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*****************************************************                    DISSENTING STATEMENT OF
              COMMISSIONER HAROLD FURCHTGOTT-ROTH

      Re: First report and Order and Further Notice of Proposed Rulemaking, Truth-in-Billing and
     Billing Format; (CC Docket 98-170).  

     I dissent from the adoption of this item and write separately to express my many
concerns about this agency's direct involvement in commercial billing issues.  I have deep
reservations about the extent of the Commission's authority over the commercial relationship
between carriers and their customers.  In particular, I am not convinced that the Commission
possesses specific statutory authority to regulate a bill's description of that commercial
relationship, or even the truthfulness of that communication.  Apart from the question of
statutory authority, I also view this exercise as an unwise use of limited Commission resources.  

     With particular respect to regulation of federal charges, I noted in the original Notice of
Proposed Rulemaking my apprehension that carriers might be pressured, even indirectly, to
remove or alter current line items or charges.  I also objected to any suggestion that carriers had
actually misrepresented any facts related to federal charges.  Indeed, as I have stated before,
while the government does not require a particular method of recovery, it has mandated payment
of the underlying contributions by the carriers.   Regrettably, today's Order assumes that some
carriers have misrepresented facts on bills and that the Commission thus must take prescriptive
action to address those misrepresentations.   I disagree with the premise that any carrier has
acted to mislead its consumers.  

     In fact, it is this agency's attempt to distance itself from certain federal charges that
qualifies as misleading.  Despite its best efforts, the Commission cannot deny that the underlying
charges to the carriers are mandated by the federal government, even if the method of recovery
has not been regulated.  A "full and non-misleading" "Truth-In-Billing" Order would recognize
the rights of carriers to inform their customers that these charges are indeed federal requirements
adopted by the FCC, and that the Commission expressly allows carriers to recover these charges
directly from consumers.  As described below, it is this Commission's desire to hide that very
fact from consumers that has precipitated this "Half-Truth in Billing" Order. 

     Regulation of descriptions for charges when there is nothing factually inaccurate about
the carriers' statements --  but their description does not reflect the government's preferred
explanation of the charges -- raises grave First Amendment questions.  This Order's attempt to
regulate speech regarding the universal service charges involves, in my view, censorship of
speech integrally related to a political dispute over social policy and taxation.  Given the lack of
clear statutory authority to adopt these regulations, the prudent course would have been to avoid
-- and not to create -- these constitutional problems.

I.  The Legal Authority for These Billing Requirements Is Questionable, And The Order's
Underlying Assumptions Contradict The Telecommunications Act's Deregulatory Mandate.

     I have serious questions about the extent of the Commission's legal authority to regulate
the commercial relationship between carriers and their customers, as well as the wisdom of this
use of limited Commission resources.  The majority relies in part on its authority under section
258 of the Act to adopt verification requirements to deter slamming.  The majority contends that
these requirements are "intended to function as a critical component of the Commission's
verification procedures."  Supra at para. 23.  But the Commission only recently adopted
verification procedures, along with liability rules, that have only recently started to take effect. 
Before enacting these additional burdens on carriers, perhaps the Commission should have tried
to determine the adequacy of its existing verification requirements.  

     Moreover, as the majority acknowledges, the Commission has even less statutory
authority for the regulations regarding standardized federal labels than it does for its verification
rules.  Id. at para. 21 ("We recognize, however, that the standardized label guideline rests
exclusively on our statutory authority under section 201(b) and therefore is limited to interstate
services.")   Section 201(b) simply provides:  "All charges, practices, classifications, and
regulations for and in connection with such communication service, shall be just and reasonable
. . . ."  The majority explains that the "principles and guidelines established in this Order are
intended to define more specifically what would constitute a violation of section 201 in the
billing context for the covered carriers."  Supra at para. 24.  But with regard to the various
federal line items, it is not clear to me that any of the cited line items or their corresponding
charges are either unjust or unreasonable.  

     For example, the majority states that carriers have labelled the fee related to universal
service as "Universal Connectivity Charge," "Federal Universal Service Fee," "Carrier Universal
Service Charge," and "Local Service Subsidy."  Id. at para. 51.  The Commission does not claim
that any of these labels are inherently unjust or unreasonable; indeed, it does not even claim that
any of the labels in the record are actually misleading.  Neither does the Commission assert that
the corresponding charges, which have ranged from $.93 per bill to 5% of the customers net
interstate and international charges, are unjust or unreasonable.  Given the utter failure to find
either the labels or the charges "unjust or unreasonable," it is difficult to see how the regulations
concerning standardized labels could be adopted since section 201(b) is the sole source of
authority cited by the Order.

     In addition, I disagree with the premise of the Order that "[e]ven in competitive markets,
. . . disclosure rules are needed to protect consumers."  Id. at para. 7; see also id. at para. 6 ("[A]t
this time, competitive pressures alone do not ensure that consumers receive clear, informative
and consumer-friendly telephone bills from certain carriers.").  I do not believe that increased
competition can ever be the impetus for further regulatory action by this agency.  Indeed,
Congress intended just the opposite.  Both the Section 10 forbearance requirements and the
Section 11 biennial review provisions are founded on the assumption that as competition
increases, the need for regulation decreases.  Through these and other provisions of the 1996
Act, Congress made clear its intention that the Commission remove regulations as competition
develops.  We are not supposed to increase regulation in response to competition, as this Order
does.

II.  This "Truth-in-Billing" Order is Internally Inconsistent, Arbitrary, and Misleading.

     This Order is riddled with internal inconsistencies, arbitrary distinctions, and misleading
statements.  For example, I am still confused as to which billing requirements apply to wireless
carriers and which do not.  These requirements, of course, are not a small matter.  The Order
states that the "broad principles that we adopt to promote truth-in-billing should apply to all
telecommunications carriers, both wireline and wireless."  Supra at para. 12 (emphasis added). 
The majority explains that these "principles" apply to all carriers because they "represent
fundamental statements of fair and reasonable practices."  Id.  The majority concludes that
"[l]ike wireline carriers, wireless carriers also should be fair, clear, and truthful in their billing
practices.  Consumers deserve no less."  Id.   Thus, the majority concludes that these principles
are enforceable as just and reasonable practices under section 201(b).  Supra at para. 24 ("The
principles and guidelines established in this Order are intended to define more specifically what
would constitute a violation of section 201(b) in the billing context for the covered carriers.")

     Comparison of the principles with the actual rules is an interesting exercise.  The
Commission's second principle, clearly applicable to wireless carriers, requires "that bills
contain full and non-misleading descriptions of charges that appear therein."  Id. at para. 5.  The
rule implementing that principle, technically applicable only to wireline carriers, requires that
"[c]harges contained on telephone bills must be accompanied by a brief, clear, non-misleading,
plain language description of the service or services rendered."  The principle is, of course,
virtually indistinguishable from the rule; it is hard to see how the obligations could differ. But,
wireless carriers are expressly exempted from the rule.  See id. at Appendix A ("[R]ule
64.2001(b) . . . shall not apply to providers of Commercial Mobile Radio Service.").  Is that
some indication these obligations should not, under any circumstances, apply to wireless
providers?  These conflicting statements make it unclear whether the bills of wireless providers
must contain full and non-misleading descriptions, or not.  While full and non-misleading
description are not required of wireless providers under the rule itself, it appears that wireless
carriers would be in violation of a fundamental fair and reasonable practices if they nonetheless
failed to provide them.  But if the descriptions are required in any event, why has the
Commission bothered to exempt wireless carriers from the implementing regulation?  
 
     In short, when one compares the text of the "principle" with the text of the "rule" based
on that principle, it is clear that they are almost identical.  Yet, the majority apparently gives this
distinction some meaning, as it chooses to apply the principle to wireless carriers but
simultaneously exempts wireless carriers from the rule.  At the same time, the majority refuses
to explain exactly what effect, if any, this exemption will have.  Are wireless carriers required to
provide full and non-misleading descriptions of charges on their bills or not?  Can a consumer
file a complaint against a wireless carrier for failing to provide such a description or not?   These
are not unreasonable questions, the answers to which should be readily apparent from a "clear
and non-misleading" FCC Order.  Wireless carriers, and their consumers, are entitled to know
what requirements are being placed on them by this agency.

      The only real distinction that I can discern between the principle applicable to wireless
carriers and the rule that exempts them is a practical one relating to the proper pleading of a
complaint against a wireless carrier.  A consumer who objects to a wireless carrier's failure to
include full and non-misleading descriptions of the charges on his bill and who files a complaint
under rule 64.2001(b) will be denied relief.  The same complaint filed against a wireless carrier
as an unreasonable practice pursuant to section 201(b), however,  would necessarily succeed, as
the Commission has already determined that including full and non-misleading descriptions of
the charges on a bill is "fundamental to a carrier's obligation of reasonable charges and
practices."  Supra at para. 37.  The majority goes even further in stating that "we find it difficult
to imagine any scenario where payment could be lawfully demanded on the basis of inaccurate,
incomplete, or misleading information."  Id.  

     Neither does this essentially ephemeral distinction between principles and rules alter the
burden of proof.  The majority has already determined that its billing principles are based on
fundamental fairness and, as such, always apply.  How could the Commission allow wireless
carriers to fail to provide fair and reasonable practices?  Could the Commission decide that
wireless consumers "deserve less" than "fundamental[ly] fair and reasonable practices?"  I doubt
it.  Would a defending wireless carrier instead need to demonstrate that the provision of full and
non-misleading descriptions is not necessarily a fundamentally fair and reasonable practice?  If a
carrier could ever make such a showing, then the provision of "full and non-misleading
descriptions" would not always be necessary to maintain fair and reasonable practices.  But the
majority's very justification for adopting these principles is that they are "fundamental principles
of fairness to consumers and just and reasonable practices by carriers."  Id. at para. 5.  Admitting
that such a showing could be made would thus undermine the justifications for adopting the
principles in the first place.  By refusing to clarify that such a complaint against wireless carriers
must be accepted and instead maintaining the exemption for wireless carriers, the Commission
signals that -- at least in the wireless context -- consumers indeed could "deserve less" than "fair,
clear, and truthful . . . billing practices."  Id. at para. 12.  

     I am astonished that the majority would go to such extremes to exempt an industry from
a particular rule, while still requiring compliance with an identical "principle" as a reasonable
practice.  For what purpose are they making this distinction?  The problem appears to be, in part,
the result of the Commission's vague use of the word "principles" to describe specific
requirements.  Moreover, these "principles" are not voluntary, but enforceable as fair practices
under section 201(b).  Supra at n. 14.  For all practical purposes, then, these principles are rules
of conduct, and materially indistinguishable from the actual rules adopted.  
     I am left to conclude that this Order is more than just confusing due to its internal
inconsistencies; it is intentionally "misleading," at least to the extent that it implies that some of
these requirements do not actually apply to wireless carriers.  Either that, or it has simply failed
to be "full and non-misleading" in informing wireless consumers that their rights under section
201(b) have been diminished and that a complaint alleging that a carrier has failed to conform to
practices that the Commission has declared fundamentally fair may be denied on its face.  Surely
consumers, and all of the industries to which these regulations apply, deserve more than the
"half truths" and doublespeak of this Order.  

     Similarly, it seems arbitrary for the majority to conclude that wireless carriers should be
subject to one of the rules implementing the second principle -- namely, that the requirement of
standardized labels for charges resulting from federal regulatory action, supra at para. 18 --
while at the same time exempting them from the guideline/rule that merely repeats the general
principle.  Compare id. at para. 18 with Appendix A.  If the general "principle of full and non-
misleading descriptions also extends to carrier charges purportedly associated with federal
regulatory action," id. at para 49, and wireless carriers must use standardized labels in the
interest of "full and non-misleading descriptions," then how can the Commission simultaneously
exempt wireless carriers from rule 64.2001(b)'s  implementing requirement that bills contain
"brief, clear, non-misleading, plain language descriptions"?  Should not a carrier be subject to a
more general requirement before it is subject to a specific rule implementing the requirement? 
Again, this Order is at best "confusing" and at worst arbitrary in its application and justification
of its regulatory scheme.

     Finally, I believe that this Order is "misleading" -- and certainly not "full and non-
misleading" -- in refusing to recognize the rights of carriers to inform their customers that the
underlying federal charges are indeed federal requirements, mandated by the FCC.  The
Commission expressly allows carriers to recover the amounts associated with these charges
directly from consumers.  Despite its claims to the contrary, the charges appearing on consumers'
bills are the result of this agency's requirement that carriers "contribute" to the universal service
fund at a specified level.  Recognizing our own role in these charges, now appearing on
consumers' bills, would be the truly "non-misleading" approach.  

     In sum, I can only conclude that the Commission has been arbitrary either: (i) in the
adoption of these requirements, since it refuses to apply its understanding of "fundamentally fair
and reasonable practices" across the board to all carriers; or (ii) in the application of its rules
only to  particular carriers, while requiring all other carriers to abide by identical principles. 
Either way, it appears that the Commission has acted arbitrarily and capriciously in adopting and
applying these binding principles and rules. Moreover,  this Order is at least as "misleading" and
"confusing" as many of the charges and practices about which the Commission complains.  It is
ironic indeed, that this agency's "truth-in-billing" initiative could not even pass its own standard
for "brief, clear, non-misleading, plain language description[s]" with regard to the regulations
that it imposes.


III.  The History of the Universal Service Program and "Truth-In-Billing"

     What disturbs me most about this Order are the Commission's underlying motives for
regulating carriers' descriptions of federal charges:  namely, that the majority does not want to be
associated with the taxes they themselves have established, and that they are angry with carriers
who have informed consumers about the tax and the majority's involvement with it.  As one high
ranking Commission official warned at the time these taxes were originally imposed, "Carriers
better sharpen their pencils and think twice about what they're putting on customers' bills and
attributing to government action." Some MCI Customers Seeing Surge in Phone Bills,
Washington Post, January 31, 1998 at page H-3.    

     This story begins with the Commission's development of the schools and libraries
program.  In a May 1997 Order, the Commission "requir[ed] phone companies [to] make . . .[a
universal service] 'contribution' for the social good of wiring schools and libraries to the internet.
. . . [T]he companies will have to hand over $2.25 billion in extra charges for the wiring cause." 
New Phone Tax, Wall Street Journal, December 9, 1997.    

     In December of 1997, I first noted my concern that the Commission was pressuring
carriers not to place line-items for these charges on their consumers' bills.  At the time, it was
widely reported that the "Commission prefers that [universal service costs] be rolled into rates,"
and that the FCC was irate with companies that planned to pass this tax through to consumers:

          The FCC is angry at companies that plan to disclose those costs to customers as a
     line item on the monthly bill. "They don't want us to call it a tax," [said one
     industry representative].  "But that's what it is."    

A New Tax for the New Year, The Washington Post, December 2, 1997.  

     I objected to the Commission's efforts to hide this tax from consumers, making clear that
"I do not share such a preference or endorse such efforts.  . . .  No carrier should have its billing
information restricted or limited by the Commission." Indeed, I believe that consumers have a
right to know when they are paying federal charges; the Commission should not discourage
companies from placing federal universal service charges on their bills.   Line items for new
taxes are a means of letting customers understand why rates are not lower than they would have
been absent the new taxes.  These line items are not a means of promoting "hidden rate
increases," as some have called it.  To the contrary, the only "hidden rate increases" here are
those that result from obscured and unexplained taxes.

     For consumers, the issue is not just whether prices have gone up or down. The question is
whether prices would have been lower without the new tax. Only in Washington could explicit
disclosure of this new tax be considered deceptive.  Depriving consumers of  information about
new taxes demoralizes a democratic society.  

     Despite the benefits of fully informing consumers about government-mandated charges,
"[t]he administration, which has touted the [schools and libraries] program as the centerpiece of
President Clinton's education goals, would rather that customers not know."  Itemized list of
phone fees hotly debated, USA Today December 15, 1997 at B-12.  So, it was reported, "the
FCC   . . . had been pushing hard to get major long-distance carriers to agree not to put line-item
charges on residential phone bills at least until July."  FCC Postpones Ruling on Internet
Connections, Washington Post, December 13, 1997 at F-9.  These efforts were designed to
"mask [the tax] for a while, to take some pressure off from the Hill." Id.  For the first few months
of the program, the Commission even "decided to reduce the [initial universal service] charges
after the carriers said the fee could lead to higher rates and after AT&T and MCI threatened to
specify the charge on the bills they send to customers."  Fund to Aid Technology in Schools
Facing Big FCC Cuts, New York Times, December 15, 1997 at D-1.  Apparently, "the agency
worried that if millions of Americans began seeing such fees on their bills, popular support for
deregulating the telecommunications industry could begin to erode."  Id.  At this point, most
large carriers began to place the line items only on bills for commercial customers, declining to
specify the charges on bills for residential customers.

     Last spring, the general issue of line items for schools and libraries "contributions" arose
again when the Commission began to consider raising the funding level for the schools and
libraries program.  By then, many carriers had announced that they would recover these costs
through separate line items on individual consumers, such as residential customers.  Again, these
announcements angered some at the Commission.  See, e.g., Statement of Chairman William E.
Kennard on AT&T Long Distance Announcement, May 28, 1998 ("AT&T's announcement is
premature, unwarranted and inconsistent with their own public proposals to the FCC.  This
announcement suggests that AT&T will raise rates to pay for universal service."); "AT&T adding
surcharges; FCC Furious," USA Today, May 29, 1998 at 2 ("The FCC is livid."). 

     Immediately after carriers announced their intent to place line items on residential bills,
the Commission announced its plan to initiate the instant "truth-in-billing" proceeding. Schools,
Libraries, Health Care Discounts Program Faces More Scrutiny, Washington Report, June 15,
1998 (Commissioners "said they plan to adopt a notice of proposed rulemaking to help clear up
consumer confusion about new rates and fees attributed to the discount programs").

     Even worse, in the view of some at the Commission, opponents of the tax were blaming
not just the Commission for the imposition new consumer charges, but also the current
Administration, which strongly supported the schools and libraries program.  As one news
magazine reported:

          [The Vice President's] biggest high-tech achievement to date is a program to wire
     every classroom and library in the country.  . . .  But right now the program is
     under assault from congress as an out of control entitlement engineered by an out-
     of-control bureaucracy.  Which does not do much for Gore's reputation as the
     architect of reinventing government.  Even more ominous is another threat:
     starting this summer phone companies that were ordered to pay for the program
     are threatening to add a new charge to the long distance bills of residential
     consumers.  Critics are already calling it the Gore Tax.

TIME, Karen Tumulty & John Dickerson, Gore's Costly High Wire Act,at 52, May, 25 1998. 
Others even claimed the schools and libraries program had been initiated in order to enhance the
chances of possible presidential candidates, arguing that it was

          nothing less than a stealth campaign to enhance Gore's presidential prospects. 
     "This was not to be a political cash-grant program so that Al Gore can run for
     President, [one Congressman] complain[ed]."    

Id. at 55.  

     Toward the end of 1998, an investigation by the United States House of Representatives
confirmed the Commission's attempt to prevent carriers from associating the federal government
with these charges:

          It is clear that the FCC pressured and threatened long distance carriers in an
     inappropriate manner from taking action regarding how long distance carriers
     would recover their contributions to universal service from their telephone
     subscribers.  The FCC was apparently motivated to exert such pressure to fulfill
     the Administration's political agenda to connect every classroom in the United
     States to the Internet by the Year 2000, and to do so while hiding the costs of
     their agenda from the American public.

Hill Report Finds FCC Threats, political Acts Against AT&T and MCI, Communications Daily,
November 30, 1998.  

     At bottom, I fear that this agency has only decided to regulate the description of federal
charges because many carriers went "against the FCC's wishes and itemiz[ed] the phone tax."
New Phone Tax, Wall Street Journal, December 9, 1997. That is not a legitimate reason for
regulation, as either a policy matter or from a First Amendment perspective.  I turn to the First
Amendment issues below.

IV.  The Standardized Labeling Requirements for Universal Service Charges Raise Grave
First Amendment Questions.

     I believe that the "standardized labeling" regulations for universal service charges, in
particular, raise serious questions under the First Amendment.  These regulations involve
censorship of speech integrally related to a political dispute over social policy and taxation.  As
such, I believe they govern speech that is not merely commercial but political as well, and that
they are thus presumptively unconstitutional.  In any event, contrary to the Order's assertions, the
standardized labeling regulations do not pass muster under the test for regulation of purely
commercial speech.

                                A.

     At the outset, some important facts must be clarified.  The Commission repeatedly
emphasizes in this Order that it has "not mandated or limited specific language that carriers
utilize to describe the nature and purpose of [universal service] charges."  Supra at para. at 56. 
The Commission has done precisely that, however, with respect to the labeling of the charges.  It
issues today a proposed list of acceptable words for characterizing the charges on line items and
presumably will issue a final list in the future.  See supra at para. 71.  In addition, this Order
appears to prohibit any line items that indicate the charge is federally-mandated or federally-
imposed.  Surely, this action "limit[s]" the "specific language" that carriers may use when
speaking about the charges.  Conversely, and by necessary implication, the Commission bans all
words other than those on the approved list, including wholly truthful and non-misleading
speech.

     To be sure, the Commission will permit carriers to use additional language to describe
the charge (so long as that description is not "misleading," a limitation discussed below).  But
that does not erase the fact of the restriction on permissible labels.  As the Commission
acknowledges by its direct regulation of the line item as opposed to other text on the bill,
consumers tend more to focus on the line items than on footnoted material at the bottom of the
page.  

     Moreover, the Supreme Court has rejected the argument that limitations on commercial
speech are permissible just because the government leaves open alternative modes of
communication.  See Linmark Associates, Inc. v. Township of Willingboro, 431 U.S. 85, 93-94
(1977) (applying strict scrutiny to ban on commercial speech notwithstanding fact that other
modes of communication were unaffected by the ban); see also Elrod v. Burns, 427 U.S. 347,
373 (1976) ("The loss of First Amendment freedoms, for even minimal periods of time,
unquestionably constitutes irreparable injury."). The Court has also rejected the argument that
content-based restrictions -- which these regulations undoubtedly are -- become permissible
when speech alternatives exist.  See Consolidated Edison Co. v. New York, 447 U.S.530, 541
(1980) ("[W]e have consistently rejected the suggestion that a government may justify a
content-based prohibition by showing that speakers have alternative means of expression.")
(citing cases). 

     It is also plain from today's Order that any additional language that carriers may wish to
include must be "non-misleading" in the Commission's eyes.  See supra at para. 55.  If the
Commission believes that it would be "deceptive" to tie the charge to the Commission or the
federal government, as it apparently does, then the companies have been afforded no meaningful
outlet at all.  See id. ("We would not consider a description of [the universal service] charge as
being 'mandated' by the Commission or the federal government to be accurate.").  It is
undeniable, as a matter of fact, that the charge has been "mandated" by the Commission.  The
only possible question could be upon whom the Commission directly levied the charges.  Thus,
the Commission's argument seems to hang on the slim reed that omission of the fact that the
charges were directly levied on carriers, as opposed to being levied directly on consumers, is
"misleading" in that it does not expressly tie accountability for the charges to the carriers. 
Indeed, it is not even clear from the face of this Order that carriers could simply state that they
were recovering from consumers charges imposed upon them by the Commission -- an entirely
accurate statement, even on the Commission's theory of the charges.

     To my mind, the assignment of responsibility for these consumer charges seems less a
question of pure fact or "truth" than opinion.  As with most questions of opinion, it is one about
which reasonable people can disagree.  Some carriers possess a reasonable belief that the
Commission, by levying a fee on carriers, was the "but-for" cause of the appearance of these
charges on consumers' bills.  In a competitive market, they say, costs are by definition passed
through to consumers, and so the imposition of new regulatory charges on carriers is tantamount
to a charge on consumers.   As long as the carriers are subject to the Commission's
understanding of "misleading" statements with respect to the charges, however, they will
presumably be forbidden by this agency from expressing to consumers their view that the fees
imposed in connection with the universal service fund are the result of government action and
that ultimate responsibility for these charges rests with the government.  By choosing the very
words that may be used to label federal charges, these regulations "attempt to give one side of a
debatable public question" -- here, the government view's about who should be held responsible
for these charges -- "an advantage in expressing its view to the people."  City of Ladue v. Gilleo,
512 U.S. 43, 50 (1994).

     Indeed, given that carriers who highlight the charges must employ terms that prevent
them from disclaiming responsibility for the charges, carriers have every incentive to omit the
line-item altogether.  Faced with a choice between expressly identifying the charges on bills in
the government's terms and not raising the issue at all, carriers "might well conclude that, under
these circumstances, the safe course is to avoid controversy, thereby reducing the free flow of
information and ideas that the First Amendment seeks to promote." Pacific Electric & Gas Co.
v. California, 475 U.S. 1, 14 (1986) (internal citation and quotation omitted).  In this way, the
regulations discourage speech about the charges altogether.

     In sum, these regulations undoubtedly constitute a limitation on the speech that may
appear on line items in bills: legally permissible language is confined to that which appears on
the Commission's list.  Conversely, these regulations prohibit all line-item speech regarding the
charges that does not appear on the list.  While the Commission loudly proclaims that carriers
are "free" to provide descriptions of the charges in addition to the standardized labels, it is clear
that those descriptions will be subject to rejection by the Commission on the basis that they
"untruthfully" point the finger of blame for the charges at the federal government.  Finally, given
that speaking about the charges on line items requires the use of the government's terminology,
the scheme deters carriers from speaking in the first place.  For the reasons that follow, this
approach to the regulation of carriers' speech is in significant tension with the First Amendment.


                                B.

     In this Order, the Commission applies the First Amendment test for limitations on
commercial speech first established in Central Hudson.  That test, however, has been further
developed and strengthened in subsequent cases.  As I read commercial speech doctrine,  the
regulations are of dubious validity.  

                                1.

     "It is well established that '[t]he party seeking to uphold a restriction on commercial
speech carries the burden of justifying it.' "Edenfield v. Fane, 507 U.S. 761, 770 (1993) (quoting
Bolger v. Youngs Drug Products Corp., 463 U.S. 60, 71 n. 20 (1983)).  Specifically, the
government must "demonstrate that the harms it recites are real and that its restriction will in
fact alleviate them to a material degree."  Edenfield v. Fane, 507 U.S. 761, 771 (1993)
(emphasis added).  The Supreme Court has expressly "cautioned that this requirement [is]
critical; otherwise, '[government] could with ease restrict commercial speech in the service of
other objectives that could not themselves justify a burden on commercial expression."  Rubin v.
Coors Brewing Co., 514 U.S. 476, 487 (1995) (quoting Edenfield v. Fane, 507 U.S. at 771).
     
     Here, there is no proof sufficient to meet the standard set in Edenfield.  To the contrary,
this Order contains nothing more than unsupported assertions of a theoretical link between the
Commission's action and its effect on the beliefs and resultant behavior of consumers.  Consider
the entirety of the Order's reasoning on this point:

          The proposed regulation will ensure that the labels assigned to charges related to federal
     regulatory action are consistent, understandable, and do not confuse or mislead
     consumers.  In addition, the regulatory scheme will encourage carriers to provide
     consumers with information that will enable them to understand their
     telecommunications bills, and prevent carriers from misleading consumers into believing
     they cannot "shop around" to find carriers that charge less for fees resulting from federal
     regulatory action.

Supra at para. 61.  This paragraph is composed of a string of conclusions -- not a demonstration
of real harm or an explanation of the ways in which the regulatory scheme will
 actually and materially remedy that harm.  

     Specifically, where is the evidence that telephone customers will be perplexed by a
description of the charge as an FCC-mandated, or federally-required, fee?  (I suspect the
American consumer would understand this explanation all too well.)  In fact, there is no record
that any carrier has even used such a label.  See id. at para. 51.  What is the basis for the
assertion that any confusion resulting from the use of the banned labels would result in
consumers' belief that the fee is nonvariable from company to company?  Further, what proof is
there that any such belief that materialized in the minds of consumers would prevent them from
comparing long distance companies on the basis of price?   Finally, what proof is there that the
agency's hand-picked words will in fact, not just in theory -- and materially -- alleviate the
posited harm?  

     Moreover, the Order does not even attempt to tie these various conclusions back to the
"ultimate goal" of the regulation, "ensur[ing] that consumers pay fair and efficient rates."  Id. at
para. 60.  Even if one assumed the soundness of each of the foregoing steps in the Commission's
chain of logic, there is no explanation of how unfair or inefficient prices for telephone service
would result from a consumer propensity not to shop on the basis of universal service charges. 
Does the Commission intend to suggest that it is "unfair" for consumers to pay rates that include
these charges in toto, or that such rates would be "inefficient"?  The Commission cannot mean
that, however, because it expressly permits carriers to pass the charges on in full.  See Federal-
State joint Board on Universal Service, 12 FCC Rcd 8776, 9209 (1997).  Also, the prices
charged by these long distance carriers have been deregulated and are thus by definition
efficient; the Commission itself states that "competition should ensure that [these charges] are
recovered in an appropriate manner."  Supra at para. 54.  I cannot discern any connection in this
Order between consumers' tendency to price shop on the basis of these charges and the ultimate
fairness of rates.

     In short, there is no record to support any of the Commission's suppositions regarding the
way in which these regulations advance its posited goal of fair and efficient prices.  The notion
of consumer confusion from putatively misleading labels, and of the harms resulting from any
such confusion, is entirely conjectural.  The idea that the words selected by the Commission will
cure that confusion is unfounded by any empirical reality.  Nor is there any nexus between the
consumer behavior that the Commission asserts will result from the use of certain labels and the
ultimate goal of ensuring fair prices.  

     As explained above, the "direct advancement" prong "is not satisfied by mere speculation
or conjecture."  Edenfield v. Fane,  507 U.S. at 770; see also 44 Liquormart, Inc. v. Rhode
Island, 517 U.S. 484, 506 (1996) (lead opinion) (rejecting State's argument than ban on alcohol
price advertising advanced its interest in temperance because State adduced "no findings of fact,
or indeed any evidentiary support whatsoever");  Ibanez v. Florida, 512 U.S. 136, 146 (1994) ("If
the protections afforded commercial speech are to retain their force, we cannot allow rote
invocation of the words 'potentially misleading' to supplant the [government's] burden [of
proof]"); Zauderer v. Ohio, 471 U.S. 626, 648 (1985) (rejecting State's asserted interest in ban on
illustrations in advertising by attorneys because "[t]he State's arguments amount to little more
than unsupported assertions;  nowhere does the State cite any evidence or authority of any kind
for its contention"); Linmark Assoc., Inc. v. Willingboro, 431 U.S. at  95-96 (holding that record
did not support respondents' "fears" that certain behavior would result if speech were permitted
and did not confirm the "assumption that proscribing" speech would have the government's
presumed effect).  

     The standardized labeling regulations bear other inadequacies under the "direct
advancement" prong of Central Hudson.  Close examination of the entire scheme reveals that it
is structured so as to preclude direct advancement of the Commission's posited goal.  

     The Commission does not require line items for universal service charges, even for
carriers that choose to recover these charges from end-users.  Carriers who wish to include the
entirety of these charges in their general rates, without breaking them out separately, are free to
do so.  See supra at para. 54 (carriers may decide "whether to include these charges as part of
their rates, or to list the charges in separate line items").  Carriers who take this approach,
however, would be just as able to "mislead" consumers into deciding not to shop around for
providers that absorb more of the cost of the charges; their customers will never know that the
charges are being passed on to them.  Likewise, there would be no way for these customers to
contrast the cost of these charges with those imposed by other carriers, since their bills would
not specify the amount of the charges at all.  If the Commission truly means to further
uniformity and accuracy with respect to universal service charges so that consumers can
compare the charges across bills and shop on that basis, then it makes no sense to permit carriers
to conceal the charges in their general rates.  This critical aspect of the regulations "directly
undermine[s] and counteract[s] [the] effect of" the entire scheme.  Rubin v. Coors Brewing Co.,
514 U.S. at 489.

     Functionally, the lack of a requirement that carriers break out universal service charges
in a separate line item allows any carrier that wishes to opt out of the labeling scheme.  To
qualify for this wholesale exemption, carriers must simply encompass the charges in overall
rates.  There is no requirement of disclosure regarding the existence or nature of the charges for
carriers who elect this course, and there is nothing in the regulations that would prevent all
carriers from doing so.  As a general matter, broad exceptions that appear unrelated to the
government's asserted interest create serious obstacles to an affirmative finding under the "direct
advancement" prong.  See, e.g., Rubin v. Coors Brewing Co., 514 U.S. at 488 (holding that
exceptions to labeling ban on malt beverage alcohol content for other kinds of alcohol rendered
scheme irrational); Valley Broadcasting v. FCC, 107 F.3d 1328, 1334 (9th Cir. 1997) (holding
that exceptions to casino advertising ban for other kinds of gambling undermined purpose of
ban).  It could easily be argued that this functional exception, which could easily swallow the
rule itself, renders the regulatory support for the Commission's purposes "ineffective [and]
remote."  Edenfield v. Fane, 507 U.S. at 769.

     In the specific context of potentially misleading speech, the law also requires that "the
record indicate[] that a particular form or method of advertising has in fact been deceptive"
before it can be regulated consistent with the First Amendment.  In re R.M.J., 455 U.S. 191
(1982) (citing Bates v. State Bar of Arizona, 433 U.S. 350 (1977)).  As explained above, there is
no record proof that the use of labels such as "FCC-mandated" or "governmentally-required" has
actually caused consumers to be misled into thinking that the amount of universal service fees
charged to them was set by law.  I am not aware of any instance of such labels actually being
used -- and the Order certainly does not point to any -- and thus it hard to see what evidence
there could be of actual deception.  In contrast to other commercial speech cases, the record
before us contains no "substantial and well-demonstrated" practice of misuse of certain titles for
the charges.  Friedman v. Rogers, 440 U.S. 1, 15 (1979). 

     For these reasons, I do not think that it can be said that the government has carried its
burden of showing that these regulations will directly and materially advance the goal of
ensuring that consumers will engage in price comparison on the basis of universal service
charges among telephone carriers.  Accordingly, the regulations appear vulnerable to
invalidation by a reviewing court on this ground alone.

                                2.

     Since Central Hudson, the Supreme Court has also expanded upon the fourth prong of
commercial speech analysis, the question whether the regulation is more extensive than
necessary to serve the asserted interest.  In City of Cincinnati v. Discovery Network, Inc., the
Court explained that although "[a] regulation need not be 'absolutely the least severe that will
achieve the desired end,' . . . if there are numerous and obvious less-burdensome alternatives to
the restriction on commercial speech, that is certainly a relevant consideration in determining
whether the "fit" between ends and means is reasonable."  507 U.S. 410, 417 n. 13 (1993)
(quoting Board of Trustees v. Fox, 492 U.S. 469, 480 (1989)).  Recently, the D.C. Circuit
extended the strict evidentiary standard of Edenfield v. Fane, which dealt with the "direct
advancement prong," to this fourth and final prong.  See Pearson v. Shalala, 164 F.3d  650, 659
n. 9 (1999) ("[W]e see no reason why the government's evidentiary burden at the final step of
Central Hudson should be any less than at the direct advancement step.").
  
     The standardized labeling regulations are susceptible to constitutional doubt under this
last part of Central Hudson as well.  In arguing that these regulations are narrowly tailored, the
Commission asserts:  "[W]e only prescribe that these charges be presented using a standardized
label."  Supra at para. at 62.  This characterization overlooks entirely the burdens on speech
imposed by the regulations.  See generally Part IV. A.  The regulations mandate not just
standardization, as the Commission claims, but require carriers to use government-approved
adjectives and nouns to characterize the charges in line items.  By necessary implication, the
regulations outlaw the use on line items of any and all other words, including accurate ones. 
Additional language that carriers include elsewhere on bills to explain the charges are subject to
the Commission's limitation on "misleading" statements.  Contrary to the assertion of the Order,
the regulations clearly "limit[] specific language that carriers utilize to describe the nature and
purpose of the charges." Id.  In terms of their impact on speech, the regulations are quite broad.

     Yet, if ensuring that consumers can compare universal service charges across bills is the
goal here, that aim could be fully achieved by a rule requiring standardization and nothing more. 
For instance, industry could agree to a certain phrase, and the Commission could simply require
or encourage uniform usage of that phrase.  Indeed, the Commission takes just that sort of non-
interventionist approach to speech with respect to charges for services rendered.  See supra at
para. 42 ("Although we decline to formulate standardized descriptions, we encourage carriers to
develop uniform terminology. . .  We believe industry is better equipped than the Commission to
develop . . . standardized descriptions that are compatible with the character limitations for text
messages and other operational restrictions. . . .").  Given the stated goal of price comparison,
there is no ostensible reason -- other than suppression of the point of view that the charge is a
federal fee or even tax for which the government should be held accountable -- that the
Commission  itself would need to select or approve the words that can be used to describe
universal service charges.  That extra step is simply not necessary to serve the putative goal of
uniformity.  

     To the extent that the Commission is concerned that certain characterizations of the
charges (specifically, those suggesting the charges are required by the government) will in fact
"mislead" consumers into the decision not to price shop, the regulations are more burdensome
than necessary to serve that goal as well.  Instead of forbidding all speech except that which
appears on its final list, the Commission could have allowed carriers to speak but prohibited
misleading statements; that is, the presumption could have been in favor of speech, not against
it.  Case-by-case adjudication of the "truthfulness" of specific phrases used to describe the
charges would be vastly less intrusive than the expansive, prophylactic rules adopted in today. 
The Commission's selection of a particular label or labels necessarily excludes a vast category of
entirely truthful, nonmisleading ways of describing the charges on line items.  See generally
Pearson v. Shalala,  164 F.3d at 655 (explaining that government "may not place an absolute
prohibition on ... potentially misleading information ... if the information also may be presented
in a way that is not deceptive") (citing In re R.M.J., 455 U.S. 191, 203 (1982)); see also
Zauderer v. Office of Disciplinary Counsel of the Supreme Court of Ohio, 471 U.S. at 648-649
(holding that State's "unsupported assertions" were insufficient to justify prohibition on attorney
advertising and that "broad prophylactic rules may not be so lightly justified if the protections
afforded commercial speech are to retain their force").  

     In addition, the Commission has chosen to suppress speech instead of permitting the
carriers to cure whatever confusion might be created by a label such as "federally-imposed" with
more detailed disclosures regarding the nature and purpose of the fee. See supra at para. 59
(expressly "declin[ing] to specify any periodic notification to consumers providing additional
explanation of any charges resulting from federal regulatory action" because "requiring standard
labels" was sufficient action).  As the D.C. Circuit has ruled, however, "[i]t is clear . . . that when
government chooses a policy of suppression over disclosure -- at least where there is no showing
that disclosure would not suffice to cure misleadingness -- government disregards a 'far less
restrictive' means." Pearson v. Shalala, 164 F.3d at 658  Even assuming that it is potentially
"misleading" to apply the words "FCC-mandated" to universal service charges on a line item,
that would seem remediable by inclusion in the bill of a more complete explanation of the
technical details of the charges.  And the Commission cannot justify its rejection of disclosure
on the grounds that it has already adopted the more restrictive approach; rather, the Commission
must explain why requiring such periodic notification would not suffice to cure the alleged
problem of misleadingness.  Requiring more speech about the nature of the charges, instead of
banning even potentially misleading short-hand names for them, is "a far less restrictive means"
of combatting consumer "confusion" over the variability of the charges as among carriers.
   
     Moreover, the direct approach of regulating the underlying conduct  -- as opposed to the
indirect approach of regulating speech about the conduct -- is also presumably available to the
Commission.  If the Commission believes that the cost of the universal service program should
be borne by carriers alone, or that any charges that are passed on should be allocated equitably,
then it could (assuming statutory authority) have regulated carriers' recovery of the cost of these
charges.  Cf. 44 Liquormart v. Rhode Island, 517 U.S. at 507 (holding that State failed to "satisfy
the requirement that its restriction on speech be no more extensive than necessary" because
"higher prices can be maintained . . . by direct regulation").  But the Commission has expressly
declined to regulate recovery of the charges, see supra at para. 49 ("[W]e decline . . . to limit the
manner in which carriers recover these costs of doing business"), choosing instead to suppress
speech regarding liability for the charges.  Under the First Amendment, that is a highly
problematic approach.  See generally 44 Liquormart v. Rhode Island, 517 U.S. at 512 ("The First
Amendment directs that government may not suppress speech as easily as it may suppress
conduct, and that speech restrictions cannot be treated as simply another means that the
government may use to achieve its ends") (emphasis added); see also id. at 520 (Thomas, J.,
concurring) (noting emphasis in modern commercial speech caselaw on "the dangers of
permitting the government to do covertly what it might not have been able to muster the political
support to do openly").  

     Finally, the Commission could have issued public notices or bulletins to increase public
awareness of the nature of the charges.  It could have explained publicly its view that universal
service charges are imposed directly on carriers, that transfer of the costs to consumers is a
"business choice" for carriers, and that consumers should use this information in evaluating
carriers.  Cf. id. at 507 (suggesting that public educational campaigns to combat the posited
problem are less restrictive alternatives to speech restrictions); see also id. (citing Linmark for
proposition that "State [could] use . . . counter-speech, rather than speech restrictions, to advance
its interests").  On this record, there is no reason to think that such a educational campaign
would be any less effective in terms of its impact on consumers' tendency to engage in price
comparison than the scheme adopted in these regulations.

     For the above reasons, the labeling regulations impinge on speech to a greater extent than
needed to advance either the goal of uniformity or of deception, much less the "ultimate" goal of
efficient and fair prices.
     
                                C.

     While the regulations are highly questionable under commercial speech doctrine, I would
dispute the characterization of the speech at issue as purely commercial.  As the Court and
individual Justices have repeatedly recognized, the commercial is often intertwined with the
political.  See, e.g., Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council,
Inc., 425 U.S. 748, 765 (1976) (explaining that unless consumers are informed about the
operation of commercial markets, they cannot establish "intelligent opinions as to how that
system ought to be regulated or altered"); 44 Liquormart, Inc. v. Rhode Island, 517 US at 520
(Thomas J., concurring) (observing that "[i]n case after case. . . the Court . . . [has]. . . stress[ed] .
. . the near impossibility of severing 'commercial speech' from speech necessary to democratic
decisionmaking").  Although the majority struggles to contain the carriers' speech to the
commercial category, I submit that speech about the nature and purpose of universal service
charges is intensely political.

       The facts of this case involve language on a telephone bill and thus, at first blush, might
be considered purely commercial.  But if one looks closer, it becomes clear that this speech does
far "more than propose a commercial transaction." Pittsburgh Press Co. v. Human Relations
Comm'n, 413 U.S. 376, 385 (1973).  Nor does it constitute "expression related solely to the
economic interests of the speaker and its audience."  Central Hudson, 447 U.S. at 561.  Rather, 
the speech at issue -- brief descriptions of the origin and purpose of universal service charges --
attempts to identify to the consumer the cause and intended use of these charges.  Accountability
for charges that some consider a tax is not just a business matter, but a highly political one. 
Neither the government nor the telephone industry wants to be viewed by the public as the
perpetrator or beneficiary of these new federally-related charges: for carriers it may be bad
public relations, but for government officials it is bad politics. Few politicians welcome the
opportunity to be associated with a new tax.  

     The speech at issue may also involve explicit or implicit criticism of the charges by
carriers.  It may certainly trigger explicit, even vehement, criticism of the charges and the
programs that they support by consumers.  Surely, discussion about the "true" nature of these
charges -- whether on a carrier's bill or editorial page -- constitutes discussion of a public issue. 
As the Supreme Court has made clear: "There is no question that speech critical of the exercise
of the [government's] power lies at the very center of the First Amendment."  Gentile v. Nevada,
501 U.S. 1030, 1033 (1991).

     The nub of these regulations is whether it is "misleading" for carriers to say that universal
service charges are "FCC-mandated," "federally-imposed," or even that they are simply
recovering charges imposed on them by the FCC.   With respect to the breadth of the
Commission's prohibition on "misleading" speech, the General Counsel of this agency stated
publicly that carriers would be flatly prohibited from describing the charges (even uniformly) as
"politician X's tax."  Commission Public Meeting, April 15, 1999.  This strikes me as a stunning
limitation, from a First Amendment perspective.  Referring to a fee, program, or tax as the
creation of a particular government official, agency, or entity -- whether to claim credit or cast
blame -- is not merely commercial speech.  Such references involve core political expression.

     Admittedly, the government can regulate the truth of facts in advertising.  But, as
suggested above, these regulations do not concern the accuracy of an objective, readily verifiable
fact, one of the original justifications for regulation of commercial speech.   See Virginia
Pharmacy Bd., 425 U.S. at 771 &. n. 24.  Rather, these regulations involve politically charged
speech, i.e. statements indicating who should be held responsible for the imposition of this
charge on the American telephone consumer.  Government assessment of the "truth" regarding
its own responsibility for consumer charges is entirely different than government assessment of
the accuracy of, say, a third party's interest rate quotation.  The incentives for governmental
self-dealing and self-protection in the former case, at the expense of free speech about
government activity, are obvious.

     For the foregoing reasons, I do not believe that this Order "involv[es] only commercial
speech."  Central Hudson v. New York, 447 U.S. at 562 n. 5 (emphasis added).  To the contrary, 
the speech governed by the labeling rules involves questions of governmental accountability for
charges used to support federal programs.  It thus "extends well beyond speech that proposes a
business transaction . . . and includes the kind of discussion of 'matters of public concern' that
the First Amendment both fully protects and implicitly encourages."  Pacific Electric & Gas Co.
v. California, 475 U.S. at 8 (citation omitted).  

     Accordingly, strict scrutiny -- rather than the more lenient scrutiny of Central Hudson --
might well apply to these regulations.  Under that standard of review, it is doubtful that these
regulations would survive judicial review.  See, e.g., Pacific Gas & Electric Co. v. California,
475 U.S. 1 (holding that State could not require private company to include in its bills messages
with which it disagreed); Consolidated Edison Co. v. New York, 447 U.S. 530 (holding that State
could not forbid private company from including in its bills inserts discussing issues of public
policy). 

                                D.

     To sum up, I doubt that these regulations could survive either the third or fourth prong of
Central Hudson. The Commission has not shown that the posited harms of consumer
misunderstanding about the mandatory nature of the charges, and the purportedly consequent
decision not to price shop, are real; that these harms have any causal connection to the goal of
fair prices; and that regulation of the uniformity and truthfulness of descriptions of universal
service charges will actually and materially advance that goal.  Moreover, the Order's yawning
loophole, which affords carriers the ability to opt out of the labelling rules altogether by not
mentioning the charges on bills while still recovering the costs in per-minute rates, severely
undermines the goal of allowing consumers to compare universal services charges.  Worse, it has
the effect of encouraging carriers not to speak about the charges in the first place.  Finally,
numerous and obvious alternatives to these sweeping, preventative speech restrictions exist.  

     Assuming for the sake of argument that these regulations are permissible under the
Central Hudson test, I do not think that the speech governed by these rules can be made to fit in
the "commercial" box.  The regulated messages, which go to public accountability for these
charges, are fraught with political significance.  It is entirely possible, if not likely, that these
regulations enjoy the full constitutional protections afforded speech regarding public issues. If
that protection obtains, these regulations are presumptively violative of the First Amendment.   

     The Supreme Court has explained that "the First Amendment directs us to be skeptical of
regulations that seek to keep people in the dark for what the government perceives to be their
own good."  44 Liquormart v. Rhode Island, 517 U.S. at 503.  We should be even more skeptical
of the instant regulations:  here, the government seeks to keep people in the dark not for their
own good, but to protect its own vested interests.  Governmental self-insulation from public
criticism and accountability, by regulation of the "misleading" nature of private speech that
seeks to attach responsibility for certain developments to the government, is antithetical to the
values embodied in the First Amendment.