Opinion ID: 3065494
Heading Depth: 2
Heading Rank: 1

Heading: Access to Entrance Facilities Under 47 U.S.C.

Text: § 251(c)(2). [1] AT&T contends the district court erred by affirming the CPUC’s arbitral order permitting competitive LECs to lease entrance facilities from incumbent LECs under 47 U.S.C. § 251(c)(2), the interconnection provision. Both the Seventh and the Eighth circuits recently rejected AT&T’s position, and have concluded that FCC regulations authorize state public utilities commissions to order incumbent LECs to lease entrance facilities to competitive LECs at regulated rates for the purpose of interconnection. See Sw. Bell Tel., LP v. Mo. Pub. Serv. Comm’n, 530 F.3d 676 (8th Cir. 2008) (“SWBT“); Ill. Bell Tel. Co. v. Box, 526 F.3d 1069 (7th Cir. 2008) (“Box I”).11 We agree with our sister circuits. 10 Under the Hobbs Act, this court lacks jurisdiction to rule on a collateral attack of an FCC order. 28 U.S.C. § 2342; see also US West Comms, Inc. v. Jennings, 304 F.3d 950, 958 n.2 (9th Cir. 2002) (“Properly promulgated FCC regulations currently in effect must be presumed valid for the purposes of this appeal. The Hobbs Act, 28 U.S.C. § 2342, requires that all challenges to the validity of final orders of the FCC be brought by original petition in a court of appeals. The district court thus lacked jurisdiction to pass on the validity of the FCC regulations, and no question as to their validity can be before us in this appeal.”); see also GTE S., Inc. v. Morrison, 199 F.3d 733, 742-43 (4th Cir. 1999) (holding the court lacked jurisdiction to rule on the validity of FCC rules “including those relating to rulemaking” on review of district court order affirming state public utility’s arbitral decision relating to provisions of the Act). 11 In Box I, the Seventh Circuit held that because entrance facilities were a “technologically feasible” means of handing off traffic between a competitive LEC and an incumbent LEC, an obligation to lease such facilities at TELRIC rates was within the scope of § 251(c)(2) and the implementing regulations. 526 F.3d at 1071-72. The Eighth Circuit reached the same conclusion in SWBT, 530 F.3d at 683-84. In SWBT, the Eighth Circuit stated: “If a [competitive] LEC needs entrance facilities to interconnect with an [incumbent] LEC’s network, it has the right to obtain such facilities from the [incumbent] LEC.” Id. at 684. PACIFIC BELL v. CALIFORNIA PUC 3399 [2] Section 251(c)(2) provides that “each incumbent local exchange carrier has the . . . duty to provide, for the facilities and equipment of any requesting telecommunications carrier, interconnection with the local exchange carrier’s network.” 47 U.S.C. § 251(c)(2). The FCC defines interconnection as “the linking of two networks for the mutual exchange of traffic.” 47 C.F.R. § 51.5. In other words, interconnection provides a way for a competitive LEC’s customers to reach AT&T’s customers and vice versa. Section 251(c)(2)(B) specifies that incumbent LECs must offer competitive LECs such interconnection “at any technically feasible point within the [incumbent] carrier’s network.” 47 U.S.C. § 251(c)(2)(B). The FCC regulation also states that incumbent LECs must provide competitive LECs with “any technically feasible method of obtaining interconnection.” 47 C.F.R. § 51.321(a). [3] The FCC calls entrance facilities “the transmission facilities that connect competitive LEC networks with incumbent LEC networks.” TRRO ¶ 136. As the term “entrance” implies, entrance facilities provide a way for a competitive LEC’s calls to enter AT&T’s network and reach AT&T customers, a fact that AT&T concedes. For the competitive LECs to use the entrance facilities this way is interconnection.12 [4] That AT&T’s entrance facilities can be used for a purpose besides interconnection (i.e., backhauling) does not change the result that 47 U.S.C. § 251(c)(2) mandates AT&T 12 AT&T seeks to distinguish the historical use of entrance facilities for interconnection by long distance service providers, which did not compete with AT&T, and the current use by competitive LECs, which do compete with AT&T. AT&T states that “entrance facilities in this case provides the same function” as entrance facilities did historically (i.e., connecting networks), but competitive LECs can feasibly interconnect with AT&T at a different point in AT&T’s network, whereas the long distance providers could not. This contention does not survive the plain language of § 251(c)(2)(B), which requires an incumbent LEC to provide interconnection “at any technically feasible point within [its] network.” (Emphasis added.) 3400 PACIFIC BELL v. CALIFORNIA PUC to provide competitive LECs access at regulated rates to its entrance facilities for interconnection. The parties disagree about the effect on this result of the FCC’s finding in its TRRO that under a different subsection of the Act, § 251(c)(3),13 competitive LECs are not impaired14 in building entrance facilities and therefore that entrance facilities are not “unbundled network elements” that incumbent LECs like AT&T have a duty to provide competitive LECs for any purpose, including backhauling. TRRO ¶¶ 136-141. As an initial matter, under general principles of statutory interpretation, the specific duty found in 47 U.S.C. § 251(c)(2) of providing interconnection facilities prevails over the general duty of providing network elements at unbundled rates, found in § 251(c)(3) (regardless whether that general unbundling duty exists as to entrance facilities). See NLRB v. A-Plus Roofing, Inc., 39 F.3d 1410, 1415 (9th Cir. 13 Section 251(c)(3) provides that incumbent LECs have “[t]he duty to provide, to any requesting telecommunications carrier for the provision of a telecommunications service, nondiscriminatory access to network elements on an unbundled basis at any technically feasible point on rates, terms, and conditions that are just, reasonable, and nondiscriminatory in accordance with the terms and conditions of the agreement and the requirements of this section and section 252 of this title. An incumbent local exchange carrier shall provide such unbundled network elements in a manner that allows requesting carriers to combine such elements in order to provide such telecommunications service.” 14 The Act tasks the FCC with deciding whether a particular network element, i.e., “a facility or equipment used in the provision of a telecommunications service,” 47 U.S.C. § 153(29), is one that incumbent LECs must lease to competitive LECs at regulated rates, i.e., the element is “unbundled” under 47 U.S.C. § 251(c)(3). 47 U.S.C. § 251(d). To make that determination, the FCC must consider, at a minimum, two factors: “whether — (A) access to such network elements as are proprietary in nature is necessary; and (B) the failure to provide access to such network elements would impair the ability of the telecommunications carrier seeking access to provide the services that it seeks to offer.” Id. The FCC thus makes an “impairment finding” as to that network element. See Covad Comms., 450 F.3d at 534-45. PACIFIC BELL v. CALIFORNIA PUC 3401 1994) (“It is a well-settled canon of statutory interpretation that specific provisions prevail over general provisions.”). Moreover, as the district court found, the TRRO reinforces that the duties of incumbent LECs under 47 U.S.C. § 251(c)(2) and § 251(c)(3) are independent. The TRRO states that the FCC’s finding that incumbent LECs need not lease entrance facilities as unbundled network elements under (c)(3) “does not alter the right of competitive LECs to obtain interconnection facilities pursuant to section 251(c)(2).” TRRO ¶ 140. [5] AT&T contends TRRO Paragraph 140 does not require incumbent LECs to offer entrance facilities at TELRIC rates because the TRRO uses the term “interconnection facilities” instead of “entrance facilities” when it refers to the right under 47 U.S.C. § 251(c)(2) that is not altered by the TRRO’s determination that “entrance facilities” need not be unbundled under § 251(c)(3). First, although the FCC did not use the term “entrance facilities” in Paragraph 140, the paragraph appears in a section of the TRRO entitled “Entrance Facilities,” which solely discusses the effect of the FCC’s finding as to entrance facilities. Moreover, prior FCC rulings make clear that the interconnection obligation contained in § 251(c)(2) includes a duty to lease entrance facilities at TELRIC rates when such facilities will be used for the purposes of interconnection. The 1996 Local Competition Order (“LCO”) broadly defined the interconnection obligation to include a duty to offer unbundled network elements at TELRIC rates: We conclude that, under sections 251(c)(2) and 251(c)(3), any requesting carrier may choose any method of technically feasible interconnection or access to unbundled elements at a particular point. Section 251(c)(2) imposes an interconnection duty at any technically feasible point; it does not limit that 3402 PACIFIC BELL v. CALIFORNIA PUC duty to a specific method of interconnection or access to unbundled elements. LCO ¶ 549 (emphasis added); see also 47 C.F.R. § 51.321(a) (stating that incumbent LECs are required to offer “any technically feasible method of obtaining interconnection”). [6] Though the LCO did not expressly state that entrance facilities were one of the “network elements” incumbent LECs were required to make available under 47 U.S.C. § 251(c)(2), the later Triennial Review Order (“TRO”) expressly interpreted the LCO to impose this obligation. The TRO stated: In reaching [the determination that entrance facilities are not “network elements” subject to the unbun- dling obligation in § 251(c)(3)] we note that, to the extent that requesting carriers need facilities in order to ‘interconnect with the incumbent LEC’s network,’ section 251(c)(2) of the Act expressly provides for this and we do not alter the Commission’s interpretation of this obligation. TRO ¶ 365. The TRO elaborated: [C]ompetitive LECs often use transmission links including unbundled transport connecting incumbent LEC switches or wire centers in order to carry traffic to and from its end users. These links constitute the incumbent LEC’s own transport network. However, in order to access UNEs [unbundled network ele- ments], including transmission between incumbent LEC switches or wire centers, while providing their own switching and other equipment, competitive LECs require a transmission link from the UNEs on the incumbent LEC network to their own equipment located elsewhere. Competitive LECs use these transmission connections between incumbent LEC PACIFIC BELL v. CALIFORNIA PUC 3403 networks and their own networks both for interconnection and to backhaul traffic. Unlike the facilities that incumbent LECs explicitly must make available for section 251(c)(2) interconnection, we find that the Act does not require incumbent LECs to unbundle transmission facilities connecting incumbent LEC networks to competitive LEC networks for the purpose of backhauling traffic. TRO ¶ 366. The TRO thus expressly interpreted the LCO to allow competitive LECs to lease entrance facilities or “transmission links” at TELRIC rates for the purpose of achieving interconnection. This interpretation of the LCO is reasonable and entitled to deference.15 Auer v. Robbins, 519 U.S. 452, 461 (1997) (An agency’s interpretation of its own regulation is “controlling unless plainly erroneous or inconsistent with the regulation.”).16 Moreover, AT&T’s contention that the TRO’s interpretation of the LCO conflicts with the terms of 47 U.S.C. § 251(c)(2) is foreclosed because AT&T cannot 15 Contrary to AT&T’s assertion, this portion of the TRO was not vacated in USTA II, 359 F.3d 554. USTA II vacated only the TRO’s conclusion that entrance facilities are categorically excluded from the definition of “network elements” under § 251(c)(3). Id. at 585. The court did not rule on the validity of the FCC’s conclusion that, under § 251(c)(2), incumbent LECs are obligated to offer entrance facilities at TELRIC rates. 16 The specific statements in the TRO and the LCO that the obligation to provide facilities and equipment under § 251(c)(2) includes a duty to provide entrance facilities foreclose AT&T’s interpretation of the term “interconnection facilities.” AT&T relies on 47 C.F.R. § 51.5, which defines “interconnection” to exclude the “transport and termination of traffic.” AT&T construes this language to exclude any duty under § 251(c)(2) to carry a competitive LEC’s traffic. This conflicts with TRRO ¶ 140 itself, which explains that “interconnection facilities” are “for transmission and routing” of telephone calls. If the duty to provide “interconnection” did not include any duty to provide any transport of calls, then § 251(c)(2) would be meaningless because incumbents could physically link networks with the competitive LEC, but refuse to carry calls to the incumbent LEC’s terminal customers, thus effectively locking the competitive LEC out of the market. 3404 PACIFIC BELL v. CALIFORNIA PUC challenge the validity of FCC orders in this proceeding. See Jennings, 304 F.3d at 958 n.2. AT&T also contends CPUC’s interpretation conflicts with the FCC’s express findings that competitive LECs are not “impaired” as to entrance facilities. See TRRO ¶¶ 138, 139. But those FCC findings also expressly distinguished entrance facilities used for the purpose of interconnection and for backhauling. TRRO ¶¶ 138-140. In light of the different economic considerations associated with the use of entrance facilities for interconnection, on the one hand, and for backhaul, on the other, the FCC could reasonably conclude that different regulations were appropriate. Where a competitive LEC uses an interconnection facility for backhaul, only the competitive LEC benefits—both the originator and the recipient of the call are competitive LEC customers. But when the competitive LEC uses the entrance facility for interconnection, both competitor and incumbent benefit: the incumbent’s customers can reach customers of the competitor, and vice versa. See generally LCO ¶ 162 (“In this situation . . . each gains value from the interconnection arrangement.”); TRO ¶ 367 (“Our conclusion in this respect is buttressed by the fact that the economics of dedicated facilities used for backhaul between networks are sufficiently different from transport within an incumbent LEC’s network that our analysis must adequately reflect this distinction.”); see also Box I, 526 F.3d at 1071 (“What’s the point of specifying that [competitive] LECs cannot demand access to entrance facilities as unbundled network elements, AT&T inquires, if state commissions can turn around and require the same access at the same price anyway? The answer . . . is that [competitive] LECs do not enjoy the “same” access to entrance facilities under the state commission’s decision as they did before the FCC’s order. Until then, [competitive] LECs could use entrance facilities for both interconnection and backhauling.”). [7] Accordingly, we agree with the district court and hold that, under 47 U.S.C. § 251(c)(2), incumbent LECs must lease PACIFIC BELL v. CALIFORNIA PUC 3405 entrance facilities at TELRIC rates to competitive LECs for the purpose of interconnection. B. Unbundled Access to DS1 Circuits Under 47 U.S.C. § 251(c)(3). [8] In its cross-appeal, Cbeyond contends the district court erred in vacating the CPUC’s order that required incumbent LECs to grant unbundled access to an unlimited number of DS1 transport circuits along routes on which competitive LECs are impaired as to DS3 transport circuits.17 The district court concluded that the plain language of the governing regulation, 47 C.F.R. § 51.319(e)(2)(ii)(B) (the “DS1 Cap Rule”),18 limits a competitive LEC to a maximum of ten DS1 circuits along any route regardless whether the competitive LEC is impaired as to DS3 lines. We agree. Under the plain language of the regulation, the DS1 Cap Rule applies to all routes where DS1 circuits are available on an unbundled basis. On appeal, Cbeyond contends the district court’s interpretation of the DS1 Cap Rule is contrary to the FCC’s findings in the earlier TRRO. Cbeyond concedes, however, that the language of the DS1 Cap Rule—47 C.F.R. § 51.319(e)(2)(ii)(B) —unambiguously limits to ten the number of DS1 circuits an incumbent LEC must offer at TELRIC rates on any route. 17 AT&T incorrectly contends Cbeyond waived this issue by failing to raise it in the district court. This issue is (1) a pure question of law; and (2) was fully briefed in the district court by the CPUC. Accordingly, the issue has not been raised for the first time on appeal and this court can reach the issue. Even if the issue was presented for the first time on appeal, the court could reach the question. See K&N Eng., Inc. v. Bulat, 510 F.3d 1079, 1081 n.2 (9th Cir. 2007) (the court may, in its discretion, reach issues raised for the first time on appeal if the record is fully developed, the question is a pure question of law, and no prejudice will result). 18 The DS1 Cap Rule provides: “Cap on unbundled DS1 transport circuits. A requesting telecommunications carrier may obtain a maximum of ten unbundled DS1 dedicated transport circuits on each route where DS1 dedicated transport is available on an unbundled basis.” 3406 PACIFIC BELL v. CALIFORNIA PUC In general, the plain meaning of an administrative regulation controls. Webb v. Smart Document Solutions, LLC, 499 F.3d 1078, 1084 (9th Cir. 2007). Plain meaning, however, is “not the end of the inquiry.” Id. at 1086; see also Safe Air for Everyone v. EPA, 488 F.3d 1088, 1097 (9th Cir. 2007). The plain language of a regulation does not control if “clearly expressed administrative intent is to the contrary or if such plain meaning would lead to absurd results.” Id. (internal quotation marks and alterations omitted). “[T]he regulatory intent that overcomes plain language must be referenced in the published notices that accompanied the rulemaking process.” Id. A rule leads to absurd results only if it would be “patently inconceivable” that the agency intended the result. Id. at 1098. [9] Here, there is no “clearly expressed administrative intent” in the published notices that accompanied the DS1 Cap Rule rulemaking process. Further, the DS1 Cap Rule as we read its plain text would not lead to absurd results. It is perfectly conceivable the FCC meant what it said when it limited the number of DS1 circuits that a competitive LEC can lease on routes where the competitive LEC is impaired as to a higher capacity DS3 circuit. Where a competitive LEC is so impaired, it will have access to an incumbent’s DS3 circuits on an unbundled basis. Hence, it would be more economical for the competitive LEC to lease a single DS3 line from the incumbent LEC, rather than eleven or more DS1 lines at greater cost. TRRO ¶ 128 (“This is consistent with the pricing efficiencies of aggregating traffic. While a DS3 circuit is capable of carrying 28 uncompressed DS1 channels, the record reveals that it is efficient for a carrier to aggregate traffic at approximately 10 DS1s.”). The FCC expressly found that once a competitive LEC could aggregate sufficient traffic, the DS3 rules should apply: “When a carrier aggregates sufficient traffic on DS1 facilities such that it effectively could use a DS3 facility, we find that our DS3 impairment conclusions should apply.” Id. [10] It is hardly “patently inconceivable” that the FCC intended the DS1 cap to apply on all routes, even those where PACIFIC BELL v. CALIFORNIA PUC 3407 competitive LECs are impaired as to DS3 circuits. In such circumstance, the competitive LEC can obtain more economical DS3 circuits, and there is no reason why the FCC would have intended to permit competitive LECs to impose greater costs on incumbent LECs by allowing unlimited leases of DS1 circuits. Cbeyond’s contention that the DS1 Cap Rule conflicts with the terms of 47 U.S.C. § 251(c)(3) is foreclosed because Cbeyond cannot challenge the validity of the FCC orders in this proceeding. See Jennings, 304 F.3d at 958 n.2. [11] Accordingly, we agree with the district court and hold that, under the plain language of the regulation, the DS1 Cap Rule limits to ten the number of DS1 lines an incumbent LEC must lease to a competitive LEC at TELRIC rates on all routes.