Atlas Telephone Co. v. Oklahoma Corp. Comm.

F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
MAR 10 2005
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
FOR THE TENTH CIRCUIT

ATLAS TELEPHONE COMPANY;
BEGGS TELEPHONE COMPANY;
BIXBY TELEPHONE COMPANY;
CANADIAN VALLEY TELEPHONE
COMPANY; CARNEGIE TELEPHONE
COMPANY; CENTRAL OKLAHOMA No. 04-6096
TELEPHONE COMPANY; CHEROKEE
TELEPHONE COMPANY;
CHICKASAW TELEPHONE
COMPANY; CHOUTEAU TELEPHONE
COMPANY; CIMARRON TELEPHONE
COMPANY; CROSS TELEPHONE
COMPANY; DOBSON TELEPHONE
COMPANY; GRAND TELEPHONE
COMPANY; HINTON TELEPHONE
COMPANY; KANOKLA TELEPHONE
ASSOCIATION; MCLOUD
TELEPHONE COMPANY; MEDICINE
PARK TELEPHONE COMPANY;
OKLAHOMA TELEPHONE &
TELEGRAPH; OKLAHOMA
WESTERN TELEPHONE COMPANY;
PANHANDLE TELEPHONE
COOPERATIVE INC.; PINE
TELEPHONE COMPANY; LAVACA
TELEPHONE COMPANY, doing
business as Pinnacle Communications;
PIONEER TELEPHONE
COOPERATIVE INC.;
POTTAWATOMIE TELEPHONE
COMPANY; SALINA-SPAVINAW
TELEPHONE COMPANY; SANTA
ROSA TELEPHONE COOPERATIVE
INC.; SHIDLER TELEPHONE
COMPANY; SOUTH CENTRAL
TELEPHONE ASSOCIATION, INC.;
SOUTHWEST OKLAHOMA
TELEPHONE COMPANY; TERRAL
TELEPHONE COMPANY; TOTAH
TELEPHONE COMPANY INC.;
VALLIANT TELEPHONE COMPANY,

Plaintiffs - Appellants,

v.

OKLAHOMA CORPORATION
COMMISSION; DENISE A. BODE;
BOB ANTHONY; JEFF CLOUD,
Corporation Commissioners in their
official capacities,

Defendants,

and

AT&T WIRELESS SERVICE, Inc.,

Defendant - Appellee.

ATLAS TELEPHONE COMPANY;
BEGGS TELEPHONE COMPANY;
BIXBY TELEPHONE COMPANY;
CANADIAN VALLEY TELEPHONE
COMPANY; CARNEGIE TELEPHONE
COMPANY; CENTRAL OKLAHOMA
TELEPHONE COMPANY; CHEROKEE
TELEPHONE COMPANY; No. 04-6098
CHICKASAW TELEPHONE
COMPANY; CHOUTEAU TELEPHONE
COMPANY; CIMARRON TELEPHONE

2
COMPANY; CROSS TELEPHONE
COMPANY; DOBSON TELEPHONE
COMPANY; GRAND TELEPHONE
COMPANY; HINTON TELEPHONE
COMPANY; KANOKLA TELEPHONE
ASSOCIATION; MCLOUD
TELEPHONE COMPANY; MEDICINE
PARK TELEPHONE COMPANY;
OKLAHOMA TELEPHONE &
TELEGRAPH; OKLAHOMA
WESTERN TELEPHONE COMPANY;
PANHANDLE TELEPHONE
COOPERATIVE INC.; PINE
TELEPHONE COMPANY; LAVACA
TELEPHONE COMPANY, doing
business as Pinnacle Communications;
PIONEER TELEPHONE
COOPERATIVE INC.;
POTTAWATOMIE TELEPHONE
COMPANY; SALINA-SPAVINAW
TELEPHONE COMPANY; SANTA
ROSA TELEPHONE COOPERATIVE
INC.; SHIDLER TELEPHONE
COMPANY; SOUTH CENTRAL
TELEPHONE ASSOCIATION, INC.;
SOUTHWEST OKLAHOMA
TELEPHONE COMPANY; TERRAL
TELEPHONE COMPANY; TOTAH
TELEPHONE COMPANY INC.;
VALLIANT TELEPHONE COMPANY,

Plaintiffs - Appellants,

v.

OKLAHOMA CORPORATION
COMMISSION; DENISE A. BODE;
BOB ANTHONY; JEFF CLOUD,
Corporation Commissioners, in their

3
official capacities; SOUTHWESTERN
BELL WIRELESS INC., doing business
as Cingular Wireless LLC, Oklahoma
RSA 3 Limited Partnership, Oklahoma
RSA 9 Limited Partnership, Oklahoma
City SMSA Limited Partnership,

Defendants - Appellees.

ATLAS TELEPHONE COMPANY;
BEGGS TELEPHONE COMPANY;
BIXBY TELEPHONE COMPANY;
CANADIAN VALLEY TELEPHONE
COMPANY; CARNEGIE TELEPHONE No. 04-6100
COMPANY; CENTRAL OKLAHOMA
TELEPHONE COMPANY; CHEROKEE
TELEPHONE COMPANY;
CHICKASAW TELEPHONE
COMPANY; CHOUTEAU TELEPHONE
COMPANY; CIMARRON TELEPHONE
COMPANY; CROSS TELEPHONE
COMPANY; DOBSON TELEPHONE
COMPANY; GRAND TELEPHONE
COMPANY; HINTON TELEPHONE
COMPANY; KANOKLA TELEPHONE
ASSOCIATION; MCLOUD
TELEPHONE COMPANY; MEDICINE
PARK TELEPHONE COMPANY;
OKLAHOMA TELEPHONE &
TELEGRAPH; OKLAHOMA
WESTERN TELEPHONE COMPANY;
PANHANDLE TELEPHONE
COOPERATIVE INC.; PINE
TELEPHONE COMPANY; LAVACA
TELEPHONE COMPANY, doing
business as Pinnacle Communications;
PIONEER TELEPHONE
COOPERATIVE INC.;

4
POTTAWATOMIE TELEPHONE
COMPANY; SALINA-SPAVINAW
TELEPHONE COMPANY; SANTA
ROSA TELEPHONE COOPERATIVE
INC.; SHIDLER TELEPHONE
COMPANY; SOUTH CENTRAL
TELEPHONE ASSOCIATION, INC.;
SOUTHWEST OKLAHOMA
TELEPHONE COMPANY; TERRAL
TELEPHONE COMPANY; TOTAH
TELEPHONE COMPANY INC.;
VALLIANT TELEPHONE COMPANY,

Plaintiffs - Appellants,

v.

OKLAHOMA CORPORATION
COMMISSION; DENISE A. BODE,
BOB ANTHONY, JEFF CLOUD,
Corporation Commissioners in their
official capacities; WWC LICENSE LLC,

Defendants - Appellees.

ATLAS TELEPHONE COMPANY;
BEGGS TELEPHONE COMPANY;
BIXBY TELEPHONE COMPANY;
CANADIAN VALLEY TELEPHONE
COMPANY; CARNEGIE TELEPHONE No. 04-6101
COMPANY; CENTRAL OKLAHOMA
TELEPHONE COMPANY; CHEROKEE
TELEPHONE COMPANY;
CHICKASAW TELEPHONE
COMPANY; CHOUTEAU TELEPHONE
COMPANY; CIMARRON TELEPHONE
COMPANY; CROSS TELEPHONE
COMPANY; DOBSON TELEPHONE

5
COMPANY; GRAND TELEPHONE
COMPANY; HINTON TELEPHONE
COMPANY; KANOKLA TELEPHONE
ASSOCIATION; MCLOUD
TELEPHONE COMPANY; MEDICINE
PARK TELEPHONE COMPANY;
OKLAHOMA TELEPHONE &
TELEGRAPH; OKLAHOMA
WESTERN TELEPHONE COMPANY;
PANHANDLE TELEPHONE
COOPERATIVE INC.; PINE
TELEPHONE COMPANY; LAVACA
TELEPHONE COMPANY, doing
business as Pinnacle Communications;
PIONEER TELEPHONE
COOPERATIVE INC.;
POTTAWATOMIE TELEPHONE
COMPANY; SALINA-SPAVINAW
TELEPHONE COMPANY; SANTA
ROSA TELEPHONE COOPERATIVE
INC.; SHIDLER TELEPHONE
COMPANY; SOUTH CENTRAL
TELEPHONE ASSOCIATION, INC.;
SOUTHWEST OKLAHOMA
TELEPHONE COMPANY; TERRAL
TELEPHONE COMPANY; TOTAH
TELEPHONE COMPANY INC.;
VALLIANT TELEPHONE COMPANY,

Plaintiffs - Appellants,

v.

OKLAHOMA CORPORATION
COMMISSION; DENISE A. BODE;
BOB ANTHONY; JEFF CLOUD,
Corporation Commissioners in their
official capacities; SPRINT SPECTRUM
LIMITED PARTNERSHIP, d/b/a Sprint

6
 PCS,

Defendants - Appellees.

APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA
(D.C. No. 03-CV-347-F)

Kendall W. Parrish (Ron Comingdeer, Mary Kathryn Kunc, David W. Lee, and Ambre C.
Gooch, Comingdeer, Lee & Gooch, Oklahoma City, Oklahoma, and Kimberly K. Brown,
Kimberly K. Brown, P.C., Oklahoma City, Oklahoma, with him on the briefs),
Comingdeer, Lee & Gooch, Oklahoma City, Oklahoma for Plaintiffs-Appellants.

Phillip R. Schenkenberg (Michael G. Harris and William H. Hickman, Moricoli Harris &
Cottingham, Oklahoma City, Oklahoma, with him on the brief), Briggs and Morgan, P.A.,
Saint Paul, Minnesota, for Defendant-Appellee WWC License L.L.C.

Marc Edwards and Jennifer Kirkpatrick, Phillips McFall McCaffrey McVay & Murrah,
P.C., Oklahoma City, Oklahoma, and Lawrence S. Smith, Smith, Majcher & Mudge,
L.L.P., Austin, Texas, on the brief for Defendant-Appellee AT&T Wireless Services, Inc.

John Paul Walters, Jr., Edmond, Oklahoma, on the brief for Defendant-Appellee Cingular
Wireless.

Brett Leopold, Sprint Spectrum, L.P., Overland Park, Kansas, on the brief for Defendant-
Appellee Sprint Spectrum, L.P., d/b/a Sprint PCS.

Before KELLY, ANDERSON and O’BRIEN, Circuit Judges.

KELLY, Circuit Judge.

In these consolidated appeals, Plaintiffs-Appellants rural telephone companies

7
(“RTCs”) collectively appeal the district court’s orders affirming final orders of the

Oklahoma Corporation Commission (“OCC”). The OCC orders established

interconnection obligations under the federal Telecommunications Act of 1996 between

the RTCs and Defendant-Appellees commercial mobile radio service (“CMRS”)

providers. Our jurisdiction arises under 28 U.S.C. § 1291, and we affirm.

Background

The RTCs are traditional landline telecommunications carriers doing business in

Oklahoma. CMRS providers are wireless telecommunications carriers. This dispute

arose from negotiations for interconnection agreements between the RTCs and CMRS

providers.

The Telecommunications Act of 1996 (“Telecommunications Act” or “Act”), 47

U.S.C. §§ 151–614, opened the previously monopolized telecommunications industry to

competition. Under the Act, local exchange carriers (“LECs”),1 like the RTCs, have a

duty to interconnect with competitors and negotiate agreements in good faith. 47 U.S.C.

§§ 251(a)(1), (c)(1). In the instant cases, the RTCs and CMRS providers resolved many

outstanding issues during voluntary negotiations entered into pursuant to § 252(a)(1) of

the Act. However, negotiations broke down over compensation for the transport and

termination of telecommunications traffic. The CMRS providers subsequently filed

An LEC is defined in the Act as “any person that is engaged in the provision of
1

telephone exchange service or exchange access.” 47 U.S.C. § 153(26) (excluding CMRS
providers from the definition).

8
petitions with the OCC seeking arbitration of the contested issues pursuant to § 252(b)(1)

of the Act.

The parties raised numerous issues before the OCC-appointed arbitrator. Relevant

here, the RTCs and CMRS providers disputed the compensation regime that would apply

to the transport and termination of telecommunications between the parties’ networks.

Under the terms of the interconnection agreements, the CMRS providers were not

required to establish physical connections with the RTC networks, although the

agreements do not preclude such connections. Rather, telecommunications traffic could

be routed through an interexchange carrier (“IXC”), Southwestern Bell Telephone

Company (“SWBT”). When an RTC customer places a call to a CMRS customer, the call

must first pass from the RTC network through a point of interconnection with the SWBT

network. SWBT then routes the call to a second point of interconnection between its

network and the CMRS network. The call is then delivered to the CMRS customer.2 In

contrast, were the RTC and CMRS networks directly connected, the call would pass only

through a single point of interconnection.

The CMRS providers maintained that, regardless of the presence of the IXC, the

telecommunications exchange referenced above is subject to the reciprocal compensation

obligations found in § 251(b)(5) of the Act. The Federal Communications Commission

The converse is true for calls originated by a CMRS customer and delivered to an
2

RTC customer.

9
(“FCC”), charged with effectuating the provisions of the Act, has determined that

reciprocal compensation should only apply to telecommunications traffic originating and

terminating in the same local area. First Report and Order, FCC 96-325, CC Docket Nos.

96-98, 95-185, ¶ 1034 (Aug. 8, 1996) (“First Report and Order”). Under a typical

reciprocal compensation agreement between two carriers, the carrier on whose network

the call originates bears the cost of transporting the telecommunications traffic to the

point of interconnection with the carrier on whose network the call terminates. Id.

Having been compensated by its customer, the originating network in turn compensates

the terminating carrier for completing the call. Id. In contrast, the RTCs maintained that

traffic passing through an IXC is subject to the access charge, or long-distance calling,

regime. Under the access charge regime, the originating caller pays the IXC, which in

turn compensates the originating and terminating networks. Id. Thus, the RTCs contend

that they have no obligation to compensate CMRS providers for transporting and

terminating such traffic.

In the context of the instant cases, the difference between the compensation

schemes is more than semantic. Under these reciprocal compensation agreements, the

originating network bears the cost of transporting telecommunications traffic across

SWBT’s network to the point of interconnection with the terminating network. The

originating network is then required to compensate the terminating network for

terminating the call. Under the Act, reciprocal compensation is based solely on the costs

10
of transport and termination incurred by the terminating provider. 47 U.S.C.

§ 252(d)(2)(A). In contrast, under the access charge regime, both the originating and

terminating carriers would be compensated by the IXC. Under this scenario, neither

carrier bears the cost of transporting traffic on the IXC network.

Excepting traffic to or from a CMRS provider, state commissions are responsible

for determining what areas are local for purposes of applying the reciprocal compensation

obligation found in § 251(b)(5). First Report and Order ¶ 1035. However, the FCC has

determined that “traffic to or from a CMRS network that originates and terminates within

the same [Major Trading Area] is subject to transport and termination rates under section

251(b)(5), rather than interstate and intrastate access charges.” Id. ¶ 1036. A major

trading area (“MTA”) is the largest FCC-authorized wireless license territory, and might

encompass all or part of numerous state-defined local calling areas. Id. Relying on this

FCC determination, the OCC-appointed arbitrator determined that reciprocal

compensation would apply to agreements between the RTCs and CMRS providers in the

instant cases. The OCC subsequently approved provisions in the arbitrated agreements

reflecting this determination.

In addition, and solely with respect to Defendant-Appellee WWC License L.L.C.

(“Western Wireless”), the arbitrator determined that Western Wireless should have the

option under the agreements to establish local numbers without establishing direct

connections with the RTCs. This determination resulted in a provision under the OCC-

11
approved interconnection agreement requiring an RTC to deliver calls to Western

Wireless at a SWBT switch.

On completion of the arbitration, the conformed agreements were submitted to and

approved by the OCC. The RTCs initially appealed the OCC orders approving the

interconnection agreements to the Oklahoma Supreme Court, but their suit was dismissed

for lack of jurisdiction. The RTCs then brought suit in federal district court. In its first

order and judgment, the district court affirmed various aspects of the OCC orders,

including the determination that compensation for the transport and termination of

telecommunications would be reciprocal. Atlas Tel. Co. v. Corp. Comm’n of Okla., 309

F. Supp. 2d 1299, 1309-10 (W.D. Okla. 2004) (“Atlas I”). In its second order and

judgment, the district court affirmed that part of the OCC’s final order approving the

provision in the interconnection agreement that requires an RTC to deliver calls to

Western Wireless at a SWBT switch. Atlas Tel. Co. v. Corp. Comm’n of Okla., 309 F.

Supp. 2d 1313, 1316-17 (W.D. Okla. 2004) (“Atlas II”).

Issues on Appeal

In Nos. 04-6096, 04-6098, and 04-6101, the RTCs challenge that portion of Atlas I

affirming the OCC’s determination “that reciprocal compensation obligations apply to all

calls originated by an RTC and terminated by a wireless provider within the same major

trading area, without regard to whether those calls are delivered via an intermediate

12
carrier.” 309 F. Supp. 2d at 1310. The RTCs contend that the holding is contrary to both

the Telecommunications Act and FCC regulations. In No. 04-6100, the RTCs reiterate

the foregoing and further challenge the district court’s determination that the Act does not

require competing carriers to interconnect physically with the LEC’s network as contrary

to the express language of the statute and FCC regulations. Atlas II, 309 F. Supp. 2d at

1317.

Discussion

I. Standard of Review

The issues raised by the RTCs in the instant cases are purely legal. As such, we

will conduct a de novo review to determine whether the interconnection agreements, as

approved by the OCC, comply with the requirements of the Act and federal regulations

implementing its statutory provisions. Southwestern Bell Tel. Co. v. Brooks Fiber

Communications of Okla., Inc., 235 F.3d 493, 498 (10th Cir. 2000). However, we note

that the RTCs have not challenged the validity of the various FCC regulations at issue in

this case. Thus, we have not been asked to undertake, nor will we engage in, a

reasonableness inquiry concerning those determinations. See Chevron U.S.A, Inc. v.

Natural Res. Def. Council, Inc., 467 U.S. 837, 843 (1984).

II. The Statutory Scheme

Section 251 of the Act establishes a three-tier system of obligations imposed on

separate, statutorily defined telecommunications entities. Pac. Bell v. Cook Telecom,

13
Inc., 197 F.3d 1236, 1237-38 (9th Cir. 1999); Competitive Telecomms. Ass’n v. FCC,

117 F.3d 1068, 1071 (8th Cir. 1997). Section 251(a) obligates each “telecommunications

carrier”3 “to interconnect directly or indirectly with the facilities and equipment of other

telecommunications carriers.” 47 U.S.C. § 251(a)(1). Under Section 251(b), the more

limited class of “local exchange carriers”4 is obligated to, among other things, “establish

reciprocal compensation arrangements for the transport and termination of

telecommunications.” Id. § 251(b)(5). Finally, § 251(c) imposes additional obligations

on “incumbent local exchange carriers” (“ILECs”).5 For instance, ILECs have the duty to

negotiate in good faith interconnection agreements that comply with the obligations in

§§ 251(b)-(c). Id. § 251(c)(1). ILECs also bear the statutory duty to “provide, for the

facilities and equipment of any requesting telecommunications carrier, interconnection

with the [ILEC’s] network.” Id. § 251(c)(2). Such interconnection must be provided “at

any technically feasible point within the [ILEC’s] network,” id. § 251(c)(2)(B), and “on

3
“Telecommunications carrier” is defined as “any provider of telecommunications
services.” 47 U.S.C. § 153(44). “Telecommunications service” is in turn defined as “the
offering of telecommunications for a fee directly to the public, or to such classes of users
as to be effectively available directly to the public, regardless of the facilities used.” Id.
§ 153(46). The FCC has determined that CMRS providers qualify as
“telecommunications carriers,” and thus are subject to the provisions of § 251(a). First
Report and Order ¶ 1012.
4
See supra note 1.
5
“Incumbent local exchange carriers” are defined in the Act as certain dominant
carriers that provided telephone exchange service on February 8, 1996. See 47 U.S.C.
§ 251(h)(1).

14
rates, terms, and conditions that are just, reasonable, and nondiscriminatory.” Id.

§ 251(c)(2)(D).

Recognizing that implementation of the pro-competitive provisions of the Act

would not be instantaneous, Congress included language to ensure that certain exchange

access and interconnection requirements would continue to be enforced after passage of

the statute.

On and after February 8, 1996, each local exchange carrier, to the
extent that it provides wireline services, shall provide exchange access,
information access, and exchange services for such access to interexchange
carriers and information service providers in accordance with the same
equal access and nondiscriminatory interconnection restrictions and
obligations (including receipt of compensation) that apply to such carrier on
the date immediately preceding February 8, 1996 . . . until such restrictions
and obligations are explicitly superseded by regulations prescribed by the
Commission after February 8, 1996.

Id. § 251(g). As the United States Court of Appeals for the District of Columbia Circuit

has explained, § 251(g) is a transitional provision designed to keep in place certain

restrictions and obligations, including the existing access charge regime, until such

provisions are superceded by FCC regulations. WorldCom, Inc. v. FCC, 288 F.3d 429,

432-33 (D.C. Cir. 2002).

Finally, in defining the parameters for reciprocal compensation under § 251(b)(5),

Congress mandated that the terms and conditions for such compensation must “provide

for the mutual and reciprocal recovery by each carrier of costs associated with the

transport and termination on each carrier’s network facilities of calls that originate on the

15
network facilities of the other carrier.” 47 U.S.C. § 252(d)(2)(A)(i). However, Congress

clearly indicated that it did not seek to preclude “arrangements that waive mutual

recovery (such as bill-and-keep arrangements).” Id. § 252(d)(2)(B)(i).

III. FCC Implementation

In its First Report and Order, the FCC made several determinations that bear

directly on these consolidated cases. While declining to treat CMRS providers as LECs,

and thus subject to the obligations imposed under §§ 251(b)-(c), the FCC expressly

determined that LECs are obligated under § 251(b)(5) to enter into reciprocal

compensation arrangements with CMRS providers. First Report and Order ¶ 1006, 1008.

Furthermore, the Commission determined that “[i]ncumbent LECs are required to provide

interconnection to CMRS providers who request it for the transmission and routing of

telephone exchange service or exchange access, under the plain language of section

251(c)(2).” Id. ¶ 1015.

In determining the scope of the § 251(b)(5) obligation, the FCC concluded that

“reciprocal compensation obligations should apply only to traffic that originates and

terminates within a local area.” Id. ¶ 1034. With respect to LEC-LEC communication,

the FCC determined that state commissions retained the authority to define “local area”

for the purpose of applying the § 251(b)(5) obligation. Id. ¶ 1035. However, the

Commission defined the local area for LEC-CMRS communication as coterminous with

the MTA, the largest Commission-authorized wireless territory. Id. ¶ 1036. The FCC

16
explained that “traffic to or from a CMRS network that originates and terminates within

the same MTA is subject to transport and termination rates under section 251(b)(5),

rather than interstate and intrastate access charges.” Id. (emphasis added).

These FCC determinations have since been codified as regulations binding on the

industry and state commissions. Relevant here, 47 C.F.R. § 51.305 details an ILEC’s

obligation under § 251(c)(2) of the Act to provide for interconnection with requesting

carriers and identifies technically feasible points of interconnection on the ILEC’s

network. With respect to reciprocal compensation requirements, the regulations further

provide that “[e]ach LEC shall establish reciprocal compensation arrangements for

transport and termination of telecommunications traffic with any requesting

telecommunications carrier.” 47 C.F.R. § 51.703(a). For purposes of applying the

requirement in section 51.703, “telecommunications traffic” is defined in relevant part as

that “exchanged between a LEC and a CMRS provider that, at the beginning of the call,

originates and terminates within the same Major Trading Area.” Id. § 51.701(b)(2).

Finally, “transport” in the context of reciprocal compensation obligations is defined as

“the transmission and any necessary tandem switching of telecommunications traffic

subject to section 251(b)(5) of the Act from the interconnection point between the two

carriers to the terminating carrier’s end office switch that directly serves the called party,

or equivalent facility provided by a carrier other than an [ILEC].” Id. § 51.701(c).

17
IV. Appellants’ Common Issue – Inconsistency Between the Agreements and the Act

and Federal Regulations

We construe the RTCs’ briefs in these consolidated cases as raising a single

common issue alleging inconsistency between the interconnection agreements and the

plain language of the Act, the First Report and Order, and the relevant regulations.6 This

issue roughly corresponds to that treated by the district court in part II.B of its order and

judgment in Atlas I. 309 F. Supp. 2d at 1309-10. We treat the issue unique to No. 04-

6100, the “Western Wireless Issue,” separately below.

We begin, as we must, with the plain language of 47 U.S.C. § 251(b)(5)7 and its

regulatory counterpart 47 C.F.R. § 51.703(a).8 In no uncertain terms, both provisions

impose a duty on LECs to establish reciprocal compensation arrangements with

requesting carriers. We next turn to 47 C.F.R. § 51.701(b)(2), a regulatory provision that

6
In so doing, we necessarily reject the CMRS providers’ contention that the RTCs
failed to preserve an issue, that the Act and FCC regulations require carriers to exchange
local traffic through a point of interconnection within the ILEC’s network, by asserting it
before the district court. See Mauldin v. Worldcom, Inc., 263 F.3d 1205, 1210 n.1 (10th
Cir. 2001). There is a difference, albeit subtle, between arguing that CMRS providers are
required to interconnect directly with the ILECs and arguing that the exchange must occur
within the ILEC’s network. The latter argument was raised in the district court, Aple.
Supp. App. at 81-82, and accordingly we consider it.

LECs have “[t]he duty to establish reciprocal compensation arrangements for the
7

transport and termination of telecommunications.” 47 U.S.C. § 251(b)(5).
8
“Each LEC shall establish reciprocal compensation arrangements for transport
and termination of telecommunications traffic with any requesting telecommunications
carrier.” 47 C.F.R. § 51.703(a).

18
both gives effect to and narrows the LECs’ obligation. Regulation 51.701(b)(2) defines

“telecommunications traffic” subject to reciprocal compensation as, in relevant part, that

“exchanged between a LEC and a CMRS provider that, at the beginning of the call,

originates and terminates within the same [MTA].” 47 C.F.R. § 51.701(b)(2).

We hold that the mandate expressed in these provisions is clear, unambiguous, and

on its face admits of no exceptions. The RTCs in the instant case have a mandatory duty

to establish reciprocal compensation agreements with the CMRS providers, see Qwest

Corp. v. FCC, 258 F.3d 1191, 1200 (10th Cir. 2001) (noting that the term “shall”

connotes a mandatory, as opposed to permissive, requirement), for calls originating and

terminating within the same MTA. Where the regulations at issue are unambiguous, our

review is controlled by their plain meaning. In re Sealed Case, 237 F.3d 657, 667 (D.C.

Cir. 2001). Nothing in the text of these provisions provides support for the RTC’s

contention that reciprocal compensation requirements do not apply when traffic is

transported on an IXC network.

Our reading of the plain language of the relevant statutory and regulatory

provisions is further supported by the FCC’s definition of “telecommunications traffic” in

the context of landline-to-landline exchange in the same regulations. See 47 C.F.R.

§ 51.703(b)(1). Regulation 51.701(b)(1) specifically excludes from reciprocal

compensation requirements landline traffic exchanged between a LEC and a non-CMRS

carrier “that is interstate or intrastate exchange access” in nature. Id. § 51.701(b)(1)

19
(emphasis added). Significantly, the Commission did not carry foward that same

exception into regulation 51.701(b)(2), the operative definition in this case. We agree

with the district court’s conclusion that the FCC was undoubtedly aware of issues arising

when access calls are exchanged, yet chose not to extend a similar exception to LEC-

CMRS traffic. Atlas I, 309 F. Supp. 2d at 1310. When in exercising its quasi-legislative

authority an agency includes a specific term or exception in one provision of a regulation,

but excludes it in another, we will not presume that such term or exception applies to

provisions from which it is omitted. Cf. Russello v. United States, 464 U.S. 16, 23 (1983)

(noting that when Congress so acts, courts will presume that the exclusion was

intentional).

We are not persuaded by the RTCs’ arguments that our interpretation creates

tension or is inconsistent with other FCC regulations and provisions of the Act. The

RTCs first contend that 47 U.S.C. § 251(c)(2) mandates that the exchange of local traffic

occur at specific, technically feasible points within an RTC’s network,9 and that this duty

is separate and distinct, though no less binding on interconnecting carriers, from the

reciprocal compensation arrangements mandated by § 251(b)(5). We simply find no

support for this argument in the text of the statute or the FCC’s treatment of the statutory

9
In this instance, the RTCs do not argue that the CMRS providers must directly
connect to their networks. Rather, the essence of their argument is that RTCs cannot be
forced to bear the additional expense of transporting traffic bound for a CMRS provider
across the SWBT network. Under their interpretation, RTCs are only responsible for
transport to a point of interconnection on their own network.

20
provisions. Section 251(c)(2) imposes a duty on the ILECs to provide physical

interconnection with requesting carriers at technically feasible points within the RTCs’

networks. By its terms, this duty only extends to ILECs and is only triggered on request.10

The fallacy of the RTCs’ argument is demonstrated in a number of ways. The

RTCs contend that the general requirement imposed on all carriers to interconnect

“directly or indirectly,” 47 U.S.C. § 251(a) (emphasis added), is superceded by the more

specific obligations under § 251(c)(2). Yet, as noted above, the obligation under

§ 251(c)(2) applies only to the far more limited class of ILECs, as opposed to the

obligation imposed on all telecommunications carriers under § 251(a). The RTCs’

interpretation would impose concomitant duties on both the ILEC and a requesting

carrier. This contravenes the express terms of the statute, identifying only ILECs as

entities bearing additional burdens under § 251(c). We cannot conclude that such a

provision, embracing only a limited class of obligees, can provide the governing

framework for the exchange of local traffic.

We also find that the RTCs’ interpretation of § 251(c)(2) would operate to thwart

the pro-competitive principles underlying the Act. Although § 251(c)(2) interconnection

is only triggered by request, the RTCs would make such interconnection obligatory to all

10
According to testimony of OCC Public Utility Division analyst Lillie R. Simon
before the OCC-appointed arbitrator, such a request is typically made when the volume of
traffic passing between two carriers makes physical interconnection economically
feasible. I App. at 216.

21
carriers seeking to exchange local traffic. At the same time, however, the Act exempts

RTCs from the application of § 251(c) until a request is made and the appropriate “State

commission determines . . . that such request is not unduly economically burdensome, is

technically feasible, and is consistent [with other provisions of the Act].” Id.

§ 251(f)(1)(A). If Congress had intended § 251(c)(2) to provide the sole governing

means for the exchange of local traffic, it seems inconceivable that the drafters would

have simultaneously incorporated a rural exemption functioning as a significant barrier to

the advent of competition. In sum, accepting the RTCs’ interpretation of § 251(c) would

compel us to assume too much and ignore altogether the express language of the statute.11

The RTCs’ next argument, in various permutations, is that the local traffic at issue

here qualifies as exchange access traffic because it transits the IXC network. In that

historical exchange access requirements continue in force even after passage of the

Telecommunications Act, 47 U.S.C. § 251(g), the RTCs argue that such requirements yet

apply when calls are transported across the IXC network. In support, the RTCs point to

various statements by the FCC in its First Report and Order limiting the scope of

reciprocal compensation requirements under the Act.

In the First Report and Order, the FCC limited application of reciprocal

11
Because we hold that 47 U.S.C. § 251(c)(2) does not govern interconnection for
the purposes of local exchange traffic, the RTCs’ argument that CMRS providers must
bear the expense of transporting RTC-originated traffic on the SWBT network must fail.
The pricing standards established under 47 U.S.C. § 252(d)(1) by their terms only apply
in the context of interconnection under § 251(c)(2).

22
compensation requirements to traffic originating and terminating within a local area.

First Report and Order ¶ 1034. In so doing, the Commission determined that reciprocal

compensation obligations “do not apply to the transport or termination of interstate or

intrastate interexchange traffic.” Id. While this statement might be read to preclude

reciprocal compensation in the instant case, we conclude that the FCC did not intend such

a bar to apply in the context of LEC-CMRS traffic. First, in describing the interexchange

traffic at issue, it is clear that the FCC had in mind the traditional setting of landline-to-

landline calls. The Commission illustrated the traffic at issue by pointing to an LEC-IXC-

LEC exchange, this after previously declining to treat CMRS providers as LECs. While

this distinction is not dispositive, we note it as relevant. Second, and most significant, the

FCC subsequently determined that “traffic to or from a CMRS network that originates

and terminates within the same MTA is subject to transport and termination rates under

section 251(b)(5), rather than interstate and intrastate access charges.” Id. § 1036.

Although in a preceding paragraph, Id. ¶ 1035, the FCC noted the continuing application

of interstate and intrastate access charges in the context of landline communications, it

omitted such language when referring to the CMRS communications. We will not ignore

the clear distinction drawn by the agency.

We also agree with the CMRS providers that the RTCs’ argument finds no support

in paragraph 1043 of the First Report and Order. The sweep of this paragraph is limited

to a narrow range of interstate interexchange traffic and is silent on the issue of reciprocal

23
compensation owed CMRS providers. As such, we find it neither persuasive nor

controlling.

Having carefully reviewed the FCC’s decision in TSR Wireless, LLC v. U.S. West

Communications, Inc., we find nothing in that decision sounding as contrary to our

holding. 15 F.C.C.R. 11,166 (2000), aff’d sum nom Qwest Corp. v. FCC, 252 F.3d 462

(D.C. Cir. 2001). TSR Wireless, LLC is factually dissimilar to the instant dispute. The

relevant issue, the analysis and answer to which the RTCs cite, was whether “section

51.703(b)’s prohibition against charges for LEC-originated traffic prohibit[s] LECs from

charging paging carriers for wide area calling services?” TSR Wireless, LLC, 15

F.C.C.R. at 11,183 (emphasis added). Section 51.703(b) prohibits LECs from charging

other carriers for traffic originating on the LECs’ networks. 47 C.F.R. § 51.703(b). In

resolving this issue, the FCC reiterated that LECs may not charge CMRS providers for

facilities used to deliver local traffic. TSR Wireless, LLC, 15 F.C.C.R. at 11,184. The

Commission then noted that “[s]uch traffic falls under our reciprocal compensation rules

if carried by the incumbent LEC, and under our access charge rules if carried by an

[IXC].” Id. The FCC then stated that “[t]his may result in the same call being viewed as

a local call by the carriers and a toll call by the end-user.” Id. It is clear to us that the

FCC made this seemingly incongruous comment in the context of discussing the effect on

LEC customers. After making this comment, the Commission unequivocally stated that

the LEC was required to deliver relevant calls free of charge to the CMRS provider, but

24
was not precluded from charging its own customers for toll calls. Id. This simply does

not address the LEC’s duty to compensate the CMRS provider for call termination.

Rather, it reflects the logical end result of the application of the FCC’s regulations. It

certainly does not relieve the originating carrier of its obligation to compensate the

terminating carrier under the reciprocal compensation regime.12

Finally, we find no merit in the RTCs’ argument that the provisions in the instant

agreements contravene the statutory scheme. The RTCs’ assertion that the FCC expected

reciprocal compensation arrangements to be contained in agreements under section 251(c)

is unsupported by the footnote to which they cite in TSR Wireless, LLC, 15 F.C.C.R. at

11,183 n.97, and undermined by language in the decision indicating that certain duties

imposed under reciprocal compensation were operative regardless of the existence of an

agreement. Id. at 11,182-83. The RTCs further argue that the indirect connection at issue

in the instant agreements would render their rural exemption nugatory because carriers

like the CMRS providers would not be required to request interconnection under 47

12
We likewise find that the RTCs’ reliance on Texcom, Inc., D/B/A Answer
Indiana v. Bell Atlantic Corp, D/B/A Verizon Communications, 16 F.C.C.R. 21,493
(2001) (“Texcom”), is unwarranted. Texcom involved “transiting traffic,” i.e., traffic
originating with a third party that “transits” the network of an LEC for delivery to a
CMRS provider. Id. at 21,495. The FCC concluded that an LEC may charge the CMRS
provider for the transport of such traffic. Id. This is, of course, in stark juxtaposition to
an LEC’s obligations where, as here, traffic originates with its own customers. The FCC
explained that in the reciprocal compensation setting, “the cost of delivering LEC-
originated traffic is borne by the persons responsible for those calls, the LEC’s
customers.” Id. at 21,495. The Commission refused to extend this burden in the “transit”
setting where LEC customers did not generate the traffic at issue. Id.

25
U.S.C. § 251(c). As we explained above, no such requirement applies to the CMRS

providers, and the rural exemption remains available when the RTCs are confronted with

requests for direct connection under § 251(c).

Accordingly, we hold that the OCC-approved agreements are not inconsistent with

or in violation of the federal regulatory and statutory schemes.

V. The “Western Wireless” Issue13

The final issue before us is unique to No. 04-6100. The RTCs assert that the

Telecommunications Act requires competing carriers to establish a physical connection

within an ILEC’s network for the exchange of local traffic. While distinct from the

assertion that traffic must be exchanged at a point of interconnection within the RTC’s

network, an analysis of this issue nonetheless touches on many aspects of our foregoing

discussion.

The RTCs interpret 47 U.S.C. § 251(c) as imposing a requirement of direct

connection on a competing carrier. We disagree. As detailed above, the affirmative duty

established in § 251(c) runs solely to the ILEC, and is only triggered on request for direct

connection. The physical interconnection contemplated by § 251(c) in no way

undermines telecommunications carriers’ obligation under § 251(a) to interconnect

“directly or indirectly.” In full accord with our previous analysis, we hold that the RTCs’

The district court designated this issue “the Western Wireless issue.” Atlas II,
13

309 F. Supp. 2d at 1313. We adopt this terminology for purposes of our discussion.

26
obligation to establish reciprocal compensation arrangements with the CMRS provider in

the instant case is not impacted by the presence or absence of a direct connection.

For the foregoing reasons, we AFFIRM the orders of the district court.

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