Bellsouth Telecom. v. Mcimetro Access Transmission

• Decision Date: 10 January 2002
• Docket Number: No. 00-12810.,No. 00-12809.,00-12809.,00-12810.
• Citation: 278 F.3d 1223
• Court: U.S. Court of Appeals — Eleventh Circuit
• Parties: BELLSOUTH TELECOMMUNICATIONS, INC., Plaintiff-Counter-Defendant-Appellant-Cross-Appellee, United States of America, Intervenor-Appellant, v. MCIMETRO ACCESS TRANSMISSION SERVICES, INC., Defendant-Counter-Claimant-Appellee, Georgia Public Service Commission, Robert B. Baker, Jr., in his official capacity as Chairman, Lauren "Bubba" McDonald, in his official capacity as Commissioner, Robert Durden, in his official capacity as Commissioner, Stancil O. Wise, in his official capacity as Commissioner, Defendants-Appellees-Cross-Appellants. BellSouth Telecommunications, Inc., Plaintiff-Counter-Defendant-Appellant-Cross-Appellee, United States of America, Intervenor-Appellant, v. WorldCom Technologies, Inc., a successor in interest to MFS Intelenet of Georgia, Inc., Defendant-Counter-Claimant-Appellee, E.Spire Communications, Inc., formerly known as American Communications Services, Inc., Nextlink Georgia, Inc., Teleport Communications Atlanta, Inc., Defendants-Appellees, Georgia Public Service Commission, Robert B. Baker, Jr., in his official capacity as Chairman, Lauren "Bubba" McDonald, in his official capacity as Commissioner, Robert Durden, in his official capacity as Commissioner, Stancil O. Wise, in his official capacity as Commissioner, Defendants-Appellees-Cross-Appellants, ICG Telecom Group, Inc., Defendant.

278 F.3d 1223

BELLSOUTH TELECOMMUNICATIONS, INC., Plaintiff-Counter-Defendant-Appellant-Cross-Appellee United States of America, Intervenor-Appellant, v. MCIMETRO ACCESS TRANSMISSION SERVICES, INC., Defendant-Counter-Claimant-Appellee Georgia Public Service Commission, Robert B. Baker, Jr., in his official capacity as Chairman, Lauren "Bubba" McDonald, in his official capacity as Commissioner, Robert Durden, in his official capacity as Commissioner, Stancil O. Wise, in his official capacity as Commissioner, Defendants-Appellees-Cross-Appellants BellSouth Telecommunications, Inc., Plaintiff-Counter-Defendant-Appellant-Cross-Appellee United States of America, Intervenor-Appellant, v. WorldCom Technologies, Inc., a successor in interest to MFS Intelenet of Georgia, Inc., Defendant-Counter-Claimant-Appellee, E.Spire Communications, Inc., formerly known as American Communications Services, Inc., Nextlink Georgia, Inc., Teleport Communications Atlanta, Inc., Defendants-Appellees, Georgia Public Service Commission, Robert B. Baker, Jr., in his official capacity as Chairman, Lauren "Bubba" McDonald, in his official capacity as Commissioner, Robert Durden, in his official capacity as Commissioner, Stancil O. Wise, in his official capacity as Commissioner, Defendants-Appellees-Cross-Appellants, ICG Telecom Group, Inc., Defendant.

No. 00-12809.

No. 00-12810.

United States Court of Appeals, Eleventh Circuit.

January 10, 2002.

Michael E. Brooks, Robert P. Marcovitch, Kilpatrick, Stockton, LLP, Robert David Powell, Atlanta, GA, Michael K. Kellogg, Sean A. Lev, Aaron M. Panner, Kellogg, Huber, Hansen, Todd & Evans, P.L.L.C., Mark B. Stern, Charles W. Scarborough, Dept. of Justice, App. Staff. Civ. Div., Washington, DC, for BellSouth Telecommunications, Inc. and United States.

John J. Hamill, Jenner & Block, Chicago, IL, for MCImetro Access Transmission Services, Inc. and WorldCom Technologics, Inc.

Daniel Stephen Walsh, Office of Consumer Affairs, Atlanta, GA, for Georgia Public Service Commission.

Thomas K. Bond, c/o Georgia Public Serv. Com'n, Atlanta, for Baker and Durden.

John W. Sandifer, Gerry, Friend & Sapronov, LLP, Atlanta, GA, for Nextlink Georgia.

Suzanne W. Ockleberry, Atlanta, GA, for Teleport Communication Atlanta, Inc.

Teresa Wynn Roseborough, Haley B. Riddle, David Isaac Adelman, Carla W. McMillian, Sutherland, Asbill & Brennan, LLP, Atlanta, GA, Darryl M. Bradford, Jenner & Block, Chicago, IL, Harold D. Melton, Georgia Dept. of Law, Charles V. Gerkin, Jr., Atlanta, GA, Newton M. Galloway, Dean Richard Fuchs, Smith, Galloway, Lyndall & Fuchs, LLP, for Appellees.

C. LeeAnn McCurry, William N. Withrow, Jr., Troutman Sanders, Atlanta, GA, for Teleport Communication Atlanta, Inc., Intervenor.

Appeals from the United States District Court for the Northern District of Georgia.

Before TJOFLAT, BARKETT and POLITZ^*, Circuit Judges.

TJOFLAT, Circuit Judge:

In these consolidated appeals, we are asked to review two orders of the Georgia Public Service Commission (the "GPSC"), which interpreted contracts between telecommunications carriers. The contracts were interconnection agreements mandated by the federal Telecommunications Act of 1996, 110 Stat. 56, 56 (1996). The United States District Court for the Northern District of Georgia, believing that the GPSC had the authority to interpret these agreements under that statute, affirmed the orders. We find no statutory authority for the action that the GPSC took in these cases and therefore reverse.

I.

A.

When telephone companies became part of the American scene in the early part of the twentieth century, local telephone companies competed with one another for customers. See H.R. Rep. No. 101-204, at 50 (1996), reprinted in 1996 U.S.C.C.A.N. 10, 13. Competing telephone companies did not interconnect their systems; in order for a customer of one company to call a customer of another company, he had to subscribe to the other company. Customers found this scenario unsatisfactory, and eventually a company emerged in each locality that provided all of the local service. Id. Thus, when Congress passed the first major telecommunications law, the Communications Act of 1934, local telephone service was a "natural monopoly." AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 371, 119 S.Ct. 721, 726, 142 L.Ed.2d 835 (1999); Stephen Breyer, Regulation and Its Reform 291 (1982).

A natural monopoly exists, "[i]f the entire demand within a relevant market can be satisfied at lowest cost by one firm rather than by two or more." Richard A. Posner, Natural Monopoly and Its Regulation, 21 Stan. L. Rev. 548, 548 (1969). The notion that local telephone service was a natural monopoly was driven in large part by technology: in 1934, local telephone service required local exchanges and loops consisting of cables under the ground or wires strung on telephone poles, and competition would have required the inconvenience and duplication involved in having several exchanges and numerous extra sets of wires and poles. Breyer at 291-92. In the Communications Act of 1934, Congress did not try to break up the monopolies this technology created, but rather tried to harness it through regulation. As one leading treatise put it, "[t]he 1934 Communications Act presumed that [the] end-to-end monopoly would be shadowed by end-to-end regulation." Peter W. Huber et al., Federal Telecommunications Law § 2.1.3 (2d ed.1999). The regulation would be provided by the Federal Communications Commission (the "FCC").

The Communications Act gave the FCC the responsibility of regulating interstate and foreign commerce in wire and radio communication. Communications Act of 1934 §§ 1, 4-5, 47 U.S.C. §§ 151, 154-55 (1991). The Act did not grant the FCC jurisdiction to regulate local telephone service, however. Instead, the Act expressly provided that local telephone service would fall under the exclusive jurisdiction of state commissions. Communications Act of 1934, ch. 652, § 221(b), 48 Stat. 1064, 1080, repealed by Telecommunications Act of 1996, Title VI, § 601(b)(2), Pub. L. No. 104-104, 110 Stat. 56, 143.¹ Free from federal regulation, "[s]tates typically granted an exclusive franchise in each local service area to a local exchange carrier (LEC), which owned, among other things, 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." AT&T Corp., 525 U.S. at 371, 119 S.Ct. at 726.

B.

As time passed, the paradigmatic underpinnings of this regulatory structure began to crumble. Technological developments, like optic fiber transmission and mobile telephones, created the possibility that local telephone service might be provided without switches or loops. Breyer at 292; Huber et al. § 2.1.2.² Perhaps more importantly, policymakers increasingly saw market competition as a more efficient method of providing public services than state regulation and sought deregulation of these services in conjunction with this mindset. See, e.g., Huber § 2.1.2 ("Policy makers have also come to recognize that even if markets are less than perfectly competitive, regulation is often ineffectual or worse because of inadequate information about the true costs of efficient production."). Congress consequently enacted the Federal Telecommunications Act of 1996 (the "Act") "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." Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56, 56 (1996).

To effectuate its goal of promoting competition in local telephone service, Congress needed to do more than simply remove all regulatory barriers to market entry. After all, local telephone service, as mentioned, is a natural monopoly. Congress, therefore, had to take affirmative steps within the 1996 Act to counteract those unique elements of telephony that deter competition, specifically the high, fixed initial cost and the need for all customers to interconnect with one another. Its solution was the establishment of a complex regulatory regime in which incumbent LECs ("ILECs") would share access to loops and exchanges with competing LECs ("CLECs").

The centerpieces of this regime are sections 251 and 252 of the Act, codified at 47 U.S.C. §§ 251-252. Section 251 imposes various duties on all LECs, including the duty not to prohibit the resale of its telecommunication services; the duty to provide number portability; the duty to provide dialing parity to other LECs; the duty to afford other LECs access to poles, ducts, conduits, and rights-of-way; and most significantly, the duty to establish reciprocal compensation arrangements for the transport and termination of telecommunications. 47 U.S.C. § 251(b). Section 251 imposes additional obligation on ILECs. Specifically for the purpose of this case, an ILEC is required to interconnect its network with that of any requesting telecommunications carrier "on rates, terms, and conditions that are just, reasonable, and nondiscriminatory." 47 U.S.C. §§ 251(c)(2).³ ILECs also have a duty to negotiate in good faith the agreements establishing the rates, terms, and conditions of these interconnections. 47 U.S.C. § 251(c)(1).

The exact process for establishing these agreements is detailed in section 252 of the Act, now 47 U.S.C. § 252. Agreements can be formed in two different ways: voluntary negotiation or compulsory arbitration. After an ILEC receives a request from a CLEC for interconnection, the two parties may enter into a voluntary agreement to effectuate the transaction. 47 U.S.C. § 252(a)(1). If the parties so request, a mediator can be provided by the "State commission" to help negotiations. 47 U.S.C. § 252(a)(2).⁴ During the period from the...