APPEALS COURT REMANDS PART OF FCC DECISION ON SBC SEC. 271 ENTRY

Court’s remand focused on “inadequate justification” given by FCC in not fully considering competitors’ “price squeeze” concerns, issue that dominated Sept. 17 oral argument (CD Sept 18 p3). Opinion, written by Senior Judge Stephen Williams, rejected other claims raised by CLECs including AT&T, Sprint and WorldCom, saying it wanted reconsideration only of price squeeze issue. Judges Laurence Silberman and David Tatel also were on panel.

Williams said challengers’ price-squeeze argument was “novel in Sec. 271 litigation.” Challengers had argued that low level of residential service by CLECs indicated rates for unbundled network elements (UNEs) weren’t cost-based. Court said it wasn’t not unreasonable for FCC to turn down that argument because Telecom Act sets requirements for cost-based rates, but not for amount of resulting residential competition. However, court agreed with challengers that FCC should at least have undertaken inquiry or offered more explanation of why it didn’t consider that adequate argument for turning down SBC’s petition, court said. “In fact, the Commission gave appellants’ claim rather a brush-off,” Williams wrote. FCC ought at least to have given it more consideration because there always was possibility that agency’s Total Element Long-Run Incremental Cost (TELRIC) standard didn’t work perfectly in this case, Williams said.

Court also was unconvinced by FCC’s argument that state regulators had primary jurisdiction over retail rates and therefore it would be inappropriate for FCC to consider price squeeze issue. Williams pointed out that U.S. Supreme Court dismissed similar argument in 1976 case, FPC v. Conway Corp. Court acknowledged that requiring price squeeze inquiries could raise problems. For one thing, FCC has only 90 days to make determinations on Sec. 271 applications so time may be factor, Williams wrote. Also, if FCC is right that Telecom Act requires only that “minimal volume of competition to be present,” it may turn out that “residential market may not be attractive to competitors even if UNE costs are at the lower end of TELRIC,” court said. Panel offered no further “evaluation” on either issue.

Appeals Court rejected rest of CLEC complaints about UNE rates in Kan. and Okla. as well as argument that FCC improperly relied on ex parte communications in reviewing SBC’s Telecom Act compliance in Kan. SBC submitted ex parte letter 10 days before FCC’s Jan. 22 decision that contained data to prove CLEC Ionex had significant number of residential customers in Kan. However, court said that because Ionex leased UNEs from SBC, SBC already was able to estimate Ionex’s residential volumes and letter just gave more specific data. Although it was party to proceeding, “Ionex uttered not a peep in protest, correction or qualification,” Williams wrote. “So the FCC’s observation that it used the ex parte letter only as ‘additional support’… was entirely legitimate.”

AT&T Vp Mark Rosenblum said decision “reaffirms the public interest test” for reviewing Sec. 271 applications. “The public interest can never justify Bell long distance entry if pricing or other factors make local competition impossible,” he said. “The single greatest obstacle to the competition that Congress promised… is the way that Bell companies can use their control of wholesale and retail pricing to squeeze out competitors.”