On June 20, 2014, the D.C. Circuit Court of Appeals vacated two FCC regulations on phone call captioning technology designed for the hearing impaired, holding that the rules were made arbitrarily and capriciously in violation of the Administrative Procedures Act.
As explained in our previous blog entry, Internet Protocol Captioned Telephone Service (IP CTS) provider Sorenson Communications filed a petition challenging FCC rules setting a $75 price floor for equipment and a requirement that such equipment include a default captions-off setting.
The court agreed with Sorenson that the Commission had no evidence to support its conclusion that IP CTS technology is being fraudulently used and that the rules were thus "intended to defeat a bogeyman whose existence was never verified[.]" Further, the Commission had no evidence that a price floor would deter fraudulent use and failed to explain why the floor was set at $75. As to the captions-off requirement, the court noted evidence in the record showing the rule to be unnecessary, ineffective, and disruptive for consumers.
The court also concluded that about ineligible use of IP CTS threatening the viability of the service's funding mechanism did not give the Commission good cause to bypass notice-and-comment when it promulgated interim versions of the rules. The court held for the first time that an agency's own determination that it had good cause is not entitled to deference but is subject to de novo review.
Ultimately, the D.C. Circuit's decision offers further assurance to businesses in regulated industries that, when an agency makes rules, it must provide the opportunity for notice-and-comment, examine all relevant data, and articulate a well-reasoned explanation for its action.
Sorenson Communications, Inc., et al. v. F.C.C., Nos. 13-1122, 13-1246 (D.C. Cir. June 20, 2014)