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United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued April 22, 2004 Decided July 16, 2004
No. 03-1396
VERIZON TELEPHONE COMPANIES,
PETITIONERS
v.
FEDERAL COMMUNICATIONS COMMISSION AND
UNITED STATES OF AMERICA,
RESPONDENTS
AT&T CORPORATION, ET AL.,
INTERVENORS
On Petition for Review of an Order of the
Federal Communications Commission
Jonathan E. Nuechterlein argued the cause for petitioners.
With him on the briefs were Samir C. Jain, Kathryn A.
Reilly, Michael E. Glover, and Edward Shakin.
Bills of costs must be filed within 14 days after entry of judgment.
The court looks with disfavor upon motions to file bills of costs out
of time.
2
Austin C. Schlick, Counsel, Federal Communications Com-
mission, argued the cause for respondents. On the brief were
R. Hewitt Pate, Assistant Attorney General, U.S. Department
of Justice, Robert B. Nicholson and Robert J. Wiggers, Attor-
neys, John A. Rogovin, General Counsel, Federal Communi-
cations Commission, and Laurel R. Bergold, Counsel. John
E. Ingle, Deputy Associate General Counsel, entered an
appearance.
David L. Lawson argued the cause for intervenors AT&T
Corporation, et al. With him on the brief were Virginia A.
Seitz, Michael J. Hunseder, David W. Carpenter, Mark D.
Schneider, Ian H. Gershengorn, William Single IV, Allison
M. Ellis, Christopher J. Wright, and Timothy J. Simeone.
Before: GINSBURG, Chief Judge, and GARLAND and ROBERTS,
Circuit Judges.
Opinion for the Court filed by Chief Judge GINSBURG.
GINSBURG, Chief Judge: Verizon petitions for review of an
order of the Federal Communications Commission denying
the Company’s request that the Commission forbear from
requiring it to unbundle and to lease certain elements of its
network pursuant to § 271 of the Communications Act of
1934. The Commission had previously determined that in-
cumbent local exchange carriers (ILECs), including Verizon,
need not unbundle and lease those same elements under
§ 251 of the Act. Because the Commission failed adequately
to explain its decision not to forbear, we grant Verizon’s
petition for review.
I. Background
Under § 10 of the Communications Act of 1934, as amend-
ed by the Telecommunications Act of 1996, the Commission
‘‘shall forbear from applying any regulation or any provision
[of the Act] TTT to a telecommunications carrier or telecom-
munications service’’ if it determines
(1) enforcement of such regulation or provision is not
necessary to ensure that the charges, practices, classifi-
cations, or regulations by, for, or in connection with that
3
telecommunications carrier or telecommunications ser-
vice are just and reasonable and are not unjustly or
unreasonably discriminatory;
(2) enforcement of such regulation or provision is not
necessary for the protection of consumers; and
(3) forbearance from applying such provision or regula-
tion is consistent with the public interest.
47 U.S.C. § 160(a)(1)-(3). The Commission must make its
determination whether to grant or to deny a petition for
forbearance within one year of receiving it, else the petition is
deemed granted. Id. § 160(c). The Commission may, how-
ever, upon finding an extension is necessary in order to meet
the requirements set out above, extend the one-year period
by 90 days, as it did here.
As a Bell Operating Company (BOC), Verizon must satisfy
the requirements of § 271 of the Act before it may provide
interLATA (i.e., long distance) services. See 47 U.S.C. § 271.
Those requirements include a ‘‘competitive checklist’’ setting
out 14 conditions a BOC must satisfy when providing ‘‘access
and interconnection’’ to competitive local exchange carriers
(CLECs). 47 U.S.C. § 271(c)(2)(B). The four checklist items
at issue in this case require the BOCs to provide CLECs with
local loop transmission, transport, and switching, as well as
nondiscriminatory access to certain network elements. See
47 U.S.C. § 271(c)(2)(B)(iv)-(vi) & (x). Section 251 of the Act
sets out ‘‘interconnection’’ requirements with which all tele-
communications carriers, not only the BOCs, must comply.
Section 251(d)(2) instructs the Commission to ‘‘consider, at a
minimum, whether TTT the failure [of an ILEC] to provide
access to such network elements would impair’’ the ability of
a CLEC to provide the services it seeks to offer. See 47
U.S.C. § 251(d)(2).
On July 29, 2002 Verizon petitioned the Commission ‘‘to
forbear from applying items four through six and item ten of
the Section 271 competitive checklist once the corresponding
elements no longer need to be unbundled under Section
251(d)(2).’’ Verizon took the position in its petition for for-
bearance that ‘‘[w]here an element no longer meets the
4
Section 251(d)(2) standard for unbundling, forbearance with
respect to the parallel checklist item is required by Section
10.’’
In August 2003 the Commission ‘‘eliminate[d]’’ the unbun-
dling requirement of § 251 with respect to most broadband
network elements, in order to ‘‘mak[e] it easier for companies
to invest in new equipment and deploy the high-speed ser-
vices that consumers desire.’’ See Report and Order and
Order on Remand and Further Notice of Proposed Rulemak-
ing, Review of the Section 251 Unbundling Obligations of
Incumbent Local Exchange Carriers, CC Docket Nos. 01–338
et al., FCC 03–36, 18 FCC Rcd 16978 (Aug. 21, 2003) (Trien-
nial Review Order). We upheld that part of the Triennial
Review Order in United States Telecom Ass’n v. FCC, 359
F.3d 554, 585 (D.C. Cir. 2004).
On October 24, 2003, one business day before expiration of
the 90–day extension of the time for the Commission to act
upon Verizon’s July 2002 petition, Verizon submitted an ex
parte letter to the Commission, as authorized by 47 C.F.R.
§§ 1.1200, 1.1206. The letter stated:
[A]lthough Verizon’s petition originally requested for-
bearance with respect to all elements that do not have to
be unbundled under section 251, the broadband issue is
sufficiently urgent that we hereby withdraw our request
for forbearance with respect to any narrowband elements
that do not have to be unbundled under section 251.
Specifically, the portion of the forbearance petition that
remains pending relates to the broadband elements that
the Commission has found [in the Triennial Review
Order] do not have to be unbundled under section 251,
including fiber-to-the-premises-loops, the packet-
switched features, functions and capability of hybrid
loops, and packet switching.
(Emphasis in original.) Along with its letter, Verizon submit-
ted a 19–page memorandum detailing the reasons it main-
tained the Commission was required to forbear from requir-
ing it to unbundle broadband elements pursuant to § 271.
5
On October 27, 2003, the last day of the 90–day extension
period, the Commission denied Verizon’s petition for forbear-
ance, stating in relevant part:
We find that Verizon’s October 24 Ex Parte Letter
abandoned the core legal rationale underlying its Petition
and substituted a wholly different argument for forbear-
ance. We therefore deny Verizon’s initial Petition be-
cause the principal argument for the relief initially re-
quested was rendered moot by the Triennial Review
Order and because Verizon substituted a new theory of
relief. In light of this substitution, we choose to treat
Verizon’s October 24 Ex Parte Letter as a new forbear-
ance petition.
As ‘‘a new forbearance petition,’’ Verizon’s ex parte letter
triggered a new one-year period for consideration, and the
Commission established a new schedule for comments accord-
ingly. Verizon now petitions the court for review of the
October 27 order.
II. Analysis
Verizon first complains the Commission violated § 10(c) of
the Communications Act by failing to rule on the merits of its
petition for forbearance within the statutory period. As
mentioned above, a petition for forbearance is deemed grant-
ed under § 10(c) if the Commission does not deny it within
one year (or, as here, one year plus 90 days) after it receives
the petition. See 47 U.S.C. § 160(c). Verizon also argues
that by treating its ex parte letter of October 24, 2003 as a
new forbearance petition, the Commission unlawfully extend-
ed the review period beyond the statutory deadline.
As the Commission first correctly points out, its decision of
October 27, although not on the merits, was timely; nothing
in the Act requires that the Commission make a decision on
the merits of an application that is defective procedurally —
particularly if the defect arises only one day before the
deadline for a decision. The significant question, therefore, is
not whether the Commission violated the statutory deadline,
but whether, as Verizon also argues, the Commission’s expla-
6
nation for denying Verizon’s petition was inadequate and its
decision therefore ‘‘arbitrary, capricious, an abuse of discre-
tion, or otherwise not in accordance with law.’’ See 5 U.S.C.
§ 706(2)(A); see also Cellular Telcoms. & Internet Ass’n v.
FCC, 330 F.3d 502, 507 (D.C. Cir. 2003) (in addition to
requirements of § 10, Commission order ‘‘is also subject to
review under the [Administrative Procedure Act] ‘arbitrary
and capricious’ standard’’).
The Commission denied Verizon’s petition on two indepen-
dent grounds: (1) In its ex parte letter of October 24 ‘‘Verizon
substituted a new theory of relief’’; and (2) ‘‘the principal
argument for the relief initially requested was rendered moot
by the Triennial Review Order.’’ With respect to the ex
parte letter, Verizon argues it neither ‘‘abandoned the core
legal rationale underlying its Petition,’’ nor ‘‘substituted a
wholly different argument for forbearance,’’ as the Commis-
sion put the matter in the order. On the contrary, Verizon
argues that in the letter it ‘‘reiterated the basic rationales for
forbearance’’ (emphasis in original); the broadband issues
raised in the ex parte letter addressed the same ‘‘policy
concerns that Verizon TTT had aired, and the FCC [had]
accepted, in the Triennial Review proceeding.’’ The Com-
mission responds by pointing out that Verizon had made no
mention of broadband in its July 2002 petition whereas in the
ex parte letter it ‘‘relied upon the specific finding relating to
broadband elements in the Triennial Review Order’’ issued in
August 2003.
The Commission’s assertion that Verizon’s ex parte letter
‘‘abandoned the core legal rationale underlying its Petition’’
makes no apparent sense when one realizes that broadband
elements are merely a subset of the network elements for
which Verizon requested forbearance in its July 2002 petition.
In that petition Verizon had asked the Commission, without
qualification or limitation,
to forbear from applying items four through six and ten
of the Section 271 competitive checklist once the corre-
sponding elements no longer need to be unbundled under
Section 251(d)(2).
7
This request was applicable on its face to broadband as well
as to other network elements. Yet the Commission in its
brief claims
the issue raised by Verizon’s ex parte forbearance re-
quest was very different [from the one it raised in its
July 2002 petition]: whether the Commission should
exercise its section 10 forbearance authority not to apply
specific section 271 competitive checklist items to broad-
band elements that the Commission had found no longer
subject to section 251 unbundling requirements.
At the very least, it is not apparent — and the Commission
certainly did not explain in the order denying Verizon’s
petition — why or how ‘‘the issue raised by Verizon’s ex parte
forbearance letter was,’’ in any meaningful way, ‘‘very differ-
ent’’ from, rather than a mere narrowing of, its petition for
forbearance.
In its brief the Commission offers additional bases of
support for its decision to treat Verizon’s ex parte letter as a
new petition. It points to § 4(j) of the Communications Act,
which authorizes the Commission to ‘‘conduct its proceedings
in such a manner as will best conduce to the proper dispatch
of business and to the ends of justice,’’ 47 U.S.C. § 154(j), and
to § 4(i), which authorizes the Commission to ‘‘perform any
and all acts, make such rules and regulations, and issue such
orders, not inconsistent with this Act,’’ id. § 154(i). No doubt
the Commission is authorized to order its own proceeding as
it reasonably sees fit, but that authority does not extend to
dispensing with a reasoned explanation for its decisions.
Perhaps the cited provisions would have formed a proper
basis for deferring a decision upon an issue first raised — if
indeed a new issue was raised — only one business day
before the statutory deadline, but nowhere in the order did
the Commission suggest Verizon’s ex parte letter was untime-
ly filed. Because the foregoing reasons formed no part of the
Commission’s rationale, and because they cannot reasonably
be linked to either of the two reasons the Commission did
give in denying Verizon’s petition, they ‘‘cannot provide the
8
basis for upholding the FCC’s decision.’’ AT&T Corp. v.
FCC, 236 F.3d 729, 735–36 (D.C. Cir. 2001).
At oral argument Commission counsel argued for the first
time the relief Verizon requested in its petition for forbear-
ance was necessarily limited to instances where ‘‘evidence TTT
supports a finding of no impairment for a particular network
element.’’ Because there was no such finding with respect to
hybrid loops, see Triennial Review Order ¶ 286, which were
included among the broadband elements expressly mentioned
in the memorandum Verizon submitted in support of its ex
parte letter, counsel claimed Verizon abandoned in its entire-
ty the theory underlying its initial petition for forbearance.
Although we do not ordinarily consider a claim or defense
raised for the first time at oral argument, see United Distrib.
Cos. v. FERC, 88 F.3d 1105, 1140 (D.C. Cir. 1996), we do so
here in order to avert a problem on remand — but only to the
limited extent of pointing out that counsel has mischaracter-
ized Verizon’s request for forbearance. The Company quite
plainly asked the Commission ‘‘to forbear from applying items
four through six and ten of the Section 271 competitive
checklist once the corresponding elements no longer need to
be unbundled under Section 251(d)(2).’’ Commission coun-
sel’s belated ‘‘no impairment’’ gloss would unfairly limit Veri-
zon’s July 2002 petition. Furthermore, although counsel’s
new claim at oral argument relied upon Verizon’s ‘‘legal
rationale’’ as applied specifically to hybrid loops, we note the
order under review contains not a single mention of hybrid
loops.
Having failed to provide an adequate explanation of how
Verizon’s ex parte letter ‘‘abandoned the core legal rationale
underlying its Petition’’ rather than, as Verizon claims, mere-
ly ‘‘narrow[ed to broadband] and simplified the range of
issues’’ covered in the petition, the Commission’s decision
denying Verizon’s petition must stand or fall upon its alterna-
tive holding that Verizon’s ‘‘principal argument for [forbear-
ance] was rendered moot by the Triennial Review Order.’’
In support of this claim the Commission relied upon the
following passage in the Triennial Review Order:
9
[T]he requirements of section 271(c)(2)(B) establish an
independent obligation for BOCs to provide access to
loops, switching, transport, and signaling regardless of
any unbundling analysis under section 251TTTT [T]he
plain language and the structure of section 271(c)(2)(B)
establish that BOCs have an independent and ongoing
access obligation under section 271. Checklist item 2
requires compliance with the general unbundling obli-
gations of section 251(c)(3) and of section 251(d)(2) which
cross-references section 251(c)(3). Checklist items 4, 5,
6, and 10 separately impose access requirements regard-
ing loop, transport, switching, and signaling, without
mentioning section 251.
¶¶ 653–54; see also id. ¶ 655.
Verizon acknowledges that its obligations under § 271 are,
per the excerpt above, independent of its corresponding obli-
gations under § 251 and therefore persist after the latter
have been eliminated, but it argues that is a ‘‘reason to grant
forbearance’’ from § 271, not a ground for dismissing its
request for forbearance as moot: ‘‘There can be no forbear-
ance until the Commission first establishes the existence of a
statutory obligation to forbear from.’’ (Emphasis in original.)
According to Verizon, the disincentive to pursue ‘‘research
and development’’ that ILECs face when forced to unbundle
certain network elements — specifically broadband ele-
ments — under § 251 is no different from the disincentive
BOCs, being a subset of ILECs, likewise face when required
to unbundle those same network elements under § 271. The
Commission responds by claiming it did not deem moot
Verizon’s request that it forbear from applying § 271 to
broadband elements; rather, the Commission viewed Veri-
zon’s petition as addressing only whether ‘‘the removal of the
section 251 unbundling requirement for a particular element
by itself mandates forbearance from the corresponding
[checklist] requirement under section 271,’’ an issue it had
already resolved in the Triennial Review Order.
As an initial matter, we note the Commission’s claim that
the Triennial Review Order rendered Verizon’s argument
10
moot is in some tension with its disclaimer in that very order:
‘‘We do not address Verizon’s forbearance petition in this
Triennial Review proceeding.’’ 18 FCC Rcd 16978, 17383
n.1977. Beyond that procedural limitation, the substance of
the Triennial Review Order falls short of having resolved the
issue raised by Verizon’s petition. In particular, the para-
graphs of the Triennial Review Order the Commission now
invokes as having mooted Verizon’s ‘‘principal argument,’’ see
¶¶ 653–55, do not provide a reasoned explanation for denying
forbearance according to the statutory requirements of § 10.
Rather, as Verizon points out, they merely confirm that a
BOC has an obligation to provide unbundled network ele-
ments under § 271 regardless whether it is also required to
do so under § 251. The Commission did not even attempt to
explain why forbearance is not appropriate or, as claimed by
Verizon, required in such a circumstance; indeed, the Com-
mission denied forbearance without ever considering the re-
quirements of § 10. Nor did the Commission consider Veri-
zon’s claim to have ‘‘fully implemented’’ the requirements of
§ 271 — a precondition of forbearance, see 47 U.S.C.
§ 160(d). These omissions render the Commission’s decision
arbitrary and capricious, not the product of reasoned deci-
sionmaking.
III. Conclusion
For the foregoing reasons, Verizon’s petition for review is
granted. This matter is remanded to the Commission either
to grant Verizon’s petition for forbearance or to provide a
reasoned explanation for denying it. Verizon’s further re-
quest that the Commission be required to issue a new order
within 30 days, based upon the record as it stands now —
that is, as supplemented by the filings of Verizon and other
interested parties since the Commission issued the order now
under review — is denied. Lest the intention of the Con-
gress in § 10 to expedite forbearance decisions be set to
naught, we would have required the Commission to issue a
new order within 30 days had Verizon itself not made clear
that it wants a decision based upon the record compiled
through the present. It would be inappropriate, however, for
the court to require so expedited a decision based upon a
11
record that, as far as we can tell, is not yet closed and may, in
any event, require the Commission to consider much material
that was not before it as of last October 27.
So ordered.