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


QWEST COMM INTL INC

v.

FCC


99-1531a

D.C. Cir. 2000


*	*	*


Rogers, Circuit Judge: Qwest Communications Interna- tional, Inc.
("Qwest") petitions for review of a decision by the  Federal
Communications Commission ("Commission") to dis- close raw audit data
to competitors in connection with a  notice of inquiry concerning the
validity and reasonableness  of statistical sampling for equipment not
found or not verifia- ble during a field audit.1 See In re Ameritech
Corporation  Telephone Operating Companies' Continuing Property Rec-
ords Audit et al., Memorandum Opinion and Order, 15  F.C.C.R. 1784
(1999) ("Order"). Qwest contends that the  Order is contrary to s 1905
of the Trade Secrets Act, 18 




__________

n 1 U S West Communications, Inc., which filed the petition for 
review, is a wholly-owned subsidiary of U S West, Inc. During the 
pendency of this appeal, U S West, Inc. merged and became Qwest 
Communications International, Inc. Accordingly, we refer to Qwest  as
the petitioner.


U.S.C. s 1905 (1994), because nothing in s 220(f) of the 
Communications Act of 1934, 47 U.S.C. s 220(f) (1994), autho- rizes
the Commission to release otherwise protected informa- tion. Qwest
further contends that the Commission's Order  violates its own
longstanding policy to provide special protec- tion to audit
information. We hold that s 220(f) provides  sufficient authorization
for disclosure of trade secrets, but  that the Commission has failed
to explain how its Order is  consistent with its policy regarding the
treatment of confiden- tial information. Accordingly, we remand the
case to the  Commission for further proceedings.2


I.


Under Part 32 of the Commission's regulations, the Region- al Bell
Operating Companies ("RBOCs") are required to  maintain detailed
accounting records of property used in their  local telephone
operations, including the property's descrip- tion, location, and
cost. See 47 C.F.R. ss 32.2000(e)-(f). The  records, which serve
various regulatory functions, including  the setting of rates and the
assessment of charge allocations,  must conform to a uniform
accounting system prescribed by  the rules and must be sufficiently
detailed to allow the  property's physical existence to be confirmed
during a spot  check conducted by the Commission. See id.


In 1997, the Commission's Common Carrier Bureau's Ac- counting
Safeguards Division ("Bureau") began an audit of  the RBOCs' records
for hard-wired central office equipment  in order "to determine if
their records were being maintained  in compliance with the
Commission's rules and to verify that  property recorded in the
accounts represented equipment  used and useful for the provision of
telecommunications ser- vices."3 During the audit, each piece of




__________

n 2 In view of our disposition of the Commission's reliance on  s
220(f), we do not address the Commission's reliance on s 154(j),  47
U.S.C. s 154(j) (1994). See Order, 15 F.C.C.R. at 1788 p 8 &  n.23.


3 The seven RBOCs were Ameritech, Bell Atlantic, BellSouth,  NYNEX,
Pacific Bell, Southwestern Bell, and U S West Telephone 


categorized or "scored" as "(1) found [as described]; (2) found  in
another location; (3) not found/missing; or (4) unverifia- ble." The
Commission explained that part of the audit in- cluded "statistical
sampling techniques so that the findings  for the sample could be
extended as representative of all of  the equipment in the category
audited, i.e., hard-wired central  office equipment." After reviewing
the RBOCs' comments on  draft reports, the Bureau's final audit
reports revealed that  the RBOCs may have overstated their book costs
by as much  as five billion dollars.4 The RBOCs filed objections, in
the  words of one Commissioner, "aggressively attack[ing] the  audits,
the competence of the auditors, and the credibility of  the audit
design."5 Qwest challenged the Bureau's final audit  report, claiming
that it failed to reflect additional data ac- counting for a majority
of items scored as "not found," and  reaffirming its conclusion that
the audit was fatally flawed for  statistical and other reasons.6 In
support of the latter point, 




__________

n Companies. See Public Notice, The Accounting Safeguards Divi- sion
Releases Information Concerning Audit Procedures for Con- sidering
Requests by the Regional Bell Operating Companies To  Reclassify or
"Rescore" Field Audit Findings of Their Continuing  Property Records,
14 F.C.C.R. 6243, 6243 (1999). The hard-wired  central office
equipment constitutes approximately one-fourth of the  RBOCs' total
capital investment. See Press Release, FCC Releases  Audit Reports on
RBOCs' Property Records, Feb. 25, 1999 ("FCC  Press Release").


4 See FCC Press Release. The audit indicated "that approxi- mately 11
percent of the [RBOCs'] equipment could not be found,  and
approximately 14 percent was either unverifiable or found in  another
location." Order, 15 F.C.C.R. at 1786 p 3.


5 In re U S West Telephone Operating Companies' Continuing  Property
Records Audit, Order, 14 F.C.C.R. 5731, 5827 (1999)  (Commissioner
Tristani, issuing separate statement).


6 Qwest's individualized audit report indicated that of the 1188 
hard-wired equipment-item records randomly sampled and "scored"  for
the audit, 294 (24.7% of the sampled items) "contained substan- tive
deficiencies and did not comply with the Commission's rules."  Id. at
5736 p 3. See also id. at 5743 p 21. Of the 294 deficient  records,
152 (12.79% of the sampled items) described equipment 


Qwest submitted an analysis by Deloitte & Touche's "quanti- tative
techniques expert," who raised doubts about the audi- tors' sampling
methodology and their evaluation techniques.


The Commission, in turn, issued a notice of inquiry in April  1999,
seeking public comment on ten criticisms relating to the  audits. See
In re Ameritech Corporation Telephone Operat- ing Companies'
Continuing Property Records Audit et al.,  Notice of Inquiry, 14
F.C.C.R. 7019, 7021-22 p 6 (1999)  ("NOI"). The only issue relevant
here is Issue 2: namely,  "[t]he validity and reasonableness of the
methodology used by  the Bureau's auditors in determining whether to
rescore or to  modify a finding during a field audit that equipment
was 'not  found.' "7 Previously, in February 1999, the Commission 
determined, over the dissent of two Commissioners, that  pursuant to
the RBOCs' waivers of confidentiality, the release  of the audit
reports and the RBOCs' responses to them was  in the public interest.8
MCI thereafter filed a Freedom of  Information Act request, pursuant
to 47 C.F.R. s 0.461,  seeking public release of the RBOCs'
explanations and sup- porting documentation regarding their equipment
not found,  the Bureau's audit workpapers showing the scoring of
partic- ular items, and the continuing property records themselves.9




__________

n that could not be verified against the record; 123 (10.35% of the 
sampled items) described equipment that could not be found; and  19
(1.60% of the sampled items) described equipment that could  only
partially be located. See id.


7 NOI, 14 F.C.C.R. at 7021 p 6. Commissioner Furchtgott- Roth indicated
apparent agreement with some of the RBOCs'  criticisms of the audit's
methodology, process, and overall conclu- sions. See In re U S West
Telephone Operating Companies'  Continuing Property Records Audit,
Order, 14 F.C.C.R. at 5832-35  (Commissioner Furchtgott-Roth,
dissenting in part).


8 See FCC Press Release.


9 MCI sought the release of three types of information:


[1] any materials that the RBOCs have submitted to the  [Bureau] to
explain why hard-wired [central office] equipment  items were not
found by the auditors or to support claims that  items in the audit
sample should be "rescored." ... [This 


Qwest opposed the release of the raw audit data on three  principal
grounds: First, releasing the requested information  is barred by s
220(f) of the Communications Act and previous  Commission rulings and
would be an unjustified departure  from the Commission's established
practice of not releasing  audit-related materials, except in
exceptional cases; second,  the requested information is confidential
commercial informa- tion, voluntarily submitted, and thus exempt from
release  under Exemption 4 of the Freedom of Information Act, 5 
U.S.C. s 552(b)(4); and third, the requested information con- stitutes
pre-decisional deliberations and as such, is protected  by Exemption 5
of the Freedom of Information Act, 5 U.S.C.  s 552(b)(5), and s
0.457(e) of the Commission's rules, 47  C.F.R. s 0.457(e). Qwest
indicated that it was opposing only  the request for release of data
submitted regarding the "not  found" and "unverifiable" audit items,
explaining that these  items "contain[ed] detailed information
including pricing in- formation on specific items used in the
provision of telecom- munications services...." These items, in
Qwest's view,  were comprised of "highly sensitive business
information  which MCI could use to unfairly improve its competitive 


The Bureau ordered release of the requested raw audit  data to parties
under a protective order. The Bureau relied  on ss 154(j) and 220(f)
of the Communications Act as provid- ing the Commission with explicit
authorization for the discre- tionary release of audit materials
otherwise protected from  release under the Freedom of Information Act
and the Trade 




__________

n includes] narrative explanations and supporting documentation  such
as invoices, telephone equipment orders, property record  input forms,
engineering drawings, and photographs[;] [2] any  audit workpapers
generated by [Bureau] staff during the  course of the audits that show
or support the item-by-item  scoring of the items in the audit
sample[;] [and 3] [Continuing  Property Records] detail (vintage,
description, etc.) for any  items scored "partially found," "not
found," or "not verifiable"  at any time during the audit process.


MCI stated that release of the requested raw data was crucial for 
responding to the questions asked in the NOI, particularly Issue 2.


Secrets Act. Relying also on "the Commission's duty to  ensure that
parties are given a reasonable opportunity to  make informed comment
on Issue No. 2," the Bureau viewed  "the unique situation" created by
the question posed in Issue  2 to require the release of information
that is "not routinely  made available to the public, even under
protective orders."  The Bureau concluded that the question regarding
the "audi- tors' rescoring process can only be answered by allowing 
parties interested in filing comments to review this [raw data] 
material." The Bureau's protective order limited access to  the
requested materials to (1) counsel for a party participat- ing in the
NOI proceeding and (2) technical advisors or other  persons authorized
by such counsel. In the Bureau's opinion,  the protective order
"reasonably ameliorated" any potential  competitive harm to the RBOCs.
All of the RBOCs except  Bell Atlantic appealed to the Commission.


The Commission affirmed the Bureau's decision to release  the raw audit
data subject to a protective order, relying  principally on the
Commission's explicit authority under  s 220(f): "[G]iven the
importance of Commission audits to  the effective performance of the
Commission's statutory re- sponsibilities with respect to carriers,
[the Commission] be- lieve[s] the [Communications] Act's statutory
scheme fully  envisions that, in some cases, disclosures of
carrier-supplied  audit information might become necessary in the
course of  carrying out the Commission's enforcement and regulatory 
policymaking functions."10 Order, 15 F.C.C.R. at 1789 p 8.  The
Commission also imposed "more stringent" terms for  access to audit
materials, modifying the protective order (1)  to restrict access to
the audit materials to "persons without  decision making authority or
influence regarding competitive  issues," (2) to redact
"vendor-specific pricing information,"  and (3) to limit the materials
to be released to those relating  to Issue 2.11 Id. at 1790-91 p p




__________

n 10 In a footnote, the Commission cited s 154(j) as an alternate 
source of its authority. See Order, 15 F.C.C.R. at 1788 n.23.


11 Noting that MCI had not requested disclosure of materials 
concerning undetailed investment, the Commission decided not to 
require access to such information. See id. at 1791 p 14.


provided that the RBOCs could suggest, for Bureau approval,  other
redactions to the auditors' workpapers and the RBOCs'  comments. Qwest
petitioned for review of the Order.12


II.


Qwest contends that the Commission's decision to release  protected
confidential information violates the Trade Secrets  Act because the
Commission is not "authorized by law" to  disclose otherwise protected
information. Section 220(f) of  the Communications Act, Qwest
maintains, is "a nondisclo- sure statute that itself prohibits agency
employees from  releasing information obtained during audits...."
Because  s 220(f) is "wholly silent as to the power of the Commission 
to issue [ ] directions" for release of such material, Qwest 
continues, the statute's "logic and purposes reflect no [Con-
gressional] intention to authorize the Commission to disclose 
confidential information based solely on the exercise of its  own


The parties agree that the material ordered disclosed by  the
Commission is covered by the Trade Secrets Act. Hence,  the question
is whether the Communications Act vests the  Commission with authority
to disclose information covered by  the Trade Secrets Act, or more
specifically, whether, for  purposes of s 1905 of the Trade Secrets
Act, the Commission  was authorized under s 220(f) of the
Communications Act to  allow Qwest's competitors access to Qwest's raw


The parties disagree about our standard of review. We  agree with the
Commission that our principal inquiry of the  meaning of s 220(f)
follows the familiar two-part test under  Chevron, U.S.A., Inc. v.
NRDC, 467 U.S. 837, 842-43 (1984):  The court "must give effect to the
unambiguously expressed  intent of Congress" or in the absence of such
intent, consider  whether the agency's interpretation is a
"permissible con- struction of the statute." Id. at 843. Necessarily,
however,  we must first examine what Congress intended by s 1905 of 




__________

n 12 The court granted Qwest's motion for a stay pending review.


the Trade Secrets Act, and in this regard, as Qwest contends,  our
review is de novo. Hence, we look first to the language  of s 1905 and
seek guidance from its structure and history.  See Chrysler v. Brown,
441 U.S. 281, 296 (1979). We then do  much the same in examining s
220(f) of the Communications  Act, reaching the Commission's
interpretation of its enabling  statute only if Congressional intent


Section 1905 of the Trade Secrets Act prohibits the unau- thorized
release of trade secrets and commercial information,  unless
"authorized by law," subject to punishment by fine and  imprisonment
and removal from office or employment. See  18 U.S.C. s 1905.13 The
history of the Act, which was  originally enacted in 1864, traces back
to Congressional con- cern over disclosures of business information by
"feckless or  corrupt revenue agents." Chrysler, 441 U.S. at 296. When
 Congress in 1948 consolidated three statutes barring or limit- ing
the release of such information, it sought to address the  demands of
the new administrative state and thereby broad- ened the reach of the
Trade Secrets Act. See CNA Fin.  Corp. v. Donovan, 830 F.2d 1132, 1149
n.122 (D.C. Cir. 1987).  As the court has previously recounted,
Congress "recog- ni[zed] that increased governmental access to
financial rec- ords and commercial operations of individuals and
entities ...  had to be accompanied by some restraint on the freedom




__________

n 13 Section 1905 provides in relevant part:


Whoever, being an officer or employee of the United States or  of any
department or agency thereof, ... publishes, divulges,  discloses, or
makes known in any manner or to any extent not  authorized by law any
information coming to him [or her] in  the course of his [or her]
employment or official duties or by  reason of any examination or
investigation made by, or return,  report or record made to or filed
with, such department ... ,  which information concerns or relates to
[ ] trade secrets ...;  or permits any income return or copy thereof
or any book  containing any abstract or particulars thereof to be seen
or  examined by any person except as provided by law; shall be  fined
under this title, or imprisoned not more than one year, or  both; and
shall be removed from office or employment.


18 U.S.C. s 1905 (emphasis added).


governmental employees to disseminate such data to third  parties."
Id.


The limits established by the Trade Secrets Act, however,  are not
inconsistent with authorizations granted to federal  agencies to
release data when necessary for the carrying out  of the agencies'
statutory responsibilities. In National Parks  and Conservation Ass'n
v. Kleppe, 547 F.2d 673 (D.C. Cir.  1976), the court noted that the
Trade Secrets Act is "merely a  general prohibition against
unauthorized disclosures of confi- dential commercial or financial
information." Id. at 687 n.50.  The court in CNA, continuing to
explore the nature of the  statute, observed that the Trade Secrets


seems to embody a congressional judgment that private  commercial and
financial information should not be re- vealed by agencies that gather
it, absent a conscious  choice in favor of disclosure by someone with
power to  impart the force of law to that decision. The Act at- tempts
to forestall casual or thoughtless divulgence-- disclosure made
without first going through a delibera- tive process--with an
opportunity for input from con- cerned parties.


CNA, 830 F.2d at 1141 (emphasis added).


In the leading case on the question of the authorization  required by s
1905 for release of trade secrets, the Supreme  Court interpreted the
phrase "authorized by law" not to have  "a special, limited meaning."
Chrysler, 441 U.S. at 298.  Instead, the Supreme Court instructed that
the exercise by  an agency of quasi-legislative power "must be rooted
in a  grant of such power by the Congress and subject to limita- tions
which that body imposes." Id. at 302. More directly,  the Court stated
that "[w]hat is important" is whether the  reviewing court could
reasonably conclude that the statutory  grant of authority
contemplated the regulations providing for  release of information.
Id. at 308. Thus, in rejecting the  contention that an Executive Order
directing the Secretary of  Labor to adopt regulations as are
"necessary and appropri- ate" meant that all regulations so
promulgated have the full  "force and effect of law," the Court


was a "nexus between the regulations and some delegation of  the
requisite legislative authority by Congress." Id. at 304.  Looking at
the statutory sources for the Executive Order,14  the Court concluded
that "it is clear that when it enacted  these statutes, Congress was
not concerned with public dis- closure of trade secrets or
confidential business informa- tion...." Id. at 306. By way of
illustration, the Court  contrasted the situation in NBC v. United
States, 319 U.S.  190, 217 (1943), where, based on the language and
logic of the  Communications Act, which vested comprehensive powers in
 the Commission, the Court upheld Commission regulations  that
extended beyond technical, engineering requirements.  See Chrysler,
441 U.S. at 308. A mere housekeeping statute,  on the other hand,
whose history indicated that it was "simply  a grant of authority to
the agency to regulate its own affairs,"  would not suffice to
authorize disclosure of confidential busi- ness information because it
was not intended to provide  authority for limiting the scope of the


Under s 220(a) of the Communications Act, the Commis- sion is
authorized to direct the kind of financial books and  records that
carriers must maintain so that the Commission  can fulfill its mandate
of ensuring that carriers' rates and  practices are just and
reasonable. See 47 U.S.C. s 220(a).  In establishing a uniform system
of accounts, the Commission  is charged with "ensur[ing] a proper
allocation of all costs to  and among telecommunication services,
facilities, and prod- ucts...." Id. s 220(a)(2). Under s 220(c), the
Commission  "shall at all times have access to and the right of
inspection  and examination of all accounts, records, and memoranda" 
maintained by the carrier pursuant to s 220. In addition, the 
Commission may use public accounting services. In this  connection,
subsection (c) provides an exception to nondisclo- sure laws as well




__________

n 14 Among the possible sources were the Federal Property and 
Administrative Services Act of 1949, Titles VI and VII of the Civil 
Rights Act of 1964, and the Equal Employment Opportunity Act of  1972.
See Chrysler, 441 U.S. at 304-05 & nn.34-36.


having access to information submitted to the Commission.  Subsection
(c) provides that "[a]ny provision of law prohibit- ing the disclosure
of the contents of messages or communica- tions shall not be deemed to
prohibit the disclosure of any  matter in accordance with the
provisions of this section." Id.  s 220(c). The statute further
provides that any person con- ducting a Commission audit shall have
the powers of the  Commission under subsection (c) and shall be
subject to  subsection (f) "in the same manner as if that person were
an  employee of the Commission." Id.15 Section 220(f), in turn, 


No member, officer, or employee of the Commission shall  divulge any
fact or information which may come to his  [or her] knowledge during
the course of examination of  books or other accounts, as hereinbefore
provided, except  insofar as he [or she] may be directed by the
Commission  or by a court.


Id. s 220(f) (emphasis added).


Subsection (f), first mentioned in s 220(c) after a sentence  that
removes any legal obstacles to the disclosure of informa- tion
submitted to the Commission in accordance with s 220,  places
nondisclosure burdens on all persons having access to  confidential
information submitted to the Commission. Thus,  its strict limitation
on how confidential information is to be  handled arises in a context
in which the Commission will have  access to information that is
otherwise protected by law from  disclosure. Nevertheless, Congress
alluded to the possibility  of disclosure by the Commission (and the
court). Qwest's  contention that s 220(f) is "an integral part of a
nondisclo- sure statute" is correct so far as it goes. However,
viewing  s 220(f) as directed to nondisclosure does not mean that its




__________

n 15 The other provisions of s 220 are not directly applicable to  this
analysis. Section 220(b) concerns depreciation charges, see 47  U.S.C.
s 220(b), while subsection (d) establishes a penalty against  carriers
for failure to comply with the record-keeping provisions,  see id. s
220(d), and subsection (e) establishes a penalty for false  entries
in, and destruction or alteration of, records by any carrier.  See id.
s 220(e).


last clause has no role to perform, much less nothing to do  with the
conditions under which disclosures may occur. Un- der Chrysler, s 1905
is satisfied without a provision of law  that expressly refers to
trade secrets. See Chrysler, 441 U.S.  at 308.


Congressional intent to allow an exception to nondisclosure  seems
implicit in the statutory scheme. In the Communica- tions Act of 1934,
Congress delegated broad authority to the  Commission in carrying out
its responsibilities for oversight  of licensing, rate making, and
carrier practices. See 47  U.S.C. s 151 et seq.; NBC, 319 U.S. at
217-20. Significantly,  in s 220, Congress placed in the Commission
the responsibili- ty to "ensure a proper allocation of all costs." 47
U.S.C.  s 220(a)(2). With the additional provisions authorizing au-
dits, it reasonably follows that Congress contemplated that  the
Commission would be reviewing the type of data at issue  here. Thus,
unlike the statutes that were considered by the  Supreme Court in
Chrysler, see 441 U.S. at 304-09, s 220  focuses on the need for the
Commission to have access to  confidential information regarding
licensees and others, and  to determine how such information is to be
protected when  the Commission carries out its responsibilities. The
former is  addressed in s 220(c), the latter in s 220(f). When
Congress  consolidated various statutes on trade secrets in 1948, it
gave  no indication that federal agencies' interpretation of their 
authority to release confidential data was in error, much less  no
longer of force and effect.16 Nothing in Chrysler suggests  that a
comparable situation existed with respect to the stat- utes considered


To the extent Qwest contends that s 220(f) is too broad an 
authorization, in its view leaving the Commission with unfet- tered
discretion, we offer two responses. First, contrary to  Qwest's
contention, Chrysler does not require that the statu- tory
authorization under s 1905 be directed, or limited, to 




__________

n 16 See, for example, s 20(7)(f) of the Interstate Commerce Act  of
1887, 49 U.S.C. s 20(7)(f) (1976) (current version at 49 U.S.C.  ss
11904, 14908, 16103 (1994 ed. Supp. I 1995)), which is the  apparent
model for s 220(f).


trade secrets.17 Rather, as the Supreme Court emphasized in  Chrysler,
the important question is whether the reviewing  court can reasonably
conclude that the grant of authority  contemplates the regulations
issued. See Chrysler, 441 U.S.  at 308. Chrysler's test is, in one
sense at least, a non- demanding one with respect to the purpose of
the Trade  Secrets Act--namely, to ensure that Congress has authorized
 release of covered information and that any such release  occurs only
after deliberation by appropriate officials. See  CNA, 830 F.2d at
1141-42. Section 220(f) is consistent with  the restraint that
Congress sought to impose in the Trade  Secrets Act because it permits
release only on order of the  Commission (or the court) where, as the
Supreme Court  noted, such release would be consistent with the
purposes of  the Communications Act. See Chrysler, 441 U.S. at 307-08.
 As we discuss in Part III, the Commission has adopted a  Confidential
Information Policy and regulations for release  decisions to be made
upon consideration of certain factors by  appropriate officials.


Second, other circuits have concluded that, under Chrysler,  a broadly
stated grant of authority to disclose confidential  information
suffices for purposes of s 1905. Thus, the  Fourth Circuit in Humana,
Inc. v. Blue Cross, 622 F.2d 76  (4th Cir. 1980), upheld the Secretary
of Health, Education,  and Welfare's "broad discretion to permit
disclosure" where  the statute, 42 U.S.C. s 1306(a), provided that
"[n]o disclo- sure ... shall be made except as the Secretary ... may
by  regulations prescribe ...." Id. at 78 (emphasis added).  Relying
on Chrysler's test, that "[t]he grant of authority  relied upon by a
federal agency in promulgating regulations  need not be specific; it
is only necessary 'that the reviewing  court reasonably be able to
conclude that the grant of author- ity contemplates the regulations
issued,' " id. (quoting Chrys- ler, 441 U.S. at 308), the court
concluded with respect to the 




__________

n 17 Bartholdi Cable Co., Inc. v. FCC, 114 F.3d 274 (D.C. Cir.  1997),
is not to the contrary, as Qwest suggests. Indeed, in  Bartholdi, the
court did not reach the statutory question that is at  issue here. See
id. at 281-82.


disclosure of cost reports, that "absent any action by the  Secretary,
disclosure would be prohibited. Such material,  however, is not exempt
from disclosure for by its very terms  the statute contemplates the
issuance of regulations by the  Secretary permitting such disclosure."
Id. at 79. In St.  Mary's Hospital, Inc. v. Harris, 604 F.2d 407 (5th
Cir. 1979),  the Fifth Circuit had reached the same conclusion about a
 regulation authorizing disclosure of cost reports, stating that 
"[s]ection 1306 bars the disclosure of Medicare providers'  costs
reports unless the Secretary in his discretion promul- gates a
regulation like [the one being challenged] ordering  disclosure of
these reports.... At the very least s 1306 may  reasonably be
construed to contemplate the promulgation of  [a regulation such as is
at issue]." Id. at 410. The Sixth  Circuit agreed in Parkridge
Hospital, Inc. v. Califano, 625  F.2d 719 (6th Cir. 1980),
interpreting the statute to be "a  broad grant of authority to the
Secretary specifically to enact  regulations providing for the release
of information filed with  the agency, at least when such disclosure
serves the purposes  described in the statute." Id. at 724.


While Qwest would distinguish the statute in Humana,  Parkridge, and
St. Mary's as reflecting Congress' clear intent  to permit disclosure
of trade secrets, the effect of the last  clause of s 220(f) of the
Communications Act is essentially  the same. That is, in both types of
statutes Congress has  alluded in an "except" clause to the
possibility of disclosure of  protected information, and in both
circumstances assured that  the Secretary and the Commission must
reach a considered  determination about releasing protected
information. The  different statutory treatment by Congress can be
said to  reflect not a difference in congressional intent but the fact
 that the Secretary is an individual decision-maker, and by  requiring
the promulgation of regulations, Congress con- strained the
Secretary's decision-making authority regarding  the release of
protected information. Comparable constraint  inheres in the statutory
requirements that the Commission  may act only as a deliberative body,
when there is a quorum,  when parties may be heard, and when its
actions are made on  the record. See generally 47 U.S.C. ss 154(h),


Accordingly, we hold that the Communications Act, and  specifically, s
220(f), does not clearly rule out the Commis- sion's interpretation,
which we find reasonable.


III.


The question remains whether the Commission has acted  arbitrarily and
capriciously in ordering the release of Qwest's  raw audit data to
some of its competitors.18 See Chrysler, 441  U.S. at 318; Bartholdi,
114 F.3d at 279. Qwest contends that  the release order is "flatly
inconsistent" with the Commis- sion's prior assurance that raw audit
data would be protected.  More particularly, Qwest contends that the
Commission's  Order is contrary to its precedents on the treatment of 
confidential information.19 Qwest calls attention to the un-
precedented nature of the release, maintaining that "whatev- er
authority the Commission may have to disclose trade  secrets in other
kinds of proceedings in order to vindicate  rights to public
participation, the logic and purposes of the 




__________

n 18 Although Qwest states in its briefs that the "sole" issue on 
appeal is whether the Communications Act authorizes the Commis- sion
to release trade secrets, and arguably the court is entitled to  take
Qwest at its word, see Fed. R. App. P. 28(a)(9); J.S.G. Boggs v. 
Rubin, 161 F.3d 37, 42 (D.C. Cir. 1998) (citing Carducci v. Regan, 
714 F.2d 171 (D.C. Cir. 1983)); Adams v. Hinchman, 154 F.3d 420,  424
n.7 (D.C. Cir. 1998), the arguments in Qwest's briefs suffice to 
preserve a second issue for appeal. The Commission has addressed 
Qwest's contention on the assumption that the court might conclude 
that the contention was properly preserved, and hence there is no 
prejudice to the Commission as a result of Qwest's failure to clearly 
designate in its briefs its alternative contention. See Fed. R. App.


19 Before the Commission, Qwest argued that the release deci- sion was
not only contrary to statute, but "contrary to the Commis- sion's own
precedent regarding treatment of audit information" and  would
adversely affect both Qwest's competitive position, and the 
Commission's ability to perform future audits. In addition, Qwest 
asserted that release breached the understanding and expectation  that
it had in submitting such information to the Commission-- namely, that
the information would be kept in confidence.


statutory provisions governing confidential agency audits are  quite
different." The Order constitutes, in Qwest's view, a  "standardless
'discretionary' exemption from disclosure" justi- fied solely on the
Commission's unprecedented step of open- ing audits to public


The Commission's Confidential Information Policy in- cludes three
paragraphs regarding audits that are pertinent  here. See In re
Examination of Current Policy Concerning  the Treatment of
Confidential Information Submitted to the  Commission, Report and
Order, 13 F.C.C.R. 24816, 24847-49  p p 53-55 (1998), amended by 14
F.C.C.R. 20128 (1999) ("Con- fidential Information Policy"). Paragraph
53 provides that  only summary audit data will be released, and only
under  special circumstances. See id. at 24847-48 p 53. Those spe-
cial circumstances arise when: "(i) the summary nature of the  data
therein is not likely to cause the submitter substantial  competitive
injury; (ii) the release of the summary data and  information is not
likely to impair [the Commission's] ability  to obtain information in
future audits; and (iii) overriding  public interest concerns favor


Paragraph 54 explains the Commission's view of audit  reports:


The Commission has a longstanding policy of treating  information
obtained from carriers during audits as con- fidential.... Carriers
have a legitimate interest in pro- tecting confidential information,
and we agree that disclo- sure could result in competitive injury to
those who  provide such information to the Commission. This policy  is
also designed to enhance the efficiency and integrity of  our audit
process by encouraging carriers to comply in  good faith with
Commission requests for information.  Moreover, the Commission
considers the audit reports to  be internal agency documents that,
consistent with FOIA  Exemption 5, generally should not be disclosed
to the  extent they present staff findings and recommendations  to
assist the Commission in pre-decisional deliberations.


Id. at 24848 p 54. Paragraph 54 also states that the Commis- sion "will
amend Section 0.457 of [its] rules to indicate that  information
submitted in connection with audits ... will not  routinely be made
available for public inspection." Id.


In paragraph 55, the Commission identified the standards  that it would
apply were confidential audit information to be  released. Observing
that it has "only rarely departed from  the general policy of
withholding audit information from  public disclosure," the Commission
advised nonetheless that,


[p]arties should note, however, that as in the past, we  may publicly
disclose audit information in rare cases  where the underlying
concerns that normally lead us to  withhold audit information from
public disclosure are  diminished by the minimal risk posed by the
release of  aggregate data or, where the data is otherwise not highly 
commercially sensitive and disclosure is justified by sig- nificant
public interest factors.


Id. at 24848-49 p 55 (emphasis added). Thus, s 0.457 of the 
Commission's regulations provides, in part, that "[t]he rec- ords in
this section are not routinely available for public  inspection," 47
C.F.R. s 0.457, and in subsection (d) that  "[t]rade secrets ... are
not routinely available for public  inspection.... A persuasive
showing as to the reasons for  inspection will be required in requests
for inspection of such  materials submitted under s 0.461." Id. s


Numerous cases reflect the Commission's application of  Paragraphs 53
and 54 of its Confidential Information Policy  and s 0.457 of its
regulations.20 None Qwest maintains, until  now, involved the release,
pursuant to Paragraph 55, to a  competitor of raw audit data in an
audit or audit-related  proceeding. In applying its Confidential
Information Policy,  the Commission has heretofore acknowledged a
distinction  between summary audit data and raw audit data:




__________

n 20 See, e.g., In Re BellSouth Corporation BellSouth Telecom-
munications, Inc., Memorandum Opinion and Order, 8 F.C.C.R.  8129,
8130 p 7 (1993) ("BellSouth"); In Re Martha H. Platt, Memo- randum
Opinion and Order, 5 F.C.C.R. 5742, 5742 p 6 (1990)  ("Platt"); In Re
Scott J. Rafferty, Memorandum Opinion and  Order, 5 F.C.C.R. 4138,
4138 p 3 (1990) ("Rafferty"); In Re Western  Union Telegraph Company,
Memorandum Opinion and Order, 2  F.C.C.R. 4485, 4486 p 10 (1987).


[T]he release of commercial and financial information of  only a
summary nature does not present the concerns  about competitive harm
that normally lead us to withhold  audit-derived information from
public disclosure....  The Summary contains no detailed underlying
commer- cial or financial information submitted by the BOCs;  rather
it presents a brief analysis of the aggregated  underlying data. The
summary nature of this informa- tion significantly diminishes the
likelihood that the BOCs  will suffer any competitive harm.


In re Bell Telephone Operating Companies, Memorandum  Opinion and
Order, 10 F.C.C.R. 11541, 11542 p 6 (1995).


Thus, the Commission has explained that it "withholds ...  raw
financial data obtained from carriers during audits as  well as audit
workpapers compiled by Commission staff" in  accord with its "general
policy [ ] to withhold from public  disclosure audit reports prepared
by Commission staff." In  Re GTE Telephone Operating Companies,
Memorandum  Opinion and Order, 9 F.C.C.R. 2588, 2588 p 4 (1994). See 
also BellSouth, 8 F.C.C.R. at 8129 p 8. "[A]udit reports  [that]
contain substantial raw data and other information  provided by
various [Local Exchange Carriers] that has not  been summarized,
reformatted, or otherwise edited," the  Commission has explained,
"[are] not routinely available for  inspection." Platt, 5 F.C.C.R. at
5742 p 6. The Commission's  view has been that the release of raw
audit data "would likely  impair the Commission's ability to obtain
necessary informa- tion in the future." Rafferty, 5 F.C.C.R. at 4138 p
2. Where  the Commission has ordered the release of confidential
finan- cial information even if there is the possibility of
competitive  harm as a result, the occasions appear to have been
confined  to an adjudication, rulemaking, or a rate proceeding in




__________

n 21 See, e.g., In re Alaskans for Better Media, Memorandum  Opinion
and Order, 70 F.C.C.2d 1366 (1979); In re Classical Radio  for
Connecticut, Inc. and WTIC-FM Listeners' Guild, Memoran- dum Opinion
and Order, 69 F.C.C.2d 1517 (1978); In re NTV  Enterprises, Inc.,
Memorandum Opinion and Order, 62 F.C.C.2d  722 (1976).


Qwest and amicus United States Telecom Association point  out that
audits "are not voluntary, afford no statutory right of  public
participation, and have historically involved" only the  Commission
and the entity being audited. Consistent with  these concerns, the
Commission, has applied its Confidential  Information Policy strictly,
allowing exceptions in audits and  related proceedings only for
release of summaries of audit  data that do not reveal "competitively
sensitive materials."  Confidential Information Policy, 13 F.C.C.R. at
24824 p 9.  While the Commission states that its Order establishes no 
"precedent that compromises the integrity of the audit pro- cess,"
Order, 15 F.C.C.R. at 1790 p 11, the Commission's  rulings,
regulations, and Confidential Information Policy  reflect a different
approach. As applied by the Commission,  the exceptional circumstances
considered in the Confidential  Information Policy for audits and in
Commission rulings  appear to have been confined to release of summary


Still, the unprecedented nature of the Commission's Order  does not
itself demonstrate arbitrariness. See Capital Net- work Sys., Inc. v.
FCC, 28 F.3d 201, 204-06 (D.C. Cir. 1994).  But, in view of the policy
by which the Commission has  constrained the exercise of its
discretion under s 220(f), its  decision to release Qwest's raw audit
data to its competitors  likely would be arbitrary and capricious if
the Commission  failed to explain how it reached the conclusions that
(1) the  raw audit data is "otherwise not highly commercially sensi-
tive," and (2) "disclosure is justified by significant public 
interest factors." Confidential Information Policy, 13  F.C.C.R at
24849 p 55. See also 47 C.F.R. s 0.457(d).


In addressing Qwest's claims of harm, the Commission  determined that
its protective order, as amended, would  ensure that any competitive
harm is minimal. See Order, 15  F.C.C.R. at 1790 p 12. This reasoning
followed, the Commis- sion concluded, because disclosure was for the
limited pur- pose of responding to Issue 2 as to sampled items not
found,  unidentified, or found in another location. See id. This is
not  the same as finding that Qwest's raw data is "otherwise not 
highly commercially sensitive," or a finding that release of the 


data would not adversely affect Qwest's competitive position. 
Confidential Information Policy, 13 F.C.C.R. at 24849 p 55.  Indeed,
the Commission appears to acknowledge that the  data is commercially
sensitive, rationalizing release on the  ground that the protective
order ensures against competitive  harm or ensures that such harm
would be minimal.


In concluding that the public interest outweighs any po- tential
competitive harm to the RBOCs, the Commission  observed that the RBOCs
raised issues that the auditors'  rescoring was not done correctly,
and that the previously  released summaries of the auditors' general
procedures  were insufficient to elicit useful information, which the 
Commission defined in terms of being able to comment on  how the
auditors' general procedures were actually imple- mented. See Order,
15 F.C.C.R. at 1789 p 9. Observing  that it has "rarely, if ever,
sought public comment on its  auditors' methodology and findings," the
Commission stated  that it "was sufficiently concerned about the
issues sur- rounding the audits to invite public comment," and that 
broader comment "will greatly assist" the Commission in  resolving the
issues. Id. at 1790 p 11. Advising on appeal  that the focus of Issue
2 involving audit methodology is  unprecedented, the Commission
repeats that "unusual  events call for an atypical response."


Missing from the Commission's decision is a discussion of  why such an
unprecedented release of confidential audit  information is required
for purposes of Issue 2. The Com- mission stated that "useful
information about the accuracy  and validity of the audits" could not
be obtained "unless  commenters were allowed to examine how those
general  procedures were actually implemented when the auditors 
decided whether rescoring was appropriate." Id. at 1789 p 9.  But it
is unclear why this is so. The Deloitte & Touche  analysis submitted
by Qwest, for example, appears to suggest  that the sampling
methodology could be evaluated in theoreti- cal terms as applied to
hypothetical situations or to a compos- ite of raw data without
identifying an individual RBOC's  sensitive commercial information.
Other ways of avoiding the  release of raw audit data to competitors


effective for the Commission's purposes. Or, at least on the  basis of
the record, the court cannot tell that other ways  would not be
equally effective. Before invoking its "rare  case" exception to its
nondisclosure policy, the Commission  must consider plausible
alternatives and discount them before  resorting to the release of raw
audit data. Otherwise,  Qwest's claim that the Order represents a
standardless ex- emption from the Commission's policy and precedent
gains  force. A response that the protective order adequately pro-
tects Qwest against competitive injury misses the mark. The 
Commission must explain why only the release of raw audit  data will
achieve meaningful public comment. In submitting  audit data, Qwest
was entitled to rely on the Commission's  announced policy and
precedent on how it would handle  confidential audit information.
Qwest is similarly entitled to  assurances that the unprecedented
disclosures will be consis- tent with the standards that the
Commission has set for itself  and that the invocation of the "rare
case" exception under  Paragraph 55 is warranted. See Motor Vehicles
Mfrs. Ass'n  v. State Farm Auto. Ins. Co., 463 U.S. 29, 43 (1983).


Accordingly, we deny the petition in part, and we remand  the case to
the Commission for further consideration.