U.S. Telecom Ass'n v. F.C.C.

• Citation: 295 F.3d 1326
• Decision Date: 16 July 2002
• Docket Number: No. 01-1085.,01-1085.
• Parties: UNITED STATES TELECOM ASSOCIATION, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents. State of Iowa, et al., Intervenors.
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

Page 1326

295 F.3d 1326

UNITED STATES TELECOM ASSOCIATION, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents State of Iowa, et al., Intervenors.

No. 01-1085.

United States Court of Appeals, District of Columbia Circuit.

Argued March 12, 2002.

Decided July 16, 2002.

On Petition for Review of an Order of the Federal Communications Commission.

William F. Maher Jr. argued the cause for petitioner. With him on the briefs were Lawrence E. Sarjeant, Linda Kent, John W. Hunter, Julie E. Rones, and Stephen Goodman.

James M. Carr, Counsel, Federal Communications Commission, argued the cause for respondents. With him on the briefs were John A. Rogovin, Deputy General Counsel, and John E. Ingle, Deputy Associate General Counsel.

Michael D. Hays argued the cause for intervenors State of Iowa and Iowa Telecommunications and Technology Commission. With him on the briefs were J.G. Harrington and Kenneth D. Salomon.

Before: GINSBURG, Chief Judge, ROGERS and GARLAND, Circuit Judges.

Opinion for the Court filed by Circuit Judge GARLAND.

GARLAND, Circuit Judge:

The United States Telecom Association (USTA) challenges a Federal Communications Commission (FCC) order finding that the Iowa Communications Network (ICN) is a common carrier. The order makes ICN eligible to receive federal subsidies for providing discounted telecommunications services under the Telecommunications Act of 1996, 47 U.S.C. § 254(h)(1). We first consider whether USTA has standing to bring this suit, and then whether the FCC reasonably classified ICN as a common carrier. We answer both questions in the affirmative and uphold the FCC's order.

I

ICN was established by the Iowa legislature to provide subsidized high-speed telecommunications services throughout Iowa, especially in areas inadequately covered by local exchange carriers. The governing statute bars ICN from offering services to individuals and to most private businesses. Iowa Code § 8D.11(2) (2001). Instead, ICN's customers are "public and private agencies." Under the statute, "public agency" means: "a state agency, an institution under the control of the board of regents, the judicial branch ..., a school corporation, a city library, a regional library ..., a county library ...[,] a judicial district department of correctional services ..., an agency of the federal government, or a United States post office which receives a federal grant for pilot and demonstration projects." Id. § 8D.2(5). A "private agency" is: "an accredited nonpublic school, a nonprofit institution of higher education eligible for tuition grants, or a [licensed] hospital ... or a physician clinic [for specified services]." Id. § 8D.2(4).¹

Section 254(h)(1) of the Telecommunications Act of 1996 requires a "telecommunications carrier" to provide services at discounted rates to schools, libraries, and rural health care providers. 47 U.S.C. § 254(h)(1). Such a carrier is entitled to receive from the FCC, in an amount equal to the aggregate discount it gives to those entities, either a reimbursement or an offset against the carrier's obligation to participate in or contribute to the universal service fund. Id. The Act defines a "telecommunications carrier" as "any provider of telecommunications services," id. § 153(44), and defines "telecommunications service" as "the offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used," id. § 153(46).

In 1998, ICN petitioned the FCC for a declaration that it qualifies as a "telecommunications carrier" under the Act, and hence is eligible to receive direct reimbursement for providing services at discounted rates. In 1999, citing its decision in an earlier case, the Commission held that the term "telecommunications carrier" includes only carriers that offer telecommunications on a "common carrier" basis. Federal-State Joint Bd. on Universal Serv., Declaratory Ruling, 14 F.C.C.R. 3040, 3040, 1999 WL 76932 (1999) [hereinafter 1999 Declaratory Ruling] (citing Federal-State Joint Bd. on Universal Serv., Report & Order, 12 F.C.C.R. 8776, 9177-78, 1997 WL 236383 (1997)). To define "common carrier," the FCC turned to the two-pronged test it had previously applied under the Communications Act of 1934, 47 U.S.C. §§ 151 et seq., a test derived from the common law as interpreted in this circuit's case law. Under that test, common carrier status turns on:

(1) whether the carrier "holds himself out to serve indifferently all potential users"; and (2) whether the carrier allows "customers to transmit intelligence of their own design and choosing."²

The FCC ruled that ICN fails to satisfy the first prong because the network does not hold itself out to serve all potential users, but rather is limited by Iowa law to a select clientele. 1999 Declaratory Ruling, 14 F.C.C.R. at 3050-51.³ The Commission did not reach the second prong of the test.

In Iowa v. FCC, 218 F.3d 756 (D.C.Cir. 2000), this court granted Iowa's petition for review and remanded the case to the Commission for further consideration. We held that the FCC had failed to consider Iowa's argument that ICN qualifies as a common carrier, even though its user base is legally restricted, because it offers service to all users that it is authorized by law to serve. See id. at 757. We pointed out that two cases that had considered the meaning of "common carrier" under the Communications Act of 1934 — FCC v. Midwest Video Corp., 440 U.S. 689, 99 S.Ct. 1435, 59 L.Ed.2d 692 (1979), and National Ass'n of Regulatory Util. Comm'rs v. FCC, 525 F.2d 630 (D.C.Cir. 1976) ("NARUC I") — "can be read as approving the general rule that a carrier offering its services only to a legally defined class of users may still be a common carrier if it holds itself out indiscriminately to serve all within that class." Iowa, 218 F.3d at 759. Although we made clear that we were "not suggesting that Midwest Video or NARUC ... require[s] a decision in Iowa's favor," we held that "the Commission's failure to address Iowa's argument requires that we remand this matter for the Commission's further consideration." Id.

On remand, the FCC reversed its 1999 ruling. The Commission held that ICN is a common carrier, and hence a telecommunications carrier for purposes of § 254(h)(1). In so holding, the Commission concluded that "a carrier offering its services only to a legally defined class of users may still be a common carrier if it holds itself out indiscriminately to serve all within that class." Federal-State Joint Bd. on Universal Serv., Order on Remand, 16 F.C.C.R. 571, 573, 2000 WL 1869492 (2000) [hereinafter 2000 Order]. Finding that ICN does not discriminate among entities within its legally defined user classes, the FCC held that ICN passes the first prong of the common carrier test. See id. at 574-75. It also found ICN to satisfy the second prong, because it "allows customers to transmit intelligence of their own design and choosing." Id. at 575. The Commission therefore declared ICN "eligible to receive direct reimbursement for discounted telecommunications services provided to schools and libraries." Id. at 577.

USTA petitions for review of the Commission's order, contending that ICN fails both prongs of the common carrier test. We discuss those contentions in Part III below. In Part II, we first consider whether USTA has standing to bring this case.

II

USTA is a trade association representing local exchange carriers. Its members provide voice, data, and video services over wireline and wireless networks throughout the United States. Although the initial briefs of the FCC and intervenor State of Iowa did not dispute USTA's standing, we have an independent obligation to assure ourselves that the petitioner has constitutional standing to bring this challenge to the FCC's decision. See Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94-95, 118 S.Ct. 1003, 1012-13, 140 L.Ed.2d 210 (1998); Liquid Carbonic Indus. Corp. v. FERC, 29 F.3d 697, 701 (D.C.Cir.1994). Accordingly, we directed the parties to submit supplemental briefs on the issue, and, at oral argument, gave USTA a further opportunity to submit affidavits in support of its position. Thereafter, USTA submitted three affidavits, two from individual USTA members and one from the association itself. We have reviewed those affidavits and are satisfied that USTA has made the requisite showing.

As a trade association, USTA has standing to sue on behalf of its members if "its members would otherwise have standing to sue in their own right, the interests it seeks to protect are germane to the organization's purpose, and neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit." Fund Democracy, LLC v. SEC, 278 F.3d 21, 25 (D.C.Cir. 2002) (citing Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 181, 120 S.Ct. 693, 704, 145 L.Ed.2d 610 (2000)). There is no question that USTA satisfies the latter two conditions; the only question is whether USTA members meet the constitutional requirements for suit in their own right. Those "irreducible constitutional minimum" requirements are:

(1) that the plaintiff have suffered an "injury in fact" — an invasion of a judicially cognizable interest which is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) that there be a causal connection between the injury and the conduct complained of — the injury must be fairly traceable to the challenged action of the defendant, and not the result of the independent action of some third party not before the court; and (3) that it be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.

Bennett v. Spear, 520 U.S. 154, 167, 117 S.Ct. 1154, 1163, 137 L.Ed.2d 281 (1997).

USTA contends that the...