Opinion ID: 781291
Heading Depth: 2
Heading Rank: 1

Heading: Background and Regulatory Framework

Text: 2 To deregulate the telephone industry, Congress enacted the Telecommunications Act of 1996, codified in 47 U.S.C. Section 151 et seq. The Act has been called one of the most ambitious regulatory programs operating under cooperative federalism, and creates a regulatory framework that gives authority to state and federal entities in fostering competition in local telephone markets. We have often reiterated the Act's purposes, which are ending local telephone company monopolies and promoting competition in local telephone markets. E.g., Mich. Bell Tel. Co. v. Strand, 305 F.3d 580, 582 (6th Cir.2002). 3 The Act encourages competitive local telephone markets by imposing several duties on incumbent local exchange carriers, the telephone companies holding monopolies in local markets prior to the Act's implementation. The incumbent must negotiate or arbitrate agreements with competing local carriers, the new entrants into the deregulated market, by providing one of three methods of competition: (1) the incumbent carrier must provide interconnection to its network to a competing carrier that builds or has its own network, 47 U.S.C. § 251(c)(2); (2) the incumbent carrier must provide access to its network elements on an unbundled basis to a competing carrier wishing to lease all or part of the incumbent's network, rather than build its own, 47 U.S.C. § 251(c)(3); and (3) the incumbent must sell its retail services at wholesale prices to a competing carrier that will resell the services at retail prices. 47 U.S.C. § 251(c)(4). 4 Interconnection agreements set forth terms, rates, and conditions of the arrangements between the incumbent local exchange carrier and a competing local exchange carrier. The Act provides for arbitration of an agreement, review of arbitrated or negotiated agreements, and judicial review of agreements. State utility commissions review and give final approval to interconnection agreements. 47 U.S.C. § 252(e)(1); § 252(e)(2)(A); Verizon Md. v. Pub. Serv. Comm'n, 535 U.S. 635, 122 S.Ct. 1753, 1756, 152 L.Ed.2d 871, 878 (2002). A party aggrieved by a commission decision may bring suit in federal district court to review whether the agreement or statement of terms complies with the Act. 47 U.S.C. § 252(e)(6); Verizon Md., 122 S.Ct. at 1758. 5 Efforts to foster competition in telecommunications have, in recent years, given rise to complex litigation regarding the relationships between telephone service carriers and between state and federal systems. The Supreme Court has stated [i]t would be a gross understatement to say that the [Act] is not a model of clarity. It is in many important respects a model of ambiguity or indeed even self-contradiction. AT & T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 395-96, 119 S.Ct. 721, 738, 142 L.Ed.2d 834, 859 (1999). Much of the complexity has resulted from the Act's incorporation of the concept of cooperative federalism. Under cooperative federalism, federal and state agencies should endeavor to harmonize their efforts with one another, while federal courts oversee this partnership by insisting on articulations of regulatory policy that respect the values embodied in the underlying legislation. Philip J. Weiser, Federal Common Law, Cooperative Federalism, and the Enforcement of the Telecom Act, 76 N.Y.U. L.Rev. 1692, 1732 (2001). In this regulatory regime state commissions are directed by provisions of the Act and FCC regulations in making decisions, which are subject to federal court review. P.R. Tel. Co. v. Telecomms. Regulatory Bd. of P.R., 189 F.3d 1, 14 (1st Cir.1999). 6 At the same time, the Act gives the state commissions latitude to exercise their expertise in telecommunications and needs of the local market. Id. We acknowledge that, within applicable standards of review, state commissions, arbitration panels, and administrative law judges have a refined expertise in telecommunications matters that come infrequently before the regional federal courts. Or, as commentators have suggested, intricate matters, such as rate-setting and determining the feasibility of regulatory mandates, lie beyond the core of judicial competence. Weiser, supra, at 1724; see also Mich. Bell. Tel. Co. v. Level 3 Communications, Inc. 218 F.Supp.2d 891, 894 (E.D.Mich.2002)(stating [t]his court should not sit as a surrogate public utilities commission to second-guess the decisions made by the state agency to which Congress has committed primary responsibility for implementing the Act. (citation omitted)). 7 Section 251(d)(3) of the Act provides that a state regulation, order or policy of a state commission that establishes access and interconnection obligations of incumbent carriers will be upheld, as long is it meets federal requirements. The prerequisite for preserving state commission regulations, policies and orders is that these decisions must be consistent with Section 251, and not substantially prevent implementation of the purposes of the Act. With no clear error in interpretation of federal law or unsupported, arbitrary and capricious findings by a state commission, the decisions of such commissions generally stand. Mich. Bell Tel. Co. v. Strand, 305 F.3d at 586-87.