Blanca Telephone Co. v. Federal Communications Commission

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 20, 2013 Decided February 28, 2014
No. 12-1365
BLANCA TELEPHONE COMPANY, ET AL.,
PETITIONERS
v.
FEDERAL COMMUNICATIONS COMMISSION AND
UNITED STATES OF AMERICA,
RESPONDENTS
On Petition for Review of an Order of
the Federal Communications Commission
Timothy E. Welch argued the cause and filed the briefs for
petitioners.
Laurel R. Bergold, Counsel, Federal Communications
Commission, argued the cause for respondents. With her on the
brief were William J. Baer, Assistant Attorney General, U.S.
Department of Justice, Robert B. Nicholson and James J.
Fredricks, Attorneys, Sean A. Lev, General Counsel, Federal
Communications Commission, Peter Karanjia, Deputy General
Counsel, and Jacob M. Lewis, Associate General Counsel.
Before: GARLAND, Chief Judge, and GINSBURG and
SENTELLE, Senior Circuit Judges.
2
GARLAND, Chief Judge: In 2003, the Federal
Communications Commission adopted regulations requiring
digital wireless service providers to offer telephone handsets that
are compatible with hearing aids. On the September 18, 2006
compliance deadline set by the agency, the three petitioners in
this case joined some one hundred other small providers in
asking the Commission to waive that deadline. Many of those
carriers subsequently came into compliance by January 2007.
The three petitioners did not.
In early 2008, the Commission responded to the waiver
petitions as a group. Because compliant handsets were not
widely available by September 2006, the Commission granted
waivers with nunc pro tunc effect to many of the companies that
had sought relief -- but not to the three petitioners. Following
reconsideration in 2012, the Commission again denied waivers
for the petitioners. Seeking review of that denial, the petitioners
argue that the differential treatment was arbitrary and capricious.
They also raise several challenges to the procedural regularity of
the Commission’s adjudication of their waiver petitions. We
reject all of the petitioners’ challenges and deny the petition for
review.
I
In 1988, Congress enacted the Hearing Aid Compatibility
Act to “ensure reasonable access to telephone service by persons
with impaired hearing.” 47 U.S.C. § 610(a). Because wireless
telephones were not widely used in the late 1980s, Congress
exempted them from the statute’s requirement that all
telephones meet technical standards for compatibility with
hearing aids. Id. § 610(b)(2)(A). Presciently imagining a future
in which cell phones would become more popular, however,
Congress authorized the Federal Communications Commission
3
(FCC) to revoke or limit the exemption if “such revocation or
limitation is in the public interest.” Id. § 610(b)(2)(B)(i).
By 2003, the FCC was ready to make that call. In
particular, the Commission determined that “wireless service has
evolved to become increasingly more important to Americans’
safety and quality of life” and that “the need for individuals with
hearing disabilities to have access to wireless services has
become critical.” In Re Section 68.4(a) of the Commission’s
Rules Governing Hearing Aid-Compatible Telephones, 18 FCC
Rcd. 16753, 16757, ¶ 7 (2003). Acting on that determination,
the FCC issued regulations requiring digital wireless telephone
manufacturers to make available to wireless service providers --
and requiring those providers to offer to customers -- hearing aid
compatible handsets. See id. at 16754-55, ¶ 3.
Hearing aids function in one of two modes: acoustic
coupling or telecoil coupling. In acoustic coupling mode, a
hearing aid uses a microphone to amplify all nearby sounds. Id.
at 16756, ¶ 5. Talking on a telephone can be difficult with a
hearing aid in acoustic coupling mode because the microphone
transmits unwanted background noise and can create distracting
feedback. For some hearing aid users, telecoil coupling mode
is the answer. Telecoil coupling mode switches off a hearing
aid’s microphone and amplifies only the audio from the person
on the other end of the telephone, a process called inductive
coupling. Id. ¶¶ 5-6. Before the FCC issued hearing aid
compatibility rules for digital wireless telephones, it was
difficult for the hearing impaired to find wireless telephones
capable of inductive coupling. Id. ¶ 6.
That was all supposed to change by mid-2006. The FCC’s
2003 regulations required digital wireless service providers to
offer at least two handset models capable of inductive coupling
by September 18, 2006. 47 C.F.R. § 20.19(d)(2) (2006). By the
4
time the deadline arrived, however, few providers had complied.
Because telephone manufacturers were slow in developing
compliant models and submitting them to the Commission for
approval, compliant handsets did not trickle down to supplier
inventory in time for many service providers to meet the
deadline. In Re Section 68.4(a) of the Commission’s Rules
Governing Hearing Aid-Compatible Telephones, 23 FCC Rcd.
3352, 3357, ¶ 8, 3362, ¶ 16 (2008) [hereinafter Order on
Review]. Smaller service providers like the petitioners here
(described by the Commission as “Tier III” carriers) found it
particularly difficult to achieve timely compliance. Id. at 3362,
¶ 16.
On the day of the September 2006 deadline, the three
petitioners asked the FCC to waive that deadline. Many other
carriers also did so at approximately the same time. Order on
Review, 23 FCC Rcd. at 3355, ¶ 5 n.12. The FCC did not
immediately act on those requests. By the close of 2006 the
rollout delays limiting availability of the telephones had largely
abated, and many carriers had come into compliance. Id. at
3362, ¶ 17.
The three petitioners failed to comply until several months
into 2007. CTC Telecom, an Idaho service provider, began
offering the required telephones on March 13, 2007. Id. at 3363,
¶ 19. CTC reported that it checked regularly with its supplier
about compliant telephones and ordered them when the supplier
began stocking the models. Farmers Cellular Telephone
Company, an Alabama carrier, similarly reported that it often
checked with its existing supplier and purchased compliant
telephones when they became available. Farmers complied on
June 6, 2007. Id. ¶ 20. Finally, Blanca Telephone Company of
Colorado came into compliance on June 20, 2007. Id. ¶ 19.
5
By the time the FCC addressed the waiver requests in 2008,
most carriers seeking waivers had come into compliance. Thus,
the Commission had to decide whether to let bygones be
bygones or, instead, to penalize some or all cases of tardiness.
The FCC chose to penalize some. Applying its general
discretionary waiver standard under 47 C.F.R. § 1.925(b), the
FCC granted waivers with nunc pro tunc effect only to late-
complying carriers that had exhibited “reasonable diligence” in
their efforts to comply. Order on Review, 23 FCC Rcd. at 3362,
¶ 17.
The Commission relied upon two factors to gauge whether
a carrier’s efforts to comply were reasonably diligent. First, it
looked to the date of compliance. Because many carriers had
complied by January 1, 2007, the FCC concluded that
compliance by that date was indicative of the time necessary “to
resolve issues involved in identifying, testing, and ultimately
selling inductive coupling-compliant handsets.” Id. Second, the
FCC examined carriers on a case-by-case basis to determine
whether they had actually exhibited reasonable diligence. The
FCC determined that a reasonably diligent carrier would, at the
very least, have attempted to comply with the hearing aid
compatibility rules. See id. at 3368-69, ¶ 34. And although
merely relying upon existing vendors to supply compatible
handsets may have been a reasonably diligent strategy at first,
the Commission concluded that after many months of
noncompliance, a reasonably diligent service provider would
have begun to search for compliant telephones beyond its
existing vendors. Id. at 3364-65, ¶ 22.
The upshot of the Commission’s evaluation was that most
of the providers to which it granted waivers had come into
compliance by January 1, 2007. There were, however, a few
exceptions. In one case, the FCC denied a waiver to a carrier
that had complied by December 2006. Id. at 3368-69, ¶ 34.
6
Although the FCC regarded pre-January compliance as
presumptively indicative of reasonable diligence, that carrier
reported that the reason for its late compliance was simple
“oversight” on its part. Id. For the FCC, that was not good
enough. In another case, the FCC ultimately granted a waiver
to a group of carriers (collectively known as the “i wireless”
carriers) that did not comply until March 2007. Although the
FCC originally denied a waiver to those carriers, upon
reconsideration it determined that they had exhibited reasonable
diligence in attempting to comply. In particular, the i wireless
carriers had contacted a variety of vendors -- not just their
current suppliers -- to find out when different compliant
telephones would become available. In addition, the i wireless
carriers partially attributed their late compliance to receiving
inaccurate information about compatibility requirements from
telephone manufacturers. See In Re Section 68.4(a) of the
Commission’s Rules Governing Hearing Aid-Compatible
Telephones, 27 FCC Rcd. 9814, 9819-20, ¶¶ 12-13 (2012)
[hereinafter Reconsideration Order].
In the FCC’s view, the three petitioners here did not
measure up to either of the benchmarks it established for
evaluating reasonable diligence: They complied after January
1, 2007, and they did nothing to obtain compliant telephones
beyond contacting their existing vendors. Accordingly, the
Commission denied their waiver requests and referred their
cases to the FCC’s Enforcement Bureau. Order on Review, 23
FCC Rcd. at 3365, ¶ 22.
The petitioners filed a petition for reconsideration,
contending that they were being treated unfairly because they
were similarly situated to the carriers that had received waivers.
They also raised challenges to the procedural regularity of the
Commission’s adjudication of their waiver petitions. After the
7
FCC denied their petition for reconsideration, the petitioners
filed the petition for review that is now before us.
II
The petitioners’ primary argument is that the FCC wrongly
refused to waive liability for their tardy compliance. To
succeed, the petitioners must show that the Commission’s denial
of their waivers was “arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law.” 5 U.S.C.
§ 706(2)(A). When evaluating an agency’s interpretation and
application of a general, discretionary waiver standard, “[o]ur
review . . . is extremely limited.” BDPCS, Inc. v. FCC, 351 F.3d
1177, 1181 (D.C. Cir. 2003). We will vacate the denial of a
waiver “only when the agency’s reasons are so insubstantial as
to render that denial an abuse of discretion.” Id. (internal
quotation marks omitted). Among other things, an agency
“abuses its discretion if it fails to provide adequate explanation
before it treats similarly situated parties differently.” Morris
Commc’ns, Inc. v. FCC, 566 F.3d 184, 188 (D.C. Cir. 2009)
(internal quotation marks omitted).
A
Under its longstanding waiver regulations, which are not
challenged in this case, the FCC may grant a request to waive a
rule if: “(i) [t]he underlying purpose of the rule[] would not be
served . . . by application to the instant case, and . . . a grant . . .
would be in the public interest; or (ii) [i]n view of unique or
unusual factual circumstances . . . , application of the rule would
be inequitable, unduly burdensome or contrary to the public
interest.” 47 C.F.R. § 1.925(b)(3). Because compliant
telephones were not widely available by the September 2006
compliance date, the Commission reasonably concluded that the
fairness concerns underlying its discretionary waiver standard
8
would be served by granting “some relief” to a small carrier
“exercising reasonable diligence.” Order on Review, 23 FCC
Rcd. at 3362, ¶¶ 16-17.
But the Commission’s determination of what it took to
show “reasonable diligence” was also reasonable. First, the
Commission decided to look at the date the carrier came into
compliance for an inference as to whether it had been reasonably
diligent. Many providers had complied by January 1, 2007,
which meant that compliant telephones had made their way to
some suppliers’ warehouses and had been tested and readied for
sale by that date. Id. Because the severity of the initial
availability shortfall had subsided by January 1, that date was an
acceptable choice for roughly measuring whether a particular
carrier’s efforts at compliance reflected reasonable diligence.
The petitioners complain that they had no notice that
January 1 would play an important role in the FCC’s analysis.
But that complaint is unpersuasive. The petitioners did have
notice of both the original September 2006 deadline and the
provisions of the FCC’s general waiver standard. A party that
files for waiver on the day of a deadline will never know in
advance how much leeway, if any, an agency will
retrospectively grant.
Second, the FCC examined the carrier’s actual efforts to
comply. “Carriers that did not achieve compliance by [January
1, 2007] were not automatically precluded from relief or subject
to higher burdens of proof; rather, the Commission was not able
to rely on the time of compliance to support” an inference of
reasonable diligence. Reconsideration Order, 27 FCC Rcd. at
9822, ¶ 19. In the FCC’s view, the most crucial factor in
assessing whether a carrier that complied after January 1 was
reasonably diligent was whether the carrier confined its search
for compliant telephones to its existing suppliers or, instead,
9
sought information from other vendors. See Order on Review,
23 FCC Rcd. at 3365, ¶ 22. One’s existing suppliers are quite
naturally the first place to look for compliant telephones, and
contacting them alone may have been reasonable for a time. But
it was not arbitrary or capricious for the FCC to determine that,
after many months of noncompliance, it was no longer
“sufficient . . . simply to contact one’s existing vendors.” Id.Because the three petitioners did not comply until after
January 1, 2007, and because they reported to the Commission
that they had done nothing to seek out compliant telephones
beyond contacting their existing suppliers, the petitioners failed
to satisfy either of the FCC’s reasonable criteria for waiver.
Accordingly, the FCC’s decision to deny the waiver petitions
would appear to be reasonable as well.
B
But that is not the end of the analysis. However reasonable
the denial of the petitioners’ waivers was on its own terms, the
Commission also had an obligation not to treat similarly situated
carriers differently without offering an adequate explanation.
See Morris Commc’ns, Inc., 566 F.3d at 188. The petitioners
contend that the FCC failed to satisfy this obligation in three
respects.1
1
This obligation is inferred from the Administrative Procedure
Act’s direction that reviewing courts shall “hold unlawful and set
aside agency action . . . found to be . . . arbitrary, capricious, [or] an
abuse of discretion.” 5 U.S.C. § 706; see Morris Commc’ns, Inc., 566
F.3d at 188. Although the petitioners’ Statement of Issues suggests
that their allegedly differential treatment also implicates their “5th
Amendment right to due process,” Pet’rs’ Br. at xviii, their brief’s
argument rests entirely on their asserted “administrative due process
right[]” to receive the same treatment as similarly situated carriers, id.10
First, the petitioners insist that they were similarly situated
to those waiver recipients that came into compliance by January
1, 2007. Pet’rs’ Br. 27-29. That contention is incorrect on its
face because the petitioners did not comply by January 1. And
as we have discussed above, in light of the fact that many
carriers were able to do so, it was not unreasonable for the
Commission to select January 1 as a presumptive indicator of
reasonable diligence.
Nor were the petitioners similarly situated with respect to
their actual diligence. As we have also explained, the
Commission viewed “reasonable diligence” as contacting one’s
existing suppliers for a limited period of time, but not
indefinitely. Thus, the carriers that complied within a few
months of the original deadline were reasonably diligent so long
as they sought compliant telephones from existing suppliers.
But by January 2007, so much time had passed since the original
deadline that the Commission regarded it as unreasonable for
carriers not to redouble their efforts to seek compliant
telephones from other sources. And that is the category into
which the petitioners fell.
Second, the petitioners contend that the FCC failed to
distinguish the denial of their waivers from its grant of a waiver
to i wireless, a group of carriers that did not come into
compliance until March 2007. Pet’rs’ Br. 30-31. Again, that is
not correct. Initially, the FCC rejected waiver petitions from
both the petitioners and i wireless. Order on Review, 23 FCC
Rcd. at 3372, ¶ 44. But at the reconsideration stage, the i
wireless carriers persuaded the Commission that, although they
failed to comply until March 2007, they had been reasonably
diligent by reaching out beyond their existing suppliers.
Specifically, the Commission found that the i wireless carriers
at 14, 37.
11
“identif[ied] the authorized distributors for particular
manufacturers [and] obtain[ed] information regarding handset
availability from these distributors.” Reconsideration Order, 27
FCC Rcd. at 9819, ¶ 12. The petitioners, by contrast, did not
look past their existing suppliers.
Third, the petitioners contrast the denial of their waivers
with the FCC’s 2007 decision to grant a group of carriers a
waiver from a different set of hearing aid compatibility rules.
Pet’rs’ Br. 33-36. Even assuming that the context of those
waivers was comparable,2 the FCC reasonably distinguished the
denial of the petitioners’ waiver requests. The 2007 waiver
recipients received misinformation from vendors assuring them
that they were in compliance with FCC requirements. See In Re
Section 68.4(a) of the Commission’s Rules Governing Hearing
Aid-Compatible Telephones, 22 FCC Rcd. 20459, 20472-73,
¶ 30 (2007). Although the petitioners here claim that they also
received inaccurate reports from their vendors, the nature of the
misinformation was different. The petitioners contend that their
vendors wrongly advised them that compliant telephones
remained unavailable. By contrast to the 2007 waiver
recipients, however, the petitioners do not dispute that they
knew they were not in compliance with the rules’ requirements.
Reconsideration Order, 27 FCC Rcd. at 9823, ¶ 21. The FCC
was not unreasonable in concluding that the two kinds of
misinformation were sufficiently different to warrant different
treatment.
2
The 2007 waiver involved requirements for telephones
compatible with hearing aids in acoustic coupling mode (unlike the
petitioners’ request for a waiver from the rules for telecoil coupling).
The Commission had previously waived one aspect of the acoustic
requirements, but when that waiver lapsed, some carriers failed to
comply with the rules, in part because their vendors wrongly assured
them they were in compliance.
12
III
The petitioners raise several additional challenges to the
denial of their waiver requests. We address each in turn.
First, the petitioners contend that, when the FCC announced
the factors that it would consider in adjudicating waivers of its
compliance deadline, the Commission effectively adopted a new
“rule” that the Administrative Procedure Act (APA) required it
to promulgate through notice-and-comment rulemaking. Pet’rs’
Br. 20 (citing 5 U.S.C. § 553). But this court has previously
rejected virtually the identical contention. In Mountain
Solutions, Ltd. v. FCC, we said that, “even if the Commission
had not previously articulated the policy rationale that formed
the primary basis for granting or denying the waiver requests,
the Commission’s exercise of its wide discretion in denying
Mountain Solutions’ waiver request . . . was in the nature of an
adjudicatory decision rather than the announcement of a new
rule.” 197 F.3d 512, 519 n.12 (D.C. Cir. 1999). And as we have
repeatedly held, adjudicatory decisions are not subject to the
APA’s notice-and-comment requirements. See, e.g., Cassell v.
FCC, 154 F.3d 478, 485-86 (D.C. Cir. 1998).
Second, the petitioners maintain that the Commission
improperly considered an opposition to the waiver petitions that
was filed in contravention of FCC rules against ex parte and
untimely filings. Pet’rs’ Br. 45. Although upon reconsideration
the Commission acknowledged that the filing violated its rules
regarding ex parte submissions, it rightly concluded that the
violation did not prejudice the petitioners. See Reconsideration
Order, 27 FCC Rcd. at 9824-25, ¶¶ 23-26. At the
reconsideration stage, the petitioners were able to -- and did --
fully contest the arguments that were advanced in the ex parte
filing. And there is no indication that the Commission’s
reconsideration was tainted by its initial consideration of the
13
filing. The violation of the rules was therefore harmless. See 5
U.S.C. § 706(2)(F) (providing that the reviewing court shall take
“due account . . . of the rule of prejudicial error”); Lichoulas v.
FERC, 606 F.3d 769, 778 (D.C. Cir. 2010) (holding that a court
will not undo the action of an agency that received an ex parte
communication “unless the agency’s decisionmaking process
was irrevocably tainted so as to make the ultimate judgment of
the agency unfair” (internal quotation marks omitted)).
Finally, the petitioners contend that the FCC violated the
Paperwork Reduction Act (PRA), 44 U.S.C. § 3512(a), by
suggesting that petitioner CTC should have supported a
document it submitted by attaching a sworn declaration of the
document’s authenticity. The PRA bars an agency from
subjecting a person “to any penalty for failing to comply with a
collection of information,” unless the agency first submits the
collection requirement to review by the Office of Management
and Budget. Id. Although we doubt that requiring that waiver
requests be accompanied by sworn declarations constitutes a
“collection of information” under the PRA, it would not matter
if it did. The FCC did not subject CTC “to any penalty” for
failing to provide a sworn declaration. Instead, the Commission
“note[d] that CTC did not provide a sworn declaration[,] . . . but
in any case” evaluated the document and dismissed its relevance
for other reasons. Reconsideration Order, 27 FCC Rcd. at 9823-
24, ¶ 22 (emphasis added). Accordingly, this challenge to the
denial of the petitioners’ waiver requests suffers the same fate
as each of the others.
IV
For the foregoing reasons, the petition for review is
Denied.