United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 21, 2001 Decided April 20, 2001
No. 00-1002
WorldCom, Inc.,
Petitioner
v.
Federal Communications Commission and
United States of America,
Respondents
AT&T Corporation, et al.,
Intervenors
---------
Consolidated with
00-1062, 00-1070
On Petitions for Review of an Order of the
Federal Communications Commission
Jonathan J. Frankel and Darryl M. Bradford argued the
cause for petitioners. With them on the briefs were William
T. Lake, Lynn R. Charytan, Dan L. Poole, Robert B. McKen-
na, Lawrence E. Sarjeant, Linda L. Kent, John W. Hunter,
Julie E. Rones, Jodie L. Kelley, John J. Hamill, Thomas F.
O'Neil III, Adam H. Charnes, Mark B. Erlich, Robert J.
Aamoth, Albert H. Kramer, Renee R. Crittendon, Richard
Martin Rindler, Charles C. Hunter and Catherine M. Han-
nan. John H. Harwood, II entered an appearance.
John E. Ingle, Deputy Associate General Counsel, Federal
Communications Commission, argued the cause for respon-
dents. With him on the briefs were Christopher J. Wright,
General Counsel, Jonathan E. Nuechterlein, Deputy General
Counsel, Laurence N. Bourne, Counsel, Catherine G. O'Sulli-
van, Nancy C. Garrison and Robert J. Wiggers, Attorneys,
U.S. Department of Justice.
Daniel Meron argued the cause for intervenors AT&T
Corporation, et al. With him on the brief were David W.
Carpenter, Peter D. Keisler, David L. Lawson, Mark C.
Rosenblum, Robert J. Aamoth, Richard M. Rindler, Christy
C. Kunin, Thomas F. O'Neil III, Adam H. Charnes, Mark B.
Ehrlich, Jonathan J. Nadler, Rodney L. Joyce, Darryl M.
Bradford, Jodie L. Kelley and John J. Hamill. James P.
Young entered an appearance.
Dan L. Poole, Robert B. McKenna, Jr., William T. Lake,
Lynn R. Charytan, Michael K. Kellogg, Mark L. Evans,
Sean A. Lev, Aaron M. Panner, Roger K. Toppins, Lawrence
E. Sarjeant, Linda L. Kent, John W. Hunter, Julie E. Rones,
Michael E. Glover, Edward H. Shakin, Donna M. Epps and
M. Robert Sutherland were on the brief of intervenors Qwest
Communications International, Inc., et al. John H. Harwood,
II, Gail L. Polivy, John F. Raposa, M. Edward Whelan, III,
Alfred G. Richter, Hope E. Thurrott and James D. Ellis
entered appearances.
Before: Williams, Sentelle and Rogers, Circuit Judges.
Opinion for the Court filed by Circuit Judge Williams.
Williams, Circuit Judge: Packet-switching and digital sub-
scriber line technologies ("DSL") make it possible to send
data at high speed over conventional copper wire. Two DSL
modems are attached to a telephone loop, one at the subscrib-
er's premises and one at the telephone company's central
office. If the line carries both ordinary telephone service and
high-speed data transmission, the carrier must separate these
streams at the company's central office, using a digital sub-
scriber line access multiplexer. With this device the carrier
sends ordinary voice calls to the public, circuit-switched tele-
phone network (which keeps a phone line open during a voice
call) and sends data traffic to a packet-switched data network
(which compresses data and can send it in split-second bursts
during gaps on a line), where it can then be routed to a
corporate local area network or internet service provider
("ISP"). See In re Deployment of Wireline Services Offering
Advanced Telecommunications Capability, 13 F.C.C.R. 24,-
011, 24,026-27 p p 29-31 (1998) ("Advanced Services Order").
The high-speed services thus provided are known as "DSL-
based advanced services."1
At issue before us is the Federal Communications Commis-
sion's decision that "incumbent" local exchange carriers
("LECs"), when they provide such services, are subject to a
range of special duties under the Telecommunications Act of
1996, Pub. L. No. 104-104, 110 Stat. 56 ("the Act"). These
duties, to which we'll return in detail later, are intended to
facilitate entry into local telephone markets. They include,
for example, an obligation to provide competitors "access to
network elements on an unbundled basis," and to offer, at
wholesale rates, any telecommunications service that the firm
offers at retail to subscribers other than telecommunications
carriers. See 47 U.S.C. ss 251(c)(3) & (4)(A).
In 1998, in response to a request for clarification from
Qwest2 and others, the Commission held that DSL-based
__________
1 In the order under review the Commission defined "advanced
services" as "high speed, switched, broadband, wireline telecommu-
nications capability that enables users to originate and receive high-
quality voice, data, graphics and video telecommunications." In re
Deployment of Wireline Services Offering Advanced Telecommuni-
cations Capability, 15 F.C.C.R. 385, 385 n.2 (1999).
2 US WEST, Inc., the parent company of US WEST Communi-
cations, Inc., merged with Qwest Communications International,
Inc. on June 30, 2000.
advanced services constitute either "telephone exchange ser-
vice" or "exchange access," and therefore were subject to the
duties set out in s 251(c). Advanced Services Order, 13
F.C.C.R. at 24,031-34 p p 38-44. On Qwest's petition for
review in this court, the Commission sought a remand to
address some of Qwest's arguments, which we granted. See
US WEST Communications, Inc. v. FCC, 1999 WL 728555
(D.C. Cir. 1999).
On remand the Commission again found incumbent LECs'
provision of DSL-based advanced services to be subject to
s 251(c) obligations. In re Deployment of Wireline Services
Offering Advanced Telecommunications Capability, 15
F.C.C.R. 385 (1999) (the "Remand Order"). It invoked two
theories to support its conclusion. The first interpreted the
statutory language defining incumbent LECs, and the second,
as in the original order, viewed DSL-based advanced services
as either "telephone exchange service" or "exchange access."
Because the Commission's reading of the statutory language
defining incumbent LECs is at least reasonable, we deny
Qwest's petition to vacate the entire Commission order. But
because the Commission's interpretation of "telephone ex-
change service" and "exchange access" is in essence the one
that we vacated and remanded in yet another case, Bell
Atlantic Telephone Cos. v. FCC, 206 F.3d 1 (D.C. Cir. 2000),
we vacate and remand on that issue. We take the two
theories in turn.
* * *
The definition of incumbent LEC. Qwest concededly pro-
vides "telephone exchange service" and "exchange access"
and under the statute is thus a "LEC" in the abstract. But
Qwest argues that its DSL-based advanced services can be
subjected to the duties created by s 251(c) only to the extent
that those specific services belong to either of the categories
that are the defining characteristics of a LEC. The language
of the Act gives Qwest's analysis some purchase.
The Act defines incumbent LECs (naturally enough) as a
subcategory of LECs. A LEC
means any person that is engaged in the provision of
telephone exchange service or exchange access. Such
term does not include a person insofar as such person is
engaged in the provision of a commercial mobile service
under section 332(c) of this title, except to the extent that
the Commission finds that such service should be includ-
ed in the definition of such term.
47 U.S.C. s 153(26) (emphasis added). The concept of incum-
bency, by contrast, is based purely on history. An incumbent
LEC with respect to an area is
the local exchange carrier that--(A) on February 8, 1996,
provided telephone exchange service in such area; and
(B)(i) on February 8, 1996, was deemed to be a member
of the exchange carrier association pursuant to section
69.601(b) of the Commission's regulations (47 C.F.R.
69.601(b)); or (ii) is a person or entity that, on or after
February 8, 1996, became a successor or assign of a
member described in clause (i).
47 U.S.C. s 251(h).
Qwest argues that the phrase in s 153(26) "is engaged in
the provision of" plainly bars the Commission from regulating
carriers' DSL-based advanced services under s 251(c) be-
cause such services are not "telephone exchange service" or
"exchange access." Qwest interprets the second sentence in
the LEC definition as confirming that services other than
"telephone exchange service" or "exchange access," like com-
mercial mobile services, are excluded from regulation. Under
Qwest's reading, the second sentence states that "you are a
local exchange carrier if you are engaged in providing tele-
phone exchange service or exchange access, but you are not a
local exchange carrier if you are engaged in providing com-
mercial mobile services." Oral Arg. Tr. at 10. In contrast,
the Commission argues that DSL-based advanced services
qualify as "telecommunications services" as to which s 251(c)
imposes many of its duties on incumbent LECs, so that it
may regulate a carrier engaged in providing such services so
long as the carrier qualifies as a LEC by providing either
"telephone exchange service" or "exchange access" and meets
the definition of incumbent under s 251(h). See Respon-
dent's Br. at 4 n.4, 19-20; Oral Arg. Tr. at 26 (Commission
counsel acknowledging that a carrier must still be a "live
LEC" to be an incumbent LEC). Under the Commission's
reading, the second sentence of the LEC definition indicates
that a carrier can be a LEC with respect to services other
than "telephone exchange service" or "exchange access": the
explicit exclusion of "commercial mobile service" (subject to
an exception) lends some credence to the view that Con-
gress's premise was inclusive. Congress, the Commission
reasons, must have assumed that without the exclusion such
persons would have been included "insofar as" they were
"engaged in" providing mobile service merely on the basis of
(elsewhere) providing exchange service or access, even if
mobile service itself did not fit either category.
The statutory definitions do not compel Qwest's reading.
There is nothing linguistically odd about defining a set of
firms subject to regulation in terms of the conduct of particu-
lar activities, and yet also regulating some other activities
that are not part of the definition. And the definition does
not say that a carrier is a LEC only "when" or "to the extent"
that it provides the regulation-triggering services. When
defining a rural telephone company Congress specified inclu-
sion "to the extent that such entity" was performing specified
services, 47 U.S.C. s 153(37) (emphasis added), and similarly
provided that a telecommunications carrier should be "treat-
ed" as a common carrier "only to the extent that it is engaged
in providing telecommunications services," id. s 153(44) (em-
phasis added). These explicit specifications tend to under-
mine Qwest's argument that such a clause must be implied in
the LEC definition. See Russello v. United States, 464 U.S.
16, 23 (1983).
The Commission draws a similar argument from Con-
gress's articulation of the s 251(c) duties. Those under
s 251(c)(2) expressly apply to "telephone exchange service"
or "exchange access," while the rest have no such limitation.
These distinctions are hard to reconcile with the idea that the
duties apply only to firms insofar as they provide "telephone
exchange service" or "exchange access."
Given the ambiguity in the statutory language, our task is
not to choose the best interpretation but merely to decide if
the Commission's is reasonable. See Atlantic Mutual Insur-
ance Co. v. Commissioner of Internal Revenue, 523 U.S. 382,
389 (1998); Chevron U.S.A., Inc. v. Natural Resources De-
fense Council, Inc., 467 U.S. 837, 842-43 (1984).
Qwest suggests that the Commission's reading will produce
absurd results, involving imposition of s 251(c) duties on
incumbents' provision of long distance, wireless, and cable
services. See Qwest's Main Br. at 17-18; see also Mova
Pharmaceutical Corp. v. Shalala, 140 F.3d 1060, 1068 (D.C.
Cir. 1998). But the Commission's response alleviates much of
this fear. See Respondent's Br. at 29-30. First, the worry
about cable services seems inapplicable. The Act says that a
"telecommunications carrier shall be treated as a common
carrier ... only to the extent that it is engaged in providing
telecommunications services." 47 U.S.C. s 153(44) (emphasis
added). Telecommunications services do not include conven-
tional cable services (though the Commission has suggested
that cable service used for high-speed internet access might
be a different story). See In re Inquiry Concerning High-
Speed Access to the Internet Over Cable and Other Facilities,
15 F.C.C.R. 19,287, 19,293-98 p p 14-24 (2000). And the
s 251(c) duties have built-in limits that constrain their appli-
cation to the other items (long distance and wireless). The
interconnection obligations (and any related collocation
duties) are by their terms restricted to telephone exchange
and exchange access services. See 47 U.S.C. ss 251(c)(2) &
(6). The unbundling obligations of s 251(c)(3) (and likewise
any related collocation duties) are constrained by the "neces-
sary" and "impair" restrictions of 47 U.S.C. s 251(d)(2). See
Remand Order, 15 F.C.C.R. at 391 p 14. Only the duty of an
incumbent LEC under s 251(c)(4), to offer at wholesale those
telecommunications services that it sells at retail, seems
unlimited; but in a competitive market the burden would be
revenue-neutral, as retail prices should represent wholesale
rates plus the additional costs needed for retailing.
Accordingly, we find no error in the Commission's conclu-
sion that it can apply the s 251(c) duties to a firm that met
the s 251(h) criteria on February 8, 1996 and is still provid-
ing "exchange access" or "telephone exchange service."
Classification of DSL-based advanced services as "tele-
phone exchange service" or "exchange access." The Commis-
sion's alternative theory was that DSL-based advanced ser-
vices actually constituted either "telephone exchange service"
or "exchange access," depending on how the technology was
used. Because the communications set in motion by ISP-
bound traffic typically do not start and end within the same
exchange, but proceed over the internet to out-of-exchange
sites, the Commission found that such traffic constitutes
"exchange access." Id. at 391-92 p 16. In contrast, the
Commission found that work-at-home applications and other
non-Internet communications (such as a corporate network)
using DSL technology that begin and terminate within an
exchange qualify as "telephone exchange service." Id.
Before addressing this, a few words about justiciability.
As this theory was one of the Commission's two alternative
bases for its ruling against Qwest, the company obviously had
standing to seek its overthrow. Resolution of the first issue
in the Commission's favor does not, under settled law, moot
the challenger's attack on the second basis. See Air Line
Pilots Ass'n Int'l v. UAL Corp., 897 F.2d 1394, 1397 (7th Cir.
1990). By considering both bases, there is obviously potential
for economy by the inferior federal courts, as higher-level
review might remove the first basis for the outcome. See id.
Further, there is a question of standing. The second (as
yet unmentioned) petitioner, WorldCom, objects to the Re-
mand Order on grounds that intersect with those of Qwest.
Though WorldCom concurs with the Commission that DSL-
based advanced services are "telephone exchange service" or
"exchange access," it objects to the Commission's view that a
customer's calls to a local ISP are "exchange access" because
of the resulting out-of-exchange communications over the
internet; if the calls are classified as "exchange access,"
WorldCom will not receive reciprocal compensation from
incumbent LECs for them. Normally a party that has ob-
tained the result that it sought in the agency proceeding
cannot sue merely because it disagrees with the rationale, see
Telecommunications Research & Action Center v. FCC, 917
F.2d 585, 588 (D.C. Cir. 1990), and WorldCom most definitely
favors the result here (the subjection of incumbent LECs'
DSL-based advanced services to s 251(c) duties). It has
been suggested, however, that such cases as International
Brotherhood of Electrical Workers v. ICC, 862 F.2d 330, 334
(D.C. Cir. 1988), and Better Government Ass'n v. Department
of State, 780 F.2d 86, 91 (D.C. Cir. 1986), might be read to
hold that "despite a disposition which favors a given party it
might still challenge a general rule if that rule remains in
existence and creates cognizable harm through its effects on
that party's future rights." Telecommunications Research &
Action Center, 917 F.2d at 588 (Silberman, J., concurring).
As the standing of one petitioner is enough, Animal Legal
Defense Fund, Inc. v. Glickman, 154 F.3d 426, 445 (D.C. Cir.
1998)(en banc), and Qwest has undoubted standing to attack
the Commission's second theory, we need not pursue the
suggestion.
Our treatment of the merits can be brief. The Commis-
sion's Remand Order was issued a few months before our
decision in Bell Atlantic Telephone Cos. v. FCC, 206 F.3d 1
(2000). There we held that the Commission, in arriving at
the same conclusion for ISP-bound calls in In re Implementa-
tion of the Local Competition Provisions in the Telecommu-
nications Act of 1996; Inter-Carrier Compensation for ISP-
Bound Traffic, 14 F.C.C.R. 3689, 3691-3703 p p 3-20 (1999),
had "not provided a satisfactory explanation why LECs that
terminate calls to ISPs are not properly seen as 'termi-
nat[ing] ... local telecommunications traffic,' and why such
traffic is 'exchange access' rather than 'telephone exchange
service.' " Bell Atlantic, 206 F.3d at 9. The Commission
does not seriously contest that its decision here, classifying
certain DSL offerings as either "telephone exchange service"
or "exchange access" under 47 U.S.C. s 153, relied not only
on the Reciprocal Compensation Order vacated in Bell Atlan-
tic but also on its defective reasoning, see Remand Order, 15
F.C.C.R. at 391-92, 400-02 p p 15-16, 33, 35.
Accordingly we vacate and remand the Commission's classi-
fication of DSL-based advanced services as "telephone ex-
change service" or "exchange access." See National Fuel
Gas Supply Corp. v. FERC, 899 F.2d 1244, 1249-50 (D.C. Cir.
1990). Qwest's claim that incumbent LECs can be subject to
s 251(c) duties only with respect to the provision of "tele-
phone exchange service" or "exchange access," however, is
denied.
So ordered.