DC Circuit Grants Petition for Review in Verizon v. FCC

July 16, 2004. The U.S. Court of Appeals (DCCir) issued its opinion [11 pages in PDF] in Verizon v. FCC, granting Verizon's petition for review of the FCC's order denying its request to forebear from requiring it to unbundle and lease certain elements of its network.

On July 29, 2002, Verizon, an incumbent local exchange carrier (ILEC) and Bell Operating Company (BOC), filed a petition for forbearance [9 pages in PDF] with the FCC. (With attachments, the filing is 799 pages.)

47 U.S.C. § 160 provides, in part, that the FCC "shall forbear from applying any regulation or any provision of this chapter to a telecommunications carrier or telecommunications service, or class of telecommunications carriers or telecommunications services, in any or some of its or their geographic markets, if the Commission determines that (1) enforcement of such regulation or provision is not necessary to ensure that the charges, practices, classifications, or regulations by, for, or in connection with that telecommunications carrier or telecommunications service are just and reasonable and are not unjustly or unreasonably discriminatory; (2) enforcement of such regulation or provision is not necessary for the protection of consumers; and (3) forbearance from applying such provision or regulation is consistent with the public interest."

Verizon requested that the FCC "forbear from applying items four through six and item ten of the Section 271 competitive checklist once the corresponding elements no longer need to be unbundled under Section 251(d)(2)."

47 U.S.C. § 271 limits the circumstances in which a BOC, such as Verizon, could provide interLATA (long distance) services. § 271(c) addresses in region interLATA services, and requires that a BOC meet certain interconnection requirements. § 271(c)(2)(B) provides the fourteen point competitive checklist to determine whether a BOC has provided access and interconnection.

The four items on this checklist relevant to this case are as follows:

"(iv) Local loop transmission from the central office to the customer's premises, unbundled from local switching or other services."
"(v) Local transport from the trunk side of a wireline local exchange carrier switch unbundled from switching or other services."
"(vi) Local switching unbundled from transport, local loop transmission, or other services."
"(x) Nondiscriminatory access to databases and associated signaling necessary for call routing and completion."

47 U.S.C. § 251 provides the interconnection requirements of all telecommunications carriers, and § 251(c) provides additional interconnection requirements for ILECs. In particular, § 251(c)(3) states that ILECs have "The duty to provide, to any requesting telecommunications carrier for the provision of a telecommunications service, nondiscriminatory access to network elements on an unbundled basis at any technically feasible point on rates, terms, and conditions that are just, reasonable, and nondiscriminatory in accordance with the terms and conditions of the agreement and the requirements of this section and section 252 of this title. 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 telecommunications service."

§ 251(d)(1) then requires that "Within 6 months after February 8, 1996, the Commission shall complete all actions necessary to establish regulations to implement the requirements of this section." And, § 251(d)(2) provides that "In determining what network elements should be made available for purposes of subsection (c)(3) of this section, the Commission shall consider, at a minimum, 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."

While the Telecommunications Act of 1996 required that this process be completed in 1996, the FCC is still involved in this process. It has three times promulgated unbundling rules; three times the courts have struck down parts of these rules.

Verizon argued in its petition for forbearance that when an element no longer meets the § 251(d)(2) standard for unbundling, forbearance with respect to the parallel § 271 checklist item is required by § 160.

§ 160 also requires that the FCC rule on petitions for forbearance within one year of filing, and that the FCC may extent this for 90 days in certain circumstances. The FCC exercised this extension authority. See, extension order [PDF]. (This is DA 03-2496).

Two relevant things happened after the filing of Verizon's petition and before the FCC's ruling. First, the FCC released its triennial review order [576 pages in PDF] on August 21, 2003. This order addressed the unbundling requirements of ILECs. See, story titled "Summary of FCC Triennial Review Order" in TLJ Daily E-Mail Alert No. 725, August 25, 2003. See also, stories titled "FCC Announces UNE Report and Order", "FCC Order Offers Broadband Regulatory Relief", "FCC Announces Decision on Switching", "Commentary: Republicans Split On FCC UNE Order", and "Congressional Reaction To FCC UNE Order" in TLJ Daily E-Mail Alert No. 609, February 21, 2003.

(On March 2, 2004, the U.S. Court of Appeals (DCCir) issued its opinion [62 pages in PDF] in USTA v. FCC in which it upheld parts of the TRO, and struck down other parts of the TRO. 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. The Appeals Court upheld portions of the TRO that were challenged by competitive local exchange carriers (CLECs) pertaining to broadband facilities. For example, the TRO provides that there is no unbundling requirement for fiber to the home (FTTH) loops.)

Second, Verizon submitted a letter and memorandum [21 pages in PDF] to the FCC on October 24, 2003 in which it stated, "Indeed, although Verizon's petition originally requested forbearance with respect to all elements that do not have to be unbundled under section 251, the broadband issue is sufficiently urgent that we hereby withdraw our request for forbearance with respect to any narrowband elements that do not have to be unbundled under section 251."

Verizon's letter continued, "Specifically, the portion of the forbearance petition that remains pending relates to the broadband elements that the Commission has found" in the Triennial Review Order "do not have to be unbundled under section 251, including fiber-to-the-premises-loops, the packet-switched features, functions and capability of hybrid loops, and packet switching."

The FCC then denied the petition for forbearance on October 27, 2003 in an order [4 pages in PDF] to which it applied a misleading title, "Public Notice", and a misleading subtitle, "Commission Establishes Comment Cycle for New Verizon Petition Requesting Forbearance from Application of Section 271".

The FCC asserted in this order that "We find that Verizon's October 24 Ex Parte Letter abandoned the core legal rationale underlying its Petition and substituted a wholly different argument for forbearance. We therefore deny Verizon's initial Petition because the principal argument for the relief initially requested was rendered moot by the Triennial Review Order and because Verizon substituted a new theory of relief. In light of this substitution, we choose to treat Verizon's October 24 Ex Parte Letter as a new forbearance petition."

Verizon then filed the present petition for review with the Court of Appeals.

Judge Ginsburg, writing for the three judge panel, got straight to the point. The FCC's assertion that Verizon's letter "abandoned the core legal rationale underlying its Petition", wrote Ginsburg, "makes no apparent sense". He reasoned that "broadband elements are merely a subset of the network elements for which Verizon requested forbearance in its July 2002 petition." Hence, the original petition for forbearance addressed broadband elements.

The FCC raised additional arguments in its appeal brief and at oral argument. The Appeals Court rejected these as well.

The Court wrote that "This matter is remanded to the Commission either to grant Verizon’s petition for forbearance or to provide a reasoned explanation for denying it."

This forbearance proceeding at the FCC is a part of the FCC's WC Docket No. 01-338.

This case is Verizon Telephone Companies, Inc. v. FCC and USA, respondents, and AT&T, intervenor, U.S. Court of Appeals for the District of Columbia, App. Ct. No. 03-1396, a petition for review of final order of the FCC.