FCC Can Force AT&T to Help Its Competitors

(CN) - Deferring to guidance from the Federal Communications Commission, the Supreme Court ruled Thursday that leading telecommunication providers must make their wires and cables available to competitors at low rates.

Incumbent providers, in this case AT&T, own the physical equipment known as local exchange networks, which are necessary to receive, properly route and deliver phone calls among customers.

Under the Telecommunications Act of 1996, the incumbent providers must facilitate market entry by competitors, since new carriers would otherwise not compete with the incumbent carriers without basically replicating the incumbent's entire existing network.

The sharing process requires incumbent carriers to lease certain network elements to the new carriers on an "a la carte" or unbundled basis, which makes it easier for a competitor to create its own network without having to build every element from scratch.

Interconnection is another stipulation, ensuring that customers on a competitor's network can call customers on the incumbent's network, and vice versa.

At issue in the underlying case was whether new carriers should be able to access the incumbents' "entrance facilities," which the ruling describes as wires or cables that connect the new and incumbent carriers' networks. Specifically, Michigan Bell Telephone dba AT&T Michigan complained that it should not have to lease its wires and cables to competitors at cost-based rates.

After the Michigan Public Service Commission refused to let AT&T charge higher rates, a federal judge and a divided panel of the 6th Circuit ruled in favor of the telecom giant.

In reviewing the decision, the high court consolidated two cases against AT&T, including one brought by Talk America, and relied on a amicus curiae brief filed by the FCC, which argued that the obligation to lease entrance facilities at cost-based rates fell under the interconnection requirement.

The unanimous court said Thursday it would the FCC's word on the case.

"Entrance facilities, at least when used for the mutual exchange of traffic, seem to us to fall comfortably within the definition of interconnection," Justice Clarence Thomas wrote for the court. "In sum, the Commission's interpretation of its regulations is neither plainly erroneous nor inconsistent with the regulatory text. Contrary to AT&T's assertion, there is no danger that deferring to the Commission would effectively 'permit the agency, under the guise of interpreting a regulation, to create de facto a new regulation.'"

Justice Elena Kagan did not participate in the court's consideration or decision of the case. Justice Antonin Scalia filed a three-page concurring opinion, saying he would not need to defer to the FCC to rule against AT&T because he found that the agency actually presented the fairest reading.

As in his dissent in another case Thursday, Scalia lamented that deference may lead to the unnecessary continuation of vague laws.

"Deferring to an agency's interpretation of a statute does not encourage Congress, out of a desire to expand its power, to enact vague statutes; the vagueness effectively cedes power to the Executive," Scalia wrote. "By contrast, deferring to an agency's interpretation of its own rule encourages the agency to enact vague rules which give it the power, in future adjudications, to do what it pleases. This frustrates the notice and predictability purposes of rulemaking, and promotes arbitrary government."

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit