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

Heading: Proxy Prices

Text: The FCC established proxy prices to be used for interconnection and network element charges, wholesale rates, and the rates for termination and transport. The state commissions are to use these proxy prices if they do not use the provided ratemaking method to establish rates. The proxy prices consist of upper limits higher than which the rates set by the state commissions shall not go. The petitioners argue the proxy prices should be vacated for three reasons. First, the petitioners state that the respondents expressly disavowed the proxy prices before the Supreme Court in order to support the FCC's position that it was not trying to set specific prices, but rather it was merely designing a pricing methodology. Therefore, the FCC, according to the petitioners, is judicially estopped from trying to revive the proxy prices now. Second, the petitioners contend the proxy prices should be vacated because they are based on the unlawful TELRIC method and employ the impermissible definition of avoided retail costs. Third, the petitioners argue the proxy prices were developed using unreliable cost models and, as a result, are arbitrary and capricious. The respondents counter that the petitioners' challenge to the proxy prices is not subject to review because the proxy prices are not binding on the states. The respondents contend that states may elect to use the proxy prices, but the states are not required to use them. The respondents insist that this court has jurisdiction to review only final orders of the FCC, and the proxy prices are not final orders because they do not impose an obligation on the states. The intervenors add that substantial deference 18 should be accorded to the FCC because the issue concerns interim relief, citing Competitive Telecommunications Association v. F.C.C., 117 F.3d 1068, 1073-75 (8th Cir. 1997). We agree with the petitioners that the respondents are estopped from trying to now revive the proxy prices. The doctrine of judicial estoppel prohibits a party from taking inconsistent positions in the same or related litigation. Hossaini v. Western Missouri Med. Ctr., 140 F.3d 1140, 1142 (8th Cir. 1998). Judicial estoppel is invoked to protect the integrity of the judicial process. Id. at 1143. The FCC represented to the Supreme Court that it was not establishing rates and depriving the state commissions of their role in implementing the Act. See Reply Br. for Federal Pet'rs at 7, AT & T Corp. v. Iowa Utils. Bd., 525 U.S. 366 (1999) 1998 WL 396961 (Nos. 97826, 97-829, 97-830, 97-831, 97-1075, 97-1087, 97-1099, and 97-1141). The FCC emphasized that it was merely providing a methodology for state commissions to use in completing the critical and complex task of determining the economic costs of an efficient telephone network. Id. The FCC dismissed the proxy prices as designed for a past period in which no cost studies could have been made available to the state commissions. They have no relevance to this case. Id. at 7 n.5. We are not persuaded by the FCC's explanation to this court of its position before the Supreme Court. The respondents explain that the proxy prices were not relevant to the ILECs' claim before the Supreme Court that the pricing rules intruded on the states' role in establishing rates because the proxy prices were optional. The First Report and Order very clearly commands the use of the proxy prices by directing that a state commission shall use [default proxies] . . . in the period before it applies the pricing methodology. First Report and Order ¶ 619 (emphasis added). Additionally, rule 51.503(b) states that the ILECs' rates for its elements shall be established using either TELRIC or the proxy prices. See 47 C.F.R. § 51.503(b) (emphasis added). The word shall is language of a mandatory nature. Clark v. Brewer, 776 F.2d 226, 230 (8th Cir. 1985). It is clear from the language of the First 19 Report and Order, as well as the rules, that the state commissions are to use the proxy prices until the state commissions have established their own rates using the TELRIC method. The use of the proxy prices until such time is not optional. The Supreme Court held that the FCC has jurisdiction to design a pricing methodology. AT & T Corp., 525 U.S. at 385. However, the FCC does not have jurisdiction to set the actual prices for the state commissions to use. Setting specific prices goes beyond the FCC's authority to design a pricing methodology and intrudes on the states' right to set the actual rates pursuant to § 252(c)(2). Following the Supreme Court's opinion, we now agree with the FCC that its role is to resolve general methodological issues, and it is the state commission's role to exercise its discretion in establishing rates. Br. for Federal Pet'rs at 26-27, AT & T Corp. v. Iowa Utils. Bd., 525 U.S. 366 (1999), 1998 WL 396945 (No. 97-831). The proxy prices are also infirm because they rely on the hypothetical most efficient carrier rationale which we have found to be violative of the Act, ante at 5-8, and because they rely on the erroneous definition of avoided retail costs. We conclude the proxy prices cannot stand and, for the foregoing reasons, vacate rules 51.513, 51.611, and 51.707.