Court Opinion

ID: 3018665
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:19:33.77816+00
Date Added: 2024-06-11T18:11:00.171670
License: Public Domain

United States Court of Appeals
                         FOR THE EIGHTH CIRCUIT

                                 ___________

                                 No. 96-3604
                                 ___________

Competitive Telecommunications           *
Association,                             *
                                         *
           Petitioner,                   *
                                         *
The Competition Policy Institute;   *
MCI Telecommunications Corporation;*
General Communication, Inc.;          *
Telecommunications Resellers          *
Association; America's Carriers       *
Telecommunication Association;        *
Cable & Wireless, Inc.; AT&T Corp.;*
Maryland Public Service Commission;* On Petitions for Review
Arkansas Public Service Commission;* of an Order of the
Oregon Public Utility Commission;   * Federal Communications
North State Telephone Company;        * Commission
Roseville Telephone Company;          *
Concord Telephone Company; Rock     *
Hill Telephone Company; Public        *
Utilities Commission of the State   *
of Hawaii; Minnesota Public           *
Utilities Commission; The Ad Hoc    *
Coalition of Telecommunications       *
Manufacturing Companies; Pacific    *
Telecom, Inc.; Minnesota              *
Independent Coalition; Worldcom,    *
Inc.; Kentucky Public Service         *
Commission; Kansas Corporation        *
Commission; Public Service            *
Commission of the State of Wyoming;*
Rhode Island Public Utilities         *
Commission; Public Service            *
Commission of Wisconsin; State of   *
Texas; Alabama Public Service         *
Commission; Citizens Telephone        *
Company of Kecksburg; New Mexico    *
State Corporation Commission;         *
Public Service Commission of the    *
State of Montana; Utah Department   *
of Commerce, Division of Public       *
Utilities; Public Service                  *
Commission of Utah; Public Service    *
Commission of the State of South      *
Carolina; Tennessee Regulatory             *
Authority; Aging Forum, doing              *
business as National Silver Haired    *
Congress, Inc.; U.S. Coalition on     *
Aging; College for Living; Council    *
of Silver Haired Legislatures;             *
Missouri Alliance of Area Agencies    *
on Aging; Missouri Association for    *
the Deaf; Missouri Council of the     *
Blind; Presidents' Club for                *
Telecommunications Justice;                *
Paraquad, Rural Advocates for              *
Independent Living; Services for      *
Independent Living; Public                 *
Utilities Commission of the State     *
of Colorado; Department of Public     *
Utilities of the Commonwealth of      *
Massachusetts; Oklahoma                    *
Corporation Commission; Public             *
Service Commission of the State of    *
Connecticut Department of Public      *
Utility Control,                           *
                                           *
           Intervenors on Appeal,     *
                                           *
     v.                                    *
                                           *
Federal Communications Commission; *
United States of America,                  *
                                           *
           Respondents,                    *
Bell Atlantic Corporation;                 *
Bellsouth Corporation; Pacific             *
Telesis Group; SBC Communications, *
Inc.; US West, Inc.; US Telephone   *
Association; Ameritech Corporation;*
Southern New England Telephone             *
Company; GTE Service Corporation;   *
New York Telephone Company; New            *
England Telephone and Telegraph            *
Company; Nextlink Communications,   *
L.L.C.; National Cable Television   *
Association, Inc.; Sprint Corp.;    *
American Communications Services,   *
Inc.; Association for Local                *

                                     -2-
Telecommunications Services;               *
Consumer Federation of America;            *
Jones Intercable, Inc.;                    *
Telecommunications, Inc.; Teleport *
Communications Group, Inc.; Allied *
Associated Partners; Geld                  *
Information Systems; U.S. One              *
Communications Services; Frontier   *
Corporation; City of Long Beach,    *
California; City of Manassas,              *
Virginia; Time Warner                      *
Communications Holdings, Inc.;             *
Personal Communications Industry    *
Association; Alltel Telephone              *
Services Corporation; Independent   *
Telephone and Telecommunications    *
Alliance; Excel Telecommunications,*
Inc.; Paging Network, Inc.;                *
Nextwave Telecom, Inc.; Small              *
Cable Business Association;                *
Metrocall, Inc.; Texas Office of    *
Public Utility Counsel,                    *
                                           *
           Intervenors on Appeal.     *
                                           *
----------------------                     *
                                           *
Honorable John D. Dingell;                 *
Honorable W.J. (Billy) Tauzin;             *
Honorable Rick Boucher; Honorable     *
Dennis Hastert,                            *
                                           *
           Amici on Behalf of              *
           Petitioner.                     *

                                  ___________

                   Submitted:     January 17, 1997

                         Filed:   June 27, 1997
                                  ___________

Before BOWMAN, WOLLMAN, and HANSEN, Circuit Judges.
                               ___________

BOWMAN, Circuit Judge.

                                     -3-
      Competitive Telecommunications Association (CompTel) petitions for
review of a portion of a Federal Communications Commission (FCC) order that
interprets the Telecommunications Act of 1996, see First Report and Order,
Implementation       of     the    Local        Competition    Provisions        in      the
Telecommunications Act of 1996, CC Docket No. 96-98 (Aug. 8, 1996)
[hereinafter First Report and Order].              This is one of a number of cases
consolidated and referred to the Eighth Circuit Court of Appeals by order
of the Judicial Panel on Multidistrict Litigation.             See Iowa Utils. Bd. v.
FCC, 109 F.3d 418, 421 (8th Cir.), motion to vacate stay denied, 117 S. Ct.
429   (1996).      The    Court   heard    oral    argument   on   CompTel’s     petition
separately, and we now issue a separate decision, as this case deals with
discrete issues raised only in CompTel’s petition.

      CompTel describes itself as “the principal industry association of
the nation’s competitive telecommunications carriers, with nearly 200
members.”   Brief of Petitioner (Disclosure of Interests at 1).             CompTel has
been described more specifically as “a trade association with over 150"
members     who    are     long-distance         telephone    companies,        known     in
telecommunications jargon as interexchange carriers or IXCs.                Competitive
Telecomms. Ass’n v. FCC, 87 F.3d 522, 524 (D.C. Cir. 1996); see also Brief
of Respondent at 3.

                                            I.

      CompTel     first   challenges      the    FCC’s   interpretation    of    the    term
“interconnection” as used in 47 U.S.C.A. § 251 (c)(2) (West Supp. 1997).1
Section 251 in general concerns the development of

      1
      All references in this opinion to sections and subsections
of the Telecommunications Act of 1996 in West’s United States
Code Annotated (U.S.C.A.) are to the 1997 supplement.

                                           -4-
competitive telecommunications markets, and the duties and obligations of
telecommunications carriers in furtherance of that objective as Congress
has described them.           Subsection (a) lists the duties imposed on all
telecommunications carriers, whether long-distance or local, and subsection
(b) details obligations of all local exchange carriers (LECs).2                       Here we
are   concerned       with   subsection      (c),    which     sets   forth    “[a]dditional
obligations of incumbent” LECs, that is, those who were providing local
phone       service    in    an    area   on     February      8,   1996,     the   date   the
Telecommunications Act of 1996 became law.               See id. § 251(h)(1).       Among the
obligations assigned incumbent LECs is “[t]he duty to provide, for the
facilities and equipment of any requesting telecommunications carrier,
interconnection with the [LEC’s] network . . . for the transmission and
routing      of   telephone       exchange     service   and    exchange      access.”     Id.
§ 251(c)(2)(A).

        In its First Report and Order, the FCC concluded “that the term
‘interconnection’ under section 251(c)(2) refers only to the physical
linking of two networks for the mutual exchange of traffic.”                    First Report
and Order ¶ 176; see also 47 C.F.R. § 51.5 (1996)(defining interconnection
as in the First Report and Order and noting that “[t]his term does not
include the transport and termination of traffic”).                   CompTel argues that
Congress intended interconnection to be more than mere physical access and
that the definition of the term should include transmission and routing
services as well.

        In reviewing the decision of an administrative agency, we “must
reject administrative constructions which are contrary to

        2
      LECs provide local telephone service or offer local access
for long-distance service. See 47 U.S.C.A. § 153(26), (47),
(16).

                                               -5-
clear congressional intent.”          Chevron U.S.A. Inc. v. Natural Resources
Defense Council, Inc., 467 U.S. 837, 843 n.9 (1984).           Here, however, the
term interconnection is undefined by the Act, and when “the statute is
silent or ambiguous with respect to the specific issue, the question for
the court is whether the agency’s answer is based on a permissible
construction of the statute.”     Id. at 843.     In applying that standard, the
FCC’s interpretation of interconnection is entitled to “considerable
weight” and this Court’s deference.          Id. at 844.

                                         A.
       CompTel first asserts that the FCC’s definition of interconnection
writes certain other language out of the statute.           We disagree.    CompTel
contends that Congress’s language requiring incumbent LECs to provide
interconnection “for the transmission and routing of telephone exchange
service and exchange access” means that Congress intended to require the
LECs   to   provide    transmission    and    routing   services   in   addition   to
interconnection.      According to the argument, the FCC’s definition renders
the phrase “for the transmission and routing” meaningless.          But considering
the section as a whole and in context, it is reasonable to conclude that
Congress intended “for the transmission and routing of telephone exchange
service and exchange access” only to describe what the interconnection, the
physical link, would be used for.3        That

       3
      Telephone exchange service is local service, that is,
“service within a telephone exchange” or within a system of
exchanges within the same area that operates as a single
exchange, or a comparable service. 47 U.S.C.A. § 153(47).
Exchange access is “the offering of access to telephone exchange
services or facilities for the purpose of the origination or
termination of telephone toll services,” that is, “service
between stations in different exchange areas for which there is
made a separate charge.” Id. § 153(16), (48). See also the
definition of local exchange carrier (LEC) at 47 U.S.C.A.

§ 153(26) (“any person that is engaged in the provision of
telephone exchange service or exchange access”).

                                         -6-
interpretation is further bolstered by the subsection’s express provision
that the LEC’s duty is to provide interconnection for the facilities and
equipment of the requesting carrier with the LEC’s network.             By its own
terms, this reference is to a physical link, between the equipment of the
carrier seeking interconnection and the LEC’s network.
      As a part of its statutory argument, CompTel also argues that the
FCC’s interpretation of interconnection violates the principle of statutory
construction set forth in Sierra Club v. Clark, 755 F.2d 608, 613 (8th Cir.
1985), wherein this Court said, ”[S]tatutory definitions of words used
elsewhere in the same statute furnish such authoritative evidence of
legislative intent and meaning that they are usually given controlling
effect.”   We reject CompTel’s argument for several reasons.

      First, the language from Sierra Club does not set forth an absolute
edict, but only states that such definitions usually will control. In any
event, CompTel does not even suggest that interconnection is defined
anywhere in the Act.       CompTel really is contending that, if the FCC’s
definition is upheld, “the 1996 Act would lose virtually all meaning”
because of the way the term interconnection is used elsewhere in the Act.
Brief of Petitioner at 13.    But the only specific use of the word to which
CompTel refers in its brief is that in 47 U.S.C.A. § 252(e), which says,
“Any interconnection agreement adopted by negotiation or arbitration shall
be submitted for approval to the State commission.”         According to CompTel’s
argument, Congress certainly did not intend this authority for review to
be   “limited   to   agreements   for   the   mere   physical   interconnection   of
networks.”

                                        -7-
Brief of Petitioner at 12.       We are inclined to agree, but the term at issue
is “interconnection agreement,” not just interconnection, and it is a
reference back to agreements discussed earlier in § 252.              Even a cursory
reading of § 252 makes it clear that interconnection agreement as used in
§   252(e)    is   the   Act’s   shorthand    for   agreements   on   providing   and
establishing rates for “interconnection, services, or network elements.”
E.g., 47 U.S.C.A. § 252(a)(1), (c)(2) (emphasis added).

      The FCC’s interpretation of interconnection as only a physical link
for mutual exchange of traffic between LECs does not violate the Act.

                                         B.

      CompTel also argues that the FCC’s interpretation will subvert the
Act’s goal of assuring that rates for telecommunications services are cost-
based.       See 47 U.S.C.A. § 252(d)(1) (requiring that “the just and
reasonable rate for the interconnection of facilities and equipment” under
§ 251(c)(2) and the “just and reasonable rate for [unbundled] network
elements” under § 251(c)(3) be cost-based and nondiscriminatory, and “may
include a reasonable profit”).        But, assuming without deciding that the
FCC’s interpretation of interconnection would have the effect CompTel
predicts, it is clear from the Act that Congress did not intend all access
charges to move to cost-based pricing, at least not immediately.             The Act
plainly preserves certain rate regimes already in place.

      Under § 251(g), an LEC

      shall provide exchange access, information access, and exchange
      services for such access to [IXCs] and

                                        -8-
     information service providers in accordance with the same equal
     access and nondiscriminatory interconnection restrictions and
     obligations (including receipt of compensation) that apply to
     such carrier on the date immediately preceding February 8, 1996
     [date of enactment] under any court order, consent decree, or
     regulation, order, or policy of the [FCC], until such
     restrictions and obligations are explicitly superseded by
     regulations prescribed by the [FCC] after February 8, 1996.

Id. § 251(g)(emphasis added).    In other words, the LECs will continue to
provide exchange access to IXCs for long-distance service, and continue to
receive payment, under the pre-Act regulations and rates.     This section
leaves the door open for the promulgation of new rates at some future date,
but any possible new exchange access rates for interstate calls will not
carry the same deadline or the same cost-based restrictions as will those
for interconnection and unbundled network elements specifically mentioned
in § 252(d)(1).

     We conclude that the FCC’s interpretation of interconnection does not
thwart the statutory scheme of the Act.

                                     C.
     CompTel also challenges the FCC’s interpretation of interconnection
as having a discriminatory impact, by permitting LECs to charge different
rates for the same service based on whether the carrier who is seeking
interconnection and other network services is a long-distance service
provider or a local service provider.     But the two kinds of carriers are
not, in fact, seeking the same services.     The IXC is seeking to use the
incumbent LEC's network to route long-distance calls and the newcomer LEC
seeks use of the incumbent LEC's network in order to offer a competing
local service.    Obviously the services sought, while they

                                    -9-
might be technologically identical (a question beyond our expertise), are
distinct.    And if the IXC wants access in order to offer local service (in
other words, wants to become a LEC), then there is no rate differential.
In these circumstances, we do not think the FCC’s interpretation of
interconnection has a discriminatory impact.

                                         D.

        In sum, we conclude that CompTel has failed to demonstrate that the
FCC’s interpretation of interconnection as a physical link, and only a
physical link, is “not one that Congress would have sanctioned.”      Chevron
U.S.A., 467 U.S. at 845 (quoting United States v. Shimer, 367 U.S. 374, 383
(1961)).      We hold that limiting interconnection for the purposes of
§ 251(c)(2) to physical linkage “is based on a permissible construction of
the statute.”    Id. at 843.

                                      II.
        CompTel also challenges an interim decision in the FCC’s First Report
and Order regarding pricing, arguing that the FCC’s position is a violation
of the Act and arbitrary and capricious.      Under the Act, as noted supra in
Part    IB   of this opinion, the rates that incumbent LECs charge for
§   251(c)(2) and (3) services (interconnection and unbundled network
elements) must be cost-based, nondiscriminatory, and “may include a
reasonable profit.”      47 U.S.C.A. § 252(d)(1).        Notwithstanding this
provision, the FCC has established “a temporary transitional mechanism to
help complete all of the steps toward the pro-competitive goal of the 1996
Act.”    First Report and Order ¶ 720.    That is, incumbent LECs for the time
being may recover from interconnecting carriers the carrier common line
charge (CCLC) and seventy-five percent of the

                                     -10-
transport    interconnection          charge     (TIC)    “for    all    interstate     minutes
traversing the incumbent LECs’ local switches for which the interconnecting
carriers pay unbundled local switching element charges.”                        Id. (emphasis
added).    Neither of these charges is based on the LECs' actual cost.
     We will “hold unlawful and set aside agency action, findings, and
conclusions    found    to    be   .    .   .    arbitrary,      capricious,    an    abuse    of
discretion, or otherwise not in accordance with law; . . . [or] in excess
of statutory jurisdiction, authority, or limitations, or short of statutory
right.”    5 U.S.C. § 706(2)(A), (C) (1994).              It is significant to our review
for unlawfulness that the CCLC and TIC presently being assessed may be
collected no later than June 30, 1997.                 See First Report and Order ¶ 720.
Although    temporary        agency     rules     are     subject       to   judicial    review
notwithstanding their transitory nature, “substantial deference by courts
is accorded to an agency when the issue concerns interim relief.”                             MCI
Telecomms. Corp. v. FCC, 750 F.2d 135, 140 (D.C. Cir. 1984).

     The FCC acknowledges the cost-based issue raised by assessing the
charges but argues that two deadlines in the Act, which are nine months
apart, have created a dilemma for the agency, and that the interim charges
are the best way to resolve it.             According to the FCC, congressional intent
on another matter of great importance in the Telecommunications Act of 1996
justifies this temporary diversion from the Act’s cost-based mandate.                          We
agree.

     Congress directed the FCC to “complete all actions necessary to
establish regulations to implement the requirements” of § 251 by August 8,
1996--hence, the First Report and Order released that date.                       47 U.S.C.A.
§ 251(d)(1).    The conflicting deadline concerns another major purpose of
the Act, that is, the reform of the universal service system.                     The goal of
what is known in the

                                                -11-
telecommunications industry as universal service is to ensure that quality
service and access are available to all consumers, “including low-income
consumers and those in rural, insular, and high cost areas . . . at rates
that are reasonably comparable to rates charged for similar services in
urban areas.”     Id. § 254(b)(3).     To date, the subsidies necessary to
achieve this goal have been derived, at least in part, from access charges
that are not cost-based, so that long-distance rates have been subsidizing
local rates.    See First Report and Order ¶ 718; Allnet Communication Serv.
v. National Exch. Carrier Ass’n, 965 F.2d 1118, 1119 (D.C. Cir. 1992).   In
keeping with the Act’s cost-based objectives, support for universal service
will soon be “explicit,” 47 U.S.C.A. § 254(e), and after the system is
reformed “[a]ll providers of telecommunications services should make an
equitable and nondiscriminatory contribution to the preservation and
advancement of universal service,” id. § 254(b)(4).     Congress’s deadline
for the adoption of universal service rules under the Act was May 8, 1997.
See id. § 254(a)(2).4
     CompTel first argues that the access charges are contrary to the
statute.    Indeed, as noted above, the Act requires that rates for certain
access     be cost-based, and at first blush the interim CCLC and TIC
assessments appear to be reversible.   But the same Act requires the reform
of universal service subsidies and not, significantly, abolishment of
universal service, even temporarily.   Clearly Congress did not intend that
universal service should be adversely affected by the institution of cost-
based rates.    But the

     4
      We hereby take judicial notice of the Report and Order,
Federal-State Joint Board on Universal Service, CC Docket No. 96-
45 (May 8, 1997). The effective date of the rules, published
along with a summary of the Report and Order at 62 Fed. Reg.
32,862 (1997), is July 17, 1997, except for Subpart E of Part 54
(Universal Service Support for Low Income Services), which has an
effective date of January 1, 1998.

                                     -12-
nine-month disparity between the deadline for implementation of cost-based
service and the deadline for reform of universal service raises the threat
of serious disruption in universal service for those nine months if cost-
based    service   is   required   before   universal   service   is   funded   by
competitively neutral means.       See First Report and Order ¶¶ 719, 720.      We
share the FCC’s concern “that implementation of the requirements of section
251 now, without taking into account the effects of the new rules on . . .
existing access charge and universal service regimes, may have significant,
immediate, adverse effects that were neither intended nor foreseen by
Congress.”    Id. ¶ 716.

        If the FCC, upon meeting the August 8, 1996, deadline for issuing the
regulations required of it by subsection 251(d)(1), had not instituted an
interim access charge of some sort in order to subsidize universal service
for the nine months before universal service reforms are complete, we think
it apparent that universal service soon would be nothing more than a
memory.     The FCC action is logical and carefully explained in the First
Report and Order.       We do not think it contrary to the Act to institute
access charges with a fixed expiration date, even though such charges on
their face appear to violate the statute, in order to effectuate another
part of the Act.    Moreover, as discussed above, incumbent LECs may collect
the charges no later than June 30, 1997, and the new universal service
rules are scheduled to go into effect July 17, 1997 (except as noted).
Given the brief life of the interim charges, and the deference that interim
rules command, we think the FCC’s order on this issue should stand.
        Further, while the FCC’s approach may not be the best way to maintain
universal service on a transitional basis, and perhaps more research and
study by the FCC would have resulted in a better solution for temporary
funding of universal service, that is not

                                       -13-
for us to say.       Because of the temporary status of the CCLC and TIC
assessments, we review the agency decision “with the understanding that the
agency may reasonably limit its commitment of resources to refining a rule
with a short life expectancy.”       Competitive Telecomms. Ass’n v. FCC, 87
F.3d at 531 (reviewing “interim” FCC rule that already had been in place
for   years).    This   interim   action   by   the   FCC   is   not   arbitrary   and
                                                                            5
capricious, and therefore should not be set aside by this Court.

                                      III.

      For the reasons discussed above, CompTel’s petition for review is
denied, except to the extent discussed supra note 5.

      A true copy.

            Attest:

                  CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT

      5
      While we uphold the FCC's decision to allow incumbent LECs
to collect, on an interim basis, access charges for interstate
calls, we vacate the Commission's attempt to regulate the
temporary recovery of access charges for intrastate calls
contained in paragraphs 729 through 732 of the First Report and
Order and C.F.R. § 51.515(c) (1996) as being beyond the scope of
the Commission's jurisdiction. See 47 U.S.C. § 152(b) (1994).
While we recognize the FCC is merely "allowing" the state
commissions to continue to allow the LECs to collect access
charges on intrastate calls, we believe that such an assertion of
regulatory power is beyond the scope of the FCC's jurisdiction.

                                      -14-