Filed: Aug. 23, 2006
Latest Update: Mar. 02, 2020
Summary: United States Court of Appeals FOR THE EIGHTH CIRCUIT _ No. 05-1725 _ WWC License, L.L.C., * * Plaintiff - Appellee, * * Appeal from the United States v. * District Court for the District of * Nebraska. Anne C. Boyle, Chairman, in their * official capacities as Commissioners of * the Nebraska Public Service * Commission; Frank E. Landis, Jr., * Commissioner, in their official * capacities as Commissioners of the * Nebraska Public Service Commission; * Lowell C. Johnson, Commissioner, in * their
Summary: United States Court of Appeals FOR THE EIGHTH CIRCUIT _ No. 05-1725 _ WWC License, L.L.C., * * Plaintiff - Appellee, * * Appeal from the United States v. * District Court for the District of * Nebraska. Anne C. Boyle, Chairman, in their * official capacities as Commissioners of * the Nebraska Public Service * Commission; Frank E. Landis, Jr., * Commissioner, in their official * capacities as Commissioners of the * Nebraska Public Service Commission; * Lowell C. Johnson, Commissioner, in * their o..
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United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 05-1725
___________
WWC License, L.L.C., *
*
Plaintiff - Appellee, *
* Appeal from the United States
v. * District Court for the District of
* Nebraska.
Anne C. Boyle, Chairman, in their *
official capacities as Commissioners of *
the Nebraska Public Service *
Commission; Frank E. Landis, Jr., *
Commissioner, in their official *
capacities as Commissioners of the *
Nebraska Public Service Commission; *
Lowell C. Johnson, Commissioner, in *
their official capacities as *
Commissioners of the Nebraska Public *
Service Commission; Rod Johnson, Jr., *
Commissioner, in their official *
capacities as Commissioners of the *
Nebraska Public Service Commission; *
Gerald L. Vap, Commissioner, in their *
official capacities as Commissioners of *
the Nebraska Public Service *
Commission; *
*
Defendants, *
*
Great Plains Communications, Inc., *
*
Defendant - Appellant. *
___________
No. 05-1726
___________
WWC License, L.L.C., *
*
Plaintiff - Appellant, *
* Appeal from the United States
v. * District Court for the District of
* Nebraska.
Anne C. Boyle, Chairman, in their *
official capacities as Commissioners of *
the Nebraska Public Service *
Commission; Frank E. Landis, Jr., *
Commissioner, in their official *
capacities as Commissioners of the *
Nebraska Public Service Commission; *
Lowell C. Johnson, Commissioner, in *
their official capacities as *
Commissioners of the Nebraska Public *
Service Commission; Rod Johnson, Jr., *
Commissioner, in their official *
capacities as Commissioners of the *
Nebraska Public Service Commission; *
Gerald L. Vap, Commissioner, in their *
official capacities as Commissioners of
*
the Nebraska Public Service *
Commission; *
*
Defendants - Appellees. *
___________
Submitted: December 12, 2005
Filed: August 23, 2006
___________
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Before MELLOY, COLLOTON and BENTON, Circuit Judges.
___________
MELLOY, Circuit Judge.
Both sides appeal a district court1 judgment affirming in part and reversing in
part two rulings from the Nebraska Public Service Commission (“Commission”)
under 47 U.S.C. § 252(e)(6), a section of the Telecommunications Act of 1996
(“Act”). In the first ruling, the Commission ordered amendments to an
interconnection agreement between Great Plains Communications, Inc. (“Great
Plains”), an incumbent local exchange carrier, and WWC License, L.L.C. (“Western
Wireless” or “Western”), a competitive wireless carrier. In the second ruling, the
Commission approved the amended agreement. The rulings dealt with various issues
including: the duty to interconnect the two parties’ telephone networks under 47
U.S.C. § 251(a); the scope of the incumbent’s statutory duty to provide dialing parity
under § 251(b)(3); the reciprocal compensation rate to be paid between the two parties
under § 251(b)(5); and the payment of interim compensation under 47 C.F.R. § 51.715
for a period of time predating the effective date of the interconnection agreement. We
affirm the judgment of the district court.
I. General Background
Historically, incumbent local exchange carriers served as the exclusive
providers of local telephone service and operated as state-sanctioned monopolies.
With the Act, Congress moved to abolish the system of monopolies in favor of a
competitive system with multiple potential carriers. Under the Act, competitive
carriers—land-based or wireless—may compete with incumbent carriers for the
provision of local service. To facilitate the market entry of competitors and ensure the
1
The Honorable Lyle E. Strom, United States District Judge for the District of
Nebraska.
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integration of competitors’ networks with incumbents’ networks, the Act imposes
certain specific duties and costs upon incumbent carriers. See 47 U.S.C. § 251(c)(1)-
(6) (enumerating incumbent-specific duties). The Act imposes other duties on
incumbent and competitive carriers alike, such as the duty to interconnect directly or
indirectly and to provide number portability, dialing parity, access to rights-of-way,
and reciprocal compensation for the transport and termination of telecommunications.
47 U.S.C. § 251(a) and (b).2
The specific statutory duties in dispute in this case are subsection (a) and (b)
duties. One of these duties is the duty of both carriers to directly or indirectly
interconnect their networks under § 251(a)(1). As the labels suggest, direct
connections between carriers involve actual physical points of interconnection
between networks; indirect connections involve connections via third parties’
networks.
Another duty at issue is the duty of carriers to provide local dialing parity.
Local dialing parity includes the recognition of local numbers for competitors’
customers and the treatment of certain calls between carriers’ customers as local calls,
with seven-digit dialing. The obligation to provide dialing parity is found in §
251(b)(3) and 47 C.F.R. § 51.207. This obligation reflects a congressional
determination that local dialing is important to provide a level playing field, promote
competition, and eliminate artificial barriers that might prevent customers from
switching carriers. See Implementation of the Local Competition Provisions of the
2
The Act provides exemptions for certain incumbent rural carriers who may
avoid or limit their obligations under § 251(b) or (c) if the obligations would be
“unduly economically burdensome” or not “technically feasible.” 47 U.S.C. §
251(f)(1) and (2). Regarding exemptions from subsection (b) duties, the incumbent
must petition its state commission for suspension or modification of the duties. Id. at
§ 251(f)(2). Great Plains does not argue that it petitioned for relief from its subsection
(b) duties under the exemption provisions of § 251(f)(2). Rather Great Plains presents
arguments directed towards the interpretation of § 251(b) itself.
-4-
Telecommunications Act of 1996, 11 F.C.C.R. 19392, 19398-400 at ¶¶ 1, 3-4, 1996
WL 819798 (August 8, 1998) (“Second Report and Order”) (discussing the Act and
its history, including S. Conf. Rep. No. 104-230).
The final duty at issue is the duty of the parties to pay one another reciprocal
compensation. Reciprocal compensation is payment from the carrier who originates
a call to the carrier who terminates or receives a call. Reciprocal compensation is
intended to permit the carrier for the customer who receives a call to recoup from the
caller’s carrier those expenses incurred for terminating the call or sending it to its final
destination. See Ace Tel. Ass’n v. Koppendrayer, 432 F.3d 876, 878 (8th Cir. 2005);
47 U.S.C. § 252(d)(2)(A)(i) (stating that reciprocal compensation must “provide for
the mutual and reciprocal recovery by each carrier of costs associated with the
transport and termination on each carrier’s network facilities of calls that originate on
the network facilities of the other carrier”). The parties dispute the per-minute rate to
be used for reciprocal compensation as well as the obligation to pay one another for
telecommunications traffic that predated the Nebraska Commission’s approval of the
interconnection agreement.
II. Factual Background
Great Plains, the incumbent local exchange carrier, operates in specific areas
of Nebraska known as local exchange service areas. Western Wireless, the
competitive wireless carrier, operates under the trade name CellularOne throughout
a substantial part of Nebraska known as a major trading area. The Western Wireless
major trading area is larger than and overlaps or encompasses multiple Great Plains
local exchange service areas.3
3
See Iowa Network Servs., Inc. v. Qwest Corp., 363 F.3d 683, 687 (8th Cir.
2004) (“Traditional notions of ‘local exchange areas’ do not fit neatly into this new
world of wireless communications. For wireless communications, the country is
divided into Major Trading Areas (MTAs) rather than local exchange areas. Thus, the
-5-
Great Plains, as an incumbent local exchange carrier, has substantial network
infrastructure in each of its local exchange areas. This infrastructure includes wire
loops that connect land-line phones as well as switching equipment for the physical
routing of calls. The switches Great Plains currently uses are called end office
switches. From these end office switches, Great Plains delivers and receives calls to
and from locations outside its own networks over trunk lines. The trunk lines are
connected to different switches called tandem switches. The tandem switches are
owned by larger, interexchange carriers such as Qwest (formerly U.S. West
Communications) and Alltel. Often, the tandem switches owned by the larger carriers
are located at points that are physically outside the Great Plains local exchange
networks.
Historically, when Great Plains routed calls outside its local exchange networks
and passed the calls off to the interexchange carriers at the tandem switches, Great
Plains treated the calls as toll calls for dialing and billing purposes, with the Great
Plains customers using ten-digit dialing to place the calls. Great Plains treated calls
within its individual local exchange networks, between numbers assigned to the same
rate center, as local calls with seven-digit dialing.
Western Wireless began sending calls from its wireless customers to the land-
line customers of Great Plains via interexchange carriers prior to March 1998. This
practice was possible because Western Wireless entered into contracts with
interexchange carriers and established physical points of interconnection with the
interexchange carriers. Through these contracts and physical points of
interconnection, Western Wireless was indirectly connected to the Great Plains
networks.
local calling area for a cell phone user is determined by the cell phone user’s MTA.”).
-6-
The amount of traffic between Western Wireless and Great Plains increased
quickly and substantially, and the two companies began informal negotiations on their
own interconnection agreement in July 2001. Informal negotiations continued
through August 26, 2002, when Western Wireless submitted a formal, bona fide
request for the commencement of negotiations under Section 252 of the Act. See 47
U.S.C. § 251(c)(1) (imposing on requesting competitive carriers and incumbent
carriers alike the duty to negotiate in good faith to establish terms and conditions for
interconnection agreements); Id. at § 252 (setting forth the procedure for the
negotiation, arbitration, and approval of interconnection agreements). Formal
negotiations resulted in partial resolution, but the companies deadlocked on eight
separate issues. The Nebraska Commission, which is required to approve
interconnection agreements, referred the disputed issues to a neutral arbitrator for
resolution. See 47 U.S.C. § 252(e)(1) (assigning the duty to approve interconnection
agreements to state commissions).
Both parties submitted proposed contract language, testimony, and evidence in
hearings before the arbitrator. On July 1, 2003, the arbitrator issued an opinion
resolving most of the outstanding issues in Western’s favor. Subsequently, on
September 23, 2003, the Nebraska Commission reversed or modified the arbitrator’s
decision as to every issue presently on appeal. Western appealed the decision to the
district court under 47 U.S.C. § 252(e)(6). On January 20, 2005, the district court
reversed in part and affirmed in part.
III. Discussion
We do not discuss every issue decided by the arbitrator, Nebraska Commission,
and district court because not all issues are presented for appeal. We discuss only
those issues that remain in dispute and such other issues necessary to paint a complete
picture of the case. The issues that remain are identified by the parties as: (A) tandem
-7-
routing and local dialing parity; (B) reciprocal compensation rate; and (C) retroactive
compensation.
A. Tandem Routing and Local Dialing Parity
The issue of tandem routing4 and local dialing parity concerns the effects of
Western Wireless’s election not to connect directly with the Great Plains networks in
each of the Great Plains local exchange areas. As noted above, Western Wireless
elected to indirectly connect with Great Plains through third parties’ tandem switches
rather than placing actual points of interconnection in the Great Plains local
exchanges. Because Great Plains historically treated calls from its own local
exchange networks that had to be sent to interexchange carriers’ tandem switches as
long distance or toll calls, Great Plains’s hardware and software is not currently
configured to send local calls to the tandem switches. As a result, Great Plains argues
that if calls from its customers to Western’s customers have to pass outside the
originating local exchange network and pass through a tandem switch for delivery
(i.e., if the calls have to be tandem routed), they need to be treated as toll calls. Great
Plains advocates this position regardless of the fact that the Western customers
receiving the calls might live next door to the Great Plains customers placing the calls
and regardless of the fact that customers’ numbers might be assigned to the same rate
center.
4
The parties use the term “tandem routing” to refer to the routing of calls
through interexchange carriers’ tandem switches rather than through direct points of
connection inside the Great Plains networks. Since Western Wireless’s customers
might live within an area inside the geographic boundaries of Great Plains network,
the customers could have numbers that are rated to that location. With tandem
routing, however, a call from the Great Plains network to the Western customer would
have to travel to a routing point at the interexchange carrier’s tandem switch, a
location potentially far away from the edge of the Great Plains network and the rating
location. The parties refer to this divergence as the issue of separate rating and
routing points for numbers or separately rated and routed calls.
-8-
Great Plains’s argument, in essence, is that the duty to provide local dialing
parity under 47 U.S.C. § 251(b)(3) is dependent on the existence of a direct point of
interconnection such that the duty to provide local dialing parity stops at the physical
edges of the local exchange networks. As a practical matter, Great Plains argues this
position because providing local dialing parity through tandem routing would impose
various costs on Great Plains including transport costs and costs related to equipment
and/or software changes. To buttress its argument, Great Plains asserts that local
dialing parity with tandem routing is incompatible with (1) the telecommunications
networks in Nebraska, (2) Great Plains’s current switches (hardware), (3) Great
Plains’s current routing and billing software, and (4) Great Plains’s equal access and
toll dialing parity obligations under federal and Nebraska law.5
The contract language proposed by Great Plains and adopted by the Nebraska
Commission regarding this issue was as follows:
In those Great Plains exchanges where Western Wireless has not
requested a direct connection to Great Plains . . . , Great Plains shall
continue to route calls originating from its exchanges to Interexchange
Carriers in compliance with its equal access and toll dialing parity
requirements.
(Emphasis added).
Western Wireless counters that, consistent with the Act, Great Plains has a duty
to provide local dialing parity for all calls placed by Great Plains customers to
Western customers if the Western customers’ numbers are from the same rate center
as the Great Plains customers’ numbers. Western demands local dialing parity even
5
Equal access and toll dialing parity are terms related to the duty of local
carriers to permit customers to select their own choice between long distance carriers
and the duty of local carriers to treat the selected long distance carriers in a
nondiscriminatory fashion.
-9-
though, in most cases, Great Plains would have to incur transport costs or make new
technical arrangements to physically route the locally dialed call outside the Great
Plains network to an interexchange carrier’s tandem switch before it could be passed
to Western’s network for delivery to the Western customer.
Western argues that such parity is necessary to truly enable competition because
if Great Plains customers are not able to call Western customers on a local, seven-digit
basis, the inconvenience could deter customers from switching to Western. Western
characterizes the Great Plains position as an attempt to create a barrier to competition
inconsistent with the goals of the Act. Western argues that the obligation to provide
local dialing parity is a general duty that is not conditioned on the existence of a direct
connection. Western argues further that the duty to provide local dialing parity is
compatible with tandem routing and cannot be excused based on technical difficulties
or expense to the incumbent.
The contract language proposed by Western regarding this issue was as follows:
If Western Wireless obtains numbers, and [rates] those numbers to a
Great Plains rate center where Western Wireless is licensed to provide
service, calls from that rate center to the Western Wireless number block
must be dialed as local calls and delivered to Western Wireless at a point
of direct interconnection (if applicable) or at the third-party tandem.
(Emphasis added).
The arbitrator ruled in favor of Western and adopted Western’s contract
language, finding that Great Plains had to provide the tandem routing and local dialing
parity demanded by Western. In so finding, the arbitrator relied on cases from other
circuits that had held indirect connections sufficient to trigger reciprocal compensation
duties and that held incumbent carriers could not charge competitors fees for the cost
of delivering local traffic to distant points of indirect interconnection. See Atlas Tel.
-10-
Co. v. Okla. Corp. Comm’n, 400 F.3d 1256, 1262-68 (10th Cir. 2005) (holding that
all calls between wireless and wireline carriers that originate and terminate within the
same major trading area are subject to reciprocal compensation even if the wireline
carrier is required to deliver calls to a distant point of interconnection); MCIMetro
Access Transmission Servs., Inc. v. Bellsouth Telecom., Inc.,
352 F.3d 872, 881 (4th
Cir. 2003) (holding that a wireline carrier could not charge transport fees for
delivering a wireless carrier’s intra-major-trading-area calls to a point of
interconnection outside the originating local exchange network). The arbitrator also
relied on the fact that the FCC had designated major trading areas as the local areas
for wireless providers for the separate and distinct purpose of defining the class of
calls subject to reciprocal compensation under 47 U.S.C. § 251(b)(5). See
Implementation of the Local Competition Provisions in the Telecommunications Act
of 1996, 11 F.C.C.R. 15,499, at ¶ 1036,
1996 WL 452885 (August 8, 1996) (“First
Report and Order”) (“Accordingly, traffic to or from a [wireless provider’s] network
that originates and terminates within the same MTA is subject to transport and
termination rates under section 251(b)(5), rather than interstate and intrastate access
charges.”)6 The arbitrator found that when the FCC characterized the major trading
area as the local area, the FCC “meant for [wireless providers] to enjoy all the benefits
of that designation of a [major trading area], including local dialing parity.”
6
Earlier in his ruling, the arbitrator found that the local area for the purpose of
reciprocal compensation under 47 U.S.C. § 252(b)(5) should be the entire Western
Wireless major trading area. In so ruling, the arbitrator relied on the First Report and
Order. The Nebraska Commission subsequently rejected the arbitrator’s ruling on this
separate issue. The district court, in turn, agreed with the arbitrator and reversed the
Nebraska Commission. Neither party appeals the district court’s ruling on this issue.
Accordingly, it is now undisputed that the local area for purposes of reciprocal
compensation under § 252(b)(5) for calls in both directions between Great Plains and
Western is the entire Western Wireless major trading area. For a detailed analysis of
the issue of local calling areas for the purpose of reciprocal compensation, see Atlas,
400 F.3d at 1262-68. The remaining dispute, as described above deals with the
provision of local dialing parity under § 251(b)(3), not reciprocal compensation.
-11-
The arbitrator did not find potentially costly technical impediments for Great
Plains to be material in identifying the scope of Great Plains’s statutory duty to
provide local dialing parity. Further, the arbitrator expressly rejected the claim by
Great Plains that the provision of local dialing parity through tandem routing was not
technically feasible. In doing so, the arbitrator noted that one of Great Plains’s
witnesses testified that the current Great Plains switches could be programmed to
insert digits into dialed numbers so that a number dialed with only seven digits would
look like a “1+” or ten-digit number when leaving the Great Plains end office switch.
Further, the arbitrator was swayed by the fact that Western had asked, in an
interrogatory to Great Plains, whether there existed any technical impediments to the
provision of tandem routed local traffic. Great Plains responded to the interrogatory
by objecting and characterizing the question as a legal or policy issue rather than a
technical issue.7 Accordingly, the arbitrator found Great Plains’ assertion of purported
technical impediments to be disingenuous.
The Commission rejected the arbitrator’s conclusion as to the issue of local
dialing parity and tandem routing, adopted Great Plains’s argument, and held that
Western Wireless had to directly connect with each Great Plains network where it
wanted to receive the benefits of local dialing parity. In doing so, it cited technical
7
Western’s Interrogatory No. 11 stated:
Western has proposed obtaining numbers with a routing point at a Qwest
or Alltel tandem but a rating point at a Great Plains end office served by
that tandem. Identify any technical reason why Great Plains could not
deliver traffic to Western Wireless on a local basis pursuant to Western
Wireless’[s] proposal.
Great Plains, in its response, stated:
Great Plains objects to this Interrogatory on the grounds that it inherently
involves legal and public policy issues that are not proper matters for
discovery and is not a “technical” matter.
-12-
features of the trunk line system in Nebraska and the end office switches used by
Great Plains. It stated the current configuration of switches and software used by
Great Plains and the nature of the trunk system in Nebraska would not permit Great
Plains to distinguish between toll calls and local calls sent to the interexchange
carriers’ tandem switches. The Commission further stated that Great Plains would
have to violate its toll dialing parity obligations in order to provide local dialing parity
through tandem routing outside the local exchange network. It did not address the
testimony from the Great Plains witness regarding technical feasibility nor did the
Commission address the failure by Great Plains to respond to the interrogatory that
asked Great Plains to identify any technical impediments.
The district court reversed, found the arbitrator’s ruling to be consistent with
the Act and held, essentially, that the Commission had created an exception to the
incumbent’s duty to provide local dialing parity where no such exception exists in the
Act.
Great Plains appeals the district court’s ruling on the issues of tandem routing
and local dialing parity.
We understand the issue of local dialing parity and tandem routing to be an
issue of cost apportionment. If Western Wireless is required to establish and maintain
points of direct interconnection within each individual Great Plains local exchange
area, Western Wireless will face a substantial price for market entry. On the other
hand, if Great Plains is required to extend local dialing parity to those Western
Wireless customers who possess locally rated numbers, Great Plains will be required
to bear the expense of transporting calls outside its local exchange networks. This will
force Great Plains to change its software and/or switches to enable it to send seven-
digit local calls to the interexchange carriers (or make some other arrangements for
the delivery of local calls to a tandem switch for termination on Western’s network).
-13-
Our analysis of this issue turns largely on the applicable standard of review.
We apply the same standard of review to the Commission’s decision as did the district
court. We review the Commission’s factual determinations and mixed questions of
law and fact under a deferential standard, affirming unless the Commission’s decision
is arbitrary and capricious. Qwest Corp. v. Koppendrayer, 436 F.3d 859, 863 (8th Cir.
2006). We owe no deference to the Commission’s interpretations of federal law,
however, and our review of the agreement for compliance with the Act is de novo.
Id.; see also
Atlas, 400 F.3d at 1262 (applying de novo review to a state commission’s
interpretation of the Act);
MCIMetro, 352 F.3d at 876 (same); Mich. Bell Tel. Co. v.
MFS Intelenet of Mich., Inc.,
339 F.3d 428, 433 (6th Cir. 2003) (setting forth a dual
standard of review: review of interconnection agreements for compliance with the Act
is de novo while review of further issues regarding state commission analysis of
interconnection agreements is under a deferential standard). Finally, in our
interpretation of the Act, we owe deference to the Federal Communications
Commission (“FCC”) based on the fact that Congress expressly charged the FCC with
the duty to promulgate regulations to interpret and carry out the Act. See AT&T
Corp. v. Iowa Utils. Bd.,
525 U.S. 366, 378 (1999) (holding that Congress expressly
authorized the FCC to promulgate regulations under the Act, even regarding issues
that had traditionally been under the exclusive jurisdiction of state utility
commissions).
In each section below, we discuss the applicable standard of review that applies
to each separate issue. We find that the applicable standards for our review of the
Commission’s determinations are de novo as to the tandem routing/local dialing parity
issue and arbitrary and capricious as to the rate-related issues.
Great Plains characterizes the issue of tandem routing and local dialing parity
as a mixed issue of law and fact such that resolution of this issue turns on factual
distinctions novel to the networks and equipment in play in this case. As a result,
Great Plains argues that we must reverse the district court and affirm the Nebraska
-14-
Commission unless the Commission’s ruling is arbitrary and capricious. Western
argues that this issue presents a pure question of federal law because it only requires
us to interpret 47 U.S.C. § 251(a) (regarding the duty to interconnect directly or
indirectly) and § 251(b)(3) (regarding the duty to provide local dialing parity).
We agree with Western Wireless. The technical impediments and factual issues
specific to Nebraska in general or Great Plains in particular could only be material if,
as a matter of law, expense, inconvenience, or technical difficulty are recognized
exceptions to the duties under 47 U.S.C. § 251(a) and (b). As already noted, the
exemption provision of §251(f) is not at issue in this case, and Great Plains seeks
interpretation of § 251(a) and (b) rather than a determination regarding the
applicability of any exemption provisions in the Act. Because resolution of the
tandem routing/local dialing parity issue requires only interpretation of the Act, and
because nothing in the Act makes the Commission’s findings concerning the nature
of the Great Plains network material to our analysis, our review is de novo.8
Turning to the merits, Great Plains emphasizes that § 251(b)(3) and the relevant
regulation, 47 C.F.R. § 51.207, do not expressly state that a local exchange carrier
must deliver locally dialed calls to a point outside the local exchange carrier’s
network. Great Plains infers from this silence that the duty to provide local dialing
parity does not extend beyond the physical bounds of the local exchange network and
is therefore dependent upon the existence of a competitor’s direct point of
interconnection within the local exchange. We believe that this inference is
unwarranted. The relevant statutory and regulatory sections are not written in such
narrow terms. Rather, the Act and the regulation state a broad duty without listing
8
We note also that Great Plains has switched positions in the course of these
proceedings, first refusing to respond to discovery by calling the compatibility of local
dialing parity and tandem routing a legal or policy issue and now demanding that we
treat the issue as one that rests entirely on factual issues concerning Great Plains’
equipment and networks in Nebraska.
-15-
exceptions and without expressly defining a geographic limitation. The statute
provides:
Each local exchange carrier has the following duties:
...
(3) Dialing Parity
The duty to provide dialing parity to competing providers of
telephone exchange service and telephone toll service, and the duty to
permit all such providers to have nondiscriminatory access to telephone
numbers, operator services, directory assistance, and directory listing,
with no unreasonable dialing delays.
47 U.S.C. § 251(b). The regulation states:
A LEC shall permit telephone exchange service customers within a local
calling area to dial the same number of digits to make a local telephone
call notwithstanding the identity of the customer’s or the called party’s
telecommunications service provider.
47 C.F.R. § 51.207. While the regulation speaks in terms of “customers within a local
calling area” it does not specifically deal with issues of routing or interconnection, it
does not define the term local calling area, and it does not suggest on its face that the
phrase “local telephone call” has a meaning in this context different from the meaning
assigned in other contexts. Accordingly, we do not find it appropriate to adopt the
inference urged by Great Plains.
We do, however, find several factors that aid in our interpretation of the local
dialing parity provisions. First, all else being equal, if a provision of the Act is vague
we are inclined to interpret the provision in a manner that promotes competition. It
is undisputed that Congress passed the Act with the intention of eliminating
monopolies and fostering competition. We do not suggest that this general intent
should be used to impose duties on incumbents beyond those created by Congress.
-16-
We do, however, believe that this general intent should guide our consideration of
competing interpretations of the Act. Such guidance suggests that we should be wary
of interpretations that simultaneously expand costs for competitors (such as a
requirement for direct connections) and limit burdens on incumbents (such as a
limitation of dialing parity to local exchange boundaries). If a cost is imposed on a
competitor, it becomes a barrier to entry and rewards the company who previously
benefitted from monopoly protection. Because Congress passed the Act with a clear
intent to foster competition, we are more inclined to interpret a vague provision in a
manner that reduces barriers to entry.
Second, the FCC has spoken unequivocally and stated that a wireless provider’s
major trading area is the local area for the purpose of reciprocal compensation. Great
Plains does not dispute this issue on appeal, and numerous other circuits have held
that an incumbent carrier is required to respect a competitor’s election to establish a
point of interconnection at a location distant from the local exchange network. See
Atlas, 400 F.3d at 1268; Mountain Comm’ns, Inc. v. FCC,
355 F.3d 644, 649 (D.C.
Cir. 2004);
MCIMetro, 352 F.3d at 881. In each of these cases, the duty of reciprocal
compensation rather than local dialing parity was at issue. This does not mean,
however, that the holdings are immaterial to our analysis. Reciprocal compensation,
like local dialing parity, is a § 251(b) duty, and Great Plains offers no authority to
support the position that we must apply a different meaning in the context of local
dialing parity.
That having been said, neither Congress nor the FCC has expressly defined the
relevant area for a local exchange carrier’s provision of local dialing parity to a
wireless competitor. Further, the FCC and the industry are well aware of this
outstanding question, as demonstrated by the subject matter of a pending petition for
declaratory ruling before the FCC. See Sprint Corp. Petition for Declaratory Ruling
Regarding the Routing and Rating of Traffic by ILECs, CC Docket No. 01-92 (May
9, 2002) (“Sprint Petition”) (asking the FCC to define the scope of the duty to provide
-17-
local dialing parity when there exists no direct point of interconnection within the
local exchange network); Comments Sought on Sprint Petition for Declaratory Ruling
Regarding the Routing and Rating of Traffic by ILECs, 17 F.C.C.R. 13859, 2002 WL
1586410 (July 18, 2002) (establishing the pleading cycle and soliciting public
comment on the Sprint Petition). In fact, on March 3, 2005, the FCC solicited further
comments on the Sprint Petition, but the FCC has not yet issued a ruling. See
Developing a Unified Intercarrier Compensation Regime, CC Docket No. 01-92,
Further Notice of Proposed Rulemaking, FCC-05-33 (2005) (recognizing the
continuing pendency of the Sprint Petition and calling for further comments).
Great Plains suggests the FCC necessarily will limit local exchange carriers’
dialing parity obligations and not carry over the local area definition applicable to
reciprocal compensation. Great Plains infers that, if the FCC intended to interpret the
local dialing parity duty as extending beyond local exchange network boundaries, it
would have done so immediately rather than delaying and soliciting further comments.
Great Plains suggests that we act in reliance on this prediction of the outcome in the
pending Sprint Petition.9 While it is possible that the FCC might rule in a manner
consistent with Great Plains’s current position, and while it is true that we would owe
deference to the FCC if it were to issue a ruling or regulation interpreting the Act in
this regard, we owe no deference to the FCC’s silence. If and when the FCC rules, we
may be required to revisit this issue. At such time, we would be armed with better
arguments and a better understanding of the issue based on the FCC’s expertise. Until
then, however, we must interpret the Act without the benefit of agency guidance on
this specific point. Without textual support, agency guidance, or other authority to
9
More precisely, because Great Plains argues that we should apply the arbitrary
and capricious standard to analyze the issue of tandem routing and local dialing parity,
Great Plains argues that if the FCC considers this issue debatable, the Commission’s
position cannot be considered arbitrary and capricious. Because we apply de novo
review, this argument carries no weight.
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treat reciprocal compensation differently than dialing parity, we will not impose on
Western the duty to connect directly.
Third, the statutory provision that imposes the duty to interconnect networks
expressly permits direct or indirect connections. 47 U.S.C. § 251(a)(1). Nothing in
the Act suggests that Congress intended a carrier’s duties to be altered based on the
carrier’s election to connect indirectly rather than directly. We believe that if
Congress intended there to be consequences attendant to choosing an indirect rather
than a direct connection, Congress could have made that fact clear. Accordingly, any
distinction we might draw based on the existence of a direct connection would be
textually unsupported.
We note also that the structure of the Act suggests that we should reject a direct
connection requirement as a condition on local dialing parity. In Atlas, 400 F.3d at
1265-66, incumbents who wanted to force direct connections argued that the general
duty to interconnect directly or indirectly was superceded by a specific provision, §
251(c)(2)(B), that imposes upon an incumbent carrier a duty to permit a requesting
carrier to interconnect directly with the incumbent’s local exchange network “at any
technically feasible point within the carrier’s network.” 47 U.S.C. §251(c)(2)(B). The
Tenth Circuit examined the structure of the Act to reject this argument. It noted that
the subsection (c) duty applied only to incumbent carriers and only if a competitor
requested a direct connection.
Id. Since the section (c) duty did not apply to
competitors, the Tenth Circuit was unwilling to impose on competitors a duty to
connect directly rather than indirectly. Further, that court noted that Congress created
specific exceptions for the subsection (c) duties as set forth in 47 U.S.C. § 251(f), such
that it would be “inconceivable” that the drafters would have imposed a direct
connection requirement on competitors while at the same providing an exemption to
the accommodation duty of the incumbents because such a duty would function “as
a significant barrier to the advent of competition.”
Atlas, 400 F.3d at 1266.
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Finally, to the extent that Great Plains argues that technical issues control in this
case, we reject that argument. The statutory duties under examination are not limited
with reference to technical feasibility or expense. Further, Great Plains did not invoke
the protections of subsection (f) when dealing with the Commission. Finally, even if
technical matters carried weight in our analysis, Great Plains’s own expert and Great
Plains’s responses to discovery demonstrate that technical infeasibility should not
excuse performance in this case.
Because we do not believe the Act permits the Commission to impose a direct
connection requirement as a condition on the receipt of local dialing parity, we affirm
the district court and reverse the Commission as to the issue of tandem routing and
local dialing parity.
B. Reciprocal Compensation Rate
The district court determined that all calls between Western Wireless and Great
Plains that originate and terminate in the Western Wireless major trading area are
subject to reciprocal compensation. Neither party appeals the district court’s finding
in this regard. See supra note 6. What the parties dispute is the actual reciprocal
compensation rate.
The parties agree that the rate must be based on a forward-looking, long-term
network model that attempts to determine the incremental cost per minute of use on
a modern network. This model includes costs calculated using the Total Element
Long Run Incremental Costs (“TELRIC”) method. The FCC defines TELRIC as:
The total element long-run incremental cost of an element is the forward-
looking cost over the long run of the total quantity of the facilities and
functions that are directly attributable to, or reasonably identifiable as
incremental to, such element, calculated taking as a given the incumbent
LEC’s provision of other elements.
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47 C.F.R. § 51.505(b). In addition, the rate may include “[a] reasonable allocation of
forward-looking common costs.” Id. at § 51.505(a)(2). The parties disagree as to
whether the evidence in the current record is adequate to support certain of the cost
elements claimed by Great Plains. In addition to this evidentiary skirmish, there are
outstanding disputes regarding the propriety of including certain specific switching
and transport costs. Because of the fact intensive nature of this inquiry into pricing,
we owe deference to the Nebraska Commission’s rate determination and must affirm
unless it acted arbitrarily and capriciously when it set the rate. See Qwest Corp. v.
Koppendrayer,
436 F.3d 859, 863 (8th Cir. 2006) (applying the arbitrary and
capricious standard of review to determinations by a state commission concerning
rate-setting issues).
In front of the arbitrator, Great Plains submitted the results of a cost study based
on a forward-looking model. Western elected not to conduct its own study, but rather,
offered a critique of the Great Plains study. Both parties had submitted initial rate
proposals, and both parties compromised to a limited extent before submitting final
offers to the arbitrator. The arbitration was issue-by-issue arbitration as mandated by
the Nebraska Commission, and the arbitrator was forced to choose one of the two
parties’ proposed rates without amendment. Great Plains had proposed a final rate of
$0.0232 per minute of use. Western had proposed a final rate of $0.00609 per minute
of use. The arbitrator determined that the most appropriate rate would be in the range
of $0.01-0.014 per minute of use and, reluctantly, selected the Western rate.
Unlike the arbitrator, the Commission was not bound to accept one party’s
proposal without amendment. It considered both parties’ final proposals as well as the
arbitrator’s analysis. It then took the arbitrator’s mid-range number as a starting point
and adjusted upward to a final rate of $0.0208 per minute of use, resolving several
individual points of dispute to reach the final rate. The district court affirmed the
Nebraska Commission’s rate determination.
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We need not address each individual cost element that contributed to the
Nebraska Commission’s overall, composite figure of $0.0208 per minute of use.
Rather, we focus only on those elements that remain in dispute. The rate is comprised
of two categories of cost elements. $0.0079 per minute of use is allocated to
termination or switching costs, and $0.0129 per minute of use is allocated to transport
costs. The parties dispute both of these cost element categories.
(1) Switching/Termination Rate
Regarding switching costs, Western argues that $0.0060 per-minute-of-use out
of the $0.0079 total fails to meet the pricing standards set forth in 47 U.S.C. §
252(d)(2). Section 252(d)(2) requires that costs be determined on the “basis of a
reasonable approximation of the additional costs of terminating such calls.” Western
argues that the disputed $0.0060 per minute of use is based on the cost of certain
switches that Great Plains included in its cost study. Western argues that these
switches are necessary for Great Plains to have a network capable of servicing its own
local exchange customers even without consideration of traffic with Western.
Western therefore argues that the cost of these switches should be considered part of
the necessary equipment for a local network (like wire loops), should be charged on
a flat-rate, per-line basis to Great Plains’s network customers, and should not be
included in the reciprocal compensation rate. Western also argues that the current and
reasonably anticipated volume of traffic on the networks is so small, and that the
smallest available switches are so powerful, that it is not appropriate to characterize
the switches as having any cost that varies with use or that contributes additional cost
to the termination of calls. Thus, Western argues the entire cost should be allocated
to Great Plains’s customers on a flat rate basis. In making this argument, Western
relies on the FCC’s First Report and Order, cited above, which sets forth a principle
of “cost causation” as follows:
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Only those costs that are incurred in the provision of the network
elements in the long run shall be directly attributable to those elements.
Costs must be attributed on a cost-causative basis. Costs are causally-
related to the network element being provided if the costs are incurred
as a direct result of providing the network elements, or can be avoided,
in the long run, when the company ceases to provide them.
First Report and Order at ¶ 691.
Although Western’s argument has some appeal, it fails to recognize that the
FCC has interpreted the Act to permit state commissions to assign some common
costs, like switching costs, not only on a flat-rate, per-line basis, but also on a per-
minute-of-use basis, or on some combination of the two methods. See 47 C.F.R. §
51.505(a)(2) (stating that forward looking costs are a combination of TELRIC and a
“reasonable allocation of forward-looking common costs”); 47 C.F.R. § 51.509(b)
(“Local switching costs shall be recovered through a combination of a flat-rated
charge for line ports and one or more flat-rated or per-minute usage charges for the
switching matrix and for trunk ports.”). This is in contrast to costs such as local loop
and subloop costs that must be recouped on a flat-rate basis. See id. at § 51.509(a)
(“Loop and subloop costs shall be recovered through flat-rated charges.”). Because
the Commission permissibly used a combination of the two methods prescribed by
Rule 51.509(b), we cannot say that it acted arbitrarily or capriciously when it found
that it was reasonable to apportion some of the cost of the switches to the termination
of calls on a per-minute basis rather than charging all switch costs on a flat, per-line
basis.
To reach the $0.006 per-minute-of-use switching figure for inclusion in the
overall rate, the Commission specifically found that the disputed switching costs were
attributable 70% to usage and 30% to flat-rate loop costs. It is a much closer question
whether the Commission acted arbitrarily or capriciously when it found that it was
reasonable to attribute, specifically, 70% of the cost of the switches on a per-minute,
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usage basis. We note that state commissions enjoy wide latitude on this issue because
not only is our review deferential, but also because the substantive standard applied
by state commissions is only one of reasonableness. Still, the only reference we find
in the present record to the 70%/30% figure is a conclusory statement by Great
Plains’s cost model expert that “30 percent of the switching costs were excluded as
nontraffic sensitive to account for line equipment of the switch.”
This conclusory statement from an expert likely would not be sufficient for us
to rely upon under a de novo standard of review. However, our deferential review is
due in part to the superior technical expertise of state commissions. As such we
should not lightly reverse a state commission’s assessment of reasonableness. Further,
Western has not attacked the particular election of the 70%/30% split as unreasonable;
rather, Western attacks the inclusion of switching costs in general as impermissible.
As a result, we do not fault the Commission for the absence of an extensive record
setting forth the complete foundation for the precise apportionment. Further, we note
that the Great Plains expert testified and was subject to cross-examination in
arbitration and there is no allegation that the arbitration was tainted by procedural
irregularities. Although this issue is close, given our conclusion that it is permissible
to include some switching costs, we are not prepared to declare the Nebraska
Commission’s reasonableness determination arbitrary and capricious merely because
that body was willing to rely on the expert’s conclusion.
(2) Transportation Rate
Regarding the transportation rate, there are two points of dispute, one
evidentiary and one substantive. The evidentiary dispute arises because, after
evidence was submitted, Great Plains included a table of figures in its briefing that the
Commission relied upon to set the transportation rate. Western argues that many of
the figures in the table enjoy no support in the record, and therefore, should not be
treated as evidence. Having carefully reviewed the testimony of Great Plains’s pricing
-24-
expert, it is clear that the figures in the table do, in fact, enjoy support in the record.
As explained more fully below, the specific figures at issue concern the allocation of
certain costs between functions to be included or excluded from the transportation
rate. In his testimony, the Great Plains expert identified the appropriate percentage
allocation for inclusion in the transportation rate as 70-75%. The disputed table
includes figures not found in the record, but generated from data found in the record
modified to take into account the expert’s range, using an assumption of 72%. There
is no error in relying on specific data points not in the record if those data points are
derived from evidence that is in the record.
Regarding the substantive dispute, we again affirm the Nebraska Commission’s
rate determination. The $0.0129 per-minute-of-use transportation rate is a final
number that Great Plains arrived at by calculating a larger, gross transportation rate
and subtracting a percentage from that gross rate based on the fact that some
transportation services provided by Great Plains are related to services not charged on
a per-minute-of-use basis. Western does not currently challenge the determination of
the larger, gross transportation cost figure, and the parties agree that it is necessary to
subtract at least a portion of the gross transportation figure. Rather Western
challenges the particular apportionment of 72% of the transportation costs to functions
that can be included in the net transportation rate of $0.0129 per-minute-of-use.
Specifically, the forward-looking network proposed by Great Plains for the
purpose of rate calculations is a network that provides functions over different kinds
of circuits, including functions above and beyond those necessary to carry traditional
usage-based switched services. The parties refer to these other functions as special
access services and state that such functions include elements such as high capacity
transport circuits dedicated to single users who pay flat monthly charges rather than
charges based on per-minute rates. An example of a special access service provided
by Great Plains is dedicated video service to schools.
-25-
In determining the proper method to reduce the gross transport figure to isolate
proper, cost-causative transport functions from costs that are unrelated to the provision
of per-minute, usage-based services, it is necessary to choose a method of calculation.
The Act and the regulations do not mandate the use of a particular method. Of three
possible methods cited and discussed by the parties, Western attacks one method as
impermissible. This one method is the method employed by Great Plains.
The three possible methods for determining a proper allocation are identified
as (1) the circuit count method, (2) the rate equivalency method, and (3) the
bandwidth method. It suffices to note that Great Plains and Western agree that there
is no legal impediment to the use of the circuit count or bandwidth methods. Roughly
speaking, these two methods apportion costs between usage-based and special access
services, respectively, based on the number of circuits dedicated to each function or
based on the percentage of total bandwidth dedicated to each function. Using the
circuit count method, the Great Plains cost expert initially recommended the allocation
of 89% of the gross transportation rate to usage-based services. Western advocated
use of the bandwidth method, and, before the arbitrator, concluded that 14-25% of the
gross transport costs should be allocated to usage-based services.
Using the challenged rate equivalency method, the Great Plains expert testified
that an allocation of 70-75% would be appropriate, and Great Plains provided
calculations that the Commission relied upon using an allocation of 72%. This rate
is within the broad range (14% - 89%) defined using the two unchallenged methods.
As such, we should not reject the Commission’s final transportation rate determination
as arbitrary and capricious even if the precise method used appears problematic.
That having been said, even if the resulting percentage were not within the
permissible range, it is not clear that use of the rate equivalency method in this context
would rise to the level of reversible error. Under the rate equivalency method, Great
Plains looked at its retail rates for both types of services (per-minute usage services
-26-
and special access services) as those retail rates then existed under state tariffs. Great
Plains then used the percentage break-down in rates to infer a percentage break-down
for the allocation of transportation costs. In general, the use of retail costs and
historical, embedded costs as reflected in existing tariffs rather than costs based on
forward-looking networks is prohibited. See 47 C.F.R. § 51.505(d)(2) (stating that
retail costs “shall not be considered in a calculation of the forward-looking economic
cost of an element”). Here, however, the rates were not used to determine the costs,
i.e., the gross transportation rate. That gross figure was based on a forward-looking
network model. The retail tariffs were only used to estimate a distribution between
special and usage-based services. It is not clear that Rule 51.505(d)(2) prohibits the
use of existing tariff rates in this manner.
We need not firmly resolve the question of whether this particular use of retail
rates runs afoul of the Rule 51.505(d)(2) prohibition on considering retail costs. As
already noted, the challenged method resulted in an allocation well within the range
established by the unchallenged methods, and it was not arbitrary and capricious for
the Nebraska Commission to select an allocation within that range. As a result, we
affirm the district court and Commission as to the rate determination.
C. Retroactive Compensation
The parties agree as to the effective date of the interconnection agreement (the
date of approval by the Commission) and its duration. They disagree, however, as to
whether compensation must be paid for any period of time that predates the effective
date of the interconnection agreement. Great Plains sought compensation going back
to approximately March 1998, a point in time well after Western began terminating
calls on the Great Plains network and prior to the start of the parties’ informal
negotiations towards an interconnection agreement. Western sought a ruling that no
compensation was due prior to finalization of the interconnection agreement.
-27-
The arbitrator found that compensation was due dating back to March 1998.
In so finding, the arbitrator concluded that the agreements between Western and US
West/Qwest (that enabled Western to terminate traffic to the Great Plains networks)
made Great Plains a third party beneficiary and “were and are in the nature of ‘interim
arrangements’ regarding Great Plains” and that Great Plains was a beneficiary under
those agreements. The Commission agreed that compensation was owed to Great
Plains. The Commission disagreed, however, that compensation was due dating back
to 1998. Rather, the Commission found that Western’s formal request for negotiation
of an interconnection agreement under the Act was a precondition to any entitlement
to reciprocal compensation. See 47 C.F.R. § 51.715(a)(2) (stating that “[a]
telecommunications carrier may take advantage of such an interim arrangement only
after it has requested negotiation with the incumbent LEC”). Accordingly, the
Commission determined that the appropriate start date for compensation was the date
that Western formally requested negotiation of an interconnection agreement under
the Act: August 26, 2002. Because the Commission had held that reciprocal
compensation was not owed by Great Plains for calls sent to a tandem switch (an issue
later reversed by the district court and not appealed by Great Plains), the Commission
found that Great Plains had not terminated any traffic to the Western network. As a
result, the Commission held that Western owed Great Plains interim payments for
traffic terminated on the Great Plains network, but that Great Plains owed Western no
such interim compensation. The district court agreed with the Commission as to the
appropriate date, but held that compensation was owed by each carrier to the other
effective August 26, 2002.
Western appeals. Because this issue turns largely on the Nebraska
Commission’s interpretation of facts including the history of the parties’
interconnection status and any arrangements that existed prior to the approval of an
interconnection agreement, we apply the deferential standard of review. We will
affirm the Nebraska Commission unless we find its ruling arbitrary and capricious.
-28-
The regulation that authorizes interim payments is 47 C.F.R. § 51.715. The
Nebraska Commission correctly characterized this regulation as one that permits a
carrier to request interconnection and transport and termination services, imposes a
duty of timely cooperation on the incumbent carrier, and permits payments under an
interim arrangement as a quid pro quo for the incumbent carrier’s cooperation.10
10
The regulation provides:
§ 51.715 Interim transport and termination pricing.
(a) Upon request from a telecommunications carrier without an
existing interconnection arrangement with an incumbent LEC, the
incumbent LEC shall provide transport and termination of
telecommunications traffic immediately under an interim arrangement,
pending resolution of negotiation or arbitration regarding transport and
termination rates and approval of such rates by a state commission under
sections 251 and 252 of the Act.
(1) This requirement shall not apply when the requesting
carrier has an existing interconnection arrangement that provides
for the transport and termination of telecommunications traffic by
the incumbent LEC.
(2) A telecommunications carrier may take advantage of
such an interim arrangement only after it has requested
negotiation with the incumbent LEC pursuant to § 51.301.
(b) Upon receipt of a request as described in paragraph (a) of this
section, an incumbent LEC must, without unreasonable delay, establish
an interim arrangement for transport and termination of
telecommunications traffic at symmetrical rates.
...
(d) If the rates for transport and termination of
telecommunications traffic in an interim arrangement differ from the
rates established by a state commission pursuant to § 51.705, the state
commission shall require carriers to make adjustments to past
compensation. Such adjustments to past compensation shall allow each
carrier to receive the level of compensation it would have received had
the rates in the interim arrangement equalled the rates later established
by the state commission pursuant to § 51.705.
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On appeal, Western presents an argument based on the plain text of the
regulation. Western argues that rule 51.715 only applies when a carrier formally
requests negotiations with an incumbent, seeks to establish an interim arrangement,
and, in fact, establishes such an arrangement. Western characterizes the requirement
for an “arrangement” as a requirement for a contract with offer, acceptance, definite
terms, and consideration. Western then argues that because it did not at any time
request to establish an interim arrangement with Great Plains, because the
Commission did not affirmatively state that there was an interim arrangement, and
because the Commission merely determined that “interim compensation is warranted,”
interim compensation is not authorized under the rule.
Great Plains counters that, through agreements with Qwest, Western, in fact,
began terminating traffic to the Great Plains network as early as January 1997. Great
Plains further states that an iteration of the agreement between Qwest and Western
that became effective in July 2000 has been in force and effect throughout all times
material to the question of interim compensation and makes Great Plains a third party
beneficiary. Great Plains presented evidence to prove the number of minutes of traffic
terminated by Western on the Great Plains network and Western did not dispute that
evidence. Great Plains does not adopt the strict contract theory for interim
arrangements as advocated by Western, and instead, states that the history of interim
services between the parties—services that were actually provided in this
case—suffices to prove the existence of an interim arrangement.
Great Plains also argues that, to the extent Western relies on the absence of a
request for an interim arrangement to defeat interim compensation, Western’s
arguments are without merit. Western was, from January 1997 onward, obtaining
termination and transport for telecommunications traffic on the Great Plains network
without having asked Great Plains for such services. Great Plains argues that because
an arrangement actually existed, there was no need for Western to ask for an
arrangement.
-30-
No party disputes the actual rate set for interim compensation as an issue
separate and distinct from their general challenges to the overall reciprocal
compensation rate discussed above. In other words, there is no issue on appeal
dealing specifically with the rate-setting provisions of Rule 51.715.
It is clear that the history of this case, involving transport and termination on
the Great Plains network without a request from Western, differs from the situation
envisioned by the FCC when the FCC fashioned Rule 51.715. That rule anticipates
that competitors will approach incumbents to gain access, not that competitors will
first terminate traffic and then discuss interconnection. It is also clear that Western
received the benefit that the FCC sought to promote when it promulgated Rule
51.715—timely access prior to the negotiation of an interconnection agreement. We
agree with Great Plains that nothing in Rule 51.715 mandates that an interim
arrangement rise to the level of a definite contract between the parties. Such a
requirement would be wholly incompatible with the interim, expedited nature of the
actions demanded by the rule. The purpose of the rule is to permit parties to operate
in the absence of a formal agreement, during a time that a formal agreement is being
negotiated. As such, it was not arbitrary and capricious for the Nebraska Commission
to find that interim compensation was due in this case, nor for it to select the date of
Western’s formal request for negotiations as a beginning date.
Finally, we agree with the district court that it is necessary to reverse the
Commission to the extent that it limited interim compensation to one-way payments
from Great Plains to Western. The rule explicitly calls for symmetrical compensation.
47 C.F.R. § 51.715(b). The Commission’s ruling that Great Plains had not terminated
any traffic to the Western Wireless network was based on the Commission’s now-
overruled determination regarding the scope of reciprocal compensation and the
termination of traffic to the tandem switch. As we stated repeatedly above, traffic in
both directions between an incumbent and a wireless carrier within a major trading
area is subject to reciprocal compensation. Accordingly, the Commission erred as a
matter of law when it found that traffic sent to a tandem switch and bound for the
-31-
Western Wireless network was not traffic terminated to the Western Wireless
network. As a result, we agree with the district court and affirm its judgment as to this
issue.
In summary, we affirm the district court in all respects. Local dialing parity is
consistent with tandem routing and consistent with the Act, and the Commission erred
as a matter of law when it approved contract language that excused Great Plains from
the local dialing parity obligations of § 251(b)(3). The Nebraska Commission did not
act arbitrarily or capriciously when it set the reciprocal compensation rate or the
effective date for interim compensation. The Nebraska Commission did, however, err
when it failed to make interim compensation symmetrical as required by 47 C.F.R. §
51.715.
______________________________
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