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AT&T Corporation v. Federal Communications Commission

April 16, 2004

AT&T CORPORATION, PETITIONER
v.
FEDERAL COMMUNICATIONS COMMISSION AND UNITED STATES OF AMERICA, RESPONDENTS WORLDCOM INC., ET AL., INTERVENORS



On Petition for Review of an Order of the Federal Communications Commission

Before: Randolph, Rogers, and Tatel, Circuit Judges.

The opinion of the court was delivered by: Randolph, Circuit Judge

Argued February 23, 2004

For nearly a decade the Federal Communications Commission has attempted to restructure payphone compensation in compliance with the Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56. The 1996 Act required the Commission to "establish a per call compensation plan to ensure that all payphone service providers are fairly compensated for each and every completed intrastate and interstate call using their payphone[.]" 47 U.S.C. § 276(b)(1)(A). On three prior occasions we have ruled on various aspects of the Commission's payphone compensation plan. Illinois Pub. Telecommunications Ass'n v. FCC, 117 F.3d 555 (D.C. Cir. 1997), supplemented at 123 F.3d 693 (D.C. Cir. 1997); MCI Telecommunications Corp. v. FCC, 143 F.3d 606 (D.C. Cir. 1998); Am. Pub. Communications Council v. FCC, 215 F.3d 51 (D.C. Cir. 2000) (" APCC "). Petitioner AT&T and intervenors MCI and Sprint ("AT&T"), all long-distance carriers, now challenge the Commission's latest revision of the compensation amount.

At the heart of these proceedings is the compensation of coinless calls - those calls in which the caller, instead of depositing money in the payphone, dials an access number or a toll free number. In 1996 the Commission designed a system in which the long-distance carrier handling the coinless call reimburses the payphone service provider on a flatrate, per phone basis.*fn1 Implementation of the Pay Telephone Reclassification and Compensation Provisions of the Telecommunications Act of 1996, Report and Order, 11 F.C.C.R. 20,541 (Sept. 20, 1996) ("First Order"). Calculating a per phone compensation figure requires multiplying two numbers: a set price per call and an average volume of calls per phone. Id. ¶ ¶ 119-25. The Commission expected that reimbursement would switch to a per call basis once tracking technology was in place. Id. ¶ 99. Call tracking would eliminate the need for an average call volume estimate. The First Order determined the price of a call to be 35 cents and the average number of calls from a payphone to be 131 per month, equaling $45.85 per phone. Id. ¶ ¶ 119-25. The Commission intended this rate to apply from November 7, 1996, to October 6, 1997, when it expected the tracking technology to have been fully implemented. Id. ¶ 126. This interval has become known as the Interim Period. The Commission also set the 35 cent per call rate as the default rate for the first year of per-call compensation after October 6, 1997. Id. ¶ 72.

In response to the petitions of various parties challenging the First Order, we vacated and remanded the 35 cent per call compensation rate for coinless calls. Illinois, 117 F.3d at 564-65, clarified at 123 F.3d at 694. No party challenged the 131 call volume estimate. On remand, the Commission, using a different methodology, adjusted the per call compensation rate to 28.4 cents per call. Implementation of the Pay Telephone Reclassification and Compensation Provisions of the Telecommunications Act of 1996, Second Report and Order, 13 F.C.C.R. 1778 ¶ 1 (Oct. 9, 1997) ("Second Order").

The Commission established this rate for two years beyond October 7, 1997. Because call tracking had not yet been fully implemented, the new rate served both as a default rate for tracked calls and as a basis for per-phone compensation. The Commission also tentatively applied this rate to the Interim Period, although it deferred full reconsideration of the Interim Period rate as ordered in Illinois until a later time. Id. ¶ 4. Finding this rate deficient as well, we remanded but did not vacate the 28.4 cent rate, giving the Commission six months to adopt a different figure. MCI, 143 F.3d at 609. On remand the Commission again established a new rate, this time 24 cents per call, which it applied retroactively to both the Interim Period and the interval between October 7, 1997, and April 20, 1999, the effective date of the newly-issued rate. In re Implementation of the Pay Telephone Reclassification and Compensation Provisions of the Telecommunications Act of 1996, Third Report and Order, and Order on Reconsideration of the Second Report and Order, 14 F.C.C.R. 2545 (Feb. 4, 1999) ("Third Order"). This latter interval is considered the Intermediate Period. The Commission also stated that the 24 cent price would serve as the default rate for coinless calls through January 31, 2002.*fn2 Id. ¶ 18. We affirmed the Commission's per call compensation rate. APCC, 215 F.3d 51.

In 2002 the Commission, still addressing the Illinois remand, further revised the per call estimate to 22.9 cents per call for the Interim and Intermediate Periods. Implementation of the Pay Telephone Reclassification and Compensation Provisions of the Telecommunications Act of 1996, Fourth Order on Reconsideration and Order on Remand, 17 F.C.C.R. 2020 ¶ 7 (Jan. 31, 2002) ("Fourth Order"). Due to the availability of new call volume data, the Commission, inter alia, adjusted the average call volume figure from 131 to 148 for both periods. Id. ¶ ¶ 11, 36. As it did in the previous orders, the Commission also applied the revised figures prospectively - this time from April 21, 1999 forward, an interval the parties call the Post-Intermediate Period. Id. App. A. No party asked the Commission to reconsider the 22.9 cents per call figure. MCI petitioned for reconsideration on the ground that the data and methodology the Commission used to reach the 148 call estimate were faulty and that the Commission should have applied a decline factor for 1998 and beyond to take into account decreasing payphone call volume. AT&T filed comments on MCI's petition. The Commission, in refusing to reopen this aspect of the Fourth Order, defended the quality of the data it used to reach the 148 figure and its decision not to adopt a decline factor in light of insufficient evidence demonstrating a decrease in per payphone call volume. Implementation of the Pay Telephone Reclassification and Compensation Provisions of the Telecommunications Act of 1996, Fifth Order on Reconsideration and Order on Remand, 17 F.C.C.R. 21,274 ¶ ¶ 16-22 (Oct. 23, 2002) ("Fifth Order").

AT&T then filed this action seeking judicial review of the Fifth Order in which the Commission denied MCI's petition for reconsideration.

The general rule is that an agency's denial of a petition for reconsideration is not subject to judicial review. ICC v. Bhd. of Locomotive Engineers, 482 U.S. 270, 278-79 (1987); Southwestern Bell Tel. Co. v. FCC, 180 F.3d 307, 310 (D.C. Cir. 1999); Beehive Tel. Co. v. FCC, 180 F.3d 314, 317-18 (D.C. Cir. 1999); Microwave Communications, Inc. v. FCC, 515 F.2d 385, 387 n.7 (D.C. Cir. 1974). AT&T admits that it sought review only of the Commission's Fifth Order denying reconsideration. But the general rule does not apply here, so AT&T argues, because the Commission had no discretion to deny reconsideration - reconsideration was mandatory under § 276(b)(1) of the 1996 Act. This section states that the Commission, "within 9 months after February 8, 1996, ... shall take all actions necessary (including any reconsideration) to prescribe regulations ... to ensure that all payphone service providers are fairly compensated...." 47 U.S.C. § 276(b)(1). The use of the word "shall," according to AT&T, removes the Commission's discretion to deny a reconsideration petition, at least when the Commission believes granting the petition is "necessary" to ensure fair payphone compensation.

AT&T's interpretation of § 276(b)(1) is impossible. On the face of it, the provision simply established a temporal mandate - 9 months. Section 276(b)(1) says nothing about the decision whether to grant a petition for reconsideration. It speaks only to how long the Commission may take for its initial actions and for proceedings, if any, after it has granted a petition for reconsideration. The evident purpose of Congress was to speed things up. Yet AT&T's version of § 276(b)(1) would only slow things down. We therefore cannot read § 276(b)(1) as departing - solely for the purpose of restructuring the payphone market - from the longstanding rule that the Commission may in its discretion deny a petition for reconsideration.

The Fifth Order, as a denial of reconsideration, is thus not subject to judicial review unless it falls within some exception to the general rule. The Supreme Court described such an exception in Locomotive Engineers: when the request for agency reconsideration rested on "new evidence or changed circumstances that rendered the agency's original order inappropriate." 482 U.S. at 278 (internal quotations omitted). The Court was there interpreting the Interstate Commerce Act, which contained three grounds for rehearing: "material error, new evidence, or substantially changed circumstances." 482 U.S. at 277 (citing 49 U.S.C. § 10327(g) (current version at 49 U.S.C. § 722(c))). Here, the rehearing statute - 47 U.S.C. § 405(a) - does not use those words. It specifies no grounds for rehearing, leaving the matter to "such general rules as the Commission may establish."*fn3 The Commission's rules provide that a petition for rehearing relying on facts not presented in the original proceeding "may" be granted if the facts "relate to events" occurring after "the last opportunity to present such matters," or if the petition "relies on facts unknown to petitioner ... which could not, through the exercise of ordinary diligence, have been learned prior to such opportunity." 47 C.F.R. § 1.106(c) & (b)(2). In Southwestern Bell, 180 F.3d at 311, and Beehive, 180 F.3d at 318, we assumed that the Commission's rehearing rules were comparable to those recited in the Court's Locomotive Engineers opinion. See also Transportation Intelligence, Inc. v. FCC, 336 F.3d 1058, 1062 (D.C. Cir. 2003); Schoenbohm v. FCC, 204 F.3d 243, 245 (D.C. Cir. 2000). We will do the same in considering AT&T's argument that the Commission should have reconsidered its Fourth Order in light of new evidence showing a decline in call volume in the Post-Intermediate Period. (AT&T concedes that its claims pertaining to the Interim and Intermediate Periods, and its other claims applicable to the Post-Intermediate Period, were not based on new evidence.)

The supposed new evidence consisted of the following. In May 2002, after the Fourth Order issued, MCI filed a reply to comments on its petition for reconsideration of the Fourth Order. MCI's reply cited its internal data for completed payphone calls in the first quarters of 1998, 1999, 2000 and 2001, which it said showed that calls per payphone have been declining over time. For the same purpose, MCI also cited data from Southwestern Bell ("SBC"), a regional Bell operating company ("RBOC"), dealing with the routing of payphone calls to long-distance carriers or other carriers for the fourth quarters of 1997, 1998, 2000 and the third quarter of 2001. SBC had filed this data in March 2002 in compliance with the Commission's request of December 20, 2001. The Commission sought the information from SBC and other RBOCs so that it could, as it did in the Fifth Order, determine the allocation of per-payphone payments among long-distance carriers. See Fifth Order, 17 F.C.C.R. 21,274 ¶ 49.

According to AT&T, not only the SBC data MCI cited in its reconsideration reply but also all the data submitted by the other RBOCs in March 2002 constitute new evidence warranting an exception to the rule that reconsideration denials are not reviewable.*fn4 This misapprehends the law. The petition for reconsideration must present the allegedly new evidence to the agency; even if the party does so and even if the evidence is in fact newly discovered, a court will reverse an agency's denial of reconsideration only "in the most extraordinary circumstances," Bowman Transp., Inc. v. Arkansas-Best Freight Sys., Inc., 419 U.S. 281, 296 (1974), and only if the agency has engaged in the "clearest abuse of discretion." Locomotive Engineers, 482 U.S. at 278, quoting United States v. Pierce Auto Freight Lines, Inc., 327 U.S. 515, 534-35 (1946); but cf. Jost v. Surface Transp. Bd., 194 F. 3d 79, 85 (D.C. Cir. 1999). When a party has not presented the evidence to the agency in its reconsideration petition, the evidence is not "new": if "no new data ... has been put forward as the basis for reopening," ...


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