What Can the FCC Declare to be Unreasonable?

Global Crossing Telecommunications, Inc. v. Metrophones Telecommunications, Inc.

The FCC requires telecommunication carriers to compensate payphone operators for free calls (eg. 1-800 calls), and has declared failure to do so “unjust and unreasonable” as it has the power to do under language substantially copied from the Interstate Commerce Act of 1887. “Unjust and unreasonable” practices are statutorily defined as “unlawful” and allow injured person to recover “damages” for “unlawful” charges or practices. Until 1887 reasonableness was a question for the courts, not a commission. Payphone operators are authorized to recover damages in court when they are “damaged.” The question here is whether payphone operators may bring suit when a carrier refuses to pay compensation for free calls.

Where “Congress would expect the agency to be able to speak with the force of law when it addresses ambiguity in the statute or fills a space in the enacted law,” a court “is obliged to accept the agency’s position if Congress has not previously spoken to the point at issue and the agency’s interpretation” is “reasonable.” Chevron. Appellants argue that the law authorizes actions seeking damages only for statutory violations, not for regulations designed to promote the objectives of that statute. Previous cases holding that an agency cannot determine accessibility of courts were based on the text of the enabling statute. Nor does the text suggest that only violations of “interpretive” regulations can amount to unjust or unreasonable practices since this legislation was passed before the interpretive/substantive-regulatory distinction came into existence.

The definition of a “practice” as one that only harms carrier customers, and not carrier suppliers is not supported by the text or history of the legislation. “The long-distance carrier ordered by the FCC to compensate the payphone operator is so ordered in its role as a provider of communications services, not as a consumer of office supplies or the like.” Next, while the FCC has not provided reasons for its determination, those reasons are obvious (and have been elucidated elsewhere). Nor does this determination violate another statutory section (§276), but it rather serves the same purpose. Finally, even if this regulation goes beyond the mandate of §276, it still furthers the same purpose and, therefore, is reasonable under Chevron.

Justice Scalia, dissenting, argues that the Court’s outcome must either be premised on (1) the idea that such practices are independently unreasonable, or (2) that these practices are unreasonable simply because they violate FCC regulations. As for (1), it would be “neither unjust nor unreasonable for a carrier to decline to act as collection agent for payphone companies.” And under (2), the enabling Act only provides a private cause of action for violations of the Act (interpretive regulations) and not mere FCC regulatory actions. Justice Scalia also believes that both the text of the statute explicitly refers to the interpretive/substantive distinction in another section and that this distinction should carry over to the section at issue lest the careful delineations marked in the rest of the law be abolished by a “backdoor” in the section at issue.

Jutice Thomas, dissenting, does not believe that the word “practice,” as used in this statute, extends to business practices, as opposed to activities of telecommunication firms as providers of services. Basically, he says that section (a) sets out the duties and powers of a common carrier, and section (b) requires them to be reasonable (describing them jointly as “practices”). Since section (a) only applies does not set out duties related to the receipt of services from suppliers, whether those are reasonable or not is no matter for section (b). At the same time, since “unjust and unreasonable” is a statutory term, a court cannot abdicate its responsibility to construe that term independently in the name of Chevron deference. Finally, the FCC’s determination is overbroad, he argues, because it regulates both interstate and intrastate calls where the “unreasonable[ness]” portion of the statute only applies to interstate calls.