Title: In re Verizon New England, Inc.

State: vermont

Issuer: Vermont Supreme Court

Document:

In re Verizon New England, Inc. (2000-118); 173 Vt. 327; 795 A.2d 1196

[Filed 22-Feb-2002]

       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal  revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of  Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any  errors in order that corrections may be made before this opinion goes
  to press.

                                No. 2000-118

In re Petition of Verizon New England Inc.	 Supreme Court
d/b/a Verizon Vermont 
                                                 On Appeal from
    	                                         Public Service Board

May Term, 2001

Michael H. Dworkin, Chair

Barbara G. Ripley of Wilson & White, P.C., Montpelier, Sean A. Lev of Kellogg,
  Huber, Hansen, Todd & Evans, P.L.L.C., Washington, D.C., and Victor D. 
  Del Vecchio and Gregory M. Kennan, Boston, Massachusetts, for Appellant.

Charles F. Storrow of Kimbell & Storrow, Montpelier, and Kenneth W. Salinger 
  of Palmer & Dodge LLP, Boston, Massachusetts, for Appellee AT&T 
  Communications of New England, Inc.

Leslie A. Cadwell and John J. Cotter, Special Counsel, Montpelier, for 
  Appellee Department of Public Service.

PRESENT:  Amestoy, C.J., Dooley, Morse, Johnson and Skoglund, JJ.

       JOHNSON, J.   Bell Atlantic-Vermont appeals an order of the Public
  Service Board  requiring the telecommunications company to make certain
  facilities or services available to  competitive local exchange carriers. 
  Bell Atlantic-Vermont argues that the Public Service Board's  order is
  inconsistent with federal law, and is not supported by independent state
  authority.  We hold 

 

  that there is ample state authority to support the order of the Public
  Service Board, and that  the order does not contradict federal law. (FN1) 
  Accordingly, we affirm.

       This case arises from the merger of New England Telephone & Telegraph
  Company with  Bell Atlantic, which was approved by the Public Service Board
  (PSB) in February 1997.  As part of  the agreement, the PSB ordered the
  merged company, known as Bell Atlantic-Vermont (BAVT), to  comply with the
  federal "competitive checklist" that is laid out in 47 U.S.C. §
  271(c)(2)(B), part of  the Telecommunications Act of 1996 (the Act).   The
  checklist contains fourteen elements that were  designed to regulate the
  entry of a Bell operating company into interLATA services (service between 
  the local exchange and an outside exchange).  This case, however, does not
  implicate the checklist,  or the Act, directly.  Rather, the PSB
  appropriated the checklist's requirements as a framework for  constraining
  any anti-competitive effects of the merger of Bell Atlantic and New England
  Telephone  & Telegraph.  Thus, the PSB required BAVT's compliance with the
  federal competitive checklist as  an exercise of the PSB's authority under
  state law to oversee the merger, not to implement the  checklist or the Act
  themselves.

       The PSB ordered BAVT to comply with the competitive checklist by
  September 1997.  In  June 1998, the PSB held a hearing to assess the extent
  to which BAVT had complied with the  competitive checklist and enacted any
  necessary changes to its network. (FN2)  After receiving 

 

  recommendations from two hearing officers in June 1999, the PSB issued its
  final order in January  2000.

       In that decision, the PSB determined that BAVT had not satisfied two
  elements of the  competitive checklist, and ordered compliance with them. 
  One element of the checklist requires  BAVT to provide "[n]ondiscriminatory
  access to network elements in accordance with the  requirements of sections
  251(c)(3) and 252(d)(1) of [47 U.S.C.]."  47 U.S.C. § 271(c)(B)(ii).  
  Another item on the checklist obligates BAVT to ensure that
  "[t]elecommunications services are  available for resale in accordance with
  the requirements of sections 251(c)(4) and 252(d)(3) of this  title."  47
  U.S.C. § 271(c)(B)(xiv).  The PSB held that BAVT had not complied with the 
  nondiscriminatory access requirement of the competitive checklist because
  the company did not offer  combinations of unbundled network elements
  (UNEs) that are ordinarily combined to provide  service to a customer, but
  that are not currently physically combined, to competitors in the local 
  exchange market.  The PSB also found that BAVT had not complied with the
  element of the  competitive checklist to resell telecommunications services
  because BAVT had not offered voice  mail for resale to competitors. 
  According to the PSB, its authority to order BAVT to provide  combinations
  of UNEs is based both in the federal law referenced by the competitive
  checklist, as  well as independent state law.  In contrast, the PSB rested
  its decision to order BAVT to offer voice  mail for resale solely on its
  authority under state law.

       BAVT appeals from the decision, arguing that state law does not
  authorize the PSB to require  the company to combine UNEs that are
  ordinarily combined at the request of a competitor.  BAVT  further contends
  that the federal law referenced in the competitive checklist does not
  require BAVT  to provide a competitor with combinations of UNEs that are
  ordinarily combined, and thus any state 

 

  law that mandates as much is preempted by federal law.  Similarly, BAVT
  argues that it should not  be required to resell voice mail as a
  telecommunications service to competitors because the PSB's  jurisdictional
  grant over "telecommunications" does not include voice mail.  BAVT claims
  that the  federal definition of "telecommunications," which does not
  include voice mail, preempts the state  definition, even if it includes
  voice mail, because the two definitions are inconsistent.

       We affirm both determinations by the PSB on the ground that
  irrespective of federal law,  state law authorizes the board to issue the
  challenged orders.  We reject the claims of federal  preemption because we
  do not find any aspect of relevant federal law inconsistent with the PSB's 
  decision.

                          I. Regulatory Background

       The competitive checklist, and the federal law referenced within, are
  part of the  Telecommunications Act of 1996, Pub. L. No. 104-104 (codified
  throughout 47 U.S.C. §§ 151-609).  The Act fundamentally amends the
  Communications Act of 1934, 48 Stat. 1064, the principal  legislation that
  regulates telecommunications and established the FCC.  According to the
  preamble,  the 1996 Act's purpose is "to promote competition and reduce
  regulation in order to secure lower  prices and higher quality services for
  American telecommunications consumers and encourage the  rapid deployment
  of new telecommunications technologies."  Pub. L. No. 104-104 (1996).  As
  such,  the Act aims to restructure local telephone markets by imposing
  duties on incumbent local exchange  carriers to open their networks to
  competition and by preventing states from enforcing laws that  impede entry
  into local exchange markets. 

       The use of a federal statute by a state board is consistent with the
  federal government's  approach to telecommunications regulation, in which
  states are considered partners in regulation.  

 

  In both the 1934 Act and the 1996 Act, Congress has taken pains to preserve
  the overlapping  jurisdiction of the states and the federal government over
  the telecommunications industry.   Specifically, the language of the 1996
  Act compels the conclusion that Congress did not intend to  occupy the
  field of telecommunications regulation, and that it took explicit steps to
  maintain the  authority of state regulatory bodies to enforce and work
  within the Act.  For example, 47 U.S.C. §  251(d)(3) states:

    In prescribing and enforcing regulations to implement the 
    requirements of this section, the Commission shall not preclude
    the  enforcement of any regulation, order, or policy of a State
    commission  that -  
         (A) establishes access and interconnection obligations of
    local  exchange carriers; 
         (B) is consistent with the requirements of this section; and 
         (C) does not substantially prevent implementation of the 
    requirements of this section and the purposes of this part.

  (Emphasis added).  Similarly § 252(e)(3) states "[n]otwithstanding
  paragraph (2), but subject to  section 253 of this title, nothing in this
  section shall prohibit a State commission from establishing or  enforcing
  other requirements of State law in its review of an agreement." (Emphasis
  added).  Also §  261(c) states:

    Nothing in this part precludes a State from imposing requirements
    on  a telecommunications carrier for intrastate services that are
    necessary  to further competition in the provision of telephone
    exchange service  or exchange access as long as the State's
    requirements are not  inconsistent with this part or the
    Commission's regulations to  implement this part.

  (Emphasis added).  These various statutes preserving state authority are
  tied to specific aspects of the  Act's requirements.  Together, however,
  these statutes indicate that despite the detailed requirements  the Act
  imposed on telecommunications operations, the regulatory scheme remains a 

 

  partnership between federal and state authorities, in which states are
  granted broad power to regulate  telecommunications as long as the states
  do not act inconsistently with federal law.  Accord Puerto  Rico Tel. Co.
  v. Telecommunications Regulatory Bd. of P.R., 189 F.3d 1, 14 (1st Cir.
  1999) ("The  Act exemplifies a cooperative federalism system, in which
  state commissions can exercise their  expertise about the needs of the
  local market and local consumers, but are guided by the provisions  of the
  Act and by the concomitant FCC regulations.").

       In Vermont, the Legislature has assumed those broad powers to regulate
  telecommunications  by granting the PSB general authority over the
  industry.  Three statutes define the board's jurisdiction  in this area. 
  Title 30 V.S.A. § 203(5) gives the PSB jurisdiction over a "company
  offering  telecommunications service to the public on a common carrier
  basis."  The extent of this jurisdiction  is further explained by 30 V.S.A.
  § 209(a)(3), which grants the board jurisdiction over the "manner  of
  operating and conducting any business subject to supervision under this
  chapter, so as to be  reasonable and expedient, and to promote the safety,
  convenience and accommodation of the public."  Finally, 30 V.S.A. § 2701
  states that the board may require connections between "two or more 
  telephone companies . . . whose lines can be made to form a continuous line
  of communication, by  the construction and maintenance of suitable
  connections, for the transfer of messages or  conversation, and that public
  convenience and necessity will be subserved thereby."  Because of the 
  concurrence of federal and state authority over BAVT, our inquiry need not
  extend beyond whether  the PSB has the authority under these state laws to
  impose the challenged requirements, and if so,  whether the exercise of
  that authority is consistent with federal law.

 

                        II. Nondiscriminatory Access

       The nondiscriminatory element of the competitive checklist requires
  BAVT to comply with  the section of the Act that governs the general duty
  of telecommunications carriers to interconnect  their facilities to allow
  for competition.  For the purposes of the Act, BAVT is considered an 
  incumbent local exchange carrier (ILEC), which simply means that BAVT is
  the current provider of  local telephone service and that it already owns
  many of the network facilities to which a competitive  local exchange
  carrier (CLEC) would need access to offer its own service.  47 U.S.C.  §
  251(c)(3),  referenced in the competitive checklist, imposes on BAVT:

    [t]he duty to provide, to any requesting telecommunications
    carrier  for the provision of a telecommunications service,
    nondiscriminatory  access to network elements on an unbundled
    basis at any technically  feasible point on rates, terms and
    conditions . . . .  An incumbent local  exchange carrier shall
    provide such unbundled network elements in a  manner that allows
    requesting carriers to combine such elements in  order to provide
    such telecommunications service."  (Emphasis  added).

  Section 252(d)(1), also referred to by the competitive checklist, sets
  forth the pricing standards for  the network elements that an incumbent may
  charge, but that statute is not relevant to this dispute.   UNEs are the
  facilities and equipment, including electronic systems, needed to provide
  telephone  service to a particular customer.  47 U.S.C. § 153(29).  In the
  typical local exchange network, the  ILEC controls the majority of the UNEs
  needed to provide service.  In order for a competitor to offer  local
  telecommunications service, the CLEC may either construct an entire network
  of its own - an  obvious burden to market entry - or it may access the
  incumbent's network elements through the  methods described in the Act. 
  Certain elements, however, must be combined in order to provide  service to
  a particular area or customer.  Because the UNEs belong to the incumbent,
  one method 

 

  for a CLEC to establish local exchange service is to request that the
  incumbent combine its UNEs in  a manner that allows the CLEC to connect its
  facilities with the combined UNEs, so that the  competitor may provide
  service to a particular customer.

       BAVT argues that the state jurisdictional statutes do not grant the
  board the necessary  authority to require the company to offer combinations
  of UNEs because there is no statute that  requires BAVT to "improve its
  network for the benefit of competitors."  This argument, however, is  based
  on BAVT's characterization of the PSB order, which we find unpersuasive. 
  Drawing from 47  U.S.C. § 251(c)(3), the PSB order requires BAVT to connect
  certain network elements that it  normally combines at the request of a
  CLEC "in order to facilitate local exchange competition."   While it is
  true that this step may benefit a competitor by making competition possible
  in the first  place, this is the stated intention of the 1996 Act.  See
  supra.  Furthermore, such connections are  plainly contemplated by 30
  V.S.A. § 2701, which "requires that [a] connection be made" if a  "physical
  connection can reasonably be made" between "two or more telephone
  companies."  Id.  In  keeping with the language of that statute, the PSB
  order mandates connections between two  companies - BAVT and a CLEC - even
  if a particular combination of UNEs must be connected  within BAVT's
  network in order to facilitate the overall connection between the
  competitor's  facilities and BAVT's network.  See id..

       Second, BAVT contends that the board's authority extends only to
  regulating how BAVT  operates and conducts "its business with its
  customers."  This assertion, however, has no support in  the plain language
  of the statutes.  The general grant of authority contained in § 209(a)(3)
  includes  "operating and conducting any business subject to supervision
  under this chapter."  30 V.S.A. §  209(a)(3).  No limitation restricts the
  board to regulating a business's dealing only with its 

 

  customers, but rather the jurisdictional statute extends the PSB's
  authority to BAVT's entire  operation.  In exercising this authority, the
  PSB order properly concerns how BAVT operates and  conducts its business in
  Vermont by modifying the manner in which it provides UNEs to CLECs.

       When reviewing a decision by the PSB, this Court defers to the board's
  expertise and  informed judgment.  Petition of Vt. Elec. Power Producers,
  Inc., 165 Vt. 282, 288,