United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
______
Argued September 16, 2011 Decided November 18, 2011
No. 10-1184
VERMONT PUBLIC SERVICE BOARD AND MAINE PUBLIC
UTILITIES COMMISSION,
PETITIONERS
v.
FEDERAL COMMUNICATIONS COMMISSION AND UNITED
STATES OF AMERICA,
RESPONDENTS
QWEST COMMUNICATIONS INTERNATIONAL INC., ET AL.,
INTERVENORS
On Petition for Review of an Order of the Federal
Communications Commission
James Hardwick Lister argued the cause for petitioners.
With him on the briefs were Elisabeth H. Ross, David Edward
Lampp, Andrew Hagler, Lisa C. Fink, and Paul Stern, Deputy
Attorney General, Office of the Attorney General for the State
of Maine. Joel B. Shifman entered an appearance.
Maureen K. Flood, Counsel, Federal Communications
Commission, argued the cause for respondents. With her on
the brief were Catherine G. O’Sullivan and Nancy C.
Garrison, Attorneys.
2
U.S. Department of Justice, Austin C. Schlick, General
Counsel, Federal Communications Commission, Peter
Karanjia, Deputy General Counsel, Richard K. Welch, Acting
Associate General Counsel, and James M. Carr, Counsel.
Daniel M. Armstrong III, Associate General Counsel, Federal
Communications Commission, entered an appearance.
Helgi C. Walker argued the cause for intervenors Verizon
and NASUCA. With her on the brief were Brett A. Shumate,
Michael E. Glover, Edward Shakin, Christopher M. Miller,
John T. Scott III, and David Bergmann. Christopher J. White
entered an appearance.
Before: HENDERSON, TATEL, and GRIFFITH, Circuit
Judges.
Opinion for the Court filed by Circuit Judge TATEL.
TATEL, Circuit Judge: Pursuant to the
Telecommunications Act of 1996, the Federal
Communications Commission, through its Universal Service
Program, provides subsidies to ensure that low-income
consumers, schools, health care providers, and libraries have
access to advanced telecommunications services and that rates
and services in rural areas are ―reasonably comparable‖ to
rates and services in urban areas. In this case, we review a
Commission order declining to increase subsidies under the
rural rates and services component of the Universal Service
Program. Because the Commission‘s decision is neither
arbitrary nor capricious, we deny the petition for review.
I.
The Telecommunications Act of 1996, 47 U.S.C.
§ 254(b), adopted six basic principles of ―universal service.‖
3
These principles instruct the Commission and the several
states to jointly ―base policies for the preservation and
advancement of universal service‖ on:
(1) Quality and rates. Quality services should be
available at just, reasonable, and affordable rates.
(2) Access to advanced services. Access to
advanced telecommunications and information
services should be provided in all regions of the
Nation.
(3) Access in rural and high cost areas.
Consumers in all regions of the Nation, including
low-income consumers and those in rural, insular,
and high cost areas, should have access to
telecommunications and information services,
including interexchange services and advanced
telecommunications and information services, that
are reasonably comparable to those services provided
in urban areas and that are available at rates that are
reasonably comparable to rates charged for similar
services in urban areas.
(4) Equitable and nondiscriminatory
contributions. All providers of telecommunications
services should make an equitable and
nondiscriminatory contribution to the preservation
and advancement of universal service.
(5) Specific and predictable support
mechanisms. There should be specific, predictable
and sufficient Federal and State mechanisms to
preserve and advance universal service.
(6) Access to advanced telecommunications
services for schools, health care, and libraries.
Elementary and secondary schools and classrooms,
health care providers, and libraries should have
access to advanced telecommunications services . . . .
4
47 U.S.C. § 254(b).
Pursuant to these statutory directives, the Commission
established the Universal Service Program, which consists of
four separate funds: 1) low-income support, which subsidizes
rates for individuals that might not otherwise be able to afford
basic telephone services; 2) rural health care support, which
subsidizes the costs of communications services health
providers need to offer medical services in rural areas; 3)
schools and libraries support, which funds the costs of phone
services and Internet access for educational institutions and
libraries; and 4) high-cost support—the fund at issue in this
case—which supports the provision of services in high-cost
areas. See Federal-State Joint Board on Universal Service,
Universal Service Monitoring Report, CC Dkt. No. 98-202, at
1-34 (2010).
The Program is financed by fees charged to telephone
companies and other providers of interstate
telecommunications services. See 47 C.F.R. § 54.706.
Telecommunications providers may pass these fees along to
their customers, and almost always do, usually through line
items on bills marked ―Federal Universal Service
Assessment.‖ See High Cost Universal Support Order on
Remand, 25 FCC Rcd. 4072, 4083-84 ¶ 21 (2010) (“Order”).
Thus, nearly every purchaser of telephone services in
America helps support the Program.
The past decade has seen a dramatic increase in annual
disbursements made pursuant to the Program, and a
corresponding increase in the surcharge levied on consumers.
In 2001, the Commission disbursed $5.35 billion in support of
universal service; by 2009, that number had risen to $7.26
billion. Order, 25 FCC Rcd. at 4082 ¶ 20. By early 2010,
5
disbursements amounted to 15.3 percent of
telecommunications companies‘ interstate and international
revenue, requiring ―many consumers [to] pay[] a surcharge of
over 15 percent on the interstate portion of their monthly
bill.‖ Id. at 4083 ¶ 21. The high-cost support fund is by far the
Program‘s most expensive component. In 2009, total
expenditures under that fund totaled $4.3 billion of the $7.26
billion Program. Id. at 4082 ¶ 20.
This case concerns a single feature of the high-cost
support fund: subsidies the Commission gives to
telecommunications companies that provide landlines—
wireless is not covered—in rural areas. Absent these
subsidies, landline customers in rural areas would generally
pay higher rates for telephone services than customers in
urban areas. This is so because it is generally more expensive
to provide landline phone service in less-populated areas,
where customers are geographically dispersed. Given this, the
Commission provides support to ―non-rural‖
telecommunications providers (i.e., large telecommunications
companies serving both rural and urban areas) to subsidize
their costs of providing landlines in rural areas. These
subsidies are provided in order to carry out Congress‘s
directive to ensure ―reasonably comparable‖ rates between
rural and urban areas. Precisely what constitutes ―reasonable‖
comparability is a definitional matter left to the Commission‘s
discretion, see Rural Cellular Ass’n v. FCC, 588 F.3d 1095,
1101-02 (D.C. Cir. 2009), and it is the Commission‘s
definition of this statutory term that lies at the heart of this
case.
In 2003, following litigation in the Tenth Circuit not
directly relevant here, Qwest Corp. v. FCC, 258 F.3d 1191
(10th Cir. 2001) (Qwest I), the Commission defined
―reasonably comparable‖ as requiring rural rates to fall within
6
a nationwide range of urban rates. Federal-State Joint Board
on Universal Service, 18 FCC Rcd. 22559, 22583 ¶ 39. The
Commission selected the range benchmark because both
urban and rural rates vary significantly from state to state, ―in
large part because states base rates on a variety of different
policies.‖ Id. at 22584 ¶ 40. Moreover, when the
Telecommunications Act was passed in 1996, ―urban
residential rates ranged from $13.04 to $30.62 and the
average urban rate was $20.01.‖ Id. Suspecting it ―reasonable
to assume that Congress was aware of the variability of urban
rates when it enacted the 1996 Act,‖ the Commission did not
―believe that Congress would have required rural rates to be
any closer to the average urban rates than other urban rates.‖
Id. For this reason, the Commission opted to use standard
deviation analysis, rather than a percentage or dollar amount,
to define ―reasonably comparable‖ rates between rural and
urban areas. Standard deviation measures the variation, or
dispersion, from the average value.
The Commission defined ―reasonably comparable‖ as
requiring rural area rates to fall within two standard
deviations of the average national urban rate. Id. at 22608-09
¶ 81. This meant that in order to be ―reasonably comparable,‖
a rural rate would have to fall within a range encompassing
95% of the individual urban rates, which the Commission
would collect by conducting an annual survey of 95 cities. Id.
at 22607-09 ¶¶ 80-81. To ensure that the federal government
and the states were both fulfilling their statutory mandate to
achieve ―reasonably comparable‖ rates, the Commission
required that states annually certify that their rural rates were
―reasonably comparable‖ to urban rates as measured by the
Commission‘s two-standard-deviation definition. Id. at
22601-02 ¶ 70.
7
To help achieve ―reasonable comparability‖ of rural and
urban rates, the Commission created the support mechanism
at issue here. Under that mechanism, telecommunications
carriers serving rural areas are eligible to receive a subsidy
totaling 76% of the amount that the statewide average cost per
line exceeds two standard deviations above the national
average cost per line. Id. at 22630 ¶ 125. For example, if two
standard deviations above the national average cost per line
was $25 and the state‘s average cost per line was $30,
telecommunications carriers within a state would receive a
subsidy of $3.80 per line—or 76% of the $5.00 difference
between the state‘s average cost per line and the national
average cost per line.
The Commission based its support mechanism on costs,
rather than rates, to avoid creating incentives for carriers to
charge higher rates in the expectation that such rates would be
subsidized by the federal government. See id. at 22572 ¶ 23.
The Commission disbursed funds based on statewide average
costs, as opposed to costs in other pre-defined ―areas,‖ to
encourage states to require telephone service providers to
average rates within their borders—i.e., to charge higher rates
to urban customers and use the excess funds to lower rural
rates. Id. at 22573 ¶24. Most states have since adopted
statewide averaging policies, and these policies have resulted
in much higher rural rates in predominantly rural states like
Vermont ($30.73 per line) than in states where rural rates are
subsidized by large cities (for example, $14.14 per line in
Texas). Order, 25 FCC Rcd. at 4133-34, app. C.
Following the Commission‘s promulgation of its 2003
order, several rural states—including Vermont, Maine, and
Wyoming—petitioned the Tenth Circuit for review of that
order. Qwest Commc’ns Int’l, Inc. v. FCC, 398 F.3d 1222
(10th Cir. 2005) (Qwest II). In Qwest II, the Tenth Circuit
8
identified several defects in the Commission‘s order. To begin
with, it ruled that the Commission had failed to support its
definition of ―reasonably comparable‖ rural rates—rates
falling within a range comprised of 95% of urban rates—with
sufficient empirical data. Id. at 1239. In particular, the court
criticized the Commission for focusing exclusively on the
comparability of urban and rural rates in 1996, when the
Telecommunications Act was passed. Id. at 1235. This
backwards-looking orientation, the court found, failed to
explain how the Commission‘s definition would, as required
by the Telecommunications Act, both ―preserve and advance‖
universal service. Id. at 1235-36 (emphasis added); see also
47 U.S.C. § 254(b)(4)–(5). According to the court, this defect
also infected the two-standard-deviation funding mechanism.
The court further instructed the Commission to explain how
the high-cost support mechanism comports with all of the
guiding principles in the Telecommunications Act, including
its requirement that ―services‖ be ―reasonably comparable‖
across rural and urban areas, as well as that they be made
available at ―affordable rates.‖ Id. at 1234 (citing 47 U.S.C.
§ 254(b)(1)). Significantly for our purposes, however, the
court never vacated the 2003 funding mechanism, and the
Commission has continued using it ever since.
Before the Commission had an opportunity to respond to
Qwest II, Congress passed the Recovery and Reinvestment
Act of 2009, Pub. L. No. 111-5, 123 Stat. 115
(2009). As part of that Act, Congress directed the
Commission to ―ensure that all people of the United States
have access to broadband capability.‖ Id. § 6001(k)(2), 123
Stat. at 516. The term ―broadband‖ refers to a
telecommunications signal of greater bandwidth than a
traditional signal, thus allowing for faster Internet connection
speeds and a greater capacity for traffic, including voice
communications. In response, the Commission adopted the
9
National Broadband Plan in 2010. There, it laid out a roadmap
for future rulemaking that would lead to the establishment of
policies in support of Congress‘s directive to ensure universal
broadband access. See Federal Communications Commission,
Executive Summary of National Broadband Plan: Connecting
America (2010), available at
http://www.broadband.gov/plan/executive-summary. Among
other things, the National Broadband Plan recommends ―a
comprehensive reform program to shift the high-cost
universal service program from primarily supporting voice
communications to supporting broadband platforms that
enable many applications, including voice.‖ Order, 25 FCC
Rcd. at 4114 ¶ 79.
Later in 2010, the Commission issued a ―narrow‖ order
―respond[ing] to the Tenth Circuit‘s remand‖ in Qwest II.
Order, 25 FCC Rcd. at 4073 ¶ 1. The Commission began by
emphasizing the significant changes that had occurred in the
telecommunications marketplace over the preceding decade.
In particular, large numbers of customers had ―migrat[ed]
away from traditional wireline telephone service,‖ replacing
their landline phones with wireless phones. Id. at 4078-79 ¶
14. In addition, and as Congress recognized when it directed
the Commission to ensure wider broadband access, customers
in some areas of the country had the option to purchase voice
services from broadband-based Internet providers, although
―these services are not yet as pervasive as traditional wireline
or wireless services.‖ Id. at 4080 ¶ 17. And explaining that it
had ―insufficient time . . . to implement [the] reforms to the
high-cost universal service mechanisms‖ mandated by the
National Broadband Plan, the Commission stated it would
―soon release a notice of proposed rulemaking that sets the
stage for comprehensive reform of the high-cost universal
service mechanism as recommended in . . . the National
Broadband Plan.‖ Id. at 4114 ¶ 80.
10
Turning to the Tenth Circuit‘s remand order, the
Commission, this time providing additional explanation,
readopted its ―reasonably comparable‖ benchmark—that a
rural rate is ―reasonably comparable‖ if it falls within two
standard deviations of the national average urban rate. Id. at
4101 ¶ 53. In response to the court‘s instruction that any
definition of ―reasonably comparable‖ must both ―preserve
and advance universal service,‖ the Commission pointed out
that telephone subscriber rates had increased since the passage
of the Telecommunications Act, and had continued increasing
since the Commission required states to certify ―reasonable
comparability‖ of urban and rural rates as measured by the
definition it had adopted in 2003. Id. at 4102-03 ¶¶ 56-57.
Indeed, telephone subscriber rates were at an all-time high,
including in rural areas. Id. at 4101 ¶ 54. Accordingly, the
Commission concluded that the two-standard-deviation
definition had actually helped advance universal service.
Because of this, the Commission found that its definition of
―reasonably comparable‖ satisfied the Telecommunications
Act‘s mandate to preserve and advance universal service.
Then, responding to the Tenth Circuit‘s direction that the
Commission support its two-standard-deviation rule with
empirical data, the Commission cited a range of information
showing that rural rates are in fact reasonably comparable to
urban rates:
Rural and urban rates are typically similar within state
boundaries, e.g., customers in Boston pay approximately
the same rates as customers in rural Massachusetts. See
id. at 4095-96 ¶ 43.
The national average rural rate is only marginally higher
than the national average urban rate. Id.
11
The range of rates does not vary as a function of
urbanization—in other words, the differences among
urban rates are similar to the differences among rural
rates. Id. at 4096-98 ¶¶ 44-46.
Based on this data, the Commission concluded that its current
system was working. Responding to comments from several
states, including Vermont and Maine, calling on the
Commission to increase subsidies to telecommunications
providers in rural states, the Commission noted that such
proposals ―would significantly increase the size of the
fund . . . and the amount that end users ultimately pay.‖ Id. at
4093 ¶ 38. Accordingly, the Commission ―decline[d] to add to
the already heavy universal service contribution burden
placed on consumers.‖ Id.
Next, the Commission responded to the Tenth Circuit‘s
directive that it explain how its high-cost support mechanism
ensures, as required by the Act, comparable services (as
opposed to rates) between rural and urban areas. See Qwest II,
398 F.3d at 1234 (citing 47 U.S.C. § 254(b)(1)). The
Commission noted that nearly every household in America
(between 95.7 and 98.2%, depending on the metric used)
subscribes to either landline or wireless telephone service.
Order, 25 FCC Rcd. at 4080-81 ¶ 18. Moreover, both rural
and urban customers have access to wireless services and
Internet-based phone services offered by companies like
Vonage and Skype. Id. at 4079-80 ¶¶ 15-17. Indeed, ―[e]ven
in rural areas, approximately 98.5 percent of the population
has access to mobile services offered by one or more
providers.‖ Id. at 4079 ¶ 15. Thus, the Commission concluded
that services were reasonably comparable between urban and
rural areas.
12
That said, the Commission acknowledged that in some
states the combination of federal and state action might be
failing to produce ―reasonably comparable‖ rates or services.
To deal with such situations, the Commission adopted a
waiver procedure under which individual states could present
the Commission with ―documentation that unique
circumstances prevent the achievement of reasonably
comparable rates in that state.‖ Id. at 4100 ¶ 51. Were a state
to make such a showing, the Commission explained, it ―can
provide appropriate relief,‖ including a grant of supplemental
high-cost support to a state. Id. ¶¶ 50-51. Pursuant to the
waiver program, one state—Wyoming—applied for additional
funding. Id. ¶ 50. In response, and in a separate Memorandum
Opinion and Order, the Commission concluded that Wyoming
had demonstrated that concurrent state and federal action had
failed to produce rural rates that were reasonably comparable
to urban rates. See id. at 4116-20 ¶¶ 84-92. To correct the
problem, the Commission granted Wyoming more than $2
million in annual supplemental high-cost support. Id. at 4120
¶ 90.
Instead of seeking a waiver, the Vermont Public Service
Board and the Maine Public Utilities Commission filed the
instant petition for review.
II.
We begin with Vermont‘s contention that Qwest II
expressly directs the Commission to revise its two-standard-
deviation high-cost support mechanism. Vermont misreads
Qwest II. Nowhere does that decision say that the
Commission‘s high-cost support mechanism is per se invalid.
Instead, Qwest II invalidates the high-cost support mechanism
only insofar as it rested on an invalid definition of
―reasonably comparable‖ rates. Qwest II, 398 F.3d at 1237.
(―In that the non-rural, high-cost support mechanism
13
contained in the Order on Remand rests on the application of
the definition of ‗reasonably comparable‘ rates invalidated
above, it too must be deemed invalid.‖) (emphasis added).
Nor does Qwest II rule that the Commission‘s underlying
definition of ―reasonably comparable‖ was per se
impermissible. Indeed, the opinion observes that the
Commission‘s use of the two-standard-deviation definition of
―reasonably comparable‖ has a ―certain logic.‖ Id. But absent
empirical evidence that the Commission‘s ―reasonably
comparable‖ definition fulfilled its concurrent duties to
―preserve and advance‖ universal service, the definition was
―rendered untenable.‖ See id. Thus, nothing in Qwest II
prevents the Commission from re-adopting the same
definition of ―reasonably comparable,‖ or the same high-cost
support mechanism. Qwest II merely directs the Commission
to explain how its definition of ―reasonably comparable‖
fulfills the statutory mandate to both ―preserve and advance‖
universal service. The Commission‘s decision to re-adopt the
same definition of ―reasonably comparable‖—and the
corresponding high-cost support mechanism—would run
afoul of Qwest II only to the extent the Commission still fails
to explain how its program complies with the
Telecommunications Act.
Vermont primarily challenges the Commission‘s reliance
on data showing (1) that the definition of ―reasonably
comparable‖ it adopted in 2003 has in fact advanced services
in rural areas, and (2) that the high-cost support mechanism
has in fact produced ―reasonably comparable‖ rates.
According to Vermont, the Commission‘s use of statistics
showing that average rural and urban rates are comparable—
both within states and as a nationwide average—failed to
account for the fact that most states already ―average‖ rates by
requiring telephone providers to charge higher rates to urban
customers, using the excess funds to lower rural rates.
14
Vermont also challenges the Commission‘s citation to high
telephone subscribership rates in rural areas, arguing that
demand for telephone service is ―highly inelastic,‖
Appellants‘ Br. 29 (quoting Allocation of Costs Associated
with Local Exchange Carrier Provision of Video
Programming Services, Notice of Proposed Rulemaking, 11
FCC Rcd. 17211, 17227 ¶ 41 (1996)), and that telephone
subscription levels change little with increasing rates. We find
nothing arbitrary or capricious in the Commission‘s use of
these metrics.
To begin with, the Commission‘s focus on intrastate rural
and urban rates was entirely in accordance with the
Telecommunications Act. The Act requires reasonable
comparability between rural and urban ―areas‖ and ―regions‖;
contrary to Vermont‘s contentions, nothing in the Act requires
reasonable comparability of rates among states. Indeed, the
Tenth Circuit vacated a previous Commission standard
because it focused exclusively on interstate rate
comparability, instructing the Commission to develop
mechanisms to ensure that states would ―preserve and
advance universal service‖ within their borders. Qwest I, 258
F.3d at 1204. The Commission did just that and, since 2003,
has required states to certify ―reasonable comparability‖ of
rural-to-urban rates within their borders as a condition for
receiving federal funds. 18 FCC Rcd 22559 ¶ 92. It is in
accordance with this certification process that many states
continue to ―average‖ rural and urban rates. The Commission,
tasked by the Tenth Circuit with demonstrating that the high-
cost support mechanism preserves and advances universal
service in rural areas, reasonably cited data showing the
mechanism‘s intrastate effects.
As to the Commission‘s citation to data showing that
national average urban rates are comparable to national
15
average rural rates, Vermont argues that this comparison fails
adequately to reflect high rural rates in states like Vermont
because those higher rates are counterbalanced in the national
average by low rural rates in states with large urban centers,
like Texas. But the Commission did not consider the national
average rates in isolation. It also considered the range of
individual urban and rural rates and determined that, although
some urban rates and some rural rates are very high, the range
of rural and urban rates ―does not vary greatly.‖ See Order, 25
FCC Rcd. at 4096-98, ¶44-46. This conclusion should obviate
Vermont‘s concern.
Finally, by citing high rural telephone subscriber rates,
the Commission was seeking to disprove a negative: that rates
had become so disparate that they were affecting customer
purchasing decisions. In so doing, the Commission was
directly responding to the Tenth Circuit‘s fear that ―if rates
are too high, the essential telecommunications services
encompassed by universal service may indeed prove
unavailable.‖ Qwest II, 398 F.3d at 1236. So even if demand
for telephone services is highly inelastic, the Commission‘s
response to the Tenth Circuit was neither arbitrary nor
capricious.
Vermont next contends that the Commission failed to
address alternative rural-cost benchmarks above which
support would be paid under the high-cost support program.
In its comments on the proposed rule, Vermont called on the
Commission to subsidize telecommunications providers if a
state‘s cost per line exceeded 125% of the cost per line in
Washington, D.C.—selected as a representative urban area—
as opposed to the current two-standard-deviation benchmark.
See Order, 25 F.C.C. Rcd. at 4130-31, app. B. The
Washington, D.C. alternative would have yielded an $18.65
benchmark. Id. at 4131. In its final rule, however, the
16
Commission expressly considered and rejected the
Washington, D.C. benchmark, explaining not only that ―the
non-rural high-cost mechanism already provides sufficient
support,‖ but also that it wanted to avoid ―add[ing] to the
already heavy universal service contribution burden placed on
customers.‖ Id. at 4093 ¶ 38.
According to Vermont, the Commission failed to
consider alternative benchmarks set at dollar amounts
between $28.13 (the amount of the current benchmark) and
$18.65 (the amount under the proposed Washington, D.C.
benchmark). In particular, Vermont points out that nothing in
the Commission‘s order expressly addresses commenters‘
proposals to reduce the benchmark to $26.00 or to $26.45.
Appellant‘s Br. 45-47.
Although the Administrative Procedure Act ―demands an
adequate explanation when . . . alternatives are rejected,‖ Int’l
Ladies’ Garment Workers’ Union v. Donovan, 722 F.2d 795,
817 (D.C. Cir. 1983), agencies ―need not respond to every
comment,‖ id. at 818 (quotation omitted). Here, the
Commission decided that it had no need to change the rural
support mechanism at all. As the Commission pointed out,
nearly every rural resident has access to telephone service and
any increase in subsidies would require customers from
around the country to pay more for telephone service. Thus,
the Commission determined—reasonably in our view—that
any reduction in the cost benchmark was unnecessary.
Because the Commission adequately explained its decision to
keep the cost benchmark at two standard deviations above the
national average, its failure to expressly address alternative
benchmarks was neither arbitrary nor capricious.
Next, Vermont contends that the Commission failed in its
statutory duty to ensure that rural ―telecommunications and
17
information services . . . are reasonably comparable to those
services provided in urban areas.‖ 47 U.S.C. § 254(b)(3). In
response to this statutory directive, the Commission found
that subscribers across the country have access to essentially
identical landline, wireless, and Internet-based telephone
services. Challenging this conclusion, Vermont cites three
items from the administrative record: a letter from former
Maine Governor John Baldacci stating that certain parts of
Maine ―have no or inadequate wireless service,‖ Letter from
John E. Baldacci, Governor of Maine, to Hon. Kevin J.
Martin, Chair, FCC, WC Docket No. 05-337 (Oct. 7, 2008);
comments from Vermont and Maine alleging that, due to the
―lack of sufficient federal support‖ in rural areas,
telecommunications companies were ―slow to deploy
advanced services,‖ Comments of Maine Pub. Utils. Comm‘n,
et al. at 5, WC Docket No. 05-337 (Jan. 28, 2010); and a
declaration from a Senior Advisor at the Maine Public
Utilities Commission stating that ―rate comparisons alone
cannot show that support is sufficient . . . because they say
nothing about the sufficiency or level of services that the rates
pay for,‖ Reply Decl. on Behalf of Joel Shifman of the Maine
Pub. Utils. Comm‘n at 5, WC Docket No. 05-337 (June 8,
2009).
We have little trouble rejecting these three items as a
basis for questioning the Commission‘s finding that rural and
urban services are in fact ―reasonably comparable.‖ The
Governor‘s letter is entirely anecdotal, Vermont and Maine‘s
conclusory comments are unsupported by any data, and the
lawyer‘s declaration simply states the self-evident proposition
that rate comparisons cannot be used to demonstrate that
services are reasonably comparable. Moreover, the
Commission cited empirical data showing that ―[e]ven in rural
areas, approximately 98.5 percent of the population has access
to [wireless] services offered by one or more providers,‖ thus
18
directly supporting its conclusion that wireless services in
rural areas are comparable to those in urban areas. Order, 25
FCC Rcd. at 4079 ¶ 15.
Vermont nonetheless contends that because Congress
required the Commission to ensure that services are
reasonably comparable, the Commission was required to
collect information about the quality of services available in
rural areas. In response, the Commission explains that since
the passage of the Telecommunications Act, it has ―reli[ed]
upon service quality data provided by the states in
combination with those data that the Commission already
gathers . . . to monitor service quality trends.‖ Appellee‘s Br.
52 (emphasis added) (quoting Federal-State Joint Bd. On
Universal Serv., 12 FCC Rcd. 8776, 8832 ¶ 100 (1997)). Such
a system, the Commission believes, works because most
states have enacted their own mechanism to ensure high-
quality service within their borders. Accordingly, ―additional
efforts undertaken at the federal level would be largely
redundant.‖ Appellee‘s Br. 52 (citing Federal-State Joint Bd.
On Universal Serv., 12 FCC Rcd. at 8831-32 ¶ 99).
Contrary to Vermont‘s contention, the Commission has
not abdicated its statutory duties by having the states submit
service quality data. The relevant provision of the
Telecommunications Act requires the Commission to ensure
that ―[c]onsumers in all regions of the Nation . . . have access
to telecommunications and information services . . . that are
reasonably comparable to those services provided in urban
areas.‖ 47 U.S.C. § 254(b)(3). Nothing in that provision
requires—nor even implies—that the Commission itself must
collect data on service comparability in any given manner.
And, as the Commission quite reasonably explains, and
Vermont nowhere disputes, most states already maintain
service quality data. If that data reveals quality problems,
19
states have every incentive to send it on to the Commission.
Thus, absent a clear congressional directive that the
Commission itself engage in fact-finding, the Commission
acted well within its discretion in requiring states to submit
service data.
Finally, Vermont contends that even if the Commission‘s
high-cost support mechanism comports with the statute and is
supported by empirical evidence, the Commission‘s use of
stale data to calculate subsidies renders that mechanism
invalid in practice. To determine the amount of high-cost
support a state should receive, the Commission must first
calculate the average cost per line—both nationally and
within states. To do so, the Commission divides the total
amount spent on providing services by the number of
telephone lines served. Although the Commission once
updated line counts periodically, it last did so in 2002, and
since then the number of landlines serviced in rural areas (and
across the country) has dropped as many customers have
abandoned landline phones altogether in favor of mobile
phone services, Order, 25 FCC Rcd. at 4078-79 ¶ 14. Because
fewer lines serviced means a higher average cost per line,
Vermont contends that had the Commission used current data,
the rural costs per line may have been higher and thus
statewide averages more likely to exceed—and to exceed by a
larger amount—two standard deviations above the national
average cost.
Acknowledging that it now uses stale line-count data, the
Commission contends that updating the data is a labor-
intensive process that would take time away from its top
priority—implementing the National Broadband Plan and
ensuring that all regions of the nation have access to advanced
telecommunications technology. Because the National
Broadband Plan will overhaul the current Universal Support
20
Program, the Commission believes it is not worth ―expending
significant time and resources‖ to update the current cost
model. Doing so, the Commission tells us, would ―impede
[its] ability to implement the congressionally-mandated
National Broadband Plan‖—a plan that, once in effect, will
replace the current high-cost support mechanisms with funds
for universal broadband deployment. Appellee‘s Br. 45.
Vermont offers us no basis for questioning the
Commission‘s assurance that it is diligently working on
implementing the National Broadband Plan nor its judgment
that updating line counts would divert resources from that
task. In any event, line counts are relevant only insofar as the
existing high-cost support program remains in effect. Pursuant
to the National Broadband Plan, that program will soon be
overhauled to take account of the rapidly shifting
technological landscape.
And that‘s not all. At oral argument, Commission counsel
assured us that states potentially disadvantaged by stale line
counts are not without recourse. Specifically, they may
petition the Commission for supplemental relief under the
waiver program by submitting ―documentation that unique
circumstances prevent the achievement of reasonably
comparable rates in that state.‖ Order, 25 FCC Rcd. at 4100 ¶
51. Indeed, Commission counsel called Vermont‘s challenge
to stale line-count data a ―perfect use of the waiver process.‖
Oral Arg. Rec. at 41:54. As we have previously held, such a
process is a ―sign of reasonableness,‖ representing an
―exception from the rigors of the broad rule‖ and thus, an
effort by an agency ―to cabin, under appropriate
circumstances, [a general rule‘s] potential sweep.‖ Natural
Res. Def. Council v. EPA, 822 F.2d 104, 120 (D.C. Cir. 1987).
21
III.
The Telecommunications Act‘s universal service
provision requires the Commission to do far more than
promote rural rates and services that are ―reasonably
comparable‖ to those in urban areas. The Commission must
also ensure that ―low-income consumers . . . schools and
classrooms, health care providers, and libraries…have access
to advanced telecommunications services.‖ 47 U.S.C.
§ 254(b). And in carrying out all these mandates, the
Commission must ensure that rates charged to consumers
nationwide are ―just, reasonable, and affordable.‖ Id. As the
Commission rightly observed, it has a ―responsibility to be a
prudent guardian of the public‘s resources.‖ Order, 25 FCC
Rcd. at 4088 ¶ 29.
Here, the Commission has explained that ―reasonable
comparability‖ between rural and urban areas has been largely
accomplished and that expansion of the high-cost support
fund will ―jeopardize other statutory mandates,‖ such as
extending services to schools, hospitals, and libraries, and
―ensuring affordable rates in all parts of the country.‖ Id. at
4087 ¶ 28. Because of this, and because the Commission has
promised to address state-specific issues, like those presented
by Vermont and Maine, through the waiver process, its
decision to leave the high-cost support mechanism unchanged
is neither arbitrary nor capricious. We thus deny the petition
for review.
So ordered.