Opinion ID: 618656
Heading Depth: 2
Heading Rank: 2

Heading: Just and Reasonable Rates

Text: Under the Telecommunications Act, PRTC is entitled to be paid just and reasonable rates for its services. 47 U.S.C. § 252(d)(1). PRTC argues that the Board made unjust and unreasonable determinations with respect to two figures: Total Cable and the Local Loop Rate. The Total Cable or Cable Size figure is the total quantity of cable in the hypothetical, forward-looking, most efficient, least cost network. The Local Loop rate or rate for local loops refers to the rate that PRTC can charge WorldNet for the wires and cable used to connect the network to a customer's home or business. [12] In both cases, PRTC argues that the end result of the Board's methodology was an unjust and unreasonable rate. [13] Further, PRTC argues that the district court deprived it of meaningful judicial review by failing to evaluate the reasonableness of the end results of the Board's determinations, and instead focusing on the Board's methodology. We disagree. Citing a line of cases following Fed. Power Comm'n v. Hope Natural Gas Co., 320 U.S. 591, 64 S.Ct. 281, 88 L.Ed. 333 (1944), PRTC asserts that when assessing whether rates are just and reasonable, the focus must be on the reasonableness of the impact of the result, and not the reasonableness of the theory or methodology employed. [14] PRTC maintains that the Board and the district court must not only ask whether each individual element or cost input was determined appropriately, but must also undertake another inquiry: whether the final interconnection compensation ratesthe aggregate or end results of all the intermediary components of the equationare just and reasonable. WorldNet and the Board argue that the first inquiry determines the latterthat is, whether a rate is just and reasonable is determined solely by asking whether each individual component was determined appropriately under the governing law. As a preliminary matter, we note that Total Cable is not a rate at all, but rather an individual network element used in calculating ratesit refers to the total quantity of cables in the hypothetical network. Thus, as a pricing input and intermediary determination, Total Cable is not properly subject to challenge as violating PRTC's asserted statutory right to a just and reasonable rate.  47 U.S.C. § 252(d)(1) (emphasis added). Nor is the Total Cable figure properly subject to constitutional challenge as an unconstitutional taking: a taking analysis focuses on the result of a rate calculation, rather than on the inputs to the calculation. Cf. Verizon, 535 U.S. at 525, 122 S.Ct. 1646 ([T]he general rule is that any question about the constitutionality of rate setting is raised by rates, not methods....). Thus, only the Local Loop Rate remains relevant for PRTC's just and reasonable arguments; we will review the Board's determination as to Total Cable with the Board's other network element determinations. See § D(6), infra. Additionally, we note that although PRTC collapses the two inquiries into one analysis in its brief, its argument on the just and reasonable issue actually encompasses two related but analytically distinct claims: (1) a statutory claim to just and reasonable rates, and (2) a constitutional claim grounded in the Takings Clause of the Fifth Amendment. [15] We begin with the statutory claim. As noted in Section I.B, supra, the 1996 Act created a new framework for determining the rates that an ILEC could charge a competitor for interconnection. The 1996 Act still requires just and reasonable rates, but the phrase now carries a different meaningand requires a different standardthan it did under the old regulatory regime. PRTC's choice of cases to cite in support of its argument makes this distinction clear. Tellingly, only two of the cases cited by PRTC in support of its argument on this issue were decided after the passage of the 1996 Act; moreover, those two citations only relate to the takings issue, not the statutory interpretation question. See Verizon, 535 U.S. at 523-28, 122 S.Ct. 1646 (rejecting the incumbent carriers' claim that TELRIC methodology will lead to an unconstitutional taking); Rural Iowa Indep. Tel. Ass'n, 385 F.Supp.2d at 826-28 (dismissing the incumbent carrier's takings claim as fatally premature because the Iowa Utilities Board had not set applicable rates in any of its decisions, and the ILEC and CLEC had not yet obtained a reciprocal compensation agreement). The other just and reasonable cases cited by PRTC [16] predate the 1996 Act and apply precisely the type of rate-of-return or rate-based standards that the 1996 Act expressly prohibits. [17] See Verizon, 535 U.S. at 489, 122 S.Ct. 1646 (noting that the 1996 Act is radically unlike all previous statutes in providing that rates be set `without reference to a rate-of-return or other rate-based proceeding') (quoting 47 U.S.C. § 252(d)(1)(A)(i)); see also Verizon New England, Inc., 509 F.3d at 9 (contrasting the potentially higher, traditional just and reasonable rates with the lower TELRIC rates which are highly favorable to the competitors). PRTC does have a statutory right to just and reasonable rates under the 1996 Act; however, the Act and the FCC's rules further specify how such just and reasonable rates are to be determined by determining the cost of the individual network elements using TELRIC. Here, by applying the TELRIC methodology to determine the cost of interconnection and individual network elements, the arbitrator and the Board followed the procedures required by the 1996 Act and the FCC rules in order to arrive at just and reasonable rates under the Act. Accordingly, PRTC's statutory claim on this issue fails. Having addressed PRTC's statutory claim, we must still address its constitutional claim. Yet the very cases PRTC relies upon undermine its constitutional claim, articulating standards that PRTC fails to meet. In Hope Natural Gas, the Supreme Court noted that an agency's rate order is the product of expert judgment which carries a presumption of validity, and he who would upset the rate order under the Act carries the heavy burden of making a convincing showing that it is invalid because it is unjust and unreasonable in its consequences. 320 U.S. at 602, 64 S.Ct. 281. In Duquesne Light, the Supreme Court reviewed the guiding principle that the Takings Clause of the Fifth Amendment [18] protects utilities from being restricted to rates that are so `unjust' as to be confiscatory. 488 U.S. at 307, 109 S.Ct. 609; see also Fed. Power Comm'n v. Texaco Inc., 417 U.S. 380, 391-92, 94 S.Ct. 2315, 41 L.Ed.2d 141 (1974) (All that is protected against, in a constitutional sense, is that the rates fixed by the Commission be higher than a confiscatory level.); Federal Power Comm'n v. Natural Gas Pipeline Co. of Am., 315 U.S. 575, 585, 62 S.Ct. 736, 86 L.Ed. 1037 (1942) (By long standing usage in the field of rate regulation, the `lowest reasonable rate' is one which is not confiscatory in the constitutional sense.). As the Eleventh Circuit has noted, [c]ases like Duquesne Light stand for the proposition that rates can be regulated so long as they are not so `unjust' as to be confiscatory, and within this range the regulatory agency has broad discretion. Ala. Power Co. v. FCC, 311 F.3d 1357, 1367 (11th Cir.2002). The Supreme Court has also defined the phrase so unjust as to be confiscatory as a rate that threaten[s] an incumbent's `financial integrity.' Verizon, 535 U.S. at 524, 122 S.Ct. 1646 (quoting Duquesne Light, 488 U.S. at 307, 109 S.Ct. 609). Therefore, we examine PRTC's constitutional claim to determine whether PRTC has demonstrated that the Local Loop Rate is so unjust as to be confiscatorythat is, whether the Local Loop Rate threatens PRTC's financial integrity. See Verizon, 535 U.S. at 524, 122 S.Ct. 1646. Here, PRTC makes no such showing. In its brief, PRTC makes only the most cursory of arguments on this point, asserting merely that the Local Loop Rate was unjust and unreasonable when compared with average loop rates across the United States and other benchmarks. Relying entirely on this one-sentence, naked assertion on appeal, [19] PRTC falls far short of meeting its heavy burden of showing that the Local Loop Rate threatens its financial integrity. See Hope Natural Gas Co., 320 U.S. at 602, 64 S.Ct. 281; Ill. Bell Tel. Co. v. FCC, 988 F.2d 1254, 1263 (D.C.Cir.1993). Thus, PRTC has failed to demonstrate an unconstitutional taking.