MCI v. Public Service Comm.

• Decision Date: 20 June 2000
• Docket Number: No. 99-4203,99-4203
• Citation: 216 F.3d 929
• Parties: (10th Cir. 2000) MCI TELECOMMUNICATIONS CORPORATION, a Delaware corporation, Plaintiff - Appellee, US WEST COMMUNICATIONS, INC., a Colorado corporation, Plaintiff-Counter-Defendant - Appellee, v. PUBLIC SERVICE COMMISSION OF UTAH; STEPHEN F. MECHAM; CONSTANCE B. WHITE; CLARK D. JONES, Commissioners of the Public Service Commission of Utah, Defendants - Appellants, and AT&T COMMUNICATIONS OF THE MOUNTAIN STATES, INC., a New York corporation, Defendant, UNITED STATES OF AMERICA, Defendant-Intervenor - Appellee
• Court: U.S. Court of Appeals — Tenth Circuit

Page 929

216 F.3d 929 (10th Cir. 2000)

MCI TELECOMMUNICATIONS CORPORATION, a Delaware corporation, Plaintiff - Appellee, US WEST COMMUNICATIONS, INC., a Colorado corporation, Plaintiff-Counter-Defendant - Appellee, v. PUBLIC SERVICE COMMISSION OF UTAH; STEPHEN F. MECHAM; CONSTANCE B. WHITE; CLARK D. JONES, Commissioners of the Public Service Commission of Utah, Defendants - Appellants and AT&T COMMUNICATIONS OF THE MOUNTAIN STATES, INC., a New York corporation, Defendant, UNITED STATES OF AMERICA, Defendant-Intervenor - Appellee.

No. 99-4203

UNITED STATES COURT OF APPEALS, TENTH CIRCUIT

June 20, 2000

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH (D. Ct. No. 98-CV-490)

[Copyrighted Material Omitted] Sandy J. Mooy, Utah Public Service Commission (Annina Mitchell, Assistant Attorney General, with her on the briefs), Salt Lake City, Utah, appearing for Defendants-Appellants.

Mark B. Stern, Attorney (William B. Schultz, Acting Assistant Attorney General, David J. Schwendiman, United States Attorney, Susan L. Pacholski, Attorney, Christopher J. Wright, General Counsel, John E. Ingle, Deputy Associate General Counsel, and Susan L. Launer, Deputy Associate General Counsel, with him on the brief), Appellate Staff Civil Division, Department of Justice, Washington, DC, appearing for the Defendant-Intervenor-Appellee.

Paul M. Smith, Jenner & Block, Washington, DC (Thomas F. O'Neil, III and William Single, IV, MCI Worldcom, Inc., Washington, DC, J. Alex Ward, Jenner & Block, Washington, DC, counsel for MCI Telecommunications Corp. and MCImetro Access Transmission Services, Inc.; Phillip L. Douglass, US West Law Department, Denver, Colorado, and Kara Sacilotto, Perkins, Coie LLP, Washington, DC, counsel for US West Communications, Inc.; Daniel Waggoner, Davis, Wright, Tremaine, LLP, Seattle, Washington, Thomas Pelto and Rebecca DeCook, AT&T Communications, Denver, Colorado, counsel for AT&T Communications of the Mountain States, Inc., with him on the brief), appearing for Appellees.

Before TACHA, BALDOCK, and BRORBY, Circuit Judges.

TACHA, Circuit Judge.

Defendants-appellants the Utah Public Service Commission (UPSC) and the individual commissioners appeal the district court's denial of their motion to dismiss on Eleventh Amendment immunity grounds. Defendants also contest the district court's conclusion that it has jurisdiction to consider US West's takings claim. We exercise jurisdiction over this interlocutory appeal pursuant to 28 U.S.C. 1291 and the collateral order doctrine, see Puerto Rico Aqueduct & Sewer Auth. v. Metcalf & Eddy, Inc., 506 U.S. 139, 147 (1993), and affirm. We do not reach the merits of defendants' argument on the takings claim.

I. Telecommunications Act of 1996

A. History

This case arises under the Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (codified in scattered sections of 47 U.S.C.A. (West Supp. 2000)) ("1996 Act" or "Act"). The 1996 Act amended the Communications Act of 1934, ch. 652, 48 Stat. 1064 (codified as amended in scattered sections of 47 U.S.C.A. (West 1991 & Supp. 2000)) ("1934 Act"). Congress adopted the 1934 Act "to protect American consumers against AT&T which, through an aggressive policy of consolidation, had gained a virtual monopoly over all segments of the telecommunications industry. Telephone service as a whole was viewed as a natural monopoly which needed to be regulated for the benefit of all users." Michael Kerf & Damien Geradin, Controlling Market Power in Telecommunications: Antitrust vs. Sector-Specific Regulation: An Assessment of the United States, New Zealand and Australian Experiences, 14 Berkeley Tech. L.J. 919, 936 (1999). Thus, pursuant to the 1934 Act, Congress created the Federal Communications Commission (FCC), and gave that agency jurisdiction to regulate interstate telephone services. See Communications Act of 1934, ch. 652, 1, 48 Stat. 1064 (codified as amended at 47 U.S.C.A. 151) (creating the FCC and giving it authority over "interstate and foreign commerce in communication by wire and radio").

The 1934 Act left regulation of intrastate telephone services to the states. See id. 2(b) (codified as amended at 47 U.S.C.A. 152) (denying the FCC jurisdiction "with respect to (1) charges, classifications, practices, services, facilities, or regulations for or in connection with intrastate communication service by wire or radio of any carrier"). In regulating local phone service,

[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. v. Iowa Utils. Bd., 525 U.S. 366, 371 (1999). Most of the LECs were part of AT&T's Bell System and were known as Bell Operating Companies ("BOCs"). Kerf & Geradin, 14 Berkeley Tech. L.J. at 937.

"As the telephone industry developed in the 1950s and 1960s, many began to challenge the basic premise that telephone service was a natural monopoly." Id. Eventually, potential competitors and the Department of Justice sued AT&T to dismantle its virtual monopoly. Pursuant to a 1982 consent decree, AT&T agreed to divest the local BOCs and reorganize them into subsidiaries of seven independent local exchange carriers, known as regional BOCs. See United States v. Western Elec. Co., 569 F. Supp. 1057, 1061-62 & 1062 n.5 (D.D.C. 1983), aff'd sub nom. California v. United States, 464 U.S. 1013 (1983). In exchange, AT&T was permitted, among other things, to compete with virtually no restrictions in long-distance services. Kerf & Geradin, 14 Berkeley Tech. L.J. at 938.

While the 1982 consent decree fostered competition in the long-distance market, technological advances occurred that made "competition among multiple providers of local service seem possible." AT&T Corp., 952 U.S. at 371. Thus, by 1994, "[m]any states had already commenced their own efforts to deregulate the telecommunications industry" by permitting local competition. Deonne L. Bruning, The Telecommunications Act of 1996: The Challenge of Competition, 30 Creighton L. Rev. 1255, 1258 (1997). In 1996, Congress passed the Telecommunications Act to further encourage local competition. See Jim Chen, The Magnificent Seven: American Telephony's Deregulatory Shootout, 50 Hastings L.J. 1503, 1514 (1999) ("The Act sought to unleash three of the most deeply entrenched monopolists in the American economylocal exchange carriers, interexchange carriers, and cable system operatorson each other's markets in the hope that competition among the large would dissolve these industrial giants.") In so doing, Congress "fundamentally restructure[d] local telephone markets" and "ended the longstanding regime of state-sanctioned monopolies." AT&T Corp., 952 U.S. at 371.

B. 47 U.S.C.A. 251-252

1. Section 251

To accomplish the goals of the Act, Congress "establish[ed] baseline rules for every company that want[s] to provide telecommunications service." Bruning, 30 Creighton L. Rev. at 1258. Specifically, 47 U.S.C.A. 251 imposes various duties on incumbent LECs to facilitate market entry. Because incumbents own the current network, "[f]oremost among these duties is the [incumbent] LEC's obligation . . . to share its network with competitors." AT&T Corp., 952 U.S. at 371; see 47 U.S.C.A. 251(c). Congress deemed network sharing, or interconnection, necessary "so that all customers, even those served by a competitor, can seamlessly and transparently make and receive calls." Bruning, 30 Creighton L. Rev. at 1259. Section 251 thus requires incumbents to negotiate interconnection agreements with entrants in good faith. See 47 U.S.C.A. 251(c)(1).

2. Section 252

Under 252, an incumbent and a new carrier may privately agree on the terms of an interconnection agreement. See id. 252(a)(1). If private negotiation fails, then either party can petition the state commission that regulates local phone service to arbitrate any open issues. Id. 252(b)(1). Whether an agreement is adopted by negotiation or arbitration, it must be submitted to the state commission. Id. 252(e)(1). The state commission then must approve or reject the agreement. Id.

A state commission may reject a negotiated agreement only if it discriminates against non-party carriers or is inconsistent with the public interest, convenience, and necessity. Id. 252(e)(2)(A). On the other hand, a state commission may reject an arbitrated agreement only if the agreement does not comply with 251, including the regulations prescribed by the FCC pursuant to 251, or the pricing standards set forth in 252(d). Id. 252(e)(2)(B).

If a state commission does not approve or reject an agreement within specified time periods, then the agreement is deemed approved. Id. 252(e)(4). However, if a state commission "fails to act to carry out its responsibility under [ 252]," then the FCC will preempt the state commission's jurisdiction over that proceeding and assume the state commission's responsibility. Id. 252(e)(5).¹ If a state commission does act, any party "aggrieved" by its determination "may bring an action in an appropriate Federal district court to determine whether the agreement . . . meets the requirements of section 251 [and section 252]." Id. 252(e)(6). State courts do not "have jurisdiction to review the action of a State commission in approving or rejecting an agreement." Id. 252(e)(4). If a state commission fails to act and the FCC asserts jurisdiction, then "the proceeding by the [FCC] . . . and any judicial review of the [FCC's] actions shall be the exclusive remedies." Id. 252(e)(6).

Thus, 252 allows a state to choose whether it will participate in the federal regulatory scheme. If a state elects to regulate interconnection agreements through its state commission,...