United States Court of Appeals
For the First Circuit
No. 06-2151
VERIZON NEW ENGLAND, INC.,
Plaintiff, Appellant,
v.
MAINE PUBLIC UTILITIES COMMISSION; STEPHEN L. DIAMOND, in his
official capacity as Commissioner of the Maine Public Utilities
Commission; SHARON M. REISHUS, in her official capacity as
Commissioner of the Maine Public Utilities Commission; KURT W.
ADAMS, in his official capacity as Commissioner of the Maine
Public Utilities Commission,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. Gene Carter, Senior U.S. District Judge]
No. 06-2429
VERIZON NEW ENGLAND, INC.,
Plaintiff, Appellee,
v.
NEW HAMPSHIRE PUBLIC UTILITIES COMMISSION; THOMAS B. GETZ,
in his official capacity as Commissioner of the New Hampshire
Public Utilities Commission; GRAHAM J. MORRISON, in his official
capacity as Commissioner of the New Hampshire Public Utilities
Commission; and MICHAEL D. HARRINGTON, in his official capacity
as Commissioner of the New Hampshire Public Utilities Commission,
Defendants, Appellants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
[Hon. Paul J. Barbadoro, U.S. District Judge]
Before
Boudin, Chief Judge,
Lynch and Lipez, Circuit Judges.
Scott H. Angstreich with whom Kelly P. Dunbar, Kellogg, Huber,
Hansen, Todd, Evans & Figel, P.L.L.C. and Bruce P. Beausejour,
Verizon New England Inc., were on brief for plaintiff.
David S. Rosenzweig and Keegan Werlin LLP on brief for AT&T
Inc. and BellSouth Corporation, Amici Curiae.
Andrew B. Livernois, Assistant Attorney General, Department of
Justice, with whom Kelly A. Ayotte, Attorney General, State of New
Hampshire, was on brief for defendants, appellants.
Andrew S. Hagler with whom Trina M. Bragdon, Maine Public
Utilities Commission, was on brief for defendants, appellees.
Thomas F. Reilly, Attorney General, and Jed M. Nosal, Special
Assistant Attorney General, General Counsel, Massachusetts
Department of Telecommunications and Energy, on brief for the
Commonwealth of Massachusetts Department of Telecommunications and
Energy, Amicus Curiae.
Russell M. Blau, Philip J. Macres and Bingham McCutchen, LLP
on brief for Alpheus Communications, L.P., Biddeford Internet
Corporation d/b/a Great Works, Covad Communications Company/DIECA
Communications Inc., Freedom Ring Communications, L.L.C. d/b/a
BayRing Communications, segTEL, Inc. and XO Communications, Inc.,
Amici Curiae.
September 6, 2007
BOUDIN, Chief Judge. Verizon is a major telephone
company comprising, among other components, several of the former
Bell System operating companies ("BOCs") based in the New England
and Mid-Atlantic regions. In the federal district court in Maine,
Verizon challenged rulings of the Maine Public Utilities Commission
("PUC") and lost; Verizon won in a comparable case in the New
Hampshire district court directed against the New Hampshire PUC.
The resulting appeals, one by Verizon and the other by the New
Hampshire agency, are now before us.
Background. When the Bell System's "substantial
domination of the telecommunications industry" was ended by
antitrust decree in 1982, United States v. AT&T Co., 552 F. Supp.
131, 163 (D.D.C. 1982), the framers of the decree conceived that
telephone service would be separated into two spheres. In the long-
distance market, it was expected that competition would grow between
AT&T (now stripped of its local operating companies) and new
entrants such as MCI, permitting reduced regulation.1
By contrast, the former local Bell System operating
companies--initially grouped under the decree into a number of
independent regional BOC entities called RBOCs--were expected to
continue as local monopolies, providing local service within their
1
Both in the decree and in later legislation that replaced it,
the distinction drawn is between "interLATA" service (service
between defined LATAs, or local access transport areas) and
intraLATA service (service within a LATA). We use "long distance"
and "local" as very crude, but more familiar, approximations.
-3-
exclusive local areas as well as local distribution for AT&T and its
new long distance competitors. The RBOCs were forbidden, with few
exceptions, to provide any service other than a kind of broadly
conceived local service. Huber et al., Federal Telecommunications
Law 45 (2d ed. 1999).
The retreat from this illusion of wholly separate spheres
began in earnest with the 1996 Telecommunications Act, Pub. L. No.
104-104, 110 Stat. 56 ("1996 Act"). The RBOCs, like Verizon, wanted
to provide long distance service; other companies, including both
new entrants and established long distance carriers like AT&T and
MCI, wanted to secure from the RBOCs access to local BOC facilities
to use for long distance services, competing local services, or
both. The 1996 Act established a complex regulatory regime for both
entry and competition in both spheres.
The same set of local facilities--importantly (but not
exclusively) traditional connections (called "loops"), usually
copper wires, between the customers and the local carrier switching
center--are used for both intrastate and interstate service. Pre-
break up, when the Bell System provided most telephone service
without competition, the principal regulatory issues revolved around
rates, and agency authority could be easily divided: the Federal
Communications Commission set interstate rates; the state
commissions set intrastate rates.
-4-
In many cases, it is wasteful to duplicate local
facilities, for example, by having each long distance carrier
construct a separate loop to the customer's house. Under the 1996
Act, RBOCs and other "incumbent" local carriers are expected to
provide access to certain elements of their local facilities to
other companies. The statute also held out to the RBOCs the
prospect of eventual entry--provided certain conditions are met--
into the long distance market. However, regulation of facilities
used in common for local and long distance service is less easily
divided than was regulation of rates for telephone calls.
Thus, the 1996 Act set up a complicated dual regime.
Pertinently, in sections 251-52, the statute divided authority
between the FCC and states over the initial sharing of local
facilities, whether owned by RBOCs or other independent incumbent
carriers. 47 U.S.C. §§ 251-52 (2000). In section 271, the statute
established special sharing requirements for the RBOCs to enter the
long distance market and gave the FCC the controlling role in
regulation under that section. Id. § 271(c), (d). Further
complicating matters, the two sets of provisions overlap.
Importantly, sections 251-52 require that the incumbents
provide competitors various "network elements" (e.g., local loops),
as specified by the FCC from time to time, on an "unbundled" basis
-5-
(such elements are commonly called "UNEs"). 47 U.S.C. § 251(c)(3).2
The pricing for such elements is determined by inter-carrier
agreement or, if they fail to agree, by arbitration under state-
commission supervision and subject to review in federal courts. Id.
§ 252(a). The FCC, with court backing, ultimately determined that
such prices should be based on total long run incremental costs
("TELRIC" rates), which are highly favorable to the competitors.
See AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 374 & n.3 (1999).
Section 271 applies only to those incumbents, like
Verizon, that are or incorporate former BOCs. 47 U.S.C. § 271(a).
Among various conditions for FCC permission to provide long distance
service, it requires--by contrast to sections 251-52--that
statutorily specified network elements be made available (e.g.,
"local loop transmission" and "local switching"). Id. §
271(c)(2)(B). In the past several years, the RBOCs have been
applying for and receiving such permissions from the FCC.
Until recently, there was a substantial overlap between
what the FCC deemed required UNEs under sections 251-52 and the
statutory list in section 271. But, as a result of FCC orders in
2
UNEs are required only to the extent that "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)(A), (B)
(2000). The number of UNEs under section 251 has been in flux,
with much back and forth between the D.C. Circuit and the FCC.
See, e.g., United States Telecom Ass'n v. FCC, 359 F.3d 554 (D.C.
Cir. 2004), cert. denied, 543 U.S. 925 (2004).
-6-
2003 and 2005, a number of the UNEs have been "delisted," so that
incumbents including RBOCs are no longer required to provide them
under sections 251-52. Further, where section 271 still requires
network elements by RBOCs who provide long distance service, the FCC
has said that TELRIC pricing would be inappropriate and that the
traditional "just and reasonable" standard would apply, likely
generating higher prices to be paid by the competitors.3
It is against this background that the present cases
arose. Each case involves an application by Verizon under section
271 to enter the long-distance market--in one case from Maine, in
the other from New Hampshire. In each instance, the resulting
district court litigation has posed the question whether the state
commission can insist (despite delisting) that Verizon continue to
provide the disputed network elements and do so at TELRIC pricing.
We describe the two cases separately.
Maine. In seeking section 271 approval for interstate
service for Maine customers, Verizon solicited support from the
Maine PUC. In March 2002, the Maine PUC agreed to recommend that
the FCC approve the application, assuming Verizon agreed with the
state agency that it would comply with specified conditions,
3
Triennial Review Order ("TRO"), 18 F.C.C.R. 16978 (2003);
Triennial Review Remand Order ("TRRO"), 20 F.C.C.R. 2533 (2005).
See also Verizon Commc'ns, Inc. v. FCC, 535 U.S. 467, 489 (2002);
Iowa Utils. Bd., 525 U.S. at 385 (holding that the FCC has
jurisdiction under section 201(b) of the 1996 Act to design a
pricing methodology for section 251 UNEs).
-7-
including a commitment to file with the Maine PUC a "wholesale
tariff" embodying the UNE offerings.
Verizon agreed, the Maine PUC filed its favorable
recommendation and in June 2002 the FCC granted Verizon's
application. Thereafter, controversy developed between the Maine
PUC and Verizon as to just what should appear in the wholesale
tariff--a matter complicated by the intervening FCC rulings
delisting various UNEs under section 251 and adopting the just and
reasonable standard for section 271 elements. Verizon sought to
adjust its tariff filings accordingly, and competing carriers
complained.
The result was a set of Maine PUC orders in 2004 and 2005
which, among other things, ruled that Verizon was obligated to
provide section 271 elements at TELRIC prices until the Maine PUC
ordered otherwise. In addition, the Maine PUC determined that
several elements that were delisted under sections 251-52 remain
required under section 271--which Verizon denies. These included
three dark fiber elements (transport, loops, and entrance
facilities) and "line sharing."4
4
Dark fiber refers to fiber-optic cable, unconditioned by
equipment that generates or receives signals, used for intercity
(transport), premises connections (loops) and connecting incumbent
with competitor switches (entrance). Line sharing involves
allowing the competitor to offer DSL service (basically, a broad
band connection) using traditional--but specially conditioned--
copper wire loops for this service but without using the loop for
ordinary telephone service which it can also handle simultaneously.
-8-
Verizon then brought suit in the federal district court
in Maine seeking to enjoin the Maine PUC from imposing these
obligations. Verizon's basis for its claim to injunctive relief was
that the Maine PUC was usurping federal authority under the 1996 Act
and acting in conflict with FCC rulings that are controlling under
the Supremacy Clause. Such actions have a lineage in federal case
law. E.g., Verizon Md., Inc. v. Pub. Serv. Comm'n of Md., 535 U.S.
635, 642 (2002).
In the district court the Maine PUC defended its orders
on the ground that the Maine PUC itself has authority to enforce
section 271, that its orders are not in conflict with FCC rulings
and that Verizon consented to the obligations imposed when it
solicited Maine's recommendation for FCC approval under section 271.
The Maine PUC also says, but Verizon disputes, that it also rested
its order on state law.
In two decisions, one in 2005 (preliminary injunction)
and the other in 2006 (permanent injunction), the district court
ruled in favor of the Maine PUC. The court determined that under
federal law the Maine PUC could set rates for section 271 elements
and could, as the Maine PUC proposed to do, adopt TELRIC pricing for
interim rates. It also said that state law provided an independent
basis for such measures even if section 271 did not.
As for the elements required by the Maine PUC but
disputed by Verizon, the court upheld the state agency's conclusion
-9-
that section 271(c)(2)(B) requires Verizon to provide access to line
sharing and dark fiber, including dark fiber loops, transport and
entrance facilities. The district court also upheld the Maine PUC's
interpretation of Verizon's interconnection agreement with a
competitor, Great Works Internet ("GWI"), in which the state agency
had reached a similar conclusion by interpreting the agreement.
New Hampshire. In 2001, Verizon sought support from the
New Hampshire PUC for its section 271 application to provide long-
distance service from New Hampshire. In New Hampshire, unlike
Maine, Verizon had earlier filed a standardized general offering of
UNEs at specified prices (an "SGAT" in the parlance of the statute).
47 U.S.C. § 252(f). The New Hampshire PUC agreed to give support
on condition that Verizon agreed to convert its SGAT into a tariff.
Verizon consented, saying that it would convert its SGAT
into a tariff by year-end 2002 and would modify the SGAT and the
tariff "to reflect changes" as determined "by the FCC or the
courts." The New Hampshire PUC recommended that the FCC approve
Verizon's section 271 application; the FCC did so in September 2002.
After the FCC altered its UNE listing requirements in 2003 and 2005,
Verizon sought to revise its SGAT and tariff purportedly in
accordance with the new FCC rulings.
The New Hampshire PUC then ruled that Verizon must
continue to provide disputed UNEs (e.g., dark fiber, line sharing)
and at existing TELRIC prices until the state agency decided
-10-
otherwise. Verizon in turn brought suit in New Hampshire federal
district court to enjoin the New Hampshire PUC from conduct
allegedly at odds with the 1996 Act and FCC rulings. On cross
motions for summary judgment, the district court ruled in favor of
Verizon.
The district court rejected the New Hampshire PUC's main
argument, namely, that Verizon had committed itself to submit its
section 271 element rates to state agency tariffing in exchange for
supporting Verizon's section 271 application. Examining the relevant
filings, the court ruled that Verizon's agreement had extended only
to UNEs listed under sections 251-52 (now largely delisted) and not
to section 271 elements. The court also said that the state's
imposition of TELRIC pricing would be preempted as conflicting with
federal policy.
State authority under section 271. On appeal, the state
commissions argue inter alia that they can determine what elements
Verizon is required to provide under section 271 and can set rate
policy for those elements. The arguments present on a legal issue,
largely subject to de novo review. Global NAPs, Inc. v. Verizon New
England, 396 F.3d 16, 23 (1st Cir. 2005), cert. denied, 544 U.S.
1061 (2005). We hold that the states' position is at odds with the
statutory language, history and policy of section 271 and most
relevant precedent.
-11-
Sections 251-52 provide for a dual federal-state regime:
the FCC determines what UNE elements must be provided and sets
pricing policy; state commissions oversee the adoption of agreements
or SGATs providing such UNEs to competitors at prices based on
those principles. 47 U.S.C. § 252(a), (b), (e), (f). Disputes as
to the adoption of the agreements submitted to state commissions go
to federal, rather than state, court for review, id. § 252(e),
although implementation issues may arise in state proceedings. In
short, the states have a major role under these sections.
By contrast, authority under section 271 is granted
exclusively to the FCC. The FCC decides whether to grant section
271 approval; states have no more than a right to express views.
47 U.S.C. § 271(d)(2)(B)(3). The power to enforce the provision
falls under the FCC's general powers, id. § 271(d)(6); and the right
to set prices for the elements flows from the FCC's power to set
just and reasonable rates, id. §§ 201-202; see also TRO ¶ 656, 18
F.C.C.R. 16978, 17386 (2003). The contrast confirms that when
Congress envisaged state commission power to implement the statute,
it knew how to provide for it.
The state commission's statutory arguments are
unconvincing. That the states have an explicit consultative role
under section 271 works against, rather than for, their claim of
other powers. Russello v. United States, 464 U.S. 16, 23 (1983).
So, too, the cross-references in section 271 to sections 251 and
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252, e.g., 47 U.S.C. § 271(c)(2)(B), are hardly a delegation of
power to the states to implement section 271: the main cross-
reference merely provides that one condition precedent to FCC
approval under section 271 is that the RBOC have in place a section
251-52 agreement. Id. § 271(c)(1).
Similarly, two savings clauses relied on by the state
commissions do not purport to grant states enforcement power under
section 271. Both savings clauses aim to prevent sections 251-52
from negating other powers of state commissions to regulate
interconnection or local service. 47 U.S.C. § 252(e)(3), (f)(2).
Section 271 has no such clause reserving state power, again
underscoring intended federal supremacy and the absence of state
power under section 271.
Nor are states helped by repeatedly referring to the
facilities in question as "local" or "intrastate" and pointing to
their statutory power over intrastate communications. 47 U.S.C. §
251(d)(3). The loops, central office switches and similar
facilities are located in individual communities but have been used
for decades to provide both interstate and intrastate service as
part of a unified network. The 1996 Act effectively regulates such
facilities, see Iowa Utils. Bd., 525 U.S. at 378 n.6, in respect of
interconnection whether for interstate or intrastate service.
Although the statutory language is more than sufficient
to resolve the point, the history of section 271 bears out FCC
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primacy. Section 271, broadly speaking, directly descends from
provisions in the AT&T federal court antitrust decree regulating the
ability of the RBOCs to offer long-distance service--an initial
prohibition coupled with an opportunity to seek entry in due course.
When the 1996 Act replaced the decree, Congress aimed to transfer
this authority to the FCC--not the states--while recasting and
refining the conditions for RBOC entry.5
Finally, precedent largely supports Verizon. Indiana
Bell Telephone Co. v. Indiana Utility Regulatory Commission, 359
F.3d 493 (7th Cir. 2004), treats section 271 as within the FCC's
exclusive authority; so do several district court decisions. Ill.
Bell. Tel. Co. v. O'Connell-Diaz, 2006 WL 2796488 (N.D. Ill. Sept.
28, 2006); Sw. Bell. Tel. v. Miss. Pub. Serv. Comm'n, 461 F. Supp.
2d 1055 (E.D. Mo. 2006). Most of the state commissions that have
spoken appear to disclaim power to determine section 271 elements
or fix pricing principles.6
5
TRO ¶ 655, 18 F.C.C.R. at 17385 n.1986 (citing United States
v. AT&T Co., 552 F. Supp. 131 (D.D.C. 1982)); see also BellSouth
Corp. v. FCC, 162 F.3d 678, 683 (D.C. Cir. 1998) (characterizing
section 271 as "merely a revised version of the [Modification of
Final Judgment] restrictions"). See also InterLATA Boundary Order
¶ 18, 14 F.C.C.R. 14392, 14401 (1999) (noting "the exclusive
authority that Congress intended that the [FCC] exercise over the
section 271 process").
6
E.g., Arkansas, Docket No. 05-081-U, Order No. 5, 2005 Ark.
PUC LEXIS 432, at *3-*4 (Ark. P.S.C. Oct. 31, 2005) ("Although SBC
should provide the items specified in section 271 and the TRO, this
Commission has no jurisdiction to enforce section 271."); Indiana,
Cause No. 42857, 2006 Ind. PUC LEXIS 40, at *88-*89 (Ind. Util.
Reg. Comm'n Jan. 11, 2006) ("[S]tate commissions have no
-14-
State law. Whether state law might independently support
the orders is a different question to which we now turn. In the
Maine case, the district court itself invoked state law sua sponte;
in the New Hampshire case, the district court said the New Hampshire
PUC had not seriously sought to develop a state law argument and
refused to consider such a claim. In this court, both state
commissions seek to rely in part on state law. Verizon objects to
state law arguments not adopted in the original agency orders, but
the state law argument fails for other reasons.
Neither state agency spends much time identifying
pertinent state statutes or rules to support the orders. But, as
already noted, interconnection affects both intrastate as well as
interstate services, Iowa Utils. Bd., 525 U.S. at 379; and state
utility statutes tend to be broadly drafted. Yet even if state
utility statutes might otherwise authorize state regulation of
facilities that affect intrastate and interstate commerce, the real
barrier to the present claims grounded in state law is federal
preemption.
State regulation, even when authorized by local law, must
give way not only "where Congress has legislated comprehensively"
jurisdiction to enforce or determine the requirements of Section
271."); North Dakota, Case No. PU-05-165, 2006 N.D. PUC LEXIS 3, at
*22-*23 (N.D. P.U.C. Feb. 8, 2006) ("The FCC has the exclusive
authority to determine whether Qwest has complied with the
substantive provisions of Section 271 including the checklist
provisions.").
-15-
in a field with an aim to occupy it, but also "where the state law
stands as an obstacle to the accomplishment and execution of the
full objectives of Congress." La. Pub. Serv. Comm'n v. FCC, 476
U.S. 355, 368-69 (1986). In this case both of the specific outcomes
that the state agencies seek to dictate are in direct conflict with
specific FCC policies adopted pursuant to its authority under the
1996 Act.
One issue is whether the states can require that section
271 elements be priced at TELRIC rates. The FCC orders provide
carriers the authority to charge the potentially higher just and
reasonable rates, in order to limit subsidization and to encourage
investment by the competitors.7 To allow the states to require the
lower TELRIC rates directly conflicts with, and undercuts, the FCC's
orders. Under preemption principles the state orders must in this
respect give way. Iowa Utils. Bd., 525 U.S. at 378 n.6; City of New
York v. FCC, 486 U.S. 57, 64 (1988).
The other issue is whether the states can require the
RBOCs to provide to competitors unbundled elements that have been
delisted under sections 251-52 and are not within the list of
7
See TRO ¶¶ 656-64, 18 F.C.C.R. at 17386-90; UNE Remand Order
¶ 473, 15 F.C.C.R. 3696, 3906 (1999) ("[I]t would be
counterproductive to mandate that the incumbent offers the element
at forward-looking prices. Rather, the market price should prevail
. . . ."); cf. 1 Kahn, The Economics of Regulation: Principles and
Institutions 63 (1970) (discussing the provision of rewards and
incentives through the imposition of rates in order to spur
efficiency and innovation).
-16-
elements required under section 271. (This is a different question
than how one defines particular terms in the section 271 list.) The
problem for the states is the FCC's delisting was intended to free
the carriers from such compulsion.
Depending on the circumstances, making a monopolist share
what used to be called "essential facilities" can promote
competition; but it can also retard investment, handicap competition
detrimentally, and discourage alternative means of achieving the
same result that could conceivably enhance competition in the long
run.8 This view underlies the delisting order. UNE Remand Order ¶
473, 15 F.C.C.R. at 3906. For a state to require such sharing where
the FCC thinks compulsion is detrimental is no different than
insistence on TELRIC pricing in contravention of the FCC's mandate
for a different pricing scheme.
Verizon's alleged promises. The question remains whether
Verizon has agreed "voluntarily" with the state agencies to provide
unbundled elements that have been delisted and are not required
under section 271 or agreed to provide TELRIC pricing for section
271 elements. Both state agencies in this case rely on alleged
commitments by Verizon to this effect. Arguably, the FCC did not
8
See Areeda & Hovenkamp, Antitrust Law ¶771b, pp. 174-76
(1996) ("[T]he right to share a monopoly discourages firms from
developing their own alternative inputs" and creates the "problem
of loss of competitor incentive[s]."); see also United States
Telecom Ass'n v. FCC, 290 F.3d 415, 424-25 (D.C. Cir. 2002), cert.
denied, 538 U.S. 940 (2003).
-17-
explicitly forbid the RBOCs from providing more elements than
required or charging them lower prices.
A truly voluntary decision by the carrier to do so might
be unexceptional; an extortionate demand by the state, perhaps no
different than direct compulsion; and, in between and arguably
legitimate, is a state's refusal to support a section 271
application unless the RBOC agreed to provide extra elements. The
issue need not be decided because Verizon made no such commitments,
as to either section 271 elements or their pricing.
Some deference is customarily given to a state agency's
interpretation of regulatory filings made with it (e.g., state
tariffs or rate contracts), Sw. Bell Tel. Co. v. Pub. Util. Comm'n
of Tex., 208 F.3d 475, 485 (5th Cir. 2000); cf. Idaho Power Co. v.
FERC, 312 F.3d 454, 461 (D.C. Cir. 2002), but Verizon's commitments
were merely representations made to obtain state support for a
federal filing seeking federal approval under a federal statute.
Further, even where an agency interprets a tariff or rate contract,
its interpretation must be reasonable. Boston Edison Co. v. FERC,
441 F.3d 10, 13 (1st Cir. 2006).
Here, Verizon agreed to the Maine PUC's demand that it
file a tariff with the agency reflecting a general offering of UNEs.
Verizon was then providing UNEs under sections 251-52 through
interconnection agreements but it had filed no tariff or SGAT making
a general offering. The state agency said that its own request for
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a tariff was in response to complaints by competitors that Verizon
was abusing the section 251-52 negotiation process by forcing
competitors to accept unfavorable or unnecessary terms in order to
obtain newly available network elements.
Sections 251-52 do not provide for tariffs--their focus
is on individual agreements or a general contractual standard
offering; one circuit has held that the agency may not insist on
tariffing of UNEs, Wis. Bell v. Bie, 340 F.3d 441, 444 (7th Cir.
2003), cert. denied, 540 U.S. 1142 (2004), but a carrier may be free
to make a state tariff offering of UNEs. If so, an array of state-
agency powers to review the tariff, insist on contents and delay
alteration might be brought into play (albeit always subject to
preemption principles).
In this instance, the relevant UNEs have been delisted
and Verizon's current offerings are now made pursuant to section
271. So far as we can tell the Maine PUC never received any
commitment by Verizon to tariff offerings it made under section 271.
In its original proposed tariff Verizon made no reference to two
elements that are required under section 271 but have never been
deemed UNEs under sections 251-52. The district court was openly
skeptical of the commitment claim, and we are unpersuaded by it.
New Hampshire's story is similar with one twist. As
earlier explained, in that state Verizon had a SGAT in place for its
UNE offerings; and the New Hampshire PUC insisted--as a condition
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of supporting the company's section 271 application--that the SGAT
offering of UNEs be reflected in a state tariff filing. Thereafter,
when the FCC delisted various UNEs, the state agency insisted that
Verizon continue such offerings with TELRIC pricing under the state
tariff.
Although the SGAT has a single introductory reference to
section 271 as well as sections 251-52, the SGAT refers specifically
to UNEs and not to elements required by section 271. Conversely,
neither the SGAT nor the subsequent tariff offered the "poles,
ducts, and conduits" regulated by section 224 and required through
section 271's competitive checklist; rather, access to both elements
was available through negotiated contractual arrangements. Perhaps
most important, Verizon's commitment to tariff its offerings
referred specifically to UNEs--not to elements under section 271's
competitive checklist.
Further, in its commitment Verizon explicitly reserved
its right to modify the SGAT "to reflect changes" as determined "by
the FCC or the courts." The FCC did then determine that contested
UNEs should be delisted and that TELRIC pricing should not be used
for section 271 elements. Whether or not some deference is accorded
to the state agency, Verizon's commitment cannot reasonably be read
as promising to tariff section 271 elements with the state agency
or provide them with TELRIC pricing.
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Definition of section 271 elements. A final issue
concerns the definition of certain of the elements required by
section 271. In particular, the Maine PUC ruled that the statutory
listing of loops (item 4) and transport (item 5) in section 271
encompasses the provision to competitors of line sharing (allegedly
under item 5) and dark fiber (allegedly under items 4 and 5). See
note 4, above (explaining these terms). Verizon contends otherwise.
The district court in Maine sided with the state agency.
The statutory language is uninformative. "Loop" could
mean the whole or it could allow the buyer to pick and choose part
of the loop capacity; loop and entrance and transport could include
dark fiber or could refer only to a completed communications
facility. The Maine district court took the view that all such
functions constituted "access" and were therefore required; but the
competitive checklist is a subset specifying types of access and
other functions and section 271 requires only those contained in the
list.
No legislative gloss has been pointed to, and the FCC,
responsible for section 271's implementation, has not clearly
expressed its view: it has approved several RBOC section 271
applications which do not list line sharing or dark fiber among
their offerings, New York Order ¶ 31, 15 F.C.C.R. 3953, 3967 n.70
(1999); Texas Order ¶ 32, 15 F.C.C.R. 18354, 18369 (2000); but it
has also made other statements which the Maine PUC interprets as
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endorsing that agency's view that line sharing and dark fiber do
fall within section 271's requirements.9
The arguments are complicated and technical and, in the
first instance, they are matters that ought to be resolved by the
expert agency charged with administering section 271, namely, the
FCC. Verizon offers statements from FCC orders that it reads as
favoring its position, as well as other arguments; the competitors
rely on other evidence. But these are hardly matters on which we
should be reduced to reading tea leaves.
As for the sparse judicial precedent, against the Maine
district court can be set a decision of a Florida district court
taking the same position as Verizon now advances. Dieca Commc'ns,
Inc. v. Fla. Pub. Serv. Comm'n, 447 F. Supp. 2d 1281 (N.D. Fla.
2006). Although statutory interpretations are the business of
courts, the FCC's view would normally receive Chevron deference,
bolstered by its technical expertise and respect for its policy
choices in relation to UNEs and element pricing.
Under primary jurisdiction principles, the meaning of
items 4 and 5 should if possible be addressed by the FCC in the
first instance and before a final court decision. The doctrine of
primary jurisdiction is specifically applicable to claims, as here,
9
E.g., Georgia and Louisiana 271 Order ¶ 132, 18 F.C.C.R.
19024, 19099 (2003); Maine Order ¶¶ 44-51, 17 F.C.C.R. 11659,
11688-93 (2002); Massachusetts 271 Order ¶ 163, 16 F.C.C.R. 8988,
9079 (2001).
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"properly cognizable in court that contain some issue within the
special competence of an administrative agency."10 A reference to
the agency can easily be ordered in the district court. Reiter v.
Cooper, 507 U.S. 258, 268 (1993).
The arguments for a reference here are stronger than
usual. Section 271 applies nationwide and, as the RBOCs handle most
origination and termination of calls, how the statute is read will
affect competition and service throughout the nation. This is not
a matter on which divergent state interpretations make sense and the
FCC's position can easily be solicited. See TON Servs., Inc. v.
Qwest Corp., F.3d , 2007 WL 2083744, at *11 (10th Cir. 2007);
Davel Commc'ns, Inc. v. Qwest Corp., 460 F.3d 1075, 1089 (9th Cir.
2006).
Accordingly, unless the Maine PUC and Verizon agree to
some other solution, the district court should proceed to refer the
matter to the FCC or stay proceedings to allow the parties to seek
a reference. What should be done about Verizon's disputed
obligations (provision, not TELRIC pricing) as to line sharing and
dark fiber in the interim should be considered in the first instance
10
Reiter v. Cooper, 507 U.S. 258, 268 (1993). See also U.S.
Pub. Interest Research Group v. Atl. Salmon of Me., LLC, 339 F.3d
23, 34 (1st Cir. 2003); Pejepscot Indus. Park, Inc. v. Me. Cent.
R.R. Co., 215 F.3d 195, 205 (1st Cir. 2000); Ass'n of Int'l Auto.
Mfrs. v. Comm'r, Mass. Dep't of Envt'l Prot., 196 F.3d 302, 304
(1st Cir. 1999); Pierce et al., Administrative Law and Process §
5.8 (2d ed. 1992).
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by the district court if the parties cannot come to an interim
accommodation.
The GWI agreement. Finally, the Maine PUC and Verizon
disagree as to the agency's interpretation of a specific
interconnection agreement between Verizon and another carrier named
GWI. The dispute concerns a refusal by Verizon to fill a request
for so-called OCn transport. The Maine PUC's determination in favor
of GWI, and its attempted extension of that ruling to other
competitors of Verizon, seems to be based on the assumption that it
could impose and set rates for section 271 elements--a position we
have rejected.
As we read the briefs, both the Maine PUC and Verizon
seem to agree that a decision in Verizon's favor on these other
issues effectively undercuts the state agency's grounds for its GWI
ruling. If so, then the GWI ruling ought to be enjoined on remand
along with the Maine PUC's broader effort to require that section
271 elements be offered at TELRIC pricing. If there is anything
more to consider as to the GWI ruling, the parties can pursue the
issue on remand.
To sum up, neither state agency may require elements that
the FCC has delisted and are not enumerated in section 271 nor
require that section 271 elements be offered under TELRIC pricing
that the FCC has explicitly rejected. As to line sharing and dark
fiber, the matter should be resolved after the FCC's views have been
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solicited. The decision of the Maine district court is vacated and
remanded for further proceedings consistent with this decision; that
of the New Hampshire district court is affirmed. All parties will
bear their own costs.
It is so ordered.
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Verizon New England, Inc. v. Maine Public Utilities Commission
Court: Court of Appeals for the First Circuit
Date filed: 2007-09-06
Citations: 509 F.3d 1
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