Southwestern Bell Telephone Co. v. Connect Communications Corp.

• Decision Date: 13 June 2000
• Docket Number: No. 99-3952,99-3952
• Citation: 225 F.3d 942
• Parties: (8th Cir. 2000) SOUTHWESTERN BELL TELEPHONE COMPANY, APPELLANT, UNITED STATES; FEDERAL COMMUNICATIONS COMMISSION, INTERVENORS ON APPEAL, v. CONNECT COMMUNICATIONS CORPORATION; ARKANSAS PUBLIC SERVICE COMMISSION; JIM VON GREMP, IN HIS OFFICIAL CAPACITY AS CHAIRMAN OF THE ARKANSAS PUBLIC SERVICE COMMISSION; SAM I. BRATTON, JR., IN HIS OFFICIAL CAPACITY AS COMMISSIONER OF THE ARKANSAS PUBLIC SERVICE COMMISSION; BETTY C. DICKEY, IN HER OFFICIAL CAPACITY AS COMMISSIONER OF THE ARKANSAS PUBLIC SERVICE COMMISSION, APPELLEES. MCI WORLDCOM, INC., AMICUS ON BEHALF OF APPELLEE. Submitted:
• Court: U.S. Court of Appeals — Eighth Circuit

Page 942

225 F.3d 942 (8th Cir. 2000)

SOUTHWESTERN BELL TELEPHONE COMPANY, APPELLANT, UNITED STATES; FEDERAL COMMUNICATIONS COMMISSION, INTERVENORS ON APPEAL, v. CONNECT COMMUNICATIONS CORPORATION; ARKANSAS PUBLIC SERVICE COMMISSION; JIM VON GREMP, IN HIS OFFICIAL CAPACITY AS CHAIRMAN OF THE ARKANSAS PUBLIC SERVICE COMMISSION; SAM I. BRATTON, JR., IN HIS OFFICIAL CAPACITY AS COMMISSIONER OF THE ARKANSAS PUBLIC SERVICE COMMISSION; BETTY C. DICKEY, IN HER OFFICIAL CAPACITY AS COMMISSIONER OF THE ARKANSAS PUBLIC SERVICE COMMISSION, APPELLEES.

MCI WORLDCOM, INC., AMICUS ON BEHALF OF APPELLEE.

No. 99-3952

UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT

Submitted: June 13, 2000

Filed: September 12, 2000

Appeal from the United States District Court for the Eastern District of Arkansas.

Before Bowman, Morris Sheppard Arnold, and Bye, Circuit Judges.

Bowman, Circuit Judge.

The Telecommunications Act of 1996, among other things, aims to jump-start competition in the market for local telephone service. See AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 371 (1999). One way Congress, through the Act, attempted to move toward this goal is by requiring the incumbent owner of a local telephone network to provide network access to its would-be competitors. See 47 U.S.C. § 251(c)(2) (Supp. III 1997). The Act describes a process for establishing the price and other terms for the provision of network access. Specifically, the incumbent is required to negotiate in good faith with its competitor, and, if the parties fail to reach a deal on their own, they submit open questions for arbitration by the relevant state commission. See id. §§ 251(c)(1), 252(a), (b). States, if they wish, may opt out, leaving the Federal Communications Commission (FCC) to arbitrate in their stead. See id. § 252(e)(5).

All such network access agreements, however reached, must be approved by the state commission or, in its absence, by the FCC. See id. § 252(e)(1), (5). The state commission must ensure that the agreement is consistent with certain requirements of the Act, but may also enforce requirements of state law such as intrastate service quality standards. See id. § 252(e)(2), (3). A party aggrieved by a "determination" of a state commission under § 252 may bring an action in federal district court. Id. § 252(e)(6). State courts do not have jurisdiction to review decisions of state commissions "approving or rejecting an agreement" under § 252. Id. § 252(e)(4).

In this case, Connect Communications Corporation wanted access to the local telephone network of incumbent Southwestern Bell Telephone Company. Connect and Southwestern Bell reached an agreement on their own--arbitration was not required. They submitted their agreement to the Arkansas Public Service Commission which approved it. Neither side sought review in the federal courts (or elsewhere). Under the terms of the agreement, Southwestern Bell allows Connect to interconnect with Southwestern Bell's network so that Connect can sell local telephone service. In line with statutory requirements, see id. § 251(b)(5), the agreement requires reciprocal compensation for "local traffic." When a Southwestern Bell customer places a local call to a Connect customer, the caller is using part of Connect's network, and Southwestern Bell must compensate Connect for that usage. The rates of compensation are established in the agreement between Connect and Southwestern Bell.

A dispute between Southwestern Bell and Connect arose from the reciprocal compensation arrangement. Several of Connect's customers are internet service providers (ISPs). The ISPs, as relevant here, provide modem-based internet access to their customers. The ISPs' customers, through their computers, place telephone calls to their ISPs, which connect the customers to the internet. These internet-connecting calls tend to be longer than average local calls and many of the ISPs' customers get their local telephone service from Southwestern Bell. Thus, if these internet-connecting calls are "local traffic," then Southwestern Bell must pay reciprocal compensation to Connect. If the calls are not "local traffic," then reciprocal compensation is not required. This is the heart of the dispute between Connect and Southwestern Bell, but, as we shall see, it is not the issue we are called upon to decide.

At some point in 1998, Southwestern Bell informed Connect that it did not consider the internet-connecting calls to be "local traffic" within the meaning of their agreement, and it would not pay Connect further reciprocal compensation based on those calls. In June 1998, Connect filed a complaint with the Arkansas Public Service Commission seeking a declaration that the internet-connecting calls were "local traffic" and an order requiring Southwestern Bell to compensate Connect for the calls. The Commission determined that it had jurisdiction and ultimately determined that the internet-connecting calls were "local traffic."

Southwestern Bell filed suit in federal court challenging the Commission's decision. Southwestern Bell named Connect as a defendant, and also named the Arkansas Public Service Commission as well as the individual Commissioners who make up the Commission. (For ease of reference, we shall refer to the Arkansas state defendants collectively as "the Commission.") The Commission and Connect moved to dismiss for lack of subject-matter jurisdiction. The District Court granted the motions, concluding that the "the plain language of the Telecommunications Act clearly grants federal courts jurisdiction only to determine if the [interconnection] agreement meets the requirements of federal law . . . [and therefore] does not confer upon federal courts jurisdiction to review a State Commission's order interpreting and enforcing an interconnection agreement." Southwestern Bell Tel. Co. v. Connect Communications Corp., No. LR-C-99-197, at 10 (E.D. Ark. Sept. 22, 1999). This appeal followed. The United States and the FCC appear on appeal as intervenors, and MCI Worldcom, Inc. appears as amicus curiae.

I.

It is axiomatic that the federal courts lack plenary jurisdiction. See Godfrey v. Pulitzer Publ'g Co., 161 F.3d 1137, 1141 (8th Cir. 1998). The inferior federal courts may only exercise jurisdiction where Congress sees fit to allow it. Here, there are two alleged statutory grounds for jurisdiction: 47 U.S.C. § 252(e)(6), part of the Telecommunications Act of 1996, and 28 U.S.C. § 1331 (1994), the "federal question" jurisdiction statute. Because we find that § 252(e)(6) provides jurisdiction here, we do not reach the argument based on § 1331.

We begin, of course, with the text of § 252(e)(6). "In any case in which a State commission makes a determination under this section [252], any party aggrieved by such determination may bring an action in an appropriate Federal district court to determine whether the agreement or statement meets the requirements of section 251 of this title and this section [252]." 47 U.S.C. § 252(e)(6). Connect and the Commission contend that this language grants federal courts jurisdiction to review commission decisions rejecting or approving interconnection agreements, but not interpreting or enforcing them. Essentially, they assert two independent arguments supporting this conclusion. First, they claim that commission decisions interpreting or enforcing interconnection agreements do not involve a "determination" under § 252. Second, they contend that interpretation and enforcement determinations do not present questions about whether "the agreement or statement meets the requirements" of §§ 251 and 252.¹ We address these contentions in turn.

A.

The Act provides that an interconnection agreement, reached either by negotiation or arbitration, must be submitted to the state commission for approval. See 47 U.S.C. § 252(e)(1). This grant of power to state commissions necessarily includes the power to enforce the interconnection agreement. See Southwestern Bell Tel. Co. v. Public Util. Comm'n, 208 F.3d 475, 479-80 (5th Cir. 2000) (citing Iowa Utils. Bd. v. FCC, 120 F.3d 753, 804 (8th Cir. 1997), aff'd in part, rev'd in part on other grounds sub nom. AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366 (1999)).

The parties all agree that state commissions have this enforcement power, and the only dispute concerns its source. The FCC interprets § 252 to provide state commissions with enforcement power and, indeed, enforcement responsibility. See Starpower Communications, LLC, No. FCC 00-216, 2000 WL 767701, ¶¶¶¶ 5-6 (FCC June 14, 2000) (opinion and order). We must defer to the FCC's view so long as it is a reasonable interpretation of an ambiguous statute. See Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43 (1984).

While the arguments of the Commission and Connect appear to reject the proposition that the state commissions' power to enforce federally-mandated interconnection agreements comes from § 252, they suggest no likely alternative. Arkansas law² alone cannot be the source. "[T]he question . . . is not whether the Federal Government has taken the regulation of local telecommunications competition away from the States. With regard to the matters addressed by the 1996 Act, it unquestionably has." AT&T Corp., 525 U.S. at 379 n.6. The new regime for regulating competition in this industry is federal in nature, see id., and while Congress has chosen to retain a significant role for the state commissions, the scope of that role is measured by federal, not state law. Therefore, while the grant of state commission enforcement power in § 252 is implicit rather than express, we can reach no conclusion but to agree with the FCC's determination that the state commissions' power to enforce interconnection agreements springs from § 252.

With this conclusion in mind, it is plain that the jurisdictional grant in § 252(e)(6) includes review of enforcement determinations. The jurisdictional...