DC Circuit Questions NaLA on Standing, FCC on Reimbursement
The U.S. Court of Appeals for the D.C. Circuit pressed attorneys from both the FCC and petitioners the National Lifeline Association in oral argument Tuesday over an FCC rule limiting carrier reimbursement for customers who are close to being eliminated from the service. Judge Harry Edwards pressured FCC trial attorney Maureen Flood into walking back an argument that NaLA’s challenge to the rule was “untimely,” while Judge Neomi Rao cut off NaLA attorney John Heitmann of Kelley Drye at the very beginning of his time to question the trade group’s standing, saying his own argument undermined his case. “I think you are admitting you don’t get the reimbursement,” she told him.
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NaLA’s petition challenged a 2018 FCC policy barring carriers from receiving reimbursement for Lifeline customers in a 15-day “cure” -- a time period triggered by a Lifeline customer not using the service for 30 days. After 30 days of non-use, FCC rules require the carriers to give customers 15 days' notice before terminating them from the program, and customers can “cure” that termination by using their phone service within those 15 days. Reimbursement to carriers is determined by the number of customers on their books on the first of each month -- called “snapshot day” -- and Tuesday’s oral argument concerned whether companies should receive reimbursement for those in their cure periods on that day. NaLA and the FCC declined to comment.
Heitmann argued Tuesday that carriers should be compensated because they must set aside “a bucket” of data and voice service for those customers in the cure period, as they do for other customers. He compared the carriers to a restaurant that must absorb the cost of a hamburger served to a customer whether or not that customer eats it. He said the FCC’s interpretation of the rules would expose Lifeline carriers to liability for years of collecting reimbursement for customers in their cure periods.
“Is the FCC saying the [eligible telecom carriers] have to provide the hamburger if no one eats it?” Rao asked Flood. Edwards supported Rao's question: “They are required to give service; they are saying it makes no sense for them to receive no reimbursement.” Judge Gregory Katsas also seemed sympathetic to the argument about providing service without reimbursement. “You are imposing on carriers this obligation to provide service after 30 days of use,” he told Flood.
The FCC “found that the burden would be light,” said Flood. The record didn't contain evidence that excluding the cure-period customers would cause big harm to carriers, she said. Rao also said she hadn’t seen evidence of costs to Lifeline providers from offering services to customers who aren’t using them. She questioned the standing of the NaLA at the argument’s outset, asking how the FCC’s action harmed the organization. After Heitmann said customers still in the midst of the 15-day period aren’t yet cured and also aren’t counted as users continuing the program, she said the rules don’t allow reimbursement to customers who aren't cured or continuous users.
Flood argued the FCC rules limit reimbursement to customers using the program, and the notice rules creating the cure period don’t mention reimbursement. Heitmann argued FCC rules creating the notice program and snapshot day made sense only if customers in the cure period could be counted. The agency established the notice rules in 2012 and the rule creating snapshot day in 2015, and it didn’t state customers in the cure period could be counted for reimbursement, Flood said. If the FCC “intended to redefine what is reimbursable,” it probably would have mentioned that, Flood said.
The Universal Service Administrative Co. under the previous FCC included guidance indicating customers in the cure period could be counted, but that was reversed after Chairman Ajit Pai took office (see 1803130028). “That the Lifeline administrator misinterpreted a policy doesn’t mean our rules are unreasonable,” Flood told Rao in response to a question about the shift. ETCs “should have followed the plain text of the rule,” Flood said.
After Flood framed NaLA’s case as an out-of-date challenge to the rules established in 2012, Edwards noted the FCC subsequently issued an order in 2018 enacting the reimbursement policy that NaLA challenged. “That’s a final order; that’s reviewable,” he said. “That’s a reviewable order,” conceded Flood.