AT&T Corp. v. FCC

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 4, 2020 Decided August 4, 2020

No. 18-1007

AT&T CORP.,

PETITIONER

v.

FEDERAL COMMUNICATIONS COMMISSION AND UNITED

STATES OF AMERICA,

RESPONDENTS

IOWA NETWORK SERVICES, INC., ET AL.,

INTERVENORS

Consolidated with 18-1257, 19-1013

On Petitions for Review of Orders of the

Federal Communications Commission

James U. Troup argued the cause for petitioner Iowa

Network Services, Inc. d/b/a Aureon Network Services. With

him on the briefs was Tony S. Lee.

Benjamin H. Dickens Jr., Mary J. Sisak, and Salvatore

Taillefer Jr. were on the briefs for intervenor South Dakota

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Network, LLC in support of petitioner Iowa Network Services,

Inc. d/b/a Aureon Network Services.

Joseph R. Guerra argued the cause for petitioner AT&T

Corp. With him on the briefs were Michael J. Hunseder,

Spencer D. Driscoll, Gary L. Phillips, and David L. Lawson.

Timothy J. Simeone was on the briefs for intervenor Sprint

Communications Company L.P. in support of petitioner AT&T

Corp. Christopher J. Wright entered an appearance.

William J. Scher, Counsel, Federal Communications

Commission, argued the cause for respondents. With him on

the brief were Michael F. Murray, Deputy Assistant Attorney

General, U.S. Department of Justice, Robert B. Nicholson and

Mary Helen Wimberly, Attorneys, Thomas M. Johnson, Jr.,

General Counsel, Federal Communications Commission,

Ashley S. Boizelle, Deputy General Counsel, and Richard K.

Welch, Deputy Associate General Counsel. Jacob M. Lewis,

Associate General Counsel, entered an appearance.

Joseph R. Guerra, Michael J. Hunseder, Spencer D.

Driscoll, Gary L. Phillips, David L. Lawson, and Timothy J.

Simeone were on the brief for intervenors AT&T Corp. and

Sprint Communications Company, L.P. in support of

respondents. Christopher J. Wright entered an appearance.

James U. Troup and Tony S. Lee were on the brief for

intervenor Iowa Network Services, Inc. d/b/a Aureon Network

Services in support of respondents.

Before: TATEL, GRIFFITH, and KATSAS, Circuit Judges.

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Opinion for the Court filed PER CURIAM.*

Opinion concurring in part and dissenting in part filed by

Circuit Judge KATSAS.

PER CURIAM:** The Communications Act of 1934 restricts

the rates that telecommunications carriers may charge for

transmitting calls across their networks. AT&T contends that

Aureon, an Iowa-based local carrier, for years charged it

unlawful access rates. The Federal Communications

Commission agreed with some of AT&T’s claims but not

others. On review, we consider three broad sets of issues:

whether Aureon charged interstate and intrastate rates that

violated certain transitional pricing rules, whether Aureon

unlawfully engaged in or abetted a practice known as access

stimulation, and whether Aureon’s interstate tariff covers the

service it provided.

I

The protagonists in this case are AT&T and Iowa Network

Services, also known as Aureon. AT&T is a long-distance or

interexchange carrier—one that transmits calls between the

networks of local carriers. For example, when an AT&T

subscriber in New York calls someone in Chicago, AT&T

connects the call between local networks in both cities.

Historically, the calling party would pay AT&T, which in turn

*

Judge Katsas wrote Parts I, II, III, IV.B, and IV.C of the per

curiam opinion; Judge Tatel wrote Part IV.A.

**

NOTE: Portions of this opinion contain Sealed Information,

which has been redacted.

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would pay the appropriate local carriers. See In re FCC 11-

161, 753 F.3d 1015, 1110–12 (10th Cir. 2014).

In most parts of the country, each local carrier directly

connects its network to that of each long-distance carrier. But

in sparsely populated areas, this can be prohibitively expensive.

In rural Iowa, local carriers solved the problem by forming

Aureon as a joint venture. Aureon operates a set of switches

connecting the networks of participating local carriers (known

as subtending carriers) to those of long-distance carriers. So

when an AT&T subscriber in New York calls someone in rural

Iowa, AT&T connects the call from the local New York

network to Aureon, which in turn connects it to the appropriate

subtending carrier. See In re Application of Iowa Network

Access Division, 3 FCC Rcd. 1468, 1468 (1988).

Aureon charges long-distance carriers for connecting calls

from their networks to those of its subtending carriers.

Different regulatory systems govern its charges for interstate

calls and for intrastate calls involving different local networks

within Iowa. For interstate calls, the Communications Act

provides that all charges must be “just and reasonable,” 47

U.S.C. § 201(b), and reflected in tariffs filed with the FCC, id.

§ 203(a). To implement these provisions, the FCC has

established various regulations governing access charges for

interstate calls. See generally 47 C.F.R. ch. 1, subch. B.

Historically, the states have regulated access charges for

intrastate calls. See In re FCC 11-161, 753 F.3d at 1111.

In recent years, the FCC has sought to transition away

from inter-carrier access charges to a “bill-and-keep” approach.

Recall the traditional arrangement for a long-distance call: the

caller paid the long-distance carrier, which in turn paid access

charges to local carriers at both ends. Under the new model,

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the local carriers will bill their own customers and keep that

revenue. This will have two major effects. First, the cost of a

call will be split between the calling party and the called party.

Second, local carriers will earn revenue from their own

subscribers, rather than from access fees charged to long-

distance carriers. See In re FCC 11-161, 753 F.3d at 1113.

In 2011, the FCC promulgated regulations to start the

transition to a bill-and-keep system for both interstate and

intrastate calls. See Connect America Fund; A National

Broadband Plan for Our Future; Establishing Just and

Reasonable Rates for Local Exchange Carriers; High-Cost

Universal Service Support, 76 Fed. Reg. 81,562 (Dec. 28,

2011) (Transitional Pricing Rules). These regulations, which

are called the “transitional access service pricing rules,”

progressively reduce the access charges that carriers may

charge one another. See 47 C.F.R. §§ 51.901–51.919.

In the same rulemaking, the FCC also restricted a practice

known as access stimulation. It involves enticing service

providers that receive a high volume of calls, such as

conference call services or adult hotlines, to locate in areas with

high access charges, which are typically rural. The

combination of high access charges and high call volumes

generates significant revenue for the local carriers. To secure

that revenue, local carriers sometimes pay service providers to

lure them to the area. “It’s a win-win for the [local carriers]

and the conference call companies,” but a loss for the long-

distance carriers. N. Valley Commc’ns, LLC v. FCC, 717 F.3d

1017, 1018–19 (D.C. Cir. 2013).

Over the last decade, Aureon’s rate for intrastate access

charges has remained the same, but the company has twice

changed its interstate rate. In 2012, Aureon filed a tariff with

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the FCC lowering its interstate rate from $0.00819 to $0.00623

per minute. In 2013, Aureon filed another tariff raising the rate

to $0.00896 per minute. Although the rate changes involve

tenths of a penny, they add up to millions of dollars across the

billions of calling minutes that Aureon services.

AT&T has long believed that Aureon’s access charges

violate the transitional pricing rules. AT&T thus has refused

to pay Aureon’s invoices in full since September 2013. In

2014, Aureon sued AT&T for the unpaid sums in the District

of New Jersey. After AT&T made several counterclaims under

the Communications Act, the district court referred the matter

to the FCC under the doctrine of primary jurisdiction. See Iowa

Network Servs., Inc. v. AT&T Corp., No. 14-cv-03439, 2015

WL 5996301 (D.N.J. Oct. 14, 2015). That doctrine permits

courts to stay cases involving “claims properly cognizable in

court that contain some issue within the special competence of

[the] agency.” Reiter v. Cooper, 507 U.S. 258, 268 (1993). A

primary jurisdiction referral stays proceedings “so as to give

the parties reasonable opportunity to seek an administrative

ruling.” Id.

AT&T then filed a complaint against Aureon under 47

U.S.C. § 208, which permits administrative actions against

telecommunications carriers. Four of AT&T’s allegations are

relevant here: First, Aureon’s interstate and intrastate access

charges violated the transitional pricing rules. Second, Aureon

improperly engaged in access stimulation. Third, Aureon

committed an unreasonable practice by agreeing with

subtending carriers to connect calls involving access

stimulation. Fourth, Aureon billed for service not covered by

its 2013 interstate tariff.

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In 2017, the FCC resolved the liability phase of the

bifurcated proceeding. AT&T Corp. v. Iowa Network Servs.,

Inc., 32 FCC Rcd. 9677 (2017). The agency agreed with

AT&T’s first argument that Aureon’s access charges violated

the transitional pricing rules. The Commission rejected

AT&T’s second and fourth arguments relating to access

stimulation and the scope of the tariff. Finally, the FCC

declined to consider the third argument—that Aureon

committed an unreasonable practice in aiding access

stimulation by its subtending carriers—because another section

208 complaint raised similar issues. After finding that

Aureon’s interstate rates violated the transitional pricing rules,

the agency ordered Aureon to file a new interstate tariff.

Aureon has complied with that order, which is not at issue here.

Damages issues remain pending.

II

AT&T and Aureon each seek review of portions of the

FCC’s liability determination. We have jurisdiction under 47

U.S.C. § 402(a) and 28 U.S.C. § 2342(1). In a bifurcated

proceeding under section 208, we have held that a party may

seek immediate review of liability determinations. Verizon Tel.

Cos. v. FCC, 269 F.3d 1098, 1103–06 (D.C. Cir. 2001).

The Administrative Procedure Act provides the familiar

standard of review. As relevant here, we consider whether the

FCC’s liability order was arbitrary, capricious, or inconsistent

with governing statutes and regulations. 5 U.S.C. § 706(2)(A).

III

We begin with Aureon’s petition, which contests the

FCC’s determination that Aureon violated the transitional

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access service pricing rules. The FCC rested its determination

on 47 C.F.R. § 51.911, which it calls Rule 51.911. That rule,

which applies to competitive local exchange carriers, has three

subsections. Subsection (a) prohibits the carriers from

increasing their intrastate rates above those in effect on

December 29, 2011. Subsection (b) requires the carriers to

lower their intrastate rates by specified amounts beginning on

July 3, 2012. Subsection (c) prohibits the carriers from

charging higher rates than those charged by the competing

incumbent local exchange carrier, effective July 1, 2013.

The FCC found that Aureon violated Rule 51.911 in two

respects: it violated subsection (b) by not lowering its intrastate

rate on or after July 3, 2012; and it violated subsection (a) by

increasing its interstate rate in 2013. AT&T Corp., 32 FCC

Rcd. at 9689. In response, Aureon contends that Rule 51.911

does not apply to it at all, and so none of its charges violated

that rule. More narrowly, Aureon contends that the cap in

subsection (a) applies only to intrastate rates, and so its 2013

increase in interstate rates did not violate that subsection. We

reject the broad argument but agree with the narrow one.

A

The transitional pricing rules cover Aureon’s services.

Those rules “apply to reciprocal compensation for

telecommunications traffic exchanged between

telecommunications providers that is interstate or intrastate

exchange access, information access, or exchange services for

such access, other than special access.” 47 C.F.R. § 51.901(b).

Aureon provides interstate and intrastate “exchange access …

services.” See J.A. 105 (Aureon’s tariff describing “Switched

Access Services”). And it does not claim to offer exempt

“special access” service, which involves the use of lines

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dedicated to specific users. See WorldCom, Inc. v. FCC, 238

F.3d 449, 453 (D.C. Cir. 2001).

The transitional pricing rules separately regulate three

different categories of local carriers. Rule 51.907 applies to

incumbent local exchange carriers operating under price-cap

regulations; Rule 51.909 applies to incumbent local exchange

carriers operating under rate-of-return regulations; and Rule

51.911 applies to competitive local exchange carriers. See 47

C.F.R. §§ 51.907, 51.909, 51.911. A “competitive local

exchange carrier” is “any local exchange carrier, as defined in

§ 51.5, that is not an incumbent local exchange carrier.” Id.

§ 51.903. Aureon is a “local exchange carrier” because it “is

engaged in the provision of telephone exchange service or

exchange access.” Id. § 51.5. And it is not an “incumbent”

carrier because it neither provided telephone exchange service

in 1996 nor succeeded a carrier that did. 47 U.S.C. § 251(h);

see J.A. 349 (Aureon arguing that it “is not an ILEC”). Because

Aureon is a “local exchange carrier … that is not an

incumbent,” the transitional pricing rules define it as a

“competitive local exchange carrier,” 47 C.F.R. § 51.903(a),

and thus subject it to regulation under Rule 51.911.

In contending that Rule 51.911 does not apply, Aureon has

little to say about the express regulatory definition of

“competitive local exchange carriers.” Instead, Aureon

attempts to exploit a separate regulatory distinction between

dominant and nondominant carriers. Aureon invokes a cross-

reference in Rule 51.911(c), which caps the rates for

competitive local exchange carriers at certain rates “charged by

the competing incumbent local exchange carrier, in accordance

with the same procedures specified in” 47 C.F.R. § 61.26. Rule

61.26 is limited to “nondominant carriers,” id. § 61.18, which

are carriers that have not been “found by the Commission to

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have market power,” id. § 61.3(q), (z). Rule 61.26 does not

apply to Aureon, which the FCC has found to have market

power. See In re Application of Iowa Network Access Division,

3 FCC Rcd. 1468 at ¶ 10. But Rule 51.911 is not so limited.

By its terms, it applies to all “competitive local exchange

carriers,” and Aureon clearly falls into that category.

Moreover, neither Rule 51.911(a) nor Rule 51.911(b)—the

specific provisions that the FCC found Aureon to have

violated—contains the allegedly limiting reference to Rule

61.26. Even Rule 51.911(c) uses rates charged by “incumbent”

local carriers to establish price caps that apply to all

“competitive” local carriers—a category that includes Aureon.

And the incorporation into Rule 51.911(c) of “procedures” set

forth elsewhere does nothing to restrict its applicability to all

competitive carriers.1

Because Rule 51.911 applies to Aureon, we affirm the

FCC’s conclusion that Aureon violated subsection (b) by not

lowering its intrastate rate as required.2

B

Aureon next contends that the 2013 increase of its

interstate rate did not violate Rule 51.911(a). We agree. That

1

The FCC reserved the question whether Aureon’s 2013 tariff

violated Rule 51.911(c). AT&T Corp., 32 FCC Rcd. at 9689. We

have explained why that provision applies to all competitive local

exchange carriers, but we too reserve whether Aureon violated it.

2

Aureon contends that applying the transitional pricing rules to

it violates due process. But there is no failure of notice, and thus no

due-process violation, in applying regulations as they are written.

See NetworkIP, LLC v. FCC, 548 F.3d 116, 123 (D.C. Cir. 2008).

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rule provides that a competitive local exchange carrier may not

“increase the rate for any originating or terminating intrastate

switched access service above the rate for such service in effect

on December 29, 2011.” 47 C.F.R. § 51.911(a)(1), (2). In

contrast, the parallel provisions for incumbent local exchange

carriers cap “intrastate” and “interstate” rates as of December

29, 2011. Id. §§ 51.907(a), 51.909(a)(1), (2). Thus, Rule

51.911(a) does not cap the interstate rates of competitive

carriers like Aureon.3

The FCC asks us to depart from the plain meaning of this

regulation based on statements that it made in an explanatory

document published shortly after the transitional pricing rules

became effective. See Transitional Pricing Rules, 76 Fed. Reg.

at 81,562. This document describes those rules as “capping all

interstate switched access rates in effect as of” December 29,

2011. See id. at 81,630. But “[b]ecause the regulation itself is

clear, we need not evaluate” either the regulatory “preamble”

or any other document that “itself lacks the force and effect of

law.” Saint Francis Med. Ctr. v. Azar, 894 F.3d 290, 297 (D.C.

Cir. 2018).4

3

The FCC briefly suggests that Rule 51.905 governs this

analysis. It requires local exchange carriers to file tariffs consistent

with “the default transitional rates specified by this subpart.” 47

C.F.R. § 51.905(b). For competitive local exchange carriers such as

Aureon, Rule 51.911 sets forth those rates.

4

The parties reference the disputed statements as they appear

in the FCC Record. See 26 FCC Rcd. 17,663, at ¶ 800–01. We

reference the Federal Register because agencies “must publish

substantive rules in the Federal Register to give them effect.” NRDC

v. EPA, 559 F.3d 561, 565 (D.C. Cir. 2009); see 5 U.S.C. § 552(a)(1).

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The FCC contends that its explanatory statements,

published in the Federal Register, should be treated as part of

the binding regulation. It is mistaken. “Publication in the

Federal Register does not suggest that the matter published was

meant to be a regulation, since the APA requires general

statements of policy to be published as well.” Brock v.

Cathedral Bluffs Shale Oil Co., 796 F.2d 533, 539 (D.C. Cir.

1986) (Scalia, J.) (citing 5 U.S.C. § 552(a)(1)(D)). Instead, the

“real dividing point” between the portions of a final rule with

and without legal force is designation for “publication in the

Code of Federal Regulations.” Id. To be sure, we have

reserved a possibility that statements in a preamble “may in

some unique cases constitute binding, final agency action

susceptible to judicial review.” NRDC v. EPA, 559 F.3d 561,

565 (D.C. Cir. 2009) (citing Kennecott Utah Copper Corp. v.

Dep’t of Interior, 88 F.3d 1191, 1222–23 (D.C. Cir. 1996)).

But “this is not the norm” because “[a]gency statements

‘having general applicability and legal effect’ are to be

published in the Code of Federal Regulations.” Id. (quoting 44

U.S.C. § 1510(a)). And where, as here, there is a discrepancy

between the preamble and the Code, it is the codified

provisions that control. For example, if a preamble purports to

establish the regulatory treatment of “high wind events” but the

regulations as published in the Code do not, then the preamble

statement is a nullity. See NRDC v. EPA, 559 F.3d at 565. The

same must be true for an explanatory document published not

with the codified regulations, but shortly thereafter.

Alternatively, the FCC invokes a “note” to Rule 51.901

cross-referencing a “chart identifying steps in the transition.”

As explained below, they must also publish them in the Code of

Federal Regulations.

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47 C.F.R. § 51.901, note. The chart appears in the explanatory

document mentioned above. It is a one-page, summary

document that simply asserts—without citation—that the

transitional pricing rules cap “interstate” switched access rates

as of their effective date. See Transitional Pricing Rules, 76

Fed. Reg. at 81,631. The FCC tries to do too much with too

little. For one thing, dropping a “note” referencing a summary

“chart” would be a strange way to add to the rules being

summarized. In any event, such a chart could hardly override

the plain meaning of the rules themselves. Moreover, specific

provisions qualify general ones. See, e.g., Robertson v. Seattle

Audubon Soc’y, 503 U.S. 429, 440 (1992). The fine print in

Rule 51.911 is far more specific than the summary chart. And,

as we have shown, it leaves no doubt that the 2011 price cap

applies only to “intrastate” rates. We thus apply the transitional

pricing rules as written.

For these reasons, we set aside the FCC’s determination

that Aureon violated Rule 51.911(a) by increasing its rate for

interstate access charges in 2013.5

5

Aureon raises various other arguments that we do not reach.

Without elaboration, it suggests that the FCC lacks authority to limit

intrastate rates and that the transitional pricing rules effect an

unconstitutional taking. But “[a] litigant does not properly raise an

issue by addressing it in a cursory fashion with only bare-bones

arguments.” Cement Kiln Recycling Coal. v. EPA, 255 F.3d 855, 869

(D.C. Cir. 2001) (cleaned up). Aureon further invokes 47 U.S.C.

§ 204(a)(3), which provides that interstate tariffs filed by local

exchange carriers “shall be deemed lawful” unless the FCC acts upon

them within 15 days. Aureon contends that section 204(a)(3)

prevents the award of damages for any violation of Rule 51.911(a)

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IV

We next turn to AT&T’s petitions, which address the

FCC’s rulings on access stimulation, unreasonable practices,

and the scope of Aureon’s tariffs.

A

AT&T contends that Aureon’s charges were unlawful

because Aureon was engaged in access stimulation, i.e.,

enticing high call volumes to generate increased access

charges. The FCC has made various efforts to curb that

practice, which it considers “wasteful arbitrage.” Updating the

Intercarrier Compensation Regime to Eliminate Access

Arbitrage, 84 Fed. Reg. 57,629, 57,630 (Oct. 28, 2019)

(Updating Rule).

Rule 61.3(bbb) represents one of those efforts. Although

the FCC has since amended the regulation to exclude carriers,

like Aureon, that serve no end-users, see id. at 57,651, during

the events at issue here, Rule 61.3(bbb) limited charges by any

local exchange carrier “engaging in access stimulation,” 47

C.F.R. § 61.3(bbb)(2) (2012). For our purposes, then, access

stimulation involves (A) maintaining an “access revenue

sharing agreement” and (B) servicing more than three times as

many incoming calls as outgoing calls. Id. § 61.3(bbb)(1)(i).

The parties agree Aureon met the second requirement. The

question, then, is whether the FCC’s conclusion that Aureon’s

contracts with its subtending carriers do not qualify as “access

revenue sharing agreements” was reasonable. It was not.

in this case. Having found no such violation, we need not reach this

damages issue.

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As relevant here, section 61.3(bbb) defines an “access

revenue sharing agreement” as an agreement between a local

exchange carrier and another party that

over the course of the agreement, would directly or

indirectly result in a net payment to the other party

(including affiliates) to the agreement, in which

payment by the ... Competitive Local Exchange

Carrier is based on the billing or collection of access

charges from interexchange carriers or wireless

carriers. When determining whether there is a net

payment under this rule, all payments, discounts,

credits, services, features, functions, and other items

of value, regardless of form, provided by

the ... Competitive Local Exchange Carrier to the

other party to the agreement shall be taken into

account.

Id. § 61.3(bbb)(1)(i). In short, the agreement must result in a

“net payment” from the carrier to a counterparty, which must

be “based on the billing or collection of access charges.”

The FCC reasoned that Aureon’s agreements were not

covered because neither the agreements themselves, nor the

“net payment[s]” to the subtending carriers, were “intended to

facilitate access stimulation.” AT&T Corp., 32 FCC Rcd. at

9693. But the FCC never explained why Aureon’s purported

lack of intent mattered. After all, nothing in the definition of

an “access revenue sharing agreement” suggests an intent

requirement; to the contrary, the regulation provides that such

agreements must “result in” a net payment, thus focusing on

effects rather than intent. 47 C.F.R. § 61.3(bbb)(1)(i) (2012).

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What’s more, the FCC failed to acknowledge its own prior

statement on what counts as an access revenue sharing

agreement. In 2012, the FCC “clarif[ied]” that the “based on”

language of section 61.3(bbb) is to be construed broadly,

explaining that “any arrangement between a LEC and another

party ... that results in the generation of switched access traffic

to the LEC and provides for the net payment of consideration

of any kind ... to the other party, ... is considered to be ‘based

upon the billing or collection of access charges.’” Connect

America Fund; A National Broadband Plan for Our Future;

Establishing Just and Reasonable Rates for Local Exchange

Carriers; High-Cost Universal Service Support, 77 Fed. Reg.

14,297, 14,301 (Mar. 9, 2012) (Clarification Rule). But in

rejecting AT&T’s access-stimulation claim, the FCC nowhere

acknowledged this prior interpretation, a particularly glaring

omission given that the agency’s newfound intent requirement

appears inconsistent with the clarification’s expansive

construction of section 61.3(bbb)’s regulatory language.

Because “the process by which [the FCC] reache[d] [its final]

result” was neither “logical [nor] rational,” we vacate its

decision. Fox v. Clinton, 684 F.3d 67, 75 (D.C. Cir. 2012)

(quoting Tripoli Rocketry Association, Inc. v. Bureau of

Alcohol, Tobacco, Firearms, & Explosives, 437 F.3d 75, 77

(D.C. Cir. 2006)).

The dissent likewise finds the FCC’s reasoning inadequate

but would nevertheless uphold the agency’s decision on the

ground that the regulation left the FCC no discretion to reject

AT&T’s claim. United Video, Inc. v. FCC, 890 F.2d 1173,

1190 (D.C. Cir. 1989) (acknowledging that vacatur and remand

“is not necessary” if “the agency has come to a conclusion to

which it was bound to come as a matter of law, albeit for the

wrong reason”). As the dissent sees it, the regulatory language

unambiguously excludes Aureon’s contracts with its

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violated this provision by agreeing to transmit calls reflecting

access stimulation by subtending carriers. The FCC declined

to reach this claim because a different administrative complaint

filed by AT&T, against one of the subtending carriers, raised

similar issues. AT&T argues that the FCC’s refusal to

adjudicate its claim was contrary to law. We agree.

AT&T lodged its complaint under section 208 of the

Communications Act. That provision imposes a series of

mandatory obligations to ensure the prompt and orderly

disposition of complaints: The FCC must “investigate the

matters complained of in such manner and by such means as it

shall deem proper.” 47 U.S.C. § 208(a). The FCC must “issue

an order concluding such investigation” within five months.

Id. § 208(b)(1). And the order “shall be” final and appealable.

Id. § 208(b)(3).

In AT&T Co. v. FCC, 978 F.2d 727 (D.C. Cir. 1992), we

held that this scheme requires the FCC to adjudicate section

208 complaints properly presented to it. There, the FCC

declined to adjudicate a complaint that it thought “would be

better considered in a rulemaking.” Id. at 731. We held that

this refusal was unlawful because section 208 imposes on the

FCC, in its capacity “as an adjudicator of private rights,” “an

obligation to decide the complaint under the law currently

applicable.” Id. at 732. The same obligation governs here,

despite the FCC’s desire to forgo a decision and resolve related

issues in another case.

In MCI Worldcom Network Services, Inc. v. FCC, 274

F.3d 542 (D.C. Cir. 2001), we recognized a limited exception

to the FCC’s duty to decide section 208 complaints. In that

case, the FCC declined to entertain a claim that was “parallel”

with and “duplicative” of claims in state administrative

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proceedings. Id. at 548. Moreover, the complainant sought “no

relief from the FCC that the state public utility commissions

[could not] grant.” Id. Under those circumstances, we held

that it was “reasonable for the FCC to defer to the states as a

matter of comity.” Id. Here, in contrast, there is no state

proceeding to defer to. Moreover, AT&T is seeking damages

from Aureon—relief that the FCC could not grant in a separate

proceeding to which Aureon is not a party. And the question

that AT&T seeks to raise, whether it was an unreasonable

practice for Aureon to connect calls to subtending carriers

engaged in access stimulation, goes well beyond the question

whether any individual subtending carrier was so engaged.

We stress that our holding is narrow. Section 208 gives

the FCC discretion over the “manner” and “means” of

investigating a complaint, 47 U.S.C. § 208(a), which we have

said allows the FCC to assign complaining parties the burden

of proof, see Hi-Tech Furnace Sys., Inc. v. FCC, 224 F.3d 781,

785–87 (D.C. Cir. 2000). The agency thus retains traditional

enforcement discretion in deciding whether or how to

investigate AT&T’s complaint. See id.; Sprint Commc’ns Co.

v. FCC, 76 F.3d 1221, 1227–31 (D.C. Cir. 1996). But “as an

adjudicator,” the FCC must “decide” claims properly presented

to it, AT&T, 978 F.2d at 732, at least absent some federalism-

based justification for deferring to parallel state proceedings

The FCC thus erred in refusing to adjudicate AT&T’s

unreasonable-practices claim.6

6

Aureon contends that AT&T is collaterally estopped from

arguing that connecting calls to access-stimulating carriers is an

unreasonable practice. The FCC did not decide this question, which

we leave open on remand.

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C

Finally, AT&T challenges the FCC’s determination that

Aureon’s existing interstate tariff covers traffic involving

subtending carriers engaged in access stimulation. We defer to

the FCC’s interpretation of a tariff if it is “reasonable and based

upon factors within the Commission’s expertise.” Am.

Message Ctrs. v. FCC, 50 F.3d 35, 39 (D.C. Cir. 1995) (cleaned

up). Here, the scope of Aureon’s tariff presents highly

technical questions that the FCC reasonably resolved.

The tariff provides rates for “switched access service,”

which it defines to include

a two-point electrical communications path between a

point of interconnection with the transmission

facilities of an Exchange Telephone Company … and

[Aureon’s] central access tandem where the

Customer’s traffic is switched to originate or

terminate its communications.

J.A. 196. The parties agree that Aureon provides “switched

access service” by routing calls from long-distance carriers to

the local exchange carriers that subtend its network.

AT&T highlights other tariff language repeatedly

describing Aureon’s service as “Centralized Equal Access

Service.” In AT&T’s view, Aureon does not provide such a

service when it transmits calls involving access-stimulating

carriers. But in its own complaint, AT&T described “equal

access service” as simply the local carrier providing all long-

distance carriers with equivalent connections. The FCC

adopted this definition. See AT&T Corp., 32 FCC Rcd. at 9678.

AT&T does not allege that Aureon failed to provide all long-

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distance carriers with equivalent connections to the networks

of subtending carriers. More generally, AT&T suggests that

the tariff distinguishes between calls reflecting access

stimulation and other calls. But the FCC concluded that the

tariff does not categorize calls in that way, and AT&T points

to no tariff language to the contrary.

Alternatively, AT&T contends that equal access service

involves only outgoing calls. But the tariff describes Aureon’s

service to occur when a customer’s “traffic is switched to

originate or terminate its communications.” J.A. 196.

Moreover, before the agency, AT&T stipulated that Aureon’s

authorized service covered both originating and terminating

traffic. That makes good sense, as AT&T provides no reason

why Aureon would seek to provide, or the FCC would approve,

a service to enable the connection of calls flowing in one

direction but not the other.

We affirm the FCC’s determination that Aureon’s

interstate tariffs apply to traffic involving any local carriers

engaged in access stimulation.

V

The petitions for review are granted in part and denied in

part. We remand this case to the FCC for further proceedings

consistent with this opinion.

So ordered.

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KATSAS, Circuit Judge, concurring in part and dissenting

in part: I join the per curiam opinion except for Part IV.A,

which remands for further consideration of whether Aureon

engaged in access stimulation. In my view, the governing

regulation unambiguously establishes that Aureon did not.

Thus, even though the FCC’s reasoning on this point was

faulty, a remand is unnecessary.

As my colleagues explain, the question about access

stimulation turns on whether Aureon provided its subtending

carriers with a “net payment” that was “based on the billing or

collection of access charges.” 47 C.F.R. § 61.3(bbb)(1)(i)(A)

(2012). I agree with my colleagues that this question does not

turn on Aureon’s intent, so we cannot affirm on the reasoning

provided by the FCC below. Ante at 15. But unlike my

colleagues, I would hold that the benefit provided by Aureon

to its subtending carriers was not “based on the billing or

collection of access charges.” And because the FCC was

bound to reach this conclusion as a matter of law, vacating its

decision on this point is unnecessary.

Of course, we cannot affirm a discretionary agency

decision based on reasoning not given by the agency. SEC v.

Chenery Corp., 318 U.S. 80, 88, 94 (1943). But “Chenery only

applies to agency actions that involve policymaking or other

acts of agency discretion.” Canonsburg Gen. Hosp. v. Burwell,

807 F.3d 295, 305 (D.C. Cir. 2015) (cleaned up). A Chenery

remand “is not necessary” if “the agency has come to a

conclusion to which it was bound to come as a matter of law.”

United Video, Inc. v. FCC, 890 F.2d 1173, 1190 (D.C. Cir.

1989). In that circumstance, “[t]o remand would be an idle and

useless formality,” and “Chenery does not require that we

convert judicial review of agency action into a ping-pong

game.” Morgan Stanley Capital Grp. Inc. v. Pub. Util. Dist.

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3

Reasonable Rates for Local Exchange Carriers; High-Cost

Universal Service Support, 77 Fed. Reg. 14,297, 14,301 (Mar.

9, 2012) (Interpretive Rule).

In my judgment, this Interpretive Rule does not reasonably

construe the governing regulation, at least as applied to inter-

carrier connection agreements. By its terms, the access

stimulation regulation does not apply unless a local exchange

carrier forms an “access revenue sharing agreement” with

another party that satisfies two distinct requirements: (1) the

agreement must “result in a net payment” to the other party,

and (2) this payment must be “based on the billing or collection

of access charges” from long-distance carriers. 47 C.F.R.

§ 61.3(bbb)(1)(i)(A). By contrast, the Interpretive Rule

requires only that the agreement “result in” more traffic for the

local exchange carrier, which will be true for any connection

agreement, and that the agreement “provide for” a net payment

to the other party, which seems equivalent to requiring that the

agreement “result in” a net payment to that party. On this

understanding, the Interpretive Rule collapses the regulation’s

second requirement into its first, eliminating the need for a

carrier’s net payment to be “based on the billing or collection

of access charges.” We should not tolerate a construction that

creates such obvious and inexplicable surplusage. See, e.g.,

Duncan v. Walker, 533 U.S. 167, 174 (2001).

The FCC understands its Interpretive Rule differently.

The agency highlights the statement that an access revenue

sharing agreement must “provid[e] for” a net payment from the

local carrier to a third party. According to the FCC, this

language means that the agreement must be intended to induce

access stimulation, rather than that the agreement simply must

result in a net payment to the third party. Even assuming that

this reflects a permissible reading of the Interpretive Rule,