Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-01-01229/USCOURTS-caDC-01-01229-0/pdf.json

Parties Involved:
Federal Communications Commission
Respondent
Sprint Corporation
Petitioner
United States of America
Respondent

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 12, 2002 Decided May 3, 2002

No. 01-1218

WorldCom, Inc.,

Petitioner

v.

Federal Communications Commission and

United States of America,

Respondents

Sprint Corporation, et al.,

Intervenors

Consolidated with

01-1229, 01-1243, 01-1255, 01-1256, 01-1257, 01-1267,

01-1274, 01-1310, 01-1311, 01-1313, 01-1319, 01-1321

On Petitions for Review of an Order of the

Federal Communications Commission

---------

USCA Case #01-1229 Document #675523 Filed: 05/03/2002 Page 1 of 9
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Darryl M. Bradford argued the cause for Carrier petitioners and supporting intervenors. With him on the briefs were

Thomas F. O'Neil III, William Single, IV, Brian J. Leske,

John J. Hamill, Jodie L. Kelley, Mark C. Rosenblum, H.

Richard Juhnke, John T. Nakahata, Timothy J. Simeone,

Christopher W. Savage, David W. Carpenter, David L. Lawson, Paul J. Zidlicky, Thomas Jones, Glenn B. Manishin,

Genevieve Morelli, Richard J. Metzger, Brad Mutschelknaus,

Richard M. Rindler, Charles C. Hunter, Catherine M. Hannan, Robert J. Aamoth, Deborah M. Royster and Albert H.

Kramer. James P. Young entered an appearance.

James B. Ramsay argued the cause for State Commission

petitioners and supporting intervenors. With him on the

briefs were Gretchen Dumas, Ellen S. LeVine, Lawrence G.

Malone, Diane T. Dean, Susan Stevens Miller, Tracey L.

Stokes, Betty D. Montgomery, Attorney General, State of

Ohio, Duane W. Luckey and Steven T. Nourse, Assistant

Attorneys General. Carl F. Patka entered an appearance.

John A. Rogovin, Deputy General Counsel, Federal Communications Commission, argued the cause for respondents.

With him on the brief were John E. Ingle, Deputy Associate

General Counsel, and Laurence N. Bourne and Rodger D.

Citron, Counsel. Catherine G. O'Sullivan and Nancy C.

Garrison, Attorneys, U.S. Department of Justice, entered

appearances.

Mark L. Evans argued the cause for intervenors BellSouth

Corporation, et al. With him on the brief were Michael K.

Kellogg, Sean A. Lev, Aaron M. Panner, Scott H. Angstreich,

Roger K. Toppins, Gary L. Phillips, James D. Ellis, Michael

E. Glover, Edward H. Shakin, John M. Goodman, Lawrence

E. Sarjeant, Linda L. Kent, John W. Hunter and Julie E.

Rones.

Howard J. Symons, Sara F. Leibman and Douglas I.

Brandon were on the brief for intervenor AT&T Wireless

Services, Inc. Michelle M. Mundt entered an appearance.

USCA Case #01-1229 Document #675523 Filed: 05/03/2002 Page 2 of 9
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Before: Sentelle and Tatel, Circuit Judges, and

Williams, Senior Circuit Judge.

Opinion for the Court filed by Senior Circuit Judge

Williams.

Williams, Senior Circuit Judge: Section 251(b)(5) of the

Telecommunications Act of 1996, 47 U.S.C. ss 151-714 (the

"1996 Act" or the "Act"), directs all local exchange carriers

("LECs") to "establish reciprocal compensation arrangements

for the transport and termination of telecommunications." 47

U.S.C. s 251(b)(5). In the order before us the Federal

Communications Commission held that under s 251(g) of the

Act it was authorized to "carve out" from s 251(b)(5) calls

made to internet service providers ("ISPs") located within the

caller's local calling area. It relied entirely on s 251(g).

Because that section is worded simply as a transitional device,

preserving various LEC duties that antedated the 1996 Act

until such time as the Commission should adopt new rules

pursuant to the Act, we find the Commission's reliance on

s 251(g) precluded. Thus we remand the case. Because

there may well be other legal bases for adopting the rules

chosen by the Commission for compensation between the

originating and the terminating LECs in calls to ISPs, we

neither vacate the order nor address petitioners' attacks on

various interim provisions devised by the Commission.

* * *

Due in part to the 1996 Act, local telephone service areas

are now typically (perhaps universally) served by more than

one LEC. The reciprocal compensation requirement of

s 251(b)(5), quoted above, is aimed at assuring compensation

for the LEC that completes a call originating within the same

area. Although its literal language purports to extend reciprocal compensation to all "telecommunications," the Commission has construed it as limited to "local" traffic only. In the

Matter of Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, 11 FCC Rcd

15499, 16012-13, p p 1033-34, 16015-16, p 1040 (1996) ("Local

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Competition Order"); 47 C.F.R. s 51.701(a). For long distance calls, by contrast, the long-distance carrier collects from

the user and pays both LECs--the one originating and the

one terminating the call. Local Competition Order, 11 FCC

Rcd at 16013, p 1034.

In an earlier order, the Commission excluded ISP calls

from the reach of s 251(b)(5) on the theory that they were

indeed not "local." In the Matter of Implementation of the

Local Competition Provisions in the Telecommunications

Act of 1996, Inter-Carrier Compensation for ISP-Bound

Traffic, 14 FCC Rcd 3689 (1999) ("Initial Order"). It reached

this conclusion by applying its "end-to-end" analysis, traditionally employed in determining whether a call was jurisdictionally interstate or not, stressing that ISP-bound traffic

ultimately reaches websites that are typically located out-of

state. See id. at 3689-90, p 1, 3695-98, p p 10-12, 3703, p 23

(1999). On review, we held that the order had failed to

adequately explain why the traditional "end-to-end" jurisdictional analysis was relevant to deciding whether ISP calls

fitted the local call or the long-distance call model, and

vacated and remanded the order. Bell Atlantic Tel. Cos. v.

FCC, 206 F.3d 1, 5, 8 (D.C. Cir. 2000).

On remand, the FCC again reached the conclusion that the

compensation between two LECs involved in delivering internet-bound traffic to an ISP should not be governed by the

reciprocal compensation provision of s 251(b)(5). In the Matter of Implementation of the Local Competition Provisions in

the Telecommunications Act of 1996, Intercarrier Compensation for ISP-Bound Traffic, 16 FCC Rcd 9151, 9152-53, p 1

(2001) ("Remand Order"). This decision rested, as we said,

on s 251(g). Having thus taken ISP calls out of s 251(b)(5)'s

reciprocal compensation obligation, the FCC proceeded to

establish what it believed was an appropriate cost recovery

mechanism. Remand Order, 16 FCC Rcd at 9154, p 4. The

system adopted was "bill-and-keep," whereby each carrier

recovers its costs from its own end-users. Id.

In reaching the bill-and-keep solution, the Commission

pointed to a number of flaws in the prevailing intercarrier

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compensation mechanism for ISP calls, under which the

originating LEC paid the LEC that served the ISP. Because

ISPs typically generate large volumes of one-way traffic in

their direction, the old system attracted LECs that entered

the business simply to serve ISPs, making enough money

from reciprocal compensation to pay their ISP customers for

the privilege of completing the calls. The Commission saw

this as leading, at least potentially, to ISPs' charging their

customers below cost. Remand Order, 16 FCC Rcd at 9153,

p 2, 9154-55, p p 4-6, 9162, p p 19-21.

To smooth the transition to bill-and-keep (but without fully

committing itself to it), the FCC adopted several interim

cost-recovery rules that sought to limit arbitrage opportunities by lowering the amounts and capping the growth of ISPrelated intercarrier payments. These tend to force ISPserving LECs to recover an increasing portion of their costs

from their own subscribers rather than from other LECs.

Remand Order, 16 FCC Rcd at 9155-57, p p 7-8. The transitional rules take effect on the expiration of existing interconnection agreements. Id. at 9189, p 82. Finally, the Commission specified that, having carved ISP-bound calls out of

s 251(b)(5) under s 251(g), it was establishing the interim

compensation regime under its general authority to regulate

the rates and terms of interstate telecommunications services

and interconnections between carriers under s 201 of the

Act; as a result, the state regulatory commissions would no

longer have jurisdiction over ISP-bound traffic as part of

their power to resolve LEC interconnection issues under

s 252(e)(1) of the Act. Id.

Two sets of petitioners now challenge the Remand Order.

One, headed by WorldCom (collectively "WorldCom"), consists of competitive LECs that deliver calls to ISPs, and thus

stand to lose reciprocal compensation payments. These companies contend that the Commission erred in finding that

s 251(g) authorized Commission exclusion of such calls from

s 251(b)(5), and that, in any event, the interim compensation

rules that the FCC adopted were not a product of reasoned

decisionmaking and are contrary to the Act's terms. The

other group, composed of several states and state regulatory

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commissions, complains that the order unlawfully preempts

their authority to determine the compensation of ISP-serving

LECs.

* * *

Section 251(g) reads as follows:

(g) Continued enforcement of exchange access and interconnection requirements.

On and after [the date of enactment of the Telecommunications Act of 1996,] each local exchange carrier, to

the extent that it provides wireline services, shall provide exchange access, information access, and exchange

services for such access to interexchange carriers and

information service providers in accordance with the

same equal access and nondiscriminatory interconnection restrictions and obligations (including receipt of

compensation) that apply to such carrier on the date

immediately preceding [the date of enactment of the

Telecommunications Act of 1996] under any court order,

consent decree, or regulation, order, or policy of the

Commission, until such restrictions and obligations are

explicitly superseded by regulations prescribed by the

Commission after [such date of enactment]. During the

period beginning on [such date of enactment] and until

such restrictions and obligations are so superseded, such

restrictions and obligations shall be enforceable in the

same manner as regulations of the Commission.

47 U.S.C. s 251(g) (emphasis added). Both sides assume that

Chevron U.S.A. Inc. v. Natural Resources Defense Council,

Inc., 467 U.S. 837 (1984), is applicable, so that we must defer

to any reasonable Commission interpretation not precluded

by the language of the statute, read with the ordinary tools of

statutory construction. We agree with petitioners that

s 251(g) is not susceptible to the Commission's reading.

On its face, s 251(g) appears to provide simply for the

"continued enforcement" of certain pre-Act regulatory "interconnection restrictions and obligations," including the ones

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contained in the consent decree that broke up the Bell

System, until they are explicitly superceded by Commission

action implementing the Act. As the Conference Report

explained, "[b]ecause the [Act] completely eliminates the prospective effect of the AT&T Consent Decree, some provision

is necessary to keep these requirements in place.... Accordingly, the conference agreement includes a new section

251(g)." H.R. Rep. 104-458, at 122-23 (1996).

On a prior occasion, the Commission also framed the scope

of s 251(g) in similarly narrow terms:

The term "information access" first appears [in the Act]

in sections [sic] 251(g). That provision is a transitional

enforcement mechanism that obligates the incumbent

LECs to continue to abide by equal access and nondiscriminatory interconnection requirements of the [AT&T

Consent Decree] when such carriers "provide exchange

access, information access and exchange services for such

access to interexchange carriers and information service

providers...." Because the provision incorporates into

the Act, on a transitional basis, these [AT&T Consent

Decree] requirements, the Act uses [AT&T Consent Decree] terminology in this section. However, this provision is merely a continuation of the equal access and

nondiscrimination provisions of the Consent Decree until superseded by subsequent regulations of the Commission.

In the Matter of Deployment of Wireline Services Offering

Advanced Telecommunications Capability, 15 FCC Rcd 385,

407, p 47 (1999) (footnote omitted) (emphasis added).

Of course such explanatory language can't be assumed to

be exclusive; legislative or agency explanations of a provision

may naturally tend to focus on its most salient features.

Thus, despite legislative history speaking only in terms of the

Consent Decree, plainly the preexisting "restrictions and

obligations" covered by s 251(g) are not limited to Consent

Decree obligations; the statute itself explicitly embraces preexisting obligations under a "regulation, order, or policy of

the Commission." See also Noland v. Shalala, 12 F.3d 258,

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262 (D.C. Cir. 1994) ("Although the legislative history ...

suggests an exclusive focus [of the statutory provision in

question], the statutory language is broader and may permit

[an alternative] construction."). But nothing in s 251(g)

seems to invite the Commission's reading, under which (it

seems) it could override virtually any provision of the 1996

Act so long as the rule it adopted were in some way, however

remote, linked to LECs' pre-Act obligations.

We will assume without deciding that under s 251(g) the

Commission might modify LECs' pre-Act "restrictions" or

"obligations," pending full implementation of relevant sections

of the Act. The Fifth Circuit appeared to make that assumption in Texas Office of Public Utility Counsel v. FCC, 265

F.3d 313 (5th Cir. 2001), where it implicitly relied on s 251(g)

(by quoting language from an Eighth Circuit case, Competitive Telecom. Ass'n v. FCC, 117 F.3d 1068, 1072 (8th Cir.

1997)), in sustaining modifications of pre-Act regulations governing the access charges paid to LECs by inter-exchange

carriers ("IXCs"). Id. at 324-25. But this assumption is not

enough to justify the Commission's action here, as it seems

uncontested--and the Commission declared in the Initial

Order--that there had been no pre-Act obligation relating to

intercarrier compensation for ISP-bound traffic. See Initial

Order, 14 FCC Rcd at 3695, p 9; see also id. at 3690, p 1,

3707-3710, p p 28-36. The best the Commission can do on

this score is to point to pre-existing LEC obligations to

provide interstate access for ISPs. See, e.g., Remand Order,

16 FCC Rcd at 9164, p 27; In the Matter of MTS & WATS

Market Structure, 97 F.C.C.2d 682, 711-15, p p 77-83 (1983).

Indeed, the Commission does not even point to any pre-Act,

federally created obligation for LECs to interconnect to each

other for ISP-bound calls. And even if this hurdle were

overcome, there would remain the fact that s 251(g) speaks

only of services provided "to interexchange carriers and

information service providers"; LECs' services to other

LECs, even if en route to an ISP, are not "to" either an IXC

or to an ISP.

Having found that s 251(g) does not provide a basis for the

Commission's action, we make no further determinations.

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For example, as in Bell Atlantic, we do not decide whether

handling calls to ISPs constitutes "telephone exchange service" or "exchange access" (as those terms are defined in the

Act, 47 U.S.C. ss 153(16), 153(47)) or neither, or whether

those terms cover the universe to which such calls might

belong. Nor do we decide the scope of the "telecommunications" covered by s 251(b)(5). Nor do we decide whether the

Commission may adopt bill-and-keep for ISP-bound calls

pursuant to s 251(b)(5); see s 252(d)(B)(i) (referring to billand-keep). Indeed these are only samples of the issues we do

not decide, which are in fact all issues other than whether

s 251(g) provided the authority claimed by the Commission

for not applying s 251(b)(5).

Moreover, we do not decide petitioners' claims that the

interim pricing limits imposed by the Commission are inadequately reasoned. Because we can't yet know the legal basis

for the Commission's ultimate rules, or even what those rules

may prove to be, we have no meaningful context in which to

assess these explicitly transitional measures.

Finally, we do not vacate the order. Many of the petitioners themselves favor bill-and-keep, and there is plainly a nontrivial likelihood that the Commission has authority to elect

such a system (perhaps under ss 251(b)(5) and 252(d)(B)(i)).

See, e.g., Allied-Signal, Inc. v. U.S. Nuclear Regulatory

Comm., 988 F.2d 146, 150-51 (D.C. Cir. 1993) ("The decision

whether to vacate depends on 'the seriousness of the order's

deficiencies (and thus the extent of doubt whether the agency

chose correctly) and the disruptive consequences of an interim change that may itself be changed.' "). Thus, we simply

remand the case to the Commission for further proceedings.

So ordered.

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