Court Opinion

ID: 185419
Source: CourtListenerOpinion
Date Created: 2011-02-05 02:31:50+00
Date Added: 2024-06-11T12:37:01.413233
License: Public Domain

253 F.3d 29 (D.C. Cir. 2001)
Association of Communications Enterprises, Petitionerv.Federal Communications Commission and United States of America, RespondentsSBC Communications Inc., et al., Intervenors
No. 00-1144
United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued April 13, 2001Decided June 26, 2001

On Petition for Review of an Order of the Federal Communications Commission
Charles C. Hunter argued the cause for petitioner.  With  him on the briefs was Catherine M. Hannan.
Rodger D. Citron, Counsel, Federal Communications Commission, argued the cause for respondents.  With him on the brief were Christopher J. Wright, General Counsel, John E.  Ingle, Deputy Associate General Counsel, and Laurence N.  Bourne, Counsel.  Catherine G. O'Sullivan and Nancy C.  Garrison, Attorneys, U.S. Department of Justice, entered  appearances.
Robert McDonald, Mark L. Evans, Donna N. Lampert,  Mark J. O'Connor, M. Robert Sutherland, Roger K. Toppins,  James D. Ellis, Alfred G. Richter, Dan L. Poole, Robert B.  McKenna, William P. Barr, M. Edward Whelan, III, Michael E. Glover, Edward Shakin and Lawrence W. Katz  appeared on the brief of intervenors America Online, Inc., et  al.
Before:  Williams, Ginsburg, and Rogers, Circuit Judges.
Opinion for the Court filed by Circuit Judge Ginsburg.
Ginsburg, Circuit Judge:

1
In order to foster competition in  telecommunication markets, the Telecommunications Act of  1996, 47 U.S.C. §§ 151 et seq., requires that an incumbent  local exchange carrier (incumbent or ILEC) "offer for resale  at wholesale rates any telecommunications service that the  carrier provides at retail to subscribers who are not telecommunications carriers."  47 U.S.C.  251(c)(4)(A).  The idea is  to enable other carriers to compete with incumbents at the  retail level.

2
In the Second Report and Order (Order) in CC Docket No.  98-147, Deployment of Wireline Services Offering Advanced  Telecommunications Capability (1999), the Commission determined that the discount-for-resale provision applies when  an incumbent offers digital-subscriber-line (DSL) service to  an end-user but not when it offers DSL service to an internet  service provider (ISP).  The Commission maintains that the  latter offering is not made "at retail" because the ISP packages and ultimately resells the service to end-users.  The  petitioner, an association of telecommunications providers,  claims that the Commission's position is contrary to the Act  or, alternatively, unreasonable.  Finding no merit in either  claim, we deny the petition for review.

I. Background

3
In addition to plain old telephone service (POTS), the  ILECs provide various advanced services, foremost among  which is DSL service.  (For a description of DSL technology,  see Worldcom, Inc. v. FCC, 246 F.3d 690, 692 (D.C. Cir.  2001).)  An ILEC may offer DSL service directly to residential and business end-users, in which event the ILEC itself  performs such collateral functions as marketing, billing, and  maintenance.  In addition, the ILEC may offer DSL service  designed specifically for ISPs (such as America Online), which  package and sell the service to end-users and perform the  marketing and other collateral functions.

4
At issue in this case is that part of the Second Report and  Order in which the Commission addressed the question  whether the resale requirement of  251(c)(4)(A) applies to an  ILEC's offering of advanced services.  As the Commission  acknowledged, it had previously determined that advanced  services constitute "telecommunications service" and that the  end-users and ISPs to which the ILECs offer such services  are "subscribers who are not telecommunications carriers"  within the meaning of  251(c)(4)(A).  The remaining issue,  therefore, was whether an ILEC's offering of certain advanced services, including DSL, is made "at retail" so as to  trigger the discount requirement.  The Commission ultimately concluded that

5
while an incumbent LEC DSL offering to residential and business end-users is clearly a retail offering designed for and sold to the ultimate end-user, an incumbent LEC offering of DSL services to Internet Service Providers as an input component to the Internet Service Provider's high-speed Internet service offering is not a retail offering.  Accordingly, ... DSL services designed for and sold to residential and business end-users are subject to the discounted resale obligations of section 251(c)(4).... [H]owever, ... section 251(c)(4) does not apply where the incumbent LEC offers DSL services as an input component to Internet Service Providers who combine the DSL service with their own Internet Service.

6
The Association of Communication Enterprises (ASCENT)  petitioned for review of this determination, and various telecommunications and DSL providers intervened on behalf of  the Commission.

II. Analysis

7
Although ASCENT is by no means precise on the point, we  take it to be making arguments under both step one and step  two of Chevron U.S.A. v. NRDC, 467 U.S. 837 (1984).  That  is, the petitioner claims first that the Commission's interpretation of the term "at retail" is inconsistent with the Congress's use of that term and, alternatively, that the Commission is being unreasonable insofar as it interprets the term as  not including an ILEC's offering of advanced services to an  ISP.

8
As the Commission states in the Order, and ASCENT does  not dispute, "The Act does not define the term 'at retail' and  the legislative history on section 251(c)(4) provides only minimal clarification of Congress' intentions with regard to the  appropriate definition and application of the term."  Therefore, the Commission invoked the authority of Black's Law  Dictionary (6th ed. 1990) and Webster's Deluxe Unabridged  Dictionary (2d ed. 1987), and construed "retail transactions  [as] necessarily involv[ing] direct sales of a product or service  to the ultimate consumer for her own personal use or consumption."

9
ASCENT argues that the Commission thereby did violence  to the plain meaning of the phrase "at retail":

10
[U]nless an ISP is reselling DSL service without substantial alteration of its form or content ... it is consuming that service in creating the information service it is selling to the public.  Resale is an essential element of a wholesale transaction;  consumption is an integral part of a retail transaction.

11
Although ASCENT correctly asserts, per Black's, that  "wholesale" entails a "sale ... to one who intends to resell,"  there is no justification for ASCENT's claim that a product "substantially altered" in form or content is by definition  "consumed."  To use ASCENT's own example, an automobile  manufacturer that converts raw steel into motor vehicles can  reasonably be said to purchase its steel "wholesale" notwithstanding that it substantially alters that steel before selling  its finished goods on the retail auto market.  See Black's  (sale for "further sale or processing" not a sale at "retail")  (emphasis added).

12
ASCENT's other textual arguments, namely, that the Commission has "attempt[ed] to write into the text of Section  251(c)(4) certain exemptions" and that it has "underminethe viability of resale as a means of competing in the local  telecommunications market," beg the question at issue:  251(c)(4)(A) applies and the discount requirement comes  into play only if a particular offering is in fact "at retail." The same is true of ASCENT's makeweight argument that  the Commission has usurped the authority of the states to set  wholesale rates under 47 U.S.C.  252(d)(3), which likewise  applies only to services offered "at retail" under  251(c)(4).

13
Because the Congress did not itself resolve the present  issue, we turn to ASCENT's arguments under Chevron step  two that the Commission's interpretation of the Act is unreasonable.  Here ACSENT argues that the Commission impermissibly ignored record evidence and its own precedent indicating that ISPs are indistinguishable from end-users.

14
Initially ASCENT complains that, because DSL services  are offered indifferently to all pursuant to a tariff, even an  ILEC's offering that is tailored to the needs of ISPs is  available likewise to any end-user that can use them.  Such  an offering requires the purchaser to make term and volume  commitments, and does not include customary retail functions, such as marketing, billing, and maintenance.  The  petitioner suggests that large, corporate end-users with the  requisite need and the ability to perform those functions for  themselves might take the service.  That mere possibility,  however, does not invalidate the Commission's interpretation  of the statute.  If in the future an ILEC's offering designed  for and sold to ISPs is shown actually to be taken by endusers to a substantial degree, then the Commission might  need to modify its regulation to bring its treatment of that  offering into alignment with its interpretation of "at retail,"  but that is a case for another day.*

15
ASCENT turns next to possible inconsistencies between  the Commission's approach in the Order under review and in  a prior proceeding.  In particular, the petitioner seizes upon  the Commission's earlier statement that "the services independent public payphone providers [IPPPs] obtain from incumbent LECs are telecommunications services that incumbent LECs provide 'at retail to subscribers who are not  telecommunication carriers' and that such services should be  available at wholesale rates to telecommunications carriers." Local Competition Order, 11 F.C.C.R. 15,499 at p 876 (1996). ASCENT maintains that for present purposes an IPPP is  indistinguishable from an ISP in that it purchases, bundles,  and then resells to end-users a telephone service -in the  case of IPPPs it is POTS -and that the Commission is  therefore unjustified in treating the IPPP but not the ISP as  an end-user.

16
This argument has force, but it cannot carry the day for  two reasons:  First, the analogy between an ISP and an IPPP  is not so close;  the POTS an ILEC sells to an IPPP is the  same POTS that the IPPP sells to end-users, whereas the  DSL service it sells an ISP is distinct because it does not  include the collateral functions the ISP performs for endusers.  Second, just two paragraphs earlier in the same  order, the Commission had determined that offerings of  exchange access services tailored for interexchange carriers (IXCs) are not subject to  251(c)(4) in part because those  services "are designed for, and sold to, IXCs as an input  component to the IXC's own retail services," namely long  distance services.  Id. at p 874.  In the Order now under  review the Commission marshaled its treatment of IXCs as  the most relevant precedent.  ASCENT does not now distinguish that treatment in any meaningful way, but attributes it  to the Commission's rationale that exchange access services,  which IXCs purchase, are used primarily by telecommunications carriers.  That does not confront the Commission's  independent rationale that IXCs supply their own service to  end-users -as do ISPs.  In any event, if there is tension  between the Commission's treatment of IXCs and IPPPs, its  resolution is not now before us;  it is enough for our purposes  that the Commission in the present Order treated ISPs like  IXCs, regardless how it treated IPPPs in a prior order.

17
ASCENT's remaining points are less weighty.  First it  contends the Commission previously had rejected the suggestion that volume-based discounts or the absence of various  retail functions take an offering outside the reach of   251(c)(4).  Id. at p 951;  Application of BellSouth Corp., 13  F.C.C.R. 539 at p 220 (1997).  In those instances, however,  the Commission did not address offerings specifically designed for customers other than end-users.  Second,  ASCENT points out that the Commission has treated ISPs as  end-users for other purposes.  That is of no moment if the  Commission was reasonable, as we have seen that it was, in  treating them as resellers whose purchases from ILECs are  not made "at retail" for the purposes of  251(c)(4)(A).  In  sum, having considered ASCENT's objections, we find the  Commission's Order in all respects reasonable.

III. Conclusion

18
For the foregoing reasons, the petition for review is

19
Denied.

Notes:

*
 ASCENT further argues in its reply brief that the Order, by  seeming to remove from the ambit of  251(c)(4)(A) "any DSL  service offering provided to any ISP, regardless of the terms of the  offering," impermissibly delegates authority to ILECs -the regulated entities -to determine what offers are outside the discountfor-resale requirement.  Because this argument does not appear in  ASCENT's initial brief, the Commission did not have an opportunity to address it, nor shall we.  See Coalition for Noncommercial  Media v. FCC, 249 F. 3d 1005, 1010 (D.C. Cir. 2001).