United States Court of Appeals 
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 16, 2009                 Decided January 12, 2010 
No. 08-1365 
CORE COMMUNICATIONS,INC.,
PETITIONER
v.
FEDERAL COMMUNICATIONS COMMISSION AND UNITED
STATES OF AMERICA,
RESPONDENTS
EARTHLINK,INC., ET AL.,
INTERVENORS
Consolidated with 08-1393, 09-1044, 09-1046 
On Petitions for Review of Orders  
of the Federal Communications Commission
Michael B. Hazzard argued the cause for petitioner Core 
Communications, Inc. and supporting intervenors.  With him 
on the briefs were Joseph P. Bowser, Adam D. Bowser,
Joshua M. Bobeck, and Ross A. Buntrock.
Case: 08-1365      Document: 1225091      Filed: 01/12/2010      Page: 1
2
 Jonathan D. Feinberg argued the cause for petitioners 
People of the State of New York and Public Service 
Commission of the State of New York, intervenors 
Pennsylvania Public Utilities Commission and the National 
Association of State Utility Consumer Advocates, and amicus
curiae Arizona Corporation Commission.  On the briefs were 
John C. Graham, James Bradford Ramsay, Robin K. Lunt,
David Cleveland Bergmann, Joseph Kevin Witmer, and 
Maureen A. Scott.
Joshua M. Bobeck, Ross A. Buntrock, and Michael B. 
Hazzard were on the brief for intervenors in support of 
petitioners.  Adam D. Bowser and Joseph P. Bowser entered 
appearances. 
Joseph R. Palmore, Deputy General Counsel, Federal 
Communications Commission, argued the cause for 
respondents.  With him on the brief were Richard K. Welch,
Deputy Associate General Counsel, and Laurence N. Bourne,
Counsel. Nancy C. Garrison and Catherine G. O'Sullivan,
Attorneys, U.S. Department of Justice, and Daniel M. 
Armstrong III, Associate General Counsel, Federal 
Communications Commission, entered appearances. 
Scott H. Angstreich argued the cause for intervenors in 
support of respondents.  With him on the brief were Michael
K. Kellogg, Kelly P. Dunbar, Michael E. Glover, Karen
Zacharia, Christopher M. Miller, Gary L. Phillips, John T. 
Nakahata, Carl W. Northrop, Stephen B. Kinnaird, Timothy J. 
Simeone, Joseph C. Cavender, and John E. Benedict. Robert
B. McKenna Jr. entered an appearance. 
Before: SENTELLE, Chief Judge, WILLIAMS AND 
RANDOLPH, Senior Circuit Judges.
Case: 08-1365      Document: 1225091      Filed: 01/12/2010      Page: 2
3
 Opinion for the Court filed by Senior Circuit Judge
WILLIAMS.
WILLIAMS, Senior Circuit Judge:  When a customer 
accesses the internet via “dial-up,” his or her call goes to a 
local exchange carrier (“LEC”), which commonly hands the 
call off to another LEC, which in turn connects the customer 
to an internet service provider (“ISP”).
1
  The ISP links the 
customer to the web.  At least as early as 1999 the Federal 
Communications Commission was concerned that the 
regulatory procedures under which the sending LEC 
compensated the recipient LEC were leading to the imposition 
of excessive rates, and that these rates in turn were distorting 
the markets for internet and telephone services.  The 
Commission in due course responded with an alternative 
regulatory regime, principally taking the form of rate caps set 
well below the rates that had prevailed before.
In the order under review here, In the Matter of 
Implementation of the Local Competition Provisions in the 
Telecommunications Act of 1996, Developing a Unified 
Intercarrier Compensation Regime, Intercarrier 
Compensation for ISP-Bound Traffic (CC Docket Nos. 96-45, 
96-98, 99-68, 99-200, 01-92), FCC 08-262, __ FCC Rcd __ 
(Nov. 5, 2008) (the “Order”), the Commission has set forth 
the basis of its authority to institute the rate cap system, 
namely, 47 U.S.C. § 201.  That section (excerpted in an 
appendix to this opinion) requires that the charges of “every 
common carrier engaged in interstate or foreign 
1
  Data in the record suggest that dial-up, though being rapidly 
replaced by various forms of higher-speed service, still accounts for 
a non-trivial share of internet access: about 20.4% in 2007, 10.5% 
in 2009, and (a prediction, obviously) 4.6% in 2014.  Joint 
Appendix 102. 
Case: 08-1365      Document: 1225091      Filed: 01/12/2010      Page: 3
4
communication by wire” for “such communication service” be 
“just and reasonable,” and authorizes the Commission to 
“prescribe such rules and regulations as may be necessary . . . 
to carry out the provisions of this chapter.”  Id.  Petitioners 
assail the Commission’s analysis on a variety of grounds, 
most powerfully on the theory that §§ 251-252 of Title 47, 
added by the Telecommunications Act of 1996, Pub.L. No. 
104-104,110 Stat. 56, 47 U.S.C. §§ 151-714 (the “1996 Act”), 
withdraw from the Commission whatever support § 201 might 
have afforded its rate cap decision.  Finding no legal error in 
the Commission’s analysis, we affirm its order.   
*  *  * 
Before the FCC imposed a rate cap system, rates for the 
transfer of calls from an originating LEC to the ISP’s LEC 
were governed, in practice, by the “reciprocal compensation” 
provisions of the 1996 Act.  That act, in the interest of 
opening the telephone market to competition, had imposed a 
number of obligations on all local exchange carriers, including 
a duty to “establish reciprocal compensation arrangements for 
the transport and termination of telecommunications.”  47 
U.S.C. § 251(b)(5).  Reciprocal compensation arrangements 
require that when a customer of one carrier makes a local call 
to a customer of another carrier (which uses its facilities to 
connect, or “terminate,” that call), the originating carrier must 
compensate the terminating carrier for the use of its facilities.  
See In re Core Communications, Inc., 455 F.3d 267, 270 
(D.C. Cir. 2006) (“Core 2006”).  Subsection 251(c) imposes 
extra duties on “incumbent local exchange carriers” 
(“ILECs”).  (ILECs are a subset of LECs, comprising mainly 
the Bell Operating Companies that succeeded to the local 
operations of AT&T on the occasion of the latter’s dissolution 
as a result of an antitrust settlement.  See United States v. 
AT&T, 552 F.Supp. 131 (D.D.C. 1982).  “Competitive local 
Case: 08-1365      Document: 1225091      Filed: 01/12/2010      Page: 4
5
exchange carriers” (“CLECs”) constitute the remainder of the 
LEC universe.) Among the § 251(c) obligations is a “duty to 
negotiate in good faith in accordance with [§ 252] the 
particular terms and conditions of agreements to fulfill the 
duties described in” § 251(b), including the reciprocal 
compensation obligations, and to provide interconnection with 
its own “network” for requesting telecommunications carriers.  
47 U.S.C. § 251(c).  Section 252 allows ILECs to satisfy their 
§ 251 obligations by privately negotiating terms with CLECs, 
but also grants parties the right to refer the negotiations to 
state commissions for mediation or arbitration.   
The Order arises out of the Commission’s concern with 
the results of applying the reciprocal compensation system to 
ISP-bound traffic, a concern perhaps most clearly expressed in 
an order responding to our initial remand of the matter: 
Because traffic to ISPs flows one way, so does money in 
a reciprocal compensation regime . . . .  It was not long 
before some LECs saw the opportunity to sign up ISPs as 
customers and collect, rather than pay, compensation 
because ISP modems do not generally call anyone. . . .  In 
some instances, this led to classic regulatory arbitrage 
that had two troubling effects: (1) it created incentives for 
inefficient entry of LECs intent on serving ISPs 
exclusively and not offering viable local telephone 
competition, as Congress had intended to facilitate with 
the 1996 Act; (2) the large one-way flows of cash made it 
possible for LECs serving ISPs to afford to pay their own 
customers to use their services, potentially driving ISP 
rates to consumers to uneconomical levels.  
Implementation of the Local Competition Provisions in the 
Telecommunications Act of 1996, Intercarrier Compensation 
for ISP-Bound Traffic, 16 FCC Rcd 9151 (2001) (the “ISP 
Remand Order”) ¶ 21.
Case: 08-1365      Document: 1225091      Filed: 01/12/2010      Page: 5
6
The Commission’s first step into this arena was its 
issuance of In the Matter of Implementation of the Local 
Competition Provisions in the Telecommunications Act of 
1996, Inter-carrier Compensation for ISP-Bound Traffic, 14 
FCC Rcd 3689 (1999) (“Declaratory Ruling”).  There it 
applied its so-called “end-to-end” analysis (as it does in the 
order under review), under which the classification of a 
communication as local or interstate turns on whether its 
origin and destination are in the same state.  Because a 
customer’s venture into the web characteristically reaches 
servers out of state (and often out of the country), the 
Commission concluded that under the end-to-end principle 
dial-up internet traffic was interstate.  Id. ¶ 18.  As such traffic 
was “jurisdictionally mixed,” id. ¶ 19, however, the 
Commission chose not to disturb state commissions’ 
application of interconnection agreements to that traffic 
“pending adoption of a rule establishing an appropriate 
interstate compensation mechanism,” id. at ¶ 21.  In review of 
the order in Bell Atlantic Tel[]. Cos. v. FCC, 206 F.3d 1 (D.C. 
Cir. 2000), we found the Commission’s conclusions in 
apparent conflict with various prior statements, and possibly 
with the statute; we vacated the order and remanded the 
matter for its further analysis.  Id. at 9.
On remand the Commission instituted substantially the 
same rate cap system that it defends here.  See ISP Remand 
Order ¶ 8.  But it claimed as supporting authority 47 U.S.C. 
§ 251(g), which required LECs to comply with certain FCC 
regulations promulgated prior to the enactment of the 1996 
Act.  In WorldCom, Inc. v. FCC, 288 F.3d 429 (D.C. Cir. 
2002), we rejected that claim, finding that § 251(g) was 
“worded simply as a transitional device” and thus could not be 
relied on for authority to promulgate new regulations.  Id. at 
430.  Recognizing that the Commission’s rules might well 
have other legal bases, however, we did not vacate the order.  
Id. at 430, 434.
Case: 08-1365      Document: 1225091      Filed: 01/12/2010      Page: 6
7
Between the ISP Remand Order and the present Order
there have been several additional visits to our court.  In July 
2003 Core Communications, Inc. (“Core”) petitioned the FCC 
to forbear from enforcing its rate caps and associated 
provisions, a petition that the FCC partly granted.  Petition of 
Core Communications, Inc. for Forbearance Under 47 U.S.C. 
§ 160(c) from Application of the ISP Remand Order, 19 FCC 
Rcd 20179, ¶¶ 23-24, ¶ 27 (2004).  We upheld the order 
against challenges by both CLECs and ILECs.  Core 2006,
455 F.3d 267.
In June 2004 Core filed a petition seeking mandamus 
requiring the FCC to respond to the WorldCom remand.  
Based on the FCC’s representations about its efforts to meet 
the remand, we denied Core’s petition “without prejudice to 
refiling in the event of significant additional delay.”  In re: 
Core Communications, Inc., No. 04-1179 (D.C. Cir. May 24, 
2005).  In October 2007 Core filed a second petition, which 
we granted, “direct[ing] the FCC to explain the legal basis for 
its ISP-bound compensation rules within six months of” May 
5, 2008. In re Core Communications, Inc., 531 F.3d 849, 850 
(D.C. Cir. 2008) (“Core 2008”).
On the last permissible day, November 5, 2008, the FCC 
released the current Order.  Petitions for review followed, 
filed by Core and by Public Service Commission of the State 
of New York and National Association of Regulatory Utility 
Commissioners (the “state petitioners”); we consolidated the 
petitions.
*  *  * 
As we noted at the outset, the Commission relies 
primarily on § 201 for its authority to regulate ISP-bound 
traffic.  See Order ¶ 21.  That section prohibits carriers 
Case: 08-1365      Document: 1225091      Filed: 01/12/2010      Page: 7
8
engaged in the delivery of interstate communications from 
charging rates that are not “just and reasonable,” and grants 
the FCC authority to prescribe regulations to implement the 
1934 Act, which include all provisions of the 1996 Act.  See 
AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 377-78 (1999) 
(observing that “Congress expressly directed that the 1996 
Act . . . be inserted into the Communications Act of 1934” and 
holding that “the grant in § 201(b) means . . . [that] [t]he FCC 
has rulemaking authority to carry out the ‘provisions of this 
Act,’ which include §§ 251 and 252”).  A savings clause 
attached to § 251, namely § 251(i), fortifies the Commission’s 
position, providing: “Nothing in this section shall be 
construed to limit or otherwise affect the Commission’s 
authority under section 201.”  Further, all parties agree that 
the familiar principles of Chevron USA v. Natural Resources 
Defense Council, 467 U.S. 837 (1984), apply to the FCC’s 
construction of the Communications Act.  State Pet’rs Br. 8; 
Core Pet’r Br. 27-28; Resp. Br. 19-20.  Finally, except as 
discussed below, the petitioners accept the end-to-end analysis 
and its application to ISP-bound calls, as announced by the 
Commission in the Declaratory Ruling in 1999 (described 
above) and restated in the Order, ¶ 21 & n.69. 
Against the Commission’s reliance on § 201, petitioners 
claim that “Congress’s specific choice” on the matter of inter-
LEC compensation, manifested in §§ 251-252, must trump the 
FCC’s “general rulemaking authority under section 201.”  
Core Interv. Br. 18.  They cite Norwest Bank Minnesota 
National Association v. FDIC, 312 F.3d 447, 451 (D.C. Cir. 
2002), for the “cardinal rule of statutory construction . . . that 
where both a specific and a general provision cover the same 
subject, the specific provision controls.”  State Pet’r Br. 27.
But it is inaccurate to characterize § 201 as a general 
grant of authority and §§ 251-252 as a specific one.  “When 
. . . two statutes apply to intersecting sets . . . , neither is more 
Case: 08-1365      Document: 1225091      Filed: 01/12/2010      Page: 8
9
specific.” Hemenway v. Peabody Coal Co., 159 F.3d 255, 
264 (7th Cir. 1998).  That is the case here.  Not all inter-LEC 
connections are used to deliver interstate communications, 
just as not all interstate communications involve an inter-LEC 
connection.  A local call to chat with a schoolmate about the 
evening’s homework would not—at least under conditions 
typical today—involve interstate communications; and a 
conventional interstate long distance call, while it will usually 
involve interconnection between the long distance provider 
and a LEC, will often not involve two LECs connecting 
directly with each other.  And, as to a LEC’s provision of 
access for completion of a long-distance call, the parties agree 
that the link between the LEC and the interexchange carrier is 
not governed by the reciprocal compensation regime of 
§ 251(b)(5).  See State Pet’rs Br. 25-26 (citing Global NAPS, 
Inc. v. Verizon New England, 444 F.3d 59, 62-63 (1st Cir. 
2006), in turn quoting the FCC’s Local Competition 
Provisions in the Telecommunications Act of 1996, 11 FCC 
Rcd 15499 (1996).
Dial-up internet traffic is special because it involves 
interstate communications that are delivered through local 
calls; it thus simultaneously implicates the regimes of both 
§ 201 and of §§ 251-252.  Neither regime is a subset of the 
other.  They intersect, and dial-up internet traffic falls within 
that intersection.  Given this overlap, § 251(i)’s specific 
saving of the Commission’s authority under § 201 against any 
negative implications from § 251 renders the Commission’s 
reading of the provisions at least reasonable.   
Petitioners next argue that because the call to the ISP 
terminates locally, the FCC’s authority over interstate 
communications is inapplicable.  State Pet’r Br. 30-33. 
Section 251(b)(5) applies to “reciprocal compensation 
arrangements for the transport and termination of 
telecommunications.”  Petitioners point to the FCC’s 
Case: 08-1365      Document: 1225091      Filed: 01/12/2010      Page: 9
10
definition (in the Order) of “terminat[ion]” as “the switching 
of traffic that is subject to Section 251(b)(5) at the terminating 
carrier’s end office switch . . . and delivery of that traffic to 
the called party’s premises.”  See Order ¶ 13; see also 47 
C.F.R. § 51.701(d).  State Pet’rs Br. 31-32.  Because the 
“called party” in the case of dial-up Internet traffic is the ISP, 
petitioners say, the § 251(b)(5) telecommunications 
“terminat[e]” locally and thus the FCC cannot apply its § 201 
authority over these communications.
This argument fails because it implicitly assumes 
inapplicability of the end-to-end analysis, which petitioners 
have not challenged.  And the FCC has consistently applied 
that analysis to determine whether communications are 
interstate for purposes of § 201.  Petitioners do not dispute 
that dial-up internet traffic extends from the ISP subscriber to 
the internet, or that the communications, viewed in that light, 
are interstate.  Given that ISP-bound traffic lies at the 
intersection of the § 201 and §§ 251-252 regime, it has no 
significance for the FCC’s § 201 jurisdiction over interstate 
communications that these telecommunications might be 
deemed to “terminat[e]” at a LEC for purposes of § 251(b)(5).
Petitioners also appear indirectly to invoke the 8th 
Circuit’s conclusion that while the FCC has authority to 
impose a methodology on state commissions’ exercise of 
power under § 252 (they specifically note “total element long-
run incremental cost” (“TELRIC”)), it has (for certain 
purposes) no power to set actual prices.  See State Pet’rs Br. 
33, citing Iowa Utils. Bd. v. FCC, 219 F.3d 744, 757 (8th Cir. 
2000).  We take no position on the issue before the 8th 
Circuit.  It reached its finding for purposes quite different 
from the present subject (FCC ratesetting authority for a leg of 
an interstate communication), and it did not address the FCC’s 
power to implement “just and reasonable” rates under § 201 
or how that power was affected by §§ 251-252.
Case: 08-1365      Document: 1225091      Filed: 01/12/2010      Page: 10
11
Petitioners further argue that it was “arbitrary and 
capricious” for the FCC to “discriminate” against dial-up 
internet traffic by requiring that LECs be compensated 
pursuant to the rate cap regime when terminating such traffic, 
but otherwise in accordance with state commissions’ 
application of the FCC’s TELRIC methodology.  Core Pet’r 
Br. 43-47; Core Interv. Br. 22-23.  See 5 U.S.C.  § 706(2)(A). 
Our review under the arbitrary and capricious standard is 
narrow.  See Core 2006, 455 F.3d at 277.  Here the agency 
action passes handily.
The Commission has provided a solid grounding for the 
differences between the treatment of inter-LEC compensation 
for delivery of dial-up internet traffic and the regime generally 
applicable to inter-LEC compensation under § 251(b)(5).  (We 
assume arguendo that the concept of discrimination is 
relevant to regimes created under entirely different statutory 
provisions.)  In the context to which reciprocal compensation 
is ordinarily applied, it noted, outgoing calls are generally 
balanced by incoming ones, so that it matters relatively little 
how accurately rates reflect costs.  ISP Remand Order ¶ 69.  
Such balance is utterly absent from ISP-bound traffic.  
Moreover, it found that in fact the rates for such traffic were 
so distorted that CLECs were in effect paying ISPs to become 
their customers.  Id. ¶ 70 & n.134; see also id. ¶ 21.  To the 
extent that ILECs simply passed the costs on to their 
customers generally (rather than having a separate charge for 
those making ISP-bound calls), they would force their non-
internet customers to subsidize those making ISP-bound calls, 
and the system would send inaccurate price signals to those 
using their facilities for internet access (in effect the ISPs and 
their customers) and to those not doing so.  Id. ¶¶ 68, 87.  On 
the other hand, the Commission believed that its “failure to act 
. . . would lead to higher rates for Internet access, as ILECs 
seek to recover their reciprocal compensation liability . . . 
from their customers to call ISPs,” id. ¶ 87, presumably 
Case: 08-1365      Document: 1225091      Filed: 01/12/2010      Page: 11
12
meaning rates “higher” than cost, correctly computed.  Thus 
the continued application of the reciprocal compensation 
regime to ISP-bound traffic would “undermine[] the operation 
of competitive markets.”  Id. ¶ 71.
Core purports to find a discrepancy between our 
mandamus order and the Commission’s response.   Our order 
required the FCC to “explain[] the legal authority for the 
Commission's interim intercarrier compensation rules that 
exclude ISP-bound traffic from the reciprocal compensation 
requirement of § 251(b)(5).”  Core 2008, 531 F.3d at 862.  
The Order, en route to finding that § 201 authorized the 
Commission to impose its rate cap system on the 
communications in question, also expressed its view that they 
were “subject to the reciprocal compensation regime in 
sections 251(b)(5) and 252(d)(2).”  Order ¶15; see also id.
¶ 16.  Core claims that in so finding the Commission violated 
our mandate.    
In context it is perfectly plain that our order sought 
simply to have the FCC explain the reasoning underlying its 
exercise of authority, not to preempt its analytical route.  The 
sort of argument made by Core here gives pettifoggery a bad 
name.   
Finally, we note the presence of a number of arguments 
introduced outside of the petitioners’ opening briefs.  Core 
intervened in the appeal filed by the state petitioners before 
we consolidated its separate appeal with the latter.  Together 
with other intervenors, Core filed a brief raising a number of 
arguments that it did not raise as petitioner.  As we explained 
in Illinois Bell Telephone Company v. FCC, 911 F.2d 776 
(D.C. Cir. 1990), “An intervening party may join issue only 
on a matter that has been brought before the court by another 
party.”  Id. at 786 (emphasis added).  While we acknowledged 
in Synovus Financial Corporation v. Board of Governors, 952 
Case: 08-1365      Document: 1225091      Filed: 01/12/2010      Page: 12
13
F.2d 426 (D.C. Cir. 1991), that this rule is prudential and 
“should not be applied categorically,” the grounds that 
Synovus mentioned for making exceptions are absent here.  Id.
at 434.  Synovus allowed an intervenor who lacked incentive 
to petition for review of the administrative action to present an 
additional issue that was “an essential predicate to [a] 
question” raised by petitioners.  Id. at 434 (internal quotes 
omitted).  But Core not only had an incentive to petition for 
review itself but did so.  See United States Telephone 
Association v. FCC, 188 F.3d 521, 531 (D.C. Cir. 1999) 
(noting that intervenors not only failed to qualify for the 
Synovus exception but “present[ed] no reason why it could not 
have petitioned in its own right”).  And the issues Core raises 
as intervenor bear “no substantive connection” to the 
challenges petitioners raise in their initial briefs.  Synovus, 952 
F.2d at 434; Cir. Rule 28(d)(2).  Accordingly, we do not 
consider the new arguments Core raises as intervenor.  
Similarly, we do not consider arguments that first appear in 
petitioners’ reply briefs.  See, e.g., Bd. of Regents of the Univ. 
of Washington v. EPA, 86 F.3d 1214, 1221 (D.C. Cir. 1996) 
(“By failing to make any specific objection until their reply 
brief, petitioners deprived the [respondents] of the opportunity 
to respond. To prevent this . . . , we have generally held that 
issues not raised until the reply brief are waived.”).  
*  *  * 
 The petitions for review are  
Denied.
Case: 08-1365      Document: 1225091      Filed: 01/12/2010      Page: 13
14
Appendix: Text of 47 U.S.C. § 201 
§ 201. Services and Charges.
(a) It shall be the duty of every common carrier 
engaged in interstate or foreign communication by wire 
or radio to furnish such communication service upon 
reasonable request therefore; and, in accordance with the 
orders of the Commission, in cases where the 
Commission, after opportunity for hearing, finds such 
action necessary or desirable in the public interest, to 
establish physical connections with other carriers, to 
establish through routes and charges applicable thereto 
and the divisions of such charges, and to establish and 
provide facilities and regulations for operating such 
through routes. 
(b) All charges, practices, classifications, and 
regulations for and in connection with such 
communication service, shall be just and reasonable, and 
any such charge, practice, classification, or regulation that 
is unjust or unreasonable is declared to be unlawful: 
Provided, That communications by wire or radio subject 
to this chapter may be classified into day, night, repeated, 
unrepeated, letter, commercial, press, Government, and 
such other classes as the Commission may decide to be 
just and reasonable, and different charges may be made 
for the different classes of communications . . . .  The 
Commission may prescribe such rules and regulations as 
may be necessary in the public interest to carry out the 
provisions of this chapter.
47 U.S.C. § 201 (emphasis added). 
Case: 08-1365      Document: 1225091      Filed: 01/12/2010      Page: 14