Petitioner Hopes DC Circuit Case Spurs FCC to Clarify Intrastate Rate Role

Judge Stephen Williams, who also sat on the net neutrality case, probed petitioners Friday on whether it isn't already a matter of state law choice for states to adjust rates at the intrastate level. FCC attorney Matthew Dunne said the Irregulators could petition for a declaratory ruling. He said if the regulatory freeze were vacated or allowed to lapse, that in itself wouldn't rewrite the rules.

Petitioners are prepared to lose the case on its merits as long as the FCC clearly spells out that states are free to determine their own intrastate price formulas, said Irregulators counsel Scott McCollough. Williams identified an issue in the case as agency delay. He said courts are reluctant to step in to force the commission to move more quickly and to reassign resources and personnel to do so. When Williams framed the challenge as the FCC wanting to draft reform "holistically" in conjunction with other changes, Dunne answered, "That's correct."

Despite the nearly two decades of regulatory freeze at the FCC, the agency has never said outright that states are free from federal pre-emption, said McCollough. "How can you say the FCC has completely withdrawn if you're hanging onto the rules?" Petitioners didn't prove standing, Dunne later argued during his allotted time. Williams asked whether standing could be shown if the oral argument moved the FCC to address the changes the petitioner seeks. "I'm not sure this would move the ball," Dunne said, saying a continued regulatory freeze would make it easier for all parties while the agency sorts out difficult matters: "The freeze isn't the reason reform is not happening." Intrastate cost regulation is just part of a larger docket on telecom reform, the government attorney said, noting "it's been frustrating for all parties."

After Dunne completed argument on behalf of the FCC, Williams asked McCollough if his assessments had been helpful. The petitioner answered, "You got a lot closer than we have."

If the court rules for the Irregulators, consumer prices should be cut, McCollough said. He acknowledged it could add a regulatory process burden for carriers: "We don't deny that. The question is whether the benefits outweigh the burdens."

Irregulators won't seek a declaratory ruling as Dunne suggested but will wait for a ruling, McCullough told reporters. He's hopeful the court recognizes the implications of a continued regulatory freeze, and is hopeful it will rule for the petitioner. If not, and the matter is remanded, "the FCC really has to solve that problem," he said. Otherwise, wireline customers will continue to subsidize wireless and broadband services, he said. Asked if that really harms consumers when many subscribe to multiple telecom services, he answered, "I get the left pocket/right pocket argument, but the problem is, everybody's pockets are different." He doesn't think his aunt, who has plain-old-telephone-service but no wireless or broadband, should subsidize other services. He told us rural price cap carriers will likely ask the FCC to raise their interstate rates if states reduce prices for local phone service.

If the court finds the FCC adequately answered its questions Friday, it could rule "expeditiously" in its favor, McCollough told us. The regulator didn't comment.

Though the rules are "arcane," New Networks Executive Director and Irregulator Bruce Kushnick told us the case is important. States say they're following the FCC rules until there's certainty, he noted. If McCollough prevails, Kushnick said, it could stop operators from cross-subsidizing wireless tower building with revenue from local phone services (see 1910030038): "If we fixed this, there could be billions of dollars freed up to upgrade to fiber."