Central Texas Telephone Cooperative, Inc. v. Federal Communications Commission
Docket: No. 03-1405
Court: Court of Appeals for the D.C. Circuit; March 10, 2005; Federal Appellate Court
Petitioners, who are rural telephone carriers, are seeking judicial review of an October 7, 2003 Memorandum Opinion and Order from the Federal Communications Commission (FCC) regarding telephone number portability among wireless carriers. They argue that the FCC's order violated procedural requirements under the Administrative Procedure Act and the Regulatory Flexibility Act, and that the order was arbitrary and capricious.
According to the Telecommunications Act of 1996, all local exchange carriers (LECs) must provide number portability when technically feasible, as mandated by 47 U.S.C. 251(b)(2). This legislation also requires LECs to establish reciprocal compensation arrangements for telecommunications transport and termination (47 U.S.C. 251(b)(5)). Number portability enables users to keep their existing phone numbers when switching carriers without losing service quality, thereby fostering competition.
In July 1996, the FCC initiated rules and schedules for implementing number portability. The Commission defined number portability in its regulations (47 C.F.R. 52.21(l)) and mandated LECs to implement it for both themselves and commercial mobile radio service (CMRS) providers. While number portability was legally required only for LECs, the FCC extended this requirement to CMRS wireless carriers based on other statutory provisions.
The FCC decided against imposing location portability (the ability to retain a phone number when moving physical locations) on LECs and wireless carriers. The definition of "physical location" remained ambiguous, with options including the customer's location or the end of the wire’s location. Furthermore, the FCC introduced a concept of "service provider portability" for wireless carriers, maintaining the same definition as number portability, which allows users to retain their numbers without quality or convenience impairment when switching carriers.
The Commission clarified that 'moving from one physical location to another' refers to telephone subscribers needing to change numbers when relocating outside their current central office area. A 'central office' is defined as a unit in a telephone system providing public service and interconnecting subscriber lines. To address technical challenges of number portability, the Commission consulted the North American Numbering Council (NANC), which submitted recommendations on wireline-to-wireline porting in May 1997. In its Second Portability Order, the Commission largely adopted these recommendations and mandated that any state-imposed location portability requirements on local exchange carriers (LECs) be restricted to carriers with a local presence in the same rate center for proper call routing. However, the NANC did not address geographic limitations for wireless carriers regarding service provider portability, prompting the Commission to request further recommendations on this matter, particularly in relation to differences in service area boundaries and roaming environments.
By 1998, NANC reported a lack of consensus on inter-modal porting (between wireless and wireline carriers). The Commission established deadlines for LECs to port numbers to wireless carriers by November 24, 2003, in the largest population centers, with a six-month extension for other areas. The Cellular Telecommunications Internet Association (CTIA) sought declaratory rulings from the Commission, asserting that LECs were obligated to port numbers to overlapping wireless carriers and vice versa. CTIA's petitions were based on claims that some LECs and rural wireless carriers were misinterpreting their porting obligations, particularly regarding the necessity for a local presence or direct interconnection for number portability. The Commission published notices in the Federal Register to gather public comments, including input from the Rural Telecommunications Group (RTG), which argued that a requesting wireless carrier must have local presence, numbering resources, and interconnection to request number portability from another wireless carrier in the same rate center.
The RTG argued that without specific requirements, number portability would cause significant customer confusion and discrimination against small and rural carriers. In response to petitions from CTIA, the Commission issued two orders regarding number portability: the October Order (October 7, 2003) focused on wireless-to-wireless porting, while the Intermodal Order (November 10, 2003) addressed wireline-to-wireless porting. The October Order rejected the RTG’s claims, stating that existing rules did not restrict wireless-to-wireless portability as proposed by RTG and that imposing such restrictions would diminish the competitive advantages of number portability. The Commission acknowledged concerns from rural wireless carriers about potential transport charges when porting numbers to carriers lacking local presence, but chose not to address these issues in the October Order. It also noted that no Regulatory Flexibility Analysis was required under the Regulatory Flexibility Act.
In the Intermodal Order, the Commission limited wireline-wireline porting to carriers within the same rate center but did not impose similar restrictions on intermodal porting. The Commission reasoned that porting from wireline to wireless, even without interconnection in the same rate center, did not equate to location portability since call rating would remain unchanged. It mandated that intermodal porting be facilitated if the wireless carrier's coverage included the assigned rate center. Additionally, the Commission opted not to require interconnection agreements for intermodal porting to avoid delays that could negate benefits to consumers. The Commission also sought comments on how to improve wireless-to-wireline porting amid concerns of competitive advantage favoring wireless carriers.
Petitioners argue that the October Order is a legislative rule that was issued in violation of the Administrative Procedure Act (APA) and the Regulatory Flexibility Act. They contend that even if the Order is deemed an interpretive rule, it should still be overturned as arbitrary and capricious. The court finds that it can consider these arguments despite the Commission’s claims of lack of standing and untimeliness in the petition for judicial review. The Commission asserts that petitioners were not harmed since their objections relate to prior interconnection rules rather than the specific wireless-to-wireless porting requirements. However, the court counters this by noting that two petitioners are both wireline and wireless carriers, thus the Order directly impacts their porting obligations. Additionally, as Local Exchange Carriers (LECs), the Order also adversely affects their financial interests due to increased costs associated with wireless-to-wireless porting.
The Commission's claim that the petitioners are attempting a delayed challenge to the First Portability Order is dismissed as it pertains to the merits of the case, with the petitioners arguing that the October Order modified the earlier order without following proper APA procedures. The court acknowledges the ongoing debate regarding whether the October Order is a substantive or interpretative rule and notes that agencies can choose between rulemaking and adjudication. In this instance, the October Order was issued in response to a petition for adjudication from CTIA, which invoked the Commission's authority under Rule 1.2. This rule empowers the Commission to issue declaratory orders to resolve disputes or clarify uncertainties.
Section 554(e) relates to formal adjudication, although the current proceedings do not qualify as such. Some authorities suggest that its declaratory ruling provision can apply in informal adjudication contexts. The Commission operated under Rule 1.2 rather than 554(e), leading to a ruling termed 'Memorandum Opinion and Order,' which typically results from adjudications. The Commission used the Federal Register to announce CTIA’s petition and invite comments, framing the proceeding as an adjudication. Despite the Commission not defending the October Order as an adjudication, it is assumed to represent a type of rule-making—legislative or interpretive—rather than informal adjudication. The broad definition of 'rule' under APA 551(4) allows the October Order to be viewed as a 'rule,' despite the Commission labeling it an 'Order.' The APA's definition of 'order' excludes it from being classified as rulemaking. The petitioners argued that the Commission's procedures violated the APA, but previous rulings indicated that notice and comment requirements were met, even if the October Order were considered a legislative rule. However, the procedural issue remains unresolved due to the Commission's failure to issue an impact statement under the Regulatory Flexibility Act, which petitioners claim was warranted given their status as small entities. The need to categorize the October Order as either a legislative rule or an interpretive rule persists, despite the petitioners not raising the Regulatory Flexibility Act during the proceedings. The RTG made a minimal effort to preserve this issue by suggesting that a rulemaking would be necessary before favoring CTIA. The text suggests that if a new rule conflicts with a prior legislative rule, it must be treated as an amendment to the original, which must also be legislative in nature.
Petitioners argue that the October Order constitutes an amendment because it mandates location portability for wireless-to-wireless number porting, contrary to the First Portability Order which rejected such a requirement. They clarify that in this context, "location" refers to the serving switch or point of interconnection, rather than the customer’s physical location. It is acknowledged that typical wireless customers can retain their phone numbers when moving, unlike wire-line customers who require location portability for the same. For instance, a wireless customer relocating from Arizona to Texas can keep their number while switching carriers, provided the service areas overlap. However, if a customer moves outside their carrier's coverage area, they cannot retain their number without the carrier's action to port it, which the Commission chose not to mandate. The Commission's October Order asserts that the relevant location in wireless-to-wireless porting is not the serving switch or point of interconnection, but rather the customer's retention of their number is based on remaining within the service area of their current carrier. The October Order does not invalidate the First Portability Order but raises questions about whether it constitutes an interpretive rule, as it must derive a clear proposition from existing regulations to qualify as such. If a rule does not interpret a statute or regulation, it is subject to notice-and-comment rulemaking requirements. The definition of "rule" under the APA includes both legislative and interpretive rules, which may interpret law, as evidenced by cases like Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc.
A clear distinction between interpretation and policymaking is not always present, as recognized in legal precedent. The Supreme Court in Chevron acknowledged that an agency’s interpretation of a statute can be affected by policy considerations. The October Order is characterized as an interpretive rule that aligns with the First Portability Order’s intent. The Commission and petitioners did not focus solely on the regulatory language of the First Portability Order, instead emphasizing its lengthy explanatory statement, which fulfills the APA 553(c) requirement for a general statement of basis and purpose. The core issue raised by CTIA was whether the First Portability Order included specific conditions for wireless-to-wireless portability, which the Commission asserted it did not. Petitioners incorrectly analogized to wireline-to-wireline porting regulations and argued for similar restrictions in the wireless context. The Commission clarified that its rules did not mandate such limitations and argued that imposing them would hinder competition among wireless carriers, contradicting the First Portability Order's goal of promoting competitive benefits. The Commission's detailed explanation further supported its interpretation, drawing on its historical familiarity with the regulatory framework.
The document addresses concerns regarding the October Order issued by the Commission, specifically relating to the porting obligations of wireless carriers. Petitioners argue that the Commission has expanded these obligations, which they believe should be constrained by the wireline rate center structure. The Commission refutes this, asserting that the obligations stem from the First Portability Order, and that petitioners are attempting to introduce new restrictions by applying wireline standards to wireless porting.
The text clarifies that interpretive rules can indeed alter conduct and create new duties, distinguishing them from legislative rules. Judicial precedents affirm that interpretive rules may significantly impact private interests without being categorized as legislative rules, which require more stringent procedural compliance under the Administrative Procedure Act (APA). Thus, the October Order is classified as an interpretive rule, exempting it from the need for an impact statement under the Regulatory Flexibility Act.
Furthermore, despite the classification as an interpretive rule, petitioners claim that the Order is arbitrary and capricious, particularly regarding the Commission’s stance that carriers must port numbers upon request, regardless of the presence of an interconnection agreement. Petitioners argue that the Act necessitates number portability within the framework of such agreements, asserting that the Order improperly restricts local exchange carriers (LECs) from negotiating interconnection terms with porting carriers.
The October Order concerned wireless-to-wireless number porting only and did not address the porting obligations of Local Exchange Carriers (LECs), which were covered in the subsequent Intermodal Order. It did not prevent any LEC from negotiating interconnection agreements, and the absence of such an agreement did not exempt wireless carriers from porting numbers. The relevant procedures for negotiating interconnection agreements apply solely to incumbent LECs, not to wireless carriers, who may interconnect outside their networks.
Petitioners argued that the October Order was arbitrary for neglecting the impact on rating and routing issues, but the Commission deemed these concerns outside the Order's scope, noting that related issues were being addressed in other proceedings. The Commission has the discretion to defer such considerations to maintain efficient proceedings. The concerns raised by petitioners about additional transport costs were found to be unrelated to whether calls were ported, as routing and billing for calls were functioning correctly even without wireline-to-wireless number portability.
The Commission concluded that the scope and consumer impact of the petitioners' claims were unclear, rejected their arguments, and determined that the October Order was an interpretive rule, thus entitling petitioners to no further process under the Administrative Procedure Act (APA) or the Regulatory Flexibility Act. Consequently, the petition for judicial review was denied.
