Opinion ID: 77289
Heading Depth: 2
Heading Rank: 4

Heading: The Background of This Appeal

Text: 19 In December 1998, several competitive local exchange carriers petitioned the Florida Commission to hold a hearing to establish rates for the unbundled network elements owned by BellSouth in Florida. In October 2000, the Florida Commission held the hearing, and BellSouth introduced the BellSouth Telecommunications Loop Model. 20 The competitive local carriers objected to the BellSouth model on several grounds relevant to this appeal. Their first objection was to the use of three scenarios instead of one to compute the TELRIC of each unbundled element. According to the Florida Commission, MCI advocated the use of a single scenario, the Combo scenario. The second objection challenged the use of an inflation factor. MCI argued that the use of the inflation factor amounted to double counting because the BellSouth model already accounted for inflation under its cost of capital factor. The third objection challenged the method used for geographic cost-based deaveraging. The BellSouth model proposed three zones based solely on geography. MCI proposed the Sprint approach, which constructed six rate zones in which the rate of each element in the zone was within 20% of the average rate for that zone. 21 The Florida Commission concluded its proceedings on September 27, 2002. The Florida Commission determined that the three-scenario approach of the BellSouth model was consistent with federal law. The Florida Commission also approved the inflation factor used in the BellSouth model. The Florida Commission rejected both the BellSouth and Sprint approaches to geographic cost-based deaveraging and adopted its own methodology. The Florida Commission used a modification of the Sprint approach to generate five groups with 20% variance, but the Florida Commission then consolidated the two most expensive zones and the two least expensive zones to create three deaveraged geographic cost groups. The order stated that it reduced the number of groups to alleviate administrative burden. 22 MCI filed suit against BellSouth and the Florida Commission in federal district court seeking declaratory and injunctive relief under section 252. See id. § 252(e)(6). Florida Digital Network was permitted to intervene. MCI and Florida Digital Network raised three arguments relevant to this appeal. First, MCI and Florida Digital Network argued that the BellSouth model violated federal law because the use of multiple scenarios to model the wire loops of the network failed to comply with TELRIC. Second, MCI and Florida Digital Network argued that the use of the inflation factor in the pricing plan violated federal law because it double-counted certain expenses. Third, Florida Digital Network argued that the method adopted by the Florida Commission to allocate geographic cost-based deaveraging zones was not supported by the record. 23 The district court concluded that the BellSouth model conflicted with federal law. The district court found that the multiple-scenario approach of the BellSouth model was contrary to FCC regulations for two reasons. First, the BellSouth model failed to take as a given the incumbent LEC's provision of other elements, 47 C.F.R. § 51.505(b), and instead focused on a particular loop type or combination to the exclusion of others. Second, the model was based on scenarios where the particular [unbundled network element] occupies the entire network as opposed to what is likely to be requested and used. See id. § 51.511(a). 24 The district court affirmed other portions of the order of the Florida Commission. First, the district court upheld the use of the inflation factor by the BellSouth method. The district court concluded that the inflation factor neither resulted in double counting nor was contrary to federal regulations because it reflects the growth costs of the hypothetical network during the rate period, which is typically three to four years. Second, the district court upheld the geographic cost-based deaveraging method adopted by the Florida Commission. The district court noted that federal law does not require the Florida Commission to use more than three zones and found that there was sufficient record evidence to support the [Florida] Commission's approach.