**Before the**

**FEDERAL COMMUNICATIONS COMMISSION**

**Washington, D.C. 20554**

+---------------------------------+---+-------------------------------+
| In the Matter of                | ) |                               |
|                                 |   |                               |
| Procedures for Arbitrations     | ) |                               |
| Conducted Pursuant to Section   |   |                               |
| 252(e)(5) of the Communications | ) |                               |
| Act of 1934, as amended.        |   |                               |
|                                 | ) |                               |
|                                 |   |                               |
|                                 | ) |                               |
+---------------------------------+---+-------------------------------+

**ORDER**

**Adopted: January 17, 2001** **Released: January 19, 2001**

By the Commission:

1\. In this Order, we amend on our own motion section 51.807 of our
rules, 47 C.F.R. § 51.807, to grant additional discretion to the FCC
arbitrator when arbitrating interconnection disputes pursuant to section
252(e)(5) of the Communications Act of 1934, as amended, 47 U.S.C. §
252(e)(5) ("Act"). We also address a number of other generic procedural
issues concerning section 252(e)(5) arbitrations conducted by the
Commission.

######### I. BACKGROUND

2\. Section 252 of the Act provides for the compulsory arbitration by
state commissions of interconnection agreements between incumbent local
exchange carriers ("LECs") and other carriers in certain circumstances.
Section 252(e)(5) provides that, if a state commission fails to act to
carry out its responsibility under section 252 in any proceeding, then
the Commission is to issue an order preempting the state commission's
jurisdiction of that proceeding, and assume the responsibility of the
state commission under section 252 with respect to the proceeding.

3\. In the *Local Competition Order*,[^1] the Commission adopted interim
rules governing the arbitration of interconnection agreements when it
preempts state commission jurisdiction

pursuant to section 252(e)(5). *See* 47 C.F.R. §§ 51.805, 51.807 (1999).
Those rules provide, among other things: (1) that the Commission is not
bound by state laws or standards that would have applied to the state
commission absent preemption, 47 C.F.R. § 51.807(b) (1999); (2) that in
resolving any open issues and in imposing conditions upon the parties to
the agreement, the Commission will ensure that such resolution and
conditions meet the requirements of section 251 of the Act, establish
any rates for interconnection, services, or network elements according
to section 252(d) of the Act, and provide a schedule for implementation
of the terms and conditions by the parties to the agreement, 47 C.F.R. §
51.807(c) (1999); and (3) that, absent mutual consent of the parties,
the decision of the arbitrator is binding on the parties. 47 C.F.R. §
51.807(h) (1999).

######### 

######### II. DISCUSSION

A.  Amendment to Section 51.807

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4.  We adopted an interim rule in the *Local Competition Order*
    establishing a hybrid scheme of "final offer" arbitration for
    section 252(e)(5) proceedings. *See* 47 C.F.R. § 51.807(d), (e), (f)
    (1999). This rule provides that, in issuing an arbitration award,
    the arbitrator "shall use final offer arbitration," which "may take
    the form of either entire package final offer arbitration or
    issue-by-issue final offer arbitration." 47 C.F.R. § 51.807(d)(1).
    If the parties' offers do not meet the standards of section 251, the
    arbitrator may require the parties to submit additional final offers
    or may adopt a result offered by neither party. 47 C.F.R. §
    51.807(f)(3) (1999).

5.  Experience gained by states in arbitrating scores of interconnection
    disputes over the past five years suggests that "final offer"
    arbitration may not always afford the arbitrator sufficient
    flexibility to resolve complex interconnection issues. Accordingly,
    we now amend section 51.807(f)(3) to provide the arbitrator
    additional flexibility in certain circumstances. The arbitrator
    shall have discretion to require the parties to submit new final
    offers, or adopt a result not submitted by any party, in
    circumstances where a final offer submitted by one or more of the
    parties fails to comply with the Act or the Commission's rules.
    There may be some unique circumstances where, even though the
    parties submit a final offer that complies with the Act and the
    Commission's rules, the arbitrator will have a basis for concluding
    that another result is more consistent with the requirements of
    section 252(c) of the Act, and the Commission's rules, although we
    do not identify those circumstances here.

6.  Because this rule is a rule of agency procedure and practice, it may
    be adopted without affording prior notice and opportunity for
    comment. *See* 5 U.S.C. § 553(b)(3)(A).[^2] In addition, we find
    good cause to make this change effective upon publication in the
    Federal Register. *See* 5 U.S.C. § 553(d)(3). In an order released
    contemporaneously herewith,[^3] the Commission has preempted the
    jurisdiction of the Commonwealth of Virginia State Corporation
    Commission and therefore may soon need to begin the process of
    arbitrating complex interconnection agreement issues among carriers
    in Virginia. This rule change is necessary to facilitate the
    efficient and expeditious discharge of the Commission's statutory
    responsibility in the Virginia arbitration proceeding pursuant to
    section 252 of the Communications Act.

**B.** **Other Procedural Issues**

B.  7\. [*Ex Parte* Classification]{.underline}. Arbitrations conducted
    pursuant to section 252(e)(5) are restricted for *ex parte*
    purposes, consistent with the Commission's *ex parte* rules. *See*
    47 CFR §§ 1.1208, 1.1204(b), 1.1206(a) (1999). Therefore, *ex parte*
    presentations are prohibited.

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8.  [Delegated Authority]{.underline}. The Commission's existing
    arbitration rules contemplate that someone other than the full
    Commission may serve as arbitrator on behalf of the Commission.
    *See* 47 C.F.R. § 51.807(d) (1999). Consistent with that rule, we
    authorize the Chief, Common Carrier Bureau, to serve as the
    arbitrator in section 252(e)(5) proceedings, with the assistance of
    the staff of the Common Carrier and Enforcement Bureaus.[^4] The
    arbitrator shall conduct such proceedings as he or she deems
    necessary and appropriate, issue the arbitration award, direct
    parties to submit an interconnection agreement conforming to the
    arbitration award, and issue an order approving or rejecting the
    agreement.

9.  The Bureau's decisions issuing the arbitration award and approving
    or rejecting the agreement (like other orders issued pursuant to
    delegated authority) will be effective and binding upon release.
    *See* 47 U.S.C. § 155(c)(3); 47 C.F.R. § 1.102(b). *See also* 47
    U.S.C. §§ 405(a), 408. Parties may file applications for review of
    both staff-level decisions. *See* 47 U.S.C. § 5(c)(4); 47 C.F.R. §
    1.115 (1999). *See also* 47 C.F.R. § 1.102(b)(3) (1999). We
    anticipate the Commission's addressing any applications for review
    of both decisions on a consolidated basis.

10. We also instruct the Chief of the Common Carrier Bureau to include
    within any arbitration award establishing rates for interconnection,
    services, or network elements, a requirement that the
    interconnection agreement provide for a "true-up" of charges between
    the parties should the Commission ultimately modify any rates set by
    the Bureau.[^5] A "true-up" mechanism will ensure that no carrier is
    disadvantaged by rates established by the Bureau's orders that
    differ from any rates set by the full Commission on review. Finally,
    we reserve the option of retaining an outside arbitrator should
    circumstances so require.

11. [Timing Issues]{.underline}. Section 252 provides that the parties
    may petition the state commission to arbitrate "\[d\]uring the
    period from the 135^th^ to the 160^th^ day (inclusive) after the
    date on which an incumbent \[LEC\] receives a request for
    negotiation ... ." 47 U.S.C. § 252(b)(1). The state commission must
    then issue an arbitration award "not later than 9 months after the
    date on which the local exchange carrier received the request \[to
    negotiate\]." 47 U.S.C. § 252(b)(4)(C). In addition, section 252
    provides that the state commission must approve or reject the
    interconnection agreement within 30 days after submission by the
    parties of an agreement adopted by arbitration under section 252(b),
    or the agreement is deemed approved. 47 U.S.C. § 252(e)(4).

12. Section 252 does not impose any time limits upon the Commission when
    it acts pursuant to section 252(e)(5). In this regard, the
    Commission stated in the *Local Competition Order* that "it would
    not make sense to apply to the Commission the timing requirements
    that section 252(b)(4)(c) \[regarding issuing the arbitration
    award\] imposes on state commissions," because the Commission might
    not assume jurisdiction until nine or more months after a party
    requested negotiations.[^6]

13. Nevertheless, we believe it is important to complete section
    252(e)(5) arbitrations expeditiously. Although the Commission is not
    bound by the deadlines imposed by section 252 upon the state
    commissions, we encourage the Chief of the Common Carrier Bureau to
    endeavor to comply with those deadlines in most circumstances.
    Accordingly, we will deem the date an arbitration petition is filed
    with the Commission to be the 135^th^ day after the incumbent LEC
    received the request to negotiate.[^7] We encourage the Chief of the
    Common Carrier Bureau to attempt to release the arbitration award
    not later than 9 months after the date on which the incumbent LEC is
    deemed to have received the request to negotiate. We also encourage
    the Chief of the Common Carrier Bureau to attempt to release an
    order approving or rejecting any interconnection agreement adopted
    by arbitration pursuant to section 252(e)(5) within 30 days after
    its submission by the parties.

14. [Judicial Review]{.underline}. While it is ultimately for the
    federal courts, not the FCC, to determine the appropriate forum for
    judicial review of Commission arbitration decisions, we think it
    will prove useful for us to set out our interpretation of the
    relevant statutory provisions at the outset. As noted above, the Act
    envisions that state commissions typically will arbitrate disputed
    interconnection issues and approve or reject interconnection
    agreements. Pursuant to state statutes, state commission actions
    ordinarily are subject to judicial review in state courts. The Act,
    however, expressly denies state courts jurisdiction to review the
    action of a state commission in approving or rejecting an
    interconnection agreement. 47 U.S.C. § 252(e)(4). The statute
    instead assigns judicial review of state arbitration decisions made
    pursuant to section 252 to the federal judiciary. Section 252(e)(6),
    captioned "Review of State Commission Actions," provides for federal
    district court review of state commission "determinations" under
    section 252. 47 U.S.C. § 252(e)(6). By expressly shifting judicial
    review of state determinations involving the Act to the federal
    judiciary, Congress presumably intended to facilitate more uniform
    interpretation of the federal statutory scheme.

15. Final orders of the Commission, in contrast, are subject to judicial
    review in any federal circuit court of appeals where venue is
    proper. 47 U.S.C. § 402(a); 28 U.S.C. § 2342(1). We do not believe
    Congress intended for judicial review of final Commission orders
    issued pursuant to section 252(e)(5) to deviate from this course.
    Nothing in subsections 252(e)(5) and 252(e)(6) expressly overrides
    other provisions of the Communications Act and Title 28 governing
    judicial review of final Commission orders. Moreover, circuit court
    review of final Commission orders issued pursuant to section
    252(e)(5) is consistent with the Act's goal of uniform
    interpretation of federal law. Accordingly, we believe that judicial
    review of any final Commission order approving or rejecting an
    interconnection agreement submitted after arbitration properly lies
    in the federal circuit courts of appeals.

16. [Consolidation]{.underline}. Section 252(g) of the Act authorizes
    state commissions to consolidate arbitration proceedings. We now
    authorize the arbitrator, upon motion of the parties or his or her
    own motion, to consolidate section 252(e)(5) proceedings in order to
    reduce administrative burdens on the parties and the Commission in
    carrying out its responsibilities under the Act.

######### III. ORDERING CLAUSES

17\. Accordingly, IT IS ORDERED, that this Order is effective upon
release.

18\. IT IS FURTHER ORDERED, pursuant to sections 4(i ), 4(j), 201(b),
303(r), 251, and 252 of the Communications Act of 1934, as amended, 47
U.S.C. §§ 154(i), 154(j), 201(b), 303(r), 251, and 252, that the
amendment to Section 51.807 IS ADOPTED as set forth in the appendix to
this Order, to be effective upon publication in the Federal Register.

FEDERAL COMMUNICATIONS COMMISSION

Magalie Roman Salas

Secretary

######### 

######### [APPENDIX]{.underline}

Part 51 of Title 47 of the Code of Federal Regulations is amended as
follows:

§ 51.807 Arbitration and mediation of agreements by the Commission
pursuant to section 252(e)(5) of the Act.

To be inserted and substituted for subsection (f)(3)

(3) Provide a schedule for implementation of the terms and conditions by
    the parties to the agreement. If a final offer submitted by one or
    more parties fails to comply with the requirements of this section
    or if the arbitrator determines in unique circumstances that another
    result would better implement the Communications Act**,** the
    arbitrator has discretion to take steps designed to result in an
    arbitrated agreement that satisfies the requirements of section
    252(c) of the Act, including requiring parties to submit new final
    offers within a time frame specified by the arbitrator, or adopting
    a result not submitted by any party that is consistent with the
    requirements of section 252(c) of the Act, and the rules prescribed
    by the Commission pursuant to that section.

[^1]: *Implementation of the Local Competition Provisions in the
    Telecommunications Act of 1996, Interconnection between Local
    Exchange Carriers and Commercial Mobile Radio Service Providers*,
    First Report and Order, 11 FCC Rcd 15499, 16122-32, ¶¶ 1269-95
    (1996), *subsequent history omitted* (*Local Competition Order*).

[^2]: *See JEM Broadcasting Co. v. FCC*, 22 F.3d 320 (D.C. Cir. 1994).
    *See also James V. Hurson Assoc. v. Glickman*, 229 F.3d 277 (D.C.
    Cir. 2000); *American Hospital Assoc. v. Bowen*, 834 F.2d 1037 (D.C.
    Cir. 1987).

[^3]: *In the Matter of Petition of WorldCom, Inc. for Preemption of
    Jurisidiction of the Virginia State Corporation Commission Pursuant
    to Section 252(e)(5) of the Telecommunications Act and for
    Arbitration of Interconnection Disputes with Verizon-Virginia,
    Inc.*, CC Docket No. 00-218, Memorandum Opinion and Order, FCC 01-20
    (rel. Jan. 19, 2001).

[^4]: The Chief, Common Carrier Bureau, will issue a Public Notice
    setting forth certain procedures and a pleading schedule specific to
    the upcoming section 252(e)(5) arbitration proceeding involving Bell
    Atlantic-Virginia, Inc., MCI WORLDCOM Communications of Virginia,
    Inc., and MCImetro Access Transmission Services of Virginia, Inc.

[^5]: *See* 47 U.S.C. § 154(i); *Local Competition Order*, 11 FCC Rcd at
    16030-31, ¶¶ 1066-67 (noting that the Commission has authority under
    section 4(i) of the Act to set interim rates subject to later
    "true-up" charges when final rates are established). *See also*
    *Lincoln Telephone and Telegraph Co. v. FCC*, 659 F.2d 1092 (D.C.
    Cir. 1981).

[^6]: *Local Competition Order*, 11 FCC Rcd at 16130, ¶ 1291.

[^7]: A party may file an arbitration petition with the FCC subsequent
    to the Commission's decision preempting a state commission's
    jurisdiction pursuant to section 252(e)(5).