APPEALS COURT EYES FCC'S BIENNIAL REVIEW PROCEDURE

Although judges’ questions don’t always indicate their positions, they appeared sympathetic to the FCC’s view that the Telecom Act didn’t require the agency to both review regulations and take resulting action, such as repeal or modification, in the same biennial year. However, the panel’s view was less clear on Verizon’s argument that the Telecom Act required the FCC to follow a stricter standard in weighing whether to eliminate rules than was followed when the rules were adopted in the first place.

The oral argument covered 2 related Verizon cases: (1) Cellco v. FCC challenged the 2000 biennial review. Cellco at the time was the legal name for Verizon Wireless. That case challenged the agency’s decision to retain 2 regulations involving the international operations of wireless companies. (2) Verizon v. FCC challenged the Commission’s 2002 biennial review in a more general way, for example questioning the public interest standard it used to review regulations and the question of how much action must be taken in a biennial calendar year.

On the timing issue, Judge Rogers asked Verizon attorney Andrew McBride to explain the company’s view that the FCC must take all action -- identifying unnecessary rules and actually eliminating them -- in the same year. Verizon has argued that the Commission erred by issuing a report in the 2002 biennial year but waiting until later to repeal or modify the targeted rules. Rogers asked McBride whether he believed the FCC would violate the law if, after deciding to modify a regulation, it held a rulemaking to gain public input. If that was seen as a violation, the FCC would have “no discretion” but to eliminate the rule, even if the agency preferred to make changes through a rulemaking, she said. McBride said Verizon’s position was that there shouldn’t be a rulemaking because the biennial review process was a self- standing proceeding. However, he said, the bottom line is that an action must be taken in the same year as the review that prompted it. Judge Garland asked McBride to picture being “on the other side” in an FCC proceeding: “Someday the FCC may want to repeal and you want a modification. Is there no chance to make that argument?”

FCC attorney Richard Welch said the Commission didn’t agree that it couldn’t institute rulemakings as part of a biennial review. He said in the 2000 review, for example, the FCC modified rather than repealed a regulation (which led to one of the Cellco challenges). There are other cases as well where the Commission chose to open a rulemaking to acquire public input on a planned modification, he said. Judge Garland asked how long the FCC was taking to complete those rulemakings, since the next biennial review year, 2004, was approaching. Welch said the agency was “moving as fast as we can.”

In the Cellco case, Verizon Wireless complained about the FCC’s retention of 2 regulations covering international operations: (1) A requirement that wireless carriers file reports on their international revenue and traffic. The Commission had eliminated quarterly reports in the review but retained annual ones. Welch said Mon. those reports were very important because the information gleaned from them helped the agency regulate international service. (2) A requirement that if a U.S. carrier’s international subsidiary had foreign ownership it must make Sec. 214 filings for new construction or acquisition of lines.

On the standards issue, Welch argued that the same standard applied whether the FCC was putting a regulation in place or later reviewing it: “We don’t see any indication that Congress intended a different standard.” At issue is the Telecom Act requirement that the FCC should repeal any regulation that “is no longer necessary in the public interest.” Verizon has contended that that language was stricter than the broader measures the FCC used for adopting regulations and that the agency had misinterpreted the statute.

Welch said the FCC had done 3 biennial reviews and “it’s a daunting task.” The agency did the reviews differently in 2000 and 2002, he said. In 2000, the staff did the review and then the FCC made the report, he said. In 2002, the entire job was delegated to the staff. Judge Garland asked whether the staff decisions in 2002 were final absent appeals and Welch said they were, “like any other [task] delegated to staff.”

Judge Rogers asked McBride why Verizon and others didn’t challenge the 2002 staff report at the FCC level before going to the appeals court, but McBride said there wasn’t much to appeal because “these were pure recommendations.” He said one of Verizon’s complaints was that the FCC didn’t do what was required by the Telecom Act because the staff report didn’t result in much action.

Responding to another Verizon charge, Welch said the way the FCC handled the biennial reviews of telecom rules didn’t conflict with a D.C. Circuit ruling in Fox v. FCC. That ruling required the Commission to make the “presumption” that all the rules should be repealed, requiring it then to prove each rule should be retained. Welch also said the Fox ruling had resulted in some confusion and “this panel has the ability to bring some clarity.”

One issue that received very little discussion at the oral argument was the FCC’s argument in its brief that Verizon didn’t have standing to challenge the 2002 report.