Well, that clears that up

On July 24, the FCC’s Wireline Competition Bureau (WCB) issued a public notice “reminding” carriers of prior approval requirements when certain Eligible Telecommunications Carriers (ETCs) plan to undergo a transfer of control. ETC status is granted by state public utility commissions in most cases, but the FCC itself handles this function in the 20% or so of the states that have chosen not to regulate in this area. ETCs receive millions of dollars from the Universal Service Fund (USF) to support the services they provide, so the administering agency, whether it be the FCC or a comparable state agency, reviews the identity and commitments of proposed ETCs carefully before granting them that status and thus making them eligible to receive the USF support. It would not be surprising, therefore, for the pertinent regulatory agency to require ETCs to seek approval before control of the entity is transferred to a new entity.

The problem is that there is nothing in the FCC’s rulebook that requires such approval.

The July 24 release “reminds” ETCs that if you have an approved Lifeline compliance plan, you have to get FCC approval before your control can be transferred. The newly announced policy appears targeted at a relatively small subset of ETCs: those which are Lifeline-only and which also do not operate over their own facilities or a combination of their own facilities and resold facilities. We keep putting “remind” in quotes because it is doubtful that this requirement really existed prior to the July 24 release. Of course, all common carriers, including ETCs, must obtain prior FCC approval for a transfer of control, but the federal requirements do not end there. In addition to obtaining the FCC’s approval of a transfer of control, the transferee may also need to obtain separate FCC approval of the transferee’s ETC status even though the transferor is already an approved ETC.

The WCB’s source for its “reminder” is a single sentence in footnote 1000 in the Commission’s 2012 Lifeline Reform Order. That 299-page tome (which drastically revised the Lifeline program as we used to know it) nowhere addressed the issue at hand here. The footnote cited by the release does say that if a Lifeline-only, non-facilities-based ETC received its designation before Dec. 29, 2011, any company which later acquires that ETC must submit its own compliance plan in order to receive USF support. This doesn’t quite stand for the proposition that prior approval of the transfer of control is required; in fact, it seems to imply exactly the opposite – that an acquiring company may file a compliance plan and get approval after  the transfer of control of the acquired ETC takes place. So the WCB seems to have stretched a bit to locate a Commission-level basis for the unwritten policy it is now “reminding” us of. But there are other problems with the articulation of this unwritten policy.

First, why does the prior approval for transfers of control only apply to this one limited category of ETCs? If the logic behind the new policy is sound, why shouldn’t it apply to all ETC transfers of control?

Second, the policy apparently applies only to Lifeline-only ETCs which are not facilities-based and have therefore filed compliance plans which are personal to them. But the Bureau routinely required  facilities-based Lifeline-only ETCs to also file compliance plans. At one point in the release, the application of the rule is expressly limited to compliance plan filers who are not facilities-based, but elsewhere it is said to apply to any Lifeline-only ETC which has filed a compliance plan. Are these latter entities which are facilities-based covered by the new policy or not?

Third, what about Lifeline-only non-facilities-based ETCs who received their designation after December 29, 2011? These seem to have been exempted by the footnote on which this whole new policy is founded, but there doesn’t seem to be any reason for differing treatment from pre-December 29 filers.

And, finally, how come the Wireless Bureau is not heeding this policy? As recently as March of this year, AT&T’s acquisition of Leap Communications was challenged on the ground that AT&T had not requested approval for the transfer of control of Leap’s Lifeline-only ETC-holding subsidiary. In other words, AT&T had not requested the very approval that the WCB’s public notice indicates is required. The Wireless Bureau ignored this problem and granted the transfer of control anyway, thus very emphatically taking the stance that the policy enunciated by the WCB does not exist. Maybe that’s why the WCB felt moved to issue this “reminder”, as much to its fellow Bureaus as to the general public. When Bureaus squabble, all their regulatory children suffer. But in the meantime, which Bureau are we supposed to believe?

We applaud the WCB for its effort to bring some clarity to a small area of communications law which certainly needed clarity, but we are not sure the recent public notice quite accomplishes the purpose. Maybe resort to an old-fashioned rulemaking, as contemplated by the Administrative Procedure Act, would help.