United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued January 26, 2009 Decided April 28, 2009
No. 08-1071
NATIONAL TELEPHONE COOPERATIVE ASSOCIATION,
PETITIONER
v.
FEDERAL COMMUNICATIONS COMMISSION AND UNITED
STATES OF AMERICA,
RESPONDENTS
QWEST COMMUNICATIONS CORPORATION, ET AL.,
INTERVENORS
On Petition for Review of an Order
of the Federal Communications Commission
L. Marie Guillory argued the cause for petitioner. With
her on the briefs were Daniel Mitchell, Jill Canfield, and
Karlen J. Reed.
Joel Marcus, Counsel, Federal Communications
Commission, argued the cause for respondent. With him on
the brief were Thomas O. Barnett, Assistant Attorney
General, U.S. Department of Justice, Catherine G. O'Sullivan
and Nancy C. Garrison, Attorneys, Matthew B. Berry,
General Counsel, Federal Communications Commission,
2
Joseph R. Palmore, Deputy General Counsel, and Richard K.
Welch, Acting Deputy Associate General Counsel.
Before: GINSBURG, GARLAND and KAVANAUGH, Circuit
Judges.
Opinion for the Court filed by Circuit Judge
KAVANAUGH.
KAVANAUGH, Circuit Judge: The Regulatory Flexibility
Act requires an agency issuing a final rule to publish an
analysis of the rule’s impact on small businesses.1
1
Section 604 of Title 5 reads in full:
(a) When 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, or promulgates a final interpretative rule
involving the internal revenue laws of the United States as
described in section 603(a), the agency shall prepare a final
regulatory flexibility analysis. Each final regulatory flexibility
analysis shall contain—
(1) a succinct statement of the need for, and
objectives of, the rule;
(2) a summary of the significant issues raised by the
public comments in response to the initial regulatory
flexibility analysis, a summary of the assessment of the
agency of such issues, and a statement of any changes
made in the proposed rule as a result of such comments;
(3) a description of and an estimate of the number of
small entities to which the rule will apply or an
explanation of why no such estimate is available;
(4) a description of the projected reporting,
recordkeeping and other compliance requirements of the
rule, including an estimate of the classes of small entities
which will be subject to the requirement and the type of
3
In 2005, we stayed and remanded a Federal
Communications Commission order because the agency had
failed to publish the required analysis. U.S. Telecom Ass’n v.
FCC, 400 F.3d 29, 42-43 (D.C. Cir. 2005). The FCC has now
issued the analysis, but the National Telecommunications
Cooperative Association challenges it as inconsistent with the
Regulatory Flexibility Act and arbitrary and capricious under
the Administrative Procedure Act. We deny NTCA’s petition
for review.
I
This case concerns “number portability” – the ability of
telephone customers to keep a telephone number after
switching service providers. In 1996, the Federal
Communications Commission issued an order requiring “local
exchange carriers” – that is, companies that provide telephone
service, see 47 U.S.C. § 153(26) – to ensure number
portability to persons changing carriers but remaining in the
same physical location. So, for example, someone switching
professional skills necessary for preparation of the report
or record; and
(5) a description of the steps the agency has taken to
minimize the significant economic impact on small
entities consistent with the stated objectives of applicable
statutes, including a statement of the factual, policy, and
legal reasons for selecting the alternative adopted in the
final rule and why each one of the other significant
alternatives to the rule considered by the agency which
affect the impact on small entities was rejected.
(b) The agency shall make copies of the final regulatory
flexibility analysis available to members of the public and
shall publish in the Federal Register such analysis or a
summary thereof.
4
between two local telephone service providers can keep the
same home telephone number. That requirement facilitates
competition among wireline carriers by eliminating the
inconvenience of having to switch numbers when changing
carriers.
In 2003, the FCC issued a second order requiring local
exchange carriers to port numbers to wireless carriers
providing service in the same area. That new requirement –
known as “intermodal portability” – means that local wireline
carriers have to route telephone calls to wireless carriers. To
accomplish this, local exchange carriers must transmit
wireline telephone signals to what is known as a “point of
interconnection” – a point where wireline signals are
converted into wireless signals. Points of interconnection are
sometimes far from local exchange carriers, however, and
local exchange carriers must bear certain costs in routing
signals over those distances.
Local exchange carriers challenged the FCC’s Order on
intermodal portability. They argued, among other things, that
the FCC had violated the Regulatory Flexibility Act, which
directs agencies to publish an analysis of how a rule will
affect small businesses. See 5 U.S.C. § 604. The FCC
responded that the Order in question was exempt from the Act
because it constituted an interpretive rule. In 2005, this Court
concluded that the intermodal portability Order was not
exempt from the Act’s requirements; we found that the Order
was a legislative rule. We therefore granted the local
exchange carriers’ petitions for review with respect to their
Regulatory Flexibility Act claim, stayed the intermodal
portability Order until the FCC supplied the required
regulatory flexibility analysis, and remanded the matter to the
FCC. U.S. Telecom Ass’n v. FCC, 400 F.3d 29, 43 (D.C. Cir.
2005).
5
In 2008, the FCC published the analysis required by the
Regulatory Flexibility Act, and the stay on enforcement of the
intermodal portability Order accordingly expired. Now the
National Telecommunications Cooperative Association – an
association of rural telephone companies, see 47 U.S.C.
§ 153(37) – challenges the Final Regulatory Flexibility
Analysis that the FCC issued on remand. Citing the Order’s
effects on small businesses, NTCA argues that the FCC
violated the Regulatory Flexibility Act and the Administrative
Procedure Act.
II
A
The Regulatory Flexibility Act requires that agencies
issuing rules under the Administrative Procedure Act publish
a final regulatory flexibility analysis. See 5 U.S.C. § 604.
Such an analysis must meet certain statutory requirements. It
must state the purpose of the relevant rule and the estimated
number of small businesses that the rule will affect, if such an
estimate is available. In addition, each analysis must
summarize comments filed in response to the agency’s initial
regulatory flexibility analysis, along with the agency’s
assessment of those comments. Finally, each analysis must
include “a description of the steps the agency has taken to
minimize the significant economic impact” that its rule will
have on small businesses, “including a statement of the
factual, policy, and legal reasons for selecting the alternative
adopted in the final rule and why each one of the other
significant alternatives to the rule considered by the agency
which affect the impact on small entities was rejected.”
§ 604(a)(5).
6
According to NTCA, the analysis issued by the FCC does
not comply with the Regulatory Flexibility Act. We disagree.
As we have previously recognized, the Act’s requirements are
“[p]urely procedural.” U.S. Cellular Corp. v. FCC, 254 F.3d
78, 88 (D.C. Cir. 2001); see also Aeronautical Repair Station
Ass’n, Inc. v. FAA, 494 F.3d 161, 178 (D.C. Cir. 2007) (“The
RFA is a procedural statute setting out precise, specific steps
an agency must take.”). Though it directs agencies to state,
summarize, and describe, the Act in and of itself imposes no
substantive constraint on agency decisionmaking. In effect,
therefore, the Act requires agencies to publish analyses that
address certain legally delineated topics. Because the analysis
at issue here undoubtedly addressed all of the legally
mandated subject areas, it complies with the Act. Cf. U.S.
Cellular Corp., 254 F.3d at 88-89 (“Petitioners dispute neither
that the Commission included a FRFA [final regulatory
flexibility analysis] . . . nor that this statement addresses all
subjects required by the RFA.”).
B
NTCA also raises a related but distinct claim that the
FCC’s action is arbitrary and capricious under the APA
because the agency did not reasonably address the Order’s
impact on small businesses.
The APA’s arbitrary-and-capricious standard requires
that agency rules be reasonable and reasonably explained.
Under State Farm, we must assess, among other things,
whether the agency decision was based on “consideration of
the relevant factors.” Motor Vehicle Mfrs. Ass’n, Inc. v. State
Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983) (internal
quotation marks omitted). The Regulatory Flexibility Act
makes the interests of small businesses a “relevant factor” for
certain rules. Therefore, the APA together with the
7
Regulatory Flexibility Act require that a rule’s impact on
small businesses be reasonable and reasonably explained. A
regulatory flexibility analysis is, for APA purposes, part of an
agency’s explanation for its rule. See Small Refiner Lead
Phase-Down Task Force v. EPA, 705 F.2d 506, 539 (D.C.
Cir. 1983) (“a reviewing court should consider the regulatory
flexibility analysis as part of its overall judgment whether a
rule is reasonable”); see also Thompson v. Clark, 741 F.2d
401, 405 (D.C. Cir. 1984) (“Thus, if data in the regulatory
flexibility analysis – or data anywhere else in the rulemaking
record – demonstrates that the rule constitutes such an
unreasonable assessment of social costs and benefits as to be
arbitrary and capricious, the rule cannot stand.”) (citation
omitted).
As we have said many times before, arbitrary-and-
capricious review in agency rulemaking cases is highly
deferential. See City of Portland, Oregon v. EPA, 507 F.3d
706, 713 (D.C. Cir. 2007); AT&T Corp. v. FCC, 448 F.3d
426, 431 (D.C. Cir. 2006). In assessing whether a rule is
reasonable and reasonably explained, our review is “narrow,”
and we must not “substitute [our] judgment for that of the
agency.” State Farm, 463 U.S. at 43. That is particularly true
with regard to an agency’s predictive judgments about the
likely economic effects of a rule. See Teledesic LLC v. FCC,
275 F.3d 75, 84 (D.C. Cir. 2001).
In this case, NTCA raises four specific objections to the
FCC’s regulatory flexibility analysis, which we consider in
turn.
First, NTCA contends that the intermodal portability
Order causes small businesses to incur unreasonably high
implementation costs. But the FCC found “scant support” for
the implementation cost estimates offered by some
8
commentators. In re Telephone Number Requirements for IP-
Enabled Services Providers, 22 F.C.C.R. 19531, 19607 ¶ 5,
2007 WL 3306343 (2007). The agency noted, moreover, that
the estimates would not impose “a significant economic
burden on small entities,” even if they were “taken at face
value.” Id. at 19606-07 ¶ 5. The FCC concluded that its
chosen approach “best balances the impact of the costs that
may be associated with the wireline-to-wireless intermodal
porting rules for small carriers and the public interest benefits
of those requirements.” Id. at 19610 ¶ 13. Although the
FCC’s explanation of implementation costs was not elaborate,
we find its consideration of those costs reasonable and
reasonably explained in light of the record in this case. See In
re Core Communications, Inc., 455 F.3d 267, 279 (D.C. Cir.
2006); United Parcel Service, Inc. v. U.S. Postal Service, 184
F.3d 827, 839-40 (D.C. Cir. 1999).
Second, according to NTCA, the FCC’s intermodal
portability Order also burdens small businesses with
significant and disproportionate transport costs – that is, costs
incurred by routing a telephone call from one carrier to
another.2 The agency here pointed out that any problems
associated with transport costs are not unique to intermodal
porting; the agency said it therefore would address the issue
comprehensively rather than piecemeal. The FCC is now
considering transport costs in a separate rulemaking
proceeding, the intercarrier compensation proceeding.
Because this Order is not the source of the transport costs
problem, and because the FCC is already performing the
2
Contrary to the FCC’s suggestion, NTCA’s transport costs
argument is not an untimely challenge to the merits of the FCC’s
underlying Order. Cf. Cellular Telecomms. & Internet Ass’n v.
FCC, 330 F.3d 502, 508 (D.C. Cir. 2003). NTCA has timely
challenged the reasonableness of the regulatory flexibility analysis
after our remand in United States Telecom Ass’n, 400 F.3d at 43.
9
review of transport cost issues that NTCA asks us to mandate,
NTCA’s opposition is misplaced and should be raised in the
intercarrier compensation proceeding. We reached the same
conclusion under similar circumstances in Central Texas
Telephone Co-op., Inc. v. FCC, 402 F.3d 205 (D.C. Cir.
2005). There, in a case involving number portability, we
found no APA violation where the FCC similarly postponed
consideration of transport cost issues that had already been
“raised . . . in other proceedings” – namely, in the intercarrier
compensation proceeding. Id. at 215 (internal quotation
marks omitted); see also Toca Producers v. FERC, 411 F.3d
262, 264 (D.C. Cir. 2005) (dismissing petition as unripe
where petitioner may obtain its requested remedy “in a
proceeding now pending before the Commission”); U.S. Air
Tour Ass’n. v. FAA, 298 F.3d 997, 1010-11 (D.C. Cir. 2002)
(agency “reasonably put off” consideration in RFA case
where it represented that it would address the matter in future
rulemaking).
As NTCA points out, the separate intercarrier
compensation proceeding has been pending for several years.
We assume the Commission will complete its work soon. If
not, an appropriate party may of course file a petition for
mandamus. Cf. In re Core Communications, Inc., 531 F.3d
849 (D.C. Cir. 2008); Telecomm. Research & Action Ctr. v.
FCC, 750 F.2d 70 (D.C. Cir. 1984).
Third, NTCA argues that the FCC should have imposed
additional mitigating measures to lighten the burden of the
Order on small businesses. We have limited capacity or
capability to second-guess how an agency weighs a rule’s
possible impact on small businesses against other statutory
objectives. We similarly have limited ability to dispute an
agency’s assessment of how best to minimize a rule’s impact
on small businesses. Those are precisely the type of issues
10
that rest “within the expertise” of the FCC “and upon which a
reviewing court must be most hesitant to intrude.” State
Farm, 463 U.S. at 53. In this case, given the FCC’s
reasonable determinations that the intermodal portability
Order (i) fulfilled statutory objectives by advancing both
competition and the interests of consumers and (ii) would not
impose significant implementation costs on small businesses,
the FCC reasonably concluded that mitigating measures were
unnecessary. See In re Telephone Number Requirements, 22
F.C.C.R. at 19606-07 ¶ 5, 19611 ¶ 16.
Fourth, NTCA alleges that the FCC inadequately
addressed alternative policy options. Courts may not
“broadly require an agency to consider all policy alternatives
in reaching [a] decision.” State Farm, 463 U.S. at 51. Here,
NTCA says the FCC could have either (i) issued a temporary
stay of the intermodal porting requirements for small wireline
carriers until the conclusion of the intercarrier compensation
proceeding or (ii) limited the scope of the intermodal
portability requirement so that wireline carriers would have to
port only to wireless carriers with nearby points of
interconnection. The FCC, however, persuasively explained
that such approaches would have the effect of denying many
wireline consumers “the benefit of being able to port their
numbers to wireless carriers.” In re Telephone Number
Requirements, 22 F.C.C.R. at 19610 ¶ 14. In addition, NTCA
suggests that the agency could have created “a partial or
blanket exemption from the wireline-to-wireless intermodal
porting requirements for small entities.” Id. at 19611 ¶ 16.
But the FCC rejected such exemptions on the ground that they
would discourage competition and “would harm consumers in
small and rural areas across the country by preventing them
from being able to port on a permanent basis.” Id. The
agency’s rejection of these alternative approaches was both
reasonable and reasonably explained.
11
***
We deny the petition for review.
So ordered.