PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

MCIMETRO ACCESS TRANSMISSION 

SERVICES, INCORPORATED, a Delaware

Corporation,

Plaintiff-Appellant,

v.

BELLSOUTH TELECOMMUNICATIONS,

INCORPORATED, A Georgia

Corporation; JOANNE SANFORD, in

her official capacity as Chair of the

North Carolina Utilities

Commission; J. RICHARD CONDER;

 No. 03-1238 ROBERT V. OWENS, JR.; SAM J.

ERVIN, IV; LORINZO L. JOYNER;

JAMES Y. KERR, II; MICHAEL S.

WILKINS, in their official capacities

as Commissioners of the North

Carolina Utilities Commission,

Defendants-Appellees,

and

NORTH CAROLINA UTILITIES

COMMISSION,

Defendant. 

Appeal from the United States District Court

for the Eastern District of North Carolina, at Raleigh.

Malcolm J. Howard, District Judge.

(CA-01-921-5)

Argued: October 30, 2003

Decided: December 18, 2003
Before LUTTIG, WILLIAMS, and KING, Circuit Judges.

Reversed in part, vacated in part, and remanded by published opinion.

Judge Williams wrote the opinion, in which Judge Luttig and Judge

King joined. 

COUNSEL

ARGUED: Michael Brian DeSanctis, JENNER & BLOCK, L.L.C.,

Washington, D.C., for Appellant. Sean Abram Lev, KELLOGG,

HUBER, HANSEN, TODD & EVANS, P.L.L.C., Washington, D.C.,

for Appellees. ON BRIEF: Donald B. Verrilli, Jr., Daniel Mach,

JENNER & BLOCK, L.L.C., Washington, D.C.; Jeffrey A. Rackow,

MCI, Washington, D.C., for Appellant. Eugene M. Paige, KELLOGG, HUBER, HANSEN, TODD & EVANS, P.L.L.C., Washington, D.C.; M. Gray Styers, Jr., KILPATRICK STOCKTON, L.L.P.,

Raleigh, North Carolina; Edward L. Rankin, III, General CounselNorth Carolina, BELLSOUTH TELECOMMUNICATIONS, INC.,

Raleigh, North Carolina, for Appellees. 

OPINION

WILLIAMS, Circuit Judge: 

In this appeal, MCImetro Access Transmission Services LLC

(MCI) challenges the legality, under the Telecommunications Act of

1996 (the 1996 Act), see 47 U.S.C.A. §§ 251-276 (West 2001 &

Supp. 2003), of three aspects of the interconnection agreement

between it and BellSouth Telecommunications, Inc. (BellSouth) that

the North Carolina Utilities Commission (NCUC) arbitrated and

approved. Specifically, MCI argues (1) that the provision in the interconnection agreement allowing BellSouth to charge MCI the incremental cost of transporting calls originating on BellSouth’s network

from the originating caller’s local calling area to MCI’s distant point

of interconnection violates 47 C.F.R. § 51.703(b) (2002); (2) that the

2 MCIMETRO ACCESS v. BELLSOUTH TELECOM.
provision in the interconnection agreement restricting MCI’s use of

BellSouth’s unbundled network elements under certain circumstances

violates various FCC rules; and (3) that the provision in the interconnection agreement limiting BellSouth’s obligation to provide access

to two-way trunking to only those circumstances where there is insufficient traffic to support one-way trunks violates 47 C.F.R.

§ 51.305(f) (2002). MCI initiated this action in the United States District Court for the Eastern District of North Carolina pursuant to the

1996 Act’s judicial review procedure. See 47 U.S.C.A. § 252(e)(6).

The district court found the challenged provisions to be consistent

with federal law and accordingly granted summary judgment in favor

of BellSouth. MCI appeals, and for the reasons that follow, we

reverse in part, vacate in part, and remand for further proceedings. 

I.

Prior to the passage of the 1996 Act, the laws of the various states

governed the provision of local telephone service, and almost without

exception, each state conferred an exclusive franchise to a single

company to provide such service. Under the protection of these stateconferred monopolies, each of these companies, called Local

Exchange Carriers (LECs), built the infrastructure necessary to provide local telephone services, including elements such as the local

loops (wires connecting telephones to switches), the switches (computerized equipment routing calls to their destinations), and the transport trunks (high capacity wires transmitting traffic between

switches). See AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 371

(1999). Thus, not only were these LECs the only entities allowed by

law to provide local telephone service, they were the only entities

with the networks necessary to do so. 

Through the 1996 Act, Congress sought to supplant the system of

state-sanctioned monopoly in favor of a system of free competition.

In addition to pre-empting the state laws that protected existing LECs1

from competition, see 47 U.S.C.A. § 253, Congress, recognizing both

1

In the parlance of the 1996 Act, the LECs that existed prior to February 8, 1996 are called "incumbents" or "incumbent LECs." See 47

U.S.C.A. § 251(h)(1) (West 2001). We use those terms interchangeably

here. 

MCIMETRO ACCESS v. BELLSOUTH TELECOM. 3
that the provision of local service required significant infrastructure

and that the prohibitive cost of duplicating an incumbent LEC’s infrastructure would be an insuperable barrier to entry, imposed on incumbents a number of affirmative duties intended to facilitate market

entry by potential competitors. See 47 U.S.C.A. § 251(c) (West 2001).

Two of these duties are relevant to the issues MCI raises in this

appeal. 

First, Congress required incumbent LECs to "interconnect" their

networks with the new networks constructed by the new entrants,

known as competing LECs (CLECs). See 47 U.S.C.A. § 251(c)(2).

Such interconnection is necessary to the viability of the multiprovider system envisioned by the 1996 Act because, absent interconnection, customers of different LECs in the same local calling area

would not be able to call each other, and CLECs consequently would

never attract customers. Under this provision, an incumbent must

allow a CLEC to select any point of interconnection (POI) with the

incumbent’s network that is "technically feasible," 47 U.S.C.A.

§ 251(c)(2)(B), and must provide interconnection "on rates, terms,

and conditions that are just, reasonable, and nondiscriminatory," 47

U.S.C.A. § 251(c)(2)(D). Pursuant to the Federal Communications

Commission’s (FCC) regulations, just, reasonable, and nondiscriminatory interconnection requires incumbents to provide access to "twoway trunking" upon request for interconnection where technically feasible. A two-way trunk is a single trunk connecting the CLEC’s

switch to the incumbent’s switch for transmission of traffic both to

and from the incumbent, as opposed to two separate trunks, each dedicated to transmitting traffic in one direction. 

Second, Congress required incumbents to lease the constituent elements of their local networks (e.g., loops, switches, etc.) to CLECs on

a separately priced, or "unbundled" basis. 47 U.S.C.A. § 251(c)(3).

The incumbents also must allow the CLECs to use leased unbundled

network elements (UNEs) to provide any "telecommunications service," see id., a term defined by statute as "the offering of telecommunications for a fee," 47 U.S.C.A. § 153(46) (West 2001). As with

interconnection, incumbents must make UNEs available "on rates,

terms, and conditions that are just, reasonable, and nondiscriminatory." 47 U.S.C.A. § 251(c)(3). 

4 MCIMETRO ACCESS v. BELLSOUTH TELECOM.
The 1996 Act likewise imposes obligations on all LECs, incumbents and CLECs alike, see 47 U.S.C.A. § 251(b), one of which is relevant here. Under § 251(b)(5), each LEC has the duty "to establish

reciprocal compensation arrangements for the transport and termination of telecommunications." Reciprocal compensation agreements

must "provide for the mutual and reciprocal recovery by each carrier

of costs associated with the transport and termination on each carrier’s network facilities of calls that originate on the network facilities

of the other carrier." 47 U.S.C.A. § 252(d)(2)(A). In other words, for

calls generated on one LEC’s network and bound for a destination on

another LEC’s network, the receiving LEC may charge the originating LEC for the cost of transporting the call from the POI to its destination and terminating that call with the intended recipient. 

In addition to imposing these and other substantive requirements,

Congress established a procedural framework through which incumbents and CLECs are to negotiate the CLECs’ entry into the incumbent’s market. First, the parties must attempt to establish terms of

interconnection through negotiation. See 47 U.S.C.A. § 252(a)(1). To

the extent they cannot reach agreement, either LEC may ask the governing state utility commission to conduct an arbitration to resolve the

disputed issues. See 47 U.S.C.A. § 252(b)(1). The results of that arbitration are then memorialized in an "interconnection agreement"

between the LECs, which is then submitted for approval to the state

utility commission. 47 U.S.C.A. § 252(e). A party aggrieved by the

state utility commission’s resolution of disputed issues may seek

review of that decision in federal district court, which has exclusive

jurisdiction over such matters. 47 U.S.C.A. § 252(e)(6). 

In this case, MCI challenges aspects of its most recent interconnection agreement with BellSouth that resulted from arbitration before

the NCUC. MCI and BellSouth began negotiating their first interconnection agreement in North Carolina in 1996, shortly after passage of

the 1996 Act. As this interconnection agreement approached expiration, the parties began negotiating a new interconnection agreement,

and on April 6, 2000, MCI petitioned the NCUC to arbitrate unresolved issues. On April 3, 2001, the NCUC issued its Recommended

Arbitration Order. See In re Petition of MCImetro Access Transmission Services LLC for Arbitration of Certain Terms and Conditions

of Proposed Agreement with BellSouth Telecommunications, Inc.

MCIMETRO ACCESS v. BELLSOUTH TELECOM. 5
Concerning Interconnection and Resale Under the Telecommunications Act of 1996, Docket No. P-474, Sub. 10, Recommended Arbitration Order (NCUC Apr. 3, 2001) (First Arbitration Order). (J.A. at

143.) MCI filed objections to the First Arbitration Order, contesting,

inter alia, the issues it raises here. On August 2, 2001, the NCUC

ruled on MCI’s objections and required the parties to file a composite

agreement. See In re Petition of MCImetro Access Transmission Services, LLC for Arbitration of Certain Terms and Conditions of Proposed Agreement with BellSouth Telecommunications, Inc.

Concerning Interconnection and Resale Under Telecommunications

Act of 1996, Order Ruling On Objections and Requiring The Filing

of The Composite Agreement, Docket No. P-474, Sub. 10 (NCUC

Aug. 2, 2001) (Second Arbitration Order). (J.A. at 263.) On November 7, 2001, following the aforementioned ruling, the parties filed

their final Composite Interconnection Agreement. 

On November 21, 2001, MCI filed suit in the district court challenging three aspects of the interconnection agreement that the NCUC

had arbitrated and approved: (1) the NCUC’s decision to allow BellSouth to charge MCI the incremental cost of transporting calls generated on BellSouth’s network from the originating caller’s local calling

area to MCI’s distant POI; (2) the decision to restrict MCI’s use of

BellSouth’s unbundled network elements under certain circumstances; and (3) the decision to require BellSouth to provide access

to two-way trunking, if technically feasible, only where there is insufficient traffic to support one-way trunking. After briefing on crossmotions for summary judgment, the district court granted summary

judgment to BellSouth on all issues. MCI now appeals. 

II.

We review de novo both the district court’s grant of summary judgment and the NCUC’s interpretation of the 1996 Act and the federal

regulations enacted pursuant thereto, and accord no deference to the

NCUC’s interpretations of federal law. AT&T Comms. of Va., Inc. v.

Bell Atlantic-Virginia, Inc., 197 F.3d 663, 668 (4th Cir. 1999). We

note that the parties challenge neither the NCUC’s findings of fact nor

the legality of the FCC’s regulations. 

6 MCIMETRO ACCESS v. BELLSOUTH TELECOM.
A.

The first issue we consider is whether BellSouth can charge MCI

for the cost of transporting local calls originating on BellSouth’s network to MCI’s chosen POI, when that POI happens to be outside of

the local calling area where the call originated. Because this issue is

a by-product of the differences between BellSouth’s and MCI’s

respective network architectures, a brief word about those architectures is helpful in understanding the legal question before us. According to the NCUC, 

this issue exists because [MCI] and BellSouth have each

built and intend to utilize totally separate and different networks for the provision of local service in North Carolina.

Each carrier’s local network was designed to be the most

efficient and cost-effective for that carrier. BellSouth stated

that its system consists of a number of local networks that

have developed over time and each local network is characterized by the use of multiple local switches. Also, as commented on by BellSouth, [MCI] has a single switch in North

Carolina. 

First Arbitration Order at 47. (J.A. at 189.) 

In exercising its right under § 251(c)(2)(B) to designate a technically feasible POI, MCI decided to interconnect with BellSouth’s network at only one point in the North Carolina local access and

transport area (LATA), through its single North Carolina switch.

Therefore, all traffic between MCI and BellSouth customers must

pass through that one POI, regardless of the locations of the two customers. This arrangement means, for example, that when a BellSouth

customer wants to call her neighbor, an MCI customer, BellSouth

must transport that call through MCI’s one POI, even though that POI

might be hundreds of miles away. Thus, as a consequence of MCI’s

independent decision respecting network construction and interconnection — i.e., the decision to use one switch in North Carolina rather

than multiple switches, and to interconnect through that one switch

alone — BellSouth must incur greater costs for transporting routine

local traffic. In arbitration before the NCUC, BellSouth proposed to

resolve this perceived inequity by requiring MCI to pay it the increMCIMETRO ACCESS v. BELLSOUTH TELECOM. 7
mental cost2

 of transporting traffic destined for MCI’s network from

the relevant local calling area to the POI. The NCUC adopted BellSouth’s proposal and ordered the cost-shifting provision be included

in the final interconnection agreement. 

MCI argues that this provision in the interconnection agreement is

contrary to federal law. MCI points specifically to FCC Rule

51.703(b), one of the several rules comprising the FCC’s regime governing reciprocal compensation for the transport and termination of

telecommunications traffic as required by 47 U.S.C.A. § 251(b)(5).

See 47 C.F.R. §§ 51.701-51.717. Rule 703(b) states, "[a] LEC may

not assess charges on any other telecommunications carrier for telecommunications traffic that originates on the LEC’s network." 47

C.F.R. § 51.703(b). Because BellSouth’s cost-shifting provision is an

assessment of charges for traffic that originates on BellSouth’s own

network, MCI argues, the provision is contrary to Rule 703(b) and

thus is illegal. Moreover, MCI notes, the Wireline Communications

Bureau (the Wireline Bureau), a subdivision of the FCC, in a case

concerning interconnection in Virginia, has rejected a similar costshifting provision as being discordant with Rule 703(b). See In re

Petition of WorldCom, Inc. Pursuant to Section 252(e)(5) of the Communications Act for Preemption of the Jurisdiction of the Virginia

State Corporation Commission Regarding Interconnection Disputes

With Verizon Virginia Inc., and for Expedited Arbitration, 17

F.C.C.R. 27039 (2002) (Virginia Arbitration Order). 

BellSouth counters that the proposed cost-shifting is not reciprocal

compensation, but rather a form of reimbursement for the cost of

interconnection that BellSouth submits is permissible under FCC

rules. In support of its position, BellSouth points to the 1996 Report

and Order wherein the FCC adopted initial rules to implement the

1996 Act. See In re Implementation Of The Local Competition Provisions In The Telecommunications Act Of 1996, 11 F.C.C.R. 15499

2BellSouth proposed, and the NCUC approved, a charge only for the

incremental cost of transporting traffic outside the local calling area. In

other words, BellSouth would transport the call from the customer to the

edge of the local calling area without charge to MCI. The charge would

reflect the cost of transporting the call the additional distance from the

edge of the local calling area to the POI. 

8 MCIMETRO ACCESS v. BELLSOUTH TELECOM.
(1996) (Local Competition Order). BellSouth notes that, in paragraph

199 of this order, the FCC, in concluding that cost was not a relevant

factor in determining whether a CLEC’s requested point of interconnection was "technically feasible," stated, "[o]f course, a requesting

carrier that wishes a ‘technically feasible’ but expensive interconnection would, pursuant to section 252(d)(1), be required to bear the cost

of that interconnection, including a reasonable profit."3Id. at 15603

¶ 199. And, later in that same order, the FCC, in discussing its rules

for the physical act of interconnection, noted that, "because competing carriers must usually compensate incumbent LECs for the additional costs incurred by providing interconnection, competitors have

an incentive to make economically efficient decisions about where to

interconnect." Id. at 15608 ¶ 209 (emphasis added). These statements,

BellSouth argues, show that the FCC intended for incumbents to be

able to shift the cost of interconnection to CLECs. Because the provision at issue here relates to the cost of interconnection, BellSouth’s

argument goes, it is not governed by the reciprocal compensation

regime at all, and Rule 703(b) is thus inapplicable. 

BellSouth points to a decision by the FCC in a proceeding arising

under 47 U.S.C.A. § 271 as evidence that its cost-shifting provision

is acceptable. See In re Application Of Verizon Pennsylvania Inc., et

al. For Authorization To Provide In-Region, InterLATA Services In

Pennsylvania, 16 F.C.C.R. 17419, 17474-75 ¶¶ 99-100 (2001) (Pennsylvania 271 Order). The Pennsylvania 271 Order addressed the

application of Verizon, a former Bell Operating Company and incumbent LEC in Pennsylvania, under 47 U.S.C.A. § 271 to provide long

distance services in Pennsylvania. This order is relevant, BellSouth

argues, because under § 271, former Bell Operating Companies who

intend to provide long distance service must satisfy a number of

requirements, one of which being that they allow interconnection with

their local exchange networks in accordance with § 251 and § 252. 47

U.S.C.A. § 271(c)(2). In conducting its review of Verizon’s application to provide long-distance service in Pennsylvania, the FCC concluded that Verizon had satisfied its interconnection obligations, even

though Verizon was imposing a charge like the one at issue here. This

3Section 252(d) sets forth the criteria that state utilities commissions

are to consider when negotiating the "just and reasonable rate for the

interconnection of facilities and equipment." 

MCIMETRO ACCESS v. BELLSOUTH TELECOM. 9
ruling, BellSouth asserts, proves the legality of its cost-shifting provision.

BellSouth’s attempts to evade the unambiguous language of Rule

703(b)4 are ultimately unavailing. First, to accept BellSouth’s position

that the provision here is a permissible charge for the cost of interconnection, the term "interconnection" must be interpreted broadly to

include not only the physical act of connecting the networks, but also

the ongoing state of interconnectivity. So interpreted, the cost of

transporting traffic to a distant interconnection point is a "cost of

interconnection" because it is necessitated by the ongoing state of

interconnectivity at MCI’s chosen POI. The FCC, however, squarely

rejected such a broad interpretation of that term in the Local Competition Order. See 11 F.C.C.R. at 15590 ¶ 176. In its Notice of Proposed

Rulemaking (NPRM) preceding the issuance of the Local Competition Order, the FCC sought comment on whether the term "interconnection" might refer "only to the physical linking of two networks or

to both the linking of facilities and the transport and termination of

traffic." Id. at 15588-89 ¶ 174. The FCC adopted the former definition: "We conclude that the term ‘interconnection’ under section

251(c)(2) refers only to the physical linking of two networks for the

mutual exchange of traffic." Id. at 15590 ¶ 176. Therefore, because

the cost of interconnection is only the one-time cost associated with

the physical act of linking one network to another and not the recurring cost of transport and termination of traffic, the charge imposed

by BellSouth here cannot be characterized as a "cost of interconnection" that is permitted by FCC rules.5

4Neither party asserts that Rule 703(b) is an unreasonable application

of § 251 and we thus accept it as binding in this action. 

5BellSouth notes that the Third and Ninth Circuits have cited paragraphs 199 and 209 of the Local Competition Order in interconnection

cases, see MCI Telecomms. Corp. v. Bell Atlantic-Pennsylvania, 271

F.3d 491, 518 (3d Cir. 2001), US West Comms., Inc. v. Jennings, 304

F.3d 950, 961 (9th Cir. 2002), and argues that the language those courts

employed supports its position here. These decisions both address the

issue of whether a CLEC can be required to establish multiple points of

interconnection in a single local access and transport area. Accordingly,

the statements regarding the cost of interconnection, to the extent that

they refer to anything more than the cost of physical linkage, are mere

dicta and not persuasive here. 

10 MCIMETRO ACCESS v. BELLSOUTH TELECOM.
Furthermore, contrary to BellSouth’s assertions, the FCC’s decision in the Pennsylvania 271 Order does not validate the legality of

its cost-shifting proposal. In the brief portion of Pennsylvania 271

Order that addresses the issue, the FCC fails to mention Rule 703(b)

even once and addresses the propriety of cost-shifting only obliquely

through reference to an Intercarrier Compensation NPRM: 

Verizon acknowledges that its policies distinguish between

the physical POI and the point at which Verizon and an

interconnecting competitive LEC are responsible for the

cost of interconnection facilities. The issue of allocation of

financial responsibility for interconnection facilities is an

open issue in our Intercarrier Compensation NPRM . . .

Because the issue is open in our Intercarrier Compensation

NPRM, we cannot find that Verizon’s policies in regard to

the financial responsibility for interconnection facilities fail

to comply with its obligations under the Act. 

Pennsylvania 271 Order, 16 F.C.C.R. at 17474-75 ¶ 100 (footnote

omitted). In the Intercarrier Compensation NPRM, the FCC does recognize and describe the tension between Rule 703(b) and the ability

of CLECs to select a single POI per LATA, and it invites comment

respecting the action that should be taken to resolve that tension. See

In re Developing a Unified Intercarrier Compensation Regime, 16

F.C.C.R. 9610, 9635 ¶ 72, 9650-51 ¶¶ 112-14 (2001) (Intercarrier

Compensation NPRM). But, it is important to note that the FCC’s

invitation for comment on the issue is motivated by its own recognition that Rule 703(b), by its plain terms, prohibits the type of costshifting that BellSouth advocates here. Id. at 9650 ¶ 112 ("Our current

reciprocal compensation rules preclude an [incumbent] from charging

carriers for local traffic that originates on the [incumbent]’s network."). Thus, whatever the implications of the Pennsylvania 271

Order, it provides thin support for the proposition that the costshifting here is not governed by Rule 703(b).6

6The FCC’s rather cursory treatment of the cost-shifting issue in the

Pennsylvania case is likely the result of the fact that the FCC considers

§ 271 proceedings to be "inappropriate forums for the considered resolution of industry-wide local competition questions of general applicability." See In re Joint Application of SBC Communications, Inc., et al. For

Provision Of In-Region, InterLATA Services In Kansas And Oklahoma,

16 F.C.C.R. 6237, 6246 ¶ 19 (2001). 

MCIMETRO ACCESS v. BELLSOUTH TELECOM. 11
We also recognize that the FCC has not ruled definitively that costshifting is prohibited. The Virginia Arbitration Order, the FCC decision upon which MCI relies, is the only occasion where the FCC has

addressed cost-shifting in the § 252 context. In that case, the Wireline

Bureau, standing in the shoes of a state utilities commission,7 arbitrated a dispute between an incumbent and a CLEC virtually identical

to the dispute here, with the incumbent advocating cost-shifting and

several CLECs resisting. The Wireline Bureau ultimately decided not

to implement the incumbent’s cost-shifting provision, but notably

stopped short of declaring such a provision illegal: 

We find that the [CLECs’] proposed language more closely

conforms to our existing rules and precedent than do [the

incumbent]’s proposals. [The incumbent]’s interconnection

proposals require competitive LECs to bear [the incumbent]’s costs of delivering its originating traffic to a point of

interconnection beyond the [incumbent]-specified financial

demarcation point[.] . . . Specifically, under [the incumbent]’s proposed language, the competitive LEC’s financial

responsibility for the further transport of [the incumbent]’s

traffic to the competitive LEC’s point of interconnection and

onto the competitive LEC’s network would begin at the

[incumbent]-designated [demarcation point], rather than the

point of interconnection. By contrast, under the [CLECs’]

proposals, each party would bear the cost of delivering its

originating traffic to the point of interconnection designated

by the competitive LEC. The [CLECs’] proposals, therefore,

are more consistent with the Commission’s rules for section

251(b)(5) traffic, which prohibit any LEC from charging

7The Wireline Bureau performed the same function that the NCUC

performed here. Under 47 U.S.C.A. § 252(e)(5), the FCC is required to

assume the responsibilities of state commissions to conduct arbitration

proceedings under the 1996 Act if a state commission "fails to act to

carry out its responsibility" under § 252. In 47 U.S.C.A. § 155(c)(1),

Congress explicitly granted the FCC the authority to delegate its functions to a subdivision. In the Virginia case, the Virginia State Corporation Commission declined to arbitrate the dispute, the parties petitioned

the FCC to conduct the arbitration, and the FCC delegated its authority

to the Wireline Bureau. 

12 MCIMETRO ACCESS v. BELLSOUTH TELECOM.
any other carrier for traffic originating on that LEC’s network; they are also more consistent with the right of competitive LECs to interconnect at any technically feasible

point.[FN 125] 

[FN 125] 47 C.F.R. § 51.703(b) 

17 F.C.C.R. at 27064-65 ¶ 53 (emphases added). The FCC’s8 choice

of words (i.e., "more closely conforms" and "more consistent with")

is, at the very least, curious, and seems to reflect a reticence on the

part of the FCC to declare cost-shifting in this context illegal, perhaps

because, in the Virginia Arbitration Order, that conclusion was not

required in arbitrating the parties’ dispute.9

In sum, we are left with an unambiguous rule, the legality of which

is unchallenged, that prohibits the charge that BellSouth seeks to

impose. Rule 703(b) is unequivocal in prohibiting LECs from levying

charges for traffic originating on their own networks, and, by its own

terms, admits of no exceptions. Although we find some surface appeal

in BellSouth’s suggestion that the charge here is not reciprocal compensation, but rather the permissible shifting of costs attending interconnection, the FCC, as noted above, has endorsed cost-shifting

related to interconnection only as it relates to the one-time costs of

8BellSouth argues that the Wireline Bureau’s decision here should not

be given the deference we normally give decisions by the FCC, because

it is a subdivision and not the commission itself. This argument lacks

merit. When a federal agency delegates its decision-making authority to

a subdivision and Congress has expressly permitted such delegation by

statute, the decision of the subdivision is entitled to the same degree of

deference as if it were made by the agency itself. See Ford Motor Credit

Co. v. Milhollin, 444 U.S. 555, 566 n.9 (1980). Although the Wireline

Bureau’s decision has limited relevance for the reasons described in text,

because the delegation was pursuant to 47 U.S.C. § 155(c)(1), we accord

it the same deference as if it had been rendered by the FCC itself. 

9We note that the Fifth Circuit has described the Virginia Arbitraion

Order as "confirm[ing] that . . . an [incumbent] is prohibited from imposing charges for delivering its local traffic to a POI outside the [incumbent’s] local calling area." Southwestern Bell Tel. Co. v. Publ. Utils.

Comm’n of Tex., ___ F.3d ___, No. 03-50107, 2003 WL 22390281, *2

(5th Cir. Oct. 21, 2003). 

MCIMETRO ACCESS v. BELLSOUTH TELECOM. 13
physical linkage, and in doing so, expressly declined the invitation to

extend the definition of "interconnection" to include the transport and

termination of traffic. See Local Competition Order, 11 F.C.C.R. at

15588-89 ¶ 176. Furthermore, the FCC recognized that such a broad

interpretation of the concept of interconnection would interfere with

its reciprocal compensation regulations: "Including the transport and

termination of traffic within the meaning of section 251(c)(2) would

result in reading out of the statute the duty of all LECs to establish

‘reciprocal compensation arrangements for the transport and termination of telecommunications,’ under section 251(b)(5)." Id. As a consequence, the FCC’s rules cannot fairly be interpreted in the manner

necessary to allow the limited construction of Rule 703(b) that BellSouth seeks. While, as a matter of good telecommunications policy,

there may be legitimate reasons to allow cost-shifting in this context,

see Intercarrier Compensation NPRM, 16 F.C.C.R. at 9650-51,

¶¶ 112-14, it is the province of the FCC and not the federal courts to

implement such a policy. Our task here is simply to assess the interconnection agreement under existing federal law. Because the interconnection agreement allows BellSouth to charge MCI for traffic

originating on the BellSouth network, it violates the 1996 Act as

implemented by the FCC’s current rules. Accordingly, we reverse the

district court’s grant of summary judgment in favor of BellSouth on

this issue, and direct the district court to enter summary judgment in

favor of MCI on this issue. See AT&T, 197 F.3d at 671 n.4. 

B.

The second issue that MCI raises on appeal is whether the provision in the interconnection agreement restricting, under certain circumstances, MCI’s use of BellSouth’s UNEs (e.g., trunks and

switches) for the provision of "switched access" service violated federal law. MCI desires to provide switched access service using BellSouth UNEs to customers in North Carolina, regardless of whether

the switched access customer is an MCI local exchange customer.

The NCUC allowed MCI to use BellSouth UNEs to provide switched

access service, but only to MCI local exchange customers. (J.A. at

204-05; 286.) MCI now argues both that this limitation violates FCC

rules prohibiting incumbents from placing any restrictions on the use

of UNEs and that the limitation is discriminatory. 

14 MCIMETRO ACCESS v. BELLSOUTH TELECOM.
Shortly before oral argument in this case, the FCC substantially

altered its rules respecting the unbundling obligations of incumbent

LECs. See In re Review of the Section 251 Unbundling Obligations

of Incumbent Local Exchange Carriers, CC Docket Nos. 01-338, 96-

98, 98-147, ___ F.C.C.R. ___, 2003 WL 22175730 (F.C.C. Aug. 21,

2003) (Triennial Review Order). Both MCI and BellSouth submitted

letters pursuant to Rule 28(j) of the Federal Rules of Appellate Procedure and our Local Rule 28(e) advising us of the Triennial Review

Order, and both parties argue that it supports their respective positions. Because the Triennial Review Order alters significantly the federal regulatory framework that governs this issue, and because the

parties do not agree on the import of that order, prudence dictates that

we vacate the award of summary judgment and remand this issue to

the district court so that the issue can be developed fully in light of

the FCC’s new rules. 

C.

The final issue we consider is the legality of the NCUC’s conclusion that BellSouth is obligated to use two-way trunks upon MCI’s

request only in circumstances where two-way trunking is both technically feasible and there is not sufficient traffic to justify one-way

trunks. In implementing the interconnection provision of the 1996

Act, the FCC adopted Rule 305(f), which states that "[i]f technically

feasible, an incumbent LEC shall provide two-way trunking upon

request." 47 C.F.R. § 51.305(f) (2002). MCI argues that the NCUC

violated this provision by allowing BellSouth to impose a condition

on the provision of two-way trunking not contained in the regulation,

that condition being the lack of traffic sufficient to justify one-way

trunks. 

In implementing the provision in question, the NCUC relied on the

FCC’s explanation in the Local Competition Order of the rationale

behind the two-way trunking rule. In paragraph 219 of that order, the

FCC explained:

We identify below specific terms and conditions for interconnection in discussing physical or virtual collocation (i.e.,

two methods of interconnection). We conclude here, however, that where a carrier requesting interconnection pursuMCIMETRO ACCESS v. BELLSOUTH TELECOM. 15
ant to section 251(c)(2) does not carry a sufficient amount

of traffic to justify separate one-way trunks, an incumbent

LEC must accommodate two-way trunking upon request

where technically feasible. Refusing to provide two-way

trunking would raise costs for new entrants and create a barrier to entry. Thus, we conclude that if two-way trunking is

technically feasible, it would not be just, reasonable, and

nondiscriminatory for the incumbent LEC to refuse to provide it.

11 F.C.C.R. at 15612-13 ¶ 219 (emphases added) (footnotes omitted).

Relying presumably on the second sentence of that paragraph, the

NCUC held as follows: "The [NCUC] believes that it is clear from the

above that an [incumbent] must accommodate two-way trunking upon

request where technically feasible. However, the FCC has not

required that an [incumbent] allow two-way trunking when there is

sufficient traffic to justify one-way trunking." First Arbitration Order

at 43. (J.A. at 185.) 

We are required to give an agency’s interpretation of its own regulations "controlling weight unless it is plainly erroneous or inconsistent with the regulation." Stinson v. United States, 508 U.S. 36, 45

(1993); see United States v. Hoechst Celanese Corp., 128 F.3d 216,

221 (4th Cir. 1997). And, the FCC has stated that rules promulgated

pursuant to the Local Competition Order should be "read in conjunction with the rest of the Order." TSR Wireless, LLC v. US West Communications, Inc., 15 F.C.C.R. 11166, 11177-78 ¶¶ 20-21 (2000). 

However, notwithstanding the fact that the Local Competition

Order can be a legitimate source of amplification for FCC rules

implemented thereby, the amplification inferred by the NCUC is not

justified by the text of paragraph 219. Read in isolation, the second

sentence of that paragraph might support the NCUC’s conclusion that

the FCC intended to condition the requirement to provide access to

two-way trunking on the lack of traffic sufficient to support one-way

trunks, but the paragraph in its entirety suggests that the scenario

mentioned in the second sentence is but one of any number of scenarios where the denial of two-way trunking would render the terms of

interconnection unjust. Otherwise, the last sentence of the paragraph,

where the FCC conspicuously excludes any mention of sufficiency of

16 MCIMETRO ACCESS v. BELLSOUTH TELECOM.
the traffic being a condition for the provision of two-way trunking,

makes no sense. Stated differently, if the second sentence were meant

to define the entire set of situations where incumbents must provide

two-way trunking, then the FCC’s statement, both in the last sentence

of the paragraph and in Rule 305(f) itself, defining a much broader

set of circumstances where access to two-way trunking is essential for

the terms of interconnection to be "just, reasonable, and nondiscriminatory" is in direct contradiction. If, however, we interpret the

second sentence as an example of one scenario where the provision

of two-way trunking is essential for the terms of interconnection to be

"just, reasonable, and non-discriminatory," the entire paragraph is harmonious. Furthermore, the fact that the FCC expressly contemplated

the insufficient traffic scenario and then declined to include an insufficient traffic condition in the final rule suggests that the FCC did not

intend for such a condition to be read into its otherwise unambiguous

rule. 

Because the NCUC’s decision to condition BellSouth’s provision

of two-way trunking to those situations where there is insufficient

traffic to support one-way trunks allows BellSouth to refuse to provide two-way trunking in situations where it is technically feasible,

it violates Rule 305(f). Accordingly, we reverse the district court’s

grant of summary judgment in favor of BellSouth on this issue, and

direct the district court to enter summary judgment in favor of MCI.

See AT&T, 197 F.3d at 671 n.4. 

III.

To summarize, (1) we reverse the district court’s conclusion that

Rule 703(b) does not prohibit the provision in the interconnection

agreement allowing BellSouth to charge MCI for the incremental cost

of transporting BellSouth-originating traffic destined for MCI’s network from the relevant local calling area to the point of interconnection and direct the district court to enter summary judgment in favor

of MCI on that issue; (2) in light of the FCC’s recent rule changes,

we vacate the district court’s summary judgment on the issue of the

propriety of restricting MCI from using BellSouth UNEs to provide

switched access service to customers other than MCI local exchange

customers and remand for further proceedings; and (3) we reverse the

district court’s conclusion that conditioning the provision of two-way

MCIMETRO ACCESS v. BELLSOUTH TELECOM. 17
trunking on the lack of traffic sufficient to justify one-way trunks was

consistent with Rule 305(f) and direct the district court to enter summary judgment in favor of MCI on that issue.

REVERSED IN PART, VACATED IN PART,

AND REMANDED

18 MCIMETRO ACCESS v. BELLSOUTH TELECOM.