# United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________ No. 96-3604

___________ Competitive Telecommunications * Association, * * Petitioner, * * The Competition Policy Institute; * MCI Telecommunications Corporation;* General Communication, Inc.; * Telecommunications Resellers * Association; America's Carriers * Telecommunication Association; * Cable & Wireless, Inc.; AT&T Corp.;* Maryland Public Service Commission;* On Petitions for Review Arkansas Public Service Commission;* of an Order of the Oregon Public Utility Commission; * Federal Communications North State Telephone Company; * Commission Roseville Telephone Company; * Concord Telephone Company; Rock * Hill Telephone Company; Public * Utilities Commission of the State * of Hawaii; Minnesota Public * Utilities Commission; The Ad Hoc * Coalition of Telecommunications * Manufacturing Companies; Pacific * Telecom, Inc.; Minnesota * Independent Coalition; Worldcom, * Inc.; Kentucky Public Service * Commission; Kansas Corporation * Commission; Public Service * Commission of the State of Wyoming;* Rhode Island Public Utilities * Commission; Public Service * Commission of Wisconsin; State of * Texas; Alabama Public Service * Commission; Citizens Telephone * Company of Kecksburg; New Mexico * State Corporation Commission; * Public Service Commission of the * State of Montana; Utah Department * of Commerce, Division of Public *

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Utilities; Public Service * Commission of Utah; Public Service * Commission of the State of South * Carolina; Tennessee Regulatory * Authority; Aging Forum, doing * business as National Silver Haired * Congress, Inc.; U.S. Coalition on * Aging; College for Living; Council * of Silver Haired Legislatures; * Missouri Alliance of Area Agencies * on Aging; Missouri Association for * the Deaf; Missouri Council of the * Blind; Presidents' Club for * Telecommunications Justice; * Paraquad, Rural Advocates for * Independent Living; Services for * Independent Living; Public * Utilities Commission of the State * of Colorado; Department of Public * Utilities of the Commonwealth of * Massachusetts; Oklahoma * Corporation Commission; Public * Service Commission of the State of * Connecticut Department of Public * Utility Control, * * Intervenors on Appeal, * * v. * * Federal Communications Commission; * United States of America, * * Respondents, * Bell Atlantic Corporation; * Bellsouth Corporation; Pacific * Telesis Group; SBC Communications, * Inc.; US West, Inc.; US Telephone * Association; Ameritech Corporation;* Southern New England Telephone * Company; GTE Service Corporation; * New York Telephone Company; New * England Telephone and Telegraph * Company; Nextlink Communications, * L.L.C.; National Cable Television * Association, Inc.; Sprint Corp.; * American Communications Services, * Inc.; Association for Local *

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Telecommunications Services; * Consumer Federation of America; * Jones Intercable, Inc.; * Telecommunications, Inc.; Teleport * Communications Group, Inc.; Allied * Associated Partners; Geld * Information Systems; U.S. One * Communications Services; Frontier * Corporation; City of Long Beach, * California; City of Manassas, * Virginia; Time Warner * Communications Holdings, Inc.; * Personal Communications Industry * Association; Alltel Telephone * Services Corporation; Independent * Telephone and Telecommunications * Alliance; Excel Telecommunications,* Inc.; Paging Network, Inc.; * Nextwave Telecom, Inc.; Small * Cable Business Association; * Metrocall, Inc.; Texas Office of * Public Utility Counsel, * * Intervenors on Appeal. * *

---------------------- * * Honorable John D. Dingell; * Honorable W.J. (Billy) Tauzin; * Honorable Rick Boucher; Honorable * Dennis Hastert, * * Amici on Behalf of * Petitioner. *

___________ Submitted: January 17, 1997 Filed: June 27, 1997

___________ Before BOWMAN, WOLLMAN, and HANSEN, Circuit Judges.

___________ BOWMAN, Circuit Judge.

### All references in this opinion to sections and subsections 1 

### of the Telecommunications Act of 1996 in West’s United States Code Annotated (U.S.C.A.) are to the 1997 supplement.
-4- Competitive Telecommunications Association (CompTel) petitions fo r review of a portion of a Federal Communications Commission (FCC) order tha t interprets the Telecommunications Act of 1996, s ee First Report and Order, Imple mentationof the Local Competition Provisions in th e Telecomm unications Act of 1996, CC Docket No. 96-98 (Aug. 8, 1996 ) [herein after First Report and Order]. This is one of a number of case s consolidated and refe rred to the Eighth Circuit Court of Appeals by order of the Judicial Panel on Multidistrict Litigatio n. See Iowa Utils. Bd. v. FCC , 109 F.3d 418, 421 (8th Cir.), motion to vacate stay denied , 117 S. Ct

. 42 9 (1996). The Court heard oral argument on CompTel’s petitio n separately, and we no w issue a separate decision, as this case deals with discrete issues raised only in CompTel’s petition.

Co mpTel describes itself as “the principal industry association o f the nation’s competitive telecommunications carriers, with nearly 20 0 members.” Brief of Petitioner (Disclosure of Interests at 1). CompTel ha s bee ndescribed more specifically as “a trade association with over 150 " members who are long-distance telephone companies, known i n telecommunications ja rgon as interexchange carriers or IXCs. Competitive Telecomms. Ass’n v. FCC , 87 F.3d 522, 524 (D.C. Cir. 1996); see also Brief of Respondent at 3.

I.
CompTel first challenges the FCC’s interpretation of the ter m “interconn ection” as used in 47 U.S.C.A. § 251 (c)(2) (West Supp. 1997). 1 Section 251 in general concerns the development of

### LECs provide local telephone service or offer local access 2 

### for long-distance service. See 47 U.S.C.A. § 153(26), (47), (16).
-5- competitive telecommu nications markets, and the duties and obligations of telecommunications carriers in furtherance of that objective as Congress has descr ibed them. Subsection (a) lists the duties imposed on al l telecommunications carriers, whether long-distance or local, and subsectio n (b) de tails obligations of all local exchange carriers (LECs). Here w e 2

are concerned with subsection (c), which sets forth “[a]dditiona l obl igations of incumbent” LECs, that is, those who were providing loca l phone serv ice in an area on February 8, 1996, the date th e Telecommunications Act of 1996 became law. See id. § 251(h)(1). Among th e obligations assigned incumbent LECs is “[t]he duty to provide, for th e faci lities and equipment of any requesting telecommunications carrier , interconnectionwith the [LEC’s] network . . . for the transmission an d routin g of telephone exchange service and exchange access.” Id

. § 251(c)(2)(A).

Inits First Report and Order, the FCC concluded “that the ter m ‘interc onnection’ under section 251(c)(2) refers only to the physica l linking of two networks for the mutual exchange of traffic.” First Report and Order ¶ 176; see also 47 C.F.R. § 51.5 (1996 )(defining interconnection

as in th e First Report and Order and noting that “[t]his term does no t include the transport and termination of traffic”). CompTel argues that Congress intended interconnection to be more tha n mere physical access and tha t the definition of the term should include transmission and routin g services as well.

Inreviewing the decision of an administrative agency, we “mus t reject administrative constructions which are contrary to

### Telephone exchange service is local service, that is, 3 

### “service within a telephone exchange” or within a system of exchanges within the same area that operates as a single exchange, or a comparable service. 47 U.S.C.A. § 153(47). Exchange access is “the offering of access to telephone exchange services or facilities for the purpose of the origination or termination of telephone toll services,” that is, “service between stations in different exchange areas for which there is made a separate charge.” Id. § 153(16), (48). See also the definition of local exchange carrier (LEC) at 47 U.S.C.A. § 153(26) (“any person that is engaged in the provision of telephone exchange service or exchange access”).
-6- clear congressional intent.” Chevron U.S.A. Inc. v. Natural Resource s Defense Council, Inc. , 467 U.S. 837, 843 n.9 (1984). Here, however, the term interconnection is undefined by the Act, and when “the statute i s silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a permissibl e construction of the statute.” Id. at 843. In a pplying that standard, the FC C’s interpretation of interconnection is entitled to “considerabl e weight” and this Court’s deference. Id. at 844.

A. Co mpTel first asserts that the FCC’s definition of interconnectio n writes certain other language out of the statute. We disagree. CompTel contend s that Congress’s language requiring incumbent LECs to provid e interconnection “ for the transmission and routing of telephone exchang e service and exchange access” means that Congress intended to require the LECs t o provide transmission and routing services in addition t o interconnection. Acc ording to the argument, the FCC’s definition renders the phrase “for the transmission and routing” meaningless. But considerin g the section as a whole and in context, it is reasonable to conclude that Congress intended “fo r the transmission and routing of telephone exchange service and exchange access” only to describe what the interconnection, th e physical link, would be used for. That 3

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interpretation is fur ther bolstered by the subsection’s express provision that the LEC’s duty is to provide interconnection for the facilities and equipment of the requesting carrier with the LEC’s network . By its ow n terms, this reference is to a physical link, between the equipment of the carrier seeking interconnection and the LEC’s network. As a part of its statutory argument, CompTel also argues that th e FCC’s interpretation of interconnection violates the principle of statutor y construction set forth in Sierra Club v. Clark , 755 F.2d 608, 613 (8th Cir

. 1985), wherein this Court said, ”[S]tatutory definitions of words use d elsewh ere in the same statute furnish such authoritative evidence o f legisl ative intent and meaning that they are usually given controllin g effect.” We reject CompTel’s argument for several reasons.

First, th e language from Sierra Clubdoes not set forth an absolute edict, but only state s that such definitions usually will control. In any event, CompTel does not even suggest that interconnection is define d any where in the Act. CompTel really is contending that, if the FCC’ s definit ionis upheld, “the 1996 Act would lose virtually all meaning ” because of the way th e term interconnection is used elsewhere in the Act. Brief of Petitioner at 13. But the only specifi c use of the word to which CompTel refers in its brief is that in 47 U.S.C.A. § 252(e), which says, “Any interconnection agreement adopted by negoti ation or arbitration shall be submitted for approval to the State commission.” According to CompTel’ s argument, Congress certainly did not intend this authority for review to be “li mited to agreements for the mere physical interconnection o f networks.”

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Brief of Petitioner at 12. We are inclined to agree, but the term at issu e is “in terconnection agreement,” not just interconnection, and it is a reference back to agreements discussed earlier in § 252. Even a cursory reading of § 252 make s it clear that interconnection agreement as used in § 252(e) is the Act’s shorthand for agreements on providing an d establishing rates for “interconnection, services, or network elements.” E.g. , 47 U.S.C.A. § 252(a)(1), (c)(2) (emphasis added).

The FCC’s interpretation of interconnection as only a physical link for mutual exchange of traffic between LECs does not violate the Act.

B.
CompTel also argues that the FCC’s interpretation will subvert th e Act’s goal of assuring that rates for telecommunications services are cost

based. See 47 U.S.C.A. § 252(d)(1) (requiring that “the just an d reasonable rate for the interconnection of facil ities and equipment” under § 251(c )(2) and the “just and reasonable rate for [unbundled] networ k elements” under § 251 (c)(3) be cost-based and nondiscriminatory, and “may inc lude a reasonable profit”). But, assuming without deciding that th e FCC’s i nterpretation of interconnection would have the effect CompTe l predicts, it is clear from the Act that Congress did not intend all access charges to move to co st-based pricing, at least not immediately. The Act plainly preserves certain rate regimes already in place.

Under § 251(g), an LEC
shall provide exchange access, information access, and exchange services for such access to [IXCs] and

### -9- information service providers in accordance with th e same equal access and nondiscriminatory interconnection restrictions and obligations ( including receipt of compensation ) that apply to such carrier on the date immediately preceding Febr uary 8, 1996 [date of enactment] under any court order, consent decree, or reg ulation, order, or policy of the [FCC] , until suc h res trictions and obligations are explicitly superseded by regulations prescribed by the [FCC] after February 8, 1996.

Id. § 251(g)(emphasis added). In other words, the LECs will continue to provide exchange access to IXCs for long-distanc e service, and continue to
rec eive payment, under the pre-Act regulations and rates. This sectio n leaves the door open for the promulgation of new rates at some future date , but any possible new exchange access rates for interstate calls will not carry the same deadli ne or the same cost-based restrictions as will those for interconnection a nd unbundled network elements specifically mentioned in § 252(d)(1).
We conclude that the FCC’s interpretation of interconnection do es not thwart the statutory scheme of the Act.

C. CompTel a lso challenges the FCC’s interpretation of interconnection as having a discrimin atory impact, by permitting LECs to charge different rates for the same service based on whether the carrier who is seekin g interco nnectionand other network services is a long-distance servic e provider or a local service provider. But the two kinds of carriers are not, in fact, seeking the same services. The IXC is seeking to use th e incumbent LEC's netwo rk to route long-distance calls and the newcomer LEC seeks use of the incumbent LEC's network in order to offer a competin g local service. Obviously the services sought, while they

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might be technologica lly identical (a question beyond our expertise), are distinct. And if the IXC wants access in order to offer local service (in other words, wants to become a LEC), then there is no rate differential. In these circumstances, we do not think the FCC’s interpretation o f interconnection has a discriminatory impact.

D.

In sum, w e conclude that CompTel has failed to demonstrate that the FCC’s interpretation of interconnection as a physical link, and only a physical link, is “no t one that Congress would have sanctioned.” Chevron U.S.A. , 467 U.S. at 845 (quoting United States v. Shimer , 367 U.S. 374, 38 3 (1961)). We hold that limiting interconnection for the purposes o f § 251(c)(2) to physical linkage “is based on a p ermissible construction of the statute.” Id. at 843.

II. CompTel also challenges an interim decision in the FCC’s First Report and Order regarding pricing, arguing that the FCC’s position is a violatio n of the Act and arbitrary and capricious. Under the Act, as noted supra in Part IB of this opinion, the rates that incumbent LECs charge fo r § 251 (c)(2) and (3) services (interconnection and unbundled networ k eleme nts) must be cost-based, nondiscriminatory, and “may include a
reason able profit.” 47 U.S.C.A. § 252(d)(1). Notwithstanding thi s provision, the FCC ha s established “a temporary transitional mechanism to help complete all of the steps toward the pro-co mpetitive goal of the 1996 Act.” First Report and Order ¶ 720. That is, i ncumbent LECs for the time being may recover from interconnecting carriers the carrier common lin e charge (CCLC) and seventy-five percent of the

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transport interconnection charge (TIC) “for all interstate minute s traversing the incumbent LECs’ local switches for which the interconnectin g carrie rs pay unbundled local switching element charges.” Id. (emphasi s added). Neither of these charges is based on the LECs' actual cost. We wi ll “hold unlawful and set aside agency action, findings, an d
co nclusions found to be . . . arbitrary, capricious, an abuse o f discretion, or otherw ise not in accordance with law; . . . [or] in excess of statutory jurisdiction, authority, or limitations, or short of statutor y right.” 5 U.S.C. § 706(2)(A), (C) (1994). It is significant to our revie w for u nlawfulness that the CCLC and TIC presently being assessed may b e collected no later th an June 30, 1997. See First Report and Order ¶ 720. Alth oughtemporary agency rules are subject to judicial revie w notwithstanding theirtransitory nature, “substantial deference by courts is accorded to an agency when the issue concerns interim relief.” MC I Telecomms. Corp. v. FCC , 750 F.2d 135, 140 (D.C. Cir. 1984).

The FCC acknowledges the cost-based issue raised by assessing th e charges b ut argues that two deadlines in the Act, which are nine month s apart, have created a dilemma for the agency, an d that the interim charges
are the best way to resolve it. According to the FCC, congressional inten t
on another matter of great importance in the Telecommunications Act of 199 6 justifies this tempor ary diversion from the Act’s cost-based mandate. We agree.

Congress directed the FCC to “complete all actions necessary t o establish regulations to implement the requireme nts” of § 251 by August 8, 1996--hence, the First Report and Order released that date. 47 U.S.C.A. § 251(d)(1). The conflicting deadline concerns another major purpose of the Act, that is, the reform of the universal se rvice system. The goal of what is known in the

### We hereby take judicial notice of the Report and Order, 4 

### Federal-State Joint Board on Universal Service, CC Docket No. 96- 45 (May 8, 1997). The effective date of the rules, published along with a summary of the Report and Order at 62 Fed. Reg. 32,862 (1997), is July 17, 1997, except for Subpart E of Part 54 (Universal Service Support for Low Income Services), which has an effective date of January 1, 1998.
-12- telecommunications industry as universal service is to ensure that quality service and access are available to all consumers, “including low-income consumers and those i n rural, insular, and high cost areas . . . at rates tha t are reasonably comparable to rates charged for similar services i n urban areas.” Id. § 254(b)(3). To date, the subsidies necessary t o achieve this goal have been derived, at least inpart, from access charges that are not cost-based, so that long-distance r ates have been subsidizing local rates. See First Report and Order ¶ 718; Allnet Communication Serv. v. National Exch. Carrier Ass’n , 965 F.2d 1118, 1119 (D.C. Cir. 1992). In keeping with the Act’s cost-based objectives, support for universal servic e will soon be “explicit,” 47 U.S.C.A. § 254(e), and after the system i s reformed “[a]ll providers of telecommunications services should make a n eq uitable and nondiscriminatory contribution to the preservation an d advancement of universal service,” id. § 254(b)(4). Congress’s deadline for the adoption of universal service rules unde r the Act was May 8, 1997. See id. § 254(a)(2). 4 Co mpTel first argues that the access charges are contrary to th e statute. Indeed, as noted above, the Act requires that rates for certain
access b e cost-based, and at first blush the interim CCLC and TI C assessments appear to be reversible. But the same Act requires the reform of univ ersal service subsidies and not, significantly, abolishment o f universal service, even temporarily. Clearly Co ngress did not intend that universal service should be adversely affected by the institution of costbased rates. But the

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nine-month disparity between the deadline for im plementation of cost-based service and the deadline for reform of universal service raises the threat of serious disruptionin universal service for those nine months if costbased service is required before universal service is funded by competitively neutral means. See First Report and Order ¶¶ 719, 720. We share the FCC’s concern “that implementation of the requirements of sectio n 251 now, without taking into account the effects of the new rules on . . . existing access charge and universal service regimes, may have significant , immedi ate, adverse effects that were neither intended nor foreseen by Congress.” Id. ¶ 716.
If the FCC, upon meeting the August 8, 1996, deadline for issui ng the regulations required of it by subsection 251(d)(1), had not instituted an interim access charge of some sort in order to s ubsidize universal service for the nine months before universal service reforms are complete, we thin k it a pparent that universal service soon would be nothing more than a memory. The FCC action is logical and carefully explained in the Firs t Repo rt and Order. We do not think it contrary to the Act to institut e
access charges with a fixed expiration date, even though such charges on their face appear to violate the statute, in order to effectuate another part of the Act. Moreover, as discussed above, incumbent LECs may collect the charges no later than June 30, 1997, and the new universal servic e rules are scheduled to go into effect July 17, 1997 (except as noted)

. Given the brief life of the interim charges, and the deference that interi m rules command, we think the FCC’s order on this issue should stand. Further, while the FCC’s approach may not be the best way to ma intain universal service on a transitional basis, and perhaps more research and study by the FCC would have resulted in a better solution for temporar y funding of universal service, that is not

### While we uphold the FCC's decision to allow incumbent LECs 5 

### to collect, on an interim basis, access charges for interstate calls, we vacate the Commission's attempt to regulate the temporary recovery of access charges for intrastate calls contained in paragraphs 729 through 732 of the First Report and Order and C.F.R. § 51.515(c) (1996) as being beyond the scope of the Commission's jurisdiction. See 47 U.S.C. § 152(b) (1994). While we recognize the FCC is merely "allowing" the state commissions to continue to allow the LECs to collect access charges on intrastate calls, we believe that such an assertion of regulatory power is beyond the scope of the FCC's jurisdiction.
-14- for us to say. Because of the temporary status of the CCLC and TI C assessments, we review the agency decision “with the understanding that th e agency may reasonably limit its commitment of re sources to refining a rule witha short life expectancy.” Competitive Telecomms. Ass’n v. FCC , 8 7 F.3dat 531 (reviewing “interim” FCC rule that already had been in place for ye ars). This interim action by the FCC is not arbitrary an d capricious, and therefore should not be set aside by this Court. 5

III.

For the reasons discussed above, CompTel’s petition for review i s denied, except to the extent discussed supra note 5.

A true copy.

Attest:

CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT