United States Telecom Ass'n v. Federal Communications Commission

295 F.3d 1326, 353 U.S. App. D.C. 59, 2002 U.S. App. LEXIS 14320
Court of Appeals for the D.C. Circuit·Decided July 16, 2002·No. No. 01-1085·Published·Cited by 21 cases

Opinion

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. § SDm1

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 Univer[1329] sal 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.

[1330] 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

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United States Telecom Ass'n v. Federal Communications Commission, 295 F.3d 1326, 353 U.S. App. D.C. 59, 2002 U.S. App. LEXIS 14320 (D.C. Cir. 2002).

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