                                                                                                                           Opinions of the United
2007 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


10-16-2007

Time Warner v. FCC
Precedential or Non-Precedential: Precedential

Docket No. 05-4769




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                                      PRECEDENTIAL

    UNITED STATES COURT OF APPEALS
         FOR THE THIRD CIRCUIT

                 __________

    Nos. 05-4769, 05-5153, 06-1466, 06-1467
                  __________

       TIME WARNER TELECOM, Inc.,

                           Petitioner in No. 05-4769,

                      v.

FEDERAL COMMUNICATIONS COMMISSION; and
      UNITED STATES OF AMERICA,

                           Respondents.

                 __________

              EARTHLINK INC.,

                           Petitioner in No. 05-5153,

                      v.

 FEDERAL COMMUNICATIONS COMMISSION,

                           Respondent.

                 __________

                  COMPTEL,

                           Petitioner in No. 06-1466,

                      v.

 FEDERAL COMMUNICATIONS COMMISSION;
      UNITED STATES OF AMERICA,
                                     Respondents,


             MONTANA SKY NETWORKS INC,
               d/b/a MONTANASKY.NET,

                                     Intervenor.

                           __________

     ACN COMMUNICATIONS SERVICES INC.;
  BROADWING COMMUNICATIONS, LLC.; INTEGRA
TELECOM INC; MCLEODUSA TELECOMMUNICATIONS
SERVICES, INC.; MPOWER COMMUNICATIONS CORP.;
         and PAC-WEST TELECOMM, INC.,

                                     Petitioners in No. 06-1467,

                                v.

    FEDERAL COMMUNICATIONS COMMISSION; and
          UNITED STATES OF AMERICA

                                     Respondents.

                           __________

          On Petition for Review of a Final Order of the
             Federal Communications Commission
                           __________

                     Argued March 16, 2007

Before: FUENTES, GREENBERG, and LOURIE,* Circuit
Judges.

                     (Filed: October 16, 2007)


      *
        Honorable Alan D. Lourie, United States Circuit Judge for
the Federal Circuit, sitting by designation.

                                2
David P. Murray (Argued)
Wilkie, Farr & Gallagher LLP
1875 K Street, N.W.
Washington, DC 20006

      Counsel for Petitioner Time Warner Telecom Inc.

James M. Carr (Argued)
Federal Communications Commission
Office of General Counsel
445 12th Street, S.W.
Washington, DC 20554

    Counsel for Respondent Federal Communications
Commission

Nancy C. Garrison
Catherine G. O’Sullivan
United States Department of Justice
Appellate Section
950 Pennsylvania Avenue, N.W.
Washington, DC 20530

      Counsel for Respondent United States of America

Michael K. Kellogg (Argued)
Kellogg, Huber, Hansen, Todd, Evans & Figel, P.L.L.C.
1615 M Street, N.W.
Suite 400
Washington, DC 20036

      Counsel for Intervenors BellSouth Corp. and AT&T Inc.

Robert B. McKenna
Qwest Services Corporation
1801 California Street
10th Floor
Denver, CO 80202

       Counsel for Intervenor Qwest Communications
International Inc.

                               3
Stephen J. Rosen
Levine, Blaszak, Block & Boothby LLP
2001 L Street, N.W., Suite 900
Washington, D.C. 20036

      Counsel for Intervenor Ad Hoc Telecommunications
Users Committee

Andrew G. McBride
Wiley Rein LLP
1776 K Street, N.W.
Washington, DC 20006

      Counsel for Intervenors the Verizon telephone companies

Mark J. O’Connor
Donna N. Lampert (Argued)
Lampert & O’Connor, P.C.
1775 K Street, N.W.
Suite 700
Washington, DC 20006

      Counsel for Petitioner Earthlink Inc.

Harold Feld
Media Access Project
1625 K Street, N.W.
Suite 1118
Washington, DC 20006

       Counsel for Intervenors National Alliance for Media Arts
and Culture; Office of Communication of the United Church of
Christ, Inc.; and Center for Digital Democracy

Marc J. Fink
John W. Butler (Argued)
Sher & Blackwell LLP
1850 M Street, N.W.
Suite 900
Washington, DC 20036


                               4
       Counsel for Petitioner COMPTEL

Ivan C. Evilsizer
2301 Colonial Drive
Suite 2B
Helena, MT 59601

       Counsel for Intervenor Montana Sky Networks Inc.

Joshua M. Bobeck
Bingham McCutchen LLP
3000 K Street, N.W.
Suite 300
Washington, DC 20007

       Counsel for Petitioners ACN Communications Services
Inc.; Broadwing Communications; Integra Telecom Inc.;
McLeodUSA Telecommunications Services Inc.; Mpower
Communications Corp.; and Pac-West Telecomm. Inc.

                           __________

                            OPINION
                           __________


FUENTES, Circuit Judge.

        The petition under review arises from an order of the
Federal Communications Commission (“FCC”), which
substantially limits federal regulation of high-speed Internet access
service provided over traditional telephone lines (referred to as
“wireline broadband Internet access service”). The dispute centers,
in large part, on the FCC’s decision to relieve telephone companies
of decades-old regulations that required them to grant competing
Internet service providers nondiscriminatory access to their
wirelines in order to reach consumers. The FCC contends that
these regulations “imposed significant costs” on telephone
companies, “thereby impeding innovation and investment in new
broadband technologies and services.” (FCC Br. at 43.)
Presumably, the FCC’s order now allows telephone companies to

                                 5
enter into individually negotiated arrangements with entities that
seek access to their broadband wireline facilities.

       Petitioners, who are independent Internet service providers,
competing telecommunications service providers, cable modem
providers, and various public interest organizations, argue that the
FCC’s order allows telephone companies to deny competitors
access to their wirelines, thereby resulting in decreased competition
and consumer choice in the market for broadband Internet service.1
For the reasons stated below, we conclude that the FCC’s order is
based on a reasonable interpretation of the Communications Act of
1934, 48 Stat. 1064 (codified as amended at 47 U.S.C. §§ 151-614
(2006)), and a proper exercise of agency discretion. Accordingly,
we will deny the petition for review.2

                       I. BACKGROUND

       We discuss in some detail the complex technical and
regulatory context for the FCC’s order, which is set forth at
Appropriate Framework for Broadband Access to the Internet over
Wireline Facilities, 20 F.C.C.R. 14853 (2005) (“Wireline
Broadband Order”).

                   A. Technical Background

       Before the advent of broadband technology, consumers

       1
          For example, Time Warner argues that “[a]bsent
compulsory regulation to make their transmission lines available to
competitive providers of Internet access, [the dominant telephone
companies] will be free to target their investments in network
upgrades to transmission inputs they make available only to their
own retail broadband Internet access services.” (Time Warner Br.
at 7.) “The resulting disparity in service between broadband
Internet access service offered by” telephone companies and their
competitors, will give telephone companies “the ability to raise
prices unilaterally on their higher-quality services without fear of
losing market share.” (Time Warner Br. at 8.)
       2
        We have jurisdiction under 47 U.S.C. § 402(a) and 28
U.S.C. § 2342(1) to review the FCC’s order.

                                 6
accessed the Internet using “dial-up” connections provided over the
interconnected system of telephone wires known as a local
exchange.3 See Nat’l Cable & Telecomm. Ass’n v. Brand X
Internet Svcs., 545 U.S. 967, 974 (2005) (“Brand X”). With a dial-
up connection, consumers use computer modems to make calls
which Internet service providers (“ISPs”) link to the Internet by
providing consumers with a physical connection and “the ability to
translate raw Internet data into information they may both view on
their personal computers and transmit to other computers
connected to the Internet.” Id. Dial-up connections, also referred
to as “narrowband” connections, transmit data at relatively slow
speeds. Id. at 974-75.


       3
         The Supreme Court has described the physical structure of
a local exchange as
       a network connecting terminals like telephones,
       faxes, and modems to other terminals within a
       geographical area like a city. From terminal network
       interface devices, feeder wires, collectively called
       the “local loop,” are run to local switches that
       aggregate traffic into common “trunks.” The local
       loop was traditionally, and is still largely, made of
       copper wire, though fiber-optic cable is also used,
       albeit to a far lesser extent than in long-haul markets.
       Just as the loop runs from terminals to local
       switches, the trunks run from the local switches to
       centralized, or tandem, switches, originally worked
       by hand but now by computer, which operate much
       like railway switches, directing traffic into other
       trunks. A signal is sent toward its destination
       terminal on these common ways so far as necessary,
       then routed back down another hierarchy of switches
       to the intended telephone or other equipment.
Verizon Commc’ns v. FCC, 535 U.S. 467, 489-90 (2002)
(footnotes omitted). In the order on review, the FCC noted that
wireline infrastructure is rapidly changing, but that “these
developments [have] not fundamentally change[d] the capabilities
of the wireline network.” Wireline Broadband Order, 20 F.C.C.R.
at 14873 ¶ 34.

                                  7
        By contrast, “broadband” connections, which are
increasingly replacing dial-up connections, are much faster and are
principally provided by: (1) cable modem service and (2) Digital
Subscriber Line (DSL) service. DSL service, the type of
transmission at issue in the Wireline Broadband Order, involves the
use of “[t]wo DSL modems [that] are attached to a telephone loop,
one at the subscriber’s premises and one at the telephone
company’s central office.” WorldCom, Inc. v. FCC, 246 F.3d 690,
692 (D.C. Cir. 2001). If the line carries telephone service and
high-speed data transmission, the telephone company—also known
as the local exchange carrier (“LEC”)—separates the streams and
sends ordinary voice calls to the telephone network and data traffic
to a “packet-switched data network” where it is routed to an ISP.4
Id. LECs use their transmission facilities to provide consumers
with Internet access service, in which case they are referred to as
“facilities-based ISPs.” See Brand X, 545 U.S. at 975; Wireline
Broadband Order, 20 F.C.C.R. at 14858 ¶ 5. They also lease their
wires on a wholesale basis to independent ISPs, referred to as
“non-facilities-based ISPs,” who use the wires to reach their
customers. See Brand X, 545 U.S. at 975; Wireline Broadband
Order, 20 F.C.C.R. at 14864-65 ¶ 16 n.43.

                   B. Regulatory Framework

       There are three key developments in the regulatory history
of telecommunications and data processing services that are
significant to this petition for review: (1) Congress’s passage of the
Communications Act in 1934; (2) the FCC’s issuance of its
Computer II ruling in 1980; and (3) the passage of the
Telecommunications Act in 1996. We discuss each in turn.

                 1. The Common Carrier Doctrine



       4
         The terms “telephone company,” “local exchange carrier,”
“telephone common carrier” and “communications common
carrier,” and other combinations of these terms, are often used
interchangeably in the relevant case law and FCC rulings. Each
term has its own historical and regulatory context and, where
possible, we use them with that in mind.

                                  8
        The regulatory issues raised in the Wireline Broadband
Order trace back to the enactment of the Communications Act in
1934, which established the FCC’s “broad authority to regulate
interstate telephone communications.”             Global Crossing
Telecomm., Inc. v. Metrophones Telecomm., Inc., 127 S. Ct. 1513,
1516 (2007). Title II of the statute heavily regulated the activities
of local telephone companies by imposing upon them certain
“common carrier” obligations.5 See id. at 1517. For example, Title
II required telephone companies to charge consumers “just and
reasonable” rates and to file and make publicly available their rate
schedules (known as “tariffs”); authorized the FCC to set rates if
the ones offered by a carrier were not just and reasonable;
prohibited carriers from constructing new wirelines without first
obtaining a certificate of public convenience and necessity from the
FCC; and established liability for carriers that violated the statute.

       5
         In incorporating common carrier requirements into Title II
of the Communications Act, Congress adopted many of the rules
set forth in the Interstate Commerce Act of 1887, 24 Stat. 379,
which previously served as the statutory basis for federal regulation
of the railroad and telephone industries. Global Crossing, 127 S.
Ct. at 1517. The Court of Appeals for the D.C. Circuit has
explained that the common carrier doctrine emerged out of
common law rules which historically
       impose[d] a greater standard of care upon carriers
       who held themselves out as offering to serve the
       public in general. The rationale was that by holding
       themselves out to the public at large, otherwise
       private carriers took on a quasi-public character.
       This character, coupled with the lack of control
       exercised by shippers or travellers over the safety of
       their carriage, was seen to justify imposing upon the
       carrier the status of an insurer.
Nat’l Ass’n of Regulatory Utility Comm’rs v. FCC, 525 F.2d 630,
640 (D.C. Cir. 1976). The D.C. Circuit further explained in a later
related decision that the “sine qua non of common carrier status”
is that the entity has taken on “a quasi public character, which
arises out of the undertaking to carry for all people indifferently.”
Nat’l Ass’n of Regulatory Utility Comm’rs v. FCC, 533 F.2d 601,
608 (D.C. Cir. 1976) (internal quotation marks omitted).

                                  9
Communications Act, ch. 652, §§ 201-03, 205-06, 214, 48 Stat.
1068, 1070-71, 1072-73, 1075-76 (1934) (prior to 1996
amendments). These common carrier provisions remain essentially
unchanged, see 47 U.S.C. §§ 201-03, 205-06, 214, although, as
discussed below, Congress has since amended Title II to include
additional common carrier obligations. See generally 47 U.S.C. §§
201-276 (setting forth the Communications Act’s Title II common
carrier requirements).

            2. The FCC’s Computer Inquiry Proceedings

       In 1966, the FCC initiated the Computer Inquiry
proceedings to address the regulatory issues presented by the
growing convergence of traditional telephone communications and
data processing services. The FCC issued three important rulings
in connection with the proceedings, known as “Computer I,”
“Computer II,” and “Computer III.”

        In Regulatory and Policy Problems Presented by the
Interdependence of Computer and Communication Services and
Facilities, 28 F.C.C.2d 267, ¶ 2 (1971) (“Computer I”), the FCC
addressed “the nature and extent of regulatory jurisdiction and
control” which it would “exercise over the furnishing of data
processing and communications services, or some combination
thereof,” by telephone and data processing companies. With
respect to telephone companies subject to Title II common carrier
requirements, the FCC was concerned that “without appropriate
regulatory safeguards, the provision of data processing services by
common carriers could adversely affect the statutory obligation of
such carriers to provide adequate communications services under
reasonable terms and conditions and impair effective competition
in the sale of data processing services.”6 Id. ¶ 8.


       6
           Specifically, the FCC identified the following issues:
       (a) That the sale of data processing services by
       carriers should not adversely affect the provision of
       efficient and economic common carrier services;
       (b) That the costs related to the furnishing of such
       data services should not be passed on, directly or
       indirectly, to the users of common carrier services;

                                  10
       To address the concern, the FCC, pursuant to its rulemaking
authority, required “maximum separation of activities which are
subject to regulation [i.e., traditional telephone communications]
from non-regulated activities involving data processing” to ensure
“adequate and efficient communications services at reasonable and
non-discriminatory rates and practices.” Id. ¶ 10 (internal
quotations marks omitted). Thus, telephone companies that
provided consumers with data processing services were permitted
to do so “only through affiliates utilizing separate books of
account, separate officers, separate operating personnel and
separate equipment and facilities devoted exclusively to the
rendition of data processing services.” Id. ¶ 12.

       At the same time that it imposed these structural safeguards
on telephone companies, the FCC determined that the
Communications Act did not require it to exercise full regulatory
authority over data processing services in general. See id. ¶¶ 4, 11,
30. As the FCC stated: “where message switching is offered as an
integral part of and as an incidental feature of a package offering
that is primarily data processing, there will be total regulatory
forbearance with respect to the entire service whether offered by a
common carrier or non-common carrier.” Id. ¶ 31.

        In Amendment of Section 64.702 of the Commission’s
Rules and Regulations, 77 F.C.C.2d 384, ¶ 2 (1980) (“Computer
II”), issued nine years after its Computer I ruling, the FCC
addressed technological developments that had further blurred the
boundary between traditional telecommunications and data
processing services. The FCC adopted a regulatory framework that
distinguished between the offering of “basic transmission service”
and “enhanced service”—subjecting only the former to mandatory


       (c) That revenues derived from common carrier
       services should not be used to subsidize any data
       processing services; and
       (d) That the furnishing of such data processing
       services by carriers should not inhibit free and fair
       competition between communication common
       carriers and data processing companies . . . .
Id. ¶ 9.

                                 11
Title II regulation. Id. ¶¶ 5, 7. The FCC defined “basic service” as
“limited to the common carrier offering of transmission capacity
for the movement of information.” Id. ¶¶ 5, 93. “In offering this
capacity, a communications path is provided for the analog or
digital transmission of voice, data, video, etc. information,” and
“the carrier’s basic transmission network is not used as an
information storage system.” Id. ¶¶ 93, 95. In other words, “a
carrier essentially offers a pure transmission capability over a
communications path that is virtually transparent in terms of its
interaction with customer supplied information.” Id. ¶ 96.

        In contrast, the FCC defined “enhanced service” as “any
offering over the telecommunications network which is more than
basic transmission service.” Id. ¶ 97. The FCC elaborated:

       In an enhanced service . . . computer processing
       applications are used to act on the content, code,
       protocol, and other aspects of the subscriber’s
       information . . . additional, different, or restructured
       information may be provided the subscriber through
       various processing applications performed on the
       transmitted information, or other actions can be
       taken by either the vendor or the subscriber based on
       the content of the information transmitted through
       editing, formating [sic], etc. Moreover, in an
       enhanced service the content of the information need
       not be changed and may simply involve subscriber
       interaction with stored information.

Id. (footnote omitted).

        In addition to distinguishing between basic transmission
services (subject to Title II) and enhanced services (not subject to
Title II), the FCC eliminated the maximum separation regime with
respect to all telephone common carriers except those under the
control of AT&T and GTE, the two dominant carriers that the FCC
determined had sufficient market power to engage in
anticompetitive activity on a national scale. See id. ¶ 228. Thus,
telephone companies were no longer required to use separate
affiliates to provide enhanced services to consumers. However, the
FCC, pursuant to its ancillary jurisdiction under Title I of the

                                 12
Communications Act, 47 U.S.C. §§ 151-61, required those carriers
engaged in the provision of enhanced services to grant competing
providers access to their wirelines on a nondiscriminatory basis
pursuant to tariffs governed by Title II. Id. ¶ 132. The FCC
explained the Computer II nondiscriminatory access requirements
as follows:

       Because enhanced services are dependent on the
       common carrier offering of basic services, a basic
       service is the building block upon which enhanced
       services are offered. Thus those carriers that own
       common carrier transmission facilities and provide
       enhanced services, but are not subject to the separate
       subsidiary requirement, must acquire transmission
       capacity pursuant to the same prices, terms, and
       conditions reflected in their tariffs when their own
       facilities are utilized. Other offerors of enhanced
       services would likewise be able to use such a
       carrier’s facilities under the same terms and
       conditions.

Id. ¶ 231. These nondiscriminatory access rules are at the center of
this petition for review.

       Finally, six years later, in Amendment of Sections 64.702 of
the Commission’s Rules and Regulations (Third Computer
Inquiry); and Policy and Rules Concerning Rates for Competitive
Common Carrier Services and Facilities Authorizations, 104
F.C.C.2d 958 (1986) (“Computer III”), the FCC replaced the
maximum separation regime applied to the dominant telephone
companies with a system of nonstructural safeguards.

              3. Telecommunications Act of 1996

       Congress substantially amended the Communications Act
of 1934 when it passed the Telecommunications Act of 1996, Pub.
L. No. 104-104, 110 Stat. 56 (codified as amended in scattered
sections of 47 U.S.C.). As one commentator has explained, “the
principal goal in the 1996 Act was to open the local telephone
market to effective competition.” James B. Speta, Handicapping
the Race for the Last Mile? A Critique of Open Access Rules for


                                13
Broadband Platforms, 17 Yale J. on Reg. 39, 63 (2000). Thus,
Title II was expanded to include additional requirements intended
to break up the dominance of a small number of LECs over the
telecommunications market. Id.

        As amended, Title II imposes on LECs the duty not to
prohibit or unreasonably restrict resale of their services; to provide
number portability so that consumers can switch LECs but still
retain their phone numbers; to accord dialing parity so that a LEC
customer can reach a customer of another LEC by dialing no more
digits than necessary; to permit competing LECs access to their
rights of way; and to establish reciprocal compensation with other
LECs for the transport and termination of all calls. See id. at 64
(citing 47 U.S.C. §§ 251(b)(1)-(5)).

        In addition, Title II imposes on “incumbent local exchange
carriers” (“ILECs”), defined as any LEC that existed as of the date
the Telecommunications Act was passed, the obligation to permit
nondiscriminatory interconnection with another carrier’s facilities
at any feasible point in the ILEC’s network; provide any other
carrier unbundled access to certain elements of the ILEC’s network
at cost-based rates; establish wholesale rates for the resale of any
telecommunications service provided by the ILEC; provide the
FCC with notice of any changes to the ILEC’s network; and permit
the collocation of other telecommunications carriers’ equipment on
the ILEC’s premises.7 See id. at 65 (citing 47 U.S.C. §§ 251(c)(2)-

       7
         The Supreme Court has explained that, “[i]t is easy to see
why [an ILEC] would have an almost insurmountable competitive
advantage . . . in routing calls within the exchange.” Verizon, 535
U.S. at 490. Specifically, “[a] newcomer could not compete with
the incumbent carrier to provide local service without coming close
to replicating the incumbent’s entire existing network, the most
costly and difficult part of which would be laying down the ‘last
mile’ of feeder wire, the local loop, to the thousands (or millions)
of terminal points in individual houses and businesses.” Id. In
addition, “[t]he incumbent company could also control its local
loop plant so as to connect only with terminals it manufactured or
selected, and could place conditions or fees (called ‘access
charges’) on long-distance carriers seeking to connect with its
network.” Id. at 490-91. Thus, “[i]n an unregulated world, another

                                 14
(6)).

        Crucial to this petition for review, the Telecommunications
Act also introduced two new important regulatory classifications
that parallel the basic and enhanced services distinction established
in Computer II: “telecommunications service” and “information
service.” 47 U.S.C. § 153(20) & (46). Only telecommunications
service is subject to mandatory regulation under Title II.

            C. Regulatory Treatment of Broadband
                   Internet Access Service

        1. Cable Modem Broadband Internet Access Service

        The FCC first applied the Communications Act’s new
regulatory classifications to broadband Internet access service in its
ruling in Inquiry Concerning High-Speed Access to the Internet
Over Cable and Other Facilities, 17 F.C.C.R. 4798 (2002) (“Cable
Modem Declaratory Ruling”). In the ruling, the FCC concluded
that broadband Internet access service provided by cable
companies is an “information service,” which does not include a
separate “telecommunications service” subject to mandatory Title
II common carrier regulation. Id. at 4802 ¶ 7. In addition, the FCC
declined to apply the Computer II nondiscriminatory access
requirements to cable modem broadband operators despite the fact
that, at the time, telephone companies engaged in the provision of
enhanced services were required to provide non-facilities-based
ISPs nondiscriminatory access to their transmission facilities. Id.
at 4825 ¶ 43. The Supreme Court upheld the Cable Modem
Declaratory Ruling in Brand X, 545 U.S. at 1002, noting that it
“appears to be a first-step in an effort to reshape the way the
Commission regulates information-service providers.”

  2. Procedural Background to the Wireline Broadband Order

     In February 2002, shortly before it released the Cable
Modem Declaratory Ruling, the FCC issued a notice of proposed


telecommunications carrier would be forced to comply with these
conditions, or it could never reach the customers of a local
exchange.” Id. at 491.

                                 15
rulemaking, setting forth and requesting public comment on a
number of tentative conclusions concerning the regulatory
treatment of wireline broadband Internet access service.
Appropriate Framework for Broadband Access to the Internet over
Wireline Facilities, 17 F.C.C.R. 3019 (2002) (“Wireline Broadband
NPRM”). In response, the FCC received numerous comments
from a wide range of interested parties.

        On September 23, 2005, three months after the Supreme
Court’s Brand X decision, the FCC released the order on review,
which substantially limited federal regulation of wireline
broadband Internet access service through two principal rulings.
First, the FCC ruled that wireline broadband Internet access
service, like cable modem service, is an information service that
does not include a separate “telecommunications service” subject
to mandatory common carrier regulation under Title II of the
Communications Act, regardless of whether such service is
provided by LECs or non-facilities-based ISPs. Wireline
Broadband Order, 20 F.C.C.R. at 14862-66 ¶¶ 12-17. Second, the
FCC eliminated the Computer II requirements on grounds that
market conditions no longer justify requiring LECs to grant
independent ISPs nondiscriminatory access to their wireline
transmission facilities. See, e.g., id. at 14879-87 ¶¶ 47-64. These
consolidated petitions for review followed.

        Petitioners, who are independent ISPs, competing
telecommunications service providers, cable modem providers, and
various public interest organizations, challenge the FCC’s statutory
classification and Computer II rulings.8 We address both in turn.

       8
         Separate briefs have been filed with the Court by the
following petitioners: (1) Time Warner Telecom, Inc., which
provides broadband cable modem Internet access service (“Time
Warner”); (2) Earthlink, Inc., a non-facilities-based ISP
(“Earthlink”); (3) COMPTEL, a trade association that represents
telecommunications carriers and independent ISPs (“COMPTEL”);
and (4) a group of non-facilities-based telecommunications and
Internet access services providers referred to collectively as
“ACN.” Intervening in support of petitioners are the National
Alliance for Media Arts and Culture; the Office of Communication
of the United Church of Christ, Inc.; the Center for Digital

                                16
                II. STANDARD OF REVIEW

       Our review is governed by Chevron U.S.A. Inc. v. Natural
Resources Defense Council, Inc., 467 U.S. 837 (1984), and § 706
of the Administrative Procedure Act (“APA”), 5 U.S.C. § 706
(2006). See Brand X, 545 U.S. at 974. Chevron requires a federal
court to defer to an agency’s reasonable interpretation of any
ambiguities in a statute which it administers. Id. at 980. Section
706 of the APA requires a court to “hold unlawful and set aside
agency action, findings, and conclusions” that are “arbitrary,
capricious, an abuse of discretion, or otherwise not in accordance
with law.” 5 U.S.C. § 706.

           III. STATUTORY CLASSIFICATION

       In the Wireline Broadband Order, the FCC rejected the
proposition that wireline broadband Internet access service
“includes both an information service and a telecommunications
service.” Wireline Broadband Order, 20 F.C.C.R. at 14862 ¶ 12
n.31. Rather, it found that wireline broadband Internet access
service is a functionally integrated “information service.” Id. We
conclude that this statutory classification is based on a reasonable
interpretation of the Communications Act.

        The classification of a particular service as a
“telecommunication service” or an “information service” under the
Communications Act turns on the following definitions in the
statute:

       The term “telecommunications” means the
       transmission, between or among points specified by
       the user, of information of the user’s own choosing,
       without change in the form or content of the
       information as sent and received.



Democracy; and Montana Sky Networks, Inc. In addition, AT&T
Inc.; BellSouth Corp.; Qwest Communications International Inc.;
and the Verizon telephone companies (collectively “AT&T”) have
intervened and filed a separate brief in support of the FCC.

                                17
47 U.S.C. § 153(43).

       The term “telecommunications service” means the
       offering of telecommunications for a fee directly to
       the public, or to such classes of users as to be
       effectively available directly to the public, regardless
       of the facilities used.

47 U.S.C. § 153(46) (emphasis added).

       The term “information service” means the offering of
       a capability for generating, acquiring, storing,
       transforming, processing, retrieving, utilizing, or
       making available information via
       telecommunications . . . .

47 U.S.C. § 153(20) (emphasis added).

       In Brand X, the Supreme Court, applying Chevron’s
familiar two-step analysis, concluded that the term
“telecommunications service” is ambiguous as applied to cable
modem Internet access service “[b]ecause the term ‘offer’ can
sometimes refer to a single, finished product and sometimes to the
individual components in a package being offered.”9 545 U.S. at
991-92 (internal quotation marks and citations omitted). The Court

       9
         Under Chevron, “[w]hen a court reviews an agency’s
construction of the statute which it administers, it is confronted
with two questions.” 467 U.S. at 842. First, the court asks
“whether Congress has directly spoken to the precise question at
issue.” Id. If Congress’s intent is clear, “the court, as well as the
agency, must give effect to the unambiguously expressed intent of
Congress.” Id. at 842-43. “[I]f the statute is silent or ambiguous
with respect to the specific issue” presented, the court must ask
whether the agency’s interpretation “is based on a permissible
construction of the statute.” Id. at 843. The Court explained in
Brand X, “if the implementing agency’s construction is reasonable,
Chevron requires a federal court to accept the agency’s
construction of the statute, even if the agency’s reading differs
from what the court believes is the best statutory interpretation.”
545 U.S. at 980.

                                 18
elaborated:

       Cable companies in the broadband Internet service
       business “offe[r]” consumers an information service
       in the form of Internet access and they do so “via
       telecommunications,” § 153(20), but it does not
       inexorably follow as a matter of ordinary language
       that they also “offer[r]” consumers the high-speed
       data transmission (telecommunications) that is an
       input used to provide this service, § 153(46).

Id. at 989 (alterations in original). The Court illustrated its
conclusion using the following analogy:

       One might well say that a car dealership “offers”
       cars, but does not “offer” the integrated major inputs
       that make purchasing the car valuable, such as the
       engine or the chassis. It would, in fact, be odd to
       describe a car dealership as “offering” consumers the
       car’s components in addition to the car itself. Even
       if it is linguistically permissible to say that the car
       dealership “offers” engines when it offers cars, that
       shows, at most, that the term “offer,” when applied
       to a commercial transaction, is ambiguous about
       whether it describes only the offered finished
       product, or the product’s discrete components as
       well. It does not show that no other usage is
       permitted.

Id. at 990.10   Given this ambiguity in the statute, the Court


       10
         In Part I of his dissent, Justice Scalia (joined by Justices
Souter and Ginsburg) strongly disagreed with the majority, stating
that cable modem providers necessarily “offer” consumers a
separate “telecommunications service” when they provide them
with Internet access service. Justice Scalia provided a competing
analogy:
       If, for example, I call up a pizzeria and ask whether
       they offer delivery, both common sense and common
       “usage” would prevent them from answering: “No,

                                 19
considered whether the FCC’s conclusion that cable modem
providers do not “offer” consumers a separate “telecommunications
service” was based on a permissible construction of the
Communications Act under Chevron.

        In its ruling, the FCC “conceded that, like all information-
service providers, cable companies use ‘telecommunications’ to
provide consumers with Internet service.” Id. at 988. That is,
“cable companies provide such service via the high-speed wire that
transmits signals to and from an end user’s computer.” Id. But
whether that service also includes a telecommunications “offering,”
in the FCC’s view, “‘turn[ed] on the nature of the functions the end
user is offered.’” Id. (quoting Cable Modem Declaratory Ruling,
17 F.C.C.R. at 4822 ¶ 38). In the FCC’s judgment, end users do
not perceive the service they receive as consisting of both a data
processing component and a transmission component.

       The Supreme Court explained the FCC’s conclusion


       we do not offer delivery—but if you order a pizza
       from us we’ll bake it for you and then bring it to
       your house. The logical response to this would be
       something on the order of, “so you do offer
       delivery.” But, our pizza-man may continue to deny
       the obvious and explain, paraphrasing the FCC and
       the Court: “No, even though we bring the pizza to
       your house, we are not actually ‘offering’ you
       delivery, because the delivery that we provide to our
       end users is ‘part and parcel of’ our pizzeria-pizza-
       at-home service and is ‘integral to its other
       capabilities.’” Any reasonable customer would
       conclude at that point that his interlocutor was either
       crazy or following some too-clever-by-half legal
       advice.
Id. at 1007 (Scalia, J., dissenting) (citations and footnotes omitted).
In the majority’s view, the dissent’s argument “only underscores
that the term ‘offer’ is ambiguous in the way that we have
described . . . leav[ing] federal telecommunications policy in this
technical and complex area to be set by the Commission, not by
warring analogies.” Id. at 991-92.

                                  20
concerning end user perception:

       Seen from the consumer’s point of view, the
       Commission concluded, cable modem service is not
       a telecommunications offering because the consumer
       uses the high-speed wire always in connection with
       the information-processing capabilities provided by
       Internet access, and because the transmission is a
       necessary component of Internet access: “As
       provided to the end user the telecommunications is
       part and parcel of cable modem service and is
       integral to its other capabilities.”

Id. (quoting Cable Modem Declaratory Ruling, 17 F.C.C.R. at 4823
¶ 39). “The wire is used, in other words, to access the World Wide
Web, newsgroups, and so forth, rather than ‘transparently’ to
transmit and receive ordinary-language messages without computer
processing or storage of the message.” Id. Because of the
“integrated” nature of the offering, the FCC determined, “cable
modem service is not a ‘stand-alone,’ transparent offering of
telecommunications.” Id. (quoting Cable Modem Declaratory
Ruling, 17 F.C.C.R. at 4823-25 ¶¶ 41-43).

       The Supreme Court concluded that the FCC’s determination
was reasonable, given “[t]hat [the] question turns not on the
language of the Act, but on the factual particulars of how Internet
technology works and how it is provided, questions Chevron leaves
to the Commission to resolve in the first instance.” Id. at 991.
Moreover, the Court observed, the FCC’s emphasis on how end
users perceive the nature of the service being offered was
consistent with Computer II, which defined “basic” and
“enhanced” services “functionally, based on how the consumer
interacts with the provided information.” Id. at 992-93.

       Applying the same analytical approach used in the Cable
Modem Declaratory Ruling, the FCC, in this proceeding,
concluded that “wireline broadband Internet access service
provided over a provider’s own facilities is appropriately classified
as an information service because its providers offer a single,
integrated service (i.e., Internet access) to end users.” Wireline
Broadband Order, 20 F.C.C.R. at 14863 ¶ 14. The parties agree

                                 21
that Internet service is an information service not subject to Title
II regulation. (See COMPTEL Br. at 6; AT&T Br. at 6.)
Petitioners contend, however, that the FCC erroneously concluded
that the wireline transmission component used to provide
broadband Internet access is not a “telecommunication service”
offering subject to mandatory Title II regulation.

       Petitioners advance three principal arguments which we
address in turn: that the FCC’s statutory classification of wireline
broadband Internet access service (1) is not supported by record
evidence; (2) is contrary to the FCC’s past rulings; and (3) is
inconsistent with the FCC’s classification of wireline broadband
service under the Communications Assistance for Law
Enforcement Act (“CALEA”), 47 U.S.C. §§ 1001-02.

                      A. Record Evidence

        In the Wireline Broadband Order, the FCC determined that
“like cable modem service (which is usually provided over the
provider’s own facilities), wireline broadband Internet access
service combines computer processing, information provision, and
data transport, enabling end users to run a variety of applications
(e.g., e-mail, web pages, and newsgroups).” 20 F.C.C.R. at 14863
¶ 14. Given the similarity between how end users perceive the
finished product (Internet access), whether provided by wireline or
cable modem providers, the FCC concluded that its decision to
classify wireline broadband Internet access service as an
information service logically flowed from the Supreme Court’s
Brand X decision. See, e.g., id. at 14864 ¶ 15. In our view, the
record adequately supports the FCC’s conclusion that from the
perspective of the end-user, wireline broadband service and cable
modem service are functionally similar and, therefore, that they
should be subject to the same regulatory classification under the
Communications Act.

      For example, public comments submitted in response to the
Wireline Broadband NPRM state that:

       [Cable modem, DSL, fixed wireless, and satellite
       service are] functionally similar. Each is used
       primarily for Internet access; each can be used with

                                22
      an ordinary personal computer, with a modest
      hardware addition; each provides an always-on
      connection, at comparable speeds; and unlike
      traditional dial-up connections, each enables
      consumers to use their ordinary telephone line for
      voice or fax while simultaneously accessing the
      Internet.

(J.A. at 2102) (Comments of Verizon, May 3, 2003) (footnotes
omitted).

      [P]roviders of [cable modem, DSL, fixed wireless,
      and satellite service] view them as substitutes. For
      example, cable operators have stated that they view
      DSL as their main competitor, whereas DSL
      providers have said the same thing about cable
      modem providers.

(J.A. at 2103) (Comments of Verizon, May 3, 2003) (footnotes
omitted).

      DSL & Cable Modem Access are Analogous
      • Functions for data access provided to the end user
      are the same.
      • Service set up processes are functionally identical
      ...
      • All data is packetized.
      • IP Addresses are assigned to the Premises in the
      same manner.
      • Data set-up uses similar protocol to connect to the
      Internet . . .
      • The end user’s computer can be used
      interchangeably. This means if the same ISP is
      connected to both the DSL and the Cable network,
      the user can plug their PC into either the DSL
      Modem or the Cable Modem and access their
      account.

(J.A. at 2789) (Ex Parte Letter from Qwest to FCC with Attached
Presentation, April 28, 2003).


                               23
       [C]onsumers view [cable modem, DSL, fixed
       wireless, and satellite service] as interchangeable.
       As one analyst has explained, “most customers don’t
       care about technologies,” but are “platform
       agnostic,” and simply want an experience that is
       better than narrowband dial-up. One poll found
       “little difference between perceptions among those
       planning to get either DSL or cable modem
       services.”

(J.A. at 2103) (Comments of Verizon, May 3, 2003) (footnotes
omitted).

        Petitioners attempt to distinguish wireline broadband service
from cable modem service on grounds that LECs offer their
wireline transmission component on a “stand-alone” basis to other
ISPs. That is, LECs lease their transmission facilities to
independent ISPs who themselves provide consumers with Internet
access service. Therefore, petitioners reason, LECs plainly “offer”
a separate telecommunications service. We are not persuaded that
this is a basis for distinguishing wireline broadband service from
cable modem service.

        The fact that LECs have provided independent ISPs with
stand-alone transmission capabilities is, as the FCC points out, a
function of the very regulatory requirements that the FCC’s order
seeks to eliminate—that is, wireline providers have been (until the
release of the Wireline Broadband Order) the only broadband
provider required by Computer II to offer their transmission
component on a stand-alone basis. Wireline Broadband Order, 20
F.C.C.R. at 14886 ¶ 63. Indeed, record evidence considered in the
Cable Modem Declaratory Ruling showed that cable modem
providers not only have the capability to offer their transmission
facilities on a stand-alone basis, but, in fact, have entered into
agreements with independent ISPs to do so. Cable Modem
Declaratory Ruling, 17 F.C.C.R. at 4828-31 ¶¶ 52-54. This fact did
not prevent the Supreme Court from upholding the FCC’s
determination that cable modem service is a fully integrated
information service. We see no reason why we should reach a
contrary decision here.


                                 24
                    B. Past Agency Decisions

       We are likewise unpersuaded by petitioners’ argument that
the FCC’s statutory classification ruling is improper because it
conflicts with past agency decisions. In particular, COMPTEL
focuses on the Advanced Services Order, 13 F.C.C.R. 24012 ¶ 36
(1998), in which the FCC concluded that it would treat broadband
Internet access service as consisting of both an information service
and a telecommunications service.

       The FCC candidly admitted in the Wireline Broadband
Order that past agency statements concerning the regulatory
treatment of wireline broadband Internet access service had not
been “entirely consistent,” but nevertheless found that there was
ample basis in its prior rulings to support its classification of
wireline broadband Internet access service as a functionally
integrated information service. 20 F.C.C.R. at 14862 ¶12 n.32.
For example, the FCC relied on its Report to Congress in Federal-
State Joint Board on Universal Service, 13 F.C.C.R. 11501, 11519
¶ 36 (1998) (“Universal Service Report”), in which it concluded
that “the categories of ‘information service’ and
‘telecommunications service’ are mutually exclusive.” See
Wireline Broadband Order, 20 F.C.C.R. at 14862 ¶ 12 n.32. The
FCC relied on the Universal Service Report “heavily” in the Cable
Modem Declaratory Ruling, and the Supreme Court in Brand X
clearly found this sufficient. See Brand X, 545 U.S. at 978.

        In addition, to the extent that the FCC’s current
classification of wireline broadband Internet access service
conflicts with past agency rulings, Brand X makes clear that an
“[a]n initial agency interpretation is not instantly carved in stone.
On the contrary, the agency . . . must consider varying
interpretations and the wisdom of its policy on a continuing basis.”
Id. at 981 (internal quotation marks omitted). As the Supreme
Court stated, “[t]hat is no doubt why in Chevron itself, this Court
deferred to an agency interpretation that was a recent reversal of
agency policy.” Id. at 981-82. Accordingly, we do not agree that
past conflicting FCC rulings render its statutory classification in
this order arbitrary and capricious.

   C. Classification of Broadband Service under CALEA

                                 25
        Petitioners next argue that the FCC’s classification of
wireline broadband Internet access service as a fully integrated
information service under the Communications Act is rendered
arbitrary and capricious by the Commission’s conflicting
interpretation in its CALEA proceeding. We agree with the FCC
that this argument is a “red herring.” (See FCC Br. at 35.)

        Congress enacted CALEA in 1994 to require
telecommunications carriers to ensure that their networks are
technologically capable of being accessed by law enforcement
officials. See Am. Council on Educ. v. FCC, 451 F.3d 226, 228
(D.C. Cir. 2006). CALEA’s substantive provisions apply to
“telecommunications carriers,” but not “information service”
providers. See id. at 229. In Communications Assistance for Law
Enforcement and Broadband Access and Services, 20 F.C.C.R.
14989, 14998-99 ¶ 18 (2005) (“CALEA Order”), released the same
day as the Wireline Broadband Order, the FCC concluded that
CALEA creates three categories of communications services: “pure
telecommunications service,” “pure information service,” and
“hybrid telecommunications-information service.”        It then
determined that broadband services are hybrid
telecommunications-information services subject to the statute.
See id.

       COMPTEL argues that the FCC’s classification of wireline
broadband service in the Wireline Broadband Order and the
CALEA Order “cannot be squared with one another.”
(COMPTEL Br. at 36.) We agree with the D.C. Circuit, however,
that the FCC has the discretion to interpret the two statutes
differently. See Am. Council on Educ., 451 F.3d at 232-33.
Specifically, CALEA (1) has a wholly distinct legislative history
and Congressional purpose; (2) uses a different term (i.e.,
“telecommunications carrier” not “telecommunications service”)
to establish the scope of the FCC’s jurisdiction under the statute;
and (3) has a different statutory structure which indicates that
Congress did not intend that the terms “telecommunications
carrier” and “information service” be mutually exclusive for
purposes of identifying the entities that are subject to the statute’s
provisions. Id. at 231-35. Accordingly, we reject COMPTEL’s
argument that the FCC’s CALEA Order renders its classification

                                 26
of wireline broadband Internet access service under the
Communications Act arbitrary and capricious.

       In sum, petitioners do not provide us with a basis for
vacating the FCC’s ruling that wireline broadband Internet access
service should not be subject to mandatory common carrier
regulation under Title II of the Communications Act.

      IV. NONDISCRIMINATORY ACCESS UNDER
                  COMPUTER II

        As discussed, in Computer II, the FCC, pursuant to its Title
I ancillary jurisdiction, required all LECs to provide competing
enhanced service providers nondiscriminatory access to the basic
transmission component underlying their enhanced services. See
Wireline Broadband Order, 20 F.C.C.R. at 14868 ¶ 24. Petitioners
argue that the FCC’s decision to eliminate the Computer II
requirements was arbitrary and capricious because the FCC: (1)
failed to engage in a proper market analysis and (2) failed to
properly apply the common carrier test set forth in National
Association of Regulatory Utility Commissioners v. FCC, 525 F.2d
630, 640 (D.C. Cir. 1976) (“NARUC I”). In addition, petitioners
assert that the FCC decision to relieve LECs of their Computer II
obligations violates the discontinuance requirements set forth in §
214 of the Communications Act, as well as the Due Process Clause
of the Constitution.

                      A. Market Analysis

       Petitioners argue that the FCC’s blanket deregulation of
wireline broadband Internet access service violates the agency’s
“well-established regulatory policy for assessing ILEC market
power,” which “differentiates between services demanded by
distinct customer classes.” (Time Warner Br. at 29.) Specifically,
petitioners contend, before eliminating the Computer II
requirements, the FCC was required to consider ILECs’ dominance
of the business market and certain geographic markets.11


       11
         The residential and business markets are also referred to
as the “mass market” and the “enterprise market,” respectively.

                                27
Accordingly, petitioners request that the Court remand this case to
the FCC for a full market analysis. We do not agree that remand
is necessary.

        To the extent that the FCC’s decision not to conduct a
traditional market analysis constitutes a departure from past agency
practice, it is well-settled that “an agency may change its course so
long as it can justify its change with a ‘reasoned analysis.’” Horn
v. Thoratec Corp., 376 F.3d 163, 179 (3d Cir. 2004) (quoting
Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463
U.S. 29, 42 (1983)). Here, the FCC argues that it “fully justified its
decision to refrain from standard market dominance analysis in
order to avoid making highly dubious and ‘premature’ conclusions
about a nascent and dynamic market that is ‘rapidly changing.’”
(FCC Br. at 54) (citing Wireline Broadband Order, 20 F.C.C.R. at
14898 ¶ 84).

       For example, the FCC explained in its order that only 20%
of consumers with access to advanced telecommunications
capability subscribe to services providing such capability;
approximately 50% of U.S. households subscribe to either
broadband or narrowband Internet access service; and alternative
broadband platforms are developing and emerging (i.e., satellite,
wireless, and powerline) in both the residential and business
markets. Wireline Broadband Order, 20 F.C.C.R. at 14880-83 ¶¶
50-51. By comparison, the market for telephone services—the
context in which traditional market analysis has been applied—has
had a market penetration rate of roughly 90% for more than twenty
years. Id. at 14883-84 ¶ 55. Thus, in the FCC’s view, “snapshot
data” of the broadband service market “may quickly and
predictably be rendered obsolete as the market continues to



Time Warner does not dispute that cable modem broadband
providers (like itself) are the clear market leader in the provision of
broadband service to residential customers. It argues, however,
that ILECs “remain the sole source of connectivity at roughly 98%
of all business premises nationwide.” (Time Warner Br. at 42; see
also Earthlink Br. at 41.) ACN advances a similar argument with
respect to the purported “monopoly” of ILECs in certain rural
markets. (ACN Br. at 21.)

                                  28
evolve.” Id. at 14881 ¶ 50.

        Instead, the FCC considered how the market for broadband
services is likely to develop. For example, the FCC predicted
based on record evidence that the market penetration of cable
modem and wireline broadband service will grow dramatically in
the future and that the two services will compete head-to-head;
both services will continue to invest in and expand the reach of
their services; emerging broadband platforms will exert
competitive pressure and gain market share; and demand among
consumers for broadband services will only increase. See id. at
14884-85 ¶¶ 56-61. We agree with the FCC that these reasons
justified its decision to refrain from a traditional market analysis
and to rely instead on larger trends and predictions concerning the
future of the broadband services market. See WorldCom, Inc. v.
FCC, 238 F.3d 449, 459 (D.C. Cir. 2001) (stating that the FCC is
not required to “be confident to a metaphysical certainty of its
predictions about the future of competition in a given market
before it may modify its regulatory scheme.”).

       Indeed, as the FCC points out, its predictive judgments
about matters within its expertise are entitled to substantial
deference. See FCC v. WNCN Listeners Guild, 450 U.S. 582, 594-
95 (1981). Moreover, we find significant that the FCC’s market
analysis in this proceeding is consistent with the approach taken in
the Cable Modem Declaratory Ruling, in which the agency made
no express findings that cable modem service providers are non-
dominant. See Brand X, 545 U.S. at 1001 (noting that the FCC’s
conclusions concerning general “market conditions” and
“substitute forms of Internet transmission” justified its regulatory
treatment of cable modem service). In sum, despite petitioners’
extensive discussion of conditions in specific customer and
geographic markets, we conclude that the FCC’s broad market
analysis in this proceeding was both reasonable and consistent with
the approach upheld by the Supreme Court in Brand X.

           B. The NARUC I Common Carrier Test

      Petitioners argue that having eliminated the Computer II
nondiscriminatory access requirements, the FCC was required to
determine whether wireline broadband transmission facilities

                                29
should nevertheless be regulated on a common carriage basis under
the test set forth in the D.C. Circuit’s decision in NARUC I. Under
this test, “a carrier has to be regulated as a common carrier if it will
make capacity available to the public indifferently or if the public
interest requires common carrier operation of the proposed
facility.” See Virgin Islands Tel. Corp. v. FCC, 198 F.3d 921, 924
(D.C. Cir. 1999) (“Vitelco”) (internal quotation marks omitted).
We disagree with petitioners that the FCC failed to properly
consider the public interest prong of the NARUC I test.

       It is well-settled that “the Commission’s judgment regarding
how the public interest is best served is entitled to substantial
judicial deference” because “the weighing of policies under the
public interest standard is a task that Congress has delegated to the
Commission.” WNCN Listeners Guild, 450 U.S. at 596 (internal
quotation marks omitted). Here, in addition to considering the
market conditions discussed above, the FCC explained at length its
judgment that continued regulation of wireline broadband providers
under Computer II would harm consumers by “imped[ing] the
development and deployment of innovative wireline broadband
Internet access technologies and services.” Wireline Broadband
Order, 20 F.C.C.R. at 14887-88 ¶ 65.

        For example, the FCC credited evidence that showed that
wireline broadband providers are unable or unwilling to integrate
more efficient equipment into their wireline networks because of
the costs of complying with the Computer II requirements. See id.
at 14887-88 ¶ 65-66. Likewise, the FCC noted that “[s]everal
parties argue that the Computer Inquiry requirements prevent them
from altering business priorities in response to changing market
demands.” Id. at 14890-91 ¶ 71. Accordingly, the FCC
determined that eliminating the Computer II rules “will make it
more likely that wireline operators will take more risks in investing
in and deploying new technologies than they [were] willing and
able to take under the [Computer Inquiry] regime.” Id. at 14891-92
¶ 72.

       With respect to whether independent ISPs would continue
to have reasonable access to ILECs’ transmission facilities in the
absence of regulatory compulsion, the FCC explained that the
record showed that wireline broadband Internet access service

                                  30
providers have business incentives to make their facilities available
to competing ISPs on a commercially reasonable basis. Id. at
14892-94 ¶¶ 74-75. In particular, the FCC noted that ILECs have
“an economic incentive to spread the costs of [their] network[s]
over as much traffic and as many customers as possible regardless
of whether such customers are wholesale or retail.”12 Id. at 14893
¶ 74. In this regard, the FCC implicitly rejected the argument
asserted by Time Warner in its brief, that as a result of the
elimination of the Computer II requirements, “ILECs will now be
free to upgrade the transmission inputs they use for their own retail
broadband Internet access services, while restricting their
competitors’ access to the increasingly outmoded transmission
services that remain subject to Title II regulation.” (Time Warner
Br. at 34.)13


       12
          At the same time, the FCC noted that it disagreed “with
commentors that equate the ability of ISPs to obtain wireline
transmission services on a Title II basis with the ability of
consumers to obtain facilities-based competitive broadband
Internet access services.” Id. at 14885-86 ¶ 62. In other words:
       A regulatory regime that promotes a competitive
       broadband Internet access services market where
       consumers have the choice of multiple providers is
       not necessarily the same as a regulatory regime that
       mandates that one particular type of broadband
       Internet access service transmission technology, and
       one alone, is available, on a nondiscriminatory basis,
       to any entity that desires to become an ISP.
Id.
       13
          We are also unpersuaded by Earthlink’s argument that the
FCC could not relieve ILECs of the Computer II requirements
unless it conducted a statutory forbearance analysis under § 10 of
the Communications Act, 47 U.S.C. § 160. As previously
discussed, the FCC established the Computer II regulations
pursuant to its ancillary jurisdiction under Title I, and not because
it determined that facilities-based wireline broadband Internet
access service providers were subject to mandatory Title II
common carrier regulation. Therefore, in eliminating the Computer
II rules, the FCC was not forbearing from any statutory

                                 31
          C. Section 214 of the Communications Act
                 and the Due Process Clause

       Finally, we reject petitioners’ argument that the Wireline
Broadband Order violates § 214 of the Communications Act and
the Due Process Clause of the Constitution by granting ILECs a
“blanket certification to discontinue providing existing customers
[with] common carrier broadband Internet access transmission
services.” Wireline Broadband Order, 20 F.C.C.R. at 14908 ¶ 101.


        Under § 214 of the Communications Act, before a common
carrier may discontinue service, it must first obtain from the FCC
a “certificate that neither the present nor future public convenience
and necessity will be adversely affected thereby.” 47 U.S.C. §
214(a). As discussed, the FCC fully considered the public interest
before eliminating the Computer II rules, and petitioners point to
no authority that prevents the FCC from granting a blanket
certification. See Lincoln Telephone & Telegraph Co. v. FCC, 659
F.2d 1092, 1101 (D.C. Cir. 1981) (noting that “[s]ection 214(a)
does not specify any particular procedure for making public interest
determinations”).

        Moreover, we note that the order imposed a one-year
transition period, requiring “facilities-based wireline transmission
providers [to] continue to honor existing transmission arrangements
with their current ISP or other customers,” in order to “allow ISPs
to continue operating under their current arrangements while they
negotiate non-common carrier agreements.” Wireline Broadband
Order, 20 F.C.C.R. at 14905, 14906 ¶¶ 98, 99. The order further
required LECs to provide both the customer and the FCC with
advance notice of any discontinuance of service, with the FCC
reserving the right to take any action that would be appropriate “to



requirement and § 10 does not come into play here. See, e.g.,
United States Telecom Ass’n v. FCC, 359 F.3d 554, 561, 579 (D.C.
Cir. 2004) (concluding that § 10 forbearance analysis did not apply
to FCC’s discretionary decision not to require an ILEC to unbundle
network elements under § 251 of the Communications Act).

                                 32
protect the public interest.” Wireline Broadband Order, 20
F.C.C.R. at 14908 ¶ 101. We fail to see how this aspect of the
FCC’s order deprives petitioners of notice or the opportunity to be
heard, whether in violation of § 214 of the Communications Act or
the Due Process Clause of the Constitution.14

                      V. CONCLUSION

      For the reasons stated, we conclude that the Wireline
Broadband Order was based on a permissible interpretation of the
Communications Act and a proper exercise of agency discretion.
Accordingly, we will deny the petition for review.
                         __________




       14
         Indeed, section 214 only requires the FCC to provide the
Secretary of Defense, the Secretary of State, and the State
Governor notice and an opportunity to be heard in the event of
service discontinuance. See 47 U.S.C. § 214(b).

                                33
