August 22, 2000
UNITED STATES COURT OF APPEALS
For the Fifth Circuit
___________________________
No. 99-50752
___________________________
SOUTHWESTERN BELL TELEPHONE COMPANY,
Plaintiff -- Appellant,
VERSUS
WALLER CREEK COMMUNICATIONS, INC.; PUBLIC UTILITY COMMISSION OF
TEXAS; PAT WOOD, III; JUDY WALSH; BRETT A. PERLMAN,
Defendants -- Appellees.
___________________________________________________
Appeal from the United States District Court
for the Western District of Texas
___________________________________________________
August 21, 2000
Before REAVLEY, DAVIS, and BARKSDALE, Circuit Judges.
W. EUGENE DAVIS, Circuit Judge:
Southwestern Bell Telephone (“SWBT”) appeals from the
district court’s order affirming the Texas Public Utilities
Commission’s (“PUC”) approval of an arbitrated interconnection
agreement between SWBT and Waller Creek Communications, Inc.
(“Waller”). SWBT contends that the PUC erred in allowing Waller
to adopt selected provisions from a prior SWBT agreement with
AT&T without further negotiation, while at the same time allowing
Waller to arbitrate additional provisions. We find no error in
the PUC’s arbitration procedures based upon its interpretation of
the Telecommunications Act and the FCC’s regulations. Nor do we
find any error in the substantive decisions of the PUC. We
therefore affirm.
I
The Telecommunications Act of 19961 was adopted to promote
competition by encouraging and facilitating the entry of new
telecommunications carriers into local service markets. See AT&T
Corp. v. Iowa Utilities Board (“Iowa Utilities II”), 525 U.S.
366, 371-72, 119 S.Ct. 721, 726-27 (1999); Reno v. ACLU, 521 U.S.
844, 857-58, 117 S.Ct. 2329, 2337-38 (1997). It requires
incumbent local exchange carriers (“ILECs”) to interconnect with
competitors (competing local exchange carriers, or “CLECs”) upon
request, and to negotiate interconnection agreements in good
faith. See 47 U.S.C. §§ 251(a)(1) and (c). If the parties are
unable to reach an interconnection agreement through negotiation,
either party may request that a state commission (here, the Texas
PUC) arbitrate the areas of dispute identified by the parties.
See 47 U.S.C. § 252 (a)(2), (b). Interconnection agreements,
whether reached by negotiation or arbitration, must be presented
to the PUC for approval. See 47 U.S.C. § 252(e)(1). When an
agreement has been arbitrated, the PUC can reject it only for
failure to satisfy the requirements of 47 U.S.C. §§ 251 and
252(d). See 47 U.S.C. § 252(e)(2)(B).
Pursuant to the Telecommunications Act, Waller (a CLEC)
1
Pub. L. No. 104-104, 110 Stat. 56 (1996), codified at 47 U.S.C. § 151 et
seq.
2
requested negotiation of an interconnection agreement with SWBT
(an ILEC). When negotiations failed to produce an agreement,
Waller asked the PUC to arbitrate.
As a basis for its own agreement with SWBT, Waller sought to
adopt most of the provisions of an existing interconnection
agreement between SWBT and AT&T. In addition, Waller sought to
arbitrate some additional provisions regarding services, uses of
technology, and business plans not addressed by the AT&T/SWBT
agreement. The PUC agreed with Waller that the so-called “most
favored nation” (“MFN”) clause of the Telecommunications Act, 47
U.S.C. § 252(i), permitted this procedure.
Section 252(i) provides that: “A local exchange carrier
shall make available any interconnection, service, or network
element provided under an agreement approved under this section
to which it is a party to any other requesting telecommunications
carrier upon the same terms and conditions as those provided in
the agreement.”
The FCC regulation interpreting the MFN clause has been
termed the “pick and choose” rule, and it provides in relevant
part that:
An incumbent LEC shall make available without
unreasonable delay to any requesting
telecommunications carrier any individual
interconnection, service, or network element
arrangement contained in any agreement to which
it is a party that is approved by a state
commission pursuant to section 252 of the Act,
upon the same rates, terms, and conditions as
those provided in the agreement....
47 C.F.R. § 51.809(a) (1998).
3
SWBT argues that the MFN clause may not be invoked to adopt
certain provisions of an earlier agreement if the CLEC also seeks
to create additional provisions not covered in the earlier
agreement. According to SWBT, a CLEC must either adopt all of
its desired terms from an existing agreement or negotiate (and,
if necessary, arbitrate) every provision of its agreement from
scratch.
Although the PUC allowed Waller to arbitrate issues not
arbitrated between SWBT and AT&T, it did not allow re-arbitration
of terms decided in the prior arbitration. The PUC-approved
agreement between Waller and SWBT included some amendments and
additions to the AT&T agreement, but most of the AT&T terms were
adopted without change. The district court affirmed the PUC’s
order and dismissed SWBT’s complaint with prejudice, finding no
error in the PUC’s interpretation of the most favored nation
provision. It also found that the PUC’s actions were supported
by substantial evidence and were not arbitrary or capricious.
SWBT now appeals.
II
We first address Waller’s contention that we lack
jurisdiction over this appeal. Waller contends that the district
court’s order was not final because it dismissed only Counts III
and IV of SWBT’s five-count complaint.2
2
The complaint alleged that: (1) the Commission erred by treating traffic
destined for the Internet as local (Count I); (2) features contained in the AT&T
agreement that Waller adopted and retained were unlawful (Count II); (3) the
Commission had applied the MFN provision, 47 U.S.C. § 252(i), improperly (Count
III); (4) the modifications Waller was allowed to make to the AT&T agreement were
4
Because the legal issues presented in Counts I, II, and V
were the same as those presented by SWBT in two separate related
cases pending in other courts,3 the parties filed a joint motion
to limit issues for briefing and trial to issues raised in Counts
III and IV.4 The district court granted the joint motion and
ordered that no briefing or argument occur on Counts I, II, and
V.5 The agreed order further provided that the outcome of Counts
I, II, and V be controlled by the other two pending appeals, and
that the parties would be bound thereby. On July 2, 1999, the
district court entered the order which is the subject of this
appeal, affirming the decision of the PUC and dismissing SWBT’s
Counts III and IV with prejudice.
Waller argues that the July 2, 1999 order did not constitute
a final order as to Counts I, II, and V. Thus, it contends that
we lack jurisdiction over this appeal because the district court
improper (Count IV); and (5) the procedures adopted by the Commission to govern
arbitrations, and applied in the Waller arbitration, were erroneous and unlawful
(Count V).
3
Waller was not a party in either of those appeals. Counts II and V were
raised by SWBT in its appeal to this Court in the AT&T proceeding. See
Southwestern Bell v. AT&T Communications, Nos. 98-51005, 99-50060, and 99-50073.
Count I raised the same issue presented to this Court in the Time Warner
proceeding. See Southwestern Bell Telephone Co. v. Public Utility Comm’n of
Texas, 208 F.3d 475 (5th Cir. 2000).
4
The Agreed Joint Motion to Limit Issues for Briefing and Trial and for
Continuance, filed November 13, 1998, provides, in relevant part: “[A]ll parties
agree to be bound by the ultimate disposition, including disposition on appeal,
of these other decisions, to the extent these other decisions adjudicate the
issues raised in Counts I, II, and V of Southwestern Bell’s Complaint.”
5
The Agreed Order, filed November 13, 1998, provides that, as to these
counts, “all parties shall be bound by the ultimate disposition, including
disposition on appeal, of the decisions in the cases listed below, to the extent
these other decisions adjudicate issues raised in Counts I, II and V of
Southwestern Bell’s Complaint.”
5
has not entered an order pursuant to Federal Rule of Civil
Procedure 54(b).
We agree with SWBT that we have appellate jurisdiction in
this case. Based on the parties’ consent, the district court
ordered that all parties would be bound by the ultimate
disposition of the pending appeals in the other cases as to the
issues in Counts I, II, and V.6 The district court’s July 1999
order affirmed the PUC’s decision, dismissed counts III and IV
with prejudice, and entered judgment. Further, it expressly
stated that “[a]ll other claims have been disposed pursuant to
this Court’s Agreed Order, filed November 13, 1998.” Nothing
remains for the district court to decide in this case, because it
has disposed of all counts of SWBT’s complaint. If either party
disputes the application to this case of any new law created in
the other appeals,7 their recourse -- under the intervening law
clause of their arbitrated agreement -- is to the PUC, not to the
district court. Thus, we conclude that the district court’s
order was final and appealable, and we therefore have
jurisdiction over this appeal.
6
See Agreed Order, filed November 13, 1998.
7
The related counts in the AT&T proceeding (corresponding to Counts II and
V) were dismissed by SWBT as reflected in this Court’s Order of October 21, 1999.
The related count in the Time Warner proceeding (corresponding to Count I) has
been decided on appeal by this Court. See Southwestern Bell, 208 F.3d 475.
6
III
A.
We next turn to the merits of SWBT’s appeal. In doing so,
we review the PUC’s interpretation of the Telecommunications Act
and the FCC’s regulations de novo. Southwestern Bell Telephone
Co. v. Public Utility Comm’n of Texas, 208 F.3d 475, 482 (5th
Cir. 2000); US West Communications v. MFS Intelenet, Inc., 193
F.3d 1112, 1117 (9th Cir. 1999); GTE South, Inc. v. Morrison, 199
F.3d 733, 742 (4th Cir. 1999). We review the PUC’s resolution of
all other issues under the “arbitrary and capricious” standard.
Id.
B.
The dispute in this case centers around the scope of the
“most favored nation” (“MFN”) clause of the Telecommunications
Act, 47 U.S.C. § 252(i), and the FCC’s “pick and choose” rule
interpreting that clause.8 The FCC’s “pick and choose” rule
“allow[s] requesting carriers to ‘pick and choose’ among
individual provisions of other interconnection agreements that
have previously been negotiated between an incumbent LEC and
other requesting carriers without being required to accept the
terms and conditions of the agreements in their entirety.” Iowa
Utilities Board v. FCC (“Iowa Utilities I”), 120 F.3d 753, 800
(8th Cir. 1997) (rev’d in part by 119 S.Ct. 721 (1999)).
The question we face today is whether, under the MFN clause,
8
47 C.F.R. § 51.809 (1998).
7
a CLEC may “pick and choose” certain provisions of an existing
agreement without being required to accept the entire agreement,
while at the same time seeking to negotiate and/or arbitrate new
provisions not contemplated in the existing agreement.
The PUC found that, “[r]egarding new requests based upon new
business ideas and arguments, ... a requesting carrier/CLEC may,
consistent with [Federal Telecommunications Act] § 252(i), MFN
into an existing agreement, then arbitrate new issues and
incorporate the results into a new interconnection agreement.”9
If new carriers were allowed to opt into a previously-arbitrated
agreement while also seeking new terms as to new business plans,
technologies, or services, it would “allow[] local competition in
Texas to move forward as new ideas are formulated in the
competitive marketplace, thereby, building upon the groundwork
laid by this Commission, SWBT, and various competitors that have
arbitrated their disputes before this Commission.”10
SWBT criticizes the PUC’s interpretation of the MFN
provision and the FCC’s “pick and choose” rule as creating a
“super-MFN” or “MFN-plus” approach, and contends that it creates
a hybrid procedure not authorized or contemplated by the
Telecommunications Act. SWBT argues that the Telecommunications
Act creates two mutually exclusive procedures applicable to this
case: (1) use of the MFN clause, § 252(i), to create an agreement
9
PUC’s Order Approving Interconnection Agreement (“PUC Order”), filed April
28, 1998, at 4.
10
Id.
8
composed only of terms adopted unchanged from existing
agreements; or (2) negotiation and, if necessary, arbitration --
under 47 U.S.C. § 252(a)-(c) -- of every term of the desired new
agreement. Thus, argues SWBT, the MFN clause only allows a CLEC
to opt into provisions from another existing SWBT agreement if
the CLEC seeks no additions or changes to that agreement. If a
CLEC wishes to include in its agreement any new term not found in
a prior agreement, it may not invoke the MFN clause for any
provision.
Waller contends that the MFN clause was designed to
facilitate the completion of new interconnection agreements,
without the need for time-consuming and costly re-litigation and
re-arbitration of numerous and complex issues already decided by
regulatory commissions.11 It urges that -- contrary to
Congressional intent -- SWBT’s interpretation of the MFN
provision would discourage innovations and new technologies by
requiring CLECs with such plans to start from scratch and
negotiate every minute detail of their desired agreement.
Further, Waller argues that the PUC’s approach was balanced
and fair to both parties. The PUC did not give Waller an
unrestricted right to arbitrate new terms; rather, the PUC
allowed it to arbitrate only as to new issues not contemplated by
the AT&T agreement, recognizing that “not all entrants have the
11
Waller notes that the AT&T arbitration took two years to resolve all
disputed issues between the parties, and that there were “thousands of discrete
issues” before the PUC. Quoting PUC Order, at 3-4.
9
same business plan and may need additional terms and conditions
not addressed in an existing agreement.”12 13
Waller was not
allowed to re-litigate issues already litigated and decided in
the AT&T arbitration.14
The Supreme Court’s decision in Iowa Utilities II is
instructive on this issue. In that case, the issue was whether
the MFN clause permitted a CLEC to “‘pick and choose’ among
individual provisions of other interconnection agreements that
have previously been negotiated between an incumbent LEC and
other requesting carriers without being required to accept the
terms and conditions of the agreements in their entirety.” Iowa
Utilities I, 120 F.3d at 800; see also Iowa Utilities II, 525
U.S. at 395-96, 119 S.Ct. at 738.
The Eighth Circuit vacated the “pick and choose” rule,
reasoning that it would deter voluntary negotiations favored by
the Telecommunications Act by making ILECs reluctant to make
12
PUC Order, at 4.
13
For example, Waller sought “dark fiber” for the purpose of offering
Ethernet service for retail customers. Ethernet service was already provided by
SWBT to its customers, but was not a service provided for in the AT&T agreement.
Thus, the AT&T agreement made dark fiber available only at a higher level of
usage (“OC-12") not consistent with Ethernet service, did not include dark fiber
access and information rights on a parity with SWBT, and did not include
efficient use standards for the use of fiber by the ILEC and its competitors.
Thus, the PUC allowed the Waller agreement with SWBT to permit usage of dark
fiber below the OC-12 level. See PUC Order at 5. Although this amendment favored
Waller, the PUC also amended the AT&T provision in favor of SWBT by shortening
the length of “take-back” notice that SWBT must provide to Waller from one year
to forty five days. Id. Also, the PUC required that access to dark fiber be
reciprocal, such that Waller must make its dark fiber resources available to SWBT
on similar terms.
14
For example, the PUC refused to allow modification to the reciprocal
compensation bill-and-keep period because that issue had already been addressed
in the AT&T agreement and arbitration. See PUC Order, at 5-6.
10
concessions on one term in exchange for benefits on another term,
knowing that a later CLEC could receive the same concession
without having to grant the same benefit. Iowa Utilities I, 120
F.3d at 801.
The Supreme Court reversed and reinstated the “pick and
choose” rule, holding that a CLEC who wants to incorporate one
term from an existing agreement is not required to accept the
entire agreement. Iowa Utilities II, 525 U.S. at 395-96, 119
S.Ct. at 738. Instead, it found that an ILEC can only require a
CLEC to accept those terms in an existing agreement that it can
prove are “legitimately related” to the desired term. Id. at
396, 119 S.Ct. at 738.
In Iowa Utilities I, as in this case, the ILECs argued that
the FCC’s “pick and choose” rule was unduly burdensome and would
“thwart negotiations” by allowing later entrants “to select the
favorable terms of a prior approved agreement without being bound
by the corresponding tradeoffs that were made in exchange for the
favorable provisions sought by the new entrant.” 120 F.3d at
800. The Supreme Court dismissed concerns that the “pick and
choose” rule would hinder the negotiation of interconnection
agreements, as “a matter eminently within the expertise of the
[FCC] and eminently beyond our ken.”15 Iowa Utilities II, 525
15
Similarly, the district court noted in this case, “Already, inherent in
§ 252(i)’s language, incumbent carriers like Southwestern Bell must certainly
negotiate or arbitrate interconnection agreements with an eye towards what future
carriers may do with those provisions. In this case, the PUC specifically found
that Waller Creek’s unique business ventures required a modification of the AT&T
terms. It was not error to arbitrate these terms into the Waller Creek
Agreement. Does this create a ‘ratcheting effect’? Perhaps so. But, this is
11
U.S. at 395-96, 119 S.Ct. at 738.16
We also find nothing in the language of the MFN provision
that prohibits a CLEC from accepting some provisions of an
existing agreement and then negotiating and arbitrating the terms
of other provisions it wishes to include in its own agreement in
order to implement its own unique business plan, technologies, or
services. We agree with the district court that the MFN
provision is not a separate and exclusive method of creating an
interconnection agreement; rather, it is a tool to facilitate the
creation of negotiated or arbitrated agreements.17
There is nothing inherently unfair in allowing such a
procedure. Under the FCC’s rules, when a CLEC invokes the MFN
provision, an ILEC can require it to “accept all terms that [the
ILEC] can prove are ‘legitimately related’ to the desired term.”
Iowa Utilities II, 525 U.S. at 396, 119 S.Ct. at 738. Consistent
with this principle, the PUC in this case refused to allow Waller
to re-arbitrate issues already decided in prior arbitration;
rather, it limited arbitration to new issues. On those new
issues, a hearing was provided and both parties had opportunity
to present evidence and arguments.
The PUC’s application of the MFN provision furthers the
Congress’s policy decision to lay the burden upon incumbent carriers. Congress
turns the wheel.” District Court Order, filed July 2, 1999, at 15-16.
16
The Supreme Court also found that the FCC rule tracked the statutory
language almost exactly and was therefore a reasonable and the “most readily
apparent” interpretation. Id. at 396, 119 S.Ct. at 738.
17
District Court Order, at 14.
12
purpose of the Telecommunications Act to encourage competition
and “encourage the rapid deployment of new telecommunications
technologies.” See 110 Stat. 56 (1996). It does this by
efficiently resolving disputes over interconnection agreements
and permitting new competitors to enter the marketplace. The
entrance of new players into the marketplace encourages new
innovations and technologies to improve services for consumers.
In contrast, SWBT’s proposed interpretation of the MFN provision
would drastically slow the resolution of new interconnection
agreements by requiring potential competitors to start
negotiations from scratch if they sought to provide any services
not found in prior agreements. This position finds no support
from Iowa Utilities II and is contrary to the purpose of the
Telecommunications Act. We therefore conclude that the PUC
committed no error in its application of the MFN provision and
the FCC’s “pick and choose” rule.
C.
Although SWBT’s primary argument on appeal is that the PUC
followed an improper “hybrid” procedure in arbitrating the
agreement between SWBT and Waller, SWBT also challenges four
specific aspects of the agreement approved by the PUC as being
unfair, each of which we address below: (1) dark fiber; (2)
combining elements; (3) ISDN connection; and (4) switch
collocation.
We review the PUC’s determinations on these issues under an
13
arbitrary and capricious standard. See Southwestern Bell
Telephone Co., 208 F.3d at 482; US West Communications, 193 F.3d
at 1117.
1. Dark Fiber
“Dark fiber” refers to fiber-optic cable that has been
installed but is not currently in use, as it has not been
equipped with electronic devices allowing it to send transmission
signals. The AT&T agreement permitted AT&T to access SWBT’s dark
fiber only for transmission of data at speeds18 of OC-12 and
above. The PUC’s order in this case allowed Waller to gain
access to SWBT’s dark fiber for transmission of data at speeds as
low as OC-3.
SWBT complains that Waller should have been required to
adopt the “dark fiber” network element upon the “same terms and
conditions” contained in the AT&T agreement.19 Under Iowa
Utilities II, 525 U.S. at 396, 119 S.Ct. at 738, an ILEC can
require a CLEC to accept all terms of an existing agreement that
the ILEC can prove are “legitimately related” to the terms the
CLEC wants to adopt. SWBT contends that the dark fiber
provisions in the AT&T agreement are on their face legitimately
related to Waller obtaining dark fiber from SWBT.
Waller contends that dark fiber is not a single network
18
The term “speeds” refers not to the velocity at which data travels but
rather the amount of data that is packaged together to travel simultaneously on
the same strand.
19
Although SWBT raises the dark fiber issue as an example of the
unfairness resulting from the “hybrid” procedure used by the PUC, it does not ask
this court to invalidate this particular aspect of the approved agreement.
14
element, which must be adopted on the same terms and conditions
as that of the prior approved agreement, if it is provided for
different functions. According to Waller, it did not opt into
the dark fiber provisions of the AT&T agreement because it wanted
to offer Ethernet service to customers –- something not
contemplated by the AT&T agreement.20 Because speeds of OC-12
are not consistent with Ethernet service, Waller sought to obtain
dark fiber usage at a lower speed. The PUC treated as separate
issues dark fiber provided for use at speeds of OC-12 and dark
fiber provided to allow Ethernet service.21
Waller argues that this “functional” approach to defining
“network elements” for purposes of the MFN provision means that a
CLEC need not opt into provisions of an existing agreement with
no functional relevance to the services the CLEC seeks to
provide. This approach, it contends, is in accord with the
holding of Iowa Utilities II because provisions with no
functional relevance to the CLEC’s services would not be
“legitimately related to the desired term.”
Waller argues further that, although the PUC allowed Waller
to access SWBT dark fiber at speeds of OC-3, it modified the AT&T
agreement’s dark fiber terms in other ways that favored SWBT
rather than Waller. For example, while the AT&T agreement
required SWBT to give twelve months notice for the return of dark
20
SWBT apparently was already providing Ethernet service to its own
customers.
21
PUC Order, at 4-5.
15
fiber, the PUC reduced the required “take-back” notice to forty-
five days for dark fiber used at levels below OC-12.22 This was
done to address concerns that the fiber would be underutilized.23
Also, the PUC required that access to dark fiber be reciprocal,
such that Waller must make its dark fiber available to SWBT on
similar terms.24
We find nothing arbitrary and capricious in the PUC’s
decision to allow arbitration regarding dark fiber for Ethernet
service. Although Waller opted into many terms of the AT&T
agreement, it was not required to adopt that agreement in toto.
Waller sought arbitration on dark fiber to accommodate its plan
to offer Ethernet service –- a service not contemplated by the
AT&T agreement. In arbitrating the dark fiber terms, the PUC
balanced the interests of both parties –- as reflected in its
provisions regarding take back notice and reciprocity.
2. Combining Elements
Telephone networks are composed of a large number of
elements, including switches, signaling systems, wires, fiber
optic cables, wiring panels, buildings, and emergency power
supplies. In its agreement with AT&T, SWBT agreed to combine
elements for AT&T in order to allow AT&T to provide certain
22
PUC Order, at 5.
23
Id.
24
Id.
16
services. SWBT argues that it agreed to this term only because
an FCC rule required it to do so, and that rule has now been
vacated by the Eighth Circuit Court of Appeals. See 47 C.F.R. §
51.315(c)-(f); Iowa Utilities I, 120 F.3d at 801.25 Thus, it
contends that the Telecommunications Act does not require it to
assemble combinations of elements for a CLEC. SWBT complains
that the PUC’s decision to allow Waller to use the MFN clause to
opt into the combining elements provisions of the AT&T agreement
was in error because: (1) the provisions are now “illegal” and
“unlawful;” and (2) Waller was ineligible to use the MFN clause
because it chose to arbitrate other issues not contained in the
AT&T agreement. Instead, SWBT contends that the PUC should have
allowed it to reopen the combining elements issue in arbitration,
since Waller was allowed to arbitrate other issues.
The PUC, in response to this argument, argues that the Ninth
Circuit – contrary to the Eighth Circuit – upheld 47 C.F.R. §
51.315(c)-(f), finding that a state commission can require an
ILEC to combine elements for competitors even if it did not
combine such elements for itself. US West Communications, 193
F.3d at 1121. The Ninth Circuit based its decision on the
Supreme Court’s upholding of an FCC rule requiring an ILEC to
combine those network elements for a requesting CLEC that the
ILEC already combined for its own use. Id. (citing Iowa
Utilities II, 525 U.S. 366, 119 S.Ct. 721).
25
This aspect of the Eighth Circuit’s decision was not appealed to the
Supreme Court.
17
We find nothing arbitrary and capricious about the PUC’s
decision to allow Waller to opt into the combining elements
provision of the AT&T agreement. The MFN clause of the
Telecommunications Act permits Waller to adopt any element of an
existing agreement, even if it does not adopt the entire
agreement. See Iowa Utilities II, 525 U.S. at 395-96, 119 S.Ct.
at 738 (upholding FCC’s “pick and choose” rule). The PUC
therefore committed no error in refusing to allow SWBT to reopen
the issue in arbitration. Waller accepted the provision without
modification under the MFN clause. That clause would be stripped
of any meaning if an ILEC could require a CLEC to re-litigate the
provision by asserting that the ILEC erred in accepting that
provision in an earlier agreement.
Further, there is nothing “illegal” about the provision
requiring SWBT to combine network elements for Waller or any
other CLEC. Nothing in the Telecommunications Act forbids such
combinations. Even if the Eighth Circuit’s decision on this
issue is correct –- which we do not decide today –- it does not
hold that such arrangements are prohibited; rather, it only holds
that they are not required by law.
3. ISDN Connection
Integrated Services Digital Network (“ISDN”) technology
creates a new method of interconnecting to a network. According
to Waller, ISDN technology makes possible new types of technical
network configurations and service offerings. SWBT complains
18
that the PUC’s “hybrid” procedure allowed Waller to arbitrate
provisions related to ISDN, although the AT&T agreement contained
no parallel provisions. However, SWBT does not specify any
particular unfairness created by allowing Waller to incorporate
such provisions into its agreement, nor does it point out any
“legitimately related” provisions in the AT&T agreement. Thus,
we find nothing arbitrary and capricious in the PUC’s
determinations.
4. Switch Collocation
At some point during negotiations, Waller requested “virtual
collocation,” a form of network access, for certain switches that
SWBT had leased from Siemens to provide ISDN service. SWBT had
decided to discontinue use of the switches and had begun ”de-
installing” and returning them to Siemens. Waller agreed to buy
them from Siemens and requested access from SWBT, but SWBT
continued to remove the switches and notified Waller that Waller
would have to pay for reinstallation if it wanted access. The
PUC ordered that the switches be reinstalled for collocation
without imposing undue costs on Waller.
SWBT had a duty under 47 U.S.C. § 251(c)(6) to provide
collocation on “just, reasonable, and nondiscriminatory” terms.
The district court agreed with the PUC that SWBT’s actions were
anti-competitive because they would have imposed wasteful costs
19
on Waller.26 It noted that in a similar situation the Supreme
Court upheld an FCC rule aimed at “preventing incumbent [local
exchange carriers] from ‘disconnect[ing] previously connected
elements, over the objection of the requesting carrier, not for
any productive reason, but just to impose wasteful reconnection
costs on new entrants.’”27 The district court found that virtual
collocation provisions allowing SWBT to impose wasteful anti-
competitive costs on Waller would not be just, reasonable, and
nondiscriminatory.28
SWBT complains that Waller was allowed to arbitrate
collocation provisions, although no such provisions were
contained in the AT&T agreement. Waller contends that the switch
collocation issue was never addressed in the AT&T arbitration;
therefore, the PUC was consistent in only allowing arbitration of
issues not already decided.
Once again, SWBT makes no attempt to explain the particular
unfairness created by allowing Waller to incorporate such
provisions into its agreement, nor does it point out any
“legitimately related” provisions in the AT&T agreement. For
this reason, we find nothing arbitrary or capricious in the PUC’s
determinations, including the finding that SWBT sought to impose
unnecessary costs on Waller. Because 47 U.S.C. § 251(c)(6)
26
District Court Order, filed July 2, 1999, at 18-19, 23.
27
District Court Order, at 22 (quoting Iowa Utilities II, 119 S.Ct. at
737).
28
District Court Order, at 22.
20
imposes on SWBT a duty to provide collocation on just,
reasonable, and nondiscriminatory terms, the decision to order
collocation without imposing unnecessary costs on Waller is in
accordance with the Telecommunications Act.
IV
For the reasons stated above, we AFFIRM the judgment of the
district court.
21