Court Supports FCC in ‘Deemed Granted’ Forbearance Case

The U.S. Court of Appeals for the District of Columbia Circuit said the FCC correctly interpreted section 10 of the Telecommunications Act, ruling that a forbearance petition is “deemed granted” if the FCC misses the statutory deadline to vote on it. Challengers said the commission should have considered inaction a denial. The court found that Congress had said otherwise in section 10, which set up the forbearance process.

The unusual outcome -- no order or other affirmative FCC action -- has been mired in dispute since. Members of Congress have introduced bills to remove section 10’s “deemed granted” language, and the FCC is pondering whether to review the Verizon forbearance. Of many such petitions since the Telecom Act’s 1996 enactment, this is the only one to have been granted automatically.

“Congress, not the Commission, granted Verizon’s forbearance petition,” said the court decision, written by Judge Raymond Randolph. “When the Commission failed to deny Verizon’s forbearance petition within the statutory period, Congress’s decision -- not the agency’s -- took effect.” Randolph cited a similar conclusion in 2004 in AT&T Corp. v. FCC, involving a statutory sunset of regulatory safeguards for certain long-distance providers. The commission “did nothing, which is why the ‘deemed granted’ provision kicked in,” wrote Randolph. The agency didn’t deny that petition and “Congress directed the Commission to treat a petition it does not deny as granted by operation of law,” he wrote.

As a sidebar, Randolph said the deemed-granted process raises a jurisdictional problem for the court. There’s no action to review, no FCC “reasoning,” he said, noting that challengers point out that by not acting on a forbearance petition the agency can evade judicial action. “But that is the consequence of the system Congress mandated [in Section 10],” he said. “There is no indication that the Commission or individual Commissioners have abused this provision,” the court said.

“We… recognize that because a deadlocked vote is unreviewable, we lack jurisdiction in what may be the hardest cases -- cases in which the forbearance petition raises such difficult issues that it produces an equally divided vote among the Commissioners,” said Randolph. “Be that as it may, the statute is clear” that a petition is “deemed granted if the commission does not deny it, he wrote.

The deemed-granted outcome was contested by Sprint Nextel, the New Jersey Division of Rate Counsel and the Ad Hoc Telecommunications Users Committee, among others. Also on the court panel were Judges Harry Edwards and Merrick Garland.

The decision “casts the spotlight on the need to reform the forbearance process” by eliminating the “deemed granted” mechanism and requiring the FCC to issue written opinions, said House Commerce Committee Chairman John Dingell (D-Mich.) and Telecommunications Subcommittee Chairman Edward Markey (D-Mass.). A bill they introduced Oct. 22 would reform the forbearance language. Sprint Nextel voiced disappointment with the decision but said it is “encouraged” to see Hill leaders pondering forbearance reform. “This decision demonstrates that changes in the law cannot happen soon enough,” said a Sprint Nextel spokesman. An FCC spokesman said the agency has no comment on the decision.

Verizon has negotiated more than 200 agreements worth $1.5 billion since gaining enterprise broadband forbearance nearly 20 months ago “and prices did not go up,” a Verizon spokesman said. “The change allowed us to serve big customers better by providing the flexibility needed to tailor service packages to big companies and other carriers,” he said. Forbearance let Verizon negotiate prices, rather than have to follow set tariffs, for Ethernet and optical high-capacity services.