AT&T Corp. v. FCC ( 2020 )

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United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued May 4, 2020 Decided August 4, 2020
No. 18-1007
AT&T CORP.,
PETITIONER
v.
FEDERAL COMMUNICATIONS COMMISSION AND UNITED
STATES OF AMERICA,
RESPONDENTS
IOWA NETWORK SERVICES, INC., ET AL.,
INTERVENORS
Consolidated with 18-1257, 19-1013
On Petitions for Review of Orders of the
Federal Communications Commission
James U. Troup argued the cause for petitioner Iowa
Network Services, Inc. d/b/a Aureon Network Services. With
him on the briefs was Tony S. Lee.
Benjamin H. Dickens Jr., Mary J. Sisak, and Salvatore
Taillefer Jr. were on the briefs for intervenor South Dakota
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Network, LLC in support of petitioner Iowa Network Services,
Inc. d/b/a Aureon Network Services.
Joseph R. Guerra argued the cause for petitioner AT&T
Corp. With him on the briefs were Michael J. Hunseder,
Spencer D. Driscoll, Gary L. Phillips, and David L. Lawson.
Timothy J. Simeone was on the briefs for intervenor Sprint
Communications Company L.P. in support of petitioner AT&T
Corp. Christopher J. Wright entered an appearance.
William J. Scher, Counsel, Federal Communications
Commission, argued the cause for respondents. With him on
the brief were Michael F. Murray, Deputy Assistant Attorney
General, U.S. Department of Justice, Robert B. Nicholson and
Mary Helen Wimberly, Attorneys, Thomas M. Johnson, Jr.,
General Counsel, Federal Communications Commission,
Ashley S. Boizelle, Deputy General Counsel, and Richard K.
Welch, Deputy Associate General Counsel. Jacob M. Lewis,
Associate General Counsel, entered an appearance.
Joseph R. Guerra, Michael J. Hunseder, Spencer D.
Driscoll, Gary L. Phillips, David L. Lawson, and Timothy J.
Simeone were on the brief for intervenors AT&T Corp. and
Sprint Communications Company, L.P. in support of
respondents. Christopher J. Wright entered an appearance.
James U. Troup and Tony S. Lee were on the brief for
intervenor Iowa Network Services, Inc. d/b/a Aureon Network
Services in support of respondents.
Before: TATEL, GRIFFITH, and KATSAS, Circuit Judges.
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Opinion for the Court filed PER CURIAM.*
Opinion concurring in part and dissenting in part filed by
Circuit Judge KATSAS.
PER CURIAM:** The Communications Act of 1934 restricts
the rates that telecommunications carriers may charge for
transmitting calls across their networks. AT&T contends that
Aureon, an Iowa-based local carrier, for years charged it
unlawful access rates. The Federal Communications
Commission agreed with some of AT&T’s claims but not
others. On review, we consider three broad sets of issues:
whether Aureon charged interstate and intrastate rates that
violated certain transitional pricing rules, whether Aureon
unlawfully engaged in or abetted a practice known as access
stimulation, and whether Aureon’s interstate tariff covers the
service it provided.
I
The protagonists in this case are AT&T and Iowa Network
Services, also known as Aureon. AT&T is a long-distance or
interexchange carrier—one that transmits calls between the
networks of local carriers. For example, when an AT&T
subscriber in New York calls someone in Chicago, AT&T
connects the call between local networks in both cities.
Historically, the calling party would pay AT&T, which in turn
*
Judge Katsas wrote Parts I, II, III, IV.B, and IV.C of the per
curiam opinion; Judge Tatel wrote Part IV.A.
**
NOTE: Portions of this opinion contain Sealed Information,
which has been redacted.
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would pay the appropriate local carriers. See In re FCC 11-
161, 753 F.3d 1015, 1110–12 (10th Cir. 2014).
In most parts of the country, each local carrier directly
connects its network to that of each long-distance carrier. But
in sparsely populated areas, this can be prohibitively expensive.
In rural Iowa, local carriers solved the problem by forming
Aureon as a joint venture. Aureon operates a set of switches
connecting the networks of participating local carriers (known
as subtending carriers) to those of long-distance carriers. So
when an AT&T subscriber in New York calls someone in rural
Iowa, AT&T connects the call from the local New York
network to Aureon, which in turn connects it to the appropriate
subtending carrier. See In re Application of Iowa Network
Access Division, 3 FCC Rcd. 1468, 1468 (1988).
Aureon charges long-distance carriers for connecting calls
from their networks to those of its subtending carriers.
Different regulatory systems govern its charges for interstate
calls and for intrastate calls involving different local networks
within Iowa. For interstate calls, the Communications Act
provides that all charges must be “just and reasonable,” 47
U.S.C. § 201(b), and reflected in tariffs filed with the FCC, id.
§ 203(a). To implement these provisions, the FCC has
established various regulations governing access charges for
interstate calls. See generally 47 C.F.R. ch. 1, subch. B.
Historically, the states have regulated access charges for
intrastate calls. See In re FCC 11-161, 753 F.3d at 1111.
In recent years, the FCC has sought to transition away
from inter-carrier access charges to a “bill-and-keep” approach.
Recall the traditional arrangement for a long-distance call: the
caller paid the long-distance carrier, which in turn paid access
charges to local carriers at both ends. Under the new model,
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the local carriers will bill their own customers and keep that
revenue. This will have two major effects. First, the cost of a
call will be split between the calling party and the called party.
Second, local carriers will earn revenue from their own
subscribers, rather than from access fees charged to long-
distance carriers. See In re FCC 11-161, 753 F.3d at 1113.
In 2011, the FCC promulgated regulations to start the
transition to a bill-and-keep system for both interstate and
intrastate calls. See Connect America Fund; A National
Broadband Plan for Our Future; Establishing Just and
Reasonable Rates for Local Exchange Carriers; High-Cost
Universal Service Support, 76 Fed. Reg. 81,562 (Dec. 28,
2011) (Transitional Pricing Rules). These regulations, which
are called the “transitional access service pricing rules,”
progressively reduce the access charges that carriers may
charge one another. See 47 C.F.R. §§ 51.901–51.919.
In the same rulemaking, the FCC also restricted a practice
known as access stimulation. It involves enticing service
providers that receive a high volume of calls, such as
conference call services or adult hotlines, to locate in areas with
high access charges, which are typically rural. The
combination of high access charges and high call volumes
generates significant revenue for the local carriers. To secure
that revenue, local carriers sometimes pay service providers to
lure them to the area. “It’s a win-win for the [local carriers]
and the conference call companies,” but a loss for the long-
distance carriers. N. Valley Commc’ns, LLC v. FCC, 717 F.3d
1017, 1018–19 (D.C. Cir. 2013).
Over the last decade, Aureon’s rate for intrastate access
charges has remained the same, but the company has twice
changed its interstate rate. In 2012, Aureon filed a tariff with
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the FCC lowering its interstate rate from $0.00819 to $0.00623
per minute. In 2013, Aureon filed another tariff raising the rate
to $0.00896 per minute. Although the rate changes involve
tenths of a penny, they add up to millions of dollars across the
billions of calling minutes that Aureon services.
AT&T has long believed that Aureon’s access charges
violate the transitional pricing rules. AT&T thus has refused
to pay Aureon’s invoices in full since September 2013. In
2014, Aureon sued AT&T for the unpaid sums in the District
of New Jersey. After AT&T made several counterclaims under
the Communications Act, the district court referred the matter
to the FCC under the doctrine of primary jurisdiction. See Iowa
Network Servs., Inc. v. AT&T Corp., No. 14-cv-03439, 2015
WL 5996301 (D.N.J. Oct. 14, 2015). That doctrine permits
courts to stay cases involving “claims properly cognizable in
court that contain some issue within the special competence of
[the] agency.” Reiter v. Cooper, 507 U.S. 258, 268 (1993). A
primary jurisdiction referral stays proceedings “so as to give
the parties reasonable opportunity to seek an administrative
ruling.” Id.
AT&T then filed a complaint against Aureon under 47
U.S.C. § 208, which permits administrative actions against
telecommunications carriers. Four of AT&T’s allegations are
relevant here: First, Aureon’s interstate and intrastate access
charges violated the transitional pricing rules. Second, Aureon
improperly engaged in access stimulation. Third, Aureon
committed an unreasonable practice by agreeing with
subtending carriers to connect calls involving access
stimulation. Fourth, Aureon billed for service not covered by
its 2013 interstate tariff.
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In 2017, the FCC resolved the liability phase of the
bifurcated proceeding. AT&T Corp. v. Iowa Network Servs.,
Inc., 32 FCC Rcd. 9677 (2017). The agency agreed with
AT&T’s first argument that Aureon’s access charges violated
the transitional pricing rules. The Commission rejected
AT&T’s second and fourth arguments relating to access
stimulation and the scope of the tariff. Finally, the FCC
declined to consider the third argument—that Aureon
committed an unreasonable practice in aiding access
stimulation by its subtending carriers—because another section
208 complaint raised similar issues. After finding that
Aureon’s interstate rates violated the transitional pricing rules,
the agency ordered Aureon to file a new interstate tariff.
Aureon has complied with that order, which is not at issue here.
Damages issues remain pending.
II
AT&T and Aureon each seek review of portions of the
FCC’s liability determination. We have jurisdiction under 47
U.S.C. § 402(a) and 28 U.S.C. § 2342(1). In a bifurcated
proceeding under section 208, we have held that a party may
seek immediate review of liability determinations. Verizon Tel.
Cos. v. FCC, 269 F.3d 1098, 1103–06 (D.C. Cir. 2001).
The Administrative Procedure Act provides the familiar
standard of review. As relevant here, we consider whether the
FCC’s liability order was arbitrary, capricious, or inconsistent
with governing statutes and regulations. 5 U.S.C. § 706(2)(A).
III
We begin with Aureon’s petition, which contests the
FCC’s determination that Aureon violated the transitional
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access service pricing rules. The FCC rested its determination
on 47 C.F.R. § 51.911, which it calls Rule 51.911. That rule,
which applies to competitive local exchange carriers, has three
subsections. Subsection (a) prohibits the carriers from
increasing their intrastate rates above those in effect on
December 29, 2011. Subsection (b) requires the carriers to
lower their intrastate rates by specified amounts beginning on
July 3, 2012. Subsection (c) prohibits the carriers from
charging higher rates than those charged by the competing
incumbent local exchange carrier, effective July 1, 2013.
The FCC found that Aureon violated Rule 51.911 in two
respects: it violated subsection (b) by not lowering its intrastate
rate on or after July 3, 2012; and it violated subsection (a) by
increasing its interstate rate in 2013. AT&T Corp., 32 FCC
Rcd. at 9689. In response, Aureon contends that Rule 51.911
does not apply to it at all, and so none of its charges violated
that rule. More narrowly, Aureon contends that the cap in
subsection (a) applies only to intrastate rates, and so its 2013
increase in interstate rates did not violate that subsection. We
reject the broad argument but agree with the narrow one.
A
The transitional pricing rules cover Aureon’s services.
Those rules “apply to reciprocal compensation for
telecommunications traffic exchanged between
telecommunications providers that is interstate or intrastate
exchange access, information access, or exchange services for
such access, other than special access.” 47 C.F.R. § 51.901(b).
Aureon provides interstate and intrastate “exchange access …
services.” See J.A. 105 (Aureon’s tariff describing “Switched
Access Services”). And it does not claim to offer exempt
“special access” service, which involves the use of lines
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dedicated to specific users. See WorldCom, Inc. v. FCC, 238
F.3d 449, 453 (D.C. Cir. 2001).
The transitional pricing rules separately regulate three
different categories of local carriers. Rule 51.907 applies to
incumbent local exchange carriers operating under price-cap
regulations; Rule 51.909 applies to incumbent local exchange
carriers operating under rate-of-return regulations; and Rule
51.911 applies to competitive local exchange carriers. See 47
C.F.R. §§ 51.907, 51.909, 51.911. A “competitive local
exchange carrier” is “any local exchange carrier, as defined in
§ 51.5, that is not an incumbent local exchange carrier.” Id.
§ 51.903. Aureon is a “local exchange carrier” because it “is
engaged in the provision of telephone exchange service or
exchange access.” Id. § 51.5. And it is not an “incumbent”
carrier because it neither provided telephone exchange service
in 1996 nor succeeded a carrier that did. 47 U.S.C. § 251(h);
see J.A. 349 (Aureon arguing that it “is not an ILEC”). Because
Aureon is a “local exchange carrier … that is not an
incumbent,” the transitional pricing rules define it as a
“competitive local exchange carrier,” 47 C.F.R. § 51.903(a),
and thus subject it to regulation under Rule 51.911.
In contending that Rule 51.911 does not apply, Aureon has
little to say about the express regulatory definition of
“competitive local exchange carriers.” Instead, Aureon
attempts to exploit a separate regulatory distinction between
dominant and nondominant carriers. Aureon invokes a cross-
reference in Rule 51.911(c), which caps the rates for
competitive local exchange carriers at certain rates “charged by
the competing incumbent local exchange carrier, in accordance
with the same procedures specified in” 47 C.F.R. § 61.26. Rule
61.26 is limited to “nondominant carriers,” id. § 61.18, which
are carriers that have not been “found by the Commission to
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have market power,” id. § 61.3(q), (z). Rule 61.26 does not
apply to Aureon, which the FCC has found to have market
power. See In re Application of Iowa Network Access Division,
3 FCC Rcd. 1468 at ¶ 10. But Rule 51.911 is not so limited.
By its terms, it applies to all “competitive local exchange
carriers,” and Aureon clearly falls into that category.
Moreover, neither Rule 51.911(a) nor Rule 51.911(b)—the
specific provisions that the FCC found Aureon to have
violated—contains the allegedly limiting reference to Rule
61.26. Even Rule 51.911(c) uses rates charged by “incumbent”
local carriers to establish price caps that apply to all
“competitive” local carriers—a category that includes Aureon.
And the incorporation into Rule 51.911(c) of “procedures” set
forth elsewhere does nothing to restrict its applicability to all
competitive carriers.1
Because Rule 51.911 applies to Aureon, we affirm the
FCC’s conclusion that Aureon violated subsection (b) by not
lowering its intrastate rate as required.2
B
Aureon next contends that the 2013 increase of its
interstate rate did not violate Rule 51.911(a). We agree. That
1
The FCC reserved the question whether Aureon’s 2013 tariff
violated Rule 51.911(c). AT&T Corp., 32 FCC Rcd. at 9689. We
have explained why that provision applies to all competitive local
exchange carriers, but we too reserve whether Aureon violated it.
2
Aureon contends that applying the transitional pricing rules to
it violates due process. But there is no failure of notice, and thus no
due-process violation, in applying regulations as they are written.
See NetworkIP, LLC v. FCC, 548 F.3d 116, 123 (D.C. Cir. 2008).
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rule provides that a competitive local exchange carrier may not
“increase the rate for any originating or terminating intrastate
switched access service above the rate for such service in effect
on December 29, 2011.” 47 C.F.R. § 51.911(a)(1), (2). In
contrast, the parallel provisions for incumbent local exchange
carriers cap “intrastate” and “interstate” rates as of December
29, 2011. Id. §§ 51.907(a), 51.909(a)(1), (2). Thus, Rule
51.911(a) does not cap the interstate rates of competitive
carriers like Aureon.3
The FCC asks us to depart from the plain meaning of this
regulation based on statements that it made in an explanatory
document published shortly after the transitional pricing rules
became effective. See Transitional Pricing Rules, 76 Fed. Reg.
at 81,562. This document describes those rules as “capping all
interstate switched access rates in effect as of” December 29,
2011. See id. at 81,630. But “[b]ecause the regulation itself is
clear, we need not evaluate” either the regulatory “preamble”
or any other document that “itself lacks the force and effect of
law.” Saint Francis Med. Ctr. v. Azar, 894 F.3d 290, 297 (D.C.
Cir. 2018).4
3
The FCC briefly suggests that Rule 51.905 governs this
analysis. It requires local exchange carriers to file tariffs consistent
with “the default transitional rates specified by this subpart.” 47
C.F.R. § 51.905(b). For competitive local exchange carriers such as
Aureon, Rule 51.911 sets forth those rates.
4
The parties reference the disputed statements as they appear
in the FCC Record. See 26 FCC Rcd. 17,663, at ¶ 800–01. We
reference the Federal Register because agencies “must publish
substantive rules in the Federal Register to give them effect.” NRDC
v. EPA, 559 F.3d 561, 565 (D.C. Cir. 2009); see 5 U.S.C. § 552(a)(1).
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The FCC contends that its explanatory statements,
published in the Federal Register, should be treated as part of
the binding regulation. It is mistaken. “Publication in the
Federal Register does not suggest that the matter published was
meant to be a regulation, since the APA requires general
statements of policy to be published as well.” Brock v.
Cathedral Bluffs Shale Oil Co., 796 F.2d 533, 539 (D.C. Cir.
1986) (Scalia, J.) (citing 5 U.S.C. § 552(a)(1)(D)). Instead, the
“real dividing point” between the portions of a final rule with
and without legal force is designation for “publication in the
Code of Federal Regulations.” Id. To be sure, we have
reserved a possibility that statements in a preamble “may in
some unique cases constitute binding, final agency action
susceptible to judicial review.” NRDC v. EPA, 559 F.3d 561,
565 (D.C. Cir. 2009) (citing Kennecott Utah Copper Corp. v.
Dep’t of Interior, 88 F.3d 1191, 1222–23 (D.C. Cir. 1996)).
But “this is not the norm” because “[a]gency statements
‘having general applicability and legal effect’ are to be
published in the Code of Federal Regulations.” Id. (quoting 44
U.S.C. § 1510(a)). And where, as here, there is a discrepancy
between the preamble and the Code, it is the codified
provisions that control. For example, if a preamble purports to
establish the regulatory treatment of “high wind events” but the
regulations as published in the Code do not, then the preamble
statement is a nullity. See NRDC v. EPA, 559 F.3d at 565. The
same must be true for an explanatory document published not
with the codified regulations, but shortly thereafter.
Alternatively, the FCC invokes a “note” to Rule 51.901
cross-referencing a “chart identifying steps in the transition.”
As explained below, they must also publish them in the Code of
Federal Regulations.
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47 C.F.R. § 51.901, note. The chart appears in the explanatory
document mentioned above. It is a one-page, summary
document that simply asserts—without citation—that the
transitional pricing rules cap “interstate” switched access rates
as of their effective date. See Transitional Pricing Rules, 76
Fed. Reg. at 81,631. The FCC tries to do too much with too
little. For one thing, dropping a “note” referencing a summary
“chart” would be a strange way to add to the rules being
summarized. In any event, such a chart could hardly override
the plain meaning of the rules themselves. Moreover, specific
provisions qualify general ones. See, e.g., Robertson v. Seattle
Audubon Soc’y, 503 U.S. 429, 440 (1992). The fine print in
Rule 51.911 is far more specific than the summary chart. And,
as we have shown, it leaves no doubt that the 2011 price cap
applies only to “intrastate” rates. We thus apply the transitional
pricing rules as written.
For these reasons, we set aside the FCC’s determination
that Aureon violated Rule 51.911(a) by increasing its rate for
interstate access charges in 2013.5
5
Aureon raises various other arguments that we do not reach.
Without elaboration, it suggests that the FCC lacks authority to limit
intrastate rates and that the transitional pricing rules effect an
unconstitutional taking. But “[a] litigant does not properly raise an
issue by addressing it in a cursory fashion with only bare-bones
arguments.” Cement Kiln Recycling Coal. v. EPA, 255 F.3d 855, 869
(D.C. Cir. 2001) (cleaned up). Aureon further invokes 47 U.S.C.
§ 204(a)(3), which provides that interstate tariffs filed by local
exchange carriers “shall be deemed lawful” unless the FCC acts upon
them within 15 days. Aureon contends that section 204(a)(3)
prevents the award of damages for any violation of Rule 51.911(a)
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IV
We next turn to AT&T’s petitions, which address the
FCC’s rulings on access stimulation, unreasonable practices,
and the scope of Aureon’s tariffs.
A
AT&T contends that Aureon’s charges were unlawful
because Aureon was engaged in access stimulation, i.e.,
enticing high call volumes to generate increased access
charges. The FCC has made various efforts to curb that
practice, which it considers “wasteful arbitrage.” Updating the
Intercarrier Compensation Regime to Eliminate Access
Arbitrage, 84 Fed. Reg. 57,629, 57,630 (Oct. 28, 2019)
(Updating Rule).
Rule 61.3(bbb) represents one of those efforts. Although
the FCC has since amended the regulation to exclude carriers,
like Aureon, that serve no end-users, see id. at 57,651, during
the events at issue here, Rule 61.3(bbb) limited charges by any
local exchange carrier “engaging in access stimulation,” 47
C.F.R. § 61.3(bbb)(2) (2012). For our purposes, then, access
stimulation involves (A) maintaining an “access revenue
sharing agreement” and (B) servicing more than three times as
many incoming calls as outgoing calls. Id. § 61.3(bbb)(1)(i).
The parties agree Aureon met the second requirement. The
question, then, is whether the FCC’s conclusion that Aureon’s
contracts with its subtending carriers do not qualify as “access
revenue sharing agreements” was reasonable. It was not.
in this case. Having found no such violation, we need not reach this
damages issue.
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As relevant here, section 61.3(bbb) defines an “access
revenue sharing agreement” as an agreement between a local
exchange carrier and another party that
over the course of the agreement, would directly or
indirectly result in a net payment to the other party
(including affiliates) to the agreement, in which
payment by the ... Competitive Local Exchange
Carrier is based on the billing or collection of access
charges from interexchange carriers or wireless
carriers. When determining whether there is a net
payment under this rule, all payments, discounts,
credits, services, features, functions, and other items
of value, regardless of form, provided by
the ... Competitive Local Exchange Carrier to the
other party to the agreement shall be taken into
account.
Id. § 61.3(bbb)(1)(i). In short, the agreement must result in a
“net payment” from the carrier to a counterparty, which must
be “based on the billing or collection of access charges.”
The FCC reasoned that Aureon’s agreements were not
covered because neither the agreements themselves, nor the
“net payment[s]” to the subtending carriers, were “intended to
facilitate access stimulation.” AT&T Corp., 32 FCC Rcd. at
9693. But the FCC never explained why Aureon’s purported
lack of intent mattered. After all, nothing in the definition of
an “access revenue sharing agreement” suggests an intent
requirement; to the contrary, the regulation provides that such
agreements must “result in” a net payment, thus focusing on
effects rather than intent. 47 C.F.R. § 61.3(bbb)(1)(i) (2012).
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What’s more, the FCC failed to acknowledge its own prior
statement on what counts as an access revenue sharing
agreement. In 2012, the FCC “clarif[ied]” that the “based on”
language of section 61.3(bbb) is to be construed broadly,
explaining that “any arrangement between a LEC and another
party ... that results in the generation of switched access traffic
to the LEC and provides for the net payment of consideration
of any kind ... to the other party, ... is considered to be ‘based
upon the billing or collection of access charges.’” Connect
America Fund; A National Broadband Plan for Our Future;
Establishing Just and Reasonable Rates for Local Exchange
Carriers; High-Cost Universal Service Support, 77 Fed. Reg.
14,297, 14,301 (Mar. 9, 2012) (Clarification Rule). But in
rejecting AT&T’s access-stimulation claim, the FCC nowhere
acknowledged this prior interpretation, a particularly glaring
omission given that the agency’s newfound intent requirement
appears inconsistent with the clarification’s expansive
construction of section 61.3(bbb)’s regulatory language.
Because “the process by which [the FCC] reache[d] [its final]
result” was neither “logical [nor] rational,” we vacate its
decision. Fox v. Clinton, 684 F.3d 67, 75 (D.C. Cir. 2012)
(quoting Tripoli Rocketry Association, Inc. v. Bureau of
Alcohol, Tobacco, Firearms, & Explosives, 437 F.3d 75, 77
(D.C. Cir. 2006)).
The dissent likewise finds the FCC’s reasoning inadequate
but would nevertheless uphold the agency’s decision on the
ground that the regulation left the FCC no discretion to reject
AT&T’s claim. United Video, Inc. v. FCC, 890 F.2d 1173,
1190 (D.C. Cir. 1989) (acknowledging that vacatur and remand
“is not necessary” if “the agency has come to a conclusion to
which it was bound to come as a matter of law, albeit for the
wrong reason”). As the dissent sees it, the regulatory language
unambiguously excludes Aureon’s contracts with its
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violated this provision by agreeing to transmit calls reflecting
access stimulation by subtending carriers. The FCC declined
to reach this claim because a different administrative complaint
filed by AT&T, against one of the subtending carriers, raised
similar issues. AT&T argues that the FCC’s refusal to
adjudicate its claim was contrary to law. We agree.
AT&T lodged its complaint under section 208 of the
Communications Act. That provision imposes a series of
mandatory obligations to ensure the prompt and orderly
disposition of complaints: The FCC must “investigate the
matters complained of in such manner and by such means as it
shall deem proper.” 47 U.S.C. § 208(a). The FCC must “issue
an order concluding such investigation” within five months.
Id. § 208(b)(1). And the order “shall be” final and appealable.
Id. § 208(b)(3).
In AT&T Co. v. FCC, 978 F.2d 727 (D.C. Cir. 1992), we
held that this scheme requires the FCC to adjudicate section
208 complaints properly presented to it. There, the FCC
declined to adjudicate a complaint that it thought “would be
better considered in a rulemaking.” Id. at 731. We held that
this refusal was unlawful because section 208 imposes on the
FCC, in its capacity “as an adjudicator of private rights,” “an
obligation to decide the complaint under the law currently
applicable.” Id. at 732. The same obligation governs here,
despite the FCC’s desire to forgo a decision and resolve related
issues in another case.
In MCI Worldcom Network Services, Inc. v. FCC, 274
F.3d 542 (D.C. Cir. 2001), we recognized a limited exception
to the FCC’s duty to decide section 208 complaints. In that
case, the FCC declined to entertain a claim that was “parallel”
with and “duplicative” of claims in state administrative
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proceedings. Id. at 548. Moreover, the complainant sought “no
relief from the FCC that the state public utility commissions
[could not] grant.” Id. Under those circumstances, we held
that it was “reasonable for the FCC to defer to the states as a
matter of comity.” Id. Here, in contrast, there is no state
proceeding to defer to. Moreover, AT&T is seeking damages
from Aureon—relief that the FCC could not grant in a separate
proceeding to which Aureon is not a party. And the question
that AT&T seeks to raise, whether it was an unreasonable
practice for Aureon to connect calls to subtending carriers
engaged in access stimulation, goes well beyond the question
whether any individual subtending carrier was so engaged.
We stress that our holding is narrow. Section 208 gives
the FCC discretion over the “manner” and “means” of
investigating a complaint, 47 U.S.C. § 208(a), which we have
said allows the FCC to assign complaining parties the burden
of proof, see Hi-Tech Furnace Sys., Inc. v. FCC, 224 F.3d 781,
785–87 (D.C. Cir. 2000). The agency thus retains traditional
enforcement discretion in deciding whether or how to
investigate AT&T’s complaint. See id.; Sprint Commc’ns Co.
v. FCC, 76 F.3d 1221, 1227–31 (D.C. Cir. 1996). But “as an
adjudicator,” the FCC must “decide” claims properly presented
to it, AT&T, 978 F.2d at 732, at least absent some federalism-
based justification for deferring to parallel state proceedings
The FCC thus erred in refusing to adjudicate AT&T’s
unreasonable-practices claim.6
6
Aureon contends that AT&T is collaterally estopped from
arguing that connecting calls to access-stimulating carriers is an
unreasonable practice. The FCC did not decide this question, which
we leave open on remand.
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20
C
Finally, AT&T challenges the FCC’s determination that
Aureon’s existing interstate tariff covers traffic involving
subtending carriers engaged in access stimulation. We defer to
the FCC’s interpretation of a tariff if it is “reasonable and based
upon factors within the Commission’s expertise.” Am.
Message Ctrs. v. FCC, 50 F.3d 35, 39 (D.C. Cir. 1995) (cleaned
up). Here, the scope of Aureon’s tariff presents highly
technical questions that the FCC reasonably resolved.
The tariff provides rates for “switched access service,”
which it defines to include
a two-point electrical communications path between a
point of interconnection with the transmission
facilities of an Exchange Telephone Company … and
[Aureon’s] central access tandem where the
Customer’s traffic is switched to originate or
terminate its communications.
J.A. 196. The parties agree that Aureon provides “switched
access service” by routing calls from long-distance carriers to
the local exchange carriers that subtend its network.
AT&T highlights other tariff language repeatedly
describing Aureon’s service as “Centralized Equal Access
Service.” In AT&T’s view, Aureon does not provide such a
service when it transmits calls involving access-stimulating
carriers. But in its own complaint, AT&T described “equal
access service” as simply the local carrier providing all long-
distance carriers with equivalent connections. The FCC
adopted this definition. See AT&T Corp., 32 FCC Rcd. at 9678.
AT&T does not allege that Aureon failed to provide all long-
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21
distance carriers with equivalent connections to the networks
of subtending carriers. More generally, AT&T suggests that
the tariff distinguishes between calls reflecting access
stimulation and other calls. But the FCC concluded that the
tariff does not categorize calls in that way, and AT&T points
to no tariff language to the contrary.
Alternatively, AT&T contends that equal access service
involves only outgoing calls. But the tariff describes Aureon’s
service to occur when a customer’s “traffic is switched to
originate or terminate its communications.” J.A. 196.
Moreover, before the agency, AT&T stipulated that Aureon’s
authorized service covered both originating and terminating
traffic. That makes good sense, as AT&T provides no reason
why Aureon would seek to provide, or the FCC would approve,
a service to enable the connection of calls flowing in one
direction but not the other.
We affirm the FCC’s determination that Aureon’s
interstate tariffs apply to traffic involving any local carriers
engaged in access stimulation.
V
The petitions for review are granted in part and denied in
part. We remand this case to the FCC for further proceedings
consistent with this opinion.
So ordered.
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KATSAS, Circuit Judge, concurring in part and dissenting
in part: I join the per curiam opinion except for Part IV.A,
which remands for further consideration of whether Aureon
engaged in access stimulation. In my view, the governing
regulation unambiguously establishes that Aureon did not.
Thus, even though the FCC’s reasoning on this point was
faulty, a remand is unnecessary.
As my colleagues explain, the question about access
stimulation turns on whether Aureon provided its subtending
carriers with a “net payment” that was “based on the billing or
collection of access charges.” 47 C.F.R. § 61.3(bbb)(1)(i)(A)
(2012). I agree with my colleagues that this question does not
turn on Aureon’s intent, so we cannot affirm on the reasoning
provided by the FCC below. Ante at 15. But unlike my
colleagues, I would hold that the benefit provided by Aureon
to its subtending carriers was not “based on the billing or
collection of access charges.” And because the FCC was
bound to reach this conclusion as a matter of law, vacating its
decision on this point is unnecessary.
Of course, we cannot affirm a discretionary agency
decision based on reasoning not given by the agency. SEC v.
Chenery Corp., 318 U.S. 80, 88, 94 (1943). But “Chenery only
applies to agency actions that involve policymaking or other
acts of agency discretion.” Canonsburg Gen. Hosp. v. Burwell,
807 F.3d 295, 305 (D.C. Cir. 2015) (cleaned up). A Chenery
remand “is not necessary” if “the agency has come to a
conclusion to which it was bound to come as a matter of law.”
United Video, Inc. v. FCC, 890 F.2d 1173, 1190 (D.C. Cir.
1989). In that circumstance, “[t]o remand would be an idle and
useless formality,” and “Chenery does not require that we
convert judicial review of agency action into a ping-pong
game.” Morgan Stanley Capital Grp. Inc. v. Pub. Util. Dist.
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3
Reasonable Rates for Local Exchange Carriers; High-Cost
Universal Service Support, 77 Fed. Reg. 14,297, 14,301 (Mar.
9, 2012) (Interpretive Rule).
In my judgment, this Interpretive Rule does not reasonably
construe the governing regulation, at least as applied to inter-
carrier connection agreements. By its terms, the access
stimulation regulation does not apply unless a local exchange
carrier forms an “access revenue sharing agreement” with
another party that satisfies two distinct requirements: (1) the
agreement must “result in a net payment” to the other party,
and (2) this payment must be “based on the billing or collection
of access charges” from long-distance carriers. 47 C.F.R.
§ 61.3(bbb)(1)(i)(A). By contrast, the Interpretive Rule
requires only that the agreement “result in” more traffic for the
local exchange carrier, which will be true for any connection
agreement, and that the agreement “provide for” a net payment
to the other party, which seems equivalent to requiring that the
agreement “result in” a net payment to that party. On this
understanding, the Interpretive Rule collapses the regulation’s
second requirement into its first, eliminating the need for a
carrier’s net payment to be “based on the billing or collection
of access charges.” We should not tolerate a construction that
creates such obvious and inexplicable surplusage. See, e.g.,
Duncan v. Walker, 533 U.S. 167, 174 (2001).
The FCC understands its Interpretive Rule differently.
The agency highlights the statement that an access revenue
sharing agreement must “provid[e] for” a net payment from the
local carrier to a third party. According to the FCC, this
language means that the agreement must be intended to induce
access stimulation, rather than that the agreement simply must
result in a net payment to the third party. Even assuming that
this reflects a permissible reading of the Interpretive Rule,