`United States Court of Appeals
`FOR THE DISTRICT OF COLUMBIA CIRCUIT
`Argued May 4, 2021
`Decided July 9, 2021
`GREAT LAKES COMMUNICATION CORP., ET AL.,
`FEDERAL COMMUNICATIONS COMMISSION AND UNITED
`STATES OF AMERICA,
`AT&T CORP., ET AL.,
`Consolidated with 19-1244
`On Petitions for Review of an Order
`of the Federal Communications Commission
`Lauren J. Coppola argued the cause for petitioners. With
`her on the joint briefs were G. David Carter, Dwayne D. Sam,
`Anthony T. Caso, John C. Eastman, Henry Goldberg, and W.
`Kenneth Ferree. Robert Callahan entered an appearance.
`James M. Carr, Counsel, Federal Communications
`Commission, argued the cause for respondents. With him on
`the brief were Michael F. Murray, Deputy Assistant Attorney
`General, U.S. Department of Justice, Robert B. Nicholson and
`Andrew N. Delaney, Attorneys, Thomas M. Johnson, Jr.,
`General Counsel, Federal Communications Commission,
`Ashley S. Boizelle, Deputy General Counsel, and Richard K.
`Welch, Deputy Associate General Counsel. Jacob M. Lewis,
`Associate General Counsel, and Matthew J. Dunne, Counsel,
`Federal Communications Commission, entered an appearance.
`Timothy J. Simeone, Deepika H. Ravi, Michael J.
`Hunseder, James P. Young, Christopher M. Heimann, and
`David L. Lawson were on the joint brief of intervenors AT&T
`Corp., et al. in support of respondents. C. Frederick Beckner
`III, Jonathan E. Nuechterlein, and Christopher J. Wright
`Before: WILKINS and RAO, Circuit Judges, and
`SILBERMAN, Senior Circuit Judge.
`Opinion for the Court filed by Senior Circuit Judge
`SILBERMAN, Senior Circuit Judge: Petitioners challenge
`an FCC rule that discourages competitive carriers from
`stimulating access fees that long-distance carriers must pay
`when routing calls to a local carrier. We deny the petitions
`because the Commission has ample statutory authority and its
`rule is reasonable.
`As we previously described, so-called “competitive
`carriers” compete with legacy “incumbent carriers,” who are
`descendants of AT&T’s broken-up monopoly. See generally
`Comptel v. FCC, 978 F.3d 1325 (D.C. Cir. 2020). Typically,
`the latter own the local phone network, while the former lease
`or purchase at wholesale the use of the incumbent’s network to
`The smaller of the incumbent carriers—operating largely
`in rural areas—are known as rate-of-return carriers because
`their prices are set by a regulatory formula based on their costs
`plus a profit percentage. Competitive carriers benchmark their
`rates to an incumbent operating in the same area, whose rates
`have already been approved. See Connect America Fund,
`Notice of Proposed Rulemaking, 26 FCC Rcd. 4569 ¶ 36
`(2011). Since competitive carriers use the networks of others,
`they have greater geographic flexibility. And this flexibility
`allows them to act quickly to exploit profitable market
`opportunities and engage in regulatory arbitrage.
`In a previous case, we described the competitive carriers’
`targeting of a market niche servicing large business and
`government entities. Comptel, 978 F.3d at 1331. In this case,
`the FCC focuses on the competitive carriers’ pursuit of another
`market segment—toll conference centers. They host telephone
`conferences where multiple people call in to a meeting.
`Servicing toll conference centers has been a particularly
`lucrative business for competitive carriers. Under existing (and
`congressionally-sanctioned) regulations, long-distance carriers
`must pay an “access fee” to local carriers that deliver calls to
`their recipients. The access fee covers the responsibility of
`tandem switching and transportation to the local carrier’s end
`office. The more people who call into the conference center,
`the more profit the carrier generates, because fees exceed the
`marginal cost to the carrier. This provides a competitive carrier
`an incentive to operate in areas where the incumbents have high
`per-minute interstate access rates, and then to inflate the
`amount of traffic on its system.
` Calls to rural areas are more expensive (and profitable) for
`technological and regulatory reasons. So competitive carriers
`will often route calls through rural areas and encourage toll
`conference centers to operate there. Indeed, some carriers
`operating in rural areas have had explicit agreements with call
`centers to share revenue from access charges—thereby
`stimulating conference callers to offer artificially low rates
`(even totally free calls).
`As a result of these incentives, some sparsely populated
`rural areas receive a disproportionate and overwhelming
`number of calls. The Commission credited AT&T’s
`observation, for instance, that twice as many calling minutes
`were routed in a month to Redfield, South Dakota (population
`2,300) and one end office as were routed to Verizon’s facilities
`in New York City (population 8,500,000) and 90 end offices.
`Similarly, Sprint explained that Iowa, with 1% of the U.S.
`population, accounts for 48% of Sprint’s access fee payments.
`In addition to higher fees, the Commission notes that access
`stimulation may result in overloaded networks, call blocking,
`and dropped calls. Updating the Intercarrier Compensation
`Regime to Eliminate Access Arbitrage, 34 FCC Rcd. 9035 ¶¶
`15, 95, 111 (2019) (“Order”).
`The long-distance carriers complained to the FCC. Under
`existing rules they could not charge their customers separately
`for such calls; long-distance rates for customers are calculated
`as flat rates without regard to the length of call or geographic
`distance. See 47 U.S.C. § 254(g); Connect America Fund,
`Report and Order, 26 FCC Rcd. 17663 ¶ 663 (“2011 Order”).
`The interexchange carriers claimed, therefore, that the costs
`generated by the few who were making these calls to
`conference centers were borne by all customers.
`In a 2011 rule, the FCC agreed with the long-distance
`carriers’ complaints. 2011 Order ¶ 675. The FCC designated
`carriers who exploited this regulatory loophole as “access
`stimulators.” That designation included both competitive
`carriers and rate-of-return carriers who (1) had a revenue
`sharing agreement with a third-party based on access charges
`and (2) had three times as many long-distance calls coming in
`(“terminating”) as going out (“originating”).1 If designated an
`access stimulator, regulators would reduce the access fees that
`a carrier was permitted to charge. 2011 Order ¶¶ 684–86, 688–
`But the 2011 rule was not completely successful. Some
`competitive carriers continued to stimulate access fees
`circumvented the ban on direct revenue sharing with the
`conference call centers by using third parties. See Order ¶ 44;
`AT&T Corp. v. FCC, 970 F.3d 344, 351–53 (D.C. Cir. 2020).
`So, in 2018, the Commission revisited the problem. It
`issued a Notice of Proposed Rulemaking that, importantly,
`inquired “whether, and if so how, to revise the current
`definition of access stimulation to more accurately and
`1 Even if a carrier didn’t meet the 3:1 ratio, it could still be
`an access stimulator if it had doubled either its interstate originating
`or terminating switched access minutes in a month, year over year.
`2 Certain carriers challenged the 2011 rule in the Tenth
`Circuit, which sided with the Commission. See generally In re FCC
`11-161, 753 F.3d 1015 (10th Cir. 2014).
`effectively target harmful access stimulation practices.”3 The
`prospective sanction for a carrier determined to be an access
`stimulator was a complete ban on charging access fees.
`The FCC released a draft order in which it stated that it
`would add an alternative definition of access stimulation that
`would not include the troubling revenue sharing agreement as
`an essential element. Instead, competitive—as well as rate-of-
`return—carriers that terminated six times the number of long-
`distance calls they originate would be access stimulators, even
`if there was no revenue sharing agreement.
`After the close of the comment period, AT&T and NTCA
`(a trade association including rate-of-return carriers) met with
`the FCC and claimed that rate-of-return carriers did not engage
`in harmful access stimulation practices, but some would
`nevertheless hit the 6:1 ratio. They proposed a higher ratio—
`10:1—for rate-of-return carriers. That same day, the FCC
`released a notice of its final agenda, thereby, under the
`Commission’s rules, preventing further responses.
`The Commission adopted rules largely following those
`proposed in the draft order but incorporating the differentiated
`definitions proposed by AT&T and NTCA. In addition to the
`old definition of access stimulation, the Commission added a
`new factor. If a competitive carrier exceeded a 6:1 ratio of
`terminating to long-distance calls in any month, it would be
`labelled an access stimulator regardless of whether it had any
`revenue sharing agreements. Order ¶¶ 43–67. But rate-of-
`return carriers without a revenue sharing agreement could
`3 Notice of Proposed Rulemaking, 33 FCC Rcd. 5466, 5475
`¶ 26 (2018) (“NPRM”).
`avoid access-stimulator status if their ratio did not exceed 10:1
`for three consecutive months.4
`The Commission explained its separate test for rate-of-
`return carriers by emphasizing their structural and economic
`differences from competitive carriers. Id. ¶¶ 47–55. As we
`previously described, the Commission noted that many rate-of-
`return carriers are small and rural. They have fixed offices and
`infrastructure serving defined communities. By contrast, many
`competitive carriers serve only high-volume commercial
`customers and can flexibly target those customers. Id. ¶ 49.
`And the Commission found that rate-of-return carriers may be
`more susceptible to seasonal fluctuations given the economics
`of rural communities. These considerations, coupled with the
`lack of evidence that rate-of-return carriers were engaging in
`harmful access-stimulation practices, led the Commission to
`adopt the separate definitions of access stimulation.
`The Order prohibited an access stimulator from collecting
`access charges from long-distance carriers. Moreover, it also
`imposed responsibility on access stimulators for paying any
`access charges imposed by intermediate carriers (carriers
`between the long-distance carrier and the access-stimulating
`network). Order ¶¶ 17–42. The agency explained this rule
`would “properly align financial incentives by making the
`access-stimulating [carrier] responsible for paying for the part
`of the call path that it dictates.” Order ¶ 17.
`4 Rate-of-return carriers also had to be of sufficient size to
`trigger the 10:1 ratio definition—at least 500,000 minutes of
`interstate terminating traffic in an end office, averaged over three
`calendar months. Order ¶ 43.
`Petitioners (several competitive carriers and companies
`that offer conference calls) challenge the rule on three grounds.
`First, they contend that it exceeds the Commission’s statutory
`the main substantive
`argument—the rule is arbitrary and capricious (unreasonable)
`for several reasons. Third, there is a separate violation of the
`APA; the rule is not a logical outgrowth of the Notice of
`Proposed Rulemaking. We take these arguments in turn.
`The government relies primarily on 47 U.S.C. § 201(b) for
`its authority to promulgate the Order. That section provides:
`All charges, practices, classifications, and regulations
`in connection with [common carrier]
`reasonable, . . . The Commission may prescribe such
`rules and regulations as may be necessary in the
`public interest to carry out the provisions of this
`(emphasis added). On its face, Section 201(b) gives the
`Commission broad authority to define and prohibit practices or
`charges that it determines unreasonable. Fees intentionally
`accrued by artificially stimulating and inefficiently routing
`calls would appear to fall within that wide authority. To be sure,
`under the APA, the Commission’s decisions as to what is
`unreasonable must themselves be reasonable. But if the
`Commission can legitimately conclude that local carriers’
`behavior as an access stimulator is unfair to the long-distance
`carriers and their customers—which we discuss in part B—
`then the local carriers who engage in access stimulation can
`reasonably be described as engaging in unreasonable practices
`under Section 201(b).
`Petitioners respond by claiming that the statutory text in
`Section 201(b) is not as broad as it seems because other
`provisions cabin the Commission’s authority. It is claimed that
`Section 251(b)(5), which obliges carriers
`reciprocal arrangements to transport and terminate calls, and
`Section 252(d)(2), which links reciprocity with just and
`reasonable agreements, are inconsistent with the remedy the
`Order applies to an access stimulator.
`47 U.S.C. § 251(b): Each local exchange carrier has
`the following duties: . . . (5) The duty to establish
`reciprocal compensation arrangements
`transport and termination of telecommunications.
`47 U.S.C. § 252(d)(2): (A) For the purposes of
`compliance by an
`carrier with section 251(b)(5) of this title, a State
`commission shall not consider
`conditions for reciprocal compensation to be just and
`reasonable unless—(i) such terms and conditions
`provide for the mutual and reciprocal recovery by
`each carrier of costs associated with the transport and
`termination on each carrier’s network facilities . . . .
`(B) This paragraph shall not be construed—(i) to
`preclude arrangements that afford the mutual recovery
`the offsetting of
`Petitioners contend that the reciprocity and mutuality
`requirements of 251(b)(5) and 252(d)(2) should inform the
`reading of 201(b)’s “just and reasonable” term. But, as the
`Commission points out, neither 251(b)(5) or 252(d)(2) applies
`directly to the FCC. They are directed to carriers and State
`Commissions respectively, and the Commission’s role is
`limited to supplying background default rules for States to
`apply. See Order ¶ 99 (citing 2011 Order ¶¶ 760–81); see also
`47 U.S.C. § 201(b) (granting rulemaking authority).
`There is no dispute between the parties that the linguistic
`meaning of “just and reasonable,” standing alone, would give
`the Commission broad authority. See Nat’l Ass’n of Regul. Util.
`Comm’rs v. ICC, 41 F.3d 721, 726–27 (D.C. Cir. 1994). But,
`arguably, the Chevron framework is still in play to determine
`whether Sections 251 and 252 affect the meaning of “just and
`reasonable” in this context. The government invoked Chevron,
`and we think its interpretation is eminently permissible. See
`467 U.S. 837 (1984).
`Even assuming the sections did limit the Commission’s
`authority under 201(b), Petitioners’ argument has no merit.
`They argue the sanction imposed on access stimulators is itself
`non-reciprocal and non-mutual because they can no longer
`recover access charges
`circumstance which doesn’t apply to calls the access stimulator
`originates. This seems to us to be a rather labored and
`unpersuasive argument. Under Petitioners’ logic, if a local
`carrier’s ratio of incoming calls to outgoing were 100:1, the
`Commission would be powerless to prevent the access
`stimulator from recovering access fees despite being grossly
`disproportionate to its costs. And after all, the whole purpose
`of the FCC’s rule is to achieve a measure of reciprocity
`between the originating and terminating calls, and thereby
`reciprocity with the interexchange carriers.5
`In sum, we think Petitioners’ statutory arguments are
`Petitioners attack the premise of the FCC’s rule. It is
`allegedly unreasonable for the FCC to conclude that consumers
`were disadvantaged by the stimulation of access charges.6
`Seventy-five million people use toll conferencing annually.
`And the revenue long-distance carriers receive from these
`subscribers—some $20.7 billion—dwarfs the $60–80 million
`in additional charges caused by access stimulators.
`The flaw in the argument is that, as the Commission
`explained, it is impossible for the long-distance carriers to
`charge those users the marginal cost for these services. Section
`254(g) of the Communications Act prevents them from
`charging customers directly for these costs. Since the costs are
`thus spread to all consumers, access stimulation raises the cost
`of calls for everyone. See Order ¶ 20 n.55 (citing 2011 Order
`5 This whole question of access stimulation will probably
`become moot as the Commission fully transitions to what is called a
`bill-and-keep regime, whereby access fees will be largely or entirely
`eliminated and each carrier will bill its customers for its cost of
`originating and terminating calls. See Order ¶ 11; 47 U.S.C. § 251(g)
`(providing the Commission authority to establish transitory rules).
`6 See 5 U.S.C. § 706(2)(A); FCC v. Prometheus Radio
`Project, 141 S. Ct. 1150, 1158 (2021) (requiring agency action be
`“reasonable and reasonably explained”).
`Still, Petitioners challenge the notion that even though the
`costs for long-distance carriers had been reduced by the 2011
`rule—and reduced further by the 2019 rule—these cost savings
`would flow to consumers. They have, according to Petitioners,
`fattened the purses of the long-distance carriers’ stockholders,
`not callers. To support this theory, Petitioners sought discovery
`into whether the 2011 rule had actually benefitted consumers.
`They contend that the Commission’s refusal to pursue evidence
`to establish their premise was erroneous and, substantively, the
`premise itself was unreasonable.
`We disagree. The Commission was well within its broad
`discretion to “decide when enough data is enough.” United
`States v. FCC, 652 F.2d 72, 90–91 (D.C. Cir. 1980) (en banc).
`And it could reasonably rely on common sense and predictive
`judgments within its expertise “even if not explicitly backed by
`information in the record.” Phoenix Herpetological Soc’y, Inc.
`v. U.S. Fish & Wildlife Serv., 998 F.3d 999, 1006 (D.C. Cir.
`2021); see also FCC v. Fox Television Stations, Inc., 556 U.S.
`502, 521 (2009).
`In any event, the requested evidentiary exploration would
`have been a snare and a delusion. It is well established the
`interexchange market is quite competitive, as the Commission
`explains. Order ¶ 32. In a competitive market, a reduction in
`producer costs can reasonably be expected to translate into
`lower consumer prices. Moreover, as the Commission further
`explained, even if some portion of the cost savings improved
`the returns of shareholders, that would benefit the public in the
`long run by encouraging further investment in long-distance
`Petitioners further contend that even large and expensive
`charges should be tolerated provided that the long-distance
`carriers are able to make a profit. This argument is based on a
`rather disappointing understanding of economics. The relevant
`point is that artificial network stimulation harms consumers by
`distorting the market.
`Next we deal with Petitioners’ claim that it was unfair, and
`thus unreasonable, to treat the rate-of-return carriers more
`leniently than the competitive carriers. It will be recalled that
`the rate-of-return carriers are not deemed access stimulators
`unless they have incoming calls which exceed a ratio of 10:1
`vis-à-vis outgoing calls, but competitive carriers are subject to
`a 6:1 ratio.7
`The Commission “bears the burden ‘to provide some
`reasonable justification for any adverse treatment relative to
`similarly situated competitors.’” Baltimore Gas & Elec. Co. v.
`FERC, 954 F.3d 279, 283–84 (D.C. Cir. 2020) (quoting ANR
`Storage Co. v. FERC, 904 F.3d 1020, 1025 (D.C. Cir. 2018)).
`We think the Commission satisfied this burden and reasonably
`distinguished the two kinds of carriers. The rate-of-return
`carriers lack the same ability to pursue conference call centers
`as customers and game the access charge regime. They have a
`relatively defined geographic footprint that prevents the
`aggressive selling practices and rate arbitrage that competitive
`carriers can employ.
`7 Petitioners also claim the 6:1 ratio is arbitrary. In a sense
`that is true, just as would be true of a 60 miles-per-hour speed limit.
`But it is within the zone of reasonableness given the Commission’s
`goal to set a ratio that would encompass carriers engaged in access
`stimulating practices without relying on a revenue sharing
`agreement. See Vonage Holdings Corp. v. FCC, 489 F.3d 1232,
`1242–43 (D.C. Cir. 2007).
`To be sure, some competitive carriers have gravitated to
`state-of-the-art network facilities, affixing them more firmly to
`a geographic area and allowing them to pursue both business
`and residential customers. But as a class, it is still true that most
`competitive carriers are much more flexible than rate-of-return
`carriers. Therefore, the FCC’s differential treatment of the two
`types of carriers was reasonable.
`Indeed, the Commission saw no evidence that rate-of-
`return carriers had sought to stimulate their access charges or
`engage in rate arbitrage. Yet the increasing use of the internet
`and cell phones to initiate long-distance calls could cause rate-
`of-return carriers’ ratio of incoming-to-outgoing calls to rise
`above 6:1. So the 10:1 limitation imposed on them by the
`Commission’s Order was a reasonable prophylactic limitation.
`Petitioners argue that the Commission’s subsequent
`enforcement of the rule and grant of waivers demonstrates the
`Order’s arbitrariness, and,
`Commission’s targeting of certain competitive carriers. The
`FCC responds that such arguments are improperly before this
`Court. We side with the Commission.
`Ordinarily we review only the order or rule before us, not
`subsequent events. Comptel, 978 F.3d at 1334. However,
`Petitioners call our attention to an exception, Amoco Oil Co. v.
`EPA, 501 F.2d 722 (D.C. Cir. 1974). The peculiar
`circumstances of that case led us to consider post-rulemaking
`events for the limited purpose of assessing “the truth or falsity
`of agency predictions.” Id. at 729 n.10. We considered post-
`rulemaking congressional testimony that bore directly on the
`plausibility of agency predictions that were essential to the
`rule—and predictions the agency reaffirmed subsequent to the
`rule. Id. at 729 n.10, 731.
`As we later emphasized, “[t]he exception made in Amoco
`Oil was quite narrow.” Defs. of Wildlife v. Gutierrez, 532 F.3d
`913, 920 (D.C. Cir. 2008). It does not apply here, and we
`certainly do not wish to extend it. If Petitioners want to
`challenge the Commission’s enforcement practices it will have
`to do so in a separate proceeding.8
`There remains Petitioners’ argument that the final rules’
`differential treatment of rate-of-return carriers and competitive
`carriers—even if reasonable—was not foreshadowed by the
`NPRM; it was not a “logical outgrowth” of the Notice. See U.S.
`Telecom Ass’n v. FCC, 825 F.3d 674, 700 (D.C. Cir. 2016) (A
`notice “satisfies the logical outgrowth test if it expressly ask[s]
`for comments on a particular issue or otherwise ma[kes] clear
`that the agency [is] contemplating a particular change.”
`(internal quotation omitted)); 5 U.S.C. § 553(b)(3) (“The notice
`shall include . . . (3) either the terms or substance of the
`proposed rule or a description of the subjects and issues
`This is a troubling argument, perhaps because the
`Commission accepted the last-minute proposal from AT&T
`and NTCA—too late for adverse comment. Even though we
`have concluded that the FCC’s adoption of the proposal was
`8 Petitioners also raise a rather weak argument that the Order
`creates a Network Edge inconsistently with past policy. See Fox
`Television Stations, 556 U.S. at 515. A Network Edge is the
`boundary in a bill-and-keep system where the financial responsibility
`shifts between carriers. Petitioners’ argument is not worth discussing
`because, as reasonably construed by the Commission, the Order does
`not set a Network Edge, as it does not yet institute a bill-and-keep
`regime. See Order ¶ 101.
`reasonable, can it fairly be said that the differential treatment
`was a logical outgrowth of the notice?
`The FCC’s position is clearly yes because the NPRM
`explicitly asked whether the Commission should “modify the
`the definition of access
`stimulation (recall it is 3:1 under the 2011 rule). NPRM ¶ 26.
`That statement warned commenters that the prior 3:1 ratio
`could be modified. Granted, it did not explicitly suggest
`differential treatment. But since the Commission concluded
`that rate-of-return carriers were not at all access stimulators—
`a conclusion that Petitioners do not challenge—it would have
`been foreseeable that rate-of-return carriers would have been
`excluded altogether from any modification of the 2011 rule.
`Because even such an extreme differential treatment was
`foreseeable, the Order’s more limited differential ratios were a
`logical outgrowth of the notice.9
`In sum, Petitioners have not shown that the Commission
`to provide adequate notice or otherwise acted
`unreasonably in its promulgation of the Order. Thus, we deny
`the petitions for review.10
`9 Petitioners also claim that the remedy to be imposed on
`access stimulators in the final rule differs from the remedy suggested
`in the NPRM. We think that is obviously of no significance. See
`NPRM ¶¶ 8–9; 13–23; Order ¶¶ 40–41.
`10 Petitioners have made a number of other and subsidiary
`arguments which we have considered and reject without written