**United States Court of Appeals**

^[FOR\ THE\ DISTRICT\ OF\ COLUMBIA\ CIRCUIT]{.smallcaps}^

^Argued\ November\ 22,\ 1999\ Decided\ March\ 24,\ 2000\ ^

^No.\ 99-1094^

^[Bell\ Atlantic\ Telephone\ Companies,\ ]{.smallcaps}^

^[Petitioner]{.smallcaps}^

^v.^

^[Federal\ Communications\ Commission\ and\ ]{.smallcaps}^

^[United\ States\ of\ America,\ ]{.smallcaps}^

^[Respondents]{.smallcaps}^

^[Telecommunications\ Resellers\ Association,\ et\ al.,\ ]{.smallcaps}^

^[Intervenors]{.smallcaps}^

^Consolidated\ with^

^99-1095,\ 99-1097,\ 99-1106,\ 99-1126,\ ^

^99-1134,\ 99-1136,\ 99-1145,^

^On\ Petitions\ for\ Review\ of\ a\ Declaratory\ Ruling\ of\ the\ ^

^Federal\ Communications\ Commission^

**^-^^---^^---^^---^^---^**

^\ ^*^Mark\ L.\ Evans^*^\ and\ ^*^Darryl\ M.\ Bradford^*^\ argued\ the\ causes\ for\ petitioners.\ With\ them\ on\ the\ briefs\ were\ ^*^Thomas\ F.\ O\'Neil,\ III,^*^\ ^*^Adam\ H.\ Charnes^*^,\ ^*^Mark\ B.\ Ehrlich^*^,\ ^*^Donald\ B.\ Verrilli,\ Jr.^*^,\ ^*^Jodie\ L.\ Kelley^*^,\ ^*^John\ J.\ Hamill,^*^\ ^*^Emily\ M.\ Williams^*^,\ ^*^Theodore\ Case\ Whitehouse^*^,\ ^*^Thomas\ Jones,^*^\ ^*^Albert\ H.\ Kramer^*^,\ ^*^Andrew\ D.\ Lipman^*^,\ ^*^Richard\ M.\ Rindler^*^,\ ^*^Robert\ M.\ McDowell,^*^\ ^*^Robert\ D.\ Vandiver^*^,\ ^*^Cynthia\ Brown\ Miller^*^,\ ^*^Charles\ C.\ Hunter,^*^\ ^*^Catherine\ M.\ Hannan^*^,\ ^*^Michael\ D.\ Hays^*^,\ ^*^Laura\ H.\ Phillips^*^,\ ^*^J.\ G.\ Harrington,^*^\ ^*^William^*^\ ^*^P.^*^\ ^*^Barr,^*^\ ^*^M.\ Edward\ Whelan,\ III^*^,\ ^*^Michael\ K.\ Kellogg^*^,\ ^*^Michael\ E.\ Glover^*^,\ ^*^Robert\ B.\ McKenna,^*^\ ^*^William\ T.\ Lake^*^,\ ^*^John\ H.\ Harwood,\ II^*^,\ ^*^Jonathan\ J.\ Frankel^*^,\ ^*^Robert\ Sutherland^*^,\ ^*^William\ B.\ Barfield,^*^\ ^*^Theodore\ A.\ Livingston^*^\ and\ ^*^John\ E.\ Muench^*^.\ ^*^Maureen\ F.\ Del\ Duca^*^,\ ^*^Lynn\ R.\ Charytan^*^,\ ^*^Gail\ L.\ Polivy^*^,\ ^*^John\ F.\ Raposa^*^\ and\ ^*^Lawrence^*^\ ^*^W.^*^\ ^*^Katz^*^\ entered\ appearances.^

^\ ^*^Christopher\ J.\ Wright^*^,\ General\ Counsel,\ Federal\ Communications\ Commission,\ argued\ the\ cause\ for\ respondents.\ With\ him\ on\ the\ brief\ were\ ^*^Daniel\ M.\ Armstrong^*^,\ Associate\ General\ Counsel,\ and\ ^*^John\ E.\ Ingle^*^,\ ^*^Laurence\ N.\ Bourne^*^\ and\ ^*^Lisa\ S.\ Gelb^*^,\ Counsel.\ ^*^Catherine\ G.\ O\'Sullivan^*^\ and\ ^*^Nancy\ C.\ Garrison^*^,\ Attorneys,\ U.S.\ Department\ of\ Justice,\ entered\ appearances.^

^\ ^*^David\ L.\ Lawson^*^\ argued\ the\ cause\ for\ intervenors\ in\ opposition\ to\ the\ LEC\ petitioners.\ With\ him\ on\ the\ brief\ were\ ^*^Mark^*^\ ^*^C.^*^\ ^*^Rosenblum^*^,\ ^*^David\ W.\ Carpenter,^*^\ ^*^James\ P.\ Young^*^,\ ^*^Emily\ M.\ Wiliams,^*^\ ^*^Andrew\ D.\ Lipman,^*^\ ^*^Richard\ M.\ Rindler,^*^\ ^*^Robert\ D.\ Vandiver,^*^\ ^*^Cynthia\ Brown\ Miller,^*^\ ^*^Theodore\ Case\ Whitehouse,^*^\ ^*^Thomas\ Jones,^*^\ ^*^John\ D.\ Seiver,^*^\ ^*^Charles\ C.\ Hunter,^*^\ ^*^Catherine\ M.\ Hannan,^*^\ ^*^Carol\ Ann\ Bischoff^*^\ and\ ^*^Robert\ M.\ McDowell.^*

^\ ^*^William\ P.\ Barr,^*^\ ^*^M.\ Edward\ Whelan,^*^\ ^*^Michael\ E.\ Glover,^*^\ ^*^Mark\ L.\ Evans,^*^\ ^*^Michael\ K.\ Kellogg,^*^\ ^*^Mark\ D.\ Roellig,^*^\ ^*^Dan\ Poole,^*^\ ^*^Robert\ B.\ McKenna,^*^\ ^*^William\ T.\ Lake,^*^\ ^*^John\ H.\ Harwood,\ II,^*^\ ^*^Jonathan\ J.\ Frankel^*^,\ ^*^Robert\ Sutherland,^*^\ ^*^William\ B.\ Barfield,^*^\ ^*^Theodore\ A^*^.^*^\ Livingston^*^\ and\ ^*^John\ E.\ Muench^*^\ were\ on\ the\ brief\ for\ the\ Local\ Exchange\ Carrier\ intervenors.^

^\ ^*^Robert\ J.\ Aamoth^*^,\ ^*^Ellen\ S.\ Levine^*^,\ ^*^Charles\ D.\ Gray^*^,\ ^*^James\ B.\ Ramsay^*^,\ ^*^Jonathan\ J.\ Nadler^*^,\ ^*^David\ A.\ Gross^*^,\ ^*^Curtis\ T.\ White,^*^\ ^*^Edward\ Hayes,\ Jr.^*^,\ and\ ^*^David\ M.\ Janas^*^\ entered\ appearances\ for\ intervenors^

^\ Before:\ [Williams]{.smallcaps},\ [Sentelle]{.smallcaps}\ and\ [Randolph]{.smallcaps},\ ^*^Circuit\ Judges^*^.^

^\ Opinion\ for\ the\ Court\ filed\ by\ ^*^Circuit\ Judge^*^\ [Williams]{.smallcaps}.^

^\ [Williams]{.smallcaps},\ ^*^Circuit\ Judge^*^:\ The\ Telecommunications\ Act\ of\ 1996,\ Pub.\ L.\ No.\ 104-104,\ 110\ Stat.\ 56,\ 47\ U.S.C.\ §§\ 151-714,\ requires\ local\ exchange\ carriers\ (\"LECs\")\ to\ \"establish\ reciprocal\ compensation\ arrangements\ for\ the\ transport\ and\ termination\ of\ telecommunications.\"\ ^*^Id^*^.\ §\ 251(b)(5).\ When\ LECs\ collaborate\ to\ complete\ a\ call,\ this\ provision\ ensures\ compensation\ both\ for\ the\ originating\ LEC,\ which\ receives\ payment\ from\ the\ end‑user,\ and\ for\ the\ recipient\'s\ LEC.\ By\ regulation\ the\ Commission\ has\ limited\ the\ scope\ of\ the\ reciprocal\ compensation\ requirement\ to\ \"local\ telecommunications\ traffic.\"\ 47\ CFR\ §\ 51.701(a).\ In\ the\ ruling\ under\ review,\ it\ considered\ whether\ calls\ to\ internet\ service\ providers\ (\"ISPs\")\ within\ the\ caller\'s\ local\ calling\ area\ are\ themselves\ \"local.\"\ In\ doing\ so\ it\ applied\ its\ so‑called\ \"end‑to‑end\"\ analysis,\ noting\ that\ the\ communication\ characteristically\ will\ ultimately\ (if\ indirectly)\ extend\ beyond\ the\ ISP\ to\ websites\ out‑of‑state\ and\ around\ the\ world.\ Accordingly\ it\ found\ the\ calls\ non‑local.\ See\ ^*^In\ the\ Matter\ of\ Implementation\ of\ the\ Local\ Competition\ Provisions\ in\ the\ Telecommunications\ Act\ of\ 1996,\ Intercarrier\ Compensation\ for\ ISP-Bound\ Traffic^*^,\ 14\ FCC\ Rcd\ 3689,\ 3690\ (¶\ 1)\ (1999)\ (\"FCC\ Ruling\").^

^\ Having\ thus\ taken\ the\ calls\ to\ ISPs\ out\ of\ §\ 251(b)(5)\'s\ provision\ for\ \"reciprocal\ compensation\"\ (as\ it\ interpreted\ it),\ the\ Commission\ could\ nonetheless\ itself\ have\ set\ rates\ for\ such\ calls,\ but\ it\ elected\ not\ to.\ In\ a\ Notice\ of\ Proposed\ Rulemaking,\ CC\ Docket\ 99-68,\ the\ Commission\ tentatively\ concluded\ that\ \"a\ negotiation\ process,\ driven\ by\ market\ forces,\ is\ more\ likely\ to\ lead\ to\ efficient\ outcomes\ than\ are\ rates\ set\ by\ regulation,\"\ FCC\ Ruling,\ 14\ FCC\ Rcd\ at\ 3707\ (¶\ 29),\ but\ for\ the\ nonce\ it\ left\ open\ the\ matter\ of\ implementing\ a\ system\ of\ federal\ controls.\ It\ observed\ that\ in\ the\ meantime\ parties\ may\ voluntarily\ include\ reciprocal\ compensation\ provisions\ in\ their\ interconnection\ agreements,\ and\ that\ state\ commissions,\ which\ have\ authority\ to\ arbitrate\ disputes\ over\ such\ agreements,\ can\ construe\ the\ agreements\ as\ requiring\ such\ compensation;\ indeed,\ even\ when\ the\ agreements\ of\ interconnecting\ LECs\ include\ no\ linguistic\ hook\ for\ such\ a\ requirement,\ the\ commissions\ can\ find\ that\ reciprocal\ compensation\ is\ appropriate.\ FCC\ Ruling,\ 14\ FCC\ Rcd\ at\ 3703-05\ (¶\ ¶\ 24-25);\ see\ §\ 251(b)(1)\ (establishing\ such\ authority).\ \"\[A\]ny\ such\ arbitration,\"\ it\ added,\ \"must\ be\ consistent\ with\ governing\ federal\ law.\"\ FCC\ Ruling,\ 14\ FCC\ Rcd\ at\ 3705\ (¶\ 25).^

^\ This\ outcome\ left\ at\ least\ two\ unhappy\ groups.\ One,\ led\ by\ Bell\ Atlantic,\ consists\ of\ incumbent\ LECs\ (the\ \"incumbents\").\ Quite\ content\ with\ the\ Commission\'s\ finding\ of\ §\ 251(b)(5)\'s\ inapplicability,\ the\ incumbents\ objected\ to\ its\ conclusion\ that\ in\ the\ absence\ of\ federal\ regulation\ state\ commissions\ have\ the\ authority\ to\ impose\ reciprocal\ compensation.\ Although\ the\ Commission\'s\ new\ rulemaking\ on\ the\ subject\ may\ eventuate\ in\ a\ rule\ that\ preempts\ the\ states\'\ authority,\ the\ incumbents\ object\ to\ being\ left\ at\ the\ mercy\ of\ state\ commissions\ until\ that\ (hypothetical)\ time,\ arguing\ that\ the\ commissions\ have\ mandated\ exorbitant\ compensation.\ In\ particular,\ the\ incumbents,\ who\ are\ paid\ a\ flat\ monthly\ fee,\ have\ generally\ been\ forced\ to\ provide\ compensation\ for\ internet\ calls\ on\ a\ per‑minute\ basis.\ Given\ the\ average\ length\ of\ such\ calls\ the\ cost\ can\ be\ substantial,\ and\ since\ ISPs\ do\ not\ make\ outgoing\ calls,\ this\ compensation\ is\ hardly\ \"reciprocal.\"^

^\ Another\ group,\ led\ by\ MCI\ WorldCom,\ consists\ of\ firms\ that\ are\ seeking\ to\ compete\ with\ the\ incumbent\ LECs\ and\ which\ provide\ local\ exchange\ telecommunications\ services\ to\ ISPs\ (the\ \"competitors\").\ These\ firms,\ which\ stand\ to\ receive\ reciprocal\ compensation\ on\ ISP‑bound\ calls,\ petitioned\ for\ review\ with\ the\ complaint\ that\ the\ Commission\ erred\ in\ finding\ that\ the\ calls\ weren\'t\ covered\ by\ §\ 251(b)(5).^

^\ The\ end‑to‑end\ analysis\ applied\ by\ the\ Commission\ here\ is\ one\ that\ it\ has\ traditionally\ used\ to\ determine\ whether\ a\ call\ is\ within\ its\ interstate\ ^*^jurisdiction^*^.\ Here\ it\ used\ the\ analysis\ for\ quite\ a\ different\ purpose,\ without\ explaining\ why\ such\ an\ extension\ made\ sense\ in\ terms\ of\ the\ statute\ or\ the\ Commission\'s\ own\ regulations.\ Because\ of\ this\ gap,\ we\ vacate\ the\ ruling\ and\ remand\ the\ case\ for\ want\ of\ reasoned\ decision‑making.^

^\*\ \*\ \*^

^\ In\ February\ 1996\ Congress\ passed\ the\ Telecommunications\ Act\ of\ 1996\ (the\ \"1996\ Act\"\ or\ the\ \"Act\"),\ stating\ an\ intent\ to\ open\ local\ telephone\ markets\ to\ competition.\ See\ H.R.\ Conf.\ Rep.\ No.\ 104-458,\ at\ 113\ (1996).\ Whereas\ before\ local\ exchange\ carriers\ generally\ had\ state‑licensed\ monopolies\ in\ each\ local\ service\ area,\ the\ 1996\ Act\ set\ out\ to\ ensure\ that\ \"\[s\]tates\ may\ no\ longer\ enforce\ laws\ that\ impede\[\ \]\ competition,\"\ and\ subjected\ incumbent\ LECs\ \"to\ a\ host\ of\ duties\ intended\ to\ facilitate\ market\ entry.\"\ ^*^AT&T\ Corp.\ v.\ Iowa\ Utils.\ Bd.^*^,\ 119\ S.\ Ct.\ 721,\ 726\ (1999).^

^\ Among\ the\ duties\ of\ incumbent\ LECs\ is\ to\ \"provide,\ for\ the\ facilities\ and\ equipment\ of\ any\ requesting\ telecommunications\ carrier,\ interconnection\ with\ the\ local\ exchange\ carrier\'s\ network\ \...\ for\ the\ transmission\ and\ routing\ of\ telephone\ exchange\ service\ and\ exchange\ access.\"\ 47\ U.S.C.\ §\ 251(c)(2).\ (\"Telephone\ exchange\ service\"\ and\ \"exchange\ access\"\ are\ words\ of\ art\ to\ which\ we\ shall\ later\ return.)\ Competitor\ LECs\ have\ sprung\ into\ being\ as\ a\ result,\ and\ their\ customers\ call,\ and\ receive\ calls\ from,\ customers\ of\ the\ incumbents.^

^\ We\ have\ already\ noted\ that\ §\ 251(b)(5)\ of\ the\ Act\ establishes\ the\ duty\ among\ local\ exchange\ carriers\ \"to\ establish\ reciprocal\ compensation\ arrangements\ for\ the\ transport\ and\ termination\ of\ telecommunications.\"\ 47\ U.S.C.\ §\ 251(b)(5).\ Thus,\ when\ a\ customer\ of\ LEC\ A\ calls\ a\ customer\ of\ LEC\ B,\ LEC\ A\ must\ pay\ LEC\ B\ for\ completing\ the\ call,\ a\ cost\ usually\ paid\ on\ a\ per‑minute\ basis.\ Although\ §\ 251(b)(5)\ purports\ to\ extend\ reciprocal\ compensation\ to\ all\ \"telecommunications,\"\ the\ Commission\ has\ construed\ the\ reciprocal\ compensation\ requirement\ as\ limited\ to\ local\ traffic.\ See\ 47\ CFR\ §\ 51.701(a)\ (\"The\ provisions\ of\ this\ subpart\ apply\ to\ reciprocal\ compensation\ for\ transport\ and\ termination\ of\ local\ telecommunications\ traffic\ between\ LECs\ and\ other\ telecommunications\ carriers.\").\ LECs\ that\ originate\ or\ terminate\ long‑distance\ calls\ continue\ to\ be\ compensated\ with\ \"access\ charges,\"\ as\ they\ were\ before\ the\ 1996\ Act.\ Unlike\ reciprocal\ compensation,\ these\ access\ charges\ are\ not\ paid\ by\ the\ originating\ LEC.\ Instead,\ the\ long‑distance\ carrier\ itself\ pays\ both\ the\ LEC\ that\ originates\ the\ call\ and\ links\ the\ caller\ to\ the\ long\ distance\ network,\ and\ the\ LEC\ that\ terminates\ the\ call.\ See\ ^*^In\ the\ Matter\ of\ Implementation\ of\ the\ Local\ Competition\ Provisions\ in\ the\ Telecommunications\ Act\ of\ 1996^*^,\ 11\ FCC\ Rcd\ 15499,\ 16013\ (¶\ 1034)\ (1996)\ (\"^*^Local\ Competition\ Order^*^\").^

^\ The\ present\ case\ took\ the\ Commission\ beyond\ these\ traditional\ telephone\ service\ boundaries.\ The\ internet\ is\ \"an\ international\ network\ of\ interconnected\ computers\ that\ enables\ millions\ of\ people\ to\ communicate\ with\ one\ another\ in\ \'cyberspace\'\ and\ to\ access\ vast\ amounts\ of\ information\ from\ around\ the\ world.\"\ ^*^Reno\ v.\ ACLU^*^,\ 521\ U.S.\ 844,\ 844\ (1997).\ Unlike\ the\ conventional\ \"circuit‑switched\ network,\"\ which\ uses\ a\ single\ end‑to‑end\ path\ for\ each\ transmission,\ the\ internet\ is\ a\ \"distributed\ packet‑switched\ network,\ which\ means\ that\ information\ is\ split\ up\ into\ small\ chunks\ or\ \'packets\'\ that\ are\ individually\ routed\ through\ the\ most\ efficient\ path\ to\ their\ destination.\"\ ^*^In\ the\ Matter\ of\ Federal-State\ Joint\ Board\ on\ Universal\ Service^*^,\ 13\ FCC\ Rcd\ 11501,\ 11532\ (¶\ 64)\ (1998)\ (\"^*^Universal\ Service\ Report^*^\").\ ISPs\ are\ entities\ that\ allow\ their\ customers\ access\ to\ the\ internet.\ Such\ a\ customer,\ an\ \"end\ user\"\ of\ the\ telephone\ system,\ will\ use\ a\ computer\ and\ modem\ to\ place\ a\ call\ to\ the\ ISP\ server\ in\ his\ local\ calling\ area.\ He\ will\ usually\ pay\ a\ flat\ monthly\ fee\ to\ the\ ISP\ (above\ the\ flat\ fee\ already\ paid\ to\ his\ LEC\ for\ use\ of\ the\ local\ exchange\ network).\ The\ ISP\ \"typically\ purchases\ business\ lines\ from\ a\ LEC,\ for\ which\ it\ pays\ a\ flat\ monthly\ fee\ that\ allows\ unlimited\ incoming\ calls.\"\ FCC\ Ruling,\ 14\ FCC\ Rcd\ at\ 3691\ (¶\ 4).^

^\ In\ the\ ruling\ now\ under\ review,\ the\ Commission\ concluded\ that\ §\ 251(b)(5)\ does\ not\ impose\ reciprocal\ compensation\ requirements\ on\ incumbent\ LECs\ for\ ISP‑bound\ traffic.\ FCC\ Ruling,\ 14\ FCC\ Rcd\ at\ 3690\ (¶\ 1).\ Faced\ with\ the\ question\ whether\ such\ traffic\ is\ \"local\"\ for\ purposes\ of\ its\ regulation\ limiting\ §\ 251(b)(5)\ reciprocal\ compensation\ to\ local\ traffic,\ the\ Commission\ used\ the\ \"end‑to‑end\"\ analysis\ that\ it\ has\ traditionally\ used\ for\ jurisdictional\ purposes\ to\ determine\ whether\ particular\ traffic\ is\ interstate.\ Under\ this\ method,\ it\ has\ focused\ on\ \"the\ end\ points\ of\ the\ communication\ and\ consistently\ has\ rejected\ attempts\ to\ divide\ communications\ at\ any\ intermediate\ points\ of\ switching\ or\ exchanges\ between\ carriers.\"\ FCC\ Ruling,\ 14\ FCC\ Rcd\ at\ 3695\ (¶\ 10).\ We\ save\ for\ later\ an\ analysis\ of\ the\ various\ FCC\ precedents\ on\ which\ the\ Commission\ purported\ to\ rely\ in\ choosing\ this\ mode\ of\ analysis.^

^\ Before\ actually\ applying\ that\ analysis,\ the\ Commission\ brushed\ aside\ a\ statutory\ argument\ of\ the\ competitor\ LECs.\ They\ argued\ that\ ISP‑bound\ traffic\ must\ be\ either\ \"telephone\ exchange\ service,\"\ as\ defined\ in\ 47\ U.S.C.\ §\ 153(47),\ or\ \"exchange\ access,\"\ as\ defined\ in\ §\ 153(16).^[^1]^\ It\ could\ not\ be\ the\ latter,\ they\ reasoned,\ because\ ISPs\ do\ not\ assess\ toll\ charges\ for\ the\ service\ (see\ ^*^id^*^.,\ \"the\ offering\ of\ access\ \...\ for\ the\ purpose\ of\ the\ origination\ or\ termination\ of\ telephone\ toll\ services\"),\ and\ therefore\ it\ must\ be\ the\ former,\ for\ which\ reciprocal\ compensation\ is\ mandated.\ Here\ the\ Commission\'s\ answer\ was\ that\ it\ has\ consistently\ treated\ ISPs\ (and\ ESPs\ generally)\ as\ \"users\ of\ access\ service,\"\ while\ treating\ them\ as\ end\ users\ merely\ for\ access\ charge\ purposes.\ FCC\ Ruling,\ 14\ FCC\ Rcd\ at\ 3701\ (¶\ 17).^

^\ Having\ decided\ to\ use\ the\ \"end‑to‑end\"\ method,\ the\ Commission\ considered\ whether\ ISP‑bound\ traffic\ is,\ under\ this\ method,\ in\ fact\ interstate.\ In\ a\ conventional\ \"circuit‑switched\ network,\"\ the\ jurisdictional\ analysis\ is\ straightforward:\ a\ call\ is\ intrastate\ if,\ and\ only\ if,\ it\ originates\ and\ terminates\ in\ the\ same\ state.\ In\ a\ \"packet‑switched\ network,\"\ the\ analysis\ is\ not\ so\ simple,\ as\ \"\[a\]n\ Internet\ communication\ does\ not\ necessarily\ have\ a\ point\ of\ \'termination\'\ in\ the\ traditional\ sense.\"\ FCC\ Ruling,\ 14\ FCC\ Rcd\ at\ 3701-02\ (¶\ 18).\ In\ a\ single\ session\ an\ end\ user\ may\ communicate\ with\ multiple\ destination\ points,\ either\ sequentially\ or\ simultaneously.\ Although\ these\ destinations\ are\ sometimes\ intrastate,\ the\ Commission\ concluded\ that\ \"a\ substantial\ portion\ of\ Internet\ traffic\ involves\ accessing\ interstate\ or\ foreign\ websites.\"\ ^*^Id^*^.\ Thus\ reciprocal\ compensation\ was\ not\ due,\ and\ the\ issue\ of\ compensation\ between\ the\ two\ local\ LECs\ was\ left\ initially\ to\ the\ LECs\ involved,\ subject\ to\ state\ commissions\'\ power\ to\ order\ compensation\ in\ the\ \"arbitration\"\ proceedings,\ and,\ of\ course\ to\ whatever\ may\ follow\ from\ the\ Commission\'s\ new\ rulemaking\ on\ its\ own\ possible\ ratesetting.^

^\*\ \*\ \*^

^\ The\ issue\ at\ the\ heart\ of\ this\ case\ is\ whether\ a\ call\ to\ an\ ISP\ is\ local\ or\ long‑distance.\ Neither\ category\ fits\ clearly.\ The\ Commission\ has\ described\ local\ calls,\ on\ the\ one\ hand,\ as\ those\ in\ which\ LECs\ collaborate\ to\ complete\ a\ call\ and\ are\ compensated\ for\ their\ respective\ roles\ in\ completing\ the\ call,\ and\ long‑distance\ calls,\ on\ the\ other,\ as\ those\ in\ which\ the\ LECs\ collaborate\ with\ a\ long‑distance\ carrier,\ which\ itself\ charges\ the\ end‑user\ and\ pays\ out\ compensation\ to\ the\ LECs.\ See\ ^*^Local\ Competition\ Order^*^,\ 11\ FCC\ Rcd\ at\ 16013\ (¶\ 1034)\ (1996).^

^\ Calls\ to\ ISPs\ are\ not\ quite\ local,\ because\ there\ is\ some\ communication\ taking\ place\ between\ the\ ISP\ and\ out‑of‑state\ websites.\ But\ they\ are\ not\ quite\ long‑distance,\ because\ the\ subsequent\ communication\ is\ not\ really\ a\ continuation,\ in\ the\ conventional\ sense,\ of\ the\ initial\ call\ to\ the\ ISP.\ The\ Commission\'s\ ruling\ rests\ squarely\ on\ its\ decision\ to\ employ\ an\ end‑to‑end\ analysis\ for\ purposes\ of\ determining\ whether\ ISP‑traffic\ is\ local.\ There\ is\ no\ dispute\ that\ the\ Commission\ has\ historically\ been\ justified\ in\ relying\ on\ this\ method\ when\ determining\ whether\ a\ particular\ communication\ is\ jurisdictionally\ interstate.\ But\ it\ has\ yet\ to\ provide\ an\ explanation\ why\ this\ inquiry\ is\ relevant\ to\ discerning\ whether\ a\ call\ to\ an\ ISP\ should\ fit\ within\ the\ local\ call\ model\ of\ two\ collaborating\ LECs\ or\ the\ long‑distance\ model\ of\ a\ long‑distance\ carrier\ collaborating\ with\ two\ LECs.^

^\ In\ fact,\ the\ extension\ of\ \"end‑to‑end\"\ analysis\ from\ jurisdictional\ purposes\ to\ the\ present\ context\ yields\ intuitively\ backwards\ results.\ Calls\ that\ are\ jurisdictionally\ ^*^intra^*^state\ will\ be\ subject\ to\ the\ federal\ reciprocal\ compensation\ requirement,\ while\ calls\ that\ are\ ^*^inter^*^state\ are\ not\ subject\ to\ federal\ regulation\ but\ instead\ are\ left\ to\ potential\ state\ regulation.\ The\ inconsistency\ is\ not\ necessarily\ fatal,\ since\ under\ the\ 1996\ Act\ the\ Commission\ has\ jurisdiction\ to\ implement\ such\ provisions\ as\ §\ 251,\ even\ if\ they\ are\ within\ the\ traditional\ domain\ of\ the\ states.\ See\ ^*^AT&T\ Corp.^*^,\ 119\ S.\ Ct.\ at\ 730.\ But\ it\ reveals\ that\ arguments\ supporting\ use\ of\ the\ end‑to‑end\ analysis\ in\ the\ jurisdictional\ analysis\ are\ not\ obviously\ transferable\ to\ this\ context.^

^\ In\ attacking\ the\ Commission\'s\ classification\ of\ ISP‑bound\ calls\ as\ non‑local\ for\ purposes\ of\ reciprocal\ compensation,\ MCI\ WorldCom\ notes\ that\ under\ 47\ CFR\ §\ 51.701(b)(1)\ \"telecommunications\ traffic\"\ is\ local\ if\ it\ \"originates\ and\ terminates\ within\ a\ local\ service\ area.\"\ But,\ observes\ MCI\ WorldCom,\ the\ Commission\ failed\ to\ apply,\ or\ even\ to\ mention,\ its\ definition\ of\ \"termination,\"\ namely\ \"the\ switching\ of\ traffic\ that\ is\ subject\ to\ section\ 251(b)(5)\ at\ the\ terminating\ carrier\'s\ end\ office\ switch\ (or\ equivalent\ facility)\ and\ delivery\ of\ that\ traffic\ from\ that\ switch\ to\ the\ called\ party\'s\ premises.\"\ ^*^Local\ Competition\ Order^*^,\ 11\ FCC\ Rcd\ at\ 16015\ (¶\ 1040);\ 47\ CFR\ §\ 51.701(d).\ Calls\ to\ ISPs\ appear\ to\ fit\ this\ definition:\ the\ traffic\ is\ switched\ by\ the\ LEC\ whose\ customer\ is\ the\ ISP\ and\ then\ delivered\ to\ the\ ISP,\ which\ is\ clearly\ the\ \"called\ party.\"^

^\ In\ its\ ruling\ the\ Commission\ avoided\ this\ result\ by\ analyzing\ the\ communication\ on\ an\ end‑to‑end\ basis:\ \"\[T\]he\ communications\ at\ issue\ here\ do\ not\ terminate\ at\ the\ ISP\'s\ local\ server\ \...,\ but\ continue\ to\ the\ ultimate\ destination\ or\ destinations.\"\ FCC\ Ruling,\ 14\ FCC\ Rcd\ at\ 3697\ (¶\ 12).\ But\ the\ cases\ it\ relied\ on\ for\ using\ this\ analysis\ are\ not\ on\ point.\ Both\ involved\ a\ single\ continuous\ communication,\ originated\ by\ an\ end‑user,\ switched\ by\ a\ long‑distance\ communications\ carrier,\ and\ eventually\ delivered\ to\ its\ destination.\ One,\ ^*^Teleconnect\ Co.\ v.\ Bell\ Telephone\ Co.^*^,\ 10\ FCC\ Rcd\ 1626\ (1995),\ ^*^aff\'d\ sub\ nom.\ Southwestern\ Bell\ Tel.\ Co.\ v.\ FCC^*^,\ 116\ F.3d\ 593\ (D.C.\ Cir.\ 1997)\ (\"^*^Teleconnect^*^\"),\ involved\ an\ 800\ call\ to\ a\ long‑distance\ carrier,\ which\ then\ routed\ the\ call\ to\ its\ intended\ recipient.\ The\ other,\ ^*^In\ the\ Matter\ of\ Petition\ for\ Emergency\ Relief\ and\ Declaratory\ Ruling\ Filed\ by\ the\ BellSouth\ Corporation^*^,\ 7\ FCC\ Rcd\ 1619\ (1992),\ considered\ a\ voice\ mail\ service.\ Part\ of\ the\ service,\ the\ forwarding\ of\ the\ call\ from\ the\ intended\ recipient\'s\ location\ to\ the\ voice\ mail\ apparatus\ and\ service,\ occurred\ entirely\ within\ the\ subscriber\'s\ state,\ and\ thus\ looked\ local.\ Looking\ \"end‑to‑end,\"\ however,\ the\ Commission\ refused\ to\ focus\ on\ this\ portion\ of\ the\ call\ but\ rather\ considered\ the\ service\ in\ its\ entirety\ (i.e.,\ originating\ with\ the\ out‑of‑state\ caller\ leaving\ a\ message,\ or\ the\ subscriber\ calling\ from\ out‑of‑state\ to\ retrieve\ messages).\ ^*^Id^*^.\ at\ 1621\ (¶\ 12).^

^\ ISPs,\ in\ contrast,\ are\ \"information\ service\ providers,\"\ ^*^Universal\ Service\ Report^*^,\ 13\ FCC\ Rcd\ at\ 11532-33\ (¶\ 66),\ which\ upon\ receiving\ a\ call\ originate\ further\ communications\ to\ deliver\ and\ retrieve\ information\ to\ and\ from\ distant\ websites.\ The\ Commission\ acknowledged\ in\ a\ footnote\ that\ the\ cases\ it\ relied\ upon\ were\ distinguishable,\ but\ dismissed\ the\ problem\ out‑of‑hand:\ \"Although\ the\ cited\ cases\ involve\ interexchange\ carriers\ rather\ than\ ISPs,\ and\ the\ Commission\ has\ observed\ that\ \'it\ is\ not\ clear\ that\ \[information\ service\ providers\]\ use\ the\ public\ switched\ network\ in\ a\ manner\ analogous\ to\ IXCs,\'\ ^*^Access\ Charge\ Reform\ Order^*^,\ 12\ FCC\ Rcd\ at\ 16133,\ the\ Commission\'s\ observation\ does\ not\ affect\ the\ jurisdictional\ analysis.\"\ FCC\ Ruling,\ 14\ FCC\ Rcd\ at\ 3697\ n.36\ (¶\ 12).\ It\ is\ not\ clear\ how\ this\ helps\ the\ Commission.\ Even\ if\ the\ difference\ between\ ISPs\ and\ traditional\ long‑distance\ carriers\ is\ irrelevant\ for\ jurisdictional\ purposes,\ it\ appears\ relevant\ for\ purposes\ of\ reciprocal\ compensation.\ Although\ ISPs\ use\ telecommunications\ to\ provide\ information\ service,\ they\ are\ not\ themselves\ telecommunications\ providers\ (as\ are\ long‑distance\ carriers).^

^\ In\ this\ regard\ an\ ISP\ appears,\ as\ MCI\ WorldCom\ argued,\ no\ different\ from\ many\ businesses,\ such\ as\ \"pizza\ delivery\ firms,\ travel\ reservation\ agencies,\ credit\ card\ verification\ firms,\ or\ taxicab\ companies,\"\ which\ use\ a\ variety\ of\ communication\ services\ to\ provide\ their\ goods\ or\ services\ to\ their\ customers.\ Comments\ of\ WorldCom,\ Inc.\ at\ 7\ (July\ 17,\ 1997).\ Of\ course,\ the\ ISP\'s\ origination\ of\ telecommunications\ as\ a\ result\ of\ the\ user\'s\ call\ is\ instantaneous\ (although\ perhaps\ no\ more\ so\ than\ a\ credit\ card\ verification\ system\ or\ a\ bank\ account\ information\ service).\ But\ this\ does\ not\ imply\ that\ the\ original\ communication\ does\ not\ \"terminate\"\ at\ the\ ISP.\ The\ Commission\ has\ not\ satisfactorily\ explained\ why\ an\ ISP\ is\ not,\ for\ purposes\ of\ reciprocal\ compensation,\ \"simply\ a\ communications‑intensive\ business\ end\ user\ selling\ a\ product\ to\ other\ consumer\ and\ business\ end‑users.\"\ ^*^Id^*^.^

^\ The\ Commission\ nevertheless\ argues\ that\ although\ the\ call\ from\ the\ ISP\ to\ an\ out‑of‑state\ website\ is\ information\ service\ for\ the\ end‑user,\ it\ is\ telecommunications\ for\ the\ ISP,\ and\ thus\ the\ telecommunications\ cannot\ be\ said\ to\ \"terminate\"\ at\ the\ ISP.\ As\ the\ Commission\ states:\ \"Even\ if,\ from\ the\ perspective\ of\ the\ ^*^end\ user^*^\ as\ customer,\ the\ telecommunications\ portion\ of\ an\ Internet\ call\ \'terminates\'\ at\ the\ ISP\'s\ server\ (and\ information\ service\ begins),\ the\ remaining\ portion\ of\ the\ call\ would\ continue\ to\ constitute\ telecommunications\ from\ the\ perspective\ of\ the\ ^*^ISP^*^\ as\ customer.\"\ Commission\'s\ Br.\ at\ 41.\ Once\ again,\ however,\ the\ mere\ fact\ that\ the\ ISP\ originates\ further\ telecommunications\ does\ not\ imply\ that\ the\ original\ telecommunication\ does\ not\ \"terminate\"\ at\ the\ ISP.\ However\ sound\ the\ end‑to‑end\ analysis\ may\ be\ for\ jurisdictional\ purposes,\ the\ Commission\ has\ not\ explained\ why\ viewing\ these\ linked\ telecommunications\ as\ continuous\ works\ for\ purposes\ of\ reciprocal\ compensation.^

^\ Adding\ further\ confusion\ is\ a\ series\ of\ Commission\ rulings\ dealing\ with\ a\ class,\ enhanced\ service\ providers\ (\"ESPs\"),\ of\ which\ ISPs\ are\ a\ subclass.\ See\ FCC\ Ruling,\ 14\ FCC\ Rcd\ at\ 3689\ n.1\ (¶\ 1).\ ESPs,\ the\ precursors\ to\ the\ 1996\ Act\'s\ information\ service\ providers,\ offer\ data\ processing\ services,\ linking\ customers\ and\ computers\ via\ the\ telephone\ network.\ See\ ^*^MCI\ Telecommunications\ Corp.\ v.\ FCC^*^,\ 57\ F.3d\ 1136,\ 1138\ (D.C.\ Cir.\ 1995).^[^2]^\ In\ its\ establishment\ of\ the\ access\ charge\ system\ for\ long‑distance\ calls,\ the\ Commission\ in\ 1983\ exempted\ ESPs\ from\ the\ access\ charge\ system,\ thus\ in\ effect\ treating\ them\ like\ end\ users\ rather\ than\ long‑distance\ carriers.\ See\ ^*^In\ the\ Matter\ of\ MTS\ &\ WATS\ Market\ Structure^*^,\ 97\ F.C.C.2d\ 682,\ 711-15\ (¶\ 77-83)\ (1983).\ It\ reaffirmed\ this\ decision\ in\ 1991,\ explaining\ that\ it\ had\ \"refrained\ from\ applying\ full\ access\ charges\ to\ ESPs\ out\ of\ concern\ that\ the\ industry\ has\ continued\ to\ be\ affected\ by\ a\ number\ of\ significant,\ potentially\ disruptive,\ and\ rapidly\ changing\ circumstances.\"\ ^*^In\ the\ Matter\ of\ Part\ 69\ of\ the\ Commission\'s\ Rules\ Relating\ to\ the\ Creation\ of\ Access\ Charge\ Subelements\ for\ Open\ Network\ Architecture^*^,\ 6\ FCC\ Rcd\ 4524,\ 4534\ (¶\ 54)\ (1991).\ In\ 1997\ it\ again\ preserved\ the\ status\ quo.\ ^*^In\ the\ Matter\ of\ Access\ Charge\ Reform^*^,\ 12\ FCC\ Rcd\ 15982\ (1997)\ (\"^*^Access\ Charge\ Reform\ Order^*^\").\ It\ justified\ the\ exemption\ in\ terms\ of\ the\ goals\ of\ the\ 1996\ Act,\ saying\ that\ its\ purpose\ was\ to\ \"preserve\ the\ vibrant\ and\ competitive\ free\ market\ that\ presently\ exists\ for\ the\ Internet\ and\ other\ interactive\ computer\ services.\"\ ^*^Id^*^.\ at\ 16133\ (¶\ 344)\ (quoting\ 47\ U.S.C.\ §\ 230(b)(2)).^

^\ This\ classification\ of\ ESPs\ is\ something\ of\ an\ embarrassment\ to\ the\ Commission\'s\ present\ ruling.\ As\ MCI\ WorldCom\ notes,\ the\ Commission\ acknowledged\ in\ the\ ^*^Access\ Charge\ Reform\ Order^*^\ that\ \"given\ the\ evolution\ in\ \[information\ service\ provider\]\ technologies\ and\ markets\ since\ we\ first\ established\ access\ charges\ in\ the\ early\ 1980s,\ it\ is\ not\ clear\ that\ \[information\ service\ providers\]\ use\ the\ public\ switched\ network\ in\ a\ manner\ analogous\ to\ IXCs\ \[inter‑exchange\ carriers\].\"\ 12\ FCC\ Rcd\ at\ 16133\ (¶\ 345).\ It\ also\ referred\ to\ calls\ to\ information\ service\ providers\ as\ \"local.\"\ ^*^Id^*^.\ at\ 16132\ (¶\ 342\ n.502).\ And\ when\ this\ aspect\ of\ the\ ^*^Access\ Charge\ Reform\ Order^*^\ was\ challenged\ in\ the\ 8th\ Circuit,\ the\ Commission\'s\ briefwriters\ responded\ with\ a\ sharp\ differentiation\ between\ such\ calls\ and\ ordinary\ long‑distance\ calls\ covered\ by\ the\ \"end‑to‑end\"\ analysis,\ and\ even\ used\ the\ analogy\ employed\ by\ MCI\ WorldCom\ here---that\ a\ call\ to\ an\ information\ service\ provider\ is\ really\ like\ a\ call\ to\ a\ local\ business\ that\ then\ uses\ the\ telephone\ to\ order\ wares\ to\ meet\ the\ need.\ Brief\ of\ FCC\ at\ 76,\ ^*^Southwestern\ Bell\ v.\ FCC^*^,\ 153\ F.3d\ 523\ (8th\ Cir.\ 1998)\ (No.\ 97-2618).\ When\ accused\ of\ inconsistency\ in\ the\ present\ matter,\ the\ Commission\ flipped\ the\ argument\ on\ its\ head,\ arguing\ that\ its\ exemption\ of\ ESPs\ from\ access\ charges\ actually\ confirms\ \"its\ understanding\ that\ ESPs\ in\ fact\ use\ interstate\ access\ service;\ otherwise,\ the\ exemption\ would\ not\ be\ necessary.\"\ FCC\ Ruling,\ 14\ FCC\ Rcd\ at\ 3700\ (¶\ 16).\ This\ is\ not\ very\ compelling.\ Although,\ to\ be\ sure,\ the\ Commission\ used\ policy\ arguments\ to\ justify\ the\ \"exemption,\"\ it\ also\ rested\ it\ on\ an\ acknowledgment\ of\ the\ real\ differences\ between\ long‑distance\ calls\ and\ calls\ to\ information\ service\ providers.\ It\ is\ obscure\ why\ those\ have\ now\ dropped\ out\ of\ the\ picture.^

^\ Because\ the\ Commission\ has\ not\ supplied\ a\ real\ explanation\ for\ its\ decision\ to\ treat\ end‑to‑end\ analysis\ as\ controlling,\ ^*^Motor\ Vehicle\ Mfrs.\ Ass\'n\ of\ U.S.,\ Inc.\ v.\ State\ Farm\ Mut.\ Auto.\ Ins.\ Co.^*^,\ 463\ U.S.\ 29,\ 43\ (1983);\ 5\ U.S.C.\ §\ 706(2)(A),\ we\ must\ vacate\ the\ ruling\ and\ remand\ the\ case.^

^\ There\ is\ an\ independent\ ground\ requiring\ remand---the\ fit\ of\ the\ present\ rule\ within\ the\ governing\ statute.\ MCI\ WorldCom\ says\ that\ ISP‑traffic\ is\ \"telephone\ exchange\ service\[\ \]\"\ as\ defined\ in\ 47\ U.S.C.\ §\ 153(16),\ which\ it\ claims\ \"is\ synonymous\ under\ the\ Act\ with\ the\ service\ used\ to\ make\ local\ phone\ calls,\"\ and\ emphatically\ not\ \"exchange\ access\"\ as\ defined\ in\ 47\ U.S.C.\ §\ 153(47).\ Petitioner\ MCI\ WorldCom\'s\ Initial\ Br.\ at\ 22.\ In\ the\ only\ paragraph\ of\ the\ ruling\ in\ which\ the\ Commission\ addressed\ this\ issue,\ it\ merely\ stated\ that\ it\ \"consistently\ has\ characterized\ ESPs\ as\ \'users\ of\ access\ service\'\ but\ has\ treated\ them\ as\ end\ users\ for\ pricing\ purposes.\"\ FCC\ Ruling,\ 14\ FCC\ Rcd\ at\ 3701\ (¶\ 17).\ In\ a\ statutory\ world\ of\ \"telephone\ exchange\ ^*^service^*^\"\ and\ \"exchange\ ^*^access^*^,\"\ which\ the\ Commission\ here\ says\ constitute\ the\ only\ possibilities,\ the\ reference\ to\ \"access\ service,\"\ combining\ the\ different\ key\ words\ from\ the\ two\ terms\ before\ us,\ sheds\ no\ light.\ \"Access\ service\"\ is\ in\ fact\ a\ pre‑Act\ term,\ defined\ as\ \"services\ and\ facilities\ provided\ for\ the\ origination\ or\ termination\ of\ any\ interstate\ or\ foreign\ telecommunication.\"\ 47\ CFR\ §\ 69.2(b).^

^\ If\ the\ Commission\ meant\ to\ place\ ISP‑traffic\ within\ a\ third\ category,\ not\ \"telephone\ exchange\ service\"\ and\ not\ \"exchange\ access,\"\ that\ would\ conflict\ with\ its\ concession\ on\ appeal\ that\ \"exchange\ access\"\ and\ \"telephone\ exchange\ service\"\ occupy\ the\ field.\ But\ if\ it\ meant\ that\ just\ as\ ESPs\ were\ \"users\ of\ access\ service\"\ but\ treated\ as\ end\ users\ for\ pricing\ purposes,\ so\ too\ ISPs\ are\ users\ of\ exchange\ access,\ the\ Commission\ has\ not\ provided\ a\ satisfactory\ explanation\ why\ this\ is\ the\ case.\ In\ fact,\ in\ ^*^In\ the\ Matter\ of\ Implementation\ of\ the\ Non^^‑^^Accounting\ Safeguards\ of\ Sections\ 271\ and\ 272\ of\ the\ Communications\ Act\ of\ 1934,\ as\ amended^*^,\ 11\ FCC\ Rcd\ 21905,\ 22023\ (¶\ 248)\ (1996),\ the\ Commission\ clearly\ stated\ that\ \"ISPs\ do\ not\ use\ exchange\ access.\"\ After\ oral\ argument\ in\ this\ case\ the\ Commission\ overruled\ this\ determination,\ saying\ that\ \"non‑carriers\ may\ be\ purchasers\ of\ those\ services.\"\ ^*^In\ the\ Matter\ of\ Deployment\ of\ Wireline\ Services\ Offering\ Advanced\ Telecommunications\ Capability^*^,\ FCC\ 99-413,\ at\ 21\ (¶\ 43)\ (Dec.\ 23,\ 1999).\ The\ Commission\ relied\ on\ its\ pre-Act\ orders\ in\ which\ it\ had\ determined\ that\ non‑carriers\ can\ use\ \"access\ services,\"\ and\ concluded\ that\ there\ is\ no\ evidence\ that\ Congress,\ in\ codifying\ \"exchange\ access,\"\ intended\ to\ depart\ from\ this\ understanding.\ See\ ^*^id^*^.\ at\ 21-22\ (¶\ 44).\ The\ Commission,\ however,\ did\ not\ make\ this\ argument\ in\ the\ ruling\ under\ review.^

^\ Nor\ did\ the\ Commission\ even\ consider\ how\ regarding\ non-carriers\ as\ purchasers\ of\ \"exchange\ access\"\ fits\ with\ the\ statutory\ definition\ of\ that\ term.\ A\ call\ is\ \"exchange\ access\"\ if\ offered\ \"for\ the\ purpose\ of\ the\ origination\ or\ termination\ of\ ^*^telephone\ toll\ services^*^.\"\ 47\ U.S.C.\ §\ 153(16).\ As\ MCI\ WorldCom\ argued,\ ISPs\ provide\ information\ service\ rather\ than\ telecommunications;\ as\ such,\ \"ISPs\ connect\ to\ the\ local\ network\ \'for\ the\ purpose\ of\'\ providing\ information\ services,\ not\ originating\ or\ terminating\ telephone\ toll\ services.\"\ Petitioner\ MCI\ WorldCom\'s\ Reply\ Br.\ at\ 6.^

^\ The\ statute\ appears\ ambiguous\ as\ to\ whether\ calls\ to\ ISPs\ fit\ within\ \"exchange\ access\"\ or\ \"telephone\ exchange\ service,\"\ and\ on\ that\ view\ any\ agency\ interpretation\ would\ be\ subject\ to\ judicial\ deference.\ See\ ^*^Chevron\ U.S.A.\ Inc.\ v.\ Natural\ Resources\ Defense\ Council,\ Inc.^*^,\ 467\ U.S.\ 837,\ 842-43\ (1984).\ But,\ even\ though\ we\ review\ the\ agency\'s\ interpretation\ only\ for\ reasonableness\ where\ Congress\ has\ not\ resolved\ the\ issue,\ where\ a\ decision\ \"is\ valid\ only\ as\ a\ determination\ of\ policy\ or\ judgment\ which\ the\ agency\ alone\ is\ authorized\ to\ make\ and\ which\ it\ has\ not\ made,\ a\ judicial\ judgment\ cannot\ be\ made\ to\ do\ service.\"\ ^*^SEC\ v.\ Chenery\ Corp.^*^,\ 318\ U.S.\ 80,\ 88\ (1943).\ See\ also\ ^*^Acme\ Die\ Casting\ v.\ NLRB^*^,\ 26\ F.3d\ 162,\ 166\ (D.C.\ Cir.\ 1994);\ ^*^Leeco,\ Inc.\ v.\ Hays^*^,\ 965\ F.2d\ 1081,\ 1085\ (D.C.\ Cir.\ 1992);\ ^*^City\ of\ Kansas\ City\ v.\ Department\ of\ Housing\ and\ Urban\ Development^*^,\ 923\ F.2d\ 188,\ 191-92\ (D.C.\ Cir.\ 1991).^

^\*\ \*\ \*^

^\ Because\ the\ Commission\ has\ 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,\"\ we\ vacate\ the\ ruling\ and\ remand\ the\ case\ to\ the\ Commission.\ We\ do\ not\ reach\ the\ objections\ of\ the\ incumbent\ LECs---that\ §\ 251(b)(5)\ preempts\ state\ commission\ authority\ to\ compel\ payments\ to\ the\ competitor\ LECs;\ at\ present\ we\ have\ no\ adequately\ explained\ classification\ of\ these\ communications,\ and\ in\ the\ interim\ our\ vacatur\ of\ the\ Commission\'s\ ruling\ leaves\ the\ incumbents\ free\ to\ seek\ relief\ from\ state‑authorized\ compensation\ that\ they\ believe\ to\ be\ wrongfully\ imposed.^

^\ \ ^*^So\ ordered^*^.^

[^1]: \"Telephone exchange service\" is defined as:

    ^(A)\ service\ within\ a\ telephone\ exchange,\ or\ within\ a\ connected\ system\ of\ telephone\ exchanges\ within\ the\ same\ exchange\ area\ operated\ to\ furnish\ tosubscribers\ intercommunicating\ service\ of\ the\ character\ ordinarily\ furnished\ by\ a\ single\ exchange,\ and\ which\ is\ covered\ by\ the\ exchange\ service\ charge,\ or\ (B)\ comparable\ service\ provided\ through\ a\ system\ of\ switches,\ transmission\ equipment,\ or\ other\ facilities\ (or\ combination\ thereof)\ by\ which\ a\ subscriber\ can\ originate\ and\ terminate\ a\ telecommunications\ service.^

    ^47\ U.S.C.\ §\ 153(47).\ \"Exchange\ access\"\ is\ defined\ as:^

    ^the\ offering\ of\ access\ to\ telephone\ exchange\ services\ or\ facilities\ for\ the\ purpose\ of\ the\ origination\ or\ termination\ of\ telephone\ toll\ services.^

    *^Id^*^.\ §\ 153(16).^

[^2]: The regulatory definition states that ESPs offer \"services \...
    which employ computer processing applications that act on the
    format, content, code, protocol or similar aspects of the
    subscriber\'s transmitted information; provide the subscriber
    additional, different, or restructured information; or involve
    subscriber interaction with stored information.\" 47 CFR §
    64.702(a).