COMPETITIVE v FCC
United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 96-3604
___________
Competitive Telecommunications *
Association, *
*
Petitioner, *
*
The Competition Policy Institute; *
MCI Telecommunications Corporation;*
General Communication, Inc.; *
Telecommunications Resellers *
Association; America's Carriers *
Telecommunication Association; *
Cable & Wireless, Inc.; AT&T Corp.;*
Maryland Public Service Commission;* On Petitions for Review
Arkansas Public Service Commission;* of an Order of the
Oregon Public Utility Commission; * Federal Communications
North State Telephone Company; * Commission
Roseville Telephone Company; *
Concord Telephone Company; Rock *
Hill Telephone Company; Public *
Utilities Commission of the State *
of Hawaii; Minnesota Public *
Utilities Commission; The Ad Hoc *
Coalition of Telecommunications *
Manufacturing Companies; Pacific *
Telecom, Inc.; Minnesota *
Independent Coalition; Worldcom, *
Inc.; Kentucky Public Service *
Commission; Kansas Corporation *
Commission; Public Service *
Commission of the State of Wyoming;*
Rhode Island Public Utilities *
Commission; Public Service *
Commission of Wisconsin; State of *
Texas; Alabama Public Service *
Commission; Citizens Telephone *
Company of Kecksburg; New Mexico *
State Corporation Commission; *
Public Service Commission of the *
State of Montana; Utah Department *
of Commerce, Division of Public *
Utilities; Public Service *
Commission of Utah; Public Service *
Commission of the State of South *
Carolina; Tennessee Regulatory *
Authority; Aging Forum, doing *
business as National Silver Haired *
Congress, Inc.; U.S. Coalition on *
Aging; College for Living; Council *
of Silver Haired Legislatures; *
Missouri Alliance of Area Agencies *
on Aging; Missouri Association for *
the Deaf; Missouri Council of the *
Blind; Presidents' Club for *
Telecommunications Justice; *
Paraquad, Rural Advocates for *
Independent Living; Services for *
Independent Living; Public *
Utilities Commission of the State *
of Colorado; Department of Public *
Utilities of the Commonwealth of *
Massachusetts; Oklahoma *
Corporation Commission; Public *
Service Commission of the State of *
Connecticut Department of Public *
Utility Control, *
*
Intervenors on Appeal, *
*
v. *
*
Federal Communications Commission; *
United States of America, *
*
Respondents, *
Bell Atlantic Corporation; *
Bellsouth Corporation; Pacific *
Telesis Group; SBC Communications, *
Inc.; US West, Inc.; US Telephone *
Association; Ameritech Corporation;*
Southern New England Telephone *
Company; GTE Service Corporation; *
New York Telephone Company; New *
England Telephone and Telegraph *
Company; Nextlink Communications, *
L.L.C.; National Cable Television *
Association, Inc.; Sprint Corp.; *
American Communications Services, *
Inc.; Association for Local *
Telecommunications Services; *
Consumer Federation of America; *
Jones Intercable, Inc.; *
Telecommunications, Inc.; Teleport *
Communications Group, Inc.; Allied *
Associated Partners; Geld *
Information Systems; U.S. One *
Communications Services; Frontier *
Corporation; City of Long Beach, *
California; City of Manassas, *
Virginia; Time Warner *
Communications Holdings, Inc.; *
Personal Communications Industry *
Association; Alltel Telephone *
Services Corporation; Independent *
Telephone and Telecommunications *
Alliance; Excel Telecommunications,*
Inc.; Paging Network, Inc.; *
Nextwave Telecom, Inc.; Small *
Cable Business Association; *
Metrocall, Inc.; Texas Office of *
Public Utility Counsel, *
*
Intervenors on Appeal. *
*
---------------------- *
*
Honorable John D. Dingell; *
Honorable W.J. (Billy) Tauzin; *
Honorable Rick Boucher; Honorable *
Dennis Hastert, *
*
Amici on Behalf of *
Petitioner. *
___________
Submitted: January 17, 1997
Filed: June 27, 1997
___________
Before BOWMAN, WOLLMAN, and HANSEN, Circuit Judges.
___________
BOWMAN, Circuit Judge.
Competitive Telecommunications Association (CompTel) petitions
for review of a portion of a Federal Communications Commission
(FCC) order that interprets the Telecommunications Act of 1996, see
First Report and Order, Implementation of the Local Competition
Provisions in the Telecommunications Act of 1996, CC Docket No. 96-
98 (Aug. 8, 1996) [hereinafter First Report and Order]. This is
one of a number of cases consolidated and referred to the Eighth
Circuit Court of Appeals by order of the Judicial Panel on
Multidistrict Litigation. See Iowa Utils. Bd. v. FCC, 109 F.3d
418, 421 (8th Cir.), motion to vacate stay denied, 117 S. Ct. 429
(1996). The Court heard oral argument on CompTel's petition
separately, and we now issue a separate decision, as this case
deals with discrete issues raised only in CompTel's petition.
CompTel describes itself as "the principal industry
association of the nation's competitive telecommunications
carriers, with nearly 200 members." Brief of Petitioner
(Disclosure of Interests at 1). CompTel has been described more
specifically as "a trade association with over 150" members who are
long-distance telephone companies, known in telecommunications
jargon as interexchange carriers or IXCs. Competitive Telecomms.
Ass'n v. FCC, 87 F.3d 522, 524 (D.C. Cir. 1996); see also Brief of
Respondent at 3.
I.
CompTel first challenges the FCC's interpretation of the term
"interconnection" as used in 47 U.S.C.A. 251 (c)(2) (West Supp.
1997).(1) Section 251 in general concerns the development of
(1) All references in this opinion to sections and subsections
of the Telecommunications Act of 1996 in West's United States
Code Annotated (U.S.C.A.) are to the 1997 supplement.
competitive telecommunications markets, and the duties and
obligations of telecommunications carriers in furtherance of that
objective as Congress has described them. Subsection (a) lists the
duties imposed on all telecommunications carriers, whether long-
distance or local, and subsection (b) details obligations of all
local exchange carriers (LECs).(2) Here we are concerned with
subsection (c), which sets forth "[a]dditional obligations of
incumbent" LECs, that is, those who were providing local phone
service in an area on February 8, 1996, the date the
Telecommunications Act of 1996 became law. See id. 251(h)(1).
Among the obligations assigned incumbent LECs is "[t]he duty to
provide, for the facilities and equipment of any requesting
telecommunications carrier, interconnection with the [LEC's]
network . . . for the transmission and routing of telephone
exchange service and exchange access." Id. 251(c)(2)(A).
In its First Report and Order, the FCC concluded "that the
term `interconnection' under section 251(c)(2) refers only to the
physical linking of two networks for the mutual exchange of
traffic." First Report and Order 176; see also 47 C.F.R. 51.5
(1996)(defining interconnection as in the First Report and Order
and noting that "[t]his term does not include the transport and
termination of traffic"). CompTel argues that Congress intended
interconnection to be more than mere physical access and that the
definition of the term should include transmission and routing
services as well.
In reviewing the decision of an administrative agency, we
"must reject administrative constructions which are contrary to
(2) LECs provide local telephone service or offer local access
for long-distance service. See 47 U.S.C.A. 153(26), (47),
(16).
clear congressional intent." Chevron U.S.A. Inc. v. Natural
Resources Defense Council, Inc.,
467 U.S. 837, 843
n.9 (1984).
Here, however, the term interconnection is undefined by the Act,
and when "the statute is silent or ambiguous with respect to the
specific issue, the question for the court is whether the agency's
answer is based on a permissible construction of the statute." Id.
at 843. In applying that standard, the FCC's interpretation of
interconnection is entitled to "considerable weight" and this
Court's deference. Id. at 844.
A.
CompTel first asserts that the FCC's definition of
interconnection writes certain other language out of the statute.
We disagree. CompTel contends that Congress's language requiring
incumbent LECs to provide interconnection "for the transmission and
routing of telephone exchange service and exchange access" means
that Congress intended to require the LECs to provide transmission
and routing services in addition to interconnection. According to
the argument, the FCC's definition renders the phrase "for the
transmission and routing" meaningless. But considering the section
as a whole and in context, it is reasonable to conclude that
Congress intended "for the transmission and routing of telephone
exchange service and exchange access" only to describe what the
interconnection, the physical link, would be used for.(3) That
(3) Telephone exchange service is local service, that is,
"service within a telephone exchange" or within a system of
exchanges within the same area that operates as a single
exchange, or a comparable service. 47 U.S.C.A. 153(47).
Exchange access is "the offering of access to telephone exchange
services or facilities for the purpose of the origination or
termination of telephone toll services," that is, "service
between stations in different exchange areas for which there is
made a separate charge." Id. 153(16), (48). See also the
definition of local exchange carrier (LEC) at 47 U.S.C.A.
interpretation is further bolstered by the subsection's express
provision that the LEC's duty is to provide interconnection for the
facilities and equipment of the requesting carrier with the LEC's
network. By its own terms, this reference is to a physical link,
between the equipment of the carrier seeking interconnection and
the LEC's network.
As a part of its statutory argument, CompTel also argues that
the FCC's interpretation of interconnection violates the principle
of statutory construction set forth in Sierra Club v. Clark, 755
F.2d 608, 613 (8th Cir. 1985), wherein this Court said,
"[S]tatutory definitions of words used elsewhere in the same
statute furnish such authoritative evidence of legislative intent
and meaning that they are usually given controlling effect." We
reject CompTel's argument for several reasons.
First, the language from Sierra Club does not set forth an
absolute edict, but only states that such definitions usually will
control. In any event, CompTel does not even suggest that
interconnection is defined anywhere in the Act. CompTel really is
contending that, if the FCC's definition is upheld, "the 1996 Act
would lose virtually all meaning" because of the way the term
interconnection is used elsewhere in the Act. Brief of Petitioner
at 13. But the only specific use of the word to which CompTel
refers in its brief is that in 47 U.S.C.A. 252(e), which says,
"Any interconnection agreement adopted by negotiation or
arbitration shall be submitted for approval to the State
commission." According to CompTel's argument, Congress certainly
did not intend this authority for review to be "limited to
agreements for the mere physical interconnection of networks."
153(26) ("any person that is engaged in the provision of
telephone exchange service or exchange access").
Brief of Petitioner at 12. We are inclined to agree, but the term
at issue is "interconnection agreement," not just interconnection,
and it is a reference back to agreements discussed earlier in
252. Even a cursory reading of 252 makes it clear that
interconnection agreement as used in 252(e) is the Act's
shorthand for agreements on providing and establishing rates for
"interconnection, services, or network elements." E.g., 47
U.S.C.A. 252(a)(1), (c)(2) (emphasis added).
The FCC's interpretation of interconnection as only a physical
link for mutual exchange of traffic between LECs does not violate
the Act.
B.
CompTel also argues that the FCC's interpretation will subvert
the Act's goal of assuring that rates for telecommunications
services are cost-based. See 47 U.S.C.A. 252(d)(1) (requiring
that "the just and reasonable rate for the interconnection of
facilities and equipment" under 251(c)(2) and the "just and
reasonable rate for [unbundled] network elements" under 251(c)(3)
be cost-based and nondiscriminatory, and "may include a reasonable
profit"). But, assuming without deciding that the FCC's
interpretation of interconnection would have the effect CompTel
predicts, it is clear from the Act that Congress did not intend all
access charges to move to cost-based pricing, at least not
immediately. The Act plainly preserves certain rate regimes
already in place.
Under 251(g), an LEC
shall provide exchange access, information access, and
exchange services for such access to [IXCs] 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 February 8, 1996 [date of
enactment] under any court order, consent decree, or
regulation, order, or policy of the [FCC], until such
restrictions and obligations are explicitly superseded by
regulations prescribed by the [FCC] after February 8,
1996.
Id. 251(g)(emphasis added). In other words, the LECs will
continue to provide exchange access to IXCs for long-distance
service, and continue to receive payment, under the pre-Act
regulations and rates. This section leaves the door open for the
promulgation of new rates at some future date, but any possible new
exchange access rates for interstate calls will not carry the same
deadline or the same cost-based restrictions as will those for
interconnection and unbundled network elements specifically
mentioned in 252(d)(1).
We conclude that the FCC's interpretation of interconnection
does not thwart the statutory scheme of the Act.
C.
CompTel also challenges the FCC's interpretation of
interconnection as having a discriminatory impact, by permitting
LECs to charge different rates for the same service based on
whether the carrier who is seeking interconnection and other
network services is a long-distance service provider or a local
service provider. But the two kinds of carriers are not, in fact,
seeking the same services. The IXC is seeking to use the incumbent
LEC's network to route long-distance calls and the newcomer LEC
seeks use of the incumbent LEC's network in order to offer a
competing local service. Obviously the services sought, while they
might be technologically identical (a question beyond our
expertise), are distinct. And if the IXC wants access in order to
offer local service (in other words, wants to become a LEC), then
there is no rate differential. In these circumstances, we do not
think the FCC's interpretation of interconnection has a
discriminatory impact.
D.
In sum, we conclude that CompTel has failed to demonstrate
that the FCC's interpretation of interconnection as a physical
link, and only a physical link, is "not one that Congress would
have sanctioned." Chevron U.S.A.,
467 U.S. at 845
(quoting United
States v. Shimer,
367 U.S. 374, 383
(1961)). We hold that limiting
interconnection for the purposes of 251(c)(2) to physical linkage
"is based on a permissible construction of the statute." Id. at
843.
II.
CompTel also challenges an interim decision in the FCC's First
Report and Order regarding pricing, arguing that the FCC's position
is a violation of the Act and arbitrary and capricious. Under the
Act, as noted supra in Part IB of this opinion, the rates that
incumbent LECs charge for 251(c)(2) and (3) services
(interconnection and unbundled network elements) must be cost-
based, nondiscriminatory, and "may include a reasonable profit."
47 U.S.C.A. 252(d)(1). Notwithstanding this provision, the FCC
has established "a temporary transitional mechanism to help
complete all of the steps toward the pro-competitive goal of the
1996 Act." First Report and Order 720. That is, incumbent LECs
for the time being may recover from interconnecting carriers the
carrier common line charge (CCLC) and seventy-five percent of the
transport interconnection charge (TIC) "for all interstate minutes
traversing the incumbent LECs' local switches for which the
interconnecting carriers pay unbundled local switching element
charges." Id. (emphasis added). Neither of these charges is based
on the LECs' actual cost.
We will "hold unlawful and set aside agency action, findings,
and conclusions found to be . . . arbitrary, capricious, an abuse
of discretion, or otherwise not in accordance with law; . . . [or]
in excess of statutory jurisdiction, authority, or limitations, or
short of statutory right." 5 U.S.C. 706(2)(A), (C) (1994). It
is significant to our review for unlawfulness that the CCLC and TIC
presently being assessed may be collected no later than June 30,
1997. See First Report and Order 720. Although temporary agency
rules are subject to judicial review notwithstanding their
transitory nature, "substantial deference by courts is accorded to
an agency when the issue concerns interim relief." MCI Telecomms.
Corp. v. FCC, 750 F.2d 135, 140 (D.C. Cir. 1984).
The FCC acknowledges the cost-based issue raised by assessing
the charges but argues that two deadlines in the Act, which are
nine months apart, have created a dilemma for the agency, and that
the interim charges are the best way to resolve it. According to
the FCC, congressional intent on another matter of great importance
in the Telecommunications Act of 1996 justifies this temporary
diversion from the Act's cost-based mandate. We agree.
Congress directed the FCC to "complete all actions necessary
to establish regulations to implement the requirements" of 251 by
August 8, 1996--hence, the First Report and Order released that
date. 47 U.S.C.A. 251(d)(1). The conflicting deadline concerns
another major purpose of the Act, that is, the reform of the
universal service system. The goal of what is known in the
telecommunications industry as universal service is to ensure that
quality service and access are available to all consumers,
"including low-income consumers and those in rural, insular, and
high cost areas . . . at rates that are reasonably comparable to
rates charged for similar services in urban areas." Id.
254(b)(3). To date, the subsidies necessary to achieve this goal
have been derived, at least in part, from access charges that are
not cost-based, so that long-distance rates have been subsidizing
local rates. See First Report and Order 718; Allnet
Communication Serv. v. National Exch. Carrier Ass'n, 965 F.2d 1118,
1119 (D.C. Cir. 1992). In keeping with the Act's cost-based
objectives, support for universal service will soon be "explicit,"
47 U.S.C.A. 254(e), and after the system is reformed "[a]ll
providers of telecommunications services should make an equitable
and nondiscriminatory contribution to the preservation and
advancement of universal service," id. 254(b)(4). Congress's
deadline for the adoption of universal service rules under the Act
was May 8, 1997. See id. 254(a)(2).(4)
CompTel first argues that the access charges are contrary to
the statute. Indeed, as noted above, the Act requires that rates
for certain access be cost-based, and at first blush the interim
CCLC and TIC assessments appear to be reversible. But the same Act
requires the reform of universal service subsidies and not,
significantly, abolishment of universal service, even temporarily.
Clearly Congress did not intend that universal service should be
adversely affected by the institution of cost-based rates. But the
nine-month disparity between the deadline for implementation of
cost-based service and the deadline for reform of universal service
raises the threat of serious disruption in universal service for
those nine months if cost-based service is required before
universal service is funded by competitively neutral means. See
First Report and Order 719, 720. We share the FCC's concern
"that implementation of the requirements of section 251 now,
without taking into account the effects of the new rules on . . .
existing access charge and universal service regimes, may have
significant, immediate, adverse effects that were neither intended
nor foreseen by Congress." Id. 716.
If the FCC, upon meeting the August 8, 1996, deadline for
issuing the regulations required of it by subsection 251(d)(1), had
not instituted an interim access charge of some sort in order to
subsidize universal service for the nine months before universal
service reforms are complete, we think it apparent that universal
service soon would be nothing more than a memory. The FCC action
is logical and carefully explained in the First Report and Order.
We do not think it contrary to the Act to institute access charges
with a fixed expiration date, even though such charges on their
face appear to violate the statute, in order to effectuate another
part of the Act. Moreover, as discussed above, incumbent LECs may
collect the charges no later than June 30, 1997, and the new
universal service rules are scheduled to go into effect July 17,
1997 (except as noted). Given the brief life of the interim
charges, and the deference that interim rules command, we think the
FCC's order on this issue should stand.
Further, while the FCC's approach may not be the best way to
maintain universal service on a transitional basis, and perhaps
more research and study by the FCC would have resulted in a better
solution for temporary funding of universal service, that is not
for us to say. Because of the temporary status of the CCLC and TIC
assessments, we review the agency decision "with the understanding
that the agency may reasonably limit its commitment of resources to
refining a rule with a short life expectancy." Competitive
Telecomms. Ass'n v. FCC, 87 F.3d at 531 (reviewing "interim" FCC
rule that already had been in place for years). This interim
action by the FCC is not arbitrary and capricious, and therefore
should not be set aside by this Court.(5)
III.
For the reasons discussed above, CompTel's petition for review
is denied, except to the extent discussed supra note 5.
A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT
**FOOTNOTES**
(4)
We hereby take judicial notice of the Report and Order,
Federal-State Joint Board on Universal Service, CC Docket No. 96-
45 (May 8, 1997). The effective date of the rules, published
along with a summary of the Report and Order at 62 Fed. Reg.
32,862 (1997), is July 17, 1997, except for Subpart E of Part 54
(Universal Service Support for Low Income Services), which has an
effective date of January 1, 1998.
(5)
While we uphold the FCC's decision to allow incumbent LECs
to collect, on an interim basis, access charges for interstate
calls, we vacate the Commission's attempt to regulate the
temporary recovery of access charges for intrastate calls
contained in paragraphs 729 through 732 of the First Report and
Order and C.F.R. 51.515(c) (1996) as being beyond the scope of
the Commission's jurisdiction. See 47 U.S.C. 152(b) (1994).
While we recognize the FCC is merely "allowing" the state
commissions to continue to allow the LECs to collect access
charges on intrastate calls, we believe that such an assertion of
regulatory power is beyond the scope of the FCC's jurisdiction.