United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 18, 2004 Decided March 11, 2005
No. 03-1414
UNITED STATES TELECOM ASSOCIATION AND
CENTURYTEL, INC.,
PETITIONERS
v.
FEDERAL COMMUNICATIONS COMMISSION AND
UNITED STATES OF AMERICA,
RESPONDENTS
CELLULAR TELECOMMUNICATIONS & INTERNET
ASSOCIATION, ET AL.,
INTERVENORS
Consolidated with
03-1443
On Petitions for Review of an Order of the
Federal Communications Commission
Aaron M. Panner argued the cause for petitioners. With
him on the briefs were Michael K. Kellogg, David E. Frulla,
Andrew D. Herman, L. Marie Guillory, Jill Canfield, and
Michael T. McMenamin.
2
Gregory W. Whiteaker, Michael R. Bennet, and Rebecca L.
Murphy were on the brief for intervenors Central Texas
Telephone Cooperative, Inc., et al. in support of petitioners.
Ivan C. Evilsizer was on the brief for amicus curiae Hot
Springs Telephone Co. in support of petitioners.
Joel Marcus, Counsel, Federal Communications
Commission, argued the cause for respondents. With him on the
brief were R. Hewitt Pate, Assistant Attorney General, U.S.
Department of Justice, Catherine G. O’Sullivan and Andrea
Limmer, Attorneys, John A. Rogovin, General Counsel, Federal
Communications Commission, Richard K. Welch, Associate
General Counsel, John E. Ingle, Deputy Associate General
Counsel, and Rodger D. Citron, Counsel.
Theodore C. Whitehouse, David M. Don, John J. LoCurto,
Luisa L. Lancetti, Charles W. McKee, Michael F. Altschul,
Robert J. Aamoth, and Todd D. Daubert were on the brief for
intervenors Cellular Telecommunications & Internet
Association, et al. in support of respondents.
Before: SENTELLE, RANDOLPH , and GARLAND, Circuit
Judges.
Opinion for the Court filed by Circuit Judge GARLAND.
GARLAND , Circuit Judge: The petitioners in these
consolidated petitions for review challenge an order of the
Federal Communications Commission (FCC) that sets forth the
conditions under which wireline telecommunications carriers
must transfer telephone numbers to wireless carriers. The
petitioners argue that the FCC’s order is a legislative rule that
requires notice and comment under the Administrative
Procedure Act (APA), 5 U.S.C. § 553, and a regulatory
3
flexibility analysis under the Regulatory Flexibility Act (RFA),
5 U.S.C. § 604. The FCC contends that its order is an
interpretative rule -- a rule that merely interprets one of the
FCC’s previous legislative rules -- and hence is exempt from
APA and RFA requirements.
We conclude that the order is a legislative rule because it
constitutes a substantive change in a prior rule. Although this
rendered the order subject to the APA’s notice-and-comment
requirements, we find that the FCC effectively complied with
those requirements (notwithstanding its view that it was not
required to do so), and that any deviations were at most harmless
error. There is no dispute, however, that the FCC failed to
comply with the RFA’s requirement to prepare a final regulatory
flexibility analysis regarding the order’s impact on small
entities.
In light of these conclusions, we grant the petitions in part
and deny them in part, remanding the order to the FCC to
prepare a final regulatory flexibility analysis. Until that analysis
is complete, we stay the effect of the order solely as it applies to
those carriers that qualify as small entities under the RFA.
I
The Telecommunications Act of 1996 imposes numerous
duties on local exchange carriers (LECs), which, for purposes of
this case, are wireline carriers -- companies that provide
telephone service over telephone wires. See 47 U.S.C. §
153(26) (defining LECs); see also FCC Br. at 2. The duty at
issue here is the obligation “to provide, to the extent technically
feasible, number portability in accordance with requirements
prescribed by the Commission.” 47 U.S.C. § 251(b)(2). The
Act defines “number portability” as “the ability of users of
telecommunications services to retain, at the same location,
4
existing telecommunications numbers without impairment of
quality, reliability, or convenience when switching from one
telecommunications carrier to another.” Id. § 153(30). The Act
further directs the FCC “to establish regulations to implement”
the statutory requirements. Id. § 251(d)(1).
On July 2, 1996, shortly after the 1996 Telecommunications
Act became law, the FCC released its first order regarding
number portability. See First Report and Order and Further
Notice of Proposed Rulemaking, Telephone Number Portability,
11 F.C.C.R. 8352 (1996) (First Order). The First Order was
issued pursuant to APA notice-and-comment procedures, and
contained the regulatory flexibility analysis required by the
RFA. Id. ¶ 1, at 8353-54, app. C, at 8486. In the First Order,
the FCC recognized two kinds of portability that are relevant to
this case: “service provider portability” and “location
portability.” Id. ¶¶ 172, 174, at 8443.
The First Order required all carriers to provide service
provider portability, which it made “synonymous with” the
statutory definition of number portability: “the ability of users
of telecommunications services to retain, at the same location,
existing telecommunications numbers . . . when switching from
one telecommunications carrier to another.” Id. ¶ 27, at 8366-
67. Compare 47 C.F.R. § 52.21(q), with 47 U.S.C. § 153(30).
In addition, the First Order clarified that the portability
obligation included not only porting between wireline carriers,
but also “intermodal portability”: the porting of numbers from
wireline carriers to wireless providers, and vice versa. First
Order ¶ 152, 11 F.C.C.R. at 8431, ¶ 155, at 8433, ¶ 166, at
8440; see 47 C.F.R. §§ 52.23(b), 52.31(a).1
1
The First Order also required porting between wireless
providers. First Order ¶ 155, 11 F.C.C.R. at 8433. Although the
Telecommunications Act of 1996 imposed porting duties only on
5
Although the First Order mandated service provider
portability, it expressly declined to require “location
portability,” which it defined as “the ability of users of
telecommunications services to retain existing
telecommunications numbers . . . when moving from one
physical location to another.” First Order ¶ 174, 11 F.C.C.R. at
8443; see id. ¶ 6, at 8356; 47 C.F.R. § 52.21(j). But the First
Order left many issues unresolved. In particular, while it
required porting “at the same location,” and expressly declined
to require porting when moving from “one physical location to
another,” it did not define the word “location.”
The FCC enlisted a federal advisory committee, the North
American Numbering Council (NANC), to make
recommendations regarding the implementation of number
portability. See First Order ¶¶ 94-95, 11 F.C.C.R. at 8401-02.
The FCC also established a phased schedule requiring LECs to
complete implementation of number portability in the 100
largest metropolitan areas by December 31, 1998. See id. ¶ 77,
at 8393. As a result of subsequent postponements, the carriers’
intermodal porting duty did not commence until November 24,
2003 in large metropolitan areas, and until six months later in
other areas. See Verizon Wireless’ Petition for Partial
Forbearance from the Commercial Mobile Radio Services
Number Portability Obligation ¶ 31, 17 F.C.C.R. 14,972,
14,985-86, ¶ 34, at 14,986-87 (2002).
In 1997, the FCC received the NANC’s recommendations
regarding wireline-to-wireline service provider portability and
issued a second order that adopted those recommendations. See
LECs, the FCC relied on another statute, the Telecommunications Act
of 1934, as the basis for imposing a porting obligation on wireless
carriers. Id. ¶ 4, at 8355, ¶ 153, at 8431 (relying on the FCC’s
authority over the wireless spectrum, as described in 47 U.S.C. § 332).
6
Second Report and Order, Telephone Number Portability, 12
F.C.C.R. 12,281 (1997) (Second Order); 47 C.F.R. § 52.26(a)
(codifying the NANC Working Group Report). Like the First
Order, the Second Order was issued pursuant to notice and
comment and included a regulatory flexibility analysis. Second
Order ¶ 2, 12 F.C.C.R. at 12,283, app. C, at 12,358. Under the
Second Order, wireline-to-wireline number portability was
“limited to carriers with facilities or numbering resources in the
same rate center . . . .” See Memorandum Opinion and Order
and Further Notice of Proposed Rulemaking, Telephone Number
Portability; CTIA Petitions for Declaratory Ruling on Wireline-
Wireless Porting Issues ¶ 7, 18 F.C.C.R. 23,697, 23,700 (2003)
(Intermodal Order) (citing the Second Order’s adoption of the
NANC recommendations). Accordingly, a subscriber could not
keep the same telephone number if he changed from a wireline
telephone in one rate center to a wireline telephone physically
located in a different rate center. Id. ¶ 7, at 23,700, ¶ 24, at
23,707. A “rate center” is a relatively small geographic area,
designated by a LEC and state regulators, that is used to
determine whether a given call is local or toll. See FCC, FCC
Clears Way for Local Number Portability Between Wireline and
Wireless Carriers, 2003 WL 22658210 (Nov. 10, 2003); FCC
Br. at 6-7.
The Second Order was limited to wireline-to-wireline
portability and did not resolve any issues relating to intermodal
portability. Instead, the FCC once again enlisted the NANC to
develop standards necessary to provide for wireless carriers’
participation in number portability. See Second Order ¶ 91, 12
F.C.C.R. at 12,333. In particular, the FCC asked the NANC to
consider “how to account for differences between service area
boundaries for wireline versus wireless services.” Id. ¶ 91, at
12,334. (The “service area” of a wireless carrier is typically
considerably larger than the rate center of a LEC. See FCC Br.
at 7.) But the NANC was unable to reach a consensus on
7
intermodal portability issues, especially because of the problem
of “rate center disparity”:
[B]ecause wireline service is fixed to a specific
location the subscriber’s telephone number is limited
to use within the rate center within which it is assigned.
By contrast, . . . because wireless service is mobile . .
. , while the wireless subscriber’s number is associated
with a specific geographic rate center, the wireless
service is not limited to use within that rate center.
Intermodal Order ¶ 11, 18 F.C.C.R. at 23,701 (discussing
NANC Report).
On January 23, 2003, the Cellular Telecommunications &
Internet Association (CTIA) petitioned the FCC for a
declaratory ruling that “wireline carriers have an obligation to
port their customers’ telephone numbers to a [wireless] provider
whose service area overlaps the wireline carrier’s rate center”
associated with the requested number. See Petition for
Declaratory Ruling of the CTIA, Telephone Number Portability,
CC Docket No. 95-116 (Jan. 23, 2003), at 1. CTIA asked the
FCC to reject the view of certain LECs that portability was
required only when a wireless provider had a physical presence
in the wireline rate center from which the customer sought to
port the number. Id. at 3. The FCC issued a public notice
seeking comments on CTIA’s proposed rule. See Petition for
Declaratory Ruling That Wireline Carriers Must Provide
Portability to Wireless Carriers Operating Within Their Service
Areas, 68 Fed. Reg. 7323 (Feb. 13, 2003). Numerous members
of the wireline industry, including several of the petitioners
here,2 submitted comments.
2
See, e.g., Comments of the U.S. Telecom Ass’n, Telephone
Number Portability, CC Docket No. 95-116 (Feb. 26, 2003);
8
Some of the commenters argued that the FCC could not
adopt the rule requested by CTIA without following APA
rulemaking procedures.3 Those commenters contended that
intermodal porting, as proposed by CTIA, necessarily entails
location portability because it requires LECs to port numbers to
a wireless carrier even if the carrier has no facilities or assigned
telephone numbers within the rate center associated with the
number to be ported. 4 Other commenters focused on the merits
of the proposal. Those contended, inter alia, that CTIA’s
proposal would give wireless carriers unfair advantages over
wireline carriers: while it would permit wireless carriers to port
numbers from -- and thus compete for -- wireline customers,
wireline carriers would be unable to compete for wireless
customers whose numbers were outside the wireline carriers’
rate centers. 5 Finally, some commenters contended that CTIA’s
proposal would impose special burdens on small and rural
telephone companies. They argued that, because wireless
carriers rarely have switching capability within the service areas
of small, independent wireline carriers serving small towns or
Comments of the Organization for the Promotion and Advancement
of Small Telecommunications Companies, Telephone Number
Portability, CC Docket No. 95-116 (Feb. 26, 2003).
3
See, e.g., Ex Parte Letter from M.T. McMenamin, USTA, to
M.H. Dortch, FCC, Telephone Number Portability, CC Docket No.
95-116 (Sept. 30, 2003); Ex Parte Letter from K.B. Levitz, BellSouth,
to M.H. Dortch, FCC, Telephone Number Portability, CC Docket No.
95-116 (Sept. 30, 2003).
4
See Ex Parte Letter of M.T. McMenamin, supra; Ex Parte Letter
of K.B. Levitz, supra.
5
See Ex Parte Letter from C. O’Connell, Qwest, to M.H. Dortch,
FCC, Telephone Number Portability, CC Docket No. 95-116 (Oct. 17,
2003).
9
rural areas, those wireline carriers would have to bear the costs
of transporting calls outside their local service territories when
their customers made calls to wireless subscribers with ported
numbers.6
On November 10, 2003, the FCC released the order at issue
in this case, known as the Intermodal Order. 18 F.C.C.R.
23,697 (2003). The Intermodal Order adopted the rule proposed
in the CTIA petition. It requires wireline carriers to “port
numbers to wireless carriers where the requesting wireless
carrier’s ‘coverage area’ overlaps the geographic location of the
rate center in which the customer’s wireline number is
provisioned,” so long as “the porting-in carrier maintains the
number’s original rate center designation following the port.”
Id. ¶ 22, at 23,706. A wireless carrier’s “coverage area” is
defined as the “area in which wireless service can be received
from the wireless carrier.” Id. ¶ 1, at 23,698.7
The FCC insisted that the Intermodal Order had merely
adopted “clarifications” of the wireline carriers’ existing
obligation under prior orders, and hence did not require a new
rulemaking. Id. ¶ 26, at 23,708. The Commission rejected the
contention that it had imposed a duty of location portability.
Because the number has to retain its original rate center
6
See Comments of the Organization for the Promotion and
Advancement of Small Telecommunications Companies, supra.
7
The order also required wireless carriers to port numbers to
wireline carriers, but only to wireline carriers within a number’s
originating rate center. Moreover, “because of the limitations on
wireline carriers’ networks ability to port-in numbers from distant rate
centers,” the FCC said it would “hold neither the wireline nor the
wireless carriers liable for failing to port under these conditions,” but
would instead issue a further notice of proposed rulemaking on the
issue. Intermodal Order ¶ 22, at 23,706.
10
designation, the FCC said, the number remains at the “same
location” for purposes of the statutory and regulatory definitions
of portability. Id. ¶ 28, at 23,708-09. The fact that the order
requires wireline carriers to port numbers to wireless carriers
that do not have “a physical point of interconnection or
numbering resources in the rate center where the number is
assigned” does not, according to the FCC, amount to location
portability. Id. ¶ 1, at 23,698; see id. ¶ 26, at 23,708.
The U.S. Telecom Association and other entities,
principally advancing the interests of wireline carriers, now
petition for review of the Intermodal Order. They do not
challenge the merits of the order. Rather, they contend that it is
invalid solely because it is a legislative rule issued without
adherence to the procedural requirements of the APA and RFA.8
II
The Administrative Procedure Act imposes notice-and-
comment requirements (the specifics of which we discuss in Part
III) that must be followed before a rule may be issued. See 5
U.S.C. § 553. The APA expressly states, however, that those
procedural requirements do not apply to “interpretative rules.”
See id. § 553(b).9 This court and many commentators have
8
On May 13, 2003, CTIA filed a separate petition with the FCC
regarding wireless-to-wireless porting. The FCC issued an order
resolving that petition on October 7, 2003. See Telephone Number
P ortability - Carrier Requests for Clarification of Wireless-Wireless
Porting Issues, 18 F.C.C.R. 20,971 (2003). That order is the subject
of another set of petitions for review in this court, which were argued
on the same day as the present case. See Central Tex. Tel. Coop., Inc.
v. FCC, No. 03-1405 (D.C. Cir. Mar. 11, 2005).
9
Although the APA’s notice-and-comment procedures are also
inapplicable to certain “adjudication[s],” the FCC made it clear that it
11
generally referred to the category of rules to which the notice-
and-comment requirements do apply as “legislative rules.”10
The petitioners contend that the Intermodal Order
constitutes a legislative rule because it effectively amends the
FCC’s previous legislative rule -- the First Order. See, e.g.,
American Mining Cong. v. Mine Safety & Health Admin., 995
F.2d 1106, 1112 (D.C. Cir. 1993) (stating that a rule that
“effectively amends a prior legislative rule” is “a legislative, not
an interpretative rule”).11 Our cases have formulated this
“effective amendment” test in a number of ways. We have, for
example, held that “new rules that work substantive changes,”
Sprint Corp. v. FCC, 315 F.3d 369, 374 (D.C. Cir. 2003)
(emphasis added), or “major substantive legal addition[s],”
Appalachian Power Co. v. EPA, 208 F.3d 1015, 1024 (D.C. Cir.
2000) (emphasis added), to prior regulations are subject to the
APA’s procedures.12 Enunciating a similar test, the Supreme
regards the Intermodal Order as a rule rather than an adjudication.
See FCC Br. at 18; Oral Arg. Tape at 30:02-30:35.
10
See, e.g., Appalachian Power Co. v. EPA, 208 F.3d 1015, 1020
& n.11 (D.C. Cir. 2000); RICHARD J. PIERCE , J R., I ADMINISTRATIVE
LAW T REATISE § 6.1, at 304 (2002); John F. Manning, Nonlegislative
Rules, 72 GEO. WASH. L. REV. 893, 893 (2004).
11
See also Sprint Corp. v. FCC, 315 F.3d 369, 374 (D.C. Cir.
2003) (noting that “an amendment to a legislative rule must itself be
legislative” (quotation marks omitted)); National Family Planning &
Reprod. Health Ass’n v. Sullivan, 979 F.2d 227, 235 (D.C. Cir. 1992)
(same).
12
See also Alaska Prof’l Hunters Ass’n v. FAA, 177 F.3d 1030,
1034 (D.C. Cir. 1999) (“[W]hen an agency has given its regulation a
definitive interpretation, and later significantly revises that
interpretation, the agency has in effect amended its rule, something it
12
Court has said that if an agency adopts “a new position
inconsistent with” an existing regulation, or effects “a
substantive change in the regulation,” notice and comment are
required. Shalala v. Guernsey Mem’l Hosp., 514 U.S. 87, 100
(1995) (emphases added) (quotation marks omitted); see id. at
101. Although these verbal formulations vary somewhat, their
underlying principle is the same: fidelity to the rulemaking
requirements of the APA bars courts from permitting agencies
to avoid those requirements by calling a substantive regulatory
change an interpretative rule. See Appalachian Power Co., 208
F.3d at 1024 (“An agency may not escape . . . notice and
comment requirements . . . by labeling a major substantive legal
addition to a rule a mere interpretation.”); C.F. Communications
Corp. v. FCC, 128 F.3d 735, 739 (D.C. Cir. 1997) (holding that
the FCC “may not bypass [the APA’s notice-and-comment]
procedure by rewriting its rules under the rubric of
‘interpretation’”).
We agree with the petitioners that the Intermodal Order
effects a substantive change in the First Order. The First Order
required carriers to ensure “the ability of users of
telecommunications services to retain, at the same location,
existing telecommunications numbers . . . when switching from
one telecommunications carrier to another.” First Order ¶ 27,
11 F.C.C.R. at 8366-67 (emphasis added); 47 C.F.R. § 52.21(q)
(emphasis added). Although the First Order did not expressly
define “same location,” the FCC did declare that it would not
require “location portability,” which it defined as “the ability of
users of telecommunications services to retain existing
may not accomplish without notice and comment.”); American Mining
Cong., 995 F.2d at 1109 (“[I]f a second rule repudiates or is
irreconcilable with [a prior legislative rule], the second rule must be
an amendment of the first . . . .” (quotation mark omitted) (second
alteration in original)).
13
telecommunication numbers . . . when moving from one
physical location to another.” First Order ¶ 174, 11 F.C.C.R. at
8443 (emphasis added); see id. ¶ 6, at 8356; 47 C.F.R. §
52.21(j).
The Intermodal Order, by contrast, requires carriers to
provide users with the ability to retain their existing numbers
regardless of physical location. Under that order, a wireline
carrier must port whenever “the requesting wireless carrier’s
‘coverage area’ overlaps the geographic location of the rate
center in which the customer’s wireline number is provisioned,”
provided that the porting-in carrier maintains the number’s
original rate center designation. Intermodal Order ¶ 22, 18
F.C.C.R. at 23,706. Because wireless carriers’ coverage
(service) areas are often quite expansive -- in some cases
encompassing much of the United States -- the Intermodal
Order effectively requires carriers to provide their subscribers
with the ability to retain their numbers “when moving from one
physical location to another,” notwithstanding the First Order’s
declaration that such location portability would not be
mandated.
Nor can the Intermodal Order derive support from the
Second Order -- another prior legislative rule, also issued
pursuant to notice and comment. In the Second Order, which
established the requirements for number portability in the
wireline-to-wireline context, the FCC provided that such
portability was “limited to carriers with facilities or numbering
resources in the same rate center . . . .” Intermodal Order ¶ 7,
18 F.C.C.R. at 23,700. But the Intermodal Order rejects a
similar limitation for wireline-to-wireless portability, and
instead requires wireline carriers to port numbers to wireless
carriers that do “not have a point of interconnection or
numbering resources in the same rate center as the ported
number . . . .” Id. ¶ 26, at 23,708; see id. ¶ 1, at 23,698
14
(describing a “point of interconnection” as something
“physical”); In re Starnet, Inc., 355 F.3d 634, 638 (7th Cir.
2004) (noting that “[u]sually a rate center corresponds to the
group of customers (a subset of an area code) served by a given
complement of telephone switching equipment”).
In short, the Intermodal Order requires wireline carriers to
port telephone numbers without regard to the physical location
of the subscriber, the equipment, or the carrier, and thus
effectively requires location portability -- a requirement that the
First Order had foresworn. Under the Intermodal Order, a
wireline subscriber can move from New York to California --
3000 miles from his original residence, from the wire attached
to his original wireline telephone, from the geographic
boundaries of the original rate center, and from the original
wireline company’s point of interconnection -- and yet keep his
telephone number provided that he switches to a wireless
company with service overlapping the original rate center.
Everything physical -- the person, the residence, the telephone,
the point of interconnection -- is at a new location, yet porting
is nonetheless required. Hence, by adopting the Intermodal
Order, the FCC removed its prior “physical location” limitation
on the duty to port.
The FCC makes three arguments in support of the contrary
contention. First, it points to a single sentence in the First Order
that, it maintains, provided notice of the interpretation later
adopted in the Intermodal Order. That sentence, which comes
directly after one that defines “location portability,” reads as
follows: “Today, telephone subscribers must change their
telephone numbers when they move outside the area served by
their current central office.” First Order ¶ 174, 11 F.C.C.R. at
8443.
15
We do not see how this sentence provides support for the
rule announced in the Intermodal Order. As the FCC concedes,
the sentence described the FCC’s then-current rules -- which did
not require location portability. FCC Br. at 25. The sentence
thus made clear that unless the Commission were to impose
location portability -- which it declined to do and insists it still
has not done13 -- subscribers would have to change their
numbers if they moved outside the area served by their current
carrier’s central office. Yet as we have discussed, under the
Intermodal Order subscribers need not change their telephone
numbers when they move outside the area served by their central
office: instead, they can switch to a cell phone and retain the
same number as long as they move anywhere in the wireless
company’s overlapping service area -- even across the country.
Hence, the Intermodal Order permits the very outcome that the
Commission associated with location portability. Moreover,
because the ported number includes the subscriber’s original
area code, this kind of portability exhibits a principal problem
that the First Order associated with location portability: the
“loss of geographic identity of one’s telephone number.” First
Order ¶ 176, 11 F.C.C.R. at 8444.
This point is further driven home by examining the notice
of proposed rulemaking that preceded the First Order. That
notice contained the same sentence that would later appear in the
First Order. But it also contained a succeeding sentence that
made the Commission’s meaning unmistakable by explaining
what location portability would enable subscribers to do:
Today, telephone subscribers must change their
telephone numbers when they move outside the area
served by their current central office. Location
13
See Intermodal Order ¶ 28, 11 F.C.C.R. at 23,708-09; FCC Br.
at 5.
16
portability would enable subscribers to keep their
telephone numbers when they move to a new
neighborhood, a nearby community, across the state,
or even, potentially, across the country.
Notice of Proposed Rulemaking, Telephone Number Portability
¶ 26, 10 F.C.C.R. 12,350, 12,360 (1995) (emphasis added). And
that is precisely what the Intermodal Order now enables
subscribers to do.
Second, the FCC argues that “porting from a wireline to a
wireless carrier that does not have a point of interconnection or
numbering resources in the same rate center as the ported
number does not, in and of itself, constitute location portability,
because the rating of calls to the ported number stays the same.”
Intermodal Order ¶ 28, 18 F.C.C.R. at 23,708 (emphasis added).
The rating remains the same because the FCC added that
requirement as a proviso: a wireline carrier must port to a
wireless carrier if the latter’s service area overlaps the rate
center associated with the subscriber’s number, “provided that
the porting-in carrier maintains the number’s original rate center
designation following the port.” Id. ¶ 22, at 23,706. The FCC
insists that under this proviso, “the number does not leave the
rate center,” and hence “it has not been subject to location
porting.” FCC Br. at 25-26 (emphasis in original) (citing
Intermodal Order ¶ 28).
But this focus on the “location” of the telephone number,
based solely on its rating, is at best metaphysical. It surely is not
the physical location discussed in the First Order.14 Moreover,
14
Indeed, at oral argument in the companion case, which
concerned the FCC’s order on wireless-to-wireless porting, see supra
note 8, FCC counsel conceded that to say a number is “located” within
its rate center is “almost a bit of fiction; there really is no physical
17
the First Order emphasized the user’s location, not the
number’s. See First Order ¶ 172, 11 F.C.C.R. at 8443 (defining
location portability as “the ability of users . . . to retain existing
telecommunications numbers . . . when moving from one
physical location to another” (emphasis added)); id. ¶ 181, at
8447 (declaring that the “1996 Act’s requirement to provide
number portability is limited to situations when users remain ‘at
the same location’” (emphasis added)). Indeed, in the sentence
highlighted by the FCC and discussed above, the First Order
explained that in the absence of location portability,
“subscribers must change their telephone numbers when they
move outside the area served by their current central office.” Id.
¶ 174, at 8443 (emphases added).
Third, the FCC argues that the Intermodal Order did not
substantively change the First Order, but instead merely
curtailed the unlimited portability requirement imposed in the
First Order. The First Order, the FCC contends, “imposed no
limitations on the LECs’ duty of wireline-to-wireless porting.”
FCC Br. at 20. And in the Commission’s view, the petitioners
have no reason to complain about a rule that merely reduced
their preexisting obligations.
But it is simply wrong to say that the First Order “imposed
no limitations” on a wireline carrier’s duty to port numbers to a
wireless carrier. To the contrary, the order expressly limited that
obligation by declaring that wireline carriers were not obligated
to provide location portability. First Order ¶ 6, 11 F.C.C.R. at
8356. Accordingly, the petitioners have every reason to
complain about a rule (if promulgated without notice and
comment) that jettisoned the First Order’s promise regarding
location portability.
location . . . .” Central Tex. Tel. Coop., Inc. v. FCC, No. 03-1405,
Oral Arg. Tape at 32:05-32:28.
18
Indeed, the FCC does not truly contend that the Intermodal
Order would have been valid had it contained no limitation on
the “unlimited” requirement of the First Order. Rather, as noted
above, the FCC’s claim that the Intermodal Order does not
impose location portability depends upon the order’s proviso
that the porting-in carrier must maintain the number’s original
rate center designation. Nor is that the only necessary limitation
in the FCC’s view. The principal limit on portability announced
by the Intermodal Order is that the wireless carrier’s coverage
area must overlap the geographic rate center in which the
customer’s wireline number is provisioned. And at oral
argument, the FCC conceded that, had the Intermodal Order not
included such a limit on the porting obligation, it “would have
begun to be inconsistent with location portability.” Oral Arg.
Tape at 38:51-39:28. It is thus clear that the Intermodal Order
cannot be defended as an interpretation that merely cuts back on
an ostensibly unlimited portability obligation imposed by the
First Order.
In short, this is not a case in which an interpretative rule
merely “supplies crisper and more detailed lines than the
authority being interpreted,” American Mining Cong., 995 F.2d
at 1112, or simply provides “a clarification of an existing rule,”
Sprint Corp., 315 F.3d at 374. Rather, it is one in which the rule
at issue substantively changes a preexisting legislative rule.
Such a rule is a legislative rule, and it can be valid only if it
satisfies the notice-and-comment requirements of the APA.
There is another reason, specific to the 1996
Telecommunications Act, to regard the rule at issue here as
legislative. The 1996 Act mandates number porting “in
accordance with requirements prescribed by the Commission,”
47 U.S.C. § 251(b)(2), requirements that are to be
“implement[ed]” in “regulations.” Id. § 251(d). As we
explained in American Mining Congress, when a statute defines
19
a duty in terms of agency regulations, those regulations are
considered legislative rules. 995 F.2d at 1109.
Of course, even when a statute requires an agency to
proceed by implementing regulations, it need not develop
legislative rules to “address every conceivable question.”
Shalala v. Guernsey Mem’l Hosp., 514 U.S. 87, 96 (1995). But
the question of what Congress meant by “at the same location”
in its definition of number portability is not just any
“conceivable question.” Rather, it is a crucial statutory element
of the portability requirement itself, at least as far as wireline-to-
wireless porting is concerned. Accordingly, the First Order did
not satisfy the FCC’s statutory obligation to “establish
regulations” to implement number portability when it merely
required “service provider portability,” and then defined that
phrase by parroting the definition of number portability already
contained in the statute. See supra Part I; cf. Pearson v. Shalala,
164 F.3d 650, 660 (D.C. Cir. 1999) (“[W]e are quite
unimpressed with the government’s argument that the agency is
justified in employing this standard without definition because
Congress used the same standard . . . .”). Something more was
necessary, 15 and that something was provided by the specifics of
the wireline-to-wireless regulations contained in the Intermodal
Order.
Finally, the FCC complains that technological disparities
require a different interpretation of the statutory term “location”
in the intermodal context than in the wireline-to-wireline
context, and that the Commission’s regulations should reflect
that difference. The Commission may well be correct. We are
15
As discussed above, to the extent that the First Order did do
something more than parrot the statutory definition (e.g., by inserting
the reference to “physical” location), it did so in language that is
inconsistent with the Intermodal Order.
20
not suggesting that the Intermodal Order is unreasonable;
indeed, the petitioners do not challenge the substantive
reasonableness of the rule. See Oral Arg. Tape at 1:02:06-
1:02:13. 1 6 It may be that, as a matter of telecommunications
policy, “location” should have reduced significance in the
wireline-to-wireless context, and that the FCC would be justified
in defining the word without reference to anything “physical.”
But in declaring that it was not requiring location
portability, and in using the adjective “physical” in the definition
of that term, the First Order made clear that it did regard
location as a physical concept. Moreover, at least in the
intermodal context, where one side of the porting transaction
involves a wireline telephone, physical location is a quite
meaningful concept.17 Accordingly, however physical location
is measured -- whether by the residence or geographic rate
center of the wireline user, the coordinates of the landline
16
The petitioners do contend that the Intermodal Order represents
a significant departure from the First Order’s promise that the FCC
would maintain competitive neutrality between wireline and wireless
carriers. The petitioners do not, however, contend that this asserted
departure renders the Intermodal Order substantively invalid, but only
argue that it supports the proposition that the Intermodal Order is so
different from the First Order that it cannot be an interpretative rule.
Pet’rs Br. at 24; Oral Arg. Tape at 1:01:45-1:02:07. Because we
conclude that the Intermodal Order is not an interpretative rule for
other reasons, we do not consider this argument. For the same reason,
we do not consider the intervenors’ argument that the Intermodal
Order is a legislative rule because it assertedly changes
interconnection obligations.
17
This point distinguishes our analysis of the FCC’s Intermodal
Order from our analysis of the Commission’s wireless-to-wireless
order, as set forth in Central Tex. Tel. Coop., Inc. v. FCC, No. 03-
1405 (D.C. Cir. Mar. 11, 2005).
21
attached to the user’s telephone, or the point of interconnection
of the user’s wireline carrier -- a rule that requires the carrier to
port the number to a wireless telephone that may be thousands
of miles from any of those places represents a substantive
change from the rule announced in the First Order.18 Such a
change may be permissible, but to accomplish it the FCC must
comply with the procedural requirements of the APA.19
For the foregoing reasons, we conclude that the Intermodal
Order was a legislative rule, and that the FCC therefore had to
issue it pursuant to the notice-and-comment requirements of
APA § 553. As the next Part explains, however, that is not the
end of the story.
III
The Administrative Procedure Act requires that “[g]eneral
notice of proposed rule making shall be published in the Federal
Register,” 5 U.S.C. § 553(b); that “[a]fter notice required by this
18
Cf. In re Starnet, Inc., 355 F.3d at 638 (noting that “[l]anguage
in the regulations links ‘location portability’ to movement ‘from one
physical location to another,’ but does not distinguish among the
customer’s physical location, the end of the wire’s physical location,
or the rate center’s physical location” (internal citation omitted)).
19
Cf. C.F. Communications Corp., 128 F.3d at 739 (holding that,
although the Commission may be able to “amend its rules to render
‘premises’ a term of art encompassing telephone equipment or land .
. . on which telephone equipment is located[,] . . . to do so, it must use
the notice and comment procedure of the Administrative Procedure
Act”); Paralyzed Veterans of Am. v. D.C. Arena L.P., 117 F.3d 579,
586 (D.C. Cir. 1997) (“Once an agency gives its regulation an
interpretation, it can only change that interpretation as it would
formally modify the regulation itself: through the process of notice
and comment rulemaking.”).
22
section, the agency shall give interested persons an opportunity
to participate in the rule making through submission[s],” id. §
553(c); that “[a]fter consideration of the relevant matter
presented, the agency shall incorporate in the rules adopted a
concise general statement of their basis and purpose,” id.; and
that a “substantive rule” shall be published “not less than 30
days before its effective date,” id. § 553(d). For the kind of
informal rulemaking at issue here, no other procedures are
required to satisfy the APA. See Vermont Yankee Nuclear
Power Corp. v. NRDC, 435 U.S. 519, 524 (1978).
Although the FCC does not raise the point, it appears that
the Commission satisfied each of these requirements when it
issued the Intermodal Order.20 The FCC published notice in the
Federal Register. See 68 Fed. Reg. 7323.21 The notice sought
comments on CTIA’s proposal “that wireline carriers are
obligated to provide portability of their customers’ telephone
numbers to [wireless] providers whose service area overlaps the
wireline carriers’ rate centers.” Id. The Commission received
and considered comments on that proposal from, among others,
the petitioners in this case. See supra note 2. It then adopted
essentially the same rule proposed in the notice, in an order that
explained the rule’s basis and purpose, and published that order.
See 18 F.C.C.R. 23,697; see generally supra Part I.
20
At oral argument, the FCC explained that it did not press this
point because APA compliance would not resolve the RFA issue. See
Oral Arg. Tape at 26:30-26:40; see also infra Part IV.
21
The APA requires that the notice include: “(1) a statement of
the time, place, and nature of public rule making proceedings; (2)
reference to the legal authority under which the rule is proposed; and
(3) either the terms or substance of the proposed rule or a description
of the subjects and issues involved.” 5 U.S.C. § 553(b). The FCC’s
notice contained each of these elements.
23
The only deficiency in these procedures identified by the
petitioners is that the FCC labeled its published notice as a
request for comment on CTIA’s “Petition for Declaratory
Ruling,” rather than as a “Notice of Proposed Rulemaking.”22
The label, however, is not fatal. As we held in New York State
Commission on Cable Television v. FCC, “to remand solely
because the Commission labeled the action a declaratory ruling
would be to engage in an empty formality.” 749 F.2d 804, 815
(D.C. Cir. 1984).
Nonetheless, because the FCC does not press it, we do not
reach a final decision as to whether the procedures attending
issuance of the Intermodal Order fully conformed to the APA.
But we do address the question -- raised in the petitioners’ own
brief -- of whether any procedural error that might have occurred
was harmless. Pet’rs Br. at 17, 27-30; see 5 U.S.C. § 706
(requiring courts to take “due account” of “the rule of prejudicial
error”). In making that assessment, the petitioners urge us to
heed our admonition in Sprint Corp. v. FCC, that “an utter
failure to comply with notice and comment cannot be considered
harmless if there is any uncertainty at all as to the effect of that
failure.” 315 F.3d 369, 376 (D.C. Cir. 2003) (quoting Sugar
Cane Growers Coop. v. Veneman, 289 F.3d 89, 96 (D.C. Cir.
2002)). As we have just noted, however, there was no “utter
failure” in this case; indeed, we are hard pressed to discern any
failure at all.
In any event, we have no uncertainty that if there was a
procedural failure, it was harmless. The petitioners contend that
by “proceeding without issuing a notice, the FCC constrained
the industry’s ability to propose solutions to technical and
22
As mentioned supra note 9, despite the label the FCC does not
defend the Intermodal Order on the ground that it was a “declaratory
ruling” that constituted an adjudication under 5 U.S.C. § 554(e).
24
regulatory barriers to intermodal portability that would have
enabled the FCC to proceed in a balanced, nondiscriminatory
fashion.” Pet’rs Br. at 17. But unlike the situation in Sprint
Corp., the FCC did not proceed without notice. To the contrary,
the proposal published in the Federal Register made the issue
under consideration crystal clear. 2 3 And as we have said, the
proposal was virtually identical to the order ultimately adopted
by the Commission.
Nor did the FCC “constrain[] the industry’s ability to
propose solutions.” Id. Again to the contrary, the Commission
invited and received comment from the industry on intermodal
portability. Nor was the industry misled by the fact that the
notice was labeled a request for comment on CTIA’s petition for
a declaratory ruling, rather than as a notice of proposed
rulemaking. Indeed, as the petitioners conceded at oral
argument, every challenge to the Intermodal Order that they
have raised in their appellate briefs was also made during the
comment period. Oral Arg. Tape at 19:33-19:42.24 And they
cannot identify a single additional comment that they would
have made but for the labeling of the notice, nor any other
deficiency in the rulemaking process. Id.; see New York State
Comm’n, 749 F.2d at 815 (declining to remand an FCC order,
23
Indeed, the title alone encapsulated the proposal under
consideration: Petition for Declaratory Ruling That Wireline Carriers
Must Provide Portability to Wireless Carriers Operating Within Their
Service Areas, 18 F.C.C.R. 832 (2003).
24
See, e.g., Intermodal Order ¶ 16, 18 F.C.C.R. at 23,703-04
(noting comments that the CTIA proposal could not be promulgated
without notice-and-comment rulemaking, that it would give wireless
carriers an unfair competitive advantage over wireline carriers, that it
would amount to a system of location portability, and that it would
cause particular difficulties for rural LECs); supra Part I and notes 2-
6.
25
despite a claim that the notice was mislabeled, where the
“arguments raised in” the comments were “identical to the
issues on appeal”).25
Under these circumstances, any error -- if error there was --
was plainly harmless. Accordingly, although we conclude that
the Intermodal Order was a legislative rule requiring adherence
to the procedures specified in APA § 553, we find no deficiency
in the procedures actually followed that would warrant vacating
or remanding the order.26
IV
The Regulatory Flexibility Act also imposes procedural
requirements on agency rulemaking, in particular the preparation
of a “final regulatory flexibility analysis” regarding the effect of
25
The Intermodal Order differed in each respect noted in the
preceding two paragraphs from the payphone provider rule at issue in
Sprint Corp., 315 F.3d 369. In Sprint Corp., the notice that preceded
issuance of the payphone rule was not published in the Federal
Register and described a proposal completely different from that
which the FCC ultimately adopted. Id. at 374, 376. Moreover, “the
comments submitted in response to the . . . Notice demonstrate[d] that
the parties did not appreciate that the Commission was contemplating”
the rule it finally issued. Id. at 376.
26
The petitioners also contend that the First Order and Second
Order established a procedure for resolving number portability issues
that required reference to the NANC. As a consequence, the
petitioners maintain that until the NANC submits a proposal, the FCC
may not impose a porting obligation without first engaging in APA
rulemaking. Although we do not read the first two orders as
establishing any such mandatory procedure, the contention is mooted
by our conclusion that issuance of the Intermodal Order satisfied the
APA.
26
the rule on small businesses. See 5 U.S.C. § 604.27 That
requirement applies “[w]hen an agency promulgates a final rule
under section 553 of this title, after being required by that
section or any other law to publish a general notice of proposed
rulemaking.” Id. Because we have concluded that the FCC was
required by section 553 to publish such a notice, the RFA’s
requirements are applicable to the Intermodal Order.
By contrast to the notice-and-comment requirements, there
is no dispute that the FCC utterly failed to follow the RFA when
it issued the Intermodal Order. Nor is there an argument that
the Commission’s failure was harmless, as it is impossible to
determine whether a final regulatory flexibility analysis -- which
must include an explanation for the rejection of alternatives
designed to minimize significant economic impact on small
entities, see id. § 604(a)(3) -- would have affected the final order
when it was never prepared in the first place. See Sprint Corp.,
315 F.3d at 377 (holding that the wholesale failure to afford
proper notice and comment was not harmless because “the effect
of the Commission’s procedural errors is uncertain”).
The RFA outlines the remedies available for its violation as
follows:
In granting any relief in an action under this section,
the court shall order the agency to take corrective
action . . . including, but not limited to--
(A) remanding the rule to the agency, and
27
Although the RFA grants courts jurisdiction to review claims of
noncompliance with the provision of the Act that requires preparation
of a final regulatory flexibility analysis, 5 U.S.C. § 604, judicial
review under other provisions of the RFA is limited, see 5 U.S.C. §
611(a).
27
(B) deferring the enforcement of the rule against small
entities unless the court finds that continued
enforcement of the rule is in the public interest.
Id. § 611(a)(4). A combination of the two specified remedies --
remand coupled with a stay of enforcement against small entities
-- is appropriate here.
The petitioners contend that the order will have a serious
impact on small rural carriers, which will have to impose the
initial cost of implementation and the continuing cost of
transporting calls to ported numbers on a narrow base of rural
subscribers. Those costs, the petitioners argue, “bring[] no
benefit to the vast majority of rural subscribers that are
unwilling to give up their wireline service, yet must bear the cost
burden nonetheless.” Pet’rs Br. at 18. The petitioners do not
seek to undo any porting of numbers that has already occurred;
they ask only to stay the mandatory obligation to accede to new
porting requests. Oral Arg. Tape at 57:15-57:55.
The FCC does not contest the petitioners’ argument, and it
gives no reasons why continued enforcement of the order with
respect to small entities pending a final regulatory flexibility
analysis would be in the public interest.28 Rather, it stands on its
contention that no regulatory flexibility analysis was required at
all. See FCC Br. at 30. Under these circumstances, we have no
basis for finding that continued enforcement against statutorily
defined small entities during the remand would be in the public
interest.
28
The FCC does allege that the public interest weighs against
vacating the entire rule (as to entities of every size), and that such a
remedy would be overbroad given the injury claimed to rural carriers.
FCC Br. at 36.
28
Accordingly, we remand the Intermodal Order to the FCC
for the Commission to prepare the required final regulatory
flexibility analysis. We stay future enforcement of the
Intermodal Order only as applied to carriers that qualify as
small entities under the RFA. The stay will remain in effect
until the FCC completes its final regulatory flexibility analysis
and publishes it in accordance with 5 U.S.C. § 604(b). Of
course, nothing in this disposition prevents small carriers from
voluntarily adhering to the Intermodal Order’s number
portability requirements during that period.
V
For the foregoing reasons, we deny the petitions with
respect to the APA claim, and grant the petitions with respect to
the RFA claim. We remand the Intermodal Order to the FCC
for the purpose of preparing a final regulatory flexibility
analysis, and we stay future enforcement of the order against
carriers that are “small entities” under the RFA until the FCC
prepares and publishes that analysis.
So ordered.