Judges Nix Neustar LNPA Arguments, Defer to FCC Handling of Telcordia's Ericsson Ties
A court panel rejected Neustar arguments and deferred to the FCC in denying the incumbent local number portability administrator's challenges to agency decisions choosing Telcordia (iconectiv) as the next LNPA (see 1705260016). The U.S. Court of Appeals for the D.C. Circuit three-judge panel concluded the commission's "process and recommendation were proper exercises of" authority.
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The panel gave deference to the FCC's "reasonable interpretation" in a dispute over Telcordia's corporate ownership and "neutrality" as LNPA, despite Neustar's "legitimate concerns." There's no error in the Commission's decision, wrote Judge David Sentelle Friday in the opinion backed by Harry Edwards and David Tatel in Neustar v. FCC, No. 15-1080. Neustar said it's "considering all ... legal options." The FCC didn't comment.
Neustar argued that the agency violated the Administrative Procedure Act by failing to do a rulemaking, that the selection of Telcordia was improper and misapplied agency neutrality regulations to Telcordia parent Ericsson, and that its evaluation of the parties' bid costs was arbitrary and capricious. The selection "does not qualify as a rule, and there is no requirement of notice-and-comment rulemaking when selecting the LNPA," Sentelle wrote. The panel said the FCC's neutrality determination, cost analysis and decisions on competing Telcordia and Neustar offers weren't arbitrary and capricious.
The panel upheld the choice of Telcordia as an "adjudication," not a "rule" that would have required a rulemaking, as Neustar argued. "While promulgating procedures for how to select a new LNPA may appropriately be done by rulemaking, the actual recommendation of the next LNPA is an individualized selection process that is sufficiently adjudicatory in nature to fall outside the scope of any requirement that the FCC promulgate rules," the opinion said.
Judges were dismissive of Neustar "best and final offer" (BAFO) arguments. Neustar said the North American Numbering Council, charged by the FCC to run the selection process, improperly failed to consider the company's second BAFO after NANC sided with Telcordia over Neustar on their initial BAFOs. The commission found NANC's decision reasonable because parties didn't have a right to make such an offer under the agency's "permissive" solicitation process. "We agree with the Commission," Sentelle wrote. "We are tempted to ask what part of 'best' and, particularly, of 'final' does Neustar not understand?" Sentelle wrote. "The bidding process had to come to an end at some point." It's "difficult to hold that a commission errs by treating a best and final offer as final," he said.
The panel voiced some sympathy for Neustar arguments that Telcordia's status as a wholly owned subsidiary of Ericsson, a telecom vendor, would affect its neutrality as LNPA overseeing telecom carrier number porting. "Neustar raises legitimate concerns -- concerns that might have justified a Commission decision against Telcordia," Sentelle wrote. "But we must keep in mind the standard of review for our consideration of Commission decisions. The Court is not to substitute our judgment for that of the FCC. Rather, the question is more narrow, as we determine whether the FCC acted arbitrarily and capriciously." He cited a D.C. Circuit 2016 USTelecom v. FCC ruling. The court deferred to the agency's "application of corporate law to its regulations, which allowed it to conclude that safeguards are sufficient and that Telcordia's status as a wholly owned subsidiary does not disqualify it."
Telcordia recently asked the FCC to approve a revised code of conduct and voting trust, and if necessary, a transfer of control to allow FP Investors to acquire a minority stake in iconectiv and eliminate any possible dispute under Delaware law (see 1705180018).
Neustar is disappointed the court denied its petition "even though it acknowledged that our concerns about Telcordia’s impartiality are legitimate," emailed a spokesman: It will "continue to meet all of our contractual obligations and deliver the high level of service our customers have come to expect."
Telcordia's iconectiv looks "forward to focusing solely on the transition, which will ultimately bring about significant security, technology, and cost benefits," emailed a spokeswoman. "This decision validates the hard work put in by the members of the North American Portability Management, the NANC and its selection committee, and the FCC."
USTelecom CEO Jonathan Spalter noted an estimate the switch could save $1 million daily in local number portability costs. "This decision is a welcome victory for both consumers and the FCC, which rightly chose the best, lowest-cost provider to oversee this vital service,” he said.
Separately, the FCC gave Neustar until June 9 to answer various queries about its planned sale to Aerial Investors, a company formed by Golden Gate Private Equity. Many of the questions in the Wireline Bureau letter concern investments in telecom service providers and other communications companies by funds that are run by Golden Gate and related parties.