Court Opinion

ID: 185105
Source: CourtListenerOpinion
Date Created: 2011-02-05 02:27:51+00
Date Added: 2024-06-11T09:42:44.261681
License: Public Domain

206 F.3d 1 (D.C. Cir. 2000)
Bell Atlantic Telephone Companies, Petitionerv.Federal Communications Commission and United States of America, RespondentsTelecommunications Resellers Association, et al.,Intervenors
No. 99-1094, 99-1095, 99-1097, 99-1106, 99-1126,99-1134, 99-1136, 99-1145,
United States Court of AppealsFOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 22, 1999Decided March 24, 2000

On Petitions for Review of a Declaratory Ruling of the Federal Communications CommissionMark L. Evans and Darryl M. Bradford argued the causes  for petitioners.  With them on the briefs were Thomas F.  O'Neil, III, Adam H. Charnes, Mark B. Ehrlich, Donald B.  Verrilli, Jr., Jodie L. Kelley, John J. Hamill, Emily M.  Williams, Theodore Case Whitehouse, Thomas Jones, Albert  H. Kramer, Andrew D. Lipman, Richard M. Rindler, Robert  M. McDowell, Robert D. Vandiver, Cynthia Brown Miller,  Charles C. Hunter, Catherine M. Hannan, Michael D. Hays,  Laura H. Phillips, J. G. Harrington, William P. Barr, M.  Edward Whelan, III, Michael K. Kellogg, Michael E. Glover, Robert B. McKenna, William T. Lake, John H. Harwood, II,  Jonathan J. Frankel, Robert Sutherland, William B. Barfield, Theodore A. Livingston and John E. Muench. Maureen F. Del Duca, Lynn R. Charytan, Gail L. Polivy, John F.  Raposa and Lawrence W. Katz entered appearances.
Christopher J. Wright, General Counsel, Federal Communications Commission, argued the cause for respondents.  With him on the brief were Daniel M. Armstrong, Associate General Counsel, and John E. Ingle, Laurence N. Bourne and Lisa S. Gelb, Counsel.  Catherine G. O'Sullivan and Nancy  C. Garrison, Attorneys, U.S. Department of Justice, entered  appearances.
David L. Lawson argued the cause for intervenors in opposition to the LEC petitioners.  With him on the brief  were Mark C. Rosenblum, David W. Carpenter, James P.  Young, Emily M. Wiliams, Andrew D. Lipman, Richard M.  Rindler, Robert D. Vandiver, Cynthia Brown Miller, Theodore Case Whitehouse, Thomas Jones, John D. Seiver,  Charles C. Hunter, Catherine M. Hannan, Carol Ann Bischoff and Robert M. McDowell.
William P. Barr, M. Edward Whelan, Michael E. Glover, Mark L. Evans, Michael K. Kellogg, Mark D. Roellig, Dan  Poole, Robert B. McKenna, William T. Lake, John H. Harwood, II, Jonathan J. Frankel, Robert Sutherland, William  B. Barfield, Theodore A. Livingston and John E. Muench  were on the brief for the Local Exchange Carrier intervenors.
Robert J. Aamoth, Ellen S. Levine, Charles D. Gray, James B. Ramsay, Jonathan J. Nadler, David A. Gross, Curtis T. White, Edward Hayes, Jr., and David M. Janas entered appearances for intervenors
Before:  Williams, Sentelle and Randolph, Circuit Judges.
Opinion for the Court filed by Circuit Judge Williams.
Williams, Circuit Judge:

1
The Telecommunications Act of  1996, Pub. L. No. 104-104, 110 Stat. 56, 47 U.S.C. §§ 151-714,  requires local exchange carriers ("LECs") to "establish reciprocal compensation arrangements for the transport and termination of telecommunications."  Id. § 251(b)(5).  When  LECs collaborate to complete a call, this provision ensures  compensation both for the originating LEC, which receives  payment from the end-user, and for the recipient's LEC.  By  regulation the Commission has limited the scope of the reciprocal compensation requirement to "local telecommunications  traffic."  47 CFR § 51.701(a).  In the ruling under review, it  considered whether calls to internet service providers  ("ISPs") within the caller's local calling area are themselves  "local."  In doing so it applied its so-called "end-to-end"  analysis, noting that the communication characteristically will  ultimately (if indirectly) extend beyond the ISP to websites  out-of-state and around the world.  Accordingly it found the  calls non-local.  See In the Matter of Implementation of the  Local Competition Provisions in the Telecommunications  Act of 1996, Intercarrier Compensation for ISP-Bound Traffic, 14 FCC Rcd 3689, 3690 (p 1) (1999) ("FCC Ruling").

2
Having thus taken the calls to ISPs out of § 251(b)(5)'s  provision for "reciprocal compensation" (as it interpreted it),  theCommission could nonetheless itself have set rates for  such calls, but it elected not to.  In a Notice of Proposed  Rulemaking, CC Docket 99-68, the Commission tentatively  concluded that "a negotiation process, driven by market  forces, is more likely to lead to efficient outcomes than are  rates set by regulation," FCC Ruling, 14 FCC Rcd at 3707  (p 29), but for the nonce it left open the matter of implementing a system of federal controls.  It observed that in the meantime parties may voluntarily include reciprocal compensation provisions in their interconnection agreements, and  that state commissions, which have authority to arbitrate  disputes over such agreements, can construe the agreements  as requiring such compensation;  indeed, even when the  agreements of interconnecting LECs include no linguistic  hook for such a requirement, the commissions can find that  reciprocal compensation is appropriate.  FCC Ruling, 14  FCC Rcd at 3703-05 (p p 24-25);  see § 251(b)(1) (establishing  such authority).  "[A]ny such arbitration," it added, "must be  consistent with governing federal law."  FCC Ruling, 14 FCC  Rcd at 3705 (p 25).

3
This outcome left at least two unhappy groups.  One, led  by Bell Atlantic, consists of incumbent LECs (the "incumbents").  Quite content with the Commission's finding of  § 251(b)(5)'s inapplicability, the incumbents objected to its  conclusion that in the absence of federal regulation state  commissions have the authority to impose reciprocal compensation.  Although the Commission's new rulemaking on the  subject may eventuate in a rule that preempts the states'  authority, the incumbents object to being left at the mercy of  state commissions until that (hypothetical) time, arguing that  the commissions have mandated exorbitant compensation.  In  particular, the incumbents, who are paid a flat monthly fee,  have generally been forced to provide compensation for internet calls on a per-minute basis.  Given the average length of  such calls the cost can be substantial, and since ISPs do not  make outgoing calls, this compensation is hardly "reciprocal."

4
Another group, led by MCI WorldCom, consists of firms  that are seeking to compete with the incumbent LECs and  which provide local exchange telecommunications services to  ISPs (the "competitors").  These firms, which stand to receive reciprocal compensation on ISP-bound calls, petitioned  for review with the complaint that the Commission erred in  finding that the calls weren't covered by § 251(b)(5).

5
The end-to-end analysis applied by the Commission here is  one that it has traditionally used to determine whether a call  is within its interstate jurisdiction.  Here it used the analysis  for quite a different purpose, without explaining why such an  extension made sense in terms of the statute or the Commission's own regulations.  Because of this gap, we vacate the  ruling and remand the case for want of reasoned decision making.

6
*  *  *

7
In February 1996 Congress passed the Telecommunications  Act of 1996 (the "1996 Act" or the "Act"), stating an intent to  open local telephone markets to competition.  See H.R. Conf.  Rep. No. 104-458, at 113 (1996).  Whereas before local exchange carriers generally had state-licensed monopolies in  each local service area, the 1996 Act set out to ensure that  "[s]tates may no longer enforce laws that impede[ ] competition," and subjected incumbent LECs "to a host of duties  intended to facilitate market entry."  AT&T Corp. v. Iowa  Utils. Bd., 119 S. Ct. 721, 726 (1999).

8
Among the duties of incumbent LECs is to "provide, for  the facilities and equipment of any requesting telecommunications carrier, interconnection with the local exchange carrier's  network ... for the transmission and routing of telephone  exchange service and exchange access."  47 U.S.C.  § 251(c)(2).  ("Telephone exchange service" and "exchange  access" are words of art to which we shall later return.)Competitor LECs have sprung into being as a result, and  their customers call, and receive calls from, customers of the  incumbents.

9
We have already noted that § 251(b)(5) of the Act establishes the duty among local exchange carriers "to establish  reciprocal compensation arrangements for the transport and  termination of telecommunications."  47 U.S.C. § 251(b)(5).Thus, when a customer of LEC A calls a customer of LEC B,  LEC A must pay LEC B for completing the call, a cost  usually paid on a per-minute basis.  Although § 251(b)(5)  purports to extend reciprocal compensation to all "telecommunications," the Commission has construed the reciprocal  compensation requirement as limited to local traffic.  See 47  CFR § 51.701(a) ("The provisions of this subpart apply to  reciprocal compensation for transport and termination of local  telecommunications traffic between LECs and other telecommunications carriers.").  LECs that originate or terminate  long-distance calls continue to be compensated with "access  charges," as they were before the 1996 Act.  Unlike reciprocal compensation, these access charges are not paid by the  originating LEC.  Instead, the long-distance carrier itself  pays both the LEC that originates the call and links the caller  to the long distance network, and the LEC that terminates  the call.  See In the Matter of Implementation of the Local  Competition Provisions in the Telecommunications Act of  1996, 11 FCC Rcd 15499, 16013 (p 1034) (1996) ("Local Competition Order").

10
The present case took the Commission beyond these traditional telephone service boundaries.  The internet is "an  international network of interconnected computers that enables millions of people to communicate with one another in  'cyberspace' and to access vast amounts of information from  around the world."  Reno v. ACLU, 521 U.S. 844, 844 (1997).Unlike the conventional "circuit-switched network," which  uses a single end-to-end path for each transmission, the  internet is a "distributed packet-switched network, which  means that information is split up into small chunks or  'packets' that are individually routed through the most efficient path to their destination."  In the Matter of Federal State Joint Board on Universal Service, 13 FCC Rcd 11501,  11532 (p 64) (1998) ("Universal Service Report").  ISPs are  entities that allow their customers access to the internet. Such a customer, an "end user" of the telephone system, will  use a computer and modem to place a call to the ISP server  in his local calling area.  He will usually pay a flat monthly  fee to the ISP (above the flat fee already paid to his LEC for  use of the local exchange network).  The ISP "typically  purchases business lines from a LEC, for which it pays a flat  monthly fee that allows unlimited incoming calls."  FCC  Ruling, 14 FCC Rcd at 3691 (p 4).

11
In the ruling now under review, the Commission concluded  that § 251(b)(5) does not impose reciprocal compensation  requirements on incumbent LECs for ISP-bound traffic. FCC Ruling, 14 FCC Rcd at 3690 (p 1).  Faced with the  question whether such traffic is "local" for purposes of its

12
regulation limiting § 251(b)(5) reciprocal compensation to local traffic, the Commission used the "end-to-end" analysis  that it has traditionally used for jurisdictional purposes to  determine whether particular traffic is interstate.  Under this  method, it has focused on "the end points of the communication and consistently has rejected attempts to divide communications at any intermediate points of switching or exchanges  between carriers."  FCC Ruling, 14 FCC Rcd at 3695 (p 10).We save for later an analysis of the various FCC precedents  on which the Commission purported to rely in choosing this  mode of analysis. Before actually applying that analysis, the Commission  brushed aside a statutory argument of the competitor LECs. They argued that ISP-bound traffic must be either "telephone exchange service," as definedin 47 U.S.C. § 153(47), or  "exchange access," as defined in § 153(16).1  It could not be  the latter, they reasoned, because ISPs do not assess toll  charges for the service (see id., "the offering of access ... for  the purpose of the origination or termination of telephone toll  services"), and therefore it must be the former, for which  reciprocal compensation is mandated.  Here the Commission's answer was that it has consistently treated ISPs (and  ESPs generally) as "users of access service," while treating  them as end users merely for access charge purposes.  FCC Ruling, 14 FCC Rcd at 3701 (p 17).

13
Having decided to use the "end-to-end" method, the Commission considered whether ISP-bound traffic is, under this method, in fact interstate.  In a conventional "circuit-switched network," the jurisdictional analysis is straightforward:  a call  is intrastate if, and only if, it originates and terminates in the  same state.  In a "packet-switched network," the analysis is  not so simple, as "[a]n Internet communication does not  necessarily have a point of 'termination' in the traditional  sense."  FCC Ruling, 14 FCC Rcd at 3701-02 (p 18).  In a  single session an end user may communicate with multiple  destination points, either sequentially or simultaneously.  Although these destinations are sometimes intrastate, the Commission concluded that "a substantial portion of Internet  traffic involves accessing interstate or foreign websites."  Id.Thus reciprocal compensation was not due, and the issue of  compensation between the two local LECs was left initially to  the LECs involved, subject to state commissions' power to  order compensation in the "arbitration" proceedings, and, of  course to whatever may follow from the Commission's new  rulemaking on its own possible ratesetting.

14
*  *  *

15
The issue at the heart of this case is whether a call to an  ISP is local or long-distance.  Neither category fits clearly.The Commission has described local calls, on the one hand, as  those in which LECs collaborate to complete a call and are  compensated for their respective roles in completing the call,  and long-distance calls, on the other, as those in which the  LECs collaborate with a long-distance carrier, which itself  charges the end-user and pays out compensation to the  LECs.  See Local Competition Order, 11 FCC Rcd at 16013  (p 1034) (1996).

16
Calls to ISPs are not quite local, because there is some  communication taking place between the ISP and out-of-state  websites.  But they are not quite long-distance, because the  subsequent communication is not really a continuation, in the  conventional sense, of the initial call to the ISP.  The Commission's ruling rests squarely on its decision to employ an end-to-end analysis for purposes of determining whether ISP traffic is local.  There is no dispute that the Commission has  historically been justified in relying on this method when  determining whether a particular communication is jurisdictionally interstate.  But it has yet to provide an explanation  why this inquiry is relevant to discerning whether a call to an  ISP should fit within the local call model of two collaborating  LECs or the long-distance model of a long-distance carrier  collaborating with two LECs.

17
In fact, the extension of "end-to-end" analysis from jurisdictional purposes to the present context yields intuitively  backwards results.  Calls that are jurisdictionally intrastate  will be subject to the federal reciprocal compensation requirement, while calls that are interstate are not subject to federal  regulation but instead are left to potential state regulation.  The inconsistency is not necessarily fatal, since under the  1996 Act the Commission has jurisdiction to implement such  provisions as § 251, even if they are within the traditional  domain of the states.  See AT&T Corp., 119 S. Ct. at 730.But it reveals that arguments supporting use of the end-to-end analysis in the jurisdictional analysis are not obviously  transferable to this context.

18
In attacking the Commission's classification of ISP-bound  calls as non-local for purposes of reciprocal compensation,  MCI WorldCom notes that under 47 CFR § 51.701(b)(1)  "telecommunications traffic" is local if it "originates and  terminates within a local service area."  But, observes MCI  WorldCom, the Commission failed to apply, or even to mention, its definition of "termination," namely "the switching of  traffic that is subject to section 251(b)(5) at the terminating  carrier's end office switch (or equivalent facility) and delivery  of that traffic from that switch to the called party's premises." Local Competition Order, 11 FCC Rcd at 16015 (p 1040);  47  CFR § 51.701(d).  Calls to ISPs appear to fit this definition: the traffic is switched by the LEC whose customer is the ISP  and then delivered to the ISP, which is clearly the "called  party."

19
In its ruling the Commission avoided this result by analyzing the communication on an end-to-end basis:  "[T]he communications at issue here do not terminate at the ISP's local  server ..., but continue to the ultimate destination or destinations."  FCC Ruling, 14 FCC Rcd at 3697 (p 12).  But the  cases it relied on for using this analysis are not on point.  Both involved a single continuous communication, originated  by an end-user, switched by a long-distance communications  carrier, and eventually delivered to its destination.  One,  Teleconnect Co. v. Bell Telephone Co., 10 FCC Rcd 1626  (1995), aff'd sub nom. Southwestern Bell Tel. Co. v. FCC, 116 F.3d 593 (D.C. Cir. 1997) ("Teleconnect"), involved an 800 call  to a long-distance carrier, which then routed the call to its  intended recipient.  The other, In the Matter of Petition for  Emergency Relief and Declaratory Ruling Filed by the BellSouth Corporation, 7 FCC Rcd 1619 (1992), considered a  voice mail service.  Part of the service, the forwarding of the  call from the intended recipient's location to the voice mail  apparatus and service, occurred entirely within the subscriber's state, and thus looked local.  Looking "end-to-end,"  however, the Commission refused to focus on this portion of  the call but rather considered the service in its entirety (i.e.,  originating with the out-of-state caller leaving a message, or  the subscriber calling from out-of-state to retrieve messages).Id. at 1621 (p 12).

20
ISPs, in contrast, are "information service providers," Universal Service Report, 13 FCC Rcd at 11532-33 (p 66), which  upon receiving a call originate further communications to  deliver and retrieve information to and from distant websites. The Commission acknowledged in a footnote that the cases it  relied upon were distinguishable, but dismissed the problem  out-of-hand:  "Although the cited cases involve interexchange  carriers rather than ISPs, and the Commission has observed  that 'it is not clear that [information service providers] use  the public switched network in a manner analogous to IXCs,'  Access Charge Reform Order, 12 FCC Rcd at 16133, the  Commission's observation does not affect the jurisdictional  analysis."  FCC Ruling, 14 FCC Rcd at 3697 n.36 (p 12).  It  is not clear how this helps the Commission.  Even if the  difference between ISPs and traditional long-distance carriers is irrelevant for jurisdictional purposes, it appears relevant forpurposes of reciprocal compensation.  Although ISPs use telecommunications to provide information service, they are  not themselves telecommunications providers (as are long distance carriers).

21
In this regard an ISP appears, as MCI WorldCom argued,  no different from many businesses, such as "pizza delivery  firms, travel reservation agencies, credit card verification  firms, or taxicab companies," which use a variety of communication services to provide their goods or services to their  customers.  Comments of WorldCom, Inc. at 7 (July 17,  1997).  Of course, the ISP's origination of telecommunications  as a result of the user's call is instantaneous (although  perhaps no more so than a credit card verification system or  a bank account information service).  But this does not imply  that the original communication does not "terminate" at the  ISP.  The Commission has not satisfactorily explained why  an ISP is not, for purposes of reciprocal compensation, "simply a communications-intensive business end user selling a  product to other consumer and business end-users."  Id.

22
The Commission nevertheless argues that although the call  from the ISP to an out-of-state website is information service  for the end-user, it is telecommunications for the ISP, and  thus the telecommunications cannot be said to "terminate" at  the ISP.  As the Commission states:  "Even if, from the perspective of the end user as customer, the telecommunications portion of an Internet call 'terminates' at the ISP's  server (and information service begins), the remaining portion  of the call would continue to constitute telecommunications  from the perspective of the ISP as customer."  Commission's Br. at 41.  Once again, however, the mere fact that the ISP  originates further telecommunications does not imply that the  original telecommunication does not "terminate" at the ISP. However sound the end-to-end analysis may be for jurisdictional purposes, the Commission has not explained why viewing these linked telecommunications as continuous works for  purposes of reciprocal compensation.

23
Adding further confusion is a series of Commission rulings  dealing with a class, enhanced service providers ("ESPs"), of  which ISPs are a subclass.  See FCC Ruling, 14 FCC Rcd at  3689 n.1 (p 1).  ESPs, the precursors to the 1996 Act's  information service providers, offer data processing services,  linking customers and computers via the telephone network. See MCI Telecommunications Corp. v. FCC, 57 F.3d 1136,  1138 (D.C. Cir. 1995).2  In its establishment of the access  charge system for long-distance calls, the Commission in 1983  exempted ESPs from the access charge system, thus in effect  treating them like end users rather than long-distance carriers.  See In the Matter of MTS & WATS Market Structure,  97 F.C.C.2d 682, 711-15 (p 77-83) (1983).  It reaffirmed this  decision in 1991, explaining that it had "refrained from applying full access charges to ESPs out of concern that the  industry has continued to be affected by a number of significant, potentially disruptive, and rapidly changing circumstances."  In the Matter of Part 69 of the Commission's  Rules Relating to the Creation of Access Charge Subelements  for Open Network Architecture, 6 FCC Rcd 4524, 4534 (p 54)  (1991).  In 1997 it again preserved the status quo.  In the  Matter of Access Charge Reform, 12 FCC Rcd 15982 (1997)  ("Access Charge Reform Order").  It justified the exemption  in terms of the goals of the 1996 Act, saying that its purpose  was to "preserve the vibrant and competitive free market that  presently exists for the Internet and other interactive computer services."  Id. at 16133 (p 344) (quoting 47 U.S.C.  § 230(b)(2)).

24
This classification of ESPs is something of an embarrassment to the Commission's present ruling.  As MCI WorldCom notes, the Commission acknowledged in the Access  Charge Reform Order that "given the evolution in [information service provider] technologies and markets since we first stablished access charges in the early 1980s, it is not clear  that [information service providers] use the public switched  network in a manner analogous to IXCs [inter-exchange  carriers]."  12 FCC Rcd at 16133 (p 345).  It also referred to  calls to information service providers as "local."  Id. at 16132  (p 342 n.502).  And when this aspect of the Access Charge  Reform Order was challenged in the 8th Circuit, the Commission's brief writers responded with a sharp differentiation  between such calls and ordinary long-distance calls covered  by the "end-to-end" analysis, and even used the analogy  employed by MCI WorldCom here--that a call to an information service provider is really like a call to a local business  that then uses the telephone to order wares to meet the need. Brief of FCC at 76, Southwestern Bell v. FCC, 153 F.3d 523  (8th Cir. 1998) (No. 97-2618).  When accused of inconsistency  in the present matter, the Commission flipped the argument  on its head, arguing that its exemption of ESPs from access  charges actually confirms "its understanding that ESPs in  fact use interstate access service;  otherwise, the exemption  would not be necessary."  FCC Ruling, 14 FCC Rcd at 3700  (p 16).  This is not very compelling.  Although, to be sure, the  Commission used policy arguments to justify the "exemption," it also rested it on an acknowledgment of the real  differences between long-distance calls and calls to information service providers.  It is obscure why those have now  dropped out of the picture.

25
Because the Commission has not supplied a real explanation for its decision to treat end-to-end analysis as controlling,  Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut.  Auto. Ins. Co., 463 U.S. 29, 43 (1983);  5 U.S.C. § 706(2)(A),  we must vacate the ruling and remand the case.

26
There is an independent ground requiring remand--the fit  of the present rule within the governing statute.  MCI  WorldCom says that ISP-traffic is "telephone exchange service[ ]" as defined in 47 U.S.C. § 153(16), which it claims "is  synonymous under the Act with the service used to make  local phone calls," and emphatically not "exchange access" as  defined in 47 U.S.C. § 153(47).  Petitioner MCI WorldCom's  Initial Br. at 22.  In the only paragraph of the ruling in which  the Commission addressed this issue, it merely stated that it "consistently has characterized ESPs as 'users of access  service' but has treated them as end users for pricing purposes."  FCC Ruling, 14 FCC Rcd at 3701 (p 17).  In a  statutory world of "telephone exchange service" and "exchange access," which the Commission here says constitute  the only possibilities, the reference to "access service," combining the different key words from the two terms before us,  sheds no light.  "Access service" is in fact a pre-Act term,  defined as "services and facilities provided for the origination  or termination of any interstate or foreign telecommunication."  47 CFR § 69.2(b).

27
If the Commission meant to place ISP-traffic within a third  category, not "telephone exchange service" and not "exchange  access," that would conflict with its concession on appeal that  "exchange access" and "telephone exchange service" occupy  the field.  But if it meant that just as ESPs were "users of  access service" but treated as end users for pricing purposes,  so too ISPs are users of exchange access, the Commission has  not provided a satisfactory explanation why this is the case. In fact, in In the Matter of Implementation of the Non Accounting Safeguards of Sections 271 and 272 of the Communications Act of 1934, as amended, 11 FCC Rcd 21905,  22023 (p 248) (1996), the Commission clearly stated that "ISPs  do not use exchange access."  After oral argument in this case the Commission overruledthis determination, saying  that "non-carriers may be purchasers of those services."  In the Matter of Deployment of Wireline Services Offering  Advanced Telecommunications Capability, FCC 99-413, at  21 (p 43) (Dec. 23, 1999).  The Commission relied on its pre Act orders in which it had determined that non-carriers can  use "access services," and concluded that there is no evidence  that Congress, in codifying "exchange access," intended to  depart from this understanding.  See id. at 21-22 (p 44).  The  Commission, however, did not make this argument in the  ruling under review.

28
Nor did the Commission even consider how regarding noncarriers as purchasers of "exchange access" fits with the  statutory definition of that term.  A call is "exchange access"  if offered "for the purpose of the origination or termination of  telephone toll services."  47 U.S.C. § 153(16).  As MCI World Com argued, ISPs provide information service rather  than telecommunications;  as such, "ISPs connect to the local  network 'for the purpose of' providing information services,  not originating or terminating telephone toll services."  Petitioner MCI WorldCom's Reply Br. at 6.

29
The statute appears ambiguous as to whether calls to ISPs  fit within "exchange access" or "telephone exchange service,"  and on that view any agency interpretation would be subject  to judicial deference.  See Chevron U.S.A. Inc. v. Natural  Resources Defense Council, Inc., 467 U.S. 837, 842-43 (1984).But, even though we review the agency's interpretation only  for reasonableness where Congress has not resolved the  issue, where a decision "is valid only as a determination of  policy or judgment which the agency alone is authorized to  make and which it has not made, a judicial judgment cannot  be made to do service."  SEC v. Chenery Corp., 318 U.S. 80,  88 (1943).  See also Acme Die Casting v. NLRB, 26 F.3d 162,  166 (D.C. Cir. 1994);  Leeco, Inc. v. Hays, 965 F.2d 1081, 1085  (D.C. Cir. 1992);  City of Kansas City v. Department of  Housing and Urban Development, 923 F.2d 188, 191-92 (D.C.  Cir. 1991).

30
*  *  *

31
Because the Commission has not provided a satisfactory  explanation why LECs that terminate calls to ISPs are not  properly seen as "terminat[ing] ... local telecommunications  traffic," and why such traffic is "exchange access" rather than  "telephone exchange service," we vacate the ruling and remand the case to the Commission.  We do not reach the  objections of the incumbent LECs--that § 251(b)(5)  preempts state commission authority to compel payments to  the competitor LECs;  at present we have no adequately  explained classification of these communications, and in the  interim our vacatur of the Commission's ruling leaves the  incumbents free to seek relief from state-authorized compensation that they believe to be wrongfully imposed.

32
So ordered.

Notes:

1
  "Telephone exchange service" is defined as:
(A) service within a telephone exchange, or within a connect-ed system of telephone exchanges within the same exchange area operated to furnish to subscribers inter communicating service of the character ordinarily furnished by a single exchange, and which is covered by the exchange service charge, or (B) comparable service provided through a system of switches, transmission equipment, or other facilities (or combination thereof) by which a subscriber can originate and terminate a telecommunications service.
47 U.S.C. § 153(47).  "Exchange access" is defined as:
the offering of access to telephone exchange services or facilities for the purpose of the origination or termination of telephone toll services.
Id. § 153(16).

2
  The regulatory definition states that ESPs offer "services ...  which employ computer processing applications that act on the  format, content, code, protocol or similar aspects of the subscriber's  transmitted information;  provide the subscriber additional, different, or restructured information;  or involve subscriber interaction  with stored information."  47 CFR § 64.702(a).