IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF FLORIDA

TALLAHASSEE DIVISION

BELLSOUTH TELECOMMUNICATIONS, INC.,

Plaintiff,

vs. CASE NO. 4:02cv325-SPM

SUPRA TELECOMMUNICATIONS

AND INFORMATION SYSTEMS, INC., et al.,

Defendants.

_____________________________________ /

FINAL ORDER

This case arises out of an arbitration proceeding conducted by the Florida

Public Service Commission (Commission). The Commission issued an

arbitration order that established terms for BellSouth Telecommunications, Inc.

(BellSouth) to provide Supra Telecommunications and Information Systems, Inc.

(Supra) access to BellSouth’s local telephone network, as required under the

Telecommunications Act of 1996. The issue presented is whether the

Commission erred by requiring BellSouth, as a term of Supra’s access to

BellSouth’s network, to continue providing digital subscriber line (DSL) Internet

access service to telephone customers who no longer subscribe to BellSouth for

local telephone service.

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I. BACKGROUND

The purpose of the Telecommunications Act of 1996 is to foster

competitive markets for local telephone services, which previously had been

provided on a monopoly basis by companies regulated under state law and by

state public service commissions. Under the Act, Congress preempted all state

laws restricting local competition. 47 U.S.C. § 253(a). Congress also imposed a

comprehensive set of affirmative requirements to facilitate market entry by

competitors. 47 U.S.C. § 251(c).

Among these, incumbent local exchange carriers (incumbent LECs or

ILECs), like BellSouth, who previously enjoyed monopoly status, are required to

provide competitors (competitive local exchange carriers or CLECs), like Supra,

interconnection and access to the ILEC’s network. 47 U.S.C. § 251(c). These

local networks were constructed over the years under the monopoly system and

include, among other things, switches and telephone lines (or loops) made of

copper wire or fiber optics. A network connects virtually every home and

business in a local service area. 

The Telecommunication Act’s interconnection requirement promotes

competition by connecting the local network so that local customers of different

carriers can call each other. Without the requirement of interconnection,

competition among carriers of separate networks would be of limited value to

customers because local calls could only be made between customers of the

same carrier. Access to the ILEC’s network is also needed to develop

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 The public service commissions may decline to act, in which case the

FCC resumes the responsibility for arbitration and approval of interconnection

agreements. 47 U.S.C. § 252(e)(5).

meaningful competition since, as a practical matter, it is impossible for a

competitor to rapidly build a new network given the high costs involved. 

To these ends, ILEC’s are required to negotiate terms for interconnection

agreements and to provide access to their network elements to other carriers on

a non-discriminatory basis. 47 U.S.C. § 251(c). A rate for access to each

network element is separately priced as an unbundled network element (UNE). 

A UNE can be leased separately or combined with other leased UNEs. 47

U.S.C. § 251(c)(3). 

State public service commissions are vested with the authority to approve

or reject interconnection agreements reached by carriers. 47 U.S.C. § 252(a)(1) 

The commissions may also arbitrate disputes between the carriers about their

interconnection agreements or arbitrate the terms and rates if no agreement is

reached.1

 47 U.S.C. § 252(b). In this way, the states’ role in local telephone

regulation is preserved and the public service commissions are free to act in

accordance with state interests, so long as those interests are not contrary to the

Telecommunications Act and Federal Communications Commission (FCC)

regulations. 47 U.S.C. §§ 251(d)(3), 261. Federal district courts have exclusive

appellate jurisdiction to review determinations made by the state public service

commissions. 47 U.S.C. § 251(e)(6).

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 A loop has a high frequency spectrum that can be used to provide DSL

service and a low frequency spectrum that can be used to provide voice

telephone service. In re BellSouth Telecommunications, Inc. Request for

Declaratory Ruling, WC Docket No. 03-251 at ¶ 25, (FCC March 25, 2005). 

II. STANDARD OF REVIEW

De novo review applies to a state commission’s interpretation of the

meaning and import of the Telecommunications Act. AT&T Communications of

Southern States v. GTE Florida, Inc., 123 F.Supp.2d 1318, 1322 (N.D. Fla.

2000). The arbitrary and capricious standard of review applies to a state

commission’s application of the Act. Id. Furthermore, to the extent the FCC

has issued an interpretive decision implementing the Act, the FCC’s decision is

entitled to “Chevron” deference, which means that the decision is “given

controlling weight unless [it is] arbitrary, capricious, or manifestly contrary to the

statute.” Chevron USA, Inc. v. Natural Resources Defense Council, Inc., 467

U.S. 837, 844 (1984); see also AT&T Corp. v, Iowa Utilities Bd., 525 U.S. 366,

384-87 (1999) (applying Chevron to FCC interpretations of the

Telecommunications Act of Act of 1996).

III. DISCUSSION

Prior to the Commission’s arbitration decision, BellSouth was offering DSL

Internet access service in connection with local telephone service so that only

those who subscribed to BellSouth for local telephone service were eligible to

subscribe to BellSouth’s DSL Internet access service. BellSouth used the same

loop to provide both services.2

 If a DSL customer changed local telephone

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 In addition to the Florida, state commissions in Kentucky, Louisiana, and

Georgia issued similar orders regarding BellSouth’s obligation to provide DSL

service. Id. at ¶¶ 11-14.

service to another carrier, like Supra, BellSouth would discontinue the customer’s

subscription for DSL service. Viewing BellSouth’s activity as an obstacle to

competition in the local telephone market, the Commission issued an arbitration

decision requiring BellSouth, as a term of Supra’s access to BellSouth’s network,

to continuing providing DSL service when a customer changed to another carrier,

like Supra, who leased loops from BellSouth to provide local telephone service. 

BellSouth objected to the requirement, arguing that the Commission had no basis

under the Telecommunications Act, or otherwise, to require BellSouth to provide

DSL service. 

In response to a petition for declaratory ruling filed by BellSouth, the FCC

issued a decision in favor of BellSouth. In re BellSouth Telecommunications, Inc.

Request for Declaratory Ruling, WC Docket No. 03-251 (FCC March 25, 2005). 

The FCC ruled that state commission orders3 requiring BellSouth to continue

providing DSL service are inconsistent with the Telecommunications Act and

FCC regulations. Id. at ¶ 1. 

The FCC specifically found that since BellSouth used the same loop to

provide both DSL service and local telephone service, requiring BellSouth to

continue providing DSL when a competitor leased the loop for local telephone

service, in effect, required BellSouth to unbundle the loop in a manner that is

contrary to the requirements of the Telecommunications Act, as determined in a

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recent FCC ruling. Id. at ¶¶ 25-27. 

Keeping a loop as a single element, the FCC noted, created incentives for

competing voice and data carriers to enter into innovative arrangements, to

deploy new facilities, and to provide different products; thereby promoting

competition. Id. at ¶¶ 28-30. With the focus on these aspects of competition, the

FCC found that the state orders, which in effect unbundled the loops, were

contrary to the Telecommunications Act and exceeded the authority reserved to

the states under the Act. Id. ¶ 17. Pursuant to the FCC’s ruling, to which this

Court defers, the Commission’s arbitration order in this case cannot be sustained

because it is contrary to the Telecommunications Act. Based on the foregoing, it

is

ORDERED AND ADJUDGED that the provisions of the Commission’s

order, PSC-02-0878-FOF-TP, requiring BellSouth to provide DSL service to

customers who do not subscribe to BellSouth’s local telephone service are

vacated. 

 DONE AND ORDERED this 18th day of July, 2005.

 s/ Stephan P. Mickle 

Stephan P. Mickle

United States District Judge

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