U.S. Telecom Ass'n v. F.C.C., 00-1012.

• Decision Date: 24 May 2002
• Docket Number: No. 00-1015.,No. 01-1075.,No. 00-1025.,No. 01-1103.,No. 00-1012.,No. 01-1102.,00-1012.,00-1015.,00-1025.,01-1075.,01-1102.,01-1103.
• Citation: 290 F.3d 415
• Parties: UNITED STATES TELECOM ASSOCIATION, et al., Petitioners, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents. Bell Atlantic Telephone Companies, et al., Intervenors. United States Telecom Association, et al., Petitioners, v. Federal Communications Commission and United States of America, Respondents. AT&T Corporation, et al., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

290 F.3d 415

UNITED STATES TELECOM ASSOCIATION, et al., Petitioners, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents.

Bell Atlantic Telephone Companies, et al., Intervenors.

United States Telecom Association, et al., Petitioners, v. Federal Communications Commission and United States of America, Respondents.

AT&T Corporation, et al., Intervenors.

No. 00-1012.

No. 00-1015.

No. 00-1025.

No. 01-1075.

No. 01-1102.

No. 01-1103.

United States Court of Appeals, District of Columbia Circuit.

Argued March 7, 2002.

Decided May 24, 2002.

On Petitions for Review of Orders of the Federal Communications Commission.

Michael K. Kellogg argued the cause for petitioners and supporting intervenors in 00-1012 & 00-1015. With him on the briefs in 00-1012 were Mark L. Evans, Sean A. Lev, James D. Ellis, Paul K. Mancini, Roger K. Toppins, Gary L. Phillips, Lawrence E. Sarjeant, Linda L. Kent, Keith Townsend, John W. Hunter, Julie E. Rones, William P. Barr, Michael E. Glover, Edward H. Shakin, John P. Frantz, Richard M. Sbaratta, and James G. Harralson. With him on the briefs in 00-1015 were Mark L. Evans, Sean A. Lev, David L. Schwarz, Lawrence E. Sarjeant, Linda L. Kent, Keith Townsend, John W. Hunter, Julie E. Rones, Sharon J. Devine, Robert B. McKenna, William T. Lake, John H. Harwood II, Jonathan J. Frankel, James D. Ellis, Paul K. Mancini, Roger K. Toppins, Gary L. Phillips, Michael E. Glover, Edward H. Shakin, William P. Barr, John P. Frantz, Jonathan B. Banks, Richard M. Sbaratta, and James G. Harralson. Donna M. Epps entered an appearance in 00-1012. Daniel L. Poole and William R. Richardson, Jr. entered appearances in 00-1015.

Laurence N. Bourne, Counsel, Federal Communications Commission, argued the cause for respondents in 00-1012. With him on the brief in 00-1012 were Charles A. James, Assistant Attorney General, Daniel M. Armstrong, Associate General Counsel, John E. Ingle, Deputy Associate General Counsel, James M. Carr, Counsel, Catherine G. O'Sullivan and Nancy C. Garrison, Attorneys, U.S. Department of Justice. Lisa S. Gelb, Counsel, Federal Communications Commission entered an appearance in 00-1012.

Richard K. Welch, Counsel, Federal Communications Commission, argued the cause for respondents in 00-1015. With him on the briefs in 00-1015 were Charles A. James, Assistant Attorney General, Daniel M. Armstrong, Associate General Counsel, John E. Ingle, Deputy Associate General Counsel, Laurence N. Bourne and James M. Carr, Counsel, Catherine G. O'Sullivan and Nancy C. Garrison, Attorneys, U.S. Department of Justice. Lisa S. Gelb, Counsel, Federal Communications Commission, entered an appearance in 00-1015.

Jonathan Jacob Nadler argued the cause for intervenors AT&T Corp., et al. in 00-1012. With him on the brief in 00-1012 were David W. Carpenter, Peter D. Keisler, James P. Young, Mark C. Rosenblum, Lawrence J. Lafaro, Richard H. Rubin, Donald B. Verrilli, Jr., Maureen F. Del Duca, Michael B. DeSanctis, Thomas F. O'Neil III, William Single, IV, Theresa K. Gaugler, Charles C. Hunter, Catherine M. Hannan, Albert H. Kramer, Robert McDowell, Jay C. Keithley and H. Richard Juhnke. John J. Heitmann, Jonathan E. Canis and Roy E. Hoffinger entered appearances in 00-1012.

David W. Carpenter argued the cause for intervenors AT&T, Corp., et al. in 00-1015. With him on the brief in 00-1015 were Peter D. Keisler, James P. Young, C. Frederick Beckner III, Mark C. Rosenblum, Lawrence J. Lafaro, Richard H. Rubin, Donald B. Verrilli, Jr., Maureen F. Del Duca, Michael B. DeSanctis, Thomas F. O'Neil III, William Single, IV, Rodney Joyce, Christy C. Kunin, Russell I. Zuckerman, Francis D.R. Coleman, Richard E. Heatter, Marilyn H. Ash, Douglas G. Bonner, Albert H. Kramer, Charles C. Hunter and Catherine M. Hannan. Roy E. Hoffinger, Lawrence G. Acker, John J. Heitmann and Jonathan E. Canis entered appearances.

Before: EDWARDS and RANDOLPH, Circuit Judges, and WILLIAMS, Senior Circuit Judge.

Opinion for the Court filed by Senior Circuit Judge WILLIAMS.

WILLIAMS, Senior Circuit Judge:

Petitioners in these two cases — certain incumbent local exchange carriers ("ILECs") and the U.S. Telecom Association, representing approximately 1200 such carriers — seek review of two rulemaking orders of the Federal Communications Commission. One order requires ILECs to lease a variety of "unbundled network elements" ("UNEs") to competitive local exchange carriers ("CLECs"), and the other unbundles a portion of the spectrum of local copper loops so that CLECs can offer competitive Digital Subscriber Line ("DSL") internet access. We grant both petitions, and remand both rules to the Commission.

I. Background

Congress passed the Telecommunications Act of 1996, Pub.L. 104-104, 110 Stat. 56, codified at 47 U.S.C. § 151 et seq. (the "1996 Act" or the "Act"), to "promote competition and reduce regulation in order to secure lower prices and higher quality services for American telecommunications consumers and encourage the rapid deployment of new telecommunications technologies." 1996 Act, preamble. In pursuit of that goal, § 251 of the Act requires that ILECs "unbundle" their network elements — that is, provide them on an individual basis to competitive providers on terms prescribed by the Commission. 47 U.S.C. § 251(c)(3). To guide the Commission in deciding which network elements are to be unbundled, the Act goes on to specify:

(2) Access standards

In determining what network elements should be made available for purposes of subsection (c)(3) of this section, the Commission shall consider, at a minimum, whether —

(A) access to such network elements as are proprietary in nature is necessary; and

(B) the failure to provide access to such network elements would impair the ability of the telecommunications carrier seeking access to provide the services that it seeks to offer.

47 U.S.C. § 251(d)(2) (emphasis added).

In its first effort at implementation, Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, First Report and Order, CC Docket No. 96-98, 11 FCC Rcd 15499 (1996) ("First Local Competition Order"), the Commission gave this section the following reading:

The term "impair" means "to make or cause to become worse; diminish in value." We believe, generally, that an entrant's ability to offer a telecommunications service is "diminished in value" if the quality of the service the entrant can offer, absent access to the requested element, declines and/or the cost of providing the service rises. We believe we must consider this standard by evaluating whether a carrier could offer a service using other unbundled elements within an incumbent LEC's network.

Id. at 15643, ¶ 285 (emphasis added). In AT&T Corp. v. Iowa Utilities Board, 525 U.S. 366, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999), the Supreme Court found the Commission's view far too broad, saying that under such a standard it was "hard to imagine when the incumbent's failure to give access to the element would not constitute an `impairment.'" Id. at 389, 119 S.Ct. at 735. It specifically criticized the Commission's having "blind[ed] itself to the availability of elements outside the incumbent's network," including self-provisioning and leasing from other providers. Id. It criticized the Commission's view that "any increase" in the competitor's cost (resulting from lack of access to an incumbent's element) would be an "impairment." Id. at 389-90, 119 S.Ct. at 735-36 (emphasis in original). Summarizing the overall picture, it said that if "Congress had wanted to give blanket access to incumbents' networks," it "would simply have said (as the Commission in effect has) that whatever requested element can be provided must be provided." Id. at 390, 119 S.Ct. at 735.

In Iowa Utilities Board, the Supreme Court also addressed the Act's provisions on rates for UNEs, reversing the Eighth Circuit's holding that the Commission had no authority to set such rates. Id. at 377-86, 119 S.Ct. at 729-34. It accordingly returned the remaining rate issues to the Eighth Circuit, which on remand invalidated the Commission's rate-setting principle, known by the acronym TELRIC (for "total element long-run incremental cost"). See Iowa Utilities Board v. FCC, 219 F.3d 744 (8th Cir.2000). The Supreme Court reversed, upholding the TELRIC principle. Verizon Communications, Inc. v. FCC, 535 U.S. ___, 122 S.Ct. 1646, 152 L.Ed.2d 701 (2002).

Following the Supreme Court's remand on the "impairment" standard, the Commission again tackled that issue in the rulemakings now on review. In what we will call the "Local Competition Order," Implementation of the Local Competition Provisions of the Telecommunications Act of 1996, Third Report and Order and Fourth Further Notice of Proposed Rulemaking, 15 FCC Rcd 3696 (1999), it revised its definition of "impair" so as to require unbundling if, "taking into consideration the availability of alternative elements outside the incumbent's network, including self-provisioning by a requesting carrier or acquiring an alternative from a third-party supplier, lack of access to that element materially diminishes a requesting carrier's ability to provide the services it seeks to offer." Local Competition Order, 15 FCC Rcd at 3725, ¶ 51 (emphasis added); 47 C.F.R. § 51.317(b)(1). In weighing the availability of alternative network elements, the Commission noted that it would examine five factors — cost, effect on timeliness of entry, quality, ubiquity, and impact on network operations. Local Competition Order, 15 FCC Rcd at 3731, ¶ 65, 3734-45, ¶¶ 71-100; 47 C.F.R. § 51.317(b)(2). Finally, it said that beyond looking simply to "impairment," it would consider five factors that it believed would further the Act's goals, namely whether unbundling would lead to "rapid introduction of competition in all markets," promote "facilities-based competition, investment, and innovation," reduce regulatory obligations, promote certainty...