Court Opinion

ID: 165579
Source: CourtListenerOpinion
Date Created: 2010-08-14 08:55:50+00
Date Added: 2024-06-11T17:24:47.789659
License: Public Domain

F I L E D
                                                      United States Court of Appeals
                                                              Tenth Circuit
                                PUBLISH
                                                             FEB 23 2005
                     UNITED STATES COURT OF APPEALS
                                                           PATRICK FISHER
                                                                  Clerk
                         FOR THE TENTH CIRCUIT

QWEST COMMUNICATIONS
INTERNATIONAL INC.,

      Petitioner,
v.

FEDERAL COMMUNICATIONS
COMMISSION; UNITED STATES OF                 No. 03-9617
AMERICA,

      Respondents,

VERIZON TELEPHONE COMPANIES;
AT&T CORP.; MAINE PUBLIC
UTILITIES COMMISSION; SBC
COMMUNICATIONS, INC. (SBC);
BELLSOUTH CORPORATION;
VERMONT PUBLIC SERVICE
BOARD; MONTANA CONSUMER
COUNSEL; MONTANA PUBLIC
SERVICE COMMISSION; WYOMING
PUBLIC SERVICE COMMISSION,

      Intervenors,

and

NATIONAL ASSOCIATION OF
STATE UTILITY CONSUMER
ADVOCATES,

      Amicus Curiae.
SBC COMMUNICATIONS, INC.,

     Petitioner,

v.                                 No. 04-9518

FEDERAL COMMUNICATIONS
COMMISSION; UNITED STATES OF
AMERICA,

     Respondents.

NATIONAL ASSOCIATION OF
STATE UTILITY CONSUMER
ADVOCATES,

     Amicus Curiae.

VERMONT PUBLIC SERVICE
BOARD,

v.                                 No. 04-9519

FEDERAL COMMUNICATIONS
COMMISSION; UNITED STATES OF
AMERICA,

     Respondents.

NATIONAL ASSOCIATION OF
STATE UTILITY CONSUMER
ADVOCATES,

     Amicus Curiae.

                               2
               PETITIONS FOR REVIEW OF AN ORDER OF THE
                FEDERAL COMMUNICATIONS COMMISSION
                        (Case Nos. 96-45 and 03-249)

Jonathan J. Frankel (John H. Harwood II, Heather M. Zachery, and Stephen M. Obenski,
with him on the briefs), Wilmer Cutler Pickering Hale and Dorr LLP, Washington, D.C.,
for Petitioner Qwest Communications International Inc., and Petitioner and Intervenor
SBC Communications Inc.

Elisabeth H. Ross (Peter Bluhm, Vermont Public Service Board, Montpelier, Vermont,
with her on the briefs), Birch, Horton, Bittner and Cherot, Washington, D.C., for
Petitioner and Intervenor Vermont Public Service Board.

James M. Carr (John A. Rogovin, General Counsel, Austin C. Schlick, Deputy General
Counsel, John E. Ingle, Counsel, Laurel R. Bergold, Counsel, and William Scher,
Counsel, on the brief) Federal Communications Commission, Washington, D.C., for
Respondent Federal Communications Commission.

Mary Wright, Attorney, Montana Consumer Counsel, Helena, Montana, for Intervenor
Montana Consumer Counsel and Martin Jacobsen, Special Assistant Attorney General,
Montana Public Service Commission, Helena, Montana, filed a brief for Intervenors
Montana Consumer Counsel and Montana Public Service Commission.

Patrick J. Crank, Attorney General, Michael L. Hubbard, Deputy Attorney General, and
Barbara L. Boyer, Senior Assistant Attorney General, State of Wyoming, Cheyenne,
Wyoming filed a brief for Intervenor Wyoming Public Service Commission.

Michael E. Glover, Edward S. Shakin, and Ann H. Rakestraw, Verizon, Arlington,
Virginia; Lisa S. Foshee, BellSouth Corporation, Atlanta, Georgia; Richard G. Taranto,
Farr & Tarranto, Washington, D.C., filed a brief for Intervenors Verizon Telephone
Companies and BellSouth Corporation.

Leonard J. Cali, Lawerence J. Lafaro and Judy Sello, AT&T Corp., Bedminster, New
Jersey; David L. Lawson, Virginia A. Seitz and James P. Young, Sidley Austin Brown &
Wood LLP, Washington, D.C., filed an Intervenors brief for AT&T Corp.

                                           3
Simon Lipstein, Assistant Attorney General, Denver, Colorado and Patrick N. Pearlman,
Deputy Consumer Advocate, West Virginia Consumer Advocate, Charleston, West
Virginia, filed an Amicus Curiae brief of the National Association of State Utility
Consumer Advocates.

Before KELLY, BALDOCK, and BRISCOE, Circuit Judges.

KELLY, Circuit Judge.

       These consolidated petitions collectively challenge the Order on Remand of the

Federal Communications Commission (“FCC” or “Commission”). In Qwest Corp. v.

FCC, 258 F.3d 1191 (2001) (“Qwest I”), we reversed and remanded the FCC’s

mechanism for providing federal support to non-rural telecommunications carriers under

the 1996 Telecommunications Act, 47 U.S.C. § 254 (the “Act”) . In the Order on

Remand the Commission sought to address the issues we identified in our previous

decision. Today, we grant in part and deny in part the petitions for review. We hold that

the FCC relied on an erroneous, or incomplete, construction of 47 U.S.C. § 254 in

defining statutory terms and crafting the funding mechanism for non-rural, high-cost

support. That construction of the statute is fatal to the cost support mechanism at issue in

this case. However, we affirm that portion of the Order on Remand creating a mechanism

to induce state action to assist in implementing the goals of universal service.

                                              4
                                       Background

       In Qwest I, we discussed in detail the advent of the competitive

telecommunications market brought about by the passage of the Telecommunications Act

of 1996 and the FCC’s subsequent regulatory attempts to implement the Act’s various

mandates. 258 F.3d 1196. To avoid repetition, we only briefly discuss those facts

relevant to our discussion here.

       Congress sought to introduce competition into once monopolized

telecommunications markets through the passage of the Act. H.R. Rep. No. 104-204, at

48 (1995), reprinted in 1996 U.S.C.C.A.N. 10, 11; see also James B. Speta, Deregulating

Telecommunications in Internet Time, 61 Wash. & Lee L. Rev. 1063, 1092-93 (2004)

(summarizing Congressional intent). In so doing, Congress expressed its continued

commitment to preserving universal service. See 47 U.S.C. § 254(b); Jennifer Hargroves,

Adjudication of Universal Funding in the Telecommunications Sector, 79 Denv. U. L.

Rev. 491, 494-96 (2002). Universal service incorporates the goal of insuring that

consumers throughout the nation, in both rural and urban markets, have access to an

evolving range of telecommunications services. Qwest I, 258 F.3d at 1195; see also 47

U.S.C. § 254(c)(1) (“Universal service is an evolving level of telecommunications

services . . . taking into account advances in telecommunications and information

technologies and services.”).

                                            5
       Prior to passage of the Act, universal service was largely sustained through

explicit, monetary payments to local carriers and a system of implicit subsidies. Qwest I,

258 F.3d at 1196. The cost of providing service in rural areas often greatly exceeds that

in urban areas. Id. To ensure universal service, states often permitted carriers to charge

higher rates in urban areas to subsidize the cost of providing service in rural areas. Id.

Similarly, the federal government structured long-distance rates to subsidize local service.

Id. With the advent of competition, Congress feared that carriers entering the market

would compete aggressively for low-cost, urban areas, leaving former monopoly carriers

the unsustainable burden of providing service to rural areas in the face of a dwindling

urban base.

       To guide the FCC in implementing “policies for the preservation and advancement

of universal service,” 47 U.S.C. § 254(b), Congress enunciated various principles, several

of which are at issue here. Congress noted that “[q]uality services should be available at

just, reasonable, and affordable rates.” Id. § 254(b)(1). Consumers in rural and high-cost

areas should have access to telecommunications services at “rates that are reasonably

comparable to rates charged for similar services in urban areas.” Id. § 254(b)(3).

Congress further posited that “[t]here should be specific, predictable and sufficient

Federal and State mechanisms to preserve and advance universal service.” Id.

§ 254(b)(5). Under the Act, telecommunications carriers might qualify for federal

                                              6
support to provide service to consumers in rural and high-cost areas. Id. § 254(e). The

Act requires such federal support to “be explicit and sufficient to achieve the purposes of

[universal service].” Id. (emphasis added).

A.     The Ninth Order and Qwest I

       In Qwest I we reversed and remanded the FCC’s Ninth Report and Order, FCC 99-

306, 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.

B.     The Order on Remand

       The FCC responded to our opinion in its Order on Remand, FCC 03-249, CC

Docket No. 96-45 (October 27, 2003) (“Order on Remand”). The Commission first

sought to address our concerns with respect to the definitions of statutory terms. The

FCC defined “sufficient” as “enough federal support to enable states to achieve

reasonable comparability of rural and urban rates in high-cost areas served by non-rural

carriers.” Order on Remand ¶ 4. The Commission then defined “reasonably comparable”

                                             9
in terms of a national urban rate benchmark, i.e., rural rates are deemed reasonably

comparable if they fall within two standard deviations2, or roughly 138%, of the national

urban average. Id. ¶ 38 n.130.

       The Order on Remand contains the FCC’s revised federal support mechanism for

non-rural carriers in high-cost areas. To gauge whether current support mechanisms

result in reasonably comparable rates, the Order on Remand requires states to regularly

compare individual rural rates with the national average urban rate benchmark referenced

above. Id. ¶ 70. The states must annually certify to the FCC whether their rural rates are

reasonably comparable. Id. The benchmark represents a safe harbor, i.e., rates falling

within the benchmark are presumed reasonably comparable. Id. However, states have the

option to present additional information that other factors impact the comparability of

their rates in high cost areas. Id. ¶ 70, 73. Importantly, non-rural carriers’ eligibility for

federal support is dependant on effective state certification. Id. ¶ 92. To determine the

level of support, the FCC then compares the statewide average cost per line against a

national average cost per line. Id. ¶¶ 49-50. Support is only available if the state’s

average exceeds the national average plus two standard deviations. Id. ¶ 64. Thus, the

       2
         A standard deviation is a statistical term representing the difference between input values
in a range and the mean or average. One standard deviation encompasses 68.27% of the values
in a given range. Two standard deviations encompasses 95.45% of the same values. In a
hypothetical survey of 100 varying rates charged by telecommunications carriers, two standard
deviations from the mean will encompass nearly 96 of the rates in the range, leaving roughly 4
rates outside the grouping.

                                                10
Order on Remand actually contains two separate benchmarks: a national average urban

rate benchmark is used to determine whether rates are reasonably comparable and a

national cost benchmark is used to determine the availability and amount of federal

support.

       In drafting the Order on Remand, the FCC rejected complaints from states and

telecommunications carriers asserting that the previous level and allocation of funding

were inadequate for the purposes of insuring universal service. However, as conceded by

Petitioners, the Order on Remand increases the level of federal support from $254 million

to $278 million, and the number of qualifying states from eight to ten.

C.     Petitions for Review

       We have consolidated three petitions for review filed against the Order on

Remand. In Nos. 03-9617 and 04-9518, Qwest Communications International, Inc.

(“Qwest”) and SBC Communications, Inc. (“SBC”) argue that (1) the FCC has violated a

statutory mandate in failing to ensure that the states transition from implicit to explicit

support mechanisms, (2) the Commission’s definition of “reasonably comparable” runs

counter to both the statute and this court’s prior decision, (3) the FCC ignored this court’s

decision in failing to adopt adequate state inducements to ensure reasonable

comparability, and (4) the Commission’s definition of “sufficient” is counter to express

Congressional intent and this court’s opinion in Qwest I. In No. 04-9519, the Vermont

                                              11
Public Service Board (“Vermont”) argues that (1) the Commission’s definition of

“reasonably comparable” does not provide a precise limiting standard, (2) the FCC’s cost-

based support mechanism is not supported by reasoned analysis and fails to provide

sufficient support, and (3) the FCC failed to resolve inequalities in its larger system to

ensure that support is sufficient overall. The Wyoming Public Service Commission,

Montana Consumer Counsel, and Montana Public Service Commission have intervened

in opposition to the Order on Remand. Vermont has intervened in partial support of the

Order on Remand. Further, AT&T Corporation, BellSouth Corporation, and Verizon

Telephone Companies have also intervened in support of the FCC. Finally, the National

Association of State Utility Consumer Advocates (“NASUCA”) has filed an amicus

curiae brief supporting affirmance of the Order on Remand.

                                         Discussion

       Our jurisdiction to review final FCC orders arises under 28 U.S.C. § 2342(1). The

Administrative Procedure Act limits our review, and we will set aside a final agency

action only if we find it to be “arbitrary, capricious, an abuse of discretion, or otherwise

not in accordance with law.” 5 U.S.C. § 706(2)(A). While our review under the arbitrary

and capricious standard is necessarily narrow, it is not insubstantial. See Lamb v.

Thompson, 265 F.3d 1038, 1046 (10th Cir. 2001). In fact, we are required to “engage in .

                                              12
. . a probing, in-depth review.” Citizens to Preserve Overton Park v. Volpe, 401 U.S.

402, 415 (1971), overruled on other grounds by Califano v. Sanders, 430 U.S. 99 (1977).

An agency’s action is arbitrary and capricious

       if the agency has relied on factors which Congress had not intended it to
       consider, entirely failed to consider an important aspect of the problem,
       offered an explanation for its decision that runs counter to the evidence
       before the agency, or is so implausible that it could not be ascribed to a
       difference in view or the product of agency expertise.

Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983).

       We owe deference to an agency’s construction of a statute it is empowered to

administer. Mainstream Mktg. Servs., Inc. v. FTC, 358 F.3d 1228, 1250 (10th Cir. 2004).

In reviewing the agency’s interpretation, we first seek to determine “whether Congress

has directly spoken to the precise question at issue.” Chevron U.S.A. Inc. v. Natural Res.

Def. Council, 467 U.S. 837, 842 (1984). If Congress has spoken, our inquiry ceases; the

agency, as well as the court, must give effect to Congress’s unambiguously expressed

intent. Id. at 842-43. However, if the statute is silent or ambiguous, we must ask

“whether the agency’s answer is based on a permissible construction of the statute.” Id. at

843. We must not simply impose our own construction. Id. Deference is especially due

when an agency’s interpretation of a statute rests upon its considered judgment, a product

of its unique expertise. See id. at 844. We will not defer to an agency’s construction if it

is “‘arbitrary, capricious, or manifestly contrary to the statute.’” Center for Legal

                                             13
Advocacy v. Hammons, 323 F.3d 1262, 1267 (10th Cir. 2003) (quoting Pharmanex v.

Shalala, 221 F.3d 1151, 1154 (10th Cir. 2000)).

I.     The Full Extent of Federal Support

       In Qwest I, we noted our inability to properly assess the sufficiency of federal

support for universal service in the absence of a comprehensive description of the support

mechanisms envisioned by the FCC. 258 F.3d at 1204. At the time, the FCC had

reserved the possibility of utilizing a different funding mechanism for rural carriers and

was still engaged in the process of reforming implicit federal support. Id. at 1204-05.

Nevertheless, we did not require the FCC to finally resolve all relevant issues in its

subsequent order. Id. at 1205.

       The FCC’s response aptly demonstrates the complexity of current mechanisms

employed to support universal service. Federal support to non-rural high-cost carriers

currently represents but a small percentage of comprehensive federal high-cost support

allocations–only 13.7% of high-cost support allocated in 2002. Order on Remand ¶ 102.

In the past several years, the FCC has sought to institute significant changes in its system

of support for non-rural carriers, including the mechanisms at issue in the Ninth Order

and the Order on Remand. At the same time, the Commission has proceeded far more

cautiously with respect to rural carriers. Id. ¶ 99. In 2001, the FCC chose not to tie

intrastate high-cost support for rural carriers to a forward-looking cost model, the same

                                             14
model applied to non-rural carriers. Id. ¶ 100. Instead, the Commission adopted a five-

year, modified embedded cost mechanism. Id. Prior to the conclusion of this period, the

FCC intends to develop a long-term universal service plan that recognizes distinctions

between and among rural carriers and non-rural carriers and better targets support to rural

carriers in the highest cost areas. Id. The Commission believes that the present system

has “proved sufficient to preserve and advance universal service,” pointing to high

subscribership rates and its conclusion that rural and high-cost rates are reasonably

comparable to urban rates under a Government Accounting Office (“GAO”) Report.3 Id.

¶ 105.

         We recognize the evolving nature of the system of supports employed by the FCC.

While a comprehensive picture of those supports is necessarily obscured at this juncture,

the description provided by the Commission in the Order on Remand informs our

analysis.

II.      Explicit Subsidies and the States

         Qwest and SBC first argue that 47 U.S.C. § 254 requires both the federal

government and the states to replace implicit subsidies with explicit subsidies.

Furthermore, the Petitioners posit that the FCC has acted unlawfully by failing to ensure

that the states transition to an explicit subsidy system. Finally, Qwest and SBC contend

         The Government Accounting Office is now the Government Accountability Office.
         3

                                             15
that the FCC has acted arbitrarily and capriciously by ignoring its own calls for a

transition to explicit support.

A.     Finality and Ripeness

       As a preliminary matter, the FCC argues that its determination that the statute

contains no mandate for states to transition from implicit to explicit subsidies is not a

final action suitable for appellate review. In the alternative, the Commission contends

that the issue is not presently ripe for consideration. We reject both arguments.

       In determining whether an agency action is final, we inquire (1) whether the

impact of the action is “direct and immediate,” (2) “whether the action marks the

consummation of an agency’s decision-making process,” and (3) whether the action

settles the rights and obligations of parties, or gives rise to legal consequences. Gordon v.

Norton, 322 F.3d 1213, 1220 (10th Cir. 2003). In this case, the FCC has unequivocally

stated “that the 1996 Act does not require states to adopt explicit universal service support

mechanisms.” Order on Remand ¶ 26. The FCC concedes, as it must, that this statement

unambiguously evidences its legal determination with respect to the statutory

requirement. However, the Commission contends that because it has yet to decide what

measures to adopt, if any, to induce states to remove implicit subsidies from intrastate

rates, the action is not final. Further, the FCC argues that SBC has failed to exhaust

remedies because it is currently challenging the statutory determination in an on-going

                                             16
rule-making proceeding. As a result, the FCC contends that the matter of a statutory

mandate remains before the Commission for consideration.

       The FCC’s determination that the Act does not mandate state action satisfies our

finality inquiry. The Commission has repeatedly stated that the Act does not mandate that

states transition from implicit to explicit subsidies.4 See id. (citing Seventh Report &

Order and Thirteenth Order on Reconsideration ¶ 45, FCC 99-119, CC Docket Nos. 96-

45, 96-262 (May 28, 1999)). When the agency has repeatedly stated its interpretive

conclusion, an appearance of finality is indeed established. HRI, Inc. v. EPA, 198 F.3d

1224, 1236 (10th Cir. 2000) (noting that in marking the consummation of a decision-

making process, the challenged action “must not be of a merely tentative or interlocutory

nature”). The result is direct and immediate because it rejects concerted action on the part

of the FCC to enforce an alleged statutory mandate. Finally, it is plain that the FCC’s

determination settles one aspect of its obligation under the act, giving rise to clear legal

responsibilities.

       Turning to ripeness, we consider the following factors when determining whether

       4
         The Commission’s ongoing efforts to determine what, if any, inducements to adopt to
effect state transition are simply not germane in this context. Nor do SBC’s comments in a
subsequent, unrelated proceeding before the FCC preclude our inquiry. The FCC’s argument
sweeps too broadly and would close the door to the appellate process envisioned by 28 U.S.C.
2342(1) any time a petitioner evidenced disagreement with a final agency decision during a
subsequent rule-making. Where, as here, the agency has repeatedly iterated its position and
given no indication that it is willing to reconsider its action, exhaustion in a collateral hearing
would be futile.

                                                 17
an issue is ripe for review under the APA: (1) whether the issues involved are purely

legal, (2) whether the agency’s action is final, (3) whether the action has or will have an

immediate impact on the petitioner, and (4) whether resolution of the issue will assist the

agency in effective enforcement and administration. Gordon, 322 F.3d at 1219.

       The FCC arguably concedes that the issue here is purely legal, Comm’n Br. at 35,

n.43, and we agree. The interpretation of a statute is a purely legal issue. As noted

above, we likewise find that the action involved is final. Qwest and SBC allege a direct

and immediate impact in that they continue to see an erosion of implicit subsidies as

competitors seize low-cost, urban market share. Harm is perpetuated through both the

structure of the federal support mechanisms and the Commission’s unwillingness to take

action to force the states to transition to explicit subsidies. That the support mechanisms

crafted by the FCC would be subject to change under the petitioner’s proposed

interpretation cannot be doubted. Qwest and SBC have adequately stated an immediate

and ongoing impact in the face of allegedly dwindling implicit support sufficient for our

inquiry. Finally, we believe that judicial resolution will promote effective enforcement

and administration. Our determination of the issue will necessarily clarify the

Commission’s role, thus facilitating its future efforts to preserve and advance universal

service. The issue is accordingly ripe for review.

B.     Statutory Mandate?

                                             18
       Under 47 U.S.C. § 254(b), the FCC must base its policies for the preservation and

advancement of universal service on several enunciated principles. Relevant here,

Congress stated that “[t]here should be specific, predictable and sufficient Federal and

State mechanisms to preserve and advance universal service.” 47 U.S.C. § 254(b)(5).

Under a separate provision, Congress noted that federal support “should be explicit and

sufficient to achieve the purposes of [universal service].” Id. § 254(e) (emphasis added).

       As we explained in Qwest I, the Act “plainly contemplates a partnership between

the federal and state governments to support universal service.” 258 F.3d at 1203. The

terms of the Act evidence recognition of concurrent state authority, providing:

       A State may adopt regulations not inconsistent with the Commission’s rules
       to preserve and advance universal service. . . . A state may adopt regulations
       to provide for additional definitions and standards to preserve and advance
       universal service within that State only to the extent that such regulations
       adopt additional specific, predictable, and sufficient mechanisms to support
       such definitions or standards that do not rely on or burden Federal universal
       service support mechanisms.

47 U.S.C. § 254(f).

       From these excerpts, Qwest and SBC5 deduce a statutory mandate requiring states

to transition from implicit to explicit support mechanisms. We reject this argument. In

drafting the statute, Congress unambiguously imposed an explicit subsidy requirement on

federal support mechanisms; no such requirement is expressly imposed on the states.

     These Petitioners are joined by the Wyoming Public Service Commission (“WPSC”).
       5

WPSC Br. at 8.

                                            19
Generally, when Congress includes a specific term in one provision of a statute, but

excludes it in another, it is presumed that the term does not govern the sections in which it

is omitted. United States v. Atandi, 376 F.3d 1186, 1188 (10th Cir. 2004) (citing

Russello v. United States, 464 U.S. 16, 23 (1983)). We see no reason to disturb this

cannon of statutory construction here.

       To the extent this arrangement may be considered ambiguous, our review of the

statute leads us to conclude that the FCC’s interpretation is not arbitrary, capricious, or

contrary to Congress’s intent. Hammons, 323 F.3d at 1267. We agree with the

Commission that, having required explicit federal support mechanisms, Congress

certainly knew what language to use to impose a similar requirement on the states. We do

not find, as urged by the Petitioners, that Congress’s requirement that state and federal

funding be “specific, predictable and sufficient,” 47 U.S.C. § 254(b)(5), provides a

backdoor to federal manipulation of state support mechanisms. The Petitioners’ argument

that implicit subsidies are inherently non-specific, unpredictable, and insufficient is

unavailing. We find no support in the plain meaning of these terms or in the relevant

statutory history for the Petitioners’ construction.

       Petitioners further urge that the Act’s requirement that “[e]very

telecommunications carrier that provides intrastate telecommunications services shall

contribute, on an equitable and nondiscriminatory basis, in a manner determined by the

                                              20
State to the preservation and advancement of universal service,” 47 U.S.C. § 254(f),

requires that the states replace existing implicit subsidies with explicit support

mechanisms. Otherwise, single carriers may be forced to bear a disproportionate and

inequitable share of the burden in supporting their own high-cost consumers. We agree

with the FCC that the plain text of the statute merely imposes an obligation on the carriers

to contribute to universal service funds; it does not impose a requirement of parity with

respect to internal functioning and the distribution of funds between and among carriers.

Moreover, the language of the provision evidences an express commitment of the

contribution issue to the states.

       In keeping with the dual regulatory scheme embraced by the Act, Congress

intended that the states retain significant oversight and authority and did not dictate an

arbitrary time line for transition from one system of support to another. Compare Nat’l

Ass’n of State Util. Consumer Advocates v. FCC, 372 F.3d 454, 459 (D.C. Cir. 2004)

(holding that the Act did not require an immediate transition in federal support from

implicit to explicit subsidies). Nor did Congress expressly foreclose the possibility of the

continued existence of state implicit support mechanisms that function effectively to

preserve and advance universal service. Under these circumstances, we will not disturb

the Commission’s statutory interpretation.

III.   Definition of Statutory Terms

                                              21
       In Qwest I, we remanded the Ninth Order with instructions that the FCC more

precisely define the terms “sufficient” and “reasonably comparable,” “in a way that can

be reasonably related to the statutory principles.” 258 F.3d at 1202. For the reasons

discussed below, we hold that the FCC has failed to reasonably define these terms.

A.     “Sufficient”

       Section 254(e) of the Act provides that federal universal service support “should

be explicit and sufficient to achieve the purposes of [§ 254].” 47 U.S.C. § 254(e). On

remand, the FCC defined “sufficient” in the following terms: “enough federal support to

enable states to achieve reasonable comparability of rural and urban rates in high-cost

areas served by non-rural carriers.” Order on Remand ¶ 30. The Commission further

limited the definition by stating that “non-rural high-cost support should be only as large

as necessary to meet the statutory goal.” Id.

       As explained more fully above, the principle of “reasonable comparability” is but

one of seven principles identified by Congress to guide the Commission in drafting

policies to preserve and advance universal service. See 47 U.S.C. § 254(b). For instance,

Congress also intended that “[q]uality services should be available at just, reasonable, and

affordable rates.” Id. § 254(b)(1). As we noted in Qwest I, “[t]he plain text of the statute

mandates that the FCC ‘shall’ base its universal policies on the principles listed in

§ 254(b).” 258 F.3d at 1200. Under the Act, the FCC’s duty is mandatory. Id. However,

                                             22
we posited that while “the FCC must base its policies on the principles, . . . any particular

principle can be trumped in the appropriate case. . . . [T]he FCC may exercise its

discretion to balance the principles against one another when they conflict, but may not

depart from them altogether to achieve some other goal.” Id.

       Petitioners Qwest and SBC argue that the FCC’s definition is impermissible in that

it ignores all but one principle enumerated in § 254(b). We agree. The FCC’s definition

of “sufficient” ignores the vast majority of § 254(b) principles by focusing solely on the

issue of reasonable comparability in § 254(b)(3). The Commission has not demonstrated

in the Order on Remand or the limited record available to this court why reasonable

comparability conflicts with or outweighs the principle of affordability, or any other

principle for that matter, in this context. The issue is more than semantic. As discussed

more fully below, this failure to consider fully the Act’s principles as a whole further

undermines the FCC’s definition of “reasonably comparable” and the cost mechanism at

issue in this case.

       The FCC urges that it is justified in defining “sufficient” solely in terms of

§ 254(b)(3) because “in general the purpose of [the federal non-rural high-cost support]

mechanism is to provide enough federal support to enable states to achieve the reasonable

comparability of rural and urban rates.” FCC Br. at 61. This explanation is patently

unpersuasive. We are troubled by the Commission’s seeming suggestion that other

                                             23
principles, including affordability, do not underlie federal non-rural support mechanisms.

Moreover, the Commission can point to no support in the Act or the legislative history

that would permit such a construction. Consequently, we will not countenance it here.

       Petitioners also take issue with the fact that the Commission sought to further limit

its definition of “sufficient” by including language intended to cap federal support at

levels “only as large as necessary” to meet the statutory goal. Order on Remand ¶ 30.

We are not troubled by this language in the abstract. As we explained in our previous

decision, excessive subsidization arguably may affect the affordability of

telecommunications services, thus violating the principle in § 254(b)(1). Qwest I, 259

F.3d at 1200. The FCC is compelled to balance the § 254(b) principles to the extent they

conflict. Id. However, the FCC has failed to demonstrate that its balancing calculus

takes into account the full range of principles Congress dictated to guide the Commission

in its actions.

       On remand, the FCC must articulate a definition of “sufficient” that appropriately

considers the range of principles identified in the text of the statute.

                                              24
B.    “Reasonably Comparable”

      Section 254(b)(3) of the Act provides that

      [c]onsumers in all regions of the Nation, including low-income consumers
      and those in rural, insular, and high cost areas, should have access to
      telecommunications and information services . . . that are reasonably
      comparable to those services provided in urban areas and that are available
      at rates that are reasonably comparable to rates charged for similar services
      in urban areas.

47 U.S.C. § 254(b)(3) (emphasis added). As noted above, § 254(b)(3) provides a

principle on which the FCC is to “base policies for the preservation and advancement of

universal service.” Id. § 254(b). In Qwest I, we ordered the FCC to more precisely

define “reasonably comparable” in reference to rates charged between rural and urban

areas. 258 F.3d at 1202.

      In its Order on Remand, the FCC defines “reasonably comparable” in terms of a

national urban rate benchmark. Order on Remand ¶ 30. For purposes of assessing the

efficacy of non-rural support mechanisms, rural rates are presumed “reasonably

comparable” if they fall within two standard deviations of the national average urban rate

contained in the Wireline Competition Bureau’s (“WCB”) annual rate survey. Id. ¶ 38.

      The Commission predicated the establishment of an appropriate benchmark on its

interpretation of Congress’s intent in drafting the Act. The FCC found it reasonable to

assume that Congress was well aware of local rate variance between the states at the time

it passed the Act in 1996. Id. ¶ 40. The Commission concedes that even it did not have

                                            25
rural rate data available during that period. Id. However, the FCC again found it

reasonable to assume that Congress was aware of the variance in urban rates at the time,

on the basis of then available WCB survey information, and that Congress would not have

required rural rates to be any closer to a national urban average than other urban rates. Id.

Underlying this assumption is the FCC’s determination that Congress considered rural

and urban rates reasonably comparable in 1996. Id. ¶ 39.

       The Commission based its determination that Congress was satisfied with rural

and urban rate disparity on its construction of the words “preserve” and “preservation” as

they appear in several provisions of the Act. See, e.g., 47 U.S.C. §§ 254(b), (d) & (f).

According to the FCC, Congress’s use of these words “indicated its view that the

universal service mechanisms that pre-dated the 1996 Act adequately promoted universal

service.” Order on Remand ¶ 39. In support, the Commission cites several statements in

the Congressional record. Id. n.137. The FCC further contends that had Congress not

viewed rates as reasonably comparable it would have expressly directed the Commission

and the states to alter the existing structure. Id. ¶ 39.

       “[T]he 1996 Act is not a model of clarity.” See AT&T Corp. v. Iowa Utils. Bd.,

525 U.S. 366, 397 (1999). However, we agree with Petitioners Qwest, SBC, and

Vermont that the Commission’s definition of “reasonably comparable” rests on a faulty,

and indeed largely unsupported, construction of the Act. As such, we hold that the FCC’s

                                               26
construction of the statute does not deserve deference and is “manifestly contrary to the

statute.” Center for Legal Advocacy, 323 F.3d at 1267.

       We first note that in each instance that Congress employed the words “preserve” or

“preservation,” the terms were conjoined with “advance” or “advancement.” See, e.g., 47

U.S.C. §§ 254(b), (d) & (f). Neither “preserve” nor “advance” are defined in the statute.

Therefore, we must employ traditional tools of statutory construction to determine their

meaning.

       “Preserve” is primarily defined as “to keep safe from injury, harm, or destruction:

PROTECT.” Webster’s Ninth New Collegiate Dictionary 930 (1991). An alternate

definition includes the concept of maintenance. Id. Similarly, “preservation” may be

defined as “Keeping safe from harm; avoiding injury, destruction, or decay; maintenance.

It is not creation, but the saving of that which already exists, and implies the continuance

of what previously existed.” Black’s Law Dictionary 1184-85 (6th ed. 1990). In contrast,

“advance” is defined as “to bring or move forward” or “to accelerate the growth or

progress of.” Webster’s Ninth New Collegiate Dictionary 58 (1991). “Advancement”

may be defined as “progression to a higher stage of development.” Id. at 59. The use of

the conjunctive “and” in the phrase “preserve and advance universal service,” or

“preservation and advancement of universal service,” clearly indicates that the

Commission cannot satisfy the statutory mandate by simply doing one or the other. The

                                             27
Commission is charged under the Act with concurrent duties.

       As verbs, “preserve” and “advance” both take as their object “universal service.”

As nouns, “preservation” and “advancement” are modified by the prepositional phrase “of

universal service.” The Commission’s construction ultimately fails because it seeks to

define separately “universal service” as it applies to each verb or noun. This reading of

the statutory language is unnatural. In reference to “preserve” or “preservation,”

“universal service” refers to the rate variance arising from the support mechanisms

existing in 1996. See Order on Remand ¶ 39. In contrast, “universal service” applied to

“advance” or “advancement” refers to evolving rules recognizing changes in markets and

technology. Id. To the extent that the latter construct ignores the importance of

continuing rate variances and the principles enunciated in § 254(b), we see no

justification for this dichotomy in either the plain language of the Act or its statutory

history.

       The FCC’s citation to inconclusive statements in the Congressional Record to

support its construction is unavailing. Id. n.137. Having reviewed the body of the

Congressional Record relating to the Act, we do not believe that statements by individual

senators to the effect that the proposed legislation would not harm existing services can

be read to freeze the assessment of reasonable comparability to a speculative variance in

rates unknown in 1996 and divined through inferential leaps in logic.

                                              28
       “Universal service” is defined in the Act as “an evolving level of

telecommunications services,” taking into account those services that are essential to

basic needs, subscribed to by a majority of consumers, deployed in networks, and

consistent with defined policy goals. 47 U.S.C. § 254(c)(1). Implicit in this definition

and the Act is access to these telecommunications services by consumers throughout the

nation. Rates cannot be divorced from a consideration of universal service, nor can the

variance between rates paid in rural and urban areas. If rates are too high, the essential

telecommunications services encompassed by universal service may indeed prove

unavailable. Thus, the Commission erred in premising its consideration of the term

“preserve” on the disparity of rates existing in 1996 while ignoring its concurrent

obligation to advance universal service, a concept that certainly could include a narrowing

of the existing gap between urban and rural rates.

       By designating a comparability benchmark at the national urban average plus two

standard deviations, the FCC has ensured that significant variance between rural and

urban rates will continue unabated. This assertion is borne out by the Commission’s own

data. In 2002, urban rates ranged from $15.65 to $35.19, with an average of $23.38.

Utilizing this data, the comparability benchmark is $32.28, or 138% of the nationwide

average urban rate. In Qwest I we expressed our concern that a discrepancy of 70-80%

between some rural rates and urban rates might impermissibly stretch the boundaries of

                                             29
rate comparability. 258 F.3d at 1201. Under the 2002 data, rural rates falling just below

the comparability benchmark may exceed the lowest urban rates by over 100%. Even if

such rural rates are compared against the national urban average, we fail to see how they

could be deemed reasonably comparable, especially in light of our previous consideration.

       The Commission explains its selection of two standard deviations as the

appropriate benchmark on the basis that it approaches the outer perimeter of the variance

in urban rates. As rural rates approach the level of the highest urban rate, the FCC

believes closer scrutiny is appropriate. While there is a certain logic to this approach, the

benchmark is rendered untenable because of the impermissible statutory construction on

which it rests. From this perspective, the Commission’s selection of a comparability

benchmark based on two standard deviations appears no less arbitrary than its prior

selection of a 135% cost-support benchmark. See id. at 1202-03. On remand, the FCC

must define the term “reasonably comparable” in a manner that comports with its

concurrent duties to preserve and advance universal service.

IV.    Funding Mechanism

       In the Order on Remand, the FCC modified its non-rural, high-cost support

mechanism. To determine eligibility and the amount of support that non-rural carriers in

each state will receive, the Commission established a cost benchmark of two standard

deviations above the national average cost per line. Order on Remand ¶ 49. Non-rural

                                             30
carriers in states with average costs exceeding the national average are eligible for

support under the new mechanism.

       In crafting its new cost support mechanism, the FCC relied on rate data compiled

in a GAO Report. Id. ¶ 49 & App. C. The GAO Report identified and compared

individual rates in urban and rural areas served by non-rural carriers. Id. App. C.

Applying the definition of “reasonably comparable” rates discussed above, the FCC

concluded that current rates were reasonably comparable. Id. ¶ 49. The Commission then

concluded that setting the cost benchmark at two standard deviations would adequately

support the goal of ensuring reasonably comparable urban and rural rates. Id.

       In that the non-rural, high-cost support mechanism contained in the Order on

Remand rests on the application of the definition of “reasonably comparable” rates

invalidated above, it too must be deemed invalid. On a separate note, we did intimate in

Qwest I that we would be inclined to affirm the FCC’s cost-based funding mechanism if

it indeed resulted in reasonably comparable rates. However, we expected the

Commission to return to us with empirical findings supporting this conclusion. Once

again, we find no evidence in the record before us to support the FCC’s pairing of rates to

costs in this context. In other words, the FCC based the two standard deviations cost

benchmark on a finding that rates were reasonably comparable, without empirically

demonstrating a relationship between the costs and rates surveyed in this context.

                                             31
       On remand, the FCC must utilize its unique expertise to craft a support mechanism

taking into account all the factors that Congress identified in drafting the Act and its

statutory obligation to preserve and advance universal service. No less important, the

FCC must fully support its final decision on the basis of the record before it.

V.     State Inducements

       In Qwest I, we held that the FCC must develop mechanisms to induce the states

“to assist in implementing the goals of universal service.” 258 F.3d at 1204. In response,

the FCC has drafted a requirement into its support mechanism for non-rural carriers

requiring states to certify that rural rates within their boundaries are reasonably

comparable. If they are not, the states must develop and present an action plan to the

FCC indicating the state’s response. If the state fails to do so, federal funds will be

withheld. The Petitioners assert that the certification process constitutes an inadequate

inducement. We disagree.

       We are satisfied that the inducement mechanism contained in the Order on

Remand adequately responds to the concerns we expressed in Qwest I. The mechanism

requires a careful yearly review, and the prospect of withheld funds will certainly bring

pressure to bear on the states. Petitioners have failed to proffer any evidence to suggest

that the Commission’s inducement mechanism will prove inadequate. As with any such

mechanism, experience may indeed prove the best judge of its efficacy. The Commission

                                              32
is in a unique position to determine what inducements are necessary to effectuate the

goals of the Act. While we can envision various approaches to more effectively induce

state action, given our deferential standard of review, we cannot say that the

Commission’s determination in this case was arbitrary or capricious. Motor Vehicle

Mfrs. Ass’n, 463 U.S. at 43.

       Qwest and SBC further argue that the FCC’s failure to adopt inducement

mechanisms to specifically effect state transition from implicit to explicit support

mechanisms is arbitrary and capricious given the Commission’s repeated statements that

implicit mechanisms are untenable in a competitive environment. This is not a case

where the Commission has suspended indefinitely its prior regulations, despite

acknowledging the importance and need for such action. See Public Citizen v. Steed, 733

F.2d 93, 99 (D.C. Cir. 1984). Nor has the FCC failed to act after identifying a pressing

and immediate need for regulation to replace disfavored implicit subsidies. See

Farmworker Justice Fund, Inc. v. Brock, 811 F.2d 613, 618-19 (D.C. Cir. 1987), vacated

as moot, 817 F.2d 890 (D.C. Cir. 1987). Owing to the complex nature of this regulatory

area and shared responsibility between the FCC and the states, we reject this argument.

Under these circumstances, it is not our province to dictate the methods and timing

employed by the agency to effect the statutory design.

VI.    Remaining Claims

                                             33
       Having invalidated the FCC’s definitions of “sufficient” and “reasonably

comparable,” and further invalidated the Order on Remand’s cost-support mechanism, we

are unable to address the Petitioners’ remaining claims with respect to the sufficiency of

federal support for non-rural carriers and the industry as a whole.

VII.   Deadline for FCC Action

       The Petitioners have requested that this court retain jurisdiction and impose a

specific deadline of no more than 180 days for FCC compliance. The Petitioners appear

to allege unreasonable delay on the part of the FCC in implementing universal service

support mechanisms and in responding to this court’s previous remand. Under 5 U.S.C.

§ 706(1), we may “compel agency action unlawfully withheld or unreasonably delayed.”

While this court has never had occasion to delineate under what circumstances such relief

will be granted, it is clear that a court-imposed deadline for agency action constitutes an

extraordinary remedy. See In re Int’l Chem. Workers Union, 958 F.2d 1144, 1149 (D.C.

Cir. 1992). The U.S. Court of Appeals for the District of Columbia Circuit has set forth

the following factors to guide courts in this determination: (1) the extent of the delay, (2)

the reasonableness of the delay in the context of the legislation authorizing agency action,

(3) the consequences of the delay, and (4) administrative difficulties bearing on the

agency’s ability to resolve an issue. See id. at 1149-50. To this we might expressly add

consideration of the complexity of the task envisioned by a court’s remand order.

                                             34
       While we recognize that nearly nine years have passed since the passage of the

Telecommunications Act and over three years since our decision in Qwest I, we decline

the invitation to retain jurisdiction or impose an arbitrary deadline. The

Telecommunications Act envisions a complex transition to a competitive communications

market and contains no statutory deadlines for completion of its universal service

mandate. No less complex is our comprehension of the task before the FCC on remand.

Redefining the statutory terms identified above and developing a support mechanism

consistent with the principles identified by Congress requires the full development of an

administrative record, empirical findings, and careful analysis. Under these

circumstances, we will not constrain the Commission’s consideration of the issues before

it. We fully expect the FCC to comply with our decision in an expeditious manner,

bearing in mind the consequences inherent in further delay.

                                        Conclusion

       The FCC has failed to appropriately respond to our decision in Qwest I.

Accordingly, in Nos. 03-9617, 04-9518, and 04-9519 we GRANT in part and DENY in

part the petitions for review and REMAND to the FCC for further proceedings consistent

with this opinion.

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