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United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued May 9, 2003 Decided July 11, 2003
No. 02-1055
NEW ENGLAND PUBLIC COMMUNICATIONS COUNCIL, INC.,
PETITIONER
v.
FEDERAL COMMUNICATIONS COMMISSION AND
UNITED STATES OF AMERICA,
RESPONDENTS
AMERICAN PUBLIC COMMUNICATIONS COUNCIL, ET AL.,
INTERVENORS
Consolidated with
02–1091, 02–1092, 02–1105
On Petitions for Review of an Order of the
Federal Communications Commission
–————
Bills of costs must be filed within 14 days after entry of judgment.
The court looks with disfavor upon motions to file bills of costs out
of time.
2
Aaron M. Panner argued the cause for Bell Operating
Company petitioners. With him on the briefs were Michael
K. Kellogg, James G. Garralson, Michael E. Glover, Edward
Shakin, John M. Goodman, James D. Ellis and Gary L.
Phillips.
Marcus W. Trathen argued the cause for petitioners New
England Public Communications Council, Inc., et al. With
him on the briefs were Paul C. Besozzi and David Kushner.
Joel Marcus, Counsel, Federal Communications Commis-
sion, argued the cause for respondent. With him on the brief
were R. Hewitt Pate, Acting Assistant Attorney General, U.S.
Department of Justice, Robert B. Nicholson and Robert J.
Wiggers, Attorneys, John A. Rogovin, Acting General Coun-
sel, Federal Communications Commission, and John E. Ingle,
Deputy Associate General Counsel. Lisa E. Boehley, Coun-
sel, Federal Communications Commission, entered an appear-
ance.
Robert F. Aldrich argued the cause for intervenor Ameri-
can Public Communications Council, Inc. With him on the
brief was Albert H. Kramer.
Aaron M. Panner argued the cause for LEC intervenors.
With him on the brief were Michael K. Kellogg, James G.
Harralson, Michael E. Glover, Edward Shakin, John M.
Goodman, James D. Ellis and Gary G. Phillips. Peter M.
Connolly entered an appearance.
Before: GINSBURG, Chief Judge, and ROGERS and TATEL,
Circuit Judges.
Opinion for the Court filed by Circuit Judge TATEL.
TATEL, Circuit Judge: Acting pursuant to a 1996 Telecom-
munications Act provision designed to promote competition in
the payphone service industry, the Federal Communications
Commission issued an order requiring the Bell operating
3
companies (BOCs) to price the service lines used by payphone
service providers at forward-looking cost-based rates. In
these consolidated cases, two groups of petitioners challenge
the order from opposing points of view. One group, com-
posed of BOCs, challenges the Commission’s authority to
require a specific rate-setting methodology for intrastate
payphone lines. The other group, composed of payphone
service providers that use non-BOC local exchange carriers’
payphone lines, challenges the Commission’s decision to limit
the forward-looking cost-based methodology requirement to
BOCs. Concluding that the Telecommunications Act autho-
rizes the Commission to regulate BOC intrastate payphone
line rates, but not those of non-BOC local exchange carriers,
we deny the petitions for review and affirm the Commission’s
order in all respects.
I.
Until the mid–1980s, because payphones could not be oper-
ated separately from local exchange service, only local ex-
change carriers (LECs) provided payphone service. See Illi-
nois Pub. Telecomms. Ass’n v. FCC, 117 F.3d 555, 558 (D.C.
Cir. 1997) (per curiam). For that reason, the LECs––which,
thanks to the 1982 consent decree under which AT&T divest-
ed its local exchange carriers, were primarily BOCs, see
United States v. Am. Tel. & Tel. Co., 552 F. Supp. 131
(D.D.C. 1982), aff’d sub nom. Maryland v. United States, 460
U.S. 1001 (1983)––generally subsidized the cost of payphone
equipment and service with revenues from their other ser-
vices. In the mid–1980s, however, advances in payphone
technology enabled independent, non-LEC payphone service
providers (PSPs) to enter the payphone market. But because
the LECs owned the payphone lines used by all PSPs, they
were able to continue to subsidize and otherwise discriminate
in favor of their own payphone service. See generally In the
Matter of Implementation of the Pay Telephone Reclassifica-
tion and Compensation Provisions of the Telecommunications
Act of 1996, 11 F.C.C.R. 6716, 6718–20 ¶ ¶ 2–6 (1996) (Notice
of Proposed Rulemaking).
4
In the Telecommunications Act of 1996, Congress funda-
mentally restructured the local telephone industry. Section
276 of the Act, which is specifically aimed at promoting
competition in the payphone service industry, prohibits ‘‘any
Bell operating company that provides payphone service’’ from
subsidizing or discriminating in favor of its own payphone
service. 47 U.S.C. § 276(a). It also authorizes the Commis-
sion to prescribe regulations consistent with the goal of
promoting competition, requiring that the Commission take
five specific steps toward that goal. One of these steps is
‘‘prescrib[ing] a set of nonstructural safeguards for Bell oper-
ating company payphone service’’ that ‘‘shall, at a minimum,
include the nonstructural safeguards equal’’ to those govern-
ing BOCs’ provision of enhanced services––the so-called Com-
puter III safeguards. Id. § 276(b)(1)(C). Finally, recogniz-
ing that the prescribed regulations would trench on state
authority, Congress provided that section 276 preempts state
law ‘‘[t]o the extent that any State requirements are inconsis-
tent with the Commission’s regulations.’’ Id. § 276(c).
The Commission implemented section 276 in a series of
orders, beginning with the so-called Payphone Orders. In
the Matter of Implementation of the Pay Telephone Reclassi-
fication and Compensation Provisions of the Telecommunica-
tions Act of 1996, 11 F.C.C.R. 20541 (1996) (Report and
Order) (‘‘First Payphone Order’’); Order on Reconsideration,
11 F.C.C.R. 21233 (1996) (‘‘Payphone Reconsideration Or-
der’’). Among other things, these orders require that incum-
bent LECs provide ‘‘individual central office coin transmis-
sion services to PSPs’’ at rates that satisfy the flexible, cost-
based ‘‘new services test’’ that developed as an outgrowth of
the Computer III proceeding. First Payphone Order, 11
F.C.C.R at 20614 ¶ 146. Specifically, in an order following
the initial Computer III order, the Commission directed that
service element rates be set at the direct costs of providing
the service element, plus ‘‘an appropriate level of overhead
costs.’’ In the Matter of Amendments of Part 69 of the
Commission’s Rules Relating to the Creation of Access
Charge Subelements for Open Network Architecture Policy
and Rules Concerning Rates for Dominant Carriers, 6
5
F.C.C.R. 4524, 4531 ¶ ¶ 38–41, 44 (1991) (Report and Order
and Order on Further Reconsideration and Supplemental
Notice of Proposed Rulemaking) (‘‘Access Charge Subele-
ments Order’’). In the Payphone Reconsideration Order, the
Commission clarified that while the states, not the Commis-
sion, would review the LECs’ intrastate payphone line tariffs,
the states must ensure that the tariffs are ‘‘(1) cost-based; (2)
consistent with the requirements of Section 276 with regard,
for example, to the removal of subsidies TTT; and (3) nondis-
criminatory,’’ and that the states ‘‘must apply TTT the Com-
puter III guidelines for tariffing such intrastate services.’’ 11
F.C.C.R. at 21308 ¶ 163.
In 1997, a group of independent PSPs petitioned the Wis-
consin Public Service Commission to determine whether Wis-
consin LECs’ payphone line service tariffs complied with the
new services test. The Wisconsin Commission denied the
request, finding its jurisdiction under state law limited to
‘‘enforcing a prohibition on cross subsidy TTT and prohibitions
on discriminatory practices.’’ Letter from Public Service
Commission of Wisconsin to Andrew J. Phillips, Yakes,
Bauer, Kindt & Phillips (Nov. 6, 1997). The FCC’s Common
Carrier Bureau, concluding that ‘‘[t]he Wisconsin Commis-
sion’s stated lack of authority to review these payphone
service offerings invokes this Commission’s obligations under
section 276 and the Commission’s Payphone Orders,’’ directed
the four largest Wisconsin LECs to file with the Commission
‘‘tariffs for intrastate payphone service offerings TTT together
with the supporting documentation TTT necessary to demon-
strate compliance with the requirements of section 276 and
the Commission’s implementing rules.’’ In the Matter of
Wisconsin Public Service Commission, 15 F.C.C.R. 9978, 9980
¶ 5 (2000) (Order) (‘‘Bureau Order’’) (footnotes omitted); see
also Letter of October 28, 1998, from Kathryn C. Brown,
Chief, Common Carrier Bureau, to Hon. Joseph P. Mettner,
Chairman, Public Service Commission of Wisconsin, 13
F.C.C.R. 20865, 20865 (1998). The Bureau also notified the
LECs that it would examine their tariffs using ‘‘an appropri-
ate forward-looking, economic cost methodology’’ consistent
with principles the Commission set forth in its 1996 Local
Competition Order, in which the Commission implemented
6
the Telecommunications Act’s local telephone market deregu-
lation provisions, 47 U.S.C. §§ 251, 252. Bureau Order, 15
F.C.C.R. at 9981 ¶ 9; see also In the Matter of Implementa-
tion of the Local Competition Provisions in the Telecommuni-
cations Act of 1996, 11 F.C.C.R. 15499 (1996) (Report and
Order) (‘‘Local Competition Order’’). In that proceeding, the
Commission prescribed a method for setting rates at which
incumbent LECs would provide network elements to their
competitors based not on the original, historical cost of the
equipment used to provide service, but rather on the current
cost of providing service using existing equipment. See Veri-
zon Communications, Inc. v. FCC, 535 U.S. 467, 495–97
(2002) (upholding the forward-looking cost methodology
against the incumbents’ challenge).
A coalition of LECs applied for review of the Bureau’s
order, primarily challenging the Bureau’s decision to use
forward-looking methodologies in applying the new services
test. Citing 47 U.S.C. section 152(b), which provides that
‘‘nothing in th[e] Act shall be construed to apply or to give
the Commission jurisdiction with respect to (1) charges, clas-
sifications, practices, services, facilities, or regulations for or
in connection with intrastate communication service,’’ the
coalition also contested the Commission’s jurisdiction to regu-
late intrastate payphone line rates.
In the order under review in this case, the Commission
determined that sections 276(a)(2) and 276(b)(1)(C) establish
its jurisdiction to regulate intrastate payphone line rates and
thus override section 152(b). It also concluded, however, that
its jurisdiction is limited to regulating BOCs’ payphone line
rates, since those provisions, by their terms, apply only to
BOCs, and Congress had not ‘‘expressed with the requisite
clarity its intention that the Commission exercise jurisdiction
over the intrastate payphone prices of non-BOC LECs.’’ In
the Matter of Wisconsin Public Service Commission, 17
F.C.C.R. 2051, 2064 ¶ 42 (2002) (Order Directing Filings)
(‘‘Wisconsin Order’’). Finally, the Commission upheld the
Bureau’s decision to use a forward-looking cost-based meth-
odology in applying the new services test. Id. at 2065 ¶ 43 &
n.100.
7
A group of BOCs now petitions for review, principally
contending that the Commission lacks jurisdiction to enter
the field of intrastate telephone service rate-making. Anoth-
er set of petitioners, PSP trade associations New England
Public Communications Council, Inc. and North Carolina
Payphone Association, Inc., by contrast, not only endorses the
Commission’s decision to impose a forward-looking cost meth-
odology on states setting intrastate payphone line rates, but
also faults the Commission for failing to apply the same
standard to the non-BOC LECs from which their members,
all independent PSPs, purchase their payphone line service.
II.
Before considering the merits, we must address the Com-
mission’s threshold argument that petitioners lack Article III
standing to challenge its Wisconsin Order. Specifically, the
Commission contends that because it has done no more than
establish a standard for the Wisconsin Public Services Com-
mission to apply in evaluating the Wisconsin BOCs’ tariffs,
and because it has ‘‘made no determination as to the actual
payphone line rate to be charged in Wisconsin or anywhere
else,’’ neither the BOC petitioners nor the PSP petitioners
have suffered an ‘‘actual or imminent’’ injury that is both
‘‘fairly traceable’’ to the Wisconsin Order and ‘‘likely’’ to be
‘‘redressed by a favorable decision,’’ as Article III requires,
Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61 (1992)
(internal quotation marks omitted). Respondents’ Br. at 18.
According to the Commission, in order to satisfy Article III,
petitioners must show that they have already suffered finan-
cial injury: that is, the BOCs must show that they must
charge less for payphone line service than they otherwise
would have, and the PSPs must show that they will be
required to pay more for payphone line service than they
would if the Commission had asserted jurisdiction over non-
BOC LECs’ line rates. Respondents’ Br. at 18–19. For that
reason, the Commission argues, petitioners’ challenge is pre-
mature: We cannot know whether the Commission’s order
directing the states to apply a particular rate-setting method-
ology will injure the petitioners until the states act.
8
Contrary to the Commission’s argument, neither set of
petitioners need wait for the states to review the LECs’
tariffs before challenging the Wisconsin Order. Cf. Verizon,
535 U.S. at 476 (reviewing a challenge to the Commission’s
prescription of a forward-looking cost-based rate-setting
methodology to be applied by state commissions). The BOCs’
injury is both clear and immediate: The Order’s forward-
looking cost-based methodology means that the BOCs cannot
recover certain expenses beyond the current costs of provid-
ing service––namely, expenses owing to inefficiencies such as
poor management or inflated capital and depreciation––that
they could recover under a historical-cost method. See id. at
511–12. To comply with the Wisconsin Order, the BOCs will
almost certainly have to modify their tariffs to lower their
existing rates––or at the very least, refrain from raising their
rates––before submitting the tariffs for state review. This
injury, moreover, is both directly traceable to the Wisconsin
Order and redressable by a decision in the BOCs’ favor.
The PSP petitioners also suffer immediate injury. The
Wisconsin Order, by departing from the Payphone Orders
regime under which the new services test applied to both
BOCs and non-BOC LECs, leaves the latter group free to set
rates that discriminate against competitor PSPs. We have
repeatedly held that ‘‘parties suffer constitutional injury in
fact when agencies lift regulatory restrictions on their com-
petitors or otherwise allow increased competition.’’ Louisi-
ana Energy & Power Auth. v. FERC, 141 F.3d 364, 367 (D.C.
Cir. 1998). While it is true, as the Commission points out,
that the states may decide on their own to apply the new
services test to non-BOC LECs, the PSP petitioners need not
wait for the states to set the LECs’ payphone line rates
before bringing their challenge. It suffices for the PSP
petitioners to show that the Wisconsin Order has ‘‘the clear
and immediate potential TTT to hurt them competitively.’’
Associated Gas Distribs. v. FERC, 899 F.2d 1250, 1259 (D.C.
Cir. 1990). This court ‘‘ha[s] not required litigants to wait
until increased competition actually occurs.’’ Louisiana En-
ergy & Power Auth., 141 F.3d at 367.
9
Mounting a second challenge to the PSP petitioners’ stand-
ing, the Commission pointed out in its brief that both petition-
ers are out-of-state trade groups that failed to allege in their
opening brief that they have any members that would be
directly affected by the Wisconsin rate-setting proceedings.
In response, the PSP petitioners moved for leave to file
supplemental affidavits indicating that NCPA does have at
least one member that operates in Wisconsin and whose
payphones connect to the network via non-BOC LECs.
Though the Commission does not oppose the motion, it draws
our attention to this court’s recent statement in Sierra Club
v. EPA, 292 F.3d 895 (D.C. Cir. 2002), that ‘‘a petitioner
whose standing is not self-evident should establish its stand-
ing by the submission of its arguments and any affidavits or
other evidence appurtenant thereto at the first appropriate
point in the review proceeding,’’ and that litigants ‘‘should not
expect’’ this court to depart from that rule ‘‘[a]bsent good
cause shown.’’ Id. at 900. We have no need to consider the
application of Sierra Club in this case, however, since the
PSP petitioners’ standing in no way turns on their members’
connections to Wisconsin. Contrary to the Commission’s
argument, the order on review is more than just ‘‘an adjudica-
tory-type proceeding TTT pertaining to rates in Wisconsin.’’
Respondents’ Br. at 18. Instead, it establishes a rule that
affects payphone line rates in every state. Indeed, the
Commission itself acknowledged as much, noting that ‘‘this
Order will assist states in applying the new services test to
BOCs’ intrastate payphone line rates in order to ensure
compliance with the Payphone Orders and Congress’ di-
rectives in section 276.’’ Wisconsin Order, 17 F.C.C.R. at
2052 ¶ 2; see also id. at 2072 ¶ 68 (‘‘[W]e issue this Order to
assist states in determining whether BOCs’ intrastate pay-
phone line rates comply with section 276 and our Payphone
Orders.’’).
III.
This brings us to the merits of petitioners’ challenges to the
Commission’s authority under section 276 to regulate the
10
BOCs’ intrastate payphone line rates. The Communications
Act of 1934 establishes ‘‘a system of dual state and federal
regulation over telephone service,’’ under which the Commis-
sion has the power to regulate ‘‘interstate and foreign com-
merce in wire and radio communication,’’ 47 U.S.C. § 151, but
is generally forbidden from entering the field of intrastate
communication service, which remains the province of the
states, id. § 152(b). Louisiana Pub. Serv. Comm’n v. FCC,
476 U.S. 355, 360 (1986); see Illinois Pub. Telecomms. Ass’n,
117 F.3d at 561; see also City of Brookings Mun. Tel. Co. v.
FCC, 822 F.2d 1153, 1155 (D.C. Cir. 1987) (‘‘[T]he FCC enjoys
jurisdiction over interstate rates, whereas the several States
reign supreme over intrastate rates.’’).
While the apportionment of regulatory power in this dual
system is, of course, subject to revision, whether the Commis-
sion may preempt state regulation of intrastate telephone
service depends, as in ‘‘any pre-emption analysis,’’ on ‘‘wheth-
er Congress intended that federal regulation supersede state
law.’’ Louisiana Pub. Serv. Comm’n, 476 U.S. at 369. The
‘‘best way’’ to answer that question, the Supreme Court has
instructed, ‘‘is to examine the nature and scope of the authori-
ty granted by Congress to the agency.’’ Id. at 374. In cases
involving the Communications Act, that inquiry is guided by
the language of section 152(b), which the Supreme Court has
interpreted as ‘‘not only a substantive jurisdictional limitation
on the FCC’s power, but also a rule of statutory construc-
tion.’’ Id. at 373. Applying this test in a challenge to the
Commission’s authority under section 276 of the 1996 Act, we
have held that ‘‘§ 276 should not be read to confer upon the
FCC jurisdiction TTT unless § 276 is so unambiguous or
straightforward so as to override the command of § 152(b).’’
Illinois Pub. Telecomms. Ass’n, 117 F.3d at 561 (internal
quotation marks omitted) (citing Louisiana Pub. Serv.
Comm’n, 476 U.S. at 377).
Here we find that section 276 unambiguously and straight-
forwardly authorizes the Commission to regulate the BOCs’
intrastate payphone line rates. Section 276(b) directs the
Commission to implement section 276(a)’s anti-subsidy and
anti-discrimination mandates by undertaking five specific
11
measures to promote ‘‘competition among payphone service
providers and TTT the widespread deployment of payphone
services to the benefit of the general public.’’ 47 U.S.C.
§ 276(b)(1). Recognizing that the Commission’s regulations
implementing these commands would tread on ground tradi-
tionally occupied by the states, Congress included a preemp-
tion clause providing that ‘‘[t]o the extent that any State
requirements are inconsistent with the Commission’s regula-
tions,’’ the Commission’s regulations would preempt state law.
Id. § 276(c); see also S. REP. NO. 104–230, at 158 (1996) (‘‘In
crafting implementing rules, the commission is not bound to
adhere to existing mechanisms or procedures established for
general regulatory purposes in other provisions of the Com-
munications Act [of 1934].’’).
Two of the five measures prescribed in section 276(b),
moreover, expressly apply to intrastate service: subsection
(b)(1)(A) directs the Commission to adopt regulations guaran-
teeing fair compensation for ‘‘intrastate and interstate
call[s],’’ 47 U.S.C. § 276(b)(1)(A) (emphasis added), and
(b)(1)(B) requires the Commission to ‘‘discontinue the intra-
state and interstate carrier access charge payphone service
elements TTT and all intrastate and interstate payphone
subsidies,’’ id. § 276(b)(1)(B) (emphasis added). In fact, we
have interpreted subsection (b)(1)(A) to permit Commission
regulation of local coin rates, which was long the exclusive
domain of the states. Illinois Pub. Telecomms. Ass’n, 117
F.3d at 561–63. And although subsections (b)(1)(D) and
(b)(1)(E) do not use the word ‘‘intrastate,’’ the two provisions
authorize the Commission to promulgate regulations concern-
ing PSPs’ selection of carriers for long-distance intraLATA
and interLATA calls, both of which are often intrastate calls.
See 47 U.S.C. § 276(b)(1)(D), (b)(1)(E). As the BOCs affirm,
‘‘the FCC could not carry out this mandate without address-
ing intrastate matters.’’ BOC Petitioners’ Br. at 12–13. All
of these provisions, which authorize the Commission to regu-
late both intrastate and interstate service in implementing
section 276(a)’s anti-subsidy and anti-discrimination com-
mands, indicate that those commands, too, apply to both
intrastate and interstate matters.
12
To be sure, as the BOC petitioners emphasize, the two
provisions on which the Commission relied in the Wisconsin
Order––section 276(a)(2)’s anti-discrimination command and
section 276(b)(1)(C)’s requirement that the Commission pre-
scribe Computer III-like nonstructural safeguards for BOC
payphone service—do not use the word ‘‘intrastate.’’ Accord-
ing to the BOCs, the omission of references to intrastate
services in these provisions, set against the inclusion of
explicit references to intrastate services in subsections
(b)(1)(A) and (b)(1)(B), demonstrates that Congress did not
intend for the Commission’s regulations implementing sec-
tions 276(a)(2) and 276(b)(1)(C) to cover intrastate services.
For support, they cite Russello v. United States, 464 U.S. 16
(1983), in which the Supreme Court held that ‘‘where Con-
gress includes particular language in one section of a statute
but omits it in another section of the same Act, it is generally
presumed that Congress acts intentionally and purposely in
the disparate inclusion or exclusion.’’ Id. at 23 (internal
quotation marks and citation omitted). As Russello itself
makes clear, however, it announces a presumption, not a
hard-and-fast rule. Indeed, in AT&T Corp. v. Iowa Utilities
Board, 525 U.S. 366 (1999), the Supreme Court rejected a
similar argument regarding the Commission’s jurisdiction to
create a pricing methodology for the states, holding that a
‘‘mere lack of parallelism is surely not enough to displace [the
Commission’s] explicit authority.’’ Id. at 385. The presump-
tion that Congress deliberately omitted the word ‘‘intrastate’’
from section 276(a) seems particularly inappropriate here
because the references to intrastate services appear in a
portion of the statute specifying measures to implement
section 276(a)’s general prohibitions on BOC subsidies and
discrimination. Cf. Clay v. United States, 537 U.S. 522, 123
S. Ct. 1072, 1078 (2003) (‘‘An unqualified term[,] TTT Russello
indicates, calls for a reading surely no less broad than a
pinpointed oneTTTT’’). If Congress had meant to prohibit
only interstate subsidies and discrimination, it is difficult to
understand why it would have directed the Commission to
regulate intrastate call compensation and intrastate pay-
phone subsidies.
13
The statute’s structure and purpose also support the Com-
mission’s assertion of jurisdiction. Much like the 1996 Tele-
communications Act’s local competition provisions, section
276(a)’s command that BOCs shall neither subsidize nor
discriminate in favor of their own payphone service, 47 U.S.C.
§ 276(a), is designed to replace a state-regulated monopoly
system with a federally facilitated, competitive market. Ob-
serving that limiting Commission jurisdiction to interstate
matters ‘‘would utterly nullify the 1996 amendments,’’ the
Supreme Court in Iowa Utilities Board affirmed the Commis-
sion’s authority to ‘‘design a pricing methodology’’ to bind
state rate-making commissions in implementing the Act’s
local competition provisions. 525 U.S. at 380, 385. Rejecting
a section 152(b) challenge to the Commission’s jurisdiction,
the Court noted that ‘‘[a]fter the 1996 Act, § 152(b) may have
less practical effectTTTT because Congress, by extending the
Communications Act into local competition, has removed a
significant area from the States’ exclusive control.’’ Id. at 382
n.8.
Of course, unlike Iowa Utilities Board, which involved
purely local, intrastate facilities and services, both intrastate
and interstate facilities and services are at issue here. But in
passing the 1996 Act’s payphone competition provision and
the local competition provisions, Congress had exactly the
same objective: to authorize the Commission to eliminate
barriers to competition. And much as the Supreme Court
concluded it would be impossible to implement the local
competition provisions while limiting the Commission’s au-
thority to interstate services, so would it make little sense for
Congress to command the Commission to promulgate rules
opening the payphone market to competition while leaving it
powerless to address intrastate subsidies and discrimination,
which are, after all, no less an obstacle to fair competition
than interstate subsidies and discrimination.
The BOC petitioners next contend that even if section
276(a) bars intrastate discrimination, it does not authorize the
Commission to prescribe any particular rate-making method-
ology. According to the BOCs, discrimination consists only of
charging unlike prices for like services, and section 276’s anti-
14
discrimination command therefore requires only pricing pari-
ty. The BOCs argue that the Commission itself took this
position in Computer III when it declined to mandate any
particular pricing standard for enhanced services, choosing
instead to require BOCs to allow competitors to use basic
network services on the same terms as the BOCs themselves
used those services. See In the Matters of Amendment of
Sections 64.702 of the Commission’s Rules and Regulations
(Third Computer Inquiry), 104 F.C.C.2d 958, 1052 ¶ ¶ 183–184
(1986) (Report and Order). But the Commission has revised
this position. Indeed, the new services test was an outgrowth
of the Commission’s recognition that pricing parity alone
would still permit BOCs to discriminate by ‘‘set[ting] relative-
ly low rates for the [basic service elements] that they use,
while pricing those that they do not need at relatively high
rates.’’ In the Matter of Amendments of Part 69 of the
Commission’s Rules Relating to the Creation of Access
Charge Subelements for Open Network Architecture, 4
F.C.C.R. 3983, 3985 ¶ 18 (1989) (Notice of Proposed Rulemak-
ing); see also Access Charge Subelements Order, 6 F.C.C.R.
at 4531 ¶ ¶ 38–44. Nothing in the statute indicates that
Congress understood the word ‘‘discrimination’’ to carry the
narrow meaning the BOCs urge, as opposed to the more
expansive view the Commission adopted in its refinements to
the Computer III regime.
Approaching the Wisconsin Order from the opposite angle,
the PSP petitioners contend that section 276 confers on the
Commission not only the authority to regulate BOCs’ intra-
state payphone line rates, but also the authority to extend its
regulations to non-BOC LECs. For support, the PSPs rely
primarily on the statute’s purposes, contending that non-BOC
LEC discrimination against competitors represents no less an
obstacle to fair competition in the payphone industry than
BOC discrimination. Though the PSPs may be correct as a
matter of policy, the fact remains that sections 276(a) and
276(b)(1)(C), the sources of the Commission’s authority to
regulate intrastate payphone rates, expressly apply only to
the BOCs. We must presume that when Congress referred
to ‘‘Bell operating companies’’ rather than ‘‘local exchange
15
carriers,’’ it acted deliberately. Indeed, the Act defines the
terms differently. 47 U.S.C. § 153(4), (26). The PSPs have,
moreover, fallen short of demonstrating that this is one of the
‘‘ ‘rare cases’ ’’ in which we may look beyond clear statutory
text to discern the statute’s meaning because ‘‘ ‘literal applica-
tion of [the] statute will produce a result demonstrably at
odds with the intentions of its drafters.’ ’’ Nat’l Pub. Radio,
Inc. v. FCC, 254 F.3d 226, 230 (D.C. Cir. 2001) (quoting
United States v. Ron Pair Enters., Inc., 489 U.S. 235, 242
(1989)); see also id. (a party seeking to ‘‘rebut[ ] the pre-
sumption created by clear language TTT must show either
that, as a matter of historical fact, Congress did not mean
what it appears to have said, or that, as a matter of logic and
statutory structure, it almost surely could not have meant it’’)
(internal quotation marks and citation omitted).
The PSPs argue that even if section 276 does not confer on
the Commission the requisite authority, the Commission may
invoke other statutory provisions––specifically, section 201(b),
the Communications Act’s general rulemaking provision, sec-
tion 202(a), the Act’s antidiscrimination provision, and section
205(a), which authorizes the Commission to prescribe just and
reasonable charges. 47 U.S.C. §§ 201(b), 202(a), 205(a).
Such general provisions cannot, however, trump section
152(b)’s specific command that no Commission regulations
shall preempt state regulations unless Congress expressly so
indicates. See Iowa Utils. Bd., 525 U.S. at 382 n.8 (‘‘Insofar
as Congress has remained silent TTT § 152(b) continues to
function.’’). Absent authorization to apply its section 276
regulations to non-BOC LECs, the Commission may not
regulate their intrastate payphone line rates.
IV.
Finally, the BOCs argue that the Commission acted arbi-
trarily and capriciously by imposing a forward-looking cost-
based methodology for basic transmission rates. Specifically,
the BOCs claim that (1) pricing under the new services test is
not rationally related to the statute’s goal of preventing
discrimination; (2) the Order is inconsistent with Computer
16
III, in which the Commission did not alter the basic line rate;
and (3) the Commission has not applied a forward-looking
cost-based methodology to federal subscriber line charges,
which, according to the BOCs, are analogous to payphone line
rates.
The Commission objects to our consideration of these argu-
ments on the ground that it ‘‘has been afforded no opportuni-
ty to pass’’ on them. 47 U.S.C. § 405(a)(2). The BOCs point
out that they did in fact raise all of these arguments before
the Commission, but they neglect to mention that they made
each argument in the course of challenging the Commission’s
authority to set intrastate payphone line rates and never
presented the type of substantive challenge they make here.
Because the BOCs failed explicitly to make a substantive
challenge, ‘‘we must determine whether ‘a reasonable Com-
mission necessarily would have seen the question raised
before [the Court] as part of the case presented to it.’ ’’
AT&T Corp. v. FCC, 317 F.3d 227, 235 (D.C. Cir. 2003)
(citation omitted) (emphasis in original). In considering this
question, we ‘‘bear[ ] in mind that TTT a litigant before the
Commission TTT ha[s] ‘at least a modicum of responsibility for
flagging the relevant issues.’ ’’ Id. (citation omitted). Claim-
ing at oral argument that the BOCs did ‘‘flag’’ the issue,
counsel pointed to a single sentence in a letter to the Com-
mission regarding its jurisdiction, which stated that imposing
a rule different from the rules that apply to federal subscrib-
er line charges ‘‘would not only be beyond the Commission’s
jurisdiction, it would be arbitrary and capricious.’’ Letter
from Aaron M. Panner, Kellogg, Huber, Hansen, Todd &
Evans, P.L.L.C., to Magalie Salas, Secretary, Federal Com-
munications Commission (Jan. 22, 2002). This was insuffi-
cient. Given that the BOCs’ three arguments were focused
on the Commission’s jurisdiction, and given that the phrase
‘‘arbitrary and capricious’’ appears just once in the middle of
a letter otherwise wholly dedicated to the BOCs’ jurisdictional
argument, ‘‘we cannot say that a reasonable Commission
‘necessarily would have seen’ ’’ that the BOCs were question-
ing not only the Commission’s authority to promulgate rules
regulating intrastate payphone line rates, but also the reason-
17
ableness of those rules. AT&T, 317 F.3d at 236 (citation
omitted). Nor did any statement in an ex parte filing entitled
‘‘An Analysis of the Scope of Commission Jurisdiction Over
Intrastate Payphone Line Rates’’ (filed Oct. 15, 2001), which
counsel also identified as ‘‘flagging’’ the issue, necessarily put
the Commission on notice of the BOCs’ substantive challenge.
As we have repeatedly held, ‘‘[t]he Commission ‘need not sift
pleadings and documents to identify’ arguments that are not
‘stated with clarity’ by a petitioner.’’ Bartholdi Cable Co.,
Inc. v. FCC, 114 F.3d 274, 279 (D.C. Cir. 1997) (citation
omitted). The BOCs should have filed a petition for reconsid-
eration to afford the Commission an opportunity to pass on
their arguments before they turned to this court for review.
See 47 U.S.C. § 405(a)(2) (requiring a litigant first to present
an argument to the Commission on reconsideration if it
‘‘relies on questions of fact or law upon which the Commission
TTT has been afforded no opportunity to pass’’).
V.
We deny the petitions for review and affirm the Wisconsin
Order in all respects.
So ordered.