Opinion ID: 165579
Heading Depth: 2
Heading Rank: 1

Heading: The Ninth Order and Qwest I

Text: In Qwest I we reversed and remanded the FCC’s Ninth Report and Order, FCC 99306, CC Docket No. 96-45 (Nov. 2, 1999) (“Ninth Order”).1 258 F.3d at 1205. The Ninth Order finalized the FCC’s funding mechanism for non-rural telecommunications carriers in high-cost areas. Rural carriers serve only rural areas or are small in size. Id. at 1196. In contrast, non-rural carriers are larger and serve some urban areas. Id. To achieve rate comparability, the FCC based its support mechanism on forward-looking costs per line. Id. at 1197. The FCC found that costs, as opposed to rates, were a better indicator of comparability. Id. First, the FCC set a benchmark of 135% of the national average cost per line. Id. The FCC then determined carrier eligibility by comparing individual state average costs per line to the federal benchmark. Id. Non-rural carriers in states with average costs exceeding the national benchmark were eligible for support. The FCC further conditioned support on state certification that an eligible non-rural carrier would use the federal funds in compliance with 47 U.S.C. § 254(e) (mandating 1 In Qwest I we affirmed the FCC’s Tenth Report and Order, FCC 99-304, CC Docket Nos. 96-45, 97-160 (Nov. 2, 1999), wherein the Commission selected input values for its cost model. 258 F.3d at 1207. 7 that federal funds only be used “for the provision, maintenance, and upgrading of facilities and services for which the support is intended”). Id. at 1198. We predicated our decision in Qwest I on a finding that the FCC had failed to “provide sufficient reasoning or record evidence to support [the Ninth Order’s] reasonableness.” Id. at 1195. First, we held that the FCC had failed to adequately define key statutory terms, including “reasonably comparable” and “sufficient.” Id. at 1201. In so doing, we expressed concern regarding the alleged variance in rates encompassed by the FCC’s national cost benchmark. Id. Second, we held that the FCC had likewise failed to justify the 135% benchmark against the statutory goals of reasonable comparability and sufficiency. Id. at 1202. While rejecting the argument that the use of statewide and national averages is inconsistent with the statutory mandate, Id. n.9, we noted that the FCC had failed to evaluate data in the record comparing rural and urban costs under the proposed funding mechanism and had not provided a cogent explanation for its choice of 135% as the benchmark figure. Id. at 1202. Third, we found that the Ninth Order provided no mechanisms to induce states to implement their own universal service programs; this despite the fact that the FCC itself acknowledged that the support provided by the Ninth Order could not result in reasonably comparable rates absent state action. Id. at 1203-04. Finally, we noted that the FCC had provided insufficient information concerning the full extent of federal universal service support. Id. at 1204- 8 05. Lacking this global context, we could not proceed in assessing the reasonableness of the Commission’s actions. Id. at 1205. In remanding the Ninth Order, we required the FCC to take the following actions. First, we directed the Commission to define relevant statutory terms “more precisely in a way that can be reasonably related to the statutory principles, and then to assess whether its funding mechanism will be sufficient for the principle of making rural and urban rates reasonably comparable.” Id. at 1202. Second, we required the FCC to “provide adequate record support and reasoning for whatever level of support it ultimately selects upon remand.” Id. at 1203. Third, we held that the FCC was required on remand “to develop mechanisms to induce adequate state action” to assist in implementing the goals of universal service. Id. at 1204. Finally, we requested that the FCC “explain further its complete plan for supporting universal service.” Id. at 1205.