FOR THE
Argued
No. 01-1218
WorldCom, Inc.,
Petitioner
v.
Federal
Communications Commission and
Respondents
Sprint Corporation,
et al.,
Intervenors
Consolidated with
01-1229, 01-1243,
01-1255, 01-1256, 01-1257, 01-1267,
01-1274, 01-1310,
01-1311, 01-1313, 01-1319, 01-1321
On Petitions for
Review of an Order of the
Federal
Communications Commission
---------
Darryl M.
Bradford argued the cause for Carrier petitioners and supporting
intervenors. With him on the briefs were
Thomas F. O'Neil III, William Single, IV, Brian J. Leske, John J. Hamill, Jodie
L. Kelley, Mark C. Rosenblum, H. Richard Juhnke, John T. Nakahata, Timothy J.
Simeone, Christopher W. Savage, David W. Carpenter, David L. Lawson, Paul J.
Zidlicky, Thomas Jones, Glenn B. Manishin, Genevieve Morelli, Richard J.
Metzger, Brad Mutschelknaus, Richard M. Rindler, Charles C. Hunter, Catherine
M. Hannan, Robert J. Aamoth, Deborah M. Royster and Albert H. Kramer. James P. Young entered an appearance.
James B. Ramsay
argued the cause for State Commission petitioners and supporting
intervenors. With him on the briefs were
Gretchen Dumas, Ellen S. LeVine, Lawrence G. Malone, Diane T. Dean, Susan
Stevens Miller, Tracey L. Stokes, Betty D. Montgomery, Attorney General, State
of
John A. Rogovin,
Deputy General Counsel, Federal Com-munications Commission, argued the cause
for respondents. With him on the brief
were John E. Ingle, Deputy Associate General Counsel, and Laurence N. Bourne
and Rodger D. Citron, Counsel. Catherine G. O'Sullivan and Nancy C. Garrison, Attorneys, U.S.
Department of Justice, entered appearances.
Mark L. Evans
argued the cause for intervenors BellSouth Corporation, et al. With him on the brief were Michael K.
Kellogg, Sean A. Lev, Aaron M. Panner, Scott H. Angstreich, Roger K. Toppins,
Gary L. Phillips, James D. Ellis, Michael E. Glover, Edward H. Shakin, John M.
Goodman, Lawrence E. Sarjeant, Linda L. Kent, John W. Hunter and Julie E.
Rones.
Howard J. Symons,
Sara F. Leibman and Douglas I. Brandon were on the brief for intervenor
AT&T Wireless Services, Inc.
Michelle M. Mundt entered an appearance.
Before: Sentelle and Tatel, Circuit Judges, and
Williams, Senior Circuit Judge.
Opinion for the Court filed by Senior Circuit Judge Williams.
Williams, Senior
Circuit Judge: Section 251(b)(5) of the Telecommunications Act of 1996, 47 U.S.C. §§ 151-714
(the "1996 Act" or the "Act"), directs all local exchange
carriers ("LECs") to "establish reciprocal compensation
arrangements for the transport and termination of
telecommunications." 47 U.S.C. § 251(b)(5). In the order
before us the Federal Communications Commission held that under § 251(g) of the
Act it was authorized to "carve out" from § 251(b)(5)
calls made to internet service providers ("ISPs") located within the
caller's local calling area. It relied
entirely on § 251(g). Because that
section is worded simply as a transitional device, preserving various LEC
duties that antedated the 1996 Act until such time as the Commission should
adopt new rules pursuant to the Act, we find the Commission's reliance on § 251(g)
precluded. Thus we remand the case. Because there may well be other legal bases
for adopting the rules chosen by the Commission for compensation between the
originating and the terminating LECs in calls to ISPs, we neither vacate the
order nor address petitioners' attacks on various interim provisions devised by
the Commission.
* * *
Due in part to
the 1996 Act, local telephone service areas are now typically (perhaps universally)
served by more than one LEC. The
reciprocal compensation requirement of § 251(b)(5),
quoted above, is aimed at assuring compensation for the LEC that completes a
call originating within the same area.
Although its literal language purports to extend reciprocal compensation
to all "telecommunications," the Commission has construed it as
limited to "local" traffic only.
In the Matter of Implementation of the Local Competition Provisions in
the Telecommunications Act of 1996, 11 FCC Rcd 15499, 16012-13, p p 1033-34,
16015-16, p 1040 (1996) ("Local Competition Order"); 47 C.F.R. § 51.701(a). For long distance calls, by contrast, the
long-distance carrier collects from the user and pays both LECs--the one
originating and the one terminating the call.
Local Competition Order, 11 FCC Rcd at 16013, p 1034.
In an earlier
order, the Commission excluded ISP calls from the reach of § 251(b)(5) on the theory that they were indeed not
"local." In
the Matter of Implementation of the Local Competition Provisions in the
Telecommunications Act of 1996, Inter-Carrier Compensation for ISP-Bound
Traffic, 14 FCC Rcd 3689 (1999) ("Initial Order"). It reached this conclusion by applying its
"end-to-end" analysis, traditionally employed in determining whether
a call was jurisdictionally interstate or not, stressing that ISP-bound traffic
ultimately reaches websites that are typically located out-of state. See id. at 3689-90,
p 1, 3695-98, p p 10-12, 3703, p 23 (1999).
On review, we held that the order had failed to adequately explain why
the traditional "end-to-end" jurisdictional analysis was relevant to
deciding whether ISP calls fitted the local call or the long-distance call
model, and vacated and remanded the order.
On remand, the
FCC again reached the conclusion that the compensation between two LECs
involved in delivering inter-net-bound traffic to an ISP should not be governed
by the reciprocal compensation provision of § 251(b)(5). In the Matter of Implementation of the Local
Competition Provisions in the Telecommunications Act of 1996, Intercarrier
Compensation for ISP-Bound Traffic, 16 FCC Rcd 9151, 9152-53, p 1 (2001)
("Remand Order"). This
decision rested, as we said, on § 251(g).
Having thus taken ISP calls out of § 251(b)(5)'s
reciprocal compensation obligation, the FCC proceeded to establish what it
believed was an appropriate cost recovery mechanism. Remand Order, 16 FCC Rcd at 9154, p 4. The system adopted was "bill-and-keep,"
whereby each carrier recovers its costs from its own end-users.
In reaching the
bill-and-keep solution, the Commission pointed to a number of flaws in the
prevailing intercarrier compensation mechanism for ISP calls, under which the
originating LEC paid the LEC that served the ISP. Because ISPs typically generate large volumes
of one-way traffic in their direction, the old system attracted LECs that
entered the business simply to serve ISPs, making enough money from reciprocal
compensation to pay their ISP customers for the privilege of completing the
calls. The Commission saw this as
leading, at least potentially, to ISPs' charging their customers below
cost. Remand Order, 16 FCC Rcd at 9153,
p 2, 9154-55, p p 4-6, 9162, p p 19-21.
To smooth the transition to bill-and-keep
(but without fully committing itself to it), the FCC adopted several interim
cost-recovery rules that sought to limit arbitrage opportunities by lowering
the amounts and capping the growth of ISP-related intercarrier payments. These tend to force ISP-serving LECs to
recover an increasing portion of their costs from their own subscribers rather
than from other LECs. Remand Order, 16
FCC Rcd at 9155-57, p p 7-8. The transitional
rules take effect on the expiration of existing interconnection
agreements.
Two sets of
petitioners now challenge the Remand Order.
One, headed by WorldCom (collectively "WorldCom"), con-sists
of competitive LECs that deliver calls to ISPs, and
thus stand to lose reciprocal compensation payments. These companies contend that the Commission
erred in finding that § 251(g) authorized Commission exclusion of such calls
from § 251(b)(5), and that, in any event, the interim compensation rules that
the FCC adopted were not a product of reasoned decisionmaking and are contrary
to the Act's terms. The other group,
composed of several states and state regulatory commissions, complains that the
order unlawfully preempts their authority to determine the compensation of
ISP-serving LECs.
* * *
Section 251(g) reads as follows:
(g) Continued enforcement of exchange access and interconnection
requirements.
On and after [the date
of enactment of the Telecommunications Act of 1996,] each local exchange
carrier, to the extent that it provides wireline services, shall provide
exchange access, information access, and exchange services for such access to
interexchange carriers and 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 [the date of enactment of the Telecommunications
Act of 1996] under any court order, consent decree, or regulation, order, or
policy of the Commission, until such restrictions and obligations are
explicitly superseded by regulations prescribed by the Commission after [such
date of enactment]. During the period
beginning on [such date of enactment] and until such restrictions and
obligations are so superseded, such restrictions and obligations shall be
enforceable in the same manner as regulations of the Commission.
47 U.S.C. § 251(g) (emphasis added). Both sides assume that Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), is applicable, so that we must defer to any reasonable Commission interpretation not precluded by the language of the statute, read with the ordinary tools of statutory construction. We agree with petitioners that § 251(g) is not susceptible to the Commission's reading.
On its face, § 251(g)
appears to provide simply for the "continued enforcement" of certain
pre-Act regulatory "interconnection restrictions and obligations,"
including the ones contained in the consent decree that broke up the Bell
System, until they are explicitly superceded by Commission action implementing
the Act. As the Conference Report
explained, "[b]ecause the [Act] completely eliminates the prospective
effect of the AT&T Consent Decree, some provision is necessary to keep these
requirements in place.... Accordingly,
the conference agreement includes a new section 251(g)." H.R. Rep. 104-458, at
122-23 (1996).
On a prior
occasion, the Commission also framed the scope of § 251(g) in similarly narrow
terms:
The term "information access" first appears [in the
Act] in sections [sic] 251(g). That
provision is a transitional enforcement mechanism that obligates the incumbent
LECs to continue to abide by equal access and nondiscriminatory interconnection
requirements of the [AT&T Consent Decree] when such carriers "provide
exchange access, information access and exchange services for such access to
interexchange carriers and information service providers...." Because the provision incorporates into the
Act, on a transitional basis, these [AT&T Consent Decree] requirements, the
Act uses [AT&T Consent Decree] terminology in this section. However, this provision is merely a
continuation of the equal access and nondiscrimination provisions of the
Consent Decree until superseded by subsequent regulations of the Commission.
In the Matter of Deployment of Wireline Services Offering
Advanced Telecommunications Capability, 15 FCC Rcd 385, 407, p 47 (1999)
(footnote omitted) (emphasis added).
Of course such
explanatory language can't be assumed to be exclusive; legislative or agency explanations of
a provision may naturally tend to focus on its most salient features. Thus, despite legislative history speaking
only in terms of the Consent Decree, plainly the preexisting "restrictions
and obligations" covered by § 251(g) are not limited to Consent Decree
obligations; the
statute itself explicitly embraces pre-existing obligations under a
"regulation, order, or policy of the Commission." See also Noland v. Shalala, 12 F.3d 258, 262
(D.C. Cir. 1994) ("Although the legislative history ... suggests an
exclusive focus [of the statutory provision in question], the statutory language
is broader and may permit [an alternative] construction."). But nothing in § 251(g) seems to invite the
Commission's reading, under which (it seems) it could override virtually any
provision of the 1996 Act so long as the rule it adopted were in some way,
however remote, linked to LECs' pre-Act obligations.
We will assume
without deciding that under § 251(g) the Commission might modify LECs' pre-Act
"restrictions" or "obligations," pending full
implementation of relevant sections of the Act.
The Fifth Circuit appeared to make that assumption in Texas Office of
Public Utility Counsel v. FCC, 265 F.3d 313 (5th Cir. 2001), where it
implicitly relied on § 251(g) (by quoting language from an Eighth Circuit case,
Competitive Telecom. Ass'n v. FCC, 117 F.3d 1068, 1072 (8th Cir. 1997)), in
sustaining modifications of pre-Act regulations governing the access charges
paid to LECs by inter-exchange carriers ("IXCs").
Having found that
§ 251(g) does not provide a basis for the Commission's action, we make no further
determinations. For example, as in Bell
Atlantic, we do not decide whether handling calls to ISPs constitutes
"telephone exchange service" or "exchange access" (as those
terms are defined in the Act, 47 U.S.C. §§ 153(16), 153(47)) or neither, or
whether those terms cover the universe to which such calls might belong. Nor do we decide the scope of the
"telecommunications" covered by § 251(b)(5). Nor do we decide whether the Commission may
adopt bill-and-keep for ISP-bound calls pursuant to § 251(b)(5); see § 252(d)(B)(i) (referring to
bill-and-keep). Indeed these are only
samples of the issues we do not decide, which are in fact all issues other than
whether § 251(g) provided the authority claimed by the Commission for not
applying § 251(b)(5).
Moreover, we do
not decide petitioners' claims that the interim pricing limits imposed by the
Commission are inadequately reasoned.
Because we can't yet know the legal basis for the Commission's ultimate
rules, or even what those rules may prove to be, we have no meaningful context
in which to assess these explicitly transitional measures.
Finally, we do
not vacate the order. Many of the
petitioners themselves favor bill-and-keep, and there is plainly a non-trivial
likelihood that the Commission has authority to elect such a system (perhaps
under §§ 251(b)(5) and 252(d)(B)(i)). See, e.g., Allied-Signal, Inc. v.
So ordered.