Wednesday, July 08, 2009

Faulty Forbearance Rulings & Remedies

My prior blog post, "Giving Forbearance the Red Tape Treatment," contained some reflections on the Federal Communications Commission’s recently-adopted procedures governing the forbearance petitioning process. The FCC’s new procedures impose certain obligations on forbearance petitioners, such as requiring that petitions be filled out completely, that they explain what rules they are seeking relief from, and that they provide evidence that the requisite elements are satisfied. Certain consequences follow for petitioners who fail to satisfy the FCC’s new procedural rules. But what happens when the FCC fails to meet its own obligations in ruling on forbearance petition—say, by departing from its precedent without supplying a reasoned analysis for doing so? Section 10 of the Telecom Act of 1996 (47 U.S.C. § 160) requires that the FCC rule on forbearance petitions within one year’s time (plus 90 days, if the agency grants itself an extension). When the FCC errs in making forbearance rulings, should the consequences include a deadline to match Section 10's mandate?

A couple weeks ago, the U.S. Court of Appeals held that the FCC acted arbitrarily and capriciously in denying a Verizon forbearance petition from certain unbundling obligations under Section 251. FSF President Randolph May sums up the Verizon v. FCC case in his recent FSF Perspectives piece "Assessing the FCC’s Competition-Assessing Competence":

…the D.C. Circuit remanded a case to the FCC for the agency’s failure to explain why, in evaluating a Verizon forbearance request, it refused to consider the marketplace impact of potential competition. In a couple of forbearance cases, the FCC has acknowledged that potential competition should be considered in assessing whether continued regulation was necessary. In the Verizon case, the FCC has focused single-mindedly on present market share, ignoring the fact that potential entrants constrain whatever market power the existing providers may possess.

As a consequence of the FCC’s failure to explain its departure from its past precedent in rejecting the forbearance petition, the D.C. Circuit panel sent the case back to the FCC to either consider whether competition can be established by evidence other than existing ILEC market share or justify its disregard of precedent. The FCC was also ordered to consider on remand whether and how the existence of potential competition would affect its Section 10 forbearance analysis. But the D.C. Circuit panel refused to impose a requested deadline for timely agency response. In particular, the Court expressly declined to require the FCC to issue any new decision within 30 days or consider the forbearance petition granted.

Ruling for the D.C. Circuit panel, Chief Judge David Sentelle wrote that "the appropriate remedy in a case such as this is to remand for a reasoned explanation," and that "[t]here is now statutory requirement that Sec. 10(c)’s mandate of deeming a petition granted applies to the FCC’s receipt of a petition on remand from this Court." Chief Judge Sentelle also pointed to a 2004 Verizon v. FCC case in which another D.C. Circuit panel similarly held the FCC erred in rejecting a forbearance petition and declined to impose on the FCC a 30-day deadline for a response.

Both Chief Judge Sentelle’s reading of the statute and his description of the result in the 2004 case are entirely correct. Yet, there’s still plenty of good reason to think that a future D.C. Circuit panel can and should properly attach a time deadline and "deemed granted" remedy to a remand order when the FCC improperly rejects a forbearance petition.

For starters, just as the statute doesn’t require that forbearance petitions rejected arbitrarily and capriciously must be remanded with a mandatory deadline for agency response, neither does the statute forbid the D.C. Circuit from adopting such a remedy when reviewing a forbearance petition ruling. In fact, remand with an accompanying deadline is perfectly appropriate in light of Section 10’s shot clock and deemed granted clause.

To recap, under Section 10(c), if the FCC fails to respond to a forbearance petition within one year (or fifteen months pursuant to an extension), the petition "shall be deemed granted." In AT&T v. FCC (DC.Cir.2006), Judge David Tatel described Section 10 as "[c]ritical to Congress’s deregulation strategy." The shot clock and deemed granted clause ensures prompt FCC action on forbearance petitions. A deadline attached to a remand order on a forbearance petition ruling is entirely consistent with the Congressional policy of prompt agency action that underlies Section 10.

Moreover, given the deadline Congress has imposed on the FCC to act on forbearance petitions, it hardly makes sense to give the FCC an unlimited timeframe for it to act when it arbitrarily and capriciously acts on a forbearance petition. That’s like telling an agency to make its ruling promptly--unless it chooses to make a mess out of its ruling, in which case it can take all the time it needs. Instead, it is sensible for a remand order relating to an erroneously forbearance petition give the FCC a deadline of 30, 60, or 90 days to respond. A court could set the deadline based on factors such as (1) amount of time FCC had left on the shot clock when it made its erroneous ruling; (2) whether or not FCC invoked the 90 day extension, (3) whether the FCC is being asked to rule on the record established at the time of its erroneous ruling or on a record that is still open or contains new information; and (4) the amount of time the FCC has taken to respond to prior remands in forbearance petition matters. (In the Verizon case decided by the D.C. Circuit last month, Verizon unsuccessfully requested the Court to order the FCC to clarify its prior ruling within 30 days. By contrast, in the 2004 Verizon case, it took the FCC about 90 days to make its ruling on remand.)

In addition, the D.C. Circuit panel in the 2004 Verizon v. FCC case referenced earlier expressed receptivity to requiring the FCC explain its ruling on a forbearance petition within 30 days in light of Section 10’s deadline for agency action. In that case, Judge David Ginsburg (who was Chief Judge at the time the case was decided) intimated that the panel would have imposed a deadline on the FCC except that Verizon had asked for an expedited ruling based on a record that was supplemented by new information subsequent to the date that the FCC rejected the forbearance petition. Wrote then-Chief Judge Ginsburg:

Lest the intention of the Congress in Section10 to expedite forbearance decisions be set to naught, we would have required the Commission to issue a new order within 30 days had Verizon itself not made clear that it wants a decision based upon the record compiled through the present. It would be inappropriate, however, for the court to require so expedited a decision based upon a record that, as far as we can tell, is not yet closed and may, in any event, require the Commission to consider such material that was not before it as of last October 27 [the date the FCC denied the forbearance petition].

Thus the D.C. Circuit ruling in the 2004 Verizon v. FCC case presents a more nuanced and hospitable approach to court-imposed agency response deadlines in forbearance remand orders than one might read into Chief Judge Sentelle’s brief reference to that case.

In sum, should the FCC erroneously rule on a forbearance petition in the future, a panel of the D.C. Circuit should continue to take seriously its discretion to fashion a deadline for FCC response. With forbearance petitions, Congress has given the FCC a job to do and a timeframe for doing it. It follows that when the FCC fails to do its duty it shouldn’t be rewarded by an indefinite timeframe for response, but that a court-imposed deadline most effectively furthers Congress’s deregulatory purpose.