 United States Court of Appeals
         FOR THE DISTRICT OF COLUMBIA CIRCUIT



Argued September 8, 2016          Decided November 18, 2016

                        No. 15-1059

                       AT&T CORP.,
                        PETITIONER

                             v.

   FEDERAL COMMUNICATIONS COMMISSION AND UNITED
               STATES OF AMERICA,
                  RESPONDENTS

               BANDWIDTH.COM, INC., ET AL.,
                     INTERVENORS


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


    Joseph Guerra, argued the cause for petitioner. With him
on the briefs were Peter D. Keisler, James P. Young, Kwaku
A. Akowuah, Gary L. Phillips, and David L. Lawson.

     Sarah E. Citrin, Counsel, Federal Communications
Commission, argued the cause for respondents. On the brief
were William J. Baer, Assistant Attorney General, Robert B.
Nicholson and Robert J. Wiggers, Attorneys, Jonathan B.
Sallett, General Counsel, Federal Communications
Commission, David M. Gossett, Deputy General Counsel,
Jacob M. Lewis, Associate General Counsel, Richard K.
                              2

Welch, Deputy Associate General Counsel, and Lisa S. Gelb,
Counsel. James M. Carr, Counsel, entered an appearance.

    Christopher J. Wright, argued the cause for intervenors.
With him on the brief were John T. Nakahata, Timothy J.
Simeone, Stephen W. Miller, Joshua M. Bobeck, Charles A.
Zdebski, and Jeffrey P. Brundage. John R. Grimm entered an
appearance.

   Before: ROGERS, Circuit Judge, and WILLIAMS and
RANDOLPH, Senior Circuit Judges.

   Opinion for the Court filed by Senior Circuit Judge
WILLIAMS.

     WILLIAMS, Senior Circuit Judge: This case arises from
the ongoing transition of American telephony to the Internet.
The process creates challenges to a regulatory system
designed for the pre-Internet world, the familiar “public
switched telephone network” or “PSTN.” We deal here with
the fees that local exchange carriers (“LECs”) can charge
inter-exchange carriers (“IXCs”) for certain services they
provide, in coordination with providers of Voice over Internet
Protocol (“VoIP”), for the completion of “inter-exchange”
calls. Resolution of the dispute turns on how the disputed
services are to be classified. The Federal Communications
Commission says that they are end-office switching services.
Petitioner AT&T says that they are tandem switching services.
The prescribed rates for the latter have generally been lower;
AT&T has no objection to paying them.

    Two decisions of the Commission are critical. First, in
2011 the Commission made a broad effort to update its system
for regulating intercarrier compensation. In re Connect
America Fund, 26 FCC Rcd. 17663 (2011) (the
“Transformation Order”). That order produced definitions of
                               3

“End Office Access Service” and “Tandem-Switched
Transport Access Service,” stated in subsections (d) and (i),
respectively, of 47 C.F.R. § 51.903. The parties focus on
subsection (d), providing:

    End Office Access Service means:

    (1) The switching of access traffic at the carrier’s end
    office switch and the delivery to or from of such traffic to
    the called party’s premises;

    (2) The routing of interexchange telecommunications
    traffic to or from the called party’s premises, either
    directly or via contractual or other arrangements with an
    affiliated or unaffiliated entity, regardless of the specific
    functions provided or facilities used; or

    (3) Any functional equivalent of the incumbent local
    exchange carrier access service provided by a non-
    incumbent local exchange carrier.

§ 51.903(d). Subsection (i), governing tandem switching
access service, employs similar “functional equivalent”
language.

     The Transformation Order recognized that LECs
partnered with VoIP providers to supply these services. It
therefore specified that a LEC could collect for provision of
access services “regardless of whether the [LEC] itself
delivers such traffic to the called party’s premises or delivers
the call . . . via contractual or other arrangements with an
affiliated or unaffiliated provider of interconnected VoIP
service.” § 51.913(b). In short, the Transformation Order
allowed a VoIP provider and its LEC partner (collectively,
“VoIP-LEC”) to charge for providing the “functional
equivalent” of end-office switching services, or tandem
switching services, as the case might be.
                               4

     In the second decision, In re Connect America Fund, 30
FCC Rcd. 1587, 1588, ¶ 2 (2015) (the “Declaratory Ruling”),
the Commission wrestled with the contention of AT&T, an
IXC, that the disputed services do not qualify as end-office
access. The Commission ruled that the disputed services are
indeed end-office access under subsection (3) of § 51.903(d).
Id. at 1588-89, ¶ 3. It presented its ruling as an interpretation
of the Transformation Order.

     AT&T challenges the Declaratory Ruling on two
grounds. First, it argues that the ruling cannot be upheld as an
interpretation of the Transformation Order. On this issue we
must uphold the Commission unless its proffered
interpretation is “plainly erroneous or inconsistent with the
regulation.” Auer v. Robbins, 519 U.S. 452, 461 (1997)
(quotation omitted). If the Declaratory Ruling fails that test,
then imposition of the fees would require a change in the
Commission’s rules, which could occur only through the usual
notice-and-comment rulemaking under the Administrative
Procedure Act, 5 U.S.C. § 553. In the end, we find that the
Declaratory Ruling does not disclose the Commission’s
reasoning with the requisite clarity to enable us to sustain its
conclusion. S.E.C. v. Chenery Corp., 318 U.S. 80, 94 (1943);
see Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut.
Auto. Ins. Co., 463 U.S. 29, 50 (1983). We therefore vacate
and remand the order to the Commission for further
explanation.

     AT&T also contends that it was arbitrary and capricious
of the Commission to apply its “interpretation” retroactively,
thus requiring AT&T to pay end-office switching charges for
access services it received before the Declaratory Ruling. On
the view we take of the first claim, we need not reach this
issue here.
                               5

                             * * *

    We now double back to describe the disputed services.
We start with end-office and tandem switching in a pure
PSTN environment, and then move to the services’ respective
places in the mixed universe of Internet and PSTN.

     The PSTN depends on time-division multiplexing
(“TDM”) technology, which allows multiple calls to travel
simultaneously over shared equipment before being separated
onto individual lines. When a subscriber “originates” a long-
distance call in the PSTN context, that call must travel from
the subscriber’s premises over the subscriber’s line (“loop” in
PSTN parlance) to an end-office switch, which will link the
call to trunk lines, where it will travel in TDM format along
with other conversations. For the called party, the process is
similar, with an end-office switch moving the call from a
trunk line to the subscriber’s line, thus enabling the call to be
terminated. (Termination doesn’t refer to the end of the phone
call, but to its reaching the called party.) The Commission has
long regulated the rates for this access because of a risk that
LECs would charge the IXCs monopolistic prices. See In re
Access Charge Reform, Seventh Report & Order, 13 FCC
Rcd. 9923, 9935-36, ¶¶ 30-34 (2001). A similar risk exists
along the network of trunk lines running between the end-
office switches for the calling and called parties. See In re
Access Charge Reform, Eighth Report & Order, 19 FCC Rcd.
9108, 9116-17, ¶ 17 (2004). “Just as the loop runs from
[customer premises] terminals to local switches, the trunks run
from the local switches to centralized, or tandem,
switches . . . , which operate much like railway switches,
directing traffic into other trunks.” Verizon Communications,
Inc. v. F.C.C., 535 U.S. 467, 490 (2002); see also In re Access
Charge Reform, First Report & Order, 12 FCC Rcd. 15982,
16051, ¶ 158 (1997). The Commission regulates switching
costs in this second context as well.
                               6

     The Commission has set the ceiling on rates chargeable
by a “competitive” LEC at the rates charged by the incumbent
LEC with which it competes. (The incumbent LECs are
mostly descendants of the “Baby BOCs”—the Bell Operating
Companies that were split off from the old AT&T on the
occasion of its break-up. The focus here is on competitive
LECs, or “CLECS”; except as necessary we refer to the two
interchangeably.) In the PSTN context, the chargeable
switching rate depends on the function of the switching
service. Thus, the Commission has said, the benchmark
switching rate “is [1] the end office switching rate when a
competitive LEC originates or terminates calls to end users
and [2] the tandem switching rate when a competitive LEC
passes calls between two other carriers.” In re Access Charge
Reform, PrairieWave Telecomms., Inc. Petition, 23 FCC Rcd.
2556, 2558, ¶ 6 (2008) (bracketed numbers added). In PSTN,
then, end-office switching occurs between a trunk line and the
subscriber’s line, while tandem switching occurs between
trunk lines.

     Given their TDM heritage these access charges do not
map cleanly onto VoIP-PSTN traffic, which the Commission
defined in the Transformation Order as “traffic exchanged
over PSTN facilities that originates and/or terminates in IP
format.”     26 FCC Rcd. at 18006, ¶ 940.            There the
Commission adopted the general principle that LECs could
“charge the relevant intercarrier compensation for functions
performed by it and/or by its retail VoIP partner, regardless of
whether the functions performed or the technology used
correspond precisely to those used under a traditional TDM
architecture.” Id. at 18026-27, ¶ 970. That focus on functions
of course undergirds the reliance on “functional equivalent[s]”
in § 51.903(d), (i).

    The Transformation Order also explicitly asserted the
application of its rules across technologies, saying that LECs
                               7

are entitled to compensation for performing functions “using,
in whole or in part, technology other than TDM transmission
in a manner that is comparable to a service offered by a local
exchange carrier.” 47 C.F.R. § 51.913(b).

     To understand the application of that principle, and the
present claims, we now must examine VoIP-PSTN services
provided by a VoIP-LEC. The universe of these provider
partnerships is divided into two—“facilities-based” and “over-
the-top.” Declaratory Ruling, 30 FCC Rcd. at 1588, ¶ 2.
Facilities-based service occurs when a VoIP provider such as
a cable company owns or leases the physical infrastructure
connecting directly to subscribers’ homes and offices and thus
completes the “last mile” of the call. Id. at 1592, ¶ 11 n.35.
This is closely parallel to the equivalent PSTN process; the
charges levied by these providers are not at issue here.

     Over-the-top VoIP providers do not connect directly to
the last mile transmission network. Id. at 1588, ¶ 2. They
“require the end user to obtain broadband transmission from a
third-party provider.” Id. at 1592, ¶ 11 n.35 (citation
omitted). Thus, suppose a call from a PSTN calling party to
an over-the-top VoIP subscriber. The call will make its way
via the calling party’s IXC to some intermediate point, at
which the VoIP-LEC provider will “convert[] the call from
TDM to IP format.” AT&T Corp. v. YMax Communications
Corp. 26 FCC Rcd. 5742, 5746, ¶ 7 (2011) (“YMax I”). Now
taking the form of data packets, the call will then proceed over
the Internet until it reaches the network of the called party’s
Internet service provider (“ISP”). Id. That ISP will then
direct the data packets to the called party’s customer premises
equipment—which in YMax I were (perhaps typically) a VoIP
device and a landline handset. See id. at 5744, 5746, ¶¶ 4, 7.

    The Commission issued the Declaratory Ruling to
resolve petitioner AT&T’s contention that the Transformation
                               8

Order did not require it to pay over-the-top VoIP-LECs the
end-office switching rate. 30 FCC Rcd. at 1594-95, ¶ 16.
AT&T argued there, and argues here, that the Transformation
Order authorizes LECs to obtain end-office switching charges
only if they actually interconnect with the last-mile network
leading into a customer’s home, a condition satisfied in the
PSTN world and by facilities-based providers in the IP world.
Id.

     AT&T bolstered the argument by reference to RAO Letter
21, 7 FCC Rcd. 5205 (1992), a staff document that identified
eight “basic switching functions,” id. at 5205 & n.1. One of
these eight functions is “[i]nterconnection [which] connects
subscriber line to subscriber line or subscriber line to trunk,”
while the remaining seven cover activities such as,
“[a]ttending [which] monitors for off-hook signals,”
“[i]nformation receiving,” and “[i]nformation transmitting.”
Id. at n.1. In 1997, the Commission clarified the letter by
stating that out of the eight functions, “interconnection, i.e.,
the actual connection of lines and trunks, is the characteristic
that distinguishes [end-office] switches from other central
office equipment.” In re Petition for Reconsideration, RAO
21, 12 FCC Rcd. 10061, 10067, ¶ 11 (1997).

     The Declaratory Ruling “recognize[d] that elements” of
the RAO “decisions emphasize, among other things, the
function of connecting lines and trunks in end-office
switching,” but dismissed arguments based on these decisions
as “necessarily tied to TDM-based technologies.”
Declaratory Ruling, 30 FCC Rcd. at 1606, ¶ 38. It treated
interconnection, formerly the sine qua non of end-office
switching, as a mere technical exigency of TDM networks and
not an inherent function of end-office switching. Id. at 1602,
¶ 30.
                                9

     Instead the Commission selected from RAO Letter 21
what it called an “aggregation of functions,” specifically “call
control, i.e., the functions necessary to ensure call set-up,
conduct and take-down,” and pronounced this the functional
equivalent of end-office switching. 30 FCC Rcd. at 1601,
¶ 28 (emphasis omitted). Finding that over-the-top VoIP
services “undoubtedly provide the call intelligence associated
with call set-up, supervision and management” because these
services “determine call destination and directly code the call
for receipt and decoding by the called party,” it concluded that
over-the-top VoIP providers supply “the functional equivalent
of end-office switching.” Id. at 1602, ¶ 29 & n.105.

     Its justification for the shift from interconnection rested in
large part on a claim that the Transformation Order had
ushered in a “new functional equivalence approach” that was
not bound by “preexisting, technology-specific, TDM-based
guidance for determining functional equivalency.” 30 FCC
Rcd. at 1600, ¶ 26 & n.98. This “new” approach, the
Declaratory Ruling explained, requires a “holistic look at how
calls are delivered to the end user” rather than a comparison of
“key physical switching functions.” Id. at 1600-1601, ¶¶ 26-
27 (explaining that a test based on “physical functions” is too
“narrow” an interpretation of the Transformation Order). The
Commission rooted this new standard in a passage from the
Transformation Order saying that the functions or
technologies used “do not need to correspond precisely to
those used under a traditional TDM architecture.” 30 FCC
Rcd. at 1600, ¶ 26 n.98 (quoting Transformation Order, 26
FCC Rcd. at 18026-27, ¶ 970) (internal quotation marks
omitted). The Commission also found support for this
approach in certain general statements the agency had
previously made about functional equivalence, a concept with
a long history in telecommunications regulation, which we
need not recount here. See 30 FCC Rcd. at 1148, ¶ 27 n.100
(citing precedents); see also id. at 1150, ¶ 31 & n.114.
                              10

     AT&T argues that the Commission misapplied this
functional equivalence concept. As we saw, the Declaratory
Ruling proclaimed the standard to be “new,” to require a
“holistic look at how calls are delivered to the end user,” and
not to require precise physical identity.           But those
propositions don’t tell us much about what functional
equivalence does mean. This seems to turn on a comparison
of the functions performed by PSTN end-office switches and
by over-the-top VoIP-LECs. The Declaratory Ruling said
that those entities’ provision of “call control” and call
intelligence did the job. Declaratory Ruling at 1601, ¶ 28.
This poses a key question: if those are the critical functions,
what distinguishes end-office switching from tandem
switching?

     AT&T assails the Commission’s failure to explain why
the activities of over-the-top VoIP-LECs should be classified
as end-office rather than tandem switching. “They [the VoIP-
LEC partners] perform only some limited subset of the call
control functions performed traditionally by all types of
switches.” Pet’r Br. at 10 (emphasis added). Indeed, AT&T
had posed that problem in the proceedings leading to the
Declaratory Ruling, clearly enough so that the Commission
noted that it had argued that the services of the VoIP-LECs
“‘more closely resemble tandem switching’ than end office
switching.” Declaratory Ruling, 30 FCC Rcd. at 1604, ¶ 33.
Having explicitly noted AT&T’s position, the Declaratory
Ruling never again mentioned tandem switching. And at oral
argument counsel for the agency was unable to point to any
Commission language, in the Declaratory Ruling or
elsewhere, indicating that call intelligence is not performed by
tandem switches. Oral Argument at 32:06.

     When the Commission applies the functional equivalence
test, it necessarily draws a line around “the essential
function[s]” of a service. See In re Investigation of Special
                               11

Access Tariffs of Local Exchange Carriers, 12 FCC Rcd.
7026, 7041, 7052, ¶¶ 27, 48 (1997) (explaining that under
“functional equivalence test,” services were not “like” when
they failed to share an “essential function”); see In re Cellexis
Internat’l, Inc. v. Bell Atlantic NYNEX Mobile Sys., Inc., 16
FCC Rcd. 22887, 22894, ¶ 19 (2001) (“[I]t is the purpose of a
technical configuration, not the configuration itself, that is
relevant in determining functional equivalence.”).           The
Declaratory Ruling held that “call control” was the essential,
defining     purpose     of    end-office    switching     while
“interconnection” was not. 30 FCC Rcd. at 1601-1602, ¶¶ 28-
30 (defining call control as “the intelligence associated with
call set-up, supervision and management”). AT&T contends
that this defining function is not defining at all. As we
mentioned above, AT&T asserts that over-the-top VoIP-LECs
“perform only some limited subset of the call control
functions performed traditionally by all types of switches.”
Pet’r Br. at 10.

     Indeed, the Declaratory Ruling never explained its
references to call set-up and the intelligence associated with it.
But in prior rulings the Commission had repeatedly referred to
“call set-up” in terms that seem to encompass the services of
tandem switches, e.g., speaking of it as the process of
“establish[ing] transmission paths over which telephone calls
are carried.” In re Ameritech Operating Cos., 11 FCC Rcd.
3839, 3841, ¶ 4 (1996). Call set-up determines the route
necessary to get from the calling party’s phone to the called
party’s phone. In a TDM phone call, this route is determined
by a signaling network, such as the SS7 network. In re High-
Cost Universal Serv. Support, 24 FCC Rcd. 6475, 6642, ¶ 327
n.848 (2008) (“SS7 is an out-of-band signaling system that is
separate from, but runs parallel to, the public switched
telephone network (PSTN) and is used to set up call paths
between calling and called parties.”); In re Access Charge
Reform, First Report & Order, 12 FCC Rcd. 15982, 16087,
                              12

¶ 244 (1997) (“[S]ignaling networks like SS7 establish and
close transmission paths over which telephone calls are
carried.”); see generally Transformation Order, 26 FCC Rcd.
at 17892-96, ¶¶ 708, 715-17 (discussing different types of
signaling networks, including SS7, Multi-Frequency
signaling, and IP signaling).

     In the most common type of signaling network, the call
set-up process relies on databases: “[S]witch[es] [] send
queries . . . to call-related databases, which return customer
information or instructions for call routing to the switch.” In
re Application of GTE Corp., 15 FCC Rcd. 14032, 14121,
¶ 189 n.431 (2000). Thus the “intelligence associated with
call set-up” exists not in end-office switches, but in these
“call-related databases.” To the extent that end-office
switches possess any of the “intelligence associated with call
set-up,” that intelligence appears to be shared with tandem
switches. Both end-office and tandem switches are, for
signaling purposes, “service switching points . . . capable of
originating, transmitting, and receiving SS7 messages for call
set-up and database transactions.” Ameritech, 11 FCC Rcd. at
3840-41, ¶ 3; see In re Access Charge Reform, First Report &
Order, 12 FCC Rcd. at 16045, ¶ 145 (indicating that both
end-office and tandem switches “process or formulate signal
information”).

     Because both tandem and end-office switches process
“intelligence associated with call-setup,” the Declaratory
Order’s functional equivalence analysis fails to distinguish
between them. If end-office switches traditionally perform
functions A (call set-up) and B (interconnection between
trunks and loops), while tandem switches perform functions A
(call set-up) and C (interconnection between trunks), it is
wholly arbitrary to say (without more) that the call set-up
activity of VoIP-LECs is the functional equivalent of end-
office switching but (implicitly) not the equivalent of tandem
                              13

switching. Which is it—one, the other, or both? And what
language in the Transformation Order gives the answer?

     The Transformation Order prescribed entirely different
consequences for services that are the functional equivalent of
end-office switching and of tandem switching. Besides
assigning them separate definitions, see 47 C.F.R.
§ 51.903(d), (i), it provided for different rate ceilings.
Compare 47 C.F.R. § 51.907(g)(1) (end-office access service)
with id. § 51.907(g)(2) (tandem switch service). In case the
Transformation Order’s rules did not insist on the distinction
between them clearly enough, the Commission drew a picture,
illustrating the two types of switching as occurring separately
at different stages of a call’s path. Figure 13, 26 FCC Rcd. at
18112, ¶ 1306. So far the Commission has not pointed to
anything in the Transformation Order from which a reader
would understand that it meant for specific services provided
by over-the-top VoIP-LEC providers to qualify as the
functional equivalent of end-office switching and not tandem
switching.

     The Commission’s muddled treatment of functional
equivalence requires vacatur and remand. But judicial
economy suggests that we address some of AT&T’s other
arguments to avoid re-litigation of identical issues in a
subsequent petition. AT&T claims that language in the
Transformation Order itself, and in Commission decisions
before and after the ruling, illustrate that references to end-
office switching services cannot be read as broadly as
necessary to sustain the Declaratory Ruling.

     In the preamble to the Transformation Order (the
“concise general statement of [the rules’] basis and purpose”
required by 5 U.S.C. § 553(c)), the Commission explained
that it was adopting rules to make clear that a carrier may
impose origination and termination charges when it “uses
                                 14

Internet Protocol facilities to transmit . . . traffic to or from the
called party’s premises.” 26 FCC Rcd. at 18025, ¶ 969
(emphasis added) (brackets omitted). It went on to say,
“[O]ur rules do not permit a LEC to charge for functions
performed neither by itself or its [VoIP] partner.” Id. at
18027, ¶ 970. On their face these passages seem to deny an
over-the-top provider authority to charge end-office switching
rates. As we’ve pointed out, the Commission acknowledged
that VoIP providers do not supply a last-mile connection and
their end-users must obtain broadband transmission from
others.

     The Commission replies that the passage is “not itself a
rule,” so that the Commission is free to deviate from its
apparent meaning. Resp. Br. at 21-22. But at the very least,
an agency’s “expla[nation] in the Federal Register” provides
evidence of the agency’s “intent at the time of the regulation’s
promulgation.” Consolidation Coal Co. v. Fed. Mine Safety
& Health Review Comm’n, 136 F.3d 819, 821-22 (D.C. Cir.
1998) (quoting Thomas Jefferson Univ. v. Shalala, 512 U.S.
504, 512 (1994)). An interpretation at odds with the agency’s
expressed intent at the time of adoption enjoys no judicial
deference. Comcast Cable Communications, LLC v. F.C.C.,
717 F.3d 982, 1003 (D.C. Cir. 2013).

     The Commission also contends that the preamble
language is ambiguous; its theory for ambiguity is that most
IXCs other than AT&T mutely paid the charges when billed
by the VoIP-LECs. Parties’ silent decisions not to incur the
cost of litigation seem a relatively remote basis for claiming
ambiguity, which in common parlance is a matter of language.
Nonetheless, the Transformation Order might conceivably
have been using “transmit” in the sense of helping to cause
another party to make the ultimate transmission.
                             15

      AT&T also cites two decisions relating to YMax
Communications Corp., an over-the-top VoIP provider. In the
first, AT&T Corp. v. YMax Communications Corp. 26 FCC
Rcd. 5742 (2011) (“YMax I”), which we’ve already
mentioned, AT&T successfully resisted YMax’s claim to end-
office switching fees. The pure holding of YMax I was
narrow: that an over-the-top VoIP provider could not levy
end-office switching charges based on a tariff that described
end-office switching purely in TDM terms. “The fundamental
problem [with YMax’s position] appears to be that YMax
chose to model its Tariff on common language in LEC access
tariffs, even though the functions YMax performs are very
different from the access services typically provided by
LECs.” YMax I, 26 FCC Rcd. at 5748, ¶ 14. Relying on the
tariff’s references to “End User station loops” and “end user
lines”—language drawn from the TDM world—the
Commission found that the tariff contemplated charges only
for TDM services. Id. at 5755-59, ¶¶ 36-45. And under the
filed rate doctrine YMax could charge only for services
specified in the tariff. Id. at 5748, ¶ 12 (quoting 47 U.S.C.
§ 203(a), (c)).

     In addition to its holding on YMax’s tariff language, the
Commission hinted that YMax’s access charges might have
failed to satisfy the functional equivalence standard but
stopped short of addressing that issue. 26 FCC Rcd. at 5743,
¶ 1 n.7 (“[W]e emphasize that this Order addresses only the
particular language in YMax’s Tariff and the specific
configuration of YMax’s network architecture . . . .”).

    The Commission also refused to “address issues
regarding the intercarrier compensation obligations, if any,
associated with [VoIP] traffic in this Order.” Id.

    The Commission cited YMax I with a “cf.” signal in the
Transformation Order, 26 FCC Rcd. at 18027, ¶ 970 n.2028,
                              16

and AT&T reads the citation as intended to illustrate that the
services of an over-the-top VoIP do not qualify for end-office
switching fees. The Commission insists here, as it did in the
Declaratory Ruling, that the citation served merely as “part of
a discussion of measures taken to prevent double billing.” 30
FCC Rcd. at 1604, ¶ 34 n.126. The evidence is mixed, but we
find the Commission’s interpretation reasonable.

     After the Transformation Order another matter involving
YMax led the Commission’s Wireline Competition Bureau to
amend one of the order’s rules. Shortly after the order was
published, YMax sought “confirmation of its interpretation”
that it need only provide “some portion of the interconnection
with the PSTN” to qualify for the “full benchmark rate” of
access charges, “even if [the rate] includes functions that
neither [the LEC] nor its VoIP retail partner are actually
providing.” In re Connect America Fund, 27 FCC Rcd. 2142,
2144, ¶ 4 (2012) (“YMax II”). The Bureau noted that YMax’s
request “highlight[ed]” a potential conflict between two of the
Transformation Order’s rules. See id. at 2144, ¶ 5. While 47
C.F.R. § 51.913(b) prevents VoIP-LECs from “charg[ing] for
functions not performed by the [LEC] itself or the . . . VoIP”
provider, the Transformation Order amended 47 C.F.R.
§ 61.26(f) to provide an apparently much laxer standard:

    If a CLEC provides some portion of the switched
    exchange access services . . . [and] if the CLEC is listed
    in the database of the Number Portability Administration
    Center as providing the calling party or dialed number,
    the CLEC may assess a rate equal to the rate that would
    be charged by the competing ILEC for all exchange
    access services required to deliver interstate traffic to the
    called number.

Transformation Order, 26 FCC Rcd. at 18226 (emphasis
added) (amending § 61.26(f)). Thus, as YMax argued,
                              17

§ 61.26(f) seemed to allow carriers to bill for services not
provided, as long as they performed “some portion” of the
total services required to deliver a call. The Bureau rejected
YMax’s interpretation of § 61.26(f) on the grounds that it
could lead to “double billing”; it amended the rule to make
clear that § 61.26(f) “is limited by section 51.913(b).” YMax
II, 27 FCC Rcd. at 2144, ¶¶ 4-5; see id. at 2149 (amending
§ 61.26(f) with the qualifier “to the extent permitted by
§ 51.913(b)”).

     AT&T asks us to read YMax II in light of both YMax’s
letter to the Bureau and its filings in YMax I, which the
Bureau did not cite. AT&T assumes that the Bureau read the
“some portion” phrase in YMax’s letter as a specific reference
to all the capabilities, including call control, that YMax had
detailed in prior filings to the Commission. From this AT&T
claims that “it is inconceivable that the Bureau would have
denied” YMax’s request if the Transformation Order allowed
a charge for end-office switching services merely on the basis
of a VoIP-LEC’s providing call control. Pet’r Br. at 33-34.
We find the argument a stretch. It is just as likely that the
Bureau interpreted “some portion” to mean unspecified
functions falling short of “call control.”

     While neither YMax decision is a holding in favor of
AT&T’s view, YMax I represents the Commission’s apparent
understanding of the “commonly understood meaning[]” of
end-office switching around the time of the Transformation
Order. See YMax I, 26 FCC Rcd. at 5758, ¶ 43. The
Commission was remarkably clear, even emphatic, in its
statement about end-office switching. Charges for such
switching, it said, “are authorized by law to allow local
exchange carriers to recover the substantial investment
required to construct the tangible connections between
themselves and their customers throughout their service
territory.” Id. at 5757, ¶ 40 & n.117. It therefore presents an
                              18

additional problem with the Commission’s attempted
application of the Transformation Order’s functional
equivalence standard, besides the ones already discussed.

     Here we note that the Declaratory Ruling also falls down
in its effort to explain why VoIP-LECs’ failure to provide
interconnection is not fatal to the claim that they provide the
functional equivalent of end-office switching. As we saw, the
RAO guidance and YMax I both appear to identify end-office
switching as supplying actual or physical interconnection.
See id. Indeed, the Declaratory Ruling acknowledged that
interconnection is “critical” to end-office switching in a TDM
call, but found that it was “not require[d]” in VoIP-PSTN
calls. 30 FCC Rcd. at 1602, ¶ 30. The ruling’s only
explanation for why interconnection is “not require[d]” is that,
in VoIP-PSTN calls, “the customer is separately paying for
[the] broadband connection, which interconnects” the call. Id.
That the customer is paying for the broadband interconnection
doesn’t support the conclusion that interconnection is
unnecessary for end-office switching—it merely indicates that
it is provided by a party other than a VoIP-LEC. Even
assuming that the Transformation Order cast off
interconnection as a remnant of “preexisting, technology-
specific, TDM-based guidance for determining functional
equivalency,” Declaratory Ruling, 30 FCC Rcd. at 1600, ¶ 26
n.98, that reading would still require the Commission to
provide some distinctive “functional equivalence” criterion in
its place. On the record before us, the Commission has not
done so.

    The Declaratory Ruling is accordingly

                                       Vacated and remanded.
