United States Court of Appeals 

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 16, 2009 Decided January 12, 2010 

No. 08-1365 

CORE COMMUNICATIONS, INC., 

PETITIONER

v. 

FEDERAL COMMUNICATIONS COMMISSION AND UNITED 

STATES OF AMERICA, 

RESPONDENTS

EARTHLINK, INC., ET AL.,

INTERVENORS

Consolidated with 08-1393, 09-1044, 09-1046 

On Petitions for Review of Orders 

of the Federal Communications Commission 

Michael B. Hazzard argued the cause for petitioner Core 

Communications, Inc. and supporting intervenors. With him 

on the briefs were Joseph P. Bowser, Adam D. Bowser, 

Joshua M. Bobeck, and Ross A. Buntrock.
2

 Jonathan D. Feinberg argued the cause for petitioners 

People of the State of New York and Public Service 

Commission of the State of New York, intervenors 

Pennsylvania Public Utilities Commission and the National 

Association of State Utility Consumer Advocates, and amicus 

curiae Arizona Corporation Commission. On the briefs were 

John C. Graham, James Bradford Ramsay, Robin K. Lunt, 

David Cleveland Bergmann, Joseph Kevin Witmer, and 

Maureen A. Scott. 

Joshua M. Bobeck, Ross A. Buntrock, and Michael B. 

Hazzard were on the brief for intervenors in support of 

petitioners. Adam D. Bowser and Joseph P. Bowser entered 

appearances. 

Joseph R. Palmore, Deputy General Counsel, Federal 

Communications Commission, argued the cause for 

respondents. With him on the brief were Richard K. Welch, 

Deputy Associate General Counsel, and Laurence N. Bourne, 

Counsel. Nancy C. Garrison and Catherine G. O'Sullivan, 

Attorneys, U.S. Department of Justice, and Daniel M. 

Armstrong III, Associate General Counsel, Federal 

Communications Commission, entered appearances. 

Scott H. Angstreich argued the cause for intervenors in 

support of respondents. With him on the brief were Michael 

K. Kellogg, Kelly P. Dunbar, Michael E. Glover, Karen 

Zacharia, Christopher M. Miller, Gary L. Phillips, John T. 

Nakahata, Carl W. Northrop, Stephen B. Kinnaird, Timothy J. 

Simeone, Joseph C. Cavender, and John E. Benedict. Robert 

B. McKenna Jr. entered an appearance. 

Before: SENTELLE, Chief Judge, WILLIAMS AND 

RANDOLPH, Senior Circuit Judges. 
3

 Opinion for the Court filed by Senior Circuit Judge

WILLIAMS. 

WILLIAMS, Senior Circuit Judge: When a customer 

accesses the internet via “dial-up,” his or her call goes to a 

local exchange carrier (“LEC”), which commonly hands the 

call off to another LEC, which in turn connects the customer 

to an internet service provider (“ISP”).1 The ISP links the 

customer to the web. At least as early as 1999 the Federal 

Communications Commission was concerned that the 

regulatory procedures under which the sending LEC 

compensated the recipient LEC were leading to the imposition 

of excessive rates, and that these rates in turn were distorting 

the markets for internet and telephone services. The 

Commission in due course responded with an alternative 

regulatory regime, principally taking the form of rate caps set 

well below the rates that had prevailed before. 

In the order under review here, In the Matter of 

Implementation of the Local Competition Provisions in the 

Telecommunications Act of 1996, Developing a Unified 

Intercarrier Compensation Regime, Intercarrier 

Compensation for ISP-Bound Traffic (CC Docket Nos. 96-45, 

96-98, 99-68, 99-200, 01-92), FCC 08-262, __ FCC Rcd __ 

(Nov. 5, 2008) (the “Order”), the Commission has set forth 

the basis of its authority to institute the rate cap system, 

namely, 47 U.S.C. § 201. That section (excerpted in an 

appendix to this opinion) requires that the charges of “every 

common carrier engaged in interstate or foreign 

 

1

 Data in the record suggest that dial-up, though being rapidly 

replaced by various forms of higher-speed service, still accounts for 

a non-trivial share of internet access: about 20.4% in 2007, 10.5% 

in 2009, and (a prediction, obviously) 4.6% in 2014. Joint 

Appendix 102. 
4

communication by wire” for “such communication service” be 

“just and reasonable,” and authorizes the Commission to 

“prescribe such rules and regulations as may be necessary . . . 

to carry out the provisions of this chapter.” Id. Petitioners 

assail the Commission’s analysis on a variety of grounds, 

most powerfully on the theory that §§ 251-252 of Title 47, 

added by the Telecommunications Act of 1996, Pub.L. No. 

104-104,110 Stat. 56, 47 U.S.C. §§ 151-714 (the “1996 Act”), 

withdraw from the Commission whatever support § 201 might 

have afforded its rate cap decision. Finding no legal error in 

the Commission’s analysis, we affirm its order. 

* * * 

Before the FCC imposed a rate cap system, rates for the 

transfer of calls from an originating LEC to the ISP’s LEC 

were governed, in practice, by the “reciprocal compensation” 

provisions of the 1996 Act. That act, in the interest of 

opening the telephone market to competition, had imposed a 

number of obligations on all local exchange carriers, including 

a duty to “establish reciprocal compensation arrangements for 

the transport and termination of telecommunications.” 47 

U.S.C. § 251(b)(5). Reciprocal compensation arrangements 

require that when a customer of one carrier makes a local call 

to a customer of another carrier (which uses its facilities to 

connect, or “terminate,” that call), the originating carrier must 

compensate the terminating carrier for the use of its facilities. 

See In re Core Communications, Inc., 455 F.3d 267, 270 

(D.C. Cir. 2006) (“Core 2006”). Subsection 251(c) imposes 

extra duties on “incumbent local exchange carriers” 

(“ILECs”). (ILECs are a subset of LECs, comprising mainly 

the Bell Operating Companies that succeeded to the local 

operations of AT&T on the occasion of the latter’s dissolution 

as a result of an antitrust settlement. See United States v. 

AT&T, 552 F.Supp. 131 (D.D.C. 1982). “Competitive local 
5

exchange carriers” (“CLECs”) constitute the remainder of the 

LEC universe.) Among the § 251(c) obligations is a “duty to 

negotiate in good faith in accordance with [§ 252] the 

particular terms and conditions of agreements to fulfill the 

duties described in” § 251(b), including the reciprocal 

compensation obligations, and to provide interconnection with 

its own “network” for requesting telecommunications carriers. 

47 U.S.C. § 251(c). Section 252 allows ILECs to satisfy their 

§ 251 obligations by privately negotiating terms with CLECs, 

but also grants parties the right to refer the negotiations to 

state commissions for mediation or arbitration. 

The Order arises out of the Commission’s concern with 

the results of applying the reciprocal compensation system to 

ISP-bound traffic, a concern perhaps most clearly expressed in 

an order responding to our initial remand of the matter: 

Because traffic to ISPs flows one way, so does money in 

a reciprocal compensation regime . . . . It was not long 

before some LECs saw the opportunity to sign up ISPs as 

customers and collect, rather than pay, compensation 

because ISP modems do not generally call anyone. . . . In 

some instances, this led to classic regulatory arbitrage 

that had two troubling effects: (1) it created incentives for 

inefficient entry of LECs intent on serving ISPs 

exclusively and not offering viable local telephone 

competition, as Congress had intended to facilitate with 

the 1996 Act; (2) the large one-way flows of cash made it 

possible for LECs serving ISPs to afford to pay their own 

customers to use their services, potentially driving ISP 

rates to consumers to uneconomical levels. 

Implementation of the Local Competition Provisions in the 

Telecommunications Act of 1996, Intercarrier Compensation 

for ISP-Bound Traffic, 16 FCC Rcd 9151 (2001) (the “ISP 

Remand Order”) ¶ 21. 
6

The Commission’s first step into this arena was its 

issuance of In the Matter of Implementation of the Local 

Competition Provisions in the Telecommunications Act of 

1996, Inter-carrier Compensation for ISP-Bound Traffic, 14 

FCC Rcd 3689 (1999) (“Declaratory Ruling”). There it 

applied its so-called “end-to-end” analysis (as it does in the 

order under review), under which the classification of a 

communication as local or interstate turns on whether its 

origin and destination are in the same state. Because a 

customer’s venture into the web characteristically reaches 

servers out of state (and often out of the country), the 

Commission concluded that under the end-to-end principle 

dial-up internet traffic was interstate. Id. ¶ 18. As such traffic 

was “jurisdictionally mixed,” id. ¶ 19, however, the 

Commission chose not to disturb state commissions’ 

application of interconnection agreements to that traffic 

“pending adoption of a rule establishing an appropriate 

interstate compensation mechanism,” id. at ¶ 21. In review of 

the order in Bell Atlantic Tel[]. Cos. v. FCC, 206 F.3d 1 (D.C. 

Cir. 2000), we found the Commission’s conclusions in 

apparent conflict with various prior statements, and possibly 

with the statute; we vacated the order and remanded the 

matter for its further analysis. Id. at 9. 

On remand the Commission instituted substantially the 

same rate cap system that it defends here. See ISP Remand 

Order ¶ 8. But it claimed as supporting authority 47 U.S.C. 

§ 251(g), which required LECs to comply with certain FCC 

regulations promulgated prior to the enactment of the 1996 

Act. In WorldCom, Inc. v. FCC, 288 F.3d 429 (D.C. Cir. 

2002), we rejected that claim, finding that § 251(g) was 

“worded simply as a transitional device” and thus could not be 

relied on for authority to promulgate new regulations. Id. at 

430. Recognizing that the Commission’s rules might well 

have other legal bases, however, we did not vacate the order. 

Id. at 430, 434. 
7

Between the ISP Remand Order and the present Order

there have been several additional visits to our court. In July 

2003 Core Communications, Inc. (“Core”) petitioned the FCC 

to forbear from enforcing its rate caps and associated 

provisions, a petition that the FCC partly granted. Petition of 

Core Communications, Inc. for Forbearance Under 47 U.S.C. 

§ 160(c) from Application of the ISP Remand Order, 19 FCC 

Rcd 20179, ¶¶ 23-24, ¶ 27 (2004). We upheld the order 

against challenges by both CLECs and ILECs. Core 2006, 

455 F.3d 267. 

In June 2004 Core filed a petition seeking mandamus 

requiring the FCC to respond to the WorldCom remand. 

Based on the FCC’s representations about its efforts to meet 

the remand, we denied Core’s petition “without prejudice to 

refiling in the event of significant additional delay.” In re: 

Core Communications, Inc., No. 04-1179 (D.C. Cir. May 24, 

2005). In October 2007 Core filed a second petition, which 

we granted, “direct[ing] the FCC to explain the legal basis for 

its ISP-bound compensation rules within six months of” May 

5, 2008. In re Core Communications, Inc., 531 F.3d 849, 850 

(D.C. Cir. 2008) (“Core 2008”). 

On the last permissible day, November 5, 2008, the FCC 

released the current Order. Petitions for review followed, 

filed by Core and by Public Service Commission of the State 

of New York and National Association of Regulatory Utility 

Commissioners (the “state petitioners”); we consolidated the 

petitions. 

* * * 

As we noted at the outset, the Commission relies 

primarily on § 201 for its authority to regulate ISP-bound 

traffic. See Order ¶ 21. That section prohibits carriers 
8

engaged in the delivery of interstate communications from 

charging rates that are not “just and reasonable,” and grants 

the FCC authority to prescribe regulations to implement the 

1934 Act, which include all provisions of the 1996 Act. See 

AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 377-78 (1999) 

(observing that “Congress expressly directed that the 1996 

Act . . . be inserted into the Communications Act of 1934” and 

holding that “the grant in § 201(b) means . . . [that] [t]he FCC 

has rulemaking authority to carry out the ‘provisions of this 

Act,’ which include §§ 251 and 252”). A savings clause 

attached to § 251, namely § 251(i), fortifies the Commission’s 

position, providing: “Nothing in this section shall be 

construed to limit or otherwise affect the Commission’s 

authority under section 201.” Further, all parties agree that 

the familiar principles of Chevron USA v. Natural Resources 

Defense Council, 467 U.S. 837 (1984), apply to the FCC’s 

construction of the Communications Act. State Pet’rs Br. 8; 

Core Pet’r Br. 27-28; Resp. Br. 19-20. Finally, except as 

discussed below, the petitioners accept the end-to-end analysis 

and its application to ISP-bound calls, as announced by the 

Commission in the Declaratory Ruling in 1999 (described 

above) and restated in the Order, ¶ 21 & n.69. 

Against the Commission’s reliance on § 201, petitioners 

claim that “Congress’s specific choice” on the matter of interLEC compensation, manifested in §§ 251-252, must trump the 

FCC’s “general rulemaking authority under section 201.” 

Core Interv. Br. 18. They cite Norwest Bank Minnesota 

National Association v. FDIC, 312 F.3d 447, 451 (D.C. Cir. 

2002), for the “cardinal rule of statutory construction . . . that 

where both a specific and a general provision cover the same 

subject, the specific provision controls.” State Pet’r Br. 27. 

But it is inaccurate to characterize § 201 as a general 

grant of authority and §§ 251-252 as a specific one. “When 

. . . two statutes apply to intersecting sets . . . , neither is more 
9

specific.” Hemenway v. Peabody Coal Co., 159 F.3d 255, 

264 (7th Cir. 1998). That is the case here. Not all inter-LEC 

connections are used to deliver interstate communications, 

just as not all interstate communications involve an inter-LEC 

connection. A local call to chat with a schoolmate about the 

evening’s homework would not—at least under conditions 

typical today—involve interstate communications; and a 

conventional interstate long distance call, while it will usually 

involve interconnection between the long distance provider 

and a LEC, will often not involve two LECs connecting 

directly with each other. And, as to a LEC’s provision of 

access for completion of a long-distance call, the parties agree 

that the link between the LEC and the interexchange carrier is 

not governed by the reciprocal compensation regime of 

§ 251(b)(5). See State Pet’rs Br. 25-26 (citing Global NAPS, 

Inc. v. Verizon New England, 444 F.3d 59, 62-63 (1st Cir. 

2006), in turn quoting the FCC’s Local Competition 

Provisions in the Telecommunications Act of 1996, 11 FCC 

Rcd 15499 (1996). 

Dial-up internet traffic is special because it involves 

interstate communications that are delivered through local 

calls; it thus simultaneously implicates the regimes of both 

§ 201 and of §§ 251-252. Neither regime is a subset of the 

other. They intersect, and dial-up internet traffic falls within 

that intersection. Given this overlap, § 251(i)’s specific 

saving of the Commission’s authority under § 201 against any 

negative implications from § 251 renders the Commission’s 

reading of the provisions at least reasonable. 

Petitioners next argue that because the call to the ISP 

terminates locally, the FCC’s authority over interstate 

communications is inapplicable. State Pet’r Br. 30-33. 

Section 251(b)(5) applies to “reciprocal compensation 

arrangements for the transport and termination of 

telecommunications.” Petitioners point to the FCC’s 
10

definition (in the Order) of “terminat[ion]” as “the switching 

of traffic that is subject to Section 251(b)(5) at the terminating 

carrier’s end office switch . . . and delivery of that traffic to 

the called party’s premises.” See Order ¶ 13; see also 47 

C.F.R. § 51.701(d). State Pet’rs Br. 31-32. Because the 

“called party” in the case of dial-up Internet traffic is the ISP, 

petitioners say, the § 251(b)(5) telecommunications 

“terminat[e]” locally and thus the FCC cannot apply its § 201 

authority over these communications. 

This argument fails because it implicitly assumes 

inapplicability of the end-to-end analysis, which petitioners 

have not challenged. And the FCC has consistently applied 

that analysis to determine whether communications are 

interstate for purposes of § 201. Petitioners do not dispute 

that dial-up internet traffic extends from the ISP subscriber to 

the internet, or that the communications, viewed in that light, 

are interstate. Given that ISP-bound traffic lies at the 

intersection of the § 201 and §§ 251-252 regime, it has no 

significance for the FCC’s § 201 jurisdiction over interstate 

communications that these telecommunications might be 

deemed to “terminat[e]” at a LEC for purposes of § 251(b)(5). 

Petitioners also appear indirectly to invoke the 8th 

Circuit’s conclusion that while the FCC has authority to 

impose a methodology on state commissions’ exercise of 

power under § 252 (they specifically note “total element longrun incremental cost” (“TELRIC”)), it has (for certain 

purposes) no power to set actual prices. See State Pet’rs Br. 

33, citing Iowa Utils. Bd. v. FCC, 219 F.3d 744, 757 (8th Cir. 

2000). We take no position on the issue before the 8th 

Circuit. It reached its finding for purposes quite different 

from the present subject (FCC ratesetting authority for a leg of 

an interstate communication), and it did not address the FCC’s 

power to implement “just and reasonable” rates under § 201 

or how that power was affected by §§ 251-252. 
11

Petitioners further argue that it was “arbitrary and 

capricious” for the FCC to “discriminate” against dial-up 

internet traffic by requiring that LECs be compensated 

pursuant to the rate cap regime when terminating such traffic, 

but otherwise in accordance with state commissions’ 

application of the FCC’s TELRIC methodology. Core Pet’r 

Br. 43-47; Core Interv. Br. 22-23. See 5 U.S.C. § 706(2)(A). 

Our review under the arbitrary and capricious standard is 

narrow. See Core 2006, 455 F.3d at 277. Here the agency 

action passes handily. 

The Commission has provided a solid grounding for the 

differences between the treatment of inter-LEC compensation 

for delivery of dial-up internet traffic and the regime generally 

applicable to inter-LEC compensation under § 251(b)(5). (We 

assume arguendo that the concept of discrimination is 

relevant to regimes created under entirely different statutory 

provisions.) In the context to which reciprocal compensation 

is ordinarily applied, it noted, outgoing calls are generally 

balanced by incoming ones, so that it matters relatively little 

how accurately rates reflect costs. ISP Remand Order ¶ 69. 

Such balance is utterly absent from ISP-bound traffic. 

Moreover, it found that in fact the rates for such traffic were 

so distorted that CLECs were in effect paying ISPs to become 

their customers. Id. ¶ 70 & n.134; see also id. ¶ 21. To the 

extent that ILECs simply passed the costs on to their 

customers generally (rather than having a separate charge for 

those making ISP-bound calls), they would force their noninternet customers to subsidize those making ISP-bound calls, 

and the system would send inaccurate price signals to those 

using their facilities for internet access (in effect the ISPs and 

their customers) and to those not doing so. Id. ¶¶ 68, 87. On 

the other hand, the Commission believed that its “failure to act 

. . . would lead to higher rates for Internet access, as ILECs 

seek to recover their reciprocal compensation liability . . . 

from their customers to call ISPs,” id. ¶ 87, presumably 
12

meaning rates “higher” than cost, correctly computed. Thus 

the continued application of the reciprocal compensation 

regime to ISP-bound traffic would “undermine[] the operation 

of competitive markets.” Id. ¶ 71. 

 Core purports to find a discrepancy between our 

mandamus order and the Commission’s response. Our order 

required the FCC to “explain[] the legal authority for the 

Commission's interim intercarrier compensation rules that 

exclude ISP-bound traffic from the reciprocal compensation 

requirement of § 251(b)(5).” Core 2008, 531 F.3d at 862. 

The Order, en route to finding that § 201 authorized the 

Commission to impose its rate cap system on the 

communications in question, also expressed its view that they 

were “subject to the reciprocal compensation regime in 

sections 251(b)(5) and 252(d)(2).” Order ¶15; see also id. 

¶ 16. Core claims that in so finding the Commission violated 

our mandate. 

In context it is perfectly plain that our order sought 

simply to have the FCC explain the reasoning underlying its 

exercise of authority, not to preempt its analytical route. The 

sort of argument made by Core here gives pettifoggery a bad 

name. 

Finally, we note the presence of a number of arguments 

introduced outside of the petitioners’ opening briefs. Core 

intervened in the appeal filed by the state petitioners before 

we consolidated its separate appeal with the latter. Together 

with other intervenors, Core filed a brief raising a number of 

arguments that it did not raise as petitioner. As we explained 

in Illinois Bell Telephone Company v. FCC, 911 F.2d 776 

(D.C. Cir. 1990), “An intervening party may join issue only 

on a matter that has been brought before the court by another 

party.” Id. at 786 (emphasis added). While we acknowledged 

in Synovus Financial Corporation v. Board of Governors, 952 
13

F.2d 426 (D.C. Cir. 1991), that this rule is prudential and 

“should not be applied categorically,” the grounds that 

Synovus mentioned for making exceptions are absent here. Id. 

at 434. Synovus allowed an intervenor who lacked incentive 

to petition for review of the administrative action to present an 

additional issue that was “an essential predicate to [a] 

question” raised by petitioners. Id. at 434 (internal quotes 

omitted). But Core not only had an incentive to petition for 

review itself but did so. See United States Telephone 

Association v. FCC, 188 F.3d 521, 531 (D.C. Cir. 1999) 

(noting that intervenors not only failed to qualify for the 

Synovus exception but “present[ed] no reason why it could not 

have petitioned in its own right”). And the issues Core raises 

as intervenor bear “no substantive connection” to the 

challenges petitioners raise in their initial briefs. Synovus, 952 

F.2d at 434; Cir. Rule 28(d)(2). Accordingly, we do not 

consider the new arguments Core raises as intervenor. 

Similarly, we do not consider arguments that first appear in 

petitioners’ reply briefs. See, e.g., Bd. of Regents of the Univ. 

of Washington v. EPA, 86 F.3d 1214, 1221 (D.C. Cir. 1996) 

(“By failing to make any specific objection until their reply 

brief, petitioners deprived the [respondents] of the opportunity 

to respond. To prevent this . . . , we have generally held that 

issues not raised until the reply brief are waived.”). 

* * * 

 The petitions for review are 

Denied.
14

Appendix: Text of 47 U.S.C. § 201 

§ 201. Services and Charges. 

(a) It shall be the duty of every common carrier 

engaged in interstate or foreign communication by wire 

or radio to furnish such communication service upon 

reasonable request therefore; and, in accordance with the 

orders of the Commission, in cases where the 

Commission, after opportunity for hearing, finds such 

action necessary or desirable in the public interest, to 

establish physical connections with other carriers, to 

establish through routes and charges applicable thereto 

and the divisions of such charges, and to establish and 

provide facilities and regulations for operating such 

through routes. 

(b) All charges, practices, classifications, and 

regulations for and in connection with such 

communication service, shall be just and reasonable, and 

any such charge, practice, classification, or regulation that 

is unjust or unreasonable is declared to be unlawful: 

Provided, That communications by wire or radio subject 

to this chapter may be classified into day, night, repeated, 

unrepeated, letter, commercial, press, Government, and 

such other classes as the Commission may decide to be 

just and reasonable, and different charges may be made 

for the different classes of communications . . . . The 

Commission may prescribe such rules and regulations as 

may be necessary in the public interest to carry out the 

provisions of this chapter. 

47 U.S.C. § 201 (emphasis added).