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Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 

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United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 06-3701

___________

Southwestern Bell Telephone, L.P., *

doing business as SBC Missouri, *

*

Plaintiff - Appellee, *

*

v. *

*

Missouri Public Service Commission; *

Jeff Davis; Connie Murray; Steve Gaw; *

Robert M. Clayton III; Linward *

Appling, in their official capacities as * Appeals from the United States

commissioners of the Missouri Public * District Court for the Eastern

Service Commission and not as * District of Missouri.

individuals, *

*

Defendants, *

*

Big River Telephone Company, LLC, *

*

Defendant - Appellant, *

*

Birch Telecom of Missouri, Inc.; Ionex *

Communications, Inc., *

*

Defendants, *

*

NuVox Communications of Missouri, *

Inc.; Socket Telecom, LLC; XO *

Communications Services, Inc.; XO *

Missouri, Inc.; Xspedius Management *

Co. of Kansas City, LLC; Xspedius *

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Management Co. Switched Services, *

LLC, *

*

Defendants - Appellants, *

*

Charter Fiberlink–Missouri, LLC; *

Navigator Telecommunications, LLC; *

WilTel Local Network, LLC; MCI *

Communications Services, Inc.; *

MCImetro, LLC, *

*

Defendants, *

*

Sprint Communications Company, L.P., *

*

Defendant - Appellee. *

_______________________________ *

*

Verizon New England, Incorporated; *

Verizon New York, Incorporated; *

Verizon Pennsylvania, Incorporated; *

Verizon Maryland, Incorporated; *

Verizon Washington, Incorporated; *

Verizon Virginia, Incorporated, *

*

Amici on Behalf of *

Appellee Southwestern *

Bell Telephone, L.P., *

doing business as SBC *

Missouri. *

___________

No. 06-3726

___________

Southwestern Bell Telephone, L.P., *

doing business as SBC Missouri, *

*

Plaintiff - Appellee, *

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-3-

*

v. *

*

Missouri Public Service Commission; *

Jeff Davis; Connie Murray; Steve Gaw; *

Robert M. Clayton III; Linward *

Appling, in their official capacities as *

commissioners of the Missouri Public *

Service Commission and not as *

individuals, *

*

Defendants - Appellants, *

*

Big River Telephone Company, LLC; *

Birch Telecom of Missouri, Inc.; Ionex *

Communications, Inc.; NuVox *

Communications of Missouri, Inc.; *

Socket Telecom, LLC; XO *

Communications Services, Inc.; XO *

Missouri, Inc.; Xspedius Management *

Co. of Kansas City, LLC; Xspedius *

Management Co. Switched Serices, *

LLC; Charter Fiberlink–Missouri, LLC; *

Navigator Telecommunications, LLC; *

Sprint Communications Company, L.P.; *

WilTel Local Network, LLC; MCI *

Communications Services, Inc.; *

MCImetro, LLC, *

*

Defendants. *

___________

No. 06-3727

___________

Southwestern Bell Telephone, L.P., *

doing business as SBC Missouri, *

*

Plaintiff - Appellant, *

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-4-

*

v. *

*

Missouri Public Service Commission; *

Jeff Davis; Connie Murray; Steve Gaw; *

Robert M. Clayton III; Linward *

Appling, in their official capacities as *

commissioners of the Missouri Public *

Service Commission and not as *

individuals; Big River Telephone *

Company, LLC, *

*

Defendants - Appellees, *

*

NuVox Communications of Missouri, *

Inc.; Socket Telecom, LLC; XO *

Communications Services, Inc.; XO *

Missouri, Inc.; Xspedius Management *

Co. of Kansas City, LLC; Xspedius *

Management Co. Switched Services, *

LLC, *

*

Defendants - Appellees, *

*

Sprint Communications Company, L.P., *

*

Defendant - Appellee, *

*

Birch Telecom of Missouri, Inc; Ionex *

Communications, Inc., *

*

Defendants, *

*

Charter Fiberlink–Missouri, LLC; *

Navigator Telecommunications, LLC, *

*

Defendants, *

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1

Judge Duane Benton recused himself from further participation in this case

following oral argument and did not participate in the decision. Pursuant to 8th Cir.

R. 47E, the two remaining judges on the panel have decided the case.

2

The Honorable Charles A. Shaw, United States District Judge for the Eastern

District of Missouri.

-5-

*

WilTel Local Network, LLC; MCI *

Communications Services, Inc.; *

MCImetro, LLC, *

*

Defendants. *

___________

Submitted: June 14, 2007

Filed: June 20, 2008

___________

Before BYE, RILEY, and BENTON,1

 Circuit Judges.

___________

BYE, Circuit Judge.

Southwestern Bell Telephone, L.P., d/b/a SBC Missouri (SBC), attempted to

negotiate interconnection agreements with several competitors (Competing Local

Exchange Carriers (CLEC)) as required by the Telecommunications Act of 1996, Pub.

L. No. 104-104, 110 Stat. 56 (codified as amended in scattered sections of 47 U.S.C.).

When those negotiations failed, the dispute was submitted to arbitration as provided

for under the Act and the resulting arbitrator's decision was adopted by the Missouri

Public Service Commission (MPSC). SBC petitioned the district court2

 for review,

arguing the MPSC exceeded its authority by ordering SBC to allow CLECs broader

access to its facilities network than mandated by the Act. SBC also argued the MPSC

erred in ordering it to provide CLECs access to entrance facilities at cost. The district

court found the MPSC exceeded its authority when it decided issues relating to which

network facilities SBC was required to make available to CLECs. The district court

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affirmed the MPSC's decision setting the rate SBC could charge CLECs for entrance

facilities needed for interconnection. On appeal, the MPSC and various CLECs argue

the district court erred in concluding the MPSC exceeded its authority. In its crossappeal, SBC argues the district court erred in setting the rate it could charge for access

to entrance facilities. We affirm.

I

For years, local telephone service was provided by companies holding

monopolies which were subject to regulation by local governments. In passing the

Telecommunications Act of 1996, Congress chose to encourage competition among

telephone service providers and to impose greater federal regulation. The Act requires

existing telephone companies, which previously held monopolies (Incumbent Local

Exchange Carriers (ILEC)), to make their local facilities or networks available to

newcomers – CLECs – for a fee, if the CLEC's ability to provide service was

"impaired" without access. This appeal focuses on two sections of the Act which

implemented these requirements – 47 U.S.C. §§ 251 and 271.

Under § 251, all ILECs are required to negotiate interconnection agreements

with impaired CLECs and to lease certain of their network facilities at cost-based rates

known as "total element long-run incremental cost" (TELRIC). If an agreement

cannot be negotiated, the Act requires unresolved § 251 disputes be submitted to

arbitration. Section 251 compliance, including the arbitration process, is subject to

oversight by state public service commissions.

Prior to 2005, the Federal Communications Commission (FCC) took the

position ILECs were required under § 251 to make all basic elements of their local

networks (Unbundled Network Elements-Platform (UNE or UNE-Platform)) available

to CLECs at TELRIC rates. Courts reviewing the FCC's orders, however, disagreed

when the practice caused the competition pendulum to swing too far in favor of

CLECs. See, e.g., AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 390 (1999) ("[I]f

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Congress had wanted to give blanket access to incumbents' networks on a basis as

unrestricted as the scheme the Commission has come up with . . . . It would simply

have said . . . whatever requested element can be provided must be provided."); U.S.

Telecom Ass'n v. FCC, 290 F.3d 415, 424 (D.C. Cir. 2002) ("If parties who have not

shared the risks are able to come in as equal partners on the successes, and avoid

payment for the losers, the incentive to invest plainly declines."); Verizon New

England, Inc. v. Maine Pub. Utils. Comm'n, 509 F.3d 1, 9 (1st Cir. 2007) ("[M]aking

a monopolist share . . . 'essential facilities' can promote competition; but it can also

retard investment, handicap competition detrimentally, and discourage alternative

means of achieving the same result that could conceivably enhance competition

. . . ."). In 2005, the FCC issued its Triennial Review Remand Order (TRRO), which

no longer required ILECs to make all elements of their local networks available under

§ 251 at TELRIC rates. See Order on Remand, In the Matter of Unbundled Access

to Network Elements, Review of the Section 251 Unbundling Obligations of

Incumbent Local Exchange Carriers, 20 F.C.C.R. 2533 (2005).

The TRRO also concluded CLECs were no longer impaired with respect to

"entrance facilities" and ILECs were not required to provide such facilities as UNEs

at TELRIC rates. An entrance facility is a connection between a switch maintained

by an ILEC and a switch maintained by a CLEC. It is a means of transferring traffic

from one carrier's network to another's, and facilitates an ILEC's obligation under the

Act to interchange traffic among networks. CLECs also use entrance facilities to route

customer traffic between a CLEC's customer and the CLEC's switch – a practice

known as "backhauling." When used to transfer traffic from one network to another,

entrance facilities are used for interconnection purposes. When used for backhauling,

they are not used for interconnection. The TRRO found CLECs did not need entrance

facilities for backhauling CLEC to CLEC traffic. Conversely, the TRRO reiterated

that ILECs are required to provide entrance facilities at TELRIC rates under

§ 251(c)(2) if necessary for interconnection purposes.

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In addition to § 251, which applies to all ILECs, § 271 imposes additional

requirements on ILECs previously part of the Bell network (Bell Operating

Companies (BOC)). Under § 271, BOCs wishing to enter the long-distance market

must demonstrate they have, in addition to complying with § 251, made additional

network facilities listed in a "competitive checklist" available to CLECs. Unlike

§ 251, the language of § 271 expressly states § 271 compliance is determined by the

FCC.

Prior to 2005, § 271 compliance was not a contentious issue because the FCC's

interpretation of § 251 required ILECs to provide § 271 network facilities as part of

the § 251 agreements. It did not matter whether states had authority to force ILECs

to comply with § 271, because they could order the same level of compliance by

enforcing § 251. After the FCC issued its 2005 TRRO reducing the number of

network facilities ILECs were required to make available, states and CLECs began

exploring whether ILECs could be required to provide the same network facilities, i.e.,

the UNE-Platform, by enforcing the competitive checklist requirements of § 271.

That brings us to the primary issue in this case – the authority of states to enforce

§ 271.

After the Act was passed, SBC negotiated § 251 agreements with various

CLECs and complied with the additional requirements of § 271. As SBC and the

CLECs were in the process of renegotiating their § 251 agreements, the FCC issued

its 2005 TRRO reducing the number of network facilities ILECs were required to

make available. As a result, SBC refused to offer its UNE-Platform, leading to an

impasse in § 251 negotiations. SBC took the position it no longer had to offer the full

UNE-Platform at TELRIC rates. The CLECs contended, even though the § 251

requirements had changed, SBC could be required to make the same network facilities

available under § 271. 

SBC and the CLECs were unable to reach an agreement and the dispute was

submitted to arbitration. The arbitrator, while recognizing he had no authority under

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§ 251 to order SBC to make the disputed network facilities available, ordered them

to be provided under § 271. Despite language in § 271 granting the FCC exclusive

authority over § 271 disputes, the arbitrator held the states have implied authority to

ensure ILECs comply with § 271. The arbitrator also held SBC was required to make

its entrance facilities available to CLECs for interconnection purposes at TELRIC

rates. The MPSC adopted the arbitrator's order. SBC appealed to the district court

arguing the MPSC exceeded its authority when it ordered SBC to provide the disputed

network facilities under § 271.

The district court affirmed in part, and reversed in part. It held the MPSC

exceeded its authority by ordering the disputed network facilities provided under

§ 271, but affirmed the MPSC's decision setting the rate SBC could charge for

entrance facilities needed for interconnection. On appeal, the MPSC and CLECs

argue the structure of the Act implies Congress granted the states implicit authority

to enforce § 271. SBC argues the FCC – not the states – has sole authority to enforce

§ 271. In its cross-appeal, SBC argues the Act no longer requires it to make entrance

facilities available at TELRIC rates. Alternatively, assuming it must provide access

for interconnection purposes, SBC argues the MPSC erred in finding the CLECs were

using the entrance facilities for interconnection, and not backhauling.

II

We review the MPSC's interpretation and application of federal law de novo

and will set aside its findings of fact only if they are arbitrary and capricious. WWC

License, L.L.C. v. Boyle, 459 F.3d 880, 889-90 (8th Cir. 2006). The parties agree this

appeal involves the interpretation and application of federal law and de novo review

applies. 

The MPSC and CLECs concede the states have no authority to enforce § 271.

Nonetheless, they contend Congress granted implicit authority by virtue of how the

Act is structured. They argue the Act requires ILECs to enter into § 251 agreements

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with CLECs and those agreements are subject to mandatory state approval. They

further argue ILECs seeking § 271 approval must, as a precondition, demonstrate they

have obtained state approval of their § 251 agreements. Thus, a state can defeat an

ILEC's attempt to win § 271 approval by withholding § 251 approval. They contend

this ability to hamstring an ILEC's attempt to obtain § 271 approval means Congress

intended to grant the states implicit authority to enforce § 271.

Sections 251-52 provide for a dual federal-state regime: the FCC

determines what UNE elements must be provided and sets pricing

policy; state commissions oversee the adoption of agreements . . .

providing such UNEs to competitors at prices based on those principles.

47 U.S.C. § 252(a), (b), (e), (f). Disputes as to the adoption of the

agreements submitted to state commissions go to federal, rather than

state, court for review, id. § 252(e), although implementation issues may

arise in state proceedings. In short, the states have a major role under

these sections.

Verizon New England, Inc., 509 F.3d at 7. 

Conversely, the plain language of § 271 makes clear states have no authority

to interpret or enforce the obligations of § 271. Section 271 contemplates two

administrative determinations and Congress assigned both to the FCC. First, a BOC

seeking § 271 approval must "apply to the Commission" – the FCC – and "the

Commission" "shall issue a written determination approving or denying the

authorization requested" after "[t]he Commission" determines whether the specified

criteria, including the competitive checklist, are satisfied. § 271(d)(1), (3);

271(c)(2)(B).

Second, the FCC must address any enforcement issues. "The Commission shall

establish procedures for the review of complaints" alleging a BOC is not complying

with § 271; "the Commission shall act on such [a] complaint within 90 days"; and "the

Commission may" take action to enforce the requirements of § 271 if "the

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Commission determines" a BOC is not in compliance with its obligations under § 271.

§ 271(d)(6). 

Unlike the authority granted states under § 251, Congress only gave states an

advisory role at the application stage of the § 271 process. The FCC is to "consult

with the State commission of any State that is the subject of" a § 271 application

before the FCC rules on the application. § 271(d)(2)(B). The FCC need not "give the

State commissions' views any particular weight." SBC Commc'ns Inc. v. FCC, 138

F.3d 410, 416 (D.C. Cir. 1998). Moreover, Congress did not grant states even an

advisory role in addressing post-approval compliance issues. § 271(d)(6). "[A]ny

complaint by [a CLEC] that [a BOC's] failure to provide [a certain form of network

access] will violate § 271 is an issue for the FCC, not for [a state commission]." Dieca

Commc'ns, Inc. v. Florida Pub. Serv. Comm'n, 447 F. Supp. 2d 1281, 1286 (N.D. Fla.

2006); see BellSouth Telecomms., Inc. v. Mississippi Pub. Serv. Comm'n, 368 F.

Supp. 2d 557, 566 (S.D. Miss. 2005). A state's role under § 271 is "limited" to

"issuing a recommendation" regarding a § 271 application, and a state commission

may not "parlay [its] limited role" into the authority to impose substantive

requirements exclusively the prerogative of the FCC. Indiana Bell Tel. Co. v. Indiana

Util. Regulatory Comm'n, 359 F.3d 493, 497 (7th Cir. 2004).

"The contrast [between the language in §§ 251, 252, and 271] confirms that

when Congress envisaged state commission power to implement the statute, it knew

how to provide for it." Verizon New England, Inc., 509 F.3d at 7. Accordingly, we

join those federal courts which have concluded the FCC has exclusive jurisdiction

over § 271. See, e.g., Id. at 7-8 (noting the majority of federal courts and state public

service commissions treat § 271 as within the exclusive authority of the FCC); Indiana

Bell Tel. Co., 359 F.3d at 495 ("The Act reserves to the FCC the authority to decide

whether to grant a section 271 application.").

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III

In its cross-appeal, SBC argues the district court erred in affirming the MPSC's

order holding CLECs are entitled to access SBC's entrance facilities for

interconnection purposes at TELRIC rates. SBC argues the order conflicts with FCC

rulings holding CLECs are no longer impaired with respect to entrance facilities and

not entitled to them as UNEs.

The MPSC acknowledged the FCC's ruling stating CLECs are not entitled to

entrance facilities as UNEs, but required SBC to allow access pursuant to § 251(c)(2),

which requires ILECs to provide interconnection to CLECs. The District Court

concluded the MPSC's order correctly implemented the FCC's rulings. Further, it

rejected SBC's argument the FCC only requires an ILEC to allow CLECs to

interconnect with its network but does not require it to lease the interconnection

facilities themselves.

The FCC has held CLECs are not impaired without access to entrance facilities

and are not entitled to entrance facilities as UNEs under § 251(c)(3). The FCC's

finding of non-impairment does not, however, alter the right of CLECs to obtain

interconnection facilities pursuant to § 251(c)(2) for transmission and routing of

telephone exchange service and exchange access service, i.e., CLEC to ILEC and

ILEC to CLEC traffic. The FCC determined when a CLEC uses entrance facilities to

carry traffic to and from its own end users, i.e., backhauling or CLEC to CLEC, the

CLEC is not entitled to obtain entrance facilities as UNEs at TELRIC rates. If a

CLEC needs entrance facilities to interconnect with an ILEC's network, it has the right

to obtain such facilities from the ILEC. Thus, CLECs must be provided access at

TELRIC rates if necessary to interconnect with the ILEC's network. See Illinois Bell

Tel. Co. v. Box, Nos. 07-3557, 07-3683, 2008 WL 2151573, at 2-3 (7th Cir. May 23,

2008). 

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Additionally, "interconnection" means the physical linking of two networks for

the mutual exchange of traffic. The term "interconnect" refers to "'facilities and

equipment,' not to the provision of any service." AT&T Corp. v. FCC, 317 F.3d 227,

234-35 (D.C. Cir. 2003) (interpreting the term interconnect in § 251(a)(1)); see

Competitive Telecomms Ass'n v. FCC, 117 F.3d 1068, 1072 (8th Cir. 1997) (stating

interconnection as used in § 251(c)(2) means "a physical link between the equipment

of the carrier seeking interconnection and the LEC's network.").

The MPSC found, and the district court agreed, the entrance facilities requested

by the CLECs would be used solely for interconnection purposes within the meaning

of § 251(c)(2). Nothing in the record suggests the finding was arbitrary or capricious.

Further, the district court correctly concluded SBC was required to provide a physical

link to CLECs for access to its entrance facilities as necessary for interconnection at

TELRIC rates. 

IV

The judgment of the district court is affirmed.

______________________________

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