New York & Public Service Commission v. Federal Communications Commission
Docket: Docket No. 99-4205
Court: Court of Appeals for the Second Circuit; September 28, 2001; Federal Appellate Court
Improvements in technology have led to increased communication options, resulting in a shortage of telephone numbers and the necessity for additional area codes, particularly in populous regions like New York City, which has caused public anxiety. New York State and the New York Public Service Commission (NYPSC) contest the Federal Communications Commission's (FCC) authority under rule 47 C.F.R. 52.19 (2000) to delegate area code relief decisions to states and mandate ten-digit dialing for local calls in areas with overlay area codes. They also challenge the FCC's refusal to grant a waiver for New York City from this rule. The court concludes that the FCC acted within its authority in both promulgating the rule and denying the waiver, affirming the FCC's decisions and rejecting the NYPSC's petition.
The North American Numbering Plan (NANP) underpins telecommunications in the U.S., Canada, and certain Caribbean nations, featuring ten-digit telephone numbers divided into area codes, central office codes, and line numbers. Developed by AT&T and Bell Laboratories in the 1940s, the NANP aimed to standardize dialing and support an integrated nationwide network. Initially, community size influenced the number of digits required to place a call, leading to various dialing systems over the decades, including the transition to seven-digit dialing in the 1960s, which faced public opposition. After AT&T's divestiture in 1984, NANP administration shifted to NeuStar, Inc.
Area code relief refers to the process of reallocating central office codes when existing area codes are nearing depletion, often resulting in the introduction of a new area code. There are three primary methods for implementing area code relief:
1. **Geographic Area Code Split**: This approach divides an area experiencing a shortage into two or more geographic regions.
2. **Boundary Realignment**: This method shifts the boundary lines between adjacent area codes to transfer unassigned codes to areas with limited availability.
3. **Area Code Overlay**: This involves introducing a new area code that serves the same region as an existing one.
The New York Public Service Commission (NYPSC) opted for the area code overlay method in New York City, which has led to controversy.
The Telecommunications Act of 1996 amended the Communications Act of 1934 to promote competition and reduce regulation in the telecommunications sector, aiming for lower prices and better service quality. The Act eliminated state-enforced local exchange monopolies, imposed obligations on local exchange carriers (LECs) to facilitate market entry, and established section 251, which includes provisions for "Interconnection." This section mandates the creation of impartial entities for telecommunications numbering administration, granting the Federal Communications Commission (FCC) exclusive jurisdiction over relevant aspects of the North American Numbering Plan, with the possibility of delegating authority to state commissions or other entities.
In August 1996, the FCC established rules under the Telecommunications Act of 1996 related to area code management, specifically delegating part of its jurisdiction over the North American Numbering Plan (NANP) to state commissions. The FCC authorized states to handle new area code implementations, citing their understanding of local conditions. While prohibiting service-specific overlays, the FCC allowed overlay area codes, emphasizing their benefits such as ease of implementation and avoiding geographic splits that could result in an area code not serving any neighborhoods.
The FCC outlined key objectives for numbering administration, including efficient resource availability and impartiality towards different industry segments and technologies. It mandated that overlay plans provide existing telecommunications carriers access to at least one central office code from the existing area code 90 days before a new overlay is introduced, aimed at mitigating anti-competitive effects.
Crucially, the FCC determined that all-services overlay plans must include a requirement for mandatory 10-digit dialing for all customers within the new area code area. This measure was intended to prevent dialing disparity, which could arise if users with the old area code continued to dial 7 digits while those with the new overlay had to dial 10 digits, potentially leading to confusion among customers.
Customers may be discouraged from switching telecommunications carriers due to new entrants needing to assign numbers in a new overlay area code, resulting in more frequent 10-digit dialing compared to the incumbent's 7-digit dialing. This requirement aims to prevent anti-competitive issues associated with all-services area code overlays. The FCC identified that incumbent local exchange carriers (LECs) have advantages, such as the ability to "warehouse" central office codes and reclaim old numbers, which new entrants do not. While the FCC delegated authority to state commissions for determining methods of area code relief and initiating planning, it retained control over overall number allocation to ensure a uniform system for efficient telecommunications service delivery. The FCC acknowledged states’ roles prior to the 1996 Act and allowed them to implement or modify local dialing patterns, provided they comply with the rule mandating 10-digit dialing for all calls in areas with overlaid codes. The FCC's rule permits state commissions to manage new area code introductions, including decisions on geographic splits or overlays, with the stipulation that mandatory 10-digit dialing must be in place at the time of an overlay's implementation. New York filed a petition against the 10-digit dialing rule, citing potential consumer costs, but the NYPSC ultimately decided to proceed with an overlay area code to address central office code shortages in New York City, despite acknowledging concerns about the dialing requirement.
The NYPSC implemented local number portability to allow customers to retain their phone numbers and area codes when switching providers, and introduced number pooling to allocate phone numbers in small blocks to both incumbent and competitive Local Exchange Carriers (LECs). On January 9, 1998, the NYPSC filed a Supplemental Petition for Reconsideration, arguing against the necessity of 10-digit dialing for competition in New York City and asserting that the FCC lacked jurisdiction to impose such a requirement. Concurrently, the NYPSC requested an expedited waiver of the 10-digit dialing rule, citing inconveniences and reiterating its position on competition.
On July 20, 1998, the FCC denied a permanent waiver but granted a temporary waiver, allowing area code overlay without 10-digit dialing until April 1, 1999. Subsequently, New York implemented area code overlays while maintaining 7-digit dialing for local calls. On August 14, 1998, the NYPSC sought expedited review of the FCC's denial of a permanent waiver. In March 1999, the NYPSC petitioned for a writ of mandamus to compel the FCC to address its earlier requests. The Court stayed enforcement of the 10-digit dialing requirement until the FCC ruled on the NYPSC's petitions or the Court decided the writ.
On October 21, 1999, the FCC denied the NYPSC’s requests and upheld the requirement for 10-digit dialing in overlay areas, emphasizing that this was necessary for competition, as new entrants would face dialing disparities. The FCC asserted its jurisdiction and authority over numbering administration, citing the 1996 Act, and dismissed concerns over customer confusion and cost implications associated with 10-digit dialing. The NYPSC's arguments that local number portability could mitigate dialing disparities were rejected. Following the FCC's order, the NYPSC sought a 10-month extension of the stay, which was granted with conditions to maintain number portability and pooling. As a result, New York City has adopted overlay area codes but has not enforced mandatory 10-digit dialing.
Exclusive jurisdiction is held to review, modify, or invalidate final orders of the FCC as permitted under section 402(a) of title 47 and 28 U.S.C. 2342 (2001). The NYPSC's petition for review was timely, filed within thirty days of the Third Order's public notice in the Federal Register, in accordance with 47 U.S.C. 402(c, 405; 47 C.F.R. 1.4(b)(1).
The FCC's authority to implement the 10-digit dialing rule in overlay regions is based on section 251(e) of the Telecommunications Act of 1996, which mandates the Commission to oversee telecommunications numbering and its equitable distribution, with exclusive jurisdiction over relevant aspects of the North American Numbering Plan. The Commission's rule-making authority is further supported by section 201(b) of the Communications Act of 1934, allowing the FCC to establish rules in the public interest, a provision upheld by the Supreme Court in AT&T.
However, section 152(b) of the Communications Act, which limits FCC jurisdiction over intrastate communication services, remains intact. The NYPSC challenges the FCC's jurisdiction over the 10-digit dialing rule, arguing it conflicts with section 152(b) by infringing on state authority over local dialing practices. Conversely, the FCC and industry intervenors assert that section 152(b) does not apply in instances where Congress has expressly granted the FCC jurisdiction over intrastate matters, as established in section 251(e).
Federal preemption of state law can occur through explicit Congressional intent, inferred intent where federal regulation does not allow for state regulation, or when state law conflicts with federal law. The Supreme Court, in *Louisiana Public Service Commission v. Federal Communications Commission*, emphasized that preemption is not assumed in areas traditionally governed by states unless Congress clearly indicates otherwise. Before the Telecommunications Act of 1996, Congress did not express such intent regarding intrastate telephone communication, and section 152(b) suggested strong opposition to preemption. The Court ruled that for the FCC to act in intrastate matters, there must be clear statutory language overriding section 152(b). The 1996 Act significantly changed the regulatory framework, confirming that federal regulation of local telecommunications competition has indeed shifted from state control. It was noted that post-1996, section 152(b) may have diminished practical relevance due to Congress extending the Communications Act into local competition. The interpretation of "Commission jurisdiction" clarified that while jurisdiction follows where the Act applies, it does not grant ancillary jurisdiction in areas outside its scope. However, Congress explicitly granted the FCC "exclusive jurisdiction" over the North American Numbering Plan through section 251(e), providing the necessary intent to override section 152(b) regarding intrastate service. The 1996 Act's section 251, focused on competitive markets, further affirms the FCC's authority over intrastate services related to numbering administration. The next step involves determining the specific scope of "North American Numbering Plan" and "numbering administration" as defined by Congress, particularly whether it allows the FCC to regulate the number of digits dialed for local calls.
The Supreme Court's framework for evaluating an administrative agency's jurisdiction includes the Chevron two-step analysis, as established in FDA v. Brown & Williamson Tobacco Corp. In cases where an agency interprets a statute it administers, the first step is to determine if Congress has explicitly addressed the issue at hand. If Congress has made its intent clear, that intent must be honored. If the legislative intent is ambiguous, deference is given to the agency's reasonable interpretation.
In this context, the New York Public Service Commission (NYPSC) argues that Congress did not explicitly grant the Federal Communications Commission (FCC) authority to regulate local dialing patterns, suggesting that this implies a lack of jurisdiction for the FCC in this area. The NYPSC maintains that section 251(e) of the Telecommunications Act does not mention local dialing, thus reinforcing state authority over intrastate matters.
However, the excerpt highlights that the absence of specific language in the statute does not necessarily clarify Congress's intent. The 1996 Act is described as ambiguous and potentially contradictory. The Supreme Court has noted that ambiguities within statutes are often intended to be resolved by the implementing agency. Therefore, as long as the FCC's interpretation of "numbering administration" and "North American Numbering Plan" is reasonable, it should be upheld.
The FCC, supported by industry intervenors, argues that establishing local dialing patterns falls under "numbering administration." This interpretation is deemed logical, as uniformity in telephone numbers, including dialing patterns, is essential for the numbering system's functionality. The NYPSC itself has requested investigations into new dialing patterns, further illustrating the interconnectedness of numbering administration and dialing patterns. The conclusion reached is that the FCC’s interpretation of "numbering administration" as encompassing both local and interstate dialing patterns is reasonable and should be upheld as a valid interpretation of section 251(e).
The FCC historically played a role in managing the North American Numbering Plan (NANP) to ensure fair and efficient access to numbering resources for telecommunications providers, even before the 1996 Act granted it exclusive jurisdiction. The FCC's objectives included facilitating market entry by providing timely access to numbering resources, ensuring no undue advantage or disadvantage to any industry segment, and allowing easy consumer access to the public switched telephone network. The FCC rejected proposals that would discriminate against specific technologies, emphasizing the impracticality of separating numbering plans for local and interstate use.
The New York Public Service Commission (NYPSC) challenged the FCC's interpretation of its jurisdiction over local dialing patterns, arguing these are distinct from the NANP, which they claim only pertains to telephone number supply. The NYPSC cited the Eighth Circuit's decision in *California v. FCC* to support its position that local dialing patterns fall outside NANP's scope. However, the Eighth Circuit did not address the FCC's authority under section 251(e) in that case, as the challenge was not ripe.
The NYPSC's reliance on an industry document regarding numbering and dialing procedures was deemed misplaced. The document's definition of dialing procedures does not undermine the FCC’s conclusion that dialing patterns are included within the NANP. The FCC's interpretation is reinforced by the Chevron doctrine, which defers to agency interpretations that are permissible under the statute. Given the pro-competitive intent of the 1996 Act and the Supreme Court's affirmation of the FCC's regulatory authority over local telecommunications markets, the FCC's jurisdiction over local dialing patterns, including the 10-digit dialing requirement, is deemed reasonable. As a result, the FCC's interpretation of "numbering administration" and the NANP is upheld as valid under the 1996 Act.
The FCC has the jurisdiction to establish rules regarding local dialing patterns, specifically the 10-digit dialing rule. The New York Public Service Commission (NYPSC) contends that the FCC's rule exceeds its authority, while the City of New York argues that the rule is an unreasonable exercise of rule-making power. The FCC asserts that the City’s argument is irrelevant as it was not presented by the NYPSC. The FCC's rule is deemed not arbitrary or capricious; it aims to prevent anti-competitive effects by ensuring that all customers, regardless of their service provider, use 10-digit dialing. This is essential to avoid disadvantaging new market entrants who would require customers to dial 10 digits, unlike those with incumbent local exchange carriers (LECs) who could continue to use 7-digit dialing for local calls.
The FCC rejected the NYPSC's claim that long-term local number portability would mitigate competitive disparities, finding that incumbents have greater access to old area code numbers. Although the transition to 10-digit dialing may initially inconvenience the public, the FCC believes this confusion will subside quickly. The NYPSC has implicitly acknowledged the FCC's exclusive jurisdiction over area code assignments, as it can only implement overlay area codes due to the FCC's delegation of authority under § 251(e). The FCC’s mandate for 10-digit dialing is viewed as a valid condition of this delegation, reinforcing its authority to regulate area code relief methods. The argument that the FCC could have assigned specific methods of area code relief or prohibited overlays altogether supports the conclusion that the 10-digit dialing rule is a reasonable exercise of the FCC's authority.
The Court requires that an agency must demonstrate it has reviewed relevant data and established a rational connection between the facts and its decisions. An agency's action can only be overturned if it considered inappropriate factors, neglected key aspects of the issue, provided explanations that contradict the evidence, or made decisions so implausible that they cannot be justified by expertise. In the case of the FCC's rule, it was determined that the FCC appropriately considered all relevant factors, and thus, its decision was not arbitrary or capricious.
Regarding the denial of a waiver to the New York Public Service Commission (NYPSC), waivers may be granted by the FCC for good cause if strict compliance would not serve the public interest. Challenging such a denial is difficult, as the applicant must prove that the Commission's rationale was insubstantial. The FCC deemed the Common Carrier Bureau's denial of NYPSC's waiver request consistent with existing regulations and policies. The NYPSC contended that the FCC wrongly treated its waiver request as merely an appeal and did not adequately address its merits, labeling the FCC's handling as arbitrary and capricious. However, the FCC did briefly address the merits and upheld the Bureau’s denial.
The NYPSC argued that the requirement for 10-digit dialing is unnecessary in New York City due to its competitive local telephone market, referencing a 1999 FCC finding that confirmed New York's openness to competition. The NYPSC also claimed that the introduction of permanent local number portability (LNP) would mitigate anti-competitive concerns by allowing customers to retain their phone numbers when switching providers.
The New York Public Service Commission (NYPSC) argues for non-discriminatory number assignment, asserting that competitive local exchange carriers (LECs) should not have their new customers disadvantaged in receiving telephone numbers in newly established overlay area codes compared to Bell Atlantic, the incumbent LEC. Despite Bell Atlantic controlling more numbers in existing area codes, the NYPSC claims competitors have an adequate supply of unused numbers relative to their market share. Joined by intervenors CFA and NYC, the NYPSC contends that mandatory 10-digit dialing would impose unnecessary costs and inconvenience on New York City residents, particularly concerning the reprogramming of automatic dialing devices.
The Federal Communications Commission (FCC) reviewed and dismissed these arguments, determining that the refusal to grant a waiver was not an abuse of discretion. The FCC acknowledged concerns regarding competition and the confusion associated with dialing disparities between old and new area codes. It noted that the implementation of any new area code generally leads to initial confusion for both local customers and those calling from outside the area.
Furthermore, the FCC indicated that many arguments presented by the NYPSC in support of the waiver application had already been addressed and rejected in prior rulings. Consequently, the Common Carrier Bureau's decision, which the FCC upheld, adequately considered all NYPSC's arguments, leading to the affirmation of the FCC's jurisdiction over local dialing and the enforcement of mandatory 10-digit dialing for areas utilizing area code overlays. The NYPSC's request for review of the FCC's orders was denied. The excerpt also references public concern over area code changes, illustrated by a cultural reference from "The Simpsons" highlighting the societal impact of such changes.
Romero highlights several parties involved in a legal action regarding telecommunications numbering administration. Key intervenors supporting the New York Public Service Commission (NYPSC) are the New York State Consumer Protection Board, the City of New York, and the Consumer Federation of America. Conversely, AT&T Corp., MCI Worldcom, and U.S. West represent the industry intervenors backing the FCC's position. Other intervenors, such as Airtouch Paging and the Missouri Public Service Commission, entered appearances but did not file briefs. The excerpt references a prior Supreme Court case (AT&T Corp. v. Iowa Utilities Board, 1999) relevant to the rules in question, with the Third Order published in the Federal Register on November 18, 1999.
The analysis presumes that "numbering administration" has traditionally been a state responsibility, though this remains debatable. Historically, AT&T and incumbent local exchange carriers (LECs) managed numbering tasks, with state commissions primarily approving their plans. The City of New York's assertion that the FCC lacks authority to implement certain regulations, based on City of Dallas v. FCC, is dismissed. The court in City of Dallas ruled against FCC cable regulations due to statutory "plain meaning," which does not apply here, allowing for Chevron deference to the FCC's interpretations of its jurisdiction.
Industry intervenors argue that the FCC's authority over telecommunications numbering encompasses both intrastate and interstate communications, as defined by federal statutes. They contend that the FCC's mandate to ensure equitable access to numbers supports its jurisdiction over local dialing, emphasizing that without mandatory 10-digit dialing, new area code numbers may be devalued compared to older ones, disadvantaging new carriers against incumbents.
The FCC's jurisdiction is firmly established under its exclusive authority over portions of the North American Numbering Plan relevant to the United States, as specified in 47 U.S.C. § 251(e)(1). The argument by the CPB that local dialing constitutes a "practice" under 47 U.S.C. § 152(b) and is outside FCC jurisdiction under § 251(e) is rejected. The FCC holds explicit jurisdiction through § 251(e), which is not limited by § 152(b). Additionally, the NYPSC's argument to interpret § 251(e) in conjunction with § 271, which outlines requirements for Bell operating companies (BOCs) entering the long-distance market, is noted but found lacking. Specifically, while the NYPSC correctly identifies that § 271 addresses nondiscriminatory access to telephone numbers pending the establishment of telecommunications numbering administration guidelines, it fails to justify its relevance to the current jurisdictional issue or to demonstrate that references to numbering administration exclude local dialing patterns.
