US West Communications Inc. v. Sprint Communications Co.

Decision Date04 January 2002
Docket NumberNo. 00-1401,N,00-1401
Citation275 F.3d 1241
Parties(10th Cir. 2001) U.S. WEST COMMUNICATIONS, INC., a Colorado corporation, Plaintiff-Appellee, USA and FEDERAL COMMUNICATIONS COMMISSION, Plaintiffs-Intervenors, v. SPRINT COMMUNICATIONS COMPANY, L.P., a limited partnership, Defendant-Appellant, ROBERT J. HIX, R. BRENT ALDERFER, and VINCENT MAJKOWSKI, Commissioners of the Public Utilities Commission of the State of Colorado; PUBLIC UTILITIES COMMISSION FOR THE STATE OF COLORADO; TCG COLORADO, a New York General Partnership; TELEPORT COMMUNICATIONS GROUP, INC., a Delaware corporation; ICG TELECOM GROUP, INC., a Colorado corporation; AT&T COMMUNICATIONS OF THE MOUNTAIN STATES, INC., a Colorado corporation; WORLDCOM TECHNOLOGIES, INC., a Delaware corporation; MCI TELECOMMUNICATIONS CORPORATION, a Delaware corporation; MCIMETRO ACCESS TRANSMISSION SERVICES, INC., a Delaware corporation, Defendants. U.S. WEST COMMUNICATIONS, INC., a Colorado corporation, Plaintiff-Counter-Defendant-Appellee, USA and FEDERAL COMMUNICATIONS COMMISSION, Plaintiffs-Intervenors, v. ROBERT J. HIX, R. BRENT ALDERFER and VINCENT MAJKOWSKI, Commissioners of the Public Utilities Commission of the State of Colorado; PUBLIC UTILITIES COMMISSION FOR THE STATE OF COLORADO; TCG COLORADO, a New York General Partnership; TELEPORT COMMUNICATIONS GROUP, INC., a Delaware corporation; ICG TELECOM GROUP, INC., a Colorado corporation; AT&T COMMUNICATIONS OF THE MOUNTAIN STATES, INC., a Colorado corporation; SPRINT COMMUNICATIONS COMPANY, L.P., a limited partnership, Defendants, WORLDCOM TECHNOLOGIES, INC., a Delaware corporation; MCI TELECOMMUNICATIONS CORPORATION, a Delaware corporation; MCIMETRO ACCESS TRANSMISSION SERVICES, INC., a Delaware corporation; MFS INTELENET OF COLORADO, INC., a Delaware corporation, Defendants-Counter-Claimants-Appellants. o. 00-1402
CourtU.S. Court of Appeals — Tenth Circuit

APPEAL FROM UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO (D.C. No. 97-D-152)

[Copyrighted Material Omitted] David P. Murray, Randy Branitsky, and Kevin M. Miller, Willkie Farr & Gallagher, of Washington D.C., for the appellant Sprint Communications Company L.P.

Terri L. Mascherin, Andrew M. Spangler, Jr., and John J. Hamill, Jenner & Block, LLC, of Chicago, Illinois; and William Single, IV, Brian J. Leske, and Thomas F. O'Neill III, Worldcom, Inc., of Washington D.C., for the appellants MCI Telecommunications Corporation and MCImetro Access Transmission Services, Inc.

Wendy M. Moser and Todd L. Lundy, Qwest Corporation, of Denver, Colorado; B. Lawrence Theis, Perkins Coie LLP, of Denver Colorado; Kara M. Sacilotto, Perkins Coie LLP, of Washington, D.C.; and Kirstin S. Dodge, Perkins Coie LLP, of Bellevue, Washington, for the appellee Qwest Corporation.

Before BRISCOE, McKAY, and HALL,1 Circuit Judges.

BRISCOE, Circuit Judge.

Plaintiff U.S. West Communications, Inc., now known as Qwest Corporation (Qwest), brought these actions pursuant to 47 U.S.C. 252(e)(6) to challenge provisions contained in arbitrated interconnection agreements with defendants Sprint Communications Company L.P. (Sprint), MCI Telecommunications Corporation, and MCImetro Access Transmission Services, Inc. (collectively MCI). The district court vacated the provisions, concluding defendant Colorado Public Utilities Commission (CPUC) overstepped its authority and acted contrary to the Telecommunications Act of 1996 in including the provisions in the agreements. Sprint and MCI appeal from that ruling. We exercise jurisdiction pursuant to 28 U.S.C. 1291, reverse the judgment of the district court, and remand with instructions to enter judgment in favor of Sprint and MCI.

I.

This case arises out of Congress' efforts, through the Telecommunications Act of 1996 (the Act), to increase competition in the market for local telephone service. In AT&T Corp. v. Iowa Utilities Bd., 525 U.S. 366 (1999), the Supreme Court briefly outlined the history of local telephone service, the impact of the Act on such service, and the methods by which the Act allows new companies to gain entry to a local market:

Until the 1990's, local phone service was thought to be a natural monopoly. States typically granted an exclusive franchise in each local service area to a local exchange carrier (LEC), which owned, among other things, the local loops (wires connecting telephones to switches), the switches (equipment directing calls to their destinations), and the transport trunks (wires carrying calls between switches) that constitute a local exchange network. Technological advances, however, have made competition among multiple providers of local service seem possible, and Congress recently ended the longstanding regime of state-sanctioned monopolies.

The Telecommunications Act of 1996 (1996 Act or the Act), Pub.L. 104-104, 110 Stat. 56, fundamentally restructures local telephone markets. States may no longer enforce laws that impede competition, and incumbent LECs are subject to a host of duties intended to facilitate market entry. Foremost among these duties is the LEC's obligation under 47 U.S.C. 251(c) (1994 ed. Supp. II) to share its network with competitors. Under this provision, a requesting carrier can obtain access to an incumbent's network in three ways: It can purchase local telephone services at wholesale rates for resale to end users; it can lease elements of the incumbent's network "on an unbundled basis"; and it can interconnect its own facilities with the incumbent's network. When an entrant seeks access through any of these routes, the incumbent can negotiate an agreement without regard to the duties it would otherwise have under 251(b) or 251(c). See 252(a)(1). But if private negotiation fails, either party can petition the state commission that regulates local phone service to arbitrate open issues, which arbitration is subject to 251 and the FCC regulations promulgated thereunder.

Id. at 371-73, 119 S. Ct. 721 (footnotes omitted).

The Act imposes three general conditions a state commission must satisfy in arbitrating open issues regarding an interconnection agreement. First, it must "ensure that [its] resolution and conditions meet the requirements of section 251 . . ., including the regulations prescribed by the [FCC] pursuant to section 251."2 47 U.S.C. 252(c)(1). Second, it must "establish any rates for interconnection, services, or network elements according to subsection (d) of [section 252]," id. 252(c)(2), which provides that interconnection and network element charges "shall be . . . based on the cost . . . of providing the interconnection or network element, and . . . nondiscriminatory, and . . . may include a reasonable profit." Third, it must "provide a schedule for implementation of the terms and conditions by the parties to the agreement." Id. 252(c)(3). As long as these three requirements are satisfied, a state commission is free, subject to the provisions of 47 U.S.C. 253,3 to "establish[] or enforc[e] other requirements of State law in its review of an [interconnection agreement], including requiring compliance with intrastate telecommunications service quality standards or requirements." 47 U.S.C. 252(e)(3).

Once an interconnection agreement is arbitrated, it must be submitted to the state commission for final approval. See 47 U.S.C. 252(e)(1). A state commission may reject an arbitrated agreement only if the agreement or a provision thereof fails to meet the requirements of section 251 of the Act or the FCC regulations promulgated under the Act. See 47 U.S.C. 252(e)(2)(B).

Finally, the Act provides for federal court review of interconnection agreements. Specifically, 47 U.S.C. 252(e)(6) authorizes "any party aggrieved by" a state commission decision regarding an interconnection agreement to "bring an action in an appropriate Federal district court." For example, if a party to an arbitrated interconnection agreement is dissatisfied with a particular provision imposed by a state commission, it can seek review of that provision by filing suit in federal court. Federal court review is limited to the determination of whether the agreement "meets the requirements of section 251 . . . and . . . section [252]." Id.

History of interconnection agreements and ensuing litigation

Plaintiff Qwest is an incumbent local exchange carrier (ILEC) based in the state of Colorado. MCI and Sprint, along with several other companies, sought entry to Qwest's market for local phone service. Under the Act, these companies are generally referred to as "competing local exchange carriers" (CLECs). MCI and Sprint each attempted, unsuccessfully, to negotiate interconnection agreements with Qwest. Accordingly, MCI and Sprint each filed a petition with the CPUC asking for arbitration of unresolved issues with Qwest. In particular, both MCI and Sprint sought inclusion in their respective interconnection agreements of "most favored nation" (or "pick and choose") clauses affording them the right to (1) pick any clause from any other interconnection agreement either agreed to or arbitrated by any other carrier who interconnected with Qwest, and (2) purchase services from Qwest out of any effective tariffs filed by Qwest with the CPUC,4 regardless of the price(s) otherwise established for such services in the parties' interconnection agreement. Dist. Ct. Order at 26.

CPUC's decision regarding MCI's petition

MCI's petition, which was filed first, was addressed by the CPUC in a written order issued on December 2, 1996. The CPUC agreed with MCI regarding the most-favored-nation provision and ordered that the interconnection agreement between MCI and Qwest include a provision allowing MCI (1) "to incorporate and use any interconnection, service, or network element from another agreement, upon acceptance of all of the terms and conditions in the agreement related to such interconnection service or element," and (2) "to purchase services out of an effective tariff, regardless...

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