Challengers Ponder 10th Circuit Rehearing Requests

"There are still some very significant remaining issues that the court did not reach,” said Scott McCullough of McCullough Henry, who represents VoIP provider Transcom. Transcom had raised at least eight specific points of error, and the court “ruled on three of them,” McCullough said. He had challenged the FCC determination that it could impose access charges on VoIP traffic supplied by non-carriers, but the court didn’t address it, he said. Parties have 45 days to make a motion for rehearing, he said. “We're presently deciding whether we will be seeking rehearing.”

It’s difficult to get en banc rehearing, but federal rules permit it when the panel got an important decision wrong that conflicts with other circuits, McCullough said. McCullough thinks the 10th Circuit decision conflicts with January’s Verizon v. FCC decision in the U.S. Court of Appeals for the D.C. Circuit. The Verizon ruling, which struck down most of the FCC’s net neutrality rules, said the agency could not impose common-carrier burdens on entities that are not common carriers. “One of the reasons that Transcom said that the FCC cannot impose exchange access on non-carrier provided VoIP service is that exchange access only applies to telephone toll, which is a telecommunications service provided by a carrier. And so if you follow the little bouncing ball -- and it really doesn’t have to bounce too many times -- you cannot impose exchange access charges on VoIP provided by a non-carrier, because when you do so you are imposing a common carrier burden on that non-carrier.” The 10th Circuit did not address the Verizon case, McCullough said.

"The decision is notable in that the 10th Circuit decided to defer to the FCC on, among other things, all questions of statutory interpretation at issue in the appeal, even on the many issues that were close calls,” said Thomas Jones of Willkie Farr, who represented tw telecom. “The Chevron standard that applies to agency interpretation of ambiguous statutory provisions is a deferential standard, so I would not say it is unusual. Under that standard, the court must uphold the agency interpretation if it is reasonable. But what is reasonable can sometimes be a fairly subjective determination."

"It’s almost inconceivable that, if the court conducted a rigorous statutory analysis, it could find that the commission was correct and the petitioners wrong on every issue and every statutory argument,” said James Falvey of Eckert Seamans, who represented petitioner Core Communications. “On a case of this breadth and importance, I would have expected a much more mixed decision: That the commission was correct on some parts of its analysis but incorrect on others.” To Falvey, a Supreme Court challenge makes more sense than a request for en banc rehearing: There is “arguably a split” with the D.C. Circuit’s Verizon holding that the FCC can’t regulate broadband as a telecom service without first reclassifying it as such. The 10th Circuit “appears to have attempted to do just that, treating broadband as a telecommunications service for USF purposes without first reclassifying it from an information service to a telecommunications service,” said Falvey.

Chevron Deference

The court gave a “tremendous amount of Chevron deference” to the agency, said Dave Bergmann, counsel for National Association of State Utility Consumer Advocates, which asked the court to review the access recovery charge intended to mitigate the effect of issues around reduced intercarrier compensation. In a “relatively unsettling ruling,” the court found that NASUCA should have filed a petition for reconsideration at the FCC, he said. NASUCA “thought we could appeal based on the fact that the D.C. [Public Service] Commission had specifically raised the issue in a petition for reconsideration,” Bergmann said. “The court, for reasons I'm not really clear about, decided that NASUCA should have filed its own petition for reconsideration. So they did not get to the substance."

What’s the practical effect for NASUCA members? “The FCC’s fundamental determination on the intercarrier compensation side -- to take intercarrier compensation down to zero, to bill and keep -- that appears pretty settled,” Bergmann said. “In NASUCA’s view, what that means is that the carriers who use other carriers’ networks are not going to be required to support the costs of those networks. So it’s all coming back to each carrier’s end users, regardless of whether there is an equality that should be appropriate for cost sharing."

A request for rehearing en banc is unlikely to be successful, said attorneys. It’s likely the full slate of judges would be “fairly deferential to the panel, just as the panel was deferential to the commission,” said an attorney who represents wireless providers and isn’t involved in the case. Given that there were parties arguing against each other on the appropriateness of the FCC’s rules, “it sure makes it seem, from the court’s perspective, that the FCC crafted a reasonable middle course,” the attorney said. The effect on wireless providers will be “minimal,” he said. “We expected this outcome and thought the real action’s going to be at the FCC.” The FCC has on its own has teed up a lot of key issues on direction of the USF support, including whether and to what extent wireless providers should participate in the Connect America Fund proceeding, what the Mobility Fund is going to be like, and the division of resources between wireline and mobile providers, he said. “All of those are already pending before the FCC,” so “it’s been apparent to us for a long time that we didn’t need a court to send a case back because the FCC already was examining the key issues."

The Voice on the Net Coalition is “disappointed that the court upheld the FCC order as it relates to VoIP blocking,” said Executive Director Glenn Richards, also a Pillsbury Winthrop communications lawyer. “However, we are pleased that the court upheld the FCC intercarrier compensation transition to bill and keep. Not surprisingly, the court deferred to the FCC’s expertise and discretion on these critical issues.”