People St NY v. FCC

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

---------

Filed September 16, 1997

No. 96-1394

Illinois Public Telecommunications Association,

Petitioner

v.

Federal Communications Commission and

United States of America,

Respondents

Competitive Telecommunications Association, et al.,

Intervenors

Consolidated with Nos. 96-1395, 96-1407, 96-1428, 96-1429,

96-1466, 96-1476, 96-1478, 96-1479, 96-1482, 96-1484,

96-1485, 96-1486, 97-1016, 97-1021, 97-1022, 97-1039,

97-1048, 97-1069, 97-1070, 97-1080

On Motion for Clarification or,

Alternatively, for Partial Rehearing

---------

Before: Edwards, Chief Judge, Ginsburg and Sentelle,
Circuit Judges.

Supplemental opinion for the court filed by Circuit Judge
Ginsburg.

Ginsburg, Circuit Judge: The Interexchange Carrier (IXC)
Parties,1 petitioners and intervenors, have moved for clarifica-
tion of the effect of our judgment of July 1, 1997 or, alterna-
tively, for partial rehearing. We grant the motion and clarify
our opinion as follows.

When this court remands a rule to an agency for further
consideration with little or no prospect of the rule's being re-
adopted upon the basis of a more adequate explanation of the
agency's reasoning, the practice of the court is ordinarily to
vacate the rule. See Allied-Signal, Inc. v. USNRC, 988 F.2d
146, 150-51 (D.C. Cir. 1993) (court takes account of "the
seriousness of the order's deficiencies (and thus the extent of
doubt whether the agency chose correctly) and the disruptive
consequences of an interim change that may itself be
changed"), quoting International Union, UMW v. FMSHA,
920 F.2d 960, 967 (D.C. Cir. 1990), which in turn referenced
Washington Metro. Area Transit Comm'n v. Holiday Tours,
Inc., 559 F.2d 841, 844 (D.C. Cir. 1977) and American Hosp.
Supply Corp. v. Hospital Prods., Ltd., 780 F.2d 589, 593-94
(7th Cir. 1986), both setting out analogous factors considered
in deciding whether to grant a preliminary injunction. See
also A.B.A. House of Delegates Res. No. 107B (Annual
Meeting, San Francisco, Aug. 5-6, 1997) (listing factors to
guide the court's exercise of discretion in deciding whether to
vacate agency action, and recommending that "a reviewing
court should normally strike the balance in favor of vacating
the agency's action, unless special circumstances exist").
Thus we have vacated FCC rules even when we have "not
foreclose[d] the possibility that the Commission may develop

__________
1 Cable & Wireless, Inc., the Competitive Telecommunications
Association, Excel Telecommunications, Inc., Frontier Corp., LCI
International Telcom Corp., MCI Telecommunications Corporation,
Sprint Corporation, Telco Communications Group, Inc., and World-
Com, Inc.

a convincing rationale" for re-adopting the same rule on
remand. Petroleum Communications, Inc. v. FCC, 22 F.3d
1164, 1173 (D.C. Cir. 1994).

Pursuant to the aforementioned criteria, we now clarify
that the court in this case did intend to vacate those portions
of the Payphone Orders 2 setting at $.35 the compensation
that the IXCs must pay to payphone service providers for
subscriber 800 and access code calls, both prescriptively
during the interim period and as the default rate thereafter.
The court likewise intended to vacate those portions of the
Payphone Orders requiring that, during the first phase of the
interim plan, the IXCs with annual toll revenues in excess of
$100 million pay the full amount of the compensation rightful-
ly due from all IXCs.

The FCC set the compensation rate for subscriber 800 and
access code calls at the deregulated coin call rate of $.35
because of the supposed similarity in the cost of originating
the various types of payphone calls. As we emphasized in
our opinion, however, "the record in this case is replete with
evidence that the costs of local coin calls versus 800 and
access code calls are not similar." Illinois Public Telecom-
munications Ass'n v. FCC, 117 F.3d 555, 563 (D.C. Cir. 1997).
The FCC had purported to disagree with that evidence, but it
"never provided any reasons for its 'disagreement.' " Id. at
564. We infer that, if it were possible to reconcile the
evidence with the agency's decision, the FCC would at least
have attempted to do so. The FCC's "failure to respond to
contrary arguments based on solid data" not only, as we said,
"epitomizes arbitrary and capricious decisionmaking," id.; it
also leaves the court with no basis for allowing the $.35 rate
to remain in place pending further consideration on remand.

The FCC invoked "administrative convenience" for its deci-
sion that the 22 largest IXCs would have to pay millions of
dollars per month for the costs of services received by other,
smaller IXCs during the first phase of the interim plan. As

__________
2 Implementation of the Pay Telephone Reclassification and
Compensation Provisions of the Telecommunications Act of 1996,
CC Docket No. 96-128, Report and Order, 11 FCC Rcd 20541
(1996); Order on Reconsideration, 11 FCC Rcd 21233 (1996).

the court explained, however, administrative convenience
"cannot possibly justify" that decision. Id. at 565. "Perhaps
more fundamentally," we noted, "the FCC did not adequately
justify why it based its interim plan on total toll revenues, as
it did not establish a nexus between total toll revenues and
the number of payphone-originated calls." Id.

Consequently, the court "grant[ed] the petition for review
on these points," including the IXCs' explicit request that the
Payphone Orders be vacated in these respects. The IXCs'
motion for clarification is therefore

Granted.