Qwest Corp. v. Fed. Commc'ns Comm'n, 10–9543.

• Decision Date: 06 August 2012
• Docket Number: No. 10–9543.,10–9543.
• Court: U.S. Court of Appeals — Tenth Circuit
• Parties: QWEST CORPORATION, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION; United States of America, Respondents. Comptel; Xo Communications, LLC; Cbeyond, Inc; Integra Telcom, Inc.; TW Telecom Inc; Cavalier Telephone LLC; Verizon; Covad Communications Company; Paetec Holding Corp.; TDS Metrocom, LLC; U.S. TelePacific Corp., d/b/a TelePacific Communications; Mpower Communications Corp., d/b/a TelePacific Communications; National Association of State Utility Consumer Advocates; Public Knowledge; At & T, Inc.; Arizona Corporation Commission; AD Hoc Telecommunications Users Committee; Sprint Nextel Corporation, Intervenors.

689 F.3d 1214

56 Communications Reg. (P&F) 762

QWEST CORPORATION, Petitioner,

v. FEDERAL COMMUNICATIONS COMMISSION; United States of America, Respondents.Comptel; Xo Communications, LLC; Cbeyond, Inc; Integra Telcom, Inc.; TW Telecom Inc; Cavalier Telephone LLC; Verizon; Covad Communications Company; Paetec Holding Corp.; TDS Metrocom, LLC; U.S. TelePacific Corp., d/b/a TelePacific Communications; Mpower Communications Corp., d/b/a TelePacific Communications; National Association of State Utility Consumer Advocates; Public Knowledge; At & T, Inc.; Arizona Corporation Commission; AD Hoc Telecommunications Users Committee; Sprint Nextel Corporation, Intervenors.

No. 10–9543.

United States Court of Appeals, Tenth Circuit.

Aug. 6, 2012.

Jonathan E. Nuechterlein, Wilmer Cutler Pickering Hale and Dorr LLP, Washington, D.C. (Heather M. Zachary and Elvis Stumbergs, Wilmer Cutler Pickering Hale and Dorr LLP, Washington, D.C.; Craig J. Brown, Robert B. McKenna, and Harisha Bastiampillai, Qwest Corporation, Denver, CO, with him on the briefs) for Petitioner Qwest Corporation.

Richard K. Welch, Acting Associate General Counsel, Federal Communications

Commission (Christine A. Varney, Assistant Attorney General, Katherine B. Forrest, Deputy Assistant Attorney General, Catherine G. O'Sullivan, Attorney, and Nancy C. Garrison, Attorney, United States Department of Justice; Austin C. Schlick, General Counsel, Peter Karanjia, Deputy General Counsel, and Laurence N. Bourne, Counsel, Federal Communications Commission, with him on the brief) for Respondent Federal Communications Commission.

Scott H. Angstreich, Kellogg, Huber, Hansen, Todd, Evans & Figel PLLC, Washington, D.C. (Jeffrey M. Harris, Kellogg, Huber, Hansen, Todd, Evans & Figel PLLC, Washington, D.C.; Michael E. Glover, Edward Shakin, and Katharine R. Saunders, Verizon; Peter D. Keisler, C. Frederick Beckner III, and Brendan J. McMurrer, Sidley Austin LLP; Christopher M. Heiman, Gary L. Phillips, and Paul K. Mancini, AT & T Inc., with him on the brief) for Intervenors AT & T Inc. and Verizon.

Christopher J. Wright of Wiltshire & Grannis LLP, Washington, D.C. (Genevieve Morelli of Kelley Drye & Warren LLP, Washington, D.C.; David P. Murray, Thomas Jones, and Nirali Patel, Willkie Farr & Gallagher LLP, Washington, D.C.; Colleen Boothby and Andrew M. Brown, Levine, Blaszak, Block, and Boothby LLP, Washington, D.C.; Maureen A. Scott, Arizona Corporation Commission, Phoenix, Arizona; Samuel L. Feder, Jenner & Block, Washington, D.C.; Mary C. Albert, COMPTEL, Washington, D.C.; Russell M. Blau, Bingham McCutchen LLP, Washington, D.C.; David C. Bergmann, Office of Ohio Consumers' Counsel, Columbus, OH; John Bergmayer and Harold Feld, Public Knowledge, Washington, D.C.; Timothy J. Simeone, Wiltshire & Grannis LLP, Washington, D.C., with him on the brief) for Intervenors COMPTEL et al.

Before BRISCOE, Chief Judge, BALDOCK and HOLMES, Circuit Judges.

HOLMES, Circuit Judge.

Petitioner Qwest Corporation (“Qwest”) seeks our review of an order of the Federal Communications Commission (“Commission”) denying Qwest's petition for regulatory forbearance pursuant to 47 U.S.C. § 160(a). Qwest filed a petition with the Commission in March 2009 seeking relief from certain regulations pertaining to telecommunications services that it provides in the Phoenix, Arizona, metropolitan statistical area (“MSA”). The Commission denied the petition, citing insufficient evidence of sufficiently robust competition that would preclude Qwest from raising prices, unreasonably discriminating, and harming consumers. Qwest challenges the Commission's decision only as it pertains to Qwest's mass-market retail services in the Phoenix MSA. For the reasons set forth below, we deny Qwest's petition.

I

In the Telecommunications Act of 1996 (“1996 Act”), Congress upended the existing telecommunications regulatory regime and imposed on the monopolistic local phone companies (called “local exchange carriers” or “LECs”) several new requirements designed to enhance competition in the market for local telephone service. See Qwest Corp. v. Colo. Pub. Utils. Comm'n, 656 F.3d 1093, 1096 (10th Cir.2011). Foremost among these is the requirement that incumbent carriers share their networks with competitors. Because new market entrants would find it prohibitively costly to replicate the infrastructure necessary to provide local service, the 1996 Act requires incumbent carriers to provide competitors with access to existing network elements on an unbundled basis at “just” and “reasonable” rates. See47 U.S.C. § 251(c)(3). The Commission is responsible for determining which unbundled network elements (“UNEs”) an incumbent LEC must make available to competitors. See id. § 251(d)(2)(B).

A second critical feature of the 1996 Act is section 10, codified at 47 U.S.C. § 160. Because newly competitive conditions could make the heavy-handed regulation of incumbent carriers obsolete, section 10 provides that the Commission “shall forbear” from applying certain statutory or regulatory requirements to an incumbent carrier if it determines that those requirements are (1) not necessary to ensure just, reasonable, and nondiscriminatory terms of service, (2) not necessary to protect consumers, and (3) consistent with the public interest. See47 U.S.C. § 160(a). A carrier can petition the Commission for forbearance. Id. § 160(c). The petition “shall be deemed granted if the Commission does not deny the petition for failure to meet the requirements for forbearance under subsection (a) ... within one year.” Id. (emphasis added). The Commission may extend that one-year deadline by an additional ninety days. See id.

The dispute here arises out of a June 2010 order of the Commission denying Qwest's petition for forbearance from unbundling obligations and dominant-carrier regulations pertaining to Qwest's provision of mass-market services in the Phoenix MSA. See In the Matter of Petition of Qwest Corporation for Forbearance Pursuant to 47 U.S.C. § 160(c) in the Phoenix, Arizona Metropolitan Statistical Area, 25 FCC Rcd. 8622, 8677, ¶ 109, 2010 WL 2526677 (2010) [hereinafter Phoenix Order]. Before reviewing that order, however, some additional background is necessary. In particular, we summarize three prior orders of the Commission that provide a central backdrop to the issues in this appeal. After providing key background information, we describe the Phoenix Order and the Commission's reasons for denying forbearance to Qwest.

A

In 2004, Qwest filed a petition for forbearance from unbundling requirements and dominant-carrier regulations in the MSA of Omaha, Nebraska, where it competes extensively with Cox Communications, a cable provider. In response to the petition, the Commission found that “sufficient facilities-based competition ... exists in certain of Qwest's Omaha MSA wire center service areas to justify forbearance.” In the Matter of Petition of Qwest Corporation for Forbearance Pursuant to 47 U.S.C. § 160(c) in the Omaha Metropolitan Statistical Area, 20 FCC Rcd. 19,415, 19,447, ¶ 64, 2005 WL 3287482 (2005) [hereinafter Omaha Order]. To reach this conclusion, the Commission essentially applied a two-prong test. Under the first prong (the “market-share test”), the Commission assessed the level of retail competition in the Omaha market and found it “compelling” that Qwest's market share for retail mass-market customers was “less than” a specified percentage.¹Id. at 19,430, ¶ 28; see also id. at 19,448, ¶ 66. Under the second prong (the “coverage test”), the Commission considered the geographic reach of Cox's cable network and found that, in certain locations called “wire centers,” Cox had deployed facilities capable of reaching a very significant percentage of end-users. See id. at 19,446, ¶ 62. Concluding that Cox could successfully compete with Qwest, the Commission granted forbearance to Qwest with respect to those wire centers. See id. at 19,447, ¶ 64.

Then, in 2006, Verizon Telephone Companies (“Verizon”) sought regulatory forbearance in six MSAs where it provided services as an incumbent carrier. The Commission denied Verizon's petition, finding insufficient evidence of facilities-based competition. See In the Matter of Petitions of the Verizon Telephone Companies for Forbearance Pursuant to 47 U.S.C. § 160(c) in the Boston, New York, Philadelphia, Pittsburgh, Providence and Virginia Beach Metropolitan Statistical Areas, 22 FCC Rcd. 21,293, 21,313, ¶ 37, 2007 WL 4270630 (2007) [hereinafter Verizon Six–MSA Order ]. Specifically, the Commission stated, “Overall, in all of the 6 MSAs, it appears that cable operators are presently making some competitive gains against Verizon by providing voice service to consumers in the residential markets, however competition from cable operators does not yet present a sufficient basis for relief.” Id. at 21,314 n. 116. In assessing Verizon's market share in a given MSA, the Commission looked to the number of Verizon customers as a percentage of both the total number of customers who subscribed to landline (“wireline”) service in the MSA and the total number of customers who subscribed exclusively to mobile wireless service— viz., customers who had “cut the cord.” See id. at 21,323, App. B; see also id. at 21,308 n. 89, ¶ 27 (“[B]ased on the record here, and consistent with recent precedent, we include [in market-share computations] cut-the-cord wireless substitution.”). Estimates for the latter group of customers were not available on an MSA-specific basis, so the Commission utilized a national estimate and “assume[d]” that 12.8% of households in a given MSA had cut the cord. Id. at 21,323, App. B.

In 2007, Qwest sought regulatory forbearance in four MSAs, including Phoenix. The Commission acknowledged that the coverage test articulated in the Omaha Order was met because Cox, Qwest's primary competitor in Phoenix, was capable of reaching at least seventy-five percent of end-users with its...