FCC’s Connect America Fund Order Violated 10th Amendment, Joint Board Tells Court
The FCC had no jurisdiction to change intercarrier compensation rates to zero in its 2011 USF/intercarrier compensation order, and it violated the 10th Amendment by treating states as administrative agents of the federal government. That’s the main argument of the state members of the Federal-State Joint Board on Universal Service, who submitted a 9,000-word amicus brief this week recounting what they called the FCC’s violation of dual-sovereignty; its “convoluted” and over-expansive interpretation of Section 251(b)(5) of the Telecom Act; and its reliance on “11th hour ex parte communications” without adequate notice, in violation of the Administrative Procedure Act. The 10th U.S. Circuit Court of Appeals had asked for 810 words.
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"What the FCC has done here just infuriates me,” said Commissioner James Cawley of the Pennsylvania Public Utility Commission, who wrote the brief. The Joint Board decided it needed to say things, and 810 words was not enough, he told us. “You can’t make an argument in three pages.” The state got a chance to make two constitutional arguments at the end of the petitioners’ brief focusing on ICC issues (CD Nov 13 p5), but “Pennsylvania was very upset because you lead with the Constitutional arguments,” Cawley said. “You don’t tack them on at the end.” So, as state chairman of the Joint Board, Cawley and his colleagues decided to submit a brief. “We are a Congressionally created advisory board,” he said. “I think they'll let us file."
Congress can “entice” states to voluntarily join a federal regulatory program, but it can’t force states to do so, the Joint Board said in its brief. Under the color of statutory authority, the FCC not only “unlawfully specifies an endgame zero rate” for intrastate terminating traffic, it also assigns states a “critical role” in implementing and enforcing the reforms, the board said. The FCC violated the 10th Amendment by “imposing regulatory mandates on the sovereign states, preempting independent state law, and using pressure akin to undue influence that forces the sovereigns’ telecommunications carriers to take action that constitutes an indirect bullet to the head of the states."
An FCC spokesman disagreed, and pointed to the “much-needed fiscal discipline” the order brought to the USF. “In addition, reforms of intercarrier compensation will unleash over $1.5 billion in annual benefits to consumers by eliminating hidden calling costs while removing major barriers to deployment of advanced IP-based broadband networks,” he said. “We are confident that the Commission’s Order is legally sound and look forward to defending it in court."
The Joint Board argued that Section 251(b)(5) doesn’t give the agency jurisdiction to include local and intrastate traffic within the Act’s definition of “telecommunications;” when the commission mandated the move to bill-and-keep, it nullified the states’ role in setting intrastate access rates, the brief said. Section 251 “establishes a duty upon LECs. It is not an FCC-empowering provision.” This isn’t the first time the FCC has overreached through “convoluted statutory interpretations,” the brief said.
This isn’t the first time the FCC “has just made up the law,” instead of going to Congress and getting the law changed, Cawley said. That’s not how regulators are supposed to work, he said. “You go across the street” to the legislature “and you beg and you plead and you do whatever it takes to finally get the law changed. You don’t make it up on your own, if for no other reason than they're depriving people of their due process rights."
Any court “worth its salt” will reverse an agency action that relies on made-up law, Cawley said, unless it decides to give the agency Chevron deference. There’s a longstanding circuit split about whether to afford Chevron deference to an agency’s interpretation of its own jurisdiction. The U.S. Supreme Court will hear oral argument in January on that very question, in City of Arlington v. FCC (CD Nov 21 p1).
Currently, two circuits don’t defer to an agency’s determination of its own jurisdiction, Cawley said. Five circuits -- including the 10th -- do. Cawley expects the Supreme Court to rule before the 10th Circuit does. If the high court rules in the FCC’s favor, “all or most of the statutory arguments in this 10th Circuit appeal will fail,” he said. NARUC General Counsel Brad Ramsay has said he’s optimistic the high court will side with the states, but Cawley isn’t hopeful about getting a helpful decision. Even then, he said, the circuit court could rule for the states based on “longstanding rules of statutory construction."
"It’s a classic usurpation of power by the FCC,” Cawley said. “We only have the federal judiciary to protect us.” If the commission gets deference, then it “effectively has the ability to do anything it wants to do. That’s what’s at stake here.” For state regulators like Cawley, if the order is allowed to stand, then “we've all become minions of the FCC.”