No. 98-1381
In the Supreme Court of the United States
OCTOBER TERM, 1998
AMERITECH CORPORATION, ET AL., PETITIONERS
v.
FEDERAL COMMUNICATIONS COMMISSION, ET AL.
ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
BRIEF FOR THE
FEDERAL COMMUNICATIONS COMMISSION
IN OPPOSITION
SETH P. WAXMAN
Solicitor General
Counsel of Record
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217
CHRISTOPHER J. WRIGHT
General Counsel
JOHN E. INGLE
Deputy Associate General
Counsel
JAMES M. CARR
Counsel
Federal Communications
Commission
Washington, D.C. 20554
QUESTION PRESENTED
Whether this Court should summarily vacate the decision below and remand
for further proceedings in light of AT&T Corp. v. Iowa Utilities Board,
119 S. Ct. 721 (1999).
In the Supreme Court of the United States
OCTOBER TERM, 1998
No. 98-1381
AMERITECH CORPORATION, ET AL., PETITIONERS
v.
FEDERAL COMMUNICATIONS COMMISSION, ET AL.
ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
BRIEF FOR THE
FEDERAL COMMUNICATIONS COMMISSION
IN OPPOSITION
OPINIONS BELOW
The opinion of the court of appeals (Pet. App. 6a-24a) is reported at 153
F.3d 597. The Federal Communications Commission's Third Order on Reconsideration
and Further Notice of Proposed Rulemaking, Implementation of the Local Competition
Provisions in the Telecommunications Act of 1996 (Pet. App. 26a- 84a), is
reported at 12 F.C.C.R. 12,460.
JURISDICTION
The judgment of the court of appeals was entered on August 10, 1998. Pet.
App. 1a-5a. A petition for rehearing was denied on December 4, 1998. Pet.
App. 25a. The petition for a writ of certiorari was filed on February 26,
1999. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).
STATEMENT
1. Statutory background. For many years, incumbent telephone companies-known
as local exchange carriers (LECs)-have maintained monopoly control over
local telephone facilities and the provision of local telephone service.
To open local telephone markets to competition, Congress enacted the local
competition provisions of the Telecommunications Act of 1996 (1996 Act),
Pub. L. No. 104-104, 110 Stat. 56, 47 U.S.C. 251 et seq. Those provisions
impose on incumbent LECs "a host of duties intended to facilitate market
entry." AT&T Corp. v. Iowa Utils. Bd., 119 S. Ct. 721, 726 (1999).
Of greatest significance here, Section 251(c)(3) compels incumbents to provide
new entrants with "nondiscriminatory access to network elements on
an unbundled basis * * * on rates, terms, and conditions that are just,
reasonable, and nondiscriminatory." 47 U.S.C. 251(c)(3); see also Iowa
Utils. Bd., 119 S. Ct. at 726-727, 736-738.
The 1996 Act broadly defines the term "network element" to encompass
any "facility or equipment used in the provision of a telecommunications
service" as well as any "features, functions, and capabilities
that are provided by means of such facility or equipment." 47 U.S.C.
153(29). The Act does not give new entrants automatic access, however, to
every facility or functionality that falls within the scope of that definition.
Instead, Section 251(d)(2) directs the Federal Communications Commission
(FCC or Commission) to "consider, at a minimum," certain factors
when determining "what network elements should be made available"
to new entrants. 47 U.S.C. 251(d)(2). Those factors are whether "access
to such network elements as are proprietary in nature is necessary"
and, as to other elements, whether "the failure to provide access to
such network elements would impair the ability of the telecommunications
carrier seeking access to provide the services that it seeks to offer."
47 U.S.C. 251(d)(2)(A) and (B).
2. The First Report and Order. The substantive challenges presented in this
petition-which relate to the Commission's application of the "necessary"
and "impair" standards of Section 251(d)(2)-were raised on review
of the FCC order that was before this Court in Iowa Utilities Board, not
on review of the subsequent FCC order underlying these proceedings. For
purposes of background, we discuss each FCC order in turn.
a. In August 1996, the FCC issued its First Report and Order, which adopted
a comprehensive set of regulations to implement the local competition provisions
of the 1996 Act. Implementation of the Local Competition Provisions in the
Telecommunications Act of 1996, 11 F.C.C.R. 15,499, 15,616-15,775 (1996)
(¶¶ 226-541), aff'd in part and vacated in part, Iowa Utils. Bd.
v. FCC, 120 F.3d 753 (8th Cir. 1997), aff'd in part and rev'd in part, AT&T
Corp. v. Iowa Utils. Bd., supra. One of those regulations was Rule 319,
47 C.F.R. 51.319, which listed seven basic categories of network elements
that incumbent LECs must make available to new entrants.
The Commission included "interoffice transmission facilities"
on that list. First Report and Order, 11 F.C.C.R. at 15,714-15,722 (¶¶
428-451). Such facilities perform a critical function called "transport":
i.e., they convey calls between switches.1 In the First Report and Order,
the FCC explained that the "interoffice transmission" element
to which new entrants may gain access includes both "dedicated transport,"
which is the "exclusive use of interoffice transmission facilities
dedicated to a particular customer or carrier," and "shared transport,"
which is the "use of the features, functions, and capabilities of interoffice
transmission facilities shared by more than one customer or carrier."
47 C.F.R. 51.319(d)(2)(i) (1997) (emphasis added).
b. On direct review, the incumbent LECs and other parties challenged the
First Report and Order on a variety of grounds. Two of those challenges
are relevant here. First, petitioners claimed that the FCC had misinterpreted
the "necessary" and "impair" standards of Section 251(d)(2)
and that this error had affected the Commission's determination, in Rule
319, of the elements that incumbents must make available to new entrants.
Second, petitioners challenged a separate FCC regulation-Rule 315(b)-that
bars incumbents from disconnecting previously combined elements when new
entrants request access to those elements in combination. 47 C.F.R. 51.315(b).
In challenging the latter regulation, the incumbents reasoned that Section
251(c)(3) requires incumbents to make network elements available only "on
an unbundled basis," and they construed the term "unbundled"
to mean "disconnected" rather than "separately priced."
The incumbents also contended that, because Rule 315(b) gives new entrants
efficient access to existing configurations of network elements, it improperly
blurs the statutory distinction between two different entry options: access
to an incumbent's network elements under 47 U.S.C. 251(c)(3) and resale
of an incumbent's finished services under 47 U.S.C. 251(c)(4).
In July 1997, the Eighth Circuit invalidated some portions of the First
Report and Order and upheld others. First, the court upheld the Commission's
application of the "necessary" and "impair" standards
as a reasonable interpretation of Section 251(d)(2). 120 F.3d at 810-812.
But, in a subsequent order issued in October 1997 and ultimately incorporated
within its original opinion, the court invalidated Rule 315(b). It reasoned:
[Section] 251(c)(3) does not permit a new entrant to purchase the incumbent
LEC's assembled platform(s) of combined network elements (or any lesser
existing combination of two or more elements) in order to offer competitive
telecommunications services. To permit such an acquisition of already combined
elements at cost based rates for unbundled access would obliterate the careful
distinctions Congress has drawn in subsections 251(c)(3) and (4) between
access to unbundled network elements on the one hand and the purchase at
wholesale rates of an incumbent's telecommunications retail services for
resale on the other. Accordingly, the Commission's rule, 47 C.F.R. §
51.315(b), which prohibits an incumbent LEC from separating network elements
that it may currently combine, is contrary to § 251(c)(3) because the
rule would permit the new entrant access to the incumbent LEC's network
elements on a bundled rather than an unbundled basis.
Id. at 813.
c. This Court granted certiorari to review the Eighth Circuit's decision,
and, in January 1999, it decided Iowa Utilities Board. It repudiated the
Eighth Circuit's basis for invalidating Rule 315(b) and held that the rule
is a reasonable interpretation of Section 251(c)(3). See 119 S. Ct. at 737.
In reinstating the rule, the Court specifically rejected the incumbents'
two principal bases for challenging Rule 315(b): the arguments that the
right of access to "unbundled" elements under Section 251(c)(3)
is a right of access only to disconnected elements; and that Rule 315(b),
by ensuring efficient, nondiscriminatory access to an incumbent's elements,
had improperly "eviscerate[d]" the statutory distinction between
network elements and resale. Ibid.
The Court separately determined, however, that the FCC had "not adequately
consider[ed]" the "necessary" and "impair" standards
of Section 251(d)(2) when setting forth the list of elements, contained
in Rule 319, that incumbents must make available to new entrants. 119 S.
Ct. at 734-736. The Court therefore vacated Rule 319 in its entirety and
remanded that aspect of the case to the Commission for further consideration
of all network elements under those standards.2
3. The Third Order on Reconsideration. In August 1997, after the Eighth
Circuit had issued its initial decision in Iowa Utilities Board but shortly
before that court issued its subsequent decision invalidating Rule 315(b),
the FCC issued the order underlying these proceedings: the Third Order on
Reconsideration, which clarified the obligation of incumbent LECs to provide
shared transport. Implementation of the Local Competition Provisions in
the Telecommunications Act of 1996, 12 F.C.C.R. 12,460, 12,475-12,477 (1997)
(¶¶ 25-26) (Pet. App. 26a- 84a) (Third Order).
In the First Report and Order, the Commission had determined that incumbents
must "provide unbundled access to shared transmission facilities between
end offices and the tandem switch." 11 F.C.C.R. at 15,718 (¶ 440).
In the Third Order, the Commission clarified that when competing carriers
request shared transport, incumbents must provide access to all of their
interoffice transmission facilities-not just the links between end office
switches and tandem switches, but also the trunks that transport phone calls
from one end office to another or from one tandem switch to another. Pet.
App. 47a-48a. The FCC also reaffirmed that shared transport falls within
the statutory definition of network element, and it clarified, among other
things, that the duty to provide shared transport requires incumbents, upon
request, to share with new entrants the same interoffice transmission facilities
that the incumbents themselves use. Id. at 58a-69a. Finally, the FCC reaffirmed
its earlier finding in the First Report and Order that shared transport
meets the "necessary" and "impair" standards of Section
251(d)(2). Id. at 52a-57a.
Petitioners, who are incumbent LECs, sought judicial review of the Third
Order on several related theories. First, they claimed that, because the
Commission had previously defined each interoffice transmission facility
as a discrete network element, the definition of shared transport in the
Third Order combined multiple network elements into a single network element;
similarly, they contended that the Third Order required them to provide
interoffice transport in combination with switching, a separate network
element. In both respects, they claimed, the Commission had done indirectly
what the Eighth Circuit had recently ruled it could not do directly under
Rule 315(b): compel incumbents to provide preassembled combinations of network
elements to new entrants. Petitioners further claimed that, by requiring
incumbents to provide separate elements in combination, the Commission's
shared transport rules, like Rule 315(b) itself, would eviscerate the distinction
between network elements and resale.
In August 1998, the Eighth Circuit rejected those arguments and upheld the
Third Order. Pet. App. 1a-24a.3 The court first held that the Commission
had acted reasonably in determining that "shared transport" falls
within the broad statutory definition of "network element" (47
U.S.C. 153(29)), even though shared transport might also be said to embrace
a combination of constituent elements. See Pet. App. 15a-17a. In so holding,
the court distinguished its earlier decision invalidating Rule 315(b). Id.
at 19a-22a. The court also "decline[d] at this time" to invalidate
the Third Order on the "speculative assumption" that, as implemented,
the Commission's shared transport rules would ultimately blur the distinction
between network elements and resale. Id. at 17a-19a.
ARGUMENT
Petitioners base their request for relief on the proposition that the Commission
misapplied the "necessary" and "impair" standards of
Section 251(d)(2) in determining that shared transport should be made available
to new entrants. But petitioners raised all of their judicial challenges
concerning those standards in Iowa Utilities Board, on direct review of
the First Report and Order, not in this case, on direct review of the Third
Order. In Iowa Utilities Board, this Court addressed those challenges, vacated
the Commission's implementation of Section 251(d)(2), and required the Commission
to reconsider whether interoffice transport, along with all the other elements
listed in the now-vacated Rule 319, meets the "necessary" and
"impair" standards. That relief, which this Court has already
ordered, is the only relief that petitioners could legitimately seek, and
they will receive that relief if this petition is denied. The petition therefore
should be denied, because nothing in Iowa Utilities Board casts doubt on
the continuing validity of the independently significant holdings below,
which had nothing to do with the "necessary" and "impair"
standards.
1. A summary order (known as a GVR) granting certiorari, vacating the judgment
below, and remanding the case is "potentially appropriate" where
"intervening developments * * * reveal a reasonable probability that
the decision below rests upon a premise that the lower court would reject
if given the opportunity for further consideration, and where it appears
that such a redetermination may determine the ultimate outcome of the litigation."
Lawrence v. Chater, 516 U.S. 163, 167 (1996) (per curiam). That, indeed,
is the legal formulation on which petitioners appear to rely in seeking
a GVR. See Pet. 5 (citing quoted passage of Lawrence v. Chater). But that
very formulation reveals why a GVR would be inappropriate here. Petitioners
do not and could not claim that any aspect of this Court's decision in Iowa
Utilities Board draws the holdings of the decision below into question.
a. Although petitioners inaccurately suggest otherwise (Pet. 5), the court
of appeals was correct when it observed that petitioners "d[id] not
argue" on review of the Third Order "that the FCC failed to give
adequate consideration" to the "necessary" and "impair"
standards of Section 251(d)(2). Pet. App. 18a.4 Instead, petitioners challenged
the Third Order on the quite different ground that "shared transport"
is not properly defined as an element in its own right, but is instead a
combination of separate constituent elements. See Ameritech C.A. Br. 24-30.
Petitioners argued that entitling new entrants to any preassembled combination
of elements would violate the rationale of the Eighth Circuit's prior decision
vacating Rule 315(b), in which the court had held (120 F.3d at 813) that
the text and structure of the 1996 Act prevent new entrants from gaining
access to elements in their precombined form. See Ameritech C.A. Br. 24-30;
see generally pp. 7-8, supra. The Eighth Circuit rejected that argument
and distinguished its earlier decision vacating Rule 315(b). See Pet. App.
19a-22a.
In Iowa Utilities Board, this Court reinstated Rule 315(b) and, in so doing,
refuted the very premise of the arguments petitioners had presented to the
Eighth Circuit on review of the Third Order. This Court determined that,
contrary to the Eighth Circuit's prior rationale for invalidating Rule 315(b),
"[i]t was entirely reasonable for the Commission to find" that
the 1996 Act compels incumbents to provide network elements in their precombined
form rather than "in discrete pieces." 119 S. Ct. at 737. The
Court similarly rejected, as a basis for challenging Rule 315(b), the incumbents'
related argument that entitling a new entrant to preassembled combinations
of an incumbent's elements would "eviscerate[] the distinction between
resale and unbundled access." Ibid.
Iowa Utilities Board thus forecloses every argument that petitioners raised
on review of the Third Order as a basis for withholding shared transport
from new entrants. And even if that were not the case, the relevant question
here is whether Iowa Utilities Board "reveal[s] a reasonable probability
that the decision below rests upon a premise that the lower court would
reject if given the opportunity for further consideration." Lawrence
v. Chater, 516 U.S. at 167. Petitioners could not possibly satisfy that
test. They do not and could not contend that anything in Iowa Utilities
Board casts doubt on whether the arguments that they raised on review of
the Third Order-the only arguments considered in the decision below-were
properly rejected. See p. 14, infra. There is accordingly no basis for vacating
that decision, and the petition should be denied.
b. Denial of the petition would not deprive petitioners of the ultimate
relief they ostensibly seek: reconsideration by the Commission, in light
of this Court's order vacating Rule 319, of whether shared transport meets
the "necessary" and "impair" standards of Section 251(d)(2).
On direct review of the First Report and Order, petitioners presented a
global challenge to the Commission's interpretation of the "necessary"
and "impair" standards. They claimed that the Commission's misapplication
of those standards had infected the entire list of elements, set forth in
Rule 319, that "should be made available" to new entrants. 47
U.S.C. 251(d)(2). One of the items on that list was interoffice transport,
of which shared transport is a species. In Iowa Utilities Board, this Court
vacated Rule 319 on the ground that the Commission had indeed misinterpreted
Section 251(d)(2) with respect to all network elements, including interoffice
transport. See 119 S. Ct. at 734-736.5
This Court's decision therefore requires the Commission to reconsider the
question that was not presented on direct review of the Third Order: whether
shared transport, like the other elements listed in Rule 319, meets the
"necessary" and "impair" standards. Until the Commission
conducts that inquiry, Rule 319 will remain vacated and could not impose
enforceable obligations to provide shared transport or any other element,
although in particular cases such obligations might independently rest on
other sources of law. And, most important for present purposes, the Commission
will have to conduct the "necessary" and "impair" inquiry
with respect to every element, including shared transport, whether or not
this Court vacates the decision below. Put another way, petitioners will
obtain the exact relief they ostensibly seek here even if their petition
is denied.
Especially in light of that consideration, the petition should be denied.
The only effect of a GVR would be to vacate important Eighth Circuit holdings
that are distinct from any question about the content of the "necessary"
and "impair" standards and are not even disputed here. The Eighth
Circuit upheld the Third Order over petitioners' claims that the FCC had
erred in defining shared transport as a network element in the first place
and that the availability of shared transport would eviscerate the distinction
between network elements and resale as entry options. See Pet. App. 15a-22a.
Petitioners do not challenge the Eighth Circuit's disposition of those issues,
nor do they claim that the court's reasoning is materially inconsistent
with Iowa Utilities Board. Indeed, as discussed, Iowa Utilities Board in
fact forecloses the very arguments that petitioners pressed in the Eighth
Circuit.
Thus, far from justifying a GVR, Iowa Utilities Board in fact confirms that
petitioners have no basis for relitigating the issues decided below. Although
a GVR would leave the Eighth Circuit free to reinstate its prior holdings,
and even though that would be the proper course for it to take,6 the very
issuance of a GVR would undoubtedly incite an unnecessary round of litigation
in that court on the significance of this Court's summary order. As this
Court has explained, "if the delay and further cost entailed in a remand
are not justified by the potential benefits of further consideration by
the lower court, a GVR order is inappropriate." Lawrence v. Chater,
516 U.S. at 168. Here a GVR would create no "potential benefits"
at all, but only "delay and further cost."
2. Although they do not clearly say so, petitioners suggest more broadly
that the decision vacating Rule 319, and lifting any current obligation
under that rule to provide shared transport or switching, requires invalidation
of any determination concerning shared transport, no matter how consistent
the determination may be with the reasoning of Iowa Utilities Board. See
Pet. 5-6. Any such argument would be irreconcilable with Iowa Utilities
Board itself.
Apart from vacating Rule 319, this Court addressed and upheld a variety
of FCC determinations concerning network elements. The Court perceived no
inconsistency between upholding those determinations and invalidating Rule
319. The Court held, for example, that the Commission had reasonably determined
that "operator services" and "operational support systems"
(OSS) fall within the statutory definition of network element (47 U.S.C.
153(29)), even though the Court simultaneously vacated the portions of Rule
319 requiring those elements to be made available, and even though on remand
the Commission must reconsider whether they should even appear on the list
of elements to which new entrants may gain access. See 119 S. Ct. at 733-736.
Similarly, the Court held that the FCC had "reasonably omitted a facilities-ownership
requirement" (which would have compelled new entrants to obtain facilities
of their own before gaining access to any of an incumbent's elements), even
though the Court added that "[t]his issue may be largely academic in
light of our disposition of Rule 319." Id. at 736.
In each of those holdings, this Court made clear that its invalidation of
Rule 319, and its remand for reconsideration by the Commission of the "necessary"
and "impair" standards, does not somehow foreclose resolution
of network-element disputes that are analytically distinct from disputes
about the "necessary" and "impair" standards themselves.
Here, the Eighth Circuit's holdings about shared transport have nothing
to do with those standards, are important in their own right, and remain
just as valid in the wake of Iowa Utilities Board as this Court's own holdings
about operator services, OSS, and the proposed "facilities ownership"
requirement.
CONCLUSION
The petition for a writ of certiorari should be denied.7
Respectfully submitted.
SETH P. WAXMAN
Solicitor General
CHRISTOPHER J. WRIGHT
General Counsel
JOHN E. INGLE
Deputy Associate General
Counsel
JAMES M. CARR
Counsel
Federal Communications
Commission
APRIL 1999
1 A network makes use of many switches to route telephone calls. Some of
those switches are located at local "end offices." Others, called
tandem switches, route telephone traffic between end offices (among other
functions).
2 On April 16, 1999, the FCC issued a notice of proposed rulemaking concerning
application of the "necessary" and "impair" standards
in light of this Court's decision in Iowa Utilities Board. See Second Further
Notice of Proposed Rulemaking, Implementation of the Local Competition Provisions
of the Telecommunications Act of 1996, FCC 99-70. Those rulemaking proceedings
are pending.
3 The court observed that petitioners "d[id] not argue that the FCC
failed to give adequate consideration" to the "necessary"
and "impair" standards of Section 251(d)(2). Pet. App. 18a.
4 Petitioners did not even cite Section 251(d)(2) in their opening brief
in the court of appeals. In their reply brief, they cited that provision
only in arguing that "[t]he FCC's discretion under section 251(d)(2)(B)
to determine what network elements must be made available is necessarily
constrained by the other provisions of the 1996 Act-sections 251(c)(3) and
(4) and section 3(29)[.]" Ameritech C.A. Reply Br. 17 (emphasis added).
Petitioners did not argue that the Third Order violated Section 251(d)(2)
itself, and the court therefore had no occasion to address the issue. See
Pet. App. 18a. For its part, the court of appeals referred to Section 251(d)(2)
as a source of the FCC's statutory "authority" to determine what
network elements must be made available (e.g., id. at 17a, 21a), but that
reference did not relate to the content of the "necessary" and
"impair" standards. Instead, the court relied on the introductory
clause of Section 251(d)(2)-which identifies the FCC as the agency that
"determin[es] what network elements should be made available"-as
the Commission's source of jurisdiction to issue any rules regarding network
elements. The Eighth Circuit needed to rely on that introductory clause
for that purpose because it had earlier held that no other provision of
law authorized the Commission (as opposed to state public utility commissions)
to exercise such jurisdiction. See 120 F.3d at 793- 807. This Court subsequently
clarified that 47 U.S.C. 201(b) grants the FCC plenary regulatory jurisdiction
to implement the provisions of the 1996 Act, including Section 251. See
119 S. Ct. at 729-733.
5 As petitioners observe (Pet. 3), "the Third Order addressed the definition
of 'interoffice transmission facilities,' one of the network elements to
which unbundled access was required in (the now-vacated) Rule 319."
In particular, the Third Order amended the definition of "shared transport"
in Rule 319(d)(1), while leaving intact Rule 319(d)(2), "which imposed
the actual obligation upon incumbent LECs to provide unbundled access to
interoffice transport." Pet. 4. Because this Court vacated Rule 319
in its entirety, it vacated all portions of Rule 319 imposing an obligation
to provide interoffice transport, including shared transport. There is thus
no respect in which a denial of certiorari in this case could shield the
Commission from its obligation to reconsider whether shared transport meets
the "necessary" and "impair" standards of Section 251(d)(2).
That is so even though-in a passage of the Third Order which petitioners
did not challenge in the court of appeals, and which that court thus had
no occasion to review-the Commission addressed those standards under its
prior, now-vacated interpretation. See Pet. App. 52a-57a. Of course, if
our analysis on this point were incorrect, and if this Court's vacatur of
Rule 319 for some reason did not require the Commission to reconsider whether
shared transport meets the "necessary" and "impair"
standards, it would then follow that petitioners had waived their present
challenge by failing to preserve it on direct review of the Third Order.
See generally Pet. App. 18a; see also note 4, supra.
6 In two passages, petitioners appear to seek not a GVR- which would permit
the Eighth Circuit to consider in the first instance the effect, if any,
of Iowa Utilities Board on its prior decision-but an order affirmatively
directing the Eighth Circuit to vacate the Third Order. See Pet. i (question
presented), 5; but cf. Pet. 6 (conclusion). Such substantive relief would
be inappropriate even if a GVR were warranted. If this Court does not deny
the petition outright, it should at most enter a standard GVR order granting
the petition, vacating the judgment of the court of appeals, and remanding
to that court for further proceedings. See, e.g., Lawrence v. Chater, 516
U.S. at 175.
7 See also note 6, supra.