Opinion ID: 168880
Heading Depth: 2
Heading Rank: 1

Heading: Statutory Framework: The Telecommunications Act of 1996

Text: 4 For most of its history, local phone service was thought to be a natural monopoly. AT & T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 371, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999). Accordingly, states alone regulated the industry, seeking to ensure that each local monopolist provided adequate service at reasonable prices. 1 This regime began to change in 1982, when AT & T agreed to divest itself of the local exchange carriers that it owned. See United States v. AT & T, 552 F.Supp. 131 (D.D.C.1982), aff'd sub nom. Maryland v. United States, 460 U.S. 1001, 103 S.Ct. 1240, 75 L.Ed.2d 472 (1983). Fourteen years later, Congress enacted the Telecommunications Act of 1996, which fundamentally changed telecommunications regulation by introducing competition in the local service market. Sw. Bell Tel. Co. v. Apple, 309 F.3d 713, 715 (10th Cir.2002) (internal quotation marks omitted). In passing the legislation, Congress hoped to obtain the benefits of competition for the American consumer while avoiding, as much as possible, the potential that established entities would use their existing market power to prey on would-be market entrants. See Thomas G. Krattenmaker, The Telecommunications Act of 1996, 29 Conn. L.Rev. 123, 129-31 (1996). 5 Therefore, incumbent LECs are subject to a host of duties intended to facilitate market entry. Iowa Utils. Bd., 525 U.S. at 371, 119 S.Ct. 721. These duties essentially require the incumbents to interconnect with and to rent parts of their networks to new entrants—especially those parts of a local network that it is least economic for a new entrant to duplicate. James B. Speta, Antitrust and Local Competition Under the Telecommunications Act, 71 Antitrust L.J. 99, 102-03 (2003). At the same time, the Act provides for targeted monitoring of these interconnections by state and federal regulators. See 47 U.S.C. § 252(e). 6 In this case, three provisions of the Act are at issue. The first is § 251, which— among other things—imposes a duty on ILECs to interconnect with would-be competitors. See 47 U.S.C. § 251(a)(1). The second is § 252, which provides that an ILEC faced with a request for interconnection may either negotiate an agreement with the requesting party or submit to arbitration by a state regulatory agency; in either case, the resulting interconnection agreement must be submitted to the state regulatory agency for approval. Id. § 252(a)-(b), (e). The third provision at issue is § 271, which allows BOCs to provide long-distance telephone service to their customers as long as they comply with certain conditions enumerated in the statute. Id. § 271(a). The dispute in this case is whether the agreements between Qwest and MCImetro are interconnection agreements that must be approved by state regulatory bodies pursuant to § 252, whether they are simply agreements wherein Qwest agrees to provide the services enumerated in § 271, or whether they are both. 7
8 Section 251 of the Act establishes a three-tier system of obligations imposed on separate, statutorily defined telecommunications entities. Atlas Tel. Co. v. Okla. Corp. Comm'n, 400 F.3d 1256, 1262 (10th Cir.2005). Under the first tier, all carriers have the duty to interconnect directly or indirectly with the facilities and equipment of other telecommunications carriers. 47 U.S.C. § 251(a)(1). In the second tier, all local exchange carriers (both ILECs and CLECs) have the duty to resell telecommunications services without unreasonable or discriminatory conditions or limitations.... Id. § 251(b)(1). They are also obligated to provide number portability, dialing parity, access to rights of way, and reciprocal compensation. Id. § 251(b)(2)(5). Finally, the third tier contains the [f]oremost among these duties[:] . . . the [ILEC's] obligation ... to share its network with competitors. Iowa Utils. Bd., 525 U.S. at 371, 119 S.Ct. 721; see 47 U.S.C. § 251(c). 9 The statute establishes three methods of providing access to an ILEC's local network. See MCI Telecomm. Corp. v. Bell Atl.-Pa., 271 F.3d 491, 498 (3d Cir.2001). First, a CLEC may build its own network and interconnect with the [ILEC's] network. Id. (internal quotation marks omitted). 2 Second, a CLEC may lease individual elements of the existing network on an `unbundled basis' at `any technically feasible point' on `rates, terms, and conditions that are just, reasonable, and nondiscriminatory.' Id. at 499 (quoting 47 U.S.C. § 251(c)(3)). Finally, a CLEC may purchase at wholesale prices the entire package of services provided by the ILEC and simply resell them to customers. Id.; see also 47 U.S.C. § 251(c)(4)(A). 10 Each of these options benefits the CLEC because [t]he firm need not build that which the incumbent LEC has already built; the entrant may just plug into it, at prices deemed fair by the FCC. Krattenmaker, supra, at 139. The requirement that ILECs share their networks is an integral part of the new regulatory scheme because [w]ithout [it], a new carrier's entry barriers would be insurmountable. Speta, supra, at 118.
11 Section 252 . . . specifically describes how § 251's obligations are to be implemented . . . . Iowa Utils. Bd., 525 U.S. at 419, 119 S.Ct. 721 (Breyer, J., concurring in part and dissenting in part). First, it permits carriers to negotiate interconnection agreements on their own initiative: 12 Upon receiving a request for interconnection . . . services, or network elements pursuant to section 251 of this title, an incumbent local exchange carrier may negotiate and enter into a binding agreement with the requesting telecommunications carrier or carriers without regard to the standards set forth in subsections (b) and (c) of section 251 of this title. . . . The agreement . . . shall be submitted to the State commission under subsection (e) of this section. 13 47 U.S.C. § 252(a)(1). This subsection allows the ILEC to negotiate and enter into a binding agreement with the new entrant to fulfill the duties imposed by §§ 251(b) and (c). . . . Verizon Md., Inc. v. Pub. Serv. Comm'n of Md., 535 U.S. 635, 638-39, 122 S.Ct. 1753, 152 L.Ed.2d 871 (2002) (internal quotation marks omitted). However, the without regard clause indicates that the parties may make agreements that go beyond or contradict the specific statutory requirements that an incumbent must follow. Speta, supra, at 119. 14 After prescribing the procedure by which a CLEC may seek compulsory arbitration by the state commission, the statute requires that all interconnection agreements—those reached by negotiation and those reached by arbitration—be submitted to the state agency for approval: 15 Any interconnection agreement adopted by negotiation or arbitration shall be submitted for approval to the State commission. A State commission to which an agreement is submitted shall approve or reject the agreement, with written findings as to any deficiencies. 16 47 U.S.C. § 252(e)(1). The statute offers only two permissible grounds for rejecting a negotiated agreement: (1) the agreement discriminates against a non-party telecommunications carrier, or (2) the implementation of the agreement is inconsistent with the public interest. Id. § 252(e)(2). Section 252(e)(6) permits a party aggrieved by the action of a state commission to appeal the decision to the district court, which must then determine whether the agreement or statement [submitted for approval] meets the requirements of section 251 of this title and this section. C. Section 271: The Competitive Checklist and InterLATA Service 17 Section 271 allows an ILEC carrier to provide long-distance service (interLATA services) 3 in its local market if that market is sufficiently competitive. The ILEC may only provide in-region interLATA services if: (A) it has entered into one or more binding agreements that have been approved under section 252 of this title specifying the terms and conditions under which the [ILEC] is providing access and interconnection to its network facilities for the network facilities of one or more unaffiliated competing providers of telephone exchange service . . . to residential and business subscribers; or (B) no CLEC has requested access and interconnection. 47 U.S.C. § 271(c)(1)(A)-(B). Thus, the first condition visualizes a demonstration of a competitor in the local exchange market, while the second is a default to prevent an ILEC from being penalized simply because no competitor wishes to enter its market. SBC Commc'ns, Inc. v. F.C.C., 138 F.3d 410, 413-14 (D.C.Cir.1998). 18 If the ILEC is operating in a competitive market and wishes to qualify under § 271(c)(1)(A), it must meet the requirements of § 251 as well as the additional requirements of the competitive checklist in § 271(c)(2)(B): [n]ondiscriminatory access to the poles, ducts, conduits, and rights-of-way owned or controlled by the [incumbent LEC] at just and reasonable rates; unbundled local loop transmission; unbundled local transport from the trunk side of a wireline local exchange carrier switch; local switching unbundled from transport, local loop transmission, or other services; and nondiscriminatory access to other network resources (e.g., 911 and E911 services). 47 U.S.C. § 271(c)(2)(B)(ii)-(vii). Most of these conditions relate to the interconnection obligations . . . that other provisions of that Act impose on each incumbent LEC. . . . In short, the BOCs' ability to offer long distance services and to manufacture equipment is conditioned on their meeting their new open interconnection responsibilities. Krattenmaker, supra, at 141-42. 19