US Telecom Assn v. FCC

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 12, 2002 Decided July 16, 2002

No. 01-1085

United States Telecom Association,
Petitioner

v.

Federal Communications Commission and
United States of America,
Respondents

State of Iowa, et al.,
Intervenors

On Petition for Review of an Order of the
Federal Communications Commission

William F. Maher Jr. argued the cause for petitioner.
With him on the briefs were Lawrence E. Sarjeant, Linda
Kent, John W. Hunter, Julie E. Rones, and Stephen Good-
man.

 James M. Carr, Counsel, Federal Communications Com-
mission, argued the cause for respondents. With him on the
briefs were John A. Rogovin, Deputy General Counsel, and
John E. Ingle, Deputy Associate General Counsel.

Michael D. Hays argued the cause for intervenors State of
Iowa and Iowa Telecommunications and Technology Commis-
sion. With him on the briefs were J.G. Harrington and
Kenneth D. Salomon.

Before: Ginsburg, Chief Judge, Rogers and Garland,
Circuit Judges.

Opinion for the Court filed by Circuit Judge Garland.

Garland, Circuit Judge: The United States Telecom Asso-
ciation (USTA) challenges a Federal Communications Com-
mission (FCC) order finding that the Iowa Communications
Network (ICN) is a common carrier. The order makes ICN
eligible to receive federal subsidies for providing discounted
telecommunications services under the Telecommunications
Act of 1996, 47 U.S.C. s 254(h)(1). We first consider whether
USTA has standing to bring this suit, and then whether the
FCC reasonably classified ICN as a common carrier. We
answer both questions in the affirmative and uphold the
FCC's order.

I

ICN was established by the Iowa legislature to provide
subsidized high-speed telecommunications services through-
out Iowa, especially in areas inadequately covered by local
exchange carriers. The governing statute bars ICN from
offering services to individuals and to most private busi-
nesses. Iowa Code s 8D.11(2) (2001). Instead, ICN's cus-
tomers are "public and private agencies." Under the statute,
"public agency" means: "a state agency, an institution under
the control of the board of regents, the judicial branch ..., a
school corporation, a city library, a regional library ..., a
county library ...[,] a judicial district department of correc-
tional services ..., an agency of the federal government, or a
United States post office which receives a federal grant for

pilot and demonstration projects." Id. s 8D.2(5). A "private
agency" is: "an accredited nonpublic school, a nonprofit insti-
tution of higher education eligible for tuition grants, or a
[licensed] hospital ... or a physician clinic [for specified
services]." Id. s 8D.2(4).1

Section 254(h)(1) of the Telecommunications Act of 1996
requires a "telecommunications carrier" to provide services at
discounted rates to schools, libraries, and rural health care
providers. 47 U.S.C. s 254(h)(1). Such a carrier is entitled
to receive from the FCC, in an amount equal to the aggregate
discount it gives to those entities, either a reimbursement or
an offset against the carrier's obligation to participate in or
contribute to the universal service fund. Id. The Act defines
a "telecommunications carrier" as "any provider of telecom-
munications services," id. s 153(44), and defines "telecommu-
nications service" as "the offering of telecommunications for a
fee directly to the public, or to such classes of users as to be
effectively available directly to the public, regardless of the
facilities used," id. s 153(46).

In 1998, ICN petitioned the FCC for a declaration that it
qualifies as a "telecommunications carrier" under the Act, and
hence is eligible to receive direct reimbursement for provid-
ing services at discounted rates. In 1999, citing its decision
in an earlier case, the Commission held that the term "tele-
communications carrier" includes only carriers that offer tele-
communications on a "common carrier" basis. Federal-State

__________
1 Iowa law divides "public and private agencies" into two further
subcategories: "certifying users," which are higher education insti-
tutions, area education agencies, and certain post offices; and
"preauthorized users," which are all other public and private agen-
cies. Certifying users must obtain specific legislative authorization
to connect to the network unless they certified their intention to
connect by July 1, 1994, and must take all of their telecommunica-
tions services from ICN unless they obtain a statutory waiver.
Preauthorized users may choose whether to connect to ICN and
which services to take from it. See id. s 8D.9; Iowa Admin. Code
s 751-7.1(8D) (2001). ICN will serve any qualifying user that
requests service. See Iowa v. FCC, 218 F.3d 756, 757-58 (D.C. Cir.
2000).

Joint Bd. on Universal Serv., Declaratory Ruling, 14
F.C.C.R. 3040, 3040 (1999) [hereinafter 1999 Declaratory
Ruling] (citing Federal-State Joint Bd. on Universal Serv.,
Report & Order, 12 F.C.C.R. 8776, 9177-78 (1997)). To
define "common carrier," the FCC turned to the two-pronged
test it had previously applied under the Communications Act
of 1934, 47 U.S.C. ss 151 et seq., a test derived from the
common law as interpreted in this circuit's case law. Under
that test, common carrier status turns on:

(1) whether the carrier "holds himself out to serve indif-
ferently all potential users"; and (2) whether the carrier
allows "customers to transmit intelligence of their own
design and choosing."2

The FCC ruled that ICN fails to satisfy the first prong
because the network does not hold itself out to serve all
potential users, but rather is limited by Iowa law to a select
clientele. 1999 Declaratory Ruling, 14 F.C.C.R. at 3050-51.3
The Commission did not reach the second prong of the test.

__________
2 1999 Declaratory Ruling, 14 F.C.C.R. at 3050 (quoting South-
western Bell Tel. Co. v. FCC, 19 F.3d 1475, 1480 (D.C. Cir. 1994),
and citing National Ass'n of Regulatory Util. Comm'rs v. FCC, 525
F.2d 630, 640-41 (D.C. Cir. 1976) ("NARUC I"), and National Ass'n
of Regulatory Util. Comm'rs v. FCC, 533 F.2d 601, 608-09 (D.C.
Cir. 1976) ("NARUC II")); see Federal-State Joint Bd. on Univer-
sal Serv., Order on Remand, 16 F.C.C.R. 571, 573, 576 (2000)
(noting common-law origins of test).

3 The FCC also held that ICN further fails the first prong
because it does not hold itself out to serve even that select group
"indifferently," but instead treats each of the subcategories of ICN
users according to different terms fixed by the legislature. 1999
Declaratory Ruling, 14 F.C.C.R. at 3051; see supra note 1 (describ-
ing subcategories). In light of the FCC's subsequent characteriza-
tion of this holding on appeal, we concluded in Iowa v. FCC, 218
F.3d 756 (D.C. Cir. 2000), that it was not an independent basis for
denying ICN common carrier status. Rather, it was equivalent to
the FCC's holding that offering "service only to the class of users
authorized by law to receive it is inconsistent with being a common
carrier." Id. at 760. On remand, the FCC reversed itself and
found "persuasive ICN's position that while its enabling statute may

In Iowa v. FCC, 218 F.3d 756 (D.C. Cir. 2000), this court
granted Iowa's petition for review and remanded the case to
the Commission for further consideration. We held that the
FCC had failed to consider Iowa's argument that ICN quali-
fies as a common carrier, even though its user base is legally
restricted, because it offers service to all users that it is
authorized by law to serve. See id. at 757. We pointed out
that two cases that had considered the meaning of "common
carrier" under the Communications Act of 1934--FCC v.
Midwest Video Corp., 440 U.S. 689 (1979), and National
Ass'n of Regulatory Util. Comm'rs v. FCC, 525 F.2d 630
(D.C. Cir. 1976) ("NARUC I")--"can be read as approving
the general rule that a carrier offering its services only to a
legally defined class of users may still be a common carrier if
it holds itself out indiscriminately to serve all within that
class." Iowa, 218 F.3d at 759. Although we made clear that
we were "not suggesting that Midwest Video or NARUC ...
require[s] a decision in Iowa's favor," we held that "the
Commission's failure to address Iowa's argument requires
that we remand this matter for the Commission's further
consideration." Id.

On remand, the FCC reversed its 1999 ruling. The Com-
mission held that ICN is a common carrier, and hence a
telecommunications carrier for purposes of s 254(h)(1). In so
holding, the Commission concluded that "a carrier offering its
services only to a legally defined class of users may still be a
common carrier if it holds itself out indiscriminately to serve
all within that class." Federal-State Joint Bd. on Universal
Serv., Order on Remand, 16 F.C.C.R. 571, 573 (2000) [herein-
after 2000 Order]. Finding that ICN does not discriminate
among entities within its legally defined user classes, the
FCC held that ICN passes the first prong of the common
carrier test. See id. at 574-75. It also found ICN to satisfy

__________
discriminate among various classes of users, it does not allow ICN
to discriminate among entities within each class of users." Federal-
State Joint Bd. on Universal Serv., Order on Remand, 16 F.C.C.R.
571, 574 (2000). The FCC thus held that ICN does treat its
authorized users "indifferently," id. at 575, and USTA has not
appealed that ruling.

the second prong, because it "allows customers to transmit
intelligence of their own design and choosing." Id. at 575.
The Commission therefore declared ICN "eligible to receive
direct reimbursement for discounted telecommunications ser-
vices provided to schools and libraries." Id. at 577.

USTA petitions for review of the Commission's order,
contending that ICN fails both prongs of the common carrier
test. We discuss those contentions in Part III below. In
Part II, we first consider whether USTA has standing to
bring this case.

II

USTA is a trade association representing local exchange
carriers. Its members provide voice, data, and video services
over wireline and wireless networks throughout the United
States. Although the initial briefs of the FCC and intervenor
State of Iowa did not dispute USTA's standing, we have an
independent obligation to assure ourselves that the petitioner
has constitutional standing to bring this challenge to the
FCC's decision. See Steel Co. v. Citizens for a Better Env't,
523 U.S. 83, 94-95 (1998); Liquid Carbonic Indus. Corp. v.
FERC, 29 F.3d 697, 701 (D.C. Cir. 1994). Accordingly, we
directed the parties to submit supplemental briefs on the
issue, and, at oral argument, gave USTA a further opportuni-
ty to submit affidavits in support of its position. Thereafter,
USTA submitted three affidavits, two from individual USTA
members and one from the association itself. We have
reviewed those affidavits and are satisfied that USTA has
made the requisite showing.

As a trade association, USTA has standing to sue on behalf
of its members if "its members would otherwise have stand-
ing to sue in their own right, the interests it seeks to protect
are germane to the organization's purpose, and neither the
claim asserted nor the relief requested requires the partic-
ipation of individual members in the lawsuit." Fund Democ-
racy, LLC v. SEC, 278 F.3d 21, 25 (D.C. Cir. 2002) (citing
Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC),
Inc., 528 U.S. 167, 181 (2000)). There is no question that

USTA satisfies the latter two conditions; the only question is
whether USTA members meet the constitutional require-
ments for suit in their own right. Those "irreducible consti-
tutional minimum" requirements are:

(1) that the plaintiff have suffered an "injury in fact"--
an invasion of a judicially cognizable interest which is (a)
concrete and particularized and (b) actual or imminent,
not conjectural or hypothetical; (2) that there be a causal
connection between the injury and the conduct com-
plained of--the injury must be fairly traceable to the
challenged action of the defendant, and not the result of
the independent action of some third party not before the
court; and (3) that it be likely, as opposed to merely
speculative, that the injury will be redressed by a favor-
able decision.

Bennett v. Spear, 520 U.S. 154, 167 (1997).

USTA contends that the FCC's order injures its members
by making ICN eligible for a subsidy that permits it to offer
lower prices for the same telecommunications services.4 We
have repeatedly recognized that parties "suffer constitutional
injury in fact when agencies ... allow increased competition"
against them. Louisiana Energy & Power Auth. v. FERC,
141 F.3d 364, 367 (D.C. Cir. 1998); see, e.g., Wabash Valley
Power Ass'n v. FERC, 268 F.3d 1005, 1113 (D.C. Cir. 2001);
MD Pharm., Inc. v. Drug Enforcement Admin., 133 F.3d 8,
11 (D.C. Cir. 1998). And we have likewise recognized that
regulatory decisions that permit subsidization of some partici-
pants in a market can have the requisite injurious impact on
those participants' competitors. See Exxon Co., U.S.A. v.
FERC, 182 F.3d 30, 43 (D.C. Cir. 1999); Liquid Carbonic, 29
F.3d at 701.

__________
4 USTA also maintains that its members suffer injury because, if
ICN is improperly reimbursed for providing discounted telecommu-
nications, insufficient universal service funds will be left to reim-
burse USTA members. Because we find that USTA's "competitive
injury" theory satisfies the requirements of standing, we do not
address this alternative theory.

 Nor is the injury to USTA's members "conjectural or
hypothetical." The affidavit of one of USTA's members, an
independent local exchange carrier, avers that the member
has tried to sell its services to a school that currently takes
similar services from ICN, but has been unsuccessful because
ICN's subsidy enables it to charge substantially lower rates.
Whipple Aff. pp 5-6. The affidavit of another USTA member
states that it lost a customer to ICN because the subsidy
enabled ICN to charge lower rates for similar services.
Kilburg Aff. pp 5, 7. And an affidavit from USTA, summariz-
ing information it gathered from a survey of its members,
avers that other members have had like experiences--either
losing business to ICN or being unable to compete for new
customers because of ICN's subsidy. Flerl Aff. pp 4-5.

These affidavits show that USTA's members are ready,
willing, and able to compete with ICN in providing telecom-
munications to schools and libraries, and that ICN's subsidy
prevents them from doing so on an equal basis. That show-
ing is sufficient to establish that the association's members
have suffered cognizable injury in fact. See Dynatlantic
Corp. v. Department of Defense, 115 F.3d 1012, 1016 (D.C.
Cir. 1997). And it is also sufficient to satisfy the remaining
two requirements of constitutional standing: The competitive
injury suffered by USTA's members is fairly traceable to the
FCC's decision to render ICN eligible for the subsidy, and
that injury would likely be redressed by a favorable decision
of this court vacating the FCC's order. See High Plains
Wireless, L.P. v. FCC, 276 F.3d 599, 605 (D.C. Cir. 2002);
Exxon, 182 F.3d at 43; Liquid Carbonic, 29 F.3d at 701. We
therefore conclude that USTA has constitutional standing to
seek judicial review of the order on behalf of its members.

III

USTA contends that ICN cannot satisfy either prong of the
common carrier test, and that the FCC therefore erred in
finding ICN eligible for reimbursement from universal ser-
vice funds. The association also argues that the FCC's order
is not entitled to a deferential standard of review because it

rests on an interpretation of this circuit's Iowa, NARUC, and
other decisions, rather than on an interpretation of a statute.
We disagree, and conclude that we must review the agency's
order with deference.

At bottom, the FCC's order rests not on judicial precedent
but on its interpretation of the term "telecommunications
carrier" in the Telecommunications Act of 1996. The Com-
mission interprets the term as the equivalent of "common
carrier" under the Communications Act of 1934, a term which
was itself previously defined by a two-pronged test derived
from the common law as construed by this circuit. USTA
does not dispute the FCC's decision to interpret "telecommu-
nications carrier" as "common carrier," or its decision to
define the latter through the two-pronged test. Indeed, we
have previously upheld the FCC's approach as a reasonable
construction of an ambiguous statutory term. See Iowa, 218
F.3d at 757 (citing Chevron, U.S.A., Inc. v. Natural Res. Def.
Council, Inc., 467 U.S. 837 (1984)); Virgin Islands Tel. Corp.
v. FCC, 198 F.3d 921, 922, 925-26 (D.C. Cir. 1999).

In deciding that ICN satisfies the requirements of the
common carrier test, the FCC further elaborated upon the
meaning of "common carrier," and then applied its version of
the two-pronged test to the facts of ICN's situation. Where a
statute is "ambiguous with respect to [a] specific issue," the
only question for this court is whether the agency's interpre-
tation "is based on a permissible construction of the statute."
Chevron, 467 U.S. at 843. We also defer to an agency's
reasonable interpretation of its own rules and precedents.
See Global Crossing Telecomms., Inc. v. FCC, 259 F.3d 740,
746 (D.C. Cir. 2001); Cassell v. FCC, 154 F.3d 478, 484 (D.C.
Cir. 1998). And we give deference as well to an agency's
application of its statutory and administrative interpretations
to specific circumstances--asking only whether such applica-
tions are "arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law." 5 U.S.C. s 706(2)(A);
see Global Crossing, 259 F.3d at 747; Cassell, 154 F.3d at 483
n.4; Huls America Inc. v. Browner, 83 F.3d 445, 452 (D.C.
Cir. 1996). Finally, where an agency has adopted a judicial
test as its own, we likewise review its application of that test

only to determine whether it is unreasonable or arbitrary and
capricious. See Independent Petroleum Ass'n of Am. v.
Babbitt, 92 F.3d 1248, 1257-58 (D.C. Cir. 1996) (noting con-
vergence of Chevron and arbitrary and capricious review
where agency adopts court decision as its rule).

In the following sections, we apply this deferential standard
of review to the two challenges that USTA levels against the
FCC's order.

A

USTA's first contention is that, because Iowa law greatly
restricts the universe of the network's authorized users, ICN
fails to satisfy the first prong of the common carrier test:
that the carrier hold itself out to serve indifferently "all
potential users." 1999 Declaratory Ruling, 14 F.C.C.R. at
3050. USTA argues that, under our opinion in NARUC I, a
carrier cannot satisfy this prong unless it holds itself out to
"the public." See NARUC I, 525 F.2d at 640. And ICN's
"class of legally authorized users," USTA maintains, "is not
broad enough to be considered a portion of 'the public.' "
Pet'r Br. at 11.

In response to this argument below, the FCC determined
that "legal restrictions on eligibility to use a carrier's services
do not necessarily preclude common carrier status," and that
this proposition is consistent with NARUC I. 2000 Order, 16
F.C.C.R. at 573. We agree. As we said in Iowa, our decision
in NARUC I "can be read as approving the general rule that
a carrier offering its services only to a legally defined class of
users may still be a common carrier if it holds itself out
indiscriminately to serve all within that class." Iowa, 218
F.3d at 759.

In NARUC I, this court held that mobile radio operators
known as Specialized Mobile Radio Systems (SMRS) were not
foreclosed from common carrier status--even though "SMRS
offer a service that may be of practical use to only a fraction
of the population," and even though an FCC order "limit[ed]
possible subscribers to SMRS services to eligibles" under
three specific sections of the FCC's regulations. NARUC I,

525 F.2d at 642 (emphasis added). "The key factor," we said,
"is that the operator offer indiscriminate service to whatever
public its service may legally and practically be of use." Id.
(emphasis added).5 As the FCC noted, this passage from
NARUC I "directly supports" its conclusion in the instant
case. 2000 Order, 16 F.C.C.R. at 573.

USTA counters, however, that the list of authorized ICN
users is so much more restricted than was the list of SMRS
eligibles that ICN's list "cannot be considered the public" and
ICN cannot qualify as a common carrier. Pet'r Br. at 11.
We do not agree. Authorized ICN users include state agen-
cies, institutions under the control of the board of regents, the
judicial branch, schools, libraries, departments of correctional
services, federal agencies, certain post offices, certain non-
profit institutions of higher education, licensed hospitals, and
physician clinics (for some purposes). See Iowa Code
s 8D.2(4)-(5). Together, these amount to at least 500 dis-
crete entities. See 2000 Order, 16 F.C.C.R. at 574. More-
over, the network's end-users are all those who can access
ICN at authorized facilities--a group that includes students,
library patrons, and state and federal employees, and that
potentially extends to all Iowans. See Iowa Admin. Code
s 751-7.5(8D).

Like the list of authorized ICN users, the list of eligible
SMRS subscribers in NARUC I was legally circumscribed.
The FCC limited SMRS subscribers to "eligibles under Sec-
tions 89, 91 and 93 of the Regulations." NARUC I, 525 F.3d
at 642. Those included local governments, police and fire
departments, motor carriers, taxicab companies, and other
specified commercial and noncommercial entities in need (pri-
marily) of dispatch services. See id. at 634, 639, 642-43.6

__________
5 In NARUC I, we eventually upheld the FCC's determination
that it could treat SMRS as non-common carriers because there was
no evidence that they would indifferently serve all eligible custom-
ers. See id. at 643-44.

6 Parts 89, 91, and 93 of the FCC's regulations listed specific
types of eligible subscribers for three categories of private radio
service: "Public Safety," "Industrial," and "Land Transportation."

Although we do not have enough information to count the
number of eligible SMRS subscribers, the SMRS list is not
any more readily characterizable as "the public" than is the
list of those eligible to use ICN. See NARUC I, 525 F.2d at
634 (characterizing class of eligible SMRS subscribers as "a
limited group of users"). In any event, it is certainly not
arbitrary for the FCC to regard the two situations as compa-
rable.

USTA also argues that ICN cannot qualify as a common
carrier because Iowa bars the network's use for "profit-
making venture[s]." Iowa Admin. Code s 751-14.1(8D)(1)(a).
NARUC I, however, does not impose a for-profit requirement
on common carriers. Instead, USTA points to "this Court's
guidance in NARUC II," Pet'r Br. at 15, an opinion stating
that price discrimination by cable system operators in favor of
noncommercial users did not necessarily preclude those oper-
ators from common carrier status--"at least if not carried to
the point of excluding all commercial users." National Ass'n
of Regulatory Util. Comm'rs v. FCC, 533 F.2d 601, 609 (D.C.
Cir. 1976) ("NARUC II"). USTA's argument rests solely on
the quoted phrase, and puts more weight on that phrase than
either its words or the NARUC II opinion as a whole can
bear.

First, the quoted phrase concerned the operators' voluntary
decision to engage in price discrimination; NARUC II was
not a case in which either discrimination or exclusion was
mandated by law. Second, the phrase served at most as
dictum in the opinion, since NARUC II was also not a case in
which price discrimination effectively excluded all commercial
users. Finally, the portion of NARUC II cited by the
petitioner is not the opinion of "this Court," but rather the
opinion of Judge Wilkey alone.7 Although we have subse-
__________

See, e.g., 47 C.F.R. s 89.251 (1975) (local government); id. s 89.301
(police); id. ss 89.501-89.519 (special emergency users); id.
s 89.551 (state guards); id. s 91.301 (petroleum radio service); id.
s 91.351 (forest products radio service); id. s 93.251 (motor carri-
ers); id. s 93.351 (railroads); id. s 93.506 (contract road service
vehicles); id. s 98.401 (taxicabs).

7 See NARUC II, 533 F.3d at 621 (Lumbard, J., concurring)
(deeming it "unnecessary to reach" common carriage question); id.

quently approved some of the views expressed by Judge
Wilkey in NARUC II, see Southwestern Bell Tel. Co. v. FCC,
19 F.3d 1475, 1480 (D.C. Cir. 1994), we have never held that a
carrier is barred from common carrier status unless it is
authorized to serve commercial users. Indeed, given
NARUC I's declaration that the key factor in determining
common carriage is whether the carrier offers "indiscriminate
service to whatever public its service may legally and prac-
tically be of use," 525 F.2d at 642 (emphasis added), we have
no warrant for concluding that the exclusion of commercial
users from ICN's network compels the Commission to dis-
qualify it as a common carrier.

USTA further purports to discern significant inconsisten-
cies between the FCC's order and the Supreme Court's
decision in FCC v. Midwest Video Corp., 440 U.S. 689 (1979).
Succeeding on that argument, however, is an uphill struggle
in light of our statement in Iowa that Midwest Video, like
NARUC I, "can be read as approving the general rule that a
carrier offering its services only to a legally defined class of
users may still be a common carrier." 218 F.3d at 759.
Nonetheless, USTA contends that Midwest Video supports its
claim that ICN fails the first prong of the common carrier
test because ICN's class of authorized users both is too small
and excludes profit-making ventures.

Midwest Video, however, said nothing about either of these
issues. Indeed, to the extent the case is relevant at all, it is
by implication only and in that respect supports the FCC. In
Midwest Video, the Supreme Court considered FCC regula-
tions requiring cable television systems to allocate channels
for educational, government, public, and leased access users.
The regulations mandated that the public and leased access
channels be open to all users, but that the educational channel
be dedicated to "local educational authorities" and the govern-
ment channel be dedicated to "local government." 47 C.F.R.
s 76.254(a)(2), (3) (1977). The Supreme Court held that the
access rules effectively "relegated cable systems, pro tanto, to

__________
at 634 (Skelly Wright, J., dissenting) (accepting only "arguendo"
that cable operators were common carriers).

common-carrier status"--an action the Court held to be be-
yond the authority of the Commission. 440 U.S. at 700-01;
see id. at 708-09.

On its face, Midwest Video is substantially more helpful to
the FCC than to USTA. As we noted in Iowa, the Midwest
Video Court found that the FCC's regulations had effectively
transformed the cable systems into common carriers, notwith-
standing that "use of the educational and government access
channels was limited respectively to 'local educational authori-
ties' and the 'local government' " and that a "private organiza-
tion could not air an educational program on the educational
access channel because it would not come within the class of
users authorized by law." 218 F.3d at 758. Thus, like the
Iowa Code, the FCC regulations at issue in Midwest Video
narrowly defined the class of authorized users for each chan-
nel and barred profit-making enterprises from using the
government and educational channels. Undaunted by these
similarities, USTA contends that the Supreme Court did not
analyze the regulations on a channel-by-channel basis, but
instead considered them as a unit that included not only the
nonprofit channels but also the public and leased access
channels that were available to the general public. Nothing
in the Midwest Video opinion, however, suggests that the
Court relied on the existence of the public channels to reach
its conclusion about common carriage. Instead, the Court
focused on the fact that the regulations required the cable
systems to offer use of the allocated channels to all who
qualified for them on a nondiscriminatory basis, and deprived
the systems of the power to select individual users or to
control the programming of those who qualified. See Mid-
west Video, 440 U.S. at 699-702. Accordingly, nothing in
Midwest Video supports USTA's claim that the list of ICN
users is too narrowly delineated for the network to qualify as
a common carrier.

Finally, USTA argues that to affirm the FCC's decision
here would be to accept that a carrier may be designated as
"common" even if it has only a single authorized user. That
is hardly the case, and it is certainly not this case. Regard-
less of whether the FCC could label a single-user network as

a common carrier without being arbitrary and capricious, the
Commission's determination that ICN--with its far broader
customer base--qualifies as a common carrier constitutes a
reasonable application of the test the Commission has
adopted to define that term.

B

USTA's second contention is that ICN cannot satisfy the
second prong of the common carrier test because it does not
allow customers to "transmit intelligence of their own design
and choosing." 1999 Declaratory Ruling, 14 F.C.C.R. at 3050.
This prong of the test is intended to confine common carrier
status to operators that do not regulate the content of their
customers' communications. Although USTA concedes that
"ICN does not specify the individual words or messages sent
over the network," Pet'r Br. at 17, it argues that Iowa
nonetheless restricts users' communications because its regu-
lations require them to adopt policies acknowledging that: (1)
"[t]he use of the network must be consistent with the written
mission of the authorized user," and (2) "[t]he network ...
cannot be used for a profit-making venture." Iowa Admin.
Code s 751-14.1(8D)(1)(b), (a).

The FCC rejected this argument in its order, concluding
that these restrictions are "intended to acknowledge the
statutorily-prescribed customer base, rather than to limit the
'intelligence' [customers] may transmit over the network."
2000 Order, 16 F.C.C.R. at 575. "The effect of this limita-
tion," the FCC continued, is merely "to restrict the use of the
ICN to the primary purpose for which the network exists."
Id. at 575-76. The Commission accepted ICN's representa-
tions that it does not police the content that a user transmits,
and instead places the responsibility on the user to determine
whether its use of the network is consistent with its written
mission statement. See id. at 576. The FCC further noted
that "ICN states, and no party disputes, that it has never
denied or cut off service on the basis of an acceptable use
issue." Id. (internal quotation marks omitted).

 These considerations persuade us that the FCC reasonably
concluded that ICN meets the second prong of the common
carrier test. As we held in Part III.A, Iowa's limitation of
ICN's services to specified categories of eligible users is
consistent with the network's status as a common carrier. A
requirement that users adhere to the missions that make
them statutorily eligible is therefore also consistent, as it
represents nothing more than a method of enforcing that
limitation. Indeed, in NARUC I we held that SMRS' com-
mon carrier status was not precluded by the fact that the
governing regulations "require that SMRS applicants certify
that they will not provide service to ineligibles." 525 F.2d at
642. Similarly, the requirement that users adopt policies
stating that ICN "cannot be used for a profit-making ven-
ture" represents nothing more than an acknowledgment that
use of the network is limited to nonprofits, a limitation that
we also upheld in Part III.A. Moreover, beyond the implicit
condition that a user's mission be one that qualifies for
network eligibility, ICN places no limits on the scope of a
user's written mission statement and no restrictions on a
user's ability to change its mission statement.

USTA once again turns to Midwest Video for support in its
attack on the FCC's order, but again that case offers only
further support for the Commission's decision. USTA points
out that, when the Supreme Court ruled that the cable access
regulations imposed common carrier obligations on cable
operators, it stated that "[o]perators are prohibited from
determining or influencing the content of access program-
ming"--a prohibition USTA claims is breached by the Iowa
regulations recounted above. Midwest Video, 440 U.S. at
702. But the Court's statement was made in a context that
demonstrates that it did not regard the restriction of users to
their authorized missions as the kind of content control that
precludes common carrier status. As we have already noted,
under the regulations at issue in Midwest Video, "use of the
educational and government access channels was limited re-
spectively to 'local educational authorities' and the 'local
government,' " and a "private organization could not air an
educational program on the educational access channel be-

cause it would not come within the class of users authorized
by law." Iowa, 218 F.3d at 758. Moreover, Midwest Video's
more complete description of the prohibition on content con-
trol in that case makes it plain that the Court did not regard
the exclusion of commercial content as inconsistent with
common carriage: "System operators," the Court said, "are
specifically enjoined from exercising any control over the
content of access programming except that they must adopt
rules proscribing the transmission on most access channels
of ... commercial matter." 440 U.S. at 693 (emphasis add-
ed).

In sum, we find that the FCC reasonably concluded that
ICN does permit its customers to "transmit intelligence of
their own design and choosing." As the FCC held, the
regulations highlighted by USTA do not control the content
of communications, but rather merely "acknowledge the stat-
utorily-prescribed customer base." 2000 Order, 16 F.C.C.R.
at 575.

IV

In ruling that ICN is a "telecommunications carrier" eligi-
ble for subsidies under s 254(h)(1), the FCC reasonably
interpreted the language of its governing statute, and reason-
ably construed and applied the test it had previously adopted
to give meaning to that language. Accordingly, USTA's
petition for review is

Denied.