Thеse appeals require us to determine whether' various interconnection agreements, arbitrated and approved by the Arizona Corporation Commission (“ACC”), between U.S. West Communications (“US West”)
I. Statutory Framework
Providing telephone service requires physically wiring each customer’s premises to a network of other customers who also have telephone lines. These networks traditionally have been owned and operated by a single utility, the local telephone company, referred to under the Act as the incumbent local exchange carrier (“ILEC”). The prohibitive cost to potential competitors, referred to under the Act as competitive local exchange carriers (“CLECs”), of laying wire and creating other facilities to support an alternative physical network has stifled competition in local phone markets. The traditional legal approach to this “natural” monopoly has been for states to regulate the ILECs and their rates.
The Act was designed to alter this state-supported monopolistic market structure by creating a meaningful potential for competition in the provision of local and long-distance telephone service. To achieve this end, the Act preempts state laws that have the effect of prohibiting competitors’ ability to еnter the telecommunications market. See 47 U.S.C. § 253(a). The Act further requires, among other things, telecommunications carriers to connect with each other; ILECs to provide requesting CLECs with access to “unbundled network elements” (that is, to discrete components of the existing ILEC network); and ILECs to offer for resale at wholesale rates any telecommunications services that an ILEC sells to its subscribers. See id. § 251(a)-(c). The Act charges the FCC with “establishing] regulations to implement the[se] requirements.” Id. § 251(d)(1). The FCC accordingly has promulgated various rules that provide access and pricing standards for network elements and retail services.
The Act directs the ILECs and CLECs to negotiate in good faith to reach an agreement over the terms of their interconnection. See id. §§ 251(c)(1), 252(a). If an ILEC and a CLEC are unable to agree, the Act provides for binding arbitration conducted under the aegis of a state public utilities commission. See id. § 252(b). Arbitrated interconnection agreements, the only type of agreement at issue in these cases, must meet the requirements of § 251, including the FCC’s regulations implementing § 251; set prices for network elements and services pursuant to § 252(d); and provide an implementation schedule. See id. § 252(c). State commissions must formally approve arbitrated agreements, ensuring that they cоmply with the above requirements. See
II. Procedural History
In Arizona, U.S. West is the ILEC, and the ACC is the state body that regulates telephone service. In the spring of 1996, shortly after the Act was passed, U.S. West began negotiating interconnection agreements with numerous CLEC competitors. Without exception, those negotiations failed, and the parties petitioned the ACC for arbitration. Beginning in late 1996, the ACC arbitrated and approved interconnection agreements among the parties. The ACC issued the last of the relevant arbitration decisions, establishing permanent prices (to replace the interim rates for unbundled loop and network elements set in earlier agreements) based on cost studies, on January 30, 1998. The parties filed separate suits in federal district court in Arizona challenging various portions of the agreements. The cases were consolidated in the district court which, on May 4, 1999, granted summary judgment, upholding some provisions of the agreements and invalidating others. US West timely appealed, and several CLECs timely cross-appealed. US West subsequently dismissed its appeal, so only the CLECs’ cross-appeals remain before us.
We originally submitted these appeals following oral argument on July 12, 2000. Six days later, the Eighth Circuit Court of Appeals vacated a number of FCC regulations, including certain provisions potentially relevant to the issues on appeal. See Iowa Utils. Bd. v. FCC,
The Supreme Court then granted certio-rari, limited to certain questions, in the Eighth Circuit ease on January 22, 2001. See Verizon Communications, Inc. v. FCC,
III. Applicable Law
The resolution of several of the issues raised before us depends on whether we should apply FCC regulations implementing the Act that have gone into effect after the ACC arbitrated and approved the interconnection agreements. Because the role of the federal courts is to determine whether the agreements comply with the Act, and because the FCC properly has exercised its authority to implement the Act by means of promulgating regulations, we conclude that we must ensure that the interconnection agreements comply with current FCC regulations, regardless of whether those regulations were in effect when the ACC approved the agreements.
Soon after Congress passed the Act, the FCC issued rules implementing the local competition provisions of the Act. See In re Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, First Report and Order, 11 F.C.C.R. 15499 (released Aug. 8, 1996) (“First Local Competition Order”). Numerous LECs across the country filed suit to challenge the validity of the regulations, and these suits were consolidated before the Eighth Circuit in Iowa Utilities Board v. FCC,
Some provisions of the interconnection agreements do not comply with the reinstated FCC regulations and with new regulations that the FCC has since issued. The ACC undеrstandably did not consider such regulations when it arbitrated and approved the agreements because they were not in force at that time. Although the Supreme Court had already ordered the FCC regulations reinstated (for the first time) when the district court reviewed the interconnection agreements, the district court did not apply them either. While acknowledging that those FCC regulations were now authoritative statements of the law and that they must be applied to all pending cases, the district court nonetheless declined to do so. It reasoned that the ACC “could not have erred” by failing to follow regulations that were not in effect at the time it rendered its decisions. U.S. West Communications, Inc. v. Jennings,
We review de novo the district court’s interpretation of the Act. See U.S.
Our reading of the reviewing court’s duty under § 252(e)(6) of the Act is consistent with the Supreme Court’s general view of a court’s duty to apply its new interpretations of law to pending cases. As the Court has explained: “When this Court applies a rule of federal law to the parties before it, that rule is the controlling interpretation of federal law and must be given full retroactive effect in all cases still open on direct review and as to all events, regardless of whether such events predate or postdate our announcement of the rule.” Harper v. Va. Dep’t of Taxation,
Contrary to U.S. West’s arguments, application of the recently reinstated and newly promulgated regulations will not have an impermissible retroactive effect. The Fourth Circuit reached a similar conclusion in GTE South, Inc. v. Morrison,
We recently reached the same conclusion when faced with another FCC regulation that was reinstаted both after a state commission had rendered its arbitration decision and after a district court had reviewed that decision. We dismissed retro-activity concerns under a slightly different rationale, holding:
This court need not determine whether switched access charges in this case met the requirements of 47 U.S.C.*958 § 252(d)(1), however. That is so because an FCC regulation interpreting the Act now flatly prohibits the inclusion of access charges in the pricing of unbundled network elements. Although temporarily not in effect at the time of the district court’s decision, 47 C.F.R. § 51.515(a) has since been reinstated by the Supreme Court.... Because the regulation promulgated by the FCC merely interprets the substantive provisions of the Act, it does not present retroactivity concerns.
AT & T Communications Sys. v. Pac. Bell,
We see no reason why the reasoning of GTE South and Pacific Bell should not extend to newly promulgated regulations, such as thosе in the Third Local Competition Order. As the Fourth Circuit stated in GTE South, the interconnection agreements “govern future business relations among [the ILEC] and its competitors in the local telephone market.”
In sum, we follow the Act’s charge to the federal courts to review the agreements for compliance with the Act, rather than for the correctness of the state commission’s decisions. Accordingly, we are required to apply all valid, implementing FCC regulations now in effect — including those recently rеinstated and those newly promulgated — to the disputed interconnection agreements.
IV. Terms of the Interconnection Agreements
We consider de novo whether the agreements comply with the Act and its implementing regulations, and we consider all other issues under an arbitrary and capricious standard. See MFS Intelenet,
CLEC e-Spire contends that the ACC’s determination of cable sheath mileage conflicts with TELRIC rate-setting rules and is unsupported by substantial evidence. The choice of which TELRIC pricing model produces the most reliable results falls within the agency’s expertise. In its final decision, the ACC set the mileage at 26,092, basеd on projections from the Hatfield Model 3.1. The fact that the figure is well below the approximately 43,-000 cable sheath miles in the existing U.S. West network is consistent with the ACC’s position that it properly followed the TEL-RIC methodology, as required by 47 U.S.C. § 252(d)(1) and 47 C.F.R. § 51.505. Substantial evidence supports the 26,092 mileage figure because it falls within the range of estimates generated during the ACC hearings. We therefore affirm the ACC’s cable sheath mileage determination.
B. Four-Wire Loop Price
US West contends that the ACC’s four-wire loop price was arbitrary and capricious. The ACC set the price for a two-wire loop at $21.98 and the price for a four-wire loop at $22.90. According tо the ACC, U.S. West did not demonstrate that it incurs any additional costs to lay a second two-wire loop at the same time and in the same place as the first two-wire loop, beyond the cost of the additional wire. This finding is supported by testimony from a U.S. West witness, who testified that, in the context of placing multiple drops, the only additional cost was the cost of the additional length of line. US West cites no record evidence to contradict the ACC’s determination. We therefore reverse the district court’s remand order and affirm the ACC’s four-wire loop price.
C. Geographic Deaveraging
The CLECs argue that the interconnection agreements provide fоr geographically averaged rates for unbundled local loops in violation of 47 C.F.R. § 51.507(f). That regulation, requiring geographic deaverag-ing of local loop rates, was temporarily stayed until May 1, 2000, and Arizona had received an additional waiver from compliance until June 29, 2000. See In the Matter of Petitions for Waiver of the Section 51.507(f) UNE Deaveraging Requirement, DA 00-956, at ¶¶5, 10 (Apr. 28, 2000). Because the deaveraging rules are now in effect, the ACC concedes that the agreements must comply with them. Indeed, on July 25, 2000, the ACC issued a decision establishing interim deaveraged rates based on three zones, as required by the FCC rules. See ACC Decision No. 62753 (July 25, 2000). On June 12, 2002, the ACC established permanent deaveraged rates based on the CLECs’ proposal. See In re Qwest,
D. Conditions on Access to Subloops
MCI disputes the interconnection agreement’s conditioning of subloop access on its completion of a formal bona fide request (“BFR”) process. At the time the ACC reached its decision, the FCC had declined to specify whether subloops constituted a network element. See First Lo
The parties concede that the BFR process does not meet that standard. The ACC itself states in its brief that, "when the [Third Local Competition] Order takes effect on February 17, 2000, U.S. West will be required to provide MCI and other CLECs with immediate access to unbundled subloops." The Third Local Competition Order, however, also provides that the presumption for immediate access can be rebutted if the ILEC offers to the state commission evidence of technical infeasibility specific to a CLEC's subloop unbun-dling request. See Third Local Competition Order ¶11223-24. No such evidenсe with respect to requests for specific sub-loops is in the record before us. According to its supplemental brief, the ACC set the issue for examination in a procedural order dated August 21, 2000. Because we do not know the current status of those proceedings, we remand to the ACC with instructions to strike the BFR process condition, permit U.S. West an opportunity to submit specific evidence of technical infeasibility, and provide MCI unbundled subloop access pursuant to the Third Local Competition Order, to the extent it has not already done so.
E. Reciprocal Access to Poles, Ducts, Conduits, and Rights-of-Way
Under the FCC's interpretation of §~ 251(b)(4) and 224 of the Act contained in 11 1231 of the First Local Competition Order, the CLECs do not have to grant U.S. West reciprocal access to their poles, ducts, conduits, and rights-of-way. See U.S. West Commnnications, Inc. v. Hamilton,
F. Collocation of Remote Switching Units ("RSUs")
The interconnection agreement's requirement that U.S. West allow MCI to collocate RSUs on U.S. West's premises is permissible under 47 U.S.C. § 251(c)(6). See Hamilton,
G. Single Point of Access
The interconnection agreement allows AT & T to interconnect with U.S. West's network at a single point per local access and transport area ("LATA"). The Act requires an ILEC "to prcrvide, for the facilities and equipment of any requesting telecommunications carrier, interconnection with the local exchange carrier's network ... at any technically feasible point within the carrier's network." 47 U.S.C. § 251(c)(2)(B).
In MFS Intelenet, we explained that provision as follows:
The plain language requires local exchange carriers to permit interconnection at any technicatly feasible point within the carrier's network. An incumbent carrier denying a request for interconnection at a particular point must prove interconnection at that point is not*961 technically feasible. See 47 C.F.R. § 51.305(e).
the fact that § 251(c)(2) permits the CLEC to choose the points in the network at which to interconnect suggests that the Act provides for a balanced resolution in the determination of interconnection points: While the ILEC cannot be required to allow interconnection at technically unfeasible points, similarly the CLEC cannot be required to interconnect at points where it has not requested to do so.
Bell Atlantic-Pa.,
Although U.S. West might bе correct that it was entitled to additional compensation under 47 U.S.C. § 252(d)(1) for increased costs incurred as a result of the single point interconnection, such increased costs do not bear on the decision to permit AT & T to interconnect at a single point per LATA. See 47 C.F.R. § 51.5 (“A determination of technical feasibility does not include consideration of economic ... concerns .... ”). However, to the extent that AT & T’s desired interconnection points prove more expensive to U.S. West, we agree that the ACC should consider shifting costs to AT & T. See Bell-Atlantic Pa.,
We observe that this issue might, in fact, be moot. According to an ACC report issued after oral argument and after supplemental briefing in this case, Qwest and the CLECs reached agreement as to the terms of single point interconnection. See In re U.S. West Communications, Inc., ACC Decision No. 63977,
H. Tandem Switch Rates
MCImetro asserts that the district court erred in conditioning the ACC’s award of tandem rates on MCImetro’s entry into an agreement with MCI Telecommunications for access to MCI Telecommunications’ long-distance facilities. MCI-metro represented to the ACC that it had planned to use the entrance facilities of its long-distance affiliate in order to serve an area geographically comparable to that served by the U.S. West tandem switch.
MCI’s switch, in conjunction with the existing facilities of MCI and its long distance affiliate, will be able to terminate calls over a geographic area comparable to or greater than the area covered by U.S. West’s tandem switch. As a result, we find it to be just and reasonable for MCI to receive compensation for the use of its switch equivalent to that of U.S. West’s tandem switch beginning from the date it enters an agreement granting access to the facilities of its long distance affiliate.
In re Petition of MCImetro Access Transmission Servs., Inc., ACC Decision No. 59931, at 24 (Dec. 18, 1996). Until MCI-metro entered into such an agreement, it would be compensated at the lower end-office switch rate. See id. Based on the ACC’s explanation, we find that its decision was not arbitrary and capricious and that the ACC did not exceed its authority under the Act. We thus affirm the district court.
I. Conditions on Resale of Centrex Services
AT & T challenges the interconnection agreement’s restriction that limits the class of customers to whom it may resell Centrex services to those who can purchase the services from U.S. West. The Act requires an ILEC to “offer for resale at wholesale rates any telecommunications service that the carrier provides at retail.” 47 U.S.C. § 251(c)(4). The parties agree that Centrex is one such retail service. The Act also prohibits an ILEC from imposing
unreasonable or discriminatory conditions or limitations on, the resale of such telecommunicаtions service, except that a State commission may, consistent with regulations prescribed by the Commission under this section, prohibit a reseller that obtains at wholesale rates a telecommunications service that is available at retail only to a category of subscribers from offering such service to a different category of subscribers.
Id. § 251(c)(4)(B). In the First Local Competition Order ¶ 964, the FCC stated that, except for limitations on reselling of residential services to business customers, such “cross-class selling restrictions should be presumed unreasonable” because they “could fetter the emergence of competition.” This presumption of unreasonableness, however, can be rebutted if an ILEC “prov[es] to the state commission that the class restriction is reasonable and nondiscriminatory.” Id.
US West successfully rebutted this presumption. Testimony indicated that allowing the resale of Centrex services to classes of customers other than those to whom U.S. West sells the services would allow CLECs to create their own “mini-networks” and bypass all interconnection charges with U.S. West. Relying on that testimony, the ACC found that the class restriction on Centrex resale was reasonable. Because the restriction permitted AT & T access to the same pool of customers as U.S. Wеst, it was also nondiscriminatory. We therefore find that the ACC’s decision was based on substantial evidence and affirm.
J. Non-Recurring Charges (“NRCs”) for Unbundled Network Elements
NRCs compensate U.S. West for the one-time costs it incurs to accommodate a CLEC’s request for access to unbundled network elements. The parties correctly agree that NRCs for unbundled network elements normally should be priced using the TELRIC methodology, pursuant to 47 U.S.C. § 252(d)(1) and the reinstated TELRIC-pricing rules. The ACC solicited
The district court reversed the ACC’s decision and remanded for further rate-setting proceedings, holding that the ACC “must price NRCs on the basis of forward-looking costs without regard to the retail price.”
K. Conditions on Access to Dark Fiber
MCI and AT & T object to two conditions that the ACC attached to their access to U.S. West’s dark fiber: (1) that they “must establish that another Network Element of comparable expense cannot satisfy their needs”; and (2) that U.S. West may reclaim the dark fiber for its own use or the use of another CLEC if it gives 12 month notice, establishes that it or another carrier needs the fiber, shows that AT & T or MCI has alternatives available at a comparable price and quality, and compensates AT & T or MCI for the cost of conversion.
The FCC considers dark fiber to be a “network element.” See Third Local Competition Order ¶¶ 174, 325-27. Thus, an ILEC must provide a requesting CLEC unbundled access to dark fiber on “terms[] and conditions” that are “just, reasonable, and nondiscriminatory.” 47 U.S.C. § 251(c)(3). Further, the FCC has ruled that CLEC access to dark fiber is always “necessary” under 47 U.S.C. § 251(d)(2), even when CLECs could self-provide or acquire substitutes from third-party providers. See Third Local Competition Order ¶¶ 165, 332. This decree directly conflicts with the ACC’s first “necessity” condition on the CLECs’ access to dark fiber; thus, we hold that condition invalid.
The Third Local Competition Order permits conditions on a CLEC’s dark fiber access only when they “relate to a likely and foreseeable threat to an incumbent LEC’s ability to provide sеrvice as a carrier of last resort.” Id. ¶ 352. We are unable to determine on the current record whether the ACC’s second “reclamation” condition on the CLECs’ access to dark fiber is sufficiently tailored to protecting U.S. West’s ability to serve as a carrier of last resort. We therefore remand to the ACC to give U.S. West an opportunity to provide evidence on its ability to serve as a carrier of last resort and to reassess what reasonable conditions, if any, on the CLECs’ access are needed to avoid interference with that duty.
Conclusion
We REVERSE the district court to the extent it held that certain FCC regulations, now in effeсt but not in effect at the time of the ACC’s decisions, do not apply on judicial review of the interconnection agreements. As to the disputed terms of
AFFIRMED IN PART, REVERSED IN PART AND REMANDED.
Notes
. US West has changed its name to Qwest Corporation since initiating these lawsuits. In this opinion, we continue to call it U.S. West.
. Properly promulgated FCC regulations currently in effect must be presumed valid for the purposes of this appeal. The Hobbs Act, 28 U.S.C. § 2342, requires that all challenges to the validity of final orders of the FCC be brought by originаl petition in a court of appeals. The district court thus lacked jurisdiction to pass on the validity of the FCC regulations, and no question as to their validity can be before us in this appeal.
. We note that the ACC recently revisited the pricing of four-wire loops, and adopted the CLECs’ new proposal that the four-wire cost be calculated by multiplying the two-wire cost by a factor of 1.3. The ACC observed that “our resolution of this issue is consistent with our conclusion in the First Cost Docket Order [ACC Decision No. 60635] where we determined that the four-wire loop charge [$22.90] should be only 4.2 percent higher than the two-wire loop charge [$21.98].” In re Qwest Corp., ACC Decision No. 64922,