Blanca Tel. Co. v. Fed. Commc'ns Comm'n
Decision Date | 15 March 2021 |
Docket Number | Nos. 20-9510,20-9524,s. 20-9510 |
Citation | 991 F.3d 1097 |
Parties | BLANCA TELEPHONE COMPANY, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION; United States of America, Respondents. |
Court | U.S. Court of Appeals — Tenth Circuit |
Timothy E. Welch, Hill and Welch, Silver Springs, Maryland, for Petitioner.
Scott Noveck, Counsel (Thomas M. Johnson, Jr., General Counsel, Ashley S. Boizelle, Deputy General Counsel, Richard K. Welch, Deputy Associate General Counsel, Federal Communications Commission, and Makan Delrahim, Assistant Attorney General, Michael F. Murray, Deputy Assistant Attorney General, and Robert B. Nicholson and Adam D. Chandler, Attorneys, United States Department of Justice, with him on the brief), Federal Communications Commission, Washington, D.C., for Respondents.
Before TYMKOVICH, Chief Judge, BRISCOE, and BACHARACH, Circuit Judges.
Blanca Telephone Company is a rural telecommunications carrier based in Alamosa, Colorado. Its business ensures its customers have access to a basic level of telephone services in rural Colorado. To make this business profitable, Blanca must rely in part upon subsidies from the Universal Service Fund (USF), a source of financial support governed by federal law and funded through fees on telephone customers. And in order to receive subsidies from the USF, Blanca must abide by a complex set of rules governing telecommunications carriers.
The Federal Communications Commission1 administers and enforces the rules governing distribution of USF support. Through an investigation begun in 2008 by the FCC's Office of Inspector General into Blanca's accounting practices, the FCC identified overpayments Blanca had received from the USF between 2005 and 2010. According to the FCC, Blanca improperly claimed roughly $6.75 million in USF support during this period for expenses related to providing mobile cellular services both within and outside Blanca's designated service area. As we describe in more detail below, Blanca was entitled only to support for "plain old telephone service," namely land lines, and not for mobile telephone services. Following the investigation, the FCC issued a demand letter to Blanca seeking repayment. The agency eventually used administrative offsets of payments owed to Blanca for new subsidies to begin collection of the debt.
Blanca objected to the FCC's demand letter and sought agency review of the debt collection determination. During agency proceedings, the FCC considered and rejected Blanca's objections. Now, in its petition for review before this court, Blanca challenges the FCC's demand letter and subsequent orders on a number of grounds. Blanca claims the FCC's decision should be set aside for three reasons: (1) it was barred by the relevant statute of limitations, (2) it violated due process, and (3) it was arbitrary and capricious.
On review of the agency's record, we AFFIRM the FCC's decision. We conclude the FCC's debt collection was not barred by any statute of limitations, Blanca was apprised of the relevant law and afforded adequate opportunity to respond to the FCC's decision, and the FCC was not arbitrary and capricious in its justifications for the debt collection.
In this appeal we must decide whether Blanca, a local exchange carrier (LEC) under federal law, could receive USF support for costs associated with providing mobile telephone services.2 In order to proceed, we first describe the laws governing Blanca as of 2005.
Blanca and other telecommunications carriers are governed by a vast regulatory scheme. As telecommunications technology has become more advanced and complex, the laws and regulations governing such technology have tried to keep pace. And as the country's population has shifted geographically, with many trading rural for urban living, the laws and regulations have tried to account for these demographic changes as well.
Throughout the latter-half of the twentieth century, it became less economically feasible for traditional phone companies to provide services to rural customers. Faced with rugged terrain across open expanses, telecommunications carriers were wary to invest in and maintain expensive infrastructure. And given the sparse populations of many of these areas, the limited economies of scale also weighed against such investments.
The Telecommunications Act of 1996 was passed to address this shortage of quality telecommunications services in rural parts of the country. 47 U.S.C. § 254(b)(3) (). The Act sought to ensure that "universal service" was available to customers, regardless of where they lived. Id. Under the Act, Congress intended to incentivize carriers to serve rural customers by providing subsidies from the USF for services provided and infrastructure built in such high-cost areas. See generally WWC Holding Co., Inc. v. Sopkin , 488 F.3d 1262, 1267 (10th Cir. 2007) ( ).
The USF is overseen by the FCC and administered by two private organizations. It is funded by mandatory contributions from carriers. 47 U.S.C. § 254(d) ; 47 C.F.R. § 54.706(a). The FCC sets the rules for distributing the funds. 47 U.S.C. § 254(k). The Universal Service Administrative Company (USAC) is an independent, non-profit corporation that is responsible for establishing the procedures for monitoring and distributing funds. See generally United States ex rel. Shupe v. Cisco Sys., Inc. , 759 F.3d 379, 381 (5th Cir. 2014) ( ). USAC is also responsible for auditing carriers and providing reports to the FCC. 47 C.F.R. §§ 54.707(a), (c). The National Exchange Carriers Association (NECA) is a membership organization of telecommunications carriers that collects and audits accounting reports from carriers. See generally Farmers Tel. Co., Inc. v. FCC , 184 F.3d 1241, 1246–45 (10th Cir. 1999) ( ). USAC can obtain any reports submitted to NECA. 47 C.F.R. § 54.707(b).
As of 2005, USF funds could be distributed to eligible telecommunications carriers (ETCs) for certain types of expenses. See 47 U.S.C. § 254(e) (2002). States were given the authority to designate which carriers qualified as ETCs. 47 U.S.C. § 214(e)(2) (1997). And states also designated a service area for each carrier. Id. at § 214(e)(5).3 The service area was used to determine a carrier's universal service obligations and support. Id.
Within each service area, a state could designate one eligible carrier as the incumbent LEC. 47 C.F.R. § 51.5 (2005) ; see also 47 U.S.C. § 153(26) (1997) ( ). Other carriers designated as ETCs by the state, but allowed to operate in an incumbent's service area, were considered competitive ETCs. Id. at § 54.5 (2005).
Congress did not intend for the USF to act as an unrestricted fund for eligible carriers to be distributed for any conceivable expense incurred while providing telecommunications services. Rather, "[a] carrier that receives such support shall use that support only for the provision, maintenance, and upgrading of facilities and services for which the support is intended." 47 U.S.C. § 254(e) (2002). For instance, "[a] telecommunications carrier may not use services that are not competitive to subsidize services that are subject to competition." Id. at § 254(k) ; see also 47 C.F.R. § 64.901(c) (2002) ( ). To ensure USF support was only used for its intended purposes, the FCC implemented accounting rules for the various types of eligible carriers. 47 U.S.C. § 254(k) (2002) ().
The FCC implemented one set of accounting rules for incumbent LECs. Under these rules, incumbent carriers had to differentiate between expenses related to regulated and unregulated activities in their accounting. See 47 C.F.R. § 32.14 (2002). Regulated accounts would include expenses incurred for providing services to which a tariff filing requirement applied. Id. at § 32.14(a). And nonregulated accounts were for "[p]reemptively deregulated activities and activities ... never subject to regulation." Id. at § 32.23(a) (1999). When an expense involved both regulated and nonregulated activities, the carrier still had to allocate the costs attributable to each for accounting purposes. Id. at § 32.23(c); see also id. at § 64.901(a) ( ). The incumbent carrier's expenses were then reported to NECA, detailing what services it provided. Id. at § 36.611 (2001); id. at § 69.601(c) (1995) ( ); see also In re Jurisdictional Separations and Referral to the Federal-State Joint Bd. , 16 FCC Rcd. 11382, 11384–85 (2001) ( ). From the outset, the FCC made clear that these "cost allocation rules are designed to prevent cross-subsidization of non-regulated...
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