This Court has “strictly construed § 405(a), and [has] made it clear that [it] will not review arguments that have not first been presented to the Commission.” (quoting Core, 455 F.3d at 276 ; Qwest Corp. v. FCC, 482 F.3d 471, 474 (D.C. Cir. 2007))
How later courts described this case
- This Court has “strictly construed § 405(a), and [has] made it clear that [it] will not review arguments that have not first been presented to the Commission.” (quoting Core, 455 F.3d at 276 ; Qwest Corp. v. FCC, 482 F.3d 471, 474 (D.C. Cir. 2007))
- explaining the structure of the Lifeline program
- “[W]hen an owner of property voluntarily participates in a regulated market, additional regulations that may reduce the value of the property regulated do not result in a taking” (citation and internal quotation marks omitted)
- “we will not review arguments that have not first been presented to the Commission”
Written by the judges who cited it.
The opinion
United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 13, 2020 Decided December 22, 2020
No. 20-1006
NATIONAL LIFELINE ASSOCIATION,
PETITIONER
v.
FEDERAL COMMUNICATIONS COMMISSION AND UNITED
STATES OF AMERICA,
RESPONDENTS
On Petition for Review of an Order of the
Federal Communications Commission
John J. Heitmann argued the cause for petitioner. With
him on the briefs was James B. Currier, Jr.
Maureen K. Flood, Counsel, Federal Communications
Commission, argued the cause for respondents. With her on
the brief were Makan Delrahim, Assistant Attorney General,
U.S. Department of Justice, Michael F. Murray, Deputy
Assistant Attorney General, Robert B. Nicholson and Andrew
DeLaney, Attorneys, Thomas M. Johnson, Jr., General
Counsel, Federal Communications Commission, Ashley S.
Boizelle, Deputy General Counsel, and Jacob M. Lewis,
Associate General Counsel. Richard K. Welch, Deputy
Associate General Counsel, Federal Communications
Commission, entered an appearance.
2
Before: KATSAS and RAO, Circuit Judges, and EDWARDS,
Senior Circuit Judge.
Opinion for the Court filed by Senior Circuit Judge
EDWARDS.
EDWARDS, Senior Circuit Judge: The Federal
Communications Commission (the “Commission” or “FCC”)
runs the Lifeline program (“Lifeline”), which offers low-
income consumers discounts on telephone and broadband
Internet access service. Qualified consumers receive service
from eligible telecommunications carriers, or “ETCs,” who in
turn receive a monthly federal support payment for each
Lifeline subscriber they serve. In 2005, “the Commission
decided to allow non-facilities-based providers (or ‘wireless
resellers’) to provide Lifeline services.” Nat’l Lifeline Ass’n v.
FCC, 921 F.3d 1102, 1108 (D.C. Cir. 2019) (as amended Apr.
10, 2019). To offer service to their subscribers, reseller ETCs
usually purchase usage allotments from facilities-based
carriers who possess their own wireless networks.
Many ETCs, including some resellers, use a standard fee-
for-service model, in which subscribers pay the ETC a
recurring, discounted monthly fee in exchange for service. A
substantial number of reseller ETCs, however, offer prepaid
wireless plans for which ETCs receive monthly Lifeline
support payments on behalf of subscribers.
Since 2012, the Commission has adopted several reforms
to the Lifeline support payment process. Currently, FCC rules
require ETCs to initiate a process of de-enrolling Lifeline
subscribers on prepaid plans who have not used their Lifeline
service within the preceding 30 days. 47 C.F.R. § 54.405(e)(3)
(2019). After 30 days of non-usage, such subscribers enter a
15-day “cure period.” At the beginning of the cure period,
3
subscribers’ ETCs are required to notify them that continued
non-usage will result in service termination. During the cure
period, however, ETCs must continue to provide Lifeline
service to non-use subscribers. However, if such a subscriber
uses Lifeline service during those 15 days, the non-usage is
“cured” and that subscriber may remain in the Lifeline
program.
The issue in this case concerns support payments to ETCs
for prepaid Lifeline subscribers in cure periods because of their
non-usage of the service. Two provisions of the FCC’s rules
are most notably in play. One provision states that ETCs will
receive payments for each “actual qualifying low-income
customer[] [the ETC] serves directly as of the first of the
month.” Id. § 54.407(a). Another provision states that for
prepaid Lifeline plans, an ETC “shall only continue to receive
[support payments] for . . . subscribers who have used the
service within the last 30 days, or who have cured their non-
usage.” Id. § 54.407(c)(2). In 2018, Petitioner National Lifeline
Association (“Petitioner”) – an industry trade group composed
primarily of Lifeline service providers – filed a Petition for
Declaratory Ruling (the “Petition”) with the FCC requesting
that “the Commission permit Lifeline ETCs to seek
reimbursement for all Lifeline subscribers served on the first
day of the month, including those subscribers receiving free-
to-the-end-user Lifeline service who are in the 15-day cure
period per the Commission’s non-usage rules.” Bridging the
Digital Divide for Low-Income Consumers, 34 FCC Rcd.
10,886, 10,936 (Oct. 30, 2019) (“2019 Lifeline Order”), Joint
Appendix (“J.A.”) 56. Petitioner primarily relied on 47 C.F.R.
§ 54.407(a). The Commission denied the Petition, holding that
the plain text of § 54.407(c)(2) controlled. See 34 FCC Rcd. at
10,937.
4
In January 2020, Petitioner filed a Petition for Review with
this court, contending that the FCC’s denial of its Petition for
Declaratory Ruling was contrary to the applicable statute,
inconsistent with the Commission’s rules, arbitrary and
capricious, and resulted in unconstitutional regulatory takings.
For the reasons explained below, we reject Petitioner’s claims.
Petitioner’s statutory argument – that the Commission’s
interpretation of its applicable rules violates 47 U.S.C.
§ 214(e) – is foreclosed because Petitioner did not raise this
claim with the FCC in the first instance. See 47 U.S.C.
§ 405(a). We also reject Petitioner’s challenge to the FCC’s
interpretation of § 54.407. The Commission’s position is
compelled by the unambiguous terms of the rules. We therefore
find no merit in Petitioner’s claim because it rests on an
untenable construction of the disputed rules. Finally, we find
no merit in any of the other claims before the court. We
therefore dismiss the Petition for Review as to Petitioner’s
statutory argument and deny all other claims.
I. BACKGROUND
A. Lifeline Service
In 1985, the Commission created the Lifeline program by
regulation “to ensure that low-income consumers had access to
affordable, landline telephone service following the divesture
of AT&T.” Nat’l Lifeline Ass’n, 921 F.3d at 1106 (citing MTS
and WATS Market Structure; and Establishment of a Joint
Board; Amendment, 50 Fed. Reg. 939 (Jan. 8, 1985)). In 1996,
Congress codified the program. Mozilla Corp. v. FCC, 940
F.3d 1, 68 (D.C. Cir. 2019) (per curiam) (citing 47 U.S.C.
§§ 214, 254).
The Commission’s rules require the Universal Service
Administrative Company (the “Administrator”) to administer
5
the Commission’s universal services programs, including the
Lifeline program. See 47 C.F.R. § 54.701(a). In that role, the
Administrator – an independent, not-for-profit corporation, see
Changes to the Board of Directors of the National Exchange
Carrier Association, Inc., 12 FCC Rcd. 18,400, 18,418-19 (July
17, 1997) – is responsible for, among other things, disbursing
support payments to ETCs. See 47 C.F.R. § 54.702(b).
However, the Administrator’s role is relatively narrow: It “may
not make policy, interpret unclear provisions of the
[applicable] statute or [the Commission’s] rules, or interpret
the intent of Congress.” Id. § 54.702(c). And, where the
applicable statute “or the Commission’s rules are unclear, or do
not address a particular situation, the Administrator [must] seek
guidance from the Commission.” Id.
Between 2005 – when the Commission first allowed
wireless resellers to participate in Lifeline – and 2012, Lifeline
support disbursements more than doubled, from under $1
billion annually to approximately $2.2 billion. See 2019
Lifeline Order at 10,888, J.A. 8. As this growth in Lifeline
occurred, so did waste, fraud, and abuse in the program. See id.
at 10,889, J.A. 9. In response, the Commission took several
steps designed to combat these problems without undermining
the goals of the program. See, e.g., Lifeline and Link Up
Reform and Modernization, 27 FCC Rcd. 6656, 6670 (Jan. 31,
2012) (“2012 Lifeline Order”); 2019 Lifeline Order at 10,893,
J.A. 13.
As mentioned above, many ETCs, including some
resellers, use a standard fee-for-service model, in which
subscribers pay the ETC a monthly fee in exchange for service.
See 2012 Lifeline Order at 6767-68. Other reseller ETCs
instead offer prepaid wireless plans. See 2019 Lifeline Order at
10,888, J.A. 8. For these plans, reseller ETCs often provide
subscribers with a free phone and a set amount of monthly
6
service. See id. Regardless of their fee structure, ETCs receive
Lifeline support payments for their active Lifeline subscribers.
See 2012 Lifeline Order at 6767. Fee-for-service ETCs use
these payments to discount each Lifeline subscriber’s recurring
monthly fee for ongoing service. See id. at 6767-68. For
prepaid plans, however, Lifeline subscribers are not required to
make recurring payments to their ETC; instead, the ETCs
receive the Lifeline support payments on behalf of such
subscribers. See id. at 6768. Thus, for prepaid plans, ETCs have
no regular billing arrangement with – and, sometimes, little
ongoing contact with – their Lifeline subscribers. See id.
In 2012, the Commission issued an Order establishing a
centralized database listing all Lifeline subscribers – the
National Lifeline Accountability Database (“NLAD”) – in
order “to detect and prevent duplicative support” attributable
to individual subscribers. 2012 Lifeline Order at 6734. To
populate the database, ETCs enter Lifeline subscriber data. Id.
at 6737-39. The ETCs and Administrator then must take steps
to ensure that there are no duplicative support payments
disbursed for individual Lifeline subscribers. See id. at 6743-
44, 6748-49.
The 2012 Lifeline Order also required ETCs to begin a
process of “de-enrolling” prepaid Lifeline subscribers who had
not used their Lifeline service in the prior 60 days. Id. at 6768-
69. The Commission explained that, due to the lack of a regular
billing relationship between ETCs and these subscribers, there
is a significant risk of “phantom accounts” for which the
subscriber is not “receiving the benefit of the supported
service.” Id. at 6771. In particular, “[t]he possibility that a
wireless phone has been lost, is no longer working, or the
subscriber has abandoned or improperly transferred the
account is much greater.” Id. As a result, for prepaid plans,
7
“there may be no other means beside usage patterns to track
whether a consumer” is still actually using Lifeline service. Id.
Rather than simply requiring ETCs to shut off prepaid
Lifeline service once there had been 60 days of non-usage, the
Commission allowed these subscribers a “cure period” of 30
days. See id. at 6875. At the beginning of the cure period, the
ETC was required to notify the subscriber that continued non-
usage would result in service termination. See 47 C.F.R.
§ 54.405(e)(3) (2012). During the cure period, the ETC was
required to continue providing Lifeline service to the
subscriber. See id. And if the subscriber used the Lifeline
service during that period, the non-usage was “cured” and the
subscriber remained in the Lifeline program. See id. From 2012
through 2016, subscriber usage was considered an outbound
call, purchase of additional talk time, answering a call from
someone other than the ETC, or actively confirming to the ETC
a desire to retain Lifeline service. See id. § 54.407(c)(2)(i)-(iv).
Along with these changes, the Commission revised 47
C.F.R. § 54.407(c) to restrict support payments attributable to
prepaid Lifeline subscribers who had not used their Lifeline
service for extended periods. To that end, the version of section
54.407(c)(2) adopted in the 2012 Lifeline Order provided that
for prepaid Lifeline subscribers, ETCs would “only continue to
receive universal service support reimbursement for . . .
subscribers who have used the service within the last 60 days,
or who have cured their non-usage.”
While the 2012 Lifeline Order established a de-enrollment
process and timeline, it did not require ETCs to submit Lifeline
support payment requests to the Administrator based on
subscribership levels as of particular dates. As a result, ETCs
submitted their requests to the Administrator reflecting their
number of Lifeline subscribers for different days each month.
8
Lifeline and Link Up Reform and Modernization, 30 FCC Rcd.
7818, 7898 (June 18, 2015) (“2015 Lifeline Order”). In 2015,
to further reduce waste in the program and to make the
Administrator’s operations more efficient, the Commission
revised 47 C.F.R. § 54.407(a) to require a uniform “snapshot
date” – the first day of the month – for support payment
requests. See id.; id. at 7926. This provision is known as the
“Snapshot Rule,” as it requires an ETC to take a “snapshot” of
its Lifeline subscribers as of the first of the month in order to
file requests for reimbursements attributable to those
subscribers.
In 2016, the Commission issued an Order mandating
creation of the National Lifeline Eligibility Verifier (the
“National Verifier”), an operations system with a central
database for Lifeline subscriber records building off the
NLAD. See Lifeline and Link Up Reform and Modernization,
31 FCC Rcd. 3962, 4006, 4010, 4016-17 (Mar. 31, 2016)
(“2016 Lifeline Order”). To reflect these changes, the
Commission again revised the text of 47 C.F.R. § 54.407(a),
with Lifeline support payments provided to ETCs “based on
the number of actual qualifying low-income customers [they]
serve[] directly as of the first day of the month found in the
National Verifier.” Id. at 4131. Other 2016 reforms included
reducing the non-usage period resulting in notification of
possible de-enrollment from 60 days to 30 days and reducing
the cure period from 30 days to 15 days. Id. at 4115. The
Commission also decided that sending a text message could
serve as “usage” of a subscriber’s Lifeline service. Id. at 4114.
Thus, by October 2016, 47 C.F.R. § 54.407(a) stated that
“[u]niversal service support for providing Lifeline shall be
provided directly to an eligible telecommunications carrier
based on the number of actual qualifying low-income
customers it serves directly as of the first day of the month”
9
(emphasis added). In turn, 47 C.F.R. § 54.405(e)(3) required
ETCs to continue to provide service to prepaid Lifeline
subscribers in non-usage cure periods. And 47 C.F.R.
§ 54.407(c)(2), which applied solely to prepaid Lifeline
service, stated that ETCs could “only continue to receive . . .
reimbursement for such Lifeline service provided to
subscribers who have used the service within the last 30 days,
or who have cured their non-usage as provided for in
§ 54.405(e)(3).” These regulatory provisions remain
substantively the same today.
B. Procedural History
In late 2016, numerous ETCs approached the FCC’s
Wireline Competition Bureau (the “Bureau”) seeking to
“clarify the interplay between” the foregoing rules. Petition at
2-3, J.A. 148-49. According to Petitioner, the Bureau provided
informal guidance that non-usage cure period Lifeline
subscribers on prepaid plans as of snapshot dates could be
included in reimbursement requests. Id. at 3, J.A. 149. The
Administrator then posted on its website that “[Lifeline
s]ervice providers must provide[] eligible subscribers with
service during the cure period and may include subscribers in
the cure period in their monthly snapshot.” Petition Ex., J.A.
158 (emphasis added). As a result, from late 2016 through late
2017, ETCs included prepaid cure period subscribers in
Lifeline support payment requests. See Comments of Sprint
Corp. at 1, J.A. 133.
In late 2017, the Administrator reversed its position,
revised its website, and required ETCs to remove non-usage
cure period subscribers from their monthly snapshots. See id.
The Administrator’s website also explained that ETCs could
upwardly adjust a previous month’s claims to receive
10
reimbursement for subscribers who subsequently cured their
non-usage. See Petition at 3, J.A. 149.
On February 7, 2018, Petitioner filed the Petition for
Declaratory Ruling with the Commission, advancing several
arguments in support of its view that ETCs should receive
payments for prepaid Lifeline subscribers in non-usage cure
periods as of snapshot dates. See J.A. 147-56. First, Petitioner
claimed that the text of 47 C.F.R. §§ 54.405(e)(3) and
54.407(a) mandated that ETCs receive payments for prepaid
Lifeline subscribers in non-usage cure periods. See id. at 4-5,
J.A. 150-51. Second, Petitioner argued that the Administrator
had exceeded its authority in changing its view. See id. at 6-7,
J.A. 152-53. Lastly, according to Petitioner, denial of the
Petition would be arbitrary and capricious or otherwise
unlawful. See id. at 7-10, J.A. 153-56. In particular, Petitioner
claimed that such action would be unjustified, see id. at 7-8,
J.A. 153-54, would harm ETCs’ reasonably held reliance
interests, see id. at 8, J.A. 154, would undermine the purposes
of the Lifeline program, see id. at 9, J.A. 155, and could result
in an unconstitutional regulatory taking, see id. at 9-10, J.A.
155-56. The Petition did not claim that the Commission lacked
statutory authority to adopt the rules in place.
Three ETCs filed Comments with the Commission in
support of the Petition. In addition to endorsing the Petition’s
arguments, the ETCs advanced their own arguments. First,
Sprint Corporation (“Sprint”) asserted that the Commission
should allow support payments for cure period subscribers
because ETCs incur costs to provide such subscribers with
service. See Comments of Sprint at 2-3, J.A. 134-35. Second,
Smith Bagley, Inc. (“Smith Bagley”) explained that ETCs
receive support payments for subscribers in cure periods facing
de-enrollment for reasons other than non-usage. See Comments
of Smith Bagley at 5, J.A. 141. Smith Bagley thus argued that
11
“[t]he Commission’s reimbursement rules do not provide a
basis” to treat non-usage cure period support payments
differently. See id. at 6, J.A. 142. Third, Q Link Wireless LLC
(“Q Link”) expanded on Petitioner’s argument that denial of
the Petition would result in an unconstitutional taking. See
Comments of Q Link at 2-3, J.A. 145-46.
On November 14, 2019, the Commission published the
2019 Lifeline Order denying the Petition. 2019 Lifeline Order
at 10,937, J.A. 57. According to the Commission, the plain
language of its rules mandated that ETCs exclude non-usage
cure period subscribers from support payment requests. See id.
In interpreting 47 C.F.R. § 54.407(a) and (c)(2), the
Commission stated that the specific provision, section
54.407(c)(2), controlled over the more general provision,
section 54.407(a). Id. at 10,938, J.A. 58. In addition, the
Commission rejected the claim that ETCs reasonably relied on
the Administrator’s website, because content posted on the
website was known to offer only informal, nonbinding advice.
Id. at 10,937 & n.338, J.A. 57. The Commission also noted that
after its 2015 adoption of the Snapshot Rule, some of
Petitioner’s members effectively acknowledged in submissions
to the FCC that non-usage cure period subscribers were to be
excluded from support payment requests. See id. at 10,938 &
n.339, J.A. 58. Finally, the Commission rejected the takings
arguments. The Commission noted that neither Petitioner nor
the commenting ETCs had quantified the economic impact of
excluding non-usage cure period subscribers from
reimbursement requests, and the FCC viewed any such impact
as “light.” See id. at 10,938-39, J.A. 58-59.
12
II. ANALYSIS
A. Standards of Review
The Petition for Review challenges the Commission’s
interpretation of its rules covering the Lifeline Program. The
Petition for Review does not assert that the Commission lacked
statutory authority to adopt and enforce the rules on which the
Commission relied in the disputed Order.
An agency may receive deference when it reasonably
interprets its own “genuinely ambiguous” regulations. Kisor v.
Wilkie, 139 S. Ct. 2400, 2414 (2019); see also Auer v. Robbins,
519 U.S. 452, 461 (1997). However, the Court made it clear in
Kisor that “if there is only one reasonable construction of a
regulation – then a court has no business deferring to any other
reading, no matter how much the agency insists it would make
more sense.” Id. at 2415.
Ambiguity, however, is necessary but not sufficient for us
to afford deference. The court must also ask “whether the
character and context of the agency interpretation entitles it to
controlling weight.” Kisor, 139 S. Ct. at 2416 (citing
Christopher v. SmithKline Beecham Corp., 567 U.S. 142, 155
(2012)).
The Supreme Court has set forth some guiding principles
to determine whether an agency’s interpretation of its own
regulations is entitled to deference. First, the interpretation at
issue “must be one actually made by the agency.” Id. at 2416.
That is, “it must be the agency’s ‘authoritative’ or ‘official
position,’ rather than any more ad hoc statement not reflecting
the agency’s views.” Id. (quoting United States v. Mead Corp.,
533 U.S. 218, 257-59, 258 n.6 (2001) (Scalia, J., dissenting)).
Second, “the agency’s interpretation must in some way
implicate its substantive expertise.” Id. at 2417. Third, “an
13
agency’s reading of a rule must reflect ‘fair and considered
judgment’ to receive . . . deference.” Id. (quoting Christopher,
567 U.S. at 155). Lastly, “[an] agency’s reading must fall
‘within the bounds of reasonable interpretation.’ And let there
be no mistake: That is a requirement an agency can fail.” Id. at
2416 (quoting City of Arlington v. FCC, 569 U.S. 290, 296
(2013)).
In determining whether a disputed agency action is
“arbitrary, capricious, an abuse of discretion, or otherwise not
in accordance with law,” 5 U.S.C. § 706(2)(A), the party
challenging the action bears the burden of proof, City of
Olmsted Falls v. FAA, 292 F.3d 261, 271 (D.C. Cir. 2002)
(citation omitted). “Under this highly deferential standard of
review, the court presumes the validity of agency action and
must affirm unless the Commission failed to consider relevant
factors or made a clear error in judgment.” Cellco P’ship v.
FCC, 357 F.3d 88, 93-94 (D.C. Cir. 2004) (internal quotation
marks and citations omitted).
Finally, we review constitutional challenges to agency
action de novo. See C-SPAN v. FCC, 545 F.3d 1051, 1054
(D.C. Cir. 2008) (citing Jifry v. FAA, 370 F.3d 1174, 1182
(D.C. Cir. 2004)).
B. Standing
Petitioner asserts, and the Commission does not contest,
that it has standing. We agree.
“In order to establish Article III standing, a plaintiff ‘must
have (1) suffered an injury in fact, (2) that is fairly traceable to
the challenged conduct of the defendant, and (3) that is likely
to be redressed by a favorable judicial decision.” N.Y. Stock
Exch. LLC v. SEC, 962 F.3d 541, 552 (D.C. Cir. 2020) (quoting
Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016) (as
14
revised May 24, 2016)). “An association has standing to bring
suit on behalf of its members when: (1) ‘its members would
otherwise have standing to sue in their own right;’ (2) ‘the
interests it seeks to protect are germane to the organization’s
purpose;’ and (3) ‘neither the claim asserted nor the relief
requested requires the participation of individual members in
the lawsuit.’” Ctr. for Sustainable Econ. v. Jewell, 779 F.3d
588, 596 (D.C. Cir. 2015) (quoting Hunt v. Wash. State Apple
Advert. Comm’n, 432 U.S. 333, 343 (1977)).
It is clear that some of the ETCs that are members of
Petitioner would have standing to sue in their own right. As a
result of the 2019 Lifeline Order, ETCs have not received
support payments for prepaid Lifeline subscribers who are in
cure periods on snapshot dates. See Decl. of David B. Dorwart,
Final Br. for Pet’r Addendum 2 (“Dorwart Decl.”) ¶¶ 5-7. Even
if this harm is small, as the Commission supposes, it is an
injury-in-fact nonetheless. Furthermore, this injury is traceable
to the Commission’s determination that such support payments
are not allowed under its rules. And, if this court were to grant
the Petition for Review, it would redress the ETCs’ injuries by
mandating reimbursement for cure period Lifeline subscribers
moving forward. Thus, any ETCs offering prepaid Lifeline
service have standing to challenge the denial of the Petition in
the 2019 Lifeline Order. Several such ETCs are members of
Petitioner. See Dorwart Decl. ¶¶ 3-5, 7. Because “at least one
of its members would have standing,” this first requirement for
associational standing is satisfied. See Sierra Club v. EPA, 292
F.3d 895, 898 (D.C. Cir. 2002).
Petitioner also satisfies the second requirement. “The
germaneness requirement mandates ‘pertinence between
litigation subject and organizational purpose.’” Ctr. for
Sustainable Econ., 779 F.3d at 597 (quoting Humane Soc’y of
the U.S. v. Hodel, 840 F.2d 45, 58 (D.C. Cir. 1988)). Petitioner
15
exists to “represent[] [ETCs] serving low-income consumers
participating in the Lifeline program.” Dorwart Decl. ¶ 2. As
an organization, it “supports the expanded availability and
affordability of the Lifeline program and advocates for reduced
barriers to program participation for low-income consumers
and the ETCs that serve them.” Id. ¶ 9. Here, the lack of support
payments attributable to non-usage cure period Lifeline
subscribers – and the possible economic impact on Petitioner’s
members – obviously is related to those goals. An ETC’s
operations may be affected in the absence of support payments.
This consideration is sufficient to satisfy the germaneness
requirement. And “[t]his is not a case in which an organization
seeks to litigate an issue about which it has little expertise and
does not much care.” Ctr. for Sustainable Econ., 779 F.3d at
597.
Finally, Petitioner satisfies the third requirement for
associational standing. “Member participation is not required
where a ‘suit raises a pure question of law’ and neither the
claims pursued nor the relief sought require the consideration
of the individual circumstances of any aggrieved member of
the organization.” Id. (quoting Int’l Union, United Auto.,
Aerospace, & Agric. Implement Workers of Am. v. Brock, 477
U.S. 274, 287 (1986)). Petitioner raises several arguments
before this court, but all are legal questions principally related
to the Commission’s interpretation of its regulations in the
2019 Lifeline Order. And “the relief [Petitioner] seeks is
invalidation of agency action,” rather than any remedy
particularized to individual members. See id. Therefore,
members of Petitioner do not need to participate in the
proceedings.
In sum, it is clear from the record in this case that
Petitioner has associational standing to press its arguments
before this court.
16
C. Petitioner’s Statutory Argument
In the claims presented to the court, Petitioner belatedly
asserts that the Commission’s interpretation of its applicable
rules violates 47 U.S.C. § 214(e). That statutory provision
requires an ETC to “offer the services that are supported by
Federal universal service support mechanisms” within
designated service areas. 47 U.S.C. § 214(e)(1)(A) (emphasis
added). According to Petitioner, “the service[]” at issue here is
not just voice or broadband service for Lifeline subscribers, but
“discounted voice/broadband service” specifically. Final Br.
for Pet’r at 47. Thus, Petitioner asserts that denial of the
Petition in the 2019 Lifeline Order violates section
214(e)(1)(A) because – for non-usage cure period
subscribers – ETCs “cannot offer a supported Lifeline
service . . . if [they] do[] not receive reimbursement.” Id. at 47-
48 (emphasis added). This claim was never raised with the
Commission. Therefore, the issue has been forfeited.
47 U.S.C. § 405(a) states, in relevant part, that
a petition for reconsideration shall not be a condition
precedent to judicial review of any [Commission]
order, decision, report, or action, except where the
party seeking such review . . . relies on questions of
fact or law upon which the Commission . . . has been
afforded no opportunity to pass.
47 U.S.C. § 405(a) (emphases added). We have “strictly
construed” § 405(a), and have made it clear that we will not
review arguments that have not first been presented to the
Commission. In re: Core Commc’ns, Inc., 455 F.3d 267, 276
(D.C. Cir. 2006) (citation omitted); Qwest Corp. v. FCC, 482
F.3d 471, 474 (D.C. Cir. 2007). “Thus, even when a petitioner
has no reason to raise an argument until the FCC issues an order
that makes the issue relevant, the petitioner must file a petition
17
for reconsideration with the Commission before it may seek
judicial review.” Globalstar, Inc. v. FCC, 564 F.3d 476, 484
(D.C. Cir. 2009) (citation and internal quotation marks
omitted).
Neither the Petition nor any of the supporting Comments
that were submitted to the Commission alleged that denial of
the Petition would violate 47 U.S.C. § 214(e). In fact, neither
Petitioner nor any other complaining party raised any statutory
arguments, save for their general argument that denial of the
Petition would violate the Administrative Procedure Act.
Rather, they relied on textual, policy, and constitutional
arguments. As a result, the FCC was never put on notice that
Petitioner meant to challenge the Commission’s statutory
authority to adopt the interpretation at issue in this case. We
therefore dismiss the Petition for Review as to this argument.
D. The Lifeline Rules Unambiguously Foreclose
Payments to ETCs for Subscribers in Prepaid Plans
Who Have Not Used Lifeline Service for 30
Consecutive Days or Who Have Not Cured Their
Nonusage
The principal issue in this case concerns Petitioner’s claim
that the Commission misinterpreted its established regulations,
not that the agency impermissibly promulgated a new rule. In
addition, Petitioner does not challenge the legality of any
existing rule covering the Lifeline program. Indeed, any such
challenge would likely be untimely. See Vernal Enters., Inc. v.
FCC, 355 F.3d 650, 655 (D.C. Cir. 2004) (explaining that
petitions for review of Commission orders outside of certain
enumerated situations “must be filed within 60 days of the date
of public notice” (citing 28 U.S.C. § 2344)).
As explained above, there has been some confusion in
recent years over de-enrolling Lifeline subscribers on prepaid
18
plans for non-usage and how ETCs should be paid for those
subscribers. To address the situation, the Commission
entertained Petitioner’s request for declaratory relief and then
issued the Order that is now the subject of review in this case.
And counsel for the FCC conceded during oral argument that
the agency’s denial of the Petition in the 2019 Lifeline Order is
final and subject to review. See Tr. of Oral Arg. at 27:19.
In support of its interpretation, the Commission rests
primarily on section 54.407(c)(2). Since 2012, this provision
has stated that when an ETC does not charge its subscribers a
monthly fee for Lifeline service, it “shall only continue to
receive universal service support reimbursement for such
Lifeline service provided to subscribers who have used the
service within [a specified time period], or who have cured
their non-usage.” 47 C.F.R. § 54.407(c)(2). In the
Commission’s view, the explicit restriction in section
54.407(c)(2) is a clear exception to the more general rule that
Lifeline subsidies shall be provided to ETCs for Lifeline
subscribers the ETC “serves directly as of the first day of the
month.” 47 C.F.R. § 54.407(a).
In response, Petitioner asserts that section 54.407(c)(2)
does not, in any way, relate to whether ETCs may receive
support payments for non-usage cure period subscribers.
Instead, according to Petitioner, that regulatory provision
merely “creates a process for eliminating future reimbursement
for de-enrolled subscribers once the non-usage and cure
periods both have elapsed.” Final Br. for Pet’r at 44; accord
Final Reply Br. for Pet’r at 5. Thus, in Petitioner’s view,
“[n]owhere does [section 54.407(c)(2)] prohibit Providers from
claiming Lifeline reimbursement for cure period subscribers
still enrolled in the program and served as of the snapshot
date.” Final Reply Br. for Pet’r at 5. Instead, Petitioner believes
19
the outcome is controlled by the text of the Snapshot Rule, 47
C.F.R. § 54.407(a), and 47 C.F.R. § 54.405(e)(3).
Petitioner is correct that section 54.407(a) appears, at first
blush, to require support payments for all “actual qualifying
low-income customers” whom ETCs serve as of the first day
of a month. And section 54.405(e)(3) appears to require that
ETCs must provide service to non-usage cure period
subscribers on prepaid plans. However, Petitioner is mistaken
in claiming that section 54.407(c)(2) does nothing more than
“create[] a process for eliminating future reimbursement for de-
enrolled [Lifeline] subscribers.” Final Br. for Pet’r at 44. As the
Commission noted in the 2019 Lifeline Order, the plain text of
section 54.407(c)(2) prohibits support payments for prepaid
Lifeline subscribers in non-usage cure periods: ETCs “shall
only continue to receive universal service support
reimbursement for such Lifeline service provided to
subscribers who have used the service within the last 30 days,
or who have cured their non-usage.” 47 C.F.R. § 54.407(c)(2)
(emphases added); see 2019 Lifeline Order at 10,937-38.
Prepaid Lifeline subscribers in non-usage cure periods as of a
snapshot date have neither “used the service within the last 30
days” nor “cured their non-usage.” Thus, the natural and best
reading of section 54.407(c)(2) is that ETCs may not receive
support payments for such subscribers.
Because the Snapshot Rule arguably requires what 47
C.F.R. § 54.407(c)(2) prohibits, it might be argued that the
rules appear to be “genuinely ambiguous.” Kisor, 139 S. Ct. at
2414. We are not convinced, however. In our view, and for the
reasons that we set forth below, we find that the Commission’s
interpretation is compelled by the terms of the rules. And Kisor
instructs that “if there is only one reasonable construction of a
regulation – then a court has no business deferring to any other
reading, no matter how much the agency insists it would make
20
more sense.” 139 S. Ct. at 2415 (holding that “[i]f uncertainty
does not exist, there is no plausible reason for deference”).
Therefore, we need not “defer” to the Commission’s judgment,
as if to suggest that there are other reasonable constructions of
the rules. We simply reject Petitioner’s position because it rests
on an untenable interpretation of the rules.
We should make it clear, however, that even if the rules
are seen to be genuinely ambiguous, “the character and context
of the agency interpretation entitles it to controlling weight.”
Id. at 2416 (citation omitted). The Supreme Court has
cautioned that, with respect to this inquiry, our analysis cannot
be “reduce[d] to any exhaustive test.” Id. However, if we
adhere to the interpretive guideposts set forth by the Supreme
Court in Kisor, we have little trouble in concluding that we
would be obliged to defer to the Commission’s position in this
case if the rules were genuinely ambiguous.
First, the disputed interpretation was “actually made by the
agency.” Id. Put another way, it was “the agency’s
‘authoritative’ [and] ‘official position’” on this issue and
“emanate[d] from those actors, using those vehicles,
understood to make authoritative policy in the relevant
context.” Id. (quoting Mead, 533 U.S. at 257-59, 258 n.6
(Scalia, J., dissenting)). The Commission denied the Petition in
a formal Order published in the Federal Register. It cannot be
doubted that this expressed an “authoritative” and “official
position” on the matter in issue.
Second, the interpretation espoused in the 2019 Lifeline
Order “implicate[d] [the Commission’s] substantive
expertise.” Id. at 2417. The Court has explained that, under this
factor, “the basis for deference ebbs when ‘[t]he subject matter
of the [dispute is] distan[t] from the agency’s ordinary’ duties
or ‘fall[s] within the scope of another agency’s authority.’” Id.
21
(alterations in original) (quoting City of Arlington, 569 U.S. at
309 (Breyer, J., concurring in part and concurring in the
judgment)). The issue presented here involved administration
of Lifeline, a complex program laden with carefully considered
implicit and explicit policy judgments on the part of the
Commission. See, e.g., 2012 Lifeline Order at 6771 (explaining
policy rationale for why only prepaid Lifeline service is subject
to the non-usage rules of 47 C.F.R. § 54.407(c)); 2016 Lifeline
Order at 4114-15 (explaining why the Commission decided to
allow sending a text message to serve as evidence of usage and
why it concurrently reduced the length of non-usage periods
leading to a Lifeline subscriber’s de-enrollment). And
Congress has explicitly entrusted the Commission with
implementation and oversight of the program. See 47 U.S.C.
§ 254(c)(1) (requiring the Commission to “establish[]” and
“defin[e] . . . the services that are supported by Federal
universal service support mechanisms”); see also Mozilla
Corp., 940 F.3d at 68 (discussing the background of, and the
Commission’s role in, the Lifeline program). The FCC’s action
in this case surely implicated its “policy expertise.” Kisor, 139
S. Ct. at 2417.
Third, the Commission’s interpretation “reflect[ed its]
‘fair and considered judgment.’” Id. at 2417 (quoting
Christopher, 567 U.S. at 155). Based on the record, the
Commission carefully considered Petitioner’s arguments –
from both a policy and an interpretative standpoint – and
rejected them. Furthermore, the Commission did not adopt its
interpretation as merely a “‘convenient litigating position’ or
‘post hoc rationalizatio[n] advanced’ to ‘defend past agency
action against attack.’” Id. (alteration in original) (quoting
Christopher, 567 U.S. at 155).
It is true that under this factor, “a court may not defer to a
new interpretation, whether or not introduced in litigation, that
22
creates ‘unfair surprise’ to regulated parties.” Id. at 2417-18
(quoting Long Island Care at Home, Ltd. v. Coke, 551 U.S.
158, 170 (2007)). Ultimately, that inquiry turns in large part on
whether the interpretation results in a “lack of ‘fair warning’”
to the regulated entities. Id. at 2418 (quoting Christopher, 567
U.S. at 156). As we explain below, there was no good reason
for Petitioner to have been surprised, let alone unfairly
surprised, by the Commission’s interpretation. From
Petitioner’s perspective, the relevant regulations were – at
best – ambiguous. The Petition itself seems to acknowledge as
much. See Petition at 2, J.A. 148 (explaining that ETCs
approached the Bureau seeking to “clarify the interplay”
between the regulations). And the guidance from the
Administrator that had created some confusion had only been
in place for little over a year and was merely “informal.” See
id. at 3, J.A. 149. To the extent these facts have any relevance
under this factor, they do not undermine our view that the
Commission’s interpretation was a product of its fair and
considered judgment.
Accordingly, we find that the character and context of the
Commission’s interpretation of its regulations in the 2019
Lifeline Order are sufficient for deference under Kisor if the
rules are seen to be genuinely ambiguous. Thus, if the
interpretation is “reasonable,” or “within the zone of
ambiguity” the language of the regulations reasonably permits,
it is entitled to deference. Id. at 2415-16 (citation omitted).
Under that standard, the Commission’s interpretation easily
passes muster.
When two provisions irreconcilably conflict, the specific
one generally governs. See Adirondack Med. Ctr. v. Sebelius,
740 F.3d 692, 698 (D.C. Cir. 2014). Section 54.407(a)
establishes a general rule: ETCs receive support payments for
Lifeline subscribers “serve[d] directly as of the first of the
23
month.” That broad language would seemingly include all
prepaid Lifeline subscribers. Section 54.407(c), however,
carves out specific exceptions applicable only to prepaid plans.
Thus, the Commission’s judgment that the command of the
more specific provision controls was reasonable. See RadLAX
Gateway Hotel, LLC v. Amalgamated Bank, 566 U.S. 639, 646
(2012) (“It is an old and familiar rule that, where there is, in the
same statute, a particular enactment, and also a general one,
which, in its most comprehensive sense, would include what is
embraced in the former, the particular enactment must be
operative, and the general enactment must be taken to affect
only such cases within its general language as are not within
the provisions of the particular enactment.” (quoting United
States v. Chase, 135 U.S. 255, 260 (1890))).
Furthermore, the Commission’s interpretation gives
meaning to every provision in the rules: The general
reimbursement rule contained in section 54.407(a) applies to
fee-for-service Lifeline plans, while the specific exceptions in
section 54.407(c) apply only to prepaid plans. To read the
regulations otherwise would render significant portions of
section 54.407(c)(2) nugatory, a result to be avoided if
possible. See Del. Dep’t of Nat. Res. & Env’t Control v. EPA,
895 F.3d 90, 99 (D.C. Cir. 2018) (“[W]e strive to construe [a]
statute[] ‘so that effect is given to all its provisions, so that no
part will be inoperative or superfluous, void or insignificant.’”
(quoting Corley v. United States, 556 U.S. 303, 314 (2009))).
In sum, we hold that the disputed rules clearly foreclose
payments to ETCs for subscribers in prepaid plans who have
not used Lifeline service for 30 consecutive days or who have
not cured their nonusage. We see no genuine ambiguity in the
rules requiring us to apply “Auer deference.” Kisor, 139 S. Ct.
at 2410. Given this finding, it goes without saying that the
24
Commission’s interpretation would easily garner deference
under Kisor if the rules were genuinely ambiguous.
E. The Commission’s Action was not Arbitrary and
Capricious
Petitioner also argues that, even if the Commission’s
interpretation of its rules was permissible, the denial of the
Petition in the 2019 Lifeline Order was arbitrary and capricious
for want of reasoned decisionmaking and lack of evidentiary
support. We disagree.
First, we reject Petitioner’s argument that the
Commission’s interpretation violates the purpose and design of
the Snapshot Rule. We agree with Petitioner that the Snapshot
Rule in 47 C.F.R. § 54.407(a) appears designed to “establish[]
Provider reimbursement claim amounts,” Final Br. for Pet’r at
20, but this does not carry the day. When the Commission
adopted the Snapshot Rule in 2015, it left in place section
54.407(c)(2), including its treatment of prepaid Lifeline
subscribers who have not used their Lifeline service for an
extended period. Thus, the Snapshot Rule was cabined by other
provisions in the Commission’s rules that remained in place
and continued to reasonably prohibit reimbursement for non-
usage, cure-period Lifeline subscribers.
Second, Petitioner argues that the 2019 Lifeline Order runs
counter to specific record evidence. According to Petitioner,
the Commission ignored its contention that if ETCs “are
prohibited from seeking reimbursement for providing Lifeline
service to eligible subscribers in a cure period as of the
snapshot date, they will have difficulty maintaining current
service offerings.” Final Br. for Pet’r at 25. Furthermore,
Petitioner asserts that the Commission ignored Sprint’s
Comment “detail[ing] the significant investments [ETCs]
make to provide Lifeline service to cure period subscribers.”
25
Id. As a result, according to Petitioner, the 2019 Lifeline Order
will lead to a “detrimental impact” on “Lifeline program
availability and affordability.” Id. at 27. Petitioner has failed to
support these claims, however.
Petitioner’s policy arguments should have been raised in
2012, when the Commission adopted the specific language in
section 54.407(c)(2) that supports the Commission’s decision
here to prohibit reimbursement for non-usage, cure-period
subscribers. Even if we assume that these claims can be
properly reviewed now, say, because the FCC effectively
reopened the matters for further consideration, we still find no
merit in Petitioner and Sprint’s claims. Neither Petitioner nor
Sprint provided any quantitative data to back up its assertions,
such as: (1) how many prepaid subscribers are in cure periods
on snapshot dates? (2) how much does it cost ETCs to provide
service for non-usage cure period subscribers? (3) what
percentage of prepaid subscribers ultimately cure their non-
usage? or (4) how much would it likely cost to update internal
ETC systems to implement any necessary changes? Given the
record in this case, the Commission justifiably concluded that
the alleged burden imposed on ETCs under its interpretation of
the rules would not be particularly onerous. See 2019 Lifeline
Order at 10,939, J.A. 59.
Third, Petitioner asserts that the 2019 Lifeline Order did
not properly address Smith Bagley’s claim that the FCC’s
enforcement scheme is unreasonable because it is internally
inconsistent. Final Br. for Pet’r at 28-30. Smith Bagley pointed
out in its Comment that Lifeline users can be de-enrolled for
several reasons, only one of which is non-usage. See
Comments of Smith Bagley at 5, J.A. 141; 47 C.F.R.
§ 54.405(e)(1), (3)-(5). For example, a Lifeline subscriber may
be de-enrolled if it appears the subscriber no longer qualifies as
a “low-income consumer” eligible to participate in the Lifeline
26
program. See 47 C.F.R. § 54.405(e)(1). The Commission’s
rules create a 30-day cure period for non-eligibility, during
which a subscriber is provided an opportunity to demonstrate
that they remain a qualifying low-income consumer and during
which – as for non-usage cure periods – an ETC must still
provide Lifeline service. See id. However, because the
strictures of section 54.407(c)(2) do not apply to de-enrollment
reasons other than non-usage, the Commission’s rules appear
to allow ETCs to receive support payments for these
subscribers in non-eligibility cure periods as of snapshot dates.
See id. § 54.407(a). Given this perceived inconsistency, Smith
Bagley argued that “[t]he Commission’s reimbursement rules
do not provide a basis for such a distinction” between non-
usage cure periods and cure periods for other de-enrollment
reasons. Comments of Smith Bagley at 6, J.A. 142 (emphasis
added).
However, as the Commission explained, the applicable
rules do provide a basis for such a distinction. The plain text of
section 54.407(c)(2) – carving out non-usage as a specific
exception to the general reimbursement rule of section
54.407(a) – provides a strong textual basis for differentiated
treatment between non-usage cure periods and all other cure
periods. And the Commission has explained why non-usage in
the prepaid category is unique and, thus, requires unique
treatment. See 2012 Lifeline Order at 6771. In sum, the full
reach of the Commission’s rationale justifying the 2012, 2015,
2016, and 2019 Lifeline Orders makes it clear that Smith
Bagley’s “inconsistent enforcement” argument is without
merit.
Fourth, as suggested above, the 2019 Lifeline Order did
not trample any reasonable reliance interests held by Petitioner
or ETCs such that denial of the Petition was arbitrary and
capricious. According to Petitioner, ETCs were misled when
27
they relied on the informal guidance posted on the
Administrator’s website. This is a specious claim. Under the
Commission’s rules, the “Administrator may not make policy,
interpret unclear provisions of the [applicable] statute or
[Commission] rules, or interpret the intent of Congress.” 47
C.F.R. § 54.702(c). Indeed, the website itself provided “no
assurance that the Commission ever accepted [the
Administrator’s 2016 approach] as correct . . . , nor even that
the Commission scrutinized the details” of the issue. See SNR
Wireless LicenseCo, LLC v. FCC, 868 F.3d 1021, 1037 (D.C.
Cir. 2017). Furthermore, the Petition itself acknowledged that
the Administrator has only a “limited role,” which necessitated
Commission intervention following the Administrator’s
revision of its website. Petition at 6, J.A. 152. And the Petition
noted that “the Commission previously has reversed decisions
by [the Administrator] that have been rendered in the absence
of a formal interpretation by the Commission of its rules.” Id.
Thus, information on the Administrator’s website in 2016 “did
not require the Commission to follow the same approach”
when evaluating the merits of the Petition. See SNR Wireless,
868 F.3d at 1037.
In addition, the Petition itself effectively acknowledged
that there was some confusion over how 47 C.F.R.
§§ 54.405(e)(3), 54.407(a), and 54.407(c)(2) should be
construed together. Indeed, this apparently explains why ETCs
approached the Bureau in late 2016 seeking to “clarify the
interplay” of those three rules. Petition at 2, J.A. 148. What
resulted was – in the words of the Petition – “informal
guidance” from the Bureau and changes to the Administrator’s
website. Id. at 3, J.A. 149. The informal guidance offered to
Petitioner and ETCs certainly did not nullify the Commission’s
authority to officially interpret its own rules when Petitioner
sought declaratory relief. See SNR Wireless, 868 F.3d at 1037
(noting a prior holding of this court “that the reasoning behind
28
unchallenged Media Bureau actions cannot be attributed to the
[Commission] unless and until the [FCC] has endorsed those
actions” (internal quotation marks and ellipses omitted)
(quoting Comcast Corp. v. FCC, 526 F.3d 763, 769 (D.C. Cir.
2008))).
F. Petitioner Has Not Established a Viable Regulatory
Takings Claim
Finally, we reject Petitioner’s argument that denial of the
Petition violated the Takings Clause of the Constitution. The
Fifth Amendment prohibits the taking of “private property . . .
for public use, without just compensation.” Under this clause,
“whether a particular restriction will be rendered invalid by the
government’s failure to pay for any losses proximately caused
by it depends largely” upon an ad hoc inquiry for a given case.
Penn Cent. Transp. Co. v. City of N.Y., 438 U.S. 104, 124
(1978) (citation omitted). However, when an owner of property
voluntarily participates in a regulated market, additional
regulations that “may reduce the value of the property
regulated” do not result in a taking. Bowles v. Willingham, 321
U.S. 503, 517 (1944); see also Garelick v. Sullivan, 987 F.2d
913, 916 (2d Cir. 1993) (“[W]here a service provider
voluntarily participates in a price-regulated program or
activity, there is no legal compulsion to provide service and
thus there can be no taking.”).
Before this court, Petitioner argues that its members’
property interests subject to a taking are “the voice/data usage
allotments purchased” by wireless resellers “to provide
Lifeline service to subscribers in a cure period.” Final Br. for
Pet’r at 51. According to Petitioner, ETCs purchase such
allotments specifically to serve prepaid Lifeline subscribers in
cure periods, and those allotments cannot be repurposed. See
id. at 51-52.
29
On the record before the court, Petitioner has not
established a Takings Clause violation. ETCs voluntarily elect
to participate in the Lifeline program. Further, they are not
required to offer prepaid Lifeline service. To the extent ETCs
decide that there is now less value in prepaid plans than they
initially perceived, they may elect to discontinue such plans or
exit the Lifeline market altogether. Regardless, “[t]here is no
requirement that the [allotments purchased by ETCs] be used
for purposes which bring them under the” auspices of 47 C.F.R.
§ 54.407(c)(2). See Bowles, 321 U.S. at 517. Thus, Petitioner
has not established a Takings Clause violation. See Garelick,
987 F.2d at 916-17.
III. CONCLUSION
For the reasons set forth above, we dismiss the Petition for
Review as to Petitioner’s statutory argument and deny all other
claims.