Texas Office of Pub. Util. Counsel v. FCC

Decision Date30 July 1999
Docket NumberNo. 97-60421,97-60421
Citation183 F.3d 393
Parties(5th Cir. 1999) TEXAS OFFICE OF PUBLIC UTILITY COUNSEL; CELPAGE, INC.; SOUTHWESTERN BELL TELEPHONE COMPANY; GTE MIDWEST, INC.; LOUISIANA PUBLIC SERVICE COMMISSION, an Executive Branch Department of the State of Louisiana; COMSAT CORPORATION; PEOPLE OF THE STATE OF CALIFORNIA; PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA; IOWA UTILITIES BOARD; SOUTH DAKOTA PUBLIC UTILITIES COMMISSION; PENNSYLVANIA PUBLIC UTILITY COMMISSION; BELL ATLANTIC TELEPHONE COMPANIES; VERMONT DEPARTMENT OF PUBLIC SERVICE; GTE SERVICE CORPORATION; GTE ALASKA INCORPORATED; GTE ARKANSAS INCORPORATED; GTE CALIFORNIA INCORPORATED; GTE FLORIDA INCORPORATED; GTE SOUTH INCORPORATED; GTE SOUTHWEST INCORPORATED; GTE NORTH INCORPORATED; GTE NORTHWEST INCORPORATED; GTE HAWAIIAN TELEPHONE COMPANY INCORPORATED; GTE WEST COAST INCORPORATED; CONTEL OF CALIFORNIA, INC.; CONTEL OF MINNESOTA, INC.; CONTEL OF THE SOUTH, INC.; PUBLIC SERVICE COMMISSION OF NEVADA; CINCINNATI BELL TELEPHONE COMPANY; FLORIDA PUBLIC SERVICE COMMISSION; PEOPLE OF THE STATE OF NEW YORK; PUBLIC SERVICE COMMISSION OF THE STATE OF NEW YORK; and THE STATE CORPORATION COMMISSION OF THE STATE OF KANSAS, Petitioners, v. FEDERAL COMMUNICATIONS COMMISSION and UNITED STATES OF AMERICA, Respondents
CourtU.S. Court of Appeals — Fifth Circuit

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] Petitions for Review of a Final Order of the Federal Communications Commission

Before SMITH, DUHE, and EMILIO M. GARZA, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

This is a consolidated challenge to the most recent attempt of the Federal Communications Commission ("FCC") to implement provisions of the landmark 1996 Telecommunications Act (the "Act").1 Petitioners, joined by numerous intervenors, challenge several aspects of the FCC's Universal Service Order (the "Order") implementing the provisions of the Act codified at 47 U.S.C. § 254. We grant the petition for review in part, deny it in part, affirm in part, reverse in part, and remand in part.

I. Background.
A. The 1996 Act and the Universal Service Order.

Beginning with the passage of the Communications Act of 1934 (the "1934 Act"), Congress has made universal service a basic goal of telecommunications regulation. As Section 1 of the 1934 Act stated, the FCC was created

[f]or the purpose of regulating interstate and foreign commerce in communication by wire and radio so as to make available, so far as possible, to all the people of the United States, without discrimination on the basis of race, color, religion, national origin, or sex, a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges . . . .

47 U.S.C. § 151 (as amended).

Armed with this statutory mandate, the FCC historically has focused on increasing the availability of reasonably priced, basic telephone service via the landline telecommunications network.2 Rather than relying on market forces alone, the agency has used a combination of implicit and explicit subsidies to achieve its goal of greater telephone subscribership. Explicit subsidies provide carriers or individuals with specific grants that can be used to pay for or reduce the charges for telephone service. This form of subsidy includes using revenues from line charges on end-users to subsidize high-cost service directly and to support the Lifeline Assistance program for low-income subscribers.

Implicit subsidies are more complicated and involve the manipulation of rates for some customers to subsidize more affordable rates for others. For example, the regulators may require the carrier to charge "above-cost" rates to low-cost, profitable urban customers to offer the "below-cost" rates to expensive, unprofitable rural customers.

For obvious reasons, this system of implicit subsidies can work well only under regulated conditions. In a competitive environment, a carrier that tries to subsidize below-cost rates to rural customers with above-cost rates to urban customers is vulnerable to a competitor that offers at-cost rates to urban customers. Because opening local telephone markets to competition is a principal objective of the Act, Congress recognized that the universal service system of implicit subsidies would have to be re-examined.

To attain the goal of local competition while preserving universal service, Congress directed the FCC to replace the patchwork of explicit and implicit subsidies with "specific, predictable and sufficient Federal and State mechanisms to preserve and advance universal service." 47 U.S.C. § 254(b)(5). Congress also specified new universal service support for schools, libraries, and rural health care providers. See 47 U.S.C. § 254(h). It then directed the FCC to define such a system and to establish a timetable for implementation within fifteen months of the passage of the Act.

The Federal-State Joint Board (the "Joint Board"), created by the Act to coordinate federal and state regulatory interests, issued two recommendations on how to implement the universal service provisions.3 The FCC met the statutory deadline when it issued the Order on May 8, 1997.4 Since that time, the agency has issued seven reconsideration orders (the last one on May 28, 1999) and has made two reports to Congress regarding the Order.

The FCC designated a set of core services eligible for universal service support, proposed a mechanism for supporting those services, and established a timetable for implementation. See Order ¶¶ 21-42. Pursuant to the Act, the agency developed rules for modifying the existing system of support for high-cost service areas and created new support programs for schools, libraries, and health care facilities.

1. High-cost Support.

The FCC's plans for changing the high-cost support system required it to resolve a number of complicated issues, including (1) what methodology to use for calculating high-cost support; (2) how to allocate costs between the states and the federal government; (3) which carriers should be required to contribute to the support system; and (4) when to implement the high-cost support program. The agency resolved the question of how to calculate the proper amount of high-cost support by accepting the Joint Board's second recommendation to identify areas where the forward-looking cost of service exceeds a cost-based benchmark and to provide extra support to any state that cannot maintain reasonable comparability.5 See Second Recommended Decision ¶ 19; Seventh Report and Order ¶ 61 n.157.

Most importantly, the FCC decided to use the "forward-looking" costs to calculate the relevant costs of a carrier serving a given geographical area. In other words, to encourage carriers to act efficiently, the agency would base its calculation on the costs an efficient carrier would incur (rather than the costs the incumbent carriers historically have incurred).6

The FCC developed rules for determining which carriers should be required to contribute to the interstate universal service support system and how their contributions should be calculated. It decided to require all telecommunications carriers and certain non-telecommunications carriers to contribute in proportion to their share of end-user telecommunications revenues. See Order ¶¶ 39-42. The agency determined that to reduce the burden on individual carriers' prices, the carriers' contribution base should be as broad as possible. See Order ¶ 783. Therefore, the agency required contributing carriers to include their international telecommunications revenues in their contribution base and rejected claims by certain carriers,7 which do not receive direct subsidies from the support program, seeking an exemption from making any contributions. See Order ¶ 805.

Finally, the FCC adopted a timetable for implementing its high-cost support plan. Because it has not yet developed an accurate assessment of forward-looking costs, it delayed implementation of its support program for non-rural carriers until January 1, 2000.8 Additionally, because the agency believes it will take even longer to develop accurate forward-looking cost models for rural carriers, it delayed the implementation of its new support plan for rural carriers to "no sooner than January 1, 2001." See Order ¶ 204.

During this delay in implementation, the FCC decided that carriers will continue to receive support at the levels generated by existing universal support programs. According to the agency, this gradual, phased-in plan for implementing its new high-cost support system meets the Act's requirement of a "specific timetable for completion." See 47 U.S.C. § 254(a)(2).

2. Schools and Libraries.

Pursuant to § 254(h), the FCC adopted rules implementing new programs for schools, libraries, and health care facilities, in particular by providing universal service support for internet access and internal connections in schools and libraries. See Order ¶ 436. The agency decided that any entity, including non-telecommunications carriers, that provides internet access or internal connections to schools and libraries will receive universal service support. See Order ¶ 594.

To fund the new § 254(h) programs, the FCC accepted the Joint Board's recommendation to assess the interstate and intrastate revenues of providers of interstate telecommunications service. See Order ¶ 808. Because many states do not already have similar support programs for schools and libraries, the agency justified its inclusion of intrastate revenues as necessary to ensure adequate funding for § 254(h) programs.

B. Challenges to the Order.

On September...

To continue reading

Request your trial
113 cases
  • Texas v. Becerra
    • United States
    • U.S. District Court — Northern District of Texas
    • December 31, 2021
    ...Interests"[S]tates have a sovereign interest in ‘the power to create and enforce a legal code.’ " Tex. Off. of Pub. Util. Couns. v. FCC , 183 F.3d 393, 449 (5th Cir. 1999) (quoting Alfred L. Snapp & Son, Inc. v. Puerto Rico ex rel. Barez , 458 U.S. 592, 601, 102 S.Ct. 3260, 73 L.Ed.2d 995 (......
  • Industrial Consumers Group v. Corp. Com'n, 96,228.
    • United States
    • Kansas Court of Appeals
    • July 7, 2006
    ...especially reluctant to apply the doctrine when defining the authority of a regulatory agency. See Texas Office of Public Utility Counsel v. F.C.C., 183 F.3d 393, 443-44 (5th Cir.1999) ("[T]he combination of the FCC's `necessary and proper' authority under [47 U.S.C.] § 154(i) and the limit......
  • Bell Atlantic Mobile, Inc. v. Dept. of Public Utility Control, (SC 16147)
    • United States
    • Connecticut Supreme Court
    • June 13, 2000
    ...commercial mobile radio service participation in state universal service programs. See Texas Office of Public Utility Counsel v. Federal Communications Commission, 183 F.3d 393, 431 (5th Cir. 1999), cert. denied sub nom. Celpage, Inc. v. Federal Communications Commission, United States Supr......
  • In Re Universal Service Fund Telephone Billing Practice Litigation. Class
    • United States
    • U.S. Court of Appeals — Tenth Circuit
    • September 20, 2010
    ...retain the flexibility to structure their recovery of the costs of universal service in many ways”); cf. Tex. Office of Pub. Util. Counsel v. FCC, 183 F.3d 393, 427 (5th Cir.1999) (finding, in dicta, that universal service contributions are not a tax) (citing Rural Tel. Coal. v. FCC, 838 F.......
  • Request a trial to view additional results
5 books & journal articles
  • Beyond Chevron's Domain: Agency Interpretations of Statutory Procedural Provisions
    • United States
    • Seattle University School of Law Seattle University Law Review No. 30-03, March 2007
    • Invalid date
    ...analysis and State Farm arbitrary and capricious review overlap, but are not identical"); Tex. Office of Pub. Util. Counsel v. FCC, 183 F.3d 393, 410 (5th Cir. 1999) ('"Arbitrary and capricious' review under the APA differs from Chevron step-two review, because it focuses on the reasonabili......
  • State sovereign standing: often overlooked, but not forgotten.
    • United States
    • Stanford Law Review Vol. 64 No. 1, January 2012
    • January 1, 2012
    ...added). (113.) Alaska v. U.S. Dep't of Transp., 868 F.2d 441, 444 (D.C. Cir. 1989). (114.) Tex. Office of Pub. Util. Counsel v. FCC, 183 F.3d 393, 449 (5th Cir. 1999) ("[S]tates have a sovereign interest in 'the power to create and enforce a legal code.'" (quoting Alfred L. Snapp & Son,......
  • THE MINOR QUESTIONS DOCTRINE.
    • United States
    • University of Pennsylvania Law Review Vol. 169 No. 4, March 2021
    • March 1, 2021
    ...but still change their mind by "diverting resources away from other priorities"). (202) See, e.g., Tex. Off. of Pub. Util. Counsel v. FCC, 183 F.3d 393,447 (5th Cir. 1999) ("[U]nder Chevron step-two, we usually give the agency deference in its interpretation of ambiguous statutory (203) Ind......
  • Verizon Communications, Inc. V. FCC - telecommunications access pricing and regulator accountability through administrative law and takings jurisprudence.
    • United States
    • Federal Communications Law Journal Vol. 56 No. 3, May 2004
    • May 1, 2004
    ...Tpk. Rd. Co. v. Sanford, 164 U.S. 578, 597 (1896). (94.) 320 U.S. 591, 602 (1944). (95.) Id. at 605. (96.) 488 U.S. 299, 315 (1989). (97.) 183 F.3d 393 (5th Cir. 1999), cert. granted sub nom. GTE Serv. Corp. v. FCC, 530 U.S. 1213, cert. denied 531 U.S. 975 (98.) The ILEC relied on Brooks-Sc......
  • Request a trial to view additional results
2 provisions
  • Pennsylvania Bulletin, Vol 49, No. 35. August 31, 2019
    • United States
    • Pennsylvania Register
    • Invalid date
    ...traffic, and they have been as- 62 Texas Office of Public Utility Counsel, Pennsylvania Public Utility Commission et al. v. FCC, 183 F.3d 393 (5th Cir. Ill. Pub. Telcoms. Ass’n v. FCC, 410 U.S. App. D.C. 69, 752 F.3d 1018 (2014), cert. denied 135 S. Ct. 1583 (2015). 64 See e.g., AT&T Corpor......
  • Pennsylvania Bulletin, Vol 49, No. 09. March 2, 2019
    • United States
    • Pennsylvania Register
    • Invalid date
    ...similar jurisdictionally-mixed telecommunications services. Under 10 See, e.g., Texas Office of Public Utility Counsel, et al v. F.C.C., 183 F.3d 393 (5 1999), at 409, 447. See also AT&T v. Eachus, 174 F.Supp.2d 1119 (D. Or. 2001). 934 STATEMENTS OF POLICY PENNSYLVANIA BULLETIN, VOL. 49, NO......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT