FCC either grabs or misses relinquished USF monies

As we reported here a few weeks ago, on December 30 the FCC adopted an Order that permits it to re-purpose the monies that are relinquished by carriers who are no longer ETCs in particular states. From the text of the Order, we thought the Commission wanted to make the Order “effective” as of December 30. Now we’re not so sure.

The back-story here starts in 2008. Under the Interim Cap Order adopted in May of that year, the FCC temporarily “froze” the amount of funds available for distribution to CETCs (including wireless carriers) at then-existing levels. The FCC emphasized at that time that the pool of funds would not change depending on the number of ETCs who were dipping into it – the FCC seems only to have been thinking about increases in the numbers of participants since it designated a lot of new ETCs at the same time as the Interim Cap Order, thus immediately reducing the pro rata funding available to participating ETCs.

In 2008, however, Sprint and Verizon both committed to relinquish their USF funds in certain states as a condition of getting mergers approved.   One would have thought that these funds would then have been available for re-distribution to the remaining ETCs since the amount of funding was to remain fixed. This would have relieved at least a portion of the hit that CETCs took when the combination of the cap and new ETC designations reduced their support well below authorized levels.

Instead, in response to a petition by Corr Wireless (full disclosure: Fletcher Heald represented Corr) complaining that the funds were not being correctly distributed, the FCC decided to just keep the money itself as a rainy day broadband fund. Presumably recognizing the legal infirmity of expropriating these funds in contravention of its own rules, the FCC quickly initiated a rulemaking proceeding which would authorize it to lawfully re-purpose such relinquished funds in the future.   The rulemaking was pushed through hastily, and on December 30, 2010, to no one’s surprise, the Commission adopted the Order.

The Order included an odd proviso. Typically, FCC rulemaking decisions (like the vast majority of federal administrative actions) become effective 30 days after the new rule is published in the Federal Register. New rules can in rare cases be made effective earlier, but the agency must justify this extraordinary timing by showing that there is good cause for it. Here the FCC simply noted that Sprint had filed notices of its intent to relinquish its ETC designations in several states effective December 31, 2010, and unless the FCC got this new rule into place before December 31, those monies would have gone back into the pool for re-distribution.

Huh? When the earlier Verizon and Sprint monies were relinquished, the FCC had no qualms about stuffing the money into its own pocket, so why couldn’t it have done the same thing with the newly available Sprint money? Perhaps the FCC was candidly acknowledging that its earlier action was legally shaky.

Unfortunately, the new action simply confuses things further.

First, the FCC’s “good cause” showing for accelerating the effective date – that it wanted to prevent CETCs from getting funds that would otherwise be due to them under the rules – would hardly seem to qualify as a basis for deviating from the requirements of the Administrative Procedures Act. Second, although the Order released on December 30 expressly states that it is effective upon release, when the order was published in the Federal Register on January 27, the effective date was given as . . . January 27.   So if the Commission was trying to get things into effect before December 31, 2010, it seems to have stepped on its own foot.

Finally, although Sprint had requested its relinquishment of ETC status to be effective as of December 31, 2010, the Wireline Competition Bureau waited until January 14, 2011 to approve that request, effective on that same day. If the Bureau could simply delay the effective date of relinquishment by delaying approval of Sprint’s request, why did the Commission need to act hastily on December 30? And as long as it was delaying Sprint’s request anyway, why didn’t it just wait to approve relinquishment until 30 days after the December 30 Order had appeared in the Federal Register? That would have removed at least a couple of the legal challenges that are otherwise certain to be filed to this unusual legerdemain involving several hundred million dollars.

So is the Sprint money available for re-distribution to CETCs or not?   You make the call.