Wide Voice, LLC v. Federal Communications Commission; United States of America

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
WIDE VOICE, LLC,
Petitioner,
v.
FEDERAL COMMUNICATIONS
COMMISSION; UNITED STATES OF
AMERICA,
Respondents,
MCI COMMUNICATIONS SERVICES,
LLC,
Respondent-Intervenor.
No. 20-70042
FCC No.
19-115
OPINION
On Petition for Review of an Order of the
Federal Communications Commission
Argued and Submitted February 4, 2021
San Francisco, California
Filed July 30, 2021

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WIDE VOICE V. FCC 2
Before: Johnnie B. Rawlinson and Patrick J. Bumatay,
Circuit Judges, and Stephen J. Murphy III,* District Judge.
Opinion by Judge Rawlinson
SUMMARY**
Federal Communications Commission
The panel granted in part and denied in part a petition for
review of the Federal Communications Commission
(“FCC”)’s order finding that a competitive local exchange
carrier’s tariffed rate was void ab initio because it violated
the FCC’s benchmarking rule by exceeding the established
step-down rates.
This appeal involves tariffed charges that local exchange
carriers impose on long-distance carriers for access to
services that complete long-distance telephone calls. When
customers, known as end users, purchase telephone service,
they generally contract with two different entities: a local
exchange carrier (LEC) and a long-distance carrier. The LEC
owns the phone lines that connect directly to end users, and
it is through the LEC’s lines that users make local calls. In
turn, the long-distance carrier connects end users’ LEC
* The Honorable Stephen J. Murphy III, United States District Judge
for the Eastern District of Michigan, sitting by designation.
** This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.

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WIDE VOICE V. FCC 3
networks to other LEC networks around the country, thus
giving end users the ability to make long-distance calls.
The Telecommunications Act of 1996 amended the
Communication Act of 1934, 47 U.S.C. § 204(a), by
providing “that a carrier “may file with the [FCC] a new or
revised charge . . . on a streamlined basis—[and]—[a]ny such
charge . . . shall be deemed lawful” if the FCC does not
suspend or investigate it within seven days (if the rate
decreases) or 15 days (if the rate increases).” 47 U.S.C.
§ 204(a)(3). The 1996 Act further divided local exchange
carriers into incumbent LECs (ILECs) and new entrants
called competitive LECs (CLECs). The FCC initially left
CLECs’ access rates unregulated. However, after discovering
that CLECs’ rates generally exceeded that of ILECs, the FCC
changed course to ensure that CLECs’ access charges were
just and reasonable as compared to the access charges of
ILECs. To achieve this goal, the FCC implemented the
“benchmarking rule,” which prohibited a CLEC from pricing
its services above the rate charged for such services by the
competing ILEC. The FCC also promulgated corollary rules
providing for price cap carriers, essentially ILECs, to
reduce—or “step down”—their “Tandem-Switched Transport
Access Service” rates. Tandem Switched Transport Service
is the function of establishing a communications path to
complete end users’ long-distance calls.
In 2019, Verizon Business Services filed a complaint with
the FCC alleging that Wide Voice’s tariff was unlawful
because it charged rates exceeding the step-down rates set
forth in 47 CFR § 51.907(g)(2) and (h). Specifically,
Verizon sought a declaration that § 51.907 applied to Wide
Voice, as a CLEC, and that Wide Voice’s tariff purporting to
authorize it to charge rates prohibited by §§ 51.907 and 61.26

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WIDE VOICE V. FCC 4
was void ab initio. The FCC agreed with Verizon,
concluding that Wide Voice’s tariffed rate violated the
benchmarking rule by exceeding the step-down rates charged
by a competing ILEC for the same service. It reasoned that
“when a benchmarking [CLEC] terminates traffic traversing
a tandem owned by it or an affiliate (i.e., the service
described in [§§] 51.907(g)(2) and (h)), it too must step down
its rate as required by the benchmark.” The panel held that
the FCC’s conclusion that Wide Voice’s tariff was unlawful
because it violated the benchmarking rule was neither
arbitrary nor capricious.
However, the FCC’s determination that the tariff was void
ab initio after being “deemed lawful” in accordance with the
governing statute was arbitrary and capricious. Applying
§ 204(a)(3) to the facts of this case, the panel held that once
Wide Voice’s tariff took effect without prior suspension or
investigation it was “deemed lawful.” As a result, only
prospective remedies were available to the FCC after its
finding that Wide Voice’s tariff was unlawful. The panel
concluded that the FCC impermissibly disregarded the
“deemed lawful” status of Wide Voice’s tariffs in
contravention of Congress’ unambiguously expressed intent
to provide a mechanism to achieve that “deemed lawful”
status. In addition, the FCC elided its own prior ruling, as
well as prior court rulings precluding retrospective remedies
for “deemed lawful” rates later determined to be
unreasonable. For these reasons, the FCC’s characterization
of Wide Voice’s tariff as void ab initio was arbitrary and
capricious.

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WIDE VOICE V. FCC 5
COUNSEL
Lauren J. Coppola (argued) and Robert F. Callahan Jr.,
Robins Kaplan LLP, Boston, Massachusetts; Glenn Danas,
Robins Kaplan LLP, Los Angeles, California; for Petitioner.
William J. Scher (argued), Counsel; Richard K. Welch,
Deputy Associate General Counsel; Jacob M. Lewis,
Associate General Counsel; Thomas M. Johnson Jr., General
Counsel; Federal Communications Commission, Washington,
D.C.; Robert B. Nicholson and Robert Wiggers, Attorneys;
Michael F. Murray, Deputy Assistant Attorney General;
Makan Delrahim, Assistant Attorney General; United States
Department of Justice, Washington, D.C.; for Respondent.
Grace W. Knofczynski (argued), Scott H. Angstreich, and
Sean Nadel, Kellogg Hansen Todd Figel & Frederick PLLC,
Washington, D.C.; Christopher M. Miller and Curtis L.
Groves, Verizon, Washington, D.C.; for Respondent-
Intervenor.
Philip J. Macres, Klein Law Group, PLLC, Washington,
D.C., for Amici Curiae Fusion Cloud Services, LLC f/k/a
Birch Communications, LLC, and Fusion Communications,
LLC f/k/a Cbeyond Communications, LLC.

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WIDE VOICE V. FCC 6
OPINION
RAWLINSON, Circuit Judge:
Competitive local exchange carrier (CLEC), Wide Voice,
LLC (Wide Voice), petitions for review of an order from the
Federal Communications Commission (FCC) finding that
Wide Voice’s tariffed rate was void ab initio because it
violated the FCC’s benchmarking rule by exceeding the
established step-down rates. We hold that the FCC did not
err in concluding that Wide Voice’s tariff violated the
benchmarking rule by deviating from the established step-
down rates. However, the FCC’s determination that the tariff
was void ab initio after being “deemed lawful” in accordance
with the governing statute was arbitrary and capricious.
Therefore, we grant in part and deny in part the petition for
review.
I. BACKGROUND
A. Legal Framework
This appeal involves tariffed charges that local exchange
carriers (LEC) impose on long-distance carriers for access to
services that complete long-distance telephone calls. When
customers, known as end users, purchase telephone service,
they generally contract with two different entities: a LEC,
and a long-distance carrier. “The LEC owns the phone lines
that connect directly to end users, and it is through the LEC’s
lines that users make local calls.” Great Lakes Comnet, Inc.
v. FCC, 823 F.3d 998, 1000 (D.C. Cir. 2016). In turn, “[t]he
long-distance carrier connects end users’ LEC networks to
other LEC networks around the country, thus giving end users

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WIDE VOICE V. FCC 7
the ability to make long-distance calls.” Id. (citation
omitted).
As an example, when a caller wishes to speak with a
friend across the country, the call travels from the caller’s
LEC’s lines to the long-distance carrier’s lines and then from
those lines to the friend’s LEC’s lines, across which it travels
to the friend’s phone. Under the traditional intercarrier
compensation system, the long-distance carrier would pay
access charges to the LEC. See In the Matter of Access
Charge Reform, 16 FCC Rcd. 9923, 9926–27 (2001) (Access
Reform Order) (explaining that customers pay their long-
distance carriers for calls and that those carriers then pay
access fees to the caller’s LEC and the recipient’s LEC).
Under § 201(b) of the Communications Act of 1934, rates
for interstate communications services must be “just and
reasonable.” 47 U.S.C. § 201(b). To ensure compliance with
this mandate, carriers must generally file a “schedule [of]
charges”—commonly referred to as tariffs—with the FCC,
listing interstate services and applicable rates. 47 U.S.C.
§ 203; see also CallerID4u, Inc. v. MCI Commc’ns Servs.
Inc., 880 F.3d 1048, 1052–53 (9th Cir. 2018). The FCC may
suspend a tariff for a limited time prior to it becoming
effective to investigate its lawfulness. 47 U.S.C. § 204(a)(1).
The Telecommunications Act of 1996 (1996 Act)
amended § 204(a) by providing that a carrier “may file with
the [FCC] a new or revised charge . . . on a streamlined
basis—[and]—[a]ny such charge . . . shall be deemed lawful”
if the FCC does not suspend or investigate it within seven
days (if the rate decreases) or 15 days (if the rate increases).
47 U.S.C. § 204(a)(3). The 1996 Act also divided local

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WIDE VOICE V. FCC 8
exchange carriers into incumbent LECs (ILECs)1 and new
entrants called competitive LECs (CLECs). See 47 U.S.C.
§§ 251, 252; see also Fones4All Corp, 550 F.3d at 813.
The FCC initially left CLECs’ access rates unregulated.
See Great Lakes Comnet, 823 F.3d at 1001. However, after
discovering that CLECs’ rates generally exceeded that of
ILECs, the FCC changed course to ensure that CLECs’ access
charges were just and reasonable as compared to that of
ILECs. See Access Reform Order, 16 FCC Rcd. at 9931. To
achieve this goal, the FCC implemented the “benchmarking
rule,” which prohibited a CLEC from pricing its services
“above . . . [t]he rate charged for such services by the
competing ILEC.” 47 CFR § 61.26(b)(1); see also Access
Reform Order, 16 FCC Rcd. at 9939.
In 2011, the FCC initiated comprehensive reforms of its
intercarrier compensation regime and adopted a timeline for
transitioning to a “bill-and-keep” framework for
telecommunications traffic involving LECs. In the Matter of
Level 3 Commc’ns., LLC v. AT&T Inc., 33 FCC Rcd. 2388,
2389 (2018); see also In the Matter of Connect Am. Fund,
26 FCC Rcd. 17663 (2011) (Transformation Order). Under
a bill-and-keep arrangement, carriers look to their
subscribers, as opposed to other carriers, to recover their
costs. See Level 3, 33 FCC Rcd. at 2388. In the
Transformation Order, the FCC adopted a multi-year plan for
1 ILECs are carriers who were in existence at the time the 1996 Act
took effect. See Fones4All Corp. v. FCC, 550 F.3d 811, 813 (9th Cir.
2008).

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WIDE VOICE V. FCC 9
transitioning the rates of price cap carriers2 to bill-and-keep
by July 1, 2018. See id. at 2389.
The FCC promulgated corollary rules providing for price
cap carriers to reduce—or “step down”—their “Tandem-
Switched Transport Access Service”3 rates in year six of the
transition plan, and to further reduce those same charges to
zero (i.e., bill-and-keep) in year seven. 47 CFR
§§ 51.907(g)(2), (h). In year six (beginning July 1, 2017), the
step-down required price cap carriers to “establish, for
interstate and intrastate terminating traffic traversing a
tandem switch that the terminating carrier or its affiliates
owns, Tandem-Switched Transport Access Service rates no
greater than $0.0007 per minute.” 47 CFR § 51.907(g)(2).
Effective July 1, 2018, the year seven step-down required
price cap carriers to reduce these rates to zero. See 47 CFR
§ 51.907(h). In sum, price cap carriers who owned the
equipment at the end of a call could no longer charge other
carriers to access that equipment. Instead, the price cap
carrier was required to recoup its costs from its subscribers.
See Level 3, 33 FCC Rcd. at 2388.
B. Procedural History
Wide Voice is a CLEC, and thus is not a price cap carrier.
Wide Voice filed a tariff with the FCC setting forth two
2 A price cap carrier is essentially an ILEC. See Cary Adickman,
Special Access: The Harm of Premature Deregulation in
Telecommunications, 31 Cardozo Arts & Ent. L.J. 113, 132, n.86 (2012).
3 Tandem Switched Transport Service is the function of establishing
a communications path to complete end users’ long-distance calls. See
47 CFR § 51.903(i); see also Verizon Commc’ns., Inc. v. FCC, 535 U.S.
467, 489–90 (2002).

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WIDE VOICE V. FCC 10
separate “terminating Tandem Switched Transport” rates.
One rate was referred to as a “Standard” rate and the other
was referred to as an “Affil PCL” rate. The Standard rate of
up to $0.03993227 per minute, was “benchmarked to the
price cap rates which are not subject to the step-down
specified in [FCC] rules.” The Affil PCL rate incorporated
the year six and year seven step-downs as specified in the
Transformation Order and in §§ 51.907(g)(2) and (h) of the
FCC’s rules. However, the step-down Affil PCL rate only
applied to terminating traffic that traversed a Wide Voice
tandem switch, with the terminating carrier being a Wide
Voice-affiliated price cap carrier. However, Wide Voice has
never actually charged the step-down Affil PCL rates of
$0.0007 per minute (as of July 29, 2017) and $0 per minute
(as of August 2, 2018) because Wide Voice has no price cap
carrier affiliates. Stated differently, Wide Voice continued to
charge other carriers for using Wide Voice’s tandem switch
even when the terminating carrier was a Wide Voice-affiliate.
Wide Voice justified its charges on the basis that the step-
down rates only applied if the terminating carrier is also a
price cap carrier, which Wide Voice is not.
In 2019, Verizon Business Services (Verizon), a price cap
carrier, filed a complaint with the FCC alleging that Wide
Voice’s tariff was unlawful because it charged rates
exceeding the step-down rates set forth in §§ 51.907(g)(2)
and (h). Specifically, Verizon sought a “declaration that
§ 51.907 applie[d] to Wide Voice, as a CLEC, and that Wide
Voice’s tariff purporting to authorize it to charge rates
prohibited by §§ 51.907 and 61.26 [was] void ab initio.” The
FCC agreed with Verizon, concluding that Wide Voice’s
tariffed rate violated the benchmarking rule by exceeding the
step-down rates charged by a competing ILEC for the same

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WIDE VOICE V. FCC 11
service, and that the tariff was void ab initio. Wide Voice
filed a timely petition for review of the FCC’s decision.
II. STANDARD OF REVIEW
An FCC decision may be set aside if it is “arbitrary,
capricious, an abuse of discretion, or otherwise not in
accordance with the law.” California v. FCC, 75 F.3d 1350,
1358 (9th Cir. 1996) (citation omitted). Under that standard,
we must determine whether the FCC’s decision “was a
reasonable exercise of its discretion.” Id. (citation and
internal quotation marks omitted).
III. DISCUSSION
A. The Benchmarking Rule
It is undisputed that Wide Voice is a CLEC subject to the
benchmarking rule. The benchmarking rule prohibits CLECs
like Wide Voice from charging rates higher than those
charged by a competing ILEC for the same service, i.e.,
tandem-switched transport service. See 47 CFR
§ 61.26(b)(1). As the FCC pointed out, “[t]he next logical
question is what rate may the competing [ILEC] charge for
tandem-switched transport service.”
ILECs are obligated to charge the step-down rates
promulgated in §§ 51.907(g)(2) and (h). See Level 3, 33 FCC
Rcd. at 2388–89 (clarifying that the step-down rates apply to
tandem-switching and transport traffic that terminates at the
end office of a price cap carrier). It naturally follows that a
benchmarking CLEC must similarly step down its tandem-
switched transport rate for traffic that traverses a tandem-
switch owned by the CLEC or its affiliate that terminates at

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WIDE VOICE V. FCC 12
the CLEC’s end office. See Transformation Order, 26 FCC
Rcd. at para. 807 (explaining that the step-down rates apply
to CLECs via the benchmarking rule); see also In re FCC 11-
161, 753 F.3d 1015, 1113 (10th Cir. 2014) (same).
The FCC concluded that Wide Voice’s tariff was
unlawful because it violated the benchmarking rule. It
reasoned that “when a benchmarking [CLEC] terminates
traffic traversing a tandem owned by it or an affiliate (i.e., the
service described in [§§] 51.907(g)(2) and (h)), it too must
step down its rate as required by the benchmark.” This
conclusion was neither arbitrary nor capricious. See Access
Reform Order, 16 FCC Rcd. at 9939 (explaining that a
benchmarking approach provides a simple way to determine
the reasonableness of a CLEC’s access rates).
B. Rates Filed on a “Streamlined” Basis
Wide Voice filed its tariff on a “streamlined” basis
pursuant to 47 U.S.C. § 204(a)(3), which provides:
A local exchange carrier may file with the
[FCC] a new or revised charge, classification,
regulation, or practice on a streamlined basis.
Any such charge, classification, regulation, or
practice shall be deemed lawful and shall be
effective 7 days (in the case of a reduction in
rates) or 15 days (in the case of an increase in
rates) after the date on which it is filed with
the [FCC] unless the [FCC] takes action under

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WIDE VOICE V. FCC 13
paragraph (1)[4] before the end of that 7-day
or 15-day period, as is appropriate.
A tariff filed pursuant to this provision is “deemed
lawful.” Id. The record here is unequivocal—Wide Voice
filed its tariff on a streamlined basis pursuant to § 204(a)(3),
and the FCC did not take action within the time frame
enumerated in § 204(a)(3). At that point, Wide Voice’s
streamlined tariff was “deemed lawful.” Id. Nevertheless,
the FCC ruled that the tariff filed by Wide Voice was void ab
initio. Put simply, the FCC ruled that although Wide Voice’s
rate was “deemed lawful” under the statute, it was never
actually lawful. But that ruling was inconsistent with the
FCC’s prior Streamlined Tariff Order, which prohibited
retroactive liability for a “deemed lawful” rate. See In the
Matter of Implementation of Section 402(b)(1) (A) of the
Telecommunications Act of 1996, 12 FCC Rcd. 2170, 2183
(1997) ( Streamlined Tariff Order) (clarifying that “tariff
filings that take effect, without suspension, under
[§] 204(a)(3) that are subsequently determined to be unlawful
in a [§] 205 investigation or a [§] 208 complaint proceeding
would not subject the filing carrier to liability for damages for
services provided prior to the determination of
unlawfulness”).
The FCC seeks to avoid the import of its prior ruling by
reasoning that Wide Voice’s streamlined tariff did not “even
meet the preliminary standard for a legal tariff filing, and
4 Paragraph 1 of the statute provides in pertinent part: “Whenever
there is filed with the [FCC] any new or revised charge . . . , the [FCC]
may either upon complaint or upon its own initiative without complaint,
upon reasonable notice, enter upon a hearing concerning the lawfulness
thereof . . .” 47 U.S.C. § 203(a)(1).

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WIDE VOICE V. FCC 14
thus, cannot become a deemed lawful tariff by operation of
§ 204(a)(3).” However, as the D.C. Circuit has opined, “[t]he
terms ‘legal’ rate and ‘lawful’ rate come to us burdened with
(or illuminated by) the Supreme Court’s decision in Arizona
Grocery Co. v. Atchison, Topeka & Santa Fe Railway Co.,
284 U.S. 370, 348 (1932).”5 ACS of Anchorage, Inc. v. FCC,
290 F.3d 403, 410 (D.C. Cir. 2002). Thus, a tariff is “legal”
if it “is procedurally valid—it has been filed with the [FCC],
the [FCC] has allowed it to take effect, and it contains the
published rates the carrier is permitted to charge.” Virgin
Islands Tel. Corp. v. FCC, 444 F.3d 666, 669 (D.C. Cir.
2006) (citations, alterations, and internal quotation marks
omitted). A lawful tariff “is not only legal, but also contains
rates that are ‘just and reasonable’ within the meaning of
§ 201(b).” Id. (citations omitted). Cognizant of this
distinction, the FCC in its Streamlined Tariff Order
acknowledged that “because [§] 204(a)(3) uses the phrase
‘deemed lawful,’ it must be read to mean that a streamlined
tariff that takes effect without prior suspension or
investigation is conclusively presumed to be reasonable and,
thus, a lawful tariff during the period that the tariff remains in
effect.” 12 FCC Rcd. at 2182.
Application of § 204(a)(3) to the facts of this case is
straightforward. Once Wide Voice’s tariff took effect
without prior suspension or investigation it was “deemed
lawful.” As a result, only prospective remedies were
available to the FCC after its finding that Wide Voice’s tariff
5 In Arizona Grocery, the Supreme Court held that the Interstate
Commerce Commission could not order a common carrier to pay
reparations for charging a rate that the agency had explicitly approved at
the time it was collected, but subsequently determined to have been
unreasonable. See 284 U.S. at 389–90.

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WIDE VOICE V. FCC 15
was unlawful. See ACS of Anchorage, 290 F.3d at 411 (“If a
later reexamination shows [the tariffed rates] to be
unreasonable, the [FCC’s] available remedies will be
prospective only. . . .”) (citing Streamlined Tariff Order,
12 FCC Rcd. at 2181–82). “Refunds from lawful tariffs are
impermissible as a form of retroactive ratemaking. . . .”
Virgin Islands Tel. Corp., 444 F.3d at 669; see also
Streamlined Tariff Order, 12 FCC Rcd. at 2175–76
(recognizing Congress’ intent to create a conclusive bar to
refunds for tariffs “deemed lawful” under § 204(a)(3))
(citation omitted). These rulings unambiguously preclude
refunds for tariffs “deemed lawful” and later found to be
unreasonable. ACS of Anchorage, 290 F.3d at 412.
The D.C. Circuit concluded in ACS of Anchorage that
“[t]he [FCC] may have been confused by its pre-§ 204(a)(3)
habit of retroactively assessing the lawfulness of a rate long
after it had taken effect without advance suspension or
initiation of hearing.” Id. at 413 (citation omitted). “But that
is not the world of § 204(a)(3), where the rate itself, if filed
and not suspended, is ‘deemed lawful.’” Id.; see also
Streamlined Tariff Order, 12 FCC Rcd. at 2176 (explaining
that § 204(a)(3) effected a radical change from previous
practice).
We follow the lead of the D.C. Circuit in concluding that
the FCC impermissibly disregarded the “deemed lawful”
status of Wide Voice’s tariffs in contravention of Congress’
unambiguously expressed intent to provide a mechanism to
achieve that “deemed lawful” status. In addition, the FCC
elided its own prior ruling, as well as prior court rulings
precluding retrospective remedies for “deemed lawful” rates
later determined to be unreasonable. For these reasons, the

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WIDE VOICE V. FCC 16
FCC’s characterization of Wide Voice’s tariff as void ab
initio was arbitrary and capricious.
IV. CONCLUSION
We DENY Wide Voice’s petition for review of the FCC’s
determination that its tariffed rate violated the benchmarking
rule; and GRANT its petition for review of the FCC’s
determination that its “deemed lawful” rates were void ab
initio. Each party shall bear its costs on appeal.

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