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MCI v. BELL-ATLANTIC

February 17, 1999

MCI, ET AL., PLAINTIFF,
v.
BELL-ATLANTIC, ET AL., DEFENDANT.



The opinion of the court was delivered by: Thomas F. Hogan, District Judge.

MEMORANDUM OPINION

MCI Telecommunications Corp. and MCIMetro Access Transmission Services, Inc. ("MCI") have brought this action pursuant to the Telecommunications Act of 1996 ("the Act"), 47 U.S.C. § 252(e)(6) (1994 ed., Supp. II), for judicial review of a network interconnection agreement approved by the Public Service Commission of the District of Columbia ("the Commission") concerning interconnection between MCI and Bell-Atlantic-Washington, D.C., Inc. ("BA-DC"). The defendants are BA-DC and the Commission. All parties have moved for summary judgment. In addition, the Federal Communications Commission ("FCC") has filed a brief amicus curiae.

On October 23, 1998, the Court heard oral argument on the parties' cross-motions for summary judgment. The Court has fully considered those arguments and the written submissions of counsel. Because there is no genuine issue of material fact for trial, the case will be decided as a matter of law pursuant to Federal Rule of Civil Procedure 56.

I.

The Telecommunications Act of 1996 was designed "to provide for a pro-competitive, de-regulatory national policy framework designed to accelerate rapidly private sector deployment of advanced telecommunications and information technologies and services to all Americans by opening telecommunications markets to competition . . ." S. Conf. Rep. No. 104-230, 104th Cong., 2d Sess. 113 (1996) (Joint Explanatory Statement of the Committee of Conference). Through the Act, Congress sought to end monopoly power in the telecommunications industry by dismantling state and local barriers to competition. See AT&T v. Iowa Utilities Bd., ___ U.S. ___, 119 S.Ct. 721, 723, ___ L.Ed.2d ___ (1999).

In furtherance of the statutory goal, the Act provides that entrants into a local telecommunications market may demand three services from an incumbent local exchange carrier ("ILEC"). First, entrants may obtain interconnection with an ILEC's existing local network. See 47 U.S.C. § 251(c)(2). Second, new entrants may lease from incumbents individual "network elements," such as routers and switches, at cost. See id. § 251(c)(3). Finally, new entrants may purchase at wholesale rights to the services that the ILEC offers to its customers at retail. See id. § 251(c)(4). These services are designed to enable market entrants to enter the market in a practicable manner. As the FCC states in its amicus brief, "without rights of access to the existing network, a potential competitor could not gradually enter the market through partial duplication of local telephone facilities: an upstart carrier would win few customers if its customers could call only one another and not customers on the ILEC's separate and completed network." FCC Amicus Brief at 5; see also United States v. Western Elec. Co., 673 F. Supp. 525, 538 (D.D.C. 1987) ("duplication of the ubiquitous local exchange network[] would require an enormous and prohibitive capital investment.").

Pursuant to § 252 of the Act, ILECs (such as BA-DC) and market entrants such as MCI may enter into voluntarily negotiated agreements for interconnection, unbundled elements and the resale of services, and may petition the pertinent state commission for arbitration to resolve any issues on which the parties cannot agree. Id. § 252(a)(1). The Act further provides that all agreements, whether negotiated or arbitrated or both, must be submitted to the appropriate state commission for approval.*fn1 Id. § 252(e). Any party aggrieved by a determination of a state commission "may bring an action in an appropriate Federal district court to determine whether the agreement" satisfies the requirements of §§ 251 and 252 of the Act. Id. § 252(a)(6). Finally, to ensure that uniform federal standards were in place before § 252's negotiation and arbitration processes commenced, Congress directed the FCC "to establish regulations to implement the requirements" of § 251 within six months of the passage of the 1996 Act. Id. § 251(d)(1). Pursuant to this provision, the FCC issued two orders, In re Implementation of the Local Competition Provisions of the Telecommunications Act of 1996, First Report and Order, 11 F.C.C.R. 15499 (1996) ("First Report and Order") and In re Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, Second Report and Order, 11 F.C.C.R. 19392 (1996) ("Second Report and Order"). Sections of the First Report and Order must be examined in light of the recent Supreme Court decision in AT & T v. Iowa Utilities Board, ___ U.S. ___, 119 S.Ct. 721, 142 L.Ed.2d 835, in which the Court invalidated the FCC's interpretation of several statutory terms relevant to this litigation.*fn2

II.

MCI and BA-DC engaged in voluntary negotiations under the Act, and on August 30, 1996, when they could not resolve all outstanding issues, MCI filed with the Commission a petition for arbitration pursuant to § 252 of the Act. The Arbitrator issued his decision in two orders in December 1996.*fn3 Following the arbitration proceeding, BA-DC and MCI entered into an interconnection agreement ("the Agreement") and a joint application for approval of the Agreement. On September 12, 1997, the Commission issued an order of conditional approval, requiring the parties to reform the Agreement in certain respects. See Formal Case No. 964C — In re the Application of Bell Atlantic — Washington, D.C., Inc. and MCImetro Access Transmission Services, Inc. for Approval of an Interconnection Agreement Under Section 252(e) of the Telecommunications Act of 1996, Order No. 11062 (Sept. 12, 1997) ("Commission Order"). The parties reformed the Agreement and refiled it with the Commission. Each party also sought reconsideration of the Commission's decision to approve the agreement with respect to certain arbitrated terms included therein. On December 12, 1997, the Commission approved the reformed Agreement and denied the parties' request for reconsideration. See Formal Case No. 964C — In re the Application Bell Atlantic — Washington, D.C., Inc. for Approval of Interconnection Agreement Under Section 252(e) of the Telecommunications Act of 1996, Order No. 11115 (Dec. 12, 1997) ("Reconsideration Order 11115").

In this appeal, MCI challenges the Commission's decision approving the Agreement with respect to (1) access to "dark fiber," (2) access to one component of BA-DC's "local loop," (3) access to BA-DC's directory assistance database, and (4) the alleged absence within the Agreement of performance measures, performance standards, reporting, and noncompliance mechanisms. BA-DC has filed a counterclaim/crossclaim in which it challenges the Commission's decision to allow MCI to use collocated remote switching modules (RSMs) to perform limited switching functions. The Commission has filed a Motion for Summary Judgment asking this Court to uphold the Agreement in all respects. These claims are considered in turn.

III.

A. Standard of Review

Under the law of this Circuit, a state agency's interpretation of a federal statute is subject to de novo review. James Madison Ltd. v. Ludwig, 82 F.3d 1085, 1096 (D.C.Cir. 1996). "A state agency's interpretation of federal statutes is not entitled to the deference afforded a federal agency's interpretation of its own statutes under Chevron U.S.A., Inc. v. Natural Resources Defense Council Inc., 467 U.S. 837, 843, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984)." Orthopaedic Hosp. v. Belshe, 103 F.3d 1491, 1495 (9th Cir. 1997). By contrast, with respect to findings of fact the Court applies the Administrative Procedure Act's "arbitrary and capricious" standard. Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 417, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971). Under that standard, substantial deference is afforded to the Commission's factual determinations.

B. MCI's Claims

Under § 251(c)(3) of the Act, an ILEC has an obligation to provide "unbundled access" to certain components of its network. The section states that an ILEC has

  [t]he duty to provide, to any requesting
  telecommunications carrier for the provision of a
  telecommunications service, nondiscriminatory access
  to network elements on an unbundled basis . . . An
  incumbent local exchange carrier shall provide such
  unbundled network elements in a manner that allows
  requesting carriers to combine such elements in order
  to provide such telecommunication service.

47 U.S.C. § 251(c)(3). In this context, unbundling is the procedure by which the components of an ILEC's facilities and provision of services are broken down into their individual parts. Thus, to "unbundle" a network element is simply to set a separate price for that element and allow a purchaser such as MCI the ability to lease it separately.

Under § 251(c)(3), an ILEC need provide only those items that qualify as "network elements." Id. The Act defines a network element as:

  a facility or equipment used in the provision of a
  telecommunications service. Such term also includes
  features, functions, and capabilities that are
  provided by means of such facility or equipment,
  including subscriber numbers, databases, signaling
  systems, and information sufficient for billing and
  collection or used in the transmission, routing or
  other provision of a telecommunications service.

47 U.S.C. § 153(29).

The determination that a facility or equipment qualifies as a network element does not end the inquiry as to whether it must be provided on an unbundled basis. Under § 251(d), the FCC is instructed to consider whether access to such network elements is "necessary," and whether "the failure to provide access would impair the ability of the telecommunications carrier . . . to provide the services that it seeks to offer." Id. § 251(d)(2). The statute also directs the FCC to order access to network elements only at "technically feasible ...


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