MCIMETRO ACCESS TRANSMISSION SERVICES, INCORPORATED, a Delaware Corporation, Plaintiff-Appellant, v. BELLSOUTH TELECOMMUNICATIONS, INCORPORATED, A Georgia Corporation; Joanne Sanford, in her official capacity as Chair of the North Carolina Utilities Commission; J. Richard Conder; Robert V. Owens, Jr.; Sam J. Ervin, IV; Lorinzo L. Joyner; James Y. Kerr, II; Michael S. Wilkins, in their official capacities as Commissioners of the North Carolina Utilities Commission, Defendants-Appellees, and North Carolina Utilities Commission, Defendant.
No. 03-1238.
United States Court of Appeals, Fourth Circuit.
Argued: October 30, 2003. Decided: December 18, 2003.
352 F.3d 872
Before LUTTIG, WILLIAMS, and KING, Circuit Judges.
Reversed in part, vacated in part, and remanded by published opinion. Judge WILLIAMS wrote the opinion, in which Judge LUTTIG and Judge KING joined.
OPINION
WILLIAMS, Circuit Judge:
In this appeal, MCImetro Access Transmission Services LLC (MCI) challenges the legality, under the Telecommunications Act of 1996 (the 1996 Act), see
I.
Prior to the passage of the 1996 Act, the laws of the various states governed the provision of local telephone service, and almost without exception, each state conferred an exclusive franchise to a single company to provide such service. Under the protection of these state-conferred monopolies, each of these companies, called Local Exchange Carriers (LECs), built the infrastructure necessary to provide local telephone services, including elements such as the local loops (wires connecting telephones to switches), the switches (computerized equipment routing calls to their destinations), and the transport trunks (high capacity wires transmitting traffic between switches). See AT & T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 371 (1999). Thus, not only were these LECs the only entities allowed by law to provide local telephone service, they were the only entities with the networks necessary to do so.
Through the 1996 Act, Congress sought to supplant the system of state-sanctioned monopoly in favor of a system of free competition. In addition to pre-empting the state laws that protected existing LECs1 from competition, see
Second, Congress required incumbents to lease the constituent elements of their local networks (e.g., loops, switches, etc.) to CLECs on a separately priced, or “unbundled” basis.
The 1996 Act likewise imposes obligations on all LECs, incumbents and CLECs alike, see
In addition to imposing these and other substantive requirements, Congress established a procedural framework through which incumbents and CLECs are to negotiate the CLECs’ entry into the incumbent‘s market. First, the parties must attempt to establish terms of interconnection through negotiation. See
In this case, MCI challenges aspects of its most recent interconnection agreement with BellSouth that resulted from arbitration before the NCUC. MCI and BellSouth began negotiating their first interconnection agreement in North Carolina in 1996, shortly after passage of the 1996 Act. As this interconnection agreement approached expiration, the parties began negotiating a new interconnection agreement, and on April 6, 2000, MCI petitioned the NCUC to arbitrate unresolved issues. On April 3, 2001, the NCUC issued its Recommended Arbitration Order. See In re Petition of MCImetro Access Transmission Services LLC for Arbitration of Certain Terms and Conditions of Proposed Agreement with BellSouth Telecommunications, Inc. Concerning Interconnection and Resale Under the Telecommunications Act of 1996, Docket No. P-474, Sub. 10, Recommended Arbitration Order (NCUC Apr. 3, 2001) (First Arbitration Order). MCI filed objections to the First Arbitration Order, contesting, inter alia, the issues it raises here. On August 2, 2001, the NCUC ruled on MCI‘s objections and required the parties to file a composite agreement. See In re Petition of MCImetro Access Transmission Services, LLC for Arbitration of Certain Terms and Conditions of Proposed Agreement with BellSouth Telecommunications, Inc. Concerning Interconnection and Resale Under Telecommunications Act of 1996, Order Ruling On Objections and Requiring The Filing of The Composite Agreement, Docket No. P-474, Sub. 10 (NCUC Aug. 2, 2001) (Second Arbitration Order). On November 7, 2001, following the aforementioned ruling, the parties filed their final Composite Interconnection Agreement.
On November 21, 2001, MCI filed suit in the district court challenging three aspects of the interconnection agreement that the NCUC had arbitrated and approved: (1) the NCUC‘s decision to allow BellSouth to charge MCI the incremental cost of transporting calls generated on BellSouth‘s network from the originating caller‘s local calling area to MCI‘s distant POI; (2) the decision to restrict MCI‘s use of BellSouth‘s unbundled network elements under certain circumstances; and (3) the decision to require BellSouth to provide access to two-way trunking, if technically feasible, only where there is insufficient traffic to support one-way trunking. After briefing on cross-motions for summary judgment, the district court granted summary judgment to BellSouth on all issues. MCI now appeals.
We review de novo both the district court‘s grant of summary judgment and the NCUC‘s interpretation of the 1996 Act and the federal regulations enacted pursuant thereto, and accord no deference to the NCUC‘s interpretations of federal law. AT & T Comms. of Va., Inc. v. Bell Atlantic-Virginia, Inc., 197 F.3d 663, 668 (4th Cir.1999). We note that the parties challenge neither the NCUC‘s findings of fact nor the legality of the FCC‘s regulations.
A.
The first issue we consider is whether BellSouth can charge MCI for the cost of transporting local calls originating on BellSouth‘s network to MCI‘s chosen POI, when that POI happens to be outside of the local calling area where the call originated. Because this issue is a by-product of the differences between BellSouth‘s and MCI‘s respective network architectures, a brief word about those architectures is helpful in understanding the legal question before us. According to the NCUC,
this issue exists because [MCI] and BellSouth have each built and intend to utilize totally separate and different networks for the provision of local service in North Carolina. Each carrier‘s local network was designed to be the most efficient and cost-effective for that carrier. BellSouth stated that its system consists of a number of local networks that have developed over time and each local network is characterized by the use of multiple local switches. Also, as commented on by BellSouth, [MCI] has a single switch in North Carolina.
First Arbitration Order at 47.
In exercising its right under
MCI argues that this provision in the interconnection agreement is contrary to federal law. MCI points specifically to FCC Rule 51.703(b), one of the several rules comprising the FCC‘s regime governing reciprocal compensation for the transport and termination of telecommunications traffic as required by
BellSouth counters that the proposed cost-shifting is not reciprocal compensation, but rather a form of reimbursement for the cost of interconnection that BellSouth submits is permissible under FCC rules. In support of its position, BellSouth points to the 1996 Report and Order wherein the FCC adopted initial rules to implement the 1996 Act. See In re Implementation Of The Local Competition Provisions In The Telecommunications Act Of 1996, 11 F.C.C.R. 15499 (1996) (Local Competition Order). BellSouth notes that, in paragraph 199 of this order, the FCC, in concluding that cost was not a relevant factor in determining whether a CLEC‘s requested point of interconnection was “technically feasible,” stated, “[o]f course, a requesting carrier that wishes a `technically feasible’ but expensive interconnection would, pursuant to section 252(d)(1), be required to bear the cost of that interconnection, including a reasonable profit.”3 Id. at 15603 ¶ 199. And, later in that same order, the FCC, in discussing its rules for the physical act of interconnection, noted that, ”because competing carriers must usually compensate incumbent LECs for the additional costs incurred by providing interconnection, competitors have an incentive to make economically efficient decisions about where to interconnect.” Id. at 15608 ¶ 209 (emphasis added). These statements, BellSouth argues, show that the FCC intended for incumbents to be able to shift the cost of interconnection to CLECs. Because the provision at issue here relates to the cost of interconnection, BellSouth‘s argument goes, it is not governed by the reciprocal compensation regime at all, and Rule 703(b) is thus inapplicable.
BellSouth‘s attempts to evade the unambiguous language of Rule 703(b)4 are ultimately unavailing. First, to accept BellSouth‘s position that the provision here is a permissible charge for the cost of interconnection, the term “interconnection” must be interpreted broadly to include not only the physical act of connecting the networks, but also the ongoing state of interconnectivity. So interpreted, the cost of transporting traffic to a distant interconnection point is a “cost of interconnection” because it is necessitated by the ongoing state of interconnectivity at MCI‘s chosen POI. The FCC, however, squarely rejected such a broad interpretation of that term in the Local Competition Order. See 11 F.C.C.R. at 15590 ¶ 176. In its Notice of Proposed Rulemaking (NPRM) preceding the issuance of the Local Competition Order, the FCC sought comment on whether the term “interconnection” might refer “only to the physical linking of two networks or to both the linking of facilities and the transport and termination of traffic.” Id. at 15588-89 ¶ 174. The FCC adopted the former definition: “We conclude that the term `interconnection’ under section 251(c)(2) refers only to the physical linking of two networks for the mutual exchange of traffic.” Id. at 15590 ¶ 176. Therefore, because the cost of interconnection is only the one-time cost associated with the physical act of linking one network to another and not the recurring cost of transport and termination of traffic, the charge imposed by BellSouth here cannot be characterized as a “cost of interconnection” that is permitted by FCC rules.5
Furthermore, contrary to BellSouth‘s assertions, the FCC‘s decision in the Pennsylvania 271 Order does not validate the legality of its cost-shifting proposal. In the brief portion of Pennsylvania 271 Order that addresses the issue, the FCC fails to mention Rule 703(b) even once and addresses the propriety of cost-shifting only obliquely through reference to an Intercarrier Compensation NPRM:
Verizon acknowledges that its policies distinguish between the physical POI and the point at which Verizon and an interconnecting competitive LEC are responsible for the cost of interconnection facilities. The issue of allocation of financial responsibility for interconnection facilities is an open issue in our Intercarrier Compensation NPRM ... Because the issue is open in our Intercarrier Compensation NPRM, we cannot find that Verizon‘s policies in regard to the financial responsibility for interconnection facilities fail to comply with its obligations under the Act.
Pennsylvania 271 Order, 16 F.C.C.R. at 17474-75 ¶ 100 (footnote omitted). In the Intercarrier Compensation NPRM, the FCC does recognize and describe the tension between Rule 703(b) and the ability of CLECs to select a single POI per LATA, and it invites comment respecting the action that should be taken to resolve that tension. See In re Developing a Unified Intercarrier Compensation Regime, 16 F.C.C.R. 9610, 9635 ¶ 72, 9650-51 ¶¶ 112-14 (2001) (Intercarrier Compensation NPRM). But, it is important to note that the FCC‘s invitation for comment on the issue is motivated by its own recognition that Rule 703(b), by its plain terms, prohibits the type of cost-shifting that BellSouth advocates here. Id. at 9650 ¶ 112 (“Our current reciprocal compensation rules preclude an [incumbent] from charging carriers for local traffic that originates on the [incumbent]‘s network.“). Thus, whatever the implications of the Pennsylvania 271 Order, it provides thin support for the proposition that the cost-shifting here is not governed by Rule 703(b).6
We find that the [CLECs‘] proposed language more closely conforms to our existing rules and precedent than do [the incumbent]‘s proposals. [The incumbent]‘s interconnection proposals require competitive LECs to bear [the incumbent]‘s costs of delivering its originating traffic to a point of interconnection beyond the [incumbent]specified financial demarcation point[.]... Specifically, under [the incumbent]‘s proposed language, the competitive LEC‘s financial responsibility for the further transport of [the incumbent]‘s traffic to the competitive LEC‘s point of interconnection and onto the competitive LEC‘s network would begin at the [incumbent]designated [demarcation point], rather than the point of interconnection. By contrast, under the [CLECs‘] proposals, each party would bear the cost of delivering its originating traffic to the point of interconnection designated by the competitive LEC. The [CLECs‘] proposals, therefore, are more consistent with the Commission‘s rules for section 251(b)(5) traffic, which prohibit any LEC from charging any other carrier for traffic originating on that LEC‘s network; they are also more consistent with the right of competitive LECs to interconnect at any technically feasible point.125
17 F.C.C.R. at 27064-65 ¶ 53 (emphases added). The FCC‘s8 choice of words (i.e., “more closely conforms” and “more consistent with“) is, at the very least, curious, and seems to reflect a reticence on the part of the FCC to declare cost-shifting in this context illegal, perhaps because, in the Virginia Arbitration Order, that conclusion was not required in arbitrating the parties’ dispute.9
In sum, we are left with an unambiguous rule, the legality of which is unchallenged, that prohibits the charge that BellSouth seeks to impose. Rule 703(b) is unequivocal in prohibiting LECs from levying charges for traffic originating on their own networks, and, by its own terms, admits of no exceptions. Although we find some surface appeal in BellSouth‘s suggestion that the charge here is not reciprocal compensation, but rather the permissible shifting of costs attending interconnection, the FCC, as noted above, has endorsed cost-shifting related to interconnection only as it relates to the one-time costs of physical linkage, and in doing so, expressly declined the invitation to extend the definition of “interconnection” to include the transport and termination of traffic. See Local Competition Order, 11 F.C.C.R. at 15588-89 ¶ 176. Furthermore, the FCC recognized that such a broad interpretation of the concept of interconnection would interfere with its reciprocal compensation regulations: “Including the transport and termination of traffic within the meaning of section 251(c)(2) would result in reading out of the statute the duty of all LECs to establish `reciprocal compensation arrangements for the transport and termination of telecommunications,’ under section 251(b)(5).” Id. As a consequence, the FCC‘s rules cannot fairly be interpreted in the manner necessary to allow the limited construction of Rule 703(b) that BellSouth seeks. While, as a matter of good telecommunications policy, there may be legitimate reasons to allow cost-shifting in this context, see Intercarrier Compensation NPRM, 16 F.C.C.R. at 9650-51, ¶¶ 112-14, it is the province of the FCC and not the federal courts to implement such a policy. Our task here is simply to assess the interconnection agreement under existing federal law. Because the interconnection agreement allows BellSouth to charge MCI for traffic originating on the BellSouth network, it violates the 1996 Act as implemented by the FCC‘s current rules. Accordingly, we reverse the district court‘s grant of summary judgment in favor of BellSouth on this issue, and direct the district court to enter summary judgment in favor of MCI on this issue. See AT & T, 197 F.3d at 671 n. 4.
The second issue that MCI raises on appeal is whether the provision in the interconnection agreement restricting, under certain circumstances, MCI‘s use of BellSouth‘s UNEs (e.g., trunks and switches) for the provision of “switched access” service violated federal law. MCI desires to provide switched access service using BellSouth UNEs to customers in North Carolina, regardless of whether the switched access customer is an MCI local exchange customer. The NCUC allowed MCI to use BellSouth UNEs to provide switched access service, but only to MCI local exchange customers. MCI now argues both that this limitation violates FCC rules prohibiting incumbents from placing any restrictions on the use of UNEs and that the limitation is discriminatory.
Shortly before oral argument in this case, the FCC substantially altered its rules respecting the unbundling obligations of incumbent LECs. See In re Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers, CC Docket Nos. 01-338, 96-98, 98-147, 18 F.C.C.R. 16978 (F.C.C. Aug. 21, 2003) (Triennial Review Order). Both MCI and BellSouth submitted letters pursuant to Rule 28(j) of the Federal Rules of Appellate Procedure and our Local Rule 28(e) advising us of the Triennial Review Order, and both parties argue that it supports their respective positions. Because the Triennial Review Order alters significantly the federal regulatory framework that governs this issue, and because the parties do not agree on the import of that order, prudence dictates that we vacate the award of summary judgment and remand this issue to the district court so that the issue can be developed fully in light of the FCC‘s new rules.
C.
The final issue we consider is the legality of the NCUC‘s conclusion that BellSouth is obligated to use two-way trunks upon MCI‘s request only in circumstances where two-way trunking is both technically feasible and there is not sufficient traffic to justify one-way trunks. In implementing the interconnection provision of the 1996 Act, the FCC adopted Rule 305(f), which states that “[i]f technically feasible, an incumbent LEC shall provide two-way trunking upon request.”
In implementing the provision in question, the NCUC relied on the FCC‘s explanation in the Local Competition Order of the rationale behind the two-way trunking rule. In paragraph 219 of that order, the FCC explained:
We identify below specific terms and conditions for interconnection in discussing physical or virtual collocation (i.e., two methods of interconnection). We conclude here, however, that where a carrier requesting interconnection pursuant to section 251(c)(2) does not carry a sufficient amount of traffic to justify separate one-way trunks, an incumbent LEC must accommodate two-way trunking upon request where technically feasible. Refusing to provide two-way trunking would raise costs for new entrants and create a barrier to entry. Thus, we conclude that if two-way trunking is technically feasible, it would not be just, reasonable, and nondiscriminatory for the incumbent LEC to refuse to provide it.
11 F.C.C.R. at 15612-13 ¶ 219 (emphases added) (footnotes omitted). Relying presumably on the second sentence of that paragraph, the NCUC held as follows: “The [NCUC] believes that it is clear from the above that an [incumbent] must accommodate two-way trunking upon request where technically feasible. However, the FCC has not required that an [incumbent] allow two-way trunking when there is sufficient traffic to justify one-way trunking.” First Arbitration Order at 43.
We are required to give an agency‘s interpretation of its own regulations “controlling weight unless it is plainly erroneous or inconsistent with the regulation.” Stinson v. United States, 508 U.S. 36, 45 (1993); see United States v. Hoechst Celanese Corp., 128 F.3d 216, 221 (4th Cir. 1997). And, the FCC has stated that rules promulgated pursuant to the Local Competition Order should be “read in conjunction with the rest of the Order.” TSR Wireless, LLC v. U.S. West Communications, Inc., 15 F.C.C.R. 11166, 11177-78 ¶¶ 20-21 (2000).
Because the NCUC‘s decision to condition BellSouth‘s provision of two-way trunking to those situations where there is insufficient traffic to support one-way trunks allows BellSouth to refuse to provide two-way trunking in situations where it is technically feasible, it violates Rule 305(f). Accordingly, we reverse the district court‘s grant of summary judgment in favor of BellSouth on this issue, and direct the district court to enter summary judgment in favor of MCI. See AT & T, 197 F.3d at 671 n. 4.
III.
To summarize, (1) we reverse the district court‘s conclusion that Rule 703(b) does not prohibit the provision in the interconnection agreement allowing BellSouth to charge MCI for the incremental cost of transporting BellSouth-originating traffic destined for MCI‘s network from the relevant local calling area to the point of interconnection and direct the district court to enter summary judgment in favor of MCI on that issue; (2) in light of the FCC‘s recent rule changes, we vacate the district court‘s summary judgment on the issue of the propriety of restricting MCI from using BellSouth UNEs to provide switched access service to customers other than MCI local exchange customers and remand for further proceedings; and (3) we reverse the district court‘s conclusion that conditioning the provision of two-way trunking on the lack of traffic sufficient to justify one-way trunks was consistent with Rule 305(f) and direct the district court to enter summary judgment in favor of MCI on that issue.
REVERSED IN PART, VACATED IN PART, AND REMANDED