High Court Reverses Ruling in Telecom Cases

WASHINGTON, D.C. - (Mealey's) The U.S. Supreme Court on June 9 reversed a Sixth Circuit U.S. Court of Appeals ruling, finding that incumbent local exchange carriers (ILECs) cannot charge competitive local exchange carriers (CLECs) more than cost-based rates for providing access to their entrance facilities (Talk America, Inc. v. Michigan Bell Telephone Company, dba AT&T Michigan, No. 10-313 and Orijiakor Isiogu, et al. v. Michigan Bell Telephone Company, dba AT&T Michigan, No. 10-329, U.S. Sup.; See April 2011).

The Telecommunications Act of 1996 required ILECs to cooperate with CLECs to allow CLECs to enter the market.

Michigan Bell Telephone Co., doing business as AT&T Michigan, an ILEC, provided entrance facilities for CLECs, including Covad Communications, Talk America Inc., XO Communications, McLeod USA Telecommunications and TDS Metrocom, to connect to its network.  Michigan Bell charged the CLECs regulated rates called "Total Element Long Run Incremental Cost" (TELRIC) rates for use of the entrance facilities but notified the CLECs that it would be changing to "interconnection agreements" and a new pricing scheme pursuant to the Federal Communication Commission's 2005 Triennial Review Remand Order (TRRO).

The CLECs complained to the Michigan Public Service Commission (MPSC), which ordered Michigan Bell to continue to provide entrance facilities at TELRIC rates.  The U.S. District Court for the Eastern District of Michigan vacated the MPSC's order.

On Feb. 23, 2010, in a 2-1 ruling, the Sixth Circuit affirmed, saying that "[t]he most plausible reading of the plain language of the TRRO is that the ILEC must allow the CLEC to connect its network to the ILEC's network, and may not charge the CLEC more than TELRIC rates for this connection.  If the ILEC requires the CLEC to connect at some point other than directly into its network, then the link . . . between the ILEC's designated connection point and the ILEC's network is . . . an 'interconnection facility,' and the ILEC may charge only TELRIC rates for the use of that (or any) interconnection facility."

The Supreme Court reversed the Sixth Circuit's ruling, agreeing with the FCC, appearing as amicus curiae, that to satisfy its duty under 47 U.S. Code Section 251(c)(2), an ILEC must make its existing entrance facilities available to competitors at cost-based rates if the facilities are to be used for interconnection.

"The FCC's interpretation is not 'plainly erroneous or inconsistent with the regulation[s],'" the court said, citing Auer v. Robbins (519 U.S. 452, 461).

The court disagreed with Michigan Bell's argument that entrance facilities are not a part of ILECs' networks.  The court also said it was not persuaded by Michigan Bell's argument that the FCC's views conflict with the definition of interconnection in 47 Code of Federal Regulations Section51.5.  The court noted that Section 51.5 provides:  "Interconnection is the linking of two networks for the mutual exchange of traffic.  This term does not include the transport and termination of traffic."

Contrary to Michigan Bell's assertion, the court said there is no danger that deferring to the FCC would effectively "permit the agency, under the guise of interpreting a regulation, to create de facto a new regulation."

Justice Clarence Thomas delivered the opinion of the court in which all other members joined except Justice Elena Kagan, who took no part in the consideration or decision of the cases.

Justice Antonin Scalia filed a concurring opinion, noting that he would reach the same result without relying on Auer v. Robbins.

[Editor's Note:  Full coverage will be in the June issue.  In the meantime, the order is available at www.mealeysonline.com or by calling the Customer Support Department at 1-800-833-9844.  Document #81-110623-008Z.  For all of your legal news needs, please visit www.lexisnexis.com/mealeys.]

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