Case Information
*2 Before WOLLMAN, MORRIS SHEPPARD ARNOLD, and COLLOTON, Circuit
Judges.
___________
COLLOTON, Circuit Judge.
WorldCom, Inc. and Time Warner Telecom of Minnesota, LLC (collectively "WorldCom") appeal the district court's entry of a permanent injunction barring the Minnesota Public Utilities Commission from requiring appellee Qwest Corporation to provide WorldCom with reports regarding the provision of certain telecommunications services. Because we conclude that the Federal Communications Commission (FCC) has not preempted the authority of the Minnesota Public Utilities Commission in this area, we reverse.
I.
Qwest Corporation is an incumbent provider of local telephone services in Minnesota. Long distance providers, such as WorldCom, rely on local telephone providers, such as Qwest, to connect customers to their long distance networks. One method of connecting local and long distance networks is through a "special access" line, which provides a direct connection from a home or business to a long distance network through a dedicated line, rather than through the switched public telephone network. Special access services generally are used by entities, such as large businesses or public institutions, that engage in a high volume of long distance telephone calling, and also allow for the provision of high-speed Internet connections to homes and businesses.
Because of alleged discrimination and quality problems in the provision of special access services by Qwest (formerly US West, referred to herein as Qwest), AT&T Communications of the Midwest filed a complaint with the Minnesota Public Utilities Commission ("Minnesota Commission") on August 18, 1999. On August *3 15, 2000, over Qwest's objection, the Minnesota Commission asserted jurisdiction over the regulation of Qwest's performance, and found that an investigation should be opened to determine whether quality standards should be developed for Qwest. In the Matter of the Complaint of AT&T Communications of the Midwest, Inc. Against US West Communications, Inc. Regarding Access Serv. , Docket No. P-421/C-99- 1183, at 5, 15 (Minn. P.U.C. Aug. 15, 2000). The Minnesota Commission also ordered Qwest to conform to "detailed reporting requirements." Id . at 15.
The investigation arising out of the AT&T complaint was consolidated with a
separate proceeding, which examined the quality of Qwest's provision of various
wholesale services to numerous other telecommunications companies, including
WorldCom. Following consolidation, the Minnesota Commission heard WorldCom's
proposed measurement plan for special access services. On March 4, 2002, the
Minnesota Commission issued an order requiring Qwest to provide reports regarding
special access performance data to AT&T and WorldCom, in accordance with
WorldCom's suggested requirements.
In the Matter of Qwest Wholesale Serv. Quality
Standards
, Docket No. P-421/M-00-849, at 4,
Qwest brought suit in district court, alleging that the Minnesota Commission lacked jurisdiction to require Qwest to comply with the reporting requirements. The district court found that the FCC has exclusive jurisdiction over lines that the FCC classified as "interstate" through a federal regulatory procedure known as "jurisdictional separations," and that the Minnesota Commission's reporting requirements were preempted with respect to those lines. The district court therefore granted Qwest's motion for a permanent injunction as to those special access lines *4 which had been classified as interstate, leaving the Minnesota Commission able to regulate only those lines that had been classified as intrastate through the FCC's jurisdictional separations process.
A district court's grant of a permanent injunction is reviewed for abuse of
discretion,
Forest Park II v. Hadley
,
II.
The Communications Act of 1934 ("the Act"), codified at 47 U.S.C. § 151
et
seq
., established "a system of dual state and federal regulation over telephone
service."
Louisiana Pub. Serv. Comm'n v. FCC
, 476 U.S. 355, 360 (1986)
("
Louisiana PSC
"). The FCC has authority to regulate interstate wire and radio
communications, 47 U.S.C. § 151, but the Act specifically denies the Commission
jurisdiction to regulate intrastate communication services, and leaves that authority
with the States. 47 U.S.C. § 152(b);
cf. Smith v. Illinois Bell Tel. Co.
,
*5
This clean parceling is not possible, because facilities and equipment used to
provide intrastate telecommunications services often are used for interstate
telecommunications services as well. Such facilities are "conceivably within the
jurisdiction of both state and federal authorities,"
id.
, and are described by the FCC
as "jurisdictionally mixed" or "mixed use" facilities.
E.g.
,
Southwestern Bell Tel. Co.
v. FCC
,
Recognizing that conflicts may emerge because of this dual regulatory system,
the Act "establishes a process designed to resolve what is known as 'jurisdictional
separations' matters, by which process it may be determined what portion of an asset
is employed to produce or deliver interstate as opposed to intrastate service."
Louisiana PSC
,
In 1989, the FCC revised the jurisdictional separations procedures for "mixed
use special access lines," such as the lines at issue in this case, which carry both
interstate and intrastate traffic.
See In the Matter of MTS and WATS Mkt. Structure,
Amendment of Part 36 of the Commission's Rules and Establishment of a Joint Bd.
,
4 F.C.C.R. 5660, at ¶ 1,
The Commission therefore adopted a bright-line rule known as the "ten percent rule," under which interstate traffic is deemed de minimis when it amounts to ten percent or less of the total traffic on a special access line. Under the ten percent rule, the cost of a mixed use line is directly assigned to the interstate jurisdiction only if the line carries interstate traffic in a proportion greater than ten percent. Id . at ¶¶ 2, 6-7; see also 47 C.F.R. § 36.154(a)-(b). The FCC concluded that the new rule would "resolve existing concerns in a manner that reasonably recognizes state and federal regulatory interests and fosters administrative simplicity and economic efficiency." 10% Order , 4 F.C.C.R. 5660, at ¶ 6 (footnote omitted).
The question presented in this case is whether the order issued by the FCC through its jurisdictional separations procedure preempts the Minnesota Commission's authority to regulate the quality of special access services on interstate lines provided by Qwest and other companies. Does the 10% Order allocate between federal and state jurisdictions all regulatory authority over special access lines based on the ten percent traffic threshold, or was the FCC's intent more limited? WorldCom argues that the ten percent rule is only a cost allocation measure, and does not assign to the FCC exclusive regulatory authority over lines classified as "interstate" under the rule. Qwest contends that the district court correctly read the FCC's order more broadly to preempt all state regulation of lines classified as interstate under the ten percent rule.
Federal regulations, like federal statutes, may preempt state law, if the
regulations are intended to have preemptive effect, and the agency is acting within the
scope of authority delegated to it by Congress.
Capital Cities Cable, Inc. v. Crisp
,
Several considerations lead us to conclude that the ten percent rule does not
preempt the Minnesota Commission's reporting requirements in this case. In
discerning the intent of the FCC, we believe it is important to consider the context in
which the FCC issued the
10% Order
, namely, the jurisdictional separations process.
As noted, the jurisdictional separations procedures "are designed primarily for the
allocation of property costs, revenues, expenses, taxes, and reserves between state and
interstate jurisdictions." 47 C.F.R. § 36.1(b). "'Jurisdictional separation' is a
procedure that determines what proportion of jointly used plant should be allocated
to the interstate and intrastate jurisdictions for ratemaking purposes."
MCI
Telecomm. Corp. v. FCC
,
Jurisdictional separations is the process by which incumbent local exchange carriers (ILECs) apportion regulated costs between the intrastate and interstate jurisdictions . Historically, one of the primary *8 purposes of the separations process has been to prevent ILECs from recovering the same costs in both the interstate and intrastate jurisdictions. Jurisdictional separations is the third step in a four-step regulatory process that begins with an ILEC's accounting system and ends with the establishment of rates for the ILEC's interstate and intrastate regulated services. First, carriers record their costs, including investments and expenses, into various accounts . . . . Second, carriers assign the costs in these accounts to regulated and nonregulated activities . . . . Third, carriers separate the regulated costs between the intrastate and interstate jurisdictions in accordance with the Commission's Part 36 separations rules. Finally, carriers apportion the interstate regulated costs among the interexchange services and rate elements that form the cost basis for their interstate access tariffs.
In the Matter of Jurisdictional Separations and Referral to the Federal-State Joint Bd. , 16 F.C.C.R. 11382, at 11384-85 ¶ 3, 2001 WL 540481 (2001) (footnotes omitted) (emphases added). The jurisdictional separations process, therefore, is one part of a larger regulatory process for rate regulation. As we see it, neither the jurisdictional separations process, nor the larger regulatory framework in which it exists, is generally designed to confer exclusive regulatory power.
Consistent with this understanding, the District of Columbia Circuit in
Illinois
Bell
recognized that the regulatory accounting treatment of a telecommunications
service as interstate or intrastate does not necessarily negate the mixed use character
of the service for purposes of regulating other aspects of that service.
The FCC's orders concerning the ten percent rule are consistent with our view
that jurisdictional separations procedures generally are designed to allocate costs and
regulatory authority over ratemaking, rather than plenary regulatory authority over
a telecommunications service. In its order initiating the proceedings, the FCC
explained that it was establishing a pleading cycle to consider "various options for the
separations treatment of all special access lines that carry significant amounts of both
interstate and intrastate traffic."
In the Matter of MTS and WATS Mkt. Structure,
Amendment of Part 67 of the Commission's Rules and Establishment of a Joint Bd.
,
1 F.C.C.R. 1287, at ¶ 19,
The 10% Order itself is plainly concerned with cost allocation. The Order begins by noting that "[a]t present, the cost of special access lines carrying both state and interstate traffic is generally assigned to the interstate jurisdiction," 10% Order , 4 F.C.C.R. 5660, at ¶ 2 (emphasis added), and ultimately "adopt[s] the Joint Board's recommendations for the separation of investment in mixed use special access lines." Id . at ¶ 8 (emphasis added). The Joint Board, whose reasoning was adopted by the Commission, likewise framed its recommendation as a matter of cost allocation. It began its discussion by noting that a "variety of options might be used to separate special access costs ," 10% Recommendation , 4 F.C.C.R. 1352, at ¶ 22 (emphasis added), and then expressed its final view in similar terms: "Based on a careful review of the record in this proceeding, we conclude that direct assignment of special access costs is superior to an allocation-based approach in terms of administrative simplicity and economic efficiency." Id . at ¶ 25 (emphasis added). The codification of the 10% Order likewise refers only to costs, without any mention of other regulatory authority. See 47 C.F.R. § 36.154(a)-(b).
Qwest argues that the
10% Order
sweeps more broadly because the Joint Board
included a statement in its recommendation that "[t]he separations procedures
*10
perform an important role in defining the separate state and federal regulatory
spheres, and thus have a major effect on both jurisdictions."
10% Recommendation
,
4 F.C.C.R. 1352, at ¶ 23. The importance and effect of the separations proceedings
are indubitable, but Qwest's quotation of the Joint Board begs the question of what
"role" is played by the separations proceedings. The Supreme Court also has spoken
of "distinct spheres of regulation" that are recognized by the jurisdictional separations
process, but it has done so in connection with questions of cost allocation and rate
regulation.
Louisiana PSC
,
Qwest also contends that a notice of proposed rulemaking issued by the FCC
in November 2001 demonstrates that the Minnesota Commission does not have
jurisdiction to enforce the requirements.
See In the Matter of Performance
Measurements and Standards for Interstate Special Access Servs.
, 16 F.C.C.R.
20896,
The FCC's comments in the
Performance Measurements Notice
are notably
agnostic for an agency that is said to have preempted state performance standards
when it issued the
10% Order
. "[B]ecause agencies normally address problems in a
detailed manner and can speak through a variety of means, . . . we can expect that
they will make their intentions clear if they intend for their regulations to be
exclusive."
Hillsborough County v. Automated Med. Labs., Inc.,
III.
Qwest argues that the judgment of the district court can be affirmed on the alternative ground that the Minnesota Commission's reporting requirements violate the "filed tariff," or "filed rate," doctrine. The filed tariff doctrine has been defined *12 as a "common law rule forbidding a regulated entity, usu[ally] a common carrier, to charge a rate other than the one on file with the appropriate federal regulatory authority[.]" Black's Law Dictionary 642 (7th ed. 1999). Qwest argues that the Minnesota Commission's reporting requirements violate the filed tariff doctrine, because the requirements alter the services provided under Qwest's federal special access tariff. The district court ruled that the filed tariff doctrine does not apply in this case, because the doctrine addresses the relationship between a carrier and its customers, not the relationship between a carrier and a regulator. We agree with this conclusion of the district court.
The Supreme Court has stated that the heart of the filed tariff doctrine is an
anti-discrimination policy designed to protect customers, and that this policy "is
violated when similarly situated customers pay different rates for the same services."
AT&T Co. v. Cent. Office Tel. Co
.,
Qwest has not cited any authority holding that the filed tariff doctrine applies to the relationship between a carrier and a regulatory agency. The doctrine is designed to "ensure rate uniformity by confining the authority to oversee the reasonableness of rates to a single regulatory agency," id. , and we do not see how rate uniformity is at issue in this case. We agree with the district court's conclusion that this case turns on the issue of preemption, and the actions of the Minnesota Commission do not conflict with the filed tariff doctrine.
* * *
For the foregoing reasons, we reverse the judgment of the district court, and remand for proceedings consistent with this opinion.
_____________________________
Notes
[1] The Telecommunications Act of 1996 gave the FCC jurisdiction over some
purely "intrastate" matters,
AT&T Corp. v. Iowa Utilities Board
,