Source: http://karenbrinkmann.com/Talk_America_Case.html
Timestamp: 2019-04-22 23:54:52+00:00

Document:
Under the Communications Act of 1934, as amended by the Telecommunications Act of 1996 (the Act), ILECs are required to lease certain services and facilities to competitive local exchange carriers (CLECs), and interconnect their networks with CLEC networks, at cost-based rates, upon request by the CLECs. This case concerns two specific obligations under the Act under which ILECs are required to make available access to their networks to CLECs at cost-based rates: First, under Section 251(c)(3), ILECs are required, on request, to lease specified “unbundled” (à la carte) network elements (UNEs) that would be “necessary” for a CLEC’s provision of local telecommunications service, unless the CLEC’s provision of such service would not be “impaired” without the requested UNE access. Second, under Section 251(c)(2), ILECs are required to provide “interconnection,” which “link[s] the [ILEC’s] telephone network with the competitor’s network for the mutual exchange of traffic.” This case involves classifying “entrance facilities,” which are “the transmission facilities that connect [CLEC] networks with [ILEC] networks,” as well as distinguishing the act of interconnecting from the facilities through which telecommunications companies interconnect.
In its 2003 Triennial Review Order (TRO), the FCC held that Section 251(c)(3) of the Act does not require that ILECs lease entrance facilities at forward-looking cost-based rates to CLECs, because entrance facilities are not UNEs within the meaning of the statute. The U.S. Court of Appeals for the D.C. Circuit remanded this aspect of the TRO for further FCC explanation, finding the FCC had not provided sufficient record justification. In its 2005 Triennial Review Remand Order (the TRRO), the Commission reversed course and held that entrance facilities do fall within the Act’s definition of UNEs, but ILECs are not required to provide cost-based access to entrance facilities because of the competitive availability of alternatives – in short, CLECs are not “impaired” without access to entrance facilities.
Critically, in paragraph 140 of the TRRO, the Commission stated that its non-impairment finding as to entrance facilities under Section 251(c)(3) “does not alter the right of [CLECs] to obtain interconnection facilities pursuant to section 251(c)(2),” and therefore “[CLECs] will have access to these facilities at cost-based rates to the extent that they require them to interconnect with the [ILEC’s] network.” It is this cryptic statement that became the subject of review in the Supreme Court, when private litigants both invoked the TRRO in support of their opposite positions on entrance facilities.
Following the release of the TRRO, AT&T’s Michigan Bell telephone company raised the rates it was charging for access to its entrance facilities. CLECs complained to the Michigan Public Service Commission (the MPSC), which found that CLECs are entitled to cost-based access to entrance facilities used for interconnection, as part of ILECs’ interconnection obligations under 251(c)(2). AT&T sued in federal district court, which reversed the MPSC’s ruling, relying on the FCC’s decision in the TRRO. On appeal by certain CLECs, the U.S. Court of Appeals for the Sixth Circuit affirmed the lower court’s ruling, and explained that the MPSC “based [its] order on its mistaken belief that TRRO ¶ 140 requires Michigan Bell to treat its entrance facilities as interconnection facilities any time the CLECs ultimately use them for interconnection.” This, according to the Sixth Circuit, is too expansive a reading of paragraph 140, and is more than is required by the TRRO or the Act.
The Sixth Circuit disagreed with the interpretation of two other federal appeals courts, both of which read paragraph 140 as distinguishing between two purposes of entrance facilities, “(1) to carry communications among CLEC customers (i.e., backhauling); and (2) to interconnect the CLEC to the ILEC network,” and both of which held that ILECs may charge market-based rates for backhauling, but may only charge cost-based rates for interconnection purposes. The Sixth Circuit believed this distinction based on the intent of the requesting CLEC to be “immaterial,” and instead held that under the TRRO, “the material distinction is between the ILEC’s side of the designated connection point (i.e., the ‘interconnection facility’) and the CLEC’s side of the designated connection point (i.e., the ‘entrance facility’).” According to the Sixth Circuit, an ILEC should only be required to provide cost-based access to an entrance facility if it is offered “instead of [an] interconnection facility (as that would effectively change the designated connection point and transform the purported ‘entrance facility’ into an ‘interconnection facility’).” Otherwise, the court said, when an entrance facility is being offered in addition to an interconnection facility, it should not matter that “the CLEC would ultimately be using the entrance facility to connect its network with the ILEC’s network (through the designated point, via the interconnection facility)” because “the ILEC most assuredly has no obligation to provide any entrance facility and the CLEC has no obligation to use the ILEC’s entrance facility” (the CLEC may connect directly to the interconnection facility, rent entrance facilities from a third party, or build its own entrance facility).
CLECs sought review of the Sixth Circuit decision in the U.S. Supreme Court. Although the FCC was not a party to the case, it filed an amicus curiae (friend of the court) brief with the high court, offering its own interpretation of the TRRO and the cryptic paragraph 140. The FCC’s position stated that the TRRO did not change the interconnection obligations of ILECs, and that these obligations include leasing entrance facilities to CLECs for the purpose of interconnection. The Commission reasoned, relying on the language of section 251(c)(2), that ILECs must lease any “technically feasible” facilities for interconnection, including existing entrance facilities, and that providing access to the AT&T entrance facilities at issue in this case was technically feasible.
The Supreme Court reversed the decision of the Sixth Circuit, deferring to the position of the FCC as explained in its amicus brief to the court. The court deferred because it found the FCC’s explanation of its TRRO decision to be neither plainly erroneous nor inconsistent with regulation – in other words, the Court did not conduct a de novo review of the statute but deferred to the expert agency’s interpretation in the context of this litigation.
The Supreme Court’s reliance on the Commission’s brief could create a significant opening for agency action. The Court relied on its prior ruling in Auer v. Robbins, dealing with an interpretation by the Secretary of Labor, where it determined that an interpretation being presented in the form of a legal brief “does not . . . make it unworthy of deference,” as long as the position “is in no sense a ‘post hoc rationalizatio[n]’ advanced by an agency seeking to defend past agency action against attack,” and if there is “no reason to suspect that the interpretation does not reflect the agency’s fair and considered judgment on the matter in question.”The Court subsequently reaffirmed that it will “defer to an agency’s interpretation of its regulations, even in a legal brief, unless the interpretation is ‘plainly erroneous or inconsistent with the regulation[s]’ or there is any other ‘reason to suspect that the interpretation does not reflect the agency’s fair and considered judgment on the matter in question.’” The Court will turn to the agency’s interpretation “[i]n the absence of any unambiguous statute or regulation.” As Justice Scalia pointed out in his concurring opinion, this standard offers a notable amount of interpretive power to an agency whose regulations have been vaguely drafted. It is also notable that, under this precedent, agencies need not act on a policy, nor be a party in a current dispute, in order to govern – they may be able to settle a legal question merely by declaring their interpretation in an amicus brief.
The scope of this opinion is confined to “existing” entrance facilities. The opinion frames the issue in the case as “whether respondent, Michigan Bell Telephone Company d/b/a AT&T Michigan (AT&T), must lease existing entrance facilities to competitive LECs at cost-based rates,” and concludes that “AT&T must lease its existing entrance facilities for interconnection at cost-based rates.” In a footnote, the court explicitly points out that “[t]hese cases concern only existing entrance facilities, and the Commission expressly declines to address whether it reads its regulations to require [ILECs] to build new entrance facilities for interconnection.” Also in the footnote, the court acknowledges that “[t]he Commission suggests here, as it has before, that additional considerations of cost or reasonableness might be appropriate if a [CLEC] were to request that an [ILEC] build new entrance facilities for interconnection.” Nevertheless, the Court elected to “express no view on the matter.” Therefore, the case leaves open questions concerning the obligations of ILECs with regard to new entrance facilities.
The opinion also does not elaborate on the term “cost-based rates” when it concludes, “AT&T must lease its existing entrance facilities for interconnection at cost-based rates.” Notably, it is unclear whether these cost-based rates for interconnection will differ from the formerly required UNE cost-based rates. If the effect of the ruling is to require ILECs to provide existing entrance facilities at the same price as if they were UNEs, the TRRO would seem to have been reinterpreted to reach a result previously rejected by the Commission.
The opinion is also unclear with regard to handling the distinction between the two possible uses of entrance facilities: backhaul and interconnection. The Supreme Court recognized that “[t]he parties and their amici dispute whether an [ILEC] has any way of knowing how a [CLEC] is using an entrance facility.” However, the Court decided that “[t]his technical factual dispute simply underscores the appropriateness of deferring to the FCC.”  The FCC previously has frowned upon ILECs’ attempts to divine CLECs’ intended use of UNEs. It remains to be seen whether ILECs will be permitted to deny cost-based access to entrance facilities based on the belief that the requesting CLEC does not intend to use them for interconnection, but only for backhaul purposes.
 Talk America, Inc. v. Michigan Bell Telephone Co., 2011 WL 2224429 (2011) at *5.
 In re Review of Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers, 20 FCC Rcd. 2533, 2609–2612, ¶¶ 136–141, 136 (2005) (TRRO).
 See In re Review of Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers, 18 FCC Rcd. 16978, 17202–17205, ¶¶ 365–367 (2003) (TRO).
 United States Telecom Assn. v. FCC, 359 F.3d 554, 586 (5th Cir.), cert. denied, 543 U.S. 925 (2004).
 TRRO ¶¶ 136-141. In support of its finding of non-impairment, the Commission explained that “entrance facilities are less costly to build, are more widely available from alternative providers, and have greater revenue potential than dedicated transport between incumbent LEC central offices,” and that “competitive LECs have a unique degree of control over the cost of entrance facilities, in contrast to other types of dedicated transport, because they can choose the location of their own switches.” Id. at ¶ 138.
 TRRO at ¶140 (emphasis added).
 Michigan Bell Telephone Co. v. Covad Communications Co., 597 F.3d 370, 386 (6th Cir. 2010).
 Michigan Bell at 386 (parentheticals in original).
 Id. at 386 (parentheticals in original).
Auer v. Robbins, 519 U.S. 452, 462 (1997) (internal citation omitted).
 Chase Bank USA, N.A. v. McCoy, 131 S.Ct. 871, 880 (2011), citing Auer at 461, 462.
 Talk America at *6 (citations omitted).
 Id. at *11, Scalia concurring. Scalia explains that “deferring to an agency's interpretation of its own rule encourages the agency to enact vague rules which give it the power, in future adjudications, to do what it pleases.” Id.
 Id. at *4 (emphasis added).
 Id. at *5 (emphasis added).
 Id. at n. 4, citing Brief for United States as Amicus Curiae 25, n. 7.
 Id. at n. 4 (citations omitted).
*Karen Brinkmann is a telecommunications, media and technology attorney practicing law in the District of Columbia since 1988.
**Drew Simshaw is a student at the Indiana University Maurer School of Law, in Bloomington, Indiana. He is a candidate for the degree of Juris Doctor in May 2012.

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