FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

NORTH COUNTY

COMMUNICATIONS

CORPORATION OF ARIZONA, a

California corporation,

Plaintiff-Appellant,

v.

QWEST CORPORATION, a

Colorado corporation, DBA

CenturyLink QC; GARY PIERCE;

BOB STUMP; SANDRA KENNEDY;

PAUL NEWMAN; BRENDA BURNS,

in their official capacity as

Commissioners of the Arizona

Corporation Commission,

Defendants-Appellees.

No. 14-15115

D.C. No.

2:13-cv-00466-DGC

Appeal from the United States District Court

for the District of Arizona

David G. Campbell, District Judge, Presiding
2 NCCC V. QWEST

NORTH COUNTY

COMMUNICATIONS

CORPORATION OF OREGON, a

California corporation,

Plaintiff-Appellant,

v.

QWEST CORPORATION, DBA

CenturyLink QC, a Colorado

corporation; JOHN SAVAGE;

SUSAN ACKERMAN; STEPHEN

BLOOM, in their capacity as

Commissioners of the Public

Utility Commission of Oregon,

Defendants-Appellees.

No. 14-35254

D.C. No.

3:13-cv-00375-BR

OPINION

Appeal from the United States District Court

for the District of Oregon,

Anna Brown, District Judge, Presiding

Argued and Submitted December 8, 2015

San Francisco, California

Filed May 31, 2016

Before: Diarmuid F. O’Scannlain, Barry G. Silverman,

and Carlos T. Bea, Circuit Judges.

Opinion by Judge O’Scannlain
NCCC V. QWEST 3

SUMMARY*

Telecommunications Act

The panel affirmed two district courts’ summary

judgments in favor of Qwest Corporation and two state

regulatory commissions in actions brought under the

Telecommunications Act of 1996 by local exchange carriers

that provide telecommunications services to their customers

in Arizona and Oregon.

The plaintiffs sued Qwest Corp., a rival local exchange

carrier, and the commissioners of the Arizona Corporation

Commission and the Public Utility Commission of Oregon,

state agencies whose responsibilities include regulating

contracts between local exchange carriers. Qwest is an

incumbent local exchange carrier (ILEC), which previously

enjoyed a monopoly on local phone service, and North

County is a competitive local exchange carrier (CLEC). 

North County requested to interconnect with Qwest, and

the parties entered into interconnection agreements in 1997. 

They subsequently entered into unsuccessful negotiations for

successor agreements, and Qwest petitioned for arbitration

before the state Commissions. The Commissions held

arbitration hearings and approved new interconnection

agreements in 2011.

Qwest argued that the Commissions had authority to

arbitrate the 2011 agreements because Qwest had the power

* This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.
4 NCCC V. QWEST

under 47 U.S.C. § 252 to initiate negotiations with North

County to replace their existing interconnection agreements

and thereafter to force North County into binding arbitration. 

Qwest relied on the FCC’s Triennial Review Order, which

states that either a CLEC or an ILEC may initiate

negotiations. Qwest also argued that the language of the

initial interconnection agreements authorized it to initiate

negotiations. The panel held that the state Commissions had

authority to arbitrate the 2011 agreements because the 1997

agreements gave Qwest both the power to initiate

negotiations and the power to compel arbitration.

The panel rejected North County’s challenges to six

specific provisions of the 2011 interconnection agreements: 

(1) the requirement that North County interconnect with

Qwest directly rather than through a third-party tandem

provider; (2) the agreements’ “Relative Use Factor;” (3) the

requirement that North County use digital signaling

technology known as SS7 signaling if and when it originates

calls to Qwest; (4) the requirement that North County pay

Qwest for certain call detail records; (5) the cap on the

number of minutes for which North County can bill Qwest;

and (6) the agreements’ failure to allow North County to

interconnect using Voice over Internet Protocol.

COUNSEL

R. Dale Dixon, Jr., Law Offices of Dale Dixon, Del Mar,

California, argued the cause and filed the briefs for the

plaintiff-appellant.
NCCC V. QWEST 5

Lawrence H. Reichman, Perkins Coie LLP, Portland, Oregon,

argued the cause and filed the brief for the defendant-appellee

Qwest Corporation.

Maureen A. Scott, Arizona Corporation Commission,

Phoenix, Arizona, argued the cause and filed the brief for the

defendants-appellees Gary Pierce, Bob Stump, Sandra

Kennedy, Paul Newman, and Brenda Burns, in their capacity

as Commissioners of the Arizona Corporation Commission. 

With her on the brief were Brian E. Smith and Robert W.

Geake, Arizona Corporation Commission, Phoenix, Arizona.

Ellen F. Rosenblum, Attorney General, Salem Oregon; Anna

M. Joyce, Solicitor General, Salem Oregon; and Michael T.

Weirich, Senior Assistant Attorney General, Salem, Oregon,

together filed the brief for the defendants-appellees John

Savage, Susan Ackerman, and Stephen Bloom, in their

capacity as Commissioners of the Public Utility Commission

of Oregon.
6 NCCC V. QWEST

OPINION

O’SCANNLAIN, Circuit Judge:

This dispute under the Telecommunications Act of 1996

pits one telephone company against another with two state

regulatory Commissions caught in the middle. We must

determine whether the matter is subject to binding arbitration,

and, if so, what rules apply.

I

These appeals involve two consolidated cases, one from

the District of Arizona, the other from the District of Oregon. 

The lawsuits were brought byNorth CountyCommunications

Corporation of Arizona and North County Communications

Corporation of Oregon (collectively referred to as “North

County,” except when necessary to distinguish one from the

other). North County is a local exchange carrier that provides

telecommunications services to its customers. North County

sued Qwest Corporation, a rival local exchange carrier, and,

in their official capacities, commissioners of two state

Commissions—the Arizona Corporation Commission

(“Arizona Commission”) and the Public Utility Commission

of Oregon (“Oregon Commission”)—state agencies whose

responsibilities include regulating contracts between such

carriers.

A

As many courts have explained, Congress passed the

Telecommunications Act of 1996, Pub. L. No. 104-104,

110 Stat. 56 (codified as amended in scattered sections of

chapter 47 of the United States Code) (the “Act”), to promote
NCCC V. QWEST 7

competition in the provision of telecommunication services. 

See, e.g., AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366,

370–72 (1999). As relevant here, the statute classifies local

exchange carriers into two categories: incumbent local

exchange carriers (ILECs), and competitive local exchange

carriers (CLECs). Quick Commc’ns, Inc. v. Mich. Bell Tel.

Co., 515 F.3d 581, 583 (6th Cir. 2008). ILECs are those

entities that enjoyed a monopoly on local phone service in a

particular geographic area prior to the Act. Id. For both the

Arizona and Oregon cases, Qwest is an ILEC, and North

County is a CLEC.

1

The Act subjects ILECs “to a host of duties intended to

facilitate market entry. Foremost among these duties is the

[incumbent local exchange carrier’s] obligation under

47 U.S.C. § 251(c) . . . to share its network with competitors.” 

AT&T Corp., 525 U.S. at 371. Doing so ensures that the

CLEC’s customers can call the ILEC’s customers, and vice

versa. Under the Act, a CLEC may access an ILEC’s

network by requesting to interconnect its facilities with the

ILEC’s network. Id.; see also 47 U.S.C. § 252(a).

2

Section 252(a) of the Act declares that “[u]pon receiving

a request for interconnection, services, or network elements

pursuant to section 251 of this title, an incumbent local

exchange carrier may negotiate and enter into a binding

agreement with the requesting telecommunications carrier.” 

47 U.S.C. § 252(a)(1). Section 252(b) then provides that

“[d]uring the period from the 135th to the 160th day

(inclusive) after the date on which an incumbent local
8 NCCC V. QWEST

exchange carrier receives a request for negotiation under this

section, the carrier or any other party to the negotiation may

petition a State commission to arbitrate any open issues.” 

47 U.S.C. § 252(b)(1). Section 252(e) states that “[a]ny

interconnection agreement [“ICA”] adopted by negotiation or

arbitration shall be submitted for approval to the State

commission. A State commission to which an agreement is

submitted shall approve or reject the agreement, with written

findings as to any deficiencies.” 47 U.S.C. § 252(e)(1).

B

In 1997, North County first requested to interconnect with

Qwest in Arizona and Oregon. One provision of the resulting

agreement (“1997 ICA”) between Qwest and North County,

section XXXIV(V), stated:

This Agreement shall be effective for a period

of 2 1/2 years, and thereafter the Agreement

shall continue in force and effect unless and

until a new agreement, addressing all of the

terms of this Agreement, becomes effective

between the Parties. The Parties agree to

commence negotiations on a new agreement

no later than two years after this Agreement

becomes effective.

Notwithstanding this provision, no new ICAs had been

entered into until the events which gave rise to this dispute.

1

At the time Qwest and North County first interconnected,

the telecommunications industry was undergoing a transition
NCCC V. QWEST 9

from analog signaling technology, known as MF signaling, to

digital signaling technology, known as SS7 signaling. These

signaling technologies are important because they transmit

information with a call as the call crosses a carrier’s system. 

Much of this information is necessary for local carriers to

know so that they can properly bill one another for the costs

generated by transmitting calls between their networks. 

Unsurprisingly, SS7 signaling has many advantages over MF

signaling: it is more efficient, more flexible, and more

reliable, and it has a greater capacity to track and to record

information relevant for billing purposes.

2

Central to the parties’ dispute is the fact that North

County continues to use the increasingly outdated MF

signaling to exchange local traffic with Qwest. (From the

record, it appears that every other CLEC that interconnects

with Qwest uses SS7 signaling to exchange local traffic.) 

That choice has important consequences when it comes to

billing. In particular, North County is entitled to bill Qwest

for some of the local traffic that Qwest sends to it when

telephone users on Qwest’s network call users on North

County’s network, but North County’s reliance on MF

technology makes it difficult for Qwest to verify the accuracy

of the bills North County sends over. At the same time,

North County does not currently send much traffic to

Qwest—in Arizona, for instance, North County primarily

provides telephone services to businesses that take incoming

calls, but does not transmit outbound calls. If, however,

North County were to begin sending traffic to Qwest via MF

signaling using a third-party service provider, Qwest would

be unable to identify and measure the traffic being routed

from North County’s network to Qwest’s.
10 NCCC V. QWEST

C

In 2008, Qwest suspected that North County was

overbilling it. Qwest, spurred on by the billing dispute,

requested North County to negotiate successor ICAs in

Arizona and Oregon. North County agreed to enter into

negotiations, which lasted more than a year. Importantly,

during that time North County “agreed to a series of

extensions of the arbitration window to file a petition for

arbitration under 47 U.S.C. § 252(b) . . . . In each of the

extension agreements dated January 16, 2009, February 9,

2009, April 29, 2009, and May 29, 2009, [North County]

specifically agreed to extend ‘the period during which either

party may file for arbitration under section 252(b)(l) of the

Act.’” (emphasis added). The negotiations ultimately were

not successful.

1

On August 3, 2009, Qwest petitioned for arbitration in

both Arizona and Oregon. North County raised a number of

objections. First, North County moved each state

Commission to dismiss Qwest’s petition for arbitration,

arguing that § 252 did not give the Commissions authority to

arbitrate new ICAs because Qwest, not North County, had

requested the underlying negotiations. Both state

Commissions denied North County’s motions to dismiss. In

2011 the Arizona Commission and the Oregon Commission

each approved a new ICA (“2011 ICAs”) based on the results

of the arbitration hearings.
NCCC V. QWEST 11

2

North County then sought declaratory and injunctive

relief in federal district court in Arizona and Oregon. North

County argued that the 2011 ICAs must be declared “void ab

initio” because, North County reiterated, the state

Commissions lacked authority to arbitrate them. The district

courts rejected this argument, although they accepted North

County’s characterization that the relevant negotiations had

been requested and initiated by Qwest. The Arizona district

court noted that “[n]o court has directly considered whether

the language of sections 252(a)(1) and (b)(1) applies to

requests to negotiate made by ILECs to CLECs.” Despite

agreeing that the text of the Act supported North

County—and only North County—the district courts

reasoned that a literal interpretation would be unacceptable

because it would frustrate the Act’s two main purposes,

which the district courts said were to “encourage competition

in the telecommunications industry by requiring the good

faith negotiation of ICAs by ILECs and CLECs,” and to give

state Commissions a prominent role in overseeing negotiated

ICAs. North County also challenged a number of the 2011

ICAs’ specific provisions, which the district courts likewise

rejected across the board.

Each district court granted summary judgment to Qwest. 

North County timely appealed in both cases.

II

We review a district court’s grant of summary judgment

de novo. Verizon Cal., Inc. v. Peevey, 462 F.3d 1142, 1150

(9th Cir. 2006). In addition, we review de novo whether

arbitrated ICAs are in compliance with Telecommunications
12 NCCC V. QWEST

Act and its implementing regulations. Id. “[W]e review all

other issues under an arbitrary and capricious standard.” U.S.

W. Commc’ns, Inc. v. Wash. Utils. & Transp. Comm’n,

255 F.3d 990, 994 (9th Cir. 2001). “A state commission’s

decision is arbitrary and capricious if the decision ‘was not

supported by substantial evidence,’ or the commission made

a ‘clear error of judgment.’” Peevey, 462 F.3d at 1150

(quoting Pac. Bell v. Pac W. Telecomm, Inc., 325 F.3d 1114,

1131 (9th Cir. 2003)).

III

North County first contends that the state Commissions

lacked authority to arbitrate the 2011 ICAs. Qwest does not

dispute North County’s premise that Qwest initiated the

relevant negotiations. Hence, the question is whether Qwest,

upon deciding it wanted to scrap the existing ICAs and

replace them with a pair of new ones, had the power to

initiate negotiations with North County and thereafter to force

North County into binding arbitration. If Qwest lacked such

power, North County contends, then the state Commissions

had no authority to resolve the parties’ disagreements.

A

Qwest responds to North County’s argument by urging

that 47 U.S.C. § 252 authorized it to request negotiations with

North County to replace their existing ICAs and to petition

for binding arbitration when those negotiations hit a snag. 

Aside from the district courts here, however, it appears that

no federal court has directly ruled on whether § 252, of its

own force, empowers an ILEC like Qwest to initiate

negotiations with a CLEC and thereafter to force the CLEC

into arbitration if the negotiations fail.
NCCC V. QWEST 13

The relevant statutory text does not appear hospitable to

the reading Qwest proposes. Specifically, § 252(a)(1),

concerning “[v]oluntary negotiations,” states that “[u]pon

receiving a request for interconnection, services or network

elements pursuant to section 251 of this title, an [ILEC] may

negotiate and enter into a binding agreement with the

requesting telecommunications carrier or carriers.” 47 U.S.C.

§ 252(a)(l) (emphasis added). Section 252(b)(l) then declares

that “[d]uring the period from the 135th to the 160th day

(inclusive) after the date on which an [ILEC] receives a

request for negotiation under this section, the carrier or any

other party to the negotiation may petition a State

commission to arbitrate any open issues.” 47 U.S.C.

§ 252(b)(1) (emphasis added).

As all parties acknowledge, both sections refer only to

situations where an ILEC receives a request for

interconnection or negotiation. The statute does not mention

requests for negotiations initiated by an ILEC or mutually

agreed upon by the two carriers. And as everyone also

agrees, in this case, the relevant negotiations—the ones that

led to the 2011 ICAs—were requested by Qwest, not North

County. That circumstance, says North County, means that

the Telecommunications Act could not have functioned as the

source of any power in Qwest to compel arbitration.

1

Qwest responds in two basic ways. The first—and

potentiallymost devastating—is that the FCC has definitively

interpreted the relevant statutory provision and that such

interpretation governs the situation here. Qwest’s argument

depends on a footnote in a 2003 FCC order—called the

Triennial Review Order (“TRO”)—in which the FCC stated
14 NCCC V. QWEST

that “[a]lthough section 252(a)(1) and section 252(b)(1) refer

to requests that are made to incumbent LECs, we find that in

the interconnection amendment context, either the incumbent

or the competitive LEC may make such a request.” In the

Matter of Review of the Section 251 Unbundling Obligations

of Incumbent Local Exchange Carriers, 18 F.C.C.R. 16978,

17405 ¶ 703 n.2087 (2003), vacated in part and remanded,

U.S. Telecom Ass’n v. FCC, 359 F.3d 554, 594 (D.C. Cir.

2004). Qwest asserts that the just-quoted language

establishes that Qwest had the power to compel arbitration in

this case, after it requested North County to negotiate

successor ICAs and those negotiations reached an impasse. 

Furthermore, Qwest maintains that the Hobbs Act, 28 U.S.C.

§ 2342, forbids us from reviewing the FCC’s interpretation.1

1 The Hobbs Act states, in relevant part: “The court of appeals (other

than the United States Court of Appeals for the Federal Circuit) has

exclusive jurisdiction to enjoin, set aside, suspend (in whole or in part), or

to determine the validity of . . . all final orders of the Federal

Communications Commission made reviewable by section 402(a) of title

47. . . . Jurisdiction is invoked by filing a petition as provided by section

2344 of this title.” 28 U.S.C. § 2342. As we have explained, “[u]nder the

Hobbs Act, this court lacks jurisdiction to rule on a collateral attack of an

FCC order. . . . ‘Properly promulgated FCC regulations currently in effect

must be presumed valid for the purposes of this appeal. The Hobbs Act,

28 U.S.C. § 2342, requires that all challenges to the validity offinal orders

of the FCC be brought by original petition in a court of appeals. The

district court thus lacked jurisdiction to pass on the validity of the FCC

regulations, and no question as to their validity can be before us in this

appeal.’” Pac. Bell Tel. Co. v. Cal. Pub. Utils. Comm’n, 621 F.3d 836,

843 n.10 (9th Cir. 2010) (quoting U.S. W. Commc’ns, Inc. v. Jennings,

304 F.3d 950, 958 n.2 (9th Cir. 2002)). If the Hobbs Act applies here,

then even if we were to “doubt the soundness of the FCC’s interpretation”

of § 252, we would “not [be] at liberty to review that interpretation.” U.S.

W. Commc’ns, Inc. v. Hamilton, 224 F.3d 1049, 1055 (9th Cir. 2000).
NCCC V. QWEST 15

Naturally, the strength of Qwest’s Hobbs Act argument

depends on whether the TRO actually addresses the scenario

that transpired here; if it does not, we could not say that North

County’s attack on Qwest is also an attack on the FCC order,

because the validity of the TRO would simply not be drawn

into question at all. Qwest’s Hobbs Act argument would

therefore be neutralized. This question may be close, and it

is certainly complicated—giving footnote number 2,087 its

proper reading in the context of the surrounding 659-page

FCC order is no simple task.2

2

Second, in addition to relying on the TRO, Qwest defends

its preferred reading of § 252 on the merits by invoking the

traditional tools of statutory construction, above all by

emphasizing the statute’s supposed purposes and the need to

avoid results Qwest deems absurd. As noted, Qwest’s

position is in some tension with the text of § 252, and we are

aware of no federal court to have read the statute in the way

Qwest proposes.

2 No party has cited any authority construing the scope of the FCC’s

ruling in the TRO, which by its own terms purported to apply only “in the

interconnection amendment context.” TRO, at 19023 n.2087. 

Nonetheless, we need not resolve today whether the statutory text of

section 252(b)(1), as interpreted by the FCC, authorizes Qwest to

commence negotiations for new interconnection agreements and then to

compel arbitration before the State commissions when those negotiations

stall. See Valle del Sol Inc. v. Whiting, 732 F.3d 1006, 1030 (9th Cir.

2013) (Bea, J., concurring in part and dissenting in part) (“[T]he ‘cardinal

principle of judicial restraint’ is that ‘if it is not necessary to decide more,

it is necessary not to decide more.’” (quoting PDK Labs. Inc. v. DEA,

362 F.3d 786, 799 (D.C. Cir. 2004) (Roberts, J., concurring in part and

concurring in the judgment))). Here, an independent source—the parties’

own contract—gives Qwest the authority to compel arbitration.
16 NCCC V. QWEST

B

We may not need to decide whether § 252(b)(1) on its

own gave Qwest the power to commence negotiations over

the 2011 ICAs and then to force North County into

arbitration, because even if the statute did not grant Qwest

such power, that would not inevitably mean Qwest lacked

such power; Qwest would just have to trace such power to a

different source.

1

But what about the 1997 ICAs themselves, which, as

private agreements, are capable of defining the parties’ rights

and obligations like any other contracts?3 As we have

explained, “[o]nce the terms [of an ICA] are set, either by

agreement or arbitration, and the state commission approves

the agreement, it becomes a binding contract.” Pac. Bell,

325 F.3d at 1120; see also CoreTel Va., LLC v. Verizon Va.,

LLC, 752 F.3d 364, 370 (4th Cir. 2014) (“[A]n ICA is a

private agreement,” which courts must interpret “[l]ike any

other contract.”); TRO at 17404 ¶ 701 (“Permitting voluntary

 

3

 Even if we assume North County is right that § 252 on its own would

not have authorized the state Commissions to arbitrate the 2011 ICAs,

North County nowhere suggests that this limitation is “jurisdictional,” in

the sense that the parties would lack the freedom to vary such rule by

contract. Nor would we readily credit such argument, had it been made. 

See, e.g., Sebelius v. Auburn Reg’l Med. Ctr., 133 S. Ct. 817, 824 (2013)

(“To ward off profligate use of the term ‘jurisdiction,’ we have adopted a

‘readily administrable bright line’ for determining whether to classify a

statutory limitation as jurisdictional. We inquire whether Congress has

‘clearly state[d]’ that the rule is jurisdictional; absent such a clear

statement, we have cautioned, ‘courts should treat the restriction as

nonjurisdictional in character.’”) (quoting Arbaugh v. Y & H Corp.,

546 U.S. 500, 516 (2006)) (internal citation omitted).
NCCC V. QWEST 17

negotiations for binding interconnection agreements is the

very essence of section 251 and section 252.”). As such, we

have held that “the agreements themselves and state law

principles govern the questions of interpretation of the [ICAs]

and enforcement of their provisions.” Pac. Bell, 325 F.3d at

1128 (quoting Sw. Bell Tel. v. Pub. Util. Comm’n, 208 F.3d

475, 485 (5th Cir. 2000)).

Qwest relies heavily on Section XXXIV(V) of the 1997

ICAs. As we noted at the outset of this opinion, Section

XXXIV(V) stated:

This Agreement shall be effective for a period

of 2 1/2 years, and thereafter the Agreement

shall continue in force and effect unless and

until a new agreement, addressing all of the

terms of this Agreement, becomes effective

between the Parties. The Parties agree to

commence negotiations on a new agreement

no later than two years after this Agreement

becomes effective.

Qwest’s position is that Section XXXIV(V) not only

gives each party the power to initiate negotiations, but also

gives each party the power to achieve a “new agreement” by

compelling arbitration before the state Commissions if those

negotiations fail to resolve all of the parties’ disputes. In

effect, Qwest interprets Section XXXIV(V) to make

reciprocal what would otherwise be a unilateral power to

invoke the § 252 negotiation-and-arbitration process. Both
18 NCCC V. QWEST

state Commissions agreed with Qwest’s interpretation of the

1997 ICAs.4

We agree as well, and we therefore conclude for the

following reasons that the state Commissions had authority to

arbitrate the 2011 ICAs because the 1997 ICAs themselves

gave Qwest both the power to initiate negotiations and the

power to compel arbitration.

2

In the first place, North County’s briefing before this

court does not address the argument that the 1997 ICAs

authorized Qwest to compel arbitration. Given that North

County is a party to the contract, its silence is damning. So,

too, is the course of conduct North County engaged in during

the period before Qwest petitioned for arbitration. As the

parties explained in the Joint Statement of Agreed Facts, filed

with the district court in the Oregon proceeding below,

“[North County] and [Qwest] agreed to a series of extensions

of the arbitration window to file a petition for arbitration

under 47 U.S.C. § 252(b) . . . . In each of the extension

agreements . . . [North County] specifically agreed to extend

‘the period during which either party may file for arbitration

4 The Oregon Commission held that “[b]y the terms of the parties’

existing ICA, either Qwest or North County may commence negotiations

under Section 252(a)(l) of the Act, and if negotiations fail, either party

may then petition this Commission to arbitrate any open issues under

Section 252(b)(1) of the Act.” Likewise, the Arizona Commission held

that “the Commission clearly has the authority to arbitrate disputes arising

during the renegotiation of an ICA between Qwest and a CLEC,” based,

in part, on “the fact that under the ICA, both parties have the right to

commence negotiation of a new agreement,” and the fact “that Qwest met

the procedural requirements under the ICA.”
NCCC V. QWEST 19

under section 252(b)(1) of the Act.’” In addition, in January

2010 North County agreed to set a date for arbitration. North

County does not argue that it took any of these actions under

a reservation of rights or the like.

North County’s behavior under the 1997 ICAs is highly

probative of those ICAs’ meaning. See, e.g., Abrams v.

Horizon Corp., 669 P.2d 51, 57 (Ariz. 1983) (“Where an

agreement involves repeated occasions for performance by

either party with knowledge of the nature of the performance

and opportunity for objection to it by the other, any course of

performance accepted or acquiesced in without objection is

given great weight in the interpretation of the agreement.” 

(quoting Restatement (Second) of Contracts § 202(4) (1979)

(emphasis deleted)); Tarlow v. Arntson, 505 P.2d 338,

341–42 (Or. 1973) (en banc) (“How the original parties and

their successors conducted themselves in relation to the

agreement is instructive in our determination of what must

have been intended.”). To be sure, North County later

objected to the state Commissions’ authority to arbitrate. But

its failure to do so at any point during the lengthy period of

time leading up to litigation casts doubt on whether its current

position reflects the proper reading of the 1997 ICAs. 

Further, one might be able to argue that the 1997 ICAs, read

as a whole, give Qwest only the power to request

negotiations, but not the additional power to force arbitration. 

But North County has not attempted to advance such

argument here.

3

In sum, given (1) the language of the 1997 ICAs’

negotiation clause and the way it was interpreted by both state

Commissions below; (2) North County’s conduct in the time
20 NCCC V. QWEST

leading up to the arbitration proceedings; and (3) North

County’s lack of any rebuttal argument before this court; we

are satisfied that the state Commissions had authority to

arbitrate the 2011 ICAs because the 1997 ICAs themselves

gave Qwest the power to invoke the negotiation-andarbitration mechanism set forth in 47 U.S.C. § 252.

IV

North County next challenges six specific provisions of

the 2011 ICAs themselves: (1) the requirement that North

County interconnect with Qwest directly rather than through

a third-party tandem provider; (2) the ICAs’ Relative Use

Factor; (3) the requirement that North County employ SS7

signaling if and when it originates calls to Qwest; (4) the

requirement that North County pay Qwest for certain call

detail records; (5) the cap on the number of minutes for which

North County can bill Qwest; and (6) the ICAs’ failure to

allow North County to interconnect using Voice over Internet

Protocol.

The operative terms of the Oregon and Arizona ICAs are

similar or identical, except as indicated herein. We examine

each of North County’s objections in turn.

A

North County’s principal claim is that sections 7.1.1 and

7.2.1.1 of the ICAs, which require North County to

interconnect with Qwest directly rather than indirectly, as in,
NCCC V. QWEST 21

through a third-party tandem provider, are illegal and

unenforceable against it.5

1

Section 7.2.1.1 of the 2011 ICAs provides that, “[u]nless

otherwise agreed to by the Parties, via an amendment to this

Agreement, the Parties will directly exchange traffic between

their respective networks without the use of third party transit

providers.” North County claims this provision is unlawful. 

North County’s position appears to be rather strange, given

that the 1997 ICAs contained nearly identical language,6and

yet North County has repeatedly stressed that the 1997 ICAs

are fully lawful.

Equally troubling is the near total lack of support for

North County’s argument. North County cites only one

authority for the proposition that federal law requires that it

be able to force Qwest to interconnect via third-party tandem

provider. That authority is a 1996 FCC order in which the

FCC stated that “competitive telecommunications carriers

that have the obligation to interconnect with requesting

carriers may choose, based upon their own characteristics,

whether to allow direct or indirect interconnection.” In the

Matter of Implementation of the Local Competition

5 North County’s direct-vs.-indirect challenge is waived with respect to

the Oregon-affected ICA because North County of Oregon never raised

it before the Oregon Commission. See W. Radio Servs. Co. v. Qwest

Corp., 678 F.3d 970, 979 (9th Cir. 2012).

6 Section V.A. of the 1997 ICAs declared that, “[a]bsent a separately

negotiated agreement to the contrary, the Parties will directly exchange

traffic between their respective networks, without the use of third party

transit providers.”
22 NCCC V. QWEST

Provisions in the Telecommunications Act of 1996,

11 F.C.C.R. 15499, 16171 ¶ 1408 (1996) (hereinafter “First

Report and Order”). From this, North County concludes that

Qwest had a “clear obligation to allow [North County] to

select indirect interconnection with [Qwest] when [Qwest]

submitted its ICA negotiation requests.”

We are not persuaded that the First Report and Order

renders section 7.2.1.1 unlawful because the FCC ruling is

not on point.

In particular, when the above-quoted FCC language

highlights a CLEC’s leeway to choose direct vs. indirect, it

does so for the limited purpose of illustrating that CLECs

have different statutoryobligations from ILECs. Specifically,

the order explains, 47 U.S.C. § 251(c) requires ILECs—but

not CLECs—to interconnect directlywith requesting carriers. 

First Report and Order at 15991 ¶ 997 (“Section 251 is clear

in imposing different obligations on carriers depending upon

their classification . . . . For example, section 251(c)

specifically imposes obligations upon incumbent LECs to

interconnect, upon request, at all technically feasible points. 

This direct interconnection, however, is not required under

section 251(a) of all telecommunications carriers.”). CLECs,

by contrast, are not subject to § 251(c); CLECs are governed

by §§ 251(a) and (b), which do not require them to

interconnect directly if direct interconnection would be

uneconomical or technically infeasible for them. Indeed, the

major conclusion reached by the FCC order was that “indirect

connection . . .satisfies a telecommunication carrier’s duty to

interconnect pursuant to section 251(a).” First Report and

Order ¶ 997. The FCC emphasized that “telecommunications

carriers should be permitted to provide interconnection

pursuant to section 251(a) either directly or indirectly, based
NCCC V. QWEST 23

upon their most efficient technical and economic choices.” 

Id.

In other words, the First Report and Order merely

clarified that CLECs are permitted to use indirect

interconnection in order to meet the statutory interconnection

obligations imposed on them by § 251(a). But just because

the statute permits CLECs to interconnect indirectly with

other LECs, does not mean that each CLEC has the absolute

right to demand indirect interconnection of other LECs under

any and all circumstances. Whatever else it says, the First

Report and Order does not condemn the default rule the 2011

ICAs establish.

Hence, the First Report and Order does not give North

Countythe unilateral right to demand indirect interconnection

from Qwest. Nor does the text of the Telecommunications

Act itself give North County that right. For those reasons,

North County cannot establish that the 2011 ICAs violate the

Act simply because they require North County to use direct

interconnection for the time being. If North County is to

succeed in establishing that it was entitled to indirect

interconnection, it must show that the Arizona Commission

acted arbitrarily and capriciously in approving the 2011 ICA

provisions that set direct interconnection as the parties’

default.

2

The Arizona Commission’s decision to approve the 2011

ICA’s direct interconnection provisions may be set aside as

arbitrary and capricious only if North County demonstrates

that such decision “was not supported by substantial

evidence,” or represents a “clear error of judgment” on the
24 NCCC V. QWEST

Commission’s part. W. Radio Servs. Co. v. Qwest Corp.,

678 F.3d 970, 976 (9th Cir. 2012) (quoting Verizon Cal., Inc.

v. Peevey, 462 F.3d 1142, 1150 (9th Cir. 2006)).

North County makes a single argument: that if North

County were allowed to interconnect indirectly with Qwest,

specifically “through a third-party tandem provider that

utilizes SS7 signaling,” then North County’s “use of MF

signaling” would become “irrelevant.” Recall that the

impetus for Qwest’s request to negotiate the 2011 ICAs was

Qwest’s claim that North County had been overbilling it and

obscuring the inclusion of inflated costs by using the more

opaque MF signaling data. North County argues that

interconnection through a third-party tandem provider would

render Qwest’s “reasons for wanting new ICAs . . . moot,”

and the “direct interconnection ICAs forced on [North

County] . . . unnecessary.”

North County’s argument does not establish that the

Arizona Commission committed a clear error of judgment. 

In the first place, North County has offered no evidence

whatsoever to substantiate its assertion that Qwest’s

legitimate concerns would evaporate if only North County

were permitted to connect through a third-party tandem

provider. On the contrary, North County’s President testified

before the Commission that he had “‘no clue’ what kind of

call information its third-party tandem provider gives to

Qwest when it passes a call from [North County].” 

Moreover, in testimony before the Commission, Qwest

explained that the parties would need to answer numerous

questions about the terms and conditions of indirect

interconnection, which were not raised during the parties’

pre-arbitration negotiations, before they could interconnect

through a third-party tandem provider. Finally, section
NCCC V. QWEST 25

7.2.1.1 of the 2011 ICAs expressly allows North County to

renegotiate this issue in the future. The Arizona Commission

was well within its discretion to approve the provisions

requiring direct interconnection for the time being.

B

North County next objects to the 2011 ICAs’ Relative

Use Factor.

In simplified terms, when someone from Qwest’s network

calls someone in North County’s network—or vice versa—

the traffic must be transmitted through certain facilities,

called trunk facilities. But transmitting local traffic between

the two networks generates costs to the party operating the

trunk facilities, and those costs must be divided between

Qwest and North County. Under FCC regulations, an ILEC

like Qwest may charge a CLEC like North County, but only

in proportion to the amount of traffic that originates on the

CLEC’s network and terminates on the ILEC’s network. 47

C.F.R. § 51.703. In an effort to charge North County for the

proportion of Qwest–North County traffic that originates with

North County, the 2011 ICAs employ a so-called “relative

use factor” that assigns 99 percent of the costs to Qwest and

1 percent of the costs to North County, although the ICAs

permit this figure to be adjusted after one calendar quarter to

reflect actual usage data.

North County objects to the 99:1 ratio; it contends that the

2011 ICAs should assign Qwest 100% of these costs to Qwest

because the 2011 ICAs specifically state that North County
26 NCCC V. QWEST

does not send any traffic to Qwest.7In light of that

stipulation, North County argues that it was arbitrary and

capricious for the state Commissions to approve a relative use

factor of 99:1.

We are not persuaded. Despite the language in the 2011

ICAs declaring that North County sends no calls to Qwest,

there was unrebutted record evidence that North County does

originate at least some calls to Qwest. Moreover, Qwest

testified that it is unable to determine how much traffic North

County originates to it, and neither party supplied the state

Commissions with any actual data quantifying their relative

use of the trunk facilities. Given that North County originates

some small but unknown amount of traffic, and given that the

ICAs allow the Relative Use Factor to be revised after a short

period of time, we conclude that it was not arbitrary and

capricious for the state Commissions to approve a provisional

relative use factor of 99:1.8

C

North County also contends that the 2011 ICAs violate

the Telecommunications Act by requiring North County to

7

In particular, section 7.1.1 of the 2011 ICAs states that “[t]he Parties

understand and agree that CLEC currently sends no traffic to Qwest and

instead terminates traffic either originated by Qwest or originated by other

carriers and passed through Qwest to CLEC.”

8 To the extent North County challenges the ICA provisions regarding

Multiplexing and installation charges, North County waived such

challenges with respect to the Oregon-affected ICA. With respect to the

Arizona-affected ICA, such challenges fail because the factual premise of

North County’s argument is incorrect: Multiplexing and installation

charges are not subject to the Relative Use Factor.
NCCC V. QWEST 27

use SS7 technology if and when it originates calls to Qwest. 

North County relies on 47 U.S.C. § 252(i), which provides

that “[a] local exchange carrier shall make available any

interconnection, service, or network element provided under

an agreement approved under this section to which it is a

party to any other requesting telecommunications carrier

upon the same terms and conditions as those provided in the

agreement.”

As its text makes clear, § 252(i) is a non-discrimination

provision. North County’s attempt to invoke it fails because

nothing in the record suggests that Qwest allows other

exchange carriers to do what North County wants to do,

namely, to transmit local traffic using only MF signaling. 

Indeed, the parties’ joint statement of undisputed facts filed

in the Oregon proceedings indicates that “[North County] is

the only CLEC in Oregon that interconnects with [Qwest]

using exclusively MF signaling.”9 North County provides no

evidence to substantiate any discrimination theory.

Moreover, it was not arbitraryand capricious or otherwise

unlawful for Qwest to insist that North County use SS7

signaling if it wants to originate calls to Qwest. Substantial

9 And while Qwest has offered evidence that at least one other CLEC in

Oregon “currently interconnects with [Qwest] using the same 1997 ICA

that [Qwest] had with [North County],” the 1997 ICA requires the CLEC

to “make a good faith effort” to transition to SS7 signaling technology

within “4 months” of the execution of that ICA. And, as already

explained above, it is undisputed that even the CLEC operating under the

1997 ICA does not now connect with Qwest using MF signaling

technology. Because there is simply no evidence that Qwest is permitting

any other carrier to do what North County wants to do—namely, transmit

local traffic using only MF signaling—there is no basis upon which to find

that section 7.2.1.1 violates the Act’s non-discrimination provision.
28 NCCC V. QWEST

evidence supports Qwest’s contention that SS7 signaling has

significant benefits when compared to MF signaling; that MF

signaling is essentially obsolete; and that North County’s use

of MF signaling created serious problems for Qwest, in

particular by impeding Qwest’s ability to bill North County

for traffic exchanged between their networks. We therefore

conclude that substantial evidence supported the state

Commissions’ decisions to approve the ICAs’ requirements

that North County use SS7 signaling if and when it decides to

originate traffic to Qwest.

D

North County next argues that the 2011 ICAs are

unlawful because section 7.6 requires North County to pay

Qwest for certain call detail records. We reject this challenge

because both North County entities failed to raise it before

their respective state Commissions, and both district courts

below properly refused to entertain it. North County

therefore may not assert it here. W. Radio Servs., 678 F.3d at

979.

E

In its penultimate challenge, North County asks us to

invalidate section 7.8 of the ICAs, which impose a cap on the

number of minutes for which North County may bill Qwest.

Recall that Qwest is obligated to compensate North

County for some portion of the traffic that Qwest sends to

North County. Recall, also, that Qwest had claimed that it

had been overbilled by North County, and that North

County’s continued use of MF signaling to terminate calls

had made it difficult for Qwest to verify the number of
NCCC V. QWEST 29

minutes for which Qwest may lawfully be made to pay North

County. Given those circumstances, Qwest insisted that the

2011 ICAs impose a cap on the number of minutes for which

North County is authorized to bill it. In Arizona, the cap is

400,000 minutes; in Oregon, it is 240,000 minutes. The

Arizona-affected ICA also provides that “[e]ither party may

request a modification of the cap, including its elimination,

based on verifiably accurate records that the traffic is

appropriatelysubject to reciprocal compensation.” Similarly,

with respect to the Oregon-affected ICA, Qwest testified that

it is “willing to negotiate to amend [the cap] if [North

County] can show that it is receiving more minutes over the

trunks that are truly local and compensable.” North County

objects that these caps are arbitrary and capricious.

We have no trouble concluding that substantial evidence

supports the state Commissions’ decisions to approve the

caps. First, the record contains ample evidence of the billing

disputes that led Qwest to insist on the caps. Moreover, as

the Arizona Commission explained, “[t]he proposed cap of an

average of 400,000 minutes of use per month . . . was

calculated based on [North County]’s current usage pattern

and Qwest’s best efforts to analyze that data based on

information received from [North County]. [North County]

did not provide evidence in this proceeding about its actual

use of its in-service circuits, nor did it contest Qwest’s

calculations.” Likewise, Qwest selected the Oregon-affected

ICA’s 240,000-minute cap based on evidence of North

County’s actual usage patterns, and in fact, the cap

deliberately allows 40% more minutes than Qwest currently

sends to North County on average. North County has not

presented any evidence to undermine the numbers Qwest has

proposed.
30 NCCC V. QWEST

In short, we conclude that the caps respond to a welldocumented, legitimate billing dispute that is the direct

consequence of North County’s continued use of MF

signaling technology. The caps are based on substantial and

uncontroverted evidence, and are subject to renegotiation in

light of future data. North County has not shown them to be

arbitrary and capricious.

F

Finally, North County argues that the

Telecommunications Act requires Qwest to allow North

County to interconnect with it using Voice over Internet

Protocol (“VoIP”) technology. North County does not claim

that it has an absolute right to demand interconnection

through VoIP; instead, North County invokes the Act’s nondiscrimination provisions, §§ 251(c)(2)(D) and 252(i), to

assert that Qwest must offer it VoIP interconnection.

As we discussed above, § 252(i) declares that “[a] local

exchange carrier shall make available any interconnection,

service, or network element provided under an agreement

approved under this section to which it is a party to any other

requesting telecommunications carrier upon the same terms

and conditions as those provided in the agreement.” 

47 U.S.C. § 252(i). Similarly, § 251(c)(2)(D) requires ILECs

to provide interconnection “on rates, terms, and conditions

that are just, reasonable, and nondiscriminatory, in

accordance with the terms and conditions of the agreement

and the requirements of this section and section 252 of this

title.” 47 U.S.C. § 251(c)(2)(D).

North County’s argument fails for several reasons. First,

with respect to the Oregon-affected ICA, North County never
NCCC V. QWEST 31

raised it before the Oregon Commission, and therefore the

district court properly concluded that it is waived.

With respect to the Arizona-affected ICA, North County

cannot successfully invoke the Act’s non-discrimination

provisions because it has pointed to no evidence that Qwest

provides service using VoIP technology to anyone. To the

contrary, Qwest testified below that it does not provide VoIP

service; only a separate corporate affiliate does. North

County cites nothing to rebut such testimony. The nondiscrimination provisions of §§ 251(c)(2)(D) and 252(i)

therefore have no application.

V

In conclusion, we are satisfied that the Commissions had

authority to arbitrate the 2011 ICAs. We are also satisfied

that none of the provisions subject to our review violates the

Telecommunications Act or its implementing regulations, and

that none of the state Commissions’ actions were arbitrary or

capricious.

The judgments of the district courts are AFFIRMED.