United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 21, 2001 Decided April 20, 2001

No. 00-1002

WorldCom, Inc.,

Petitioner

v\.

Federal Communications Commission and

United States of America,

Respondents

AT&T Corporation, et al.,

Intervenors

\-\-\-\-\-\-\-\--

Consolidated with

00-1062, 00-1070

On Petitions for Review of an Order of the

Federal Communications Commission

Jonathan J. Frankel and Darryl M. Bradford argued the cause for
petitioners. With them on the briefs were William T. Lake, Lynn R.
Charytan, Dan L. Poole, Robert B. McKenna, Lawrence E. Sarjeant, Linda
L. Kent, John W. Hunter, Julie E. Rones, Jodie L. Kelley, John J.
Hamill, Thomas F. O\'Neil III, Adam H. Charnes, Mark B. Erlich, Robert
J. Aamoth, Albert H. Kramer, Renee R. Crittendon, Richard Martin
Rindler, Charles C. Hunter and Catherine M. Hannan. John H. Harwood, II
entered an appearance.

John E. Ingle, Deputy Associate General Counsel, Federal Communications
Commission, argued the cause for respondents. With him on the briefs
were Christopher J. Wright, General Counsel, Jonathan E. Nuechterlein,
Deputy General Counsel, Laurence N. Bourne, Counsel, Catherine G.
O\'Sullivan, Nancy C. Garrison and Robert J. Wiggers, Attorneys, U.S.
Department of Justice.

Daniel Meron argued the cause for intervenors AT&T Corporation, et al.
With him on the brief were David W. Carpenter, Peter D. Keisler, David
L. Lawson, Mark C. Rosenblum, Robert J. Aamoth, Richard M. Rindler,
Christy C. Kunin, Thomas F. O\'Neil III, Adam H. Charnes, Mark B.
Ehrlich, Jonathan J. Nadler, Rodney L. Joyce, Darryl M. Bradford, Jodie
L. Kelley and John J. Hamill. James P. Young entered an appearance.

Dan L. Poole, Robert B. McKenna, Jr., William T. Lake, Lynn R. Charytan,
Michael K. Kellogg, Mark L. Evans, Sean A. Lev, Aaron M. Panner, Roger
K. Toppins, Lawrence E. Sarjeant, Linda L. Kent, John W. Hunter, Julie
E. Rones, Michael E. Glover, Edward H. Shakin, Donna M. Epps and M.
Robert Sutherland were on the brief of intervenors Qwest Communications
International, Inc., et al. John H. Harwood, II, Gail L. Polivy, John F.
Raposa, M. Edward Whelan, III, Alfred G. Richter, Hope E. Thurrott and
James D. Ellis entered appearances.

Before: Williams, Sentelle and Rogers, Circuit Judges.

Opinion for the Court filed by Circuit Judge Williams.

Williams, Circuit Judge: Packet-switching and digital subscriber line
technologies (\"DSL\") make it possible to senddata at high speed over
conventional copper wire. Two DSL modems are attached to a telephone
loop, one at the subscriber\'s premises and one at the telephone
company\'s central

office. If the line carries both ordinary telephone service and
high-speed data transmission, the carrier must separate these streams at
the company\'s central office, using a digital subscriber line access
multiplexer. With this device the carrier sends ordinary voice calls to
the public, circuit-switched telephone network (which keeps a phone line
open during a voice call) and sends data traffic to a packet-switched
data network (which compresses data and can send it in split-second
bursts during gaps on a line), where it can then be routed to a
corporate local area network or internet service provider (\"ISP\"). See
In re Deployment of Wireline Services Offering Advanced
Telecommunications Capability, 13 F.C.C.R. 24,-011, 24,026-27 p p 29-31
(1998) (\"Advanced Services Order\"). The high-speed services thus
provided are known as \"DSL-based advanced services.\"[^1]

At issue before us is the Federal Communications Commission\'s decision
that \"incumbent\" local exchange carriers (\"LECs\"), when they provide
such services, are subject to a range of special duties under the
Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (\"the
Act\"). These duties, to which we\'ll return in detail later, are
intended to facilitate entry into local telephone markets. They include,
for example, an obligation to provide competitors \"access to network
elements on an unbundled basis,\" and to offer, at wholesale rates, any
telecommunications service that the firm offers at retail to subscribers
other than telecommunications carriers. See 47 U.S.C. §§ 251(c)(3) &
(4)(A).

In 1998, in response to a request for clarification from Qwest[^2] and
others, the Commission held that DSL-based advanced services constitute
either \"telephone exchange service\" or \"exchange access,\" and
therefore were subject to the duties set out in s 251(c). Advanced
Services Order, 13 F.C.C.R. at 24,031-34 p p 38-44. On Qwest\'s petition
for review in this court, the Commission sought a remand to address some
of Qwest\'s arguments, which we granted. See US WEST Communications,
Inc. v. FCC, 1999 WL 728555 (D.C. Cir. 1999).

On remand the Commission again found incumbent LECs\' provision of
DSL-based advanced services to be subject to s 251(c) obligations. In re
Deployment of Wireline Services Offering Advanced Telecommunications
Capability, 15 F.C.C.R. 385 (1999) (the \"Remand Order\"). It invoked
two theories to support its conclusion. The first interpreted the
statutory language defining incumbent LECs, and the second, as in the
original order, viewed DSL-based advanced services as either \"telephone
exchange service\" or \"exchange access.\" Because the Commission\'s
reading of the statutory language defining incumbent LECs is at least
reasonable, we deny Qwest\'s petition to vacate the entire Commission
order. But because the Commission\'s interpretation of \"telephone
exchange service\" and \"exchange access\" is in essence the one that we
vacated and remanded in yet another case, Bell Atlantic Telephone Cos.
v. FCC, 206 F.3d 1 (D.C. Cir. 2000), we vacate and remand on that issue.
We take the two theories in turn.

\* \* \*

The definition of incumbent LEC. Qwest concededly provides \"telephone
exchange service\" and \"exchange access\" and under the statute is thus
a \"LEC\" in the abstract. But Qwest argues that its DSL-based advanced
services can be subjected to the duties created by s 251(c) only to the
extent that those specific services belong to either of the categories
that are the defining characteristics of a LEC. The language of the Act
gives Qwest\'s analysis some purchase.

The Act defines incumbent LECs (naturally enough) as a subcategory of
LECs. A LEC means any person that is engaged in the provision of
telephone exchange service or exchange access. Such term does not
include a person insofar as such person is engaged in the provision of a
commercial mobile service under section 332(c) of this title, except to
the extent that the Commission finds that such service should be
included in the definition of such term.

47 U.S.C. s 153(26) (emphasis added). The concept of incumbency, by
contrast, is based purely on history. An incumbent LEC with respect to
an area is

the local exchange carrier that\--(A) on February 8, 1996, provided
telephone exchange service in such area; and (B)(i) on February 8, 1996,
was deemed to be a member of the exchange carrier association pursuant
to section 69.601(b) of the Commission\'s regulations (47 C.F.R.
69.601(b)); or (ii) is a person or entity that, on or after February 8,
1996, became a successor or assign of a member described in clause (i).

47 U.S.C. s 251(h).

Qwest argues that the phrase in s 153(26) \"is engaged in the provision
of\" plainly bars the Commission from regulating carriers\' DSL-based
advanced services under s 251(c) because such services are not
\"telephone exchange service\" or \"exchange access.\" Qwest interprets
the second sentence in the LEC definition as confirming that services
other than \"telephone exchange service\" or \"exchange access,\" like
commercial mobile services, are excluded from regulation. Under Qwest\'s
reading, the second sentence states that \"you are a local exchange
carrier if you are engaged in providing telephone exchange service or
exchange access, but you are not a local exchange carrier if you are
engaged in providing commercial mobile services.\" Oral Arg. Tr. at 10.
In contrast, the Commission argues that DSL-based advanced services
qualify as \"telecommunications services\" as to which s 251(c) imposes
many of its duties on incumbent LECs, so that it may regulate a carrier
engaged in providing such services so long as the carrier qualifies as a
LEC by providing either \"telephone exchange service\" or \"exchange
access\" and meets the definition of incumbent under s 251(h). See
Respondent\'s Br. at 4 n.4, 19-20; Oral Arg. Tr. at 26 (Commission
counsel acknowledging that a carrier must still be a \"live LEC\" to be
an incumbent LEC). Under the Commission\'s reading, the second sentence
of the LEC definition indicates that a carrier can be a LEC with respect
to services other than \"telephone exchange service\" or \"exchange
access\": the explicit exclusion of \"commercial mobile service\"
(subject to an exception) lends some credence to the view that
Congress\'s premise was inclusive. Congress, the Commission reasons,
must have assumed that without the exclusion such persons would have
been included \"insofar as\" they were \"engaged in\" providing mobile
service merely on the basis of (elsewhere) providing exchange service or
access, even if mobile service itself did not fit either category.

The statutory definitions do not compel Qwest\'s reading. There is
nothing linguistically odd about defining a set of firms subject to
regulation in terms of the conduct of particular activities, and yet
also regulating some other activities that are not part of the
definition. And the definition does not say that a carrier is a LEC only
\"when\" or \"to the extent\" that it provides the regulation-triggering
services. When defining a rural telephone company Congress specified
inclusion \"to the extent that such entity\" was performing specified
services, 47 U.S.C. s 153(37) (emphasis added), and similarly provided
that a telecommunications carrier should be \"treated\" as a common
carrier \"only to the extent that it is engaged in providing
telecommunications services,\" id. s 153(44) (emphasis added). These
explicit specifications tend to undermine Qwest\'s argument that such a
clause must be implied in the LEC definition. See Russello v. United
States, 464 U.S. 16, 23 (1983).

The Commission draws a similar argument from Congress\'s articulation of
the s 251(c) duties. Those under s 251(c)(2) expressly apply to
\"telephone exchange service\" or \"exchange access,\" while the rest
have no such limitation. These distinctions are hard to reconcile with
the idea that the duties apply only to firms insofar as they provide
\"telephone exchange service\" or \"exchange access.\"

Given the ambiguity in the statutory language, our task is not to choose
the best interpretation but merely to decide if the Commission\'s is
reasonable. See Atlantic Mutual Insurance Co. v. Commissioner of
Internal Revenue, 523 U.S. 382, 389 (1998); Chevron U.S.A., Inc. v.
Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43 (1984).

Qwest suggests that the Commission\'s reading will produce absurd
results, involving imposition of s 251(c) duties on incumbents\'
provision of long distance, wireless, and cable services. See Qwest\'s
Main Br. at 17-18; see also Mova Pharmaceutical Corp. v. Shalala, 140
F.3d 1060, 1068 (D.C. Cir. 1998). But the Commission\'s response
alleviates much of this fear. See Respondent\'s Br. at 29-30. First, the
worry about cable services seems inapplicable. The Act says that a
\"telecommunications carrier shall be treated as a common carrier \...
only to the extent that it is engaged in providing telecommunications
services.\" 47 U.S.C. s 153(44) (emphasis added). Telecommunications
services do not include conventional cable services (though the
Commission has suggested that cable service used for high-speed internet
access might be a different story). See In re Inquiry Concerning
High-Speed Access to the Internet Over Cable and Other Facilities, 15
F.C.C.R. 19,287, 19,293-98 p p 14-24 (2000). And the s 251(c) duties
have built-in limits that constrain their application to the other items
(long distance and wireless). The interconnection obligations (and any
related collocation duties) are by their terms restricted to telephone
exchange and exchange access services. See 47 U.S.C. ss 251(c)(2) & (6).
The unbundling obligations of s 251(c)(3) (and likewise any related
collocation duties) are constrained by the \"necessary\" and \"impair\"
restrictions of 47 U.S.C. s 251(d)(2). See Remand Order, 15 F.C.C.R. at
391 p 14. Only the duty of an incumbent LEC under s 251(c)(4), to offer
at wholesale those telecommunications services that it sells at retail,
seems unlimited; but in a competitive market the burden would be
revenue-neutral, as retail prices should represent wholesale rates plus
the additional costs needed for retailing.

Accordingly, we find no error in the Commission\'s conclusion that it
can apply the s 251(c) duties to a firm that met the s 251(h) criteria
on February 8, 1996 and is still providing \"exchange access\" or
\"telephone exchange service.\"

Classification of DSL-based advanced services as \"telephone exchange
service\" or \"exchange access.\" The Commission\'s alternative theory
was that DSL-based advanced services actually constituted either
\"telephone exchange service\" or \"exchange access,\" depending on how
the technology was used. Because the communications set in motion by
ISP-bound traffic typically do not start and end within the same
exchange, but proceed over the internet to out-of-exchange sites, the
Commission found that such traffic constitutes \"exchange access.\" Id.
at 391-92 p 16. In contrast, the Commission found that work-at-home
applications and other non-Internet communications (such as a corporate
network) using DSL technology that begin and terminate within an
exchange qualify as \"telephone exchange service.\" Id.

Before addressing this, a few words about justiciability. As this theory
was one of the Commission\'s two alternative bases for its ruling
against Qwest, the company obviously had standing to seek its overthrow.
Resolution of the first issue in the Commission\'s favor does not, under
settled law, moot the challenger\'s attack on the second basis. See Air
Line Pilots Ass\'n Int\'l v. UAL Corp., 897 F.2d 1394, 1397 (7th Cir.
1990). By considering both bases, there is obviously potential for
economy by the inferior federal courts, as higher-level review might
remove the first basis for the outcome. See id.

Further, there is a question of standing. The second (as yet
unmentioned) petitioner, WorldCom, objects to the Remand Order on
grounds that intersect with those of Qwest. Though WorldCom concurs with
the Commission that DSL-based advanced services are \"telephone exchange
service\" or \"exchange access,\" it objects to the Commission\'s view
that a customer\'s calls to a local ISP are \"exchange access\" because
of the resulting out-of-exchange communications over the internet; if
the calls are classified as \"exchange access,\" WorldCom will not
receive reciprocal compensation from incumbent LECs for them. Normally a
party that has obtained the result that it sought in the agency
proceeding cannot sue merely because it disagrees with the rationale,
see Telecommunications Research & Action Center v. FCC, 917 F.2d 585,
588 (D.C. Cir. 1990), and WorldCom most definitely favors the result
here (the subjection of incumbent LECs\' DSL-based advanced services to
s 251(c) duties). It has been suggested, however, that such cases as
International Brotherhood of Electrical Workers v. ICC, 862 F.2d 330,
334 (D.C. Cir. 1988), and Better Government Ass\'n v. Department of
State, 780 F.2d 86, 91 (D.C. Cir. 1986), might be read to hold that
\"despite a disposition which favors a given party it might still
challenge a general rule if that rule remains in existence and creates
cognizable harm through its effects on that party\'s future rights.\"
Telecommunications Research & Action Center, 917 F.2d at 588 (Silberman,
J., concurring). As the standing of one petitioner is enough, Animal
Legal Defense Fund, Inc. v. Glickman, 154 F.3d 426, 445 (D.C. Cir.
1998)(en banc), and Qwest has undoubted standing to attack the
Commission\'s second theory, we need not pursue the suggestion.

Our treatment of the merits can be brief. The Commission\'s Remand Order
was issued a few months before our decision in Bell Atlantic Telephone
Cos. v. FCC, 206 F.3d 1 (2000). There we held that the Commission, in
arriving at the same conclusion for ISP-bound calls in In re
Implementation of the Local Competition Provisions in the
Telecommunications Act of 1996; Inter-Carrier Compensation for ISP-Bound
Traffic, 14 F.C.C.R. 3689, 3691-3703 p p 3-20 (1999), had \"not provided
a satisfactory explanation why LECs that terminate calls to ISPs are not
properly seen as \'terminat\[ing\] \... local telecommunications
traffic,\' and why such traffic is \'exchange access\' rather than
\'telephone exchange service.\' \" Bell Atlantic, 206 F.3d at 9. The
Commission does not seriously contest that its decision here,
classifying certain DSL offerings as either \"telephone exchange
service\" or \"exchange access\" under 47 U.S.C. s 153, relied not only
on the Reciprocal Compensation Order vacated in Bell Atlantic but also
on its defective reasoning, see Remand Order, 15 F.C.C.R. at 391-92,
400-02 p p 15-16, 33, 35.

Accordingly we vacate and remand the Commission\'s classification of
DSL-based advanced services as \"telephone exchange service\" or
\"exchange access.\" See National Fuel Gas Supply Corp. v. FERC, 899
F.2d 1244, 1249-50 (D.C. Cir. 1990). Qwest\'s claim that incumbent LECs
can be subject to s 251(c) duties only with respect to the provision of
\"telephone exchange service\" or \"exchange access,\" however, is
denied.

So ordered.

[^1]: In the order under review the Commission defined \"advanced
    services\" as \"high speed, switched, broadband, wireline
    telecommunications capability that enables users to originate and
    receive high-quality voice, data, graphics and video
    telecommunications.\" In re Deployment of Wireline Services Offering
    Advanced Telecommunications Capability, 15 F.C.C.R. 385, 385 n.2
    (1999).

[^2]: US WEST, Inc., the parent company of US WEST Communications, Inc.,
    merged with Qwest Communications International, Inc. on June 30,
    2000.