Worldcom Inc. v. Federal Commun. Comm. & USA

• Decision Date: 20 April 2001
• Docket Number: 00-1062,00-1070,No. 00-1002,00-1002
• Citation: 246 F.3d 690
• Parties: (D.C. Cir. 2001) WorldCom, Inc., Petitioner v. Federal Communications Commission and United States of America, Respondents AT&T Corporation, et al., Intervenors
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 690

246 F.3d 690 (D.C. Cir. 2001)

WorldCom, Inc., Petitioner v. Federal Communications Commission and United States of America, Respondents

AT&T Corporation, et al., Intervenors

No. 00-1002, 00-1062, 00-1070

United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 21, 2001

Decided April 20, 2001

On Petitions for Review of an Order of the Federal Communications Commission

Jonathan J. Frankel and Darryl M. Bradford argued the cause for petitioners. With them on the briefs were William T. Lake, Lynn R. Charytan, Dan L. Poole, Robert B. McKenna, Lawrence E. Sarjeant, Linda L. Kent, John W. Hunter, Julie E. Rones, Jodie L. Kelley, John J. Hamill, Thomas F. O'Neil III, Adam H. Charnes, Mark B. Erlich, Robert J. Aamoth, Albert H. Kramer, Renee R. Crittendon, Richard Martin Rindler, Charles C. Hunter and Catherine M. Hann. John H. Harwood, II entered an appearance.

John E. Ingle, Deputy Associate General Counsel, Federal Communications Commission, argued the cause for respondents. With him on the briefs were Christopher J. Wright, General Counsel, Jonathan E. Nuechterlein, Deputy General Counsel, Laurence N. Bourne, Counsel, Catherine G. O'Sullivan, Nancy C. Garrison and Robert J. Wiggers, Attorneys, U.S. Department of Justice.

Daniel Meron argued the cause for intervenors AT&T Corporation, et al. With him on the brief were David W. Carpenter, Peter D. Keisler, David L. Lawson, Mark C. Rosenblum, Robert J. Aamoth, Richard M. Rindler, Christy C. Kunin, Thomas F. O'Neil III, Adam H. Charnes, Mark B. Ehrlich, Jonathan J. Nadler, Rodney L. Joyce, Darryl M. Bradford, Jodie L. Kelley and John J. Hamill. James P. Young entered an appearance.

Dan L. Poole, Robert B. McKenna, Jr., William T. Lake, Lynn R. Charytan, Michael K. Kellogg, Mark L. Evans, Sean A. Lev, Aaron M. Panner, Roger K. Toppins, Lawrence E. Sarjeant, Linda L. Kent, John W. Hunter, Julie E. Rones, Michael E. Glover, Edward H. Shakin, Donna M. Epps and M. Robert Sutherland were on the brief of intervenors Qwest Communications International, Inc., et al. John H. Harwood, II, Gail L. Polivy, John F. Raposa, M. Edward Whelan, III, Alfred G. Richter, Hope E. Thurrott and James D. Ellis entered appearances.

Before: Williams, Sentelle and Rogers, Circuit Judges.

Opinion for the Court filed by Circuit Judge Williams.

Williams, Circuit Judge:

Packet-switching and digital subscriber line technologies ("DSL") make it possible to send data at high speed over conventional copper wire. Two DSL modems are attached to a telephone loop, one at the subscriber's premises and one at the telephone company's central office. If the line carries both ordinary telephone service and high-speed data transmission, the carrier must separate these streams at the company's central office, using a digital subscriber line access multiplexer. With this device the carrier sends ordinary voice calls to the public, circuit-switched telephone network (which keeps a phone line open during a voice call) and sends data traffic to a packet-switched data network (which compresses data and can send it in split-second bursts during gaps on a line), where it can then be routed to a corporate local area network or internet service provider ("ISP"). See In re Deployment of Wireline Services Offering Advanced Telecommunications Capability, 13 F.C.C.R. 24,- 011, 24,026-27 29-31 (1998) ("Advanced Services Order"). The high-speed services thus provided are known as "DSL-based advanced services."¹

At issue before us is the Federal Communications Commission's decision that "incumbent" local exchange carriers ("LECs"), when they provide such services, are subject to a range of special duties under the Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 ("the Act"). These duties, to which we'll return in detail later, are intended to facilitate entry into local telephone markets. They include, for example, an obligation to provide competitors "access to network elements on an unbundled basis," and to offer, at wholesale rates, any telecommunications service that the firm offers at retail to subscribers other than telecommunications carriers. See 47 U.S.C. 251(c)(3) & (4)(A).

In 1998, in response to a request for clarification from Qwest² and others, the Commission held that DSL-based advanced services constitute either "telephone exchange service" or "exchange access," and therefore were subject to the duties set out in 251(c). Advanced Services Order, 13 F.C.C.R. at 24,031-34 38-44. On Qwest's petition for review in this court, the Commission sought a remand to address some of Qwest's arguments, which we granted. See US WEST Communications, Inc. v. FCC, 1999 WL 728555 (D.C. Cir. 1999).

On remand the Commission again found incumbent LECs' provision of DSL-based advanced services to be subject to 251(c) obligations. In re Deployment of Wireline Services Offering Advanced Telecommunications Capability, 15 F.C.C.R. 385 (1999) (the "Remand Order"). It invoked two theories to support its conclusion. The first interpreted the statutory language defining incumbent LECs, and the second, as in the original order, viewed DSL-based advanced services as either "telephone exchange service" or "exchange access." Because the Commission's reading of the statutory language defining incumbent LECs is at least reasonable, we deny Qwest's petition to vacate the entire Commission order. But because the Commission's interpretation of "telephone exchange service" and "exchange access" is in essence the one that we vacated and remanded in yet another case, Bell Atlantic Telephone Cos. v. FCC, 206 F.3d 1 (D.C. Cir. 2000), we vacate and remand on that issue. We take the two theories in turn.

***

The definition of incumbent LEC. Qwest concededly provides "telephone exchange service" and "exchange access" and under the statute is thus a "LEC" in the abstract. But Qwest argues that its DSL-based advanced services can be subjected to the duties created by 251(c) only to the extent that those specific services belong to either of the categories that are the defining characteristics of a LEC. The language of the Act gives Qwest's analysis some purchase.

The Act defines incumbent LECs (naturally enough) as a subcategory of LECs. A LEC

means any person that is engaged in the provision of telephone exchange service or exchange access. Such term does not include a person insofar as such person is engaged in the provision of a commercial mobile service under section 332(c) of this title, except to the extent that the Commission finds that such service should be included in the definition of such term.

47 U.S.C. 153(26) (emphasis added). The concept of incumbency, by contrast, is based purely on history. An incumbent LEC with respect to an area is

the local exchange carrier that-(A) on February 8, 1996, provided telephone exchange service in such area; and (B)(i) on February 8, 1996, was deemed to be a member of the exchange carrier association pursuant to section 69.601(b) of the Commission's regulations (47 C.F.R. 69.601(b)); or (ii) is a person or entity that, on or after February 8, 1996, became a successor or assign of a member described in clause (i).

47 U.S.C. 251(h).

Qwest argues that the phrase in 153(26) "is engaged in the provision of" plainly bars the Commission from regulating carriers' DSL-based advanced services under 251(c) because such services are not "telephone exchange service" or "exchange access." Qwest interprets the second sentence in the LEC definition as confirming that services other than "telephone exchange service" or "exchange access," like commercial mobile services, are excluded from regulation. Under Qwest's reading, the second sentence states that "you are a local exchange carrier if you are engaged in providing telephone exchange service or exchange access, but you are not a local exchange carrier if you are engaged in providing commercial mobile services." Oral Arg. Tr. at 10. In contrast, the Commission argues that DSL-based advanced services qualify as "telecommunications services" as to which 251(c) imposes many of its duties on incumbent LECs, so that it may regulate a carrier engaged in providing such services so long as the carrier qualifies as a LEC by providing either "telephone exchange service" or "exchange access" and meets the definition of incumbent under 251(h). See Respondent's Br. at 4 n.4, 19-20; Oral Arg. Tr. at 26 (Commission counsel acknowledging that a carrier must still be a "live LEC" to be an incumbent LEC). Under the Commission's reading, the second sentence of the LEC definition indicates that a carrier can be a LEC with respect to services other than "telephone exchange service" or "exchange access": the explicit exclusion of "commercial mobile service" (subject to an exception) lends some credence to the view that Congress's premise was inclusive. Congress, the Commission reasons, must have assumed that without the exclusion such persons would have been included "insofar as" they were "engaged in" providing mobile service merely on the basis of (elsewhere) providing exchange service or access, even if mobile service itself did not fit either category.

The statutory definitions do not compel Qwest's reading. There is nothing linguistically odd about defining a set of firms subject to regulation in terms of the conduct of particular activities, and yet also regulating some other activities that are not part of the definition. And the definition does not say that a carrier is a LEC only "when" or "to the extent" that it provides the regulation-triggering services. When defining a rural telephone company Congress specified inclusion "to the extent that such entity" was performing specified services, 47 U.S.C. 153(37) (emphasis added), and similarly provided that a telecommunications carrier should be "treated" as a common carrier "only to the extent that it is engaged in providing telecommunications services," id....