Court Opinion

ID: 185264
Source: CourtListenerOpinion
Date Created: 2011-02-05 02:29:53+00
Date Added: 2024-06-11T17:26:14.424148
License: Public Domain

229 F.3d 1172 (D.C. Cir. 2000)
Qwest Communications International Inc.,Petitionerv.Federal Communications Commission and United States of America, RespondentsMCI World Com, Inc. and AT&T Corporation, Intervenors
No. 99-1531
United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 5, 2000Decided October 27, 2000

On Petition for Review of an Order of the Federal Communications Commission
William R. Richardson, Jr. argued the cause for petitioner. With him on the briefs were William T. Lake, Patrick J. Carome, Julie A. Veach, Dan L. Poole, and Robert B. McKenna.
Lawrence E. Sarjeant, Linda Kent, John Hunter, Julie E.  Rones, William F. Maher, Jr., Stephen L. Goodman, and  Richard White, Jr. were on the brief for amicus curiae in  support of petitioner.
Joel Marcus, Counsel, Federal Communications Commission, argued the cause for respondents.  With him on the  brief were Christopher J. Wright, General Counsel, Daniel  M. Armstrong, Associate General Counsel, Joel I. Klein,  Assistant Attorney General, U.S. Department of Justice, Robert B. Nicholson, and Christopher Sprigman, Attorneys. John E. Ingle, Deputy Associate General Counsel, Federal  Communications Commission, entered an appearance.
Anthony C. Epstein argued the cause for intervenors  World Com, Inc. and AT&T Corp.  With him on the brief  were Thomas F. O'Neil, III, William Single, IV, Mark C.  Rosenblum, Peter H. Jacoby, Judy Sello, and David Lawson.  James P. Young entered an appearance.
Before:  Williams, Sentelle, and Rogers, Circuit Judges.
Opinion for the Court filed by Circuit Judge Rogers.
Rogers, Circuit Judge:

1
Qwest Communications International, Inc. ("Qwest") petitions for review of a decision by the  Federal Communications Commission ("Commission") to disclose raw audit data to competitors in connection with a  notice of inquiry concerning the validity and reasonableness  of statistical sampling for equipment not found or not verifiable during a field audit.1  See In re Ameritech Corporation  Telephone Operating Companies' Continuing Property Records Audit et al., Memorandum Opinion and Order, 15  F.C.C.R. 1784 (1999) ("Order").  Qwest contends that the  Order is contrary to § 1905 of the Trade Secrets Act, 18 U.S.C. § 1905 (1994), because nothing in § 220(f) of the  Communications Act of 1934, 47 U.S.C. § 220(f) (1994), authorizes the Commission to release otherwise protected information.  Qwest further contends that the Commission's Order  violates its own longstanding policy to provide special protection to audit information.  We hold that § 220(f) provides  sufficient authorization for disclosure of trade secrets, but  that the Commission has failed to explain how its Order is  consistent with its policy regarding the treatment of confidential information.  Accordingly, we remand the case to the  Commission for further proceedings.2

I.

2
Under Part 32 of the Commission's regulations, the Regional Bell Operating Companies ("RBOCs") are required to  maintain detailed accounting records of property used in their  local telephone operations, including the property's description, location, and cost.  See 47 C.F.R. §§ 32.2000(e)-(f).  The  records, which serve various regulatory functions, including  the setting of rates and the assessment of charge allocations,  must conform to a uniform accounting system prescribed by  the rules and must be sufficiently detailed to allow the  property's physical existence to be confirmed during a spot  check conducted by the Commission.  See id.

3
In 1997, the Commission's Common Carrier Bureau's Accounting Safeguards Division ("Bureau") began an audit of  the RBOCs' records for hard-wired central office equipment  in order "to determine if their records were being maintained  in compliance with the Commission's rules and to verify that  property recorded in the accounts represented equipment  used and useful for the provision of telecommunications services."3  During the audit, each piece of equipment was categorized or"scored" as "(1) found [as described];  (2) found  in another location;  (3) not found/missing;  or (4) unverifiable."  The Commission explained that part of the audit included "statistical sampling techniques so that the findings  for the sample could be extended as representative of all of  the equipment in the category audited, i.e., hard-wired central  office equipment."  After reviewing the RBOCs' comments on  draft reports, the Bureau's final audit reports revealed that  the RBOCs may have overstated their book costs by as much  as five billion dollars.4  The RBOCs filed objections, in the  words of one Commissioner, "aggressively attack[ing] the  audits, the competence of the auditors, and the credibility of  the audit design."5  Qwest challenged the Bureau's final audit  report, claiming that it failed to reflect additional data accounting for a majority of items scored as "not found," and  reaffirming its conclusion that the audit was fatally flawed for  statistical and other reasons.6  In support of the latter point, Qwest submitted an analysis by Deloitte & Touche's "quantitative techniques expert," who raised doubts about the auditors' sampling methodology and their evaluation techniques.

4
The Commission, in turn, issued a notice of inquiry in April 1999, seeking public comment on ten criticisms relating to the  audits.  See In re Ameritech Corporation Telephone Operating Companies' Continuing Property Records Audit et al.,  Notice of Inquiry, 14 F.C.C.R. 7019, 7021-22 p 6 (1999)  ("NOI").  The only issue relevant here is Issue 2:  namely,  "[t]he validity and reasonableness of the methodology used by  the Bureau's auditors in determining whether to rescore or to  modify a finding during a field audit that equipment was 'not  found.' "7  Previously, in February 1999, the Commission  determined, over the dissent of two Commissioners, that  pursuant to the RBOCs' waivers of confidentiality, the release  of the audit reports and the RBOCs' responses to them was  in the public interest.8  MCI thereafter filed a Freedom of  Information Act request, pursuant to 47 C.F.R. S 0.461,  seeking public release of the RBOCs' explanations and supporting documentation regarding their equipment not found,  the Bureau's audit work papers showing the scoring of particular items, and the continuing property records themselves.9

5
Qwest opposed the release of the raw audit data on three  principal grounds:  First, releasing the requested information  is barred by S 220(f) of the Communications Act and previous  Commission rulings and would be an unjustified departure  from the Commission's established practice of not releasing  audit-related materials, except in exceptional cases;  second,  the requested information is confidential commercial information, voluntarily submitted, and thus exempt from release  under Exemption 4 of the Freedom of Information Act, 5  U.S.C. S 552(b)(4);  and third, the requested information constitutes pre-decisional deliberations and as such, is protected  by Exemption 5 of the Freedom of Information Act, 5 U.S.C.  S 552(b)(5), and S 0.457(e) of the Commission's rules, 47  C.F.R. S 0.457(e).  Qwest indicated that it was opposing only  the request for release of data submitted regarding the "not  found" and "unverifiable" audit items, explaining that these  items "contain[ed] detailed information including pricing information on specific items used in the provision of telecommunications services...."  These items, in Qwest's view,  were comprised of "highly sensitive business information  which MCI could use to unfairly improve its competitive  position" relative to Qwest and other market competitors.

6
The Bureau ordered release of the requested raw audit  data to parties under a protective order.  The Bureau relied  on §§ 154(j) and 220(f) of the Communications Act as providing the Commission with explicit authorization for the discretionary release of audit materials otherwise protected from  release under the Freedom of Information Act and the Trade Secrets Act.  Relying also on "the Commission's duty to  ensure that parties are given a reasonable opportunity to  make informed comment on Issue No. 2," the Bureau viewed  "the unique situation" created by the question posed in Issue  2 to require the release of information that is "not routinely  made available to the public, even under protective orders."The Bureau concluded that the question regarding the "auditors' rescoring process can only be answered by allowing  parties interested in filing comments to review this [raw data]  material."  The Bureau's protective order limited access to  the requested materials to (1) counsel for a party participating in the NOI proceeding and (2) technical advisors or other  persons authorized by such counsel.  In the Bureau's opinion,  the protective order "reasonably ameliorated" any potential  competitive harm to the RBOCs.  All of the RBOCs except  Bell Atlantic appealed to the Commission.

7
The Commission affirmed the Bureau's decision to release  the raw audit data subject to a protective order, relying  principally on the Commission's explicit authority under  § 220(f):  "[G]iven the importance of Commission audits to  the effective performance of the Commission's statutory responsibilities with respect to carriers, [the Commission] believe[s] the [Communications] Act's statutory scheme fully  envisions that, in some cases, disclosures of carrier-supplied  audit information might become necessary in the course of  carrying out the Commission's enforcement and regulatory  policymaking functions."10  Order, 15 F.C.C.R. at 1789 p 8.The Commission also imposed "more stringent" terms for  access to audit materials, modifying the protective order (1)  to restrict access to the audit materials to "persons without  decision making authority or influence regarding competitive  issues," (2) to redact "vendor-specific pricing information," and (3) to limit the materials to be released to those relating  to Issue 2.11  Id. at 1790-91 p p 13-14.  The Commission also provided that the RBOCs could suggest, for Bureau approval,  other redactions to the auditors' work papers and the RBOCs'  comments.  Qwest petitioned for review of the Order.12

II.

8
Qwest contends that the Commission's decision to release  protected confidential information violates the Trade Secrets  Act because the Commission is not "authorized by law" to  disclose otherwise protected information.  Section 220(f) of  the Communications Act, Qwest maintains, is "a  non-disclosure statute that itself prohibits agency employees from  releasing information obtained during audits...."  Because  § 220(f) is "wholly silent as to the power of the Commission  to issue [ ] directions" for release of such material, Qwest  continues, the statute's "logic and purposes reflect no [Congressional] intention to authorize the Commission to disclose  confidential information based solely on the exercise of its  own unbounded 'discretion.' "

9
The parties agree that the material ordered disclosed by  the Commission is covered by the Trade Secrets Act.  Hence,  the question is whether the Communications Act vests the  Commission with authority to disclose information covered by  the Trade Secrets Act, or more specifically, whether, for  purposes of § 1905 of the Trade Secrets Act, the Commission  was authorized under § 220(f) of the Communications Act to  allow Qwest's competitors access to Qwest's raw audit data.

10
The parties disagree about our standard of review.  We  agree with the Commission that our principal inquiry of the  meaning of § 220(f) follows the familiar two-part test under  Chevron, U.S.A., Inc. v. NRDC, 467 U.S. 837, 842-43 (1984):The court "must give effect to the unambiguously expressed  intent of Congress" or in the absence of such intent, consider  whether the agency's interpretation is a "permissible construction of the statute."  Id. at 843.  Necessarily, however,  we must first examine what Congress intended by § 1905 of the Trade Secrets Act, and in this regard, as Qwest contends,  our review is de novo.  Hence, we look first to the language  of § 1905 and seek guidance from its structure and history. See Chrysler v. Brown, 441 U.S. 281, 296 (1979).  We then do  much the same in examining § 220(f) of the Communications  Act, reaching the Commission's interpretation of its enabling  statute only if Congressional intent is unclear.

11
Section 1905 of the Trade Secrets Act prohibits the unauthorized release of trade secrets and commercial information,  unless "authorized by law," subject to punishment by fine and  imprisonment and removal from office or employment.  See  18 U.S.C. § 1905.13  The history of the Act, which was  originally enacted in 1864, traces back to Congressional concern over disclosures of business information by "feckless or  corrupt revenue agents."  Chrysler, 441 U.S. at 296.  When  Congress in 1948 consolidated three statutes barring or limiting the release of such information, it sought to address the  demands of the new administrative state and thereby broadened the reach of the Trade Secrets Act.  See CNA Fin.  Corp. v. Donovan, 830 F.2d 1132, 1149 n.122 (D.C. Cir. 1987).As the court has previously recounted, Congress "recogni[zed] that increased governmental access to financial records and commercial operations of individuals and entities ...  had to be accompanied by some restraint on the freedom of governmental employees to disseminate such data to third  parties."  Id.

12
The limits established by the Trade Secrets Act, however,  are not inconsistent with authorizations granted to federal  agencies to release data when necessary for the carrying out  of the agencies' statutory responsibilities.  In National Parks  and Conservation Ass'n v. Kleppe, 547 F.2d 673 (D.C. Cir.  1976), the court noted that the Trade Secrets Act is "merely a  general prohibition against unauthorized disclosures of confidential commercial or financial information."  Id. at 687 n.50.The court in CNA, continuing to explore the nature of the  statute, observed that the Trade Secrets Act:

13
seems to embody a congressional judgment that private commercial and financial information should not be revealed by agencies that gather it, absent a conscious choice in favor of disclosure by someone with power to impart the force of law to that decision.  The Act at-tempts to forestall casual or thoughtless divulgence--disclosure made without first going through a deliberative process--with an opportunity for input from concerned parties.

14
CNA, 830 F.2d at 1141 (emphasis added).

15
In the leading case on the question of the authorization  required by § 1905 for release of trade secrets, the Supreme  Court interpreted the phrase "authorized by law" not to have  "a special, limited meaning."  Chrysler, 441 U.S. at 298.Instead, the Supreme Court instructed that the exercise by  an agency of quasi-legislative power "must be rooted in a  grant of such power by the Congress and subject to limitations which that body imposes."  Id. at 302.  More directly,  the Court stated that "[w]hat is important" is whether the  reviewing court could reasonably conclude that the statutory  grant of authority contemplated the regulations providing for  release of information.  Id. at 308.  Thus, in rejecting the  contention that an Executive Order directing the Secretary of  Labor to adopt regulations as are "necessary and appropriate" meant that all regulations so promulgated have the full  "force and effect of law," the Court focused on whether there was a "nexus between the regulations and some delegation of  the requisite legislative authority by Congress."  Id. at 304.Looking at the statutory sources for the Executive Order,14  the Court concluded that "it is clear that when it enacted  these statutes, Congress was not concerned with public disclosure of trade secrets or confidential business information...."  Id. at 306.  By way of illustration, the Court  contrasted the situation in NBC v. United States, 319 U.S.  190, 217 (1943), where, based on the language and logic of the  Communications Act, which vested comprehensive powers in  the Commission, the Court upheld Commission regulations  that extended beyond technical, engineering requirements. See Chrysler, 441 U.S. at 308.A mere housekeeping statute,  on the other hand, whose history indicated that it was "simply  a grant of authority to the agency to regulate its own affairs,"  would not suffice to authorize disclosure of confidential business information because it was not intended to provide  authority for limiting the scope of the Trade Secrets Act.  Id.  at 309.

16
Under § 220(a) of the Communications Act, the Commission is authorized to direct the kind of financial books and  records that carriers must maintain so that the Commission  can fulfill its mandate of ensuring that carriers' rates and  practices are just and reasonable.  See 47 U.S.C. § 220(a).In establishing a uniform system of accounts, the Commission  is charged with "ensur[ing] a proper allocation of all costs to  and among telecommunication services, facilities, and products...."  Id. § 220(a)(2).  Under § 220(c), the Commission  "shall at all times have access to and the right of inspection  and examination of all accounts, records, and memoranda"  maintained by the carrier pursuant to § 220.  In addition, the  Commission may use public accounting services.  In this  connection, subsection (c) provides an exception to non-disclosure laws as well as a non-disclosure limitation on persons having access to information submitted to the Commission. Subsection (c) provides that "[a]ny provision of law prohibiting the disclosure of the contents of messages or communications shall not be deemed to prohibit the disclosure of any  matter in accordance with the provisions of this section."  Id.  § 220(c).  The statute further provides that any person conducting a Commission audit shall have the powers of the  Commission under subsection (c) and shall be subject to  subsection (f) "in the same manner as if that person were an  employee of the Commission."  Id.15  Section 220(f), in turn,  provides:

17
No member, officer, or employee of the Commission shall divulge any fact or information which may come to his [or her] knowledge during the course of examination of books or other accounts, as hereinbefore provided, exceptin so far as he [or she] may be directed by the Commissionor by a court.

18
Id. § 220(f) (emphasis added).

19
Subsection (f), first mentioned in § 220(c) after a sentence  that removes any legal obstacles to the disclosure of information submitted to the Commission in accordance with § 220,  places non-disclosure burdens on all persons having access to  confidential information submitted to the Commission.  Thus,  its strict limitation on how confidential information is to be  handled arises in a context in which the Commission will have  access to information that is otherwise protected by law from  disclosure.  Nevertheless, Congress alluded to the possibility  of disclosure by the Commission (and the court).  Qwest's  contention that § 220(f) is "an integral part of a non-disclosure statute" is correct so far as it goes.  However, viewing  § 220(f) as directed to non-disclosure does not mean that its last clause has no role to perform, much less nothing to do  with the conditions under which disclosures may occur.  Under Chrysler, § 1905 is satisfied without a provision of law  that expressly refers to trade secrets.  See Chrysler, 441 U.S.  at 308.

20
Congressional intent to allow an exception to non-disclosure  seems implicit in the statutory scheme.  In the Communications Act of 1934, Congress delegated broad authority to the  Commission in carrying out its responsibilities for oversight  of licensing, rate making, and carrier practices.  See 47  U.S.C. § 151 et seq.;  NBC, 319 U.S.at 217-20. Significantly,  in § 220, Congress placed in the Commission the responsibility to "ensure a proper allocation of all costs."  47 U.S.C.  § 220(a)(2).  With the additional provisions authorizing audits, it reasonably follows that Congress contemplated that  the Commission would be reviewing the type of data at issue  here.  Thus, unlike the statutes that were considered by the  Supreme Court in Chrysler, see 441 U.S. at 304-09, § 220  focuses on the need for the Commission to have access to  confidential information regarding licensees and others, and  to determine how such information is to be protected when  the Commission carries out its responsibilities.  The former is  addressed in § 220(c), the latter in § 220(f).  When Congress  consolidated various statutes on trade secrets in 1948, it gave  no indication that federal agencies' interpretation of their  authority to release confidential data was in error, much less  no longer of force and effect.16  Nothing in Chrysler suggests  that a comparable situation existed with respect to the statutes considered in that case.  See Chrysler, 441 U.S. at 308.

21
To the extent Qwest contends that § 220(f) is too broad an  authorization, in its view leaving the Commission with unfettered discretion, we offer two responses.  First, contrary to  Qwest's contention, Chrysler does not require that the statutory authorization under § 1905 be directed, or limited, to trade secrets.17  Rather, as the Supreme Court emphasized in  Chrysler, the important question is whether the reviewing  court can reasonably conclude that the grant of authority  contemplates the regulations issued.  See Chrysler, 441 U.S.  at 308.  Chrysler's test is, in one sense at least, a non-demanding one with respect to the purpose of the Trade  Secrets Act--namely, to ensure that Congress has authorized  release of covered information and that any such release  occurs only after deliberation by appropriate officials.  See  CNA, 830 F.2d at 1141-42.  Section 220(f) is consistent with  the restraint that Congress sought to impose in the Trade  Secrets Act because it permits release only on order of the  Commission (or the court) where, as the Supreme Court  noted, such release would be consistent with the purposes of  the Communications Act.  See Chrysler, 441 U.S. at 307-08.As we discuss in Part III, the Commission has adopted a  Confidential Information Policy and regulations for release  decisions to be made upon consideration of certain factors by  appropriate officials.

22
Second, other circuits have concluded that, under Chrysler,  a broadly stated grant of authority to disclose confidential  information suffices for purposes of § 1905.  Thus, the  Fourth Circuit in Humana, Inc. v. Blue Cross, 622 F.2d 76  (4th Cir. 1980), upheld the Secretary of Health, Education,  and Welfare's "broad discretion to permit disclosure" where  the statute, 42 U.S.C. § 1306(a), provided that "[n]o disclosure ... shall be made except as the Secretary ... may by  regulations prescribe ...."  Id. at 78 (emphasis added).Relying on Chrysler's test, that "[t]he grant of authority  relied upon by a federal agency in promulgating regulations  need not be specific;  it is only necessary 'that the reviewing  court reasonably be able to conclude that the grant of authority contemplates the regulations issued,' " id. (quoting Chrysler, 441 U.S. at 308), the court concluded with respect to the disclosure of cost reports, that "absent any action by the  Secretary, disclosure would be prohibited.  Such material,  however, is not exemptfrom disclosure for by its very terms  the statute contemplates the issuance of regulations by the  Secretary permitting such disclosure."  Id. at 79.  In St.  Mary's Hospital, Inc. v. Harris, 604 F.2d 407 (5th Cir. 1979),  the Fifth Circuit had reached the same conclusion about a  regulation authorizing disclosure of cost reports, stating that  "[s]ection 1306 bars the disclosure of Medicare providers'  costs reports unless the Secretary in his discretion promulgates a regulation like [the one being challenged] ordering  disclosure of these reports....  At the very least § 1306 may  reasonably be construed to contemplate the promulgation of  [a regulation such as is at issue]."  Id. at 410.  The Sixth  Circuit agreed in Parkridge Hospital, Inc. v. Califano, 625  F.2d 719 (6th Cir. 1980), interpreting the statute to be "a  broad grant of authority to the Secretary specifically to enact  regulations providing for the release of information filed with  the agency, at least when such disclosure serves the purposes  described in the statute."  Id. at 724.

23
While Qwest would distinguish the statute in Humana,  Parkridge, and St. Mary's as reflecting Congress' clear intent  to permit disclosure of trade secrets, the effect of the last  clause of § 220(f) of the Communications Act is essentially  the same.  That is, in both types of statutes Congress has  alluded in an "except" clause to the possibility of disclosure of  protected information, and in both circumstances assured that  the Secretary and the Commission must reach a considered  determination about releasing protected information.  The  different statutory treatment by Congress can be said to  reflect not a difference in congressional intent but the fact  that the Secretary is an individual decision-maker, and by  requiring the promulgation of regulations, Congress constrained the Secretary's decision-making authority regarding  the release of protected information.  Comparable constraint  inheres in the statutory requirements that the Commission  may act only as a deliberative body, when there is a quorum,  when parties may be heard, and when its actions are made on  the record.  See generally 47 U.S.C. §§ 154(h), (j).

24
Accordingly, we hold that the Communications Act, and  specifically, § 220(f), does not clearly rule out the Commission's interpretation, which we find reasonable.

III.

25
The question remains whether the Commission has acted  arbitrarily and capriciously in ordering the release of Qwest's  raw audit data to some of its competitors.18  See Chrysler, 441  U.S. at 318;  Bartholdi, 114 F.3d at 279.  Qwest contends that  the release order is "flatly inconsistent" with the Commission's prior assurance that raw audit data would be protected. More particularly, Qwest contends that the Commission's  Order is contrary to its precedents on the treatment of  confidential information.19  Qwest calls attention to the unprecedented nature of the release, maintaining that "whatever authority the Commission may have to disclose trade  secrets in other kinds of proceedings in order to vindicate  rights to public participation, the logic and purposes of the statutory provisions governing confidential agency audits are  quite different."  The Order constitutes, in Qwest's view, a  "standardless 'discretionary' exemption from disclosure" justified solely on the Commission's unprecedented step of opening audits to public comment.

26
The Commission's Confidential Information Policy includes three paragraphs regarding audits that are pertinent  here.  See In re Examination of Current Policy Concerning  the Treatment of Confidential Information Submitted to the  Commission, Report and Order, 13 F.C.C.R. 24816, 24847-49  p p 53-55 (1998), amended by 14 F.C.C.R. 20128 (1999) ("Confidential Information Policy").  Paragraph 53 provides that  only summary audit data will be released, and only under  special circumstances.  See id. at 24847-48 p 53.  Those special circumstances arise when:  "(i) the summary nature of the  data therein is not likely to cause the submitter substantial  competitive injury;  (ii) the release of the summary data and  information is not likely to impair [the Commission's] ability  to obtain information in future audits;  and (iii) overriding  public interest concerns favor release of the report."  Id.

27
Paragraph 54 explains the Commission's view of audit  reports:

28
The Commission has a longstanding policy of treating information obtained from carriers during audits as confidential....  Carriers have a legitimate interest in protecting confidential information, and we agree that disclosure could result in competitive injury to those who provide such information to the Commission.  This policy is also designed to enhance the efficiency and integrity of our audit process by encouraging carriers to comply in good faith with Commission requests for information. Moreover, the Commission considers the audit reports to be internal agency documents that, consistent with FOIA Exemption 5, generally should not be disclosed to the extent they present staff findings and recommendations to assist the Commission in pre-decisional deliberations.

29
Id. at 24848 p 54.  Paragraph 54 also states that the Commission "will amend Section 0.457 of [its] rules to indicate that  information submitted in connection with audits ... will not  routinely be made available for public inspection."  Id.

30
In paragraph 55, the Commission identified the standards  that it would apply were confidential audit information to be  released.  Observing that it has "only rarely departed from  the general policy of withholding audit information from  public disclosure," the Commission advised nonetheless that,

31
[p]arties should note, however, that as in the past, we may publicly disclose audit information in rare cases where the underlying concerns that normally lead us to withhold audit information from public disclosure are diminished by the minimal risk posed by the release of aggregate data or, where the data is otherwise not highly commercially sensitive and disclosure is justified by significant public interest factors.

32
Id. at 24848-49 p 55 (emphasis added).  Thus, S 0.457 of the  Commission's regulations provides, in part, that "[t]he records in this section are not routinely available for public  inspection," 47 C.F.R. S 0.457, and in subsection (d) that  "[t]rade secrets ... are not routinely available for public  inspection....  A persuasive showing as to the reasons for  inspection will be required in requests for inspection of such  materials submitted under S 0.461."  Id. S 0.457(d).

33
Numerous cases reflect the Commission's application of  Paragraphs 53 and 54 of its Confidential Information Policy  and S 0.457 of its regulations.20  None Qwest maintains, until  now, involved the release, pursuant to Paragraph 55, to a  competitor of raw audit data in an audit or audit-related  proceeding.  In applying its Confidential Information Policy,  the Commission has heretofore acknowledged a distinction  between summary audit data and raw audit data:

34
[T]he release of commercial and financial information of only a summary nature does not present the concerns about competitive harm that normally lead us to withhold audit-derived information from public disclosure....The Summary contains no detailed underlying commercial or financial information submitted by the BOCs; rather it presents a brief analysis of the aggregated underlying data.  The summary nature of this information significantly diminishes the likelihood that the BOCs will suffer any competitive harm.

35
In re Bell Telephone Operating Companies, Memorandum  Opinion and Order, 10 F.C.C.R. 11541, 11542 p 6 (1995).

36
Thus, the Commission has explained that it "withholds ...  raw financial data obtained from carriers during audits as  well as audit work papers compiled by Commission staff" in  accord with its "general policy [ ] to withhold from public  disclosure audit reports prepared by Commission staff."  In  Re GTE Telephone Operating Companies, Memorandum  Opinion and Order, 9 F.C.C.R. 2588, 2588 p 4 (1994).  See  also BellSouth, 8 F.C.C.R. at 8129 p 8.  "[A]udit reports  [that] contain substantial raw data and other information  provided by various [Local Exchange Carriers] that has not  been summarized, reformatted, or otherwise edited," the  Commission has explained, "[are] not routinely available for  inspection."  Platt, 5 F.C.C.R. at 5742 p 6.  The Commission's  view has been that the release of raw audit data "would likely  impair the Commission's ability to obtain necessary information in the future."  Rafferty, 5 F.C.C.R. at 4138 p 2.  Where  the Commission has ordered the release of confidential financial information even if there is the possibility of competitive  harm as a result, the occasions appear to have been confined  to an adjudication, rulemaking, or a rate proceeding in which  a party has placed its financial condition at issue.21

37
Qwest and amicus United States Telecom Association point  out that audits "are not voluntary, afford no statutory right of  public participation, and have historically involved" only the  Commission and the entity being audited.  Consistent with  these concerns, the Commission, has applied its Confidential  Information Policy strictly, allowing exceptions in audits and  related proceedings only for release of summaries of audit  data that do not reveal "competitively sensitive materials."Confidential Information Policy, 13 F.C.C.R. at 24824 p 9.While the Commission states that its Order establishes no  "precedent that compromises the integrity of the audit process," Order, 15 F.C.C.R. at 1790 p 11, the Commission's  rulings, regulations, and Confidential Information Policy  reflect a different approach.  As applied by the Commission,  the exceptional circumstances considered in the Confidential  Information Policy for audits and in Commission rulings  appear to have been confined to release of summary audit  data.

38
Still, the unprecedented nature of the Commission's Order  does not itself demonstrate arbitrariness.  See Capital Network Sys., Inc. v. FCC, 28 F.3d 201, 204-06 (D.C. Cir. 1994).But, in view of the policy by which the Commission has  constrained the exercise of its discretion under S 220(f), its  decision to release Qwest's raw audit data to its competitors  likely would be arbitrary and capricious if the Commission  failed to explain how it reached the conclusions that (1) the  raw audit data is "otherwise not highly commercially sensitive," and (2) "disclosure is justified by significant public  interest factors."  Confidential Information Policy, 13  F.C.C.R at 24849 p 55.  See also 47 C.F.R. S 0.457(d).

39
In addressing Qwest's claims of harm, the Commission  determined that its protective order, as amended, would  ensure that any competitive harm is minimal.  See Order, 15  F.C.C.R. at 1790 p 12.  This reasoning followed, the Commission concluded, because disclosure was for the limited purpose of responding to Issue 2 as to sampled items not found,  unidentified, or found in another location.  See id.  This is not  the same as finding that Qwest's raw data is "otherwise not  highly commercially sensitive," or a finding that release of the data would not adversely affect Qwest's competitive position. Confidential Information Policy, 13 F.C.C.R. at 24849 p 55.Indeed, the Commission appears to acknowledge that the  data is commercially sensitive, rationalizing release on the  ground that the protective order ensures against competitive  harm or ensures that such harm would be minimal.

40
In concluding that the public interest outweighs any potential competitive harm to the RBOCs, the Commission  observed that the RBOCs raised issues that the auditors'  rescoring was not done correctly, and that the previously  released summaries of the auditors' general procedures  were insufficient to elicit useful information, which the  Commission defined in terms of being able to comment on  how the auditors' general procedures were actually implemented.  See Order, 15 F.C.C.R. at 1789 p 9.  Observing  that it has "rarely, if ever, sought public comment on its  auditors' methodology and findings," the Commission stated  that it "was sufficiently concerned about the issues surrounding the audits to invite public comment," and that  broader comment "will greatly assist" the Commission in  resolving the issues.  Id. at 1790 p 11.  Advising on appeal  that the focus of Issue 2 involving audit methodology is  unprecedented, the Commission repeats that "unusual  events call for an atypical response."

41
Missing from the Commission's decision is a discussion of  why such an unprecedented release of confidential audit  information is required for purposes of Issue 2.  The Commission stated that "useful information about the accuracy  and validity of the audits" could not be obtained "unless  commenters were allowed to examine how those general  procedures were actually implemented when the auditors  decided whether rescoring was appropriate."  Id. at 1789 p 9.But it is unclear why this is so.  The Deloitte & Touche  analysis submitted by Qwest, for example, appears to suggest  that the sampling methodology could be evaluated in theoretical terms as applied to hypothetical situations or to a composite of raw data without identifying an individual RBOC's  sensitive commercial information.  Other ways of avoiding the  release of raw audit data to competitors might be equally effective for the Commission's purposes.  Or, at least on the  basis of the record, the court cannot tell that other ways  would not be equally effective.  Before invoking its "rare  case" exception to its non-disclosure policy, the Commission  must consider plausible alternatives and discount them before  resorting to the release of raw audit data.  Otherwise,  Qwest's claim that the Order represents a standardless exemption from the Commission's policy and precedent gains  force.  Aresponse that the protective order adequately protects Qwest against competitive injury misses the mark.  The  Commission must explain why only the release of raw audit  data will achieve meaningful public comment.  In submitting  audit data, Qwest was entitled to rely on the Commission's  announced policy and precedent on how it would handle  confidential audit information.  Qwest is similarly entitled to  assurances that the unprecedented disclosures will be consistent with the standards that the Commission has set for itself  and that the invocation of the "rare case" exception under  Paragraph 55 is warranted.  See Motor Vehicles Mfrs. Ass'n  v. State Farm Auto. Ins. Co., 463 U.S. 29, 43 (1983).

42
Accordingly, we deny the petition in part, and we remand  the case to the Commission for further consideration.

Notes:

1
  U S West Communications, Inc., which filed the petition for  review, is a wholly-owned subsidiary of U S West, Inc.  During the  pendency of this appeal, U S West, Inc. merged and became Qwest  Communications International, Inc.  Accordingly, we refer to Qwest  as the petitioner.

2
  In view of our disposition of the Commission's reliance on  § 220(f), we do not address the Commission's reliance on § 154(j),  47 U.S.C. § 154(j) (1994).  See Order, 15 F.C.C.R. at 1788 p 8 &  n.23.

3
  The seven RBOCs were Ameritech, Bell Atlantic, BellSouth,  NYNEX, Pacific Bell, Southwestern Bell, and U S West Telephone Companies.  See Public Notice, The Accounting Safeguards Division Releases Information Concerning Audit Procedures for Considering Requests by the Regional Bell Operating Companies To  Reclassify or "Rescore" Field Audit Findings of Their Continuing  Property Records, 14 F.C.C.R. 6243, 6243 (1999).  The hard-wired  central office equipment constitutes approximately one-fourth of the  RBOCs' total capital investment.  See Press Release, FCC Releases  Audit Reports on RBOCs' Property Records, Feb. 25, 1999 ("FCC  Press Release").

4
  See FCC Press Release.  The audit indicated "that approximately 11 percent of the [RBOCs'] equipment could not be found,  and approximately 14 percent was either unverifiable or found in  another location."  Order, 15 F.C.C.R. at 1786 p 3.

5
  In re U S West Telephone Operating Companies' Continuing  Property Records Audit, Order, 14 F.C.C.R. 5731, 5827 (1999)  (Commissioner Tristani, issuing separate statement).

6
  Qwest's individualized audit report indicated that of the 1188  hard-wired equipment-item records randomly sampled and "scored"  for the audit, 294 (24.7% of the sampled items) "contained substantive deficiencies and did not comply with the Commission's rules."Id. at 5736 p 3.  See also id. at 5743 p 21.  Of the 294 deficient  records, 152 (12.79% of the sampled items) described equipment that could not be verified against the record;  123 (10.35% of the  sampled items) described equipment that could not be found;  and  19 (1.60% of the sampled items) described equipment that could  only partially be located.  See id.

7
  NOI, 14 F.C.C.R. at 7021 p 6.  Commissioner Furchtgott-Roth indicated apparent agreement with some of the RBOCs'  criticisms of the audit's methodology, process, and overall conclusions.  See In re U S West Telephone Operating Companies'  Continuing Property Records Audit, Order, 14 F.C.C.R. at 5832-35  (Commissioner Furchtgott-Roth, dissenting in part).

8
  See FCC Press Release.

9
  MCI sought the release of three types of information:
any materials that the RBOCs have submitted to the [Bureau] to explain why hard-wired [central office] equipment items were not found by the auditors or to support claims that items in the audit sample should be "rescored." ... [This includes] narrative explanations and supporting documentation such as invoices, telephone equipment orders, property record input forms, engineering drawings, and photographs[;]  [2] any audit work papers generated by [Bureau] staff during the course of the audits that show or support the item-by item scoring of the items in the audit sample[;]  [and 3] [Continuing Property Records] detail (vintage, description, etc.) for any items scored "partially found," "not found," or "not verifiable"at any time during the audit process. MCI stated that release of the requested raw data was crucial for  responding to the questions asked in the NOI, particularly Issue 2.

10
  In a footnote, the Commission cited § 154(j) as an alternate  source of its authority.  See Order, 15 F.C.C.R. at 1788 n.23.

11
  Noting that MCI had not requested disclosure of materials  concerning undetailed investment, the Commission decided not to  require access to such information.  See id. at 1791 p 14.

12
  The court granted Qwest's motion for a stay pending review.

13
  Section 1905 provides in relevant part:
Whoever, being an officer or employee of the United States or of any department or agency thereof, ... publishes, divulges, discloses, or makes known in any manner or to any extent not authorized by law any information coming to him [or her] in the course of his [or her] employment or official duties or by reason of any examination or investigation made by, or return, report or record made to or filed with, such department ... ,which information concerns or relates to [ ] trade secrets ...;or permits any income return or copy thereof or any book containing any abstract or particulars thereof to be seen or examined by any person except as provided by law;  shall befined under this title, or imprisoned not more than one year, or both;  and shall be removed from office or employment.18 U.S.C. § 1905 (emphasis added).

14
  Among the possible sources were the Federal Property and  Administrative Services Act of 1949, Titles VI and VII of the Civil  Rights Act of 1964, and the Equal Employment Opportunity Act of  1972.  See Chrysler, 441 U.S. at 304-05 & nn.34-36.

15
  The other provisions of § 220 are not directly applicable to  this analysis.  Section 220(b) concerns depreciation charges, see 47  U.S.C. § 220(b), while subsection (d) establishes a penalty against  carriers for failure to comply with the record-keeping provisions,  see id. § 220(d), and subsection (e) establishes a penalty for false  entries in, and destruction or alteration of, records by any carrier. See id. § 220(e).

16
  See, for example, § 20(7)(f) of the Interstate Commerce Act  of 1887, 49 U.S.C. § 20(7)(f) (1976) (current version at 49 U.S.C.  §§ 11904, 14908, 16103 (1994 ed. Supp. I 1995)), which is the  apparent model for § 220(f).

17
  Bartholdi Cable Co., Inc. v. FCC, 114 F.3d 274 (D.C. Cir.  1997), is not to the contrary, as Qwest suggests.  Indeed, in  Bartholdi, the court did not reach the statutory question that is at  issue here.  See id. at 281-82.

18
  Although Qwest states in its briefs that the "sole" issue on  appeal is whether the Communications Act authorizes the Commission to release trade secrets, and arguably the court is entitled to  take Qwest at its word, see Fed. R. App. P. 28(a)(9);  J.S.G. Boggs v.  Rubin, 161 F.3d 37, 42 (D.C. Cir. 1998) (citing Carducci v. Regan,  714 F.2d 171 (D.C. Cir. 1983));  Adams v. Hinchman, 154 F.3d 420,  424 n.7 (D.C. Cir. 1998), the arguments in Qwest's briefs suffice to  preserve a second issue for appeal.  The Commission has addressed  Qwest's contention on the assumption that the court might conclude  that the contention was properly preserved, and hence there is no  prejudice to the Commission as a result of Qwest's failure to clearly  designate in its briefs its alternative contention.  See Fed. R. App. P.  28(a)(5), (8).

19
  Before the Commission, Qwest argued that the release decision was not only contrary to statute, but "contrary to the Commission's own precedent regarding treatment of audit information" and  would adversely affect both Qwest's competitive position, and the  Commission's ability to perform future audits.  In addition, Qwest  asserted that release breached the understanding and expectation  that it had in submitting such information to the Commission-namely, that the information would be kept in confidence.

20
  See, e.g., In Re BellSouth Corporation BellSouth Telecommunications, Inc., Memorandum Opinion and Order, 8 F.C.C.R.  8129, 8130 p 7 (1993) ("BellSouth");  In Re Martha H. Platt, Memorandum Opinion and Order, 5 F.C.C.R. 5742, 5742 p 6 (1990)  ("Platt");  In Re Scott J. Rafferty, Memorandum Opinion and  Order, 5 F.C.C.R. 4138, 4138 p 3 (1990) ("Rafferty");  In Re Western  Union Telegraph Company, Memorandum Opinion and Order, 2  F.C.C.R. 4485, 4486 p 10 (1987).

21
  See, e.g., In re Alaskans for Better Media, Memorandum  Opinion and Order, 70 F.C.C.2d 1366 (1979);  In re Classical Radio  for Connecticut, Inc. and WTIC-FM Listeners' Guild, Memorandum Opinion and Order, 69 F.C.C.2d 1517 (1978);  In re NTV  Enterprises, Inc., Memorandum Opinion and Order, 62 F.C.C.2d  722 (1976).