Opinion
No. 5:01-CV-921-H(4)
January 21, 2003
ORDER
This matter is before the court on the cross-motions of plaintiff MCImetro Access Transmission Services LLC ("WorldCom") and defendant BellSouth Telecommunications, Inc. ("BellSouth") for summary judgment. The parties have responded and this matter is ripe for adjudication.
STATEMENT OF THE CASE
The court considers this case pursuant to the judicial review provisions of the federal Telecommunications Act of 1996 ("the 1996 Act" or "the Act"). The 1996 Act is intended to create a "pro-competitive, de-regulatory" framework for the provision of telecommunications services. S. Conf. Rep. No. 104-230, at 1 (1996). The Act expressly preempts state laws limiting competition in local telephone service, permitting new entrants to compete in those markets. See 47 U.S.C. § 253. Additionally, the 1996 Act places certain affirmative duties on incumbent local exchange carriers ("ILECs"). ILECs, such as BellSouth, are companies that have traditionally provided telecommunications in particular geographic areas. The affirmative duties recognized in the 1996 Act are designed to create a "level playing field," thereby permitting new entrants, such as WorldCom, to compete in local markets. See In re Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, 11 F.C.C.R. 15499, 15576, ¶ 152 ("Local Competition Order"). These new entrants are referred to as competitive local exchange carriers ("CLECs").
Among the duties imposed upon ILECs by the 1996 Act is the obligation to offer nondiscriminatory "interconnection" with the ILEC's network. 47 U.S.C. § 251(c)(2). This interconnection allows CLEC customers to place calls to, and receive calls from, ILEC customers in a given area. This interconnection may be accomplished through the use of interconnection "trunks" that connect the facilities of the two carriers. The 1996 Act also requires ILECs such as BellSouth to provide access to "unbundled network elements" ("UNEs") — various component parts of their telephone networks — under some circumstances. 47 U.S.C. § 251(d)(2)(B).
These 1996 Act duties are implemented through "interconnection agreements" between the ILEC and the CLEC. The parties are free to negotiate the terms of interconnection, but if they cannot agree either party may seek arbitration before a state public utilities commission. 47 U.S.C. § 252(b). If the state commission declines to act, arbitration may be sought before the Federal Communications Commission ("FCC"). 47 U.S.C. § 252(c). In the arbitration proceeding, the commission must apply the requirements of the federal statute and any controlling FCC rules. 47 U.S.C. § 252(c)(1). The terms ultimately produced through arbitration must then be incorporated into an interconnection agreement that is submitted to the commission for approval. Id.
On April 6, 2000, WorldCom and BellSouth found themselves unable to agree on all terms of an interconnection agreement, and WorldCom petitioned the North Carolina Utilities Commission ("NCUC") for arbitration. After various objections by WorldCom and pursuant to orders by the NCUC, the parties submitted their final Composite Interconnection Agreement on November 21, 2001. After the NCUC approved this agreement, WorldCom filed this action pursuant to 74 U.S.C. § 252(e)(6), seeking review of the compliance of the agreement with federal law.
COURT'S DISCUSSION
I. Standard of Review
Summary judgment is appropriate pursuant to Fed.R.Civ.P. 56 when no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986).
WorldCom challenges the NCUC's interpretation of federal law in ordering and approving the final Composite Interconnection Agreement. The Fourth Circuit has held that federal courts should "accord no deference to the state commissions s interpretations" of federal law. ATT Communications of Virginia, Inc. v. Bell Atlantic-Virginia, 197 F.3d 663, 668 (4th Cir. 1999). Accordingly, the court reviews de novo the legal conclusions of the NCUC. See id.; GTE South, Inc. v. Morrison, 199 F.3d 733, 745 (4th Cir. 1999). The court's review is guided by the 1996 Act, as well as rules and regulations issued by the FFC that implement the Act. See Freeman v. Burlington Broadcasters, Inc., 204 F.3d 311, 321 (2d Cir. 2000).
II. Access to Two-Way Trunking
WorldCom's first challenge to the NCUC's ruling involves WorldCom's access to "two-way trunking" — lines that carry telecommunications traffic in two directions. The NCUC limited BellSouth's obligation to provide two-way trunking to conditions where (1) two-way trunking is technically feasible, and (2) there is insufficient telephone traffic to justify one-way trunking. Recommended Arbitration Order, Petition of MCImetro Access Transmission Services, LLC for Arbitration of Certain Terms and Conditions of Proposed Agreement with BellSouth Telecommunications, Inc. Concernino Interconnection and Resale under the Telecommunications Act of 1996, 43 (N.C.U.C. Apr. 3, 2001) ("First Arbitration Order"); Order Ruling on Objections and Requiring the Filing of the Composite Agreement, Petition of MCImetro Access Transmission Services, LLC for Arbitration of Certain Terms and Conditions of Proposed Agreement with BellSouth Telecommunications, Inc. Concerning Interconnection and Resale under the Telecommunications Act of 1996, 11 (N.C.U.C. Aug. 2, 2001) ("Second Arbitration Order"). WorldCom argues that under controlling regulations, its access to two-way trunking should be limited only by technical feasibility and not by the volume of traffic.
WorldCom contends that the resolution of this issue is controlled by FCC Rule 305(f), which states: "If technically feasible, an incumbent LEC shall provide two-way trunking upon request." 47 C.F.R. § 51.305(f). According to WorldCom, this rule limits a CLEC's access to two-way trunking only on the grounds of technical feasibility, and any and all additional restrictions on two-way trunking are per se unlawful. In response, BellSouth defends the NCUC's reliance on the FCC decision that promulgated Rule 305(f) and referred to another potential limitation: "We conclude here . . . that where a carrier requesting interconnection pursuant to section 251(c)(2) does not carry a sufficient amount of traffic to justify separate one-way trunks, an incumbent LEC must accommodate two-way trunking where technically feasible." Local Competition Order, 11 F.C.C.R. at 15612, ¶ 219 (emphasis added). Thus, the essential dispute between the parties on this issue is whether the FCC's contemporaneous interpretation of a rule while in the process of promulgating it should be considered in later applying the rule.
Established legal precedent requires federal courts to give an agency's interpretation of its own regulation "controlling weight unless it is plainly erroneous or inconsistent with the regulation." Stinson v. United States, 508 U.S. 36, 45 (1993); see also Electronic Engineering Co. v. FCC, 140 F.3d 1045, 1049 (D.C. Cir. 1998); United States v. Hoechst Celanese Corp., 128 F.3d 216, 221 (4th Cir. 1997). Indeed, in a case analogous to this one, the Supreme Court found that a limitation discussed by the FCC in its Local Competition Order but not explicitly incorporated into a final rule was nevertheless relevant to the application of the rule. See Verizon Communications Inc. v. FCC, 122 S.Ct. 1646, 1686 (2002). In Verizon, the Court addressed FCC Rule 315(c), which requires ILECs to combine certain network elements for CLECs. Although the final rule did not condition this obligation on the inability of CLECs to combine these facilities for themselves, the Court found such a condition to exist. The court based this finding on language in the Local Competition Order, which stated that an ILEC was obligated to combine only "[i]f the carrier is unable to combine the elements."Id. (quoting Local Competition Order, 11 F.C.C.R. at 15647, ¶ 294).
The FCC itself has also suggested that rules promulgated by theLocal Competition Order should, if possible, be "read in conjunction with the rest of the Order." TSR Wireless, LLC v. US West Communications, Inc., 15 F.C.C.R. 11166, 11177-78, ¶¶ 20-21 (2000).
In light of this legal framework, the court reads Rule 305(f) in light of the FCC's discussion in the Local Competition Order. The court finds that the rule requires "an incumbent carrier to provide two-way trunking where the competing carrier has insufficient traffic to justify use of separate one-way trunks and two-way trunking is technically feasible." US West Communications v. MFS Intelnet, Inc., 193 F.3d 1112, 1124 (9th Cir. 1999) (dictum); see also Local Competition Order, 11 F.C.C.R. at 15612, ¶ 219. This interpretation merely supplements the final regulation, and is neither plainly erroneous nor inconsistent with it. Furthermore, the court finds no evidence in the record that this interpretation will "create a barrier to entry" for CLECs such as WorldCom, see Local Competition Order, 11 F.C.C.R. at 15612, ¶ 219, or that it is unjust, unreasonable, or discriminatory. See 47 U.S.C. § 251(c)(3). Accordingly, the court finds no error in the NCUC's ruling on this issue.
III. Compensation Based on Points of Interconnection
WorldCom also challenges the NCUC's imposition of certain costs for calls originating from BellSouth's local calling area based on WorldCom' s chosen points of interconnection. Specifically, the NCUC ruled that WorldCom "may designate its own points of interconnection (POIs) within BellSouth's network." Second Arbitration Order at 12; First Arbitration Order at 49. However, if WorldCom "interconnects at points within the LATA [Local Access and Transport Area] but outside BellSouth's local calling area from which traffic originates, [WorldCom] should be required to compensate BellSouth for, or otherwise be responsible for, transport beyond the local calling area." First Arbitration Order at 49. In other words, WorldCom would be allowed to interconnect with BellSouth's network wherever it chooses, but might be required to pay part of the cost for transporting calls to that point of interconnection if it is beyond BellSouth's local calling area.
WorldCom argues that the portion of the NCUC's ruling requiring WorldCom to compensate BellSouth for transport to a POI beyond the local calling area violates FCC regulations. WorldCom and BellSouth agree that the 1996 Act permits CLECs to interconnect "at any technically feasible point within the carriers s network," 47 U.S.C. § 251(c)(2)(B), and on terms that are just, reasonable, and nondiscriminatory. 47 U.S.C. § 251(c)(2)(D). This provision lowers barriers to competitive entry for CLECs by allowing them "to choose the most efficient points at which to exchange traffic with incumbent LECs . . ."Local Competition Order at 15588, ¶ 172. Furthermore, in implementing the 1996 Act's "reciprocal compensation" scheme, the FCC ruled that an ILEC "may not assess charges on any other telecommunications carrier for local telecommunications traffic that originates on the [ILEC's] network." 47 C.F.R. § 51.703(b). WorldCom contends that this regulatory language prohibits any requirement that WorldCom compensate BellSouth for any portion of the transportation of calls originating in BellSouth's network.
The NCUC found the FCC's prior orders on the particular issue here inconclusive, and noted that the FCC had solicited comments on the issue in a notice of proposed rulemaking. Second Arbitration Order at 13. However, WorldCom insists that a division of the FCC has since issued a decision settling the matter. In July 2002, the Wireline Competition Bureau, conducting an arbitration on behalf of the FCC and in the place of a state commission, held that requiring an ILEC to bear the cost of transporting traffic all the way to the POI, regardless of location, was "more consistent with the [FCC's] rules" than requiring the CLEC to pay for transportation beyond the LATA. In re Petition of WorldCom, Inc. Pursuant to Section 252(e)(5) of the Communications Act for Preemption of the Jurisdiction of the Virginia State Corporation Commission Regarding Interconnection Disputes With Verizon Virginia, Inc. and for Expedited Arbitration, 2002 WL 1576912, ¶ 53 ("Virginia Arbitration Order"). WorldCom argues that this interpretation evinces the unlawfulness of the NCUC's ruling.
Such delegations of authority are permitted by 47 U.S.C. § 155(c)(1).
In response, BellSouth argues that the NCUC's ruling is supported by the FCC itself, and that the Virginia Arbitration Order is not controlling. BellSouth first notes language from the Local Competition Order, in which the FCC stated that "competing carriers must usually compensate incumbent LECs for the additional costs incurred by providing interconnection." Local Competition Order, 11 F.C.C.R. at 15608, ¶ 209. The FCC further explained that a CLEC "that wishes a `technically feasible' but expensive interconnection would . . . be required to bear the cost of that interconnection." Id. at 15603, ¶ 199. As BellSouth points out, the FCC later relied on this language in its own amicus curiae brief, arguing that "consistent with the [Local Competition Order]," an ILEC may "obtain additional compensation if a specific request for interconnection warrants it." Memorandum of the Federal Communications Commission as Amicus Curiae, US West Communications. Inc. v. ATT Communications of the Pacific Northwest, Inc., No. CV 97-1575 JE, at 22 n. 17 (D. Or. filed Aug. 16, 1998). Additionally, the FCC held in 2001 that an ILEC's policies requiring CLECs to pay transportation costs beyond the LATA did "not represent a violation" of FCC rules. Memorandum Opinion and Order, Application of Verizon Pennsylvania Inc., et al. for Authorization to Provide In-Region InterLATA Services in Pennsylvania, 16 F.C.C.R. 17419, 17474, ¶ 100 (2001). Following these FCC precedents, the Third and Ninth Circuits have held that state commissions may lawfully require CLECs such as WorldCom to pay for additional costs resulting from their choice of expensive POIs. See MCI Telecommunications Corp. v. Bell Atlantic-Pennsylvania, 271 F.3d 491, 518 (3d Cir. 2001), cert. denied, 123 S.Ct. 340 (2002) (holding that "to the extent . . . [a CLEC's] decision on interconnection points may prove more expensive to Verizon, the [state commission] should consider shifting costs to [that CLEC]"); US West Communications, Inc. v. Jennings, 304 F.3d 950, 961 (9th Cir. 2002) (agreeing with the Third Circuit).
Although the court to which the brief was addressed found that the state commission had not adequately addressed the issue, it appears to have adopted the FCC's position in guiding the state commission's future analysis: "In determining how many points of interconnection are required, and the compensation payable to the ILEC, the [state commission] may properly consider relevant factors, including whether a CLEC is purposely structuring its point(s) of interconnection to maximize the cost to the ILEC or otherwise gain an unfair competitive advantage."US West Communications, Inc. v. ATT Communications of Pacific Northwest, Inc., 31 F. Supp.2d 839, 853 n. 8 (D. Or. 1998), reversed in part, vacated in part on other grounds by, 224 F.3d 1049 (9th Cir. 2000) (emphasis added).
The court finds itself challenged to reconcile the interpretation endorsed by the Wireline Competition Bureau in the Virginia Arbitration Order (each party bearing all costs for transportation to and from the POI) and that endorsed by the FCC and the Third and Ninth Circuits (state commissions may lawfully shift costs for expensive POIs to the CLEC). BellSouth argues that the Bureau's authority is undermined by the fact that it is a subdivision of the FCC, and not the FCC itself. However, 47 U.S.C. § 155(c)(3) clearly states that decisions made by the Bureau pursuant to a delegation of authority under 47 U.S.C. § 155(c)(1) have the same "force and effect" as a decision by the FCC itself. Because the Bureau was acting pursuant to such a delegation when it issued the Virginia Arbitration Order, the order must be given equal weight as the authorities presented by BellSouth.
The court notes that the Ninth Circuit's decision in Jennings was issued subsequently to the Virginia Arbitration Order, but did not address it. It is unclear whether the Ninth Circuit had no notice of theVirginia Arbitration Order, or simply ignored it.
After thoroughly considering all of the authorities proffered by the parties, the court declines to adopt WorldCom's position. The Bureau's decision in the Virginia Arbitration Order adopted the interconnection language proposed by the CLEC in that case because it found that language "more consistent" with FCC rules. The Bureau did not hold, however, that the position of the ILEC in that case violated FCC rules. Indeed, under prior and subsequent decisions, a state commission may shift transportation costs in some circumstances; it is not required to do so. The decision of a state commission (or in that case, the Bureau acting in place of a state commission) not to shift costs does not necessarily make cost-shifting unlawful.
To the extent that the Bureau did intend to declare cost-shifting "inconsistent" with FCC rules, the court declines to follow the Bureau's interpretation and instead follows the majority of decisions to have addressed the issue. The Bureau's decision appears to be something of an aberration. All other courts addressing the issue appear to have found cost-shifting quite consistent with the FCC rules. In the Local Competition Order, the FCC explicitly held that cost-shifting for an expensive interconnection was appropriate. The FCC and numerous federal courts have subsequently endorsed this holding. Indeed, the Ninth Circuit's holding in Jennings adhered to this interpretation even after the Virginia Arbitration Order. In the absence of a clear ruling from the FCC or a federal appellate court to the contrary (which, in this court's opinion, the Virginia Arbitration Order is not), this court cannot conclude that cost-shifting in this context violates federal law.
The court finds support for the practical reasonableness of this interpretation in In re ATT Communications of Southern States, Inc., 2001 WL 872914, *9-*13 (S.C.P.S.C. Jan 30, 2001). In that case, the South Carolina Commission discussed in detail the practical "equities" of the two positions asserted by the parties here, and concluded that the cost-switching interpretation was the most reasonable. Although that commission's findings are by no means binding on this court, the commission's practical discussion of this issue is persuasive.
IV. Restrictions on Switched Access
Finally, WorldCom claims that the NCUC erred by concluding that WorldCom could route long-distance switched access traffic over BellSouth local interconnection trunks only if "the switched access is being provided to (a WorldCom] local exchange customer." First Arbitration Order at 62-63. WorldCom argues that 1996 Act confers upon CLECs the right to use network elements to originate or terminate long-distance calls, even when WorldCom is not providing local telephone service to the customers at issue. WorldCom contends that the NCUC's limits on this "exchange access" constitute unlawful restrictions on WorldCom's use of BellSouth's network elements.
As previously stated, the 1996 Act requires ILECs to provide just, reasonable, and nondiscriminatory access to UNEs for the provision of telecommunications service, including exchange access in some situations. See 47 U.S.C. § 251(c)(3); Local Competition Order at 15679, ¶ 356. Furthermore, regulations implementing the Act state that "lain incumbent LEC shall not impose limitations, restrictions, or requirements on requests for, or the use of, unbundled network elements that would impair the ability of a requesting telecommunications carrier to offer a telecommunications service in the manner that requesting telecommunications carrier intends." 47 C.F.R. § 51.309(a). WorldCom interprets this regulation as prohibiting the imposition of any restriction on a CLEC's use of a UNE.
In support of this interpretation, WorldCom cites a paragraph from a 1999 FCC ruling, in which it stated:
In the Local Competition First Report and Order, the Commission found that section 251(c)(3) "permits interexchange carriers and all other requesting carriers, to purchase unbundled elements for the purpose of offering exchange access services to themselves in order to provide interexchange services to consumers." In particular, the Commission found that its conclusion not to impose restrictions on the use of unbundled network elements was "compelled by the plain language of the 1996 Act" . . . This conclusion that the Act does not permit usage restrictions was codified in Rule 51.309(a). That rule was not challenged in court by any party.In re Implementation of the Local Competition Provisions of the Telecommunications Act of 1996, 15 F.C.C.R. 3696, 3884, ¶ 484 (1999) ("UNE Remand Order"). WorldCom reads this passage to grant requesting carriers the federal right to provide exchange access services for calls to all customers, not just their own. WorldCom insists that this right is essential to effective competition with ILECs, who now claim a majority of customers in their service areas.
BellSouth contends that the restriction in question is tailored to prevent CLECs from gaining an unfair advantage over ILECs, and that UNE Remand Order is not controlling on this issue. Before the issuance of theUNE Remand Order, the FCC explicitly held that requesting carriers did have a right to provide exchange access to its own customers, In re Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, 12 F.C.C.R. 12460, 12483, ¶ 38 ("theThird Order"), but reserved the question of whether such a right existed as to other carriers' customers. Id. at 12495-6, ¶ 61. In fact, the FCC solicited comment on proposed rule-making on the issue. Id. While theUNE Remand Order addressed requesting carriers' rights to exchange access services in broad terms, it did not explicitly resolve the question reserved in the Third Order.
Furthermore, the propriety of those broad statements in the UNE Remand Order has been brought into doubt by subsequent federal cases. InCompetitive Telecommunications Ass'n. v. FCC, 309 F.3d 8 (D.C. Cir. 2002) ("CompTel"), the D.C. Circuit reviewed an FCC decision that expressly permitted a use restriction similar to the one at issue in this case. See In re Implementation of the Local Competition Provisions of the Telecommunications Act of 1996, Supplemental Order, 15 F.C.C.R. 1760 (1999) ("Supplemental Order") The FCC had limited the use of a combination of network elements, known as enhanced extended links ("EELs"), to circumstances where the CLEC was providing "a significant amount of local exchange service." CompTel, 309 F.3d at 10-11;Supplemental Order, 15 F.C.C.R. 1760 at ¶ 2. The CLEC in that case, like WorldCom, argued that this limitation was unlawful because the 1996 Act prohibited all use restrictions. The court rejected this argument. Specifically, the D.C. Circuit held that while 47 U.S.C. § 251(c)(3) provided CLECs with the right to use UNEs for the "provision of a telecommunications service," it did not confer the right to use the UNE for any service. CompTel, 309 F.3d at 12. The court therefore concluded that service-by-service restrictions were not prohibited by the Act. A contrary holding, the court reasoned,
would mean that once the Commission found a single purpose as to which an `element' met the impairment [of the provision of services] standard, no matter how limited, it would be forced to mandate provision of the element for all, no matter how little potential impairment was involved in the remainder of the telecommunications field. CompTel never explains what logic could have persuaded Congress to lock the Commission into such a scheme.Id. at 13.
The court concluded by dismissing the argument that the UNE Remand Order required a different result. The court noted the FCC's recognition that the Supreme Court's decision in ATT Corp. v. Iowa Utilities Board, 525 U.S. 366 (1999), abrogated any prior rulings that prohibited all use restrictions. Although the UNE Remand Order followed Iowa Utilities Board, the D.C. Circuit found that the order did not reaffirm a prohibition on all use restrictions. On the contrary, the UNE Remand Order simply recounted past FCC conclusions, and ultimately suggested that the issue was unsettled. Thus, the D.C. Circuit found the FCC's interpretation of the issue in the Supplemental Order (permitting appropriate use restrictions) to be proper in light of Iowa Utilities Board, and accordingly affirmed that interpretation.
In light of the D.C. Circuit's assessment of the current law, this court cannot conclude that the NCUC violated federal law in permitting the use restriction at issue. While WorldCom argues that the holding ofCompTel was limited to permitting use restrictions only as to EELs, it is clear from the D.C. Circuit's language that the doors have been opened to other appropriate use restrictions. The general rule that the court gleans from CompTel and 47 C.F.R. § 51.309(a) is that use restrictions on UNEs are permissible if they do not impair the ability of the requesting carrier to offer a telecommunications service. It is not evident from the record that the restriction on exchange access in this case to non-WorldCom customers would so impair WorldCom's ability to offer services as to make it unlawful. Nor does it appear, in light ofCompTel, that such access restrictions are unlawfully discriminatory. Accordingly, the court finds no error in the NCUC's ruling on this issue.
CONCLUSION
For the foregoing reasons, the court DENIES plaintiff's motion for summary judgment and GRANTS defendants' motion for summary judgment. Because this ruling effectively eliminates plaintiff's right to relief against the individual defendants, summary judgment is GRANTED in their favor as well. The clerk is directed to close this case.