Opinion ID: 757345
Heading Depth: 2
Heading Rank: 4

Heading: Extension of Implicit Subsidies to Purchasers of Unbundled Networks

Text: 19 The BellSouth petitioners next argue that the Commission's decision to exempt purchasers of unbundled network elements (UNEs) from contributing to universal service support through interstate access charges represents an arbitrary and capricious reversal of agency policy and is contrary to § 254's requirement that contributions to universal service support be equitable and nondiscriminatory. 20 After passage of the 1996 Act, the Commission initially determined that purchasers of UNEs would be required to contribute to universal service by paying a portion of access charges, i.e., the entire CCLC and seventy-five percent of the TIC, until the new universal service support mechanism was fully operational. See In re Implementation of the Local Competition Provisions in the Telecommunications Act of 1996; Interconnection between Local Exchange Carriers and Commercial Mobile Radio Service Providers, First Report and Order (CC Docket Nos. 96-98, 95-185), FCC 96-325, 11 FCC Rcd No. 28 15499 p 720 (released August 8, 1996) [hereinafter Local Competition Order ], petition denied in part and order vacated in part, Competitive Telecomms. Ass'n, 117 F.3d at 1068 (addressing only CC Docket No. 96-98). The FCC reasoned that new entrants into the local service market otherwise could avoid contributing to universal service support by serving their local customers solely through the use of unbundled network elements rather than through resale, thereby circumventing imposition of access charges. Id. p 719. The Commission's decision to permit the imposition of some interstate access charges on UNE purchasers, however, was explicitly time-limited and expired on June 30, 1997. See Order p 339. 21 As the BellSouth petitioners acknowledge, the FCC created a general exemption from the assessment of access charges by LECs on purchasers of UNEs, and permitted LECs to assess the CCLC and seventy-five percent of the TIC from such purchasers until June 30, 1997, see 47 C.F.R. § 51.515(a)-(b) (1997). The BellSouth petitioners cannot now complain that passage of the expiration date for this temporary exception and the consequent termination of its application signifies an abrupt change in FCC policy. In fact, the FCC emphasized in the Local Competition Order that it could conceive of no circumstances under which the temporary assessment of access charges on UNE purchasers would be extended beyond June 30, 1997. Local Competition Order p 725. That the FCC has now made good on its promise to exempt purchasers of UNEs from access charges should come as no surprise to the BellSouth petitioners. 22 Nor is the Commission's decision to exempt purchasers of UNEs from access charges that are imposed by incumbent LECs in contravention of § 254's directive to ensure equitable and nondiscriminatory contributions to universal service support. The BellSouth petitioners argue that allowing UNE purchasers access to their networks without the imposition of access charges guarantees discriminatory and inequitable contribution to universal service support by LECs who must continue to contribute, despite their inability to collect a fair contribution from UNE purchasers. As the FCC has explained, however, payment of cost-based rates represents full compensation to the incumbent LEC for use of the network elements that carriers purchase.... Allowing incumbent LECs to recover access charges in addition to the reasonable cost of such facilities would constitute double recovery because the ability to provide access services is already included in the cost of the access facilities themselves. Order p 337. 23 The FCC specifically addresses in the Order the BellSouth petitioners' argument that access charges should be imposed on UNEs because charging only cost-based rates for such elements will not allow the providers to recover universal service support subsidies, which are implicitly built into the access charge regime. The FCC points out that purchasers of UNEs will contribute to universal service pursuant to § 254--they receive no exemption from universal service support obligations by purchasing UNEs. See Order p 338. Furthermore, having observed the market-opening provisions of the 1996 Act in operation for ten months, the FCC has predicted that an extension of the temporary application of interstate access charges to purchasers of UNEs is not necessary to protect the universal service support system from marked losses. According to the FCC, purchasers of UNEs are providing no more than a de minimis share of industry-wide access service[s]. In re Access Charge Reform; Price Cap Performance Review for Local Exchange Carriers; Transport Rate Structure and Pricing; End User Common Line Charges, Order (CC Docket Nos. 96-262, 94-1, 91-213, 95-72), FCC 97-216, 12 FCC Rcd No. 17 10175 p 15 (released June 18, 1997). It is not unreasonable for the FCC to conclude that, given the relatively insignificant headway UNE purchasers have made in the telecommunications market, universal service will not be threatened by the exemption of UNE purchasers from access charges. The Commission also has explained that rate structure modifications adopted in the Order will allow incumbent LECs to recover costs, including those associated with universal service support obligations. See Order p 338. 24 We conclude that the Commission's decision to exempt purchasers of UNEs from interstate access charges is not an arbitrary and capricious departure from statutory standards, nor has the FCC violated its statutory mandate to ensure contributions to universal service that are equitable and nondiscriminatory. Consequently, we will defer to the agency's expertise and leave intact its decision regarding the imposition of interstate access charges on purchasers of UNEs.