Court Opinion

ID: 9856999
Source: CourtListenerOpinion
Date Created: 2023-09-24 07:10:13.011401+00
Date Added: 2024-06-11T09:37:49.255992
License: Public Domain

WILLIAMS, Chief Judge,
concurring in part and in the judgment:
The majority interprets the Telecommunications Act of 1996, Pub.L. No. 104-104, 110 Stat. 56 (1996) (the “Telecommunications Aet”)’s definition of “telecommunications service” to mean that special offers featuring gift incentives form part of the “offering of telecommunications” that incumbent local exchange carriers (LECs) must make available for resale to would-be competitors. I agree. For the reasons that follow, however, I respectfully disagree with the portion of the majority opinion suggesting that the NCUC did not resolve whether the special offers at issue in this case are “promotions” within the meaning of 47 C.F.R. § 51.613(a)(2) (2006) but rather independently “established guidelines similar to those given by the FCC in its Local Competition Order,” ante at 453.
I.
A
Like the majority, I believe that although we review de novo the NCUC’s interpretations of the Telecommunications Act and the regulations and rulings of the FCC, the orders of the state commissions nevertheless reflect “a body of experience and informed judgment to which courts ... may properly resort for guidance.” Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 89 L.Ed. 124 (1944). It is important to note, however, that this is an area in which the FCC has previously disagreed with the state commissions, including the NCUC. See In the Matter of Am. Commc’ns Servs., Inc., 14 F.C.C.R. 21579, 21605 n. 124 (1999) (citing favorably to MCI Telecomm. Corp. v. BellSouth Telecomm., Inc., 7 F.Supp.2d 674 (E.D.N.C.1998), which invalidated a section of an *455NCUC order setting out the terms of an interconnection agreement providing that “[s]hort-term promotions shall not be available for resale”); MCI Telecomm. Corp. v. BellSouth Telecomm., Inc., 40 F.Supp.2d 416, 426 n. 9 (E.D.Ky.1999) (noting that BellSouth had withdrawn its argument that it was not required to resell contract service arrangements (CSAs) at the wholesale rate after “the FCC made clear that it disagreed with the PSC and other state commissions on th[e] issue” and “informed BellSouth that it would not grant Bell-South the authority to provide long distance service originating in any state in which it provides local service if such CSA restrictions exist in that state”); In the Matter of Application of BellSouth Corp., 13 F.C.C.R. 539 (1997) (FCC order requiring BellSouth to offer CSAs for resale at the wholesale rate).
B.
FCC regulations require incumbent LECs to offer their telecommunications services for resale to competing local providers (CLPs) “subject to the same conditions” on which retail subscribers receive them. 47 C.F.R. § 51.603 (2006). An incumbent LEC seeking to impose a restriction on resale ordinarily must prove to the state commission that the restriction is reasonable and nondiscriminatory. 47 C.F.R. § 51.613(b) (2003). There exist two exceptions, however, to this requirement. Pursuant to 47 C.F.R. § 51.613(a), incumbent LECs may prohibit resellers from engaging in “cross-class selling” and may offer “short-term promotions” without applying the wholesale discount to the promotional rate. 47 C.F.R. § 51.613(a)(1), (2). This case requires us to resolve whether the NCUC correctly concluded that special offers featuring gift benefits are “promotions” within the meaning of 47 C.F.R. § 51.613(a)(2).1
I agree with the district court that the FCC’s Local Competition Order2 limits *456the scope of the term “promotions” and therefore forecloses the interpretation adopted by NCUC. In its Local Competition Order, the FCC stated that, in discussing promotions, it was “only referring to price discounts from standard offerings that will remain available for resale at wholesale rates, i.e., temporary price discounts.” Local Competition Order, para. 948. This statement makes clear that the FCC intended the term “promotion” to refer only to temporary price discounts. This interpretation is bolstered by the language of the regulation itself, which provides that,
An incumbent LEC shall apply the wholesale discount to the ordinary rate for a retail service rather than a special promotional rate only if:
(I) Such promotions involve rates that will be in effect for no more than 90 days; and
(ii) The incumbent LEC does not use such promotional offerings to evade the wholesale rate obligation, for example by making available a sequential series of 90-day promotional rates.
47 C.F.R. § 51.613(a)(2) (emphasis added). Thus, the regulation specifically contemplates a “special promotional rate” brought about by the “temporary price discount” referenced in the Local Competition Order.
The NCUC conceded that special offers featuring gift benefits are not “discount service offerings per se because they do not result in a reduction of the tariffed retail price charged for the regulated service at the heart of the offerings,” but reasoned that they “do provide a savings and therefore a type of discount to subscribers for the regulated services provided.” (J.A. at 33, 34.)3 The NCUC thus reasoned that because anything of economic value given to a customer represents a benefit to the customer that may offset the cost of service, “anything of economic value paid, given, or offered to a customer to promote or induce purchase of a ... service offering ... is a promotional discount.” (J.A. at 25.) Section 51.613(a)(2) and the Local Competition Order, however, do not broadly encompass “anything of economic value,” (J.A. at 25), but instead contemplate only “temporary price discounts” giving rise to “special promotional rates,” 47 C.F.R. § 51.613(a)(2); Local Competition Order, para. 948. Both legal and non-legal dictionaries define a “discount” as “[a] reduction from the full amount or value of something, esp[ecially] a price.” Black’s Law Dictionary 498 (8th ed.2004); see also Merriam-Webster’s Collegiate Dictionary 357 (11th ed.2004) (defining “discount” as “a reduction made from the gross amount or value of something: as a(l): a reduction made from a regular or list price....”).
In addition to recognizing that gift offers are not discount service offerings per se, the NCUC recognized that gift offers have different anti-competitive effects than do direct price discounts. It determined that gift offers “do not have the same degree of anti-competitive effect that a direct discounting of the retail price would have on a reseller market.” (J.A. at 34.) The conclusion that gift offers do not have the same degree of anti-competitive effect as price discounts undermines the NCUC’s finding that gift offers are “promotional discounts.”
*457The FCC’s determination that promotional rates “cease to be ‘short-term’ and must therefore be treated as a retail rate for an underlying service” if they are greater than 90 days in duration was the result of a careful balancing of the pro- and anti-competitive effects promotional prices. Local Competition Order, paras. 946-50; see also 47 C.F.R. § 51.613(a)(2). Accordingly, I believe we should.not expand 47 C.F.R. § 51.613(a)(2)’s exemption for short-term promotions to one-time gift offers, which have a lesser anti-competitive effect than do direct price discounts and to which the FCC did not anticipate that the exemption would apply.4
C.
The majority opinion does not address the NCUC’s belief that gift offers have lesser anti-competitive effects than price discounts. Instead, it emphasizes that incentives to subscription may be “used to create an uneven playing field,” ante at 452, and seeks to demonstrate potential anti-competitive effects by way of a hypothetical. The hypothetical involves an incumbent LEC that sends its customers a monthly rebate check. See Ante at 450-51. The NCUC’s orders, however, focused on one-time gifts offered as an inducement to subscription. The NCUC issued its first order in response to the Public Staffs request for guidance on the applicability of the Telecommunications Act’s resale obligations to such offers. The Public Staff argued that “bill credits, gift cards, checks or coupons offered to customers by a company’s regulated business ... to encourage subscription to a regulated service are promotions featuring price discounts.” (J.A. at 24.) In its first order, the NCUC agreed with the Public Staff that “gift cards, checks, check coupons and similar benefits offered as an inducement to purchase telecommunications services ... are promotional discounts.” (J.A. at 25.) In its Clarifying Order, the NCUC described its initial order as an “Order regarding resale obligations applicable to one-time gift promotions.” (J.A. at 47 (emphasis added).) The Clarifying Order explains that the NCUC’s Order of December 22, 2004 “requires that telecommunications services subject to the resale obligation of Section 251(c)(4) be resold at rates that give resellers the benefit of the change in rate brought about by offering one-time incentives for more than 90 days.” (J.A. at 46 (emphasis added).)
Consideration of the one-time gift offers addressed by the NCUC’s orders reveals an important distinction between such offers and price discounts. A customer must continue to subscribe to an incumbent LEC’s services to receive a discounted rate for those services. Customers receiving one-time gifts with no corresponding obligation to commit to a particular term of service, in contrast, may attempt to take advantage of the special offer by signing up for the gift benefit and cancelling their service soon or shortly thereafter. Moreover, the time period during which the incumbent LEC makes a one-time gift offer available does not affect the value of the gift. With a direct price discount (or a recurring gift benefit), the longer the discount is offered, the more savings a customer receives. With a one-time gift offer, in contrast, the customer receives the same gift regardless of the duration of the offer. Thus, whether the offer extends for more than 90 days would have a minimal im*458pact on the anti-competitive effects of the special offer.
Concluding that the gift offers at issue are not “promotions” within the meaning of 47 C.F.R. § 51.613(a)(2) would not prevent the NCUC from exercising oversight over gift offers or allow incumbent LECs to use this type of special offer to create an uneven playing field. To the contrary, it would impose a greater burden on incumbent LECs. Section 51.613(a)(2) allows restrictions on the resale of short-term promotions as a narrow exemption to the general rule that incumbent LECs “may impose a restriction [on resale] only if it proves to the state commission that the restriction is reasonable and non-discriminatory.” 47 C.F.R. § 51.613(b). Accordingly, concluding that gifLoffers are not “promotions” would require incumbent LECs to prove to the state commission that restrictions on the resale of all offers including gift incentives (and not merely those lasting for more than 90 days) were reasonable and nondiscriminatory. Such a case-by-case analysis would allow the NCUC to apply its expertise in assessing the pro- and anti-competitive effects of this particular type of special offer. This assessment by the NCUC would better serve the goals of the statute and the FCC regulations than applying an ill-fitting exemption designed to address a different type of special offer with admittedly different anti-competitive effects.
II.
In sum, I concur in the majority’s interpretation of the Telecommunications Act and ultimate conclusion that special offers featuring gift benefits offered for more than 90 days must be made available to resellers in the form of a reduced wholesale price. I believe, however, that onetime gift offers are not price discounts within the meaning of the FCC’s Local Competition Order and therefore do not constitute “promotions” within the meaning of 47 C.F.R. § 51.613(a)(2).

. I agree with the majority that the NCUC’s orders did not conclusively determine how to treat BelISouth's "1FR + 2Cashback” offer or any other specific offer. Rather, the NCUC sought to provide guidance on how these types of special offers should be treated under the Telecommunications Act and its implementing regulations. I do not believe, however, that the NCUC sought to independently establish guidelines similar to the FCC’s. The NCUC’s orders sought to provide guidance on whether gift offers are subject to the resale requirements set forth in the Telecommunications Act and the FCC regulations by determining whether such offers (1) form part of an offering of telecommunications, and (2) constitute “promotions” within the meaning of 47 C.F.R. § 51.613(a)(2). In its initial order, the NCUC agreed with commen-ters and the Public Staff that “gift cards, checks, check coupons and similar benefits offered as an inducement to purchase telecommunication services ... are promotional discounts.” (J.A. at 25.) The NCUC’s Clarifying Order emphasizes that the initial order "should not be read as a change of law or policy,” and that "[i]f the Commission is called upon to determine whether a promotion offered for more than 90 days must be offered to resellers at the promotional rate minus the wholesale discount, the Commission will follow the law as stated in 47 U.S.C. 251(c)(4) and 47 C.F.R. 51.613(a)(2) and (b).” (J.A. at 43.) Thus, this case requires us to resolve whether the NCUC’s interpretation of "the law as stated in ... 47 C.F.R. 51.613(a)(2)," (J.A. at 43), — that special offers featuring gift benefits are "promotions” within the meaning of 47 C.F.R. § 51.613(a)(2)— was correct. I therefore disagree with the majority opinion to the extent that it suggests that the NCUC’s orders sought to independently "establish!] guidelines similar to those given by the FCC in its Local Competition Order.” Ante at 453.

. In re Implementation of the Local Competition Provisions in the Telecomms. Act of 1996, Report and Order, 11 F.C.C.R. 15499 (1996), aff'd in relevant part and remanded on other grounds, Iowa Utils. Bd. v. FCC, 120 F.3d 753, 819 (8th Cir.1997), off d in part and remanded on other grounds, AT & T Corp. v. Iowa Utils. *456Bd., 525 U.S. 366, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999).

. Citations to the refer to the contents of the joint appendix filed by the parties to this appeal.

. Notably, in arguing for a broad construction of the term ‘‘promotions,” the NCUC commissioners stress that "[t]he statement in ¶ 948 was written in 1996, long before the type of promotional offering at issue in this case began to appear.” (J.A. at 30.)