Solicitor General Will Not Seek Supreme Court Review in USTA II

June 9, 2004. The Federal Communications Commission (FCC) stated in a release [PDF] that "The Office of the Solicitor General has informed the Commission that it has decided not to appeal the D.C. Circuit decision vacating the Commission's local telephone unbundling rules."

The Solicitor General (SG) is Ted Olson (at right).

In addition, FCC Commissioner Kevin Martin released a brief statement: "The Solicitor General has decided not to appeal the D.C. Circuit decision eliminating the Commission's rules requiring incumbent telephone carriers to open their voice networks to competition. Because the Solicitor General decided not to support the FCC's appeal, I no longer support appealing the D.C. Circuit's decision."

Finally, the acting administrator of the National Telecommunications and Information Administration (NTIA), Michael Gallagher, issued a statement in which he announced that the SG's decision is "Consistent with the Administration's views".

To the extent that the views of the SG influence the decisions of the Supreme Court Justices regarding whether or not to vote to grant a petition for writ of certiorari, this SG announcement diminishes the likelihood that the Supreme Court will grant certiorari in this case, and hence, increases the likelihood that the opinion of the DC Circuit will stand.

TRO and USTA II. On August 21, 2003, the FCC released its triennial review order [576 pages in PDF], which addresses the unbundling requirements of incumbent local exchange carriers (ILECs) under 47 U.S.C. § 251.

On March 2, 2004, the U.S. Court of Appeals (DCCir) issued its opinion [62 pages in PDF] in USTA v. FCC overturning key provisions of the FCC's triennial review order. This case is also known as USTA II.

The Appeals Court wrote that "We therefore vacate, as an unlawful subdelegation of the Commission's § 251(d)(2) responsibilities, those portions of the Order that delegate to state commissions the authority to determine whether CLECs are impaired without access to network elements, and in particular we vacate the Commission’s scheme for subdelegating mass market switching determinations." See also, story titled "Appeals Court Overturns Key Provisions of FCC Triennial Review Order" in TLJ Daily E-Mail Alert No. 848, March 3, 2004.

Competitive local exchange carriers (CLECs), and other parties to the proceeding, may still obtain a writ of certiorari from the Supreme Court, without the support of the SG or FCC.

FCC Reaction. On March 2, FCC Commissioners Martin, Michael Copps, and Jonathan Adelstein issued a joint statement [PDF] in which they wrote that "We have instructed our General Counsel to seek a stay and to appeal the D.C. Circuit decision to the Supreme Court". One consequence of Martin's shift is that there is no longer a three member majority at the FCC in support of seeking Supreme Court review.

Commissioners Martin, Copps and Adelstein formed the three member majority for the portions of the TRO dealing with local telephone unbundling rules. Michael Powell and Kathleen Abernathy dissented.

Commissioner Michael Copps, who now finds himself in the minority, issued a brief statement. "I regret that the Solicitor General has decided not to appeal to the Supreme Court. The lower court decision drastically limits competition in telecommunications markets. The result of the executive branch sitting this one out is that higher consumer prices and fewer choices are more likely. The people who pay America’s phone bills deserve better."

Bush Administration. The NTIA's Gallagher released a statement after the SG made his decision known. He stated that the SG's decision is "Consistent with the Administration's views".

He wrote that "Over the last 10 weeks, the telecommunications industry has participated in an historic effort to use commercial negotiations to end 8 years of regulatory and legal stalemate. Although the largest telecommunications players have not been able to find common ground, nine agreements have been reached, including the significant accord between Qwest and MCI. The Administration has supported these negotiations as the best way to achieve a higher degree of market-based competition within the telecommunications industry."

Gallagher (at left) continued that "Consistent with the Administration's views, the Solicitor General will not support a Supreme Court review of the DC Circuit’s decision in USTA v FCC. The decision not to support a Supreme Court review is a step toward creating greater regulatory certainty while bringing competition and choice to American consumers. In an era of rapidly changing new technologies like mobile wireless, high-speed fiber optics, and expanded broadband deployment, policy should favor customer choice. Speeding the development of clear national rules will help create regulatory stability in the telecommunications sector that will promote both competition and investment."

He concluded that "In the event that the Supreme Court does not grant a stay or Writ of Certiorari, the Administration will urge the Federal Communications Commission to rapidly develop appropriate interim rules that will protect consumers and continue to ensure competitive access to the local telephone network. During the time that these interim rules are in place, the Administration will encourage the FCC to develop final national ground rules that appropriately continue competition and are sustainable in the courts. The Administration will also continue to support negotiated commercial agreements and will continue to urge all parties to negotiate commercial agreements in good faith."

Gallagher has been nominated by the President to run the NTIA, which has the statutory responsibility of representing the position of the administration on telecommunications issues.

While the Solicitor General is also an appointee of the President, and Presidents generally appoint SGs who share their views on major legal issues, Presidents rarely communicate their positions on specific cases directly to a sitting Solicitor General. Determinations of the SG are usually not characterized as administration positions.

Notably, Gallagher made his public statement after the SG announced his decision. If the SG made his decision after receiving a request or instruction from the NTIA or the Executive Office of the President (EOP), neither the SG, NTIA nor EOP has issued a public statement disclosing this.

CLECs. CLECs are disappointed by the SG's decision.

Russell Frisby, the CEO of CompTel/ASCENT, stated in a release that "CompTel/ASCENT is disappointed that the Solicitor General did not seek Supreme Court review of the D.C. Circuit’s ruling in the Triennial Review Order appeal. We believe the Solicitor General’s decision is wrong, since it is contrary to the law and the public interest. However, based strictly on its merits, we believe that the high court will have no other choice but to consider this appeal."

MCI WorldCom's Stasia Kelly stated in a release that "MCI is disappointed that the Solicitor General declined to ask the U.S. Supreme Court to stay a lower court decision overturning the FCC's Triennial Review local competition rules. If the FCC's rules are allowed to lapse and wholesale rates rise MCI may be forced to raise prices in some markets and pull out of others."

Sprint also issued a release in which it stated that "Sprint is disappointed in the decision by the U.S. Solicitor General against seeking Supreme Court review of the U.S. Court of Appeals decision on Unbundled Network Elements. This is bad news for consumers, who will soon see some phone service prices go up. It is also bad news for the telecommunications industry, which will face continued investment uncertainty and an immediate splash of cold water on the local phone competition that was spurred by the Federal Communications Commission's UNE rules."

ILECs. ILECs are pleased with the SG's decision.

Walter McCormick, P/CEO of the U.S. Telecom Association (USTA), stated in a release that "This is bold leadership from the Administration on American jobs, investment and economic growth. The Administration had a clear choice: Continue down a path of extreme government intervention in a competitive marketplace or embrace the free-market principles that make our economy strong. It chose the forward-looking path.  From the nation’s broadband competitiveness to the choices, services and value available to us all, this decision will have a far-reaching, positive impact on our economy, on consumer choice and on American innovation."

Tom Tauke, EVP of Verizon, also asserted in a release that the SG's decision represents an administration position. He wrote that "We applaud the Bush Administration for making a tough call today, but one that will bring the benefits to consumers of stepped-up investment in advanced telecommunications networks by competing providers. When faced with a choice between reliance on market forces and government mandates, the administration has placed its faith in market forces. Verizon looks forward to working with the administration, the FCC and the industry to launch a new era in telecommunications and reassert our leadership in the world."

Gary Lytle of Qwest stated in a release that "we are pleased that the Solicitor General has decided not to participate in this matter. Qwest, through its historic wholesale services agreement with MCI, has demonstrated that commercially-negotiated relationships are not only possible, but preferable to further litigation and uncertainty. We will continue to negotiate with any and all wholesale customers in an effort to reach similar agreements." He added that "The D.C. Circuit‘s decision in March, and its denial of a stay, are correct and legally sound. Any appeal or request for a stay should be denied by the Supreme Court, just as it was by the Solicitor General of the United States."

Herschel Abbott of BellSouth stated in a release that "This decision by the Solicitor General moves us toward a free-market that will bring true competition as well as hastening delivery of new products and services to the American people."

State Commissions. The DC Circuit's opinion in USTA II overturned provisions of the TRO that delegated authority to state public utilities commissions. Many members of state public utilities commissions supported these provisions of the TRO.

However, some, such as members of the Federation for Economically Rational Utility Policy (FERUP), a coalition of state regulators that favor market oriented approaches, opposed these provisions.

Charles Davidson of Florida commission stated in a FERUP release that "today's decision by the Solicitor General is great news. The Administration has demonstrated a preference for the FCC to get to the business of providing clear guidance to the industry and of developing a set of sustainable rules. The FCC has made very substantial progress in the past few weeks in facilitating meaningful negotiations and good-faith settlement proposals from the RBOCs, AT&T, MCI and others. I am hopeful that the FCC will continue to focus on the ‘fix’.”

Similarly, Greg Sopkin, Chairman of the Colorado commission, stated in the same FERUP release that "I greatly commend the Solicitor General for favoring the path of voluntary commercial agreements over protracted litigation and regulatory diktat ... The removal of legal uncertainty is welcome news for consumers and telecommunications investment.  The recent agreement struck by Quest and MCI shows that the market can work, if only the parties and regulators let it."

Congressional Reaction. Rep. Joe Barton (R-TX), the Chairman of the House Commerce Committee, and Rep. Fred Upton (R-MI), the Chairman of the Subcommittee on Telecommunications and the Internet, issued a joint release in which they stated that "We are delighted that the Solicitor General has decided not to appeal the D.C. Circuit's decision that struck down parts of the FCC's Triennial Review Order, or to ask the Supreme Court to stay the decision pending appeals from other parties. This is the right decision to facilitate new investment in the telecommunications sector that can help continue the economic growth that we have witnessed so far this year."

They added that "We again applaud the parties that have already reached commercial agreements governing competitive carriers' access to incumbent local exchange facilities, and encourage all parties to return to the negotiating table to complete further agreements. And we strongly urge the FCC commissioners to immediately promulgate interim access rules that will apply to carriers that are not able to negotiate commercial agreements."

In contrast, Rep. Ed Markey (D-MA), the ranking Democrat on the Subcommittee on Telecommunications and the Internet wrote in a release that "Siding yet again with large corporate behemoths over the interests of millions of consumers, the Administration today endorsed a faith-based approach to breaking down monopolies and fostering entrepreneurial investment and consumer choice." He added that "The Bush Administration’s decision not to defend the FCC’s telephone competition rules is contrary to precedent and is anti-consumer and anti-investor."

Also, Sen. Ernest Hollings (D-SC), the ranking Democrat on the Senate Commerce Committee, stated in a release that "Unfortunately, today's announcement shows this Administration's willingness to put the wishes of four large campaign contributors ahead of the interests of 57 million consumers. It is bad policy, bad law, and bad news for all Americans who believe in the value of competitive choices. By siding with the Bell monopolies, this Administration has sentenced Americans to higher phone prices, fewer innovative services and has hung the competitive telephone industry out to dry."

He added that "While I hope that the Supreme Court will see through this political ruse, I am confident consumers in Ohio, Florida, Missouri, Illinois, Michigan, California, and other states will remember in November that when Americans called for help, the Bush Administration hung up."