[00:00:04] Speaker ?:
regulators.

[00:00:07] Speaker ?:
Yeah.

[00:01:02] Speaker 03:
May it please the court.

[00:01:11] Speaker 03:
My name is W. Scott McCullough.

[00:01:14] Speaker 03:
I'm counsel for the petitioners, the regulators at all.

[00:01:19] Speaker 03:
The regulators are six individuals acting in the role of consumers in an effort to obtain reasonable rates

[00:01:29] Speaker 03:
on the interstate side, but even more specifically on the intrastate side.

[00:01:34] Speaker 03:
The case before you involves an order from the Federal Communications Commission extending what was known as a separations freeze, which basically froze certain factors that are used to allocate costs between the intrastate and interstate jurisdictions.

[00:01:55] Speaker 03:
Many of these factors were initially frozen in 2001,

[00:01:59] Speaker 03:
and they were supposed to only be in place for five years.

[00:02:03] Speaker 03:
There have been seven extensions.

[00:02:06] Speaker 03:
The freeze has currently been in place for some 16, 17 years.

[00:02:11] Speaker 03:
The order before you extended that freeze once again for six years over our objection.

[00:02:17] Speaker 02:
Council, the primary source of the petitioner's concern appears to have been the idea that

[00:02:29] Speaker 02:
the freeze compelled state regulators in performing their functions to follow the jurisdictional separations as frozen.

[00:02:45] Speaker 02:
But at least so far as the price cap carriers, who appear to be the firms selling to the individual petitioners,

[00:02:57] Speaker 02:
That seems clearly not to be the case.

[00:03:00] Speaker 02:
And I call your attention to section 32 of the forbearance order applying to AT&T in which the commission says we have some objections about this, about whether this will mean that the state regulators won't have

[00:03:26] Speaker 02:
these data to rely on because no one will be compelling the firms to produce them.

[00:03:32] Speaker 02:
And the commission says, yep, that's right.

[00:03:39] Speaker 02:
States will have to use their own devices to get data.

[00:03:44] Speaker 03:
What the commission said in those paragraphs was that the states could invoke state law to require price cap carriers subject to their jurisdiction for intrastate purposes.

[00:03:54] Speaker 03:
to obtain the information they needed to apply the proper factors.

[00:04:02] Speaker 02:
The proper factors?

[00:04:05] Speaker 03:
Yes.

[00:04:06] Speaker 03:
What those paragraphs say is that the state commissions can get the information they need to determine intrastate costs.

[00:04:14] Speaker 03:
But what it does not say is the states can make up their own factors or assignments.

[00:04:23] Speaker 03:
It does not say they can set factors.

[00:04:26] Speaker 02:
They do not have authority under sections 2 and 10 to maintain federal regulatory requirements that meet the three-pronged forbearance test in order to maintain regulatory burdens that may produce information helpful to state commissions.

[00:04:46] Speaker 02:
But if the price cap carriers are not bound by

[00:04:53] Speaker 02:
these information-generating forces.

[00:04:57] Speaker 02:
What is the basis of your claim that the Commission assumed that the price cap carriers for purposes of intrastate regulation were governed by those factors at all?

[00:05:17] Speaker 03:
If you take a look at paragraph 18 of the freeze order,

[00:05:21] Speaker 03:
And now I'm speaking of the freeze order, not the probation.

[00:05:24] Speaker 03:
It acknowledges that separations is still relevant to the commission and to the state for certain purposes.

[00:05:31] Speaker 03:
And they speak to how the states use separations information for various things, including intrastate USF assessments and taxes.

[00:05:42] Speaker 03:
And you also must keep in mind how we started this separations notion.

[00:05:47] Speaker 02:
Well, let's slow down a bit.

[00:05:50] Speaker 02:
The first clause of paragraph 18, the Commission uses these only for carriers subject to rate of return regulation.

[00:06:03] Speaker 03:
The FCC does, but it goes on to note that the states use it for other purposes, including the intrastate USF program.

[00:06:12] Speaker 03:
And I would point out, going back to the forbearance order,

[00:06:16] Speaker 03:
that the commission did not completely support.

[00:06:18] Speaker 02:
This is intrastate universal service support.

[00:06:22] Speaker 02:
Yes.

[00:06:23] Speaker 02:
Are you saying that the federal law compels the states to use these data for their calculation of their universal service support?

[00:06:40] Speaker 02:
How could that be legally?

[00:06:42] Speaker 03:
Our contention is that ever since the 1800s,

[00:06:46] Speaker 03:
in the Smith decision from the Supreme Court.

[00:06:49] Speaker 03:
For so long as there is dual regulation, there must be a reasonable appropriation between the state jurisdictions and the interstate.

[00:06:58] Speaker 02:
Indeed.

[00:06:59] Speaker 02:
Indeed.

[00:06:59] Speaker 02:
And the question here is, who performs it?

[00:07:01] Speaker 02:
If the state thinks if the, with respect to the price cap carriers, the feds have withdrawn from the field,

[00:07:11] Speaker 02:
Then it's up to the state, subject, as you argue, at some point in your papers, subject to a possible claim of violation of due process.

[00:07:21] Speaker 02:
Indeed.

[00:07:22] Speaker 02:
But that's different from saying that the customers of price cap carriers are affected by this.

[00:07:33] Speaker 03:
In the state price cap regimes, there is what is known as an exogenous factor.

[00:07:39] Speaker 03:
While it is true that price caps, both state and federal, do delink costs and prices to some extent, it does not do so completely.

[00:07:48] Speaker 03:
Every price cap regime at the state level has what's known as an exogenous adjustment.

[00:07:54] Speaker 03:
And one of the major components is changes in separations factors.

[00:07:58] Speaker 03:
And so if separations factors change, then on the state level, the commission can adjust intrastate price cap prices.

[00:08:10] Speaker 03:
And so the question here is who sets the factor?

[00:08:12] Speaker 02:
You've got to be very careful about intra-intra.

[00:08:15] Speaker 02:
Yes, sir.

[00:08:16] Speaker 02:
So I'm sorry.

[00:08:17] Speaker 02:
So repeat that sentence with leading me carefully through intra and intra.

[00:08:24] Speaker 03:
I'm speaking of the intrastate price cap regimes.

[00:08:27] Speaker 02:
OK.

[00:08:28] Speaker 03:
Every single one of them has what is known as an exogenous adjustment.

[00:08:33] Speaker 03:
OK.

[00:08:34] Speaker 03:
That's a state law choice.

[00:08:36] Speaker 03:
Yes, it is.

[00:08:37] Speaker 03:
And pursuant to that exogenous adjustment, when there is a change to separations factors, it is flown through intrastate price cap rates.

[00:08:48] Speaker 02:
Again, a state choice.

[00:08:50] Speaker 03:
Yes.

[00:08:51] Speaker 03:
And so the question here is, could a state today decide that rather than accepting assignment of 75% of common loop calls or 60% of corporations operations expense,

[00:09:05] Speaker 03:
in Verizon New York alone, that's $1.1 billion a year, if they wish to reduce that factor.

[00:09:13] Speaker 03:
And what the commission has never said expressly is that the states are free now from the compulsion in 221, the statutory preemption.

[00:09:26] Speaker 02:
Which follows from only when there's been a voluntary exercise of the power to impose the separation agreement.

[00:09:33] Speaker 03:
I agree.

[00:09:33] Speaker 03:
And one of the things we have to sort out here is whether the way that this forbearance works, if part 36 is now an informal method, like this court described in Crockett, or if they have completely withdrawn.

[00:09:46] Speaker 03:
And what I'm trying to suggest is the commission has not said it has completely withdrawn.

[00:09:51] Speaker 03:
It has not said that the states could change the factors.

[00:09:55] Speaker 03:
Now, if it says that.

[00:09:56] Speaker 02:
What does it need to say more than it said in paragraph 32 of the Forbearance Order?

[00:10:02] Speaker 03:
If you read this, they don't say you can change the factors.

[00:10:07] Speaker 03:
They don't say that.

[00:10:09] Speaker 02:
They don't say that, but they also say, we're not going to oblige the price cap carriers to make these calculations at all.

[00:10:21] Speaker 03:
But the states can.

[00:10:22] Speaker 01:
Isn't the whole point of separation that the regulatory scheme that applies to interstate calls is different from the regulation that applies to interest?

[00:10:39] Speaker 01:
It can be.

[00:10:40] Speaker 01:
That's why you separate in the first place.

[00:10:42] Speaker 03:
It is.

[00:10:42] Speaker 03:
And interestingly, the situation we're kind of arguing about here is

[00:10:50] Speaker 03:
similar to what you had to face in your dissent in Mozilla.

[00:10:54] Speaker 03:
In that case, the FCC said... I'm always glad to know that it had readers.

[00:11:02] Speaker 03:
In that situation, the FCC was saying, we have foreborn, and that precludes the states from erecting similar rules.

[00:11:10] Speaker 02:
Yeah, that was a very specific decision.

[00:11:13] Speaker 02:
reporting unsuccessfully with my colleagues, reporting to require states to follow the federal rule.

[00:11:22] Speaker 03:
Here the sole question is, is there a clear and unambiguous withdrawal of the FCC so that 221 no longer preempts the states?

[00:11:35] Speaker 03:
And we are back in the situation for price cap carriers before 1934 with Section 221.

[00:11:42] Speaker 03:
where the reasonable appropriation required by Smith is once again performed at the state level using methods and factors and formulas developed by the states.

[00:11:56] Speaker 02:
I mean, I agree they don't spell that out.

[00:12:00] Speaker 02:
And here's our problem.

[00:12:02] Speaker 02:
It's not clear to all of me that that was business that required to be spelled out in the forbearance order itself.

[00:12:11] Speaker 03:
Well, but it did in the freeze order, because we were telling the commission that the states were still bound and could not change factors.

[00:12:20] Speaker 03:
And it disagreed with us.

[00:12:21] Speaker 03:
It said it's irrelevant, but they never said, yes, they can change factors.

[00:12:24] Speaker 03:
That's why you're wrong.

[00:12:26] Speaker 03:
If you read the forbearance orders and if you read the freeze orders, they never say we have completely withdrawn.

[00:12:33] Speaker 03:
And it makes sense.

[00:12:34] Speaker 03:
If you look at the forbearance order, the commission did not forbear from part 36 subpart C, the revenue side of the part 36 rule for price caps.

[00:12:47] Speaker 03:
That's expressly stated in the forbearance order.

[00:12:52] Speaker 03:
So how can you completely withdraw from the field if you're still keeping a part of the rules?

[00:12:57] Speaker 03:
Now, these were the revenue rules, not the cost rules.

[00:13:00] Speaker 03:
But you can't completely withdraw if you're hanging on to part of it.

[00:13:03] Speaker 02:
But to the extent that there was an incomplete withdrawal with respect to revenue, you aren't complaining about that aspect of it, right?

[00:13:13] Speaker 02:
Are you?

[00:13:14] Speaker 03:
It has implications for the way the states determine what costs, revenues, and facilities are.

[00:13:21] Speaker 02:
I don't think you make this argument at all in your papers.

[00:13:24] Speaker 03:
We do.

[00:13:25] Speaker 03:
We speak to the USF programs.

[00:13:27] Speaker 03:
We explain how.

[00:13:28] Speaker 02:
You speak to USF, indeed.

[00:13:30] Speaker 03:
Well, we also speak to regulatory assessments.

[00:13:33] Speaker 03:
And then we explain how the same situation applies to intrastate price cap regimes.

[00:13:40] Speaker 03:
Part 36 is about cost, revenues, and it identifies facilities.

[00:13:45] Speaker 03:
And if the commission has absolutely withdrawn, it has said, we are not compelling you anymore pursuant to 221.

[00:13:54] Speaker 03:
And you are now free states to devise your own method and your formulas

[00:14:00] Speaker 03:
to determine what is the interest state.

[00:14:02] Speaker 02:
We will accept that result, but they haven't said that.

[00:14:04] Speaker 02:
Why is that a virtually inevitable inference from withdrawing from mandating that the price cap carriers produce the data?

[00:14:18] Speaker 03:
I don't think so.

[00:14:18] Speaker 03:
It doesn't necessarily follow.

[00:14:20] Speaker 03:
I think you can just as easily read the forbearance order to say, we're going to allow the states to invoke state law to require price cap carriers

[00:14:28] Speaker 03:
to obtain, to provide information so that our formulas can apply.

[00:14:34] Speaker 02:
So that our formula?

[00:14:35] Speaker 03:
Yes.

[00:14:38] Speaker 02:
But you don't point me to any actual language that says that.

[00:14:42] Speaker 03:
That's in that period between 29 to 34 in the forbearance orders.

[00:14:47] Speaker 03:
And you also have to understand the FCC's own practice is to still follow the separations, results, and rules, even for price cap carriers.

[00:14:58] Speaker 03:
For example, direct assignment of private lines is a creature of Part 36.

[00:15:08] Speaker 03:
And yet the commission has gone down the road.

[00:15:11] Speaker 03:
This court has reviewed some of the BDS orders where the commission uses the 10% rule on how you determine what is interstate comes straight out of Part 36 on the cost side, subcategory 1.2.

[00:15:26] Speaker 03:
in the private line rules to talk about what BDS prices and facilities and services are an issue before the FCC.

[00:15:39] Speaker 03:
They at least informally operate as if all of this still applies in some fashion.

[00:15:45] Speaker 03:
And until it is absolutely clear that the states are free, we cannot go to the states and say change the factor.

[00:15:52] Speaker 03:
Because they will tell us, just like Maine did, that we're bound.

[00:15:56] Speaker 02:
Let me just assume, arguing though, that you're completely right on that.

[00:16:01] Speaker 02:
Let's further assume that in oral argument, which is about to follow in a few seconds, the counsel for the commission unequivocally says that as a result of these various things, the states are not bound by the results of the Part 36

[00:16:22] Speaker 02:
requirements.

[00:16:24] Speaker 03:
We will accept that representation.

[00:16:26] Speaker 03:
We will embrace it.

[00:16:27] Speaker 03:
We will lose on the merits on this issue.

[00:16:31] Speaker 03:
So long as it is presidential and well spelled out so that we can take this to the states, we will be satisfied with that.

[00:16:38] Speaker 03:
We are willing to go to the states

[00:16:42] Speaker 03:
But we do not believe that under these orders, the states have yet been set free.

[00:16:46] Speaker 03:
If counsel says they have, and it is clear and unequivocal, and the court embraces that, we will take that.

[00:16:51] Speaker 02:
And just for curiosity, do you have any episode of an exchange with state regulators in which you said, look, you guys are really completely free?

[00:17:06] Speaker 02:
of results of that, use your freedom to get it right.

[00:17:14] Speaker 03:
I'm not at liberty to talk about discussions I've had with state regulators, but I can point you to the 2014 Maine case, where they expressly held they were still preempted.

[00:17:27] Speaker ?:
Yes.

[00:17:27] Speaker 02:
Well, we are not bound by their interpretation.

[00:17:28] Speaker 03:
That is true.

[00:17:29] Speaker 03:
And if you tell Maine they were wrong, we will happily go back to Maine and tell them try again.

[00:17:36] Speaker 03:
I see my time is up.

[00:17:38] Speaker 01:
Thank you very much.

[00:17:54] Speaker 00:
Good morning, Your Honors.

[00:17:54] Speaker 00:
Matthew Dunn for the FCC.

[00:17:57] Speaker 00:
I think there are two points that would be helpful to make to address the ongoing colloquy there between Judge Williams and Petitioner's Council.

[00:18:05] Speaker 00:
I think the first point I would like to make is if there is uncertainty about the extent to which states are bound, I don't think that that goes to petitioners standing here.

[00:18:16] Speaker 00:
I think they have a burden to establish that they're harmed and they haven't met that burden.

[00:18:21] Speaker 00:
Sort of to the side, if they want more clarity about that, I think the mechanism for that is to go to the commission and petition for a declaration, make it patently clear that this is the case.

[00:18:32] Speaker 00:
That being said, I agree with Judge Williams

[00:18:34] Speaker 00:
I think almost the only reading of the AT&T order is that states are not bound.

[00:18:38] Speaker 00:
But if they want any more clarity, as a lawyer at the podium, I can only go by what's in the orders.

[00:18:44] Speaker 00:
I think if they want something more clear than what's already written, what they should do is petition for a declaratory ruling.

[00:18:52] Speaker 00:
But I would like to make another point that I think goes to this case directly.

[00:18:56] Speaker 00:
on standing, even if it were the case that they are harmed in the way they allege as price cap consumers, we have, I think, a very clear redressability problem.

[00:19:07] Speaker 00:
And I'll just flag that for you.

[00:19:08] Speaker 00:
I think you probably understand our point, but this is just an extension of the freeze, these categorizations.

[00:19:14] Speaker 00:
If this order were vacated, the freeze lapsed, that wouldn't rewrite the rules.

[00:19:21] Speaker 00:
It would simply go back to an older version of the rules and force small carriers to re-perform the calculations.

[00:19:28] Speaker 02:
Well, if I understand the petitioner's argument on that, it is that it can be sufficient for standing if the remedy removes an obstacle to the course that the petitioners seek.

[00:19:48] Speaker 02:
And would it not be the case that

[00:19:50] Speaker 02:
throwing the separations process into the maelstrom for reform, and the commission expresses agreement with the concerns of the petitioners, so presumably it would embark on reform.

[00:20:12] Speaker 02:
Removal of an obstacle is a sufficient remedy for the remediability prong of standing.

[00:20:20] Speaker 00:
I think it can be.

[00:20:20] Speaker 00:
I don't think there's a showing here that this would move the ball for them at all.

[00:20:26] Speaker 00:
I guess one way to think of this is the freeze is not really the obstacle to separations reform.

[00:20:31] Speaker 00:
The freeze makes it easier on parties while the difficult policy questions of separations form are sorted out.

[00:20:39] Speaker 00:
But the fact of the freeze is not the reason that reform has not happened.

[00:20:44] Speaker 00:
And removing the freeze doesn't make it any more likely that it will happen.

[00:20:48] Speaker 02:
Could you elaborate on that?

[00:20:50] Speaker 02:
I mean, one thing would be to show that the commission in some process has inquiries underway about the reform of the process.

[00:21:05] Speaker 00:
Well, this is part of the docket.

[00:21:08] Speaker 00:
This order is not about reform.

[00:21:10] Speaker 00:
It's part of a docket that is about reform.

[00:21:12] Speaker 00:
And this question has been referred to the joint board, this joint state board.

[00:21:16] Speaker 02:
And in this order... Certainly your briefs here suggest that the expectation of anything from the Joint Board is rather remote.

[00:21:26] Speaker 00:
Well, it's been frustrating for all parties, including, I'm sure, the Joint Board up to this point.

[00:21:31] Speaker 00:
There is some... I don't think that that means we can throw up our hands or write off the Joint Board.

[00:21:38] Speaker 00:
But even if the Joint Board is not the obstacle, let's say that the Commission by itself is going to rewrite the rules and not wait on a recommendation.

[00:21:46] Speaker 00:
I still don't think that there's a direct connection between the fact of the freeze and rewriting those rules.

[00:21:53] Speaker 02:
Is this a fair reframing of what you're saying, that we're really talking about significant, in significant part talking about a problem of agency delay, at least as read by the petitioners.

[00:22:08] Speaker 02:
They won't perform, they want it fast.

[00:22:10] Speaker 00:
I think that's right.

[00:22:11] Speaker 02:
that the commission agrees there should be reform and it wants it done, it explicitly says it wants it done in conjunction with various other changes and that they should be approached holistically and that even to the extent that unfreezing the freeze might push the process, it's still the fact that all these

[00:22:39] Speaker 02:
coordinating things have to be resolved.

[00:22:42] Speaker 00:
I think that's precisely correct.

[00:22:45] Speaker 00:
Some of these things have been resolved.

[00:22:47] Speaker 00:
If you look at this as sort of a 20-year process of rewriting the rules which govern wireline carriers, there have been some very big rulemaking, some of which have been in this court, about intercarrier compensation, universal service reform, business data services.

[00:23:01] Speaker 00:
A lot of those big pieces are now out of the way.

[00:23:04] Speaker 00:
These rules now have to be revised in light of those changes.

[00:23:09] Speaker 00:
That's exactly right.

[00:23:13] Speaker 00:
Are there no further questions?

[00:23:16] Speaker 00:
All right.

[00:23:16] Speaker 00:
Thank you.

[00:23:17] Speaker 00:
We ask that you dismiss the petition or deny it.

[00:23:20] Speaker 01:
All right.

[00:23:21] Speaker 01:
Council for a petition.

[00:23:25] Speaker 02:
Well, I was unable to extract precisely what you wanted.

[00:23:29] Speaker 03:
You got far closer than we have you.

[00:23:32] Speaker 03:
And for that, I thank you.

[00:23:38] Speaker 03:
The price cap issue is of course our biggest issue.

[00:23:43] Speaker 03:
It is not the only issue.

[00:23:45] Speaker 03:
We did express some concerns about the rate of return carriers and we showed standing to deal with that issue as well.

[00:23:55] Speaker 02:
Does I understand that your standing claim there is that the price cap carrier's rates are affected by the

[00:24:06] Speaker 02:
rates of the rate of return carriers which are supplying service to them, right?

[00:24:13] Speaker 03:
It is an indirector.

[00:24:14] Speaker 03:
We're one step removed from the rate of return carrier.

[00:24:17] Speaker 02:
And the price cap carriers, by definition, are operating under price caps.

[00:24:22] Speaker 02:
Yes.

[00:24:25] Speaker 02:
And I guess one obvious problem with your argument would be they're bumping up against them.

[00:24:34] Speaker 02:
Without showing that the price cap carrier is relevant to your petitioners, without showing that they have wiggle room, the price cap is there and nothing will change.

[00:24:56] Speaker 03:
Let me clarify a couple of things.

[00:24:57] Speaker 03:
First of all, with regard to the price cap carriers, they're passed through.

[00:25:03] Speaker 02:
of their USF assessment is not under price cap.

[00:25:11] Speaker 02:
I understand that.

[00:25:12] Speaker 02:
Similarly.

[00:25:13] Speaker 02:
I thought we were talking first of the actual costs incurred by the rate of return carriers.

[00:25:20] Speaker 03:
Well, each of the petitioners also has wireless service and they make long distance calls.

[00:25:29] Speaker 03:
They pay US pass-throughs on that.

[00:25:32] Speaker 02:
You've jumped back to USF.

[00:25:35] Speaker 02:
You had a significant part of your papers independent of USF.

[00:25:40] Speaker 02:
Oh, yes.

[00:25:40] Speaker 02:
Yes.

[00:25:41] Speaker 03:
It is the means by which we are trying to show standing for purposes of the rate of return.

[00:25:45] Speaker 02:
Let's stick with that for a moment.

[00:25:49] Speaker 02:
I beg your pardon?

[00:25:50] Speaker 02:
I wanted you to stick with that for a moment and address the question.

[00:25:56] Speaker 02:
If it is the case that the relevant price cap carriers are bouncing up against their caps, that is, they're charging simply the capped rate, and I didn't see anything in the record saying the contrary, then it's not going to make any difference what happens with the rate of return carriers.

[00:26:17] Speaker 03:
The consumer role that we are wearing with regard to the rate of return carriers isn't tied to the fact that any of us buy from a price cap carrier.

[00:26:25] Speaker 03:
It is that we use cell phone providers and long distance carriers who pay switched access rates to the rate of return carriers and pass that through to us.

[00:26:38] Speaker 03:
It is also because we pay USF assessments on those.

[00:26:43] Speaker 03:
Now, in addition, as a price cap carrier customer, we pay the USF pass through.

[00:26:51] Speaker 03:
And the price cap carrier pays into the state and interstate

[00:26:55] Speaker 03:
USF regime, the money is dispersed.

[00:26:58] Speaker 03:
And so we are, even as a price cap carrier customer, an indirect contributor to the rate of return carrier.

[00:27:05] Speaker 03:
And that is passed through to us on a pro rata basis.

[00:27:08] Speaker 02:
It's not under price cap.

[00:27:09] Speaker 02:
The subsidies to the rate of return carriers are in turn capped.

[00:27:15] Speaker 02:
And I didn't see anything showing that any kind of foreseeable reduction in rate of return

[00:27:25] Speaker 02:
improvement in rate of return carrier economics would actually affect the USF charge that was being passed on to you.

[00:27:42] Speaker 03:
If a rate of return carrier changes its factors, it will have the effect of moving costs to the interstate side and reducing costs on the intrastate side.

[00:27:53] Speaker 03:
Revenues will go down concurrently.

[00:27:56] Speaker 03:
And our USF pass-through on the state side will also go down.

[00:28:04] Speaker 02:
Oh, the USF pass-through on the state side.

[00:28:07] Speaker 02:
Yes.

[00:28:08] Speaker 02:
That's the state's choices.

[00:28:10] Speaker 03:
It is indeed.

[00:28:11] Speaker 03:
But once again, it all ultimately ties back to the separations factors.

[00:28:16] Speaker 03:
And it is uncontested here.

[00:28:19] Speaker 02:
So let me just try to pin this down.

[00:28:22] Speaker 02:
So if it is the case, either with counsel's concession or with, as a matter of fact, our own ruling, there is no federal legislative requirement on the states to use the jurisdictional separations in any of their calculations.

[00:28:48] Speaker 03:
You're home free.

[00:28:49] Speaker 03:
A big chunk of our issues go away.

[00:28:52] Speaker 03:
A big chunk of them.

[00:28:52] Speaker 03:
Not all of them.

[00:28:53] Speaker 03:
It is obviously much smaller.

[00:28:56] Speaker 03:
We still have the impact on the rate of return carriers.

[00:29:00] Speaker 03:
We still do.

[00:29:01] Speaker 03:
And I think we have standing to contest the commission's decision to make the change voluntary.

[00:29:09] Speaker 03:
And I think that a really good showing was made that some real progress has to be made.

[00:29:15] Speaker 03:
And let me speak to the remediation here.

[00:29:19] Speaker 03:
We understand that there is going to be some regulatory burden.

[00:29:23] Speaker 03:
We do.

[00:29:25] Speaker 03:
The problem that we have is the regulatory burden involved if assuming the freeze goes away.

[00:29:32] Speaker 03:
The process.

[00:29:33] Speaker 03:
The process.

[00:29:34] Speaker 03:
Certainly the carriers, the rate of return carriers in particular, will have a burden.

[00:29:39] Speaker 03:
We don't deny that.

[00:29:41] Speaker 03:
The question is whether the burden outweighs the benefit.

[00:29:45] Speaker 03:
And there is just simply nothing that the FCC found regarding the foregone benefits to consumers from continuing to extend the freeze.

[00:29:56] Speaker 03:
Really, the only numbers in the case were ours, which showed that on a nationwide basis, yes, with price cap carriers included, the consumer burden from continuing to freeze is somewhere between $14 and $53 billion a year.

[00:30:13] Speaker 03:
Now, I submit to you.

[00:30:14] Speaker 03:
It doesn't really, I cannot conceive of a burden on carriers that would remotely approximate that.

[00:30:23] Speaker 03:
I do not, several orders of magnitude small.

[00:30:27] Speaker 03:
It could be 10 million, 20 million, yes.

[00:30:30] Speaker 03:
But the consumer benefit far outweighs it.

[00:30:32] Speaker 02:
You haven't precisely addressed the timing issue.

[00:30:37] Speaker 02:
Let's say, if it is the case that the commission

[00:30:42] Speaker 02:
has your agenda in mind and is pursuing it in a way that it regards as the proper treatment of the relevant segments of the problem, are you not effectively asking us for

[00:31:03] Speaker 02:
to order them to proceed fast because they've unreasonably delayed.

[00:31:10] Speaker 03:
Effectively, that's true.

[00:31:11] Speaker 03:
Keep in mind, in the Comtail case, the court said 15 years was too long.

[00:31:16] Speaker 02:
As you know, I'm sure the obligation we have to meet before finding an agency in unreasonable delay is very, very high.

[00:31:26] Speaker 03:
It is, and it found that 13 years, I believe, in the Comtail case was too many.

[00:31:30] Speaker 03:
Here we're talking about

[00:31:34] Speaker 03:
18 years already, and it will be extended to 24.

[00:31:38] Speaker 03:
Now, we understand that this is complicated.

[00:31:42] Speaker 03:
And we're not saying necessarily that if you were to vacate, the commission would have to accept the old rules going back into effect.

[00:31:53] Speaker 03:
The commission has the tools to say, OK, we will effectively extend the freeze.

[00:32:01] Speaker 03:
for a short period of time and spend all of our resources that are possible to solve this problem.

[00:32:07] Speaker 02:
But that's exactly the reason why court's hesitant to find unreasonable delay, because it's a reordering of agency resources.

[00:32:16] Speaker 02:
It is.

[00:32:17] Speaker 03:
It is.

[00:32:18] Speaker 03:
But that's exactly how it turned out in one of the unbundled network element cases when this court vacated the UNI rules.

[00:32:24] Speaker 03:
The commission was required to reinstate the rules that just had been vacated.

[00:32:29] Speaker 03:
And then it fixed it.

[00:32:32] Speaker 03:
So here's the bottom line.

[00:32:36] Speaker 03:
And let's just be really frank.

[00:32:38] Speaker 03:
In 2001, the commission rushed to freeze these factors.

[00:32:42] Speaker 03:
And the reason it did so was because the cost things had changed.

[00:32:46] Speaker 03:
But there was an over allocation to the interstate jurisdiction.

[00:32:50] Speaker 03:
So they wanted to freeze it because they were overburdened.

[00:32:54] Speaker 03:
Now the converse is true.

[00:32:56] Speaker 03:
The states are the ones that are overburdened.

[00:32:58] Speaker 03:
And the Commission has not shown a real sense of urgency here to solve this problem, because the states are the ones that are having to deal with these excessive rates.

[00:33:08] Speaker 02:
But that turns on our initial subject.

[00:33:12] Speaker 03:
It does.

[00:33:13] Speaker 03:
And I will absolutely grant that a huge part of this problem goes away if we get the clear and unequivocal holding that we've been trying to get.

[00:33:22] Speaker 03:
There will still be the rate of return problem.

[00:33:24] Speaker 03:
It'll be a smaller problem, probably manageable.

[00:33:31] Speaker 03:
Thank you.