United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

______

Argued September 16, 2011 Decided November 18, 2011

No. 10-1184

VERMONT PUBLIC SERVICE BOARD AND MAINE PUBLIC 

UTILITIES COMMISSION,

PETITIONERS

v.

FEDERAL COMMUNICATIONS COMMISSION AND UNITED 

STATES OF AMERICA,

RESPONDENTS

QWEST COMMUNICATIONS INTERNATIONAL INC., ET AL.,

INTERVENORS

On Petition for Review of an Order of the Federal 

Communications Commission

James Hardwick Lister argued the cause for petitioners.

With him on the briefs were Elisabeth H. Ross, David Edward 

Lampp, Andrew Hagler, Lisa C. Fink, and Paul Stern, Deputy 

Attorney General, Office of the Attorney General for the State 

of Maine. Joel B. Shifman entered an appearance.

Maureen K. Flood, Counsel, Federal Communications 

Commission, argued the cause for respondents. With her on 

the brief were Catherine G. O’Sullivan and Nancy C. 

Garrison, Attorneys.
2

U.S. Department of Justice, Austin C. Schlick, General 

Counsel, Federal Communications Commission, Peter 

Karanjia, Deputy General Counsel, Richard K. Welch, Acting 

Associate General Counsel, and James M. Carr, Counsel.

Daniel M. Armstrong III, Associate General Counsel, Federal 

Communications Commission, entered an appearance. 

Helgi C. Walker argued the cause for intervenors Verizon 

and NASUCA. With her on the brief were Brett A. Shumate,

Michael E. Glover, Edward Shakin, Christopher M. Miller,

John T. Scott III, and David Bergmann. Christopher J. White

entered an appearance. 

Before: HENDERSON, TATEL, and GRIFFITH, Circuit 

Judges.

Opinion for the Court filed by Circuit Judge TATEL.

TATEL, Circuit Judge: Pursuant to the 

Telecommunications Act of 1996, the Federal 

Communications Commission, through its Universal Service 

Program, provides subsidies to ensure that low-income 

consumers, schools, health care providers, and libraries have 

access to advanced telecommunications services and that rates 

and services in rural areas are ―reasonably comparable‖ to

rates and services in urban areas. In this case, we review a

Commission order declining to increase subsidies under the 

rural rates and services component of the Universal Service

Program. Because the Commission‘s decision is neither 

arbitrary nor capricious, we deny the petition for review.

I.

The Telecommunications Act of 1996, 47 U.S.C. 

§ 254(b), adopted six basic principles of ―universal service.‖
3

These principles instruct the Commission and the several 

states to jointly ―base policies for the preservation and 

advancement of universal service‖ on:

(1) Quality and rates. Quality services should be 

available at just, reasonable, and affordable rates.

(2) Access to advanced services. Access to 

advanced telecommunications and information 

services should be provided in all regions of the 

Nation.

(3) Access in rural and high cost areas. 

Consumers in all regions of the Nation, including 

low-income consumers and those in rural, insular, 

and high cost areas, should have access to 

telecommunications and information services, 

including interexchange services and advanced 

telecommunications and information services, that 

are reasonably comparable to those services provided 

in urban areas and that are available at rates that are 

reasonably comparable to rates charged for similar 

services in urban areas.

(4) Equitable and nondiscriminatory 

contributions. All providers of telecommunications 

services should make an equitable and 

nondiscriminatory contribution to the preservation 

and advancement of universal service.

(5) Specific and predictable support

mechanisms. There should be specific, predictable 

and sufficient Federal and State mechanisms to 

preserve and advance universal service.

(6) Access to advanced telecommunications 

services for schools, health care, and libraries. 

Elementary and secondary schools and classrooms, 

health care providers, and libraries should have 

access to advanced telecommunications services . . . .
4

47 U.S.C. § 254(b).

Pursuant to these statutory directives, the Commission

established the Universal Service Program, which consists of 

four separate funds: 1) low-income support, which subsidizes 

rates for individuals that might not otherwise be able to afford 

basic telephone services; 2) rural health care support, which 

subsidizes the costs of communications services health 

providers need to offer medical services in rural areas; 3) 

schools and libraries support, which funds the costs of phone 

services and Internet access for educational institutions and 

libraries; and 4) high-cost support—the fund at issue in this 

case—which supports the provision of services in high-cost 

areas. See Federal-State Joint Board on Universal Service, 

Universal Service Monitoring Report, CC Dkt. No. 98-202, at 

1-34 (2010).

The Program is financed by fees charged to telephone 

companies and other providers of interstate 

telecommunications services. See 47 C.F.R. § 54.706.

Telecommunications providers may pass these fees along to 

their customers, and almost always do, usually through line 

items on bills marked ―Federal Universal Service 

Assessment.‖ See High Cost Universal Support Order on 

Remand, 25 FCC Rcd. 4072, 4083-84 ¶ 21 (2010) (“Order”).

Thus, nearly every purchaser of telephone services in 

America helps support the Program.

The past decade has seen a dramatic increase in annual 

disbursements made pursuant to the Program, and a 

corresponding increase in the surcharge levied on consumers.

In 2001, the Commission disbursed $5.35 billion in support of 

universal service; by 2009, that number had risen to $7.26 

billion. Order, 25 FCC Rcd. at 4082 ¶ 20. By early 2010, 
5

disbursements amounted to 15.3 percent of 

telecommunications companies‘ interstate and international 

revenue, requiring ―many consumers [to] pay[] a surcharge of 

over 15 percent on the interstate portion of their monthly 

bill.‖ Id. at 4083 ¶ 21. The high-cost support fund is by far the 

Program‘s most expensive component. In 2009, total 

expenditures under that fund totaled $4.3 billion of the $7.26 

billion Program. Id. at 4082 ¶ 20.

This case concerns a single feature of the high-cost 

support fund: subsidies the Commission gives to 

telecommunications companies that provide landlines—

wireless is not covered—in rural areas. Absent these 

subsidies, landline customers in rural areas would generally 

pay higher rates for telephone services than customers in 

urban areas. This is so because it is generally more expensive 

to provide landline phone service in less-populated areas, 

where customers are geographically dispersed. Given this, the 

Commission provides support to ―non-rural‖

telecommunications providers (i.e., large telecommunications 

companies serving both rural and urban areas) to subsidize 

their costs of providing landlines in rural areas. These 

subsidies are provided in order to carry out Congress‘s 

directive to ensure ―reasonably comparable‖ rates between 

rural and urban areas. Precisely what constitutes ―reasonable‖

comparability is a definitional matter left to the Commission‘s

discretion, see Rural Cellular Ass’n v. FCC, 588 F.3d 1095, 

1101-02 (D.C. Cir. 2009), and it is the Commission‘s

definition of this statutory term that lies at the heart of this 

case.

In 2003, following litigation in the Tenth Circuit not 

directly relevant here, Qwest Corp. v. FCC, 258 F.3d 1191 

(10th Cir. 2001) (Qwest I), the Commission defined 

―reasonably comparable‖ as requiring rural rates to fall within 
6

a nationwide range of urban rates. Federal-State Joint Board 

on Universal Service, 18 FCC Rcd. 22559, 22583 ¶ 39. The 

Commission selected the range benchmark because both 

urban and rural rates vary significantly from state to state, ―in 

large part because states base rates on a variety of different 

policies.‖ Id. at 22584 ¶ 40. Moreover, when the 

Telecommunications Act was passed in 1996, ―urban 

residential rates ranged from $13.04 to $30.62 and the 

average urban rate was $20.01.‖ Id. Suspecting it ―reasonable 

to assume that Congress was aware of the variability of urban 

rates when it enacted the 1996 Act,‖ the Commission did not 

―believe that Congress would have required rural rates to be 

any closer to the average urban rates than other urban rates.‖

Id. For this reason, the Commission opted to use standard 

deviation analysis, rather than a percentage or dollar amount, 

to define ―reasonably comparable‖ rates between rural and 

urban areas. Standard deviation measures the variation, or 

dispersion, from the average value.

The Commission defined ―reasonably comparable‖ as 

requiring rural area rates to fall within two standard 

deviations of the average national urban rate. Id. at 22608-09 

¶ 81. This meant that in order to be ―reasonably comparable,‖

a rural rate would have to fall within a range encompassing 

95% of the individual urban rates, which the Commission 

would collect by conducting an annual survey of 95 cities. Id. 

at 22607-09 ¶¶ 80-81. To ensure that the federal government 

and the states were both fulfilling their statutory mandate to 

achieve ―reasonably comparable‖ rates, the Commission

required that states annually certify that their rural rates were 

―reasonably comparable‖ to urban rates as measured by the 

Commission‘s two-standard-deviation definition. Id. at 

22601-02 ¶ 70.
7

To help achieve ―reasonable comparability‖ of rural and 

urban rates, the Commission created the support mechanism

at issue here. Under that mechanism, telecommunications 

carriers serving rural areas are eligible to receive a subsidy 

totaling 76% of the amount that the statewide average cost per 

line exceeds two standard deviations above the national 

average cost per line. Id. at 22630 ¶ 125. For example, if two 

standard deviations above the national average cost per line

was $25 and the state‘s average cost per line was $30, 

telecommunications carriers within a state would receive a 

subsidy of $3.80 per line—or 76% of the $5.00 difference 

between the state‘s average cost per line and the national 

average cost per line. 

The Commission based its support mechanism on costs, 

rather than rates, to avoid creating incentives for carriers to 

charge higher rates in the expectation that such rates would be 

subsidized by the federal government. See id. at 22572 ¶ 23. 

The Commission disbursed funds based on statewide average 

costs, as opposed to costs in other pre-defined ―areas,‖ to 

encourage states to require telephone service providers to 

average rates within their borders—i.e., to charge higher rates 

to urban customers and use the excess funds to lower rural 

rates. Id. at 22573 ¶24. Most states have since adopted 

statewide averaging policies, and these policies have resulted

in much higher rural rates in predominantly rural states like 

Vermont ($30.73 per line) than in states where rural rates are 

subsidized by large cities (for example, $14.14 per line in 

Texas). Order, 25 FCC Rcd. at 4133-34, app. C.

Following the Commission‘s promulgation of its 2003 

order, several rural states—including Vermont, Maine, and 

Wyoming—petitioned the Tenth Circuit for review of that 

order. Qwest Commc’ns Int’l, Inc. v. FCC, 398 F.3d 1222 

(10th Cir. 2005) (Qwest II). In Qwest II, the Tenth Circuit 
8

identified several defects in the Commission‘s order. To begin 

with, it ruled that the Commission had failed to support its 

definition of ―reasonably comparable‖ rural rates—rates 

falling within a range comprised of 95% of urban rates—with 

sufficient empirical data. Id. at 1239. In particular, the court 

criticized the Commission for focusing exclusively on the 

comparability of urban and rural rates in 1996, when the 

Telecommunications Act was passed. Id. at 1235. This

backwards-looking orientation, the court found, failed to 

explain how the Commission‘s definition would, as required 

by the Telecommunications Act, both ―preserve and advance‖

universal service. Id. at 1235-36 (emphasis added); see also

47 U.S.C. § 254(b)(4)–(5). According to the court, this defect 

also infected the two-standard-deviation funding mechanism.

The court further instructed the Commission to explain how 

the high-cost support mechanism comports with all of the 

guiding principles in the Telecommunications Act, including 

its requirement that ―services‖ be ―reasonably comparable‖

across rural and urban areas, as well as that they be made 

available at ―affordable rates.‖ Id. at 1234 (citing 47 U.S.C. 

§ 254(b)(1)). Significantly for our purposes, however, the 

court never vacated the 2003 funding mechanism, and the 

Commission has continued using it ever since.

Before the Commission had an opportunity to respond to 

Qwest II, Congress passed the Recovery and Reinvestment 

Act of 2009, Pub. L. No. 111-5, 123 Stat. 115

(2009). As part of that Act, Congress directed the 

Commission to ―ensure that all people of the United States 

have access to broadband capability.‖ Id. § 6001(k)(2), 123 

Stat. at 516. The term ―broadband‖ refers to a 

telecommunications signal of greater bandwidth than a 

traditional signal, thus allowing for faster Internet connection 

speeds and a greater capacity for traffic, including voice 

communications. In response, the Commission adopted the 
9

National Broadband Plan in 2010. There, it laid out a roadmap 

for future rulemaking that would lead to the establishment of 

policies in support of Congress‘s directive to ensure universal 

broadband access. See Federal Communications Commission, 

Executive Summary of National Broadband Plan: Connecting 

America (2010), available at

http://www.broadband.gov/plan/executive-summary. Among 

other things, the National Broadband Plan recommends ―a 

comprehensive reform program to shift the high-cost 

universal service program from primarily supporting voice 

communications to supporting broadband platforms that 

enable many applications, including voice.‖ Order, 25 FCC 

Rcd. at 4114 ¶ 79.

Later in 2010, the Commission issued a ―narrow‖ order 

―respond[ing] to the Tenth Circuit‘s remand‖ in Qwest II.

Order, 25 FCC Rcd. at 4073 ¶ 1. The Commission began by 

emphasizing the significant changes that had occurred in the 

telecommunications marketplace over the preceding decade.

In particular, large numbers of customers had ―migrat[ed] 

away from traditional wireline telephone service,‖ replacing

their landline phones with wireless phones. Id. at 4078-79 ¶

14. In addition, and as Congress recognized when it directed 

the Commission to ensure wider broadband access, customers

in some areas of the country had the option to purchase voice 

services from broadband-based Internet providers, although 

―these services are not yet as pervasive as traditional wireline 

or wireless services.‖ Id. at 4080 ¶ 17. And explaining that it

had ―insufficient time . . . to implement [the] reforms to the 

high-cost universal service mechanisms‖ mandated by the 

National Broadband Plan, the Commission stated it would 

―soon release a notice of proposed rulemaking that sets the 

stage for comprehensive reform of the high-cost universal 

service mechanism as recommended in . . . the National 

Broadband Plan.‖ Id. at 4114 ¶ 80. 
10

Turning to the Tenth Circuit‘s remand order, the 

Commission, this time providing additional explanation,

readopted its ―reasonably comparable‖ benchmark—that a 

rural rate is ―reasonably comparable‖ if it falls within two 

standard deviations of the national average urban rate. Id. at 

4101 ¶ 53. In response to the court‘s instruction that any 

definition of ―reasonably comparable‖ must both ―preserve 

and advance universal service,‖ the Commission pointed out

that telephone subscriber rates had increased since the passage 

of the Telecommunications Act, and had continued increasing

since the Commission required states to certify ―reasonable 

comparability‖ of urban and rural rates as measured by the 

definition it had adopted in 2003. Id. at 4102-03 ¶¶ 56-57.

Indeed, telephone subscriber rates were at an all-time high, 

including in rural areas. Id. at 4101 ¶ 54. Accordingly, the

Commission concluded that the two-standard-deviation 

definition had actually helped advance universal service.

Because of this, the Commission found that its definition of 

―reasonably comparable‖ satisfied the Telecommunications 

Act‘s mandate to preserve and advance universal service. 

Then, responding to the Tenth Circuit‘s direction that the 

Commission support its two-standard-deviation rule with 

empirical data, the Commission cited a range of information 

showing that rural rates are in fact reasonably comparable to 

urban rates:

Rural and urban rates are typically similar within state 

boundaries, e.g., customers in Boston pay approximately 

the same rates as customers in rural Massachusetts. See 

id. at 4095-96 ¶ 43. 

The national average rural rate is only marginally higher 

than the national average urban rate. Id.
11

The range of rates does not vary as a function of 

urbanization—in other words, the differences among

urban rates are similar to the differences among rural 

rates. Id. at 4096-98 ¶¶ 44-46.

Based on this data, the Commission concluded that its current 

system was working. Responding to comments from several 

states, including Vermont and Maine, calling on the

Commission to increase subsidies to telecommunications 

providers in rural states, the Commission noted that such 

proposals ―would significantly increase the size of the 

fund . . . and the amount that end users ultimately pay.‖ Id. at 

4093 ¶ 38. Accordingly, the Commission ―decline[d] to add to 

the already heavy universal service contribution burden 

placed on consumers.‖ Id.

Next, the Commission responded to the Tenth Circuit‘s 

directive that it explain how its high-cost support mechanism 

ensures, as required by the Act, comparable services (as 

opposed to rates) between rural and urban areas. See Qwest II, 

398 F.3d at 1234 (citing 47 U.S.C. § 254(b)(1)). The 

Commission noted that nearly every household in America 

(between 95.7 and 98.2%, depending on the metric used) 

subscribes to either landline or wireless telephone service.

Order, 25 FCC Rcd. at 4080-81 ¶ 18. Moreover, both rural 

and urban customers have access to wireless services and 

Internet-based phone services offered by companies like 

Vonage and Skype. Id. at 4079-80 ¶¶ 15-17. Indeed, ―[e]ven

in rural areas, approximately 98.5 percent of the population 

has access to mobile services offered by one or more 

providers.‖ Id. at 4079 ¶ 15. Thus, the Commission concluded 

that services were reasonably comparable between urban and 

rural areas.
12

That said, the Commission acknowledged that in some 

states the combination of federal and state action might be 

failing to produce ―reasonably comparable‖ rates or services.

To deal with such situations, the Commission adopted a 

waiver procedure under which individual states could present 

the Commission with ―documentation that unique 

circumstances prevent the achievement of reasonably 

comparable rates in that state.‖ Id. at 4100 ¶ 51. Were a state 

to make such a showing, the Commission explained, it ―can 

provide appropriate relief,‖ including a grant of supplemental 

high-cost support to a state. Id. ¶¶ 50-51. Pursuant to the 

waiver program, one state—Wyoming—applied for additional 

funding. Id. ¶ 50. In response, and in a separate Memorandum 

Opinion and Order, the Commission concluded that Wyoming 

had demonstrated that concurrent state and federal action had 

failed to produce rural rates that were reasonably comparable 

to urban rates. See id. at 4116-20 ¶¶ 84-92. To correct the 

problem, the Commission granted Wyoming more than $2 

million in annual supplemental high-cost support. Id. at 4120 

¶ 90.

Instead of seeking a waiver, the Vermont Public Service 

Board and the Maine Public Utilities Commission filed the 

instant petition for review.

II.

We begin with Vermont‘s contention that Qwest II 

expressly directs the Commission to revise its two-standarddeviation high-cost support mechanism. Vermont misreads 

Qwest II. Nowhere does that decision say that the 

Commission‘s high-cost support mechanism is per se invalid.

Instead, Qwest II invalidates the high-cost support mechanism 

only insofar as it rested on an invalid definition of 

―reasonably comparable‖ rates. Qwest II, 398 F.3d at 1237.

(―In that the non-rural, high-cost support mechanism 
13

contained in the Order on Remand rests on the application of 

the definition of  ̳reasonably comparable‘ rates invalidated 

above, it too must be deemed invalid.‖) (emphasis added).

Nor does Qwest II rule that the Commission‘s underlying 

definition of ―reasonably comparable‖ was per se 

impermissible. Indeed, the opinion observes that the 

Commission‘s use of the two-standard-deviation definition of 

―reasonably comparable‖ has a ―certain logic.‖ Id. But absent 

empirical evidence that the Commission‘s ―reasonably

comparable‖ definition fulfilled its concurrent duties to 

―preserve and advance‖ universal service, the definition was 

―rendered untenable.‖ See id. Thus, nothing in Qwest II 

prevents the Commission from re-adopting the same 

definition of ―reasonably comparable,‖ or the same high-cost 

support mechanism. Qwest II merely directs the Commission

to explain how its definition of ―reasonably comparable‖

fulfills the statutory mandate to both ―preserve and advance‖

universal service. The Commission‘s decision to re-adopt the 

same definition of ―reasonably comparable‖—and the 

corresponding high-cost support mechanism—would run 

afoul of Qwest II only to the extent the Commission still fails 

to explain how its program complies with the 

Telecommunications Act.

Vermont primarily challenges the Commission‘s reliance

on data showing (1) that the definition of ―reasonably 

comparable‖ it adopted in 2003 has in fact advanced services 

in rural areas, and (2) that the high-cost support mechanism 

has in fact produced ―reasonably comparable‖ rates.

According to Vermont, the Commission‘s use of statistics 

showing that average rural and urban rates are comparable—

both within states and as a nationwide average—failed to 

account for the fact that most states already ―average‖ rates by 

requiring telephone providers to charge higher rates to urban 

customers, using the excess funds to lower rural rates. 
14

Vermont also challenges the Commission‘s citation to high 

telephone subscribership rates in rural areas, arguing that 

demand for telephone service is ―highly inelastic,‖

Appellants‘ Br. 29 (quoting Allocation of Costs Associated 

with Local Exchange Carrier Provision of Video 

Programming Services, Notice of Proposed Rulemaking, 11 

FCC Rcd. 17211, 17227 ¶ 41 (1996)), and that telephone 

subscription levels change little with increasing rates. We find 

nothing arbitrary or capricious in the Commission‘s use of 

these metrics. 

To begin with, the Commission‘s focus on intrastate rural

and urban rates was entirely in accordance with the 

Telecommunications Act. The Act requires reasonable 

comparability between rural and urban ―areas‖ and ―regions‖; 

contrary to Vermont‘s contentions, nothing in the Act requires 

reasonable comparability of rates among states. Indeed, the

Tenth Circuit vacated a previous Commission standard 

because it focused exclusively on interstate rate 

comparability, instructing the Commission to develop

mechanisms to ensure that states would ―preserve and 

advance universal service‖ within their borders. Qwest I, 258 

F.3d at 1204. The Commission did just that and, since 2003,

has required states to certify ―reasonable comparability‖ of 

rural-to-urban rates within their borders as a condition for 

receiving federal funds. 18 FCC Rcd 22559 ¶ 92. It is in 

accordance with this certification process that many states 

continue to ―average‖ rural and urban rates. The Commission, 

tasked by the Tenth Circuit with demonstrating that the highcost support mechanism preserves and advances universal 

service in rural areas, reasonably cited data showing the 

mechanism‘s intrastate effects.

As to the Commission‘s citation to data showing that 

national average urban rates are comparable to national 
15

average rural rates, Vermont argues that this comparison fails

adequately to reflect high rural rates in states like Vermont

because those higher rates are counterbalanced in the national 

average by low rural rates in states with large urban centers, 

like Texas. But the Commission did not consider the national 

average rates in isolation. It also considered the range of

individual urban and rural rates and determined that, although 

some urban rates and some rural rates are very high, the range 

of rural and urban rates ―does not vary greatly.‖ See Order, 25 

FCC Rcd. at 4096-98, ¶44-46. This conclusion should obviate

Vermont‘s concern.

Finally, by citing high rural telephone subscriber rates, 

the Commission was seeking to disprove a negative: that rates

had become so disparate that they were affecting customer

purchasing decisions. In so doing, the Commission was 

directly responding to the Tenth Circuit‘s fear that ―if rates 

are too high, the essential telecommunications services 

encompassed by universal service may indeed prove 

unavailable.‖ Qwest II, 398 F.3d at 1236. So even if demand 

for telephone services is highly inelastic, the Commission‘s 

response to the Tenth Circuit was neither arbitrary nor 

capricious.

Vermont next contends that the Commission failed to 

address alternative rural-cost benchmarks above which 

support would be paid under the high-cost support program.

In its comments on the proposed rule, Vermont called on the 

Commission to subsidize telecommunications providers if a 

state‘s cost per line exceeded 125% of the cost per line in 

Washington, D.C.—selected as a representative urban area—

as opposed to the current two-standard-deviation benchmark.

See Order, 25 F.C.C. Rcd. at 4130-31, app. B. The

Washington, D.C. alternative would have yielded an $18.65

benchmark. Id. at 4131. In its final rule, however, the
16

Commission expressly considered and rejected the 

Washington, D.C. benchmark, explaining not only that ―the 

non-rural high-cost mechanism already provides sufficient 

support,‖ but also that it wanted to avoid ―add[ing] to the 

already heavy universal service contribution burden placed on 

customers.‖ Id. at 4093 ¶ 38.

According to Vermont, the Commission failed to 

consider alternative benchmarks set at dollar amounts 

between $28.13 (the amount of the current benchmark) and 

$18.65 (the amount under the proposed Washington, D.C.

benchmark). In particular, Vermont points out that nothing in 

the Commission‘s order expressly addresses commenters‘

proposals to reduce the benchmark to $26.00 or to $26.45.

Appellant‘s Br. 45-47.

Although the Administrative Procedure Act ―demands an 

adequate explanation when . . . alternatives are rejected,‖ Int’l 

Ladies’ Garment Workers’ Union v. Donovan, 722 F.2d 795, 

817 (D.C. Cir. 1983), agencies ―need not respond to every 

comment,‖ id. at 818 (quotation omitted). Here, the 

Commission decided that it had no need to change the rural 

support mechanism at all. As the Commission pointed out, 

nearly every rural resident has access to telephone service and 

any increase in subsidies would require customers from 

around the country to pay more for telephone service. Thus, 

the Commission determined—reasonably in our view—that 

any reduction in the cost benchmark was unnecessary.

Because the Commission adequately explained its decision to 

keep the cost benchmark at two standard deviations above the 

national average, its failure to expressly address alternative 

benchmarks was neither arbitrary nor capricious.

Next, Vermont contends that the Commission failed in its 

statutory duty to ensure that rural ―telecommunications and 
17

information services . . . are reasonably comparable to those 

services provided in urban areas.‖ 47 U.S.C. § 254(b)(3). In 

response to this statutory directive, the Commission found

that subscribers across the country have access to essentially 

identical landline, wireless, and Internet-based telephone 

services. Challenging this conclusion, Vermont cites three

items from the administrative record: a letter from former 

Maine Governor John Baldacci stating that certain parts of 

Maine ―have no or inadequate wireless service,‖ Letter from 

John E. Baldacci, Governor of Maine, to Hon. Kevin J. 

Martin, Chair, FCC, WC Docket No. 05-337 (Oct. 7, 2008);

comments from Vermont and Maine alleging that, due to the

―lack of sufficient federal support‖ in rural areas, 

telecommunications companies were ―slow to deploy 

advanced services,‖ Comments of Maine Pub. Utils. Comm‘n, 

et al. at 5, WC Docket No. 05-337 (Jan. 28, 2010); and a 

declaration from a Senior Advisor at the Maine Public 

Utilities Commission stating that ―rate comparisons alone 

cannot show that support is sufficient . . . because they say 

nothing about the sufficiency or level of services that the rates 

pay for,‖ Reply Decl. on Behalf of Joel Shifman of the Maine 

Pub. Utils. Comm‘n at 5, WC Docket No. 05-337 (June 8, 

2009).

We have little trouble rejecting these three items as a 

basis for questioning the Commission‘s finding that rural and 

urban services are in fact ―reasonably comparable.‖ The

Governor‘s letter is entirely anecdotal, Vermont and Maine‘s 

conclusory comments are unsupported by any data, and the 

lawyer‘s declaration simply states the self-evident proposition 

that rate comparisons cannot be used to demonstrate that 

services are reasonably comparable. Moreover, the 

Commission cited empirical data showing that ―[e]ven in rural 

areas, approximately 98.5 percent of the population has access 

to [wireless] services offered by one or more providers,‖ thus 
18

directly supporting its conclusion that wireless services in 

rural areas are comparable to those in urban areas. Order, 25 

FCC Rcd. at 4079 ¶ 15.

Vermont nonetheless contends that because Congress 

required the Commission to ensure that services are 

reasonably comparable, the Commission was required to 

collect information about the quality of services available in 

rural areas. In response, the Commission explains that since 

the passage of the Telecommunications Act, it has ―reli[ed] 

upon service quality data provided by the states in 

combination with those data that the Commission already 

gathers . . . to monitor service quality trends.‖ Appellee‘s Br. 

52 (emphasis added) (quoting Federal-State Joint Bd. On 

Universal Serv., 12 FCC Rcd. 8776, 8832 ¶ 100 (1997)). Such 

a system, the Commission believes, works because most 

states have enacted their own mechanism to ensure highquality service within their borders. Accordingly, ―additional 

efforts undertaken at the federal level would be largely 

redundant.‖ Appellee‘s Br. 52 (citing Federal-State Joint Bd. 

On Universal Serv., 12 FCC Rcd. at 8831-32 ¶ 99). 

Contrary to Vermont‘s contention, the Commission has 

not abdicated its statutory duties by having the states submit 

service quality data. The relevant provision of the 

Telecommunications Act requires the Commission to ensure 

that ―[c]onsumers in all regions of the Nation . . . have access 

to telecommunications and information services . . . that are 

reasonably comparable to those services provided in urban 

areas.‖ 47 U.S.C. § 254(b)(3). Nothing in that provision 

requires—nor even implies—that the Commission itself must 

collect data on service comparability in any given manner.

And, as the Commission quite reasonably explains, and 

Vermont nowhere disputes, most states already maintain 

service quality data. If that data reveals quality problems, 
19

states have every incentive to send it on to the Commission.

Thus, absent a clear congressional directive that the 

Commission itself engage in fact-finding, the Commission 

acted well within its discretion in requiring states to submit 

service data.

Finally, Vermont contends that even if the Commission‘s 

high-cost support mechanism comports with the statute and is 

supported by empirical evidence, the Commission‘s use of 

stale data to calculate subsidies renders that mechanism 

invalid in practice. To determine the amount of high-cost 

support a state should receive, the Commission must first 

calculate the average cost per line—both nationally and 

within states. To do so, the Commission divides the total 

amount spent on providing services by the number of 

telephone lines served. Although the Commission once 

updated line counts periodically, it last did so in 2002, and 

since then the number of landlines serviced in rural areas (and 

across the country) has dropped as many customers have 

abandoned landline phones altogether in favor of mobile 

phone services, Order, 25 FCC Rcd. at 4078-79 ¶ 14. Because 

fewer lines serviced means a higher average cost per line, 

Vermont contends that had the Commission used current data, 

the rural costs per line may have been higher and thus 

statewide averages more likely to exceed—and to exceed by a 

larger amount—two standard deviations above the national 

average cost.

Acknowledging that it now uses stale line-count data, the 

Commission contends that updating the data is a laborintensive process that would take time away from its top 

priority—implementing the National Broadband Plan and 

ensuring that all regions of the nation have access to advanced

telecommunications technology. Because the National 

Broadband Plan will overhaul the current Universal Support 
20

Program, the Commission believes it is not worth ―expending 

significant time and resources‖ to update the current cost 

model. Doing so, the Commission tells us, would ―impede 

[its] ability to implement the congressionally-mandated

National Broadband Plan‖—a plan that, once in effect, will 

replace the current high-cost support mechanisms with funds 

for universal broadband deployment. Appellee‘s Br. 45.

Vermont offers us no basis for questioning the 

Commission‘s assurance that it is diligently working on 

implementing the National Broadband Plan nor its judgment 

that updating line counts would divert resources from that 

task. In any event, line counts are relevant only insofar as the 

existing high-cost support program remains in effect. Pursuant 

to the National Broadband Plan, that program will soon be 

overhauled to take account of the rapidly shifting 

technological landscape.

And that‘s not all. At oral argument, Commission counsel

assured us that states potentially disadvantaged by stale line 

counts are not without recourse. Specifically, they may

petition the Commission for supplemental relief under the 

waiver program by submitting ―documentation that unique 

circumstances prevent the achievement of reasonably 

comparable rates in that state.‖ Order, 25 FCC Rcd. at 4100 ¶ 

51. Indeed, Commission counsel called Vermont‘s challenge 

to stale line-count data a ―perfect use of the waiver process.‖

Oral Arg. Rec. at 41:54. As we have previously held, such a 

process is a ―sign of reasonableness,‖ representing an

―exception from the rigors of the broad rule‖ and thus, an 

effort by an agency ―to cabin, under appropriate 

circumstances, [a general rule‘s] potential sweep.‖ Natural 

Res. Def. Council v. EPA, 822 F.2d 104, 120 (D.C. Cir. 1987).
21

III.

The Telecommunications Act‘s universal service 

provision requires the Commission to do far more than 

promote rural rates and services that are ―reasonably 

comparable‖ to those in urban areas. The Commission must 

also ensure that ―low-income consumers . . . schools and 

classrooms, health care providers, and libraries...have access 

to advanced telecommunications services.‖ 47 U.S.C. 

§ 254(b). And in carrying out all these mandates, the 

Commission must ensure that rates charged to consumers 

nationwide are ―just, reasonable, and affordable.‖ Id. As the 

Commission rightly observed, it has a ―responsibility to be a 

prudent guardian of the public‘s resources.‖ Order, 25 FCC 

Rcd. at 4088 ¶ 29.

Here, the Commission has explained that ―reasonable 

comparability‖ between rural and urban areas has been largely 

accomplished and that expansion of the high-cost support 

fund will ―jeopardize other statutory mandates,‖ such as 

extending services to schools, hospitals, and libraries, and 

―ensuring affordable rates in all parts of the country.‖ Id. at

4087 ¶ 28. Because of this, and because the Commission has 

promised to address state-specific issues, like those presented 

by Vermont and Maine, through the waiver process, its 

decision to leave the high-cost support mechanism unchanged

is neither arbitrary nor capricious. We thus deny the petition 

for review.

So ordered.