D.C. Circuit Panel Questions Standard of Review in LTD RDOF Challenge

The FCC "applied a heightened and skeptical standard of review to LTD Broadband's long-form application that violates its rules and deprived rural Americans of internet access," said Michael Showalter, an attorney for the ISP. Judge Justin Walker questioned whether the FCC can review the completeness of an application but not the quality of the submitted content. "If that's the case, why even have the information submitted if the [Wireline] Bureau is not permitted to review it?" Walker asked.

The FCC "has to be a prudent guardian of the Universal Service Fund, and it was not going to give $1 billion in universal service subsidies to a small company to build, operate and manage a 10-state broadband network without checking that company's technical and financial qualifications," said commission attorney Maureen Flood. "This scope, scale and size review is a fiction."

Flood noted, "Here, what happened was the commission staff looked at the information that LTD filed with this long-form application and reasonably determined that LTD had failed to demonstrate that it could scale up." When Walker asked what happened to the 367,000 residences and businesses across 10 states that LTD's winning bids covered, Flood said those locations are now eligible for other state and federal broadband support. "The commission isn't required to give a billion dollars to a company on the hope that it will be technically and financially qualified to provide the services that it's committed to provide," she said.

Walker also pressed Showalter on what the FCC should do if audited financial statements suggest a company is unable to meet its obligations despite having a letter of credit commitment. Judge Neomi Rao questioned whether LTD was challenging the FCC's factual determinations or suggesting there wasn't substantial evidence for them. Showalter said LTD's challenge is "independent of the substance of our long-form application." Instead, its focus is on the standard of review placed on LTD's application. "You're not arguing that the FCC lacks substantial evidence for its factual findings," Rao said.

"I'm not sure that I understand this argument that the FCC applied a heightened standard," she added. Showalter cited the FCC's denial of LTD's petition for reconsideration of its long-form application, noting the commission said in the order that it applied additional scrutiny. Rao questioned whether the commission was "trying to determine whether LTD is reasonably capable" of meeting its obligations. "Part of the inquiry about whether it's reasonably capable of meeting these obligations is, in part, related to its size," Rao said. The FCC "is required to protect the public interest" and must "be careful that it's giving it to a vendor that can do what it says it will do," she said.

Walker questioned Showalter on why there was an "awfully powerful" dissent in the commission's denial of Starlink's long-form application and not LTD's. The commission denied both companies' long-form applications in 2022 (see 2208100050). Showalter noted the standard of review applied in Starlink's case was the same as the one applied to LTD's application. "I can't think of a likely reason why [commissioners] would have said what they said in the Starlink case and not said it here," Walker said.

"The question before the court is, did we apply the wrong standard of review?" Flood said, and to remand the decision, "you would have to find that we applied the wrong standard." Flood emphasized that LTD "is not technically and financially qualified for universal service support" under "even the most deferential standard of review."