BRISCOE, Circuit Judge.
Plaintiff U.S. West Communications, Inc., now known as Qwest Corporation (Qwest), brought these actions pursuant to 47 U.S.C. § 252(e)(6) to challenge provisions contained in arbitrated interconnection agreements with defendants Sprint Communications Company L.P. (Sprint), MCI Telecommunications Corporation, and MCImetro Access Transmission Services, Inc. (collectively MCI). The district court vacated the provisions, concluding defendant Colorado Public Utilities Commission (CPUC) overstepped its authority and acted contrary to the Telecommunications Act of 1996 in including the provisions in the agreements. Sprint and MCI appeal from that ruling. We exercise jurisdiction pursuant to 28 U.S.C. § 1291, reverse the judgment of the district court, and remand with instructions to enter judgment in favor of Sprint and MCI.
This case arises out of Congress' efforts, through the Telecommunications Act of 1996 (the Act), to increase competition in the market for local telephone service. In AT & T Corp. v. Iowa Utilities Bd., 525 U.S. 366, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999), the Supreme Court briefly outlined the history of local telephone service, the impact of the Act on such service, and the methods by which the Act allows new companies to gain entry to a local market:
Id. at 371-73, 119 S.Ct. 721 (footnotes omitted).
The Act imposes three general conditions a state commission must satisfy in arbitrating open issues regarding an interconnection agreement. First, it must "ensure that [its] resolution and conditions meet the requirements of section 251 ..., including the regulations prescribed by the [FCC] pursuant to section 251."
Finally, the Act provides for federal court review of interconnection agreements. Specifically, 47 U.S.C. § 252(e)(6) authorizes "any party aggrieved by" a state commission decision regarding an interconnection agreement to "bring an action in an appropriate Federal district court." For example, if a party to an arbitrated interconnection agreement is dissatisfied with a particular provision imposed by a state commission, it can seek review of that provision by filing suit in federal court. Federal court review is limited to the determination of whether the agreement "meets the requirements of section 251 ... and ... section ." Id.
History of interconnection agreements and ensuing litigation
Plaintiff Qwest is an incumbent local exchange carrier (ILEC) based in the state of Colorado. MCI and Sprint, along with several other companies, sought entry to Qwest's market for local phone service. Under the Act, these companies are generally referred to as "competing local exchange carriers" (CLECs). MCI and Sprint each attempted, unsuccessfully, to negotiate interconnection agreements with Qwest. Accordingly, MCI and Sprint each filed a petition with the CPUC asking for arbitration of unresolved issues with Qwest. In particular, both MCI and Sprint sought inclusion in their respective interconnection agreements of "most favored nation" (or "pick and choose") clauses affording them the right to (1) pick any clause from any other interconnection agreement either agreed to or arbitrated by any other carrier who interconnected with Qwest, and (2) purchase services from Qwest out of any effective tariffs filed by Qwest with the CPUC,
CPUC's decision regarding MCI's petition
MCI's petition, which was filed first, was addressed by the CPUC in a written order issued on December 2, 1996. The CPUC agreed with MCI regarding the most-favored-nation provision and ordered that the interconnection agreement between MCI and Qwest include a provision allowing MCI (1) "to incorporate and use any interconnection, service, or network element from another agreement, upon acceptance of all of the terms and conditions in the agreement related to such interconnection service or element," and (2) "to purchase services out of an effective tariff, regardless of prices set forth in an existing agreement." MCI App. at 366. The CPUC concluded the first portion of the provision was required by Section 252(i) of the Act (47 U.S.C. § 252(i)) and FCC Rule 809, which implemented Section 252(i). The CPUC concluded the second portion of the provision (i.e., the tariff opt-in portion) was "consistent with the Act and [Qwest's] common carrier obligations." Id. More specifically, the CPUC agreed with MCI that it "would be unable to fairly compete in serving end-users if it [wa]s required to purchase services from [Qwest] at unfavorable rates or on less favorable
After the CPUC issued its decision, the Eighth Circuit vacated FCC Rule 809, the regulation implementing Section 252(i) of the Act. See Iowa Utilities Bd. v. FCC, 120 F.3d 753, 816 (8th Cir.1997), aff'd in part, rev'd in part sub nom. AT & T Corp. v. Iowa Utilities Bd., 525 U.S. 366, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999). Accordingly, pursuant to Qwest's petition for reconsideration, the CPUC modified the most-favored-nation provision by striking all references to MCI's right to incorporate terms from other interconnection agreements. The CPUC subsequently approved the arbitrated interconnection agreement between MCI and Qwest, which included the following most-favored-nation provision:
MCI App. at 451.
CPUC's decision regarding Sprint's petition
Sprint's petition was addressed initially by an arbitrator. The arbitrator agreed with Sprint and ordered, in pertinent part, that the interconnection agreement between Sprint and Qwest "permit Sprint to purchase services out of an effective tariff, regardless of prices set forth in [the] existing agreement." Sprint App. at 100. The arbitrator concluded that this provision was "consistent with the Act and [Qwest's] common carrier obligations, and with other Commission orders." Id. More specifically, the arbitrator "agree[d] with [Sprint] that a CLEC would be unable to fairly compete in serving end users if it [wa]s required to purchase services from [Qwest] at unfavorable rates or on less favorable terms and conditions as compared to other providers." Id. The arbitrator's decision was consistent with the CPUC's decision on MCI's petition, which was issued approximately one week prior to the arbitrator's decision.
Qwest filed exceptions to the arbitrator's decision, triggering review by the CPUC itself. In particular, Qwest challenged the portion of the arbitrator's decision requiring inclusion of the "most favored nation" clause. On January 8, 1997, the CPUC issued an order rejecting Qwest's exception to the "most favored nation" clause. Id. at 111. In doing so, the Commission
Consistent with the CPUC's decision, the interconnection agreement between Sprint and Qwest included the following most-favored-nation provision:
Dist. Ct. Order at 28 (citing Sprint Interconnection Agreement, Section 36.2).
District court proceedings
Qwest, acting pursuant to 47 U.S.C. § 252(e)(6), filed separate actions challenging the CPUC's decisions on MCI's and Sprint's petitions. With respect to the Sprint interconnection agreement, Qwest initially opposed the "most-favored-nation" clause in its entirety. However, following the Supreme Court's decision in Iowa Utilities Bd., Qwest narrowed its challenge to only the portion of the provision affording Sprint the right to purchase services out of Qwest's Colorado tariffs.
The district court ultimately agreed with Qwest and concluded that neither the Act nor the FCC rules promulgated pursuant to the Act "permit[ted] a requesting carrier to opt into tariff provisions." Dist. Ct. Order at 30. The district court further concluded that allowing MCI and Sprint "to use a tariff to supplement or supplant any term, condition, or price that is covered by the agreement ... would eviscerate the provisions of 251 and 252 of the Act which require that the parties negotiate the terms of an interconnection agreement and arbitrate those terms that they are not able to agree to." Id. More specifically, the district court concluded there would be little incentive for carriers such as MCI and Sprint "to negotiate" if they could "simply opt into a more favorable tariff than the state commission imposes." Id. at 31. The court also expressed concern that permitting carriers such as MCI and Sprint to pick and choose from tariffs could "undermine federal court review of interconnection obligations under the ... Act." Id. Lastly, the court noted that if
We review de novo whether the arbitrated interconnection agreements are in compliance with the Act and the implementing FCC regulations. Southwestern Bell Tel. Co. v. Brooks Fiber Comm. of Okla., Inc., 235 F.3d 493, 498 (10th Cir.2000). All other issues, including state law determinations made by the CPUC, are reviewed under an arbitrary and capricious standard. Id.
Sprint's Appeal (Case No. 00-1401)
The primary question we must address is whether the tariff opt-in provision violates § 252(i) and/or the FCC's implementing regulation, 47 C.F.R. § 51.809. Section 252, as its title indicates, generally outlines the "[p]rocedures for negotiation, arbitration, and approval of [interconnection] agreements." Section 252(i), entitled "Availability to other telecommunications carriers," provides:
47 U.S.C. § 252(i). In turn, FCC Rule 51.809 provides:
47 C.F.R. § 51.809 (2000).
The district court concluded that § 252(i) and the implementing regulation "govern only a requesting carrier's ability to opt into interconnection agreements entered into under the Act." Dist. Ct. Order at 29. Proceeding further, the district court interpreted § 252(i) and the implementing regulation as precluding a state commission from allowing a CLEC to opt into the prices and terms set forth in an ILEC's published tariffs. In other words, the district court interpreted Section 252(i) as governing the entire universe of so-called "opt-in" provisions, and concluded that, because "[a] tariff is not `an agreement approved under' Section 252," nor "part of the Section 252 negotiation and arbitration process," it violates § 252(i) if a CLEC is allowed to opt into one or more of an ILEC's tariffs. Id. at 29.
We reject the district court's interpretation of § 252(i). Nothing in the language of § 252(i) suggests that it was intended to govern the entire universe of "opt-in" provisions. See generally Iowa Utilities Bd., 525 U.S. at 394, 119 S.Ct. 721 (holding that the Act's language requiring incumbent carriers to "provide such unbundled network elements in a manner that allows requesting carriers to combine such elements in order to provide such telecommunications service" indicates that network elements may be leased in discrete parts, but "does not say, or even remotely imply, that elements must be provided only in this fashion and never in combined form"); Illinois Bell Tel. Co. v. Worldcom Tech., Inc., 179 F.3d 566, 573 (7th Cir.1999) (noting that simply because "the Act does not require" something does not mean "that it prohibits it") (italics in original). Rather, the language of § 252(i) indicates it was intended only to make clear that, under the Act, ILECs are required to allow CLECs to opt into provisions in other interconnection agreements. In other words, § 252(i) allows a CLEC to effectively amend its own interconnection agreement by taking advantage of more favorable provisions contained in other CLEC interconnection agreements. As Sprint argues, the provision, by allowing CLECs to purchase services at equal prices and on equal terms, enables a CLEC to remain competitive with other CLECs in the local market. The provision does not, however, address the ability of a CLEC to remain competitive with an ILEC (which appears to be the intended purpose of the tariff opt-in provision).
The next question is whether the tariff opt-in provision violates any other portions of §§ 251 or 252. The district court concluded that allowing Sprint "to use a tariff to supplement or supplant any term, condition, or price that is covered by
The district court concluded that the tariff opt-in provision violated §§ 251 and 252 because, in the district court's view, it had the potential to negatively impact the negotiation of interconnection agreements. According to the district court, "there is little incentive for carriers to negotiate if they can simply opt into a more favorable tariff than the state commission imposes." Dist. Ct. Order at 31.
We question the district court's conclusion. At least from the standpoint of a CLEC,
In concluding that the tariff opt-in provision would negatively impact the negotiation of interconnection agreements, the district court relied on MCI Telecommunications Corp. v. GTE Northwest, Inc., 41 F.Supp.2d 1157 (D.Or.1999). That case, however, is not on point. In MCI Telecommunications, the Oregon Public Utility Commission (OPUC) ordered an ILEC to publish a tariff listing elements that the OPUC decided must be unbundled and the prices that the OPUC had fixed for those elements. The effect of the OPUC's order was to allow prospective CLECs to order services from the ILEC "off-the-rack" without entering into an interconnection agreement with the ILEC. The ILEC challenged the OPUC's order and the district court struck it down, concluding it conflicted with the Act and was therefore preempted. Id. at 1176. The basis for the district court's decision was its conclusion that the challenged order "dispensed with the interconnection agreement altogether and [wa]s allowing CLECs to order services `off the rack' without an interconnection agreement." Id. at 1178. That is not the case here, where Sprint and the other CLECs have in place interconnection agreements with Qwest.
Although Qwest repeatedly asserts that the tariff opt-in provision allows Sprint to bypass its interconnection agreement, we disagree. The fact is that the CPUC is imposing an alternative price/term scheme as part of the interconnection agreements. Thus, under the terms of the interconnection agreement, Sprint can purchase serservices
One of the main cases relied on by Qwest in support of its "bypass" argument, Verizon North v. Strand, 140 F.Supp.2d 803 (W.D.Mich.2000), is inapposite. There, the plaintiff, an ILEC, was challenging a state commission order that required it "to file tariffs offering its network elements and services for sale on fixed terms to all potential entrants without the necessity of negotiating an interconnection agreement." Id. at 809. In other words, the tariff the plaintiff was ordered to file would "completely displace[ ] ... interconnection agreement[s]." Id. Here, in contrast, the challenged provision does not eliminate interconnection agreements, but rather is a part of one. A decision by MCI or Sprint to purchase services at the rates and terms set forth in one or more of Qwest's tariffs does not result in abandonment of the interconnection agreement between itself and Qwest. It simply means that the interconnection agreement is amended to include the terms of the particular tariff(s). The parties remain bound by the interconnection agreement at all times, as anticipated by the Act.
In striking the tariff opt-in provision, the district court also expressed concern that the provision could undermine federal court review of interconnection obligations:
Dist. Ct. Order at 31. In our view, the district court's concerns are unfounded. In a case decided after the district court's decision, we held that state commissions have inherent authority to interpret and enforce previously-approved interconnection agreements, and that federal courts have jurisdiction to review state commission decisions interpreting and enforcing previously-approved interconnection agreements. Brooks Fiber, 235 F.3d at 497. Thus, if Sprint chooses to exercise its rights under the tariff opt-in provision to purchase services at the rates and terms set forth in Qwest's Colorado tariffs, Qwest can ask the CPUC to review the effectively amended interconnection agreement to ensure that it complies with the terms of the Act. In turn, any of the parties can then seek federal court review of the CPUC's decision.
The only additional argument Qwest makes on this issue is that "federal court review over state interconnection tariffs is not settled." Qwest Br. (in the Sprint appeal) at 21. Qwest's point is not clear. To the extent a federal court is required to pass on a tariff opt-in provision, it is only determining whether the provision complies with the Act. It is not, as Qwest would have it, passing on the legitimacy of the tariffs themselves. In any event, Qwest readily admits "that parties can agree to incorporate the rates, terms, and conditions of Colorado tariffs in their interconnection agreements." Id. at 6. If that is the case, it is unclear why it was improper for the CPUC in this case to allow Sprint to take advantage of the rates and terms set forth in Qwest's tariffs.
MCI's Appeal (Case No. 00-1402)
The issues raised in MCI's appeal are identical to those raised in Sprint's appeal, with one exception. The most-favored-nation provision in the interconnection agreement between MCI and Qwest, in addition to affording MCI the right to permanently amend its interconnection agreement with terms and conditions contained in Qwest's tariffs, states that MCI may also "purchase services out of an effective ... tariff, regardless of prices set forth in an existing agreement." MCI App. at 362. At first glance, this clause appears problematic since it seems to suggest that MCI can operate outside the terms of its interconnection agreement. Upon closer inspection, however, that is not the case. Instead, the clause allows MCI to temporarily "opt into" Qwest's tariffs, without permanently amending its interconnection agreement to include the tariff rates and terms. In other words, the most-favored-nation provision, considered as a whole, allows MCI to take advantage of Qwest's tariffs in one
One other aspect of MCI's appeal must be briefly addressed. In challenging the district court's conclusion that the tariff opt-in provision would undermine negotiations of interconnection agreements, MCI contends that, "[u]nder the Act, interconnection agreements are not intended to be the sole means for competing carriers to obtain interconnection, access, or services." MCI's Opening Br. at 27. We find it unnecessary to decide this question because, even if interconnection agreements are the sole means for competing carriers to obtain interconnection, access, or services, nothing in the most-favored-nation provision changes that. The fact is that, however MCI utilizes the most-favored-nation provision, it is acting through the interconnection agreement arbitrated and approved by the CPUC. Further, for the reasons outlined above, we conclude the tariff opt-in provision does not undermine the negotiation process.
The judgment of the district court is REVERSED and the case is REMANDED to the district court with directions to enter judgment in favor of defendants Sprint and MCI.
Even assuming, arguendo, that the Supreme Court reverses our decision in Brooks Fiber and holds that federal courts do not have jurisdiction to review State commission orders interpreting and enforcing previously approved interconnection agreements, the concerns expressed by the district court appear to be minimal. Presumably the CPUC, in approving the tariff opt-in provision at issue, concluded that it generally complied with the provisions of §§ 251 and 252, and that, should Sprint exercise its rights under the provision to opt into any of Qwest's tariffs, the prices and terms received by it under those tariffs would likewise comply with the Act.