2007 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

10-16-2007

Time Warner v. FCC

Precedential or Non-Precedential: Precedential

Docket No. 05-4769

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

__________

Nos. 05-4769, 05-5153, 06-1466, 06-1467

__________

TIME WARNER TELECOM, Inc.,

Petitioner in No. 05-4769,

v.

FEDERAL COMMUNICATIONS COMMISSION; and

UNITED STATES OF AMERICA,

Respondents.

__________

 EARTHLINK INC.,

Petitioner in No. 05-5153,

v.

FEDERAL COMMUNICATIONS COMMISSION,

Respondent.

__________

 COMPTEL,

Petitioner in No. 06-1466,

v.

FEDERAL COMMUNICATIONS COMMISSION; 

UNITED STATES OF AMERICA, 
*

 Honorable Alan D. Lourie, United States Circuit Judge for

the Federal Circuit, sitting by designation.

2

Respondents,

MONTANA SKY NETWORKS INC, 

d/b/a MONTANASKY.NET,

Intervenor.

__________

ACN COMMUNICATIONS SERVICES INC.; 

BROADWING COMMUNICATIONS, LLC.; INTEGRA

TELECOM INC; MCLEODUSA TELECOMMUNICATIONS

SERVICES, INC.; MPOWER COMMUNICATIONS CORP.;

and PAC-WEST TELECOMM, INC.,

Petitioners in No. 06-1467,

v.

 FEDERAL COMMUNICATIONS COMMISSION; and

UNITED STATES OF AMERICA

Respondents.

__________

On Petition for Review of a Final Order of the 

Federal Communications Commission

__________

Argued March 16, 2007

Before: FUENTES, GREENBERG, and LOURIE,*

 Circuit

Judges.

(Filed: October 16, 2007)
3

David P. Murray (Argued)

Wilkie, Farr & Gallagher LLP

1875 K Street, N.W.

Washington, DC 20006

Counsel for Petitioner Time Warner Telecom Inc.

James M. Carr (Argued)

Federal Communications Commission

Office of General Counsel

445 12th Street, S.W.

Washington, DC 20554

Counsel for Respondent Federal Communications

Commission 

Nancy C. Garrison

Catherine G. O’Sullivan

United States Department of Justice

Appellate Section

950 Pennsylvania Avenue, N.W.

Washington, DC 20530

Counsel for Respondent United States of America

Michael K. Kellogg (Argued)

Kellogg, Huber, Hansen, Todd, Evans & Figel, P.L.L.C.

1615 M Street, N.W.

Suite 400

Washington, DC 20036

Counsel for Intervenors BellSouth Corp. and AT&T Inc.

Robert B. McKenna

Qwest Services Corporation

1801 California Street

10th Floor

Denver, CO 80202

Counsel for Intervenor Qwest Communications

International Inc.
4

Stephen J. Rosen

Levine, Blaszak, Block & Boothby LLP

2001 L Street, N.W., Suite 900

Washington, D.C. 20036

Counsel for Intervenor Ad Hoc Telecommunications

Users Committee

Andrew G. McBride

Wiley Rein LLP

1776 K Street, N.W.

Washington, DC 20006

Counsel for Intervenors the Verizon telephone companies

Mark J. O’Connor 

Donna N. Lampert (Argued)

Lampert & O’Connor, P.C.

1775 K Street, N.W.

Suite 700

Washington, DC 20006

Counsel for Petitioner Earthlink Inc.

Harold Feld

Media Access Project

1625 K Street, N.W.

Suite 1118

Washington, DC 20006

Counsel for Intervenors National Alliance for Media Arts

and Culture; Office of Communication of the United Church of

Christ, Inc.; and Center for Digital Democracy

Marc J. Fink

John W. Butler (Argued)

Sher & Blackwell LLP

1850 M Street, N.W.

Suite 900 

Washington, DC 20036
5

Counsel for Petitioner COMPTEL

Ivan C. Evilsizer

2301 Colonial Drive 

Suite 2B

Helena, MT 59601

Counsel for Intervenor Montana Sky Networks Inc.

Joshua M. Bobeck

Bingham McCutchen LLP

3000 K Street, N.W.

Suite 300

Washington, DC 20007

Counsel for Petitioners ACN Communications Services

Inc.; Broadwing Communications; Integra Telecom Inc.;

McLeodUSA Telecommunications Services Inc.; Mpower

Communications Corp.; and Pac-West Telecomm. Inc.

__________

OPINION 

__________

FUENTES, Circuit Judge.

The petition under review arises from an order of the

Federal Communications Commission (“FCC”), which

substantially limits federal regulation of high-speed Internet access

service provided over traditional telephone lines (referred to as

“wireline broadband Internet access service”). The dispute centers,

in large part, on the FCC’s decision to relieve telephone companies

of decades-old regulations that required them to grant competing

Internet service providers nondiscriminatory access to their

wirelines in order to reach consumers. The FCC contends that

these regulations “imposed significant costs” on telephone

companies, “thereby impeding innovation and investment in new

broadband technologies and services.” (FCC Br. at 43.)

Presumably, the FCC’s order now allows telephone companies to
1

 For example, Time Warner argues that “[a]bsent

compulsory regulation to make their transmission lines available to

competitive providers of Internet access, [the dominant telephone

companies] will be free to target their investments in network

upgrades to transmission inputs they make available only to their

own retail broadband Internet access services.” (Time Warner Br.

at 7.) “The resulting disparity in service between broadband

Internet access service offered by” telephone companies and their

competitors, will give telephone companies “the ability to raise

prices unilaterally on their higher-quality services without fear of

losing market share.” (Time Warner Br. at 8.)

2

 We have jurisdiction under 47 U.S.C. § 402(a) and 28

U.S.C. § 2342(1) to review the FCC’s order.

6

enter into individually negotiated arrangements with entities that

seek access to their broadband wireline facilities. 

Petitioners, who are independent Internet service providers,

competing telecommunications service providers, cable modem

providers, and various public interest organizations, argue that the

FCC’s order allows telephone companies to deny competitors

access to their wirelines, thereby resulting in decreased competition

and consumer choice in the market for broadband Internet service.1

For the reasons stated below, we conclude that the FCC’s order is

based on a reasonable interpretation of the Communications Act of

1934, 48 Stat. 1064 (codified as amended at 47 U.S.C. §§ 151-614

(2006)), and a proper exercise of agency discretion. Accordingly,

we will deny the petition for review.2

I. BACKGROUND

We discuss in some detail the complex technical and

regulatory context for the FCC’s order, which is set forth at

Appropriate Framework for Broadband Access to the Internet over

Wireline Facilities, 20 F.C.C.R. 14853 (2005) (“Wireline

Broadband Order”). 

A. Technical Background

Before the advent of broadband technology, consumers
3

 The Supreme Court has described the physical structure of

a local exchange as

a network connecting terminals like telephones,

faxes, and modems to other terminals within a

geographical area like a city. From terminal network

interface devices, feeder wires, collectively called

the “local loop,” are run to local switches that

aggregate traffic into common “trunks.” The local

loop was traditionally, and is still largely, made of

copper wire, though fiber-optic cable is also used,

albeit to a far lesser extent than in long-haul markets.

Just as the loop runs from terminals to local

switches, the trunks run from the local switches to

centralized, or tandem, switches, originally worked

by hand but now by computer, which operate much

like railway switches, directing traffic into other

trunks. A signal is sent toward its destination

terminal on these common ways so far as necessary,

then routed back down another hierarchy of switches

to the intended telephone or other equipment.

Verizon Commc’ns v. FCC, 535 U.S. 467, 489-90 (2002)

(footnotes omitted). In the order on review, the FCC noted that

wireline infrastructure is rapidly changing, but that “these

developments [have] not fundamentally change[d] the capabilities

of the wireline network.” Wireline Broadband Order, 20 F.C.C.R.

at 14873 ¶ 34. 

7

accessed the Internet using “dial-up” connections provided over the

interconnected system of telephone wires known as a local

exchange.3

 See Nat’l Cable & Telecomm. Ass’n v. Brand X

Internet Svcs., 545 U.S. 967, 974 (2005) (“Brand X”). With a dialup connection, consumers use computer modems to make calls

which Internet service providers (“ISPs”) link to the Internet by

providing consumers with a physical connection and “the ability to

translate raw Internet data into information they may both view on

their personal computers and transmit to other computers

connected to the Internet.” Id. Dial-up connections, also referred

to as “narrowband” connections, transmit data at relatively slow

speeds. Id. at 974-75.
4

 The terms “telephone company,” “local exchange carrier,”

“telephone common carrier” and “communications common

carrier,” and other combinations of these terms, are often used

interchangeably in the relevant case law and FCC rulings. Each

term has its own historical and regulatory context and, where

possible, we use them with that in mind. 

8

By contrast, “broadband” connections, which are

increasingly replacing dial-up connections, are much faster and are

principally provided by: (1) cable modem service and (2) Digital

Subscriber Line (DSL) service. DSL service, the type of

transmission at issue in the Wireline Broadband Order, involves the

use of “[t]wo DSL modems [that] are attached to a telephone loop,

one at the subscriber’s premises and one at the telephone

company’s central office.” WorldCom, Inc. v. FCC, 246 F.3d 690,

692 (D.C. Cir. 2001). If the line carries telephone service and

high-speed data transmission, the telephone company—also known

as the local exchange carrier (“LEC”)—separates the streams and

sends ordinary voice calls to the telephone network and data traffic

to a “packet-switched data network” where it is routed to an ISP.4

Id. LECs use their transmission facilities to provide consumers

with Internet access service, in which case they are referred to as

“facilities-based ISPs.” See Brand X, 545 U.S. at 975; Wireline

Broadband Order, 20 F.C.C.R. at 14858 ¶ 5. They also lease their

wires on a wholesale basis to independent ISPs, referred to as

“non-facilities-based ISPs,” who use the wires to reach their

customers. See Brand X, 545 U.S. at 975; Wireline Broadband

Order, 20 F.C.C.R. at 14864-65 ¶ 16 n.43.

B. Regulatory Framework

There are three key developments in the regulatory history

of telecommunications and data processing services that are

significant to this petition for review: (1) Congress’s passage of the

Communications Act in 1934; (2) the FCC’s issuance of its

Computer II ruling in 1980; and (3) the passage of the

Telecommunications Act in 1996. We discuss each in turn.

1. The Common Carrier Doctrine
5

 In incorporating common carrier requirements into Title II

of the Communications Act, Congress adopted many of the rules

set forth in the Interstate Commerce Act of 1887, 24 Stat. 379,

which previously served as the statutory basis for federal regulation

of the railroad and telephone industries. Global Crossing, 127 S.

Ct. at 1517. The Court of Appeals for the D.C. Circuit has

explained that the common carrier doctrine emerged out of

common law rules which historically

impose[d] a greater standard of care upon carriers

who held themselves out as offering to serve the

public in general. The rationale was that by holding

themselves out to the public at large, otherwise

private carriers took on a quasi-public character.

This character, coupled with the lack of control

exercised by shippers or travellers over the safety of

their carriage, was seen to justify imposing upon the

carrier the status of an insurer.

Nat’l Ass’n of Regulatory Utility Comm’rs v. FCC, 525 F.2d 630,

640 (D.C. Cir. 1976). The D.C. Circuit further explained in a later

related decision that the “sine qua non of common carrier status”

is that the entity has taken on “a quasi public character, which

arises out of the undertaking to carry for all people indifferently.”

Nat’l Ass’n of Regulatory Utility Comm’rs v. FCC, 533 F.2d 601,

608 (D.C. Cir. 1976) (internal quotation marks omitted).

9

The regulatory issues raised in the Wireline Broadband

Order trace back to the enactment of the Communications Act in

1934, which established the FCC’s “broad authority to regulate

interstate telephone communications.” Global Crossing

Telecomm., Inc. v. Metrophones Telecomm., Inc., 127 S. Ct. 1513,

1516 (2007). Title II of the statute heavily regulated the activities

of local telephone companies by imposing upon them certain

“common carrier” obligations.5

 See id. at 1517. For example, Title

II required telephone companies to charge consumers “just and

reasonable” rates and to file and make publicly available their rate

schedules (known as “tariffs”); authorized the FCC to set rates if

the ones offered by a carrier were not just and reasonable;

prohibited carriers from constructing new wirelines without first

obtaining a certificate of public convenience and necessity from the

FCC; and established liability for carriers that violated the statute.
6

 Specifically, the FCC identified the following issues:

(a) That the sale of data processing services by

carriers should not adversely affect the provision of

efficient and economic common carrier services;

(b) That the costs related to the furnishing of such

data services should not be passed on, directly or

indirectly, to the users of common carrier services;

10

Communications Act, ch. 652, §§ 201-03, 205-06, 214, 48 Stat.

1068, 1070-71, 1072-73, 1075-76 (1934) (prior to 1996

amendments). These common carrier provisions remain essentially

unchanged, see 47 U.S.C. §§ 201-03, 205-06, 214, although, as

discussed below, Congress has since amended Title II to include

additional common carrier obligations. See generally 47 U.S.C. §§

201-276 (setting forth the Communications Act’s Title II common

carrier requirements).

2. The FCC’s Computer Inquiry Proceedings

In 1966, the FCC initiated the Computer Inquiry

proceedings to address the regulatory issues presented by the

growing convergence of traditional telephone communications and

data processing services. The FCC issued three important rulings

in connection with the proceedings, known as “Computer I,”

“Computer II,” and “Computer III.”

In Regulatory and Policy Problems Presented by the

Interdependence of Computer and Communication Services and

Facilities, 28 F.C.C.2d 267, ¶ 2 (1971) (“Computer I”), the FCC

addressed “the nature and extent of regulatory jurisdiction and

control” which it would “exercise over the furnishing of data

processing and communications services, or some combination

thereof,” by telephone and data processing companies. With

respect to telephone companies subject to Title II common carrier

requirements, the FCC was concerned that “without appropriate

regulatory safeguards, the provision of data processing services by

common carriers could adversely affect the statutory obligation of

such carriers to provide adequate communications services under

reasonable terms and conditions and impair effective competition

in the sale of data processing services.”6

 Id. ¶ 8. 
(c) That revenues derived from common carrier

services should not be used to subsidize any data

processing services; and

(d) That the furnishing of such data processing

services by carriers should not inhibit free and fair

competition between communication common

carriers and data processing companies . . . .

Id. ¶ 9. 

11

To address the concern, the FCC, pursuant to its rulemaking

authority, required “maximum separation of activities which are

subject to regulation [i.e., traditional telephone communications]

from non-regulated activities involving data processing” to ensure

“adequate and efficient communications services at reasonable and

non-discriminatory rates and practices.” Id. ¶ 10 (internal

quotations marks omitted). Thus, telephone companies that

provided consumers with data processing services were permitted

to do so “only through affiliates utilizing separate books of

account, separate officers, separate operating personnel and

separate equipment and facilities devoted exclusively to the

rendition of data processing services.” Id. ¶ 12. 

At the same time that it imposed these structural safeguards

on telephone companies, the FCC determined that the

Communications Act did not require it to exercise full regulatory

authority over data processing services in general. See id. ¶¶ 4, 11,

30. As the FCC stated: “where message switching is offered as an

integral part of and as an incidental feature of a package offering

that is primarily data processing, there will be total regulatory

forbearance with respect to the entire service whether offered by a

common carrier or non-common carrier.” Id. ¶ 31.

In Amendment of Section 64.702 of the Commission’s

Rules and Regulations, 77 F.C.C.2d 384, ¶ 2 (1980) (“Computer

II”), issued nine years after its Computer I ruling, the FCC

addressed technological developments that had further blurred the

boundary between traditional telecommunications and data

processing services. The FCC adopted a regulatory framework that

distinguished between the offering of “basic transmission service”

and “enhanced service”—subjecting only the former to mandatory
12

Title II regulation. Id. ¶¶ 5, 7. The FCC defined “basic service” as

“limited to the common carrier offering of transmission capacity

for the movement of information.” Id. ¶¶ 5, 93. “In offering this

capacity, a communications path is provided for the analog or

digital transmission of voice, data, video, etc. information,” and

“the carrier’s basic transmission network is not used as an

information storage system.” Id. ¶¶ 93, 95. In other words, “a

carrier essentially offers a pure transmission capability over a

communications path that is virtually transparent in terms of its

interaction with customer supplied information.” Id. ¶ 96.

In contrast, the FCC defined “enhanced service” as “any

offering over the telecommunications network which is more than

basic transmission service.” Id. ¶ 97. The FCC elaborated: 

In an enhanced service . . . computer processing

applications are used to act on the content, code,

protocol, and other aspects of the subscriber’s

information . . . additional, different, or restructured

information may be provided the subscriber through

various processing applications performed on the

transmitted information, or other actions can be

taken by either the vendor or the subscriber based on

the content of the information transmitted through

editing, formating [sic], etc. Moreover, in an

enhanced service the content of the information need

not be changed and may simply involve subscriber

interaction with stored information. 

Id. (footnote omitted).

In addition to distinguishing between basic transmission

services (subject to Title II) and enhanced services (not subject to

Title II), the FCC eliminated the maximum separation regime with

respect to all telephone common carriers except those under the

control of AT&T and GTE, the two dominant carriers that the FCC

determined had sufficient market power to engage in

anticompetitive activity on a national scale. See id. ¶ 228. Thus,

telephone companies were no longer required to use separate

affiliates to provide enhanced services to consumers. However, the

FCC, pursuant to its ancillary jurisdiction under Title I of the
13

Communications Act, 47 U.S.C. §§ 151-61, required those carriers

engaged in the provision of enhanced services to grant competing

providers access to their wirelines on a nondiscriminatory basis

pursuant to tariffs governed by Title II. Id. ¶ 132. The FCC

explained the Computer II nondiscriminatory access requirements

as follows:

Because enhanced services are dependent on the

common carrier offering of basic services, a basic

service is the building block upon which enhanced

services are offered. Thus those carriers that own

common carrier transmission facilities and provide

enhanced services, but are not subject to the separate

subsidiary requirement, must acquire transmission

capacity pursuant to the same prices, terms, and

conditions reflected in their tariffs when their own

facilities are utilized. Other offerors of enhanced

services would likewise be able to use such a

carrier’s facilities under the same terms and

conditions.

Id. ¶ 231. These nondiscriminatory access rules are at the center of

this petition for review.

Finally, six years later, in Amendment of Sections 64.702 of

the Commission’s Rules and Regulations (Third Computer

Inquiry); and Policy and Rules Concerning Rates for Competitive

Common Carrier Services and Facilities Authorizations, 104

F.C.C.2d 958 (1986) (“Computer III”), the FCC replaced the

maximum separation regime applied to the dominant telephone

companies with a system of nonstructural safeguards. 

3. Telecommunications Act of 1996

Congress substantially amended the Communications Act

of 1934 when it passed the Telecommunications Act of 1996, Pub.

L. No. 104-104, 110 Stat. 56 (codified as amended in scattered

sections of 47 U.S.C.). As one commentator has explained, “the

principal goal in the 1996 Act was to open the local telephone

market to effective competition.” James B. Speta, Handicapping

the Race for the Last Mile? A Critique of Open Access Rules for
7

 The Supreme Court has explained that, “[i]t is easy to see

why [an ILEC] would have an almost insurmountable competitive

advantage . . . in routing calls within the exchange.” Verizon, 535

U.S. at 490. Specifically, “[a] newcomer could not compete with

the incumbent carrier to provide local service without coming close

to replicating the incumbent’s entire existing network, the most

costly and difficult part of which would be laying down the ‘last

mile’ of feeder wire, the local loop, to the thousands (or millions)

of terminal points in individual houses and businesses.” Id. In

addition, “[t]he incumbent company could also control its local

loop plant so as to connect only with terminals it manufactured or

selected, and could place conditions or fees (called ‘access

charges’) on long-distance carriers seeking to connect with its

network.” Id. at 490-91. Thus, “[i]n an unregulated world, another

14

Broadband Platforms, 17 Yale J. on Reg. 39, 63 (2000). Thus,

Title II was expanded to include additional requirements intended

to break up the dominance of a small number of LECs over the

telecommunications market. Id. 

As amended, Title II imposes on LECs the duty not to

prohibit or unreasonably restrict resale of their services; to provide

number portability so that consumers can switch LECs but still

retain their phone numbers; to accord dialing parity so that a LEC

customer can reach a customer of another LEC by dialing no more

digits than necessary; to permit competing LECs access to their

rights of way; and to establish reciprocal compensation with other

LECs for the transport and termination of all calls. See id. at 64

(citing 47 U.S.C. §§ 251(b)(1)-(5)). 

In addition, Title II imposes on “incumbent local exchange

carriers” (“ILECs”), defined as any LEC that existed as of the date

the Telecommunications Act was passed, the obligation to permit

nondiscriminatory interconnection with another carrier’s facilities

at any feasible point in the ILEC’s network; provide any other

carrier unbundled access to certain elements of the ILEC’s network

at cost-based rates; establish wholesale rates for the resale of any

telecommunications service provided by the ILEC; provide the

FCC with notice of any changes to the ILEC’s network; and permit

the collocation of other telecommunications carriers’ equipment on

the ILEC’s premises.7

 See id. at 65 (citing 47 U.S.C. §§ 251(c)(2)-
telecommunications carrier would be forced to comply with these

conditions, or it could never reach the customers of a local

exchange.” Id. at 491. 

15

(6)).

Crucial to this petition for review, the Telecommunications

Act also introduced two new important regulatory classifications

that parallel the basic and enhanced services distinction established

in Computer II: “telecommunications service” and “information

service.” 47 U.S.C. § 153(20) & (46). Only telecommunications

service is subject to mandatory regulation under Title II. 

C. Regulatory Treatment of Broadband 

Internet Access Service

1. Cable Modem Broadband Internet Access Service

The FCC first applied the Communications Act’s new

regulatory classifications to broadband Internet access service in its

ruling in Inquiry Concerning High-Speed Access to the Internet

Over Cable and Other Facilities, 17 F.C.C.R. 4798 (2002) (“Cable

Modem Declaratory Ruling”). In the ruling, the FCC concluded

that broadband Internet access service provided by cable

companies is an “information service,” which does not include a

separate “telecommunications service” subject to mandatory Title

II common carrier regulation. Id. at 4802 ¶ 7. In addition, the FCC

declined to apply the Computer II nondiscriminatory access

requirements to cable modem broadband operators despite the fact

that, at the time, telephone companies engaged in the provision of

enhanced services were required to provide non-facilities-based

ISPs nondiscriminatory access to their transmission facilities. Id.

at 4825 ¶ 43. The Supreme Court upheld the Cable Modem

Declaratory Ruling in Brand X, 545 U.S. at 1002, noting that it

“appears to be a first-step in an effort to reshape the way the

Commission regulates information-service providers.”

2. Procedural Background to the Wireline Broadband Order

In February 2002, shortly before it released the Cable

Modem Declaratory Ruling, the FCC issued a notice of proposed
8

 Separate briefs have been filed with the Court by the

following petitioners: (1) Time Warner Telecom, Inc., which

provides broadband cable modem Internet access service (“Time

Warner”); (2) Earthlink, Inc., a non-facilities-based ISP

(“Earthlink”); (3) COMPTEL, a trade association that represents

telecommunications carriers and independent ISPs (“COMPTEL”);

and (4) a group of non-facilities-based telecommunications and

Internet access services providers referred to collectively as

“ACN.” Intervening in support of petitioners are the National

Alliance for Media Arts and Culture; the Office of Communication

of the United Church of Christ, Inc.; the Center for Digital

16

rulemaking, setting forth and requesting public comment on a

number of tentative conclusions concerning the regulatory

treatment of wireline broadband Internet access service.

Appropriate Framework for Broadband Access to the Internet over

Wireline Facilities, 17 F.C.C.R. 3019 (2002) (“Wireline Broadband

NPRM”). In response, the FCC received numerous comments

from a wide range of interested parties. 

On September 23, 2005, three months after the Supreme

Court’s Brand X decision, the FCC released the order on review,

which substantially limited federal regulation of wireline

broadband Internet access service through two principal rulings.

First, the FCC ruled that wireline broadband Internet access

service, like cable modem service, is an information service that

does not include a separate “telecommunications service” subject

to mandatory common carrier regulation under Title II of the

Communications Act, regardless of whether such service is

provided by LECs or non-facilities-based ISPs. Wireline

Broadband Order, 20 F.C.C.R. at 14862-66 ¶¶ 12-17. Second, the

FCC eliminated the Computer II requirements on grounds that

market conditions no longer justify requiring LECs to grant

independent ISPs nondiscriminatory access to their wireline

transmission facilities. See, e.g., id. at 14879-87 ¶¶ 47-64. These

consolidated petitions for review followed. 

Petitioners, who are independent ISPs, competing

telecommunications service providers, cable modem providers, and

various public interest organizations, challenge the FCC’s statutory

classification and Computer II rulings.8

 We address both in turn.
Democracy; and Montana Sky Networks, Inc. In addition, AT&T

Inc.; BellSouth Corp.; Qwest Communications International Inc.;

and the Verizon telephone companies (collectively “AT&T”) have

intervened and filed a separate brief in support of the FCC.

17

II. STANDARD OF REVIEW

Our review is governed by Chevron U.S.A. Inc. v. Natural

Resources Defense Council, Inc., 467 U.S. 837 (1984), and § 706

of the Administrative Procedure Act (“APA”), 5 U.S.C. § 706

(2006). See Brand X, 545 U.S. at 974. Chevron requires a federal

court to defer to an agency’s reasonable interpretation of any

ambiguities in a statute which it administers. Id. at 980. Section

706 of the APA requires a court to “hold unlawful and set aside

agency action, findings, and conclusions” that are “arbitrary,

capricious, an abuse of discretion, or otherwise not in accordance

with law.” 5 U.S.C. § 706.

III. STATUTORY CLASSIFICATION

In the Wireline Broadband Order, the FCC rejected the

proposition that wireline broadband Internet access service

“includes both an information service and a telecommunications

service.” Wireline Broadband Order, 20 F.C.C.R. at 14862 ¶ 12

n.31. Rather, it found that wireline broadband Internet access

service is a functionally integrated “information service.” Id. We

conclude that this statutory classification is based on a reasonable

interpretation of the Communications Act.

The classification of a particular service as a

“telecommunication service” or an “information service” under the

Communications Act turns on the following definitions in the

statute:

The term “telecommunications” means the

transmission, between or among points specified by

the user, of information of the user’s own choosing,

without change in the form or content of the

information as sent and received. 
9

 Under Chevron, “[w]hen a court reviews an agency’s

construction of the statute which it administers, it is confronted

with two questions.” 467 U.S. at 842. First, the court asks

“whether Congress has directly spoken to the precise question at

issue.” Id. If Congress’s intent is clear, “the court, as well as the

agency, must give effect to the unambiguously expressed intent of

Congress.” Id. at 842-43. “[I]f the statute is silent or ambiguous

with respect to the specific issue” presented, the court must ask

whether the agency’s interpretation “is based on a permissible

construction of the statute.” Id. at 843. The Court explained in

Brand X, “if the implementing agency’s construction is reasonable,

Chevron requires a federal court to accept the agency’s

construction of the statute, even if the agency’s reading differs

from what the court believes is the best statutory interpretation.”

545 U.S. at 980. 

18

47 U.S.C. § 153(43).

The term “telecommunications service” means the

offering of telecommunications for a fee directly to

the public, or to such classes of users as to be

effectively available directly to the public, regardless

of the facilities used. 

47 U.S.C. § 153(46) (emphasis added). 

The term “information service” means the offering of

a capability for generating, acquiring, storing,

transforming, processing, retrieving, utilizing, or

making available information via

telecommunications . . . .

47 U.S.C. § 153(20) (emphasis added). 

In Brand X, the Supreme Court, applying Chevron’s

familiar two-step analysis, concluded that the term

“telecommunications service” is ambiguous as applied to cable

modem Internet access service “[b]ecause the term ‘offer’ can

sometimes refer to a single, finished product and sometimes to the

individual components in a package being offered.”9

 545 U.S. at

991-92 (internal quotation marks and citations omitted). The Court
10 In Part I of his dissent, Justice Scalia (joined by Justices

Souter and Ginsburg) strongly disagreed with the majority, stating

that cable modem providers necessarily “offer” consumers a

separate “telecommunications service” when they provide them

with Internet access service. Justice Scalia provided a competing

analogy:

If, for example, I call up a pizzeria and ask whether

they offer delivery, both common sense and common

“usage” would prevent them from answering: “No,

19

elaborated:

Cable companies in the broadband Internet service

business “offe[r]” consumers an information service

in the form of Internet access and they do so “via

telecommunications,” § 153(20), but it does not

inexorably follow as a matter of ordinary language

that they also “offer[r]” consumers the high-speed

data transmission (telecommunications) that is an

input used to provide this service, § 153(46).

Id. at 989 (alterations in original). The Court illustrated its

conclusion using the following analogy: 

One might well say that a car dealership “offers”

cars, but does not “offer” the integrated major inputs

that make purchasing the car valuable, such as the

engine or the chassis. It would, in fact, be odd to

describe a car dealership as “offering” consumers the

car’s components in addition to the car itself. Even

if it is linguistically permissible to say that the car

dealership “offers” engines when it offers cars, that

shows, at most, that the term “offer,” when applied

to a commercial transaction, is ambiguous about

whether it describes only the offered finished

product, or the product’s discrete components as

well. It does not show that no other usage is

permitted. 

Id. at 990.10 Given this ambiguity in the statute, the Court
we do not offer delivery—but if you order a pizza

from us we’ll bake it for you and then bring it to

your house. The logical response to this would be

something on the order of, “so you do offer

delivery.” But, our pizza-man may continue to deny

the obvious and explain, paraphrasing the FCC and

the Court: “No, even though we bring the pizza to

your house, we are not actually ‘offering’ you

delivery, because the delivery that we provide to our

end users is ‘part and parcel of’ our pizzeria-pizzaat-home service and is ‘integral to its other

capabilities.’” Any reasonable customer would

conclude at that point that his interlocutor was either

crazy or following some too-clever-by-half legal

advice.

Id. at 1007 (Scalia, J., dissenting) (citations and footnotes omitted).

In the majority’s view, the dissent’s argument “only underscores

that the term ‘offer’ is ambiguous in the way that we have

described . . . leav[ing] federal telecommunications policy in this

technical and complex area to be set by the Commission, not by

warring analogies.” Id. at 991-92.

20

considered whether the FCC’s conclusion that cable modem

providers do not “offer” consumers a separate “telecommunications

service” was based on a permissible construction of the

Communications Act under Chevron. 

In its ruling, the FCC “conceded that, like all informationservice providers, cable companies use ‘telecommunications’ to

provide consumers with Internet service.” Id. at 988. That is,

“cable companies provide such service via the high-speed wire that

transmits signals to and from an end user’s computer.” Id. But

whether that service also includes a telecommunications “offering,”

in the FCC’s view, “‘turn[ed] on the nature of the functions the end

user is offered.’” Id. (quoting Cable Modem Declaratory Ruling,

17 F.C.C.R. at 4822 ¶ 38). In the FCC’s judgment, end users do

not perceive the service they receive as consisting of both a data

processing component and a transmission component.

The Supreme Court explained the FCC’s conclusion
21

concerning end user perception: 

Seen from the consumer’s point of view, the

Commission concluded, cable modem service is not

a telecommunications offering because the consumer

uses the high-speed wire always in connection with

the information-processing capabilities provided by

Internet access, and because the transmission is a

necessary component of Internet access: “As

provided to the end user the telecommunications is

part and parcel of cable modem service and is

integral to its other capabilities.” 

Id. (quoting Cable Modem Declaratory Ruling, 17 F.C.C.R. at 4823

¶ 39). “The wire is used, in other words, to access the World Wide

Web, newsgroups, and so forth, rather than ‘transparently’ to

transmit and receive ordinary-language messages without computer

processing or storage of the message.” Id. Because of the

“integrated” nature of the offering, the FCC determined, “cable

modem service is not a ‘stand-alone,’ transparent offering of

telecommunications.” Id. (quoting Cable Modem Declaratory

Ruling, 17 F.C.C.R. at 4823-25 ¶¶ 41-43). 

The Supreme Court concluded that the FCC’s determination

was reasonable, given “[t]hat [the] question turns not on the

language of the Act, but on the factual particulars of how Internet

technology works and how it is provided, questions Chevron leaves

to the Commission to resolve in the first instance.” Id. at 991.

Moreover, the Court observed, the FCC’s emphasis on how end

users perceive the nature of the service being offered was

consistent with Computer II, which defined “basic” and

“enhanced” services “functionally, based on how the consumer

interacts with the provided information.” Id. at 992-93.

Applying the same analytical approach used in the Cable

Modem Declaratory Ruling, the FCC, in this proceeding,

concluded that “wireline broadband Internet access service

provided over a provider’s own facilities is appropriately classified

as an information service because its providers offer a single,

integrated service (i.e., Internet access) to end users.” Wireline

Broadband Order, 20 F.C.C.R. at 14863 ¶ 14. The parties agree
22

that Internet service is an information service not subject to Title

II regulation. (See COMPTEL Br. at 6; AT&T Br. at 6.)

Petitioners contend, however, that the FCC erroneously concluded

that the wireline transmission component used to provide

broadband Internet access is not a “telecommunication service”

offering subject to mandatory Title II regulation. 

Petitioners advance three principal arguments which we

address in turn: that the FCC’s statutory classification of wireline

broadband Internet access service (1) is not supported by record

evidence; (2) is contrary to the FCC’s past rulings; and (3) is

inconsistent with the FCC’s classification of wireline broadband

service under the Communications Assistance for Law

Enforcement Act (“CALEA”), 47 U.S.C. §§ 1001-02. 

A. Record Evidence

In the Wireline Broadband Order, the FCC determined that

“like cable modem service (which is usually provided over the

provider’s own facilities), wireline broadband Internet access

service combines computer processing, information provision, and

data transport, enabling end users to run a variety of applications

(e.g., e-mail, web pages, and newsgroups).” 20 F.C.C.R. at 14863

¶ 14. Given the similarity between how end users perceive the

finished product (Internet access), whether provided by wireline or

cable modem providers, the FCC concluded that its decision to

classify wireline broadband Internet access service as an

information service logically flowed from the Supreme Court’s

Brand X decision. See, e.g., id. at 14864 ¶ 15. In our view, the

record adequately supports the FCC’s conclusion that from the

perspective of the end-user, wireline broadband service and cable

modem service are functionally similar and, therefore, that they

should be subject to the same regulatory classification under the

Communications Act. 

For example, public comments submitted in response to the

Wireline Broadband NPRM state that:

[Cable modem, DSL, fixed wireless, and satellite

service are] functionally similar. Each is used

primarily for Internet access; each can be used with
23

an ordinary personal computer, with a modest

hardware addition; each provides an always-on

connection, at comparable speeds; and unlike

traditional dial-up connections, each enables

consumers to use their ordinary telephone line for

voice or fax while simultaneously accessing the

Internet. 

(J.A. at 2102) (Comments of Verizon, May 3, 2003) (footnotes

omitted).

[P]roviders of [cable modem, DSL, fixed wireless,

and satellite service] view them as substitutes. For

example, cable operators have stated that they view

DSL as their main competitor, whereas DSL

providers have said the same thing about cable

modem providers. 

(J.A. at 2103) (Comments of Verizon, May 3, 2003) (footnotes

omitted). 

DSL & Cable Modem Access are Analogous

• Functions for data access provided to the end user

are the same. 

• Service set up processes are functionally identical

. . . 

• All data is packetized. 

• IP Addresses are assigned to the Premises in the

same manner. 

• Data set-up uses similar protocol to connect to the

Internet . . . 

• The end user’s computer can be used

interchangeably. This means if the same ISP is

connected to both the DSL and the Cable network,

the user can plug their PC into either the DSL

Modem or the Cable Modem and access their

account. 

(J.A. at 2789) (Ex Parte Letter from Qwest to FCC with Attached

Presentation, April 28, 2003). 
24

[C]onsumers view [cable modem, DSL, fixed

wireless, and satellite service] as interchangeable.

As one analyst has explained, “most customers don’t

care about technologies,” but are “platform

agnostic,” and simply want an experience that is

better than narrowband dial-up. One poll found

“little difference between perceptions among those

planning to get either DSL or cable modem

services.” 

(J.A. at 2103) (Comments of Verizon, May 3, 2003) (footnotes

omitted). 

Petitioners attempt to distinguish wireline broadband service

from cable modem service on grounds that LECs offer their

wireline transmission component on a “stand-alone” basis to other

ISPs. That is, LECs lease their transmission facilities to

independent ISPs who themselves provide consumers with Internet

access service. Therefore, petitioners reason, LECs plainly “offer”

a separate telecommunications service. We are not persuaded that

this is a basis for distinguishing wireline broadband service from

cable modem service. 

The fact that LECs have provided independent ISPs with

stand-alone transmission capabilities is, as the FCC points out, a

function of the very regulatory requirements that the FCC’s order

seeks to eliminate—that is, wireline providers have been (until the

release of the Wireline Broadband Order) the only broadband

provider required by Computer II to offer their transmission

component on a stand-alone basis. Wireline Broadband Order, 20

F.C.C.R. at 14886 ¶ 63. Indeed, record evidence considered in the

Cable Modem Declaratory Ruling showed that cable modem

providers not only have the capability to offer their transmission

facilities on a stand-alone basis, but, in fact, have entered into

agreements with independent ISPs to do so. Cable Modem

Declaratory Ruling, 17 F.C.C.R. at 4828-31 ¶¶ 52-54. This fact did

not prevent the Supreme Court from upholding the FCC’s

determination that cable modem service is a fully integrated

information service. We see no reason why we should reach a

contrary decision here.
25

B. Past Agency Decisions

We are likewise unpersuaded by petitioners’ argument that

the FCC’s statutory classification ruling is improper because it

conflicts with past agency decisions. In particular, COMPTEL

focuses on the Advanced Services Order, 13 F.C.C.R. 24012 ¶ 36

(1998), in which the FCC concluded that it would treat broadband

Internet access service as consisting of both an information service

and a telecommunications service. 

The FCC candidly admitted in the Wireline Broadband

Order that past agency statements concerning the regulatory

treatment of wireline broadband Internet access service had not

been “entirely consistent,” but nevertheless found that there was

ample basis in its prior rulings to support its classification of

wireline broadband Internet access service as a functionally

integrated information service. 20 F.C.C.R. at 14862 ¶12 n.32.

For example, the FCC relied on its Report to Congress in FederalState Joint Board on Universal Service, 13 F.C.C.R. 11501, 11519

¶ 36 (1998) (“Universal Service Report”), in which it concluded

that “the categories of ‘information service’ and

‘telecommunications service’ are mutually exclusive.” See

Wireline Broadband Order, 20 F.C.C.R. at 14862 ¶ 12 n.32. The

FCC relied on the Universal Service Report “heavily” in the Cable

Modem Declaratory Ruling, and the Supreme Court in Brand X

clearly found this sufficient. See Brand X, 545 U.S. at 978. 

In addition, to the extent that the FCC’s current

classification of wireline broadband Internet access service

conflicts with past agency rulings, Brand X makes clear that an

“[a]n initial agency interpretation is not instantly carved in stone.

On the contrary, the agency . . . must consider varying

interpretations and the wisdom of its policy on a continuing basis.”

Id. at 981 (internal quotation marks omitted). As the Supreme

Court stated, “[t]hat is no doubt why in Chevron itself, this Court

deferred to an agency interpretation that was a recent reversal of

agency policy.” Id. at 981-82. Accordingly, we do not agree that

past conflicting FCC rulings render its statutory classification in

this order arbitrary and capricious.

C. Classification of Broadband Service under CALEA
26

Petitioners next argue that the FCC’s classification of

wireline broadband Internet access service as a fully integrated

information service under the Communications Act is rendered

arbitrary and capricious by the Commission’s conflicting

interpretation in its CALEA proceeding. We agree with the FCC

that this argument is a “red herring.” (See FCC Br. at 35.) 

Congress enacted CALEA in 1994 to require

telecommunications carriers to ensure that their networks are

technologically capable of being accessed by law enforcement

officials. See Am. Council on Educ. v. FCC, 451 F.3d 226, 228

(D.C. Cir. 2006). CALEA’s substantive provisions apply to

“telecommunications carriers,” but not “information service”

providers. See id. at 229. In Communications Assistance for Law

Enforcement and Broadband Access and Services, 20 F.C.C.R.

14989, 14998-99 ¶ 18 (2005) (“CALEA Order”), released the same

day as the Wireline Broadband Order, the FCC concluded that

CALEA creates three categories of communications services: “pure

telecommunications service,” “pure information service,” and

“hybrid telecommunications-information service.” It then

determined that broadband services are hybrid

telecommunications-information services subject to the statute.

See id.

COMPTEL argues that the FCC’s classification of wireline

broadband service in the Wireline Broadband Order and the

CALEA Order “cannot be squared with one another.” 

(COMPTEL Br. at 36.) We agree with the D.C. Circuit, however,

that the FCC has the discretion to interpret the two statutes

differently. See Am. Council on Educ., 451 F.3d at 232-33.

Specifically, CALEA (1) has a wholly distinct legislative history

and Congressional purpose; (2) uses a different term (i.e.,

“telecommunications carrier” not “telecommunications service”)

to establish the scope of the FCC’s jurisdiction under the statute;

and (3) has a different statutory structure which indicates that

Congress did not intend that the terms “telecommunications

carrier” and “information service” be mutually exclusive for

purposes of identifying the entities that are subject to the statute’s

provisions. Id. at 231-35. Accordingly, we reject COMPTEL’s

argument that the FCC’s CALEA Order renders its classification
11 The residential and business markets are also referred to

as the “mass market” and the “enterprise market,” respectively.

27

of wireline broadband Internet access service under the

Communications Act arbitrary and capricious.

In sum, petitioners do not provide us with a basis for

vacating the FCC’s ruling that wireline broadband Internet access

service should not be subject to mandatory common carrier

regulation under Title II of the Communications Act.

IV. NONDISCRIMINATORY ACCESS UNDER

COMPUTER II

As discussed, in Computer II, the FCC, pursuant to its Title

I ancillary jurisdiction, required all LECs to provide competing

enhanced service providers nondiscriminatory access to the basic

transmission component underlying their enhanced services. See

Wireline Broadband Order, 20 F.C.C.R. at 14868 ¶ 24. Petitioners

argue that the FCC’s decision to eliminate the Computer II

requirements was arbitrary and capricious because the FCC: (1)

failed to engage in a proper market analysis and (2) failed to

properly apply the common carrier test set forth in National

Association of Regulatory Utility Commissioners v. FCC, 525 F.2d

630, 640 (D.C. Cir. 1976) (“NARUC I”). In addition, petitioners

assert that the FCC decision to relieve LECs of their Computer II

obligations violates the discontinuance requirements set forth in §

214 of the Communications Act, as well as the Due Process Clause

of the Constitution. 

A. Market Analysis

Petitioners argue that the FCC’s blanket deregulation of

wireline broadband Internet access service violates the agency’s

“well-established regulatory policy for assessing ILEC market

power,” which “differentiates between services demanded by

distinct customer classes.” (Time Warner Br. at 29.) Specifically,

petitioners contend, before eliminating the Computer II

requirements, the FCC was required to consider ILECs’ dominance

of the business market and certain geographic markets.11
Time Warner does not dispute that cable modem broadband

providers (like itself) are the clear market leader in the provision of

broadband service to residential customers. It argues, however,

that ILECs “remain the sole source of connectivity at roughly 98%

of all business premises nationwide.” (Time Warner Br. at 42; see

also Earthlink Br. at 41.) ACN advances a similar argument with

respect to the purported “monopoly” of ILECs in certain rural

markets. (ACN Br. at 21.)

28

Accordingly, petitioners request that the Court remand this case to

the FCC for a full market analysis. We do not agree that remand

is necessary. 

To the extent that the FCC’s decision not to conduct a

traditional market analysis constitutes a departure from past agency

practice, it is well-settled that “an agency may change its course so

long as it can justify its change with a ‘reasoned analysis.’” Horn

v. Thoratec Corp., 376 F.3d 163, 179 (3d Cir. 2004) (quoting

Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463

U.S. 29, 42 (1983)). Here, the FCC argues that it “fully justified its

decision to refrain from standard market dominance analysis in

order to avoid making highly dubious and ‘premature’ conclusions

about a nascent and dynamic market that is ‘rapidly changing.’”

(FCC Br. at 54) (citing Wireline Broadband Order, 20 F.C.C.R. at

14898 ¶ 84). 

For example, the FCC explained in its order that only 20%

of consumers with access to advanced telecommunications

capability subscribe to services providing such capability;

approximately 50% of U.S. households subscribe to either

broadband or narrowband Internet access service; and alternative

broadband platforms are developing and emerging (i.e., satellite,

wireless, and powerline) in both the residential and business

markets. Wireline Broadband Order, 20 F.C.C.R. at 14880-83 ¶¶

50-51. By comparison, the market for telephone services—the

context in which traditional market analysis has been applied—has

had a market penetration rate of roughly 90% for more than twenty

years. Id. at 14883-84 ¶ 55. Thus, in the FCC’s view, “snapshot

data” of the broadband service market “may quickly and

predictably be rendered obsolete as the market continues to
29

evolve.” Id. at 14881 ¶ 50. 

Instead, the FCC considered how the market for broadband

services is likely to develop. For example, the FCC predicted

based on record evidence that the market penetration of cable

modem and wireline broadband service will grow dramatically in

the future and that the two services will compete head-to-head;

both services will continue to invest in and expand the reach of

their services; emerging broadband platforms will exert

competitive pressure and gain market share; and demand among

consumers for broadband services will only increase. See id. at

14884-85 ¶¶ 56-61. We agree with the FCC that these reasons

justified its decision to refrain from a traditional market analysis

and to rely instead on larger trends and predictions concerning the

future of the broadband services market. See WorldCom, Inc. v.

FCC, 238 F.3d 449, 459 (D.C. Cir. 2001) (stating that the FCC is

not required to “be confident to a metaphysical certainty of its

predictions about the future of competition in a given market

before it may modify its regulatory scheme.”). 

Indeed, as the FCC points out, its predictive judgments

about matters within its expertise are entitled to substantial

deference. See FCC v. WNCN Listeners Guild, 450 U.S. 582, 594-

95 (1981). Moreover, we find significant that the FCC’s market

analysis in this proceeding is consistent with the approach taken in

the Cable Modem Declaratory Ruling, in which the agency made

no express findings that cable modem service providers are nondominant. See Brand X, 545 U.S. at 1001 (noting that the FCC’s

conclusions concerning general “market conditions” and

“substitute forms of Internet transmission” justified its regulatory

treatment of cable modem service). In sum, despite petitioners’

extensive discussion of conditions in specific customer and

geographic markets, we conclude that the FCC’s broad market

analysis in this proceeding was both reasonable and consistent with

the approach upheld by the Supreme Court in Brand X.

B. The NARUC I Common Carrier Test

Petitioners argue that having eliminated the Computer II

nondiscriminatory access requirements, the FCC was required to

determine whether wireline broadband transmission facilities
30

should nevertheless be regulated on a common carriage basis under

the test set forth in the D.C. Circuit’s decision in NARUC I. Under

this test, “a carrier has to be regulated as a common carrier if it will

make capacity available to the public indifferently or if the public

interest requires common carrier operation of the proposed

facility.” See Virgin Islands Tel. Corp. v. FCC, 198 F.3d 921, 924

(D.C. Cir. 1999) (“Vitelco”) (internal quotation marks omitted).

We disagree with petitioners that the FCC failed to properly

consider the public interest prong of the NARUC I test.

It is well-settled that “the Commission’s judgment regarding

how the public interest is best served is entitled to substantial

judicial deference” because “the weighing of policies under the

public interest standard is a task that Congress has delegated to the

Commission.” WNCN Listeners Guild, 450 U.S. at 596 (internal

quotation marks omitted). Here, in addition to considering the

market conditions discussed above, the FCC explained at length its

judgment that continued regulation of wireline broadband providers

under Computer II would harm consumers by “imped[ing] the

development and deployment of innovative wireline broadband

Internet access technologies and services.” Wireline Broadband

Order, 20 F.C.C.R. at 14887-88 ¶ 65. 

For example, the FCC credited evidence that showed that

wireline broadband providers are unable or unwilling to integrate

more efficient equipment into their wireline networks because of

the costs of complying with the Computer II requirements. See id.

at 14887-88 ¶ 65-66. Likewise, the FCC noted that “[s]everal

parties argue that the Computer Inquiry requirements prevent them

from altering business priorities in response to changing market

demands.” Id. at 14890-91 ¶ 71. Accordingly, the FCC

determined that eliminating the Computer II rules “will make it

more likely that wireline operators will take more risks in investing

in and deploying new technologies than they [were] willing and

able to take under the [Computer Inquiry] regime.” Id. at 14891-92

¶ 72.

With respect to whether independent ISPs would continue

to have reasonable access to ILECs’ transmission facilities in the

absence of regulatory compulsion, the FCC explained that the

record showed that wireline broadband Internet access service
12 At the same time, the FCC noted that it disagreed “with

commentors that equate the ability of ISPs to obtain wireline

transmission services on a Title II basis with the ability of

consumers to obtain facilities-based competitive broadband

Internet access services.” Id. at 14885-86 ¶ 62. In other words:

A regulatory regime that promotes a competitive

broadband Internet access services market where

consumers have the choice of multiple providers is

not necessarily the same as a regulatory regime that

mandates that one particular type of broadband

Internet access service transmission technology, and

one alone, is available, on a nondiscriminatory basis,

to any entity that desires to become an ISP.

Id.

13 We are also unpersuaded by Earthlink’s argument that the

FCC could not relieve ILECs of the Computer II requirements

unless it conducted a statutory forbearance analysis under § 10 of

the Communications Act, 47 U.S.C. § 160. As previously

discussed, the FCC established the Computer II regulations

pursuant to its ancillary jurisdiction under Title I, and not because

it determined that facilities-based wireline broadband Internet

access service providers were subject to mandatory Title II

common carrier regulation. Therefore, in eliminating the Computer

II rules, the FCC was not forbearing from any statutory

31

providers have business incentives to make their facilities available

to competing ISPs on a commercially reasonable basis. Id. at

14892-94 ¶¶ 74-75. In particular, the FCC noted that ILECs have

“an economic incentive to spread the costs of [their] network[s]

over as much traffic and as many customers as possible regardless

of whether such customers are wholesale or retail.”12 Id. at 14893

¶ 74. In this regard, the FCC implicitly rejected the argument

asserted by Time Warner in its brief, that as a result of the

elimination of the Computer II requirements, “ILECs will now be

free to upgrade the transmission inputs they use for their own retail

broadband Internet access services, while restricting their

competitors’ access to the increasingly outmoded transmission

services that remain subject to Title II regulation.” (Time Warner

Br. at 34.)13
requirement and § 10 does not come into play here. See, e.g.,

United States Telecom Ass’n v. FCC, 359 F.3d 554, 561, 579 (D.C.

Cir. 2004) (concluding that § 10 forbearance analysis did not apply

to FCC’s discretionary decision not to require an ILEC to unbundle

network elements under § 251 of the Communications Act).

32

C. Section 214 of the Communications Act 

and the Due Process Clause

Finally, we reject petitioners’ argument that the Wireline

Broadband Order violates § 214 of the Communications Act and

the Due Process Clause of the Constitution by granting ILECs a

“blanket certification to discontinue providing existing customers

[with] common carrier broadband Internet access transmission

services.” Wireline Broadband Order, 20 F.C.C.R. at 14908 ¶ 101.

Under § 214 of the Communications Act, before a common

carrier may discontinue service, it must first obtain from the FCC

a “certificate that neither the present nor future public convenience

and necessity will be adversely affected thereby.” 47 U.S.C. §

214(a). As discussed, the FCC fully considered the public interest

before eliminating the Computer II rules, and petitioners point to

no authority that prevents the FCC from granting a blanket

certification. See Lincoln Telephone & Telegraph Co. v. FCC, 659

F.2d 1092, 1101 (D.C. Cir. 1981) (noting that “[s]ection 214(a)

does not specify any particular procedure for making public interest

determinations”). 

Moreover, we note that the order imposed a one-year

transition period, requiring “facilities-based wireline transmission

providers [to] continue to honor existing transmission arrangements

with their current ISP or other customers,” in order to “allow ISPs

to continue operating under their current arrangements while they

negotiate non-common carrier agreements.” Wireline Broadband

Order, 20 F.C.C.R. at 14905, 14906 ¶¶ 98, 99. The order further

required LECs to provide both the customer and the FCC with

advance notice of any discontinuance of service, with the FCC

reserving the right to take any action that would be appropriate “to
14 Indeed, section 214 only requires the FCC to provide the

Secretary of Defense, the Secretary of State, and the State

Governor notice and an opportunity to be heard in the event of

service discontinuance. See 47 U.S.C. § 214(b). 

33

protect the public interest.” Wireline Broadband Order, 20

F.C.C.R. at 14908 ¶ 101. We fail to see how this aspect of the

FCC’s order deprives petitioners of notice or the opportunity to be

heard, whether in violation of § 214 of the Communications Act or

the Due Process Clause of the Constitution.14 

V. CONCLUSION

For the reasons stated, we conclude that the Wireline

Broadband Order was based on a permissible interpretation of the

Communications Act and a proper exercise of agency discretion.

Accordingly, we will deny the petition for review.

__________