Court Opinion

ID: 9559128
Source: CourtListenerOpinion
Date Created: 2023-08-21 17:23:07.442164+00
Date Added: 2024-06-11T09:09:23.633338
License: Public Domain

SUTTON, Circuit Judge,
dissenting.
The majority admirably pieces together the statutory, regulatory and technical components of this complicated case. Together, the majority concludes, they show that the duty of the incumbent telecommunication provider, Michigan Bell, “to provide ... interconnection with [its] network” to competitors at cost-based rates, 47 U.S.C. § 251(c)(2), requires only that Michigan Bell provide competitors with a place to plug into its local telephone network and that “entrance facilities” fall outside of this interconnection obligation. That may be a reasonable interpretation. So too, however, is the FCC’s competing interpretation, one premised on an interpretation of its own regulations and one that we must respect as a result. See Auer v. Robbins, 519 U.S. 452, 461, 117 S.Ct. 905, 137 L.Ed.2d 79 (1997). I accordingly respectfully dissent.
Prior to the Telecommunications Act of 1996, Pub.L. No. 104-104, 110 Stat. 56, incumbent local telephone companies, such as Michigan Bell, enjoyed a natural monopoly. The high fixed costs of recreating a local telephone network, including running wires to each home and business in a community, together with the low marginal cost of operating a pre-existing network gave incumbents “an almost insurmountable competitive advantage.” Verizon Commc’ns, Inc. v. FCC, 535 U.S. 467, 490, 122 S.Ct. 1646, 152 L.Ed.2d 701 (2001). To combat these monopolies, the 1996 Act mandates that incumbents share their network with competitors at cost-based rates. See id. at 489, 122 S.Ct. 1646; AT & T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 371, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999).
As part of this sharing obligation, incumbents must lease certain elements of their network to competitors on an “unbundled” — a la carte — basis and must do so at cost-based rates. 47 U.S.C. § 251(c)(3), (d)(2). That allows a competitor to connect its network with other phone networks, to provide enhanced services to its customers or to expand its network so it can reach a broader potential customer base. See id. § 153(29); Triennial Review Order, 18 F.C.C.R. 16978 ¶ 59 (2003); 47 C.F.R. § 51.319(a). The upshot of this duty is that, if a competitor wishes to offer phone service to everyone in a given community without incurring the upfront costs of running its own wire to each potential customer, the Act and implementing regulations facilitate the entrant’s efforts by requiring the incumbent to offer these services on unbundled terms and at cost-based rates.
The Act imposes a related, but narrower, sharing obligation, one that also must be provided at cost-based rates. Incumbents must “provide ... interconnection with [their] network” to competitors so customers on one network can seamlessly call customers on the other network. 47 U.S.C. § 251(c)(2); see id. § 251(d)(1); 47 C.F.R. § 51.5 (defining interconnection as the “linking of two networks for the mutual exchange of traffic”); FCC Br. at 4. In the absence of this obligation, no rational consumer would switch from the large incumbent to the competing entrant, at least without a steep discount. Who wants a local phone service that connects customers to just a handful of other individuals in the community? See Verizon Commc’ns, 535 U.S. at 490, 122 S.Ct. 1646. By requiring cost-based rates for this service, the Act ensures that incumbents do not charge competition-dampening rates for interconnection, a not insignificant risk *388given that entrants need interconnection more than incumbents do.
Which brings me to “entrance facilities,” the part of the network of the incumbent, Michigan Bell, at issue here. Entrance facilities physically link telecommunications networks together, see Triennial Review Remand Order (TRRO), 20 F.C.C.R. 2533 ¶¶ 136-39 (2005), and competitors use an incumbent’s entrance facilities for two purposes: interconnection and backhauling. See Triennial Review Order ¶ 365. When used for interconnection, entrance facilities route traffic between one of the competitor’s customers and one of the incumbent’s customers. When used for backhauling, entrance facilities route traffic between two of the competitor’s customers, likely because the competitor leases some elements of the incumbent’s network, rather than between a customer of the competitor and a customer of the incumbent. See id. ¶¶ 365, 367.
In deciding what incumbents may charge for the use of their entrance facilities, the FCC interprets its regulations to draw a distinction. On one side of the line, incumbents must lease their entrance facilities to competitors at cost-based rates when they use the facilities for interconnection. On the other side, incumbents may charge market-based rates, or not lease the facilities at all, when competitors use the facilities for backhauling. See FCC Br. at 15-17, 20. Everyone (at least everyone involved in this case) agrees that the FCC correctly concluded that incumbents may charge market-based rates for backhauling. What divides the parties is whether the FCC correctly concluded that incumbents cannot do the same for interconnection. In answering this question, we must keep in mind that Congress charged the FCC with administering § 251, see 47 U.S.C. § 251(d)(1), and the FCC wrote the regulations at issue, all of which means that the FCC’s interpretation binds us unless it flouts the regulations’ text. See Auer, 519 U.S. at 461, 117 S.Ct. 905.
The line drawn by the FCC permissibly interprets its own regulation. In elaborating on § 251(e)(2)’s duty to “provide ... interconnection,” the FCC’s regulation says that incumbents must provide “any technically feasible method of obtaining interconnection” at cost-based rates. 47 C.F.R. § 51.321(a). Entrance facilities come within the ordinary meaning of a “technically feasible method of obtaining interconnection.” They are “designed for the very purpose of linking two carriers’ networks.” Ill. Bell Tel. Co. v. Box, 526 F.3d 1069, 1072 (7th Cir.2008). And that is how competitors use them — to bridge the gap between their network and an interconnection point within the incumbent’s network so that the two networks can mutually exchange traffic. See U.S. Telecom Ass’n v. FCC, 359 F.3d 554, 586 (D.C.Cir.2004).
In providing illustrative examples of an incumbent’s interconnection duties in § 51.321, the FCC confirms that the regulation uses the phrase “method of obtaining interconnection” in its ordinary sense — one that applies to entrance facilities. One example says that incumbents upon request must interconnect with competitors through meet point facilities, see 47 C.F.R. § 51.321(b)(2), which requires the incumbent and competitor to build transmission facilities from their respective networks to a designated meet point and to link the two transmission facilities together at that point “for the mutual exchange of traffic,” Local Competition Order, 11 F.C.C.R. 15499 ¶553 (1996). An incumbent’s portion of a meet point facility, it turns out, is merely one manifestation of an entrance facility, as entrance *389facilities are “the transmission facilities that connect competitive LEC networks with incumbent LEC networks.” See TRRO ¶ 136. Another example — dealing with collocation, which is installing and maintaining equipment for use solely by the competitor at an incumbent’s physical facilities, see 47 C.F.R. § 51.5-also shows that an incumbent’s duty to provide methods of obtaining interconnection covers facilities that aid in bridging the gap between two networks. See 47 U.S.C. § 251(c)(6) (mandating that incumbents allow physical or virtual “collocation of equipment necessary for interconnection”); 47 C.F.R. § 51.321(b)(1).
To put all of this in context, it might help to return to the majority’s extension-cord analogy. The meet-point example is akin to saying that the homeowner sometimes must provide a park-goer with an extension cord, at a cost-based price, that links the outlet in the garage with the park-goer’s extension cord, rather than forcing the park-goer to run an extension cord all the way from the park to the garage or forcing the park-goer to pay the homeowner market-based rates for the use of one of its cords. The collocation obligation is akin to saying that the homeowner sometimes must let park-goers store an extension cord on a reel in the garage and access the garage when they want to extend the cord from the garage to the park. As these examples show, an incumbent’s interconnection duty encompasses more than providing competitors with an outlet to plug into.
The Triennial Review Remand Order does not undermine the FCC’s position. The TRRO represents the FCC’s fourth attempt to promulgate valid unbundling regulations, see Covad Commc’ns Co. v. FCC, 450 F.3d 528, 531 (D.C.Cir.2006), and it aims to satisfy the D.C. Circuit’s concerns in setting aside the FCC’s previous unbundling regulations, see TRRO ¶¶ 1-4, 13, 19-20. Nearly a quarter of the order clarifies the FCC’s overarching unbundling analysis and not one paragraph discusses how the FCC analyzes interconnection obligations. See id. ¶¶ 20-65.
The one section that mentions entrance facilities confirms the TRRO’s focus on unbundling, not interconnection. The section analyzes whether competitors would be “impair[ed]” without unbundled access to entrance facilities under § 251(c)(3), and it concludes that they would not be. See TRRO ¶¶ 136-41; see also 47 U.S.C. § 251(d)(2). Yet, as the FCC points out, an impairment analysis has no role to play under § 251(c)(2), see 47 U.S.C. § 251(d)(2); FCC Br. at 16, and the FCC has never, to my knowledge, considered impairment when analyzing an incumbent’s interconnection obligations. See Ill. Bell, 526 F.3d at 1072 (noting that whether an incumbent can charge market-based rates for interconnection “is not related to the scope of an [incumbent’s] obligations under § 251(c)(3) to furnish unbundled network elements”). It would be surprising, then, if the TRRO exempted entrance facilities from the pre-existing obligations of 47 C.F.R. § 51.321(a) through a novel analysis without comment.
The TRRO’s sole mention of interconnection in the context of entrance facilities instead sounds a cautionary note: No one should read the FCC’s categorical unbundling analysis under § 251(c)(3) as affecting incumbents’ interconnection duties under § 251(c)(2). See TRRO ¶ 140 (stating “our finding of non-impairment with respect to entrance facilities does not alter the right of competitive LECs to obtain interconnection facilities pursuant to section 251(c)(2)”). This cautionary note makes perfect sense if, as the FCC and both courts of appeals to address this issue have concluded, entrance facilities used for *390interconnection fall within § 251(c)(2)’s interconnection obligation. See Ill. Bell, 526 F.3d at 1071-72 (“What the FCC said in ¶ 140 is that [incumbents] must allow use of entrance facilities for interconnection at ‘cost-based rates’.”); Sw. Bell Tel., L.P. v. Mo. Pub. Serv. Comm’n, 530 F.3d 676, 684 (8th Cir.2008).
The regulations promulgated by the TRRO, moreover, discuss only unbundling obligations. They say that “in accordance with section 251(c)(3)” — the provision imposing the unbundling requirement — an incumbent “is not obligated to provide a requesting carrier with unbundled access ” to entrance facilities. 47 C.F.R.. § 51.319(e) (emphasis added); see also TRRO, 20 F.C.C.R. at 2682. This speaks only to an incumbent’s unbundling obligation, not its narrower, independent duty to “provide ... interconnection” under § 251(c)(2). Michigan Bell disagrees, claiming the regulation “unequivocally]” states that incumbents have no obligation to provide entrance facilities, period. Michigan Bell Br. at 23. But this turns the phrase “with unbundled access” into a useless appendage. See Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 59-60, 127 S.Ct. 2201, 167 L.Ed.2d 1045 (2007) (noting general rule that courts should give effect to all words in a provision).
Michigan Bell reads the TRRO differently. The TRRO, it says, draws no distinction between the functions of an entrance facility (backhauling versus interconnection), but instead draws a distinction between two distinct and mutually exclusive types of facilities (entrance versus interconnection). The text of ¶¶ 136-41, it is true, does not distinguish between backhauling and interconnection. But the footnotes to those paragraphs draw that precise distinction. See TRRO ¶¶ 138 n. 389, 141 n. 396. And even if the FCC had not drawn this functional line, that would not eliminate ambiguity about the point; the silence would create ambiguity, particularly since the FCC consistently has drawn functional lines when implementing the 1996 Act. See Triennial Review Order ¶¶ 365-67; Local Competition Order ¶ 553. Either way, Auer deference applies to the FCC’s position that those paragraphs draw a functional line that exempts incumbents only from the obligation to lease their entrance facilities at cost-based rates when competitors use those facilities for backhauling, as opposed to interconnection.
Michigan Bell’s competing interpretation also fits awkwardly with the TRRO and its predecessor, the Triennial Review Order. Why, if that interpretation is correct, would the FCC clutter its unbundling analysis by stressing the distinction between backhauling and interconnection? See Triennial Review Order ¶ 365. And why would it underscore the incumbents’ continuing obligation to provide interconnection facilities? See id.; TRRO ¶ 140. These points of emphasis make little sense if entrance facilities never function as § 251(c)(2) interconnection facilities.
To support its mutual exclusivity theory, the majority notes that incumbents may choose whether a facility counts as an entrance facility or an interconnection facility. If the incumbent requires that competitors interconnect at that facility, then it is an interconnection facility. But if the incumbent provides a facility that bridges the gap between the incumbent-designated interconnection point and the competitor’s network, then it counts as an entrance facility. This premise, however, does not square with § 251(c)(2), which requires incumbents to “provide ... interconnection” “at any technically feasible point within [its] network.” 47 U.S.C. § 251(c)(2) (emphasis added); see also Local Competition *391Order ¶ 209 (stating that § 251(c)(2) allows competitors “to select the points in an incumbent[’s] ... network at which they wish to deliver traffic”). And in the absence of this premise, I see no workable way to distinguish between these two supposedly distinct and mutually exclusive types of facilities.
One more point. While the majority’s principal objection to this analysis is that the regulation is plain as day and thus leaves no room for administrative deference, it also suggests two reasons for ignoring Auer deference altogether. First, it cites a Seventh Circuit case, which suggests that agency amicus briefs (like the one filed here) should get Auer deference only at the Supreme Court, not at the court of appeals. Until a case reaches the Supreme Court, goes the view, agency briefs represent “unreviewed staff decisions,” and Congress could not have meant to delegate “the power to make law to fill gaps in” the law to low-level staff. Keys v. Barnhart, 347 F.3d 990, 993-94 (7th Cir.2003).
A deference doctrine that turns on whether a brief was filed in the United States Supreme Court or a court of appeals has little to commend it. An “inferi- or” appellate court, U.S. Const, art. Ill § 1, has just as many reasons, if not more, to learn the agency’s interpretation of one of its regulations in the course of resolving a dispute between two private parties before it issues a decision rather than after. This case is a perfectly good example. The regulations are intricate and complex, and as a result we called for the views of the FCC in order to understand how the agency construed its regulations and to make sure we were not missing something in the process. The Seventh Circuit may or may not be right that, when a court of appeals invites an agency to take a position in a given case, it can expect nothing more than “unreviewed staff decisions.” As for myself, I doubt it, and if I am wrong that suggests a management problem, not a proper view of how agencies should operate. It seems likely that agencies take their amicus briefs — particularly those filed at the request of a court of appeals— at least as seriously as their more frequent opinion letters, which also receive Auer deference, see Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 563-64, 100 S.Ct. 790, 63 L.Ed.2d 22 (1980). As agencies must well appreciate, moreover, lower courts reap the same benefits as the Supreme Court from an agency’s “fair and considered judgment,” Auer, 419 U.S. at 462, 95 S.Ct. 584, including the advantage of the agency’s “unique expertise and policymaking prerogatives,” Martin v. Occupational Safety & Health Review Com’n, 499 U.S. 144, 151, 111 S.Ct. 1171, 113 L.Ed.2d 117 (1991). In any event, the Supreme Court has strongly hinted that Auer deference does not turn on whether an agency’s position was prepared by its staff or its head. See Ford Motor Credit Co., 444 U.S. at 566 n. 9, 100 S.Ct. 790. There is, in short, no reason why an agency brief — particularly one filed at the request of a court — becomes less authoritative because it is filed with a court based in Cincinnati, Ohio rather than one based in Washington, D.C.
Second, the majority suggests that the TRRO does not deserve Auer deference because it is an interpretive rule, not a legislative one. I disagree with the majority’s characterization of the TRRO and its suggestion that interpretive rules do not deserve Auer deference. The FCC had a formal notice-and-comment period before issuing the TRRO, and the TRRO concludes by adopting seven pages of amendments to the Code of Federal Regulations. See TRRO ¶¶ 18-19, 239-251, App’x A, App’x B. The TRRO in point of fact promulgates the version of 47 C.F.R. *392§ 51.319(e)(2)(i) that the majority quotes. See TRRO at 2677, 2682; Maj. Op. at 376-77. All of this confirms that the TRRO is a legislative rule. See Lincoln v. Vigil, 508 U.S. 182, 195-196, 113 S.Ct. 2024, 124 L.Ed.2d 101 (1993); St. Francis Health Care Ctr. v. Shalala, 205 F.3d 937, 949 (6th Cir.2000) (“[I]f by its action the agency intends to create new law ..., the rule is properly considered to be a legislative rule.”).
Perhaps the majority means that ¶¶ 136-40 of the TRRO do not deserve deference because those paragraphs are part of the “concise general statement” of the TRRO’s “basis and purpose,” 5 U.S.C. § 553(c), not amendments to the federal code. See Maj. Op. at 375 n. 6 (“[T]he TRRO ... is ... not a true ‘regulation.’ ”). I am unaware of any court reading such a line into Auer. No one has done so, I believe, because “[cjourts and Congress treat the terms ‘regulation’ and ‘rule’ as interchangeable,” Nat’l Treasury Employees Union v. Weise, 100 F.3d 157, 160 (D.C.Cir.1996), and “concise general statements” are part of the rule, see 5 U.S.C. § 553(c); Lincoln, 508 U.S. at 195-96, 113 S.Ct. 2024. Justice Scalia’s concurrence in Coeur Alaska is not to the contrary. See Coeur Alaska, Inc. v. Se. Alaska Conservation Council, — U.S. -, 129 S.Ct. 2458, 2479, 174 L.Ed.2d 193 (noting courts defer under Auer only “to an agency’s interpretation of its own ambiguous regulation.”). Justice Scalia was distinguishing between regulations and statutes, not between sections of a legislative rule. See id.
But whether the TRRO is an interpretive or legislative rule is beside the point. We generally defer to an agency’s interpretation of its own rules because it “make[s] little sense” to impose our interpretation on the agency when it remains free to rewrite the rule (largely) however it wants. Auer, 519 U.S. at 463, 117 S.Ct. 905. That rationale applies with extra force to interpretive rules: An agency could amend its interpretive rule and wipe a court’s interpretation off the board without even the delay of notice-and-comment rulemaking.
In the final analysis, the FCC’s interpretation reasonably respects the words of its regulations and Auer requires us to respect that interpretation. The majority seeing it differently, I respectfully dissent.