Court Opinion

ID: 9378081
Source: CourtListenerOpinion
Date Created: 2023-03-09 17:00:36.189648+00
Date Added: 2024-06-11T17:17:18.955053
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

WIDE VOICE, LLC,                       No. 21-71375

        Petitioner,                   FCC No. 20-362

 v.
                                         OPINION
FEDERAL COMMUNICATIONS
COMMISSION; UNITED STATES
OF AMERICA,

        Respondents,

AT&T CORP.; AT&T SERVICES,
INC.; MCI COMMUNICATIONS
SERVICES, LLC,

        Respondents-Intervenors.

      On Petition for Review of an Order of the
       Federal Communications Commission

       Argued and Submitted October 18, 2022
                 Portland, Oregon

                Filed March 9, 2023
2                     WIDE VOICE, LLC V. FCC

    Before: Richard A. Paez and Bridget S. Bade, Circuit
       Judges, and Raner C. Collins,* District Judge.

                     Opinion by Judge Paez

                          SUMMARY **

           Federal Communications Commission

    The panel denied a petition for review of a Federal
Communications Commission (“FCC”) order finding that
Wide Voice, LLC violated § 201(b) of the Communications
Act of 1934 by restructuring its business operations to
continue imposing charges that were otherwise prohibited by
the Access Arbitrage Order, 34 FCC Rcd. 9035 (2019).
     Access stimulation occurs when telephone companies
artificially inflate call traffic connected over their local
networks to collect higher fees from long distance
carriers. The FCC issued rules to address this phenomenon,
including the Access Arbitrage Order that refined the
definition of access stimulation and declared that imposing
costs on long-distance carriers for access stimulation traffic
was unjust and unreasonable under § 201(b).
    Wide Voice contended that it complied with, rather than
violated, the Access Arbitrage Order, and that without an

*
 The Honorable Raner C. Collins, United States District Judge for the
District of Arizona, sitting by designation.
**
   This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
                   WIDE VOICE, LLC V. FCC                    3

explicit rule violation, the FCC did not have the authority to
find its conduct “unjust and unreasonable” under §
201(b). The panel held that the FCC properly exercised its
authority under § 201(b) to hold Wide Voice liable for
circumventing its newly adopted rule in the Access Arbitrage
Order when the company devised a work around. Contrary
to Wide Voice’s assertions, the FCC need not establish new
rules prohibiting the evasion of its existing rules to find a §
201(b) violation. Further, Wide Voice’s contention that
courts require a rule violation to find conduct unjust and
unreasonable under § 201(b) is unfounded. Finally, the
FCC’s construction of § 201(b) was reasonable because it
was consistent with the agency’s longstanding
precedent. Under Chevron U.S.A. Inc. v. Nat. Res. Def.
Council, Inc., 467 U.S. 837 (1984), the panel deferred to the
agency in holding that the FCC may find a carrier’s practice
“unjust and unreasonable” without an explicit rule violation.
    Wide Voice argued that even if the FCC had the
authority to find it liable for a sham arrangement under §
201(b), the FCC’s ruling that Wide Voice restructured its
business to evade the Access Arbitrage Order was
unfounded, and therefore, arbitrary and capricious. The
panel rejected Wide Voice’s specific contentions. First, the
panel held that the FCC reasonably determined that Wide
Voice, HD Carrier, and Free Conferencing were closely
related, non-independent entities. Second, the FCC
reasonably determined that Wide Voice, HD Carrier, and
Free Conferencing intentionally re-routed traffic to evade
the Access Arbitrage Order. The panel rejected Wide
Voice’s contention that it restructured its business to comply
with, rather than evade, the FCC’s new rules. The panel
further held that the FCC reasonably concluded that absent
4                  WIDE VOICE, LLC V. FCC

Wide Voice’s workaround, Wide Voice, under its previous
business model, would have likely triggered the new rules.
    Finally, the panel rejected Wide Voice’s contention that
even if the FCC was permitted to find its conduct “unjust and
unreasonable,” it did not have fair notice that its practices
were unlawful, and therefore the FCC violated its right to
due process. Wide Voice was involved in the rulemaking
process that resulted in in the Access Arbitrage Order. The
panel held that there was no doubt it had sufficient notice as
to what behavior complied with the law. The panel did not
see any due process violations.

                        COUNSEL
Lauren J. Coppola (argued) and Rebecca A. Bact, Robins
Kaplan LLP, Boston, Massachusetts, for Petitioner.
William Scher (argued), Counsel; Jacob M. Lewis,
Associate General Counsel; Sarah E. Citrin, Deputy
Associate General Counsel; P. Michele Ellison, General
Counsel;    Federal     Communications       Commission;
Washington, D.C.; Robert B. Nicholson and Robert J.
Wiggers, Attorneys; Jonathan S. Kanter, Assistant Attorney
General; United States Department of Justice, Antitrust
Division; Washington, D.C.; for Respondents.
Michael J. Hunseder (argued) and Alice A. Wang, Sidley
Austin LLP, Washington, D.C.; Grace W. Knofczynski and
Scott H. Angstreich, Kellogg Hansen Todd Figel &
Frederick PLLC, Washington, D.C.; Christopher M. Miller
and Curtis L. Groves, Verizon, Washington, D.C.; Brett
Farley, Christopher M. Heimann, and David L. Lawson,
AT&T Services Inc., Washington, D.C.; for Respondents-
Intervenors.
                    WIDE VOICE, LLC V. FCC                    5

                          OPINION

PAEZ, Circuit Judge:

    The Federal Communications Commission (“FCC”) has
long monitored local telephone companies’ “access
stimulation.”    Access stimulation occurs when such
companies artificially inflate call traffic connected over their
local networks to collect higher fees from long-distance
carriers. In 2011, the FCC issued rules to address this
phenomenon, defining when carriers engage in access
stimulation and restricting the rates that they could charge.
After local carriers found loopholes in this regulatory
system, the FCC revisited and updated these rules, issuing
the Updating the Intercarrier Compensation Regime to
Eliminate Access Arbitrage (“Access Arbitrage Order”), 34
FCC Rcd. 9035 (2019). The Access Arbitrage Order refined
the definition of access stimulation and declared that
imposing costs on long-distance carriers for access
stimulation traffic was “unjust and unreasonable” under
§ 201(b) of the Communications Act of 1934, 47 U.S.C. §
201 (“§ 201(b)”).
    In the wake of these new rules, local exchange carrier,
Wide Voice, LLC (“Wide Voice”), rearranged its business
model and call traffic path in coordination with closely
related entities, HD Carrier and Free Conferencing. These
changes allowed Wide Voice to continue charging long-
distance carriers higher fees without technically breaching
the Access Arbitrage Order. Long-distance carriers AT&T
Corp. and AT&T Services, Inc. (collectively, “AT&T”) and
MCI Communications Services LLC (“Verizon”) filed a
complaint with the FCC. The FCC subsequently found that
Wide Voice’s actions violated § 201(b).
6                    WIDE VOICE, LLC V. FCC

    Wide Voice petitions for review of the FCC’s order,
specifically arguing that the FCC unreasonably concluded
that it violated § 201(b) by restructuring its business
operations to continue imposing charges that were otherwise
prohibited by the Access Arbitrage Order. 1 Wide Voice
asserts that the FCC’s order should be set aside because (1)
the FCC exceeded its statutory authority; (2) the FCC
unreasonably deviated from its own legal precedent; (3) the
FCC’s findings are not supported by substantial evidence;
and (4) the FCC’s determination violated due process. We
reject Wide Voice’s arguments and conclude that the FCC’s
decision was not arbitrary and capricious, nor unlawful
under the Administrative Procedure Act. Accordingly, we
deny the petition for review.
I.      BACKGROUND
     A. Regulatory Background
    Historically, when a long-distance interexchange carrier
(“IXC”) transferred a telephone call to a local exchange
carrier (“LEC”), the IXC paid per-minute fees, called
“access charges,” to the LEC. Wide Voice, LLC v. FCC, 7
F.4th 796, 798–99 (9th Cir. 2021). These fees, however,
regularly exceeded the cost to the LEC, incentivizing LECs
to boost traffic on their networks through artificial means
called “access stimulation.” Great Lakes Commc’n Corp. v.
FCC, 3 F.4th 470, 472 (D.C. Cir. 2021). LECs originally
engaged in access stimulation by entering into revenue
sharing agreements with high-volume call service providers
(such as conference call lines), which agreed to direct calls
to the LECs’ local networks with high access rates. All Am.

1
 We have jurisdiction under 28 U.S.C. §§ 2342(1), 2344, and 47 U.S.C.
§ 402(a).
                    WIDE VOICE, LLC V. FCC                    7

Tel. Co. v. FCC, 867 F.3d 81, 85 (D.C. Cir. 2017). These
agreements allowed both the LECs and the high-volume call
service providers to collect significant profits while IXCs
paid the cost. In the Matter of Connect America Fund,
Report and Order and Further Notice of Proposed
Rulemaking, 26 FCC Rcd. 17663, 17874 ¶ 657 (2011). As
a result, IXCs were forced to spread expenses to consumers,
ultimately raising prices for the general public. Great Lakes,
3 F.4th at 476.
    In 2011, the FCC targeted access stimulation as part of a
comprehensive reform of its intercarrier compensation
regime. See generally Connect America Fund, 26 FCC Rcd.
at 17663, 17874–90 ¶¶ 656–701. In those newly adopted
rules, the FCC created a definition for access stimulation,
identifying the practice as when an LEC had (1) an “access
revenue sharing agreement” with a third party and (2) either
had three times more long-distance calls coming in
(“terminating”) than going out (“originating”), or more than
100 percent growth in monthly call minutes compared to the
previous year. Id. at 17676 ¶ 33. Under these rules, access
stimulating carriers’ rates were restricted to undermine any
financial incentive to inflate call traffic artificially. Id. at
17882–89 ¶¶ 679–98.
    To avoid qualifying as an access stimulator under the
2011 rules, some carriers ended their third-party revenue-
sharing agreements while others turned to tandem switching.
See Access Arbitrage Order, 34 FCC Rcd. at 9039 ¶ 11, 9053
¶ 44. Tandem switching permitted LECs to direct traffic
solely between carriers instead of delivering calls to
receiving parties (“end users”). Verizon Commc’ns, Inc. v.
FCC, 535 U.S. 467, 490 (2002). Because the 2011 rules did
not regulate tandem switching, IXCs still had to pay high
access rates when transferring calls to tandem switching
8                  WIDE VOICE, LLC V. FCC

LECs or “intermediate carriers,” which delivered calls to
LECs for delivery to end users. Access Arbitrage Order, 34
FCC Rcd. at 9039–40 ¶ 12. LECs took advantage of this
loophole in the 2011 rules by routing the majority of access
stimulation calls to two intermediate carriers in Iowa and
South Dakota in order to continue collecting high access
rates. Id. at 9041–42 ¶¶ 15–16.
    In response to these developments, the FCC revisited and
revised its access stimulation rules in 2019, releasing the
Access Arbitrage Order, which addressed the “evolving
nature” of access-stimulation. 34 FCC Rcd. 9035 (2019).
The Access Arbitrage Order provided that requiring IXCs to
pay tandem switching charges for access-stimulation traffic
was “unjust and unreasonable” in violation of § 201(b). Id.
at 9073–74 ¶ 92 (citing 47 U.S.C. § 201(b)). To further
combat these practices, the new rules prohibited access
stimulators from obtaining fees from IXCs and instructed
them to recover costs from high-volume calling service
providers instead. Id. at 9053 ¶ 42. In addition, the FCC
required access stimulators to pay the tandem-switching-
and-transport charges of their chosen intermediate carriers to
ensure that access stimulators were responsible for paying
for the part of the call path that they required IXCs to use.
Id. The FCC also expanded the scope of the rules by
changing the definition of access stimulation to include
LECs that operated without revenue-sharing agreements if
their traffic profile was unbalanced (6:1 terminating to
originating minutes). 47 C.F.R. § 61.3(bbb)(1). However,
to ensure that innocent intermediate carriers that were placed
in access stimulators’ call paths were not unfairly penalized,
the FCC also limited the definition of access stimulation to
carriers that only serve end users. Id.; Access Arbitrage
                       WIDE VOICE, LLC V. FCC                          9

Order, 34 FCC Rcd. at 9060 ¶ 57; see also 47 C.F.R.
§ 51.914(d).
    B. Factual Background
    Wide Voice is a nationwide, facilities-based LEC that
offers telecommunications services to its varied customers.
Wide Voice was founded in 2010 by Pat Chicas, who served
as its first CEO, and David Erickson. In 2014, Andrew
Nickerson was hired as president and CEO of the company.
However, Erickson remains involved as the settlor of a trust
that is the controlling owner of Wide Voice.
    Between 2012 to 2019, Wide Voice primarily served end
users while also providing tandem services. During that
period, Wide Voice mainly terminated calls to high-volume
voice applications, including free-to-the-caller conference-
calling providers, three of which were also owned and
managed by Erickson (collectively “Free Conferencing” 2).
    In 2019, however, Wide Voice rearranged its business
model, allegedly to comply with the FCC’s new rules and
“transition away from the access stimulation business” in
response to changes in the market. As a result, Wide Voice
stopped connecting calls to end users and began exclusively
providing tandem services. Wide Voice continued to carry
Free Conferencing’s high-volume, free-to-the-caller traffic,
but rather than terminating any calls directly to Free
Conferencing (and thus serving end users), Wide Voice sent
the traffic to a Voice-over-Internet-Protocol provider

2
 “Free Conferencing” includes, Free Conferencing Corporation, Carrier
X, LLC d/b/a Free Conferencing, and FreeConferenceCall.com, an
Internet application through which Free Conferencing Corporation
provides free calling services. All three entities were “largely own[ed]”
and managed by Erickson.
10                 WIDE VOICE, LLC V. FCC

(“VoIP”) called HD Carrier, LLC (“HD Carrier”), which is
also owned and managed by Erickson. HD Carrier then
terminated the calls to Free Conferencing. Thus, when an
individual called one of Free Conferencing’s services, the
call would be routed from the IXC to Wide Voice, which
would transfer it to HD Carrier, which would then connect
the call with Free Conferencing.
    Unlike Wide Voice, many LECs that had serviced Free
Conferencing and other high-volume applications did not
remodel their call paths following the Access Arbitrage
Order, and thus had no choice but to leave the access
stimulation business due to the increased cost of complying
with the Order. Their departure left Free Conferencing with
“an immediate need to migrate [the] traffic” that would have
come through these LECs. Free Conferencing migrated this
traffic to HD Carrier for termination. HD Carrier, in turn,
designated Wide Voice as one of its tandem service
providers to which the IXCs were to deliver the traffic. This
arrangement allowed Wide Voice to continue to bill IXCs
for tandem-switching-and-transport access charges on calls
delivered to HD Carrier, despite the Access Arbitrage Order.
Meanwhile, because other LECs had left the market, the
volume of calls that Wide Voice transferred to HD Carrier
for delivery to Free Conferencing significantly increased,
causing call congestion and leading to charges totaling over
$5 and $6 million annually.
     C. Procedural Background
    Wide Voice billed IXCs AT&T and Verizon for tariffed
tandem services for calls delivered to Free Conferencing.
Wide Voice claims these charges were permissible under the
Access Arbitrage Order as neither it nor HD Carrier
technically engaged in access stimulation because Wide
                    WIDE VOICE, LLC V. FCC                  11

Voice does not serve end users and HD Carrier is a VoIP
service provider rather than a common carrier, and thus is
not subject to the access stimulation rules.
     AT&T and Verizon disputed Wide Voice’s charges and
filed an informal complaint with the FCC in April 2020.
AT&T Corp., AT&T Servs., Inc., & MCI Commc’ns Servs.
LLC v. Wide Voice LLC, Memorandum Opinion and Order,
36 FCC Rcd. 9771, 9778 (2021) (“Order”). The parties,
however, were unable to resolve their dispute, and on
January 11, 2021, AT&T and Verizon filed a formal
complaint alleging eleven counts against Wide Voice. Id. In
its final order, pursuant to 47 U.S.C. § 208 (“§ 208”), the
FCC found that Wide Voice had violated § 201(b) and ruled
that Wide Voice “may not bill AT&T and Verizon in
connection with the traffic at issue . . . and must refund any
amounts AT&T and Verizon already have paid.” Order, 36
FCC Rcd. at 9779, 9787. The FCC found that Wide Voice’s
conduct was “unjust and unreasonable” in three respects:
“[1] by restructuring its business operations so that it could
impose tandem charges that it otherwise was not entitled to
bill (Count V); [2] by intentionally causing call congestion
in an effort to force the IXCs into commercial arrangements
that required the payment of tandem charges (Count I); and,
[3] for the same purpose, by unilaterally declaring a new
interconnection point that does not create a net public benefit
(Counts II and III).” Id. at 9779. The FCC then dismissed
the remaining counts and did not address whether Wide
Voice violated the Access Arbitrage Order. Id. at 9783
n.110.
    Importantly, with regard to its first ruling on Count V,
the FCC concluded that Wide Voice, in concert with closely
related companies, Free Conferencing and HD Carrier,
entered into a sham arrangement to rearrange traffic flows
12                  WIDE VOICE, LLC V. FCC

for the purpose of enabling Wide Voice to continue
imposing access charges, which it would otherwise be
unable to charge under the Access Arbitrage Order. Id. at
9784. The FCC premised its decision on two findings: (1)
Wide Voice, HD Carrier, and Free Conferencing were a
common enterprise; and (2) these closely related entities
rerouted traffic to evade the access stimulation rules. Id. at
9780, 9782.
    Wide Voice petitioned for reconsideration of the FCC’s
ruling. AT&T Corp., AT&T Servs., Inc., & MCI Commc’ns
Servs. LLC v. Wide Voice, LLC, Memorandum Opinion and
Order, 36 FCC Rcd. 9771 (2021) (“Reconsideration
Order”). The FCC dismissed the petition on procedural
grounds and, in the alternative, denied it on the merits. Id.
at 9879–80. Wide Voice timely petitioned for review of the
FCC’s merits decision but did not seek review of the
Reconsideration Order.
II.    Jurisdiction & Standard of Review
    As a federal agency, judicial review of the FCC’s actions
is governed by § 706 of the Administrative Procedure Act
(“APA”). 5 U.S.C. § 706(2)(A); FCC v. Prometheus Radio
Project, 141 S. Ct. 1150, 1158 (2021). Under § 706, we
must determine whether the agency’s decision was
“arbitrary, capricious, an abuse of discretion, or otherwise
not in accordance with law.” 5 U.S.C. § 706(2)(A). “The
scope of review under the ‘arbitrary and capricious’ standard
is narrow and a court is not to substitute its judgment for that
of the agency.” Motor Vehicle Mfrs. Ass’n v. State Farm
Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). “As a reviewing
court, we must consider whether the decision was based on
a consideration of the relevant factors and whether there has
been a clear error of judgment.” San Luis & Delta-Mendota
                   WIDE VOICE, LLC V. FCC                  13

Water Auth. v. Jewell, 747 F.3d 581, 601 (9th Cir. 2014)
(quotation marks and citation omitted). In addition, we
review the agency’s factual findings for “substantial
evidence,” which requires “more than a mere scintilla but
less than a preponderance; it is such relevant evidence as a
reasonable mind might accept as adequate to support a
conclusion.” Nat. Res. Def. Council v. U.S. Env’t Prot.
Agency, 31 F.4th 1203, 1206 (9th Cir. 2022) (quotation
marks and citation omitted).
    On the other hand, we review agencies’ interpretations
of statutes under the two-step Chevron test. Chevron U.S.A.
Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 842–843
(1984); see also Glob. Crossing Telecomms., Inc. v.
Metrophones Telecomms., Inc. (“Metrophones I”), 550 U.S.
45, 55 (2007) (applying Chevron analysis to FCC’s § 201(b)
construction). Chevron deference applies whether we are
interpreting a statute by rulemaking or adjudication. See
City of Arlington, Texas v. FCC, 569 U.S. 290, 307 (2013).
Under step one of Chevron, we must determine whether
Congress “has directly spoken to the precise question at
issue.” Chevron, 467 U.S. at 842. If “the statute is silent or
ambiguous with respect to [a] specific issue, the question for
the court is whether the agency’s answer is based on a
permissible construction of the statute.” Id. at 843. If so,
“we defer at step two to the agency’s interpretation so long
as the construction is a reasonable policy choice for the
agency to make.” Nat’l Cable & Telecomms. Ass’n v. Brand
X Internet Servs. (“Brand X”), 545 U.S. 967, 986 (2005)
(quotation marks and citation omitted).
14                 WIDE VOICE, LLC V. FCC

III.      DISCUSSION
       A. Section 201(b) Violations Are Not Limited to
          Explicit Rule Violations.
     Wide Voice contends that it has complied with, rather
than violated, the Access Arbitrage Order, and that without
an explicit rule violation, the FCC did not have the authority
to find its conduct “unjust and unreasonable” under § 201(b).
Wide Voice argues that the FCC’s interpretation of its
§ 201(b) authority is unreasonable and undeserving of
deference. See Chevron, 467 U.S. at 842. Wide Voice
asserts that Congress only delegated the agency adjudicatory
powers to find a § 201(b) violation where a carrier has
breached an existing regulation or order, and thus, that the
FCC exceeded its statutory authority. See 5 U.S.C.
§ 706(2)(B) (providing that courts may set aside agency
action found to be in “excess of statutory jurisdiction,
authority, or limitations, or short of statutory right”). We
disagree.
    It is well established that the FCC has broad discretion
to “administer the Communications Act through rulemaking
and adjudication.” Arlington, 569 U.S. at 307. While the
FCC, unlike a court, can “make new law protectively
through the exercise of its rule-making powers,”
adjudication is just as necessary as “[n]ot every principle”
“can or should be cast immediately into the mold of a general
rule.” SEC v. Chenery Corp., 332 U.S. 194, 202 (1947).
Adjudication empowers agencies to solve problems “despite
the absence of a relevant general rule” to “deal with the
problems on a case-to-case basis.” Id. at 202–03. In fact,
under § 208, the FCC must adjudicate a complaint regardless
of whether the claims would be better suited for rulemaking.
                   WIDE VOICE, LLC V. FCC                   15

47 U.S.C. § 208; see AT&T Co. v. FCC (“AT&T I”), 978
F.2d 727, 732 (D.C. Cir. 1992).
    The FCC’s determination here is no exception.
Section 201(b) requires that “[a]ll charges, practices,
classifications, and regulations for and in connection with
[interstate wire] communication service[s], shall be just and
reasonable.” 47 U.S.C. § 201(b). The Supreme Court has
affirmed that Congress intentionally left § 201(b) ambiguous
and “delegated to the Commission the authority to ‘execute
and enforce’ the Communications Act.” Brand X, 545 U.S.
at 980 (internal citations omitted). The Court has further
established that the FCC may address this ambiguity by
regulation or “orders with the force of law.” Metrophones I,
550 U.S. at 58; compare 73 Cong. Ch. 652, June 19, 1934
with 77 Cong. Ch. 295, May 31, 1938, 52 Stat. 588
(demonstrating that originally the FCC could only enforce
§ 201(b) through adjudications until 1938 when Congress
permitted the FCC to also prescribe rules as well).
    While “there are statutory constraints on the
Commission’s power” under § 201(b), Wide Voice’s
reading of the statute is too narrow.            Metrophones
Telecomms., Inc. v. Glob. Crossing Telecomms., Inc.
(“Metrophones II”), 423 F.3d 1056, 1068–69 (9th Cir.
2005), aff’d, 550 U.S. 45 (internal citations omitted).
Congress delegated the FCC authority to “fill” “gap[s]” in
interpreting § 201(b) that it could not otherwise anticipate or
address. Metrophones I, 550 U.S. at 58.
    The FCC exercised its authority under § 201(b) to hold
Wide Voice liable for circumventing its newly adopted rules
in the Access Arbitrage Order when the company devised a
workaround. See, e.g., AT&T Corp. v. F.C.C. (“AT&T II”),
317 F.3d 227, 232–33 (D.C. Cir. 2003) (affirming the FCC’s
16                 WIDE VOICE, LLC V. FCC

§ 201(b) adjudicative finding where the carriers’
arrangement clearly “was devised solely in order to
circumvent regulation”).        Contrary to Wide Voice’s
assertions, the FCC need not establish new rules prohibiting
the evasion of its existing rules to find a § 201(b) violation;
to do so would belie common sense. See Shalala v.
Guernsey Mem’l Hosp., 514 U.S. 87, 96–97 (1995) (“The
APA does not require that all the specific applications of a
rule evolve by further, more precise rules rather than by
adjudication. . .”).
    Further, Wide Voice’s contention that courts require a
rule violation to find conduct unjust and unreasonable under
§ 201(b) is simply unfounded. While the Supreme Court in
Metrophones I held that not “every violation of FCC
regulations is [necessarily] an unjust and unreasonable
practice[,]” the opposite does not follow. See 550 U.S. at 56.
The cases Wide Voice relies on do not suggest otherwise, as
they only speak to when private plaintiffs may sue in federal
court for damages arising from violations of FCC rules. See
id. at 53 (holding that plaintiffs may sue for damages where
the carriers’ conduct amounted to unjust and unreasonable
conduct under an FCC rule); Stuart v. Glob. Tel*Link Corp.,
956 F.3d 555, 561–62 (8th Cir. 2020) (affirming that claims
alleging unjust and unreasonable charges could not proceed
in district court because they lacked the necessary predicate
action by the agency); Havens v. Mobex Network Servs.,
LLC, 820 F.3d 80, 89 (3d Cir. 2016) (same). This has no
bearing on the FCC’s own authority to find a practice unjust
and unreasonable under § 201(b) in an adjudicatory
proceeding.
    Finally, the FCC’s construction of § 201(b) is reasonable
because it is consistent with the agency’s longstanding
precedent. See Brand X, 545 U.S. at 986 (“[W]e defer at step
                      WIDE VOICE, LLC V. FCC                       17

two to the agency’s interpretation [of an ambiguous statute]
so long as the construction is a reasonable policy choice for
the agency to make.”) (quotation marks and citation
omitted). Contrary to Wide Voice’s depiction, the FCC’s
finding is not novel; the FCC has long relied on § 201(b) in
adjudications to address unjust and unreasonable practices
without finding an explicit rule violation. See In the Matter
of Total Telecomms. Servs., Inc, 16 F.C.C. Rcd. 5726, 5733
(2001) (“Total Tel Order”) (rejecting the argument that
carriers did not violate § 201(b) because their relationship
complied with FCC regulations); AT&T Corp. v. Alpine
Commc’ns, LLC, Memorandum Opinion and Order, 27 FCC
Rcd. 11511, 11530 (2012) (“Alpine Order”) (finding a
§ 201(b) violation based “not upon an overarching rule, but
upon the particular stipulated factual record in [the] case”);
In the Matter of AT&T Corp., Complainant, 28 F.C.C. Rcd.
3477, 3491 (2013) (“All American Order”) (finding a
§ 201(b) violation where carriers acted unjustly and
unreasonably to circumvent the rules). 3 In fact, the FCC has
already rejected this same argument. See All American
Order, 28 FCC Rcd. at 3490 (“[T]he Commission has
awarded damages (or permitted the complainant to seek
damages) under Section 208 for violations of Section 201(b),
even where no independent violation of a particular rule was
found.”). Thus, because the FCC’s interpretation of § 201(b)
is perfectly “reasonable,” we defer to the agency in holding
that the FCC may find a carrier’s practice “unjust and

3
  See also In the Matter of Sti Telecom Inc., 30 FCC Rcd. 11742, 11744
(2015) (finding a § 201(b) violation even though “the Commission has
not adopted clear rules related to the advertising of prepaid calling
cards”); In Re NOS Commc’ns, Inc., 16 FCC Rcd. 8133, 8141–42 (2001)
(same result).
18                 WIDE VOICE, LLC V. FCC

unreasonable” without an explicit rule violation.         See
Chevron, 467 U.S. at 845.
     B. The FCC Employed a Well-established, Legally
        Sound Definition of “Sham.”
    Wide Voice argues that the FCC’s use of the term
“sham” to characterize its new business operation is
unsupported by precedent and, thus, that the agency relied
on a novel and legally incognizable term, which rendered its
decision “arbitrary and capricious.” Wide Voice challenges
the FCC’s reliance on Total Tel Order, All-American Order,
and Alpine Order in its finding that Wide Voice, Free
Conferencing, and HD Carrier entered into a “sham”
practice. See Order, 36 FCC Rcd. at 9780, 9786. Wide
Voice contends that according to these cases, neither it, the
other entities, nor their business arrangement could possibly
constitute a “sham.” Rather, Wide Voice asserts that the
precedent establishes that a “sham” operation must involve
(1) the creation of new entities (2) that lack proper business
purpose and (3) have overlapping operations with another
company. See Total Tel Order, 16 FCC Rcd. at 5733
(finding a “sham” business scheme where one company was
created for the sole purpose of extracting inflated access
charges); All-American Order, 28 FCC Rcd. at 3487–88
(finding a sham arrangement where new LECs were created
to generate higher rates and had no intention of becoming
bona fide operations). As Wide Voice, HD Carrier, and Free
Conferencing were all established for proper business
purposes before the call traffic at issue, Wide Voice argues
that each of these companies fails to meet the FCC’s own
definition, and therefore, the FCC’s decision is
unreasonable.
                   WIDE VOICE, LLC V. FCC                  19

     While an “‘[u]nexplained inconsistency’ between
agency actions is ‘a reason for holding an interpretation to
be an arbitrary and capricious change,’” there is no such
inconsistency here. Organized Vill. of Kake v. USDA, 795
F.3d 956, 966 (9th Cir. 2015) (en banc) (quoting Brand X,
545 U.S. at 981). Although some prior orders involved the
creation of new shell companies, these facts were in no way
critical to the FCC’s § 201(b) findings. Rather, throughout
these decisions, the FCC focused on the carriers’ efforts to
circumvent the rules through artificial means, whether
through fake entities or other sham-like schemes. See Total
Tel Order, 16 FCC Rcd. at 5734 (finding a § 201(b) violation
where two highly intertwined LECs devised a workaround
to “charge indirectly, through a sham arrangement, rates that
it could not charge directly through existing tariffs”); All-
American Order, 28 FCC Rcd. at 3490–91 (finding a
§ 201(b) violation where an LEC created a sham
arrangement with competitive LECs and high-volume call
providers to inflate access revenues and charge IXCs without
violating any rules); Alpine Order, 27 FCC Rcd. at 11529
(although not explicitly addressing sham arrangements,
finding a § 201(b) violation where LECs coordinated to
move all their interconnection locations with IXCs to
increase mileage charges without explicitly violating any
rules). By finding that Wide Voice’s actions constituted a
“sham,” the FCC reasonably considered Wide Voice’s
conduct in light of these analogous cases, as all were accused
of devising schemes to indirectly inflate revenue in evasion
of the rules. See Order, 36 FCC Rcd. at 9780, 9784. Thus,
the FCC’s use of “sham” here was “a reasonable exercise of
its discretion” as it mirrored, rather than deviated from,
earlier precedent. See California v. FCC, 75 F.3d 1350,
1358 (9th Cir. 1996) (internal citations omitted).
20                  WIDE VOICE, LLC V. FCC

     C. Wide Voice Rearranged its Business Solely to
        Circumvent the Arbitrage Order.
    Wide Voice argues that even if the FCC has the authority
to find it liable for a sham arrangement under § 201(b), the
agency’s ruling that Wide Voice only restructured its
business to evade the Access Arbitrage Order was
unfounded, and therefore, arbitrary and capricious. Wide
Voice challenges the FCC’s two primary findings, arguing
that (1) the FCC had no basis to find that Wide Voice, HD
Carrier, and Free Conferencing were a common enterprise,
and (2) the FCC improperly assumed that these entities
restructured their call traffic to evade the rules, when in fact
they did so for proper business purposes. We disagree.
    First, the FCC reasonably determined that Wide Voice,
HD Carrier, and Free Conferencing were closely related,
non-independent entities. Order, 36 FCC Rcd. at 9780–82.
Substantial evidence demonstrates that these companies
were “highly intertwined” as the evidence establishes that
David Erickson was significantly involved in the operation
of each company. Id. at 9780–81. In addition to being the
owner and manager of HD Carrier, Erickson also owns Free
Conferencing and founded Wide Voice. Id. at 9781. Despite
Wide Voice’s claims that Erickson has severed ties with the
company, the record shows that Erickson is the settlor of the
controlling trust of Wide Voice. Id. Erickson concedes that
he has “personal knowledge” of Wide Voice’s current
business operations, including the company’s strategic
direction. Id. Furthermore, Wide Voice’s management is
enmeshed with the other organizations, as Wide Voice’s
current CEO, Andrew Nickerson, has an email address at
Free Conferencing. Id. at 9782. Finally, some of the
companies share customers in addition to administrative and
                   WIDE VOICE, LLC V. FCC                   21

technical support services, further undermining Wide
Voice’s claims of independence. Id.
    Second, the FCC reasonably determined that Wide
Voice, HD Carrier, and Free Conferencing intentionally re-
routed traffic to evade the Access Arbitrage Order. Id. at
9782–84. Foremost, Wide Voice admits that it shifted its
business model in response to the Access Arbitrage Order
by stopping service to end users and exclusively providing
tandem switching after operating as an access stimulator. Id.
at 9783. Furthermore, there is substantial evidence that at
the same time Wide Voice transitioned its business, all three
entities changed their call path in the following ways: (1)
Free Conferencing moved its high-volume traffic, which had
previously been directed to Wide Voice and other access
stimulating LECs, to HD Carrier and (2) HD Carrier
delegated Wide Voice as its tandem provider. Id. at 9783–
84. Under this new model, Wide Voice and HD Carrier were
not subject to the Access Arbitrage Order and Wide Voice
was free to continue collecting high tandem access rates
from IXCs. Id. at 9784. In addition, Wide Voice’s decision
to shift its operations coincided with other access stimulating
LECs leaving the business rather than complying with the
Access Arbitrage Order. Id. This development enabled
Wide Voice and HD Carrier to assume Free Conferencing’s
and other high-volume call providers’ traffic, allowing this
common enterprise to dramatically increase its traffic
without bearing the cost. Id. at 9783–84. In light of this
evidence, the FCC reasonably concluded that Wide Voice,
in coordination with HD Carrier and Free Conferencing,
intentionally shifted its operations to circumvent the Access
Arbitrage Order.
    Wide Voice’s alternative narrative does not convince us
otherwise. Wide Voice contends that it restructured its
22                 WIDE VOICE, LLC V. FCC

business to comply with, rather than evade, the FCC’s new
rules. While the FCC encouraged access stimulators to
adjust their practices to comply with the new rules, this was
not an invitation to contravene the main purpose of the
Access Arbitrage Order. Access Arbitrage Order, 34 FCC
Rcd. at 9069 ¶ 79. The FCC’s central aim in promulgating
the rules was to prevent access stimulating LECs from
imposing costs on IXCs through tandem switching. Id. at
9079 ¶ 104. As Wide Voice blatantly sought to continue
burdening IXCs while avoiding financial responsibility for
its own call path through a technicality, the FCC had “cogent
reasons” for discrediting Wide Voice’s good faith
arguments. See Shire v. Ashcroft, 388 F.3d 1288, 1295 (9th
Cir. 2004); Order, 36 FCC Rcd. at 9785. Thus, as the FCC’s
two findings were rationally connected to substantial
evidence in the record, the FCC reasonably concluded that
“Wide Voice in concert with closely related companies,
acted to evade the Commission’s access stimulation rules by
rearranging traffic flows to preserve the ability to impose
tandem access charges on IXCs that it otherwise could not
charge.” Order, 36 FCC Rcd. at 9780.
    Finally, Wide Voice challenges the FCC’s finding that
but-for “reorganiz[ing] operations so that the traffic
terminates to HD Carrier instead of Wide Voice’s end
offices, the traffic would have triggered the revised access
stimulation rule” and that “Wide Voice itself would have
been responsible for the charges under the revised rule.” Id.
at 9784. Wide Voice insists that the FCC’s supposed
hypothetical rule violation was not possible because it is not
bound by the Access Arbitrage Order. Wide Voice clarifies
that (1) it could not qualify as an access stimulator because
it no longer serves end users nor has a revenue-sharing
agreement with high-volume call providers and (2) HD
                   WIDE VOICE, LLC V. FCC                   23

Carrier could not be an access stimulator because it is a VoIP
service provider and thus not subject to the new rules. In
addition, Wide Voice argues that the FCC failed to prove
that it has met or would meet the requisite traffic ratios, and
thus, there is no evidence it “would have” triggered the
Access Arbitrage Order.
     These arguments miss the mark. Contrary to Wide
Voice’s depiction, the FCC did not find or even suggest that
Wide Voice’s new business arrangement meets the
definition of an access stimulator under the Access Arbitrage
Order. Id. at 9783 n.110. Rather, the FCC reasonably
concluded that absent Wide Voice’s workaround, Wide
Voice, under its previous business model, would likely have
triggered the new rules. Id. at 9784. This is a commonsense
interpretation of the facts as even Wide Voice admitted to
being in the “access stimulation business” prior to the FCC’s
release of the Access Arbitrage Order. Id. at 9779. Thus,
we need not engage in speculation as Wide Voice suggests
nor assess evidence of traffic ratios. Because the record
establishes that Wide Voice, under its prior model, would
have been prohibited from charging IXCs access charges for
its call traffic under the Access Arbitrage Order, the FCC’s
finding was reasonable. Id. at 9784.
   D. The FCC Afforded Wide Voice Due Process.
    Finally, Wide Voice asserts that even if the FCC was
permitted to find its conduct “unjust and unreasonable,” it
did not have fair notice that its practices were unlawful, and
therefore, the FCC violated its right to due process. Wide
Voice contends that it neither had reason to believe that the
FCC could make a § 201(b) finding without a rule violation
nor any notice that its actions could constitute a “sham”
practice in light of the FCC’s precedent. Wide Voice claims
24                  WIDE VOICE, LLC V. FCC

it was blindsided by the FCC’s decision as it was merely
attempting to comply with the Access Arbitrage Order yet
was retroactively penalized based on an unforeseeable
wrong.
     Under the APA, we may “set aside administrative action
where [it is] contrary to constitutional right.” 5 U.S.C.
§ 706(2)(B). Because Wide Voice has not shown that its due
process rights were violated, there is no basis to set aside the
FCC’s decision. As discussed earlier, we are not persuaded
that the FCC’s actions here are novel. The FCC has an
established precedent of both finding § 201(b) violations in
the absence of a rule violation, see supra Section III(A), and
explicitly holding carriers accountable for “sham”
operations that circumvent its rules, see supra Section III(B).
Furthermore, Wide Voice’s assertions of good faith
compliance are not persuasive. See supra Section III(C).
Indeed, Wide Voice was involved in the rulemaking process
that resulted in the Access Arbitrage Order, and thus, was
aware that the FCC sought to preclude LECs from imposing
access stimulation tandem switching costs on IXCs. There
can be no doubt that it had “sufficient notice as to what
behavior complies with the law.” See United States v. AMC
Ent., Inc., 549 F.3d 760, 768 (9th Cir. 2008). Wide Voice
thus had “fair notice” that rearranging its business model and
call path to avoid qualifying as an access stimulator, while
still collecting high access charges from IXCs for
performing tandem switching, would constitute “forbidden”
conduct in light of the Access Arbitrage Order. See FCC v.
Fox Television Stations, Inc., 567 U.S. 239, 253 (2012)
(internal citations omitted); Order, 36 FCC Rcd. at 9786–
9787.
    Wide Voice lastly calls attention to the FCC’s current
rulemaking on whether VoIP service providers, like HD
                   WIDE VOICE, LLC V. FCC                  25

Carrier, may be subject to access stimulation rules. See
Further Notice of Proposed Rulemaking ¶ 17, VoIP FNPRM
(FCC Aug. 6, 2021). Because the FCC’s position on this
matter is unsettled, Wide Voice contends it has been
deprived of due process as its new business arrangement
may not violate any new rules adopted by the FCC. This
argument is meritless.
     The FCC’s proposed rulemaking on VoIP service
providers has little bearing on this case. Whether the FCC
determines that VoIP providers may qualify as access
stimulators is irrelevant because the FCC did not find that
HD Carrier was an access stimulator nor that it violated the
Access Arbitrage Order. Order, 36 FCC Rcd. at 9783 n.110.
Rather, the FCC found that Wide Voice, not HD Carrier,
violated § 201(b) by using its knowledge that the FCC
currently does not subject VoIP providers to the Access
Arbitrage Order to devise a workaround of the rules. Id. at
9784–85. As the record demonstrates that Wide Voice was
not only aware of this loophole, but that it took advantage of
it, we fail to see any due process violations. Id.
IV.     CONCLUSION
    Because the FCC’s decision finding that Wide Voice
violated § 201(b) “by restructuring its business operations so
that it could impose tandem charges that it otherwise was not
entitled to bill” was reasonable and lawful, we deny Wide
Voice’s petition for review. Id. at 9779.
      PETITION DENIED.