Court Opinion

ID: 4667678
Source: CourtListenerOpinion
Date Created: 2021-03-15 16:00:48.207943+00
Date Added: 2024-06-11T08:02:58.481979
License: Public Domain

FILED
                                                         United States Court of Appeals
                                                                 Tenth Circuit

                                   PUBLISH                     March 15, 2021
                                                            Christopher M. Wolpert
                  UNITED STATES COURT OF APPEALS                Clerk of Court

                              TENTH CIRCUIT

 BLANCA TELEPHONE COMPANY,

             Petitioner,
       v.                                       Nos. 20-9510 and 20-9524
 FEDERAL COMMUNICATIONS
 COMMISSION; UNITED STATES
 OF AMERICA,

             Respondents.

                   PETITION FOR REVIEW FROM
            THE FEDERAL COMMUNICATIONS COMMISSION
                   (NOS. FCC 17-162 and FCC 20-28)

Timothy E. Welch, Hill and Welch, Silver Springs, Maryland, for Petitioner.

Scott Noveck, Counsel (Thomas M. Johnson, Jr., General Counsel, Ashley S.
Boizelle, Deputy General Counsel, Richard K. Welch, Deputy Associate General
Counsel, Federal Communications Commission, and Makan Delrahim, Assistant
Attorney General, Michael F. Murray, Deputy Assistant Attorney General, and
Robert B. Nicholson and Adam D. Chandler, Attorneys, United States Department
of Justice, with him on the brief), Federal Communications Commission,
Washington, D.C., for Respondents.

Before TYMKOVICH, Chief Judge, BRISCOE, and BACHARACH, Circuit
Judges.

TYMKOVICH, Chief Judge.
      Blanca Telephone Company is a rural telecommunications carrier based in

Alamosa, Colorado. Its business ensures its customers have access to a basic

level of telephone services in rural Colorado. To make this business profitable,

Blanca must rely in part upon subsidies from the Universal Service Fund (USF), a

source of financial support governed by federal law and funded through fees on

telephone customers. And in order to receive subsidies from the USF, Blanca

must abide by a complex set of rules governing telecommunications carriers.

      The Federal Communications Commission 1 administers and enforces the

rules governing distribution of USF support. Through an investigation begun in

2008 by the FCC’s Office of Inspector General into Blanca’s accounting

practices, the FCC identified overpayments Blanca had received from the USF

between 2005 and 2010. According to the FCC, Blanca improperly claimed

roughly $6.75 million in USF support during this period for expenses related to

providing mobile cellular services both within and outside Blanca’s designated

service area. As we describe in more detail below, Blanca was entitled only to

support for “plain old telephone service,” namely land lines, and not for mobile

telephone services. Following the investigation, the FCC issued a demand letter

      1
          We also refer to the FCC as the “agency” throughout the opinion.

                                        -2-
to Blanca seeking repayment. The agency eventually used administrative offsets

of payments owed to Blanca for new subsidies to begin collection of the debt.

      Blanca objected to the FCC’s demand letter and sought agency review of

the debt collection determination. During agency proceedings, the FCC

considered and rejected Blanca’s objections. Now, in its petition for review

before this court, Blanca challenges the FCC’s demand letter and subsequent

orders on a number of grounds. Blanca claims the FCC’s decision should be set

aside for three reasons: (1) it was barred by the relevant statute of limitations,

(2) it violated due process, and (3) it was arbitrary and capricious.

      On review of the agency’s record, we AFFIRM the FCC’s decision. We

conclude the FCC’s debt collection was not barred by any statute of limitations,

Blanca was apprised of the relevant law and afforded adequate opportunity to

respond to the FCC’s decision, and the FCC was not arbitrary and capricious in its

justifications for the debt collection.

                                  I. Background

      A. Factual Background

             1. The Regime Governing Blanca

      In this appeal we must decide whether Blanca, a local exchange carrier

(LEC) under federal law, could receive USF support for costs associated with

                                          -3-
providing mobile telephone services. 2 In order to proceed, we first describe the

laws governing Blanca as of 2005.

      Blanca and other telecommunications carriers are governed by a vast

regulatory scheme. As telecommunications technology has become more

advanced and complex, the laws and regulations governing such technology have

tried to keep pace. And as the country’s population has shifted geographically,

with many trading rural for urban living, the laws and regulations have tried to

account for these demographic changes as well.

      Throughout the latter-half of the twentieth century, it became less

economically feasible for traditional phone companies to provide services to rural

customers. Faced with rugged terrain across open expanses, telecommunications

carriers were wary to invest in and maintain expensive infrastructure. And given

the sparse populations of many of these areas, the limited economies of scale also

weighed against such investments.

      The Telecommunications Act of 1996 was passed to address this shortage

of quality telecommunications services in rural parts of the country. 47 U.S.C.

§ 254(b)(3) (“Consumers in all regions of the Nation, including low-income

consumers and those in rural, insular, and high cost areas, should have access to

      2
         Throughout the opinion, we interchangeably use the terms “mobile,”
“cellular,” and “wireless” to describe this type of service.

                                        -4-
telecommunications and information services . . . 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.”). The Act

sought to ensure that “universal service” was available to customers, regardless of

where they lived. Id. Under the Act, Congress intended to incentivize carriers to

serve rural customers by providing subsidies from the USF for services provided

and infrastructure built in such high-cost areas. See generally WWC Holding Co.,

Inc. v. Sopkin, 488 F.3d 1262, 1267 (10th Cir. 2007) (discussing why the USF

was created).

      The USF is overseen by the FCC and administered by two private

organizations. It is funded by mandatory contributions from carriers. 47 U.S.C.

§ 254(d); 47 C.F.R. § 54.706(a). The FCC sets the rules for distributing the

funds. 47 U.S.C. § 254(k). The Universal Service Administrative Company

(USAC) is an independent, non-profit corporation that is responsible for

establishing the procedures for monitoring and distributing funds. See generally

United States ex rel. Shupe v. Cisco Sys., Inc., 759 F.3d 379, 381 (5th Cir. 2014)

(describing the structure and function of USAC). USAC is also responsible for

auditing carriers and providing reports to the FCC. 47 C.F.R. §§ 54.707(a), (c).

The National Exchange Carriers Association (NECA) is a membership

organization of telecommunications carriers that collects and audits accounting

                                         -5-
reports from carriers. See generally Farmers Tel. Co., Inc. v. FCC, 184 F.3d

1241, 1246–45 (10th Cir. 1998) (describing the structure and function of NECA).

USAC can obtain any reports submitted to NECA. 47 C.F.R. § 54.707(b).

      As of 2005, USF funds could be distributed to eligible telecommunications

carriers (ETCs) for certain types of expenses. See 47 U.S.C. § 254(e) (2002).

States were given the authority to designate which carriers qualified as ETCs. 47

U.S.C. § 214(e)(2) (1997). And states also designated a service area for each

carrier. Id. at § 214(e)(5). 3 The service area was used to determine a carrier’s

universal service obligations and support. Id.

      Within each service area, a state could designate one eligible carrier as the

incumbent LEC. 47 C.F.R. § 51.5 (2005); see also 47 U.S.C. § 153(26) (1997)

(defining LECs as companies “engaged in the provision of telephone exchange

service or exchange access,” but not “engaged in the provision of commercial

mobile service . . . except to the extent that the Commission finds that such

service should be included in the definition of such term”). Other carriers

designated as ETCs by the state, but allowed to operate in an incumbent’s service

area, were considered competitive ETCs. Id. at § 54.5 (2005).

      3
        The area in which a rural carrier operates is also referred to as a “study
area.” 47 U.S.C. § 214(e)(5). We use the two terms, service area and study area,
interchangeably when discussing Blanca.

                                         -6-
      Congress did not intend for the USF to act as an unrestricted fund for

eligible carriers to be distributed for any conceivable expense incurred while

providing telecommunications services. Rather, “[a] carrier that receives such

support shall use that support only for the provision, maintenance, and upgrading

of facilities and services for which the support is intended.” 47 U.S.C. § 254(e)

(2002). For instance, “[a] telecommunications carrier may not use services that

are not competitive to subsidize services that are subject to competition.” Id. at

§ 254(k); see also 47 C.F.R. § 64.901(c) (2002) (reiterating the same prohibition

on cross-subsidization specifically for incumbent LECs). To ensure USF support

was only used for its intended purposes, the FCC implemented accounting rules

for the various types of eligible carriers. 47 U.S.C. § 254(k) (2002) (“The

Commission . . . and the States . . . shall establish any necessary cost allocation

rules, accounting safeguards, and guidelines to ensure that services included in

the definition of universal service bear no more than a reasonable share of the

joint and common costs of facilities used to provide those services.”).

      The FCC implemented one set of accounting rules for incumbent LECs.

Under these rules, incumbent carriers had to differentiate between expenses

related to regulated and unregulated activities in their accounting. See 47 C.F.R.

§ 32.14 (2002). Regulated accounts would include expenses incurred for

providing services to which a tariff filing requirement applied. Id. at § 32.14(a).

                                          -7-
And nonregulated accounts were for “[p]reemptively deregulated activities and

activities . . . never subject to regulation.” Id. at § 32.23(a) (1999). When an

expense involved both regulated and nonregulated activities, the carrier still had

to allocate the costs attributable to each for accounting purposes. Id. at

§ 32.23(c); see also id. at § 64.901(a) (describing method for separating regulated

from nonregulated costs). The incumbent carrier’s expenses were then reported to

NECA, detailing what services it provided. Id. at § 36.611 (2001); id. at

§ 69.601(c) (1995) (requiring all incumbent carriers to certify the accuracy of

their reports to NECA); see also In re Jurisdictional Separations and Referral to

the Federal-State Joint Bd., 16 FCC Rcd. 11382, 11384–85 (2001) (describing the

accounting process for incumbent carriers). From the outset, the FCC made clear

that these “cost allocation rules are designed to prevent cross-subsidization of

non-regulated activities.” In the Matter of Implementation of the Telecomms. Act

of 1996: Accounting Safeguards Under the Telecomms. Act of 1996, 11 FCC Rcd.

17539, 17565 (1996).

      By contrast, competitive ETCs were governed by different accounting rules.

47 C.F.R. § 54.307(b) (2005). These carriers could receive identical support to

the local incumbent for services provided in an incumbent carrier’s service area.

And this included funding for both fixed and cellular services. Id. at § 54.307(a);

see also In re Federal-State Joint Bd. on Universal Serv., 16 FCC Rcd. 11244,

                                         -8-
11314 (2001) (clarifying that competitive eligible telecommunications carriers

providing mobile services could use a subscriber’s billing address for purposes of

determining USF support); In the Matter of High-Cost Universal Serv. Support,

23 FCC Rcd. 8834, 8843–44 (2008) (explaining that the FCC never intended

identical support to be used to subsidize wireless services, although that was how

most competitive carriers used it). To receive USF support, competitive carriers

needed to report to USAC the number of customers they served in an incumbent

LEC’s service area. 47 C.F.R. § 54.307(b) (2005). They did not need to allocate

costs between regulated and nonregulated activities.

      As of 2005, cellular services were considered nonregulated for accounting

purposes. See In the Matter of Amendment of the Comm’n Rule to Establish

Competitive Serv. Safeguards for Local Exchange Carrier Provision of Com.

Mobile Radio Servs., 12 FCC Rcd. 15668, 15691 (1997) (“The cost allocation

rules, included in parts 32 and 64 of the Commission’s rules, provide a basic

framework for separating costs between LEC’s regulated activities (such as

provision of local exchange service) and nonregulated activities (such as

provision of wireless service).”); see id. at 15691 n.102 (“The Commission has

chosen to forbear from rate regulation of wireless services.”). 4 As a result,

      4
       Blanca insists cellular services were regulated because they were subject
to mandatory tariff requirements under Colorado law. The Colorado law Blanca
                                                                    (continued...)

                                         -9-
incumbent LECs had to treat expenses associated with cellular services as

nonregulated for accounting purposes. 5

      Incumbent LECs could receive USF support for one category of cellular

services: basic exchange telecommunications radio services (BETRS). BETRS

was a type of mobile radio service intended as a gap-filler for areas with

particularly rough terrains. See 12 FCC Rcd. at 15710–11 (“We also believe that

rural LECs may find it economical to use [commercial mobile radio services]

licenses to provide fixed wireless services in remote areas as an alternative means

of extending the local exchange network to unserved or hard to serve areas.”).

Rather than having a wired connection, the company would use BETRS to provide

      4
        (...continued)
cites to, 4 CCR 723-2-2122, does not transform cellular services into a regulated
service for federal accounting purposes. To be sure, the federal regulations say
state tariff requirements can cause an account to be treated as regulated. 47 C.F.R.
§ 32.14(b) (2002). But such accounts will not be treated as regulated “where such
treatment is proscribed or otherwise excluded from the requirements pertaining to
regulated telecommunications products and services by this Commission.” Id.
Federal law explicitly preempts state rate-regulation of cellular services. See 47
U.S.C. § 332(c) (1996). And, as the cited orders make clear, the FCC intended
cellular services to be treated as nonregulated. 12 FCC Rcd. at 15691.
      5
         The prohibition on USF support for cellular services for incumbent LECs
was more explicit for a subset of these carriers. Some incumbent LECs had to
establish subsidiaries to handle their commercial mobile radio services. 12 FCC
Rcd. at 15672. This subsidiary requirements was intended to further protect
against cross-subsidization. Id. at 15689 (“Improper cost allocation occurs when
a LEC subsidiary shifts costs from its [commercial mobile radio services] to its
regulated local exchange service.”). Blanca, as a rural carrier, was exempt from
the subsidiary requirement. Id. at n.11. But Blanca was not exempt from the
reporting requirements intended to prevent against such cross-subsidization.

                                          -10-
a customer with basic telephone service. The FCC’s order made clear that

BETRS was considered a fixed service and distinct from other cellular services.

See In the Matter of Amendment of the Comm’n Rules to Permit Flexible Serv.

Offerings in the Commercial Mobile Radio Servs., 11 FCC Rcd. 8965, 8987

(1996) (“[W]e have determined that BETRS is a fixed service, rather than mobile

service, and therefore BETRS providers are not subject to [commercial mobile

radio services] regulations under Section 332.”). As a result, costs associated

with BETRS were considered regulated for accounting purposes.

             2. Blanca’s Conduct

      Blanca is a telecommunications provider based in Alamosa, Colorado. It

was originally incorporated in 1926. In 1997, Colorado designated Blanca as an

incumbent LEC for parts of Alamosa and Costilla counties. Neither the FCC nor

the state ever designated Blanca as a competitive ETC. And Blanca never

submitted any of the reports required of a competitive ETC to claim identical

support from the USF.

      Starting in 2005, Blanca claimed USF support for all of its services, both

fixed and cellular. And Blanca claimed USF support for expenses incurred both

within and outside its study area. 6

      6
      There is some inconsistency regarding whether Blanca’s services were
BETRS. In its petition for reconsideration to the FCC, Blanca insisted that the
                                                                     (continued...)

                                        -11-
       Blanca submitted its costs studies from 2005 onward to NECA. In 2012,

NECA conducted a review of Blanca’s 2011 cost study. And in 2013, NECA

concluded that Blanca had impermissibly received USF support for costs incurred

while providing nonregulated services, i.e., cellular service. NECA advised

Blanca to revise the 2011 cost study and any subsequent studies in which Blanca

had failed to allocate its costs. Blanca then hired a cost consultant to review and

revise Blanca’s submissions from 2011 and 2012. Blanca eventually reached a

settlement with NECA in 2013 based on overpayments identified in the revised

cost studies. 7

       6
        (...continued)
FCC previously “authorized Blanca’s BETRS service using cellular technology by
rule.” R., Vol. II at 334–35 (citing In the Matter of Revision of Part 22 of the
Commission’s Rules Governing the Mobile Servs., Report and Order, 9 FCC Rcd.
6513, 6571 (1994)). But in its initial petition for agency review, Blanca claimed
that it updated its previous BETRS system to new cellular technology and only
continued using the term BETRS out of convenience. See R., Vol. I at 26
(explaining that, for its accounting, “Blanca continued use of the BETRS name
merely for continuity purposes.”). It also argued that “the BETRS discussion is a
red herring” because “USF funding is available for mobile cellular services.” Id.

       Blanca misunderstands the FCC’s position on BETRS. The FCC maintains
it never authorized Blanca to treat all its cellular services as BETRS. It explains
that Blanca improperly relied on an order that “only adopted a proposal to
eliminate a prohibition on the offering of non-BETRS fixed service in cellular
bands.” R., Vol. II at 405. Leading up to 2005, the FCC’s position was that
BETRS was strictly a fixed service. See 11 FCC Rcd. at 8987.
       7
         This settlement only covered a 24-month period from 2011 to 2012. By
contract with its members, NECA is only authorized to conduct “true-up”
processes for up to a 24-month window.

                                         -12-
            3. The FCC’s Investigation into Blanca

      The FCC first began investigating Blanca’s accounting practices in 2008.

The following year, the FCC’s Office of Inspector General issued subpoenas to

Blanca for reports, filings, and correspondence that Blanca filed with NECA and

USAC regarding USF support. After Blanca’s settlement with NECA, the FCC

eventually concluded Blanca had improperly reported and received overpayments

from the USF from 2005 to 2010. 8 In particular, Blanca claimed and received

USF support for nonregulated services both within and outside of Blanca’s study

area. The FCC relied on the same methodology employed by Blanca’s cost

consultant in the NECA settlement to identify the amount of the overpayments.

      In 2016, 9 the FCC’s Office of Managing Director issued a demand letter to

Blanca, identifying the overpayments and requesting repayment. In particular, it

faulted Blanca for “charateriz[ing] its cellular stations as Basic Exchange

Telephone Relay Service (BETRS) facilities in its [cost studies]” and, by

      8
        At one point, the FCC turned the case over to the Department of Justice to
consider a possible claim under the False Claims Act. The Department never
acted on this referral.
      9
         While we affirm the FCC’s decision, the agency has been far from
exemplary throughout its investigation of and proceedings involving Blanca. For
instance, the agency’s commissioners acknowledged this action came far later
than it should have. Commissioner O’Reilly said of the action against Blanca, “I
am concerned . . . that the troubling conduct at issue here occurred between 2005
and 2010, was not discovered until 2012, and is only now being remedied. We
must do better.” R., Vol. II at 317.

                                        -13-
including cellular service costs in its reports, “fail[ing] to comply with Parts 64,

36 and 69 of the FCC’s rules.” R., Vol. I at 2. These accounting practices

“resulted in inflated disbursements to Blanca from [the USF].” Id. Reviewing

books and records obtained through the earlier subpoenas, the FCC determined

Blanca owed $6,748,280 from USF overpayments. The letter also indicated that

Blanca could challenge the finding by submitting evidence to the FCC within 14

days of receiving the letter.

      B. Procedural Background

      Blanca petitioned the FCC for review of the Managing Director’s demand

letter. It challenged the letter’s findings on multiple grounds. Most significantly,

Blanca argued the FCC’s demand letter did not afford it the due process required

under law. In 2017, the FCC issued an order in response to Blanca’s petition,

rejecting Blanca’s claims and affirming the demand letter. Following this order,

the FCC initiated collection of the debt from Blanca through administrative

offsets, withholding USF support to which Blanca was otherwise entitled.

      At the end of 2017, Blanca petitioned the FCC again, this time for a

reconsideration of the agency’s order. 10 In January of 2020, Blanca brought a

      10
          The current petition is not the first time Blanca has sought review from a
federal court on this issue. In 2016, Blanca went to the D.C. Circuit, seeking a
Writ of Prohibition. The D.C. Circuit denied Blanca’s petition and did not retain
jurisdiction. Blanca then sought a mandamus order and injunction from this court
                                                                        (continued...)

                                         -14-
petition for review of the FCC’s order to this court. 11 In March of 2020, the FCC

affirmed the demand letter and order. Blanca then filed a new petition for review

and a motion to supplement the record based on the FCC’s final order. 12

      10
        (...continued)
in 2017 to stop the FCC’s debt collection through administrative offset. Both the
mandamus order and injunction were denied. In 2018, Blanca then petitioned this
court for review of the FCC’s first order. A panel of this court dismissed the
petition on jurisdictional grounds, concluding that because the FCC was still
considering Blanca’s petition on reconsideration, there was no final agency action
to review. Later in 2018, the FCC petitioned this court for review again and the
petition was again dismissed on jurisdictional grounds.
      11
          We had asked Blanca and the FCC to brief the jurisdictional issues for
Blanca’s January 2020 petition, 20-9510. The parties completed briefing prior to
the FCC’s final order. Most of the issues raised in 20-9510 were mooted by the
FCC’s final order on reconsideration. See N.M. Health Connections v. U.S.
Health and Human Servs., 946 F.3d 1138, 1158 (10th Cir. 2019) (explaining that
when an agency eliminates the issues on which petition for review is based, those
issues are rendered moot). In particular, Blanca had sought to compel the FCC to
act (issue the final order) and sought review of whether the FCC acted within its
statutory authority in its collection efforts. With the FCC’s final order and
Blanca’s new petition, 20-9524, we now have a final agency action and a full
record to evaluate.
      12
           We deny Blanca’s motion to supplement the record. We presume the
agency’s record is complete absent clear evidence to the contrary. See Citizens
for Alts. to Radioactive Dumping v. U.S. Dep’t of Energy, 485 F.3d 1091, 1097
(10th Cir. 2007). We will allow extra-record evidence that the agency did not
consider during proceedings in very limited circumstances, including where a
party’s standing is at issue. U.S. Magnesium, LLC v. EPA, 690 F.3d 1157, 1165
(10th Cir. 2012). The FCC has conceded Blanca’s standing, so it is unnecessary
to consider Blanca’s extra-record evidence.

                                        -15-
                            II. Standard of Review

      In evaluating the FCC’s actions, we must bear in mind two different

standards of review.

      A. Arbitrary and Capricious Standard

      In acting, the FCC must comply with the Administrative Procedure Act

(APA). And the APA authorizes courts to review agency action. 5 U.S.C. § 704.

      In particular, the APA directs courts to “set aside agency actions, findings

and conclusions found to be arbitrary, capricious, an abuse of discretion, or

otherwise not in accordance with the law.” Id. at § 706(2)(A). Arbitrary and

capricious review by this court is narrow. In re FCC 11-161, 753 F.3d 1015,

1041 (10th Cir. 2014) (citing Motor Vehicle Mfrs. Ass’n of the U.S., Inc. v. State

Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)). We will not set aside the

agency’s action if it “is rational, based on consideration of the relevant factors

and within the scope of the authority delegated to the agency by the statute.” In

re FCC 11-161, 753 F.3d at 1041(internal quotation marks omitted). We must

uphold the agency’s decision as long as the agency’s path may “reasonably be

discerned.” Id. (internal quotation marks omitted).

      B. De Novo Standard

      Blanca also contends the FCC violated its due process rights.

                                         -16-
      The APA requires us to “set aside agency actions, findings, and conclusions

found to be . . . contrary to constitutional right.” 5 U.S.C. § 706(2)(B). We

review de novo any constitutional issues. In re FCC 11-161, 753 F.3d at 1041.

                                   III. Analysis

      Blanca suggests that we can reverse the FCC on any one of three grounds:

(1) the agency did not act within the relevant statutes of limitations, (2) it violated

Blanca’s procedural rights established by statute and the Constitution, and (3) its

orders were arbitrary and capricious. We address each issue in turn.

      A. Did the FCC act within the applicable statute of limitations?

      Blanca insists the FCC’s action is time-barred. It points to two statutes that

would preclude the FCC’s action: 47 U.S.C. § 503 and 28 U.S.C. § 2462.

According to Blanca, one of these statutes governs the FCC’s action here and

either statute would prevent the FCC from taking punitive actions against Blanca

over a decade after the alleged violations occurred.

      We do not agree. Rather, because the FCC’s action is most properly

characterized as debt collection, not punishment, the FCC had to comply with all

requirements of the Debt Collection Improvement Act (DCIA), codified at 31

U.S.C. §§ 3711–17. The DCIA authorizes agencies to collect debts owed to the

United States and contains no limitations period preventing the FCC’s debt

collection.

                                         -17-
             1. Legal Standard

      Our default rule is that the government claim will not be time-barred.

United States v. Telluride Co., 146 F.3d 1241, 1244 (10th Cir. 1998). Congress

must expressly set a statute of limitations to overcome this default rule. Id.

When a party argues a government claim is barred by a statute of limitations, we

must construe the statute in favor of the government. Id. at 1245.

      The FCC and Blanca disagree about what statute should govern the

agency’s action. The FCC suggests its interpretation of the relevant statutes, and

the applicability of those statutes to its decision, should control based on the

deference owed to agencies under Chevron, U.S.A. v. Natural Resource Defense

Council, 467 U.S. 837 (1984).

      To determine whether an agency’s interpretation of a statute is entitled to

deference, we first determine whether the statute is ambiguous. Chevron, 467

U.S. at 842. If the statute is clear, we do not defer to the agency’s interpretation.

Id. at 842–43; see also New Mexico v. U.S. Dep’t of Interior, 854 F.3d 1207, 1231

(10th Cir. 2017) (finding a statute clear, so declining to move to step two of the

Chevron analysis). But if it is ambiguous or silent about the relevant issue, we

defer to the agency’s interpretation unless it is arbitrary, capricious, or manifestly

opposed to the plain meaning of the statute. In re FCC 11-161, 753 F.3d at 1041

(citing Chevron, 467 U.S. at 844).

                                         -18-
      We also do not give any Chevron deference to an agency’s interpretation of

statutes that are outside of the agency’s expertise. Hydro Res., Inc. v. EPA, 608

F.3d 1131, 1145 (10th Cir. 2010) (“Courts do not . . . afford the same deference

to an agency’s interpretation of a statute lying outside the compass of its

particular expertise and special charge to administer.”). We review such statutes

de novo. Id.

               2. Application

      Here, Blanca and the FCC each point to different statutes that they argue

should apply here. Blanca insists the FCC must have acted under either 47 U.S.C.

§ 503 or 28 U.S.C. § 2462 in issuing the demand letter and initiating debt

collection. The statutes require certain types of government actions to be brought

either within one year, see 47 U.S.C. § 503(b)(6), or five years, see 28 U.S.C.

§ 2462, respectively—both of which would bar the FCC’s actions toward Blanca.

The FCC, though, says that its actions are authorized by the DCIA. And the

DCIA contains no statute of limitations for administrative offsets. 31 U.S.C.

§ 3716(e)(1) (“Notwithstanding any other provision of law, regulation, or

administrative limitation, no limitation on the period within which an offset may

be initiated or taken pursuant to this section shall be effective.”).

      In its orders, the FCC interpreted each statute as it relates to recovering

overpayments from Blanca. The FCC argued it was not acting under 47 U.S.C.

                                         -19-
§ 503. Rather, according to the orders, “[t]he commission or USAC has

consistently sought recovery of USF funds outside of section 503 proceedings.”

R., Vol. II at 310. This is because “[n]either the plain language of section 503 of

the Act nor its legislative history indicates that Congress intended that section to

govern debt determinations.” Id. The FCC also insists the collection is not

pursuant to 28 U.S.C. § 2462, which governs penalties, not debt collection.

      We do not afford the FCC any deference in interpreting the DCIA or 28

U.S.C. § 2462, because neither statute was specifically entrusted to the FCC to

administer. Hydro Res., Inc., 608 F.3d at 1146. Also, because 47 U.S.C. § 503 is

not ambiguous about the type of agency action it covers, we do not afford the

FCC’s interpretation of it any deference. New Mexico v. U.S. Dep’t of Interior,

854 F.3d at 1231. We review the statutes de novo.

      Both 47 U.S.C. § 503 and 28 U.S.C. § 2462 authorize agencies to impose

penalties against regulated entities that violate the law. Section 503 states that a

person who willfully and repeatedly fails to comply with the FCC’s rules or

regulations “shall be liable to the United States for a forfeiture penalty.” 47

U.S.C. § 503(b). Section 503 further clarifies that “[a] forfeiture penalty under

this subsection shall be in addition to any other penalty provided for by this

chapter.” Id. (emphasis added). Section 503 is used to penalize above and

beyond other remedies.

                                         -20-
      Section 2462 is not specific to any agency. It authorizes suits or

proceedings by the United States to enforce civil fines, penalties, or forfeitures.

28 U.S.C. § 2462. The Supreme Court has made clear that § 2462 governs only

actions that penalize. Fines, penalties, and forfeitures each “refer to something

imposed in a punitive way for an infraction of public law.” Kokesh v. SEC, 137

S. Ct. 1635, 1643 (2017) (internal quotation marks omitted).

      The DCIA, by contrast, is aimed at pure debt collection. It authorizes

agencies to collect “a claim of the United States government for money or

property arising out of the activities of, or referred to, the agency.” See 31 U.S.C.

§ 3711(a)(1). A claim is “any amount of funds or property that has been

determined by an appropriate official of the Federal Government to be owed to

the United States.” Id. at § 3701(b)(1). This includes overpayments, specifically

“payments disallowed by audits performed by the Inspector General of the agency

administering the program.” Id. at § 3701(b)(1)(C). If the head of an agency

attempts to collect a claim through the methods described in § 3711 to no avail,

the agency may collect the debt through administrative offset. Id. at § 3716(a).

      These statutes are not ambiguous. Sections 503 and 2462 apply to punitive

agency action; the DCIA applies to debt collection of funds owed to the United

States. In that light, we must answer two questions to determine which statute

governs the FCC’s collection efforts and which statute of limitations applies.

                                         -21-
First, do the FCC’s actions constitute a penalty? Second, if the action is not a

penalty, are the overpayments from the USF “owed to the United States”?

                   a. Penalty or Debt Collection

      The Supreme Court recently provided a framework for determining whether

an agency action constitutes a penalty in Kokesh. See 137 S. Ct. 1635. The SEC

had sought a disgorgement judgment against Kokesh for violations of federal law

that occurred over an almost fifteen-year period. The district court ordered

disgorgement of money illegally obtained during this time. On appeal, Kokesh

argued the disgorgement operated as a penalty, so it should have been barred in

part by the five-year statute of limitations in 28 U.S.C. § 2462. To decide

whether the statute of limitations applied, the Court had to determine whether an

SEC disgorgement was a penalty within the purview of § 2462.

      To determine whether the SEC’s disgorgement was punitive, the Court

considered two guiding principles: (1) whether the agency’s action is redressing a

wrong to the public or to a private party and (2) whether the agency’s action is

taken for punitive purposes, e.g., to deter others from committing a similar

violation. Id. at 1642. The Court concluded the disgorgement was a penalty. The

disgorgement was enforced against Kokesh for a violation of public laws,

intended to deter future violators, and not strictly compensatory. Id. at 1643–44.

                                         -22-
Because the disgorgement carried the hallmark traits of a penalty, the SEC’s

disgorgement was partially barred by the five-year statute of limitations in § 2462.

      Blanca argues the FCC’s action here is like the disgorgement in Kokesh. It

asserts the collection effort is punitive because the violation was of a public

accounting law and the FCC’s ultimate purpose is deterrence. Blanca points to

the demand letter and subsequent orders as proof of the action’s true nature. The

FCC identifies a goal of rooting out “fraud, waste, and abuse” throughout its

orders. Opening Br. at 48. And the FCC identified the harms Blanca’s actions

caused the public and the marketplace. 13 The FCC also described the collection

effort as “enforcement activity” in a later order. Reply Br. at 15 (citing

Memorandum and Opinion Order, 34 FCC Rcd. 2590, 2600 (2019)).

      In response, the FCC contends that it is not punishing Blanca. Rather, the

debt collection is intended to do nothing more than return Blanca to “the status

quo.” Resp. Br. at 47. The FCC insists the mere “belief the sanction is costly or

painful does not make it punitive.” Id. (quoting Telluride, 146 F.3d at 1247).

      We agree with the FCC that Kokesh does not compel us to conclude the

reimbursements are a penalty.

      13
          Blanca also argues that the FCC’s referral of the matter to the
Department of Justice in 2014 makes the action punitive. We do not agree.
Simply because the FCC referred the matter to the Department to explore the
possibility of an enforcement action does not make the debt collection punitive.

                                         -23-
      First, we have previously concluded that just because a party violated a

public law and because an agency wants to protect the public through a

subsequent action does not necessarily make that action a penalty. See Telluride,

146 F.3d at 1246 (“[W]e see no reason to include all wrongs to the public as

penalties.”). The Supreme Court’s decision in Kokesh did not change that. The

identity of the wronged party is just one guiding principle when deciding whether

government action is punitive. The fact that Blanca’s accounting violations

wronged the public as opposed to a discrete private party does not decide the

issue for us.

      Looking to the second principle—the purposes underlying the FCC’s

actions—convinces us the collection efforts are not a penalty. The FCC’s purpose

was compensation for the overpayment. Kokesh, 137 S. Ct. at 1642 (“[A]

pecuniary sanction operates as a penalty only if it is sought for the purpose of

punishment . . . as opposed to compensating a victim for his loss.”) (internal

quotation marks omitted). In the orders, the FCC sought only repayment of the

amount overpaid out of the USF to Blanca. 14 The fact that it also identified how

      14
          Blanca has drawn our attention to the fact that the FCC has increased the
amount owed since litigation began, adding $3.5 million to the original $6.75
million debt. Blanca says this amount is made up of “explicit penalties.”
Opening Br. at 49. We do not think late fees or the inclusion of interest
transforms the FCC’s action into a penalty. The fact that the government assesses
a late fee does not alter the underlying purpose of the FCC’s action. It is simply a
                                                                      (continued...)

                                         -24-
its action might protect the public or marketplace from harm does not transform

the underlying nature of the action. See Bennett v. Ky. Dep’t of Educ., 470 U.S.

656, 662–63 (1985) (“Although recovery of misused . . . funds clearly is intended

to promote compliance with the requirements of the grant program, a demand for

repayment is more in the nature of an effort to collect upon a debt than a penal

sanction.”).

      Blanca’s arguments about the FCC’s self-description of the collection

efforts as “enforcement activity” and as aimed at rooting out “waste, fraud, and

abuse” are unavailing. A single, passing reference to the collection as an

“enforcement activity” does not transform it into a penalty. And while the FCC

used the phrase “waste, fraud, or abuse” at times to describe its justification for

undertaking audits and investigations, it also stressed that the present action was

solely to recover USF support improperly disbursed, not to punish for waste,

fraud, or abuse. See, e.g., R., Vol. II at 311 (“Here the Commission is merely

seeking to recover sums improperly paid.”).

                    b. Funds Owed to the United States

      Even if the collection effort is not a penalty, we must ensure the FCC is

collecting “funds . . . owed to the United States.” 31 U.S.C. § 3701(b)(1).

      14
        (...continued)
recognition of the time-value of money.

                                         -25-
      The FCC has interpreted the DCIA to cover overpayments from the USF.

See 47 C.F.R. § 1.1901(b). But the FCC has no particular experience in

interpreting the DCIA, so we do not defer to the FCC’s interpretation. Rather, we

review de novo whether overpayments from the USF fall within the DCIA.

      Blanca contends USF overpayments are not funds owed to the United

States. According to Blanca, the DCIA does not apply here because the USF is

funded by contributions from carriers. So, any overpayments out of the fund

would be owed directly to the USF, not to the United States.

      Blanca points to an out-of-circuit case to bolster its argument. See United

States ex rel. Shupe v. Cisco Sys., 759 F.3d 379 (5th Cir. 2014). In Shupe, the

Fifth Circuit had to determine whether a party had violated a previous version of

the False Claims Act, 31 U.S.C. § 3729 (2008), by lying on applications for USF

support. A person violated the False Claims Act if he “knowingly ma[de], use[d],

or cause[d] to be made or use[d], a false record or statement to get a false or

fraudulent claim paid or approved by the government.” 31 U.S.C. § 3729(a)(2)

(2008). And it defined “claim” as “any request . . . for money . . . if the United

States Government provides any portion of the money.” Id. at § 3729(b) (2008).

      In Shupe, the Fifth Circuit determined the United States government did not

provide any portion of the money for the USF, so the defendant could not be

prosecuted under the False Claims Act. In coming to this conclusion, the court

                                         -26-
emphasized the control USAC exercises over the USF and the fact that the statute

did not extend to funds overseen by such private parties. 759 F.3d at 387–88.

The FCC’s regulatory supervision of the USF was insufficient to consider

payments made from it as “provided by the United States.” Id. at 388.

      Shupe does not dictate our decision here. We face a different statutory

scheme with different language. While the False Claims Act limited a claim to

money that the United States provides any portion of, the DCIA defines claim

more expansively. It expressly includes overpayments “disallowed by audits

performed by the Inspector General of the agency administering the program.” 31

U.S.C. § 3701(b)(1)(c). The overpayments at issue fall within that description.

      Blanca asserts the DCIA does not apply because the FCC’s Inspector

General did not produce a formal audit or adverse finding. It faults the FCC for

issuing the demand letter through the Managing Director rather than the Inspector

General. But in both the demand letter and orders, the FCC claimed to be acting

on an audit by the Office of Inspector General. See R., Vol. I at 1–2 (“Our

determination follows an investigation by the FCC’s Office of Inspector

General.”); see also R., Vol. II at 299 (“Based on its investigation and review of

documentation provided by Blanca, [the Office of Inspector General] concluded

that Blanca had misallocated costs between its CMRS and wireline services.”).

Here, the FCC’s Office of Inspector General conducted an investigation and

                                        -27-
concluded Blanca had misallocated costs. This is enough to bring the

overpayments within the scope of the DCIA.

                                      *    *     *

      The FCC’s action is not barred by a statute of limitations. While Blanca

argues the FCC was statutorily barred from collecting the overpayments, the

statutes on which it relies do not apply. Rather, the overpayments are covered by

the DCIA, which has no statute of limitations for administrative offsets.

      B. Did the FCC violate Blanca’s due process rights?

      Blanca also claims the FCC did not comply with statutory and

constitutional procedural requirements in initiating the debt collection.

Specifically, Blanca argues the FCC engaged in a summary adjudication that gave

Blanca insufficient notice and no meaningful opportunity to respond. In addition,

Blanca insists that the laws, regulations, and orders in place as of 2005 failed to

give it fair notice that its conduct was prohibited.

      Blanca fails to establish a due process violation. Although the underlying

regime governing USF distributions is complex, Blanca had adequate notice that

it could not receive USF funding for providing cellular services. Furthermore, in

identifying the rules violated and starting the debt collection process, the FCC

provided all the process required by statutes and the Constitution.

                                          -28-
             1. Legal Standard

                   a. Statutory Process

      The APA “expressly provides for two categories of administrative hearing

and decision: rulemaking and adjudication.” Phillips Petroleum Co. v. Federal

Power Comm’n, 475 F.2d 842, 851 (10th Cir. 1973). And it identifies procedures

agencies must provide for each type of action.

      Here, the FCC acted through an informal adjudication. It has very broad

discretion to decide whether to proceed through adjudication or rulemaking when

“interpreting and administering its statutory obligations under the

[Telecommunications Act].” Conf. Grp., LLC v. FCC, 720 F.3d 957, 965 (D.C.

Cir. 2013). It is appropriate for an agency to use informal adjudications in

making individualized determinations. See Sinclair Wyo. Refining Co. v. EPA,

887 F.3d 986, 992 (10th Cir. 2017); see also Nat’l Biodiesel Bd. v. EPA, 843 F.3d

1010, 1017–18 (D.C. Cir. 2017) (stating that adjudications characteristically are

“highly fact-specific, case-by-case” proceedings).

      Procedurally, the APA imposes “minimal requirements” on informal

adjudications. Pension Benefit Guar. Corp. v. LTV Corp., 496 U.S. 633, 655

(1990). The agency must only notify a party that it is denying a petition and

provide the grounds for denial. 5 U.S.C. § 555(e); see also Kobach v. U.S.

Election Assistance Comm’n, 772 F.3d. 1183, 1197 (10th Cir. 2014) (“When an

                                        -29-
agency undertakes an informal adjudication, we require only that the grounds

upon which the agency acted be clearly disclosed in, and sustained by, the

record.”) (internal quotation marks omitted and alterations incorporated).

      Beyond the APA, the DCIA also has its own procedural requirements. 15 In

order to use administrative offsets to recover debt, the agency must give the

debtor: (1) written notice of the type and amount of the claim, the intention to

collect the claim by administrative offset, and an explanation of the debtor’s

rights; (2) an opportunity to inspect and copy the agency’s records regarding the

claim; (3) an opportunity for review by the agency of the claim decision; and (4)

an opportunity to make a written agreement with the agency head to repay the

claim. 31 U.S.C. § 3716(a). If an agency “previously has given a debtor any of

      15
          Blanca also insists that the FCC failed to comply with the procedural
requirements of 47 U.S.C. § 503(b)(4). Section 503 requires the FCC to provide
notice of apparent liability prior to imposing a forfeiture penalty. This
requirement is inapplicable here. As previously discussed, see supra, III.A, we
believe Blanca’s actions are governed by the DCIA, not § 503.

       This also resolves another of Blanca’s arguments: that the FCC treated it
differently than similarly-situated telecommunications carriers, who received
notices of apparent liability prior to FCC proceedings. Blanca is comparing
apples and oranges. The other carriers were treated differently because they were
subject to forfeiture proceedings under 47 U.S.C. § 503. The FCC has made clear
that in the proceedings Blanca references, the FCC “invoked the forfeiture
process only to seek penalties in addition to, and separate from, seeking
repayment (and indeed after the companies at issue had already returned the
improper payments).” Resp. Br. at 39. The differential treatment was appropriate.

                                        -30-
the required notice and review opportunities with respect to a particular debt, the

agency need not duplicate such notice and review opportunities before

administrative offset may be initiated.” 31 C.F.R. § 901.3(b)(4)(iv). 16

                   b. Constitutional Due Process

      The Fifth Amendment also requires the federal government to provide a

baseline level of due process when depriving a person of life, liberty, or property.

U.S. Const. amend V. Procedural due process requires fair notice that conduct is

prohibited and, prior to a deprivation, meaningful notice and opportunity to be

heard. We discuss the contours of each aspect of due process below.

      First, due process requires the government to “give a person of ordinary

intelligence fair notice that his contemplated conduct is forbidden” before

withdrawing a benefit. United States v. Richter, 796 F.3d 1173, 1188 (10th Cir.

2015) (internal quotation marks omitted). “A fundamental principle in our legal

      16
          We note that Blanca made brief reference to another alleged procedural
deficiency through a one-line footnote in its opening brief. Specifically, Blanca
insists the FCC violated its own rules by beginning debt collection prior to the
end of litigation. See Opening Br. at 34 (citing 47 C.F.R. § 1.1910(b)(3)(i)). But
Blanca does not explain why, on its theory, § 1.1910(b)(3)(I) should even apply in
this case. This regulation applies only to debt collection made under the DCIA.
And Blanca has specifically maintained throughout litigation that the FCC did not
act pursuant to the DCIA. Blanca has not argued before us, even in the
alternative, that the DCIA applies here. Therefore, we conclude that Blanca has
waived this argument. See Fuerschbach v. Sw. Airlines Co., 439 F.3d 1197,
1109–10 (10th Cir. 2006) (inadequately briefed and underdeveloped theories are
waived).

                                        -31-
system is that laws which regulate persons or entities must give fair notice of

conduct that is forbidden or required.” FCC v. Fox Television Stations, Inc., 567

U.S. 239, 253 (2012). Due process requires fair notice for two reasons. First,

regulated parties need to know what is required of them so they may act

accordingly. Id. Second, it prevents officers or agencies who enforce the law

from acting in an arbitrary or discriminatory manner. Id.

      Fair notice concerns will arise “when an agency advances a novel

interpretation of its own regulation in the course of a civil enforcement action.”

United States v. Magnesium Corp. of America, 616 F.3d 1129, 1144 (10th Cir.

2010). It would be inappropriate for an agency, having long acquiesced in

practice to one interpretation, to manufacture liability by retroactively applying a

new interpretation. See Christopher v. SmithKline Beecham Corp., 567 U.S. 142,

156 (10th Cir. 2012) (“To defer to the agency’s interpretation in this circumstance

would seriously undermine the principle that agencies should provide regulated

parties fair warning of the conduct a regulation prohibits or requires.”) (internal

quotation marks and brackets omitted).

      That being said, fair notice does not require an agency to publish an easily

digestible, abridged version of its rules. Technical and complex regulations are

often necessary to govern the conduct of parties involved in complex affairs.

Thus, the requirements of due process are understood through the lens of parties

                                         -32-
with special knowledge because we refer to “the common understanding of that

group” to measure whether the party had fair notice. Richter, 796 F.3d at 1189.

When regulations are addressed to such groups, “the standard is lowered and a

court may uphold a statute which uses words or phrases having a technical or

other special meaning, well enough known to enable those within its reach to

correctly apply them.” Id. No one doubts the complexity of telecommunications

regulations and the famously detailed rules that apply to carriers operating in that

environment.

      Second, due process requires the government to provide “notice and

opportunity for hearing appropriate to the nature of the case” prior to deprivation.

Riggins v. Goodman, 572 F.3d 1101, 1108 (10th Cir. 2009) (internal quotation

marks omitted). Notice and the opportunity to be heard “must be granted at a

meaningful time and in a meaningful manner.” Fuentes v. Shevin, 407 U.S. 67,

80 (1972). “If the right to notice and a hearing is to serve its full purpose . . . it

must be granted at a time when the deprivation can still be prevented.” Id. at 81.

But this does not mean a hearing must be held before the agency’s decision to

deprive. See Riggins, 572 F.3d at 1111 (“[D]ue process is required not before the

initial decision or recommendation to terminate is made, but instead before the

termination actually occurs.”).

                                           -33-
              2. Application

                    a. Statutory Process

        The FCC complied with the relevant procedural requirements of both the

APA and the DCIA.

        First, the FCC fulfilled the requirements for an informal adjudication by

providing Blanca with notice of its intention to collect the repayments and

grounds for that decision. The initial demand letter satisfied the APA by

identifying the FCC’s decision and the reasons for that decision. The demand

letter pointed to the relevant accounting regulations and described Blanca’s

conduct that had violated those regulations. The FCC’s subsequent orders did the

same.

         The FCC also fulfilled the procedural requirements of the DCIA. In the

demand letter, the FCC informed Blanca of the type and amount of the debt and

its intention to collect. It gave Blanca an opportunity for review and to make an

agreement with the agency’s head on repaying the claim. While the FCC did not

give Blanca an opportunity to review the agency record in the FCC’s possession,

it informed Blanca it had relied only on documents Blanca itself had submitted.

Blanca already had the entire record in its possession. Because these documents

were in Blanca’s possession, the FCC did not need to give Blanca an additional

opportunity to review them.

                                         -34-
                   b. Constitutional Due Process

      Blanca also claims it did not have fair notice that its conduct was

prohibited. And it insists the demand letter and subsequent orders did not provide

the meaningful notice and opportunity to be heard that due process requires.

      According to Blanca, the rules, orders, and regulations in place as of 2005

did not make clear that cellular services were ineligible for USF support. Rather,

Blanca argues the demand letter and FCC orders were the first time the FCC

interpreted the regulations in such a way to make Blanca’s conduct illicit. As far

as Blanca is concerned, the FCC’s 2016 demand letter was a summary

adjudication that in one fell swoop told Blanca its accounting practices were

unlawful and that it was being punished for those practices. If Blanca’s

characterization was accurate, it would squarely implicate fair notice concerns.

      But Blanca misconstrues the state of the law in 2005. The FCC’s rules and

orders were clear about limits on USF support for cellular services. As an

incumbent LEC, Blanca had to allocate its costs between regulated and

nonregulated accounts. 47 C.F.R. § 32.14 (2002). Cellular services were

considered nonregulated, see 12 FCC Rcd. at 15691, so Blanca had to separate

these costs from its other expenses. The FCC had previously explained that these

accounting rules were intended to prevent carriers from using USF support to

                                        -35-
subsidize their nonregulated services. 11 FCC Rcd. at 17565. Yet Blanca failed

to properly allocate its regulated and nonregulated expenses.

      Furthermore, Blanca could only receive USF support for services provided

in its designated service area. 47 U.S.C. § 214(e)(5) (2002). Competitive ETCs

could receive identical support from the USF for providing services beyond a

single study area. 47 C.F.R. § 54.307(a) (2005). But Blanca never separately

made the reports required of a competitive ETC and neither the FCC nor Colorado

ever certified Blanca as a competitive ETC. See R., Vol. II at 306.

      The statutes, regulations, and orders at issue here do not trigger fair notice

concerns. It is undoubtedly inappropriate for agencies to create liability by

advancing novel interpretations during administrative proceedings. See

Magnesium Corp. of America, 616 F.3d at 1144. But, despite Blanca’s

contentions, the FCC did not engage in summary rule adjudication here. The

demand letter and orders did not interpret any regulations for the first time.

Rather, through the demand letter and proceedings, the FCC indicated why debt

collection was appropriate under the relevant rules. The FCC’s synthesis of the

law to explain its decision to collect from Blanca does not require a separate

adjudication or rulemaking.

      The FCC’s rules are, admittedly, labyrinthine and technical. But we

attribute to Blanca the specialized knowledge of a telecommunications carrier.

                                         -36-
Blanca should have known cellular services were considered nonregulated under

the FCC’s orders. It should have known that the accounting guidelines had been

put into place to prevent carriers from using support for noncompetitive services

to support competitive services. And it should have known that it never

submitted the reports required of a competitive ETC to receive identical support.

Between the statutes governing the USF, the FCC’s regulations, and previous

FCC orders, Blanca had adequate notice that it could not receive USF support for

expenses related to cellular service either within or outside its study area.

      Blanca also argues that the demand letter and subsequent FCC review did

not provide meaningful notice and opportunity to be heard. First, Blanca insists

the demand letter provided inadequate notice. It suggests the demand letter

identified a regulatory “framework” Blanca had violated without identifying an

actual rule violation. But the FCC did identify both the legal and factual

underpinnings of its action. It identified three sections of accounting regulations

Blanca had violated and thoroughly described what conduct it considered

                                         -37-
improper¯claiming USF support for cellular services as an incumbent carrier. 17

This notice was sufficient.

      Blanca also argues the post-decision, pre-deprivation review the FCC

provided Blanca was deficient. According to Blanca, the FCC should have held a

hearing before the demand letter was issued. But our cases are clear: due process

requires only a pre-deprivation hearing. See Riggins, 572 F.3d at 1110. And

Blanca received such a hearing from the FCC.

      Blanca also points to the FCC’s subsequent initiation of administrative

offsets as evidence that the post-decision review was constitutionally

inadequate. 18 But by seeking to forestall any deprivation until the end of

litigation, Blanca asks more than the Constitution requires. The administrative

      17
          Admittedly, the three sections of accounting regulations are extensive
and the FCC could have identified particular provisions of the accounting rules
Blanca violated. But due process imposes a floor, not a ceiling. The notice
provided in the demand letter was adequate, if not exemplary. This is aside from
the fact that Blanca had recently reached a settlement with NECA over similar
issues. The demand letter identified the precise issues dealt with in the
settlement. The FCC provided Blanca adequate notice of the violations.
      18
          The FCC did begin collections prior to the end of litigation. Blanca
claims this was contrary to the FCC’s own regulations. But even if the FCC’s
initiation of debt collection action was contrary to the FCC’s own regulations, an
issue we take no position on, this does not make the FCC’s collection practices
constitutionally suspect. See United States v. Caceres, 440 U.S. 741, 749–750
(1979) (an agency’s failure to follow its own rules does not necessarily raise
constitutional issues).

                                        -38-
offsets began after the FCC provided Blanca with a hearing and considered all its

objections. Such agency action satisfies due process.

                                     *    *     *

      The FCC did not deprive Blanca of either the statutory or constitutional

process it was entitled to. The agency followed the procedures required for

informal adjudications under the APA and for initiating administrative offsets

under the DCIA. The law as of 2005 apprised Blanca that its conduct was

prohibited. And the FCC’s demand letter and subsequent procedure afforded

Blanca notice and a meaningful opportunity to be heard.

      C. Did the FCC act arbitrarily and capriciously?

      Finally, Blanca argues the FCC’s decision to collect debt was arbitrary and

capricious. It insists the FCC’s demand letter and orders were inadequate in

several ways. First, Blanca argues the FCC’s decision to initiate debt collection

deprived it of the benefits of its 2013 settlement with NECA. Second, Blanca

argues the FCC ignored statutory provisions that allowed it to receive USF

support for cellular service. And third, Blanca argues the record as a whole

lacked substantial evidence to support the FCC’s decision.

      We do not consider the FCC’s decisions on any of these issues to be

arbitrary and capricious. Rather, the FCC’s analysis is “reasoned and

reasonable.” In re FCC 11-161, 753 F.3d at 1071.

                                         -39-
             1. Legal Standard

      Review under the arbitrary and capricious standard is narrow. Id. at 1041.

In making its decision, the agency must “examine the relevant data and articulate

a satisfactory explanation for its action including a rational connection between

the facts found and the choice made.” Renewable Fuels Ass’n v. EPA, 948 F.3d

1206, 1254 (10th Cir. 2020) (internal quotation marks omitted), cert. granted,

HollyFrontier Cheyenne v. Renewable Fuels Ass’n, __ S. Ct. __, 2021 WL 77244

(2021). The agency cannot rely on factors deemed irrelevant by Congress, fail to

consider important aspects of a problem, or present an explanation that is either

implausible or contrary to the evidence. Renewable Fuels, 948 F.3d at 1206. We

will not set aside agency decisions that meet this baseline level of reasoning.

      Beyond the agency’s reasons for the decision, we are also authorized to

evaluate the adequacy of the record supporting the decision. If the agency’s

decision is not supported by substantial evidence in the record, we must set it

aside as arbitrary and capricious. See Olenhouse v. Commodity Credit Corp., 42

F.3d 1560, 1575 (10th Cir. 1994). For the evidence to be “substantial,” the

agency’s record must contain enough facts supporting the decision that a

“reasonable mind” could accept it as “adequate to support [the] conclusion.” Id.

at 1581. The evidence is inadequate if it is overwhelmed by other evidence or

constitutes a mere conclusion. Id.

                                        -40-
      When determining whether the agency’s decision was arbitrary and

capricious, review is “generally based on the full administrative record that was

before all decision makers.” Bar MK Ranches v. Yuetter, 994 F.2d 735, 739 (10th

Cir. 1993). We assume the agency properly designated the record absent clear

evidence to the contrary. Id. at 740. Even if the record is incomplete, “[t]he

harmless error rule applies to judicial review of agency proceedings.” Id. So,

“errors in such administrative proceedings will not require reversal unless [the

petitioners] can show they were prejudiced.” Id.

             2. Application

                   a. The 2013 NECA Settlement

      Blanca asserts that the FCC’s decision to pursue debt collection is arbitrary

and capricious because it failed to consider one of Blanca’s arguments: the FCC’s

actions deprived Blanca of the benefit of its 2013 settlement with NECA. Blanca

argues that it explicitly entered the settlement with NECA to “avoid protracted

litigation.” Opening Br. at 30. The FCC’s orders, though, have resulted in just

such costly and protracted litigation.

      But the FCC did address the 2013 NECA settlement in its orders. There,

the FCC explained that “NECA is a private association of wireline carriers, not a

government entity, and accordingly has no authority to compromise or waive any

claims on behalf of the government.” R., Vol. II at 404. And the FCC noted that

                                         -41-
under Blanca’s settlement with NECA, Blanca still had an obligation to make any

repayments from funds received outside of NECA’s 24-month settlement window.

      In its orders, the FCC pointed to one of our cases, Farmers Tel. Co. v.

FCC, 184 F.3d 1241, 1250 (10th Cir. 1999), as support for this conclusion. In

Farmers, we needed to determine whether NECA’s interpretation of a regulation

bound the FCC. We concluded that NECA “has no authority to perform any

adjudicatory or governmental functions.” Id. at 1246. Rather, “NECA is an agent

of its members and has no authority to issue binding interpretations of FCC

regulations.” Id. at 1250. The FCC reasoned that if NECA’s interpretations of

regulations could not control the FCC, NECA’s settlements were not binding on

the FCC either.

      We cannot say the FCC’s decision to pursue debt collection after Blanca’s

2013 settlement with NECA was arbitrary and capricious. In its orders, the FCC

described NECA as a private entity, discussed the terms of the 2013 settlement

between Blanca and NECA, and identified relevant precedent supporting its

decision to pursue collection despite the settlement. The FCC’s reasons are clear

and cogent.

                   b. Regulations Concerning Cellular Service

      Blanca also argues the FCC ignored numerous regulations supporting

Blanca’s position. In particular, Blanca points to a score of regulations and

                                        -42-
orders dealing with treatment of cellular services. See, e.g., Opening Br. at 24–25

(citing 47 C.F.R. § 54.5 (2005) (defining “telecommunications carrier” to include

those who provide wireless services); id. at § 54.101 (1998) (designating support

for voice grade access to “public switched networks” with no reference to

delivery method); id. at § 54.307(b) (2005) (fixing the service location of a

wireless subscriber as the subscriber’s billing address)). According to Blanca,

these references to cellular services indicate that USF support was available for

such services. If the FCC had ignored these various regulations in its orders, this

would be grounds to set aside its decision as arbitrary and capricious.

      In its orders and briefing, the FCC does not dispute that numerous

regulations and orders make USF support available for certain cellular services.

For instance, competitive ETCs could receive identical support, regardless of the

technology used. And BETRS, as a regulated cellular service, was also eligible

for USF support.

      But the fact that some carriers could claim USF support for some cellular

services did not mean all carriers could claim support for all cellular services. In

its orders, the FCC explained that the regulations and orders about cellular

services did not pertain to Blanca, an incumbent LEC. See R., Vol. II at 405

n.103 (“Blanca’s many citations to rules and related orders referring to cellular

service as an eligible service does not pertain to rate-of-return high-cost universal

                                         -43-
service support, the kind of support Blanca received between 2005 and 2010.”).

So, according to the FCC, Blanca’s reliance on these various regulations and

orders is misplaced.

      The FCC’s treatment of these various regulations dealing with cellular

service was not arbitrary and capricious. 19 It did not ignore the regulations and

orders Blanca cited. Rather, the FCC considered the regulations but found them

inapplicable.

                   c. The Adequacy of the Record

      Finally, Blanca argues the FCC’s record is incomplete, making the agency’s

reliance upon it arbitrary and capricious. 20 It identifies various documents not

      19
          Blanca also argues “[t]he FCC’s ‘regulated v. unregulated’ distinction in
the context of ‘mobile services’ is unreasoned.” Opening Br. at 27. In its orders,
the FCC did distinguish regulated and unregulated activities. But in doing so it
cited a number of regulations and previous orders that explain the significance of
the distinction. See, e.g., R., Vol. II at 305 (citing 11 FCC Rcd. at 17572). This
distinction was not unreasoned.
      20
          We construe Blanca’s aside in its opening brief as a separate arbitrary
and capricious argument. While discussing the inadequacy of the record, Blanca
argues that the FCC’s refusal to give it access to the Office of Inspector General
subpoenas of NECA records that Blanca requested “is the epitome of
arbitrariness.” Opening Br. at 23. The FCC acknowledged this request in its
orders. In responding to Blanca, the FCC pointed out that “Blanca did have
access to the underlying cost data because [the Office of the Managing Director]
explicitly based its financial accounting on the cost studies Blanca itself
commissioned.” R., Vol. II at 313. And the FCC further noted that “Blanca does
not state that such records request has any bearing on its ability to challenge the
Commission’s [demand] Letter.” Id. at 314 n.152. Given that Blanca already had
access to any of the underlying records, we cannot say that the FCC’s refusal was
                                                                        (continued...)

                                         -44-
included in the record, including the subpoenas from the FCC’s Inspector

General, Blanca’s responses to those subpoenas, reports and papers from NECA,

and Blanca’s accounting records.

      Blanca has presented clear and convincing evidence that the record before

us is not the full administrative record the FCC had before it throughout the

proceedings. The FCC references documents throughout the demand letter and

subsequent orders that it did not include in the record presented to this court. To

be sure, the FCC erred by depriving this court of the full administrative record.

      Blanca raises only one argument regarding prejudice, though, contending

“[t]here is nothing in the record to support the FCC’s Orders.” Opening Br. at 23.

We disagree.

      First, the record provides an adequate factual basis for the FCC’s decision.

The record includes evidence that Blanca claimed USF support for cellular

services both within and beyond its designated study area. It reflects that Blanca

did not distinguish between regulated and nonregulated activities in its

accounting. And the record establishes that Blanca was never designated as a

competitive ETC and never submitted the reports necessary to receive identical

support as a competitive ETC. Blanca does not deny these facts. The subpoenas,

      20
        (...continued)
arbitrary and capricious.

                                        -45-
Blanca’s responses, and Blanca’s underlying accounting reports 21 would tell us

little more than the record already does.

      Second, the record provides an adequate legal basis for the decision.

Blanca insists “[t]he FCC Orders rely upon a single, non-binding, non-record

NECA cost allocation manual to support its view that Blanca’s BETRS service is

not eligible for USF funding.” Id. at 29. But Blanca’s characterization of the

record is incorrect. Throughout the proceedings, the FCC provided much more

than a single “NECA cost allocation manual” to support its view that Blanca had

improperly received USF payments. See, e.g., R., Vol. II at 304–07 (describing

the regulations and orders that require proper cost allocation in order to determine

USF support). Given that the FCC provided an adequate legal basis for its

decision, any further NECA documents that the FCC relied on for its reasoning

are not necessary. Inclusion of such documents in the record would not change

our understanding of the underlying regulatory scheme or our decision.

      21
          Blanca also insists the FCC’s record is deficient because it does not
include all the underlying accounting reports it relied on in reaching its decision.
But Blanca has never argued the FCC miscalculated the overpayments. See R.,
Vol. II at 304 (“In reaching these conclusions, we emphasize that Blanca has
conceded that it offered CMRS services and it has not challenged the accuracy of
OMD’s accounting of the aggregate high-cost support attributable to Blanca’s
inclusion of CMRS-related costs in regulated accounts between 2005 and 2010.”).
In fact, during oral arguments, Blanca’s counsel conceded that it was not
challenging the FCC’s calculated debt amount. Blanca contests only the fact that
any debt exists. Because Blanca does not dispute the FCC’s calculations, Blanca
has not convinced us that the failure to include the cost data is prejudicial.

                                        -46-
      Given that the administrative record supports the FCC’s decision, the

FCC’s failure to include documents referred to in the record is harmless.

      The foregoing analysis also leads us to conclude that the FCC’s reliance on

the record was supported by substantial evidence. The record contains undisputed

facts about Blanca’s conduct and accounting practices between 2005 and 2010.

And these facts establish that Blanca requested USF support for cellular services

during this time, that the cellular services were not fixed-BETRS, and that Blanca

never submitted the reports necessary to claim USF support as a competitive ETC.

A reasonable mind could accept this undisputed evidence in the record as

adequate to support the FCC’s decision.

                                     *    *     *

      The FCC did not act arbitrarily and capriciously. The FCC supported its

decision to initiate debt collection with an explanation of the rules Blanca had

violated and a calculation of the overpayments Blanca had received. And the

record, though incomplete, is adequate to support the FCC’s actions.

                                IV. Conclusion

      We DENY Blanca’s Motion to Supplement the Record. And we AFFIRM

the FCC’s decision to collect USF overpayments to Blanca through administrative

offsets. We remand to the FCC for any further proceedings.

                                         -47-