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Vermont Public Service Board and Maine Public Utilities Commission v. Federal Communications Commission and United States of America

November 18, 2011

VERMONT PUBLIC SERVICE BOARD AND MAINE PUBLIC UTILITIES COMMISSION, PETITIONERS
v.
FEDERAL COMMUNICATIONS COMMISSION AND UNITED STATES OF AMERICA,
RESPONDENTS QWEST COMMUNICATIONS INTERNATIONAL INC., ET AL., INTERVENORS



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

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

Argued September 16, 2011

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

Opinion for the Court filed by Circuit Judge TATEL.

Pursuant to the Telecommunications Act of 1996, the Federal Communications Commission, through its Universal Service Program, provides subsidies to ensure that low-income consumers, schools, health care providers, and libraries have access to advanced telecommunications services and that rates and services in rural areas are "reasonably comparable" to rates and services in urban areas. In this case, we review a Commission order declining to increase subsidies under the rural rates and services component of the Universal Service Program. Because the Commission's decision is neither arbitrary nor capricious, we deny the petition for review.

I.

The Telecommunications Act of 1996, 47 U.S.C. § 254(b), adopted six basic principles of "universal service." These principles instruct the Commission and the several states to jointly "base policies for the preservation and advancement of universal service" on:

(1) Quality and rates. Quality services should be available at just, reasonable, and affordable rates.

(2) Access to advanced services. Access to advanced telecommunications and information services should be provided in all regions of the Nation.

(3) Access in rural and high cost areas. Consumers in all regions of the Nation, including low-income consumers and those in rural, insular, and high cost areas, should have access to telecommunications and information services, including interexchange services and advanced telecommunications and information services, that are reasonably comparable to those services provided in urban areas and that are available at rates that are reasonably comparable to rates charged for similar services in urban areas.

(4) Equitable and nondiscriminatory contributions. All providers of telecommunications services should make an equitable and nondiscriminatory contribution to the preservation and advancement of universal service.

(5) Specific and predictable support mechanisms. There should be specific, predictable and sufficient Federal and State mechanisms to preserve and advance universal service.

(6) Access to advanced telecommunications services for schools, health care, and libraries. Elementary and secondary schools and classrooms, health care providers, and libraries should have access to advanced telecommunications services . . . .

47 U.S.C. § 254(b).

Pursuant to these statutory directives, the Commission established the Universal Service Program, which consists of four separate funds: 1) low-income support, which subsidizes rates for individuals that might not otherwise be able to afford basic telephone services; 2) rural health care support, which subsidizes the costs of communications services health providers need to offer medical services in rural areas; 3) schools and libraries support, which funds the costs of phone services and Internet access for educational institutions and libraries; and 4) high-cost support-the fund at issue in this case-which supports the provision of services in high-cost areas. See Federal-State Joint Board on Universal Service, Universal Service Monitoring Report, CC Dkt. No. 98-202, at 1-34 (2010).

The Program is financed by fees charged to telephone companies and other providers of interstate telecommunications services. See 47 C.F.R. § 54.706. Telecommunications providers may pass these fees along to their customers, and almost always do, usually through line items on bills marked "Federal Universal Service Assessment." See High Cost Universal Support Order on Remand, 25 FCC Rcd. 4072, 4083-84 ¶ 21 (2010) ("Order"). Thus, nearly every purchaser of telephone services in America helps support the Program.

The past decade has seen a dramatic increase in annual disbursements made pursuant to the Program, and a corresponding increase in the surcharge levied on consumers. In 2001, the Commission disbursed $5.35 billion in support of universal service; by 2009, that number had risen to $7.26 billion. Order, 25 FCC Rcd.at 4082 ¶ 20. By early 2010, disbursements amounted to 15.3 percent of telecommunications companies' interstate and international revenue, requiring "many consumers [to] pay[] a surcharge of over 15 percent on the interstate portion of their monthly bill." Id. at 4083 ¶ 21.The high-cost support fund is by ...


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