United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 9, 2006 Decided August 15, 2006

No. 05-1087

EARTHLINK, INC.,

PETITIONER

v.

FEDERAL COMMUNICATIONS COMMISSION AND

UNITED STATES OF AMERICA,

RESPONDENTS

BELLSOUTH CORPORATION, ET AL.,

INTERVENORS

On Petition for Review of an Order of the

Federal Communications Commission

Mark J. O'Connor argued the cause for petitioner. With him

on the briefs were Donna N. Lampert and Jennifer L.

Phurrough.

Nandan M. Joshi, Counsel, Federal Communications

Commission, argued the cause for respondent. On the brief were

Thomas O. Barnett, Assistant Attorney General, U.S.

Department of Justice, Catherine G. O'Sullivan and Nancy C.

Garrison, Attorneys, Samuel L. Feder, General Counsel, Federal

Communications Commission, Jacob M. Lewis, Associate
2

General Counsel, John E. Ingle, Deputy Associate General

Counsel, and Laurence N. Bourne, Counsel.

Scott H. Angstreich argued the cause for intervenors

BellSouth Corporation, et al. in support of the respondent. With

him on the briefs were Michael K. Kellogg, Mark L. Evans,

Geoffrey M.Klineberg, Sean A. Lev, Michael E. Glover, Edward

Shakin, James D. Ellis, Gary L. Phillips, and Bennett L. Ross.

Before: SENTELLE and BROWN, Circuit Judges, and

EDWARDS, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge BROWN.

BROWN, Circuit Judge: Traditionally (if that can be said of

anything in the information age), many internet users lumbered

along via dial-up connections over standard copper phone lines.

Increasingly, however, broadband internet service is becoming

available, providing significantly higher access speeds. Two of

the most widespread methods of delivering broadband service

are digital subscriber line (DSL), which utilizes the highfrequency portion of copper lines, and cable modem service.

Other technologies, such as fiber optics, are steadily gaining

ground.

In the case before us, the Federal Communications Commission (FCC) agreed not to require the Bell Operating Companies (BOCs) to provide their competitors with “unbundled”

access to certain fiber-based network facilities. See 47 U.S.C.

§ 271(c)(2)(B). EarthLink, Inc., an internet service provider that

benefits from such unbundling, challenges the FCC’s order.

Persuaded that the agency’s interpretation and application of the

statutory scheme are permissible, we deny the petition for

review. 
3

I

Until the 1990s, local telephone companies operated as

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

371 (1999); AT&T Corp. v. FCC, 220 F.3d 607, 610 (D.C. Cir.

2000). The local exchange carriers in a given area owned “the

local loops (wires connecting telephones to switches), the

switches (equipment directing calls to their destinations), and

the transport trunks (wires carrying calls between switches) that

constitute a local exchange network.” Iowa Utils. Bd., 525 U.S.

at 371. Congress passed the Telecommunications Act of 1996,

Pub. L. No. 104-104, 110 Stat. 56 (“the Act”) (amending the

Communications Act of 1934, 47 U.S.C. § 151 et seq.), to

“promote competition and reduce regulation in order to secure

lower prices and higher quality services for American telecommunications consumers and encourage the rapid deployment of

new telecommunications technologies.” U.S. Telecom Ass’n v.

FCC, 290 F.3d 415, 417 (D.C. Cir. 2002) (USTA I) (quoting Act

pmbl.) (internal quotation marks omitted). 

Under 47 U.S.C. § 251, the FCC has authority to require

incumbent local exchange carriers (ILECs) to provide access to

their network facilities and capabilities on an “unbundled” basis

to competitive local exchange carriers (CLECs). Id. § 251(c)(3),

(d)(2). In determining what unbundled network elements must

be made available, the FCC considers “at a minimum, whether

. . . the failure to provide access . . . would impair the ability of

the [CLEC] to provide the services that it seeks to offer.”

Id. § 251(d)(2)(B); see id. § 153(29) (defining “network element” as “a facility or equipment used in the provision of a

telecommunications service”). 

The Act also contains provisions applicable specifically to

the BOCs (a subset of ILECs), allowing them to enter long

distance markets forbidden to them under the antitrust consent
4

See 47 U.S.C. § 153(21) (defining “interLATA service” as 1

“telecommunications between a point located in a local access and

transport area and a point located outside such area”); id. § 271(b)(1)

(“in-region” refers to services that originate within the BOC’s

geographic region).

47 U.S.C. § 160(a) and (b): 2

(a) Regulatory flexibility[.] . . . [T]he [FCC] shall forbear from

applying any regulation or any provision of this chapter to a

telecommunications carrier or telecommunications service, or

decree that broke up AT&T in the early 1980s. See AT&T, 220

F.3d at 610-12. Under 47 U.S.C. § 271, BOCs seeking to

provide certain long-distance services—namely, in-region

“interLATA services” —must obtain permission from the FCC, 1

id. § 271(d)(1), premised upon, among other things, the BOC’s

compliance with a “[c]ompetitive checklist,” id. § 271(c)(2)(B).

Checklist items four through six and ten require BOCs to

provide unbundled access to local loops, local transport, local

switching, and call-related databases. Id. § 271(c)(2)(B)(iv)-(vi),

(x). These particular obligations are independent of any

unbundling required by § 251. U.S. Telecom Ass’n v. FCC, 359

F.3d 554, 588 (D.C. Cir. 2004) (USTA II); cf. 47 U.S.C.

§ 271(c)(2)(B)(ii) (incorporating by reference the unbundling

requirements of § 251(c)(3)).

Notwithstanding the foregoing, under 47 U.S.C. § 160, the

FCC must forbear from applying a given provision of the

Communications Act to a telecommunications carrier “in any or

some of its . . . geographic markets,” if three conditions are met:

(1) enforcement is not necessary to ensure that charges and

practices are just, reasonable and non-discriminatory; (2)

enforcement “is not necessary for the protection of consumers”;

and (3) forbearance “is consistent with the public interest.” Id.

§ 160(a). As to the third prong, the FCC “shall consider 2
5

class of telecommunications carriers or telecommunications

services, in any or some of its or their geographic markets, if the

[FCC] determines that--

(1) enforcement of such regulation or provision is not

necessary to ensure that the charges, practices,

classifications, or regulations by, for, or in connection with

that telecommunications carrier or telecommunications

service are just and reasonable and are not unjustly or

unreasonably discriminatory;

(2) enforcement of such regulation or provision is not

necessary for the protection of consumers; and

(3) forbearance from applying such provision or regulation

is consistent with the public interest.

(b) Competitive effect to be weighed[.] In making the

determination under subsection (a)(3) of this section, the [FCC]

shall consider whether forbearance from enforcing the provision

or regulation will promote competitive market conditions,

including the extent to which such forbearance will enhance

competition among providers of telecommunications services. If

the [FCC] determines that such forbearance will promote

competition among providers of telecommunications services,

that determination may be the basis for a[n] [FCC] finding that

forbearance is in the public interest.

whether forbearance . . . will promote competitive market

conditions, including the extent to which such forbearance will

enhance competition among providers of telecommunications

services.” Id. § 160(b). Telecommunication carriers may petition

for forbearance and, if the FCC declines to act within a year

(subject to a 90-day extension), the petition is deemed granted

as a matter of law. Id. § 160(c).

Furthermore, section 706 of the Act sets forth the following
6

The FCC’s prior attempts were unsuccessful. See Iowa Utils.

3

Bd., 525 U.S. 366; USTA I, 290 F.3d 415.

overarching direction:

The [FCC] . . . shall encourage the deployment on a

reasonable and timely basis of advanced telecommunications capability to all Americans . . . by utilizing . . .

regulatory forbearance, measures that promote competition

in the local telecommunications market, or other regulating

methods that remove barriers to infrastructure investment.

Act § 706(a) (emphasis added) (reproduced at 47 U.S.C. § 157

note); see Act § 706(c)(1) (defining “advanced telecommunications capability” as “high-speed, switched, broadband telecommunications capability that enables users to originate and

receive high-quality voice, data, graphics, and video telecommunications using any technology”).

A

In 2003, in its Triennial Review Order, the FCC attempted

to implement the unbundling requirements of § 251(c)(3).

Review of the Section 251 Unbundling Obligations of Incumbent

Local Exchange Carriers, 18 F.C.C.R. 16,978 (2003) (Triennial

Review Order). In pertinent part, the agency relieved those

3

obligations on a nationwide basis with respect to certain new

fiber broadband network elements. Specifically, the FCC did not

require ILECs unbundle fiber-to-the-home (FTTH) loops (i.e.,

loops extending from the ILEC’s central office all the way to the

customers’ premises) in places where fiber loop plant had not

previously existed: “greenfield” situations (i.e., new residential

areas where no lines had existed) and “overbuild” situations

(i.e., locations where only copper loop plant was in place). Id. at

17,142. In the latter, however, if the ILEC decides to retire the
7

incumbent copper loops, it must then make its fiber loops

available—albeit only for narrowband, not broadband uses. Id.

The FCC also declined to require unbundling as to the “next

generation network, packetized capabilities” of hybrid loops

(i.e., loops comprised only partially of fiber) and “packetswitching.” Id. at 17,149, 17,321.

In the agency’s view, balancing the costs and benefits of

unbundling, with particular attention to incentivizing new fiber

investment by both ILECs and CLECs, the scales tipped against

mandating unbundling. See, e.g., id. at 17,121-22, 17,141-53.

The FCC emphasized that its “obligation to ensure the deployment of advanced telecommunications capability under section

706 warrants different approaches with regard to existing

[copper] loop plant and new [fiber] loop plant.” Id. at 17,126.

In USTA II, while vacating much of the Triennial Review

Order, we upheld the FCC’s nationwide decision to refrain from

requiring § 251 unbundling as to the fiber broadband elements

described above. USTA II, 359 F.3d at 578-87. The FCC had

reasonably determined, for example, that “any damage to

broadband competition from denying unbundled access to the

broadband capacities of hybrid loops is likely to be mitigated by

the availability of loop alternatives or intermodal competition.”

Id. at 582. As to the latter, we noted that cable companies,

having roughly a 60% share of the nationwide broadband

market, provided “robust intermodal competition” to ILECs,

which occupied a secondary market position. Id.

Furthermore, we held that the FCC “reasonably interpreted

§ 251(c)(3) to allow it to withhold unbundling orders, even in

the face of some impairment, where such unbundling would

pose excessive impediments to infrastructure investment,” id. at

580, because “[s]ection 706(a) identifies one of the Act’s goals

beyond fostering competition piggy-backed on ILEC facilities,
8

namely, removing barriers to infrastructure investment,” id. at

579. Even if the FCC’s judgment “entails increasing consumer

costs today in order to stimulate technological innovations,” we

opined, “there is nothing in the Act barring such trade-offs.” Id.

at 581. That is, FCC may weigh the “costs of unbundling” (e.g.,

investment disincentives) against the “benefits of removing this

barrier to competition.” Id. at 579 (discussing hybrid loops);see

id. at 583 (“[T]he [section] 706 considerations . . . are enough to

justify the [FCC’s] decision not to unbundle FTTH.”).

 In turn, we found reasonable the FCC’s conclusion that

requiring unbundling of the elements at issue would, indeed,

produce undesirable incentives as it is “likely to delay infrastructure investment, with CLECs tempted to wait for ILECs to

deploy FTTH and ILECs fearful that CLEC access would

undermine the investments’ potential return.” Id. at 584.

Accordingly, we upheld the FCC’s refusal to unbundle the

broadband fiber elements, “even in the face of some CLEC

impairment, in light of evidence that unbundling would skew

investment incentives in undesirable ways and that intermodal

competition from cable ensures the persistence of substantial

competition in broadband.” Id. at 585.

After we decided USTA II, the FCC extended the same

§ 251 unbundling relief to fiber-to-the-curb (FTTC) loops (i.e.,

hybrid loops in which fiber runs nearly, but not all the way, to

the customers’ premises) and loops to multi-dwelling units.

Triennial Review Order, Order on Reconsideration, 19 F.C.C.R.

20,293 (2004); Triennial Review Order, Order on Reconsideration, 19 F.C.C.R. 15,856 (2004).
9

For simplicity, “Verizon” refers to the Verizon telephone 4

companies—the local exchange carriers affiliated with Verizon

Communications, Inc.

In 2005, SBC Communications acquired AT&T Corp. (forming 5

AT&T Inc.).

Upon being divested by AT&T as required by the 1982 consent 6

decree, the BOCs were consolidated into seven regional holding

companies and, due to mergers, that number has since dropped to four.

See Ass’n of Commc’ns Enters. v. FCC, 235 F.3d 662, 663-64 (D.C.

Cir. 2001); AT&T, 220 F.3d at 610-11. There might soon be only

three. See Dionne Searcey et al., A Reborn AT&T to Buy BellSouth,

WALL ST. J., Mar. 6, 2006, at A1.

B

The BOCs filed four petitions—one each for Verizon;4

AT&T Inc. (formerly SBC Communications, Inc.); Qwest 5

Communications International, Inc.; and BellSouth Telecommunications, Inc.—seeking forbearance under § 160 from the

additional unbundling requirements of § 271. After consolidat- 6

ing the petitions, the FCC, in the Order under review here,

agreed to forbear from applying § 271’s independent unbundling

obligations to the broadband elements that the FCC had previously “relieved from unbundling [on a national basis] under

[§] 251: FTTH loops, FTTC loops, the packetized functionality

of hybrid loops, and packet switching.” Petition for Forbearance of the Verizon Telephone Companies Pursuant to 47 U.S.C.

§ 160(c), 19 F.C.C.R. 21,496, ¶ 12 (2004) (Order).

At the outset, the FCC made clear that its forbearance

analysis is “informed” by section 706’s mandate to encourage

deployment of broadband services. Id. ¶ 20 (citing Act pmbl.,

§ 706; Deployment of Wireline Servs. Offering Advanced

Telecomms. Capability, 13 F.C.C.R. 24,012, 24,047 (1998)
10

(discussing the relationship between § 160 and section 706)).

Through that prism, the FCC then applied § 160(a)’s tripartite

inquiry, determining that unbundling the broadband fiber

elements is not necessary either to ensure just and reasonable

rates or to protect consumers, and that forbearance is in the

public interest. Id. ¶¶ 19-36. The FCC’s analysis was similar for

all three prongs, balancing short-term competitive effects and

future developments. See, e.g., id. ¶ 31 (“[T]he [FCC] lawfully

may focus on future consumer benefits anticipated by its current

policy decisions.” (citing USTA II, 359 F.3d at 581)).

The FCC acknowledged the important role that competition

plays in ensuring reasonable rates, protecting consumers, and

furthering the public interest. Id. ¶¶ 24, 30, 33; see also 47

U.S.C. § 160(b). The agency determined, however, that the

BOCs have only “limited competitive advantages” in the

market. Id. ¶ 30. Considering the “wholesale market in conjunction with competitive conditions in the downstream retail

broadband market,” the FCC looked to several factors, including

the emerging nature of the broadband market, in which “the

preconditions for monopoly are not present”; the fact that cable

modem providers, not ILECs, “control a majority of all residential and small-business lines”; the expected rise of other

intermodal broadband competition, such as fixed wireless,

satellite, and broadband over powerline; and the CLECs’

continued ability to compete in the broadband market by

deploying their own fiber loops or accessing ILECs’ legacy

copper elements. Order ¶¶ 21-23. Ultimately, the FCC concluded that any short-term effects on competition are offset by

the prospect of additional intermodal competition and the

benefits that forbearance will provide: incentives for both ILECs

and CLECs to invest in and deploy broadband facilities, which

will increase competition going forward and thereby keep rates

reasonable, benefit consumers, and serve the public interest.
11

EarthLink, an internet service provider that relies on CLECs

and ILECs(including the BOCs) for last-mile access to consumers, petitions for review of the Order. Verizon, AT&T and

BellSouth intervene in support of the FCC.

II

EarthLink raises a number of challenges to the FCC’s

interpretation and application of the statutory forbearance

provision. We conclude the FCC’s decision (1) survives

Chevron analysis, (2) is neither arbitrary nor inconsistent with

FCC precedent, and (3) is supported by the record.

A

First, EarthLink argues the Order runs afoul of § 160(a).

We examine the FCC’s interpretation under the familiar

Chevron framework. Chevron U.S.A., Inc. v. Natural Res. Def.

Council, Inc., 467 U.S. 837 (1984); Cellular Telecomms. &

Internet Ass’n v. FCC, 330 F.3d 502, 507 (D.C. Cir. 2003). First,

if the statute unambiguously controls the “precise question at

issue,” then we need go no further. Chevron, 467 U.S. at 842-43.

Second, where the agency exercises delegated authority to

resolve statutory ambiguity, we will uphold the FCC’s interpretation as long as it is reasonable, see id. at 843-44, even if “there

may be other reasonable, or even more reasonable, views,”

AT&T, 220 F.3d at 621 (internal quotation marks and citation

omitted). See also AT&T Corp. v. FCC, 349 F.3d 692, 698-99

(D.C. Cir. 2003) (“Chevron deference is due . . . only if the

agency has acted pursuant to ‘delegated authority’ and the

agency action has the ‘force of law.’” (citations omitted)).

According to EarthLink, the statute permits the FCC to

grant forbearance only after a “painstaking analysis of market

conditions” in “particular geographic markets and for specific
12

See, e.g., Petitioner’s Br. 34-35 (FCC cannot rely on 7

“‘investment disincentives’ to justify forbearance” because § 160(a)(1)

“does not permit the FCC either to ignore or counterbalance” the

short-term effect on “‘rates and charges’ in order to accommodate

other goals, even worthy goals such as broadband deployment”); id.

at 36 (FCC cannot conclude “‘the protection of consumers’ is

adequately addressed in the here and now by the promise of future

alternatives broadband networks yet to be built”). 

telecommunications services.” We disagree. On its face, the

statute imposes no particular mode of market analysis or level

of geographic rigor. See 47 U.S.C. § 160(a) (requiring forbearance in “any or some of [a carrier’s] geographic markets” if

three conditions are met). Seizing on the phrase “geographic

markets” in § 160(a), EarthLink contends the decision to forbear

on a nationwide basis—without considering more localized

regions individually—is per se improper. This argument is

tenuous, at best. In context, the language simply contemplates

that the FCC might sometimes forbear in a subset of a carrier’s

markets; it is silent about how to determine when such partial

relief is appropriate. Similarly, the statute does not require

consideration of specific services. See id. (permitting forbearance as to a “class of telecommunications carriers or telecommunications services” (emphasis added)). Instead, we are

persuaded the agency reasonably interpreted the statute to allow

the forbearance analysis to vary depending on the circumstances.

Insofar as EarthLink suggests the statute does not permit the

FCC to make the forbearance decision with an eye to the

future—by accounting for section 706’s goals and assessing

likely market developments—the argument also fails. Nothing 7

in § 160 prohibits weighing such considerations in assessing the

impact of forbearance on rates, consumers, and the public

interest. See 47 U.S.C. § 160(a)(1), (2), (3); id. § 160(b).
13

Further, section 706 explicitly directs the FCC to “utiliz[e]”

forbearance to “encourage the deployment on a reasonable and

timely basis of advanced telecommunications capability to all

Americans.” As the precise interplay between section 706 and

the three-part forbearance inquiry is not self-evident from the

text, it is precisely the type of ambiguity entrusted to reasonable

agency construction. The language of section 706 suggests a

forward-looking approach and, reading the two statutory

provisions together, we cannot fault the FCC for interpreting it

to inform the § 160 analysis.

This conclusion finds support in USTA II where we held

that the FCC properly considered section 706’s goals in deciding

not to require § 251 unbundling. See 359 F.3d at 579-80

(interpreting § 251(d)(2)’s “at a minimum” clause). We rejected

the argument that the Act prohibits “‘ad hoc’ balancing of the

statute’s pro-competition goals with an allegedly conflicting

goal derived from [section] 706,” holding instead that “[s]ection

706(a) identifies one of the Act’s goals beyond fostering

competition piggy-backed on ILEC facilities, namely, removing

barriers to infrastructure investment.” Id. at 579. Similar tradeoffs are also reasonably incorporated into a decision to forbear

from § 271 unbundling. While the FCC’s prior decision to

relieve § 251 unbundling does not automatically make it proper

to forbear from the separate § 271 unbundling requirements, the

FCC permissibly construed the statutory scheme to permit

weighing similar considerations in each case.

B

Next, EarthLink argues the Order “arbitrarily assessed

broadband competition in an irrational and ad hoc manner.” We

review the FCC’s application of the Act pursuant to the deferential “arbitrary and capricious” standard. See Cellular

Telecomms. & Internet Ass’n, 330 F.3d at 507-08; 5 U.S.C.
14

§ 706(2)(A). Our role in this regard is a limited one and we will

not substitute our judgment for that of the agency. Cellular

Telecomms. & Internet Ass’n, 330 F.3d at 507. We must ensure

the FCC has “considered the relevant factors and ‘articulate[d]

a rational connection between the facts found and the choice

made.’” AT&T, 220 F.3d at 616 (quoting Motor Vehicle Mfrs.

Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43

(1983)). We will reverse “only if the agency’s decision is not

supported by substantial evidence, or the agency has made a

clear error in judgment”; indeed, an extra measure of deference

is warranted where the decision involves a “high level of

technical expertise” in an area of “rapid technological and

competitive change.” Id. (internal quotation marks and citations

omitted).

Similar to its statutory interpretation argument, EarthLink

contends “competition” can only rationally be assessed by

focusing on more specific product and geographic markets and

by conducting a “traditional market analysis (including market

share, demand and supply elasticity, and other factors).” While

such an analysisis no doubt appropriate in some circumstances,

we cannot say the FCC was unreasonable in taking another tack

here, tailoring the forbearance inquiry to the situation at hand.

Given the FCC’s view of the broadband market as still

emerging and developing, it reasonably eschewed a more

elaborate snapshot of the current market in deciding whether to

forbear with respect to the fiber network elements at issue here.

Cf. Inquiry Concerning High-Speed Access to the Internet over

Cable and Other Facilities, 17 F.C.C.R. 4798, 4847-48 (2002)

(suggesting forbearance from common carrier regulations would

be proper on a nationwide basis with respect to cable-modem

service). Guided by section 706, the agency decided to balance

the future benefits against short term impact. Cf. Petition of U.S.

West Commc’ns, Inc. for a Declaratory Ruling Regarding the
15

Provision of Nat’l Directory Assistance, 14 F.C.C.R. 16,252,

16,277 (1999) (basing forbearance decision in part on whether

“pro-consumer benefits . . . outweigh any potential competitive

advantage that may accrue” to the carrier requesting forbearance). The FCC then appropriately stepped through the threepart forbearance inquiry, at each step explaining its view that

forbearance would only have a “modest” impact that was

outweighed by forward-looking benefits (increased competition

and fiber deployment).

Nor is the Order inconsistent with FCC precedent. The

decisions proffered by EarthLink are not directly applicable to

the present circumstances; for example, many of them address

dominant carrier regulation rather than unbundling requirements, see, e.g., WorldCom, Inc. v. FCC, 238 F.3d 449, 459

(D.C. Cir. 2001) (noting, in dicta, that the FCC requires a

“painstaking analysis of market conditions” when “an LEC

seeks classification as a non-dominant carrier or the forbearance

of dominant carrier regulation”); AT&T Corp. v. FCC, 236 F.3d

729, 735-36 (D.C. Cir. 2001) (explaining that, in making

dominance classifications, FCC’s traditional market power

inquiry looks to factors such as carrier’s market share, supply

and demand elasticity, and carrier’s cost structure, size and

resources), or are otherwise distinguishable, see, e.g., Applications for Consent to the Transfer of Control of Licensees and

Section 214 Authorizations by Time Warner Inc. and America

Online, Inc., Transferors, to AOL Time Warner Inc., Transferee,

16 F.C.C.R. 6547, 6578 (2001) (finding, in merger analysis, the

“relevant geographic markets for residential high-speed Internet

access services are local”).

EarthLink’s reliance on Qwest Omaha, a post-Order

decision, is particularly inapt as that case highlights the FCC’s

capacity and propensity to adapt forbearance decisions to the

circumstances. Petition of Qwest Corp. for Forbearance
16

Pursuant to 47 U.S.C. § 160(c) in the Omaha Metro. Statistical

Area, 20 F.C.C.R. 19,415 (2005) (Qwest Omaha). First, while

the FCC acknowledged that a decision to forbear from dominant

carrier regulation is “informed by the [FCC’s] traditional market

power analysis,” id. at 19,425, the agency was quick to note that

such analysis “does not bind [the FCC’s § 160] forbearance

analysis,” id. at 19,425 n.52 (emphasis added) (citing AT&T

Corp., 236 F.3d at 736-37). Second, when addressing forbearance from §§ 251 and 271, the FCC did not invoke its “traditional market power” analysis, see, e.g., id. at 19,443-19,470,

instead noting at one point that the FCC’s “unbundling analysis”

is “instructive for purposes of rendering [its § 160(a)] determination,” id. at 19,446 (emphasis added). Third, in denying forbearance from § 271, Qwest Omaha specifically distinguished the

Order:

The reasoning that formed the basis of the [FCC’s] decision

[in the Order] to forbear from applying the [§] 271 network

access requirements to certain of the BOCs’ broadband

facilities does not extend to . . . legacy elements. The supply

market for legacy services is quite different from the supply

market for broadband services. As explicitly recognized in

section 706, it is important for [the FCC] to remove investment disincentives that apply to broadband services in order

to encourage the construction of next generation facilities

to customers nationwide. In contrast, the policies of section

706 do not apply to already-constructed legacy elements.

Id. at 19,469. Thus, insofar as the later Qwest Omaha decision

is relevant at all, cf. AT&T Inc. v. FCC, 452 F.3d 830, 839 (D.C.

Cir. 2006) (examining subsequent agency action to show pattern

of arguably inconsistent decisionmaking), it lends credence to

the FCC’s action in the present matter.

In sum, EarthLink pointed to no case speaking directly to
17

Various related arguments warrant little discussion. EarthLink 8

contends that “the FCC proffered [§] 271 unbundling as an effective

backstop for competitors in light of the [Triennial Review Order’s]

elimination of [§] 251 unbundling.” However, in the passage

EarthLink cites in support, the FCC merely concluded that § 271

obligations are independent from those in § 251, not that the former

must remain in place wherever the latter have been lifted. See

Triennial Review Order, 18 F.C.C.R. at 17,385-86. 

Also, according to EarthLink, the FCC failed to properly consider

the wholesale market. Not so. The FCC explained its lack of concern

in the wholesale market; in its view, the CLECs have alternate ways

to compete and the BOCs will be inclined to offer reasonable

wholesale rates because they face “intense intermodal competition”

inducing them, “even in the absence of [§] 271 unbundling,” to “find

ways to keep traffic ‘on-net.’” Order ¶ 26; see also id. ¶ 28 (rejecting

argument that “a fully competitive wholesale market is a mandatory

precursor” to forbearance).

the present circumstances, and we find no “abrupt departure”

from FCC precedent. Wis. Valley Improvement v. FERC, 236

F.3d 738, 748 (D.C. Cir. 2001); see also Motor Vehicle Mfrs.

Ass’n, 463 U.S. at 42; Greater Boston Television Corp. v. FCC,

444 F.2d 841, 852 (D.C. Cir. 1970) (“[A]n agency changing its

course must supply a reasoned analysis indicating that prior

policies and standards are being deliberately changed . . . .”).

Rather, the agency reasonably tailored its analysis to the

situation at hand.8

C

Finally, the record supports the FCC’s forbearance determination. Given the FCC’s forward-looking interpretation and

application of the statute, the agency only needed to show that

the positive short-term impact of unbundling would be outweighed by the longer-term positive impact that not unbundling
18

would have on rates, consumers, and the public interest. The

record here is up to the task.

The FCC reasonably concluded the benefits of unbundling

were “modest,” pointing to, among other things, evidence of

intermodal competition indicating that cable modem service—not ILECs—is the nationwide broadband market leader

with a solid majority. See, e.g., Order ¶ 22 (citing Industry

Analysis and Technology Division, FCC, High-Speed Services

for Internet Access: Status as of June 30, 2003, tbls. 3, 4 (Dec.

2003)). Indeed, the FCC relied on a report that is a later iteration

of the study relied upon in the Triennial Review Order to find a

sufficiently “competitive environment,” 18 F.C.C.R. at 17,151-

52—a finding we upheld in resounding terms: 

[W]e agree with the [FCC] that robust intermodal competition from cable providers—the existence of which is

supported by very strong record evidence, including cable’s

maintenance of a broadband market share on the order of

60%—means that even if all CLECs were driven from the

broadband market, mass market consumers will still have

the benefits of competition between cable providers and

ILECs.

USTA II, 359 F.3d at 582 (citation omitted). It can hardly be

irrational, then, to similarly find sufficient competition in the

present case. That is, it is reasonable to conclude that the BOCs’

secondary market position relative to cable internet providers

tends to mitigate the impact of forbearance on the state of

competition in the broadband market, especially where cable

internet providers themselves are not required to unbundle.

EarthLink’s proffered evidence and statistical analysis are

not to the contrary and its frantic claim that the Order is

premised on a “momentous new economic theory”—one that
19

“reverse[s] decades of communications precedent” by finding

that “duopoly now equates to rigorous competition”—misses the

mark. The FCC nowhere asserts that cable’s majority market

share alone is dispositive, only that, in light of the various other

circumstances, it lends support to the forbearance decision in the

present case. 

In the agency’s view, “[t]he broadband market is still an

emerging and changing market, where, as the [FCC] previously

has concluded, the preconditions for monopoly are not present.

In particular, actual and potential intermodal competition

informs rational competitors’ decisions concerning nextgeneration broadband technologies.” Order ¶ 22 (footnote

omitted). The FCC cited its prior decision in which it elaborated

on that thought:

The facts that different companies are using different

technologies to bring broadband to residential consumers

and that each existing broadband technology has advantages

and disadvantages as a means of delivery to millions of

customers opens the possibility of intermodal competition,

like that between trucks, trains, and planes in transportation.

. . . Anti-competitive coordination among competitors is

difficult in such markets.

Inquiry Concerning the Deployment of Advanced Telecomms.

Capability, 14 F.C.C.R. 2398, 2423-24 (1999) (footnotes

omitted) (citing Brooke Group Ltd. v. Brown & Williamson

Tobacco Corp., 509 U.S. 209, 238 (1993) (“Tacit coordination

is facilitated by a stable market environment, fungible products,

and a small number of variables upon which the firms seeking

to coordinate their pricing may focus.”)); see also Rulemaking

to Amend Part 1, 2, 21, and 25 of the Commission’s Rules, 15

F.C.C.R. 11,857, 11,864-65 (2000). This represents the agency’s

expert assessment, and we examine “not whether the FCC’s
20

Cf. W. Coal Traffic League v. Surface Transp. Bd., 169 F.3d 9

775, 778-79 (D.C. Cir. 1999) (upholding agency’s conclusion that

merger would result in “rivalry, not collusion”; agency had explained

that “‘the outcome where just two companies offer the only significant

competitive alternatives in a market may range all the way from

intense rivalry to collusion, depending on the circumstances of the

industry’” (citation omitted)); FTC v. H.J. Heinz Co., 246 F.3d 708,

717 (D.C. Cir. 2001) (stating that where district court found “there had

been no significant entries in the baby food market in decades and that

new entry was ‘difficult and improbable,’” this finding “largely

eliminates the possibility that the reduced competition caused by the

[three-to-two] merger will be ameliorated by new competition from

outsiders” (citation omitted)).

economic conclusions are correct or are the ones that we would

reach on our own, but only whether they are reasonable.” In re

Core Commc’ns, Inc., --- F.3d ----, 2006 WL 1789003, at *10

(D.C. Cir. June 30, 2006). We find the FCC’s explanation

reasonable.9

Nor are we given sufficient cause to second-guess the

FCC’s predictions. “[A]n agency’s predictive judgments about

areas that are within the agency’s field of discretion and

expertise are entitled to particularly deferential review, as long

as they are reasonable,” id. at *12 (emphasis added) (internal

quotation marks and citation omitted), and need not rest on

“pure factual determinations,” FCC v. WNCN Listeners Guild,

450 U.S. 582, 594 (1981). See Time Warner Entm’t Co. v. FCC,

240 F.3d 1126, 1133 (D.C. Cir. 2001) (“Substantial evidence

does not require a complete factual record—we must give

appropriate deference to predictive judgments that necessarily

involve the expertise and experience of the agency.”).

Here, the FCC’s predictions about the development of new

broadband technologies and about the incentives for increased

deployment (and, in turn, increased competition) flowing from
21

EarthLink’s suggestion that forbearance from § 271 10

contravenes FCC precedent by denying CLECs the protections of

§§ 201 and 202 is meritless. The Order granted forbearance as to

§ 271, not §§ 201 and 202.

an absence of unbundling are well within the agency’s area of

expertise. Indeed, they echo predictions made in the Triennial

Review Order and upheld in USTA II. See, e.g., USTA II, 359

F.3d at 584 (“Absence of unbundling . . . will give all parties an

incentive to take a shot at this potentially lucrative market.”); id.

at 581 (rejecting CLEC’s argument that decision rested on “pure

speculation”); Triennial Review Order, 18 F.C.C.R. at 17,144

(anticipating new technologies); cf. Cincinnati Bell Tel. Co. v.

FCC, 69 F.3d 752, 763 n.4 (6th Cir. 1995) (declining to defer to

FCC’s predictive judgment about increased competition in

cellular market). Moreover, FCC is fully capable of reassessing

the situation if its predictions are not borne out. See Order ¶ 26

n.84.

EarthLink contends that invocation of the disincentives

associated with § 251 unbundling is improper because they are

more acute than those associated with § 271 unbundling. Section

251, EarthLink points out, requires ILECs to provide the

network elements at cost-based (so-called “TELRIC”) pricing,

while § 271 operates under the more relaxed “just and reasonable” standard of 47 U.S.C. §§ 201 and 202. See USTA II, 359

F.3d at 589-90; 47 U.S.C. § 252(d)(1). Nonetheless, even if

unbundling under § 271 would produce marginally less disincentive, the FCC reasonably concluded there would still be a

significant deterrent due to costs inherent in complying with any

unbundling mandate. See, e.g., Order ¶¶ 25, 34.10

In sum, the FCC, reasonably weighed present conditions

and future developments in determining what is necessary for

just and reasonable rates, “necessary for the protection of
22

consumers,” and “consistent with the public interest,” 47 U.S.C.

§ 160(a), and made a “rational connection between the facts

found and the choice made.” AT&T Corp., 220 F.3d at 616

(internal quotation marks and citation omitted).

III

For the foregoing reasons, EarthLink’s petition for review

is 

Denied.