FILED

United States Court of Appeals

Tenth Circuit

June 4, 2009

Elisabeth A. Shumaker

Clerk of Court

PUBLISH

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

SORENSON COMMUNICATIONS, INC.

and GOAMERICA, INC.,

Petitioners,

v.

FEDERAL COMMUNICATIONS

COMMISSION and UNITED STATES OF

AMERICA,

Respondents.

________________________________

 Nos. 08-9503

08-9507

08-9545

08-9547

08-9550

SORENSON COMMUNICATIONS, INC.

and GOAMERICA, INC.,

Intervenors-Petitioners.

PETITION FOR REVIEW OF AN ORDER FROM

THE FEDERAL COMMUNICATIONS COMMISSION

(Nos. FCC-1:CG 03-123 & FCC-1: FCC 07-186)
*

Donald B. Verrilli has left the firm of Jenner & Block LLP to enter

government service. He was replaced as principal attorney of record for Sorenson

Communications, Inc., by Ian Heath Gershengorn as of March 4, 2009.

**Ian Heath Gershengorn has left the firm of Jenner & Block LLP to enter

government service. He was replaced as counsel for Sorenson Communications,

Inc., by Paul M. Smith as of May 21, 2009.

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Donald B. Verrilli, Jr.* (Ian Heath Gershengorn,** Michael B. DeSanctis, Ginger

D. Anders and Jonathan F. Olin, with him on the briefs), Jenner & Block LLP,

Washington, D.C., for Intervenor-Petitioner, Sorenson Communications, Inc.

Karl Buch of Chadbourne & Parke LLP, New York, New York (Dana Frix of

Chadbourne & Parke LLP, Washington, D.C., with him on the briefs), for

Intervenor-Petitioner, GoAmerica, Inc.

Jacob Lewis, General Counsel, Federal Communication Commission, Washington,

D.C. (Deborah A. Garza, Acting Assistant Attorney General; James J. O’Connell,

Jr., Deputy Assistant Attorney General; Robert B. Nicholson and Robert J.

Wiggers, Attorneys, United States Department of Justice, Washington D.C.;

Matthew L. Berry, General Counsel; Joseph R. Palmore, Deputy General Counsel;

Daniel M. Armstrong, Associate General Counsel; and C. Grey Pash, Jr., Counsel,

Federal Communications Commission, Washington, D.C., on the briefs), for

Respondents, Federal Communications Commission and the United States of

America.

Before TACHA, MURPHY and TYMKOVICH, Circuit Judges.

MURPHY, Circuit Judge.

I. INTRODUCTION

The Americans with Disabilities Act (“ADA”) mandates that individuals

with hearing or speech disabilities have access to telecommunications relay

services (“TRS”), which are telephone transmission services enabling such
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individuals to communicate in a manner functionally equivalent to how

individuals without disabilities communicate. 47 U.S.C. § 225(a)(3), (b)(1). 

Interstate TRS providers are compensated for the costs of providing TRS from a

fund (the “TRS Fund”) governed by the Federal Communications Commission

(“FCC”). 47 C.F.R. § 64.604(c)(5)(iii). In two declaratory rulings, the FCC

articulated three restrictions on TRS providers which petitioners challenge in this

case. First, the FCC prohibited providers from using revenues received from the

TRS Fund to lobby customers. Telecommunications Relay Servs. (2008

Declaratory Ruling), 23 F.C.C.R. 8993, 8998 (2008). Second, it prohibited

providers from using customer data collected in the course of providing TRS for

lobbying or any other purpose except the handling of TRS calls. Id. at 8997;

Telecommunications Relay Servs. (2007 Declaratory Ruling), 22 F.C.C.R. 20140,

20176 (2007). Third, the FCC prohibited providers from engaging in various

marketing practices designed to increase TRS usage. 2008 Declaratory Ruling,

23 F.C.C.R. at 8998-99; 2007 Declaratory Ruling, 22 F.C.C.R. at 20173-75.

Sorenson Communications, Inc. (“Sorenson”) and GoAmerica, Inc.

(“GoAmerica”), two TRS providers, raise statutory and constitutional challenges

to these restrictions. Exercising jurisdiction pursuant to 47 U.S.C. § 402(a) and

28 U.S.C. § 2342(1), this court concludes the restriction on using revenue from

the TRS Fund for lobbying is arbitrary and capricious because the FCC provided

no explanation for why lobbying was singled out for prohibition. This court also
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concludes the restriction on the use of customer data violates the First

Amendment as an impairment of providers’ right to engage in political and

commercial speech without any showing the restriction is narrowly tailored to

advance a significant government interest. GoAmerica’s challenge to the

restriction on abusive marketing practices is dismissed under 47 U.S.C. § 405(a)

because GoAmerica failed to present its argument to the FCC prior to seeking

judicial review. 

II. BACKGROUND

The ADA mandates that individuals with hearing or speech disabilities have

access to TRS. 47 U.S.C. § 225(a)(3), (b)(1). Various types of TRS exist. 2007

Declaratory Ruling, 22 F.C.C.R. at 20141 n.2. One type of TRS is Video Relay

Service “(“VRS”), which enables a person with a hearing disability to remotely

communicate with a hearing person by means of a video link and communications

assistant. Id. at 20142 n.9. The VRS customer communicates with the

communications assistant by sign language, and the communications assistant

communicates with the hearing person by voice. See id.; 47 C.F.R.

§ 64.601(a)(26).

TRS customers do not pay the costs associated with the service. 47 U.S.C.

§ 225(d)(1)(D). Providers of traditional telephone voice transmission service are

obligated to make TRS available to persons with hearing and speech disabilities. 

Id. § 225(b). The costs associated with interstate and intrastate TRS are
1

On an interim basis, providers of intrastate VRS are compensated by the

TRS Fund. Telecommunications Relay Servs. (2007 Declaratory Ruling), 22

F.C.C.R. 20140, 20144 n.15 (2007).

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compensated by way of funds administered by the federal and state governments,

respectively.1

 Id. § 225(d)(3)(B). The TRS Fund is financed by interstate

telecommunications providers on the basis of interstate end-user

telecommunications revenues. 47 C.F.R. § 64.604(c)(5)(iii)(A). TRS providers

are compensated out of the TRS Fund at a rate determined by the FCC. 

Id. § 64.604(c)(5)(iii)(E). For VRS, the FCC sets tiered per-minute compensation

rates that vary depending on the size of the provider. 2007 Declaratory Ruling,

22 F.C.C.R. at 20162-63. VRS is compensated at a higher rate than most other

forms of TRS, and the number of people using VRS has increased in recent years. 

Id. at 20145. For the 2007-08 Fund year, nearly 75 percent of the TRS Fund was

attributable to VRS. Id.

In 2006, the FCC decided to examine whether it should revise its rate

structure for TRS. Further Notice of Proposed Rulemaking: Telecommunications

Relay Servs., 21 F.C.C.R. 8379, 8380 (2006). In its notice of proposed

rulemaking, the FCC sought “comment on a broad range of issues concerning the

compensation of providers of . . . TRS from the Interstate TRS Fund.” Id. These

included “numerous issues relating to the cost recovery methodology used for

determining the TRS compensation rates paid by the Fund, as well as the scope of

the costs properly compensable under Section 225 and the TRS regime as
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intended by Congress.” Id. at 8384. The notice also proposed new methodologies

for calculating per-minute compensation rates. Id. at 8385. 

In the 2007 Declaratory Ruling, the FCC changed how it calculates perminute compensation rates. 2007 Declaratory Ruling, 22 F.C.C.R. at 20176. 

Those changes are not at issue in this appeal. In addition to changing the

compensation methodology, the FCC also used the 2007 Declaratory Ruling to

clarify issues regarding improper incentives and marketing practices on the part

of some TRS providers. 2007 Declaratory Ruling, 22 F.C.C.R. at 20173. 

Because customers do not pay for the service, the FCC explained, providers could

encourage them to make calls they might not otherwise make. Id. at 20173-74. 

The FCC reminded providers of a 2005 Public Notice regarding impermissible

marketing practices. Id. at 20174. It went on to note it was still receiving reports

of VRS providers offering improper incentives to TRS customers, and it

reaffirmed the prohibitions on improper incentives and marketing practices. Id. at

20175. 

The FCC also declared that providers “may not use a consumer or call

database to contact TRS users for lobbying or any other purpose.” Id. at 20176. 

It explained that using a customer’s profile information to contact the customer

was an improper use of such data, and declared that providers could not contact

customers to inform them about pending TRS compensation issues. Id. The FCC

further declared that providers engaging in improper marketing practices or
2

Hands On Video Relay Services is a wholly owned subsidiary of

GoAmerica. 

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misusing customer information would be ineligible for compensation from the

Fund. Id.

After the 2007 Declaratory Ruling was issued, Sorenson petitioned the FCC

to reconsider the prohibition on using customer data to contact customers “for

lobbying or any other purpose,” arguing the prohibition violated the

Administrative Procedures Act (“APA”) and the First Amendment. See 2008

Declaratory Ruling, 23 F.C.C.R. at 8996. Counsel for Hands On Video Relay

Services, Inc.2

 also submitted three ex parte letters to the FCC. In those letters,

Hands On stated it “supports much of the [2007 Declaratory Ruling], which

addresses certain abusive marketing practices, such as . . . contacts made by

provider representatives urging VRS consumers to make more calls using a

provider’s service.” The letters went on to list statutory and constitutional

concerns with “the portion of the [2007 Declaratory Ruling] which prohibits

providers from contacting for any reason consumers who have registered with a

provider.” 

In response to the concerns expressed by VRS providers, the FCC issued

the 2008 Declaratory Ruling for the purposes of clarification. Id. at 8993. In the

2008 Declaratory Ruling, the FCC clarified that the restriction on the use of

customer information “for any . . . purpose” does not prohibit contacts directly
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related to the handling of TRS calls. Id. at 8997. As examples, it explained

providers could contact customers to inform them of a service outage, respond to

a call for emergency services, assist in the delivery of emergency services, or

provide technical support for TRS products or services. Id. It also stated

providers could use such data “to comply with a federal statute, a Commission

rule or order, a court order, or other lawful authority.” Id. (quotation omitted). 

In the 2008 Declaratory Ruling, the FCC also explained providers were

prohibited from using revenue from the TRS Fund to contact customers and

attempt to persuade them to support the provider’s position on matters pending

before the FCC, since the payments from the Fund are only intended to

compensate providers for the costs of providing TRS. Id. at 8998. Finally, with

respect to impermissible financial incentives and marketing practices, the FCC

clarified that such practices are prohibited regardless of whether the provider uses

customer call data or similar, privately collected information. Id. at 8998-99.

Sorenson and GoAmerica filed petitions seeking judicial review of the

declaratory rulings. Both challenge the prohibition on using TRS revenues to

contact customers for lobbying or advocacy purposes. They both also challenge

the prohibition on using customer data to contact customers for lobbying or any

purpose other than the handling of relay calls. GoAmerica alone challenges the

prohibition on abusive marketing practices. After Sorenson and GoAmerica filed

petitions for review of the declaratory rulings and their challenges were
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consolidated in this court, a panel of this court granted a stay of enforcement of

the challenged portions of the declaratory rulings pending appeal. 

III. DISCUSSION

A. Restriction on Use of TRS Revenues for Lobbying or Advocacy Purposes

The various challenges to the FCC’s rulings are premised on both statutory

and constitutional grounds. It is a “fundamental rule of judicial restraint” for

courts, “[p]rior to reaching any constitutional questions, . . . [to] consider

nonconstitutional grounds for decision.” Jean v. Nelson, 472 U.S. 846, 854

(1985) (quotations omitted). This court, therefore, considers petitioners’ statutory

arguments first.

Sorenson argues the restriction on using TRS Funds to lobby customers is

arbitrary, capricious, or contrary to law in violation of the APA, 5 U.S.C.

§ 706(2)(A). The FCC asserts the restriction is a logical action taken to

counteract a specific problem. An agency action is arbitrary and capricious under

the APA if, inter alia, the agency fails to “examine the relevant data and

articulate a satisfactory explanation for its action including a rational connection

between the facts found and the choice made.” Motor Vehicle Mfrs. Ass’n of U.S.

v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983) (quotation omitted). 

The same standard of review applies to both initial policy decisions and

subsequent changes in policy. F.C.C. v. Fox Television Stations, Inc., 129 S.Ct.

1800, 1810-11(2009). Review under the arbitrary and capricious standard is
3

Although the 2008 Declaratory Ruling referred to the bombardment of

customers with lobbying materials, the FCC has not attempted to defend the

restriction on lobbying users under a consumer protection rationale. This court,

therefore, expresses no opinion on whether such a rationale could support the

restriction. 

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narrow in scope, but is still a “probing, in-depth review.” Qwest Commc’ns Int’l,

Inc. v. F.C.C., 398 F.3d 1222, 1229 (10th Cir. 2005) (quotation omitted). An

agency’s action is entitled to a presumption of validity, and the burden is upon the

petitioner to establish the action is arbitrary or capricious. Citizens’ Comm. to

Save Our Canyons v. Krueger, 513 F.3d 1169, 1176 (10th Cir. 2008). The court

must rely upon the reasoning set forth in the administrative record and disregard

post hoc rationalizations of counsel. Olenhouse v. Commodity Credit Corp., 42

F.3d 1560, 1580 (10th Cir. 1994).

In the 2008 Declaratory Ruling, the FCC explained providers were not

permitted to use revenues from the TRS Fund for “lobbying or advocacy

activities” directed at customers because it found “[e]vidence in the record [] that

at least one service provider has bombarded deaf persons with material seeking to

persuade them to support the provider’s position on matters pending before the

FCC.”3

 2008 Declaratory Ruling, 23 F.C.C.R. at 8998 (footnote omitted).

According to the FCC, “using revenue from the TRS Fund . . . to engage in that

kind of advocacy is inconsistent with the purpose of the TRS Fund.” Id. The

FCC went on to state that “[t]he TRS Fund is designed to ensure that persons with

hearing and speech disabilities have access to the telephone system. It was not
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intended to finance lobbying by providers directed at end users. The Commission

is under no obligation to fund such activities out of the public fisc.” Id.

(quotation omitted). The rationale for the restriction, therefore, was that lobbying

end users was not an activity the TRS Fund was intended to compensate, and

therefore monies from the TRS Fund were not permitted to be used for that

purpose. 

The FCC does not reimburse VRS providers for actual costs. Instead it

compensates them based upon a tiered price cap formula. 2007 Declaratory

Ruling, 22 F.C.C.R. at 20160-63. From provider data of expected costs and levels

of usage, the FCC sets a per-minute compensation rate for providers. Id. One

rationale for this approach is to give providers an incentive to innovate and

reduce costs. See id. at 20162. If a provider can deliver VRS at an actual cost

lower than the FCC’s estimated cost, it retains the difference. The FCC has noted

that in prior years estimated costs generally exceeded actual costs. Id. at 20161. 

Under this compensation scheme that allows VRS providers to retain

payments in excess of actual costs, the FCC singled out lobbying as the one

expenditure for which TRS Fund proceeds could not be used. The interdiction of

the use of payments from the TRS fund for lobbying was premised on the Fund’s

limited design “to ensure that persons with hearing and speech disabilities have

access to the telephone system.” 2008 Declaratory Order, 23 F.C.C.R. at 8998. 
4

This court need not decide whether the FCC may, under any

circumstances, dictate the use of TRS revenues under a price-cap-based

compensation scheme. If it is to do so, however, it must provide a satisfactory

explanation for its action. Motor Vehicle Mfrs. Ass’n of U.S. v. State Farm Mut.

Auto. Ins. Co., 463 U.S. 29, 43 (1983).

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The FCC’s justification is inconsistent with the logic of a price cap-based

compensation system. The FCC has chosen to reward efficient providers by

allowing them to retain the savings generated by providing TRS at a low cost. It

does this by compensating providers regardless of their actual costs in providing

TRS. This reward mechanism is only effective if providers are permitted to

decide how to spend those savings. Regardless of the validity of the FCC’s

concern regarding the purpose of the TRS Fund, it made no attempt to explain

how restricting the use of revenues from the TRS Fund is consistent with its

choice of a price cap scheme which itself seeks to reward efficiency and increase

market access by allowing providers to retain cost savings.4

 

 Under the FCC’s broad rationale, any expenditure apart from the actual

cost of providing TRS is inconsistent with the purpose of the Fund. Lobbying

expenditures, however, are the only expenditures prohibited. It is true the FCC is

not required to address all problems “in one fell swoop,” and may focus on

problems depending upon their acuteness. Nat’l Ass’n of Broadcasters v. F.C.C.,

740 F.2d 1190, 1207 (D.C. Cir. 1984). Nonetheless, the FCC must still articulate

“a satisfactory explanation for its action.” Motor Vehicle Mfrs. Assn., 463 U.S. at
5

The FCC does not assert it complied with notice and comment procedures,

so if the restriction is a legislative rule, it was improperly issued. 

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43. The FCC made no attempt to explain why lobbying expenditures were

deserving of prohibition while all other uses of Fund revenues were not. 

Because the FCC’s chosen cost recovery system allows providers to spend

revenues from the TRS Fund however they choose, the FCC inadequately

explained its restriction on the grounds that lobbying expenditures are

inconsistent with the purpose of the TRS Fund. 2008 Declaratory Ruling, 23

F.C.C.R. at 8998. The FCC further failed to provide any reason why lobbying

expenses are deserving of prohibition when all other business expenditures are

permissible. Absent these justifications, the prohibition on lobbying expenditures

is arbitrary and capricious in violation of 5 U.S.C. § 706(2)(A). The 2008

Declaratory Ruling is hereby REMANDED to the FCC for further proceedings

consistent with this opinion. Because the restriction is unlawful under the APA,

this court does not consider the constitutional challenge. 

B. Restriction on Use of Customer Data

1. Notice and Comment Challenge 

GoAmerica contends the restriction on the use of customer data constitutes

a legislative rule and, as such, was improperly issued without notice and

comment. The FCC argues the restriction is an interpretative rule which does not

require notice and comment.5

 See 5 U.S.C. § 553(b)(A). Under the APA,
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legislative rules can be issued only following notice and comment procedures. 

Ballesteros v. Ashcroft, 452 F.3d 1153, 1158 (10th Cir. 2006), aff’d in relevant

part on reh’g, 482 F.3d 1205, 1205 (10th Cir. 2007). A rule is legislative when it

“has the force of law, and creates new law or imposes new rights or duties.” 

F.D.I.C. v. Schuchmann, 235 F.3d 1217, 1222 (10th Cir. 2000) (quotation

omitted). Interpretative rules, by contrast, “advise the public of the agency’s

construction of the statutes and rules which it administers.” Shalala v. Guernsey

Mem. Hosp., 514 U.S. 87, 99 (1995) (quotation omitted). The agency’s own label

for its action is not dispositive. Truckers United for Safety v. Fed. Highway

Admin., 139 F.3d 934, 939 (D.C. Cir. 1998). 

In support of its argument that the restriction on the use of consumer data is

an interpretative rule, the FCC points to a prior order (the “2000 Order”) where it

stated, “[TRS customer] data may not be used for any purpose other than the

provision of TRS.” Telecommunications Relay Servs. (2000 Order), 15 F.C.C.R.

5140, 5175 (2000). This was codified as a regulation stating, “[TRS customer]

data may not be used for any purpose other than to connect the TRS user with the

called parties desired by the TRS user.” 47 C.F.R.§ 64.604(c)(7). The FCC

argues the 2000 Order and the regulation created the restriction on the use of

customer data, and the Declaratory Rulings at issue in this case serve only to

remind regulated entities of this obligation. Therefore, the FCC argues, the
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restriction on the use of customer data was an interpretative rule, not subject to

the APA’s notice and comment requirements. 

GoAmerica argues the 2000 Order concerned an entirely different issue and

context. The relevant portion of the 2000 Order concerned the transfer of

customer data during changeovers between providers. 2000 Order, 15 F.C.C.R. at

5173. In order to minimize disruptions in TRS, outgoing providers were ordered

to give customer data to incoming providers. Id. at 5175. To protect the privacy

expectations of customers, however, the FCC also prohibited providers from using

customer profile information for any purpose other than to connect TRS calls. Id.

According to GoAmerica, the restriction on the use of customer information

applies in the narrow context when providers are replaced without the knowledge

and consent of customers. The FCC’s use of this restriction in the current context

is entirely different, GoAmerica argues, and the FCC has conceded the new

restrictions were not motivated by privacy concerns. Because the restriction

arises in a new context and is meant to achieve a different purpose from the

restriction in the 2000 Order, GoAmerica contends it constitutes a new rule for

which notice and comment were required. 

The regulation at 47 C.F.R. § 64.604(C)(7) restricting the use of customer

data came about in the context of transfers between outgoing and incoming

providers, but the regulation unambiguously prohibits the use of customer data

except to connect TRS calls. The declaratory rulings at issue in this case did not
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create any new duties with respect to customer data, but merely informed

providers of the FCC’s interpretation of the existing regulation. As a

consequence, the restriction contained in the declaratory rulings was an

interpretative rule, and the FCC was not required to comply with notice and

comment procedures. 

2. Arbitrary and Capricious Challenge

Sorenson and GoAmerica both argue the restriction on the use of customer

data was arbitrary, capricious, an abuse of discretion, or otherwise not in

accordance with law in violation of 5 U.S.C. § 706(2)(A). An agency must

provide a rational explanation when it departs from an existing regulation or

position. Utahns for Better Transp. v. U.S. Dept. of Transp., 305 F.3d 1152, 1165

(10th Cir. 2002). Sorenson and GoAmerica argue the prohibition on using

customer data to contact customers runs directly contrary to prior and ongoing

FCC requests for providers to engage in outreach efforts to customers. 

GoAmerica also argues the prohibition is contrary to the FCC’s prior

interpretation of the statute requiring TRS to be “functionally equivalent” to the

telephone service available to persons without disabilities. 47 U.S.C. § 225(a)(3). 

In support of the argument that the prohibition is contrary to prior FCC

positions regarding customer outreach, GoAmerica cites specifically to 47 C.F.R.

§ 64.604(c)(3), which requires telecommunications carriers to make the public

aware of the availability of TRS. Sorenson claims FCC staff recently contacted
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the company asking for help in publicizing the transition to digital television. 

The 2008 Declaratory Ruling clarified that providers could use customer data “to

comply with a federal statute, a Commission rule or order, a court order, or other

lawful authority.” 2008 Declaratory Ruling, 23 F.C.C.R. at 8997 (quotation

omitted). Consequently, the restriction does not create competing obligations for

providers or conflict with prior positions of the FCC. If another order or

regulation requires providers to communicate with customers, it prevails. There

is no conflict between the new restriction on the use of customer data and other

FCC orders and regulations.

GoAmerica also argues the prohibition is contrary to the FCC’s prior

interpretation of the ADA’s functional equivalence mandate. The ADA defines

TRS as telephone transmission services that enable persons with disabilities to

use the telephone system in a manner “functionally equivalent” to how it is used

by persons without disabilities. 47 U.S.C. § 225(a)(3). GoAmerica contends the

FCC has interpreted the statutory phrase “functionally equivalent” broadly to

require providers to do such things as retain auxiliary power sources for their

facilities, handle complaints regarding enforcement issues, allow customers to

make TRS calls from public telephones using coins, and provide ten-digit phone

numbers for customers. According to GoAmerica, this broad interpretation of

functional equivalence demonstrates a requirement that TRS customers enjoy the

same relationship with their providers as persons without disabilities. It further
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argues this relationship includes the ability to solicit feedback from TRS

customers. Additionally, if providers are unable to notify customers of pending

changes to TRS being contemplated by the FCC, GoAmerica predicts customers

will be less likely to participate in the proceedings, and the FCC will be more

likely to take action contrary to the ADA. 

The FCC has never interpreted the ADA to require TRS customers to have

the same relationship with their telecommunications providers enjoyed by persons

without disabilities. By its very nature the TRS customer-provider relationship is

different from the traditional telecommunications customer-provider relationship

because TRS customers do not pay for the costs associated with the service. 47

U.S.C. § 225(d)(1)(D). The one regulation cited by GoAmerica that even touches

upon the customer-provider relationship is the regulation requiring providers to

handle complaints from customers. 47 C.F.R. § 64.604(c)(1)-(2), (6). This

regulation does not support GoAmerica’s position, however, because it does not

address functional equivalence. Instead, it implements separate, specific statutory

clauses regarding complaints. 47 U.S.C. § 225(e)(2), (g). GoAmerica cites no

other regulation to support its position that functional equivalence requires the

TRS provider-customer relationship to be identical to the traditional telephone

provider-customer relationship. It likewise cites no authority for its argument

that a necessary aspect of this relationship is the ability to solicit feedback

regarding service. The prohibition on the use of customer data therefore does not
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conflict with prior interpretations of the functional equivalence mandate, and

consequently it is not arbitrary or capricious.

GoAmerica also claims functional equivalence may be threatened in the

future if it is unable to warn customers in the event the FCC decides to undertake

proceedings that would diminish functional equivalence. This argument relies

upon a chain of questionable inferences and is purely speculative, as GoAmerica

identifies no pending FCC action that threatens functional equivalence. Such

speculation does not render the prohibition arbitrary, capricious, or contrary to

law.

3. Constitutional Challenge

GoAmerica and Sorenson argue the FCC’s restriction on the use of

customer data is a violation of the First Amendment under U.S. West, Inc. v.

F.C.C., 182 F.3d 1224 (10th Cir. 1999). In U.S. West, this court considered a

challenge to the FCC’s regulations regarding the use of consumer proprietary

network information (“CPNI”) by telecommunications providers. Id. at 1228. 

CPNI was defined as information pertaining to “the quantity, technical

configuration, type, destination, and amount of use of a telecommunications

service . . . that is made available to the [telecommunications] carrier by the

customer solely by virtue of the carrier-customer relationship” as well as

information contained in the bills received by customers. Id. at 1228 n.1. The

FCC prohibited telecommunications providers from using CPNI to market
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services to which customers did not already subscribe unless the customer “opted

in” and gave affirmative approval to the provider. Id. at 1230. This court struck

down the restriction as an unconstitutional infringement on commercial speech

because the FCC failed to demonstrate its regulations restricted no more speech

than necessary to safeguard the asserted state interests in protecting privacy and

competition. Id. at 1239. 

As a threshold matter this court was required to determine whether the

regulation affected “speech” at all, since on its face it only regulated the use of

data. Id. at 1232. This court concluded the regulation did restrict speech because

it made the speech between providers and customers more difficult by limiting the

ability of providers to target their speech to a particular audience. Id. While

providers could still conceivably contact the intended audience by

indiscriminately broadcasting their speech to a larger audience, the speech was

still impaired because the providers’ preferred channel of communication was

eliminated. Id. 

Sorenson and GoAmerica argue U.S. West is directly on point. They

contend the FCC is restricting the ability of providers to use their preferred

channel of communication to contact their intended audience. As a result, they

claim the restriction must withstand First Amendment scrutiny. The FCC

attempts to distinguish U.S. West on the grounds that it is not preventing

providers from contacting customers directly so long as they do not use
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information derived from participation in the government-funded TRS program. 

The information at issue in this case, the FCC argues, was gathered as a result of

participation in a government program. Because the providers only have this

information as a result of the service provided to the government, the government

may restrict the use of the information. The FCC argues any effect on speech

resulting from such a restriction is permissible under Rust v. Sullivan, 500 U.S.

173, 193-94 (1991). The FCC does not, however, argue it has a proprietary

interest in the customer data.

As in U.S. West, the restriction on using customer data to lobby customers

affects speech because it limits a preferred channel of communication between the

speaker and the intended audience. U.S. West, 182 F.3d at 1232. Both

commercial and political speech are affected, as the Declaratory Ruling restricts

the use of customer data for “lobbying or any other purpose.” 2007 Declaratory

Ruling, 22 F.C.C.R. at 20176. 

The next question is whether the restriction must withstand the applicable

First Amendment tests governing restrictions on political and commercial speech. 

The FCC does not argue it owns the customer information merely because it funds

the TRS provided by petitioners. It instead relies entirely upon Rust as authority

for its ability to promulgate the restriction. Rust, however, is not sufficient

support for the government’s position. Rust concerned the government’s ability

to restrict the use of funds distributed under a subsidy program. 500 U.S. at 193. 
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Because it is the government’s prerogative to selectively subsidize some activities

and not others, the Supreme Court in Rust held the government could prevent

subsidy recipients from engaging in counseling activities outside a government

program’s intended scope. Id. at 193-94. Here, the government is not directing

the use of subsidies, but is instead restricting how providers can use information

they collect from customers in the course of providing a federally mandated

service. The TRS program, furthermore, is intended to provide a service to

persons with disabilities and is not intended to spread a governmental message

that would be jeopardized by the providers’ use of data to communicate with

customers. Legal Servs. Corp. v. Velazquez, 531 U.S. 533, 541-42 (2001). The

FCC has not cited to any case applying Rust to a restriction on the use of

information gathered in the course of providing a government-mandated service,

and this court has found none. Rust, therefore, does not permit the FCC to evade

First Amendment scrutiny in this context. Absent any other authority

categorically allowing the FCC to restrict the use of this information, this court

analyzes the restriction under the First Amendment tests for restrictions on

commercial and political speech. 

Restrictions on commercial speech must meet the test set out in Central

Hudson Gas & Electric Corp. v. Public Service Commission of New York, 447

U.S. 557, 566 (1980). If the restriction cannot meet the Central Hudson test for

commercial speech, it will necessarily be unable to pass the more stringent strict
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scrutiny analysis applicable to restrictions on political speech. Under the Central

Hudson test, three conditions must be met for the restriction to survive: (1) the

government must have “a substantial interest in regulating the speech,” (2) the

regulation must “directly and materially advance[] that interest,” and (3) the

regulation must be “no more extensive than necessary to serve the interest.” U.S.

West, 182 F.3d at 1233 (quotation omitted). The burden is on the government to

prove the restriction on commercial speech is valid under the First Amendment. 

Id. 

Here, because it relied exclusively on Rust and its assertion it could

regulate the use of data solely because it was obtained through participation in a

governmentally funded program, the FCC has not attempted to meet its burden

under Central Hudson. It asserted in the 2008 Declaratory Ruling that the use of

customer data to contact customers outside the context of handling calls “is

inconsistent with the purpose of the TRS Fund.” 2008 Declaratory Ruling, 23

F.C.C.R. at 8998. Nowhere in the Declaratory Rulings or the FCC’s brief to this

court, however, does the FCC articulate the governmental interest to be served by

the restriction, or why the restriction is narrowly tailored to not restrict more

speech than necessary. Under the Central Hudson analysis, this court may not

“supplant the precise interests put forward by the [government] with other

suppositions.” Edenfield v. Fane, 507 U.S. 761, 768 (1993). The FCC’s broad

prohibition on all uses of customer data belies the notion that the prohibition is
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narrowly tailored. Because the FCC does not explain why the restriction on the

use of customer data accords with the First Amendment, the restriction must fail. 

Upon remand, the FCC must vacate the restriction on using customer data for

“lobbying or any other purpose.”

C. Restriction on Marketing Communications

Apart from the restrictions on the use of TRS Fund proceeds and customer

data, the Declaratory Rulings also prohibit or restrict certain marketing

communications between TRS providers and customers. The 2007 Declaratory

Ruling reiterated an existing prohibition on the use of financial and other

incentives for consumers to make TRS calls. 2007 Declaratory Ruling, 22

F.C.C.R. at 20173-74. The FCC noted it continued to discover providers were

providing improper incentives to customers. Id. at 20175. These impermissible

incentives included “calling a consumer and requiring, requesting, or suggesting

that the consumer make VRS calls.” Id. The 2007 Declaratory Ruling prevented

providers from using customer data “to in any way attempt to affect or influence,

directly or indirectly, their use of relay service.” Id. at 20176. The 2008

Declaratory Ruling clarified that this prohibition applies even when a provider

does not use customer data to engage in the communication. 2008 Declaratory

Ruling, 23 F.C.C.R. at 8998. GoAmerica argues this language is broad enough to

block essentially all marketing to customers, since almost all marketing

communications suggest the use of a service or are an attempt to influence
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customer behavior. GoAmerica raises a variety of statutory and constitutional

challenges to this restriction on marketing practices. As a threshold matter,

however, this court must address whether GoAmerica adequately preserved its

challenge to this provision.

The FCC argues this court should not hear GoAmerica’s challenges to the

marketing restrictions because GoAmerica did not give the FCC an opportunity to

consider the challenges. Under 47 U.S.C. § 405(a), when “the party seeking []

review . . . relies on questions of fact or law upon which the Commission . . . has

been afforded no opportunity to pass,” a petition for reconsideration is a condition

precedent to judicial review. GoAmerica never filed a petition for

reconsideration and, the FCC argues, its arguments were never raised before the

FCC by any party. As a consequence, the FCC asks this court to dismiss

GoAmerica’s challenges to the restrictions on marketing practices. 

The FCC acknowledges the ex parte correspondence from Hands On

tangentially addresses the lawfulness of the marketing restrictions, but argues the

letter contains no more than the “grist” of an argument and was insufficient to

give the FCC an opportunity to pass on the legal question at hand. See Nw. Ind.

Tel. Co. v. F.C.C., 824 F.2d 1205, 1210 n.8 (D.C. Cir. 1987); Alianza Federal de

Mercedes v. F.C.C., 539 F.2d 732, 739 (D.C. Cir. 1976). GoAmerica responds

that the Hands On ex parte letters sufficiently raised all of the arguments it

advances on appeal. It claims the letters gave notice of the legal deficiencies in
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the 2007 Declaratory Ruling and it points out that an appellate court may

“consider the same basic argument [as raised before the FCC] in a more polished

and imaginative form.” Sprint-Nextel Corp. v. F.C.C., 524 F.3d 253, 257 (D.C.

Cir. 2008) (quotation omitted). 

The three ex parte letters are substantially similar to each other. They

express support for the FCC’s regulation of “abusive marketing practices,

[including] . . . contacts made by provider representatives urging VRS consumers

to make more calls using a provider’s service.” The only portion of the 2007

Declaratory Ruling they criticize is “the portion . . . which prohibits providers

from contacting for any reason consumers who have registered with a provider.” 

They then allege the restriction has constitutional, statutory, and policy-based

infirmities. The Hands On ex parte letters are almost entirely focused upon the

restriction on using customer data to contact customers. The one passing

reference to the regulation of marketing practices actually supports the FCC’s

position. 

Far from giving the FCC an opportunity to pass on its objections to the

abusive marketing practices restriction, the letters indicate Hands On agreed with

the restriction. Because GoAmerica did not file a petition for reconsideration, the

failure to raise the basis for its legal challenge prevents GoAmerica from

obtaining judicial review. 47 U.S.C. § 405(a). GoAmerica’s petition for review

of the regulation on abusive marketing practices is therefore dismissed. 
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IV. CONCLUSION

The prohibition on the use of monies from the TRS Fund for lobbying

purposes is arbitrary and capricious in violation of the APA because the FCC

failed to provide any rationale for why lobbying expenses are the only use of TRS

Fund revenues to be specifically prohibited. The prohibition on the use of

customer data violates the First Amendment because it impairs commercial and

political speech and the FCC has failed to demonstrate why the prohibition is

justified under Central Hudson. The 2007 and 2008 Declaratory Rulings are

hereby REMANDED to the FCC for proceedings consistent with this opinion. 

GoAmerica’s challenge to the restrictions on marketing practices is DISMISSED

because the challenge was not preserved for judicial review.