USTA v. FCC:
A Decision Ripe for the Supremes

Two legal experts eviscerate the recent DC Circuit Court ruling in favor of the RBOC trade lobby in its lawsuit against the FCC's anti-monopoly policies.

by Fred R. Goldstein and Jonathan S. Marashlian [March 25, 2004]

Fred R. Goldstein is the Principal of Ionary Consulting. Mr. Goldstein advises companies on technical, regulatory and business issues related to the telecommunications and Internet industries, especially in areas where they overlap. Jonathan S. Marashlian is a Partner at The Helein Law Group, a boutique telecommunications and technology law firm. Mr. Marashlian represents the interestes of competitive telcom companies before federal and state regulators.

Each year about 4,500 cases are appealed to the Supreme Court of the United States ("Supreme Court"). And every year, the Supreme Court agrees to hear oral arguments in only 200 or so of these cases. Those of us in the competitive telecommunications industry rarely pay attention to such statistics. This all changed following last week's monumental USTA v. FCC decision by the D.C. Circuit Court of Appeals ("DC Circuit").

Most of you are aware of the USTA v. FCC decision by now. For those who may not be, in the admittedly biased opinion of these proponents of competition, the 62-page decision vacating the Federal Communications Commission's ("FCC") Triennial Review Order ("TRO") can be best described as threatening to gut over 8 years of hard work, sacrifice and the billions of dollars that have been invested by entrepreneurial competitive local exchange carriers ("CLECs") that are just beginning to create competition in the local telecom marketplace.

Why such a pessimistic analysis? Because unless the DC Circuit's decision is stayed by the Supreme Court, many of the FCC rules that require incumbent local exchange carriers ("ILEC") to share key elements of their networks with competitors, the rules which are the foundation of the still nascent competitive local market, will be vacated.

In many ways, the USTA decision and the reaction of proponents of competition is reminiscent of the 8th Circuit of Court of Appeal's 1997 decision in Iowa Utilities Board v. FCC. In that case, the court stayed much of the FCC's first attempt to implement vast portions of the 1996 Act, including the original unbundling and ILEC network sharing rules.

The Iowa decision, like USTA, was based on very narrow, pro-ILEC interpretations. Then FCC-Chairman Reed Hundt commented on the Iowa decision:

"The 8th Circuit Court of Appeals decision today is a very regrettable setback for the purpose and intent of the 1996 Telecommunications Act. In several significant respects, the decision is wholly inconsistent with the mandate and intent of Congress. The antidote to the 8th Circuit decision can be found in the United States Supreme Court. That is where we should now go for relief."

Hundt's comments are reflective of the opinions held today by the vast majority on the pro-competition side of the aisle. Like Iowa, the competitive industry must now work to ensure that USTA is ultimately overturned by the Supreme Court.

Certainly the DC Circuit's decision warrants Supreme Court scrutiny, not solely on moral grounds, to those of us who see competition as a good thing, but also sound legal grounds.

For example, in USTA (and decisions in earlier unbundling cases decided by the court), the DC Circuit faults the FCC for failing to support its unbundling mandates with "particularized" evidence. Yet, take one look at the court's handling of the TRO's elimination of competitors' access to ILEC broadband networks and you see that the court is all too willing to forgive a lack of particularized evidence if it serves its agenda.

Without presenting a scintilla of tangible evidence and only offering hollow promises that we've all heard time and time again, the ILECs assert that they would be more willing to invest in and build "advanced networks" if and only if they could be assured of an absolute monopoly on their usage (sounding a lot like the argument a believer in monopolies might make!).

The court takes the ILEC cue and uses the broad and vague language of Section 706 of the Act, which creates a type of "motherhood-and-apple-pie" support for the deployment of advanced networks, in order to trump the more specific unbundling language of Section 251. In essence, the court "uses" Section 706 to support a pro-ILEC conclusion that less unbundling is necessary to stimulate competition, a conclusion that is directly contrasted by the specific language of Section 251 and the 1996 Act's legislative history.

USTA v. FCC: A Decision Ripe for the Supremes

>USTA v. FCC, page 2: It gets worse

USTA v. FCC, page 3: Moving from the strange to the truly bizarre