Bellsouth Telecommc'ns Inc v. The Tenn. Regulatory Auth., 3:08-00059

• Decision Date: 25 February 2011
• Docket Number: NO. 3:08-00059,3:08-00059
• Parties: BELLSOUTH TELECOMMUNICATIONS, INC., d/b/a AT&T Tennessee, Plaintiff, v. THE TENNESSEE REGULATORY AUTHORITY, et al., Defendant.
• Court: U.S. District Court — Middle District of Tennessee

BELLSOUTH TELECOMMUNICATIONS, INC., d/b/a AT&T Tennessee, Plaintiff,

v.THE TENNESSEE REGULATORY AUTHORITY, et al., Defendant.

NO. 3:08-00059

UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTIRCT OF TENNESSEE

NASHVILLE DIVISION

Date: February 25, 2011

JUDGE HAYNES

MEMORANDUM

Plaintiff, Bellsouth Telecommunications, Inc. d/b/a AT&T Tennessee ("AT&T"), filed this action under 28 U.S.C. § 1331, 28 U.S.C. § 1343(a)(3), and 47 U.S.C. § 252(e)(6) against the Defendants: the Tennessee Regulatory Authority, Eddie Roberson, Sara Kyle, and Ron Jones in their official capacities as TRA members. Plaintiff challenges Defendants' authority to issue certain orders under § 271 of the Federal Telecommunications Act of 1996 ("Act") and seeks declaratory and injunctive relief against the Defendants to enjoin the enforcement of those Orders.

This action arises out of two federal and state administrative proceedings in 2004. In a prior proceeding, Plaintiff sought to address recent decisions of the Federal Communications Commission ("FCC")¹ and the District of Columbia Circuit on the FCC's implementation of the Federal Telecommunications Act of 1996 ("Act"). 47 U.S.C. § 151, et seq. Defendant TRA instituted a proceeding in 2004 to address the effect of the FCC's Triennial Review Order ("TRO") and the D.C. Circuit's decision on existing interconnection agreements between Plaintiff and competing carriers. Subsequently, the TRA expanded its proceeding to incorporate the determinations in the FCC's 2005 Triennial Review Remand Order. On November 28, 2007, the TRA issued its final Order requiring Plaintiff to grant access to a line splitter and fiber-optic cable and disallowed Plaintiff's imposition of termination fees. Order, No. 04-00381 (TRA Nov. 28, 2007).

After this action was filed, there was a related proceeding before the FCC that resulted in a stay of these proceedings. Plaintiff later filed a notice of its withdrawal from that proceeding. The Court ordered a filing of the administrative record before the TRA and a filing of briefs on the parties' claims and contentions.

The primary issue here involves the TRA's regulatory authority under the Federal Telecommunications Act of 1996, 47 U.S.C § 151 et seq., and the decisional law interpreting the Act since the TRA deliberated on these issues in 2006. A brief background of the Act and its historical evolution provide an important context to review TRA's decisions.²

Historically, States regulated local telephone service within its territorial limits, but that regulation created local monopolies that in 1982 resulted in the divestiture by AT&T of its subsidiaries, the Bell Operating Companies ("BOCs"), that were precluded from entering the long-distance market. United States v. Am. Tel. & Tel, Co.. 552 F. Supp. 131, 222-25 (D.D.C. 1982), aff'd sub nom. Maryland v. United States, 460 U.S. 1001 (1983); see also SBC Commc'ns, Inc. v. FCC, 138 F.3d 410, 412 (D.C. Cir. 1998) ("Divestiture was called for, in large part, because it was thought that a corporation that enjoyed a monopoly on local calls would ineluctably leverage that bottleneck control in the interexchange (long distance) market."). The AT&T consent decree contemplated a dual telephone service market with new entrants in the long-distance market, and the BOCs as local service monopolies.

In 1996, Congress enacted the Telecommunications Act of 1996, Pub.L. 104-104, 110 Stat. 56, codified at 47 U.S.C. § 151 et seq, (the "Act").

[The Act] sought to foster a competitive market in telecommunications. To enable new firms to enter the field despite the advantages of the incumbent local exchange carriers ("ILECs"), the Act gave the Federal Communications Commission broad powers to require ILECs to make "network elements" available to other telecommunications carriers, id. §§251 (c)(3), Cd), most importantly the competitive local exchange carriers ("CLECs"). The most obvious candidates for such obligatory provision were the copper wire loops historically used to carry telephone service over the "last mile" into users' homes. But Congress left to the Commission the choice of elements to be "unbundled, " specifying that in doing so it was to

consider, at a minimum, whether... the failure to provide access to such network elements would impair the ability of the telecommunications carrier seeking access to provide the services that it seeks to offer.

Id. § 251(d)(2) (emphasis added).

United States Telecomm. Ass'n v. FCC, 359 F.3d 554, 561 (D.C. Cir. 2004).

Sections 251, 252 and 271 of the Act created a role for state regulatory agencies and allowed BOCs to compete in the long distance market.

Sections 251 and 252 of the Act require former monopoly local carriers to enter into interconnection agreements that provide the new competitors with access to some of their telecommunications components on an unbundled basis and on terms favorable to the competitors. Meanwhile, Section 271 allows local phone companies that used to be subsidiaries of AT&T previously barred by an antitrust decree from entering the long-distance market, to supply long-distance services if their interconnection agreements contain certain access provisions. The Act explicitly authorizes state commissions to play a crucial, but restricted, role in this process, while reserving the power to administer various parts of the Act exclusively to the Federal Communications Commission.

Qwest Corp. v. Arizona Corp. Comm'n, 567 F.3d 1109, 1111 (9th Cir. 2009).

The Sixth Circuit described the Act's principal purpose to promote competition through federal and state regulation.

[The Act] has been called one of the most ambitious regulating programs operating under "cooperative federalism, " and creates a regulatory framework that gives authority to state and federal entities in fostering competition in local telephone markets. We have often reiterated the Act's purposes, which are ending local telephone company monopolies and promoting competition in local telephone markets.

Michigan Bell Telephone Co. v, MCIMetro Access Transmission Services, Inc., 323 F.3d 348 (6th Cir. 2002) (internal citation omitted).

Congress required ILECs to offer their services to competitors or new entrants at wholesale rates. Forty seven U.S.C. § 251(c)(4) requires ILECs to interconnect with new entrants that elected to construct their own networks. "Interconnection" allows the customers of the competitor to communicate with the incumbent provider's customers. Without interconnection and the associated reciprocal compensation mechanisms, a competitor's network would not be useful to potential customers. Congress also required several elements of ILECs local networks (including the features, functions and capabilities of these elements) to be leasedby competitors on an "unbundled" basis. 47 U.S.C. § 251(e)(3) and (d)(2). Congress authorized state regulatory commissions to review and administer the interconnection agreements between ILECs and CLECs. Congress also authorized state commissions to impose additional state regulatory requirements consistent with the 1996 Act or FCC rules and regulations. 47 U.S.C. §§ 251(d)(3); 252(e)(3). The 1996 Act granted state commissions authority to arbitrate interconnection agreement disputes between an ILEC and a CLEC. 47 U.S.C. § 252(b). If a party disagrees with the state commission's decision, the aggrieved party could seek review in the federal district court. 47 U.S.C. § 252(e)(6).

Under the Act, the FCC promulgated regulations that caused extensive litigation, and in the interim, state commissions, such as the TRA, interpreted and implemented the Act under FCC rules and court decisions. The FCC's first regulations were issued in August of 1996 in the First Report and Order. In re Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, 11 FCC Red. 15499 (1996). In January 1999, the Supreme Court determined that certain FCC regulations were unlawful and remanded the regulations to the FCC for further proceedings. AT&T Corp v. Iowa Utilities Bd., 525 U.S. 366 (1999).

In November 1999, the FCC issued new regulations and on May 24, 2002, the D.C. Circuit held that a part of those regulations were unlawful and remanded issues to the FCC for further proceedings. United States Telecom Ass'n v. FCC. 290 F.3d 415 (2002) ("USTA I"). On August 21, 2003 the FCC issued its Triennial Review Order ("TRO"), In the matter of Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers, 18 FCC Red. 16978 (2003), with new regulations, but the D.C. Circuit vacated certain portions of the TRO regulations. United States Telecom Ass'n v. FCC. 359 F.3d 554 (2004) ("USTA II"). After the remand in 2005, the FCC issued its current set of unbundling rules in the TRO, Orderon Remand, In re Unbundled Access to Network Elements, 20 FCC Red. 2533, 2005 WL 289015 (Feb. 4, 2005), that were affirmed in 2006. Covad Comms. Co. v. FCC, 450 F.3d 528 (D.C. Cir. 2006).

The Act specifically states that "this Act and the amendments made by this Act shall not be construed to modify, impair, or supersede Federal, State, or local law unless expressly provided in such Act or amendments." Telecommunications Act of 1996, § 601(c)(1), 47 U.S.C.A. § 152 note (1997). Congress included this provision to prevent "affected parties from asserting that the bill impliedly pre-empts other laws." House Conference Report No. 104-458, 104th Cong., 2d Sess., 201, reprinted in 1996 U.S.C.C.A.N. 124, 215. With specific reference to the interconnection issue, the Act also states that it should not be construed to prohibit state commissions from enforcing or promulgating regulations or from imposing additional requirements that "are necessary to further competition in the provision of telephone exchange service or exchange access" as long as they are "not inconsistent" with the Act. See 47 U.S.C. § 261(b), (c) (1997).

The TRA's Order at issue here relied upon a 2006 version...