Talk Am., Inc. v. Mich. Bell Tel. Co., s. 10–313

• Citation: 131 S.Ct. 2254,564 U.S. 50,180 L.Ed.2d 96
• Decision Date: 09 June 2011
• Docket Number: 10–329.,Nos. 10–313,s. 10–313
• Parties: TALK AMERICA, INC., Petitioner, v. MICHIGAN BELL TELEPHONE CO. dba AT&T Michigan. Orjiakor Isiogu, et al, Petitioners, v. Michigan Bell Telephone Co. dba AT&T Michigan.
• Court: United States Supreme Court

564 U.S. 50

131 S.Ct. 2254

180 L.Ed.2d 96

TALK AMERICA, INC., Petitioner,

v.MICHIGAN BELL TELEPHONE CO. dba AT&T Michigan.

Orjiakor Isiogu, et al, Petitioners,

v.Michigan Bell Telephone Co. dba AT&T Michigan.

Nos. 10–313

10–329.

Supreme Court of the United States

Argued March 30, 2011.

Decided June 9, 2011.

John J. Bursch, Lansing MI, for petitioners.

Eric D. Miller for United States as amicus curiae, by special leave of the Court, supporting the petitioners.

Scott H. Angstreich, Washington, DC, for respondents.

Bill Schuette, Attorney General, John J. Bursch, Michigan Solicitor General, Counsel of Record, Lansing, MI, B. Eric Restuccia, Michigan Deputy Solicitor General, Steven D. Hughey, Public Service Division Chief, Anne M. Uitvlugt, Assistant Attorney General, Public Service Division, for petitioners Orjiakor N. Isiogu, Monica Martinez, and Greg R. White, MPSC Commissioners.

D. Wayne Watts, AT&T Inc., Dallas, TX, John T. Lenahan, Mark R. Ortlieb, AT&T Services Inc., Chicago, IL, Cynthia F. Malone, AT&T Services Inc., Dallas, TX, Scott H. Angstreich, Counsel of Record, Brendan J. Crimmins, Scott K. Attaway, Kellogg, Huber, Hansen, Todd, Evans & Figel, P.L.L.C., Washington, DC, Gary L. Phillips, Christopher M. Heimann, AT&T Services Inc., Washington, DC, for Michigan Bell Telephone Company.

THOMAS, J., delivered the opinion of the Court,In these cases, we consider whether an incumbent provider of local telephone service must make certain transmission facilities available to competitors at cost-based rates. The Federal Communications Commission (FCC or Commission) as amicus curiae¹ contends that its regulations require the incumbent provider to do so if the facilities are to be used for interconnection: to link the incumbent provider's telephone network with the competitor's network for the mutual exchange of traffic. We defer to the Commission's views and reverse the judgment below.

I

The Telecommunications Act of 1996 (1996 Act), 110 Stat. 56, imposed a number of duties on incumbent providers of local telephone service in order to facilitate market entry by competitors. AT & T Corp. v. Iowa Utilities Bd., 525 U.S. 366, 371, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999). The incumbent local ex-change carriers (LECs) owned the local exchange networks: the physical equipment necessary to receive, properly route, and deliver phone calls among customers. Verizon Communications Inc. v. FCC, 535 U.S. 467, 490, 122 S.Ct. 1646, 152 L.Ed.2d 701 (2002). Before the 1996 Act, a new, competitive LEC could not compete with an incumbent carrier without basically replicating the incumbent's entire existing network. Ibid.

The 1996 Act addressed that barrier to market entry by requiring incumbent LECs to share their networks with competitive LECs in several ways, two of which are relevant here. First, 47 U.S.C. § 251(c)(3) requires incumbent LECs to lease "on an unbundled basis"—i.e., a la carte—network elements specified by the Commission. This makes it easier for a competitor to create its own network without having to build every element from scratch. In identifying which network elements must be available for unbundled lease under § 251(c)(3), the Commission is required to consider whether access is "necessary" and whether failing to provide access would "impair" a competitor's provision of service. § 251(d)(2). Second, § 251(c)(2) mandates that incumbent LECs "provide ... interconnection" between their networks and competitive LECs' facilities. This ensures that customers on a competitor's network can call customers on the incumbent's network, and vice versa. The interconnection duty is independent of the unbundling rules and not subject to impairment analysis. It is undisputed that both un-bundled network elements and interconnection must be provided at cost-based rates. See § 252(d)(1); Brief for Petitioner in No. 10–313, p. 28; Brief for Petitioners in No. 10–329, p. 7; Brief for Respondent 4.

These cases concern incumbent LECs' obligation to share existing "entrance facilities" with competitive LECs. Entrance facilities are the transmission facilities (typically wires or cables) that connect competitive LECs' networks with incumbent LECs' networks. The FCC recently adopted a regulation specifying that entrance facilities are not among the network elements that § 251(c)(3) requires incumbents to lease to competitors on an unbundled basis at cost-based rates. See 47 CFR § 51.319(e)(2)(i) (2005). The Commission noted, however, that it "d[id] not alter the right of competitive LECs to obtain interconnection facilities pursuant to section 251(c) (2)." In re Unbundled Access to Network Elements, 20 FCC Rcd. 2533, 2611, ¶ 140 (2005) (Triennial Review Remand Order) .

The specific issue here is whether respondent, Michigan Bell Telephone Company d/b/a AT & T Michigan (AT & T), must lease existing entrance facilities to competitive LECs at cost-based rates. The FCC interprets its regulations to require AT & T to do so for the purpose of interconnection. We begin by reviewing the Commission's recent actions regarding entrance facilities and then explain the particular dispute that is before us today.

A

In 2003, the FCC decided, contrary to its previous orders, that incumbent LECs were not obligated to provide cost-based unbundled access to entrance facilities under § 251(c)(3). In re Review of Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers, 18 FCC Rcd. 16978, 17202–17205, ¶¶ 365–367 (2003) (Triennial Review Order) . Explaining that its previous approach had been "misguided" and "overly broad," id., ¶¶ 366, 365, the Commission concluded that entrance facilities were not subject to the unbundling requirement because they are not network elements at all. See id., ¶ 366 (entrance facilities "exist outside the incumbent LEC's local network"). The Commission therefore did not conduct an impairment analysis.

The FCC emphasized, however, the limits of this ruling. Entrance facilities are used for two purposes: interconnection and backhauling.² It expressly "d[id] not alter" an incumbent LEC's obligation under § 251(c)(2) to provide "facilities in order to ‘interconnect with the incumbent LEC's network.’ " Id., ¶ 366 (brackets omitted). Thus, although the Commission specified that § 251(c)(3) did not require any unbundled leasing of entrance facilities, it determined in practical effect only that "incumbent LECs [were not obligated] to unbundle [entrance facilities] for the purpose of backhauling traffic." Id., ¶ 365.

On direct review, the D.C. Circuit questioned the Commission's determination that entrance facilities are not network elements under § 251(c)(3), but found the agency rulemaking record insufficient and remanded to the Commission for further consideration. See United States Telecom Assn. v. FCC, 359 F.3d 554, 586, cert. denied, 543 U.S. 925, 125 S.Ct. 313, 316, 345, 160 L.Ed.2d 223 (2004). The court noted that if entrance facilities were in fact " ‘network elements,’ " then "an analysis of impairment would presumably follow." 359 F.3d, at 586.

In 2005, the Commission responded. See Triennial Review Remand Order ¶¶ 136–141. The Commission re-treated from its view that entrance facilities are not network elements but adhered to its previous position that cost-based unbundled access to them need not be provided under § 251(c)(3). Id., ¶¶ 137–138. Treating entrance facilities as network elements, the Commission concluded that competitive LECs are not impaired without access to them. Ibid. The Commission again emphasized that it "d[id] not alter the right of competitive LECs to obtain interconnection facilities pursuant to section 251(c)(2)." Id., ¶ 140.

B

In the wake of the Triennial Review Remand Order , AT & T notified competitive LECs that it would no longer provide entrance facilities at cost-based rates for either backhauling or interconnection, but would instead charge higher rates. Competitive LECs complained to the Michigan Public Service Commission (PSC) that AT & T was unlawfully abrogating their right to cost-based interconnection under § 251(c)(2). The Michigan PSC agreed with the competitive LECs and ordered AT & T to continue providing entrance facilities for interconnection at cost-based rates.

AT & T challenged the Michigan PSC's ruling in the District Court, which, relying on the Triennial Review Remand Order , ruled in AT & T's favor. The Michigan PSC and several competitive LECs, including petitioner Talk America, Inc., appealed.

The Court of Appeals for the Sixth Circuit affirmed over a dissent. Michigan Bell Telephone Co. v. Covad Communications Co., 597 F.3d 370 (2010). At the court's invitation, the FCC filed a brief as amicus curiae, arguing that the Triennial

Review Remand Order

did not change incumbent LECs' interconnection obligations, including the obligation to lease entrance facilities for interconnection. The Sixth Circuit declined to defer to the FCC's views, 597 F.3d, at 375, n. 6, and also expressly disagreed with the Seventh and Eighth Circuits, id., at 384–386 (discussing Illinois Bell Tel. Co. v. Box, 526 F.3d 1069 (2008), and Southwestern Bell Tel., L.P. v. Missouri Pub. Serv. Comm'n, 530 F.3d 676 (2008) ).³

We granted certiorari, 562 U.S. ––––, 131 S.Ct. 818, 178 L.Ed.2d 551 (2010), and now reverse.

II

Petitioners contend that AT & T must lease its existing entrance facilities for interconnection at cost-based rates. We agree.

A

No statute or regulation squarely addresses whether an incumbent LEC must provide access to entrance facilities at cost-based rates as part of its interconnection duty under § 251(c)(2). According to the statute, each incumbent LEC has:

"The duty to provide, for the facilities and equipment of any requesting telecommunications carrier, interconnection with the local exchange carrier's network—

"(A) for the transmission and routing of telephone exchange service and exchange access;

"(B) at any technically feasible point within the carrier's network;

"(C) that is at least equal

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