UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


US TELE ASSN

v.

FCC


97-1469a

D.C. Cir. 1999


*	*	*


Williams, Circuit Judge: Long-distance telephone traffic is  ordinarily
transmitted by a local exchange carrier ("LEC")  from its origin to a
long-distance carrier (or interexchange  carrier or "IXC"). The IXC
carries the traffic to its region of  destination and hands it off to
the LEC there. The IXC  charges the customer for the call and pays
"access charges"  to the LECs at either end. In a 1997 rulemaking the
Federal  Communications Commission amended its methodology for 
limiting these charges, as applied to the largest IXCs. The  rule is
challenged on one side by a group of LECs, and on the  other by one
IXC, namely MCI, and an Ad Hoc Telecommu- nications Users Committee
(collectively referred to here as  MCI).


In regulating access charges the FCC currently uses a  "price cap"
method--mandatory for the largest LECs (the  regional Bell operating
companies and GTE) and optional for  others. Under traditional
rate-of-return regulation an agency  sets rates calculated to allow
the utility to recover its costs,  including a reasonable rate of
return on investment, with  adjustment as needed to reflect cost
changes; here, however,  it sets rate ceilings and, with some
qualifications, allows the  utilities to keep whatever profits they
can make while charg- ing rates at or under the cap. (A LEC may also
file rates  above the caps, but for these the review process is
cumber- some and the substantive standards stringent.) The price  cap
system is intended (among other things) to improve the  utility's
incentives to cut costs and refrain from overinvest- ment, incentives
that are more blunted under the traditional 


method. See generally National Rural Telecom Ass'n v.  FCC, 988 F.2d
174, 177-79 (D.C. Cir. 1993).


The price caps were initially set at the levels of each  carrier's
rates on July 1, 1990. From the outset they have  been subject to
various annual adjustments, including reduc- tion by a "productivity
offset," or "X-Factor." See 47 CFR  s 61.45. In the order under
review, the agency revised the  method for determining the X-Factor,
eliminated a "sharing"  mechanism that forced LECs to return some or
all of the  profits above specified levels to ratepayers, and required
 "reinitialization," i.e., a reduction in the price caps applicable 
after July 1, 1997 so that they would be calculated as if the  new
X-Factor had been in effect for the LECs' 1996 tariff  filings. In the
Matter of Price Cap Performance Review for  Local Exchange Carriers,
Fourth Report & Order, 12 FCC  Rcd 16,642 (1997) ("1997 Order").
Because the access  charges are in the aggregate so enormous, even
small  changes in the X-Factor have a large monetary value; the  LECs
claim (without dispute) that each 0.1% change in the  factor
represents a $23 million change in the industry-wide  access charge.


I. The historic productivity component of the X-Factor


The X-Factor is aimed at capturing a portion of expected  increases in
carrier productivity, so that these improvements,  as under
competition, will result in lower prices for consum- ers. In the
Matter of Policy and Rules Concerning Rates for  Dominant Carriers, 3
FCC Rcd 3195, 3394 (1988). Apart  from a "consumer productivity
dividend" ("CPD") described  below, it is based on an assumption that
historic productivity  increases will be matched in the future. The
agency resolved  in the 1997 Order that the X-Factor (apart from the
CPD)  should be calculated as the sum of the difference in productiv-
ity growth and the difference in input price growth between  the LECs
and the economy as a whole. See 12 FCC Rcd at  16,680, p 95. It can
thus be expressed as follows: X = ( % LEC TFP - % TFP) + ( % U.S.
input prices - % LEC  input prices), where TFP = total factor


FCC Rcd at 16,785.1 The formula may be more readily  conceptualized as
X = ( % LEC TFP - LEC input prices) -  ( % U.S. TFP - % U.S. input
prices). Several parties submitted estimates of historical X-Fac-
tors. In a determination unchallenged here, the FCC accord- ed the
greatest weight to its own estimates, although it also  gave "some
weight" to AT&T's estimates (we discuss this  decision below). See
1997 Order, 12 FCC Rcd at 16,695, p 37.  The estimates the FCC
considered, and the averages of those  estimates over specified
periods, are the following: Table 1 Year FCC AT&T 1986 -0.5% 0.2% 1987
5.0 4.1 1988 5.0 6.4 1989 7.9 8.8 1990 8.8 11.0 1991 5.8 6.0




__________

n 1 This equation is apparently derived as follows from the FCC's 
general rule that the X-Factor is to "provide a reliable measure of 
the extent to which changes in the LECs' unit costs have been less 
than the change in level of inflation," see 1997 Order, 12 FCC Rcd  at
16,647, p 5: The general rule yields X = U - L, where U is the 
"change in level of inflation," and L is the change in the LECs' unit 
costs. The FCC then observes that "changes in a firm's unit costs 
come from two sources: (1) changes in productivity, and (2) changes 
in input prices," id. at n.16. Thus, L = % LEC input price - % LEC
productivity. Reading "change in level of inflation" as  "change in
unit costs in the economy as a whole," we get the similar  expression:
U = % U.S. input price - % U.S. productivity.  Substituting these
values into the equation X = U - L, using  "TFP" for productivity, and
performing a little algebraic manipu- lation yields the equation in
the text. As the Commission also increases the cap by general price 
inflation, see 12 FCC Rcd at 16,646, p 3, the net effect of these 
adjustments is (roughly, subject to effects of the use of different 
indices) to increase the cap by the LECs' estimated change in unit 
costs. It is somewhat as if the overall adjustment ("A") were (using 
the terms of the prior paragraph) A = U - X = U - (U - L) = L.


1992 3.4 4.1 1993 4.7 6.0 1994 5.4 5.9 1995 6.8 9.4 Specified periods
(averaged) 1986-95 5.2 6.2 1987-95 5.9 6.9 1988-95 6.0 7.2 1989-95 6.1
7.3 1990-95 5.8 7.1 1991-95 5.2 6.3 Range of Averages: 5.2-6.1
6.2-7.3


1997 Order, 12 FCC Rcd at 16,696, p 137.


The FCC consulted the moving averages to establish a  range of
reasonableness from 5.2% to 6.3% and then selected  6.0% as the
historical (i.e., non-CPD) component of the X- Factor. See id. at
16,697, p 141. The LECs argue that the  FCC did not give a rational
explanation of that choice, and we  agree. None of the reasons given
for choosing 6.0% holds  water.


A.Devaluation of 1986-95 and 1991-95 averages


First, in choosing a point within the range of reasonable- ness, the
FCC determined that it was "reasonable to place  less weight" on two
lowest averages, the ones for 1986-95 and  1991-95. It said that the
first, 1986-95, "is heavily influenced  by the improbably low 1986
estimate of-0.5 percent." Id. at  16,697, p 139. But the Commission
gave no reason for con- demning the 1986 estimate as "improbable," and
mere diver- gence from the other numbers does not justify such a
conclu- sion. See Thomas H. Wonnacott & Ronald J. Wonnacott, 
Introductory Statistics for Business and Economics 497 (2d  ed. 1977).
The FCC invokes our cases upholding the elimina- tion of outlying data
points, but in them the agency explained  why the outliers were
unreliable or their use inappropriate.  See Bell Atlantic Tel. Cos. v.
FCC, 79 F.3d 1195, 1202 (D.C.  Cir. 1996) (study indicated outlier
erroneous); Association of  Oil Pipe Lines v. FERC, 83 F.3d 1424, 1434


(skewed data distribution required outlier elimination to avoid 
windfall profits to many oil pipelines).


As to the 1991-95 average, the Commission said it was the  one "most
affected by the low 1992 estimate," which it in turn  diagnosed as "an
artifact of a one-year jump in the measured  productivity of the
national economy as economic activity  increased, rather than a change
in the growth rate of LEC  productivity or input prices." 1997 Order,
12 FCC Rcd at  16,697, p 139. This is mystifying. If the productivity
compo- nent of the X-Factor is to reflect the difference between LEC 
and overall productivity growth, a proposition that is built  into the
Commission's formula, see 1997 Order, 12 FCC Rcd  at 16,785, there
seems no reason to slight a datum because its  anomalous character
stems from the unusual magnitude of  the second term rather than of


B.Alleged upward trend


In justification of its choice of 6.0% the FCC also cites an  upward
trend in the X-Factor during the last years it sur- veyed. See 1997
Order, 12 FCC Rcd at 16,697, p 139  ("[F]rom 1993 onward there has
been an upward trend in the  X-Factor"); id. at p 141 ("[T]here
appears to be a strong  upward trend in productivity growth from 1992
to 1995").2  The FCC's reliance on the upward trend necessarily
reflects  the (unexplained) assumption that the trend will continue,
at  least in the immediate future. Explanation might be reason- ably
omitted if there were no obvious reason to doubt contin- uation of an
observed trend. But two such reasons exist.


First, the trend appears to be part of a cyclical pattern.  Although
the X-Factor did increase steadily in the 1992-95  period, it also
decreased from 1990 to 1992, after rising from  1986 to 1990. See
Table 1, supra. Perhaps there was reason 




__________

n 2 The parties dispute whether the trend in question covers  1992-95
or 1993-95, with the FCC calling the reference to 1992-95  at p 141 a
"typographical error," FCC Br. at 34, and the LECs  arguing that any
typographical error should have been corrected in  FCC's errata, LEC
Reply Br. at 10. The answer makes no  difference to our analysis.


to believe that there would be no cyclical downturn during the 
expected life of this X-Factor determination, which was to be 
reviewed about two years after being made. See 1997 Order,  12 FCC Rcd
at 16,707, p 166. But the FCC offered no such  reason.


Second, the X-Factor is calculated as the sum of two  components,
neither of which followed a trend during the  period in question. In
fact, their year-to-year fluctuations  swamped the trend increments:


Table 2 Year Difference between Difference between LEC & US changes in
LEC and US changes total factor in input prices productivity 1992 0.21
3.21 1993 1.44 3.26 1994 3.69 1.71 1995 1.78 5.04


1997 Order, 12 FCC Rcd at 16,785. Where's the trend? As  the underlying
variables appear to be thrashing about wildly,  the FCC's conclusion
that the trend in the difference between  the two had some predictive
value requires explanation.


C.Partial reliance on AT&T estimates


Finally, the LECs argue that in its treatment of AT&T's  X-Factor
estimates the FCC "implicitly endorsed methodolo- gies that it had
earlier discredited." LEC Br. at 27. The  FCC incorporated the aspects
of AT&T's method that it  deemed reasonable into its own method, see
1997 Order, 12  FCC Rcd at 16,658, p 33, and then gave independent
weight  to AT&T's X-Factor estimates in deciding to extend the  range
of reasonableness upward, see 1997 Order, 12 FCC Rcd  at 16,697, p
140, and to select a value near the top of the  range. Id. at p 141.
We agree that both these uses of  AT&T's estimates appear irrational;
any differences between  the FCC's and AT&T's estimates presumably
resulted from  elements of AT&T's analysis that the FCC specifically
reject- ed. The FCC's argument that AT&T's estimates were "help-


ful" because AT&T's methodology was "similar," FCC Br. at  37, fails
to overcome that logic. If there is an explanation-- for example,
conceivably the Commission gave some weight to  AT&T's conclusions out
of concern for the risk that it had  erred in rejecting specific
elements of AT&T's analysis--the  FCC has failed to mention it.


The Commission having failed to state a coherent theory  supporting its
choice of 6.0%, we remand for further explana- tion.


II. Consumer productivity dividend


The second component of the X-Factor is a "consumer  productivity
dividend" ("CPD") of 0.5%. At the time of the  1990 order instituting
price-cap regulation, the FCC "expect- ed ... that incentive
regulation would result in greater  productivity gains than rate of
return regulation," Bell Atlan- tic, 79 F.3d at 1198, and instituted
the CPD, as it said, to  "assure that the first benefits of price caps
flow to customers  in the form of reduced rates," In the Matter of
Policy and  Rules Concerning Rates for Dominant Carriers, 5 FCC Rcd 
6786, 6799, p 100 (1990) ("Price Cap Order"). It retained the  0.5%
CPD without specific explanation in a 1995 interim rule,  Bell
Atlantic, 79 F.3d at 1204, and retained it again in the  current rule.
See 1997 Order, 12 FCC Rcd at 16,690, p 123.


The LECs challenge the 0.5% CPD as based on an "obso- lete"
justification. The Commission's earlier data on historic  productivity
improvement derived from the rate-of-return  era, so an adjustment to
reflect the expected incentive effects  of price caps was in order;
but the post-1990 data presum- ably reflect those effects.


FCC counsel responds that the agency believes that an  innovation in
the current rule--the Commission's elimination  of the "sharing" of
profits exceeding certain benchmarks-- will give the LECs still
further productivity incentives, and  that the FCC relied on that in
retaining the CPD. Even if  the agency relied on this justification
(which the LECs dis- pute), it never explained retention of the old
percentage, a  retention that required some comparison of the current


change with the initial one in terms of their likely impacts on 
productivity. Thus we must remand for an explanation of the 
Commission's choice of the amount--0.5%.


The LECs claim that the FCC did not rely on the expected  effects of
sharing elimination and that it gave no other reason  justifying the
retention of any CPD. We do not reach these  arguments because the FCC
will be able to give a clearer  statement of its reasons in the remand
on the amount and  since the LECs do not dispute the argument FCC's
counsel is  presently making--that it is defensible to include a CPD 
corresponding to whatever productivity increase may be ex- pected from
the elimination of sharing.


III. Elimination of sharing


Before the rule at issue in this case, the FCC's price cap  regime
included a "sharing" mechanism, which mandated  LEC rate reductions
sufficient to return profits above speci- fied levels to their
customers, the IXCs. The most recent  sharing regime, enacted in the
1995 interim order, made the  sharing obligation dependent on the
X-Factor, imposing no  obligation of firms choosing a 5.3% X-Factor,
and the follow- ing on ones choosing 4.7% and 4.0%:


Table 3 Chosen X- 50% Give-back 100% Give-back Factor required for
required for rate-of-return rate-of-return over over


4.7% 13.25% 17.25% 4.0% 12.25% 16.25% In the Matter of Price Cap
Performance Review for Local  Exchange Carriers, 10 FCC Rcd 8961,
9058, p 222 ("Perfor- mance Review Order") (1995). Attacking the
Commission's  elimination of the "sharing" mechanism, MCI first claims
that  the statutory mandate of "just and reasonable" rates, 47  U.S.C.
s 201(b), requires the FCC to impose a mechanism to  prevent
"unreasonable" returns. In the absence of any indi- cation that
Congress directly addressed the issue, we defer to  the FCC's
interpretation of the Communications Act unless it 


is unreasonable. See Chevron U.S.A. Inc. v. NRDC, 467 U.S.  837
(1984). MCI cites no authority rejecting an FCC inter- pretation of
the statute contrary to the one MCI advances,  and in Time Warner
Entertainment Co. v. FCC, 56 F.3d 151  (D.C. Cir. 1995), we endorsed a
pure price cap regime with no  sharing provision in the face of a
statutory mandate to ensure  "reasonable" basic cable rates. See id.


Next, MCI argues that elimination of sharing was arbitrary  and
capricious. But the agency advanced two sound ratio- nales for its
decision. First, it found that "sharing severely  blunts the
efficiency incentives of price cap regulation by  reducing the rewards
of LEC efforts and decisions." 1997  Order, 12 FCC Rcd at 16,700, p
148. When all profits are  taken away, a firm has no incentive to make
them; when  some proportion is taken away, firms will avoid at least
some  otherwise desirable choices with a prospect of enhancing  profit
but a risk of loss. Second, the FCC found that  eliminating sharing
would remove the incentive to shift costs  to services that are
subject to sharing and away from services  that are not, thus
cross-subsidizing the latter. 1997 Order, 12  FCC Rcd at 16,700, p
148; id. at 16,701, p 151. MCI does not  contest these effects, nor
does it question the Commission's  argument that monitoring to catch
them would be administra- tively burdensome and would increase its
reliance on obsolete  embedded accounting costs. Id. at 16,701-02, pp


Finally, MCI contends that it was arbitrary and capricious  for the FCC
to scuttle sharing but at the same time retain its  "low-end
adjustment," which gives the LECs some pricing  leeway to prevent
their returns from falling below a given  level. There is clearly a
literal asymmetry in protecting  LECs in lean conditions while not
constraining them in  unexpectedly fat ones. But the FCC gave a good
reason for  creating this asymmetry--the Constitution's takings
clause,  which forbids the imposition of confiscatory rates without
just  compensation. See 1997 Order, 12 FCC Rcd at 16,704, p 157; 
Duquesne Light Co. v. Barasch, 488 U.S. 299, 307-08 (1989).  The
Commission thus avoided raising a non-trivial constitu- tional
question, one that has no analogy at the upper end of 


the range of allowable rates. See Time Warner, 56 F.3d at  170.


IV. Interstate v. total-company productivity


MCI argues that in calculating the X-Factor the FCC  arbitrarily used
the LECs' productivity in all their telecom- munications business
rather than productivity only in their  interstate operations. Again,
we disagree. The FCC reason- ably concluded that "the record before us
does not allow us to  quantify the extent, if any, to which interstate
productivity  growth may differ significantly from total company
productiv- ity growth," 1997 Order, 12 FCC Rcd at 16,686, p 110, and 
this determination was enough to justify using the total  company


In the first place, it is not clear that "interstate productivi- ty,"
as opposed to total company productivity, is measurable,  or even
economically well-defined. This is so because direct  productivity
measurement requires measurement of inputs,  and there is no obviously
meaningful way to segregate LEC  interstate and intrastate inputs
because, as is undisputed,  "interstate and intrastate services are
usually provided over  common facilities." 1997 Order, 12 FCC Rcd at
16,685, p 107.  The Commission had previously recognized this
analytical  difficulty, questioning "whether it would be possible to
devel- op separate production functions for interstate and intrastate 
services," id., and it never unambiguously declared the issue 


The Commission nonetheless declared itself ready to con- sider some
adjustment if it were shown that inclusion of  intrastate data
systematically biased the X-Factor estimate  downward. 1997 Order, 12
FCC Rcd at 16,686, p 109. AT&T  offered claims of faster interstate
productivity growth. It  based these on an assumption of equal growth
rates for  interstate and intrastate inputs, but it offered no
explanation  why that assumption was economically justified, much less
 one so compelling that it would be error for the FCC to reject  it.
See AT&T Comments, CC Docket No. 94-1, App. A at  23-30, 72-78; 1997
Order, 12 FCC Rcd at 16,686-87, p 110.


MCI argues that in the original 1990 LEC price cap order  the
Commission inferred faster productivity growth in inter- state
services from the undisputed fact of faster output  increase in that
sector. See Price Cap Order, 5 FCC Rcd at  6798, p 92 ("[T]he more
rapid growth in interstate usage  results in higher apparent
interstate productivity growth.").  This assumption should have
continued, it says. But the 1990  method of measuring productivity had
not depended on the  measurement of inputs at all; the Commission had
simply  inferred productivity growth from prior trends in rate reduc-
tions. 1997 Order, 12 FCC Rcd at 16,648, p 8. Given the  shift to
direct focus on input changes (a move that no one  questions) and the
uncertainty over interstate input trends,  we do not see why the
agency should have been bound to  retain the assumption of faster
interstate productivity growth.  On this record, therefore, we do not
find it unreasonable for  the agency to have relied on total company
productivity  despite its theoretical shortcomings.


V. Reinitialization


"Reinitialization" is the name for the Commission's setting  a current
price cap at what it would have been if past X- Factors had been
different. For instance, if the price cap  starts at 100 and the
X-Factor is 1% for the first three years,  the cap would stand at
approximately 97 at the end of those  years. 100 - (3 x 1) = 97. (The
figure is only approximate  because of compounding.) If the regulator
then changes the  X-Factor to 2% and imposes full reinitialization, it
would  revise the cap to about 94 for the year immediately following. 
100 - (3 x 2) = 94. In the 1997 Order, the FCC ordered 
reinitialization for one year, 1996. See 12 FCC Rcd at 16,714,  p 179.
Under our simple example, then, the cap would fall to  approximately
96. 100 - (2 x 1) [two years' reduction of  1%] - (1 x 2) [one year's


Both the LECs and MCI challenge this decision, seeking to  have it
modified to favor their respective interests.


A.Reinitialization based on CPD


The LECs challenge the FCC's requirement that they  include the CPD in
the X-Factor used for reinitialization. In 


Part II, we explained the need to remand the case for further 
explanation of size of the CPD. We agree with the LECs  that if the
FCC retains the CPD because of the productivity  benefits expected
from the elimination of sharing, no element  of reinitialization based
on the CPD will be appropriate in the  absence of evidence linking
productivity gains to the anticipa- tion of sharing's elimination; the
companies could not have  responded to that incentive before its


B.Disparate impact of uniform reinitialization


The LECs argue that reinitialization fell more harshly on  carriers
that chose low X-Factors with high sharing obli- gations for 1996 than
on ones that chose high X-Factors. As  a result of reinitialization,
the low X-Factor carriers lost  some of the future benefits of that
choice, but were not in a  position to recover any of sharing costs
that they may have  borne because of it. Reinitialization imposed no
such asym- metry on companies that had elected a high X-Factor. The 
LECs' specific complaint is that this was "an important  aspect of the
problem" before the Commission, which it was  obliged to discuss. See
Motor Vehicle Mfrs. Ass'n v. State  Farm Mut. Auto. Ins. Co., 463 U.S.
29, 43 (1983).


The Commission argues that it failed to discuss the dispari- ty because
the LECs never brought the subject up. It cites  s 405 of the
Communications Act, 47 U.S.C. s 405, which  bars review of an issue on
"which the Commission ... has  been afforded no opportunity to pass,"
see also United States  v. FCC, 707 F.2d 610, 619 (D.C. Cir. 1983),
unless the  petitioners sought rehearing before the Commission--which 
the LECs did not. The LECs in turn say they couldn't have  afforded
the Commission a chance to pass on it; the Commis- sion had never
given notice of any intent to order reinitializa- tion.


Section 405's "no opportunity to pass" clause does not in  terms
exclude instances where the lack of opportunity is due  to some fault
of the Commission--such as its springing a  novelty at the last
minute. But we need not sort that out  here, because we find no fault
in the Commission's procedure.  Reinitialization may not have been a
subject on which the 


Commission explicitly elicited comment in its notices for this 
rulemaking, but the prospect surely brooded over the pro- ceeding. In
its 1995 mid-course correction of the price caps it  had ordered
reinitialization--in a form, in fact, that fell only  on those LECs
that had chosen a low X-Factor in exchange  for greater risk of
sharing, and not at all on those that had  chosen a high one.
Performance Review Order, 10 FCC Rcd  at 9069-73, pp 245-54. If the
perceived asymmetry was as  serious as the LECs now make out, we
should have expected  them to alert the Commission in this proceeding
in advance:  "If you do a reinitialization, at least avoid the
dreadful  asymmetry of the 1995 order." No such alert was sounded.


C.Reinitialization for only one year


MCI claims that the FCC should have reinitialized the X- Factor all the
way back to 1991 (the first year of the price-cap  regime). It says
the agency has a policy of correcting errors  in X-Factor
determinations and that it decided in the current  rule that prior
determinations were in error. In the alterna- tive, MCI argues that
the FCC should reinitialize back to  1995, the year in which the
previous X-Factor was adopted.


In the 1995 interim price cap review, the FCC determined  that a single
year's productivity estimate generated by its  former method was
understated, based in large part on the  estimate's discrepancy with
the results of a TFP study. See  Performance Review Order, 10 FCC Rcd
at 9053, p 208. It  then calculated a new X-Factor designed to
eliminate the  effects of the understatement and required LECs to set
their  price caps as though the new X-Factor had been in effect  since
the advent of price cap regulation. See id. at 9069,  p 245. In 1997
the Commission determined that its former  method had systematically
understated productivity relative  to the TFP method, but required
reinitialization for one year  only. See 1997 Order, 12 FCC Rcd at
16,713-14, pp 178-79.


The situations are somewhat similar, but the FCC ade- quately
distinguished them. It rested its 1997 decision to  limit
reinitialization on the need to "limit harm to LEC  productivity
incentives that could result from the perception  that our regulatory
policies unnecessarily lack constancy." 


1997 Order, 12 FCC Rcd at 16,714, p 179. It seems clear that  a second
extensive reinitialization would considerably aggra- vate such a
perception. Universal, complete reinitialization  would impair the
supposed incentive advantages of price  caps--which derive from firms'
supposing that their efficien- cies will not come back to haunt


VI. The rule's effects on small and mid-size LECs


The Independent Telephone and Telecommunications Alli- ance, an
intervenor, argues that the FCC acted arbitrarily  and capriciously in
establishing a uniform X-Factor for all  LECs, regardless of size and
economic characteristics, and in  failing to consider the disparate
impact of its reinitialization  requirement on small and mid-size
LECs. Because the peti- tioners here have not raised these issues,
ITTA is procedural- ly barred from arguing them. See Illinois Bell
Tel. Co. v.  FCC, 911 F.2d 776, 785-86 (D.C. Cir. 1990).


It is true, as ITTA points out, that this court in Synovus  Fin. Corp.
v. Board of Governors, 952 F.2d 426, 434 (D.C. Cir.  1991),
characterized the rule against consideration of issues  raised by
intervenors and not by petitioners as "a prudential  restraint rather
than a jurisdictional bar." But in deciding to  consider the
intervenor's issue there, the court relied on the  fact that the
relevant issue was "an essential predicate" to an  issue raised by a
petitioner. Id. That circumstance is cer- tainly not present here. The
Synovus court offered a second  reason to hear the claim--that the
intervenor was not "the  losing party in the administrative
proceeding," and thus did  not have "every incentive to petition for
review." Id. Here,  ITTA itself claims that it "through its members,
participated  fully in the proceedings below," ITTA Reply Br. at 3,
and that  its "members raised the issue of the necessity of multiple
X- Factors," the very issue it seeks to raise in this court.


Thus, neither of the special circumstances cited in Synovus  is
present. Furthermore, ITTA presents no reason why it  could not have
petitioned in its own right. We decline to  consider its arguments.


Conclusion


The FCC's decisions to select 6.0% as the first component  of the
X-Factor and to retain the 0.5% CPD are reversed and  remanded to the
agency for further explanation; the FCC  may of course request a stay
of this order pending its  reconsideration. The petitions for review
are otherwise de- nied.


So ordered.