Comptel v. Fed. Commc'ns Comm'n
| Decision Date | 03 November 2020 |
| Docket Number | C/w 19-1202,No. 19-1164,19-1164 |
| Citation | 978 F.3d 1325 |
| Parties | COMPTEL, d/b/a Incompas, Petitioner v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents USTelecom, the Broadband Association, Intervenor |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
David P. Murray argued the cause for petitioner COMPTEL. With him on the briefs were Thomas Jones, Mia Guizzetti Hayes, and Samuel H. Eckland, Washington, DC. Angela M. Kronenberg entered an appearance.
Enrique Gallardo argued the cause for petitioner California Public Utilities Commission. With him on the briefs were Arocles Aguilar and Helen M. Mickiewicz, San Francisco, CA. Kimberly Lippi entered an appearance.
Thaila Sundaresan, Counsel, Federal Communications Commission, argued the cause for respondents. With her on the brief were Michael F. Murray, Deputy Assistant Attorney General, U.S. Department of Justice, Robert B. Nicholson and Robert J. Wiggers, Attorneys, Thomas M. Johnson Jr., General Counsel, Federal Communications Commission, and Richard K. Welch, Deputy Associate General Counsel. Ashley S. Boizelle, Deputy General Counsel, Jacob M. Lewis, Associate General Counsel, and James M. Carr, Counsel, entered appearances.
Katherine C. Cooper argued the cause for intervenor USTelecom in support of respondents. With her on the brief was Scott H. Angstreich, Washington, DC.
Before: Srinivasan, Chief Judge, Tatel, Circuit Judge, and Silberman, Senior Circuit Judge.
Local Exchange Telephone Carriers (hereinafter "incumbents") at one time had monopoly positions. In 1996, Congress, in order to foster competition, obliged incumbents to sell to Competitive Local Exchange Carriers (hereinafter "insurgents") their voice services for resale to customers.1 The maximum rate the incumbents could charge was their wholesale price. Congress also obliged the incumbents to lease the use of network elements (called "unbundling") at cost—in case the insurgents didn't want the whole service. But the FCC determined that incumbents no longer dominated the telecommunications market because of the plethora of competitor modes of voice transmission. Accordingly, the FCC exercised its statutory authority to forbear from enforcing the wholesale pricing requirement and one element of the unbundling requirement. The insurgents contest the propriety of the FCC's forbearance of the wholesale price requirements. California's Public Utility Commission (CPUC) brings a separate challenge to the forbearance of the unbundling requirement. We reject both petitions.
This case involves two statutory provisions related to legacy wired telephone services (Plain Old Telephone Service).2 As noted, the first requirement is for incumbents to "unbundle" network elements. It requires incumbents to lease the use of specified elements of their networks—at cost-based rates—to entrants into local telephone markets, which we refer to as insurgents. These competitors could then use the leased network elements in combination with their own facilities to provide retail services. Of particular importance in this litigation is a certain type of network element known as Analog Loops, which are copper
wires that provide connections between the incumbent's switches and the customer premises.
The Telecommunications Act vests the Commission with the unusual authority and responsibility to forbear from enforcing provisions of the Act and related regulations when they are no longer necessary for competition, consumer welfare, or the public interest. Verizon v. FCC , 770 F.3d 961, 964 (D.C. Cir. 2014). The Commission must forbear from applying a statutory provision or regulation if the Commission determines:
47 U.S.C. § 160(a). The public interest element is clarified by 47 U.S.C. § 160(b) which explains that:
In making the [public interest determination], the Commission shall consider whether forbearance from enforcing the provision or regulation will promote competitive market conditions, including the extent to which such forbearance will enhance competition among providers of telecommunications services.
The Commission's forbearance authority is further informed by § 1302(a) which states:
The Commission ... shall encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans ... by utilizing, in a manner consistent with the public interest, convenience, and necessity ... regulatory forbearance ... or other regulating methods that remove barriers to infrastructure investment.
USTelecom, a national trade association representing incumbents, asked the Commission to forbear from enforcing the unbundling requirement with respect to Analog Loops and the avoided-cost resale requirement in relation to TDM over copper
wires. USTelecom's forbearance request was limited to legacy telecommunications networks. The FCC had already forborne from many unbundling requirements for next-generation telecommunications networks, such as those that use fiber. See, e.g. , 2015 USTelecom Forbearance Order , 31 FCC Rcd 6157 ; Triennial Review Order , 18 FCC Rcd 16978, 16984 ¶ 3 (2003). Similarly, avoided-cost resale requirements generally do not apply to next-generation voice services, such as Voice Over Internet Protocol (VoIP)-based services. As opposed to TDM, VoIP refers to a method of transmitting and receiving voice signals through an internet-based connection, such as receiving voice services through one's internet provider directly or through "over-the-top" applications that use the internet, such as Google Voice, Skype, or Zoom.
USTelecom's main argument in support of its forbearance petition was that the market for voice services had become highly competitive. It claimed that next-generation voice service providers had supplanted the incumbents’ offerings and were the new market leaders. Thus, the statutory requirements were no longer necessary to discipline prices and were allegedly harmful because—by allowing insurgents to operate on incumbents’ legacy networks at reduced rates—the regulations effectively subsidized insurgents’ TDM copper
offerings and thus slowed the transition to next-generation networks.
Several commenters opposed the forbearance petition before the agency. They argued that the competition for voice services was neither as significant nor as geographically widespread as US Telecom had alleged. Some asserted that business and government customers continue to demand TDM copper
offerings because of its greater reliability due to its distinctive line-powered feature—unlike other types of voice services, phones using TDM copper can operate without an external power source or battery. In this regard, several state regulators raised concerns about how forbearance would affect the 9-1-1 system and questioned whether forbearance would decrease the availability of TDM copper and thus threaten public safety in emergency situations. Other opponents asserted that, because forbearance would restore incumbents to a monopoly position at least in TDM copper, forbearance would actually discourage incumbents—if not insurgents—from investing in next-generation networks.
The Commission granted the requested forbearance from enforcement of both the unbundling requirement for Analog Loops and wholesale pricing requirement for TDM over copper
.4
In its Order—actually a Rule—the FCC found that incumbents face significant and increasing intermodal competition for voice services. While they once controlled virtually all of the market for voice services, the promulgation of new modes of voice communication—including mobile phones, voice services through cable and fiber providers, and other VoIP voice services—have created a competitive market. Mobile phones are now nearly ubiquitous, though they can be subject to gaps in wireless coverage and rely on batteries to remain operable. Cable and fiber providers offer voice services to homes and businesses through their wired connections instead of through the traditional copper
telephone network. But unlike TDM copper, cable and fiber voice services generally cannot be used when the power goes out unless there is a battery back-up. Other "over-the-top" VoIP services, like Google Phone, Skype, or Zoom, make use of an existing internet connection to provide voice services, and their reliability depends on the reliability of the underlying internet connection.
Rather than the near-complete monopoly that incumbents had as recently as 1996, now incumbents account for just 12% of all voice connections (both wired and mobile voice plans) and 37% of all wireline telephone connections (the subset of all voice connections that are physical rather than wireless—e.g. , TDM copper
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...carriers" compete with legacy "incumbent carriers," who are descendants of AT&T's broken-up monopoly. See generally Comptel v. FCC , 978 F.3d 1325 (D.C. Cir. 2020). Typically, the latter own the local phone network, while the former lease or purchase at wholesale the use of the incumbent's ......
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COMPTEL v. Federal Communications Commission.
...authority was affirmed. (32) Accordingly, the court denied Incompas' and CPUC's petitions for review. (33) (1.) COMPTEL v. FCC, 978 F.3d 1325, 1330-31 (D.C. Cir. (2.) See id. at 1335-36. (3.) Id. at 1328; see also 47 U.S.C. [section] 160(a); 47 U.S.C. [section] 160(b) (clarifying the public......