Earthlink, Inc. v. F.C.C.

• Citation: 462 F.3d 1
• Decision Date: 15 August 2006
• Docket Number: No. 05-1087.,05-1087.
• Parties: EARTHLINK, INC., Petitioner v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents BellSouth Corporation, et al., Intervenors.
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

Page 1

462 F.3d 1

EARTHLINK, INC., Petitioner v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents BellSouth Corporation, et al., Intervenors.

No. 05-1087.

United States Court of Appeals, District of Columbia Circuit.

Argued May 9, 2006.

Decided August 15, 2006.

On Petition for Review of an Order of the Federal Communications Commission.

Mark J. O'Connor argued the cause for petitioner. With him on the briefs were Donna N. Lampert and Jennifer L. Phurrough.

Nandan M. Joshi, Counsel, Federal Communications Commission, argued the cause for respondent. On the brief were Thomas O. Barnett, Assistant Attorney General, U.S. Department of Justice, Catherine G. O'Sullivan and Nancy C. Garrison, Attorneys, Samuel L. Feder, General Counsel, Federal Communications Commission, Jacob M. Lewis, Associate General Counsel, John E. Ingle, Deputy Associate General Counsel, and Laurence N. Bourne, Counsel.

Scott H. Angstreich argued the cause for intervenors BellSouth Corporation, et al. in support of the respondent. With him on the briefs were Michael K. Kellogg, Mark L. Evans, Geoffrey M. Klineberg, Sean A. Lev, Michael E. Glover, Edward Shakin, James D. Ellis, Gary L. Phillips, and Bennett L. Ross.

Before: SENTELLE and BROWN, Circuit Judges, and EDWARDS, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge BROWN.

BROWN, Circuit Judge.

Traditionally (if that can be said of anything in the information age), many internet users lumbered along via dial-up connections over standard copper phone lines. Increasingly, however, broadband internet service is becoming available, providing significantly higher access speeds. Two of the most widespread methods of delivering broadband service are digital subscriber line (DSL), which utilizes the high-frequency portion of copper lines, and cable modem service. Other technologies, such as fiber optics, are steadily gaining ground.

In the case before us, the Federal Communications Commission (FCC) agreed not to require the Bell Operating Companies (BOCs) to provide their competitors with "unbundled" access to certain fiber-based network facilities. See 47 U.S.C. § 271(c)(2)(B). EarthLink, Inc., an internet service provider that benefits from such unbundling, challenges the FCC's order. Persuaded that the agency's interpretation and application of the statutory scheme are permissible, we deny the petition for review.

I

Until the 1990s, local telephone companies operated as monopolies. See AT & T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 371, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999); AT&T Corp. v. FCC, 220 F.3d 607, 610 (D.C.Cir.2000). The local exchange carriers in a given area owned "the local loops (wires connecting telephones to switches), the switches (equipment directing calls to their destinations), and the transport trunks (wires carrying calls between switches) that constitute a local exchange network." Iowa Utils. Bd., 525 U.S. at 371, 119 S.Ct. 721. Congress passed the Telecommunications Act of 1996, Pub.L. No. 104-104, 110 Stat. 56 ("the Act") (amending the Communications Act of 1934, 47 U.S.C. § 151 et seq.), to "promote competition and reduce regulation in order to secure lower prices and higher quality services for American telecommunications consumers and encourage the rapid deployment of new telecommunications technologies." U.S. Telecom Ass'n v. FCC, 290 F.3d 415, 417 (D.C.Cir.2002) (USTA I) (quoting Act pmbl.) (internal quotation marks omitted).

Under 47 U.S.C. § 251, the FCC has authority to require incumbent local exchange carriers (ILECs) to provide access to their network facilities and capabilities on an "unbundled" basis to competitive local exchange carriers (CLECs). Id. § 251(c)(3), (d)(2). In determining what unbundled network elements must be made available, the FCC considers "at a minimum, whether . . . the failure to provide access . . . would impair the ability of the [CLEC] to provide the services that it seeks to offer." Id. § 251(d)(2)(B); see id. § 153(29) (defining "network element" as "a facility or equipment used in the provision of a telecommunications service").

The Act also contains provisions applicable specifically to the BOCs (a subset of ILECs), allowing them to enter long distance markets forbidden to them under the antitrust consent decree that broke up AT & T in the early 1980s. See AT&T, 220 F.3d at 610-12. Under 47 U.S.C. § 271, BOCs seeking to provide certain long-distance services—namely, in-region "inter-LATA services"¹—must obtain permission from the FCC, id. § 271(d)(1), premised upon, among other things, the BOC's compliance with a "[c]ompetitive checklist," id. § 271(c)(2)(B). Checklist items four through six and ten require BOCs to provide unbundled access to local loops, local transport, local switching, and call-related databases. Id. § 271(c)(2)(B)(iv)-(vi), (x). These particular obligations are independent of any unbundling required by § 251. U.S. Telecom Ass'n v. FCC, 359 F.3d 554, 588 (D.C.Cir.2004) (USTA II); cf. 47 U.S.C. § 271(c)(2)(B)(ii) (incorporating by reference the unbundling requirements of § 251(c)(3)).

Notwithstanding the foregoing, under 47 U.S.C. § 160, the FCC must forbear from applying a given provision of the Communications Act to a telecommunications carrier "in any or some of its ... geographic markets," if three conditions are met: (1) enforcement is not necessary to ensure that charges and practices are just, reasonable and non-discriminatory; (2) enforcement "is not necessary for the protection of consumers"; and (3) forbearance "is consistent with the public interest." Id. § 160(a).² As to the third prong, the FCC "shall consider whether forbearance ... will promote competitive market conditions, including the extent to which such forbearance will enhance competition among providers of telecommunications services." Id. § 160(b). Telecommunication carriers may petition for forbearance and, if the FCC declines to act within a year (subject to a 90-day extension), the petition is deemed granted as a matter of law. Id. § 160(c).

Furthermore, section 706 of the Act sets forth the following overarching direction:

The [FCC] ... shall encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans . . . by utilizing ... regulatory for bearance, measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment.

Act § 706(a) (emphasis added) (reproduced at 47 U.S.C. § 157 note); see Act § 706(c)(1) (defining "advanced telecommunications capability" as "high-speed, switched, broadband telecommunications capability that enables users to originate and receive high-quality voice, data, graphics, and video telecommunications using any technology").

A

In 2003, in its Triennial Review Order, the FCC attempted to implement the unbundling requirements of § 251(c)(3). Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers, 18 F.C.C.R. 16,978 (2003) (Triennial Review Order).³ In pertinent part, the agency relieved those obligations on a nationwide basis with respect to certain new fiber broadband network elements. Specifically, the FCC did not require ILECs unbundle fiber-to-the-home (FTTH) loops (i.e., loops extending from the ILEC's central office all the way to the customers' premises) in places where fiber loop plant had not previously existed: "greenfield" situations (i.e., new residential areas where no lines had existed) and "overbuild" situations (i.e., locations where only copper loop plant was in place). Id. at 17,142. In the latter, however, if the ILEC decides to retire the incumbent copper loops, it must then make its fiber loops available—albeit only for narrowband, not broadband uses. Id. The FCC also declined to require unbundling as to the "next generation network, packetized capabilities" of hybrid loops (i.e., loops comprised only partially of fiber) and "packet-switching." Id. at 17,149, 17,321.

In the agency's view, balancing the costs and benefits of unbundling, with particular attention to incentivizing new fiber investment by both ILECs and CLECs, the scales tipped against mandating unbundling. See, e.g., id. at 17,121-22, 17,141-53. The FCC emphasized that its "obligation to ensure the deployment of advanced telecommunications capability under section 706 warrants different approaches with regard to existing [copper] loop plant and new [fiber] loop plant." Id. at 17,126.

In USTA II, while vacating much of the Triennial Review Order, we upheld the FCC's nationwide decision to refrain from requiring § 251 unbundling as to the fiber broadband elements described above. USTA II, 359 F.3d at 578-87. The FCC had reasonably determined, for example, that "any damage to broadband competition from denying unbundled access to the broadband capacities of hybrid loops is likely to be mitigated by the availability of loop alternatives or intermodal competition." Id. at 582. As to the latter, we noted that cable companies, having roughly a 60% share of the nationwide broadband market, provided "robust intermodal competition" to ILECs, which occupied a secondary market position. Id.

Furthermore, we held that the FCC "reasonably interpreted § 251(c)(3) to allow it to withhold unbundling orders, even in the face of some impairment, where such unbundling would pose excessive impediments to infrastructure investment," id. at 580, because "[s]ection 706(a) identifies one of the Act's goals beyond fostering competition piggy-backed on ILEC facilities, namely, removing barriers to infrastructure investment," id. at 579. Even if the FCC's judgment "entails increasing consumer costs today in order to stimulate technological innovations," we opined, "there is nothing in the Act barring such trade-offs." Id. at 581. That is, FCC may weigh the "costs of unbundling" (e.g., investment disincentives)...