Cellco Partnership v. Federal Communications Commission , 700 F.3d 534 ( 2012 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 20, 2012 Decided December 4, 2012
No. 11-1135
CELLCO PARTNERSHIP,
APPELLANT
v.
FEDERAL COMMUNICATIONS COMMISSION,
APPELLEE
BRIGHT HOUSE NETWORKS, LLC, ET AL.,
INTERVENORS
Consolidated with 11-1136
On Petition for Review of and On Appeal from an Order of
the Federal Communications Commission
Helgi C. Walker argued the cause for appellant. With her
on the briefs were Thomas R. McCarthy, Brett A. Shumate,
Henry Weissmann, Michael E. Glover, and John T. Scott III.
Andrew G. McBride entered an appearance.
Peter Karanjia, Deputy General Counsel, Federal
Communications Commission, argued the cause for appellee.
With him on the brief were Catherine G. O'Sullivan and
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Finnuala K. Tessier, Attorneys, U.S. Department of Justice,
Austin C. Schlick, General Counsel, Federal Communications
Commission, Richard K. Welch, Deputy Associate General
Counsel, and Laurence N. Bourne, Counsel.
Richard P. Bress argued the cause for intervenors. With
him on the brief were James H. Barker, Matthew A. Brill,
Alexander Maltas, Carl W. Northrop, Michael L. Lazarus,
Caressa D. Bennet, Michael R. Bennet, Jill Canfield, Daniel
L. Brenner, Jessica L. Ellsworth, Peter M. Connolly, and
Douglas E. Hart.
Carl W. Northrop, Michael L. Lazarus, Andrew Morentz
and Mark A. Stachiw were on the brief for intervenor
MetroPCS Communications, Inc. in support of appellee.
Thomas J. Sugrue, Luisa Lancetti, Howard J. Symons,
and Russell H. Fox were on the brief for intervenor T-Mobile
USA, Inc. in support of appellee.
Harold Feld was on the brief for amici curiae Public
Knowledge, et al. in support of appellee.
Before: TATEL, GARLAND, and GRIFFITH, Circuit Judges.
Opinion for the Court filed by Circuit Judge TATEL.
TATEL, Circuit Judge: The Federal Communications
Commission has long imposed “roaming” requirements on
wireless telephone companies. Roaming occurs when wireless
subscribers travel outside the range of their own carrier’s
network and use another carrier’s network infrastructure to
make a call. Until the issuance of the rule challenged in this
case, mobile carriers’ obligation to permit roaming extended
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only to voice-telephone services. Recognizing the growing
importance of mobile data in a wireless market in which
smartphones—cellphones that can connect to the internet—
are increasingly common, the Commission adopted a rule
requiring mobile-data providers to offer roaming agreements
to other such providers on “commercially reasonable” terms.
Cellco Partnership, more commonly known as Verizon,
challenges the “data roaming rule” on multiple grounds. Most
significantly, Verizon argues that the Commission lacks
statutory authority to issue the rule and that the rule
unlawfully treats mobile-internet providers as common
carriers. We disagree on both counts. Title III of the
Communications Act of 1934 plainly empowers the
Commission to promulgate the data roaming rule. And
although the rule bears some marks of common carriage, we
defer to the Commission’s determination that the rule imposes
no common carrier obligations on mobile-internet providers.
In response to Verizon’s remaining arguments, we conclude
that the rule does not effect an unconstitutional taking and is
neither arbitrary nor capricious. We therefore reject Verizon’s
challenge to the data roaming rule.
I.
The Communications Act of 1934, 47 U.S.C. §§ 151 et
seq., endows the Federal Communications Commission with
broad authority to oversee wire and radio communication in
the United States. Title II of the Act authorizes the
Commission to regulate common carrier services, including
telecommunications services like landline telephone services.
See id. §§ 201 et seq. It also sets forth the duties of common
carriers, including the obligations to “furnish . . .
communication service upon reasonable request,” id.
§ 201(a), to charge “just and reasonable” rates, id. § 201(b),
and to refrain from “mak[ing] any unjust or unreasonable
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discrimination in charges . . . or services,” id. § 202(a).
Although the Act’s definition of “common carrier” is
unsatisfyingly circular, see id. § 153(11) (defining a “common
carrier” as “any person engaged as a common carrier for
hire”), the Commission has interpreted it to exclude providers
of “information services,” defined as “the offering of a
capability for generating, acquiring, storing, transforming,
processing, . . . or making available information via
telecommunications.” Id. § 153(24). See Appropriate
Regulatory Treatment for Broadband Access to the Internet
Over Wireless Networks, 22 F.C.C.R. 5901, 5919 ¶ 50 (2007)
(“Broadband Classification Order”).
Title III of the Act empowers the Commission to regulate
radio transmissions, including traditional radio, broadcast
television, and mobile telephony. See id. §§ 301 et seq.
Although mobile telephony involves radio transmission and
thus falls under the Commission’s Title III authority, the Act
provides that some mobile-telephone services are also subject
to Title II’s common carriage requirements. See id.
§ 332(c)(1)(A). In particular, section 332 specifies that
providers of “commercial mobile services,” such as wireless
voice-telephone service, are common carriers, whereas
providers of other mobile services are exempt from common
carrier status. See id. § 332(d)(3), (c)(2).
The Commission has previously determined and here
concedes that wireless internet service both is an “information
service” and is not a “commercial mobile service.” See
Broadband Classification Order, 22 F.C.C.R. at 5915–21
¶¶ 37–56; Verizon’s Br. 11 n.6, 19 n.11. Accordingly, mobile-
data providers are statutorily immune, perhaps twice over,
from treatment as common carriers. See id. Given that
mobile-voice providers are considered common carriers, the
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exclusion of mobile-data services from the common carriage
regime subjects cellphone companies like Verizon, which
provide both services, to a bifurcated regulatory scheme. Cf.
National Association of Regulatory Utility Commissioners v.
FCC (NARUC II), 533 F.2d 601, 608 (D.C. Cir. 1976) (noting
that a single entity “can be a common carrier with regard to
some activities but not others”). Even though wireless carriers
ordinarily provide their customers with voice and data
services under a single contract, they must comply with Title
II’s common carrier requirements only in furnishing voice
service. Likewise, the Commission may invoke both its Title
II and its Title III authority to regulate mobile-voice services,
but may not rely on Title II to regulate mobile data.
The Commission’s foray into roaming began in 1981
when it adopted a limited voice roaming requirement as part
of the original cellular-service rules. See An Inquiry Into the
Use of the Bands 825–845 MHz and 870–890 MHz for
Cellular Communications Systems and Amendment of Parts 2
and 22 of the Commission’s Rules Relative to Cellular
Communications Systems, 86 F.C.C. 2d 469, 502 ¶¶ 75–76
(1981); see also Reexamination of Roaming Obligations of
Commercial Mobile Radio Service Providers and Other
Providers of Mobile-data services, 26 F.C.C.R. 5411, 5412
¶ 3 & n.2 (2011) (“Data Roaming Order”) (explaining origins
of roaming regulation). As cellphones grew ubiquitous and
nationwide travel more frequent, the need for more robust
roaming regulations became clear. Although some carriers
were voluntarily entering into roaming arrangements with
other providers—under which the subscribers of one carrier
could roam on the network of the other—in many cases
subscribers of smaller carriers remained unable to use their
mobile phones when traveling outside their home networks.
Seeking to promote nationwide access to cellphone service,
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the Commission in 2007 dramatically expanded carriers’
roaming obligations by mandating that they offer roaming
agreements to other carriers on a just, reasonable, and
nondiscriminatory basis. See Reexamination of Roaming
Obligations of Commercial Mobile Radio Service Providers,
22 F.C.C.R. 15817, 15818 ¶¶ 1–3 (2007) (“2007 Voice
Roaming Order”). In using this classic common carriage
standard, the Commission expressly invoked Title II,
explaining that mobile-voice providers have “a common
carrier obligation” to provide roaming. See id. at 15818 ¶ 1.
Three years later, in 2010, the Commission further expanded
and clarified voice providers’ roaming obligations in ways not
relevant to this case. See Reexamination of Roaming
Obligations of Commercial Mobile Radio Service Providers
and Other Providers of Mobile-data services, 25 F.C.C.R.
4181, 4190–4201 ¶¶ 18–40 (2010) (“2010 Voice Roaming
Order”). Under these Voice Roaming Orders, subscribers of a
small carrier in Nebraska, for example, can travel to New
York and use Verizon’s cell towers to make phone calls.
Demonstrating the success of the orders, most cellphone users
experience no service disruption when traveling beyond their
provider’s service range.
The roaming regulations, however, extended only to
mobile-voice services. Absent an obligation to permit
roaming, some mobile-data providers were voluntarily
entering into data roaming agreements, but this was often not
the case, especially on “advanced ‘3G’ data networks.” See
Data Roaming Order, 26 F.C.C.R. at 5424–27 ¶¶ 24–27.
Conscious of the increasing importance of mobile internet and
seeking to promote nationwide access, the Commission began
formal consideration of whether and how it might institute a
data-roaming requirement. See 2007 Voice Roaming Order,
22 F.C.C.R. at 15845–47 ¶¶ 77–81. To that end, when the
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Commission issued the 2007 Voice Roaming Order, it sought
comment on the propriety of extending roaming obligations to
data services as well as on the potential “legal and policy
basis for doing so.” Id. at 15845 ¶ 79. In the 2010 Voice
Roaming Order, the Commission again requested input about
a potential data roaming rule. See 2010 Voice Roaming Order,
25 F.C.C.R. at 4207–24 ¶¶ 50–91.
Approximately two dozen parties, including numerous
providers of mobile-internet services, filed formal comments
in response to these requests. See Data Roaming Order, 26
F.C.C.R. at 5416–18 ¶¶ 11–12. All but two major national
carriers—Verizon and AT&T—favored a data roaming rule in
some form. See id. The supporting commenters emphasized
that wireless providers must be able to offer nationwide
internet access in order to compete in the current mobile
marketplace. See id. at 5416–17 ¶ 11. The commenters also
pointed out that because larger carriers had no obligation to
offer roaming agreements, they were often unwilling to do so
on reasonable terms. See id. Mandating that providers offer
such agreements, the commenters maintained, would preserve
appropriate incentives for investment in network expansion
while ensuring that newer and smaller providers would be
able to compete. See id. Verizon and AT&T opposed data
roaming regulation on both legal and policy grounds. See id.at 5417–18 ¶ 12, 5439 ¶ 60. They argued not only that the
Commission lacked statutory authority to obligate mobile-
internet providers to offer roaming, but also that a data
roaming rule was unnecessary—because providers were
already entering into roaming agreements voluntarily—and
inadvisable—because it would reduce investment incentives.
See id. As Verizon and AT&T saw it, the benefit a data
roaming rule would confer on smaller carriers would come at
the expense of larger carriers because the obligation to share
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network space would prevent them from fully capitalizing on
their investments in network infrastructure.
Based on the record created in response to its 2007 and
2010 requests for comment, the Commission adopted the Data
Roaming Order on April 7, 2011. See id. at 5411. In general
terms, the Order instituted a rule requiring “providers of
commercial mobile-data services to offer data roaming
agreements to other such providers on commercially
reasonable terms and conditions, subject to certain
limitations.” Id. at 5411 ¶ 1. Addressing AT&T’s and
Verizon’s objections at length, the Commission ultimately
found that the data roaming rule would “best promote
consumer access to seamless mobile data coverage
nationwide, appropriately balance the incentives for new
entrants and incumbent providers to invest in and deploy
advanced networks across the country, and foster competition
among multiple providers in the industry.” Id. at 5418 ¶ 13.
The Commission explained that it was adopting the rule
through an exercise of its authority under “several provisions
of Title III,” id. at 5412 ¶ 2, including section 303(b), which
authorizes the Commission to “[p]rescribe the nature of the
service to be rendered by each class of licensed station.” 47
U.S.C. § 303(b); see also Data Roaming Order, 26 F.C.C.R.
at 5441 ¶ 62. The Commission also noted that the rule
“furthers the goals” of other statutory provisions, see Data
Roaming Order, 26 F.C.C.R. at 5442 ¶ 64 (citing section
706(a) and (b) of the Telecommunications Act of 1996, 47
U.S.C. § 1302), and suggested in a footnote that the rule falls
within the agency’s “ancillary authority.” See id. at 5442 ¶ 63
n.176. Two members of the Commission dissented, arguing
primarily that the data roaming rule violates the
Communications Act and Commission precedent by imposing
a common carriage obligation on mobile data providers. See
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id. at 5483–84 (Dissenting Statement of Commissioner
McDowell); id. at 5487–88 (Dissenting Statement of
Commissioner Baker).
Several features of the data roaming rule are especially
relevant here. The rule requires providers to “offer data
roaming arrangements on commercially reasonable terms and
conditions,” but it permits them to “negotiate the terms of
their roaming arrangements on an individualized basis.” Id. at
5432 ¶ 43. As the Order explains, this means that providers
may tailor roaming agreements to “individualized
circumstances without having to hold themselves out to serve
all comers indiscriminately on the same or standardized
terms.” Id. at 5433 ¶ 45. The Order also excuses providers
from offering data roaming where it is not “technically
feasible,” id. at 5432 ¶ 43, and establishes a process for
resolving disputes arising out of data-roaming negotiations
that is “similar” to the voice roaming dispute resolution
process. Id. at 5448 ¶ 74.
Challenging the Commission’s decision, Verizon
advances two primary arguments and a flurry of smaller-scale
objections. First, it argues that the data roaming rule violates
the statutory prohibition against treating mobile-internet
providers as common carriers. Second, it asserts that the
Commission lacked affirmative authority under Title III or
any other statutory provision to promulgate the rule. Although
Verizon presents the common carrier issue first, we think it
more natural to begin with the question of the Commission’s
affirmative authority. We thus address these issues in Sections
II and III in that sequence. Then, in Section IV we consider
Verizon’s arguments that the data roaming rule effects an
unconstitutional taking and is arbitrary and capricious.
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Although Verizon filed both a petition for review
pursuant to 47 U.S.C. § 402(a) and a notice of appeal pursuant
to 47 U.S.C. § 402(b), “we need not decide which is the more
appropriate” vehicle for our review “[s]ince . . . we plainly
have jurisdiction by the one procedural route or the other.”
United States v. Green, 499 F.2d 538, 540 n.5 (D.C. Cir.
1974).
II.
The Commission identified three potential sources of
regulatory authority for the data roaming rule: Title III of the
Communications Act, section 706 of the Telecommunications
Act of 1996, and the Commission’s ancillary authority, see
Comcast Corp. v. FCC, 600 F.3d 642, 644 (D.C. Cir. 2010)
(explaining that the Commission has authority to promulgate
regulations “‘reasonably ancillary to the . . . effective
performance of its statutorily mandated responsibilities’”
(quoting American Library Association v. FCC, 406 F.3d 689,
692 (D.C. Cir. 2005))). Verizon argues that not one of these
authorities empowers the Commission to promulgate the rule.
In deciding whether the Commission acted pursuant to
delegated authority, we begin—and end—with Title III.
The extent of the Commission’s Title III authority is, of
course, a question of statutory interpretation. Chevron’s
familiar framework governs our review of the Commission’s
interpretation of the Communications Act, its organic statute.
See National Cable & Telecommunication Association v.
Brand X Internet Services, 545 U.S. 967, 981 (2005) (“[W]e
apply the Chevron framework to the Commission’s
interpretation of the Communications Act.”). According to
Verizon, however, Chevron deference does not extend to
interpretive questions, like this one, that implicate the scope
of an agency’s jurisdiction. But this Court has repeatedly held
otherwise. See, e.g., Transmission Agency of Northern
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California v. FERC, 495 F.3d 663, 673 (D.C. Cir. 2007) (“In
determining whether FERC has acted beyond its jurisdiction,
we grant FERC Chevron deference.”); National Mining Ass’n
v. U.S. Army Corps of Engineers, 145 F.3d 1399, 1403 (D.C.
Cir. 1998) (“The ‘jurisdictional’ character of the issue has no
effect on the level of deference . . . .”); Oklahoma Natural
Gas Co. v. FERC, 28 F.3d 1281, 1283–84 (D.C. Cir. 1994)
(discussing Chevron’s applicability to jurisdictional questions
and ultimately proceeding under the Chevron framework). To
be sure, as Verizon pointed out in a post-oral argument letter,
the Supreme Court has granted certiorari on this issue. See
City of Arlington v. FCC, 2012 WL 4748083 (U.S. Oct. 5,
2012) (No. 11-1545). But the outcome of that case will make
no difference here for, as we shall explain, the statute clearly
affords the Commission the ability to promulgate the data
roaming rule. See Chevron, U.S.A., Inc. v. Natural Resources
Defense Council, 467 U.S. 837, 842–43 (1984) (“If the intent
of Congress is clear, that is the end of the matter; for the
court, as well as the agency, must give effect to the
unambiguously expressed intent of Congress.”).
Title III affords the Commission “broad authority to
manage spectrum . . . in the public interest.” Data Roaming
Order, 26 F.C.C.R. at 5440 ¶ 62. In invoking its Title III
powers, the Commission both spoke in general terms about
Title III’s broader purposes and relied on several of its
specific provisions. It focused in particular on two provisions
in section 303: section 303(b), which authorizes the agency to
“‘[p]rescribe the nature of the service to be rendered by each
class of licensed stations and each station within any class’”;
and section 303(r), which empowers the Commission, subject
to the demands of the public interest, to “‘[m]ake such rules
and regulations and prescribe such restrictions and conditions,
not inconsistent with law, as may be necessary to carry out the
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provisions of this chapter.’” See id. at 5441 ¶ 62 & nn. 172–
73 (quoting 47 U.S.C. § 303(b), (r)). In addition, the
Commission pointed to section 316, which empowers it to
modify existing licenses, including by rulemaking, “if it
determines that such action ‘will promote the public interest,
convenience, and necessity.’” See id. at 5441 ¶ 62 & nn. 170–
71 (quoting 47 U.S.C. § 316(a)(1) and citing, e.g., Celtronix
Telemetry v. FCC, 272 F.3d 585, 589 (D.C. Cir. 2001)). These
provisions, the Commission concluded, authorize it to adopt
the data roaming rule. See id. at 5442 ¶ 63.
Verizon argues that the Commission’s interpretation of
its Title III authority represents “an unprecedented and
unbounded theory of regulatory power over wireless Internet
service under its general ‘public interest’ authority.”
Verizon’s Reply Br. 18. Focusing on the Commission’s more
general statements about Title III instead of its references to
specific sections of the statute, Verizon maintains that the
Commission justified the rule solely on the basis of its finding
that the rule would serve the public interest. Because “[t]he
FCC cannot act in the ‘public interest’ if the agency does not
otherwise have the authority to promulgate the regulations at
issue,” Motion Picture Association of America, Inc. v. FCC
(MPAA), 309 F.3d 796, 806 (D.C. Cir. 2002), Verizon
believes that the Commission’s public-interest finding is
insufficient to bring the rule within Title III’s scope.
Although Title III does not “confer an unlimited power,”
NBC v. United States, 319 U.S. 190, 216 (1943), the Supreme
Court has emphasized that it does endow the Commission
with “expansive powers” and a “comprehensive mandate to
‘encourage the larger and more effective use of radio in the
public interest.’” Id. at 219 (quoting 47 U.S.C. § 303(g)).
True, the Commission may not rely on Title III’s public-
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interest provisions without mooring its action to a distinct
grant of authority in that Title. See MPAA, 309 F.3d at 806.
But here the Commission did not rely solely on its power to
act in the public interest. Instead, it expressly relied on
particular delegations of authority in Title III, such as section
303(b).
As the Order itself explains, section 303(b) directs the
Commission, consistent with the public interest, to
“[p]rescribe the nature of the service to be rendered by each
class of licensed stations and each station within any class.”
47 U.S.C. § 303(b). As a glance at a dictionary confirms,
“prescribe” means, among other things, “to lay down a rule.”
Webster’s Third New International Dictionary 1792 (1993).
That is exactly what the data roaming rule does—it lays down
a rule about “the nature of the service to be rendered” by
entities licensed to provide mobile-data service. Verizon
argues that the data roaming rule exceeds the bounds of
section 303(b) because instead of merely prescribing the
nature of a service, the rule mandates the provision of service.
Not so. Like any other entity, Verizon may choose not to
provide mobile-internet service. Like other rules that govern
Title III services, the data roaming rule merely defines the
form mobile-internet service must take for those who seek a
license to offer it. Especially when taken together with section
303(r), which supplements the Commission’s ability to carry
out its mandates via rulemaking even if it confers no
independent authority, see MPAA, 309 F.3d at 806, and
section 316, which enables the Commission to “alter the term
of existing licenses by rulemaking,” Celtronix Telemetry, 272
F.3d at 589, we think it clear that the data roaming rule falls
well within the Commission’s Title III authority.
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Verizon nonetheless contends that the Data Roaming
Order runs afoul of three limitations on the Commission’s
regulatory power. First, relying on the Supreme Court’s
statement in FCC v. Sanders Brothers Radio Station that the
Communications Act “does not essay to regulate the business
of the licensee,” 309 U.S. 470, 475 (1940), Verizon argues
that the data roaming rule exceeds the Commission’s power to
intrude into carriers’ business affairs. Sanders Brothers,
however, held merely that the Commission has “no
supervisory control of [licensees’] programs, . . . business
management or . . . policy.” Id. It stands only for the
uncontroversial proposition that the Commission lacks a
general mandate to regulate a licensee’s business separate and
apart from the authority otherwise conferred by Title III.
Nothing in Sanders Brothers imposes an independent
limitation on the Commission’s regulatory authority.
Second, Verizon invokes Regents of University System of
Georgia v. Carroll, which held that “the Communications Act
[does not] give authority to the Commission to determine the
validity of contracts between licensees and others.” 338 U.S.
586, 602 (1950). Because the data roaming rule establishes
the terms on which providers must deal with third parties—
namely, other providers who wish to enter into roaming
agreements and their subscribers—Verizon argues that it
conflicts with Carroll. Unlike Sanders Brothers, Carroll does
impose a limit on the Commission’s regulatory authority.
Carroll’s scope, however, is quite modest, as the decision
holds only that the Commission lacks authority to invalidate
licensees’ contracts with third parties and to abrogate state-
law contract remedies. See id. Although the data roaming rule
dictates certain interactions between licensees and third
parties, this kind of third-party impact differs in kind from the
state-law contract issue at stake in Carroll. Because Verizon
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nowhere suggests that the data roaming rule will void third-
party contracts, Carroll does not stand in the Commission’s
way.
Third, Verizon contends that Title III gives the
Commission no authority to make “fundamental changes” to
the terms of existing licenses. See MCI Telecommunications
Corp. v. AT&T, 512 U.S. 218, 228 (1994) (holding that
statutory “authority to ‘modify’ does not contemplate
fundamental changes”); Community Television, Inc. v. FCC,
216 F.3d 1133, 1140–41 (2000) (applying that reasoning to
section 316). Insisting that the data roaming rule effects a
“revolutionary change to wireless licenses,” Verizon’s Br. 50,
Verizon argues that the rule exceeds the Commission’s Title
III authority. Verizon is right that the Commission’s section
316 power to “modif[y]” existing licenses does not enable it
to fundamentally change those licenses. See Community
Television, 216 F.3d at 1141. The data roaming rule, however,
cannot be said to have wrought such a “fundamental change.”
Indeed, a comparison to the Supreme Court’s decision in MCI
v. AT&T makes this quite clear. There, the Court held that the
Commission’s power to “modify” requirements related to
telecommunications carriers’ obligation to file tariffs did not
include the power to eliminate tariffs entirely. See MCI, 512
U.S. at 229; see also Community Television, 216 F.3d at 1141(distinguishing MCI). Of course, given that the data roaming
rule requires nothing more than the offering of “commercially
reasonable” roaming agreements, it hardly effects such a
radical change. Indeed, imposing a limited obligation to offer
data-roaming agreements to other mobile-data providers “can
reasonably be considered [a] modification[ ] of existing
licenses.” Community Television, 216 F.3d at 1141.
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III.
Having concluded that Title III authorizes the
Commission to promulgate the data roaming rule, we arrive at
the critical issue—Verizon’s contention that the rule
contravenes the Communications Act’s prohibition against
treating mobile-internet providers as common carriers. Before
resolving the statutory question, however, we must address
Verizon’s antecedent argument, namely, that the Commission
is bound by its statement in the Voice Roaming Orders that
automatic roaming—that is, roaming that takes place pursuant
to a preexisting agreement between providers, see Data
Roaming Order, 26 F.C.C.R. at 5412 ¶ 3 n.2—is inherently
common carriage. In support, Verizon points to portions of
those Orders that speak to roaming in general terms. But
context matters. In characterizing the voice roaming rule as a
common carrier requirement, the Commission was merely
invoking its Title II authority and applying that Title’s
common carriage standards to voice roaming. Especially
given the “high level of deference due to an agency in
interpreting its own orders and regulations,” MCI Worldcom
Network Services, Inc. v. FCC, 274 F.3d 542, 548 (D.C. Cir.
2001), we have little difficulty concluding that the
Commission’s classification of the voice roaming rule as a
common carrier obligation does not amount to a conclusion
that automatic-roaming requirements necessarily entail
common carriage. We thus must address Verizon’s statutory
argument.
Whether the data roaming rule runs afoul of the statutory
exclusion of mobile-internet providers from common carrier
status hinges on the meaning of the term “common carrier.”
Again, Verizon contests the applicability of Chevron
deference. Relying primarily on our decision in National
Association of Regulatory Utility Commissioners v. FCC
17
(NARUC I), 525 F.2d 630, 644 (D.C. Cir. 1975), Verizon
insists that the Commission’s interpretation of “common
carrier” warrants no deference because the Act merely
codified a concept of common carriage that was well
established at common law. But to the extent we suggested as
much in NARUC I, a decision predating Chevron, that
suggestion was dicta. Instead, we are bound by our express
determination in U.S. Telecom Association v. FCC, 295 F.3d
1326 (D.C. Cir. 2002), that the Commission’s interpretation
and application of the term “common carrier” warrants
Chevron deference. See id. at 1331–32.
In arguing that the data roaming rule imposes a common
carriage obligation, Verizon relies primarily on the Supreme
Court’s decision in FCC v. Midwest Video Corp. (Midwest
Video II), 440 U.S. 689 (1979). There, the Court struck down
the Commission’s “public access” rules on the ground that the
agency had “relegated cable systems, pro tanto, to common
carrier status.” Id. at 700–01. Because the Communications
Act provides that an entity “engaged in . . . broadcasting shall
not . . . be deemed a common carrier,” 47 U.S.C. § 153(11),
and because the public-access rules “impose[d] common-
carrier obligations on cable operators,” Midwest Video II, 440
U.S. at 701, the Court concluded that the Commission lacked
authority to promulgate them. According to Verizon, the data
roaming rule similarly imposes a common carriage obligation
on an entity statutorily excluded from common carrier status.
At oral argument, Verizon made its position crystal clear:
because the company does not qualify as a common carrier
with respect to mobile-data services, the Commission has no
authority to compel it to permit other providers’ subscribers to
roam on its network. See Oral Arg. Tr. 23–24.
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The Commission concedes that, in keeping with Midwest
Video II, it has no authority to treat mobile-data providers like
Verizon as common carriers. Rather, the Commission defends
its conclusion, reached after express consideration of
Verizon’s position, that the data roaming rule does not
relegate mobile-data providers to common carrier status. See
Data Roaming Order, 26 F.C.C.R. at 5444–46 ¶ 68. The
dispute thus turns on whether the requirements imposed by
the data roaming rule are, notwithstanding the Commission’s
contrary determination, fundamentally common carriage
obligations. On the one hand, Verizon points to features of the
rule it contends are characteristic of common carriage, such as
the enforceable obligation to offer service to all comers and
the similarity between the rule’s “commercially reasonable”
standard and the “just and reasonable” standard applicable to
common carriers. On the other hand, the Commission’s Order
highlights those aspects of the rule that diverge from the
classic common carrier duties, like the permissibility of
individualized contract terms and the distance between
“commercially reasonable” and “just and reasonable.” See id.The rule plainly bears some marks of common carriage. The
question is whether those marks so predominate as to
“relegate[ ]” mobile-internet providers “to common-carrier
status.” Midwest Video II, 440 U.S. at 700–01.
A brief history of common carriage helps answer this
question. For centuries, common carriage principles have
structured the transportation and communications industries.
Borrowing from English common law traditions that imposed
certain duties on individuals engaged in “common callings,”
such as innkeepers, ferrymen, and carriage drivers, American
common law has long applied the concept of common
carriage to transportation and communications enterprises.
See, e.g., Interstate Commerce Commission v. Baltimore &
19
O.R. Co., 145 U.S. 263, 275 (1892) (explaining that even
prior to the passage of the Interstate Commerce Act, railroads
were bound by the common law duties of common carriers);
Western Union Telegraph Co. v. Call Publishing Co., 181
U.S. 92, 98, 102 (1901) (telegraph company subject to
common law common carriage duties). Under the common
law, all comers had “equal rights” of access to a common
carrier’s enterprise, “both in respect to service and charges.”
Western Union, 181 U.S. at 100.
Over the decades, these common law duties were
codified in a variety of statutory regimes. In 1887, Congress
passed the Interstate Commerce Act, 24 Stat. 379, which
created the Interstate Commerce Commission (“ICC”) and
codified the common carriage obligations of rail carriers. The
Act’s “great purpose” was “to secure equality of rates as to all
and to destroy favoritism, these last being accomplished by
requiring the publication of tariffs and by prohibiting secret
departures from such tariffs, and forbidding rebates,
preferences and all other forms of undue discrimination.” New
York, New Haven & Hartford R.R. v. ICC, 200 U.S. 361, 391
(1906). Later, the Mann-Elkins Act of 1910, 36 Stat. 539,
brought the telecommunications industry under the purview
of the Interstate Commerce Act and the ICC. Although the
Communications Act of 1934 transferred regulatory authority
over telecommunications from the ICC to the FCC, Title II’s
language was “largely copied” from the Interstate Commerce
Act and the concept of common carriage remained generally
unchanged. See Global Crossing Telecom., Inc. v.
Metrophones Telecom., Inc., 550 U.S. 45, 48–50 (2007).
Of course, telecommunications carriers remain subject to
common carrier regulation under Title II. See 47 U.S.C.
§ 153(51); id. §§ 201 et seq. Over the years, however, the
20
Commission has relaxed the duties of common carriers in
certain respects, and the line between common carriers and
private carriers, i.e., entities that are not common carriers, has
blurred. For instance, the Commission has ruled that tariff
requirements, the centerpiece of the Interstate Commerce Act,
are no longer applicable to certain common carrier services,
thereby “dissolving what the Supreme Court described as the
‘indissoluble unity’ between [the] tariff-filing requirement
and the prohibition against rate discrimination.” Orloff v.
FCC, 352 F.3d 415, 418–19 (D.C. Cir. 2003) (quoting Texas
& Pacific Railway v. Abilene Cotton Oil Co., 204 U.S. 426,
440 (1907)).
The cases relied on by the parties here implicate the
evolving meaning of common carriage and courts’ efforts to
pin down the essence of common carriage in the midst of
changing technology and the evolving regulatory landscape.
For example, in NARUC I we distinguished between common
and private carriers by observing that “[t]he common law
requirement of holding oneself out to serve the public
indiscriminately draws . . . a logical and sensible line between
the two types of carriers.” 525 F.2d at 642. Consistent with
this principle, we upheld the Commission’s classification of
certain mobile-service providers as private carriers where the
providers were able to “negotiate with and select future
clients on a highly individualized basis.” Id. at 643. We
elaborated on this distinction in NARUC II, concluding that
“the primary sine qua non of common carrier status is a quasi-
public character, which arises out of the undertaking ‘to carry
for all people indifferently . . . .’” 533 F.2d at 608 (quoting
Semon v. Royal Indemnity Co., 279 F.2d 737, 739 (5th Cir.
1960)). “That is to say,” we went on to explain, “a carrier will
not be a common carrier where its practice is to make
individualized decisions in particular cases whether and on
21
what terms to serve.” Id. at 608–09. In still another case,
Southwestern Bell Telephone Co. v. FCC, we put it this way:
“[T]he indiscriminate offering of service on generally
applicable terms . . . is the traditional mark of common carrier
service.” 19 F.3d 1475, 1481 (D.C. Cir. 1994). Applying this
standard, we determined that the services in question did not
qualify as common carrier services because they were offered
pursuant to “individually tailored arrangements.” Id. Finally,
in a decision that perhaps reflects the high-water mark of the
broadening definition of common carriage, we held in Orloff
v. FCC that Verizon did not run afoul of Title II’s common
carriage requirements when it engaged in individualized
negotiations. See 352 F.3d at 419–21.
Considering these cases together, we glean several basic
principles. If a carrier is forced to offer service
indiscriminately and on general terms, then that carrier is
being relegated to common carrier status. See Southwestern
Bell, 19 F.3d at 1481; NARUC I, 525 F.2d at 642; NARUC II,
533 F.2d at 608. But perhaps more importantly, the
Commission has significant latitude to determine the bounds
of common carriage in particular cases. Moreover, there is an
important distinction between the question whether a given
regulatory regime is consistent with common carrier or
private carrier status, see, e.g., Orloff, 352 F.3d at 419–21,
and the Midwest Video II question whether that regime
necessarily confers common carrier status, see Midwest Video
II, 440 U.S. at 700–02. Accordingly, even if a regulatory
regime is not so distinct from common carriage as to render it
inconsistent with common carrier status, that hardly means it
is so fundamentally common carriage as to render it
inconsistent with private carrier status. In other words,
common carriage is not all or nothing—there is a gray area in
which although a given regulation might be applied to
22
common carriers, the obligations imposed are not common
carriage per se. It is in this realm—the space between per se
common carriage and per se private carriage—that the
Commission’s determination that a regulation does or does
not confer common carrier status warrants deference. Cf. U.S.
Telecom Association, 295 F.3d at 1331–32 (deferring to
Commission’s interpretation of “common carrier”). Such is
the case with the data roaming rule.
Comparing the data roaming rule to the public-access
television rules struck down in Midwest Video II demonstrates
the reasonableness of the Commission’s conclusion that the
data roaming rule imposes obligations that differ materially
from the kind of requirements that necessarily amount to
common carriage. In deciding that the public-access rules
“relegated cable systems, pro tanto, to common-carrier
status,” Midwest Video II, 440 U.S. at 700–01, the Court
highlighted aspects of those rules that “plainly impose[d]
common-carrier obligations on cable operators.” Id. at 701.
Specifically, the rules required cable systems “to hold out
dedicated channels on a first-come, nondiscriminatory basis,”
id. at 701–02, prohibited them from “determining or
influencing the content of access programming,” id. at 702,
and “delimit[ed] what [they could] charge for access and use
of equipment.” Id. The public-access rules thus obligated
cable companies to set aside a dedicated space for members of
the public to broadcast any message they might choose either
at no cost or at a price dictated by the Commission. This, the
Court held, was core common carriage. See id. at 700–02.
Midwest Video II clarified, though, that not every
limitation on an entity’s discretion concerning with whom and
how it will deal is necessarily common carriage. In both
United States v. Midwest Video Corp. (Midwest Video I), 406
23
U.S. 649 (1972), and United States v. Southwestern Cable
Co., 392 U.S. 157 (1968), for example, the Supreme Court
upheld rules that limited cable operators’ discretion to decide
who could use their channels and what could be transmitted
thereon. Midwest Video II expressly distinguished these cases.
The origination rule upheld in Midwest Video I, the Court
explained in Midwest Video II, “did not abrogate the cable
operators’ control over the composition of their programming,
as [did] the access rules.” Midwest Video II, 440 U.S. at 700.
And the signal-carriage rules at issue in Southwestern Cable,
the Court emphasized, “did not amount to a duty to hold out
facilities indifferently for public use and thus did not compel
cable operators to function as common carriers.” Id. at 706
n.16. By distinguishing the rules upheld in Midwest Video I
and Southwestern Cable, Midwest Video II itself makes clear
that there is room for permissible regulation of private carriers
that shares some aspects of traditional common carrier
obligations.
The data roaming rule is much closer to the rules upheld
in Midwest Video I and Southwestern Cable than the public-
access rules set aside by Midwest Video II. Unlike the public-
access rules, the data roaming rule leaves substantial room for
individualized bargaining and discrimination in terms. The
rule expressly permits providers to adapt roaming agreements
to “individualized circumstances without having to hold
themselves out to serve all comers indiscriminately on the
same or standardized terms.” Data Roaming Order, 26
F.C.C.R. at 5433 ¶ 45. Given this, like the rule at issue in
Southwestern Cable and distinguished by Midwest Video II,
the data roaming rule does “not amount to a duty to hold out
facilities indifferently for public use.” Midwest Video II, 440
U.S. at 706 n.16 (emphasis added).
24
True, providers must offer terms that are “commercially
reasonable.” But the data roaming rule, unlike the voice
roaming rule, imposes no presumption of reasonableness. And
the “commercially reasonable” standard, at least as defined by
the Commission, ensures providers more freedom from
agency intervention than the “just and reasonable” standard
applicable to common carriers. Cf. Morgan Stanley Capital
Group, Inc. v. Public Utility District No. 1 of Snohomish
County, 554 U.S. 527, 532 (2008) (explaining that courts
“afford great deference” to FERC’s interpretation and
application of “just and reasonable”). The rule itself actually
spells out sixteen different factors plus a catch-all “other
special or extenuating circumstances” factor that the
Commission must take into account in evaluating whether a
proffered roaming agreement is commercially reasonable. See
Data Roaming Order, 26 F.C.C.R. at 5452–53 ¶ 86. The
Commission has thus built into the “commercially
reasonable” standard considerable flexibility for providers to
respond to the competitive forces at play in the mobile-data
market. Although the rule obligates Verizon to come to the
table and offer a roaming agreement where technically
feasible, the “commercially reasonable” standard largely
leaves the terms of that agreement up for negotiation.
Given the room left for individualized negotiation, the
clear differences between the public-access rules in Midwest
Video II and this rule, and the deference owed the
Commission, we conclude that the data roaming rule does not
contravene the statutory exclusion of mobile-internet
providers from common carrier status. But in so doing, we
take Verizon’s point that even if the rule sounds different
from common carriage regulation, the more permissive
language could, as applied, turn out to be no more than
“smoke and mirrors.” See Oral Arg. Tr. 60. That is, Verizon
25
worries that despite the rule’s divergence from the classic
vocabulary of common carriage, the Commission might
nonetheless apply it in a manner that will effectively
“relegate[ ]” mobile-data providers “to common-carrier
status.” Midwest Video II, 440 U.S. at 700–01. For instance,
“commercially reasonable,” as applied by the Commission,
may in practice turn out to be no different from “just and
reasonable.”
Verizon, however, has brought a facial challenge,
meaning that we must uphold the rule unless “no set of
circumstances exists” in which it can be lawfully applied. See
Reno v. Flores, 507 U.S. 292, 301 (1993) (quoting United
States v. Salerno, 481 U.S. 739, 745 (1987). As explained
above, the rule, as interpreted by the Commission, to which
we owe deference, see MCI Worldcom, 274 F.3d at 548, does
not on its face impose a common carriage obligation. That
said, should the Commission apply the data roaming rule so
as to treat Verizon as a common carrier, Verizon is free to
return to court with an “as applied” challenge. In
implementing the rule and resolving disputes that arise in the
negotiation of roaming agreements, the Commission would
thus do well to ensure that the discretion carved out in the
rule’s text remains carved out in fact.
IV.
Only a few smaller claims remain for resolution.
Verizon argues that the data roaming rule results in an
unconstitutional taking. In support, it cites Bell Atlantic
Telephone Companies v. FCC, which barred the Commission
from adopting rules that would effect unlawful takings in an
“identifiable class” of applications absent a “clear warrant” in
the statute. 24 F.3d 1441, 1444–46 (D.C. Cir. 1994). Verizon
26
contends that, like the rule at issue in Bell Atlantic, which
gave third parties the right to physically co-locate equipment
in local telephone companies’ offices, see id., the data
roaming rule effects a physical taking in the form of the
electrons that will occupy a host provider’s physical
infrastructure during roaming. In the alternative, Verizon
argues that the rule results in a regulatory taking insofar as it
interferes with providers’ reasonable, investment-backed
expectations that the Commission would maintain its
deregulatory approach to mobile internet services.
Because regulatory-taking claims “require[ ] ‘ad hoc,
factual inquiries,’” we have followed “the Bell Atlantic
approach to statutory interpretation” only in the context of per
se physical takings. See Building Owners and Managers
Association v. FCC, 254 F.3d 89, 99 (D.C. Cir. 2001)
(quoting Penn Central Transportation Co. v. New York City,
438 U.S. 104, 124 (1978)). And even if Verizon could show
that the data roaming rule will effect physical takings in an
“identifiable class” of applications, those takings would, as
required by the rule, be compensated by a “commercially
reasonable” payment. Because a “just[ly] compensat[ed]”
taking is not unconstitutional, see U.S. Const. amend. V,
nothing in the rule implicates the constitutional avoidance
principle underlying Bell Atlantic.
In addition to its takings argument, Verizon advances
three “arbitrary and capricious”-style claims. First, taking a
slightly different approach to its common carrier argument,
see supra Part III, Verizon contends that the Commission’s
conclusion that the data roaming rule imposed no common
carrier obligation conflicts with its prior contrary
classification of the voice roaming rule. Seeing no distinction
between the two rules that could justify the agency’s
27
conclusion that the one imposes a common carrier obligation
while the other does not, Verizon believes that the
Commission acted arbitrarily and capriciously. In support, it
highlights the similarity between the “commercially
reasonable” terms required by the data roaming rule and the
“reasonable and nondiscriminatory” terms required by the
voice roaming rule, as well as the similarities between the
dispute-resolution processes established by the two rules. In
response, the Commission emphasizes essentially the same
features of the data roaming rule that we have held make it
lawful for the Commission to apply it to private carriers—for
example, the absence of a non-discrimination mandate. See
supra Part III.
The two rules are undeniably similar. Indeed, as the data
roaming rule’s history makes clear, the rule derived from and
was intended to complement the voice roaming rule. Both
rules relate to the same technological phenomenon,
“roaming,” and both govern essentially the same entities,
cellphone companies. But the same features of the data
roaming rule that led us to credit the Commission’s
determination that it imposes no common carriage obligation
are largely absent from the voice roaming rule. Unlike the
data roaming rule, the voice roaming rule incorporates Title
II’s common carriage requirements, see 2007 Voice Roaming
Order, 22 F.C.C.R. at 15818 ¶ 1, expressly forbids
discrimination in terms, see id. at 15818 ¶ 1, 15826 ¶ 23,
15832 ¶ 37, institutes a presumption that requests for roaming
are reasonable so long as there is network compatibility, see
id. at 15831 ¶ 33, and relies on the classic “just and
reasonable” standard, id. at 15818 ¶ 1. These distinctions
more than suffice to justify the Commission’s different
classifications of the two rules.
28
Second, Verizon asserts that the Order is arbitrary and
capricious because the few comments in the record from
providers that had had trouble obtaining data-roaming
agreements prior to the rule’s institution were insufficient to
justify such sweeping regulatory reform. Indeed, Verizon
maintains that the record demonstrates that carriers were
entering into roaming arrangements voluntarily. Accordingly,
Verizon maintains that the record evinced no “problem in
need of industry-wide regulation” and that the Commission
thus “lack[ed] a rational basis” for promulgating the rule.
Verizon’s Br. 57–58.
The record refutes this argument. The Commission twice
requested comment on the need for a data roaming rule, and
every commenter besides Verizon and AT&T thought such a
rule was necessary. See Data Roaming Order, 26 F.C.C.R. at
5416–18 ¶¶ 11–12. Moreover, the Commission expressly
considered and rejected “arguments by AT&T and Verizon
. . . that a data roaming rule [was] unnecessary because data
roaming agreements [were] occurring without regulation,”
finding instead that “providers ha[d] encountered significant
difficulties obtaining data roaming arrangements on advanced
‘3G’ data networks, particularly from the major nationwide
providers.” Id. at 5424 ¶ 24. In fact, the Order cites comments
revealing that carriers were having trouble reaching roaming
agreements with Verizon in particular. See id. at 5425–26
¶ 26. To be sure, the record contains contrary evidence
proffered by Verizon and AT&T. But the Commission
squarely addressed that evidence, and the data roaming rule
reflects a viable policy choice justified by substantial record
evidence. Cf. Motor Vehicle Manufacturers Association of the
United States v. State Farm Mutual Automobile Insurance
Co., 463 U.S. 29, 43 (1983) (The APA requires only that the
agency “examine the relevant data and articulate a satisfactory
29
explanation for its action,” and “a court is not to substitute its
judgment for that of the agency.”).
Finally, Verizon argues that the Commission made a
logical error when it weighed the costs of the data roaming
rule against its benefits. Specifically, Verizon sees a conflict
between (1) the Commission’s argument that the data roaming
rule would serve the public interest, and (2) its statement that,
in light of the “high cost of roaming,” “providers are unlikely
to rely on roaming arrangements in place of network
deployment.” Data Roaming Order, 26 F.C.C.R. at 5423 ¶ 21.
The Commission’s attempt to downplay the possibility that
the rule will discourage investment in network infrastructure
on the ground that providers will rarely invoke it, Verizon
contends, “is tantamount to saying the saving grace of the rule
is that it will not entail costs if it is not used.” Business
Roundtable v. SEC, 647 F.3d 1144, 1156 (D.C. Cir. 2011).
Verizon oversimplifies the Commission’s reasoning and
omits key language in the Order, creating a contradiction
where none exists. As one of several arguments against
AT&T’s and Verizon’s assertions that the rule would remove
incentives for investment, the Order states that “providers
[would be] unlikely to rely on roaming arrangements in place
of network deployment as the primary source of their service
provision.” Data Roaming Order, 26 F.C.C.R. at 5423 ¶ 21
(emphasis added). This hardly amounts to an assertion that
providers will decline to rely on the rule at all; rather, the
Order merely asserts that roaming will not displace network
development as the “primary” means of serving subscribers.
Indeed, the Commission carefully explained that roaming
would assist new entrants into various markets and that those
new entrants could then amass a customer base sufficient to
enable them to develop their own infrastructure. See id. at
30
5421–23 ¶¶ 18–22. Verizon’s myopic focus on part of a
longer sentence plucked from a more extensive analysis
obscures what the Order makes clear: that the Commission
performed a thoughtful and nuanced balance of the costs and
benefits of the data roaming rule.
V.
For the foregoing reasons, we reject Verizon’s challenge
to the data roaming rule.
So ordered.