Michigan Bell Telephone v. Covad Communications Co.
| Decision Date | 23 February 2010 |
| Docket Number | No. 07-2469.,No. 07-2473.,07-2469.,07-2473. |
| Citation | 597 F.3d 370 |
| Parties | MICHIGAN BELL TELEPHONE COMPANY, Plaintiff-Appellee, v. COVAD COMMUNICATIONS COMPANY, et al., Intervenors Defendants-Appellants, McLeodUsa Telecommunications Services, Inc., et al., Intervenors, J. Peter Lark, Commissioner, et al., Defendants. Michigan Bell Telephone Company, Plaintiff-Appellee, v. Laura Chappelle, et al., Defendants-Appellants, Covad Communications Company, et al., Intervenors. |
| Court | U.S. Court of Appeals — Sixth Circuit |
ARGUED: Bill Magness, Casey, Gentz & Magness, L.L.P., Austin, Texas, Michael A. Nickerson, Office of the Michigan Attorney General, Lansing, Michigan, for Appellants. William Julius Champion III, Dickinson Wright PLLC, Ann Arbor, Michigan, for Appellee. Scott H. Angstreich, Kellogg, Huber, Hansen, Todd, Evans & Figel, PLLC, Washington, D.C., for Amici Curiae.
ON BRIEF:
Bill Magness, Casey, Gentz & Magness, L.L.P., Austin, Texas, Steven D. Hughey, Office of the Michigan Attorney General, Lansing, Michigan, Michael S. Ashton, Fraser, Trebilcock, Davis & Dunlap, P.C., Lansing, Michigan, Steven D. Hughey, Office of the Michigan Attorney General, Lansing, Michigan, for Appellants. William Julius Champion III, Jeffery V. Stuckey, Dickinson Wright PLLC, Ann Arbor, Michigan, for Appellee. Scott H. Angstreich, Kellogg, Huber, Hansen, Todd, Evans & Figel, PLLC, Washington, D.C., Laurel R. Bergold, P. Michele Ellison, Richard K. Welch, Federal Communications Commission, Washington, D.C., for Amici Curiae.
Before: BATCHELDER, Chief Judge; GILMAN and SUTTON, Circuit Judges.
BATCHELDER, C.J., delivered the opinion of the court, in which GILMAN, J., joined. SUTTON, J. (pp. 387-92), delivered a separate dissenting opinion.
A state telephone-utility commission and several competitive local exchange carriers appeal a judgment in which the district court vacated the commission's order requiring the incumbent local exchange carrier to provide certain "entrance facilities" at wholesale prices. Finding the appellants' arguments unpersuasive, we AFFIRM.
Congress enacted the Telecommunications Act of 1996, 47 U.S.C. § 152 et seq., to mandate "that local service, which was previously operated as a monopoly overseen by the several states, be opened to competition." MCI Telecom. Corp. v. Bell Atl., 271 F.3d 491, 497 (3d Cir.2001). Congress required the incumbent local exchange carriers (ILECs) to cooperate with competitive local exchange carriers (CLECs) to allow the CLECs to enter the market, either by connecting their equipment to the ILEC's existing network or by purchasing or leasing existing network elements and services. Id. The ILECs and CLECs, through negotiation or arbitration, enter into "interconnection agreements," which set out the terms, rates, and conditions. Id. Congress directed the Federal Communications Commission (FCC) to promulgate implementing regulations, but gave oversight of the interconnection agreements to the state publicutility commissions. Id.
In the present case, the ILEC is Michigan Bell; the CLECs are Covad Communications, Talk America, Inc., XO Communications, McLeod USA Telecommunications, and TDS Metrocom; and the state utility commission is the Michigan Public Service Commission (MPSC), for which the individual commissioners were J. Peter Lark, Laura Chappelle, and Monica Martinez. This case concerns the regulation of "entrance facilities," a type of transmission facility that connects a CLEC network with an ILEC network. But, just to be clear, an "entrance facility" is really just a fancy name for a cable or wire used to transport calls from a CLEC switch to an ILEC switch, and this wire can be very short (if the two switches are close together), or it can be very long, stretching for blocks or even miles (if the switches are far apart), depending on the relative locations of the two switches.
As Congress directed, the FCC promulgated regulations regarding interconnection, see 47 C.F.R. § 51.1 et seq., and then set about deciding which of the ILEC's network elements must be "unbundled"; that is, which of the ILEC's network elements must be offered for sale or lease to the CLECs at regulated prices or rates.1 In August 1996, the FCC issued its Local Competition Order, 11 FCC Rcd. 15499, 1996 WL 452885 (Aug. 8, 1996), in which it purported to apply the Act's "impairment test"2 and — finding impairment everywhere — required the ILECs to unbundle all of their interoffice-transmission facilities (which included entrance facilities). But the Supreme Court vacated that order, finding the FCC's analysis of impairment unjustifiably over-broad, and remanded the issue to the FCC to try again. See AT & T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999).
Meanwhile, Michigan Bell had begun to provide for the CLECs to connect to its network. In so doing, Michigan Bell added "entrance facilities" (i.e., cables or wires) with which the CLECs could connect, in order to access Michigan Bell's network. Acting pursuant to the FCC's initial directives, Michigan Bell offered its "entrance facilities" to the CLECs at regulated rates.
The FCC, on remand from the Iowa Utilities Board decision, again required the ILECs to unbundle all of their interoffice transmission facilities (including entrance facilities), once again under an "impairment test" in which it found impairment everywhere. See UNE Remand Order, 15 FCC Rcd. 3696, 1999 WL 1008985 (Nov. 5, 1999). But the reviewing court vacated that order as well, finding the FCC's analysis of impairment unjustifiably over-broad, and remanded the issue to the FCC to try a third time. See USTA v. FCC, 290 F.3d 415 (D.C.Cir. 2002) ("USTA I").
In its third attempt, on remand from the D.C. Circuit, the FCC — among other things — removed "entrance facilities" from its description of the ILEC network and concluded that an impairment test was not even necessary to hold that entrance facilities need not be unbundled. See Triennial Review Order (TRO), 18 FCC Rcd. 16978, 2003 WL 22175730, ¶ 366 n. 1116 (Sept. 17, 2003) ("Our determination here effectively eliminates `entrance facilities' as UNEs [unbundled network elements] and, therefore, moots the [FCC's pending notice of proposed rule making] insofar as it proposes limitations on obtaining entrance facilities as UNEs."). But the reviewing court vacated the order yet again, finding that the FCC's exclusion of entrance facilities from the impairment analysis was improper and directing that the FCC must conduct an impairment analysis for entrance facilities. See USTA v. FCC, 359 F.3d 554 (D.C.Cir.2004) ("USTA II").
Consequently, the FCC issued a fourth order, the Triennial Review Remand Order (TRRO), 20 FCC Rcd. 2533, 2005 WL 289015 (Feb. 4, 2005), in which it reestablished that entrance facilities are a part of the ILEC network, but found that unbundled access was not necessary because the CLECs were not impaired by paying competitive rates for the use of entrance facilities.3 At the conclusion of this finding, however, the FCC included the following paragraph:
140. We note in addition that our finding of non-impairment with respect to entrance facilities does not alter the right of competitive LECs to obtain interconnection facilities pursuant to section 251(c)(2) for the transmission and routing of telephone exchange service and exchange access service. Thus, competitive LECs will have access to these [interconnection] facilities[4] at cost-based rates to the extent that they require them to interconnect with the incumbent LEC's network.
TRRO, 20 FCC Rcd. 2533, 2005 WL 289015, ¶ 140 (footnotes omitted).
As mentioned previously, Michigan Bell had provided entrance facilities for some time, and had been charging the CLECs regulated (TELRIC) rates for use of those entrance facilities. But, in light of the TRRO, Michigan Bell decided that it would henceforth charge higher (i.e., competitive) rates for the entrance facilities it was providing.5 Thus, Michigan Bell notified the CLECs that it would be changing the "interconnection agreements" to reflect this new pricing scheme.
The CLECs, none too pleased with this impending price increase, responded by complaining to the MPSC, arguing that (regardless of the other paragraphs in the TRRO) paragraph 140 dictates that the CLECs are still entitled to use the entrance facilities at TELRIC rates for purposes of interconnection with the ILEC network. The MPSC agreed and ordered Michigan Bell to continue to provide entrance facilities at TELRIC rates. The parties refer to this as the "September Order."
Michigan Bell appealed to the district court, which agreed with Michigan Bell (i.e., disagreed with the MPSC's interpretation of the TRRO) and reversed the September Order, explaining:
Th[is][c]ourt agrees with [] Michigan [Bell] and concludes that the September Order[,] which pertains to this issue[,] does not comply with the rules that were adopted by the FCC pursuant to Section 251. It is not reasonable to interpret an explanatory comment, such as the one found in ¶ 140 of the TRRO, in a manner that undermines the plain meaning of the rule. The meaning of ¶ 140 must be interpreted in light of the FCC rule, which provides that entrance facilities need not be provided by incumbent carriers to competing carriers on an unbundled basis. The TRRO conveys the finding by the FCC that entrance facilities should be offered competitively. A review of the ruling by the MPSC reveals that the September Order does not comply with this directive, and, accordingly, must be set aside.
Mich. Bell Tel. Co. v. Lark, No. 06-11982, 2007 WL 2868633, at *7 (E.D.Mich.2007).
Both the CLECs and the MPSC commissioners appealed the decision to this court, raising one issue for review. In addition, the FCC and Verizon have submitted briefs as amicus curiae.
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