[00:00:01] Speaker 00:
Case number 20-1006, National Lifeline Association Petitioner versus Federal Communications Commission and United States of America.

[00:00:10] Speaker 00:
Mr. Heitman for the petitioner, Ms.

[00:00:12] Speaker 00:
Flood for the respondents.

[00:00:16] Speaker 05:
Good morning, Mr. Heitman.

[00:00:17] Speaker 05:
Please proceed.

[00:00:19] Speaker 03:
Good morning, Your Honors, and may it please the Court.

[00:00:22] Speaker 03:
I'm John Heitman appearing today for Appellant National Lifeline Association, or NALA.

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I'd like to reserve two minutes of my time this morning for rebuttal.

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My focus today will be in the plain language of three FCC rules to demonstrate that the order is not in accordance with the FCC's own rules and therefore violates the APA.

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The Supreme Court's Kaiser decision makes clear that an FCC order that runs contrary to its own rules is not entitled to any deference.

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The non-reimbursement order must be vacated because it's not in accordance with the plain text of FCC rule 54407A, which we call in our briefs the snapshot rule, but today I'll refer to it simply as 407A.

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The order also cannot be squared with the plain text of rules 407C2 and 405E3.

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I'll now walk your honors through the plain text of each of these rules so that I can demonstrate that there is only one reasonable construction of these rules.

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And it is that carriers are entitled to support for lifeline service provided to subscribers for whom the 15-day non-usage cure period has not ended as of the first day of the month.

[00:01:30] Speaker 03:
You can find the text of the relevant version.

[00:01:32] Speaker 01:
Yes, go ahead.

[00:01:34] Speaker 01:
Before we get to the merits, can I ask you about your standing in this appeal?

[00:01:40] Speaker 01:
Yes.

[00:01:41] Speaker 01:
So what exactly is the theory of standing for your organization?

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Is it based on increased administrative burdens, or is it based on the harms in the Dorwar declaration?

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Erin, I would say it is based on both, right?

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or an industry association that represents a group of providers and carriers in the Lifeline program.

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And so its members join NALA so that they can join together and it represents its interests just like many other industry associations before the agency.

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And so NALA itself is burdened because NALA now has to shift resources to this appeal and to this case as opposed to doing other things that NALA would do for its members.

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the members who are members of NALA are also burdened because they have a going forward burden of not being able to receive reimbursement for the lifeline discounts provided to consumers going forward.

[00:02:40] Speaker 01:
But more importantly, perhaps, is that they have- Well, so that they can, they do get reimbursement if a subscriber actually uses the service during the cure period, they're able to seek an adjustment.

[00:02:52] Speaker 01:
So they do get paid.

[00:02:53] Speaker 01:
It's just a question of the timing of the payment.

[00:02:56] Speaker 03:
Is your honor, if the if the subscriber cures during the cure period, but this is a case about a subscriber who is in the cure period and has not cured and they have 15 days to cure.

[00:03:08] Speaker 01:
So we cannot know declaration focuses on the harm of not being revert not being reimbursed for someone who does cure.

[00:03:22] Speaker 03:
Actually, I would have to pull the declaration, Your Honor, but the case, we have briefed the case and we have certainly made clear to the court that there are harms going forward in not being reimbursed.

[00:03:33] Speaker 01:
What are those harms specifically, though?

[00:03:36] Speaker 03:
The harm is that the subscriber for whom we provide service to during the cure period, we provide service to.

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And if we don't get reimbursed, our reimbursement goes from up to $34.25 down to zero by virtue of the FCC's rule.

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And not only does it go down to zero presently for customers we serve, it goes down to zero for customers we serve in the future.

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But perhaps more importantly, we have a massive retroactive liability exposure that has happened here because of the FCC's change in its view on the rule when it ruled on the NALA petition back at the end of last year.

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So under the FCC's change, the FCC who had been paying

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reimbursement for subscribers in their cure period, because we have to provide service to them, Your Honor.

[00:04:26] Speaker 03:
We have to provide discount on lifeline service to them, and the FCC is reimbursing them.

[00:04:30] Speaker 01:
I guess what I'm not seeing in the record, though, is what is the cost of providing a service that is not used?

[00:04:37] Speaker 01:
I mean, the FCC at cost is de minimis or non-existent, and I'm just, I guess I'm not seeing in the record what the cost is to the providers who are providing a service that's not being used.

[00:04:51] Speaker 03:
Yes, Your Honor.

[00:04:52] Speaker 03:
First and foremost, this case is about Lifeline, which is a discount program, right?

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The Lifeline program provides us with a reimbursement for a discount.

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So we lose on every subscriber up to $34.25 a month that we have not charged a subscriber because the federal government provides that to us in support.

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So that is the amount of money we lose.

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That is the key economic metric.

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That's the key harm right there in losing that $34.25.

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Now, you asked about the cost of service.

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I think it doesn't frankly matter for this reimbursement question.

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It matters perhaps for the takings question.

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But the cost of service is this.

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We have to provide and allocate a bucket of minutes, text, and data every single month to every subscriber, including those who are in the non-use of secure period.

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So we have to buy a provision and allocate that bucket of service to that subscriber.

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just the same as we have to allocate it to another subscriber who uses all of it, another subscriber who uses some of it.

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Our cost, you know, think of it like a hamburger we put on the table, right?

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If I put a hamburger on each of your judges' tables, and Judge Rao, you eat none of it, and Judge Edwards, you eat half of it, and Judge Caxas, you eat all of it, my cost in serving them hamburgers is the same thing.

[00:06:10] Speaker 03:
I can't take it back, and I can't re-serve it to somebody else,

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Not the same month or even the next month.

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I bought that service and I use it or I lose it.

[00:06:19] Speaker 05:
It's just like you buy capacity user by user.

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We allocate chunks or buckets as they're called judge by user.

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So we lose up to 3425 in reimbursement every single month for every subscriber.

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And we are unable to recover our costs in serving those subscribers.

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But I would submit to you, the more important element for this appeal is the fact that we lose that 3425 up to 3425.

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And we had been being paid it for serving these customers in their care period for years until the non-reimbursement order was adopted.

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So I want to actually go quickly, if I can, through these rules.

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And I want to start with 407A.

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Because 407A says by its plain language, universal service support shall be provided directly to eligible telecommunications carrier based on the number of actual qualifying low-income customers it serves directly as of the first day of the month.

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47A was amended in 2015 to include that concept of service as of the first day of the month.

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We call it the snapshot date.

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It is important because the FCC at that point in time filled the regulatory gap.

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Prior to that point in time, there was no date upon which a carrier had to count all of its customers for the purpose of submitting reimbursement claims.

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This rule clarified everything for the carrier and for the administrator.

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This is the date it is done.

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We take a snapshot of who you served on the first of the month

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and that is who we reimburse.

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So if the plain text of 407A says, support shall be provided to carriers based on the number of customers it serves as of the first day of the month.

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407A contains no other limitation, and importantly, it contains no exemption to a carrier's right to receive reimbursement for a customer who is in the non-usage cure period, or any cure period for that matter.

[00:08:23] Speaker 04:
Well, 407C2 calls out an exception.

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Your honor, I submit to you respectfully that it does not in this case.

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It does not carve out an exception for subscribers for whom the 15-day non-cure period has not ended.

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And so if I can explain, 407C2 doesn't have that exemption.

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The plain text as a carrier shall only continue to receive universal service support reimbursement for such lifeline service provided to subscribers who have used the service

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within the last 30 days or who have cured their non-usage provided for in 405E3.

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By its terms, 407 says something about a carrier's right to continue to receive support.

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The word continue is important.

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It indicates that support is already being provided and that at some point in the future, it will only continue to be provided if something happens.

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Specifically, 407C2 says that a carrier should only continue to receive support for subscribers

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who have cured their non-usage as provided for in 405E3.

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That's important because the rule says, is about what will happen going forward if and when a subscriber cures her non-usage as governed by 405E3.

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We take a look at 405E3 and the relevant text says, if a subscriber fails to use as usage is defined in 407C2 for 30 consecutive days,

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An eligible telecommunications carrier must provide the subscriber with 15 days notice using clear, easily understood language that the subscriber's failure to use the Lifeline service within the 15 day notice period will result in termination.

[00:10:06] Speaker 03:
So rule 405 E3, by its plain term, says that if a subscriber fails to use within 30 days, a carrier has to provide 15 days notice to that subscriber

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And he or she has 15 days in which to cure their non-usage.

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That's very important because the reference to 405E3 contained in 407C2 tells us that we cannot know.

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We cannot know under 407C2 which subscribers will have cured their non-usage as provided for in 405E3.

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We can't know it until 15 days have passed.

[00:10:47] Speaker 05:
Doesn't 62 says who have cured, correct?

[00:10:51] Speaker 05:
Yes.

[00:10:52] Speaker 05:
Present perfect, which means the cure has already happened.

[00:10:58] Speaker 05:
Yes.

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And that's the people we're talking about in this case have not cured.

[00:11:06] Speaker 03:
Yes, but they have not had their 15 days to cure.

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And the reference in 407C2

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goes to 405-E3, which provides subscribers with 15 days to cure.

[00:11:16] Speaker 05:
If we were talking about a user in the cure period.

[00:11:23] Speaker 05:
Yes, we are.

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And I simply asked a question, has, and he hasn't yet cured, you asked the question, has that user cured?

[00:11:40] Speaker 05:
The simplest correct answer would be no.

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And the elaboration on that answer would be, it may be that that person has some number of days in which he might cure in the future, but he hasn't done it yet.

[00:11:57] Speaker 03:
That's right, Your Honor.

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But the language of 407C2 is implementing a non-usage rule that gives consumers 30 days to use and 15 days to cure.

[00:12:06] Speaker 03:
It's a 45-day period.

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And the rule plainly says carriers will only continue to receive support after this 45-day period if the consumer uses or cures.

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It doesn't say what happens during the 15-day cure period.

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If it did say that, you would have to strike several words out of it.

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And I think so if the FCC effectively does in its order.

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I think if it said what the FCC said it says, I think you would have to strike the words only continue to,

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out of 47C2.

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And I think you would have to add the word not a couple of times.

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You'd have to say, instead of saying to Lifeline subscribers, to subscribers who have used the service, I think you would have to insert the word not, who have not used the service.

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And likewise, instead of, or have cured their non-usage, I think you would have to say, or have not cured their non-usage.

[00:13:00] Speaker 03:
But that's not the plain language of this rule.

[00:13:02] Speaker 03:
The rule contains those words.

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It's not phrased with knots.

[00:13:08] Speaker 05:
I'm not following that because two conditions are imposed on not on losing the right to receive reimbursement, but on continuing to receive reimbursement.

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You can continue to receive reimbursement if the person has used the service or has cured the non-use.

[00:13:34] Speaker 03:
We have asserted, and the FCC has agreed in their brief with us on page 23, that these customers who are in their 15-day cure period and not cured are in neither of these two buckets.

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Because they are in neither of these two buckets, this rule does not apply to them.

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This rule is carefully worded.

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It does not apply to them.

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And because it doesn't apply, 407A's language applies.

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There is a way to read all three of these together, Your Honor, and it is

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at the point in time in which the 15-day cure period ends.

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And at that point in time, if the consumer still has not cured their usage, then they are terminated under 405E3.

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And then the carrier's right to continue to receive support for them ends.

[00:14:21] Speaker 03:
It ceases under 407C2 and under 407A.

[00:14:26] Speaker 03:
That is the way you read these three rules together.

[00:14:28] Speaker 01:
I'm interested in your argument that you're saying the people who are in the cure period but haven't cured are not encompassed within 407C2, right?

[00:14:41] Speaker 01:
Because 407C2 says

[00:14:44] Speaker 01:
After service activation and eligible telecommunication carrier shall only continue to receive service support for these two categories, right, people who have used it or who have cured it.

[00:14:57] Speaker 01:
So by saying that it's outside of that, I think you're

[00:15:02] Speaker 01:
admitting that you don't get the reimbursement because you only get universal support reimbursement if you fall under one of these two categories.

[00:15:11] Speaker 01:
And you're saying that you're in a place that doesn't fall within one of those two categories.

[00:15:16] Speaker 01:
So I think that's to admit that you don't get reimbursement.

[00:15:19] Speaker 03:
Is that?

[00:15:20] Speaker 03:
I'm not admitting that.

[00:15:21] Speaker 03:
And I think what you have to look at is the reference to 405 E3.

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That reference is there for a reason.

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And it says as provided for in 405E3 and 405E3 provides 15 days, 15 days in which to do this.

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And so until that 15 days is up, I submit to you the 407C2 by its plain terms does not apply.

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And that 407A does apply.

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When the 15 days is up and the subscriber doesn't cure, then they get terminated under 405E3 and they're not entitled to reimbursement

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under 407C2 and 407A.

[00:15:57] Speaker 03:
But that doesn't happen, Your Honor, until they are terminated and until their non-usage cure period is expired as provided for in 405E3.

[00:16:07] Speaker 01:
How does the 15 days go to this question of whether they have cured their non-usage?

[00:16:14] Speaker 01:
They have 15 days in which they could do it, but whether they're on day one or day 15, if they have not cured it, then you can't get reimbursement.

[00:16:25] Speaker 03:
I think, Your Honor, I think you cannot read out the 405E3 reference.

[00:16:29] Speaker 03:
You cannot read out from the rules here the 15 days that are provided for in 405E3.

[00:16:35] Speaker 03:
It says as provided for in 405E3.

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It doesn't end with just non-usage.

[00:16:42] Speaker 03:
The statute and what you're suggesting is perhaps to strike the words as provided for in 405E3.

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And I think the FCC would like that.

[00:16:49] Speaker 03:
But that's not the rule they wrote.

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The rule they wrote contains that reference and that reference means the subscribers get 15 days to cure.

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And by the way, these rules require us to provide that service to these subscribers.

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During that period, we provide that discounted service to these subscribers to that period for two reasons.

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One, so they can cure and two, because there's a benefit to them.

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There's a benefit from being able to pick up the phone and call emergency services or go online and find a job.

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There is a benefit to this that we provide to these subscribers even during the 15 day cure period.

[00:17:23] Speaker 03:
So I think if you look at the language that is provided to you in 407C2, and there's a lot of it, you have to look at the reference to 405E3.

[00:17:33] Speaker 03:
But you also have to resist the temptation to insert the knots that the FCC has asked you to insert into this rule that they did not write into it when they wrote it.

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They did not say shall not receive.

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They did not say have not used.

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They did not say have not cured.

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That's not what this rule says.

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That's not what the plain text of the rule says.

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You can read these three rules together.

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The FCC, by doing this work on 407C2, has no explanation for the reference to 405E3 and has no explanation for why 407A sits as it is with that mandate.

[00:18:06] Speaker 03:
There's no specific versus general conflict here, none whatsoever.

[00:18:10] Speaker 03:
The three rules can be read in perfect harmony.

[00:18:13] Speaker 03:
And so that's what I asked the court to do because that is what had been done for years.

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for years, up until the point the non-reimbursement order was adopted.

[00:18:22] Speaker 05:
Thank you, Mr. Heitman.

[00:18:23] Speaker 05:
Judge Edwards, any questions?

[00:18:24] Speaker 05:
No, thank you.

[00:18:26] Speaker 03:
Thank you, Your Honors.

[00:18:38] Speaker 03:
Ms.

[00:18:38] Speaker 03:
Flood.

[00:18:39] Speaker 02:
Thank you.

[00:18:40] Speaker 02:
Good morning.

[00:18:40] Speaker 02:
May it please the court?

[00:18:41] Speaker 02:
Maureen Flood from the Federal Communications Commission.

[00:18:45] Speaker 02:
I agree with Mr. Heitman that this

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case is governed by the text of the commission's rules.

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And the commission's interpretation of the rules in the order is the only reasonable one.

[00:18:55] Speaker 02:
Subsection A of rule 54.407 establishes how an ETC's baseline lifeline reimbursement amount shall be determined.

[00:19:04] Speaker 02:
And then subsection C2 is a specific restriction on that general rule.

[00:19:09] Speaker 02:
It provides that after an ETC activates service, it shall only continue to receive support

[00:19:16] Speaker 02:
for subscribers who have used the service in the past 30 consecutive days or who have cured their non-usage problem.

[00:19:23] Speaker 02:
If a subscriber does not fall into one of those two categories, the ETC will not continue to be reimbursed.

[00:19:30] Speaker 04:
What about 405E3?

[00:19:32] Speaker 02:
405E3 establishes a process by which an ETC has to provide notice of the opportunity to cure the non-usage problem before de-enrollment

[00:19:45] Speaker 02:
but it says nothing about reimbursement.

[00:19:49] Speaker 02:
Reimbursement is handled by 54.407A.

[00:19:54] Speaker 02:
What Petitioner is trying to do here is raise some sort of temporal restriction in subsection 54.407C2.

[00:20:03] Speaker 02:
It doesn't include one.

[00:20:05] Speaker 02:
If a subscriber does not fall into one of those two categories on the snapshot date,

[00:20:12] Speaker 02:
the ETC shall not continue to receive support for that subscriber.

[00:20:16] Speaker 02:
E3 only adopts or it only establishes this cure period, this notice period by which, during which the subscriber can cure, but it has nothing to do with reimbursement.

[00:20:28] Speaker 02:
The reference to E3 in subsection C2 is only acknowledging that the cure period, the 15-day notice period during which the subscriber can cure.

[00:20:38] Speaker 02:
But it doesn't say that the ETC can claim reimbursement for the subscriber while they are in that 15-day cure period.

[00:20:47] Speaker 02:
And again, that has been the case since 2012.

[00:20:50] Speaker 02:
Petitioner, well, ETCs before the agency in fact even acknowledged that they could not claim support for subscribers in the cure period.

[00:21:00] Speaker 02:
on the snapshot date.

[00:21:02] Speaker 02:
When the commission adopted the snapshot date in the 2015 lifeline order, it did so to mitigate ETC's reporting burdens by establishing a single date on which they would submit the line counts used to determine their general reimbursement support amount.

[00:21:20] Speaker 02:
But nothing in the 2015 lifeline order mentioned subsection C2, the non-usage restriction, let alone amended that restriction

[00:21:30] Speaker 02:
so that ETCs can now claim support for subscribers in the cure period if that cure period fell on the snapshot date.

[00:21:40] Speaker 01:
Ms.

[00:21:40] Speaker 01:
Flood, so what about the administrator of the USAC providing guidance in a different direction from what the FCC is arguing now?

[00:21:51] Speaker 02:
Your Honor, the fact that the lifeline administrator misinterpreted the commission's rules does not mean that the commission's rules are unreasonable.

[00:21:59] Speaker 02:
the plain text of the rules since 2012.

[00:22:03] Speaker 02:
have stated that an ETC cannot claim lifeline reimbursement for a subscriber in the cure period for non-usage.

[00:22:11] Speaker 01:
Isn't the FCC is responsible for ensuring that the guidance given by the administrator is accurate?

[00:22:18] Speaker 01:
Is it not, right?

[00:22:19] Speaker 01:
Because the administrator can't make any new substantive rules or issue guidance contrary to the rules, as you say, but that guidance was allowed to stand on its website.

[00:22:30] Speaker 02:
Your Honor, what happened here, you're correct.

[00:22:33] Speaker 02:
The Commission is responsible for making sure that the Lifeline Administrator follows our rules, but here the Lifeline Administrator made a mistake.

[00:22:41] Speaker 02:
And that happened.

[00:22:42] Speaker 02:
That's what happened in the Solons Academy case that the Commission relied on in the Order on Review and is discussed in the briefs.

[00:22:48] Speaker 02:
Unfortunately, the Lifeline Administrator will make mistakes from time to time.

[00:22:52] Speaker 02:
It put the incorrect guidance, which was one sentence, on its website in December 2016.

[00:22:58] Speaker 02:
That guidance was revised in December of 2017.

[00:23:01] Speaker 02:
So at least since December of 2017, ETC should not have been claiming support for subscribers in the cure period for non-usage.

[00:23:09] Speaker 02:
And I'm perplexed by the assertion made by Petitioner's Council

[00:23:16] Speaker 02:
that ETCs face years of retroactive liability here, given that they should have known since December of 2017 that they should not be claiming support for those subscribers.

[00:23:26] Speaker 02:
If they're willing to rely on guidance from the lifeline administrator that they'd like, they also have to rely on guidance from the lifeline administrator that they might not agree with.

[00:23:34] Speaker 02:
You know, I'd also point out, and we raise this issue or we cite the petition at page 39 of our brief, but in 2016,

[00:23:44] Speaker 02:
A group of ATCs filed a waiver petition with the commission that asked the commission to waive the non-usage rules so that they could collect lifeline reimbursement for subscribers in the non-usage cure period on the snapshot date.

[00:24:00] Speaker 02:
In other words, their understanding of the commission's rules was the same as the commission's in the order on review.

[00:24:07] Speaker 02:
So given that they understood the rule to deny reimbursement and given that the rule since 2012 has denied them reimbursement for subscribers in the non-usage cure period, when the Lifeline Administrator posted that incorrect guidance on its website, ETCs should have followed the plain text of the rules, particularly given that they understood the rules.

[00:24:32] Speaker 04:
But the core point that they're making is there a group of subscribers for whom they will never be reimbursed even though they're required to give service.

[00:24:42] Speaker 04:
They've got to make an investment.

[00:24:44] Speaker 02:
That is their argument, Your Honor.

[00:24:46] Speaker 02:
But isn't that correct?

[00:24:49] Speaker 02:
That is correct.

[00:24:49] Speaker 02:
There are some subscribers, if a subscriber is in a fixed period and they don't cure their non-usage problem, then the ETC will not be able to claim reimbursement from them.

[00:25:00] Speaker 04:
Even though they have provided service.

[00:25:02] Speaker 02:
Your Honor, the non-usageable in subsection C2 is not concerned with the provision of service by an ATC.

[00:25:08] Speaker 02:
It's concerned with usage.

[00:25:10] Speaker 02:
It talks about usage.

[00:25:11] Speaker 02:
No, no.

[00:25:12] Speaker 04:
We're talking about getting the equivalent of reimbursement or getting the support you would otherwise get.

[00:25:20] Speaker 02:
That's correct, Your Honor.

[00:25:21] Speaker 02:
But again, this case is determined by the rules.

[00:25:24] Speaker 04:
And so here are the text of rules of subsection C. But that, respectfully, counsel, that doesn't make sense.

[00:25:30] Speaker 04:
That's like saying if we have a rule that says we're just not going to reimburse you, then you lose because we have a rule that says we're not going to reimburse you.

[00:25:38] Speaker 04:
I'm trying to understand.

[00:25:39] Speaker 04:
They're saying that they are required to give service.

[00:25:43] Speaker 04:
even during this non-usage period, they are required to give a service by your rules.

[00:25:49] Speaker 04:
And they're saying, as I understand it, it makes no sense for them not to receive reimbursement for a period when they were required to give service.

[00:25:57] Speaker 02:
Right.

[00:25:57] Speaker 02:
My response to that, Your Honor, is the commission made the determination that they have to provide service in that period in 2012 when the commission adopted subsection C2 and the 2012 lifeline order.

[00:26:09] Speaker 02:
And there are good policy reasons for that.

[00:26:11] Speaker 02:
When the commission adopted the non-usage rule, it did so because it didn't want to waste lifelines.

[00:26:17] Speaker 04:
You mean they weren't getting reimbursement beginning in 2012?

[00:26:20] Speaker 02:
That's correct, Your Honor.

[00:26:22] Speaker 02:
That is correct.

[00:26:22] Speaker 02:
In 2012,

[00:26:24] Speaker 02:
In 2012, the commission adopted the non-usage rule in 2012.

[00:26:28] Speaker 02:
And in 2012, the non-usage rule said that, subsection C2 of the rule said that Lifeline, since 2012, the non-usage rule in subsection C2 has provided that Lifeline ETCs cannot claim reimbursement for subscribers in the cure period for non-usage.

[00:26:45] Speaker 02:
Nothing in that rule has changed.

[00:26:47] Speaker 02:
The crux of petitioner's argument is that when the commission adopted, inserted the snapshot date

[00:26:53] Speaker 02:
and subsection A in the 2015 lifeline order, all of that changed.

[00:27:00] Speaker 02:
The ETC subsequently could claim support for subscribers in the cure period for non usage on the snapshot date.

[00:27:09] Speaker 02:
So in other words, their argument is key to the adoption of the snapshot date.

[00:27:13] Speaker 02:
But the non-usage rule, which focuses on usage, usage by the customer and not service, has been in effect since 2012.

[00:27:20] Speaker 02:
And our point is, is that if the commission adopting the snapshot date intended to redefine what is reimbursable under subsection C2, we probably would have mentioned subsection C2 in the 2015 lifeline order.

[00:27:36] Speaker 02:
and explain why we were effectively amending that rule, but we didn't.

[00:27:41] Speaker 02:
The snapshot date, which is the key to the petitioner's argument here, was simply adopted by the commission to mitigate the reporting costs.

[00:27:51] Speaker 02:
Um on etcs when they file their reimbursement claims.

[00:27:55] Speaker 02:
It has nothing to do with what is reimbursable miss flood.

[00:27:58] Speaker 01:
Do you agree with Mr. Heitman's hamburger analogy right is the FCC effectively saying that these etc have to provide a hamburger, whether or not somebody eats it.

[00:28:11] Speaker 01:
And if someone doesn't eat it.

[00:28:12] Speaker 04:
Same thing I'm asking exactly.

[00:28:14] Speaker 04:
That's certainly my understanding.

[00:28:16] Speaker 04:
I didn't hear you say anything to the contrary.

[00:28:18] Speaker 02:
No, and that has been the case since 2012.

[00:28:21] Speaker 02:
But I would point this out.

[00:28:22] Speaker 02:
In the order on review, the commission considered the argument that the petitioner put in the record, that burden is significant and unfair.

[00:28:35] Speaker 02:
And the commission found very little evidence in the record that the impact of that rule, again, a rule that has withheld support for ETCs

[00:28:44] Speaker 02:
from ETCs for subscribers in this period of time since 2012, but the Commission found that that burden would be light.

[00:28:51] Speaker 02:
There was no evidence in the record about the amount of costs that ETCs would incur.

[00:28:57] Speaker 02:
There was no evidence in the record about the number of subscribers who are in the cure period for non-usage in the typical month.

[00:29:05] Speaker 02:
And so the Commission released, and

[00:29:07] Speaker 02:
As the court pointed out, an ETC is reimbursed if the subscriber eventually cures its non usage problem.

[00:29:14] Speaker 02:
So there was no evidence in the record to contradict the commission's determination that the burden of providing

[00:29:21] Speaker 02:
an unused service for at most the period of 15 days would be anything other than like.

[00:29:26] Speaker 02:
Can I go back to that?

[00:29:27] Speaker 01:
Mr. Flood, to the extent that the non-reimbursement order is, if we assume that the non-reimbursement order was consistent with the rules, as you suggest, then can the petitioners, I mean, they're not able to challenge the merits of the underlying rules at this point, are they?

[00:29:47] Speaker 02:
No, really what petitioners, and we make this point in our brief when we talk about this issue about the impact on ETCs, but effectively in arguing that our interpretation of the rules places this undue burden on ETCs, that is an untimely collateral attack to the 2012 lifeline order, because that's when the commission adopted the non-usage restriction in subsection C2.

[00:30:11] Speaker 02:
And since 2012, ETCs have not been able to claim reimbursement forces for non-usage.

[00:30:19] Speaker 02:
The interesting thing is we did not hear these complaints from ETCs until the commission adopted the snapshot date in 2015.

[00:30:27] Speaker 02:
But again, the snapshot date has no bearing at all on subsection C2.

[00:30:33] Speaker 04:
Wait, let me make sure I'm following you.

[00:30:35] Speaker 04:
But I did think about this following you on this argument on finality or reviewability.

[00:30:41] Speaker 04:
whatever you're suggesting.

[00:30:43] Speaker 04:
My understanding is they petitioned for a declaration, right?

[00:30:48] Speaker 04:
And the commission issued an order in response to that and gave the interpretations that are now subject to our consideration, right?

[00:30:57] Speaker 02:
Correct.

[00:30:57] Speaker 04:
That's a final order that's reviewable because there was confusion about what had gone up on the website.

[00:31:04] Speaker 04:
I would agree with you.

[00:31:05] Speaker 04:
If there's nothing more than interpretive rules being thrown on the website, there's a question about reviewability.

[00:31:12] Speaker 04:
But they filed a declaration.

[00:31:14] Speaker 04:
You could have said, we're not responding.

[00:31:16] Speaker 04:
The agency did respond, and they responded with a final order and gave these interpretations, which we're not considering.

[00:31:24] Speaker 04:
That's reviewable.

[00:31:25] Speaker 04:
What am I missing?

[00:31:26] Speaker 02:
Your Honor, our point is that the policy determination

[00:31:36] Speaker 02:
cut, that ETCs cannot claim support for those subscribers was made in 2012.

[00:31:41] Speaker 04:
Well, I understand your argument about the rule you switched in response to Judge Royall to suggest maybe this isn't even reviewable.

[00:31:49] Speaker 04:
And I'm not following that at all.

[00:31:51] Speaker 04:
You did not have to issue a reviewable order, but the agency did.

[00:31:56] Speaker 02:
Your Honor, the- Right?

[00:31:59] Speaker 04:
Okay, so if the- Your argument is that the order we issued

[00:32:04] Speaker 04:
is reasonable and certainly consistent with what we think we've always meant.

[00:32:08] Speaker 04:
But we agree there was confusion, so we took the petitions for declaration and we responded.

[00:32:14] Speaker 04:
And what we're doing we think is consistent with what we've always done.

[00:32:18] Speaker 04:
That's your argument, right?

[00:32:20] Speaker 02:
Yes, that is very welcome.

[00:32:22] Speaker 02:
That is my argument.

[00:32:23] Speaker 04:
But that's a reviewable order.

[00:32:25] Speaker 02:
That is a reviewable order.

[00:32:28] Speaker 05:
You said that the snapshot date

[00:32:33] Speaker 05:
has nothing to do with this.

[00:32:37] Speaker 05:
This is all just about C2.

[00:32:39] Speaker 05:
But I'm not sure that's right.

[00:32:44] Speaker 05:
And as I understand this, if a carrier, if a subscriber didn't do anything for, if a subscriber didn't use the service for 30 days and the carrier

[00:33:04] Speaker 05:
cut the service off on day 31, that would be unlawful under this scheme, correct?

[00:33:12] Speaker 02:
Yes, the carrier has to provide 15 days notice before cutoff.

[00:33:17] Speaker 05:
So you're imposing on the carriers this affirmative obligation to continue providing service after a 30-day period of non-usage.

[00:33:30] Speaker 05:
And then you say in 407A, support is based on the actual customers served directly as of the first date of the month.

[00:33:47] Speaker 05:
And for a while I was wondering if someone who hadn't used the service in 30 days might not be an actual qualifying customer, but under this scheme,

[00:34:01] Speaker 05:
on day 31 through 45, whatever it is, they still have this legal obligation to continue providing the service.

[00:34:12] Speaker 05:
And the snapshot date seems to treat them as actual qualifying customers if they're in that status on the first date of the month.

[00:34:25] Speaker 02:
That's correct, Your Honor.

[00:34:26] Speaker 05:
The way the rule works is... So if we just had 407A,

[00:34:32] Speaker 05:
the snapshot date strengthens the petitioner's case, correct?

[00:34:39] Speaker 05:
Yeah, so there is no subsection C2.

[00:34:42] Speaker 05:
And that is at least some reason for trying to construe 407C2 and 405E3

[00:34:55] Speaker 05:
in harmony with that.

[00:34:56] Speaker 05:
I mean, you're right, specific qualifies the general, but before we get to that, we try to harmonize all provisions so that there's no conflict to begin with.

[00:35:05] Speaker 02:
Correct, Your Honor.

[00:35:06] Speaker 02:
But the problem with that reading of subsection A is that it renders subsection C to superfluous.

[00:35:12] Speaker 02:
And we walk through the example on pages 23 and pages 24 of our brief.

[00:35:16] Speaker 02:
But effectively what petitioners are arguing is that subsection C2 is prospective only.

[00:35:23] Speaker 02:
In other words, it only eliminates support for subscribers once they've been de-enrolled from the Lifeline program.

[00:35:30] Speaker 02:
The problem with that is that subsection A already does that.

[00:35:35] Speaker 02:
Because if a subscriber is de-enrolled for non-usage, let's say in the middle of April,

[00:35:40] Speaker 02:
That subscriber pursuant to subsection A is not going to show up on the snapshot date under subsection A in the next month.

[00:35:48] Speaker 02:
So, prospectively, the lifeline ETC doesn't get reimbursement.

[00:35:52] Speaker 02:
Subsection C2 only performs work if pursuant to the second factor in subsection C2, it also eliminates support for the subscriber

[00:36:02] Speaker 02:
in the non-usage cure period on the snapshot date.

[00:36:06] Speaker 02:
In other words, subsection C2 only does any work if it eliminates support for two months instead of one.

[00:36:13] Speaker 02:
And then I go back to the fact that subsection C2 doesn't have any sort of temporal restriction.

[00:36:18] Speaker 02:
I understand that petitioners don't like the construct that the commission came up with, but our interpretation of the rules is truly the only way

[00:36:25] Speaker 02:
to reconcile A and C2 because it's the only interpretation that actually gives the fact to subsection C2.

[00:36:38] Speaker 05:
Okay.

[00:36:39] Speaker 05:
Judge Rao, anything else?

[00:36:41] Speaker 04:
No.

[00:36:41] Speaker 05:
Judge Edwards?

[00:36:42] Speaker 04:
Nothing more.

[00:36:43] Speaker 04:
Thank you.

[00:36:43] Speaker 05:
Thank you, Ms.

[00:36:44] Speaker 05:
Flood.

[00:36:45] Speaker 05:
Thank you.

[00:36:46] Speaker 05:
Does Mr. Heitman have any time?

[00:36:51] Speaker 00:
Council was out of time.

[00:36:52] Speaker 00:
We'll give you two minutes.

[00:36:54] Speaker 03:
Thank you, Your Honor.

[00:36:56] Speaker 03:
Judge Katz, in response to your question about qualifying customer, it's defined in rule 409.

[00:37:00] Speaker 03:
A qualifying customer is an eligible customer.

[00:37:03] Speaker 03:
So the fact that a customer is in a non-usage period does not make them a non-qualifying customer.

[00:37:08] Speaker 03:
They are a qualifying customer.

[00:37:11] Speaker 03:
Now, with respect to going back to 2012, the rules 407A, the core of it that says you shall be reimbursed, and the core of the non-usage rule, 407C2,

[00:37:21] Speaker 03:
have been the same.

[00:37:22] Speaker 03:
They have been adjusted in 2015, adjust a snapshot date into 407A, and the non-usage period has been condensed down from 30 to 15 days in 407C2.

[00:37:34] Speaker 03:
And so it is the case that based on the plain language of these rules, carriers have in fact been claiming reimbursement for subscribers served in the cure period for a long time.

[00:37:46] Speaker 03:
We said so in our brief.

[00:37:47] Speaker 03:
The FCC said it'd only go back to 2016 in their brief.

[00:37:50] Speaker 03:
So in our reply brief, we said, fine, if we're only going to be exposed back to 2016, we'll agree to that.

[00:37:55] Speaker 03:
But the fact of the matter is there's exposure that goes behind that.

[00:37:59] Speaker 03:
And in 2016, you're right.

[00:38:01] Speaker 03:
It did crystallize for us.

[00:38:02] Speaker 03:
Because as I explained, the 2015 snapshot idea crystallized the timing impact, right?

[00:38:10] Speaker 03:
It says 407A happens on a day, right?

[00:38:13] Speaker 03:
What you've not heard yet from counsel from the FCC

[00:38:16] Speaker 03:
is what 405E3 means and what the reference to 405E3 means in 407C2.

[00:38:23] Speaker 03:
And it means that we have 15 days.

[00:38:25] Speaker 03:
So you have that 15 day period colliding with this one day.

[00:38:29] Speaker 03:
And the only way that you give all three of these rules meaning is that you pay the carrier's reimbursement for subscribers for whom the cure period has not ended, but they are still served as the first day of the month.

[00:38:43] Speaker 03:
You give all three,

[00:38:44] Speaker 03:
rulings, all three rules, meaning to the FCC's effect on day 16.

[00:38:50] Speaker 03:
On day 16, when the subscriber has not cured, they are terminated under 405E3.

[00:38:56] Speaker 03:
The carrier no longer has the right to continue to receive reimbursement under C2, and they don't get reimbursement under A. Thank you, Your Honors.

[00:39:06] Speaker 05:
Thank you, Counsel.

[00:39:08] Speaker 05:
Case is submitted.