DC Circuit Panel Presses Neustar, FCC Attorneys on LNPA Arguments
Judges sparred with both sides at oral argument on Neustar challenges to FCC orders picking Telcordia to become the next local number portability administrator (LNPA). Judges Harry Edwards and David Sentelle of the U.S. Court of Appeals for the D.C. Circuit questioned whether the FCC adequately addressed concerns about the impartiality of Telcordia, given its ties to parent Ericsson, a telecom equipment manufacturer. But they also seemed to suggest the FCC could remedy the concerns through its neutrality safeguards, with Edwards questioning Neustar arguments that no safeguards could be sufficient. Judge David Tatel suggested he might not agree with a core Neustar argument about Delaware corporate law.
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
“It feels like the judges were trying to direct the FCC to a position that was more sustainable for the commission," Hedgeye Potomac Research analyst Paul Glenchur told us afterward. "But that doesn’t address the question of threshold eligibility" raised by Neustar, he said. "That’s probably something the judges have to discuss separately in conference." Glenchur said caution was advisable on reading the tea leaves given what he called the surprise June ruling co-authored by Tatel that upheld the FCC's entire net neutrality order (see 1606140023). After oral argument in that case, he said, most parties thought the commission would at least lose on its reclassification of mobile broadband under Communications Act Title II (see 1512070054).
Tatel engaged in most of the questioning of Neustar counsel Kannon Shanmugam, asking first why the dispute was "such a big deal." Shanmugam said the administrator oversees LNP systems that not only allow consumers to keep their phone numbers when changing carriers, but also that route their calls. He said the FCC violated impartiality requirements in the law by selecting Telcordia, a wholly owned subsidiary of Ericsson, whose interests were aligned with the wireless industry. Edwards asked whether that meant there was nothing the FCC could do to remedy the situation through neutrality safeguards, which it had adopted. Shanmugam said one has to look at the affiliation of Ericsson, and he said Telcordia's interests must serve Ericsson's under Delaware law.
Tatel twice suggested he might disagree with Neustar's interpretation of Delaware law, the second time asking for Shanmugam's best other argument for overturning the FCC. Shanmugam said Neustar doesn't believe the agency's "purported" safeguards could cure the "alignment problem" of an LNPA tied to a particular industry segment. In response to a Tatel procedural question, Shanmugam said the FCC effectively amended rules without proper notice and comment through a rulemaking. He said the FCC failed to address transition costs or consider Neustar's second bid.
Edwards pressed FCC attorney David Gossett on Telcordia's ties to Ericsson and the related concerns. Edwards said parties can quibble about Delaware law, but he said the FCC explanation "falls flat" because it hadn't analyzed Ericsson's industry role and how that could affect the impartiality of Telcordia. Gossett said Telcordia's ties to Ericsson don't trump its duties to comply with its legal obligations, including on LNPA neutrality. Edwards said the FCC hadn't analyzed the nature of Telcordia's relationship to Ericsson. Gossett disagreed, saying the agency accounted for the concerns and accepted the recommendation of an industry advisory committee to pick Telcordia. That committee included parties from various telco segments, not just wireless, he said. Intervenor attorney Peter Karanjia, representing CTIA and USTelecom, separately made the same point, saying numerous industry parties had "skin in the game."
Edwards suggested the FCC didn't sufficiently appreciate the threat of bias caused by Telcordia's being a wholly owned subsidiary of Ericsson. Gossett said the FCC addressed the concerns through various corporate safeguards, and also said that under Delaware law, it wasn't the case that a subsidiary has the same interests as the parent. Sentelle, who arrived late (citing traffic problems), said the FCC couldn't expect the court to rely on Delaware law, given the potential for a conflict of interest caused by the Telcordia/Ericsson linkage. Both he and Edwards said the FCC would do better to simply acknowledge the problem and argue the safeguards provided a remedy. Gossett thanked Sentelle for "saying it more clearly than I did." Gossett also said Neustar didn't start raising process objections until it became concerned it might lose the contract to Telcordia in competitive bidding.
When Shanmugam offered rebuttal, Edwards questioned him again on whether there were any ways to remedy the impartiality concerns. Edwards said he didn't understand Shanmugam's argument and said the fight should be over the remedy specifics. Shanmugam said the FCC tried to write the "alignment" prohibition out of the rules, but he said it was a threshold issue. He also said the FCC attorney gladly accepted Sentelle throwing him a "lifeline" with his suggested remedy focus, but if that argument is accepted, it would allow Ericsson itself to become the LNPA with safeguards. Shanmugam also said smaller wireless carriers raised objections about the FCC LNPA choice, but Tatel said, "They're not here."