Opinion ID: 757345
Heading Depth: 2
Heading Rank: 2

Heading: New Implicit Subsidies and Erosion

Text: 9 The BellSouth petitioners further argue that the FCC, in addition to delaying impermissibly the implementation of an explicit universal service support mechanism, has created new implicit subsidies in violation of the 1996 Act while, at the same time, exposing these subsidies to competitive forces that will render them ineffective. 10 The BellSouth petitioners first take issue with the FCC's decision to maintain the flat-rated (as opposed to per-minute) subscriber line charge (SLC) ceiling of $3.50 per month on primary residential lines while increasing the SLC ceiling for both non-primary residential lines and multi-line business lines. See Order p 78 (raising the multi-line business line SLC ceiling to $9.00 per month and allowing an increase of up to $1.50 per month in the non-primary residential line SLC ceiling beginning January 1, 1998 with additional phased-in increases in the future). According to the BellSouth petitioners, preserving the current SLC cap on primary residential lines prevents LECs from recovering the costs associated with serving those lines, while increasing the SLC cap on non-primary and multi-line business lines above actual cost forces users of these lines to subsidize expenses associated with the under-funded primary residential lines. The ultimate result of these changes is the creation of a new, implicit subsidy funded by the increased rate ceilings on customers with non-primary residential or multi-line business lines and benefiting customers with only primary residential lines. This, according to the BellSouth petitioners, is in direct contravention of § 254's directive that support for universal service be explicit. 47 U.S.C.A. § 254(e). 11 We cannot agree that the FCC's decisions to increase SLCs on non-primary residential and multi-line business lines and to maintain the current ceiling on primary residential lines are in violation of the 1996 Act. The Commission, relying on recommendations from the Federal-State Universal Service Joint Board 6 [hereinafter Joint Board], justifiably determined that an increase in the SLC ceiling for primary residential lines would threaten universal service in ways that an increase in the SLC ceiling for non-primary residential and multi-line business lines simply would not. See Order p 70 (noting Joint Board's conclusion that the SLC ... has an impact on universal service concerns such as affordability and its recommendation that the Commission leave the current SLC ceilings in place for primary residential and single-line business lines). The courts have recognized that universal service concerns are valid justifications for FCC action. See, e.g., Competitive Telecomms. Ass'n v. FCC, 117 F.3d 1068, 1074 (8th Cir.1997); Rural Tel. Coalition v. FCC, 838 F.2d 1307, 1315 (D.C.Cir.1988); National Ass'n of Regulatory Util. Comm'rs v. FCC, 737 F.2d 1095, 1108 (D.C.Cir.1984), cert. denied, 469 U.S. 1227, 105 S.Ct. 1224, 84 L.Ed.2d 364 (1985). While the FCC acknowledges that its decisions regarding SLC ceilings will require customers with multiple telephone lines to contribute, for a limited period, to the recovery of common line costs that incumbent LECs incur to serve single-line customers, Order p 101 (emphasis added), we note that this temporary, transitional arrangement is not an unreasonable solution to the implicit tension between the FCC's goals of moving toward cost-based rates and protecting universal service, see Competitive Telecomms., 117 F.3d at 1073-74 (Although temporary agency rules are subject to judicial review notwithstanding their transitory nature, 'substantial deference by courts is accorded to an agency when the issue concerns interim relief.' ) (quoting MCI Telecomms. Corp. v. FCC, 750 F.2d 135, 140 (D.C.Cir.1984)); City of St. Louis, 936 F.2d at 1543 ([T]he weighing of one public-interest factor against another is preeminently a function for an expert agency, not a court.). 12 Furthermore, as the FCC points out, the decision to retain the $3.50 per month SLC ceiling on primary residential lines was made in conjunction with the introduction of a flat-rated presubscribed interexchange carrier charge (PICC), assessed directly on IXCs rather than on users to recoup costs not covered by the SLC, that will increase incrementally until the SLC and PICC combined recover all costs associated with primary residential lines. See Order paras. 94, 99 (imposing PICC on primary residential and single-line business lines at a maximum of $0.53 per month, on non-primary residential lines at a maximum of $1.50 per month, and on multiple business lines at a maximum of $2.75 per month). Upon completion of the Commission's phased-in plan of PICC ceiling increases on primary residential lines (combined with corresponding PICC cap decreases on multi-line business lines), the aggregate flat-rated charges (the combination of both SLC and PICC) imposed upon primary residential lines will be the same per line as those imposed upon multi-line business lines. See id. p 102. 13 For the reasons stated, we conclude that the FCC's decision to maintain the current SLC ceiling on primary residential lines does not amount to the creation of a new implicit subsidy for the benefit of primary residential line customers and to the detriment of non-primary line and multi-line business line customers, in violation of § 254's direction that subsidies be explicit.