Full opinion text
BOWMAN, Circuit Judge. In these consolidated cases, referred to this Court by order of the Judicial Panel on Multidistrict Litigation, numerous petitioners challenge an order of the Federal Communications Commission (“FCC” or “Commission”) issued pursuant to the Telecommunications Act of 1996, Pub.L. No. 104-104, 110 Stat. 66 (to be codified as amended in scattered sections of 47 U.S.C.) [hereinafter Act or 1996 Act], revising the regulatory scheme under which local exchange carriers (“LECs”) assess costs to long-distance (“IXCs”) and other carriers for use of the LECs’ local telephone networks to complete interstate telephone calls, see In re Access Charge Reform; Price Cap Performance Review for Local Exchange Carriers; Transport Rate Structure and Pricing; End User Common Line Charges, First Report and Order (CC Docket Nos. 96-262, 94-1, 91-213, 95-72), FCC 97-158, 12 FCC Red No. 27 15982 (released May 16, 1997) [hereinafter Order f Petitioners contend that various specific actions taken by the FCC in the Order that directly affect the application and calculation of access charges are in violation of the 1996 Act, and that other decisions made by the FCC in the Order are arbitrary and capricious. The IXCs argue generally that the Order does not make the transition to competitive access rates quickly enough and is too cautious in its concern for universal service. The incumbent LECs, on the other hand, argue that the FCC was insufficiently cautious with respect to protecting universal service and left them exposed to inefficient competitive entry in the short term. The FCC counters that the challenged provisions of the Order are the result of a reasonable exercise of its authority to regulate rates for interstate services under the Telecommunications Act of 1996, and are not arbitrary and capricious. The FCC contends that it charted a propér middle course, “taking account of the complementary but sometimes diverging goals of competition and universal service support.” FCC Brief at 37. We review agency action under the Administrative Procedure Act to determine whether it is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,” 5 U.S.C. § 706(2)(A) (1994), rejecting only such administrative constructions of the law as are “contrary to clear congressional intent,” Chevron U.S.A Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837; 843 n. 9, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). We are mindful “that considerable weight should be accorded to an executive department’s construction of a statutory scheme it is entrusted to administer.” Id. at 844, 104 S.Ct. 2778. Where, as here, Congress has specifically assigned to the administrative agency the responsibility of interpreting and administering the statute at issue, “[t]he Supreme Court has many times made clear that this sort of question of law is for the agency to decide, so long as its interpretation of the statute is reasonable,” City of St. Louis v. Department of Transp., 936 F.2d 1528, 1533 (8th Cir.1991). The question for this Court is not whether there might have been a better way for the agency to resolve the conflicting issues with which it was faced, but whether the agency’s choice is a reasonable one. See MCI Telecomms. Corp. v. FCC, 675 F.2d 408, 413 (D.C.Cir.1982). Bearing in mind our considerably deferential standard of review, we address the contentions.of each petitioner or group of petitioners in order. For the sake of simplicity, we will not attempt to identify the in-tervenors who have joined in the arguments made by either the petitioners or the FCC except in the case of Bell Atlantic and Amer-itech Corporation, who filed a joint brief. I. The BellSouth Petitioners The BellSouth petitioners contend that the Order violates 47 U.S.C.A. § 254 (West Supp.1998) (1) by failing immediately to remove all implicit subsidies from interstate access charges, in contravention of the requirement that the mechanisms to implement universal service support be “specific [and] predictable,” 47 U.S.C.A. § 254(b)(5); (2) by neglecting to protect the implicit universal service support subsidies encompassed within interstate access charges from competition until a new universal service support regime is operational, in contravention of the requirement that the mechanisms to implement universal service support be “sufficient,” id.; and (3) by continuing to impose on incumbent LECs, but not new entrants into the local exchange market, the obligation to support universal service through interstate access charges, in contravention of the requirement that contributions be “nondiscriminatory,” id. § 254(b)(4). The FCC’s actions, according to the BellSouth petitioners, will prevent LECs from recovering the costs of universal service support traditionally included as implicit subsidies within interstate access charges and will unfairly burden incumbent LECs' with the costs of universal service support while exempting new entrants into the market from bearing their share of these costs. A. Immediate Replacement of Existing System The BellSouth petitioners first argue that the Commission’s Order violates the statutory mandate of § 254 that all “mechanisms to preserve and advance universal service subsidies” be “specific” and “predictable.” Id. § 254(b)(5). By delaying the implementation of a new regime of explicit universal service subsidies until at least January 1, 1999, while at the same time promoting immediate competition in the local exchange market as a means of bringing access charges more closely in line with actual costs, the BellSouth petitioners contend that the FCC has ensured that universal service support subsidies will be detrimentally deflated to such an extent that they will cease to serve their purpose.' The FCC replies that changes to interstate access charges made in the Order are well within the discretionary authority granted to the Commission by Congress to implement the policies of the 1996 Act, including the promotion of competition in the local exchange market, the elimination of implicit universal service support subsidies, and the preservation of universal service. The Commission argues specifically that its decision to open local exchange markets to competition in compliance with 47 U.S.C.A. § 251(d) (requiring completion by August 1996 of regulations to implement market opening provisions) prior to the full implementation of a new, explicit regime of universal service support pursuant to § 254, is permissible under the 1996 Act. By its specific language, the Act contemplates sequential implementation of, initially, the market opening provisions of § 251, followed by the new explicit universal service support mechanisms of § 254. The decision to promote competition in the local exchange market prior to the enactment of a new universal support mechanism is therefore reasonable, according to the FCC. We agree that the FCC’s decision to adjust the computation of interstate access charges to eliminate implicit subsidies and promote competition in the local exchange market before an explicit universal service support mechanism is fully operational is reasonable in light of the specific language of the 1996 Act. Section 251(d)(1) required the Commission to adopt rules implementing the market opening provisions by August 1996. Section 254(a)(2), however, did not require the FCC to adopt universal service rules until May 1997. See id. (“The Commission shall initiate a single proceeding to implement the recommendations from the [the Federal-State] Joint Board [on universal service] ... and shall complete such proceeding within 15 months after February 8, 1996.”). The Act does not require that the rules promulgated under § 254 immediately implement a new, explicit universal service support mechanism. Rather, the rules enacted by the FCC must establish “a specific timetable for implementation.” Id. By establishing, an explicit universal service support regime in the In re Federal-State Joint Board on Universal Service, First Report and Order (CC Docket No. 96-45), FCC 97-157, 12 FCC Red No. 16 8776 (released May 8, 1997)[hereinafter Universal Service Order ], petitions for. review pending, Texas Office of Public Utility Counsel v. FCC, 5th Cir. No. 97-60421, that will be fully operational by January 1999, the Commission has proceeded in a manner contemplated by the Act. The Commission has made a predictive judgment, based on evidence in the record and adequately explained in the Order, that competitive pressures in the local exchange market will not threaten universal service during the interim period until the permanent, explicit universal service support mechanism has been fully implemented. See City of St. Louis, 936 F.2d at 1534 (“Such forecasts must be accepted ‘if they are rational, based on a consideration of all the relevant factors, and adequately explained.’”) (citations to quoted cases omitted). The Commission’s decision to promote competition in the local exchange market and eliminate implicit subsidies embedded in interstate access charges prior to the full implementation of a new, explicit mechanism for universal service support does not violate the provisions of the 1996 Act, nor does it represent an unreasonable interpretation of the Act. B. New Implicit Subsidies and Erosion The BellSouth petitioners further argue that the FCC, in addition to delaying imper-missibly the implementation of an explicit universal service support mechanism, has created new implicit subsidies in violation of the 1996 Act while, at the same time, exposing these subsidies to competitive forces that will render them ineffective. The BellSouth petitioners first take issue with the FCC’s decision to maintain the flat-rated (as opposed to per-minute) subscriber line charge (“SLC”) ceiling of $3.50 per month on primary residential lines while increasing the SLC ceiling for. both non-primary residential lines and multi-line business lines, See Order. ¶ 78 (raising the multi-line business line SLC ceiling to $9.00 per mo,nth and allowing an increase of up to $1.50 per month in the non-primary residential fine SLC ceiling beginning January 1, 1998 with additional phased-in increases in the future). According to the BellSouth petitioners, preserving. the current SLC cap on primary residential lines prevents LECs from recovering the costs associated with serving those lines, while increasing the SLC cap on non-primary and multi-line business lines above actual cost forces users of these lines to subsidize expenses associated with the under-funded primary residential lines. The ultimate result of these-changes is the creation of a new, implicit subsidy funded by the increased rate ceilings on customers with non-primary residential or multi-line business lines and benefiting customers with only primary residential lines. This, according to the BellSouth petitioners, is in direct contravention of § 254’s directive that support for universal service be “explicit.” 47 U.S.C.A. § 254(e). We cannot agree that the FCC’s decisions to increase SLCs on non-primary residential and multi-line business lines and to maintain the current ceiling on primary residential lines are in violation of the 1996 Act. The Commission, relying on recommendations from the Federal-State Universal Service Joint Board [hereinafter Joint Board], justifiably determined that an increase in the SLC ceiling for primary residential lines would threaten universal service in ways that an increase in the SLC ceiling for non-primary residential and multi-line business lines simply would not. See Order ¶ 70 (noting Joint Board’s conclusion that “the SLC .. has an impact on universal service concerns such as affordability” and its recommendation “that the Commission leave the current SLC ceilings in place for primary residential and single-line business lines”). The courts have recognized that universal service concerns are valid justifications for FCC action. See, e.g., Competitive Telecomms. Ass’n v. FCC, 117 F.3d 1068, 1074 (8th Cir.1997); Rural Tel. Coalition v. FCC, 838 F.2d 1307, 1315 (D.C.Cir.1988); National Ass’n of Regulatory Util. Comm’rs v. FCC, 737 F.2d 1095, 1108 (D.C.Cir.1984), cert. denied, 469 U.S. 1227, 105 S.Ct. 1224, 84 L.Ed.2d 364 (1985). While the FCC acknowledges that its decisions regarding SLC ceilings “will require customers with multiple telephone lines to contribute, for a limited period, to the recovery of common line costs that incumbent LECs incur to serve single-line customers,” Order ¶ 101 (emphasis added), we note that this temporary, transitional arrangement is not an unreasonable solution to the implicit tension between the FCC’s goals of moving toward cost-based rates and protecting universal service, see Competitive Telecomms., 117 F.3d at 1073-74 (“Although temporary agency rules are subject to judicial review notwithstanding their transitory nature, ‘substantial deference by courts is accorded to an agency when the issue concerns interim relief.’”) (quoting MCI Telecomms. Corp. v. FCC, 750 F.2d 135, 140 (D.C.Cir.1984)); City of St. Louis, 936 F.2d at 1543 (“[T]he weighing of one public-interest factor against another is preeminently a function for an expert agency, not a court.”). Furthermore, as the FCC points out, the decision to retain the $3.50 per month SLC ceiling on primary residential lines was made in conjunction with the introduction of a flat-rated presubscribed interexchange carrier charge (“PICC”), assessed directly on IXCs rather than on users to recoup costs not covered by the SLC, that will increase incrementally until the SLC and PICC combined recover all costs associated with primary residential lines. See Order paras. 94, 99 (imposing PICC on primary residential and single-line business lines at a maximum of $0.53 per month, on non-primary residential lines at a maximum of $1.50 per month, and on multiple business lines at a maximum of $2.75 per month). Upon completion of the Commission’s phased-in plan of PICC ceiling increases on primary residential lines (combined with corresponding PICC cap decreases on multi-line business lines), the aggregate flat-rated charges (the combination of both SLC and PICC) imposed upon primary residential lines will be the same per line as those imposed upon multi-line business lines. See id. ¶ 102. For the reasons stated, we conclude that the FCC’s decision to maintain the current SLC ceiling on primary residential lines does not amount to the creation of a new implicit subsidy for the benefit of primary residential line customers and to the detriment of non-primary line and multi-line business line customers, in violation of § 254’s direction that subsidies be “explicit.” C. Originating Minutes Both the BellSouth petitioners and the Bell Atlantic parties challenge the FCC’s actions with respect to the imposition of per-minute charges on originating access minutes. They contend that the requirement to recoup non-traffic-sensitive costs not fully recovered under the flat-rated SLC and PICC price ceilings by applying a per-minute access carrier common line charge (“CCLC”) and a per-minute residual transport interconnection charge (“TIC”) assessed on originating access minutes (charges imposed on carriers for outgoing calls), rather than on terminating access minutes, is in violation of the 1996 Act. They argue that the higher degree of competition for originating access minutes will prevent them from imposing the CCLC or the TIC to recoup costs lest they risk losing customers to competitors who can undercut their prices. This approach, according to the BellSouth petitioners, is inherently discriminatory — it places a disproportionate burden of paying for universal service support on incumbent LECs in violation of the Act. See 47 U.S.C.A. § 254(b)(4) (“All providers of telecommunications services should make an equitable and nondiscriminatory contribution to ... universal service”). Furthermore, the BellSouth petitioners and the Bell Atlantic parties argue, the Commission’s decision to employ a per-minute charge to recover non-traffie-sensitive, or flat, costs is contrary to the agency’s stated goal of imposing access charges in a cost-causative manner — “in a way that reflects the way the costs are incurred.” Order passim. The Commission defends its decision to allow recovery of non-traffic-sensitive residual costs through per-minute access charges as an interim solution that will be phased out as flat-rated PICC caps increase to allow for such recovery. See id. ¶ 102. Prior to the changes implemented in the Order, these residual costs were recovered through per-minute charges assessed on both originating and terminating access minutes. The Commission, realizing that greater competition would exist for provision of originating rather than terminating access minutes, determined that recovery of these residual costs on originating minutes would promote the agency’s objective of allowing the marketplace to move LECs’ access rates toward competitive levels. See id. ¶100. The decision to continue employing a traffic-sensitive mechanism to recover these non-traffic-sensitive costs is justified by universal service concerns. Until flat-rated PICC ceilings rise sufficiently over time to allow recovery of these residual, non-traffic-sensitive costs, the FCC has opted to maintain the non-cost-causative, per-minute charges that, in addition to permitting recovery of- otherwise lost residual costs, have the added advantage of promoting Congress’s goal of moving access rates toward competitive levels. As the Commission points out, a phased-in transition from non-cost-eausative per-minute rates to cost-causative flat rates has been adopted in the Order. We find that the Commission’s decision to impose the residual per-minute CCLC and TIC on originating, rather than terminating, access minutes is not in violation of the 1996 Act. This transitional solution is a reasonable exercise of the Commission’s discretionary authority to balance competing statutory goals. See National Ass’n of Regulatory Util. Comm’rs, 737 F.2d at 1134 (noting that FCC has broad “statutory discretion to balance the multiple goals embodied in the Communications Act”). Rather than jeopardize universal service support by immediately eliminating any per-minute charges currently associated with flat costs, the FCC elected to eliminate these non-cost-causative charges over time, gradually increasing the flat-rated PICC to levels necessary to recoup these residual costs. “The shift from one type of nondiscriminatory rate structure to another may certainly be accomplished gradually to permit the affected carriers, subscribers and state regulators to adjust to the new pricing system, thus preserving the efficient operation of the interstate telephone network during the interim.” Id. at 1135-36. We cannot conclude that this solution is contrary to the 1996 Act. Furthermore, we cannot second-guess the FCC’s decision to impose .the CCLC and the TIC on originating access minutes. The 1996 Act was intended to encourage competition in the telecommunications market, and the Commission’s determination that the above transitional method of accounting for residual costs would increase competition and move costs toward competitive levels is a reasonable one. See Competitive Telecomms., 117 F.3d at 1073-75 (according substantial deference to transitional plan to preserve universal .service). “It is not the Commission’s chore to convince us that what it has done is the best that could be done, but that what it has done is reasonable under difficult circumstances.” National Ass’n of Regulatory Util. Comm’rs, 737 F.2d at 1141. D. Extension of Implicit Subsidies to Purchasers of Unbundled Networks The BellSouth petitioners next argue that the Commission’s decision to exempt purchasers of unbundled network elements (“UNEs”) from contributing to universal service support through interstate access charges represents an arbitrary and capricious reversal of agency policy and is contrary to § 254’s requirement that contributions to universal service support be equitable and nondiscriminatory. After passage of the 1996 Act, the Commission initially determined that purchasers of UNEs would be required to contribute to universal service by paying a portion of access charges, i.e., the entire CCLC and seventy-five percent of the TIC, until the new universal service support mechanism was fully operational. See In re Implementation of the Local Competition Provisions in the Telecommunications Act of 1996; Interconnection between Local Exchange Carriers and Commercial Mobile Radio Service Providers, First Report and Order (CC Docket Nos. 96-98, 95-185), FCC 96-325, 11 FCC Red No. 28 15499 ¶ 720 (released August 8, 1996) [hereinafter Local Competition Order ], petition denied in part and order vacated in part, Competitive Telecomms. Ass’n, 117 F.3d at 1068 (addressing only CC Docket No. 96-98). The FCC reasoned that new entrants into the local service market otherwise could avoid contributing to universal service support “by serving their local customers solely through the use of unbundled network elements rather than through resale,” thereby circumventing imposition of access charges. Id. ¶ 719. The Commission’s decision to permit the imposition of some interstate access charges on UNE purchasers, however, was explicitly time-limited and expired on June 30, 1997. See Order ¶ 339. As the BellSouth petitioners acknowledge, the FCC created a general exemption from the assessment of access charges by LECs on purchasers of UNEs, and permitted LECs to assess the CCLC and seventy-five percent of the TIC from such purchasers until June 30, 1997, see 47 C.F.R. § 51.515(a)-(b) (1997). The BellSouth petitioners cannot now complain that passage of the expiration date for this temporary exception and the consequent termination of its application signifies an abrupt change in FCC policy. In fact, the FCC emphasized in thé Local Competition Order that it could “conceive of no circumstances” under which the temporary assessment of access charges on UNE purchasers would-be extended beyond June 30, 1997. Local Competition Order ¶ 725. That the FCC has now made good on its promise to exempt purchasers of UNEs from access charges should come as no surprise to the BellSouth petitioners. Nor is the Commission’s decision to exempt purchasers of UNEs from access charges that are imposed by incumbent LECs in contravention of § 254’s directive to ensure equitable and nondiscriminatory contributions to universal service support. The BellSouth petitioners argue that allowing UNE purchasers access to their networks without the imposition of access charges guarantees discriminatory and inequitable contribution to universal service support by LECs who must continue to contribute, despite their inability to collect a fair contribution from UNE purchasers. As the FCC has explained, however, “payment of cost-based rates represents full compensation to the incumbent LEC for use of the network elements that carriers purchase.... Allowing incumbent LECs to recover access charges in addition to the reasonable cost of such facilities would constitute double recovery because the ability to provide access services is already included in the cost of the access facilities themselves.” Order ¶ 337. The FCC specifically addresses in the Order the BellSouth petitioners’ argument that access charges should be imposed on UNEs because charging only cost-based rates for such elements will not allow the providers to recover universal service support subsidies, which are implicitly built into the access charge regime. The FCC points out that purchasers of UNEs will contribute to universal service pursuant to § 254 — they receive no exemption from universal service support obligations by purchasing UNEs. See Order ¶ 338. Furthermore, having observed the market-opening provisions of the 1996 Act in operation for ten months, the FCC has predicted that an extension of the temporary application of interstate access charges to purchasers of UNEs is not necessary to protect the universal service support system from marked losses. According to the FCC, purchasers of UNEs are “providing no more than a de minimis share of industry-wide access servieefs].” In re Access Charge Reform; Price Cap Performance Review for Local Exchange Carriers; Transport Rate Structure and Pricing; End User Common Line Charges, Order (CC Docket Nos. 96-262, 94-1, 91-213, 95-72), FCC 97-216, 12 FCC Red No. 17 10175 ¶ 15 (released June 18, 1997). It is not unreasonable for the FCC to conclude that, given the relatively insignificant headway UNE purchasers have made in the telecommunications market, universal service will not be threatened by the exemption of UNE purchasers from access charges. The Commission also has explained that rate structure modifications adopted in the Oi’der will allow incumbent LECs to recover costs, including those associated with universal service support obligations. See Order ¶ 338. We conclude that the Commission’s decision to exempt purchasers of UNEs from interstate access charges is not an arbitrary and capricious departure from statutory standards, nor has the FCC violated its statutory mandate to ensure contributions to universal service that are equitable and nondis-eriminatory. Consequently, we will defer to the agency’s expertise and leave intact its decision regarding the imposition of interstate access charges on purchasers of UNEs. E. Permanent Exemption for ISPs Finally, the BellSouth petitioners, joined by the Bell Atlantic parties, argue that the Commission’s decision to grant information service providers (“ISPs”) an exemption from interstate access charges creates a new,' implicit, and discriminatory subsidy in violation of the 1996 Act; imper-missibly forces state regulators to set rates for the recovery of interstate costs; and converts a transitional access charge exemption for ISPs into a permanent one. The FCC denies these assertions and contends that its determination to prohibit the assessment of interstate access charges on ISPs is a reasonable one under the 1996 Act. The BellSouth petitioners initially maintain that the FCC’s refusal to extend interstate access charges to ISPs constitutes a new, implicit, and discriminatory subsidy in violation of § 254. They assert that the exemption excuses ISPs from paying the access charges associated with their traffic over the LECs’ local networks. Their argument is that the FCC’s explanation for this decision — avoiding the disruption of an evolving industry — cannot justify acting in violation of the 1996 Act. The FCC, on the other hand, argues that it did not create a new, implicit, and discriminatory subsidy by declining to extend to ISPs (which never have paid per-minute access rates under the old rules) a rate structure that, as a result of the transition into universal service support funded solely through explicit subsidies, unavoidably includes residual implicit subsidies. See Order ¶ 345. We agree that the FCC’s decision to exempt ISPs from interstate access charges while continuing to investigate potential future changes in this area is a reasonable exercise of the agency’s discretion under the 1996 Act. Initially we note that the FCC has maintained the same position for the past fourteen years, refusing to -permit the assessment of interstate access charges on ISPs. See In re Amendments of Part 69 of the Commission’s Rules Relating to the Creation of Access Charge Subelements for Open Network Architecture; Policy and Rules Concerning Rates for Dominant Carriers, Report and Order (CC Docket Nos. 89-79, 87-313), FCC 91-186, 6 FCC Rcd No. 15 4524 ¶ 60 (released July 11, 1991) (noting that access system in which ISPs do not pay interstate per-minute charges is the “status quo”). Furthermore, the Commission’s actions do not discriminate in favor of ISPs, which do not utilize LEC services and facilities in the same way or for the same purposes as other customers who are assessed per-minute interstate access charges. As this Court noted in Competitive Telecommunications, even where two different sets of carriers seek to use LEC network services and facilities that might be “technologically identical,” the services and facilities provided by the LEC are “distinct” if the carriers are making different uses of them. 117 F.3d at 1073. Consequently, different regulatory treatment of LEC services and facilities in such circumstances does not have “a discriminatory impact.” Id. Here, we agree with the FCC that “it is not clear that ISPs use the ... network in a manner analogous to IXCs,” Order ¶ 345, and conclude, therefore, that the Commission’s refusal to impose access charges on ISPs does not violate § 254’s requirement that contributions to universal service be nondiseriminatory. Neither does the Commission’s decision to exempt ISPs from interstate access charges violate § 254(e)’s requirement that “explicit” support mechanisms for universal service be implemented. The Universal Service Order outlines the FCC’s plan for eradicating implicit subsidies. Section 254, as we previously have discussed, does not require the immediate elimination of implicit subsidies, only the establishment of a specific timetable to move from implicit to explicit universal service support subsidies. We conclude that the Commission’s decision to exempt ISPs from interstate access charges does not constitute the creation of a new, implicit, and discriminatory subsidy in contravention of the 1996 Act. The petitioners also argue that there are uncompensated costs associated with the LECs’ service to ISPs. The FCC, however, was not convinced of the alleged shortfalls, and identified sources of revenue that are available to the LECs to cover the interstate costs generated by the ISPs. See Order ¶ 346. The FCC has made a rational choice regarding the treatment of ISPs from a number of alternatives that are each imperfect. When an agency has gone to considerable lengths to amass information, sift through the record for pertinent facts, and reach a temporary conclusion, it has not acted arbitrarily or capriciously. The BellSouth petitioners and the Bell Atlantic parties next allege that the interstate access charge exemption for ISPs impermis-sibly requires state regulatory commissions to recover interstate costs. They argue that “[t]here is no question” that ISPs, like IXCs, use the local network to provide interstate services. Bell Atlantic Brief at 12. Moreover, they argue that there is no dispute that the interstate costs imposed on LECs by these services have increased dramatically in recent years as a result of the expansion of traffic on the Internet. The LECs contend that, as a result of this increased traffic, they have been required to spend “billions of dollars to enhance network capacity.” Id. at 13. While the increased burdens on local networks generate, according to the BellSouth petitioners and Bell Atlantic parties, “undeniably interstate costs,” they complain that the ISP access charge exemption precludes recovery of the majority of those costs. Id. Instead, ISPs, which are classified as end users, “may purchase services from incumbent LECs under the same intrastate tariffs available to end users,” without paying equitable rates to compensate LECs for the increased costs associated with the services provided. Order ¶ 342. The petitioners contend that the FCC’s suggestion that LECs “address their concerns to state regulators,” amounts to a dereliction of the Commission’s obligation to retain exclusive jurisdiction over interstate communications and forces state regulatory commissions to overstep their authority by recovering interstate costs. Id. ¶346 (“To the extent that some intrastate rate structures fail to compensate incumbent LECs adequately for providing service to customers with high volumes of incoming calls, incumbent LECs may address their concerns to state regulators.”). We disagree with the petitioners’ characterization of the manner in which ISPs utilize the local network and thereby generate interstate costs susceptible to FCC regulation. See id. ¶ 343 (noting that FCC “tentatively concluded” in notice of proposed rulemaking that “ISPs should not be subjected to an interstate regulatory system designed for circuit-switched interexchange voice telephony solely because ISPs use incumbent LEC networks to receive calls from their customers.”). Contrary to the petitioners’ assertions, there is some disagreement as to the manner in which ISPs make use of the local network. As the FCC argues, the services provided by ISPs may involve both an intrastate and an interstate component and it may be impractical if not impossible to separate the two elements. See People of State of California v. FCC, 905 F.2d 1217, 1244 (9th Cir.1990). Consequently, the FCC has determined that the facilities used by ISPs are “jurisdictionally mixed,” carrying both interstate and intrastate traffic. FCC Brief at 79. Because the FCC cannot reliably separate the two components involved in completing a particular call, or even determine what percentage of overall ISP traffic is interstate or intrastate, see id. (noting that at least some ISP services are purely intrastate and not susceptible to FCC regulation), the Commission has appropriately exercised its discretion to require an ISP to pay intrastate charges for its line and to pay the SLC (which has been increased in the Order to cover a greater proportion of interstate allocated loop costs), but not to pay the per-minute interstate access charge. The states are free to assess intrastate tariffs as they see fit. In these circumstances, we cannot say that the FCC has shirked its responsibility to regulate interstate telecommunications, nor can we conclude that it has directed the States to inflate intrastate tariffs to cover otherwise unrecoverable interstate costs, thereby exceeding its statutory authority. See Iowa Utils. Bd. v. FCC, 120 F.3d 753, 796 (8th Cir.1997) (holding that FCC lacks authority to determine intrastate rates), cert. granted, — U.S. -, 118 S.Ct. 879, 139 L.Ed.2d 867 (1998). Moreover, the FCC has not issued its final determination with regard to the treatment of ISPs. As noted in the Order, the Commission has initiated a Notice of Inquiry (“NOI”) to investigate further what changes, if any, should be made with regard to the regulation of ISPs. See Access Charge Reform; Price Cap Performance Review for Local Exchange Carriers; Transport Rate Structure and Pricing; Usage of the Public Switched Network by Information Service and Internet Access Providers, Proposed Rule (CC Docket Nos. 96-262, 94-1, 91-213, 96-263), FCC 96-488, 62 Fed.Reg. 4670, 4712-13 (1997) (to be codified at 47 C.F.R. pts. 61 and 69). In the NOI, we will address a range of fundamental issues about the Internet and other information services, including ISP usage of the public switched network. The NOI will give us an opportunity to consider the implications of information services more broadly, and to craft proposals for a subsequent NPRM [Notice of Proposed Rulemaking] that are sensitive to the complex economic, technical, and legal questions raised in this area. Order ¶348 (footnote omitted). The FCC thus has not foreclosed the possibility that ISPs will be subjected to additional regulation under a scheme yet to be determined. To the-extent that the BellSouth petitioners and the Bell Atlantic parties complain about the ISPs’ uncompensated burden on their local networks, they, as well as other LECs, are welcome to address their continued concerns to the FCC through the NOI process. Finally, the BellSouth petitioners and the Bell Atlantic parties argue that the FCC has permanently abandoned its stated policy that all those who use the local telephone networks to provide interstate services should bear their fair share of interstate access charges. The petitioners cite Competitive Telecommunications Association v. FCC, 87 F.3d 522 (D.C.Cir.1996) (CompTel ), as support for their position that ISPs should be subject to interstate access charges. In the 1983 Access Charge Order at issue in Comp-Tel, the FCC had instituted transitional rules favoring smaller long-distance carriers in an effort to promote competition in the long-distance market. These transitional rules were extended by the Commission for thirteen years under the justification that sufficient cost information necessary to determine appropriate rates was not yet developed. The D.C. Circuit struck down the rules acknowledging that, while the FCC is not required to impose purely cost-based rates for all services, it must “specially justify any rate differential that does not reflect cost.” Id. The facts in CompTel are distinguishable from the facts with which we are faced here. In CompTel, the FCC was imposing inconsistent, allegedly transitional rates on entities— incumbent long-distance carriers and smaller long-distance carriers — that essentially provided identical services. Here, the FCC is exempting from interstate access charges ISPs that, according to the FCC, utilize the local networks differently than do IXCs. The FCC has justified its decision to exempt ISPs from access charges paid by IXCs by noting the distinction between the manner in which these separate entities utilize the local networks. See, e.g., Order ¶¶ 343, 345. The FCC explained in the Order that “[mjaintaining the existing pricing structure for [ISP] services avoids disrupting the still-evolving information services industry and advances the goals of the 1996 Act to ‘preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation.’ ” Order ¶ 344 (footnote omitted) (quoting 47 U.S.C.A. § 230(b)(2)). The Commission reasonably has exercised its discretion in evaluating the relevant data and in concluding that, at least for the present, ISPs should be excluded from the imposition of interstate access charges. We will overturn an agency rule as arbitrary and capricious only “if the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.” Motor Vehicle Mfrs. Ass’n of the United States v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983). We find no such fault with the Commission’s decision and we decline to interfere with the FCC’s determination to grant ISPs an exemption from interstate access charges. II. Bell Atlantic Parties The Bell Atlantic parties argue that the FCC acted arbitrarily, abandoning its long-held position to the contrary, when it announced in the Order that LECs subject to price-cap regulation must adjust their price-cap indices downward to reflect the completed amortizations of extraordinary, one-time equal access conversion expenses. While it is true that this decision marks a change in course by the FCC, such a change, if satisfactorily explained, is permissible. Cf. id. at 57, 103 S.Ct. 2856 (reversing agency action and noting that agency failed to explain its decision). Because we are satisfied that the Commission has adequately justified its changed position and its decision to require this downward adjustment, we conclude that the FCC has not acted arbitrarily. In 1985, the FCC directed that certain expenses associated with equal access conversion, oi’dinarily fully accounted for in the year in which the expenses were incurred, be identified separately and amortized over a period of eight years, ending December 31, 1993. See In re Petitions for Recovery of Equal Access and Network Reconfiguration Costs, Memorandum Opinion and Order FCC No. 86-470, 1 FCC Red No. 3 434, ¶25 (released Nov. 5, 1986) [hereinafter Petitions for Recovery of Equal Access Costs ]. On January 1, 1991, during the recovery period for these equal access conversion expenses, the FCC converted from rate of return regulation to price-cap regulation. In conjunction with this conversion, the FCC chose a set of “baseline” rate levels, those in effect on July 1, 1990, to which the price-cap indices were tied as the starting point for measuring subsequent incremental cost changes. See In re Policy and Rules Concerning Rates for Dominant Carriers, Second Report and Order (CC Docket No. 87-313) FCC 90-314, 5 FCC Red No. 23 6786, ¶ 230 (released Oct. 4, 1990) [hereinafter LEC Price Cap Order], petitions dismissed, National Rural Telecom Ass’n v. FCC, 988 F.2d 174 (D.C.Cir.1993). The one-time equal access expenses that would have been recovered in the same year in which they were incurred were reflected in these 1990 baseline figures, resulting in an artificially high starting point from which the FCC allowed subsequent increases. The FCC now concedes that, in prior decisions, it has not addressed properly the question of whether equal access expenses that were embedded within original baseline rates pursuant to the one-time amortizations should have been removed through downward adjustments when, the amortizations expired. In the Order, however, the FCC reversed the position it had taken on this issue and determined that price-cap LECs should be required to make downward price-cap adjustments to reflect the expiration of their equal access expense amortizations. See Order ¶309. The FCC likened the equal access amortizations to the depreciation reserve deficiency and inside wiring cost amortizations that “were given exogenous cost treatment when they expired because they reflected temporary, one-time treatment of costs under ROR [rate of return] regulation that, due to the mid-stream switch to price-cap regulation, would have become permanent (even though the costs already had been recovered) absent an exogenous cost adjustment.” Id. ¶ 310. The Bell Atlantic parties first claim that the equal access amortizations cannot be compared to the depreciation reserve deficiency and inside wiring amortizations because the costs associated with the latter amortizations were incurred entirely before the switch to price-cap regulation, while LECs continued to incur equal access costs after the price-cap regime commenced. As the FCC explained, however, the amortized costs in all three instances were extraordinary and were reflected in the baseline rate levels adopted by the FCC as the starting point from which future adjustments would be made. As the FCC explained when it categorized these expenses as extraordinary, they are distinguishable from “normal recurring expenses” due to the “unusually high concentration of expenses ... incurred over a limited time.” Petitions for Recovery of Equal Access Costs ¶ 24; see also, Equal Access and Network Reconfiguration Costs, FCC 85-628, 50 Fed.Reg. 50910, 50914 ¶ 33 (Dec. 13, 1985); Order ¶ 300. We cannot conclude that the FCC improperly determined that the one-time equal access conversion amortizations should be subject to treatment similar to that accorded depreciation reserve deficiency and inside wiring amortizations. The Bell Atlantic parties further criticize the FCC’s decision to refuse an upward cost adjustment for “subsequent equal access costs,” while requiring a downward cost adjustment to reflect the expiration of the original equal access conversion amortizations. Bell Atlantic Brief at 33. This argument, however, fails to acknowledge that the original conversion costs, unlike any subsequent costs, were extraordinary, one-time costs. Furthermore, the FCC categorizes “the ongoing costs of providing equal access as part of the normal costs of providing telephone service. Exogenous treatment of these costs is unnecessary.” Order ¶ 312. The FCC’s refusal to allow an upward cost adjustment to account for ongoing costs associated with equal access is not arbitrary. We conclude that the FCC’s decision to require LECs to adjust their price-cap indices downward to reflect the completed amortizations of extraordinary', one-time equal access conversion expenses is neither arbitrary nor capricious. “[T]he mere change of an administrative opinion after a lawful reconsideration can hardly be arbitrary and capricious on its face.” Southwestern Bell Tel. Co. v. FCC, 138 F.3d 746, 753 (8th Cir.1998). Upon further reflection, the FCC determined that this downward adjustment, although rejected in past decisions, was an equitable and necessary one. As the Commission explained, “[Rjatepayers should not be forced to pay for a cost that, were it not for the way price-cap regulation occurred in this instance, they would no longer be paying.” Order ¶ 311. We cannot fault the Commission for reconsidering its position and ordering the necessary adjustment. III. IXC Petitioners A. Access Charges The IXC petitioners argue that the Commission’s decision not to lower interstate access charges to equal economic cost is arbitrary, capricious, and inconsistent with the FCC’s responsibility to promulgate regulations that best serve the public interest. They contend that the existing access charge system, rife with non-cosUbased rates and implicit subsidies, violates FCC precedent and various provisions of the 1996 Act. Furthermore, they claim that by adopting a market-based, rather than a prescriptive, approach to driving access rates toward economic costs, the Order fails to remedy the defects in the current system. The FCC, on the other hand, argues that the current system is lawful and that the market-based approach adopted in the Order represents a reasonable attempt to “shift from one type of [lawful regulatory system] to another ... gradually to permit the affected carriers, subscribers and state regulators to adjust to the new pricing system.” National Ass’n of Regulatory Util. Comm’rs, 737 F.2d at 1135-36 (upholding gradual shift to flat-rate end-user access charges in order to avoid excessively burdening carriérs). The IXC petitioners first argue that the FCC failed to provide a reasoned explanation for its decision to adopt a market-based approach to interstate access charge reform rather than a prescriptive approach under which the Commission sets rates at economic cost levels. The FCC’s explanation for declining to prescribe access charge rates—the impracticability of developing a forward-looking cost model necessary to determine the economic costs of the services— is, according to the IXC petitioners, contrary to the Commission’s position taken in an identical regulatory situation. The IXC petitioners contend that the FCC has directed states to determine the economic costs of certain unbundled network elements in order to.develop a forward-looking cost model for local services to be used in determining universal service support needs. But see Iowa Utils. Bd., 120 F.3d at 793-800 (holding that FCC lacks jurisdiction to issue pricing rules for local telecommunications traffic, and vacating the provisions of the Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, CC Docket No. 96-98 (Aug. 8, 1996), that attempted to impose pricing rules on the states). The network elements involved in the local-services project are, according to the IXC petitioners, identical to those necessary to develop a reliable cost model for interstate access charges. Therefore, the IXCs contend, the FCC’s assertion that it cannot develop the cost model necessary to establish prescriptive rates for interstate access charges is unavailing. The FCC argues that the two projects are distinguishable and that its position in regard to access charges is supported by long recognized regulatory problems associated with the allocation of common costs that are not as prevalent in a determination of the economic costs of unbundled network elements. See, e.g., MCI Telecomms. Corp., 675 F.2d at 410. The Commission has explained that “separate telecommunications services are typically provided over shared network facilities, the costs of which may be joint or common with respect to some services.” Local Competition Order ¶ 678 (emphasis added). The FCC notes, for example, that the local loop is used to provide virtually all telephone services, but, in setting rates for the various services, regulations must allor cate a portion of the common loop cost to each individual service that uses the loop. By contrast, unbundled network elements are generally treated as distinct facilities, the entire cost of which is reflected in the rate for that particular element. Due to the difficulty in creating a reliable forward-looking cost model for interstate access services, a prescriptive plan would not be feasible at the present time, even if the agency believed süch a plan were preferable. We find that the FCC’s emanation is an adequate, although perhaps not compelling, justification for its refusal to set prescriptive rates for interstate access service. Given our deferential standard of review, this is all that is required. The IXC petitioners further argue that, even if the Commission’s stated reason for rejecting prescribed cost-based rates was satisfactory, the FCC was required to explain why a market-based approach was likely to meet the public interest by lowering "access charges to an amount equal to economic costs. Citing an absence of evidence that local telephone service markets have developed the level of competition necessary to drive interstate access charges to economic costs, the IXC petitioners contend that the FCC’s decision to adopt a market-based approach is arbitrary and capricious. The FCC counters that its objective was to drive access charges toward competitive levels in a way that was pragmatic, would preserve universal service, would avoid unnecessary economic dislocation, and was consonant with Congress’s directive that the Commission replace regulation with competition to the greatest extent possible consistent with the public interest. See, e.g., 47 U.S.C.A. § 257(b) (“[T]he Commission shall seek to promote the policies and purposes of this ehaptor favoring diversity of media voices, vigorous economic competition, technological advancement, and promotion of the public interest, convenience, and necessity.”); see also Order ¶¶ 1, 9, 42, 44, 47, 262, 263. The IXC petitioners’ claim ignores the FCC’s “ ‘broad discretion in selecting methods ... to make and oversee rates.’ ” MCI Telecomms. Corp., 675 F.2d at 418 (quoting Aeronautical Radio, Inc. v. FCC, 642 F.2d 1221, 1228 (D.C.Cir.1980)) (alteration by this Court, cert. denied, 451 U.S. 920, 101 S.Ct. 1999, 68 L.Ed.2d 311 (1981)). The Commission explained that “competitive markets are far better than regulatory agencies at allocating resources and services efficiently for the maximum benefit of consumers.” Order ¶ 42. Furthermore, this approach appears to be consistent with Congress’s preference for “á pro-competitive, deregulatory national policy framework” for the telecommunications industry. Id., ¶1. We note further that § 205(a) permits the FCC to take the extreme action of prescribing rates only when, among other things, the rates currently charged are “or will be in violation of any of the provisions” of the Act. 47 U.S.C. § 205(a) (1994). The FCC has reasonably exercised its predictive judgment in concluding that competition in the local telephone services market will effectively drive interstate access charges to economic costs. See City of St. Louis, 936 F.2d at 1534 (noting that judicial deference to agency action is “especially important” when agency’s judgments are “predictive”). If, in light of actual market developments, the Commission determines that competition is .not having the anticipated effect on access charges, the agency presumably will revisit this issue. We cannot conclude at this time that the FCC’s decision to adopt a market-based approach to interstate access reform was arbitrary, capricious, or in derogation of the public interest in light of the broad discretion Congress has given the Commission in setting interstate rates. The IXC petitioners next contend that the FCC failed to explain adequately its decision to retain “inflated” access charges to the detriment of long-distance carriers in order to avoid the negative consequences to LECs of imposing cost-based rates immediately. They argue that the LECs have enjoyed excessive and unlawful earnings as a result of access charges based on historical rate-of-return costs rather than on forward-looking-economic costs. The FCC has acknowledged that non-cost-based access charges harm both long-distance companies and their customers and impede competition in the long-distance market. See, e.g., Order ¶ 30. Yet, according to the IXC petitioners, the Commission has failed to explain why these concerns have not been alleviated through an immediate move to cost-based access charges. According to the IXC petitioners, the only effect on the long-distance market that the FCC addressed was the effect these rates have on competition when local telephone companies also provide long-distance services directly or through an affiliate. They argue that, although a LEC would impose the same “inflated” access charge on its affiliate as it would on unaffiliated long-distance companies, because of the affiliation, the transaction has no true economic effect. The IXC petitioners contend that perpetuating “inflated” access charges allows LECs and their affiliate long-distance companies to take advantage of their lower real cost of access to cherry pick the IXCs’ most lucrative customers or to engage in price squeezing to undercut the IXCs’ prices. Furthermore, unaffiliated long-distance companies would be inclined to purchase inefficient, but less expensive, access arrangements from alternative providers, while LEC-affiliated long-distance companies would always use the most efficient access arrangements and incur only actual, rather than “inflated,” costs. The IXC petitioners contend that the FCC’s rationale and its reliance on alleged safeguards to prevent these situations are insufficient to justify its decision. The FCC initially notes that the access rates charged by incumbent LECs, while based on historical costs rather than forward-looking economic costs, are permissible under the “just and reasonable” standard prescribed by § 201(b) of the Act. Cf., e.g., Competitive Telecomms., 117 F.3d at 1072 (noting “just and reasonable” standard under § 251 of the 1996 Act). Furthermore, the Commission disputes the correlation the IXC petitioners claim exists between the LECs 1996 earnings levels and “inflated” access rates under the current price-cap regime. The FCC points out that higher returns for price-cap carriers do not necessarily indicate imposition of unlawful rates under the price-cap regime. Rather, the purpose of price-cap regulation is to promote efficient use of the network while ensuring that rates, as opposed to earnings, are no greater than they would have been under historical rate of return regulation. See Order ¶¶ 292-93. Furthermore, even if LECs were earning unlawfully high returns as a result of current historic-cost-based access charges, setting rates on the basis of forward-looking economic costs is not statutorily required, and the FCC could impose an alternative solution that effectively and permissibly reduced rates. As to the IXCs’ argument that the Commission’s failure to prescribe access charges to forward-looking economic costs creates conditions for an anticompetitive price squeeze when a LEC affiliate offers interexchange service, 'the FCC responds that these concerns are unwarranted because adequate safeguards are in place to prevent such an occurrence. See Id. ¶¶ 278-79, 281. The Commission notes that independent (non-Bell Operating Company) incumbent LECs have been providing long-distance service for some time “with no substantiated complaints of a price squeeze.” Id. ¶279. In addition, the FCC expects that increasing access service competition will give unaffiliated IXCs alternative sources of access that would lessen the risk of a price squeeze by incumbent LECs. See Id., ¶ 280. Deferring, as. we must, to the agency’s expertise in this highly technical- area, we conclude that the FCC adequately explained its decision not to prescribe access charges at forward-looking economic costs and that its decision is not arbitrary or capricious. See Downer v. United States, 97 F.3d 999, 1002 (8th Cir.1996) (per curiam) (noting that “reviewing court may not substitute^ its judgment for that of the agency and must give substantial deference to agency determinations”). The IXCs next contend that the FCC’s failure to prescribe access charges at forward-looking economic costs leaves implicit universal subsidies embedded in current access charges in violation of the 1996 Act. These subsidies allegedly violate (1) § 254(d) because, being recovered primarily from IXCs, they are not “equitable and nondiscriminatory”; (2) § 254(e) because they do not provide universal service support that is “explicit”; and (3) § 254(k) because they constitute prohibited subsidies. These claims, like the BellSouth claims addressed earlier in this opinion, are premised upon the mistaken assumption that § 254 requires immediate implementation of a new universal support mechanism. As we noted above, § 254 requires merely that the Commission establish a “specific timetable for implementation” of the new universal support regime, 47 U.S.C.A. § 254(a)(2), and the FCC has complied with this mandate, see Order ¶ 47. In a related argument, the IXCs contend that the FCC’s regulatory choice of a market-based approach to drive access charges to economic costs cannot be justified on the basis of universal service support needs, because the Commission did not rely on this rationale in the Order. “If the agency itself has not provided a reasoned basis for its action, the court may not supply one.” Downer, 97 F.3d at 1002. Moreover, the IXCs argue that even were this Court permitted to consider this untimely justification, universal service needs cannot supply a reasoned basis for permitting inflated access charges after January 1999, when the new universal service mechanism will be implemented. We note that the Commission explained in the Order that it would “not remove all implicit [universal service] support from all access charges immediately” because “eliminating [such support] all at once might have an inequitable impact on the incumbent local exchange carriers,” a statement that can be read to implicate universal service support needs. Order ¶ 9; see also id. ¶ 46 (noting that a prescription “could result in a .substantial decrease in revenue for incumbent LECs, which could prove highly disruptive to business operations, even when new explicit universal service support mechanisms are taken into account”). While the FCC, in the Order, may have made only passing, nonspecific reference to universal service support needs as grounds for this decision, we cannot say that the Commission is precluded from advancing the universal service rationale for its decision not to prescribe forward-looking economic costs. Moreover, the IXCs’ argument ignores the fact that the Commission believed that prescribing rates was, in any circumstances, an inferior solution to the problem. The FCC was informed by Congress’s directive to “promote competition and reduce regulation,” Telecommunications Act of 1996, Pub.L. No. 104-104, 110 Stat. 56 (to be codified as amended in scattered sections of 47 U.S.C.); and elected the market-based approac