the Commission\'s rulings, regulations, and
Confidential Information Policy reflect a different approach. As applied
by the Commission, the exceptional circumstances considered in the
Confidential Information Policy for audits and in Commission rulings
appear to have been confined to release of summary audit data.

Still, the unprecedented nature of the Commission\'s Order does not
itself demonstrate arbitrariness. See Capital Net-work Sys., Inc. v.
FCC, 28 F.3d 201, 204-06 (D.C. Cir. 1994). But, in view of the policy by
which the Commission has constrained the exercise of its discretion
under § 220(f), its decision to release Qwest\'s raw audit data to its
competitors likely would be arbitrary and capricious if the Commission
failed to explain how it reached the conclusions that (1) the raw audit
data is \"otherwise not highly commercially sensitive,\" and (2)
\"disclosure is justified by significant public interest factors.\"
Confidential Information Policy, 13 F.C.C.R at 24849 ¶ 55. See also 47
C.F.R. § 0.457(d).

In addressing Qwest\'s claims of harm, the Commission determined that
its protective order, as amended, would ensure that any competitive harm
is minimal. See Order, 15 F.C.C.R. at 1790 ¶ 12. This reasoning
followed, the Commission concluded, because disclosure was for the
limited purpose of responding to Issue 2 as to sampled items not found,
unidentified, or found in another location. See id. This is not the same
as finding that Qwest\'s raw data is \"otherwise not highly commercially
sensitive,\" or a finding that release of the data would not adversely
affect Qwest\'s competitive position. Confidential Information Policy,
13 F.C.C.R. at 24849 ¶ 55. Indeed, the Commission appears to acknowledge
that the data is commercially sensitive, rationalizing release on the
ground that the protective order ensures against competitive harm or
ensures that such harm would be minimal.

In concluding that the public interest outweighs any potential
competitive harm to the RBOCs, the Commission observed that the RBOCs
raised issues that the auditors\' rescoring was not done correctly, and
that the previously released summaries of the auditors\' general
procedures were insufficient to elicit useful information, which the
Commission defined in terms of being able to comment on how the
auditors\' general procedures were actually implemented. See Order, 15
F.C.C.R. at 1789 ¶ 9. Observing that it has \"rarely, if ever, sought
public comment on its auditors\' methodology and findings,\" the
Commission stated that it \"was sufficiently concerned about the issues
surrounding the audits to invite public comment,\" and that broader
comment \"will greatly assist\" the Commission in resolving the issues.
Id. at 1790 ¶ 11. Advising on appeal that the focus of Issue 2 involving
audit methodology is unprecedented, the Commission repeats that
\"unusual events call for an atypical response.\"

Missing from the Commission\'s decision is a discussion of why such an
unprecedented release of confidential audit information is required for
purposes of Issue 2. The Commission stated that \"useful information
about the accuracy and validity of the audits\" could not be obtained
\"unless commenters were allowed to examine how those general procedures
were actually implemented when the auditors decided whether rescoring
was appropriate.\" Id. at 1789 ¶ 9. But it is unclear why this is so.
The Deloitte & Touche analysis submitted by Qwest, for example, appears
to suggest that the sampling methodology could be evaluated in
theoretical terms as applied to hypothetical situations or to a
composite of raw data without identifying an individual RBOC\'s
sensitive commercial information. Other ways of avoiding the release of
raw audit data to competitors might be equally effective for the
Commission\'s purposes. Or, at least on the basis of the record, the
court cannot tell that other ways would not be equally effective. Before
invoking its \"rare case\" exception to its nondisclosure policy, the
Commission must consider plausible alternatives and discount them before
resorting to the release of raw audit data. Otherwise, Qwest\'s claim
that the Order represents a standardless exemption from the
Commission\'s policy and precedent gains force. A response that the
protective order adequately protects Qwest against competitive injury
misses the mark. The Commission must explain why only the release of raw
audit data will achieve meaningful public comment. In submitting audit
data, Qwest was entitled to rely on the Commission\'s announced policy
and precedent on how it would handle confidential audit information.
Qwest is similarly entitled to assurances that the unprecedented
disclosures will be consistent with the standards that the Commission
has set for itself and that the invocation of the \"rare case\"
exception under Paragraph 55 is warranted. See Motor Vehicles Mfrs.
Ass\'n v. State Farm Auto. Ins. Co., 463 U.S. 29, 43 (1983).

Accordingly, we deny the petition in part, and we remand the case to the
Commission for further consideration.

[^1]: U S West Communications, Inc., which filed the petition for
    review, is a wholly-owned subsidiary of U S West, Inc. During the
    pendency of this appeal, U S West, Inc. merged and became Qwest
    Communications International, Inc. Accordingly, we refer to Qwest as
    the petitioner.

[^2]: In view of our disposition of the Commission\'s reliance on §
    220(f), we do not address the Commission\'s reliance on § 154(j), 47
    U.S.C. § 154(j) (1994). See Order, 15 F.C.C.R. at 1788 ¶ 8 & n.23.

[^3]: The seven RBOCs were Ameritech, Bell Atlantic, BellSouth, NYNEX,
    Pacific Bell, Southwestern Bell, and U S West Telephone Companies.
    See Public Notice, The Accounting Safeguards Division Releases
    Information Concerning Audit Procedures for Considering Requests by
    the Regional Bell Operating Companies To Reclassify or \"Rescore\"
    Field Audit Findings of Their Continuing Property Records, 14
    F.C.C.R. 6243, 6243 (1999). The hard-wired central office equipment
    constitutes approximately one-fourth of the RBOCs\' total capital
    investment. See Press Release, FCC Releases Audit Reports on RBOCs\'
    Property Records, Feb. 25, 1999 (\"FCC Press Release\").

[^4]: See FCC Press Release. The audit indicated \"that approximately 11
    percent of the \[RBOCs\'\] equipment could not be found, and
    approximately 14 percent was either unverifiable or found in another
    location.\" Order, 15 F.C.C.R. at 1786 ¶ 3.

[^5]: In re U S West Telephone Operating Companies\' Continuing Property
    Records Audit, Order, 14 F.C.C.R. 5731, 5827 (1999) (Commissioner
    Tristani, issuing separate statement).

[^6]: Qwest\'s individualized audit report indicated that of the 1188
    hard-wired equipment-item records randomly sampled and \"scored\"
    for the audit, 294 (24.7% of the sampled items) \"contained
    substantive deficiencies and did not comply with the Commission\'s
    rules.\" Id. at 5736 ¶ 3. See also id. at 5743 ¶ 21. Of the 294
    deficient records, 152 (12.79% of the sampled items) described
    equipment that could not be verified against the record; 123 (10.35%
    of the sampled items) described equipment that could not be found;
    and 19 (1.60% of the sampled items) described equipment that could
    only partially be located. See id.

[^7]: NOI, 14 F.C.C.R. at 7021 ¶ 6. Commissioner Furchtgott-Roth
    indicated apparent agreement with some of the RBOCs\' criticisms of
    the audit\'s methodology, process, and overall conclusions. See In
    re U S West Telephone Operating Companies\' Continuing Property
    Records Audit, Order, 14 F.C.C.R. at 5832-35 (Commissioner
    Furchtgott-Roth, dissenting in part).

[^8]: See FCC Press Release.

[^9]: MCI sought the release of three types of information:

    \[1\] any materials that the RBOCs have submitted to the

    \[Bureau\] to explain why hard-wired \[central office\] equipment

    items were not found by the auditors or to support claims that

    items in the audit sample should be \"rescored.\" \... \[This

    includes\] narrative explanations and supporting documentation

    such as invoices, telephone equipment orders, property record

    input forms, engineering drawings, and photographs\[;\] \[2\] any

    audit workpapers generated by \[Bureau\] staff during the

    course of the audits that show or support the item-by-item

    scoring of the items in the audit sample\[;\] \[and 3\] \[Continuing

    Property Records\] detail (vintage, description, etc.) for any

    items scored \"partially found,\" \"not found,\" or \"not
    verifiable\"

    at any time during the audit process.

    MCI stated that release of the requested raw data was crucial for
    responding to the questions asked in the NOI, particularly Issue 2.

[^10]: In a footnote, the Commission cited § 154(j) as an alternate
    source of its authority. See Order, 15 F.C.C.R. at 1788 n.23.

[^11]: Noting that MCI had not requested disclosure of materials
    concerning undetailed investment, the Commission decided not to
    require access to such information. See id. at 1791 ¶ 14.

[^12]: The court granted Qwest\'s motion for a stay pending review.

[^13]: Section 1905 provides in relevant part:

    Whoever, being an officer or employee of the United States or

    of any department or agency thereof, \... publishes, divulges,

    discloses, or makes known in any manner or to any extent not

    authorized by law any information coming to him \[or her\] in

    the course of his \[or her\] employment or official duties or by

    reason of any examination or investigation made by, or return,

    report or record made to or filed with, such department \... ,

    which information concerns or relates to \[ \] trade secrets \...;

    or permits any income return or copy thereof or any book

    containing any abstract or particulars thereof to be seen or

    examined by any person except as provided by law; shall be

    fined under this title, or imprisoned not more than one year, or

    both; and shall be removed from office or employment.

    18 U.S.C. § 1905 (emphasis added).

[^14]: Among the possible sources were the Federal Property and
    Administrative Services Act of 1949, Titles VI and VII of the Civil
    Rights Act of 1964, and the Equal Employment Opportunity Act of
    1972. See Chrysler, 441 U.S. at 304-05 & nn.34-36.

[^15]: The other provisions of § 220 are not directly applicable to this
    analysis. Section 220(b) concerns depreciation charges, see 47
    U.S.C. § 220(b), while subsection (d) establishes a penalty against
    carriers for failure to comply with the record-keeping provisions,
    see id. § 220(d), and subsection (e) establishes a penalty for false
    entries in, and destruction or alteration of, records by any
    carrier. See id. § 220(e).

[^16]: See, for example, § 20(7)(f) of the Interstate Commerce Act of
    1887, 49 U.S.C. § 20(7)(f) (1976) (current version at 49 U.S.C. §§
    11904, 14908, 16103 (1994 ed. Supp. I 1995)), which is the apparent
    model for § 220(f).

[^17]: Bartholdi Cable Co., Inc. v. FCC, 114 F.3d 274 (D.C. Cir. 1997),
    is not to the contrary, as Qwest suggests. Indeed, in Bartholdi, the
    court did not reach the statutory question that is at issue here.
    See id. at 281-82.

[^18]: Although Qwest states in its briefs that the \"sole\" issue on
    appeal is whether the Communications Act authorizes the Commission
    to release trade secrets, and arguably the court is entitled to take
    Qwest at its word, see Fed. R. App. P. 28(a)(9); J.S.G. Boggs v.
    Rubin, 161 F.3d 37, 42 (D.C. Cir. 1998) (citing Carducci v. Regan,
    714 F.2d 171 (D.C. Cir. 1983)); Adams v. Hinchman, 154 F.3d 420, 424
    n.7 (D.C. Cir. 1998), the arguments in Qwest\'s briefs suffice to
    preserve a second issue for appeal. The Commission has addressed
    Qwest\'s contention on the assumption that the court might conclude
    that the contention was properly preserved, and hence there is no
    prejudice to the Commission as a result of Qwest\'s failure to
    clearly designate in its briefs its alternative contention. See Fed.
    R. App. P. 28(a)(5), (8).

[^19]: Before the Commission, Qwest argued that the release decision was
    not only contrary to statute, but \"contrary to the Commission\'s
    own precedent regarding treatment of audit information\" and would
    adversely affect both Qwest\'s competitive position, and the
    Commission\'s ability to perform future audits. In addition, Qwest
    asserted that release breached the understanding and expectation
    that it had in submitting such information to the
    Commission\--namely, that the information would be kept in
    confidence.

[^20]: See, e.g., In Re BellSouth Corporation BellSouth
    Telecommunications, Inc., Memorandum Opinion and Order, 8 F.C.C.R.
    8129, 8130 ¶ 7 (1993) (\"BellSouth\"); In Re Martha H. Platt,
    Memorandum Opinion and Order, 5 F.C.C.R. 5742, 5742 ¶ 6 (1990)
    (\"Platt\"); In Re Scott J. Rafferty, Memorandum Opinion and Order,
    5 F.C.C.R. 4138, 4138 ¶ 3 (1990) (\"Rafferty\"); In Re Western Union
    Telegraph Company, Memorandum Opinion and Order, 2 F.C.C.R. 4485,
    4486 ¶ 10 (1987).

[^21]: See, e.g., In re Alaskans for Better Media, Memorandum Opinion
    and Order, 70 F.C.C.2d 1366 (1979); In re Classical Radio for
    Connecticut, Inc. and WTIC-FM Listeners\' Guild, Memorandum Opinion
    and Order, 69 F.C.C.2d 1517 (1978); In re NTV Enterprises, Inc.,
    Memorandum Opinion and Order, 62 F.C.C.2d 722 (1976).