Opinion ID: 3024925
Heading Depth: 3
Heading Rank: 2

Heading: Wholesale Rates

Text: Section 252(d)(3) of the Act provides that state commissions shall determine wholesale rates on the basis of retail rates charged to subscribers for the telecommunications service requested, excluding the portion thereof attributable to any marketing, billing, collection, and other costs that will be avoided by the local exchange carrier. Pursuant to this section, the FCC promulgated 47 C.F.R. § 51.607 which excludes avoided retail costs from wholesale rates. Avoided retail costs are defined by the FCC as those costs that reasonably can be avoided when an incumbent LEC provides a telecommunications service for resale at wholesale rates to a requesting carrier. 47 C.F.R. § 51.609(b). The petitioners challenge the FCC's interpretation of the term avoided retail costs. The petitioners contend § 252(d)(3) plainly requires wholesale rates to reflect the ILECs' retail rates less those costs that an ILEC actually avoids when it loses its retail customers to a reselling competitor. However, under the FCC's definition of avoided retail costs, the petitioners argue the FCC requires them to exclude all retailing costs rather than only those costs that an ILEC actually avoids. The petitioners state that many costs associated with retailing are fixed and will not begin to decline initially nor will the costs decline proportionately to the number of customers lost to the reseller. The petitioners explain the phrase will be avoided in § 252(d)(3) means actually avoided because otherwise the wholesale discount given the reseller would be inflated. The respondents counter that the phrase will be avoided is ambiguous and that the FCC reasonably interpreted the language of the statute. The intervenors explain that the ILECs avoid incurring any retailing costs when engaging in wholesale 16 transactions, and even if certain retailing costs are fixed, the ILECs would still incur only those costs that arose in connection with the ILECs' retailing activities. The respondents state that making competitors pay for a portion of the ILECs' retailing costs, even though the new entrant is not the cause of those retail costs, would result in the new entrants subsidizing the ILECs' retail offerings while still having to pay the new entrants' own retailing costs. We agree with the petitioners that the phrase will be avoided refers to those costs that the ILEC will actually avoid incurring in the future, because of its wholesale efforts, not costs that can be avoided. The verb will is defined, in part, as a word of certainty. BLACK'S LAW DICTIONARY 1598 (6th ed. 1990). Whereas, the verb can is [o]ften used interchangeably with 'may,' id. at 206, and may is a word of speculation and uncertainty. Id. at 1598. The language of the statute is clear. Wholesale rates shall exclude costs that will be avoided by the local exchange carrier. 47 U.S.C. § 252(d)(3). The plain meaning of the statute is that costs that are actually avoided, not those that could be or might be avoided, should be excluded from the wholesale rates. If the Congress had meant the standard to be one of reasonable avoidability, it could have easily said so. We note that Congress's starting point in § 252(d)(3) is the retail rates the ILEC charges its subscribers for the same service the new competitor (who wants to enter the market by reselling) has requested be furnished to it. From those retail rates, the ILEC's costs that will be avoided by furnishing those services to the competitor are to be excluded. The statute recognizes that the ILEC will itself remain a retailer of telephone service with its own continuing costs of providing that retail telephone service. The FCC's rule treats the ILEC as if it were strictly a wholesaler whose sole business is to supply local telephone service in bulk to new purveyors of retail telephone service. Under the statute as it is written, it is only those continuing costs of providing retail telephone service which will be avoided by selling 17 to the competitor the services it requests which are to be excluded. The FCC's rule is contrary to the statute. Consequently, we vacate and remand rule 51.609.