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

Decision Date11 March 2005
Docket NumberNo. 03-1414.,03-1414.
Citation400 F.3d 29
PartiesUNITED STATES TELECOM ASSOCIATION and CENTURYTEL, INC., Petitioners v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents Cellular Telecommunications & Internet Association, et al., Intervenors
CourtU.S. Court of Appeals — District of Columbia Circuit

Aaron M. Panner argued the cause for petitioners. With him on the briefs were Michael K. Kellogg, David E. Frulla, Andrew D. Herman, L. Marie Guillory, Jill Canfield, and Michael T. McMenamin.

Gregory W. Whiteaker, Michael R. Bennet, and Rebecca L. Murphy were on the brief for intervenors Central Texas Telephone Cooperative, Inc., et al. in support of petitioners.

Ivan C. Evilsizer was on the brief for amicus curiae Hot Springs Telephone Co. in support of petitioners.

Joel Marcus, Counsel, Federal Communications Commission, argued the cause for respondents. With him on the brief were R. Hewitt Pate, Assistant Attorney General, U.S. Department of Justice, Catherine G. O'Sullivan and Andrea Limmer, Attorneys, John A. Rogovin, General Counsel, Federal Communications Commission, Richard K. Welch, Associate General Counsel, John E. Ingle, Deputy Associate General Counsel, and Rodger D. Citron, Counsel.

Theodore C. Whitehouse, David M. Don, John J. LoCurto, Luisa L. Lancetti, Charles W. McKee, Michael F. Altschul, Robert J. Aamoth, and Todd D. Daubert were on the brief for intervenors Cellular Telecommunications & Internet Association, et al. in support of respondents.

Before: SENTELLE, RANDOLPH, and GARLAND, Circuit Judges.

GARLAND, Circuit Judge.

The petitioners in these consolidated petitions for review challenge an order of the Federal Communications Commission (FCC) that sets forth the conditions under which wireline telecommunications carriers must transfer telephone numbers to wireless carriers. The petitioners argue that the FCC's order is a legislative rule that requires notice and comment under the Administrative Procedure Act (APA), 5 U.S.C. § 553, and a regulatory flexibility analysis under the Regulatory Flexibility Act (RFA), 5 U.S.C. § 604. The FCC contends that its order is an interpretative rule — a rule that merely interprets one of the FCC's previous legislative rules — and hence is exempt from APA and RFA requirements.

We conclude that the order is a legislative rule because it constitutes a substantive change in a prior rule. Although this rendered the order subject to the APA's notice-and-comment requirements, we find that the FCC effectively complied with those requirements (notwithstanding its view that it was not required to do so), and that any deviations were at most harmless error. There is no dispute, however, that the FCC failed to comply with the RFA's requirement to prepare a final regulatory flexibility analysis regarding the order's impact on small entities.

In light of these conclusions, we grant the petitions in part and deny them in part, remanding the order to the FCC to prepare a final regulatory flexibility analysis. Until that analysis is complete, we stay the effect of the order solely as it applies to those carriers that qualify as small entities under the RFA.


The Telecommunications Act of 1996 imposes numerous duties on local exchange carriers (LECs), which, for purposes of this case, are wireline carriers — companies that provide telephone service over telephone wires. See 47 U.S.C. § 153(26) (defining LECs); see also FCC Br. at 2. The duty at issue here is the obligation "to provide, to the extent technically feasible number portability in accordance with requirements prescribed by the Commission." 47 U.S.C. § 251(b)(2). The Act defines "number portability" as "the ability of users of telecommunications services to retain, at the same location, existing telecommunications numbers without impairment of quality, reliability, or convenience when switching from one telecommunications carrier to another." Id. § 153(30). The Act further directs the FCC "to establish regulations to implement" the statutory requirements. Id. § 251(d)(1).

On July 2, 1996, shortly after the 1996 Telecommunications Act became law, the FCC released its first order regarding number portability. See First Report and Order and Further Notice of Proposed Rulemaking, Telephone Number Portability, 11 F.C.C.R. 8352 (1996) (First Order). The First Order was issued pursuant to APA notice-and-comment procedures, and contained the regulatory flexibility analysis required by the RFA. Id. ¶ 1, at 8353-54, app. C, at 8486. In the First Order, the FCC recognized two kinds of portability that are relevant to this case: "service provider portability" and "location portability." Id. ¶¶ 172, 174, at 8443.

The First Order required all carriers to provide service provider portability, which it made "synonymous with" the statutory definition of number portability: "the ability of users of telecommunications services to retain, at the same location, existing telecommunications numbers ... when switching from one telecommunications carrier to another." Id. ¶ 27, at 8366-67. Compare 47 C.F.R. § 52.21(q), with 47 U.S.C. § 153(30). In addition, the First Order clarified that the portability obligation included not only porting between wireline carriers, but also "intermodal portability": the porting of numbers from wireline carriers to wireless providers, and vice versa. First Order ¶ 152, 11 F.C.C.R. at 8431, ¶ 155, at 8433, ¶ 166, at 8440; see 47 C.F.R. §§ 52.23(b), 52.31(a).1

Although the First Order mandated service provider portability, it expressly declined to require "location portability," which it defined as "the ability of users of telecommunications services to retain existing telecommunications numbers ... when moving from one physical location to another." First Order ¶ 174, 11 F.C.C.R. at 8443; see id. ¶ 6, at 8356; 47 C.F.R. § 52.21(j). But the First Order left many issues unresolved. In particular, while it required porting "at the same location," and expressly declined to require porting when moving from "one physical location to another," it did not define the word "location."

The FCC enlisted a federal advisory committee, the North American Numbering Council (NANC), to make recommendations regarding the implementation of number portability. See First Order ¶¶ 94-95, 11 F.C.C.R. at 8401-02. The FCC also established a phased schedule requiring LECs to complete implementation of number portability in the 100 largest metropolitan areas by December 31, 1998. See id. ¶ 77, at 8393. As a result of subsequent postponements, the carriers' intermodal porting duty did not commence until November 24, 2003 in large metropolitan areas, and until six months later in other areas. See Verizon Wireless' Petition for Partial Forbearance from the Commercial Mobile Radio Services Number Portability Obligation ¶ 31, 17 F.C.C.R. 14,972, 14,985-86, ¶ 34, at 14,986-87 (2002).

In 1997, the FCC received the NANC's recommendations regarding wireline-to-wireline service provider portability and issued a second order that adopted those recommendations. See Second Report and Order, Telephone Number Portability, 12 F.C.C.R. 12,281 (1997) (Second Order); 47 C.F.R. § 52.26(a) (codifying the NANC Working Group Report). Like the First Order, the Second Order was issued pursuant to notice and comment and included a regulatory flexibility analysis. Second Order ¶ 2, 12 F.C.C.R. at 12,283, app. C, at 12,358. Under the Second Order, wireline-to-wireline number portability was "limited to carriers with facilities or numbering resources in the same rate center...." See Memorandum Opinion and Order and Further Notice of Proposed Rulemaking, Telephone Number Portability; CTIA Petitions for Declaratory Ruling on Wireline-Wireless Porting Issues ¶ 7, 18 F.C.C.R. 23,697, 23,700 (2003) (Intermodal Order) (citing the Second Order's adoption of the NANC recommendations). Accordingly, a subscriber could not keep the same telephone number if he changed from a wireline telephone in one rate center to a wireline telephone physically located in a different rate center. Id. ¶ 7, at 23,700, ¶ 24, at 23,707. A "rate center" is a relatively small geographic area, designated by a LEC and state regulators, that is used to determine whether a given call is local or toll. See FCC, FCC Clears Way for Local Number Portability Between Wireline and Wireless Carriers, 2003 WL 22658210 (Nov. 10, 2003); FCC Br. at 6-7.

The Second Order was limited to wireline-to-wireline portability and did not resolve any issues relating to intermodal portability. Instead, the FCC once again enlisted the NANC to develop standards necessary to provide for wireless carriers' participation in number portability. See Second Order ¶ 91, 12 F.C.C.R. at 12,333. In particular, the FCC asked the NANC to consider "how to account for differences between service area boundaries for wireline versus wireless services." Id. ¶ 91, at 12,334. (The "service area" of a wireless carrier is typically considerably larger than the rate center of a LEC. See FCC Br. at 7.) But the NANC was unable to reach a consensus on intermodal portability issues, especially because of the problem of "rate center disparity":

[B]ecause wireline service is fixed to a specific location the subscriber's telephone number is limited to use within the rate center within which it is assigned. By contrast,... because wireless service is mobile ..., while the wireless subscriber's number is associated with a specific geographic rate center, the wireless service is not limited to use within that rate center.

Intermodal Order ¶ 11, 18 F.C.C.R. at 23,701 (discussing NANC Report).

On January 23, 2003, the Cellular Telecommunications & Internet Association (CTIA) petitioned the FCC for a declaratory ruling that "wireline carriers have an obligation to port their customers'...

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