Appendix — Sprint Nextel Corp. Corp. v. National Association of State Utility Consumer Advocates (No. 06-1184)
Supreme Court brief2007
Ask Donna
What actually matters in this document.
Text
No. OFFICE OF THE CLERK
In the Supreme Court of the United
States
SPRINT NEXTEL CORPORATION AND
T-MOBILE USA, INC.
Petitioners,
NATIONAL ASSOCIATION OF STATE UTILITY CONSUMER
ADVOCATES, ET AL.
Respondents.
On Petition for a Writ of Certiorari to the United States
Court of Appeals for the Eleventh Circuit
APPENDIX TO
PETITION FOR A WRIT OF CERTIORARI
LEONARD J. KENNEDY CHRISTOPHER J. WRIGHT*
SPRINT NEXTEL CORPORATION TIMOTHY J. SIMEONE
2001 Edmund Halley Drive STEPHANIE WEINER
Reston, VA 2019] HARRIS, WILTSHIRE &
GRANNIS LLP
THOMAS J. SUGRUE 1200 Eighteenth Street. N.W.
T-MOBILE USA, INC. Washington, DC 20036
401 9th Street, NW, Suite 550 = (202) 730-1300
Washington, DC 20004 * Counsel of Record
TABLE OF CONTENTS
Page
Appendix A (Eleventh Circuit opinion, filed July 31,
aces ciara cbacativeennmseamabammpbieiies la
Appendix B (order denying rehearing en banc, filed
Ns i aia ier acialinc cia hae erasiaininenncidanentobes 34a
Appendix C (order on petition for panel rehearing,
Sh RETR e eae: SSeS ne 36a
Appendix D (FCC Decision, rel. Mar. 18, 2006) ........ 38a
Appendix E (Peck v. Cingular Wireless, LLC, W.D.
Washington, filed Oct. 24, 2006) ......... es seseeeseees 14la
Appendix F (Peck v. Cingular Wireless, LLC, W.D.
Washington, filed Nov. 30, 2006) ...........cccesseseees 149a
Appendix G (Hesse v. Sprint Spectrum, L.P., W.D.
Washington, filed Jan. 18, 2007) ......... ec eeeeeeeeees lS5la
Appendix H (letter from Indiana State Utility
Commission, dated Aug. 1, 2003) 00... eee eeeeeeeee 159a
yo BE Bet adl & 5» | SERN nn nnn l6la
la
APPENDIX A
UNITED STATES COURT OF APPEALS FOR THE
ELEVENTH CIRCUIT
Nos. 05-11682 AND 05-12601
NATIONAL ASSOCIATION OF STATE UTILITY CONSUMER
ADVOCATES, PETITIONER
NATIONAL ASSOCIATION OF REGULATORY UTILITY
COMMISSIONERS, INTERVENOR-PETITIONER
V.
FEDERAL COMMUNICATIONS COMMISSION, RESPONDENT
AT&T CORPORATION,
CINGULAR WIRELESS, INC..,
LEAP WIRELESS INTERNATIONAL, INC.,
NEXTEL COMMUNICATIONS, INC.,
SPRINT CORPORATION,
T-MOBILE USA, INC.,
VERIZON,
CELLULAR TELECOMMUNICATIONS AND INTERNET
ASSOCIATION, INTERVENORS-RESPONDENTS
VERMONT PUBLIC SERVICE BOARD, PETITIONER
Vv.
FEDERAL COMMUNICATIONS COMMISSION, RESPONDENT
July 31, 2006, Filed
2a
Petitions for Review of Decisions of the Federal
Communications Commission.
Before: BLACK, PRYOR and COX, Circuit Judges.
PRYOR, Circuit Judge.
OPINION
The key issue presented in this petition for review is
whether the Federal Communications Commission exceeded
its authority, under section 332(c)(3)(A) of the
Communications Act of 1934, when it issued an order that
preempted the states from requiring or prohibiting the use of
line items in customer billing for cellular wireless services.
47 U.S.C. § 332(c)(3)(A); see Truth-in-Billing and Billing
Format, Nat'l Ass'n of State Util. Consumer Advocates’
Petition for Declaratory Ruling Regarding Truth-in-Billing,
20 F.C.C.R. 6448 (2005) [hereinafter “Second Report and
Order” or “the Order”]. The Commission argues, on the one
hand, that the regulation of line-item billing involves “rates
charged” for cellular wireless services, which is the exclusive
province of federal regulation. 47 U.S.C. § 332(c)(3)(A).
Representatives of state interests argue, on the other hand,
that the regulation of line-item billing involves “other terms
and conditions” of cellular wireless services, which are
regulable by the states. /d.
This appeal also addresses three threshold issues: (1)
whether, under the Hobbs Act, 28 U.S.C. § 2344, this Court
lacks subject matter jurisdiction to review the petition filed
by the Vermont Public Service Board (the Vermont Board);
(2) whether the Nationa! Association of Regulatory Utility
Commissioners (the State Utility Regulators) may participate
as an intervenor: and (3) whether the National Association of
3a
State Utility Consumer Advocates (the State Consumer
Advocates) has standing to petition for review. As to the
threshold issues, we dismiss the petition of the Vermont
Board because it is not a “party aggrieved” by the Second
Report and Order, but we allow the State Utility Regulators
to continue as an intervenor and deny the motion to dismiss
the petition of the State Consumer Advocates, which have
standing as a consumer of wireless service.
On the key issue, we grant the petitions for review
because we conclude that the Commission exceeded its
authority when it preempted the states from requiring or
prohibiting the use of line items. The scope of federal
authority to regulate “rates” or “entry” does not include the
presentation of line items on cellular wireless bills. 47 U.S.C. .
§ 332(c)(3)(A). This billing practice is a matter of “other
terms and conditions” that Congress intended to be regulable
by the states. /d.
I. BACKGROUND
The State Consumer Advocates filed a petition with the
Commission that requested a prohibition on the use of line
items by cellular wireless carriers unless the line item is
mandated by state or federal law. In response to this petition,
the Commission issued an order that amended the Truth-in-
Billing Rules of the Commission, preempted the states from
requiring or prohibiting the use of line items in customer
billing for wireless service, and proposed further rulemaking
to preempt the states from the regulation of billing practices
of wireless service providers. The State Consumer Advocates
and the Vermont Board petition for review of the Order by
the Commission. Sprint Nextel Corp. and Cingular Wireless
LLC (collectively, the Carriers) intervene in support of the
Commission, and the State Utility Regulators intervene in
support of the Vermont Board.
To explain the context of this appeal, we address three
4a
preliminary matters. We first describe the enactment and
amendment of the Communications Act and _ the
promulgation of the Truth-in-Billing Rules. We next discuss
the petition for declaratory ruling filed by the State Consumer
Advocates and the Second Report and Order issued by the
Commission in response to that petition. We then discuss
motions filed by the Carriers and the Commission to dismiss
the petitions of the Vermont Board and the State Consumer
Advocates.
A. The Communications Act of 1934 and the
Truth-in-Billing Rules
The Communications Act of 1934, 47 U.S.C. §§ 151 to
615b, was enacted “for the purpose of regulating interstate
and foreign commerce in communication by wire and radio.”
Id. § 151. The Act vested the Commission with the authority
to regulate radio frequencies used in wireless services. Id. §
303. In 1993, Congress amended the Communications Act to
create a new regulatory class called “commercial mobile
radio service,’ which is “any mobile service [] that is
provided for profit and makes interconnected service
available [] to the public or [] to such classes of eligible users
as to be effectively available to a substantial portion of the
public.” /d. § 332(d)(1). The amendment granted the federal
government exclusive authority to regulate the “rates
charged” and “entry” of wireless carriers. See id. §
332(c)(3)(A). Although the states were prohibited from
regulating “rates” or “entry,” the amendment provided that
the states could continue to regulate “other terms and
conditions” of wireless service. /d. § 332(c)(3)(A).
In May 1999, in response to a growing concern with
consumer fraud in the provision of telecommunications
services. the Commissicn promulgated the Truth-in-Billing
Rules. /n the Matter of Truth-in-Billing and Billing Format.
14 F.C.C.R. 7492 (1999) [hereinafter “First Report and
5a
Order”. The stated purpose of the Rules was “to ensure that
consumers are provided with basic information they need to
make informed choices in a competitive telecommunications
marketplace, while at the same time protecting themselves
from unscrupulous competitors.” /d. at 7493-94. The Truth-
in-Billing Rules required consumer telephone bills to (1) “be
clearly organized, clearly identify the service provider, and
highlight any new providers”; (2) “contain full and non-
misleading descriptions of charges”; and (3) “contain clear
and conspicuous disclosure of any information the consumer
may need to make inquiries about, or contest charges, on the
bill.” Id. at 7496 5.
The Commission exempted wireless service providers
from severai of these rules, id. at 7501-02 44 13-19, but the
Cermmissicn required, among other things, “(1) that the name
mf the service provider associated with each charge be clearly
identified on the bill: and (2) that each bill should
prominently display a telephone number that customers may
call free-of-charge in order to inquire or dispute any charge
comfained on the bill.” Jd. at 7502 § 15. The Commission
soughi further comment on whether the Truth-in-Billing
Rules should be applied to wireless service providers. /d. at
75354 68.
EB. The State Consumer Advocates and the Second
Report and Order
The State Consumer Advocates “are state agencies
designated by laws of their respective jurisdictions to
represent the interests of utility consumers before regulatory
agencies and in the courts.” The State Consumer Advocates
petitioned the Commission for a declaratory ruling that
prohibited wireless telecommunications carners “from
imposing any separate line item or surcharge on a customer's
bill that was not mandxed or authorized by federal. state or
local law.” Second Repos and Order, 20 F.C.C.R. at 6449 4
6a
1. A line item is “a discrete charge identified separately on an
end user’s bill.” Jd at 6462 § 30. According to the State
Consumer Advocates, the use of line items that were not
required by federal or state law violated the Truth-in-Billing
Rules and the Communications Act because these line items
“do not allow customers to accurately assess what they are
being billed for or permit customers to determine whether the
amounts charged conform to the price charged for service.”
Id. at 6454 § 13 n.32.
In response to the request for a declaratory ruling filed by
the State Consumer Advocates, the Commission issued a
notice that solicited comments regarding the petition. The
notice stated that the Commission “seeks comment,” about
whether telecommunications carriers should be prohibited
from “imposing monthly line-item charges, surcharges or
other fees on customers bills unless such charges have been
expressly mandated by a regulated agency.” Nat'l Ass’n of
State Util. Consumer Advocates’ Petition for Declaratory
Ruling Regarding Truth-in-Billing, 19 F.C.C.R. 9541 (2004)
(public notice). Comments were submitted by wireless
carriers. the State Utility Regulators, the State Consumer
Advocates. and individual consumers. Many consumers
submitted brief comments that expressed confusion and
dissatisfaction with their monthly telephone bills.
After the public comment period closed, during the so-
called “permit but disclose” proceedings, see 47 C.F.R. §
1.1206, the Commission received ex parte presentations and
letters. On March 3, 2005, the State Utility Regulators
provided notice of oral and written ex parte communications
with the members of the Commission. Also on March 3, the
Vermont Board sent an ex parte letter addressed to the five
members of the Commission. On March 4, the permit-but-
disclose period closed, and communications with the
Commission were no longer permitted. See id. § 1.1203. On
that date. the Vermont Board electronically filed notice of the
Ta
ex parte letter it had sent on March 3, but the Clerk of the
Commission excluded the letter because it “was received
during the Sunshine Agenda period, and is associated with,
but not made part of the record.”
On March 18, 2005, the Commission issued its
conclusions in an Order that addressed three issues. First, in a
“Second Report and Order,” the Commission amended or
clarified the Truth-in-Billing Rules and applied these rules to
wireless service providers. Second Report and Order, 20
F.C.C.R. at 6454-58 9§ 14-20. Second, in a “Declaratory
Ruling,” the Commission denied the petition filed by the
State Consumer Advocates and preempted the states from
requiring or prohibiting the use of line items on monthly
telephone bills by wireless service providers. /d. at 6458-
6467 *§ 21-36. Third, the Commission requested a “Second
Further Notice of Proposed Rulemaking” that proposed to
adopt new rules in the billing practices of wireless service
providers. /d. at 6467-6478 4] 37-57.
As to the first issue, the Commission reviewed the history
of the Truth-in-Billing Rules and concluded “that [wireless
service providers] should no longer be exempt from [the]
requirement that billing descriptions be brief, clear, non-
misleading and in plain language.” Jd. at 6456 4 16; see also
47 C.F.R. § 64.2401(b). The Commission found that “the
increasing number of consumer complaints to this
Commission and state regulatory agencies regarding wireless
billing practices provides empirical evidence that application
of the truth-in-billing rules to [wireless service providers] is
necessary and in the public interest.” Second Report and
Order, 20 F.C.C.R. at 6457 §€ 18. The Commission
“emphasize[d]” that the application of the truth-in-billing
rules to wireless service providers did not “limit[] states”
authority to enforce their own generally applicable consumer
protection laws. to the extent such laws do not require or
prohibit use of line items.” /d. at 6458 4 20.
8a
As to the second issue, the Commission denied the
petition filed by the State Consumer Advocates because
“nothing in the 7ruth-in-Billing Order prohibits carriers from
using non-misleading line items.” /d. at 6458-59 4 23.
Although the Commission found that consumers and state
regulatory agencies were confused about the use of line
items, the Commission “recognize[d] that overbroad state
regulations . . . may frustrate our federal rules and the federal
objective of minimizing regulatory burdens on the
competitive [wireless service provider] industry.” /d at
6459-60 § 24. The Commission stated that “it is permissible
for carriers to recover [regulatory] costs so long as they do so
in a manner that complies” with the Truth-in-Billing Rules,
but “it is a misleading practice for carriers to state or imply
that a charge is required by the government when it is the
carriers’ business decision as to whether and how much of
such costs they choose to recover directly from consumers
through a separate line item charge.” /d. at 6460-61 {| 26—
27.
The Commission also concluded that “state regulations
requiring or prohibiting the use of line items . . . constitute
rate regulation and . . . are preempted under section
332(c\(3)(A)” of the Act. Jd. at 6462 § 30. The Commission
explained that “rates.” included “rate levels,” “rate
structures.” and “rate elements.” /d. at 6462-63 4 30. After
describing line items as a “rate element,” the Commission
reasoned that the prohibition or requirement of line items
“directly affect[s] the manner in which the [wireless service
provider] structures its rates.” /d. at 6463 4¥ 30-31.
The Commission distinguished the ability of the states to
mandate or prohibit line items from the ability to impose
taxes, state universal service support charges, and other
disclosure laws, which the Commission left undisturbed. /d.
at 6464-65 ©€ 32-33. The Commission explained that
“requiring or prohibiting the use of line items” has a “direct
9a
effect” on the ability of wireless service providers to structure
rates, but other state regulations have an “indirect effect . . .
on a company’s behavior.” /d. at 6466 § 34 (quoting Wireless
Consumers Alliance Order, 15 F.C.C.R. 17,021, 17,034 4 23
(2000}). The Commission stated that it “may not always be
clear” whether line item regulation is preempted by section
332(c)(3)(A), and it was necessary to look to the “substance,
{and] not merely the form of the line item.” /d.
The Commission premised its decision to preempt state
regulation on “the pro-competitive, deregulatory framework
for [wireless service providers] prescribed by Congress.” /d.
at 6466 § 35. The Commission stated, “Congress has directed
that the rate relationships between [wireless service]
providers and their customers be governed ‘by the
mechanisms of the competitive marketplace.’” /d. (quoting
Wireless Consumers Alliance Order, 15 F.C.C.R. at 17,032-
33 4§ 20-21)). Because wireless service providers “have
come to structure their offerings on a national or regional
basis,” state laws that prohibit or require the use of line items
would result in a “patchwork of inconsistent rules” that
“conflict[s] with federal policies.” /d.
As to the third issue, the Commission solicited comments
about “the role of states in regulating billing” and “other
truth-in-billing issues.” /d. at 6468 {| 37. The Commission
sought comments about whether other state regulation of
billing practices was preempted by the Communications Act.
Id. at 6474 § 50. The Commission explained that “limiting
state regulation of . . . billing practices [by wireless service
providers] . . . will eliminate the inconsistent state regulation
that is spreading across the country, making nationwide
service more expensive for carriers to provide and raising the
cost of service to consumers.” Jd. at 6475 4 52.
The State Consumer Advocates and the Vermont Board
filed petitions for review of the Order. The State Utility
10a
Regulators intervened in support of the Vermont Board.
Sprint Nextel and Cingular Wireless, public corporations that
provide cellular wireless services, intervened in support of
the Commission.
C. Motions Filed After the Petition for Review
After the State Consumer Advocates and the Vermont
Board petitioned for review of the Order, the Commission
moved to dismiss both the petitions of the State Consumer
Advocates and the Vermont Board. The Commission argued
that the State Consumer Advocates lacked standing to
petition for review on behalf of its members because the State
Consumer Advocates failed to establish that “at least one of
its members meets the minimal Article III prerequisites for
standing to sue.” The Commission contended that we lacked
subject matter jurisdiction to consider the petition cf the
Vermont Board because it was not a party to the agency
proceedings under the Hobbs Act. 28 U.S.C. § 2344. The
Carriers supported the motion to dismiss of the Commission.
The Vermont Board responded that it was a “party
aggrieved” because it had participated in the proceedings, 28
U.S.C. § 2344, or alternatively, was a party because the
Commission “expressly subjected the [the Vermont Board] to
its Order.” First. the Vermont Board argued that it had
participated in the Commission proceedings because it both
submitted comments in the first Truth-in-Billing Order,
which had the same agency docket number, and sent an ex
parte letter to the Commissioners on March 3 that was
deemed untimely by the Clerk of the Commission. The
Vermont Board moved to correct the administrative record by
including the ex parte letter. Second, the Vermont Board
argued that even if it had failed to participate in the agency
proceedings. it could petition for review because it was
“directly bound” by the Order.
The State Consumer Advocates responded that their
lla
association. has standing to challenge the Order either on
behalf of its members or as a consumer of wireless service.
The State Consumer Advocates argued that they have
associational standing because the members of the State
Consumer Advocates are charged by state sidtutes “to
advocate on behalf of consumers.” In support of this
argument, the State Consumer Advocates submitted
affidavits from three individual members of the State
Consumer Advocates who are consumers of wireless
telecommunications service. The affidavits stated that the
preemption Order “will make it difficult to enact... new
state laws . . . that are necessary to protect wireless customers
from unreasonable, misleading, deceptive or illegal line item
fees and charges.” The State Consumer Advocates attached
the affidavit of John Perkins, the President of the State
Consumer Advocates, who testified, “NASUCA is itself a
consumer of telephone services . . . . All of the monthly bills
for service received by [the State Consumer Advocates]
contain line items.”
In response to these arguments, the Commission moved
to withdraw the motion to dismiss the State Consumer
Advocates, but continued to move for dismissal of the
Vermont Board. The Carriers then submitted their own
motion to dismiss the petiticn of the State Consumer
Advocates on the same grounds the Commission had argued
in its withdrawn motion. We granted the motion by the
Coramission to withdraw its motion to dismiss the petition of
the State Consumer Advocates, and we ordered that the
motions to dismiss the petitions of the State Consumer
Advocates and the Vermont Board be carried with the case.
The motion of the Vermont Board to correct the
administrative record was also carried with the case.
Il. STANDARD OF REVIEW
We review our subject matter jurisdiction de novo.
]2a
Williams v. Best Buy Co., 269 F.3d 1316, 1319 (11th Cir.
2001). We review whether a party has standing to challenge
an order de novo. Bochese v. Town of Ponce Inlet, 405 F.3d
964, 975 (11th Cir.), cert. denied _ US. __, 126 S. Ct.
377 (2005). We review the authority of the Commission to
regulate under the Communications Act based on the
standard enunciated in Chevron U.S.A. v. Natural Resource
Defense Council, 467 U.S. 837, 842-43, 104 S. Ct. 2778,
2781 (1984).
Iii. DISCUSSION
Before we address the petitions for review, we must
consider issues about our jurisdiction. We first address
whether the Vermont Board is a “party aggrieved” by the
Order under the Hobbs Act. 27 U.S.C. § 2344. Because we
conclude that the Vermont Board is not a party aggrieved, we
next consider whether the State Utility Regulators may
continue as intervenors. We then address whether the State
Consumer Advocates have standing to petition for review of
the Order. After we conclude that the State Consumer
Advocates and the State Utility Regulators have standing, we
then turn to the merits of the petitions for review: whether
section 322(c)(3)(A) expressly preempted the ability of the
states to require or prohibit the use of line items by wireless
service providers.
A. The Yermont Board Is Not a “Party Aggrieved”
Under the Hobbs Act.
The Communications Act provides, “Any proceeding to
enjoin. set aside. annul, or suspend any order of the
[Commission] . . . shall be brought as provided by and in the
manner prescribed in” the Hobbs Act. 47 U.S.C. § 407(a).
The Hobbs Act vests exclusive jurisdiction in the courts of
appeals to “determine the validity of [] all final orders of the
{Commission].” 28 U.S.C. § 2342. “Any party aggrieved by
the final order may . . . file a petition to review the order . . .
13a
.” Id. § 2344. “A ‘party aggrieved’ is one who participated in
the agency proceeding.” Ala. Power Co. v. FCC, 311 F.3d
1357, 1366 (11th Cir. 2002). A nonparty to the proceeding of
the Commission must file a petition for reconsideration as a
condition precedent to judicial review of the Order. 47 U.S.C.
§ 40S(a).
The Vermont Board presents three arguments that it is a
“party aggrieved” by the Order. 28 U.S.C. § 2344. First, the
Vermont Board contends that, because it participated in the
First Report and Order, which shares the same docket number
as the Second Report and Order, it has participated in the
proceedings. Second, the Vermont Board argues that it is a
“party aggrieved” because it submitted an ex parte letter to
the members of the Commission, which the Vermont Board
alleges was erroneously excluded from the administrative
record. As part of this argument, the Vermont Board moves
to correct the administrative record by including the ex parte
communication. Third, the Vermont Board argues that even if
it did not participate in the proceedings, it may challenge the
Order because it is subject to the Order and its arguments
challenge the authority of the Commission. We address each
argument in turn and conclude that each argument fails.
1. Participation in the First Report and Order
Does Not Render the Vermont Board a
“Party Aggrieved.”
The Vermont Board argues that the comments it
submitted in the proceedings for the First Report and Order
confer party status on it to petition for review. Because the
docket number for the First Report and Order. Docket No.
98-170. is the same as the Second Report and Order, the
Vermont Board argues that it is a “party aggrieved” under the
Hobbs Act. We disagree.
The reliance by the Vermont Board on the docket number
to argue that it is a “party aggrieved” by the Second Report
l4a
and Order is misplaced. Under the Hobbs Act, “[a]ny party
aggrieved by the final order” may petition for review. 28
U.S.C. § 2344. Although the First and Second Orders and
Report share the same docket number, the Hobbs Act confers
party status on those who participated in proceedings that led
to the Order under review. See Ala. Power Co., 311 F.3d at
1366.
The Vermont Board is not a “party aggrieved by the final
order” because the Vermont Board petitions for review of the
Second Report and Order. 28 U.S.C. § 2344. Regardless of
the docket number assigned to the preeeeding. the Vermont
Board had to be a participant in the proceedings that led to
the Second Report and Order to be a “party aggrieved.” Jd.
The comments that the Vermont Board submitted in the
proceedings that led to the First Report and Order are
immaterial: those comments make the Vermont Board a
“party aggrieved by” the First Report and Order, but they do
not make the Vermont Board a “party aggrieved by” the
Second Report and Order. Jd.; see Simmons v. ICC, 716 F.2d
40, 45 (D.C. Cir. 1983) (stating that the petitioner was not a
“party aggrieved” where the petitioner participated in a
proceeding that was “procedurally and _ substantially
independent” from the challenged order).
2. The Ex Parte Letter Submitted by the
Vermont Board Failed to Comply with
Regulations Issued by the Commission.
The Vermont Board also contends that it participated in
the Commission proceeding because it submitted an ex parte
letter that it asserts was erroneously excluded from the
administrative record. The Commission did not include the
letter in the administrative record because the Vermont Board
electronically submitted notice of the letter during the
“Sunshine” period when no communication was allowed with
the Commissioners. See 47 C.F.R. 1.1203(a). The Vermont
15a
Board moves to correct the administrative record by
including the letter. We address the motion filed by the
Vermont Board before we consider whether the ex parte
letter is sufficient to confer the Vermont Board with party
status.
We have discretion to correct the administrative record to
“supply any omission from the record or correct a
misstatement.” Fed. R. App. P. 16(b). An administrative
record consists of “the order sought to be reviewed or
enforced, the findings or reports on which it is based, and the
pleadings, evidence and proceedings before the agency.” Fed.
R. App. P. 16(a). We may deny a motion to correct the record
where, among other reasons, the proffered item does not fall
within the definition of the record, see Deukmejian v.
Nuclear Regulatory Comm'n, 751 F.2d 1287, 1324 (D.C. Cir.
1984), the proffered item is immaterial or incomplete, Ala.
Tissue Ctr. of Univ. of Ala. v. Sullivan, 975 F.2d 373, 376
(7th Cir. 1992), or the agency did not have the opportunity to
consider the evidence. see Altawil v. INS, 179 F.3d 791, 792
(9th Cir. 1999).
The regulations of the Commission provide that ex parte
presentations are allowed during the permit-but-disclose
period of the agency proceeding. 47 C.F.R. § 1.1206(a). Ex
parte presentations shall be included in the administrative
record if the presentation includes a cover letter and “shall
clearly identify the proceeding to which it relates, including
the docket number, if any, shall indicate that two copies have
been submitted to the Secretary, and must be labeled as an ex
parte presentation.” 47 C.F.R. § 1.1206(b)(1). To be
considered. ex parte communications must comply with these
provisions. See id. § 1.1206(a).
The Vermont Board concedes that its electronic
submission on March 4 failed to include a cover letter to
explain that it provided notice for the March 3 ex parte letter.
l6a
There was no way for the Commission to discern that the
letter electronically filed on March 4 disclosed an ex parte
communication that timely had been submitted to the five
Commissioners. Because the electronic subinission failed to
identify that it disclosed an ex parte letter submitted on
March 3, it is not properly part of the record that the agency
should have included. 47 C.F.R. § 1.1206(b)(1) (stating that
the cover letter that provides notice “must be labeled as an ex
parte presentation”); see Deukmejian, 751 F.2d at 1324 (“In
discharging their obligation to monitor agency action, courts
review a record compiled by the agency and containing its
rationale and supporting findings . . . .”). The Commission
followed its regulations when it excluded the ex parte letter
from the administrative record.
We deny the motion to supplement the record with the ex
parte letter. “We must give substantial deference to an
agency ’s interpretation of its own regulations,” Thomas
Jefferson Univ. v. Shalala, 512 U.S. 504, 512, 114 S. Ct.
2381, 1286 (1994), and the Commission was not “arbitrary
and capricious” when it excluded the letter from the
administrative record, 5 U.S.C. § 706(2)(A). The Vermont
Board did not “participate in the proceedings” by submitting
the letter. Ala. Power Co., 311 F.3d at 1366.
3. No Exception Exists to Allow the Vermont
Board to Petition for Review of the Order.
The Vermont Board alternatively argues that, even if it
did not participate in the proceedings, it is a party entitled to
petition for review of the Order for two reasons. First, the
Vermont Board contends that it is a “party aggrieved”
because it 1s subject to the Order. Second, the Vermont Board
argues that “party status is not . . . required when the agency
has acted bevond its authority.”
The argument that the Vermont Board may petition for
review because it is subject to the Order fails because the
17a
Vermont Board misunderstands the scope of our jurisdiction.
The Hobbs Act confers the courts of appeals with subject
matter jurisdiction to review the orders of administrative
agencies. “Since petitioners were never parties to the
rulemaking proceedings, this court simply does not have
jurisdiction over their claim.” Gage v. U.S. Atomic Energy
Comm'n, 479 F.2d 1214, 1218 (D.C. Cir. 1973). The cases
cited by the Vermont Board are inapposite because they
involve the extension of personal jurisdiction, Gilchrist v.
Gen. Elec. Cap. Corp., 262 F.3d 295, 300-01 (4th Cir. 2001),
R.M.S. Titanic, Inc. v. Haver, 171 F.3d 943, 955 (4th Cir.
1999), or the relaxation of prudential standing requirements,
Devlin v. Scardalletti, 536 U.S. 1, 7-8, 122 S. Ct. 2005,
2009-10 (2002). These cases do not allow a court to expand
the statutory grant of subject matter jurisdiction to review an
agency decision.
The argument that a petitioner need not be a party when
the petitioner challenges the authority of an administrative
agency runs contrary to our precedent. We have held that “[a]
‘party aggrieved” is one who participated in the agency
proceeding.” Ala. Power Co., 311 F.3d at 1366. In support of
its argument, the Vermont Board cites two decisions from the
Fifth Circuit, see Wales Transp., Inc. v. ICC, 728 F.2d 774,
776 n.1 (Sth Cir. 1984); Am. Trucking Ass’ns, Inc. v. ICC,
673 F.2d 82, 84 n.4 (Sth Cir. 1982), but we are bound by our
decision that a petitioner must be a “party aggrieved” without
regard to the type of challenge the petitioner seeks to bring.
Ala. Power Co., 311 F.3d at 1366; cf Baros v. Tex. Mexican
Ry. Co., 400 F.3d 228, 238 n.24 (Sth Cir. 2005) (stating that
the exception to party status discussed in American Trucking
Ass'ns has been “squarely rejected by some of our sister
circuits’): see also Erie-Niagara Rail Steering Comm. v.
Surface Transp. Bd., 167 F.3d 111, 112 (2d Cir. 1999)
(concluding that the discussion in American Trucking Ass ‘ns
is dictum and Wales Transportation erroneously relied on
18a
American Trucking Ass’ns). The Vermont Board is not a
“party aggrieved” entitled to petition for review of the Order
by the Commission.
We grant the motion by the Commission to dismiss the
petition of the Vermont Board. Neither the participation of
the Vermont Board in the First Report and Order nor the ex
parte letter that was procedurally deficient confer party status
on the Vermont Board, and no exception excuses the failure
of the Vermont Board to participate in the proceedings of the —
Commission. We lack jurisdiction to consider the petition
filed by the Vermont Board.
B. The State Utility Regulators May Proceed As an
Intervenor.
Although we dismiss the Vermont Board, the State Utility
Regulators may continue as an intervenor. “Intervention . . .
cannot create jurisdiction if none existed before.” 7C Charles
Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal
Practice and Procedure § 1917, at 457-58 (2d ed. 1986), but
we have discretion to “treat intervention as a separate action,
especially when the intervenor has an independent basis for
jurisdiction,” Atkins v. State Bd. of Educ. of N.C., 418 F.2d
874, 875 (4th Cir. 1969) (per curiam); see 7C Wright, Miller
& Kane, Federal Practice and Procedure § 1917, at 458-59;
see also Fuller v. Volk, 351 F.2d 323, 328-29 (3d Cir. 1965).
Because the State Utility Regulators participated in the
proceedings by submitting comments and notice of ex parte
communications, the State Utility Regulators have
independently established their status as “party aggrieved.”
28 U.S.C. § 2344. We exercise our discretion to allow the
State Utility Regulators to continue in the petition for review.
C. The State Consumer Advocates Have Standing
to Petition for Review.
The Constitution of the United States limits the subject
matter jurisdiction of federal courts to “Cases” and
19a
“Controversies.” U.S. Const., Art. IIIf § 2. “[T]he core
component of standing is an essential and unchanging part of
the case-or-controversy requirement of Article III.” Lujan v.
Defenders of Wildlife, 504 U.S. 555, 560, 112 S. Ct. 2130,
2136 (1992). The minimum requirements for constitutional
standing are “injury in fact,” “a causal connection between
the injury and the conduct complained of,” and that the
“injury will be redressed by a favorable decision.” Jd. at 560-
61, 112 S. Ct. at 2136. On a motion to dismiss, “general
factual allegations of injury resulting from the defendant’s
conduct may suffice.” Jd. at 561, 112 S. Ct. at 2137.
The Carriers move to dismiss the State Consumer
Advocates for failure to establish associational standing. The
Carriers contend that the State Consumer Advocates cannot
establish that at least one of their members has suffered
particularized injury and only the member agencies of the
State Consumer Advocates have the authority to petition for
review. The State Consumer Advocates argue that we need
not address this argument because they have standing on an
alternative ground.
The State Consumer Advocates argue that they need not
rely on associational] standing because they are a consumer of
wireless telecommunications services that receives bills. The
affidavit submitted by the State Consumer Advocates from
the President of their organization stated, “NASUCA is itself
a consumer of telephone services, both wireline and wireless.
It presently has wireline service with Verizon and AT&T and
wireless service with Verizon Wireless. All of the monthly
bills for service received by NASUCA contain line items.”
The State Consumer Advocates have established “general
factual allegations of injury resulting from the defendant's
conduct.” Lujan, 504 U.S. at 561, 112 S. Ct. at 2136. The
State Consumer Advocates contend that, because the
preemption of the Commission affects the ability of the states
20a
to regulate the disclosure of charges on consumer wireless
bills, the Order adversely affects the interests of the State
Consumer Advocates as a consumer of wireless service. The
complaints of the State Consumer Advocates are redressable
by granting the petition and vacating the Order of the
Commission. That disposition would allow the states to
require or prohibit the use of line items by wireless service
providers, which the State Consumer Advocates contend
would protect consumers from fraud.
The Carriers argue that the State Consumer Advocates
may not rely on their status as a consumer of wireless service
as a basis for standing because the State Consumer
Advocates “chose not to base [their] right to seek review on
[their] own receipt of phone bills” in the petition for review.
We disagree. When ruling on motions to dismiss for lack of
standing, federal courts may consider affidavits and other
factual materials in the record. See Lujan yv. Nat'l Wildlife
Fed’n, 497 U.S. 871, 881. 110 S. Ct. 3177, 3185 (1990)
(considering affidavits submitted in response to a motion for
summary judgment to establish standing); FW/PBS, Inc. v.
City of Dallas, 493 U.S. 215, 233, 110 S. Ct. 596, 609
(1990). overruled in part on other grounds by City of
Littleton v. Z.J. Gifts D-4, LLC, 541 U.S. 774, 124 S. Ct.
2219 (2004) (“[S]tanding . . . must affirmatively appear in the
record.” (internal quotations and citations omitted)
(emphasis added)). Because the State Consumer Advocates
have established standing to petition for review as a
consumer of wireless service through the affidavit of their
President. we deny the motion by the Carriers. We next turn
to the merits of the petitions for review filed by the State
Utility Regulators and the State Consumer Advocates.
D. The Commission Exceeded Its Authority When
It Preempted State Regulation of Line-Item
Billing Under Section 332(c)(3){A).
2la
“This Constitution, and the Laws of the United States
which shall be made in Pursuance thereof . . . shall be the
supreme Law of the Land[,]... any Thing in the Constitution
or Laws of any State to the Contrary notwithstanding.” U.S.
Const. Art VI. “The Supremacy Clause of Art. VI of the
Constitution provides Congress with the power to pre-empt
state law.” La. Pub. Serv. Comm'n v. FCC, 476 U.S. 355,
368, 106 S. Ct. 1890, 1898 (1986). “[A] federal agency
acting within the scope of its congressionally delegated
authority may pre-empt state regulation.” Jd. at 369, 106 S.
Ct. at 1887-88.
“Where Congress has directed an administrator to
exercise his discretion, his judgments are subject to judicial
review only to determine whether he has exceeded his
statutory authority or acted arbitrarily.” Fid. Fed. Sav. &
Loan v. De la Cuesta, 458 U.S. 141, 153-54, 102 S. Ct. 3014,
3022-23 (1982) (quoting United States v. Shimer, 367 U.S.
374, 381-82, 81 S. Ct. 1554, 1560 (1960)). Where a federal
agency preempts state law, “the inquiry becomes whether the
federal agency has properly exercised its own delegaied
authority rather than simply whether Congress has properly
exercised the legislative power.” New York v. FCC, 486 U.S.
57, 68, 108 $. Ct. 1637, 1642 (1988). “Federal regulations
have no less pre-emptive effect than federal statutes.” Fid
Fed. Sav. & Loan. 458 U.S. at 153, 102 S. Ct. at 3022.
Federal law may preempt state law in three ways. First,
express “[p|re-emption occurs when Congress, in enacting a
federal statute. expresses a clear intent to pre-empt state law.”
La. Pub. Serv. Comm'n, 476 U.S. at 368, 106 S. Ct. at 1898.
Second. conflict preemption occurs “when there is outright or
actual conflict between federal and state law.” /d. Third, field
preemption occurs “where compliance with both federal and
state law is in effect physically impossible.” Jd. “[T]he
categories of preemption are not rigidly distinct . . . field pre-
emption may be understood as a species of conflict pre-
22a
emption.” Crosby v. Nat'l Foreign Trade Council, 530 U.S.
363, 373, 120 S. Ct. 2288, 2294 (2000); see Caleb Nelson,
Preemption, 86 Va. L. Rev. 225, 262 (2000).
oes
[T]he purpose of Congress is the ultimate touchstone’
of pre-emption analysis.” Cipollone v. Liggett Group, Inc.,
505 U.S. 504, 516, 112 S. Ct. 2608, 2617 (1992) (plurality
opinion) (quoting Malone v. White Motor Corp., 435 U.S.
497, 504, 98 S. Ct. 1185 (1978)). “[A]ny understanding of
the scope of a pre-emption statute must rest primarily on a
fair understanding of congressional purpose.” Medtronic, Inc.
v. Lohr, 518 U.S. 470, 485-86, 116 S. Ct. 2240, 2250 (1996).
“Congress’ intent may be ‘explicitly stated in the statute’s
language or implicitly contained in its structure and
purpose.’” Jd. (quoting Jones v. Rath Packing Co., 430 U.S.
519, 525, 97 S. Ct. 1305 (1977)). Courts interpret the text of
the statute and apply traditional cannons of statutory
construction to discern the intent of Congress. See MCI
Telecomms. Corp. v. Am. Tel. & Tel. Co., 512 U.S. 218, 229,
114 S. Ct. 2223, 2231 (1994); see, eg. La. Pub. Serv.
Comm'n, 476 U.S. at 369, 106 S. Ct. at 1899.
“When we consider issues that arise under the Supremacy
Clause . . . , we start with the assumption that the historic
police powers of the states are not superseded by federal law
unless preemption is the clear and manifest purpose of
Congress.” Cliff v. Payco Gen. Am. Credits, Inc., 363 F.3d
1113, 1122 (11th Cir. 2004). “Although the Constitution
makes a few of the federal government’s powers exclusive,
the states retain concurrent authority over most of the areas in
which the federal government can act.” Nelson, supra, at
225. We accordingly presume that “Congress does not
cavalierly pre-empt state[]law.” Medtronic, Inc., 518 U.S. at
485, 116 S. Ct. at 2250. “[FJederal regulation of a field of
commerce should not be deemed preemptive of state
regulatory power in the absence of persuasive reasons—
either that the nature of the regulated subject matter permits
23a
no other conclusion, or that the Congress has unmistakably so
ordained.” Fla. Lime & Avocado Growers, Inc. v. Paul, 373
U.S. 132, 142, 83 S. Ct. 1210, 1217 (1963). Although the
presumption against preemption cannot trump our review of
the Order under Chevron, this presumption guides our
understanding of the statutory language that preserves the
power of the States to regulate “other terms and conditions.”
See Smiley v. Citibank, N.A., 517 U.S. 735, 743-44, 116 S.
Ct. at 1730, 1735 (1996). We apply these principles to
determine whether Congress granted the Commission
authority to preempt the state regulation of line item billing.
In the Second Report and Order, the Commission
preempted state regulation of line-item billing based on the
express language of the Communications Act. See 20
F.C.C.R. at 6462-63 § 30, 6466 § 35. The Commission
concluded that the language of section 332(c)(3)(A) of the
Communications Act “‘prohibit[s] states from prescribing,
setting or fixing rates’ of wireless service providers.” /d. at
6462 § 30 (quoting Pittencrief Commc'ns, Inc., 13 F.C.C.R.
1735, 1745 (1997)). The Commission explained that
“le|fforts by individual states to regulate [wireless service
providers’] rates through line item requirements . . . would be
inconsistent with the federal policy of a uniform, national and
deregulatory framework” of the Communications Act. /d. at
6467 § 35.
“When a court reviews an agency’s construction of the
statute which it administers, it is confronted with two
questions.” Chevron U.S.A., 467 U.S. at 842-43, 104 S. Ct. at
2781. First, we consider “whether Congress has directly
spoken to the precise question at issue. If the intent of
Congress is clear... . the court, as well as the agency, must
give effect to the unambiguously expressed intent of
Congress.” /d. To determine if “Congress has directly spoken
to the precise question at issue.” id, courts interpret the
language of the statute and apply traditional cannons of
24a
statutory construction, see MC] Telecomms. Corp., 512 U.S.
at 229, 114 S. Ct. at 2231. “The construction put on a statute
by the agency charged with administering it is entitled to
deference by the courts, and ordinarily that construction will
be affirmed if it has a reasonable basis in law{, b]ut the courts
are the final authorities on issues of statutory construction.”
SEC v. Sloan, 436 U.S. 103, 118, 98 S. Ct. 1701, 1712 (1978)
(internal citations and quotations omitted); see also Chevron
U.S.A., 467 U.S. at 842-43, 104 S. Ct. at 2781-82.
Second, “if the statute is silent or ambiguous with respect
to the specific issue, the question for the court is whether the
agency’s answer is based on a permissible construction of the
statute.” Chevron U.S.A., 437 U.S. at 843, 104 S. Ct. at 2782
(emphasis added). To determine whether a term within a
statute is ambiguous, we consider the context in which the
term is used. See MCI Telecomms. Corp., 512 U.S. at 226,
114 S. Ct. at 2229 (explaining that Chevron deference
applied because “contextual indications” created ambiguity in
the term “modify”). The interpretation of an ambiguous
statute by an administrative agency is “given controlling
weight unless [it is] arbitrary, capricious, or manifestly
contrary to the statute.” Jd. at 843-44, 104 S. Ct. at 2782.
“Unexplained inconsistency is . . . a reason for holding an
interpretation to be an arbitrary and capricious change from
agency practice.” Nar’) Cable & Telecomms. Ass’n v. Brand
X Internet Servs... _ U.S. __, 125 S. Ct. 2688, 2699 (June
27, 2005).
The Commission premised the preemption of state
regulation of line item billing on the language of section
332(c)(3)(A). That: provision states that “no State or local
government shall have any authority to regulate the entry of
or the rates charged by any commercial mobile service,
except that this paragraph shall not prohibit a State from
regulating the other terms and conditions of commercial
mobile services.” 47 U.S.C. § 332(c)(3 (A). The Commission
25a
found that “Congress did not specifically define ‘rates,’
‘entry, or other key terms in section 332(c)(3)(A),” but
explained that “rate regulation extends to regulation of ‘rate
levels and ‘rate structures’ for” wireless service providers.
Second Report and Order, 20 F.C.C.R. at 6462-63 4 30
(citing Sw. Bell Mobile Sys., Inc., 14 F.C.C.R. 19,898,
19,906—07 €| 18~20(1999)). The Commission reasoned that
the “type of state regulations in question reveals that many
directly affect [wireless service providers’] rates and rate
structures in a manner that amounts to rate regulation.” /d. at
6463 4 31. We disagree with this reasoning.
The language of section 332(c)(3)(A) unambiguously
preserved the ability of the States to regulate the use of line
items in cellular wireless bills. Although the term “rates
charged” is not defined in the Communications Act, the
meaning of this term is clear in this context. A
straightforward reading of the complementary phrases
“regulate entry of or the rates charged” and “other terms and
conditions,” 47 U.S.C. § 332(c)(3)(A). evidences the “clear
and manifest purpose of Congress” to leave the regulation of
line items to the states, Cliff, 363 F.3d at 1122.
A “rate.” as defined by the Oxford English Dictionary, is
“(t]he amount of a charge or payment . . . having relation to
some other amount or basis of calculation.” Oxford English
Dictionary (2d ed. 1989). Other dictionaries define a “rate” as
“la]n amount paid or charged for a good or service,” Black's
Law Dictionary 1268 (7th ed. 1999), or “a charge per unit of
a public-service commodity.” Merriam-Webster Online
Dictionary. available at www.mw.com/cgi-bin/dictionary
(last visited June 27. 2006). “[A]s a basic rule of statutory
interpretation. we read the statute using the normal meanings
of its words.” Horton Homes, Inc. v. United States, 357 F.3d
1209, 1211 (11th Cir. 2004) (quoting Consol. Bank, N.A. v.
Dep't of Treas. 118 F.3d 1461, 1463 (11th Cir. 1997)). “In
the absence of an indication to the contrary. words in a statute
26a
are assumed to bear their ‘ordinary, contemporary, common
meaning.” Walters v. Metro. Ed. Enters., Inc., 519 U.S. 202,
207, 117 S. Ct. 660, 664 (1997) (quoting Pioneer Inv. Servs.
Co. v. Brunswick Assocs. Ltd. P ship, 507 U.S. 380, 388, 113
S. Ct. 1489, 1494 (1993)).
The prohibition or requirement of a line item affects the
presentation of the charge on the user’s bill, but it does not
affect the amount that a user is charged for service. State
regulations of line items regulate the billing practices of
cellular wireless providers, not the charges that are imposed
on the consumer. Because the presentation of line items on a
bill is not a “charge or payment” for service, Oxford English
Dictionary (2d ed. 1989), it is an “other term or condition”
regulable by the states, 47 U.S.C. § 332(c)(3)(A).
The Commission argues that the Second Report and
Order is consistent with its previous decisions because the
prohibition or requirement of line items “directly affect[s]
[wireless service providers’] rates and rate structures in a
manner that. amounts to rate regulation.” Second Report and
Order, 20 F.C.C.R. at 6463 4 31. According to the
Commission, section 332(c)(3)(A) prohibits the state
regulation of “rate structures” and “rate levels.” /d. at 6462-
63 § 30. The Commission contends that state regulation of
the use of line items “directly intrudes upon the carrier's
ability to set rates and establish rate structures for [wireless]
service.” This argument fails.
In the Second Report and Order, the Commission failed
to follow the common definition of “rates” employed in its
previous decisions. The Commission has stated that “‘rate’ is
defined in the dictionary as an ‘amount of payment or charge
based on some other amount.’” Sw. Bell Mobile Sys., Inc., 14
F.C.C.R. at 19,901 © 19. The Commission has also ruled that
the phrase “rates charged” “‘prohibit[s] states from
prescribing, setting or fixing rates’ of wireless service
27a
providers.” Cellular Telecomms. Indus. Ass'n v. FCC, 168
F.3d 1332, 1336 (D.C. Cir. 1999) (quoting Pittencrieff
Commc'ns., Inc., 13 F.C.C.R. 1735, 1745 4 20 (1997)).
Until now, the Commission has consistently applied the
distinction between “rates” and “other terms and conditions”
to interpret whether a regulation amounts to rate regulation
under section 332(c)(3)(A). 47 U.S.C. § 322(c)(3)(A). The
Commission has concluded that the states may not regulate
the method by which wireless service providers calculate the
length of a call because it affects “which services to charge
for and how much to charge for these services.” Sw. Bell
Mobile Sys., Inc., 14 F.C.C.R. at 19,898 § 1. Consistent with
the distinction of “rates” and “other terms and conditions,”
the Commission has permitted the states to require wireless
service providers “to contribute to state universal service
mechanisms.” Pittencrieff, 13 F.C.C.R. at 1741 4 13. A
universal service mechanism is a charge imposed by state or
federal law on providers of telephone service “to make
communications services available to all Americans at
affordable rates.” Cellular Telecomms. Indus. Ass'n, 168 F.3d
at 1334. Even though universal service charges have an
“impact on the rates charged” to consumers, the Commission
concluded that “universal service contribution requirement is
not, within the plain meaning of the statute, a rate or entry
regulation.” Pittencrieff, 13 F.C.C.R. at 1742 49 15, 16. Both
decisions by the Commission follow the definition of “rates”
in the dictionary as a “charge or a payment.”
The Commission, by contrast, has defined a line item on a
bill as something for which “a consumer receives no tangible
product.” First Report and Order, 14 F.C.C.R. at 7531 4 61.
According to the definitions espoused by the Commission, a
line item is not a rate because “line-item charges cannot be
attributed to individual tangible articles of commerce,” id. at
7531 § 61, but “a ‘rate’ has no significance without the
element of service for which it applies,” Sw. Bell Mobile Sys.,
28a
Inc., 14 F.C.C.R. at 19,901 § 19. The Commission asserts
that the state regulation of line items affects “rate structures,”
but these regulations do not require a carrier to recover nor
prohibit a carrier from recovering a particular cost. These
regulations pertain only to the presentation of that cost on
customer bills.
The Commission also failed adequately to explain its
conclusion that a line item falls within the definition of
“rates” because the use of line items has an alleged direct
effect on rates. In the Second Report and Order, the
Commission explained that “requiring or prohibiting the use
of line items” has a “direct effect” on the ability of wireless
service providers to structure rates, but other state regulations
have an “indirect effect . . . on a company’s behavior.”
Second Report and Order, 20 F.C.C.R. at 6466 § 34 (quoting
Wireless Consumers Alliance Order, 15 F.C.C.R. 17,021,
17,034 § 23 (2000)). The Commission requested further
comments because it “recognize[s] that the line between
prohibited and permissible state regulations of line items may
not always be clear.” /d. (internal quotations and citations
omitted). The attempt by the Commission to distinguish the
regulation of line items on cellular wireless bills from the
imposition of universal service charges is unavailing.
That the prohibition or requirement of a line item has
some effect on the charge to the consumer does not
necessarily place a regulation within the meaning of “rates”
and outside the ambit of state regulation of “other terms and
conditions.” The Commission argues that rate regulation
includes the regulation of “rate structures” and “rate levels,”
id. at 6463 4 31. but rate levels and rate structures are still
components of “rates.” The inclusion of the specific
components “rate levels” or “rate structures” within the
general term “rates” does not magically expand the authority
of the Commission beyond what the statutory language
allows.
29a
The Commission has disavowed the argument that a
regulation with some effect on prices is per se rate regulation
under section 322(c)(3)(A). The Commission, for example,
has upheld state regulations that require wireless service
providers to contribute to the state-wide universal service
fund as an “other term or condition.” Pittencrieff, 13
F.C.C.R. at 1742 9§ 42-43, affd sub nom. Cellular
Telecomms. Indus. Ass'n, 168 F.3d at 1332. The
Commission, in Pittencrieff, expressly rejected the argument
that the imposition of a universal service fee was rate
regulation because it “impacts the rates that a [wireless
service] provider charges its customers.” Jd. at 1745 4 20.
The Commission stated, “The Commission has found the
‘rates charged by’ language to prohibit states from
prescribing, setting, or fixing rates of [wireless service]
providers. We have not found, however, that it preempts state
authority over matters which may have an impact on the costs
of doing business for a [wireless service] operator.” Jd.
(footnotes omitted). “To equate state action that may increase
the cost of doing business with rate regulation would .. .
forbid nearly all forms of state regulation, a result at odds
with the ‘other terms and conditions’ portion of the first
sentence.” Celluiar Telecomms. imdus. Ass'n, 168 F.3d at
1336. aff'g Pittencrieff. 13 ¥.C.C.iR. 1735. If the imposition
of a universal service charge has an “indirect” relationship
with rates that places it withim the purview of “other terms
and conditions.” then requiring or prohibiting the use of line
items has an even more attenuated relationship with rates.
We can discern no logical distinction between what the
Commission terms a “direct effect” caused by the regulation
of line items and the alleged “indirect effect” caused by the
imposition of universal service charges. Second Report and
Order, 20 F.C.C.R. at 6466 § 34. The Commission fails to
explain why the imposition of universal service charges,
which increases the amount a consumer is charged, is more
30a
attenuated to the amount a consumer pays for service than the
regulation of line items, which affects the presentation of
matters on a bill. The Commission is unable to articulate a
logical distinction between these two outcomes.
The Commission also contends that the Second Report
and Order “is consistent with prior Commission statements
equating ‘line items’ with ‘rate elements.’” Second Report
and Order, 20 F.C.C.R. at 6463 § 30 & n.83. In support of
this argument, the Commission relies on its decision in
Federal-State Joint Board of Universal Service, 17 F.C.C.R.
24,952 (2002). In that decision, the Commission ruled that
incumbent local exchange carriers may “recover their federal
universal service contributions costs through a separate line
item” as long as carriers do not “include[] a mark-up above
the relevant contribution factor.” /d. at 24,970 ¥ 31.
This argument fails for at least two reasons. First,
Federal-State Joint Board is inapposite because the authority
of the Commission to regulate federal universal service
contribution. derives from section 254(d) of the
Communications Act, not section 332(c)(3)(A). The decision
in Federal-State Joint Board does not govern whether the
regulation of line items by the states is preempted under
section 332(c)(3)(A). Compare 47 U.S.C. § 254(d) (granting
the Commission authority to impose federal universal service
charges), with id. § 332(c)(3)(A) (granting the Commission
authority to regulate “entry” and “rates”). Second, although
the Commission stated in Federal-State Joint Board that a
federal universal service contribution is a “rate element”
which may be recovered through a line item, id. at 24,979 §
53 n.133, the Commission did not equate the imposition of
the universal service contribution with the presentation of the
universal service contribution on the bill. Federal-State Joint
Board does not equate “line items” with “rate elements.”
In the Second Report and Order, the Commission also
3la
misconstrued the legislative history of section 332(c)(3)(A).
See Second Report and Order, 20 F.C.C.R. at 6464 4 32. The
House Committee Report regarding section 332(c)(3)(A)
explained that “other terms and conditions” of wireless
service, which are regulated by the states, “include such
matters as customer billing information and practices and
billing disputes and other consumer protection matters.” H.R.
Rep. No. 103-111, at 211 (1993), reprinted in 1993
U.S.C.C.A.N. 378, 588. Because “our sole concern is the
intent of Congress . . . , it is necessary to look to the
administrative and legislative background of the enactment.”
United States v. Zacks, 375 U.S. 59, 62, 84 S. Ct. 178, 180
(1963). Contrary to the argument of the Commission, the
legislative history shows that Congress intended to leave the
authority to regulate line items with the states.
The Commission dismisses this statement from the
legislative history as unpersuasive because it “nowhere
suggests that states may regulate rates in the guise of
regulating billing practices.” The Commission explains that
although “not all regulation relating to a carrier’s billing and
its relationship with customers represents preempted ‘rate
regulation,” state regulations that require or prohibit line
items are regulation. Second Report and Order, 20 F.C.C.R.
at 6464 © 33. The Commission counsels that we should look
to the “substance. not merely the form” of the regulation to
determine if it has a direct effect on rates. /d. at 6466 § 34
(quoting Wireless Consumers Alliance Order, 15 F.C.C.R. at
17,037 § 28).
This argument is flawed for at least two reasons. First, the
Second Report and Order belies the contention by the
Commission that line items are not a “billing practice.” In the
Order, the Commission expressly classifies the use of line
items as a “billing practice.” /d. Second, although we agree
that the “substance, not merely the form” of a regulation
governs whether it is rate regulation, id, the Commission
32a
does not articulate the “substance” that distinguishes whether
a regulation of line items is a billing practice or rate
regulation. The prohibition or requirement of the use of line
items on wireless bills involves “billing information and
practice,” not “rates.”
The interpretation of the term “rates” urged by the
Commission deprives the complementary phrase “other terms
and conditions” of all meaning. 47 U.S.C. § 332(c)(3)(A). “It
is a cardinal principle of statutory construction that a statute
ought, upon the whole, to be so construed that, if it can be
- prevented, no clause, sentence, or word shall be superfluous,
void, or insignificant.” TRW Inc. v. Andrews, 534 U.S. 19,
31, 122 S. Ct. 441, 449 (2001). If the presentation of line
items on consumer bills were a matter of “rates” and not an
“other term[{] or condition||” of wireless service, then the
Commission would be free to preempt virtually any form of
state regulation of wireless service, including laws regarding
disclosure and consumer protection. 47 USC. §
332(c\(3)(A). Under the interpretation of the Commission,
even powers historically retained by the states, such as the
imposition of state taxes, would be preempted so long as they
impact “how carriers recover [the] costs of doing business.”
Cf Dows v. City of Chicago, 78 U.S. (11 Wall.) 108, 110
(1871) (“{T]he modes adopted to enforce the taxes levied [by
the states] should be interfered with as little as possible.”).
The failure of the Commission to delineate the proper scope
of rate regulation allows the Commission indefinitely to
expand its authority without regard to the mandate by
Congress that “other terms and conditions” remain the realm
of state regulation. 47 U.S.C. § 332(c)(3)(A).
The interpretation by the Commission that the prohibition
or requirement of line items is expressly preempted by the
language of section 332(c)(3)(A) is not supported by the
common definition of “rates.” A “rate.” as defined in the
dictionary and previous decisions by the Commission, is
33a
“(t]he amount of a charge or payment.” Oxford English
Dictionary (2d ed. 1989); see Sw. Bell Mobile Sys., Inc., 14
F.C.C.R. at 19,901 4 19. Because the regulation of line-item
billing is not rate regulation, the express language of section
332(c)(3)(A) of the Communications Act does not preempt
state regulations that require or prohibit the use of line items
on cellular wireless bills.
IV. CONCLUSION
We GRANT the motion to dismiss the petition of the
Vermont Board for lack of subject matter jurisdiction. We
DENY the motion by the Vermont Board to correct the
administrative record. We also DENY the: motion by the
Carriers to dismiss the petition of the State Consumer
Advocates for lack of standing. Because the Communications
Act allows the states to regulate line item billing for wireless
services, we GRANT the petitions for review filed by the
State Consumer
Advocates and the State Utility Regulators and VACATE
the Second Report and Order.
34a
APPENDIX B
UNITED STATES COURT OF APPEALS FOR THE
ELEVENTH CIRCUIT
Nos. 05-11682 AND 05-12601
NATIONAL ASSOCIATION OF STATE UTILITY CONSUMER
ADVOCATES, PETITIONER,
NATIONAL ASSOCIATION OF REGULATORY UTILITY
COMMISSIONERS, INTERVENTOR-PETITIONER,
¥,
FEDERAL COMMUNICATIONS COMMISSION, RESPONDENT,
AT&T CORPORATION,
CINGULAR WIRELESS, INC.,
LEAP WIRELESS INTERNATIONAL, INC.,
NEXTEL COMMUNICATIONS, INC.,
SPRINT CORPORATION,
T-MOBILE USA, INC.,
VERIZON,
CELLULAR TELECOMMUNICATIONS AND INTERNET
ASSOCIATION, INTERVENORS-RESPONDENTS
VERMONT PUBLIC SERVICE BOARD. PETITIONER
V.
FEDERAL COMMUNICATIONS COMMISSION, RESPONDENT.
Nov. 29, 2006, Filed
1th Cir. 19, F.2d ___).
(Opinion
35a
On Petition for Rehearing En Banc.
Petitions for Review of Decisions of the Federal
Communications Commission.
Before: BLACK, PRYOR and COX, Circuit Judges.
PER CURIAM:
No Judge in regular active service on the Court having
requested that the Court be polled on rehearing en banc (Rule
35, Federal Rules of Appellate Procedure), the Petitions for
Rehearing in En Banc are denied.
ENTERED FOR THE COURT:
eo “=
UNITED STATESCIRCUITAUDGE /
36a
APPENDIX C
UNITED STATES COURT OF APPEALS FOR THE
ELEVENTH CIRCUIT
No. 05-11682
NATIONAL ASSOCIATION OF STATE UTILITY CONSUMER
ADVOCATES, PETITIONER.
NATIONAL ASSOCIATION OF REGULATORY UTILITY
COMMISSIONERS, INTERVENOR-PETITIONER.
V.
FEDERAL COMMUNICATIONS COMMISSION, RESPONDENT,
AT&T CORPORATION,
CINGULAR WIRELESS, INC.,
LEAP WIRELESS INTERNATIONAL, INC.,
NEXTEL COMMUNICATIONS, INC.,
SPRINT CORPORATION,
T-MOBILE USA, INC..
VERIZON,
CELLULAR TELECOMMUNICATIONS AND INTERNET
ASSOCIATION, INTER VENORS-RESPONDENTS
Oct. 3, 2006. Filed
On Petitions for Panel Rehearing.
Petition for Review of a Decision of the Federal
Communications Commission.
37a
Before BLACK, PRYOR and COX, Circuit Judges.
PER CURIAM:
Upon consideration of the petitions for panel rehearing
filed by the Federal Communications Commission and the
Intervenors-Respondents, the opinion filed in this case on
July 31, 2006, and published at 457 F.3d 1238, is modified in
one respect. The final sentence of the opinion is deleted, and
in its place the following is inserted:
Because the Communications Act allows the
States to regulate line item billing for wireless
services, we GRANT the petitions for review
filed by the.State Consumer Advocates and
the State Utility Regulators, VACATE the
preemption ruling set forth in the Declaratory
Ruling in the Second Report and Order, and
REMAND the case to the Commission.
In all other respects, the petitions for pane! rehearing are
DENIED.
38a
APPENDIX D
BEFORE THE
FEDERAL COMMUNICATIONS COMMISSION
WASHINGTON, D.C. 20554
CC DOCKET No. 98-170
IN THE MATTER OF TRUTH-IN-BILLING AND BILLING FORMAT
CG DOCKET No 04-208
NATIONAL ASSOCIATION OF STATE UTILITY CONSUMER
ADVOCATES’ PETITION FOR DECLARATORY RULING
REGARDING TRUTH-IN-BILLING
SECOND REPORT AND ORDER, DECLARATORY
RULING, AND
SECOND FURTHER NOTICE OF PROPOSED
RULFMAKING
Adopted: Merch 10, 2005
Released: March 18, 2005
Comment Date: 30 days after publication in the Federal
Register.
Reply Comment Date: 60 days after publication in the
Federal Register.
By the Conimission: Chairman Powell and Commissioner
Abernathy issuing separate statements;
Commissioners Copps and Adelstein
39a
approving in part, dissenting in part,
and issuing separate statements.
I. INTRGQDUCTION
1. In this item, we address a Petition for Declaratory
Ruling filed by the National Association of State Utility
Consumer Advocates (NASUCA) seeking to prohibit
telecommunications carriers from imposing any separate line
item or surcharge on a customers’ bill that was not mandated
or authorized by federal, state or local law.' In light of the
significant consumer concerns with the billing practices of
wireless and other interstate providers raised in this
proceeding and outstanding issues from the 1999 Truth-in-
Billing Order and Further Notice, we also take this
opportunity to reiterate certain aspects of our existing rules
and policies affecting billing for telephone service.
Specifically, we: 1) remove the existing exemption for
Commercial Mobile Radio Service (CMRS) carriers from 47
C.F.R. § 64.2401(b) — requiring that billing descriptions be
brief, clear, non-misleading and in plain language; 2)
reiterate that non-misleading line items are permissible under
our rules; 3) reiterate that it is misleading to represent
discretionary line item charges in any manner that suggests
such line items are taxes or charges required by the
government; 4) “jarify that the burden rests upon the carrier
' Petition for Declaratory Ruling, filed by National Association
of State Utility Consumer Advocates’ (March 30, 2004)
(NASUCA Petition). NASUCA is an association of 44 consumer
advocates designated by the laws of their respective states to
represent the interests of utility consumers before state and federal
regulators and in the courts.
* Truth-in-Billing and Billing Format, First Report and Order
and Further Notice of Proposed Rulemaking, CC Docket No. 98-
170, 14 FCC Red 7492 (1999) (Truth-in-Billing Order and/or
Further Notice).
40a
to demonstrate that any line item that purports to recover a
specific governmental or regulatory program fee conforms to
the amount authorized by the government to be collected;
and 5) clarify that state regulations requiring or prohibiting
the use of line items for CMRS constitute rate regulation and
are preempted under section 332(c)(3)(A).
2. In addition, in a Further Notice of Proposed
Rulemaking, we propose and seek comment on certain
measures to facilitate the ability of telephone consumers to
make informed choices among competitive
telecommunications service offerings. In particular, we: 1)
tentatively conclude that where carriers choose to list charges
in separate line items on their customers’ bills, government
mandated charges must be placed in a section of the bill
separate from all other charges; 2) seek comment on the
distinction between government “mandated” and other
charges; 3) seek comment on whether it is unreasonable to
combine federal regulatory charges into a single line item;
and 4) tentatively conclude that carriers must disclose the full
rate, including any non-mandated line items and a reasonable
estimate of government mandated surcharges, to the
consumer at the point of sale, and that such disclosure must
occur before the customer signs any contract for the carrier’s
services. In an effort to address the potential for balkanized
state regulation of CMRS and other interstate carrier billing
practices, we also tentatively conclude that the Commission
should reverse its prior holding permitting states to enact and
enforce telecommunications carrier-specific truth-in-billing
rules, and that the Commission should preempt inconsistent
state regulation. We emphasize, however, that no action we
propose will limit states’ ability to enforce their own
generally applicable consumer protection laws.
~
3. | We believe that the truth-in-billing rules proposed
herein and the clarifications we make will allow consumers
to better understand their telephone bills, compare service
4la
offerings, and thereby promote a more efficient competitive
marketplace. As the Commission noted in 1998 when it
initiated the Truth-in-Billing proceeding, the proper
functioning of competitive markets is predicated on
consumers having access to accurate, meaningful information
in a format that they can understand.’ Unless consumers are
adequately informed about the service choices available to
them and are able to make reasonable price comparisons
between service offerings, they are unlikely to be able to take
full advantage of the benefits of competitive forces.
Il. BACKGROUND
A. The Truth-in-Billing Orders
4. In 1999, the Commission released the Truth-in-
Billing Order to address concerns that there was growing
consumer confusion’ relating to billing for
telecommunications service and an increase in the number of
entities willing to take advantage of this confusion.
Consistent with sections 201(b) and 258 of the
Communications Act of 1934, as amended (the “Act”),* the
Commission adopted “broad, binding principles to promote
truth-in-billing rather than mandate detailed rules that would
rigidly govern the details or format of carrier billing
* See Truth-in-Billing and Billing Format, CC Docket No. 98-
170, Notice of Proposed Rulemaking, 13 FCC Red 18176 (1998).
* Section 201(b) requires that common carriers’ “practices ...
for and in connection with ... communications service. shall be
just and reasonable, and any such ... practice ... that is unjust or
unreasonable is hereby declared to be unlawful ...”. 47 U.S.C. §
201(b). Section 258(a) makes it unlawful for any
telecommunications carrier to "submit or execute a change in a
subscriber's selection of a provider of telephone exchange service
or telephone toll service except in accordance with such
verification procedures as the Commission shall prescribe.” 47
U.S.C. § 258.
42a
practices.”
5. The Commission stated that these truth-in-billing
principles should apply to all carriers, including wireless
carriers.° In general, the principles require: 1) that consumer
telephone bills be clearly organized, clearly identify the
service provider, and highlight any new providers; 2) that
bills contain full and non-misleading descriptions of charges
that appear therein; and 3) that bills contain clear and
conspicuous disclosure of any information the consumer may
need to make inquiries about, or contest charges on the bill.’
The Commission incorporated these principles into rules
“because we intend for these obligations to be enforceable to
the same degree as other rules.”* However, most of the
details regarding compliance with these obligations were left
to the carriers to satisfy in a manner that best fit their own
specific needs and those of their customers. At that time, the
Commission determined that, although the principles and
section 201(b) applied to all carriers, it would be appropriate
to exempt CMRS carriers from three of the codified rules
because they were deemed either inapplicable or unnecessary
in the CMRS context.’ In a Further Notice, however, the
Commission sought comment on whether these rules should
apply to CMRS carriers in the future."
* See Truth-in-Billing Order, 14 FCC Red at 7498, para. 9.
° Jd. at 7501, para 13.
” Id. at 7496, para 5.
* Id. at 7499, para. 9; see 47 C.F.R. §§ 64.2400 and 2401.
” Truth-in-Billing Order, 14 FCC Red at 7501, para. 15. See
also 47 C.F.R. § 64.2400(b).
'° Truth-in-Billing Further Notice, 14 FCC Red at 7535, para.
68. In the Further Notice, the Commission also proposed standard
labels for line items for charges associated with federal regulation.
43a
6. On March 29, 2000, the Commission modified
some of the Truth-in-Billing requirements in an Order on
Reconsideration.'' In addition, the Commission clarified that
where an entity bundles a number of services, some of which
may be provided by different carriers, as a single package
offered by a single company, such offering may be listed on a
telephone bill as a single offering. '”
B. Joint Advertising Statement
7. On March 1, 2000, the Commission released a Joint
Policy Statement with the Federal Trade Commission (FTC)
to provide carriers with guidance about how principles of
truthful advertising apply in the long distance service
The Commission tentatively concluded that the following labels
would be appropriate: "Long Distance Access" to identify charges
related to interexchange carriers’ costs for access to the networks
of local exchange carriers; "Federal Universal Service" to describe
line items seeking to recover universal service contributions; and
"Number Portability” to describe charges relating to local number
portability. The Commission asked for comments on these
proposed labels and alternatives. Jd. at 7537, para 71.
'' Truth-in-Billing and Billing Format, CC Docket No. 98-170,
Order on Reconsideration, 15 FCC Red 6023 (2000). Specifically,
the Reconsideration Order: 1) modified the requirement for
identification of new service providers to apply only te subscribed
services for which the provider places periodic charges on the bill
(i.e. not per-transaction basis such as dial-around or directory
assistance—although those still have to be separated by provider):
and 2) modified the “contact” requirement to ailow for other
electronic means in addition to the toll-free number, in limited
cases where the customer does not receive a paper copy of the bill
(for example billed by e-mail or Internet).
"> Id. at 6027, para. 9.
44a
marketplace.'? The Commission explained that the need to
address such issues arose from a proliferation of
advertisements for dial-around numbers, long-distance
calling plans, and other new telecommunications services;
combined with an increase in the number of complaints
regarding how these services were promoted.'* In addition,
the Joint Policy Statement noted that the FCC found that
unfair and deceptive marketing practices by common carriers
constitute unjust and unreasonable practices under section
201(b) of the Act.'° The Commission and FTC provided
specific examples of misrepresentations in advertisements for
long-distance service and material information that carriers
should clearly and conspicuously disclose in such
advertisements to comply with section 201(b).'°
'S See Joint FCC/FTC Policy Statement For the Advertising of
Dial-Around And Other Long-Distance Services To Consumers,
File No. 00-72, 15 FCC Red 8654 (2000) (Joint Policy Statement).
'* Id. at 8655, para. 3.
'* Id. at para. 4.
'° See id. at 8657-69, paras. 11-32. For example, the Statement
provided the following example of misleading advertising:
A 30-second television advertisement for a long-distance
calling plan features a spokesperson who on three occasion
states that calls on the plan are “10¢ a minute anytime.” In
addition, a graphic reading “10¢ a minute anytime” is
depicted twice during the ad. In fact, the 10¢ a minute rate
requires the payment of a $5.95 monthly fee. The only
disciosure of the monthly fee is through a visual superscript
at the end of the ad. Especially because the triggering
representation—that calls on the plan are “10¢ a minute
anytime”—was made both orally and visually, the visual
superscript would likely be less effective in disclosing the
monthly fee than had the same information been conveyed
both orally and visually.
45a
C. Universal Service Contribution Order
8. In 2002, the Commission released the Universal
Service Fund Contribution Order (USF Contribution Order),
which examined the reasonableness of a line item that
purported to describe Universal Service fees under section
201(b).!’ The amount of the Universal Service line item
imposed by carriers on customers often varied from the
contribution factor used to calculate the carriers’ actual
obligation to the fund. The Commission noted that an
analysis of federal universal service line-item charges across
industry segments revealed that such charges often bore little
or no relationship to the amount of the assessment.'* The
Commission stated that to the extent that carriers recover
Joint Policy Statement, Example #20.
'’ See generally Federal-State Joint Board On Universal
Service, CC Docket No. 96-45, 1998 Biennial Regulatory Review -
Streamlined Contributor Reporting Requirements Associated With
Administration of Telecommunications Relay Service, North
American Numbering Plan, Local Number Portability, and
Universal Service Support Mechanisms, CC Docket No. 98-17],
Telecommunications Services for Individuals with Hearing and
Speech Disabilities and the Americans with Disabilities Act of
1990, CC Docket No. 90-571, Administration of the North
American Numbering Plan and North American Numbering Plan
Cost Recovery Contribution Factor and Fund Size, CC Docket No.
92-237, Number Resource Optimization, CC Docket No. 99-200,
Telephone Number Portability, CC Docket No. 95-116, Truth-In-
Billing and Billing Format, CC Docket No. 98-170, Report and
Order and Second Further Notice of Proposed Rulemaking, 17
FCC Red 24952, 24979, para. 44 (2002) (USF Contribution
Order).
'§ Id. at 24977. para 47. “We are concerned, however, that the
flexibility provided under our current rules may have enabled some
companies to include other completely unrelated costs in their
federal universal service line items.” /d. at 24978, para 49.
46a
their contribution costs through a separate line item on
customer bills, they must accurately describe the nature of
the charge.'”
9. The Commission found it was “unreasonable”
under section 201(b) for carriers to characterize
administrative and other costs as part of regulatory fees or
universal service charges. The Commission stated that such
costs are no different than other costs associated with the
business of providing telecommunications service and,
although they could be recovered through rates or other line
item charges, it is unreasonable to describe an amount as a
universal service regulatory fee when that amount varies
from the contribution factor.”° Carriers, therefore, are
prohibited from including administrative costs in line items
that are “characterized as federal umiversal service
contribution recovery charges.”
10. The Commission stated that the elimination of
mark-ups in carrier universal service line items would
alleviate end user confusion and frustration, and “foster a
more competitive market by better enabling customers to
comparison shop among carriers.” The Commission also
concluded that this action would further the goal of
“promoting transparency for the end user in order to facilitate
informed customer choice.”” Finally, the Commission
declined at that time to mandate a specific label for federal
universal service line-items, but said it would monitor the
"9 Id. at para. 51.
© Id. at 24980, para 54.
"" Id.
2? Id. at 24978, para 50.
8 Id.
47a
. : 4
order’s effect on carrier practices.”
D. State and Industry Actions
11. In 2003, the wireless industry developed the CTIA
Consumer Code to facilitate the provision of accurate
information between consumers and wireless service
providers.” Over 30 wireless service providers, including
many national providers, are signatories to the Code. In
relevant part, the Code requires that signatory carriers
“Disclose Rates and Terms of Service to Consumers.” ”°
Among the disclosures mandated by that provision is the
disclosure of “the amount or range of any .. . fees or
surcharges that are collected and retained by the carrier.” In
addition, the Code requires that carriers separately identify
carrier charges from taxes on billing statements.”’
12. In July 2004, Attorneys General from 32 states
entered into settlement agreements with Verizon Wireless,
Cingular Wireless, and Sprint PCS regarding allegations of
misleading advertisements and unclear disclosures relating to
*4 Td. at 24983, para 65
25
“See
http://www.ctia.org/wireless_consumers/consumer_code/index.cf
m.
© CTIA Code, Item One.
"? CTIA Code, Item Six:
On customers” bills. carriers will distinguish (a) monthly
charges for service and features, and other charges collected
and retained by the carrier, from (b) taxes, fees and other
charges collected by the carrier and remitted to federal, state,
or local governments. Carriers will not label cost recovery
fees or charges as taxes.
48a
service agreement terms and wireless coverage areas.”*
Specifically, with regard to consumer bills, carriers agreed to
separate “taxes, fees, and other charges that [they are]
required to collect directly from Consumers and remit to
federal, state, or local governments, or to third parties
authorized by such governments, for the administration of
government programs” from monthly charges and all other
discretionary charges, except when the taxes, fees and other
charges are bundled into a single rate with monthly charges
for service and all other discretionary charges.” The carriers
also agreed to not represent, expressly or by implication, that
the discretionary costs recovery fees are taxes. ° In addition,
the carriers agreed to make point of sale disclosures
describing all charges appearing on consumers’ bills.?!
E. NASUCA Petition
13. On March 30, 2004, NASUCA filed a Petition for
Declaratory Ruling in the Truth-in-Billing and Billing
Format Docket urging the Commission to address what it
describes as the growing problem of consumer confusion
with telephone bills. Specifically, NASUCA requested that
’8 See Letter from Kathryn A. Zachem, Counsel for Verizon
Wireless. to Marlene H. Dortch, FCC, dated Jan. 10, 2005
(Attachment — Assurance of Voluntary Compliance) (Verizon
AVC). The thirty two states include: Alabama, Arkansas,
Colorado, Delaware, Georgia, Hawaii, Idaho, Illinois, lowa,
Kansas, Maine, Maryland, Massachusetts, Michigan, Mississippi,
Montana, Nebraska, Nevada, New Hampshire, New Jersey, New
Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon,
South Dakota, Tennessee, Texas, Virginia, Wisconsin and
Wyoming.
*’ Verizon AVC at 14, para. 36(a).
* Id. at para. 36(b).
*' Id. at 5-9, paras. 17-23.
49a
the Commission clarify that telecommunications carriers —
both wireline and wireless — are prohibited from imposing
line-item charges, surcharges or other fees on customers’
bills unless those charges are expressly mandated or
authorized by a federal or state law. NASUCA argues that
allowing the inclusion of line items that are not mandated or
authorized by the government violates the truth-in-billing
principles and rules and both section 201(b) and 202 of the
Act. In addition, NASUCA argues that the amount of any
such government mandated charge must conform to the
amount expressly authorized by federal, state, or local
governmental authority. NASUCA’s Petition sets forth
numerous examples of line item charges imposed by
interexchange (IXC) and wireless carriers that it contends are
misleading or unreasonable.” On May 25, 2004, the
Consumer & Governmental Affairs Bureau issued a public
notice seeking comment on the Petition in a newly created
CG Docket 04-208. In addition to numerous individual
consumers, more than 40 parties filed comments in response
to the Petition.
lil. SECOND REPORT AND ORDER
A. Background
14. In the Truth-in-Billing Order, the Commission
concluded that the broad principles adopted to promote truth-
in-billing should apply to all telecommunications carriers,
* See NASUCA Petition at 18-23, 29 (contending that, for
example, surcharges identified as “regulatory assessment fees,”
“carrier cost recovery charges,” “interstate access surcharge,”
“universal connectivity charge,” and “primary carrier charge” do
not allow customers to accurately assess what they are being billed
for or permit customers to determine whether the amounts charged
conform to the price charged for service).
50a
both wireline and wireless.*? The Commission noted that
these principles represent fundamental statements of fair and
reasonable practices. The Commission therefore rejected the
argument that certain classes of carriers should be wholly
exempt from complying with the truth-in-billing guidelines
solely because competition exists in the market which they
operate? In the wireline context, the Commission
incorporated these principles and guidelines into rules for
enforcement purposes “after considering an extensive record
of both the nature and volume of customer complaints, as
well as substantial information about wireline billing
practices.””°
15. In the wireless context, however, the Commission
found that the record did not reflect the same high volume of
customer complaints, nor did the record indicate that CMRS
billing practices failed to provide consumers with the clear
and non-misleading information they need to make informed
choices.*° The Commission therefore exempted CMRS
carriers from the truth-in-billing rule that requires charges
contained on telephone bills to be accompanied by a brief,
clear, non-misleading, plain language description of the
* Truth-in-Billing Order, 14 FCC Red at 7501, para. 13
(“[ljike wireline carriers, wireless carriers also should be fair,
clear, and truthful in their billing practices”).
* Id.
*S Jd. at para. 15.
*© Jd. at 7502, para. 16. The Commission also noted that
notwithstanding the decision not to apply these guidelines to
CMRS providers, that such providers remain subject to the
reasonableness and nondiscrimination requirements of sections 201
and 202, “and our decision here in no way diminishes such
obligations as they may relate to billing practices of CMRS
carriers.” See Truth-in-Billing Order, 14 FCC Red at 7502, para.
19.
Sla
service or services rendered.*’ In addition, the Commission
found certain of the truth-in-billing rules inapplicable to
CMRS.** In a Further Notice of Proposed Rulemaking, the
Commission sought comment on whether the truth-in-billing
rules adopted in the wireline context should apply to CMRS
carriers in order to protect consumers.*” The Commission
reiterated that all consumers expect and should receive bills
that are fair, clear, and truthful, but sought further comment
on whether such a problem existed in the wireless context,
and to what extent the presence of a competitive market is
relevant to consumers’ ability to protect themselves from the
harms that the truth-in-billing rules were designed to
address.“ The majority of commenters, representing
primarily CMRS providers, responded that the lack of billing
complaints against wireless providers along with the
competitive nature of the wireless industry should indicate
that it is not necessary to apply these rules to CMRS."' The
” See 47 C.F.R. §§ 64.2400(b), 64.2401(b).
** For example, because CMRS carriers are excluded from
equal access obligations, the Commission concluded that CMRS
carriers will seldom need to indicate a new long distance service
provider on their bill. See Truth-in-Billing Order, 14 FCC Rcd at
7502, para. 16. The Commission concluded that CMRS carriers
must comply with two of the truth-in-billing rules: 1) that the
name of the service provider associated with each charge be clearly
identified: and 2) that each bill should prominently display a
telephone number that customers may call free-of-charge in order
to inquire or dispute any charge contained on the bill. See 47
C.F.R. § 64.2401(a)(1) and (d).
°° Truth-in-Billing Further Notice, 14 FCC Red at 7535-36,
paras. 68-70.
*° Id. at paras. 68-69.
*! See, e.g.. Bell Atlantic Mobile 1999 Comments at 3; CTIA
1999 Comments at 5; PCIA 1999 Comments 4-5.
52a
California Public Utilities Commission, on the other hand,
argued that section 64.2401(b) of our rules is so fundamental
that it should apply to all telecommunications carriers,
including CMRS carriers.” Finally, responding to the
Commission’s suggestion that parties address _ the
applicability of a section 10 forbearance analysis,”’ a few
commenters suggested that the Commission should consider
forbearing the truth-in-billing requirements to CMRS
carriers.
B. Discussion
16. We conclude that CMRS carriers should no longer
be exempt from 47 C.F.R. § 64.2401(b)’s requirement that
billing descriptions be brief, clear, non-misleading and in
plain language. In creating this exemption in 1999, the
” See Cal PUC July 26, 1999 Comments (also maintaining that
47 C.F.R. § 64.2401(a)(2) and (c) should apply to CMRS carriers,
the former in the event a CMRS carrier bills for charges for two or
more carriers, and the latter in the event a CMRS carrier also bills
for charges for basic local service).
** Truth-in-Billing Order, 14 FCC Red at 7535, para. 69.
* See, e.g., Omnipoint 1999 Comments at 5; PCIA 1999
Comments at 8. Neither Omnipoint nor PCIA suggest that they
were formally petitioning the Commission for forbearance under
section 10(c) of the Act. Section 10(c) establishes a one-year
statutory deadline for Commission action on forbearance petitions,
and provides that a petitioning party’s requested relief is “deemed
granted” if the Commission does not act within that timeframe.
See 47 U.S.C. § 160(c). The Commission did not treat these
comments as petitions filed under section 10(c), nor did any party
subsequently suggest that the procedure under section 10(c) had
been triggered. Accordingly, while we discuss these parties’
comments regarding forbearance below, we do not recognize their
comments as triggering the requirements of section 10(c) and do
not recognize the relief as having been granted by operation of law.
53a
Commission relied upon the fact that the record did not
indicate a high volume of complaints in the CMRS context.*”
The Commission’s more recent data indicates that complaints
regarding wireless “billing & rates” and “marketing &
advertising” have increased significantly since that time. For
exampie, in 1999, the Commission received only a few dozen
complaints regarding wireless billing.“© In 2004, the
Commission received approximately 18,000 complaints
about wireless carrier practices in these categories.*’ This
trend is supported by the recent comments of a number of
states and consumers in this proceeding.** Although we
acknowledge that this increase may be due in part to the
significant increase in wireless subscribers since 1999, we
also believe it is demonstrative of consumer confusion and
dissatisfaction with current billing practices.
17. We disagree with those commenters that argue that
CMRS providers should be exempted from this requirement
* Truth-in-Billing Order, 14 FCC Red at 7501-02, para. 16.
*© See id. at 7564, Concurring Statement of Commissioner
Michael K. Powell.
" See First and Second Quarterly Report on Informal
Consumer Inquiries and Complaints (rel. Feb. 11, 2005); Third and
Fourth Quarterly Report on Informal Consumer Inquiries and
Complaints (rel. Match 4, 2005). See also 2003 Quarterly Report
on Informal Consumer Inquiries and Complaints (rel. May 10,
2003; Sept. 12, 2003; Nov. 20, 2003 and June 10, 2004).
Complaints filed in the categories of “billing and rates” and
“marketing and advertising” constituted over one-half of the total
complaints filed against wireless providers in 2003.
* See. e.g.. Cal. PUC Comments at 6-7; Texas OAG
Comments at 2: Consumers Union Comments at 3; Joseph Canfora
Comments at 1; John Gantz Comments at 1; Nancy Murray
Comments at |.
54a
because they operate in a competitive marketplace.” The
Commission specifically rejected this argument in the 7ruth-
in-Billing Order noting that, as competition evolves, the
provision of clear and truthful bills is paramount to efficient
operation of the marketplace.’ Although we agree that a
robustly competitive marketplace provides the best incentive
for carriers to meet the needs of their customers and affords
dissatisfied customers with an opportunity to change carriers,
we also recognize that some providers in a competitive
market may engage in misconduct in ways that are not easily
rectified through voluntary actions by the industry.°! As the
Commission emphasized in the Truth-in-Billing Order, one
of the fundamental goals of the truth-in-billing principles is
to provide consumers with clear, well-organized, and non-
misleading information so that they will be able to reap the
advantages of competitive markets.” We believe that
making the requirements of 47 C.F.R. § 64.2401(b)
mandatory for CMRS will help to ensure that wireless
consumers receive the information that they require to make
informed decisions in a competitive marketplace.
18. For the reasons discussed above, we also do not
” See, e. g., AT&T Wireless Comments at 2: CTIA Comments
at 8; PCIA 1999 Comments at 5.
© See Ti ruth-in-Billing Order, 14 FCC Red at 7501, para. 14.
*! See also Personal Communications Industry Association's
Broadband Personal Communications Services Alliance's Petition
for Forbearance for Broadband Personal Communications
Services, WT Docket No. 98-100, Memorandum Opinion and
Order and Notice of Proposed Rulemaking, 13 FCC Red 16857,
16868 at para. 23 (PCIA Forbearance Order) (1998) (“[a]ssuming
all relevant product and geographic markets become substantially
competitive, moreover, carriers may still be able to treat some
customers in an unjust, unreasonable, or discriminatory manner”).
* Truth-in-Billing Order, 14 FCC Rcd at 7501, para. 14.
/
55a
believe it would be appropriate to forbear from applying the
truth-in-billing rules to CMRS carriers. We find that the
record before us does not reflect that all three statutory
criteria established under section 10 have been satisfied.
Specifically, the record does not reflect that these
requirements are unnecessary to ensure that the charges and
practices of carriers are just and reasonable, or that
forbearance is consistent with the public interest. To the
contrary, the increasing number of consumer complaints to
this Commission and state regulatory agencies regarding
wireless billing practices provides empirical evidence that
application of the truth-in-billing rules to CMRS carriers is
necessary and in the public interest. It is critical for
consumers to receive accurate billing information from their
carriers to take full advantage of the benefits of a competitive
marketplace. We also note that the Commission declined to
forbear from the application of sections 201 and 202 of the
Act to broadband Personal Communications Service (PCS),
concluding that those sections “lie at the heart of consumer
protection under the Act.”*? In the PCIA Forbearance
Order, the Commission noted that it had never previously
refrained from enforcing sections 201 and 202 against
common carriers, even when competition exists in a
market.”
19. The Commission already has concluded that the
truth-in-billing principles, including the principle that billing
descriptions be brief, clear, non-misleading and in plain
language, apply to both wireline and wireless.°> The
Commission also noted that CMRS billing practices remain
** See PCIA Forbearance Order, 13 FCC. ee at 16865, para.
15.
™ Jd. at 16866, para. 17.
™ Truth-in-Billing Order, 14 FCC Red at 7501, para. 14.
56a
subject to the reasonableness and _ nondiscrimination
requirements of sections 201 and 202 of the Act.°° Thus, we
do not believe that making this requirement mandatory will
constitute a significant new regulatory burden on CMRS
providers, including smaller providers.°’ We believe that
eliminating the exemption from 47 C.F.R. § 64.2401(b) for
CMRS providers will remove any ambiguity regarding the
necessity of CMRS carriers to provide clear and non-
misleading billing information to their customers. In
addition, CMRS carners are put on notice that the
Commission intends to review complaints regarding unclear
or misleading billing descriptions, and may take enforcement
action under this rule as appropriate based on such
complaints or other evidence of non-compliance.
20. Though we remove the exemption from 47 C.F.R. §
64.2401(b) for CMRS providers, and thereby erase any
ambiguity regarding the necessity of CMRS carriers to
provide clear and non-misleading billing information to their
customers under our rules, we recognize that states may wish
to play a role in enforcing rules against CMRS and other
interstate carriers providing misleading billing information.
At a minimum, we emphasize that no action that we take in
this Second Report and Order and the Declaratory Ruling
below limits states’ authority to enforce their own generally
applicable consumer protection laws, to the extent such laws
do not require or prohibit use of line items, nor limits a
State's ability to assess taxes or create, for example, a state-
specific universal service fund to which carriers must
*° Id. at 7502, para. 19.
>’ See Cingular Comments at 7-11 (contending that Cingular is
already in compliance); Leap Comments at 9-11] (fees meet truth-
in-billing requirements); Verizon Wireless Comments (bills
comply with federal law even though Verizon Wireless is not
subject to truth-in-billing rules).
57a
contribute. In the Second Further Notice below, we seek
comment on specifically where to draw the line between the
Commission’s jurisdiction and states’ jurisdiction over the
billing practices of CMRS and other interstate carriers.
IV. DECLARATORY RULING
A. Background
21. In its Petition for Declaratory Ruling, NASUCA
raises concerns about the use of line items on consumer
telephone bills. NASUCA contends that, in some cases, the
exact nature of the line items are often unclear from the
descriptions, and the line items are characterized in a way
that could mislead consumers into believing these charges are
government mandated charges. Further, NASUCA contends
that the descriptions of such line items often have little or no
relationship to the actual charge listed on the bill.
22. NASUCA_requests that the Commission prohibit
telecommunications carriers — both wireline and wireless -
from imposing monthly line-item charges, surcharges or
other fees on customers’ bills unless such charges expressly
have been mandated or authorized by a regulatory agency.°®
NASUCA does not object to line items for “government
mandated fees.” nor does it object to “government authorized
fees.” NASUCA argues that allowing the inclusion of line
items that are not mandated or authorized by the government
violates the Truth-in-Billing principles and rules, the USF
Contribution Order. and both sections 201(b) and 202 of the
Act.
** NASUCA asks that if we deem a Petition for Declaratory
Ruling to be procedurally lacking for their proposals, that we
instead initiate a new rulemaking.
B. Discussion
1. NASUCA Petition
23. We deny NASUCA’s request for a Declaratory
Ruling prohibiting telecommunications carriers from
imposing any line items or charges that have not been
authorized or mandated by the government. There is no
general prohibition against the use of line items on telephone
bills under our rules or the Act. As NASUCA has
acknowledged, nothing in the Truth-in-Billing Order
prohibits carriers from using non-misleading line items.” To
the contrary, the USF Contribution Order states that while
carriers cannot include administrative costs under the
umbrella of regulatory charges, they may recover such costs
through their rates or “other line items.”© The truth-in-
billing rules require that charges contained on telephone bills
be accompanied by a brief, clear, non-misleading, plain
language description of the service or services rendered.°' If
carriers choose to offer descriptions of various charges in the
form of line items, however, there is nothing in the existing
Truth-in-Billing requirements to prevent them from doing
»° See generally Truth-in-Billing Order, 14 FCC Red 7492; see
also NASUCA Petition at 8, and n.16. See also AT&T Comment
at 5 (no Commission order or rule that prohibits impositions of
line-item charges).
°° See USF Contribution Order, 17 FCC Rcd at 24979. para.
55. See also Sprint Comments at 6 (citing the USF Contribution
Order and E911 proceeding); USTA-Comments at 4 (the only
unresolved matter is how to standardize line items); Verizon
Comments at 3-5 (the Commission has expressly authorized the
recovery of specific line item surcharges in Commission
proceedings such as the USF Contribution Order, and proceeding
regarding Local Number Portability fees); BellSouth Comments
at 5 (NASCUA has failed to show a controversy or uncertainty).
°' 47 C.F.R. § 64.2401(b).
59a
so.” Nor do we believe there is any basis to conclude that
such a practice is “unreasonable” under section 201(b). As
several commenters have noted, the provision of accurate and
non-misleading information on a telephone bill may be useful
information to the consumer in better understanding the
charges associated with their service and making informed
cost comparisons between carriers.” In sum, we reiterate
that carriers are not prohibited per se under our existing
Truth-in-Billing rules or the Act from including non-
misleading line items on telephone bills.™
24. Commenters in this docket have supplied evidence
that there is considerable consumer confusion regarding
telephone bills and even possible abuse of line item
°° See Sprint Comments at 15 and AT&T Comments at 10, 13
(the Commission left it up to the carriers to decide how to meet
Truth-in-Billing requirements).
°° See, e.g., CTIA Comments at 3; Giobal Crossing Comments
at 2; Verizon Wireless Comments at 14.
** We note that this finding does not alter the role of any other
specific prohibition or restriction on the use of line items. For
example, this Commission has prohibited line items for interstate
Telephone Relay Service (TRS) costs. See Telecommunications
Services for Individuals with Hearing and Speech Disabilities, and
the Americans with Disabilities Act of 1990, CC Docket No. 90-
571, Order on Reconsideration, Second Report and Order, and
Further Notice of Proposed Rulemaking, 8 FCC Red 1802, 1806,
para. 22 (1993). See also Report and Order and Request for
Comments, 6 FCC Red 4657, 4664, para. 34; Telecommunications
Relay Services and Speech-to-Speech Services for Individuals with
Hearing and Speech Disabilities, CC Docket No. 98-67, Order, 19
FCC Red 12224. 12228 n.33 (2004). As noted infra, we intend to
revisit the prohibition on line items referring to interstate TRS in a
future proceeding in a separate docket that will take into
consideration the policy objectives outlined in this proceeding.
60a
65
charges.” Both the Texas Office of the Attorney General
® See, e.g., TURN & UCAN Comments at 4 (contending that
there has been a proliferation of deceptive, misleading charges).
The National Consumers League says that complaints about billing
descriptions have increased, prompting the group to create a link
on their website regarding “Understanding Your Phone Bill,” but
the group has difficulty keeping this up-to-date with the vague line
items (Consumers League Comments at 4-5). Consumers Union,
the National Consumer Law Center, and the Massachusetts Union
of Public Housing Tenants say the truth-in-billing principles have
failed to clean up the clutter and to help consumers make informed
choices about their service (Consumers Union Comments at 4).
Ohio PUC describes consumer confusion over vague charges that
appear to be regulatory in origin, such as “Government
Assessment” charges (Ohio PUC Comments at 8-10). Indiana
URC contends that the practice of placing extra charges not
expressly mandated or clearly disclosed on customer bills is
misleading and does not comport with the spirit of the Act (Indiana
URC Comments at 2). The lowa UB says that it is difficult to
determine if the surcharge is recovering only what the actual
regulatory costs are to that carrier or operating costs; thus, the true
cost of service is obscured, which makes it difficult for a consumer
to make cost-based comparisons between competing service
providers (lowa UB Comments at 2). The Texas OAG states:
“The State of Texas has received countless bills containing
instances of regulatory fees and surcharges purporting to recover
‘regulatory’ or ‘administrative’ costs, but which upon further
analysis are nothing other than regular operating expenses, such as
those incurred by any other business” (Texas OAG Comments at
2). The commenting “Rural Wireline Carriers” contend that some
of them provide interexchange services in competition with
carriers that impose misleading line item surcharges described in
NASUCA’s Petition (RWC Comments at 2). Massachusetts OAG
contends that market forces alone are not sufficient to ensure that
consumers are not deceived and can make accurate price
comparisons (Massachusetts OAG Comments at 2). Teletruth
provides details of a two-year investigation into consumer phone
bills by Teletruth and New Networks Institute, a market research
6la
and the Iowa Utilities Board, for example, note that
increasing amounts of their resources are devoted to
reviewing various surcharges, in response to consumer
complaints.” We recognize that the provision of accurate
information on consumer telephone bills is among one of the
most important issues for telecommunications consumers. In
particular, we are concerned that some carriers may be
disguising rate increases in the form of separate line item
charges and implying that such charges are necessitated by
governmental action. As a result, we take this opportunity to
reiterate, and provide some additional clarifications to, our
existing rules, and we seek further comment on additional
proposals below that we believe would be beneficial in
ensuring that consumers receive accurate information. We
also recognize that overbroad state regulations in this area
may frustrate our federal rules and the federal objective of
minimizing regulatory burdens on the competitive CMRS
industry. Moreover, we note that in establishing the
regulatory framework for CMRS, Congress expressly
assigned certain tasks, including rate regulation, to the
federal government. Accordingly, we also discuss the roles
of federal and state authority in this area, and identify those
types of state regulations that expressly are preempted by the
Act.
2. Application of Section 201(b) to Line Items
25. Section 201(b) of the Act requires that all charges,
practices, classifications. and reguiations for and in
firm, and LTC Consulting, a phone bill auditing firm (see
generally Teletruth Comments). Several consumer commenters
also express discontent with the line item charges on their bills.
See, e.g., Jason G. Campbell Comments.
°° Texas OAG Comments at 2; lowa UB Comments at 2
(hundreds if not thousands of consumer inquiries concerning
current billing practices).
62a
conjunction with interstate communications service be just
and reasonable, and gives the Commission jurisdiction to
enact rules to implement that requirement.” The
Commission has concluded that a carrier’s provision of
misleading or deceptive billing information is an unjust and
unreasonable practice in violation of section 201(b).°
26. Although we have not prohibited carriers from
using line items, we reiterate here that all carriers are
prohibited from including misleading information on their
telephone bills. We believe that it is useful to now provide
some additional detail on whether certain practices may be
deemed unreasonable or misleading under our rules.” It
appears from the record that a common source of consumer
confusion derives from the myriad of charges that are
assessed by carriers ostensibly to recover costs incurred as a
result of specific government action. These regulatory
charges generally can be characterized as mandated fees or
taxes that the carrier is required to collect from the consumer
(e.g., federal excise tax),’” authorized fees that the carrier has
the discretion to pass on to the consumer (e.g., universal
service), and administrative or other costs that may be
associated with the cost of compliance with regulatory
requirements. We emphasize that it is permissible for
carriers to recover these costs so long as they do so in a
manner that complies with our rules.
°7 47 U.S.C. § 201(b). |
°° See Truth-in-Billing Order, 14 FCC Red at 7560, para. 24.
* We emphasize that our statements herein are of general
applicability and are not intended to supersede more specific
federal rules that may govern the recovery of particular fees.
” See, e.g., 26 U.S.C.A. § 4251(a)(2) (“Payment of [excise]
tax. — The tax imposed by this section shall be paid by the person
paying for such services”).
63a
27. Consistent with the Commission’s prior findings,
we reiterate that it is a misleading practice for carriers to state
or imply that a charge is required by the government when it
is the carriers’ business decision as to whether and how much
of such costs they choose to recover directly from consumers
through a separate line item charge.’’ Consumers may be
less likely to engage in comparative shopping among service
providers if they are led to believe erroneously that certain
rates or charges are unavoidable federally mandated amounts
from which individual carriers may not deviate.” This
prohibition includes not only misleading statements or
descriptions, but also placement of the charge on the bill in
such a way as to lead a reasonable consumer to believe that
the charge has been mandated by the government. For
example, because placing a discretionary charge in a section
or subsection of the bill that otherwise contains only
government required charges or taxes may mislead a
reasonable consumer into believing that such charge also is
required, such placement is not allowed. We also are
concerned that some carriers may be labeling certain non-
regulatory line item charges in such a way as to create
confusion with regulatory programs. As a result, carries
should take great caution in using terms that are most
commonly associated with governmental programs to
describe other charges that are unrelated to those programs.”
28. Consistent with the Commission’s conclusion in the
USF Contribution Order, we reiterate that it is unreasonable
"' See Truth-in-Billing Order, \4 FCC Red at 7527. para. 56.
” See id. at 7522-23, para. 49.
” See, e.g., NASUCA Petition at 29-30 (arguing that one
carriers’ “TSR Administrative Fee” is designed to be confused
with the Telecommunications Relay Service (TRS) charge, and
another’s “Universal Connectivity Charge” may be confused with
a separate universal service charge on that carrier's bill).
64a
and misleading for carriers to include administrative and
other costs as part of “regulatory fees or universal service
charges” or similar line item labels that imply government
mandated charges.“ Although the Commission focused
primarily on the universal service charge, we reiterate here
that, as the language in that order indicates, this prohibition
applies to all regulatory fees. It is our view that these costs
are no different than other costs associated with the business
of providing telecommunications service and may be
recovered through rates or other line item charges.”” Thus, it
is an unreasonable practice for carriers to include any costs
that do not accurately reflect the carrier’s actual obligation to
the specific governmental program that the line item purports
to recover. For example, carriers that elect to recover their
universal service contribution costs through a separate line
item may not mark up the line item above the relevant
contribution factor established by the Commission.” As a
result, a regulatory line item charge should never exceed any
maximum amount or cap established by the government to
recover for that specific program. Carriers that are not rate-
regulated by this Commission, namely interexchange
carriers, CMRS providers, and competitive local exchange
carriers will have the same flexibility that exists today to
recover legitimate administrative and other costs, and may
recover those legitimate administrative and other related
costs through rates or other line items.
29. To the extent that a carrier decides to collect a
regulatory fee through a separate line item, we clarify that the
”* USF Contribution Order, 17 FCC Red at 24979, para. 54.
75
Id.
© See id. at 24978, paras. 49-51 (noting that if the contribution
factor is 7.28%, a carrier’s federal universal service line item
charge cannot exceed 7.28%).
65a
burden rests upon the carrier to demonstrate that the charge
imposed on the customer accurately reflects the specific
governmental program fee it purports to recover. This
burden is satisfied if the carrier demonstrates that the line
item charge in question falls within any maximum level
allowed by the government for its recovery.”’ In those
instances, however, when a carrier is not subject to a
maximum cap or other specific guidelines for its recovery,
the carrier should be prepared to demonstrate that the cost
imposed pursuant to a regulatory line item charge
corresponds to the amount remitted to the government or its
agent for that program. As discussed above, it is not
permissible for a carrier to collect administrative or other
charges pursuant to a line item that describes a specific
governmental program or fee. Thus, carriers should be able
to demonstrate with probative accounting documentation and
other relevant evidence that the amounts collected for
specific governmental programs and fees equals the amount
submitted to the government or its agent for that program.
3. Section 332
30. We find that state regulations requiring or
prohibiting the use of line items — defined here to mean a
discrete charge identified separately on an end user’s bill —
constitute rate regulation and, as such, are preempted under
section 332(c)(3)(A) of the Act. This statutory provision
states. in relevant part:
[N]o State or local government shall have any
authority to regulate the entry of or the rates
charged by any commercial mobile service or
” See, eg, 47 C.F.R. § 54.712 (“the amount of the federal
universal service line-item charge may not exceed the interstate
telecommunications portion of that customer’s bill times the
relevant contribution factor’).
66a
any private mobile service, except that this
paragraph shall not prohibit a State from
regulating the other terms and conditions of
commercial mobile services.”
As the D.C. Circuit has recognized, Congress did not
specifically define “rates,” “entry,” or other key terms in
section 332(c)(3)(A).”” The Commission, however,
consistently has interpreted the rate regulation provision of
the statute to be broad in scope. The Commission has
interpreted this provision to “prohibit states from prescribing,
setting or fixing rates” of wireless service providers.*’ The
Commission also has made clear that the proscription of state
rate regulation extends to regulation of “rate levels” and “rate
structures” for CMRS.*' Along these lines, the Commission
has found that section 332(c)(3)(A) not only prohibits states
from prescribing “how much may be charged” for CMRS,
but also prohibits states from prescribing “the rate elements
for CMRS” or “specify[ing] which among the CMRS
services provided can be subject to charges by CMRS
providers.”*’ We also note that our interpretation here is
consistent with prior Commission statements equating “line
47 U.S.C. § 332(c)(3)(A) (emphasis added).
” CTIA vy. FCC, 168 F.3d 1332, 1336 (D.C. Cir. 1999).
*° Id.. citing Pittencrief Communications, Inc., 13 FCC Red
1735, 1745 (1997) (“Pittencrief Order’).
5! Southwestern Bell Mobile Systems, Inc. Petition for a
Declaratory Ruling Regarding the Just and Reasonable Nature of.
and State Challenges to, Rates Charged by CMRS Providers when
Charging for Incoming Calls and Charging for Calls in Whole-
Minute Increments, Memorandum Opinion and Order, 14 FCC Red
19898. 19906-07, paras. 18-20 (1999) (“Southwestern Bell
Order’’).
*° Id. at 19907, para. 20.
67a
items” with “rate elements.”® Recognizing the
Commission’s broad prior interpretation of rate regulation
and statements about line items, we find that state
regulations” requiring or prohibiting line items similarly fall
*° For example, in discussing the manner in which federal
universal service contributions may be reflected on end users’ bills,
the Commission explained that “incumbent local exchange carriers
are required to recover their federal universal service contribution
costs through a line item, which may be combined for billing
purposes with another rate element.” USF Contribution Order, \7
FCC Red at 24979, para. 53 n.133 (emphasis added). And in a
prior order on the same subject matter, the Commission approved a
plan permitting local phone companies to establish “a separate rate
element (e.g. line item)” to recover federal universal service
contributions. Access Charge Reform, Price Cap Performance
Review for Local Exchange Carriers, Low-Volume Long Distance
Users, Federal-State Joint Board on Universal Service, Sixth
Report and Order in CC Docket Nos. 96-262 and 94-1, Report and
Order in CC Docket No. 99-249, Eleventh Report and Order in CC
Docket No. 96-45, 15 FCC Red 12962, 13057-58, paras. 218-19
(2000).
“We note that the terms “state regulation” and “state
regulatory action” have broad application in the context of section
332. See Wireless Consumers Alliance, Inc. Petition for a
Declaratory Ruling Concerning Whether the Provisions of the
Communications Act of 1934, as Amended, or the Jurisdiction of
the Federal Communications Commission Thereunder, Serve to
Preempt State Courts from Awarding Monetary Relief Against
Commercial Mobile Radio Service (CMRS) Providers (a) for
Violating State Consumer Protection Laws Prohibiting False
Advertising and Other Fraudulent Business Practices, and/or (6)
in the Context of Contractual Disputes and Tort Actions
Adjudicated Under State Contract and Tort Laws, WT Docket No.
99-263. Memorandum Opinion and Order, 15 FCC Red 17021,
17027. para. 12 (2000) (“Wireless Consumers Alliance Order’’)
(recognizing that judicial, legislative and administrative action all
can constitute state regulation under section 332).
68a
within the statute’s zone of proscribed state regulatory
activity.*°
31. A closer look at the type of state regulations in
question reveals that many directly affect CMRS carriers’
rates and rate structures in a m nner that amounts to rate
regulation. State regulations that prohibit a CMRS carrier
from recovering certain costs through a separate line item,
thereby permitting cost recovery only through an
undifferentiated charge for service, clearly and directly affect
the manner in which the CMRS carrier structures its rates.*°
Parties have submitted several examples of state regulations
and proposals in this category, all of which are preempted by
the Act.*’ As a further illustration, we note that the
*° We note that our analysis of section 332 herein has no effect
on voluntary agreements between CMRS carriers and states such
as the one discussed above in para. 12.
*° We recognize that precluding states from prohibiting carriers
from using line items on an end user’s bill may be in tension with
our prior conclusion in the TRS context that carriers may not
recover interstate TRS costs as a specifically identified line item.
See supra n.64. Although we recognize that the prohibition on
line items referring to interstate TRS reflects concerns specific to
TRS’s genesis in Title IV of the Americans with Disabilities Act of
1990, as noted above, we intend to revisit this TRS-related
prohibition in a future proceeding in a separate docket.
*” See, e.g., Letter from John T. Scott, Ill, Vice President &
Deputy General Counsel Regulatory Law, Verizon Wireless, to
Marlene H. Dortch, Secretary, Federal Communications
Commission, CG Docket No. 04-208 and CC Docket No. 98-170,
at 5 (filed Jan. 25, 2005) (Verizon Wireless Jan. 25 Ex Parte).
Such state regulations include a Vermont Public Service Board
proposal to prohibit carriers from itemizing a separate charge to
recover the Vermont gross receipts tax imposed on carriers, see
Public Service Board Proposed Rule 7.617(c); an Indiana Utility
Regulatory Commission letter prohibiting carriers from placing a
69a
regulatory relief sought by NASUCA in its Petition (i.e., a
regulation curtailing a CMRS carrier’s ability to structure its
bills and isolate charges into separate line items) would have
a direct effect on a CMRS carrier’s rate structure presented to
its end users and, if instituted by a state commission, would
be preempted by the Act. We find that the converse is also
true: a state rule requiring CMRS carriers to segregate
particular costs into line items represents the other side of the
same coin, and similarly would limit a carrier’s ability to set
and structure its rates. Parties have submitted at least one
example of such a requirement.*® That this type of line item
regulation would affect a CMRS carrier’s rates and rate
structure is particularly evident when considering that most
CMRS carriers (as discussed in more detail below) market
and price their services on a national basis. A CMRS carrier
forced to adhere to a varying patchwork of state line item
requirements, which require costs to be broken out or
combined together in different manners, would be forced to
adjust its rate structure from jurisdiction to jurisdiction.
32. While we hold that state regulation prohibiting or
line item for the Indiana Utility Receipts tax on their bills, see
Letter from Christopher R. Day, Counsel, Government Affairs,
Nextel, to Marlene H. Dortch, Secretary, Federal Communications
Commission, CG Docket No. 04-208 (filed Dec. 22, 2004); and a
Georgia law prohibiting recovery of carrier contributions to the
State universal service fund through separate charges, see
NASUCA Petition at 65 n.170. The statutory preemption we
recognize in this item is not limited to these particular state rules,
but would apply to other rules, now and in the future, that
constitute “rate regulation” in the manner described above.
8 See Verizon Wireless Jan. 25 Ex Parte at 5, citing a
requirement under Colorado law, 4 Colo. Code Regs. Sec. 723-
41.2.3, which requires carriers to segregate a particular cost and
collect it through “a line item on the monthly bill of each...end
user.”
70a
requiring CMRS line items constitutes preempted rate
regulation, we emphasize that this preemption does not affect
other areas within the states’ regulatory authority. For
example, our ruling does nothing to disturb the states’ ability
to require CMRS carriers to contribute to state universal
service support mechanisms or to impose other regulatory
fees and taxes. The Commission previously has recognized
that section 254(f) of the Act authorizes states to require
CMRS providers to contribute to state universal service
support mechanisms — and that section 332(c)(3) does not
take this authority away.”’ Indeed, in distinguishing rate and
entry regulations from “other terms and conditions,” which
are not expressly preempted under section 332, Congress
explained that the latter includes “such matters as customer
billing information and practices and billing disputes and
other consumer protection matters . . . or such other matters
as fall within a state’s lawful authority.””? Similarly,
8° Federal-State Joint Board on Universal Service. CC Docket
No. 96-45, Report and Order, 12 FCC Red 8776, 9181-82, para.
791 (1997); Pittencrieff Order, 13 FCC Red 1735, aff'd, CTIA v.
FCC. |
* HLR. Rep. No. 111, 103d Cong., 1% Sess., at 261 (1993).
The Commission previously has recognized that state regulation of
customer billing practices fall within “other terms and conditions”
in section 332(c)(3)(A). See Petition of the State Independent
Alliance and the Independent Telecommunications Group for a
Declaratory Ruling that the Basic Universal Service Offering
Provided by Western Wireless in Kansas is Subject to Regulation
as Local Exchange Service, WT Docket No. 00-239, Memorandum
Opinion and Order, 17 FCC Red 14802, 14805, para. 6 (2002)
(Western Wireless Kansas Order): Calling Party Pays Service
Offering in the Commercial Mobile Radio Services, WT Docket
No. 97-207, Declaratory Ruling and Notice of Proposed
Rulemaking, 14 FCC Red 10861, 10881, para. 37 (1999) (Calling
Party Pays NPRM). The Commission never has considered,
however, where among section 332(c)(3)(A)’s key terms state
Tla
consistent with section 601(c)(2) of the 1996 Act, we do not
read section 332(c)(3) to limit a state’s authority to impose
taxes or other regulatory fees.°' What section 332(c)(3) does
regulation prohibiting or requiring line items should fall. We
address this issue for the first time in this item and, for the reasons
expressed above, find that such regulation represents rate
regulation. For similar reasons, our ruling here is not at odds with
the decision of the Court of Appeals for the Seventh Circuit in
Fedor v. Cingular Wireless Corp., 355 F.3d 1069 (7th Cir. 2004)
(holding that challenge to wireless carrier’s billing practice was not
preempted by section 332(c\3)A) and thus not removable to
federal court). The issue of state regulation of line items was not
before that court, and we address it for the first time here. In
addition, the Fedor court did not call into question the
Commission's findings in the Southwestern Bell Order and the
Wireless Consumers Alliance Order, which support our declaratory
ruling here, and the Fedor court indeed relied on those decisions.
Moreover, the court stated that, in deciding whether a billing-
related claim is preempted, the proper inquiry was whether the
claim requires the state court to assess what rate a carrier may
charge. By addressing what may or may not be presented as part
of a provider's rate, regulations of the sort we preempt here would
directly affect what subscribers see as the provider's rates, which
the Act expressly precludes the states from regulating.
*! Telecommunications Act of 1996, Pub. L. No. 104-104, 110
Stat. 56 (1996) (“1996 Act”). In particular, section 601(c)(2) of
the 1996 Act provides, with limited exceptions, that "nothing in
[the 1996] Act or the amendments made by [the 1996] Act shall be
construed to modify, impair, or supersede, or authorize the
modification, impairment, or supersession of, any State or local
law pertaining to taxation.” 1996 Act, § 601(c)(2), published as a
note to 47 U.S.C. § 152; see also Promotion of Competitive
Networks in Local Telecommunications Markets; Wireless
Communications Association International, Inc. Petition for
Rulemaking to Amend Section 1.4000 of the Commission's Rules to
Preempt Restrictions on Subscriber Premises Reception or
Transmission Antennas Designed to Provide Fixed Wireless
72a
address, however, in precluding state regulation of a CMRS
carrier’s rates, are rules that dictate whether and how CMRS
Carriers may incorporate these regulatory fees into their end
user bills.
33. We also emphasize that not all regulation relating to
a carrier's bills and its relationship with customers represents
preempted "rate regulation." For example, state regulations
that address the disclosure of whatever rates the CMRS
provider chooses to set,” and the neutral application of state
contractual or consumer fraud laws, are not preempted by
section 332.” In addition, state requirements that are
consistent with our federal truth-in-billing rules can coexist
with these rules.” As with other types of state "truth in
billing” regulation, however, regulation of interstate services
that conflicts with federal rules and objectives may be subject
Services; Cellular Telecommunications Industry Association
Petition for Rulemaking and Amendment of the Commission's
Rules to Preempt State and Local Imposition of Discriminatory
and/or Excessive Taxes and Assessments; Implementation of the
Local Competition Provisions in the Telecommunications Act of
1996, Notice of Proposed Rulemaking and Notice of Inquiry in
WT Docket No. 99-217, and Third Further Notice of Proposed
Rulemaking in CC Docket No. 96-98, 14 FCC Red 12673 (1999).
* See Southwestern Bell Order, 14 FCC Red at 19908, para.
23.
*° See Southwestern Bell Order, 14 FCC Red at 19903, para.
10; Western Wireless Kansas Order, 17 FCC Red at 14819, para.
30 n.119.
4 See 47 C.F.R. § 64.2400(c); see also Truth-in-Billing Order,
14 FCC Red at 7507, para. 26 (“states will be free to continue to
enact and enforce additional regulation consistent with the general
guidelines and principles set forth in this Order, including rules
that are more specific than the general guidelines we adopt
today”).
73a
to future preemption. In the Second Further Notice that we
adopt in this proceeding, we seek comment on, among other
things, how to define more clearly prohibited and permissible
state regulation pursuant to section 332(c)(3)(A).”
34. Our ruling is further consistent with and supported
by the Commission’s decision in the Wireless Consumers
Alliance Order. In that decision, the Commission found that
state court damage awards do not necessarily fall within the
concept of “rates” in section 332(c)(3)(A) because “there is
no necessary correspondence between the indirect effect that
monetary liability may have on a company’s behavior and
the direct effect that a statute or regulatory rate requirement
will have on that behavior.”” Here, however, we find that
state regulation requiring or prohibiting the use of line iterns
representing charges for CMRS is preempted because of its
direct effect on the CMRS carrier’s rates and rate structure.
The Commission further stated in the Wireless Consumers
Alliance Order that state damage awards “may, in specific
cases, be preempted by section 332[(c)(3)(A)].”. As we
found in the Wireless Consumers Alliance Order, here we
find that “it is the substance, not merely the form” of the line
item at issue that determines whether the state is engaging in
rate regulation proscribed by _ section 332(c)(3)(A).*
Because “[w]e recognize that the line between prohibited and
permissible” state regulations of line items “may not always
be clear,””? we issue a Second Further Notice seeking
comment on how further to define the scope of section
» See infra paras. 49-54.
%© Wireless Consumers Alliance Order, 15 FCC Red at 17034,
para. 23.
”” Td. at 17036. para. 2
*8 Id. at 17037. para. 2
7
to ow
= =
74a
332(c)(3)(A)’s preemption, as well as in general on where to
draw the line between the Commission’s jurisdiction and
states’ jurisdiction over wireless and wireline carriers’ billing
practices.
35. Even setting aside the preemptive effect of section
332(c)(3), we note that the type of state regulations described
above also may be subject to preemption because they
conflict with established federal policies. It is recognized
widely that federal law preempts state law where, as here, the
state law would “stand as an obstacle to the accomplishment
and execution of the full purposes and objectives of
Congress,’ or of federal regulations.’"’ The pro-
competitive, deregulatory framework for CMRS prescribed
by Congress and implemented by the Commission has
enabled wireless competition to flourish, with substantial
benefits to consumers.” In this environment, Congress has
directed that the rate relationship between CMRS providers
and their customers be governed “by the mechanisms of a
competitive marketplace,” in which prospective rates are
established by the CMRS carrier and customer in service
contracts, rather than dictated by federal or state
regulators.'”? To succeed in this marketplace, CMRS carriers
'° Fidelity Federal Sav. and Loan Ass'n v. De La Cuesta, 458
U.S. 141, 153 (1982).
'' See City of New York v. FCC, 486 U.S. 57, 64 (1988):
United States v. Shimer, 367 U.S. 374, 381-382 (1961).
‘2 See Implementation of Section 6002(b) of the Omnibus
Budget Reconciliation Act of 1993; Annual Report and Analysis of
Competitive Market Conditions with Respect to Commercial
Mobile Services, WT Docket No. 04-111, Ninth Report, 19 FCC
Red 20597, 20601. para. 4 (2004) (Ninth CMRS Market Conditions
Report).
'S Wireless Consumers Alliance Order, 15 FCC Red at 17032-
33, paras. 20-21: see Personal Communications Industry
75a
typically operate without regard to state borders and, in
contrast to wireline carriers, generally have come to structure
their offerings on a national or regional basis.’ Efforts by
individual states to regulate CMRS carriers’ rates through
line item requirements thus would be inconsistent with the
federal policy of a uniform, national and deregulatory
framework for CMRS. Moreover, there is the significant
possibility that state regulation would lead to a patchwork of
inconsistent rules requiring or precluding different types of
line items, which would undermine the benefits derived from
allowing CMRS carriers the flexibility to design national or
regional rate plans.
36. The preemption recognized above under the rate
regulation provisions of section 332(c)(3)(A) is limited to
state regulations that require or prohibit the use of line items.
We thus decline in this Declaratory Ruling to go as far as
urged by some CMRS carriers in the record, to the extent
they suggest that any state regulation affecting line items is
prohibited rate structure regulation.'®° We seek comment in
Association's Broadband Personal Communications Services
Alliance's Petition for Forbearance for Broadband Personal
Communications Services; Biennial Regulatory Review—
Elimination or Streamlining of Unnecessary and Obsolete CMRS
Regulations; Forbearance from Applying Provisions of the
Communications Act to Wireless Telecommunications Carriers,
WT Docket No. 98-100, Further Forbearance from Title II
Regulation for Certain Types of Commercial Mobile Radio Service
Providers, GN Docket No. 94-33, GTE Petition for
Reconsideration or Waiver of a Declaratory Ruling, MSD-92-14,
Memorandum Opinion and Order and Notice of Proposed
Rulemaking, 13 FCC Red 16857 (1998).
‘4 Ninth CMRS Market Conditions Report, 19 FCC Rcd at
20644, para. 113; see also CTIA Comments at 4-6.
105
See, e.g.. Verizon Wireless Jan. 25 Ex Parte at 8-10; Letter
from Leonard J. Kennedy, Senior Vice President and General
76a
the Second Further Notice below regarding appropriate
federal rules to govern, among other things, the description
of line items, and we also ask questions about the balance
between federal and state regulation on these subjects.
V. SECOND FURTHER NOTICE OF PRCPOSED
RULEMAKING
A. Introduction
37. In soliciting comment on the NASUCA Petition, we
highlighted that the NASUCA Petition raised issues
implicated in our Truth-in-Billing proceeding. °° However,
the broader issue of the role of states in regulating billing was
addressed primarily in reply comments and ex parte
submissions, and received only cursory treatment in
comments on the NASUCA Petition. Given the importance
and complexity of this broader issue, a second Further Notice
of Proposed Rulemaking is appropriate in order to garner as
complete and up-to-date a record as possible.'°’ We also
seek comment on other truth-in-billing issues, as specified
below, and invite commenters to refresh the record on any
issues from the Truth-in-Billing Further Notice that we have
Counsel, Nextel] Communications, and Thomas J. Sugrue, Vice-
President, Government Affairs, T-Mobile USA, to Michael K.
Powell, Chairman, Federal Communications Commission, et al.,
CG Docket No. 04-208, at 2, 10-11 (filed Dec. 13, 2004)
(Nextel/T-Mobile Dec. 13 Ex Parte).
' National Association of State Utility Consumer Advocates
(NASUCA) Petition for Declaratory Ruling Regarding Truth-in-
Billing and Billing Format, Comments Requested, 69 Fed. Reg.
33021 (June 14, 2004).
1°” But see Verizon Wireless Jan. 25 Ex Parte at 11-14
(suggesting that this issue is ripe for resolution now and that
Administrative Procedure Act requirements have been satisfied).
77a
not addressed above.!
B. Discussion
1. Billing of Government Mandated and
Non-Mandated Charges
38. In the Truth-in-Billing Order, the Commission
required carriers that list charges in separate line items to
identify certain of such line item charges through standard
industry-wide labels and to provide full. clear and non-
misleading descriptions of the nature of the charges.'”? The
Commission sought comment on the specific labels that
carriers should adopt, while tentatively concluding that such
labels will, without unduly burdening carriers, identify
adequately the charges and provide consumers with a basis
for comparison among carriers.''? In addition, while
declining to formulate standardized descriptions for billed
services, the Commission encouraged carriers to develop
'8 For instance, while we do resolve above the 7ruth-in-
Billing Further Notice’s question regarding whether 47 C.F.R. §
64.2401(b) should apply to CMRS carriers, see 7ruth-in-Billing
Further Notice, 14 FCC Red at 7534-35, paras. 68-69, we do not
decide above, however, whether 47 C.F.R. § 64.201(a)(2) and (c)
should apply in the wireless context. See Truth-in-Billing Further
Notice, 14 FCC Red at 7535-36, para. 70. We invite commenters
to refresh the record on these issues.
'° See Truth-in-Billing Order and Further Notice, 14 FCC
Red at 7522-23, 7525-26, paras. 50, 55.
110
See id. at 7537, para. 71. We will address these issues in
the order that we adopt in response to this 7ruth-in-Billing Second
Further Notice. Given that it has been over five and a half years
since the comment cycle on the 7ruth-in-Billing Further Notice
closed. we encourage commenters to refresh the record on these
issues.
78a
uniform terminology for such descriptions.’”’ The
Commission also encouraged industry and consumer groups
to consider further whether some categorization of charges
would be advisable."
39. Nearly six years after adoption of the 7ruth-in-
Billing Order, the record reflects that consumers still
experience a tremendous amount of confusion regarding their
bills’? which inhibits their ability to compare carriers’
service and price offerings, in contravention of the pro-
competitive framework of the 1996 Act. To help alleviate
this situation, consistent with our prior finding,''* as well as
the recommendations of commenters such as the Ohio
PUC,''* we tentatively conclude that where carriers choose to
list charges in separate line items on their customers’ bills,
government mandated charges must be placed in a section of
the bill separate from all other charges. We also solicit
comment on how we should define the distinction between
mandated and non-mandated charges for truth-in-billing
purposes.
''! See Truth-in-Billing Order, 14 FCC Red at 7518-19, para.
43.
''? See id. at 7526, para. 55. The Commission provided as an
example one method that carriers may use to provide clear
descriptions of services rendered would be to identify a section of
the telephone bill as “long distance service,” followed by an
itemized description of calls. See id. at 7517-18, para. 41.
' See supra paras. 16 and 24; but see Verizon Wireless Jan.
25 Ex Parte at 6 n.27 (asserting that the record in this proceeding
“contains no credible evidence that CMRS providers fail to
provide consumers with clear and non-misleading information they
need to make informed choices”).
114
See supra para. 27.
''® See generally, e.g., Ohio PUC Comments at 2.
--
79a
a. Distinction Between Mandated and
Non-Mandated
40. We solicit comment on how we should define the
distinction between mandated and non-mandated charges for
truth-in-billing purposes. Should we define government
“mandated” charges as amounts that a carrier is required to
collect directly from customers, and remit to federal, state or
local governments? Under this definition, some examples of
mandated charges would include state and local taxes, federal
excise taxes on communication services,''® and some state
E911 fees. Non-mandated charges then could be defined as
comprised of government authorized but discretionary fees,
which a carrier must remit pursuant to regulatory action but
over which the carrier has discretion whether and how to pass
on the charge to the consumer. Under this definition, some
examples of non-mandated, government authorized but
discretionary charges would include state
Telecommunications Relay Service''’ and universal service
charges-*—Another form of non-mandated charges also
would include administrative fees and other purely
discretionary charges.''? We believe that these definitions
' See 26 U.S.C. § 4251.
'” See supra note 64.
''® Government authorized but discretionary charges only
could include those costs that are directly related to the specific
governmental program or action that the line item purports to
recover. See supra para. 26.
''’ Though carriers may recover such costs, we emphasize that
Carriers may not include such costs in the line item purporting to
recover costs directly related to the specific underlying
governmental program or action. For example, while carriers may
recover administrative and other costs related to collection of
universal service charges from end users, carriers may not include
80a
would be consistent with the settlement agreements between
Attorneys General from 32 states and Verizon Wireless,
Cingular Wireless, and Sprint PCS, 120 and with our
precedents. For instance, discussing the universal service
charge in the Truth-in-Billing Order, the Commission stated:
[W]e would not consider a description of that
charge as being “mandated” by the
Commission or the federal government to be
accurate. Instead, it is the carriers’ business
decision whether, how, and how much of such
costs they choose to recover directly from
consumers through separately identifiable
charges. Accordingly, to state or imply that
the carrier has no choice regarding whether or
not such a charge must be included on the bill
. would be misleading. !
Similarly, after discussing carrier imposition of line items
for charges such as access charge recovery and universal
such costs as part of a line item for “regulatory fees or universal
service charges.” See supra para. 28.
120
See, e.g., Verizon AVC at 14, para. 36(a), stating that on
consumers’ bills. carriers will separate “taxes, fees, and other
charges that [carriers are] required to collect directly from
Consumers and remit to federal, state, or local governments . . .
from ... all other discretionary charges (including, but not limited
to, Universal Service Fund fees).”
'"! Truth-in-Billing Order, 14 FCC Red at 7527, para. 56
(citations omitted). The Commission further noted that its view
was consistent with the then-recent decision of the Federal-State
Joint Board on Universal Service recommending that the
Commission “‘prohibit carriers from depicting [universal service]
charges as . . mandated by the Commission or the federal
government by *:rms or placement on the bill.”” /d. (citations
omitted).
8la
service, the Commission expressed concern that consumers
may be confused about the nature of these charges, because
the “names associated with these charges as well as
accompanying descriptions (or entire lack thereof) may
convince consumers that all of these fees are federally
mandated.””'””
41. Another possible distinction between government
mandated and non-mandated charges could be based on
whether the amount listed is remitted directly to a
governmental entity or its agent.'?° Pursuant to this
distinction, “mandated” charges would differ from non-
mandated ones in that non-mandated charges only would be
composed of fees collected by carriers that go to the carrier’s
coffers, and which are not directly related to any regulatory
action or government program. For example, under this
definition, a charge to recover universal service contributions
would be considered to be government “mandated,” though a
line item charge for administrative and other costs related to
collection of universal service charges from end users still
would be considered non-mandated. We observe that this
proposed distinction is consistent with that in the CTIA
Consumer Code, which states that on customers’ bills,
carriers will distinguish “(a) monthly charges for service and
features, and other charges collected and retained by the
carrier, from (b) taxes, fees, and other charges collected by
the carrier and remitted to federal, state or local
3124
governments.
"°° Id. at 7524-25, para. 53.
'** Charges also would be considered mandated if the
government required that the funds be remitted to a quasi-
governmental authority such as_ the Universal Service
Administrative Company.
'°4 CTIA Consumer Code, Item Six.
82a
42. We seek comment on these potential distinctions
between government mandated and non-mandated charges
that we have set forth, as well as any others that commenters
may wish to propose. It would be helpful if commenters
indicate how whatever proposal they support is in accord
with our truth-in-billing policy goals and other policy
considerations, and if they address how whatever distinction
and definitions they advocate comport with Commission
precedents and/or industry efforts to address billing and other
consumer issues. We also encourage commenters to assess
the ease or difficulty of administering any proposed
distinction between government mandated and non-mandated
charges.
b. Separate Section for Government
Mandated Charges
43. Section 64.2400(a) of the Commission’s rules
provides that our truth-in-billing rules are intended “to aid
customers in understanding their telecommunications bills,
and to provide them with the tools they need to make
informed choices in the market for telecommunications
service.”'*° Section 64.2401(b) requires that descriptions of
billed charges be brief, clear, non-misleading, and in plain
language.'*° The Commission adopted these rules in the
Truth-in-Billing Order, where it elaborated that the “proper
functioning of competitive markets . . . is predicated on
consumers having access to accurate, meaningful,
information in a format that they can understand.”'?’ The
'° 47 C.F.R. § 64.2400(a). See also Truth-in-Billing Order, 14
FCC Red at 7493, para. 1: 7523, para. 50.
© See 47 C.F.R. § 64.2401(b). In the Order above, we
explicitly apply the requirements of 47 C.F.R. § 64.2401(b) to
CMRS carriers. See supra paras. 16-19.
'"” Truth-in-Billing Order. 14 FCC Red at 7494, para. 2. See
also id. at 7498, para. 8; 7519, para. 43 (“Adopting understandable
83a
Commission further emphasized that one of the fundamental
goals of the truth-in-billing principles is “to provide
consumers with clear, well-organized, and non-misleading
information so that they may be able to reap the advantages
of competitive merkets.”!** We believe that separating
government mandated charges from all other charges
satisfies all of these policy goals, and will strike a balance
between some carriers’ desires to explain that they incur
costs associated with government programs, and the needs of
consumers and regulators to assess bills accurately. At the
same time, such separation will discourage a carrier from
misleading consumers by recovering other operating costs as
government mandated charges. We also note that the
proposed rule is consistent with the relevant obligations of
the aforementioned settlement agreements between Attorneys
General from 32 states and Verizon Wireless, Cingular
Wireless, and Sprint PCS,'*? and Verizon, Nextel and T-
Mobile have acknowledged that separating taxes and other
government mandated fees from non-mandated line items is
appropriate.'°° We seek comment on the merits of our
common descriptions for services offered could enable consumers
to comparison shop more readily, and thereby take full advantage
of the benefits of a competitive telecommunications market”).
28 Id. at 7501, para. 14. See also id. at 7498, para. 7.
'? See. e.g., Verizon AVC at 14, para. 36.
°° See Nextel/T-Mobile Dec. 13 Ex Parte at 6 (asserting that
the CTIA Consumer Code already calls for separation of
government mandated and non-mandated charges on bills); Letter
from Kathryn A. Zachem, Counsel for Verizon Wireless, to
Marlene H. Dortch, Secretary, Federal Communications
Commission, CG Docket No. 04-208 and CC Docket No. 98-170,
at 2 (filed Dec. 2. 2004) (Verizon Wireless Dec. 2 Ex Parte)
(emphasizing efforts of Verizon Wireless and the wireless industry
to address “commingling” of taxes and non-mandated fees, and
misleading-descriptions).
84a
tentative conclusion regarding placement on bills of
government mandated charges in a section separate from all
other charges.
c. Other Considerations
44. We seek further comment on the mechanics of
placing government mandated fees and taxes in a section of a
bill separate from all other charges, and we recognize that
some of these specifics may depend largely on how we
distinguish ultimately between government mandated and
non-mandated charges. Should a bill only separate
government mandated from non-mandated charges, | or
should it require separation of categories of charges beyond
merely government mandated and non-mandated? In
addition, should the labeling of such categories of charges be
subject to imperative national uniformity, and if so, what
should these categories be called?
45. As for our proposal for standardized labeling of
categories of charges, we seek comment on whether the First
Amendment provides any legal impediment. We found in
the Truth-in-Billing Order that so long as we do not mandate
or limit specific language that carriers utilize in their
descriptions of the charges, standardized labels would not
violate the First Amendment.'*? As discussed above,'** both
as a matter of First Amendment law'** and as a matter of
5! See, e.g., California PUC Comments at 2.
'%? See Truth-in-Billing Order, 14 FCC Red at 7530, para. 60.
'°° See supra para. 3.
14 See Truth-in-Billing Order. 14 FCC Red at 7530-32, paras.
60-63.
85a
policy,'*> our focus in this Second Report and Order,
Declaratory Ruling, and Second Further Notice is to ensure
that bills are not misleading, such that consumers can make
informed decisions on carriers based on pricing and services,
in furtherance of the pro-competitive goals of the 1996 Act.
Do our labeling proposals address satisfactorily these legal
and policy considerations? Are there any other potential
legal impediments, such as interstate and _ intrastate
jurisdictional issues, in light of the 7ruth-in-Billing Order's
foundation in sections 201(b) and 258 of the Act? What
separate role, if any, should states have with respect to
labeling and determining what labels and descriptions are
misleading?'*° If we establish national rules, can we have
states enforce them?'?”
46. We additionally seek comment on what the
pragmatic considerations are in assessing whether we should
require standardized labeling of categories of charges. What
would be the monetary costs of such a requirement? We
138
See, e.g. id. at 7498, para. 7 (“our [truth-in-billing]
principles and guidelines will protect consumers from misleading
and inaccurate billing practices”).
1° See, e.g. Minnesota DOC Comments at 2: “The
Commission should recognize that states are in some cases the
appropriate venues in which to handle misleading surcharges and
fees . . . [and] that states play an important role in enforcing
consumer protections.” The Minnesota DOC acknowledges that
State jurisdiction over interexchange and wireless carriers “is
limited concerning the practices complained of in the NASUCA
petition,” and urges the Commission to step in and prohibit
misleading charges. Jd. at 3. Nevertheless, the Minnesota DOC
expresses that any Commission decision on the NASUCA Petition
would apply only to interstate service, and would merely “assist
states” in evaluating intrastate charges. Jd. at 4.
'S” See also infra paras. 51 and 57.
86a
encourage commenters to address this issue with utmost
specificity, such as data on how many bills they generate per
month, a description of what billing systems would have to
be changed, and what the estimated costs of such changes
would be for the number of bills they generate. We
particularly seek comment on the nature of the economic
impact of such a requirement on small entities, and whether
the proposed requirement should be applied to them in any
manner different from its application to entities that do not
qualify as smal! entities.'°* We also welcome comment on a
comparison of such costs with current costs of compliance
with any state-specific billing category labeling
requirements.
47. Finally, consistent with our emphasis here on
ensuring that consumers’ bills are not misleading and that
carriers do not misleadingly invoke government requirement
or sanction of certain line items, we seek comment on
whether it is misleading for carriers to include expenses such
as property taxes, regulatory compliance costs, and billing
expenses in line items labeled such as “regulatory assessment
fees” or “universal connectivity charge.”'”’ For instance, is it
misleading to include billing expenses -- which at best are
related tangentially to regulation — in a line item called
“regulatory assessment fee”? Similarly, given that property
taxes are not related to regulation under the Act of a
telecommunications company’s provision of services, is it
misleading to include such taxes in a “regulatory assessment
fee”? In addition, we seek comment on whether surcharges
identified as “regulatory assessment fees” or “cost recovery
charges” are sufficiently clear and specific enough to comply
'°8 See infra Appendices B and C for a discussion of what
constitutes a “small entity.”
139
See supra n.32.
87a
with the requirements of section 64.2401(b) of our rules. '*°
2. Combination of Federal Regulatory
Charges in Line Items
48. In the Truth-in-Billing Further Notice, the
Commission sought comment on how carriers should identify
line items that combine two or more federal regulatory
charges into a single charge.'*' However, in the Truth-in-
Billing Order, the Commission also expressed concern that
where regulatory-related charges are not broken down into
line items, it facilitates carriers’ ability to bury costs in lump
figures.'“* In light of these conflicting considerations, as
well as the record developed in response to the NASUCA
Petition,'*? we now refine our proposal to seek comment on
whether it is unreasonable under section 201(b) of the Act for
line items to combine federal regulatory charges.'“*
40 See, e.g., NASUCA Petition at 10-23, noting other
examples of surcharges identified as “regulatory charge,”
“regulatory programs fee,” “regulatory cost recovery fee,” and
“telecom connectivity fee.”
'*! See Truth-in-Billing Further Notice, 14 FCC Red at 7537,
para. 71.
'*° See Truth-in-Billing Order, 14 FCC Red at 7526, para. 55.
'** See, e.g.. Global Crossing Comments at 2; MCI Comments
at 5: RCA Comments at 8: NASUCA Reply at 16-21; SBC Reply
at 4.
144
Our proposal is limited to federal r
This text is long and has been trimmed here. Open the source document for the complete record.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.