IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT … · individual cost study. Cost or revenues in categories that are used exclusively for interstate or intrastate communications

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ORAL ARGUMENT NOT YET SCHEDULED

IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT

_____________________

No. 19-1085 _____________________

THE IRREGULATORS, NEW NETWORKS INSTITUTE, BRUCE A. KUSHNICK, MARK N. COOPER, TOM ALLIBONE, KENNETH LEVY, FRED GOLDSTEIN, AND CHARLES W. SHERWOOD, JR.,

Petitioners, V.

FEDERAL COMMUNICATIONS COMMISSION AND UNITED STATES OF AMERICA,

Respondents, ____________

On Petitions For Review Of An Order Of The

Federal Communications Commission ____________

AMICUS BRIEF OF NATIONAL EXCHANGE CARRIER ASSOCIATION,

INC. AND NATIONAL TELECOMMUNICATIONS COOPERATIVE ASSOCIATION IN SUPPORT OF RESPONDENTS

____________

REGINA MCNEIL ROBERT DEEGAN NATIONAL EXCHANGE CARRIER ASSOCIATION, INC. 80 South Jefferson Road Whippany, NJ 07981 (973) 884-8000 Of Counsel

GREGORY J. VOGT LAW OFFICES OF GREGORY J. VOGT, PLLC 103 Black Mountain Ave., Suite 11 Black Mountain, NC 28611 (828) 669-2099 Counsel for National Exchange Carrier Association, Inc. and National Telecommunications Cooperative Association

September 19, 2019

USCA Case #19-1085 Document #1807254 Filed: 09/19/2019 Page 1 of 31

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CORPORATE DISCLOSURE STATEMENTS

Pursuant to Federal Rule of Appellate Procedure 26.1 and D.C. Cir. R. 26.1,

National Exchange Carrier Association, Inc. (“NECA”) and National

Telecommunications Cooperative Association d/b/a NTCA-The Rural Broadband

Association (“NTCA”) submit the following disclosure statements:

Amicus NECA has no parent corporation, and no publicly held corporation

owns 10 percent or more of NECA’s stock.

Amicus NTCA has no parent corporation, and no publicly held corporation

owns 10 percent of more of NTCA’s stock.


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TABLE OF CONTENTS

CORPORATE DISCLOSURE STATEMENTS..................................................... ii TABLE OF CONTENTS ...................................................................................... iii TABLE OF AUTHORITIES ................................................................................. iv GLOSSARY .......................................................................................................... v STATEMENT OF INTEREST OF AMICUS CURIAE ......................................... 1 STATEMENT OF AUTHORSHIP AND FINANCIAL CONTRIBUTIONS ......... 4 STATEMENT OF THE CASE .............................................................................. 4 SUMMARY OF ARGUMENT .............................................................................. 6 ARGUMENT ......................................................................................................... 8 I. ELIMINATION OF THE SEPARATIONS FREEZE WOULD BE VERY

BURDENSOME TO SMALLER RATE-OF-RETURN CARRIERS AND COSTLY TO RATEPAYERS WITH NO ASSURANCE OF CONCOMITANT BENEFITS ....................................................................... 8

II. THE ONE-TIME OPTION TO PERMIT RATE-OF-RETURN CARRIERS TO “UNFREEZE” CATEGORY RELATIONSHIPS WAS REASONABLE. ..................................................................................................................... 14

CONCLUSION .................................................................................................... 17


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TABLE OF AUTHORITIES

CASES BDPCS, Inc. v. FCC, 351 F.3d 1177, 1183 (D.C. Cir. 2003). ............................... 17 Cellular Telecomm. & Internet Ass’n v. FCC, 330 F.3d 502, 504 (D.C. Cir. 2003)

......................................................................................................................... 15 MCI Telecommunications Corp. v. FCC., 750 F.2d 135, 141 (D.C. Cir. 1984) ..... 14

STATUTES 28 U.S.C. § 2344 .................................................................................................. 15 47 U.S.C. § 152(b) ................................................................................................. 9 47 U.S.C. § 405(a) ........................................................................................... 8, 17 47 U.S.C. § 410(c) ............................................................................................... 13

REGULATIONS 47 C.F.R. § 36.125(f) ............................................................................................. 5 47 C.F.R. § 36.154(a), (b) ...................................................................................... 5 47 C.F.R. § 36.154(c) ............................................................................................. 6 47 C.F.R., Part 32…………………………………………………………….. 2, 4, 5 47 C.F.R., Part 36 ............................................................................................... 2, 4 47 C.F.R., Part 64 ................................................................................................... 2 47 C.F.R., Part 69 ................................................................................................... 2

ADMINISTRATIVE DECISIONS Connect America Fund, WC Docket Nos. 10-90, et al., 31 FCC Rcd 3087, ¶ 1

(2016) ............................................................................................................... 16 Jurisdictional Separations and Referral to the Federal-State Joint Board, 16 FCC

Rcd 11382, ¶ 1 (2001) ................................................................................ 10, 15 Jurisdictional Separations and Referral to the Federal-State Joint Board, CC

Docket No. 80-286, Report and Order and Waiver, 33 FCC Rcd 12743 (2018) ............................................................... 2, 3, 4, 7, 9, 10, 11, 12, 13, 15, 16 MTS and WATS Market-Structure, CC Docket No. 78-72, Phase I, Third Report

and Order, 93 FCC 2d 241, ¶¶ 339 (1983) .......................................................... 1

ADMINISTRATIVE RECORD AUTHORITIES Comments of NTCA–The Rural Broadband Association, CC Docket No. 80-286, 4

(Aug. 27, 2018) ................................................................................................ 12 Comments of the National Exchange Carrier Association, Inc., CC Docket No 80-

286, 5 (Aug. 27, 2018) ..................................................................................... 12 Comments of WTA – Advocates for Rural Broadband, CC Docket No. 80-286, 2

(Aug. 27, 2018) ................................................................................................ 13


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GLOSSARY

NECA and NTCA adopt the terms contained in the Respondents’ Glossary

of Terms.


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STATEMENT OF INTEREST OF AMICUS CURIAE

NECA is an intra-industry, not-for-profit corporation, established by order of

the Federal Communications Commission (“FCC” or “Commission”) to administer

the interstate access charge system, an industry-wide settlement payment system

among communications providers.1 Among other things, NECA is responsible for

filing a federal access tariff on behalf of nearly 900 local telephone companies that

specify the rates, terms and conditions for offering interstate access services. In

addition, NECA administers a nationwide pooling mechanism that permits each

participating telephone company to recover its costs of providing interstate access

services, while member telephone companies charge the rates contained in

NECA’s tariff. All of NECA’s members are affected by the regulations at issue in

this proceeding.

NTCA is a trade association representing approximately 850 small rural

telephone companies and cooperatives, many if not all of which are subject to the

regulations addressed by the Order under review. NTCA participated in the

proceeding below through the filing of comments and other submissions in the

FCC's docket.

1 MTS and WATS Market-Structure, CC Docket No. 78-72, Phase I, Third Report

and Order, 93 FCC 2d 241, ¶¶ 339 (1983).


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The Commission Order2 under review changes rules applicable to the third

of four steps in the rate regulation process for rate-of-return carriers. The first step

requires rate-of-return carriers to record costs pursuant to 47 C.F.R., Part 32

accounting rules. The second step separates accounting costs between regulated

and unregulated services pursuant to 47 C.F.R., Part 64 of the Commission’s rules.

The third step allocates Part 64 regulated costs between the federal and state

jurisdictions in accordance with 47 C.F.R., Part 36 separations rules. The fourth

step apportions interstate costs among interexchange services in accordance with

47 C.F.R., Part 69 of the Commission’s rules.

The Order extends a previously imposed separations “freeze” applicable to

both price cap and rate-of-return regulated carriers on Part 36 account category

relationships and jurisdictional allocation factors for a period of up to six years.3

The nature of the freeze is more precisely set forth in the Order under review and

in Respondents’ brief. Resp. Br. 9. The Commission also allowed certain rate-of-

return carriers the opportunity to update their category relationships, and use those

2 Jurisdictional Separations and Referral to the Federal-State Joint Board, CC

Docket No. 80-286, Report and Order and Waiver, 33 FCC Rcd 12743 (2018) (“Order”). This Order is attached to The Irregulator’s Petition for Review.

3 The original freeze in 2001 was adopted at a time when separations applied to both price cap carriers and rate-of-return carriers. The FCC forbore from applying the separations rules in 2008 to price cap carriers, and in 2018 to certain rate-of-return carriers. See id. at ¶¶ 16-17.


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revised relationships to develop interstate rates for the tariff period that began on

July 1, 2019. This update for rate-of-return carriers was on a one-time basis,

implemented in accordance with rules specified in the Order, and subject to

Commission review.

The Order under review affects the costs included in rate-of-return carrier

tariffs for interstate services. The resolution of issues raised by the Order and the

petition for review filed in this Court implicate the amount of money NECA pool

members receive pursuant to the NECA pooling mechanism. Because of NECA’s

unique position in administering interstate access tariffs and revenue pools on

behalf of NECA’s members, it has a strong interest in the outcome of this

proceeding. Because many NTCA member companies must file tariffs in

accordance with the rules at issue in the petition either on their own behalf or

through NECA as the filing and pooling entity, NTCA has a strong interest in the

outcome of this proceeding. Both NECA itself, and NTCA and NECA members,

could potentially suffer additional burdens if the Order is modified. NECA and

NTCA participated in the proceeding on which the petition for review is based.


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STATEMENT OF AUTHORSHIP AND FINANCIAL CONTRIBUTIONS

No party or its counsel, and no person other than amici curiae, made a

monetary contribution intended to fund the preparation or submission of this brief.

Submitting counsel are the sole authors of this brief.

STATEMENT OF THE CASE

Amici adopt Respondent’s Counterstatement. Resp. Br. 2-19. Amici add

the following background information.

The Federal Communications Commission’s jurisdictional separations rules

are located at Part 36 of Title 47 of the Code of Federal Regulations. The rules in

one form or another have been in place for over fifty years, but were moved to Part

36 and modified in 1987, where they have resided since that time. The separations

rules require carriers to assign costs of regulated services that were booked to Part

32 accounts4 based on a classification of assets, expenses, and revenues. The FCC

has described Part 36 procedures as “arcane” and compliance efforts today would

be very difficult. Order, ¶¶ 22-23.

Separations procedures require carriers to conduct annual cost studies that

include jurisdictional separations amounts. Part 36 category relationships are

4 Part 32 contains rules implementing the Uniform System of Accounts,

traditionally applicable to all regulated telecommunications carriers, but now only applicable to a subset of carriers.


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percentages of costs in a Part 32 account that are assigned to separations categories

corresponding to that account. The term category includes “subcategories” of

certain accounts. For instance, local switching costs are assigned based on a

complicated formula that essentially equals the relative number of minutes the

carrier’s equipment is used to switch traffic, both intrastate and interstate. See,

e.g., 47 C.F.R. § 36.125(f). The carrier uses these category relationships to assign

costs or revenues in each category between the interstate and intrastate jurisdiction,

with the potential for assignments to vary every year based on the carrier’s

individual cost study.

Cost or revenues in categories that are used exclusively for interstate or

intrastate communications are directly assigned to the appropriate jurisdiction. For

instance, the costs of a private line service (i.e., dedicated communications path

between subscriber-designated premises) that is used 10 percent or more for

interstate service are assigned to the interstate jurisdiction. See 47 C.F.R.

§ 36.154(a), (b).

Finally, amounts of costs or revenues in certain categories that support both

interstate and interstate jurisdictions are divided between the jurisdiction using

allocation factors that reflect relative use or a fixed percent. For instance, the costs

of the local loop, the wire connecting the subscriber premise to the local central

office, are divided 25 percent to the interstate jurisdiction and 75 percent to


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intrastate. See 47 C.F.R. § 36.154(c). These allocation factors are fixed each year

by FCC rule regardless of the results of the carrier cost study.

A freeze of both allocation factors and category relationships keeps stable

the percentage of an account, but the costs contained in the account for rate-of-

return carriers vary from year to year in accordance with actual assets, expenses,

and revenues for a particular year. The separations freeze did not impact the

changes in accounting costs from year to year, but rather the percentage of such

costs assigned to the interstate or intrastate jurisdiction.

SUMMARY OF ARGUMENT

The jurisdictional separations process was established over fifty years ago

when telephone companies provided only traditional local and long distance

services. This arcane and burdensome process was needed to separate costs and

revenues of a joint-use network between intrastate and interstate jurisdictions,

which was shared between the states and the FCC, respectively.

To stabilize and simplify the separations process, and after consultation with

the Federal-State Joint Board on Separations, the FCC froze nearly 20 years ago

the allocation factors and category relationships for price cap carriers and

allocation factors only for rate-of-return carriers, pending action on a Joint Board

recommendation as to comprehensive separations reform. Rate-of-return carriers


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were at the same time given the option to freeze their category relationships as

well, but only a limited number actually did so.

When the Order under review was adopted, and with no Joint Board

recommendation as to comprehensive reform, the Commission faced two choices:

extend the freeze or allow the pre-2001 separations rules to become effective once

again. The FCC reasonably balanced the costs and benefits of reinstating the

separations rules and determined that continuation of the freeze would be the better

regulatory course. The decision to extend the freeze up to six additional years,

with an option by rate-of-return carriers to unfreeze rate-of-return category

relationships, was in fact based upon and supported by a recommendation from the

State regulatory members of the Joint Board.

Because of an insufficient record on the impact of reinstating separations

rules, the Commission believed that lifting the freeze might produce worse results

than continuing the freeze. The record strongly supported the Commission’s

conclusion that lifting the separations freeze would be highly disruptive and

burdensome, particularly to small rate-of-return carriers. The need to undertake

the burdensome work effort would not be necessary for those carriers that did not

have different operating characteristics since 2001, but the effort would

nonetheless generate costs that could lead to higher rates. While waiting for a Joint

Board recommendation on comprehensive reform, the FCC’s interim decision is


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entitled to substantial deference in making this cost-benefit analysis to continue the

freeze on an interim basis in order to protect consumers and carriers alike.

Moreover, the FCC was entitled to provide rate-of-return carriers a one-time

option to “unfreeze” category relationships, but not allocation factors. This

challenge to the 2001 FCC decision to allow certain rate-of-return carriers to

optionally freeze category relationships is untimely and should be rejected.

Notwithstanding, the FCC justified giving the few rate-of-return carriers that had

frozen category relationships in 2001 an option to “unfreeze” them now because

carrier cost structures and investment patterns varied widely. As a result, burdens

on some carriers could outweigh any potential benefits of continuing the category

relationships freeze.

Pursuant to 47 U.S.C. § 405(a), Petitioners waived their argument that the

FCC improperly “delegated” to private companies the decision whether to unfreeze

category relationships because the argument was not presented to the Commission.

ARGUMENT

I. ELIMINATION OF THE SEPARATIONS FREEZE WOULD BE VERY BURDENSOME TO SMALLER RATE-OF-RETURN CARRIERS AND COSTLY TO RATEPAYERS WITH NO ASSURANCE OF CONCOMITANT BENEFITS

Petitioners argue that the FCC erred in determining that the separations

freeze should not be lifted at this time. Pet. Br. 66. Amici agree with the

Respondents that the FCC adequately justified the continuation of the freeze


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pending a recommendation of the Federal State Joint Board on Separations (“Joint

Board”).5 Resp. Br. 33-46. The decision to extend the freeze up to six additional

years, with an option for rate-of-return carriers to unfreeze rate-of-return category

relationships, was in fact based upon and supported by a recommendation from

State regulatory members of the Joint Board. Order, ¶ 4 & note 5.

The jurisdictional separations process was established over fifty years ago

when telephone companies provided only traditional local and long distance

services. This arcane and burdensome process was needed to separate costs and

revenues of a joint-use network,6 because the jurisdiction to regulate intrastate and

interstate telecommunications was shared between the states and the FCC,

respectively. 47 U.S.C. § 152(b).

To stabilize and simplify the separations process in the face of the rapid

evolution of the communications marketplace, and after consultation with the Joint

Board, the FCC in 2001 froze both allocation factors and category relationships for

price cap carriers and allocation factors only for rate-of-return carriers.

Jurisdictional Separations and Referral to the Federal-State Joint Board, 16 FCC

5 Amici also support Respondent’s argument that Petitioners lack standing to

bring this petition, Resp. Br. 24-32, particularly because they do not take service from any rate-of-return carrier.

6 The joint-use network includes the wires, switches, and other equipment that carried local, interstate, and more recently, broadband services.


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Rcd 11382, ¶ 1 (2001) (“2001 Separations Freeze Order”). Rate-of-return carriers

were given the option to freeze their category relationships as well, but once the

option was selected the category relationships for that rate-of-return carrier could

not be changed absent grant of a waiver. Id., ¶ 21. The FCC determined that “the

most effective action at this time will be to freeze separations on an interim

basis . . . ,” id., ¶ 12, pending action on a further Joint Board recommendation as

to comprehensive separations reform.

In the years after the original freeze technology and market changes

accelerated: consumer adoption and use of regulated local and interstate voice

services continued to decline, while non-regulated voice services provided over

wireless and IP-based networks rose dramatically. Order, ¶ 2. Over the same

period, the Commission substantially revised its regulatory requirements, making

traditional rate-of-return regulations (including, but not limited to, the separations

rules) applicable to only a diminishing group of carriers and services. Id., ¶¶ 16-

18. Given these changes, the FCC correctly recognized that the difficulty of

“reforming the separations rules cannot be overstated.” Id., ¶ 26. Thus, when the

Order under review was adopted, and with no Joint Board recommendation as to

comprehensive reform, the Commission faced two choices: extend the freeze (as

supported by the State regulatory members of the Joint Board) or allow the


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separations rules that were last applied in full nearly 20 years earlier to become

effective once again. Id., ¶ 20.

As to the impact of reinstating the separations regime to govern a limited

number of rate-of-return carriers, the FCC balanced the costs and benefits of

reinstating the separations rules on these small businesses and determined that

continuation of the freeze would be the wisest course of action. In particular,

because of the lack of record concerning the impact of reinstating the separations

rules, the Commission was especially concerned that lifting the freeze might

produce worse results than the freeze’s continuance. Id., ¶¶ 23, 33.

The record strongly supported the Commission’s conclusion that lifting the

separations freeze would be highly burdensome, particularly for smaller rate-of-

return carriers that would “find it extremely difficult, if not impossible, to perform

all of the studies needed for full compliance.” Id., ¶ 21. Since 2001 many carriers

had lost personnel and systems that were used to update separations factors and

category relationships, an arcane process that required a skill set that had not been

learned by a younger work force.

[D]eveloping “traffic factors” to jurisdictionally separate costs assigned to voice-related services is “an arcane science” and that, after 17 years of not performing traffic factor studies, carriers would be required to incur substantial training and other costs to reestablish the expertise necessary to perform them.


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Id., ¶ 22. Reimposing separations rules “could produce negative consequences by

causing significant disruptions in carriers’ regulated rates, cost recovery, and other

operating conditions.” Id., ¶ 23. Therefore, the FCC was correct when it

concluded that it could not “justify imposing such a burden on small carriers

particularly given that the impact of such traffic factors is continuing to diminish as

investment in voice services decreases due to growing deployment of broadband

services.” Id., ¶ 22.

The record strongly supported the FCC’s conclusions. NECA pointed out

that reinstating the decades old separations rules would be very burdensome

because “it is highly questionable whether small companies would be able to gain

access to internal or external personnel with the expertise needed to perform

annual cost studies at this point.” Comments of the National Exchange Carrier

Association, Inc., CC Docket No 80-286, 5 (Aug. 27, 2018) (JA __). NTCA stated

that a return to pre-2001 rules would be burdensome because

these smaller providers would be forced to return to a regulatory environment that last operated in full nearly two decades ago, necessitating the hiring or retraining of staff – assuming expertise can even be found to do so – and revising of internal procedures in ways that could overwhelm their operations.

Comments of NTCA–The Rural Broadband Association, CC Docket No. 80-286, 4

(Aug. 27, 2018) (JA __). WTA posited that smaller companies would face serious

difficulties in now hiring employees or consultants that were capable of


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compliance with the separations rules. “[T]he costs of re-educating and re-training

industry and regulatory personnel would be substantial.” Comments of WTA –

Advocates for Rural Broadband, CC Docket No. 80-286, 2 (Aug. 27, 2018) (JA

__). No commenter contradicted these record submissions.

Petitioners’ argument that the FCC failed to take into consideration

consumer harm is patently incorrect. Petitioners speculate that rate-of-return

carriers “overcharge” consumers of intrastate local services and certain interstate

access charges. Pet. Br. 74. Petitioners cite no record data to support this

assertion, and indeed the FCC did not draw such a conclusion in the Order before

this Court. Rather, the FCC only raises a “concern” that the separations rules

“misallocate network costs.” Order, ¶ 43. Notwithstanding the unresolved factual

issues raised in the record, and absent a formal Joint Board recommendation, the

FCC rationally concluded that requiring carriers to perform the extensive and

complicated cost studies necessary to comply with the pre-2001 rules would be

burdensome and could raise rates for consumers unnecessarily. Id., ¶¶ 22-23.

In fact, the fundamental purpose of the original Joint Board referral was to

evaluate these asserted facts and the questions they raised and to make

recommendations to the FCC on how separations should be comprehensively

reformed or eliminated. Given 47 U.S.C. § 410(c)’s mandate that changes to

jurisdictional separations be referred to a Joint Board, the FCC can hardly be


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faulted for exercising caution in waiting for a formal Joint Board recommendation

prior to taking action in the circumstances presented to date. As the expert agency,

the FCC is entitled to substantial deference in making this cost-benefit analysis in

order to protect consumers and carriers alike.

Substantial deference must be accorded an agency when it acts to maintain the status quo so that the objectives of a pending rulemaking proceeding will not be frustrated. What needs to be shown to uphold the FCC is that “existing, possibly inadequate rules” had to be frozen to avoid “compounding present difficulties.”

MCI Telecommunications Corp. v. FCC., 750 F.2d 135, 141 (D.C. Cir. 1984)

(citations omitted). This Court should follow the MCI precedent, which afforded

the FCC substantial deference in upholding an interim separations rule freeze of a

specific separations allocation factor to preserve the status quo while a permanent

rule change was considered. As the Respondents indicate in their brief, Resp. Br.

33-36, the continuation of the freeze is reasonable and justified on the current

record.

II. THE ONE-TIME OPTION TO PERMIT RATE-OF-RETURN CARRIERS TO “UNFREEZE” CATEGORY RELATIONSHIPS WAS REASONABLE.

In their very short final brief section, petitioners offer two arguments that the

FCC was arbitrary, capricious and engaged in an abuse of discretion in its decision

to provide rate-of-return carriers a one-time option to “unfreeze” their category


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relationships.7 First, petitioners argue the FCC did not explain why it would

permit carriers a one-time option rather than require all rate-of-return carriers to

“unfreeze” their category relationships. Pet. Br. 73-74. Second, petitioners argue

the FCC improperly delegated to private carriers the decision whether to

“unfreeze” category relationships. Pet. Br. 74.

At the outset, Petitioners exclusively contest that the Order unlawfully

allows some rate-of-return carriers to maintain their category relationships freezes.

Pet. Br. 74. But the optional category relationships freeze was permitted in the

2001 Separations Freeze Order and was not changed in the Order under review. It

is now too late to challenge that 2001 decision. See Cellular Telecomm. & Internet

Ass’n v. FCC, 330 F.3d 502, 504 (D.C. Cir. 2003); 28 U.S.C. § 2344. So the

optionality argument simply collapses into Petitioners’ argument that the extension

of the freeze was unlawful, which was adequately addressed by Respondents.

Resp. Br. at 33-36.

7 Petitioners’ argument is confusing because the brief appears to suggest that the

Commission allowed rate-of-return carriers to optionally unfreeze separations factors, rather than category relationships. The Order does not affect the freeze of separations allocation factors, but only allows rate-of-return carriers a one-time option to unfreeze category relationships that they voluntarily froze in 2001. Amici respond to the argument as if made applicable to the category relationships unfreeze. If this is not what Petitioners meant, then the entire argument should be rejected because the Commission did not take any action to optionally unfreeze separations factors.


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Notwithstanding, as to Petitioner’s first argument, the FCC did in fact justify

the flexibility given to rate-of-return carriers to choose the option to “unfreeze”

category relationships because “the burden on some affected carriers could

outweigh any potential benefits.” Order, ¶ 33. The Commission found that “the

size, cost structures, and investment patterns of rate-of-return carriers varied

widely,” id., and therefore different choices would be justified for different

carriers. First,

[c]ertain rate-of-return carriers’ cost structures may not have changed significantly enough since the freeze began to warrant the administrative costs that these carriers would incur in updating their category relationships, costs that would be borne by their customers and the high cost universal service support program.

Id., ¶ 33. Second, the FCC believed that for other carriers, the “unfreeze” of

category relationships “would disrupt business plans,” id., undermining

investment incentives. Id., ¶ 29. The category relationships freeze could also

prevent carriers from recovering costs of more recent investment, including from

universal service funds, and thus could also disincent carriers to invest in their

networks. Id., ¶¶ 29, 31-32. The FCC has long sought to encourage carrier

investment to promote availability of higher-capacity communications services.

See, e.g., Connect America Fund, WC Docket Nos. 10-90, et al., 31 FCC Rcd

3087, ¶ 1 (2016). Thus, the FCC did provide a reasonable and supportable

explanation for its optional category relationships “unfreeze” decision.


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As to the second argument, Section 405(a) of the Communications Act

provides that filing a petition for reconsideration is a “condition precedent to

judicial review” if petitioner “relies on questions of fact or law upon which the

Commission . . . has been afforded no opportunity to pass.” 47 U.S.C. § 405(a).

Thus, the court of appeals has no jurisdiction to review an argument unless the

Commission is afforded “a fair opportunity to review the arguments” before raising

them in court. BDPCS, Inc. v. FCC, 351 F.3d 1177, 1183 (D.C. Cir. 2003).

Petitioners did not present the improper “delegation” argument to the Commission

and it is therefore waived.

CONCLUSION

The Court should deny the petition for review.

Respectfully submitted,

REGINA MCNEIL ROBERT DEEGAN NATIONAL EXCHANGE CARRIER ASSOCIATION, INC. 80 South Jefferson Road Whippany, NJ 07981 (973) 884-8000 Of Counsel

/s/ Gregory J. Vogt GREGORY J. VOGT LAW OFFICES OF GREGORY J. VOGT, PLLC 103 Black Mountain Ave., Suite 11 Black Mountain, NC 28611 (828) 669-2099 Counsel for National Exchange Carrier Association, Inc. and National Telecommunications Cooperative Association

September 19, 2019


CERTIFICATE OF COMPLIANCE

Pursuant to Federal Rule of Appellate Procedure 32(a)(7)(C) and D.C.

Circuit Rule 32(a), the undersigned certifies that this brief complies with the

applicable type-volume limitations. This brief was prepared using a proportionally

spaced type (Times New Roman, 14 point). Exclusive of the portions exempted by

Federal Rule of Appellate Procedure 32(a)(7)(B)(iii) and D.C. Circuit Rule

32(a)(1), this brief contains 3,679 words. This certificate was prepared in reliance

on the word-count function of the word-processing system (Microsoft Word for

Mac ver. 16.16.12) used to prepare this brief.

/s/ Gregory J. Vogt Gregory J. Vogt

September 19, 2019


CERTIFICATE OF FILING AND SERVICE

Pursuant to Rule 25 of the Federal Rules of Appellate Procedure, and Circuit

Rule 25(A)(a), I hereby certify that I have this 19th day of September, 2019, filed a

copy of the foregoing with the Clerk of the Court for the United States Court of

Appeals for the District of Columbia Circuit through the Court’s CM/ECF system.

I further certify that all participants in the case are registered CM/ECF users and

will be served electronically by the CM/ECF system.

Respectfully submitted,

/s/ Gregory J. Vogt Gregory J. Vogt


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Statutory And Regulations Addendum

Statutes 28 U.S.C. § 2344….………………………………………………………………2 47 U.S.C. § 152(b)………………………………………………………………..3 47 U.S.C. § 405(a) (reproduced in Respondent’s Brief Statutory Addendum at 8) 47 U.S.C. § 410(c) (reproduced in Respondent’s Brief Statutory Addendum at 10) Regulations 47 C.F.R. § 36.125…………………………………………………………………4 47 C.F.R. § 36.154…………………………………………………………………6


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28 U.S.C. § 2344. Review of orders; time; notice; contents of petition; service.

On the entry of a final order reviewable under this chapter, the agency shall promptly give notice thereof by service or publication in accordance with its rules. Any party aggrieved by the final order may, within 60 days after its entry, file a petition to review the order in the court of appeals wherein venue lies. The action shall be against the United States. The petition shall contain a concise statement of

(1) the nature of the proceedings as to which review is sought;

(2) the facts on which venue is based; (3) the grounds on which relief is sought; and (4) the relief prayed.

The petitioner shall attach to the petition, as exhibits, copies of the order, report, or decision of the agency. The clerk shall serve a true copy of the petition on the agency and on the Attorney General by registered mail, with request for a return receipt.


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47 U.S.C. § 152 Application of chapter.

(a) The provisions of this chapter shall apply to all interstate and foreign communication by wire or radio and all interstate and foreign transmission of energy by radio, which originates and/or is received within the United States, and to all persons engaged within the United States in such communication or such transmission of energy by radio, and to the licensing and regulating of all radio stations as hereinafter provided; but it shall not apply to persons engaged in wire or radio communication or transmission in the Canal Zone, or to wire or radio communication or transmission wholly within the Canal Zone. The provisions of this chapter shall apply with respect to cable service, to all persons engaged within the United States in providing such service, and to the facilities of cable operators which relate to such service, as provided in subchapter V-A. (b) Except as provided in sections 223 through 227 of this title, inclusive, and section 332 of this title, and subject to the provisions of section 301 of this title and subchapter V-A, nothing in this chapter shall be construed to apply or to give the Commission jurisdiction with respect to (1) charges, classifications, practices, services, facilities, or regulations for or in connection with intrastate communication service by wire or radio of any carrier, or (2) any carrier engaged in interstate or foreign communication solely through physical connection with the facilities of another carrier not directly or indirectly controlling or controlled by, or under direct or indirect common control with such carrier, or (3) any carrier engaged in interstate or foreign communication solely through connection by radio, or by wire and radio, with facilities, located in an adjoining State or in Canada or Mexico (where they adjoin the State in which the carrier is doing business), of another carrier not directly or indirectly controlling or controlled by, or under direct or indirect common control with such carrier, or (4) any carrier to which clause (2) or clause (3) of this subsection would be applicable except for furnishing interstate mobile radio communication service or radio communication service to mobile stations on land vehicles in Canada or Mexico; except that sections 201 to 205 of this title shall, except as otherwise provided therein, apply to carriers described in clauses (2), (3), and (4) of this subsection.


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47 C.F.R. § 36.125 Local switching equipment—Category 3. (a) Local switching equipment is included in account 2210. It comprises all central office switching equipment not assigned other categories. Examples of local switching equipment are basic switching train, toll connecting trunk equipment, interlocal trunks, tandem trunks, terminating senders used for toll completion, toll completing train, call reverting equipment, weather and time of day service equipment, and switching equipment at electronic analog or digital remote line locations. Equipment used for the identification, recording and timing of customer dialed charge traffic, or switched private line traffic (e.g., transmitters, recorders, call identity indexers, perforators, ticketers, detectors, mastertimes) switchboards used solely for recording of calling telephone numbers in connection with customer dialed charge traffic, or switched private line traffic (or both) is included in this local switching category. Equipment provided and used primarily for operator dialed toll or customer dialed charge traffic except such equipment included in Category 2 Tandem Switching Equipment is also included in this local switching category. This includes such items as directors, translators, sender registers, out trunk selectors and facilities for toll intercepting and digit absorption. Special services switching equipment which primarily performs the switching function for special services (e.g., switching equipment, TWX concentrators and switchboards) is also included in this local switching category.

(1) Local office, as used in § 36.125, comprises one or more local switching entities of the same equipment type (e.g., step-by-step, No. 5 Crossbar) in an individual location. A local switching entity comprises that local central office equipment of the same type which has a common intermediate distributing frame, market group or other separately identifiable switching unit serving one or more prefixes (NNX codes).

(2) A host/remote local switching complex is composed of an electronic analog or

digital host office and all of its remote locations. A host/remote local switching complex is treated as one local office. The current jurisdictional definition of an exchange will apply.

(3) Dial equipment minutes of use (DEM) is defined as the minutes of holding

time of the originating and terminating local switching equipment. Holding time is defined in the Glossary.

(4) The interstate allocation factor is the percentage of local switching investment

apportioned to the interstate jurisdiction.


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(5) The interstate DEM factor is the ratio of the interstate DEM to the total DEM.

A weighted interstate DEM factor is the product of multiplying a weighting factor, as defined in paragraph (f) of this section, to the interstate DEM factor. The state DEM factor is the ratio of the state DEM to the total DEM.

(b) Beginning January 1, 1993, Category 3 investment for study areas with 50,000 or more access lines is apportioned to the interstate jurisdiction on the basis of the interstate DEM factor. Category 3 investment for study areas with 50,000 or more access lines is apportioned to the state jurisdiction on the basis of the state DEM factor. (c) to (e) [Reserved] (f) Beginning January 1, 1998, for study areas with fewer than 50,000 access lines, Category 3 investment is apportioned to the interstate jurisdiction by the application of an interstate allocation factor that is the lesser of either .85 or the sum of the interstate DEM factor specified in paragraph (a)(5) of this section, and the difference between the 1996 interstate DEM factor and the 1996 interstate DEM factor multiplied by a weighting factor as determined by the table below. The Category 3 investment that is not assigned to the interstate jurisdiction pursuant to this paragraph is assigned to the state jurisdiction.


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47 C.F.R. § 36.154 Exchange Line Cable and Wire Facilities (C&WF)—Category 1—apportionment procedures.

(a) Exchange Line C&WF—Category 1. The first step in apportioning the cost of exchange line cable and wire facilities among the operations is the determination of an average cost per working loop. This average cost per working loop is determined by dividing the total cost of exchange line cable and wire Category 1 in the study area by the sum of the working loops described in subcategories listed below. The subcategories are: Subcategory 1.1—State Private Lines and State WATS Lines. This subcategory shall include all private lines and WATS lines carrying exclusively state traffic as well as private lines and WATS lines carrying both state and interstate traffic if the interstate traffic on the line involved constitutes ten percent or less of the total traffic on the line. Subcategory 1.2—Interstate private lines and interstate WATS lines. This subcategory shall include all private lines and WATS lines that carry exclusively interstate traffic as well as private lines and WATS lines carrying both state and interstate traffic if the interstate traffic on the line involved constitutes more than ten percent of the total traffic on the line. Subcategory 1.3—Subscriber or common lines that are jointly used for local exchange service and exchange access for state and interstate interexchange services. (b) The costs assigned to subcategories 1.1 and 1.2 shall be directly assigned to the appropriate jurisdiction. (c) Effective January 1, 1986, 25 percent of the costs assigned to subcategory 1.3 shall be allocated to the interstate jurisdiction. (d) to (f) [Reserved] (g) Effective July 1, 2001, through December 31, 2024, all study areas shall apportion Subcategory 1.3 Exchange Line C & WF among the jurisdictions as specified in paragraph (c) of this section. Direct assignment of subcategory


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Categories 1.1 and 1.2 Exchange Line C & WF to the jurisdictions shall be updated annually as specified in paragraph (b) of this section.


NECA-NTCA Amicus Brief9-19-19Statutory and Regulations Addendum9-19-19

Documents

IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT … · individual cost study. Cost or revenues in categories that are used exclusively for interstate or intrastate communications