Verizon Communications, Inc. v. FCC-Telecommunications Access Pricing and Regulator Accountability through Administrative Law and Takings Jurisprudence

I. INTRODUCTION II. U.S. TELECOMMUNICATIONS REGULATION A. Deregulation Framework B. Access Pricing III. ADMINISTRATIVE LAW AND REVIEWING TELECOMMUNICATIONS ACCESS PRICES A. The Verizon Decision B. Administrative Law and Access Pricing IV. TAKINGS JURISPRUDENCE AND REVIEWING TELECOMMUNICATIONS ACCESS PRICES A. Takings and Telecommunications Before Verizon B. Takings and Telecommunications After Verizon V. CONCLUSION I. INTRODUCTION The need for regulators to manage changing economic conditions and technology in the telecommunications industry has given rise to access regimes characterized by broad guidelines and considerable flexibility for the regulator. The incumbent local exchange carriers ("ILECs") sought to challenge this broad discretion in Verizon Communications, Inc. v. Federal Communications Commission (1) which required the Supreme Court to scrutinize the Telecommunications Act of 1996 and Implementation of the Local Competition Provision in the Telecommunications Act of 1996, First Report and Order ("Local Competition Provisions"). (2) Two issues before the Court were (1) the legality of using forward-looking economic cost for setting rates for interconnection or leasing of network elements and further, the legality of defining forward-looking economic cost through the total element long-run incremental cost ("TELRIC") of the element which measures costs through a hypothetically efficient network; and (2) whether a rate-setting methodology could amount to a 'taking' for the purposes of the Fifth Amendment, which states "nor shall private property be taken for public use, without just compensation" (the "Takings Clause"). (3) This Article draws on the Supreme Court decision in Verizon to argue that the intersection of ambiguous telecommunications access statutes and the limits on judicial review as a result of the separation of powers and the application of Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc. (4) mean that administrative law has become an ineffective tool in ensuring the accountability of telecommunications regulators. Telecommunications regulation has become too reliant on regulatory expertise, and in the process, has ceded control over a vital area of economic policy to the regulator. (5) A dearth of regulator accountability can give rise to a technocratic approach that undermines democratic governance. This Article argues for Congress to address access pricing in greater detail. If further guidance is not provided, the Article argues, further challenges to TELRIC based on the Takings Clause and the Supreme Court's rate-setting cases can be expected. The limits on judicial review that are embodied in Chevron do not apply to the enforcement of a fundamental constitutional guarantee such as the Takings Clause. It follows that this constitutional protection will be more frequently invoked to establish a "just compensation" floor as a brake on the lack of regulator accountability. II. U.S. TELECOMMUNICATIONS REGULATION The deregulation of the U.S. Telecommunications industry took place through the Telecommunications Act of 1996, which amended the Communications Act of 1934. (6) The application of the rules varies depending upon whether an entity is an ILEC, or a new entrant, referred to in the legislation as a competitive local exchange carrier ("CLEC"). A. Deregulation Framework There are two types of rules. The first type may be described as the necessary conditions for a CLEC to enter the local call market, which apply equally to ILECs and CLECs. The rules require mandatory interconnection for the exchange of traffic to overcome the natural monopoly. (7) Interconnection must be provided at any technically feasible point, must be at least equal in quality to that provided by the ILEC to itself and must be provided according to rates, terms, and conditions that are nondiscriminatory. …