Direct Communications Cedar Valley, LLC v. Federal Communications Commission

In late 2011, the Federal Communications Commission (FCC or Commission) issued a Report and Order and Further Notice of Proposed Rulemaking (Order) comprehensively reforming and modernizing its universal service and intercarrier compensation systems. Petitioners, each of whom were parties to the FCC’s rule-making proceeding below, filed petitions for judicial review of the FCC’s Order. The Judicial Panel on Multidistrict Litigation consolidated the petitions in this court.

In the Joint Universal Service Fund Principal Brief, Additional Universal Service Fund Issues Principal Brief, Wireless Carrier Universal Service Fund Principal Brief, and Tribal Carriers Principal Brief, petitioners assert a host of challenges to the portions of the Order revising how universal service funds are to be allocated to and employed by recipients. After carefully considering those claims, we find them either unpersuasive or barred from judicial review. Consequently, we deny the petitions to the extent they are based upon those claims.

Table of Contents

I. Glossary

II. Background

A. Introduction

B. Distinction between telecommunications service providers and information-service providers

C. The FCC’s pre-Order regulatory framework for telephone services

D. The deficiencies identified by the FCC regarding its pre-Order regulatory framework

E. The FCC’s National Broadband Plan

*1034F. The FCC’s Notice of Inquiry and Notice of Proposed Rulemaking

G. The FCC’s Report and Order of November 18, 2011

H. This litigation

III. Standards of review

A. The Chevron standard

B. The arbitrary and capricious standard

C. The de novo standard

IV. Universal Service Fund Issues

A. Joint Universal Service Fund Principal Brief

1. Did the FCC’s broadband requirement exceed its authority under 17 U.S.C. § 254.?

2. Did the FCC act arbitrarily in simultaneously imposing the broadband requirement and reducing USF support?

3. Does the FCC’s use of auctions to distribute USF violate § 214(e)?

4. Was the FCC’s decision to reduce USF support in areas with “artificially low” end user rates unlawful or arbitrary?

5. Does the Order unlawfully deprive rural carriers of a reasonable opportunity to recover their prudently-incurred costs?

6. Do the FCC’s regression and SNA rules have unlawful retroactive effects?

7. Did the FCC disregard evidence that allocating USF to rural price cap carriers by competitive bidding would reduce service quality?

8. Does eliminating USF support for the highest-cost areas defeat the very purpose of universal service?

9. Is the FCC’s decision to eliminate high-cost support to RLECs, where an unsubsidized competitor offers voice and broadband to all of the RLECs’ customers in the same study area, unlawful and unsupported by substantial evidence?

10. Did the FCC arbitrarily fail to explain how its new definition of supported telecommunications services took into account the four factors it was required to consider under § 254(c)(1)?

11. Did the FCC arbitrarily disregard comments that the Order’s incremental USF support provisions would duplicate or undermine state-initiated plans for broadband deployment?

12. Did the Order unlawfully make changes not contained in the FCC’s proposed rule that could not reasonably have been anticipated by commenters?

B. Additional Universal Service Fund Issues Principal Brief

1. The FCC’s decision to limit USF support for broadband deployment to price-cap ILECs

2. Did the FCC violate the mandatory referral duty imposed by 47 U.S.C. § 410(c)?

3. Did the FCC irrationally refuse to modify service obligations for carriers to whom it denied USF support?

4. Is the Order, as applied to Allband and similarly-situated small rural carriers, unconstitutional under due process principles and as a bill of attainder, and/or does it violate the Act, principles of estoppel and contract law?

C. Wireless Carrier Universal Service Fund Principal Brief

1. Does the FCC lack authority to redirect USF support to broadband or to regulate broadband?

2. Must the USF portions of the Order be vacated?

3. Did the FCC act arbitrarily and capriciously in reserving CAFII support for ILECs?

4. Did the FCC act arbitrarily and capriciously in repealing the identical support rule and adopting a single-winner reverse auction?

Did the FCC act arbitrarily and capriciously in setting the Mobility II budget at $500 million? 5.

*10356. Did the FCC fail to respond to comments calling for a separate mobility fund for insular areas?

D. Tribal Carriers Principal Brief

1. Did the FCC act arbitrarily and capriciously in prescribing funding cuts for tribal carriers?

V. Conclusion

I. Glossary

1996 Act Telecommunications Act of 1996

Act (or 1934 Act) Communications Act of 1934

APA Administrative Procedure Act

ARC Access Recovery Charge

Joint Board Federal-State Joint Board on Universal Service

CAF Connect America Fund

CETC Competitive Eligible Telecommunications Carrier

COLR Carrier of Last Resort

ETC Eligible Telecommunications Carrier

FCC (or Commission) Federal Communications Commission

HCLS High Cost Loop Support

IAS Interstate Access Support

ICC Intercarrier Compensation

ICLS Interstate Common Line Support

ILEC Incumbent Local Exchange Carrier

IP Internet Protocol

JA Joint Appendix

LEC Local Exchange Carrier

Mobility Fund CAF Mobility Fund

NPRM Notice of Proposed Rulemaking

PSTN Public Switched Telephone Network

RLEC Rate-of-Return ILEC

SA Supplemental Joint Appendix

SNA Safety Net Additive

USF Universal Service Fund

VoIP Voice over Internet Protocol

WCB FCC’s Wireline Competition Bureau

II. Background

A. Introduction

For nearly eighty years, the FCC has regulated interstate communications. When it was first created by way of the Communications Act of 1934 (the 1934 Act or the Act), the FCC’s regulatory activities were focused on “communication^] by wire and radio.” 47 U.S.C. § 151. The FCC’s regulatory oversight subsequently expanded to include telephone service. Most recently, the FCC was charged by Congress with developing a “[N]ational [BJroadband [P]lan,” American Recovery and Reinvestment Act of 2009, Pub.L. No. 111-5, § 6001(k)(l), 123 Stat. 115, 515, the purpose of which is “to ensure that all people of the [U]nited [SJtates have access to broadband capability and [to] establish benchmarks for meeting that goal,” id. § 6001(k)(2), 123 Stat. at 516.

In a statement issued on March 16, 2010, the FCC concluded that Congress’s stated goals for the National Broadband Plan could not be achieved unless the FCC “comprehensively reformed” its existing regulatory system for telephone service. JA at 2. On February 9, 2011, the FCC issued a Notice of Proposed Rulemaking (NPRM) “proposing] to fundamentally modernize the [FCC]’s Universal Service Fund (USF or Fund) and intercarrier *1036compensation (ICC) system.” Id. at 284 (NPRM ¶ 1). After receiving and considering comments in response to the NPRM, the FCC on November 18, 2011 issued a Report and Order and Further Notice of Proposed Rulemaking (Order). The Order, and the reforms it proposes, are the subject of this litigation.

B. Distinction between telecommunications service providers and information-service providers

The 1934 Act, as amended by the Telecommunications Act of 1996 (the 1996 Act), “subjects all providers of ‘telecommunications servic[e]’ to mandatory common-carrier regulation, [47 U.S.C.] § 153(44).” Nat’l Cable & Telecomm. Ass’n v. Brand X Internet Servs., 545 U.S. 967, 973, 125 S.Ct. 2688, 162 L.Ed.2d 820 (2005). “Telecommunications service” is defined as “the offering of telecommunications for a fee directly to the public ... regardless of the facilities used.” 47 U.S.C. § 153(46). In turn, “[telecommunications” is “the transmission, between or among points specified by the user, of information of the user’s choosing, without change in the form or content of the information as sent and received.” 47 U.S.C. § 153(43). “Telecommunications earrierfs]” are defined as “provider[s] of telecommunications services.” 47 U.S.C. § 153(44).

Notably, the 1934 Act, as amended by the 1996 Act, does not regulate information-service providers. “[I]nformation service” is defined as “the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications.... ” 47 U.S.C. § 153(20). In March 2002, the FCC formally “concluded that broadband Internet service provided by cable companies is an ‘information service’ but not a ‘telecommunications service’ under the [1934] Act, and therefore not subject to mandatory Title II common-carrier regulation.” Nat’l Cable, 545 U.S. at 977-78, 125 S.Ct. 2688. In June 2005, the Supreme Court held that this “conclusion [wa]s a lawful construction of the [1934] Act under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), and the Administrative Procedure Act.” Nat’l Cable, 545 U.S. at 974, 125 S.Ct. 2688.

C. The FCC’s pre-Order regulatory framework for telephone services

The pre-Order regulatory system for telephone service, which was developed by the FCC over decades, was revised by the FCC in accordance with the 1996 Act. The 1996 Act, which “fundamentally restructure[d] local telephone markets,” AT & T Corp. v. Iowa Util. Bd., 525 U.S. 366, 370, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999), “sought to introduce competition to local telephone markets” while simultaneously “preserving universal service.” Qwest Corp. v. FCC, 258 F.3d 1191, 1196 (10th Cir.2001) (Qwest Corp.). “Universal service” was defined in the 1996 Act “[a]s an evolving level of telecommunications services that the [FCC] shall establish periodically under [§ 254 of the 1996 Act], taking into account advances in telecommunications and information technologies and services.” 47 U.S.C. § 254(c)(1). In other words, the 1996 Act “anticipate^] ... that in the future other types of telecommunications m[ight] become necessary for the nation to remain at the forefront of technological development,” and, consequently, it “outlin[ed] a process for the FCC to adjust [the definition of ‘universal service’] as new technologies ar[o]se.” Wireless World. LLC v. Virgin Islands Pub. Servs. Comm’n, No. Civ. A. 02-0061STT at *7 n. 7, 2008 WL 5635107 (D .Virgin Islands 2008).

*1037The FCC implemented “high-cost universal service support ... to help ensure that consumers ha[d] access to telecommunications services in areas where the cost of providing such services would otherwise be prohibitively high.” JA at 2. This “high-cost [universal service] support [wa]s provided through a complicated patchwork of programs ... in which the types of support a carrier reeeive[d] depended] on the size and regulatory classification of the carrier.” Id. at 3. More specifically, “[t]he federal high-cost support mechanism included five major components,” id.:

1) “High-cost loop support [that] provided support for intrastate network costs to rural incumbent local exchange carriers (LECs) in service areas where the cost to provide service exceeded] 115 percent of the national average,” id.;

2) “Local switching support [that] provided intrastate support for switching costs for companies that served 50,000 or fewer access lines,” id.;

3) “High-cost model support [that] provided support for intrastate network costs to non-rural incumbent LECs in states where the cost to provide service in non-rural areas exceeded] two standard deviations above the national average cost per line,” id.;

4) “Interstate access support (IAS) [that] provided support for price cap carriers to offset certain reductions in interstate access charges,” id.; and

5) “Interstate common line support (ICLS) [that] provided support to rate-of-return carriers, to the extent that subscriber line charge (SLC) caps d[id] not permit such carriers to recover their interstate common line revenue requirements,” id.

This system, often referred to as the inter-carrier compensation or ICC system, was “designed for an era of separate long-distance companies[,] ... high per-minute charges, and [little] competition ... among telephone companies_” Id. at 396 (Order ¶ 9).

D. The deficiencies identified by the FCC regarding its pre-Order regulatory framework

In devising its National Broadband Plan, the FCC noted what it perceived as deficiencies in its pre-Order regulatory framework. To begin with, “only voice [wa]s a supported service” under this framework, and “there [wa]s no requirement to provide broadband service to consumers, nor [wa]s there any mechanism to ensure that support [wa]s targeted toward extending broadband service to unserved areas.” Id. at 3. Further, “some of the ... high-cost programs d[id] not provide support in an economically efficient manner.” Id. “In addition, several programs provide[d] support based on an incumbent carrier’s embedded costs, whether or not a competitor provide[d], or could provide, service at a lower cost.” Id.1 Thus, “only non-rural high-cost support [wa]s based on forward-looking economic cost, as determined by the [FCC]’s voice telephony cost model.”2 Id. at 4. As a result, “[i]n 2009, the [FCC] *1038disbursed almost $4.3 billion in high-cost support, of which $331 million was calculated on the basis of forward-looking costs.” Id. at 6-7.

E. The FCC’s National Broadband Plan

“On March 26, 2010, the [FCC] delivered to Congress [its] National Broadband Plan.” Id. at 7. “The National Broadband Plan estimated that 14 million people living in seven million housing units in the United States currently do not have access to .terrestrial broadband infrastructure capable of meeting this target, described as ‘the broadband availability gap.’ ” Id. Consequently, the National Broadband Plan “recommend[ed] the creation of a Connect America Fund [ (CAF) ] to address the broadband availability gap in unserved areas and to provide any ongoing support necessary to sustain service in areas that require public funding, including those areas that already may have broadband.” Id. The National Broadband Plan outlined five principles that the CAF should adhere to,3 and it recommended that the FCC “create a fast-track program in CAF for providers to receive targeted funding for new broadband construction in unserved areas, and create a Mobility Fund to provide one-time support for deployment of 3G networks, to bring all states to a minimum level of 3G (or better) mobile service availability.” Id. at 7 (internal quotation marks omitted). “The National Broadband Plan [also] recommend[ed] that the [FCC] direct public investment toward meeting an initial national broadband availability target of 4 Mbps of actual download speed and 1 Mbps of actual upload speed.” Id. at 7. In addition, the National Broadband Plan recommended that the FCC’s “long range goal should be to replace all of the legacy High-Cost programs with a new program that preserves the connectivity that Americans have today and advances universal broadband in the 21st century.” Id. (internal quotation marks omitted). In other words, the National Broadband Plan proposed “cap[ping] and cut[ting] the legacy high-cost programs and” shifting the “realize[d] savings ... to targeted investment in broadband infrastructure.” Id. at 9.

F. The FCC’s Notice of Inquiry and Notice of Proposed Rulemaking

On April 21, 2010, the FCC issued a Notice of Inquiry and Notice of Proposed Rulemaking (Notice of Inquiry). The Notice of Inquiry sought “comment on three discrete groups of issues.” Id. at 8. First, the Notice of Inquiry sought “comment on use of a model as a competitively neutral and efficient tool for helping [the FCC] to quantify the minimum amount of universal service support necessary to support networks that provide broadband and voice service, such that the contribution burden that ultimately falls on American consumers is limited.” Id. Second, the Notice sought “comment on potential approaches to providing such targeted funding on an accelerated basis in order to extend broadband networks in unserved areas, such as a competitive procurement auction.” Id. *1039Third, the Notice sought “comment on specific proposals to cap and cut the legacy high-cost programs [for voice services] and realize savings that c[ould] be shifted to targeted investment in broadband infrastructure.” Id. at 8-9.

The FCC subsequently “received over 2,700 comments, reply comments, and ex parte filings totaling over 26,000 pages, including hundreds of financial filings from telephone companies of all sizes, including numerous small carriers that operate in the most rural parts of the nation.” Id. at 398 (Order ¶ 12). The FCC “held over 400 meetings with a broad cross-section of industry and consumer advocates.” Id. The FCC also “held three open, public workshops, and engaged with other federal, state, Tribal, and local officials throughout the process.” Id.

G. The FCC’s Report and Order of November 18, 2011

On November 18, 2011, the FCC released its 752-page Order. Id at 390. The Order stated that “[t]he universal service challenge of our time is to ensure that all Americans are served by networks that support high-speed Internet access — in addition to basic voice service — where they live, work, and travel.” Id. at 395 (Order ¶ 5). In turn, the Order stated that the “existing universal service and intercarrier compensation systems [we]re based on decades-old assumptions that fail[ed] to reflect today’s networks, the evolving nature of communications services, or the current competitive landscape.” Id. at 396 (Order ¶ 6). In light of these factors, the Order purported to “comprehensively reform[] and modernize[ ] the universal service and intercarrier compensation systems to ensure that robust, affordable voice and broadband service, both fixed and mobile, [we]re available to Americans throughout the nation.” Id. at 394 (Order ¶ 1).

The Order summarized the key components of the universal service reform the FCC would be implementing. Because the vast majority of Americans “that lack access to residential fixed broadband at or above the [FCC]’s broadband speed benchmark live in areas served by price cap carriers,” i.e., “Bell Operating Companies and other large and mid-sized carriers,” the FCC stated that it “w[ould] introduce targeted, efficient support for broadband in two phases” for these areas. Id. at 400 (Order ¶ 21). Phase I of this plan, intended “[t]o spur immediate broadband build-out,” would freeze “all existing high-cost support to price cap carriers” and make “an additional $300 million in CAF funding ... available.” Id. (Order ¶ 22). “Frozen support w[ould] be immediately subject to the goal of achieving universal availability of voice and broadband, and subject to obligations to build and operate broadband-capable networks in areas unserved by an unsubsidized competitor over time.” Id. Phase II of the plan “w[ould] use a combination of a forward-looking broadband cost model and competitive bidding to efficiently support deployment of networks providing both voice and broadband service for five years.” Id. (Order ¶ 23).

With respect to rate-of-return carriers, which “serve[d] less than five percent of access lines in the U.S.,” but received “total support from the high-cost fund ... approaching $2 billion annually,” the Order imposed substantial reforms. Id. at 401 (Order ¶ 26). In particular, any such carriers “receiving legacy universal service support, or CAF support to offset lost ICC revenues,” were required to “offer broadband service meeting initial CAF requirements ... upon their customers’ reasonable requests.” Id. The Order noted that, because of “the economic challenges of extending service in the high-cost areas of the country served by rate-of-return carri*1040ers, this flexible approach [would] not require rate-of-return companies to extend service to customers absent such a request.” Id.

The Order indicated that a CAF Mobility Fund would be created to “promot[e] the universal availability” of “mobile voice and broadband services.” Id. at 402 (Order ¶ 28). Phase I of the CAF Mobility Fund would “provide up to $300 million in one-time support to immediately accelerate deployment of networks for mobile voice and broadband services in unserved areas.” Id. at 402. This support, the Order indicated, would “be awarded through a nationwide reverse auction.” Id. Phase II of the Mobility Fund would “provide up to $500 million per year in ongoing support” in order to “expand and sustain mobile voice and broadband services in communities in which service would be unavailable absent federal support.” Id. Included in this $500 million annual budget was “ongoing support for Tribal areas of up to $100 million per year.” Id. Phase II also anticipated “eliminating] the identical support rule that determines the amount of support for mobile, as well as wireline, competitive ETCs [ (eligible telecommunications carriers) ],” id. (Order ¶ 29), and the creation of a “Remote Areas Fund” designed “to ensure that Americans living in the most remote areas in the nation, where the cost of deploying traditional terrestrial broadband networks is extremely high, can obtain affordable access through alternative technology platforms, including satellite and unlicensed wireless services,” id. (Order ¶ 30).

The Order also indicated that the FCC was reforming its intercarrier compensation rules, including “adoptflng] a uniform national bill-and-keep framework as the ultimate end state for all telecommunications traffic exchanged with a LEC.” Id. at 403 (Order ¶ 34). “Under bill-and-keep,” the Order noted, “carriers look first to their subscribers to cover the costs of the network, then to explicit universal service support where necessary.” Id. Relatedly, the Order noted that the FCC was “abandoning] the calling-party-network-pays model that dominated ICC regimes of the last century.” Id. However, the Order noted, “states will have a key role in determining the scope of each carrier’s financial responsibility for purposes of bill-and-keep, and in evaluating interconnection agreements negotiated or arbitrated under the framework in sections 251 and 252 of the Communications Act.” Id.

H. This litigation

Petitioners, who were parties to the FCC’s rulemaking proceeding below, each filed petitions for judicial review of the Order. After the Judicial Panel on Multi-district Litigation consolidated the petitions in this court, we held oral argument on the petitions on November 19, 2013.

III. Standards of review

The issues raised by petitioners in their respective briefs implicate three different standards of review: the Chevron standard, which applies to all of the issues in which petitioners assert that the FCC acted contrary to its statutory authority; the arbitrary and capricious standard, which applies to petitioners’ challenges to rules implemented by the FCC in its Order; and the de novo standard of review that applies to the constitutional issues raised by petitioners.

A. The Chevron standard

In “reviewing] an agency’s construction of [a] statute which it administers,” the first question for the court is “whether Congress has directly spoken to the precise question at issue.” Chevron, 467 U.S. at 842, 104 S.Ct. 2778. “If the *1041intent of Congress is clear, that is the end of the matter,” id, and both the agency and the court “must give effect to the unambiguously expressed intent of Congress,” id. at 843, 104 S.Ct. 2778. “If, however, ... the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute.” Id. This court gives deference to the agency’s interpretation so long as that interpretation is not arbitrary, capricious, or manifestly contrary to the statute. Id. at 844, 104 S.Ct. 2778.

B. The arbitrary and capricious standard

The Administrative Procedure Act (APA) directs us to “hold unlawful and set aside agency action, findings and conclusions found to be ... arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). Under the arbitrary and capricious standard, “a reviewing court may not set aside an agency rule that is rational, based on consideration of the relevant factors and within the scope of the authority delegated to the agency by the statute.” Motor Vehicle Mfrs. Ass’n of the United States, Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983). “The scope of review under the ‘arbitrary and capricious’ standard is narrow and a court is not to substitute its judgment for that of the agency.” Id. “Nevertheless, the agency must examine the relevant data and articulate a satisfactory explanation for its action including a rational connection between the facts found and the choice made.” Id. (internal quotation marks omitted). A reviewing court must “uphold a decision of less than ideal clarity if the agency’s path may reasonably be discerned.” Id. (internal quotation marks omitted).

C. The de novo standard

The APA also compels us to “set aside agency action, findings and conclusions found to be ... contrary to constitutional right.” 5 U.S.C. § 706(2)(B). “Because constitutional questions arising in a challenge to agency action under the APA fall expressly within the domain of the courts, we review de novo whether agency action violated a claimant’s constitutional rights.” Copar Pumice Co. v. Tidwell, 603 F.3d 780, 802 (10th Cir.2010) (internal quotation marks omitted).

IV. Universal Service Fund Issues

In the Joint Universal Service Fund Principal Brief, Additional Universal Service Fund Issues Principal Brief, Wireless Carrier Universal Service Fund Principal Brief, and Tribal Carriers Principal Brief,4 petitioners assert various challenges to the portions of the Order revising how universal service funds are to be allocated to and employed by recipients. We proceed to address each of those briefs and the issues raised therein.

*1042A. Joint Universal Service Fund Principal Brief

1. Did the FCC’s broadband requirement exceed its authority under 17 U.S.C. § 254.?

Petitioners argue that the FCC’s “continued classification of broadband Internet access service as an ‘information service’ is fatal to” the FCC’s condition that “USF support recipients ... provide broadband Internet access to consumers on reasonable request.” Pet’r Br. 3 at 11. More specifically, petitioners argue that the FCC, in requiring USF support recipients to provide broadband Internet access to consumers upon reasonable request, exceeded its authority under 47 U.S.C. § 254 in two ways. First, petitioners argue that the Act “expressly dictates that supported services are limited to an ‘evolving level of telecommunications services.’ ” Id. (italics in brief). “But the Order,” petitioners argue, “unlawfully mandates that carriers provide non-supported information services to receive USF support.” Id. at 11-12. Second, petitioners argue that, although the Act expressly provides that USF support is to go exclusively to telecommunications carriers for the purpose of providing “telecommunications services,” the Order “unlawfully gives USF support to entities that are not telecommunications carriers to provide non-telecommunications services.” Id. at 11.

a) Relevant statutory language

In addressing petitioners’ arguments, we begin by quoting at length the statutory language at issue. The primary statute upon which petitioners rely, 47 U.S.C. § 254, provides, in pertinent part, as follows:

(b) Universal service principles. The [Federal-State] Joint Board[, which was created in subsection (a) by the 1996 Act,] and the Commission shall base policies for the preservation and advancement of universal service on the following principles:

(1) Quality and rates. Quality services should be available at just, reasonable, and affordable rates.

(2) Access to advanced services. Access to advanced telecommunications and information services should be provided in all regions of the Nation.

(3) Access in rural and high-cost areas. Consumers in all regions of the Nation, including low-income consumers and those in rural, insular, and high cost areas, should have access to telecommunications and information services, including interexchange services and advanced telecommunications and information services, that are reasonably comparable to those services provided in urban areas and that are available at rates that are reasonably comparable to rates charged for similar services in urban areas.

(4) Equitable and nondiscriminatory contributions. All providers of telecommunications services should make an equitable and nondiscriminatory contribution to the preservation and advancement of universal service.

(5) Specific and predictable support mechanisms. There should be specific, predictable and sufficient Federal and State mechanisms to preserve and advance universal service.

(6) Access to advanced telecommunications services for schools, health care, and libraries. Elementary and secondary schools and classrooms, health care providers, and libraries should have access to advanced telecommunications services as described in subsection (h).

*1043(7) Additional principles. Such other principles as the Joint Board and the Commission determine are necessary and appropriate for the protection of the public interest, convenience, and necessity and are consistent with this Act.

(c)Definition. (1) In general. Universal service is an evolving level of telecommunications services that the Commission shall establish periodically under this section, taking into account advances in telecommunications and information technologies and services. The Joint Board in recommending, and the Commission in establishing, the definition of the services that are supported by Federal universal service support mechanisms shall consider the extent to which such telecommunications services—

(A) are essential to education, public health, or public safety;

(B) have, through the operation of market choices by customers, been subscribed to by a substantial majority of residential customers;

(C) are being deployed in public telecommunications networks by telecommunications carriers; and

(D) are consistent with the public interest, convenience, and necessity.

(2) Alterations and modifications. The Joint Board may, from time to time, recommend to the Commission modifications in the definition of the services that are supported by Federal universal service support mechanisms.

(3) Special services. In addition to the services included in the definition of universal service under paragraph (1), the Commission may designate additional services for such support mechanisms for schools, libraries, and health care providers for the purposes of subsection (h).

(d) Telecommunications carrier contribution. Every telecommunications carrier that provides interstate telecommunications services shall contribute, on an equitable and nondiscriminatory basis, to the specific, predictable, and sufficient mechanisms established by the Commission to preserve and advance universal service. The Commission may exempt a carrier or class of carriers from this requirement if the carrier’s telecommunications activities are limited to such an extent that the level of such carrier’s contribution to the preservation and advancement of universal service would be de minimis. Any other provider of interstate telecommunications may be required to contribute to the preservation and advancement of universal service if the public interest so requires.

(e) Universal service support. After the date on which Commission regulations implementing this section take effect, only an eligible telecommunications carrier designated under section 214(e) [47 U.S.C. § 214(e) ] shall be eligible to receive specific Federal universal service support. A carrier that receives such support shall use that support only for the provision, maintenance, and upgrading of facilities and services for which the support is intended. Any such support should be explicit and sufficient to achieve the purposes of this section.

47 U.S.C. § 254(b), (c), (d), (e).

The terms “telecommunications,” “telecommunications carrier,” and “telecommunications service,” which are used in § 254 and throughout the Act, are defined in the following manner:

(50) Telecommunications. The term “telecommunications” means the transmission, between or among points specified by the user, of information of the user’s choosing, without change in the *1044form or content of the information as sent and received.

(51) Telecommunications carrier. The term “telecommunications carrier” means any provider of telecommunications services, except that such term does not include aggregators of telecommunications services (as defined in section 226 [47 USCS § 226]). A telecommunications carrier shall be treated as a common carrier under this Act only to the extent that it is engaged in providing telecommunications services, except that the Commission shall determine whether the provision of fixed and mobile satellite service shall be treated as common carriage.

He * *

(53) Telecommunications service. The term “telecommunications service” means the offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used.

47 U.S.C. § 153(50), (51), (53). Notably, “telecommunications service” is treated distinctly under the Act from “information service,” which is defined under the Act as “the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications....” 47 U.S.C. § 153(24).

b) Is the FCC prohibited from imposing the broadband requirement?

Petitioners argue that § 254 unambiguously bars the FCC from conditioning USF funding on recipients’ agreement to provide broadband internet access services. Pet’r Br. 3 at 12. In support, petitioners begin by noting that § 254(c)(1) “explicitly defines ‘universal service’ as ‘an evolving level of telecommunications services’ the [FCC] is to establish, ‘taking into account advances in telecommunications and information technologies and services.’ ” Id. at 12 (quoting 47 U.S.C. § 254(c)(1); emphasis added in brief). In turn, petitioners note that ‘ “telecommunications services’ are common carrier services under Title II of the Act, distinct from ‘information services’ defined in 47 U.S.C. § 153(24), and the [FCC] has declined to classify [broadband] services such as Voice over Internet Protocol (“VoIP’), as telecommunications services.” Id. In particular, petitioners note that the FCC previously determined “that bundled broadband internet access is an ‘information service,’ not a ‘telecommunications service,’ ” and that this determination “was upheld [by the Supreme Court] as a permissible choice under Chevron.” Id. at 14 n. 7 (citing Nat’l Cable & Telecomm. Ass’n v. Brand X Internet Servs., Inc., 545 U.S. 967,