Appeal from a judgment of the United States District Court for the District of Connecticut (Eginton, J.).
The opinion of the court was delivered by: Barrington D. Parker, Circuit Judge:
Southern New England Telephone Company v. Comcast
Argued: September 12, 2012
37 Before: POOLER, B.D. PARKER AND WESLEY, Circuit Judges.
We affirm the district court's determination that Appellant is obligated to provide 42 Appellees with transit traffic service under the Telecommunications Act of 1996 at regulated 43 rates. We further affirm the district court's reversal of an order requiring Appellant to apply 44 regulated rates to all of its contracts for the provision of transit traffic service.
21 This appeal requires us to determine whether the Telecommunications Act of 1996 22 ("TCA"), Pub. L. No. 104-104, 110 Stat. 56 (codified in part at 47 U.S.C. §§ 251-261), obligates 23 former telecommunications monopolists, known as Incumbent Local Exchange Carriers 24 ("ILECs"), to provide a connection service known as transit traffic service ("transit service") at 25 negotiated rates or at lower regulated rates to new entrants seeking to exchange traffic with each 26 other through the ILEC's facilities. We agree with the United States District Court for the 27 District of Connecticut (Edginton, J.) that the regulated rates apply. 28 The TCA transformed the "longstanding regime of state-sanctioned monopolies" into a 29 competitive market. AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 371 (1999). Prior to its 30 passage, ILECs held state-granted franchises to act as exclusive telephone service providers and, 31 after its passage, they continue to control the physical network infrastructure in most states. See 32 id.; 47 U.S.C. § 251(h)(1). Plaintiff-Appellant Southern New England Telephone Company, d/b/a 33 AT&T Connecticut ("AT&T"), is an ILEC in Connecticut.
1 New entrants, known as Competitive Local Exchange Carriers ("CLECs"), entered the 2 market after deregulation. They now compete with ILECs to provide services, but they lack some 3 of the advantages that the ILECs enjoy due to the ILECs' historical ownership of network 4 infrastructure. Intervenors-Defendants-Appellees Comcast Phone of Connecticut, Inc., 5 Cablevision Lightpath-Connecticut, Inc., and Cox Connecticut Telecom, LLC are CLECs.
6 Commercial mobile radio services ("CMRSs") are new entrants who offer wireless 7 communication and compete with both ILECs and CLECs to provide telephone service. 8 Intervenors-Defendants-Appellees MetroPCS New York, LLC, Sprint Communications, L.P., 9 Sprint Spectrum, L.P., Nextel Communications of the Mid-Atlantic, Inc., and Youghiogheny 10 Communications Northeast, LLC d/b/a Pocket Communications ("Pocket Communications") are 11 CMRSs.
12 To advance Congress' goals of promoting competition and widespread user access to 13 telecommunications services, section 251(a) of Title 47 of the United States Code requires all 14 telecommunications carriers to "interconnect," that is physically link their facilities for the mutual 15 exchange of traffic. 47 U.S.C. § 251(a); 47 C.F.R. § 51.5. In requiring universal 16 interconnection, the TCA aims to ensure that the customers of all carriers will be able to exchange 17 telecommunications traffic with each other. In addition, §§ 251(c)(2) and 252(d)(1) require 18 ILECs, like AT&T, to physically connect all other carriers to their network facilities at regulated 19 or Total Element Long-Run Incremental Cost ("TELRIC") rates.*fn1 47 U.S.C. §§ 251(c)(2), 20 252(d)(1). In requiring ILECs to provide interconnection to the facilities of new entrants, the1 TCA seeks to ensure that ILECs do not exploit their former monopoly status and their continuing 2 control of network infrastructure to the disadvantage of CLECs.
3 Interconnection may be direct, where a carrier attaches his equipment to the physical 4 network infrastructure of another carrier, or indirect, where "the attachment occurs through the 5 facilities or equipment of an additional carrier." In the Matters of Deployment of Wireline Servs. 6 Offering Advanced Telecomms. Capability and Implementation of the Local Competition 7 Provisions of the Telecomms. Act of 1996, 15 F.C.C.R. 17806, 17845 n.198 (2000). Typically, 8 two new entrants use an ILEC's network to interconnect indirectly. In the Matter of Dev'g a 9 Unified Intercarrier Comp. Regime, Further Notice of Proposed Rulemaking, 20 F.C.C.R. 4685, 10 4737 (2005) ("Notice 2005"). When carriers are directly interconnected, they are able to 11 exchange traffic. However, when they are indirectly interconnected, they must rely on and pay 12 the interconnecting carrier to route the traffic between them. 13 The principal question in this appeal is whether AT&T, an interconnecting carrier, is 14 obligated under § 251(c)(2) to provide this routing of traffic, or transit service, at lower TELRIC 15 rates or whether AT&T is permitted to charge higher negotiated rates. Most new entrants 16 interconnect indirectly and transit service is essential to ensuring that indirectly interconnected 17 entrants can exchange traffic. It would be inconsistent with the stated purpose of the TCA to 18 allow AT&T to charge higher negotiated rates for this service because this would impose 19 additional costs and competitive disadvantages upon new entrants. Such an imposition would 20 allow AT&T to further exploit its status as a former monopolist. Thus, we conclude that the 21 provision of transit service falls under AT&T's obligation as an ILEC and that the service must 22 be delivered at regulated rates.