MCI Telecomm. v. Bell Atlantic-Pennsylvania

Page 491

271 F.3d 491 (3rd Cir. 2001)

MCI TELECOMMUNICATION CORPORATION, A DELAWARE CORPORATION; MCIMETRO ACCESS TRANSMISSION SERVICES, INC., A DELAWARE CORPORATION; AT&T COMMUNICATION OF PENNSYLVANIA; UNITED STATES OF AMERICA (INTERVENORS-PLAINTIFFS IN DISTRICT COURT) v. BELL ATLANTIC-PENNSYLVANIA; PENNSYLVANIA PUBLIC UTILITY COMMISSION; JOHN M. QUAIN; ROBERT K. BLOOM; JOHN HANGER; DAVID W. ROLKA; NORA M. BROWNELL, IN THEIR OFFICIAL CAPACITIES AS COMMISSIONERS OF THE PENNSYLVANIA PUBLIC UTILITY COMMISSION PENNSYLVANIA PUBLIC UTILITY COMMISSION; JOHN M. QUAIN; ROBERT K. BLOOM; JOHN HANGER; DAVID W. ROLKA; NORA MEAD BROWNELL, IN THEIR OFFICIAL CAPACITIES AS COMMISSIONERS OF THE PENNSYLVANIA PUBLIC UTILITY COMMISSION, APPELLANTS

BELL ATLANTIC-PENNSYLVANIA, INC., APPELLANT

Nos. 00-2257 and 00-2258

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

Argued June 21, 2001

Filed November 2, 2001

Appeal from the United States District Court for the Middle District of Pennsylvania (D.C. Civil Action No. 97-CV-01857) District Judge: Honorable Sylvia H. Rambo [Copyrighted Material Omitted]

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] Maureen F. Del Duca, Esquire, Jodie L. Kelley, Esquire, James A. Trilling, Esquire, Jenner & Block, 601 13th Street, N.W., 12th Floor, Washington, D.C. 20005, and Jeffrey A. Rackow, Esquire (Argued), MCI Worldcom, Inc., 1133 19th Street, N.W., Washington, D.C. 20036, for Appellees. MCI Telecom Corp. and MCIMetro Access Transmission, Services, Inc.,

David M. Levy, Esquire (Argued), Stephen B. Kinnaird, Esquire, Michael L. Post, Esquire, Sidley & Austin 1722 Eye Street, N.W., Washington, D.C. 20006; Daniel Clearfield, Esquire, Alan C. Kohler, Esquire, Joseph C. Crawford, Esquire, Wolf, Block, Schorr & Solis-Cohen, 1650 Arch Street, 22nd Floor, Philadelphia, PA 19103-2097; and Mark A. Keffer, Esquire, Robert C. Barber, Esquire, At&t Communications, 3033 Chain Bridge Road, Oakton, VA 22185, for Appellee. AT&T Communications of Pa, Inc.,

David M. Barasch, United States Attorney, Stuart E. Schiffer, Acting Assistant Attorney General, Mark B. Stern, Esquire, Charles W. Scarborough, Esquire, Kathleen A. Kane, Esquire, United States Department of Justice, Civil Division, Appellate Staff, 601 D Street, N.W., Washington, D.C. 20530, for Appellee. United States of America,

Thomas B. Schmidt, III, Esquire, Donna L. Fisher, Esquire, Kelly Ann Ryan, Esquire, Pepper Hamilton Llp, 200 One Keystone Plaza, North Front and Market Streets, P.O. Box 1181, Harrisburgh, PA 17108-1181, and Julia A. Conover, Esquire, Suzan DeBusk Paiva, Esquire, (Argued), Verizon Pennsylvania Inc., 1717 Arch Street, 32n, Philadelphia, PA 19103, for Appellant. Bell Atlantic-Pennsylvania, Inc. in No. 00-2258,

Bohdan R. Pankiw, Chief Counsel, Robert J. Longwell, Deputy Chief Counsel, Maryanne R. Martin (Argued), Assistant Counsel, Pennsylvania Public Utility Commission, P.O. Box 3265, Harrisburg, PA 17105-3265, for Appellants. Pennsylvania Public Utility Commission, John M. Quain, Robert K. Bloom, John Hanger, David W. Rolka, Nora Mead Brownell, in their official capacities as Commissioners of the Pennsylvania Public Utility, Commission in No. 00-2257.

Counsel on Sovereign Immunity Issues Exclusively, Albert G. Bixler, Esquire (Argued for Appellants),

Susan D. Paiva, Esquire (Argued for Appellees).

Before: Roth, Ambro and Fuentes, Circuit Judges

OPINION OF THE COURT

Roth, Circuit Judge.

In passing the Telecommunications Act of 1996, Congress altered the regulatory scheme for local telephone service. The Act requires that local service, which was previously operated as a monopoly overseen by the several states, be opened to competition according to standards established by federal law. Under the Act, the incumbent local telephone service carriers must negotiate or arbitrate agreements with competitive local carriers, allowing entering carriers either to connect their equipment to the existing network or to purchase or lease elements and services of the existing network. The terms, rates, and conditions of such arrangements are set forth in interconnection agreements established between the carriers. The state utility commissions are empowered, but not required, to review and give final approval to interconnection agreements to ensure that they comport with federal law.

Verizon Pennsylvania, Inc. (Verizon -- known at that time as Bell Atlantic-Pennsylvania, Inc.), the incumbent local carrier in Pennsylvania, entered into negotiations with MCI/Worldcom (Worldcom), a competing carrier which sought to provide local telephone service. After various negotiations and arbitrations by the Pennsylvania Public Utility Commission (PUC), the parties established an interconnection agreement and submitted it to the PUC which approved it contingent on certain revisions and the incorporation of certain rates. Worldcom then brought suit in federal court against Verizon, the PUC, and the PUC Commissioners, under 47 U.S.C. S 252(e)(6), the judicial review provision of the Act, to challenge certain terms of the agreement; Verizon counterclaimed and cross-claimed to challenge other aspects of the agreement. The PUC and PUC Commissioners moved to dismiss the action, arguing that they were immune from suit under the Eleventh Amendment of the United States Constitution. The District Court rejected the immunity claim and the PUC did not appeal at that time. The District Court then resolved all the substantive claims asserted by Worldcom and Verizon. The PUC and Verizon each appealed and the appeals were consolidated.

The District Court had jurisdiction to review the interconnection agreement pursuant to 47 U.S.C. S 252(e)(6) and had general federal question jurisdiction pursuant to 28 U.S.C. S 1331. We have jurisdiction over the final decision of a District Court, pursuant to 28 U.S.C. S 1291.

For the reasons that follow, we conclude that the PUC and the Commissioners are not entitled to Eleventh Amendment immunity from suit in federal court under the 1996 Act. We will, therefore, affirm the decision of the District Court on this issue. On the questions, raised by Verizon and the PUC regarding the terms of the interconnection agreement, we will affirm the District Court in part and reverse it in part.

I. Statutory Background

Prior to 1996, local telephone service operated as a monopoly, subject to exclusive regulation by the several states. In each local service area, the states would grant a monopoly franchise to one local exchange carrier, which owned the facilities and equipment necessary to provide telephone service. See AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 370 (1999) (Iowa Utils. I). With the Telecommunications Act of 1996, Congress fundamentally restructured local telephone markets by eliminating state-granted local service monopolies. See id. The Act preempts exclusive state regulation of local monopolies in favor of the competitive scheme established in 47 U.S.C. SS 251 and 252. See AT&T Communications v. Bellsouth Telecomm. Inc., 238 F.3d 636, 641 (5th Cir.), reh'g en banc denied, 252 F.3d 437 (5th Cir. 2001) (Bellsouth).

The Act essentially requires incumbent local exchange carriers (ILECs) to share their networks and services with competitors seeking entry into the local service market. See MCI Telecomm. Corp. v. Illinois Bell Tel. Co., 222 F.3d 323, 328 (7th Cir. 2000), cert. denied, 121 S. Ct. 896 (2001). Under the Act, a new entrant to the local telephone market, known as a competitive local exchange carrier (CLEC), is able to compete with an ILEC without having to bear the prohibitive cost of building its own telecommunications network. See id. Both an ILEC and a CLEC are required to "negotiate in good faith" the "terms and conditions of agreements" which will permit the CLEC, as well as other providers, to share the network and to provide service. 47 U.S.C. S 251(c)(1). The FCC is empowered to promulgate regulations to implement the requirements of the Act. 47 U.S.C. S 251(d)(1); see also Iowa Utils. I, 525 U.S. at 384 (upholding FCC rulemaking authority, including its power to determine the methodology for establishing prices).

Section 251 and FCC regulations establish three methods of providing a CLEC access to a local network. See Iowa Utils. I, 525 U.S. at 370; GTE South, Inc. v. Morrison, 199 F.3d 733, 737 (4th Cir. 1999). First, a CLEC may build its own network and "interconnect" with the incumbent network. 47 U.S.C. S 251(c)(2). Such interconnection must be, inter alia, for the "transmission and routing of telephone exchange service and exchange access," 47 U.S.C. S 251(c)(2)(A), "at any technically feasible point within the [incumbent] carrier's network," 47 U.S.C.S 251(c)(2)(B), and "on rates, terms, and conditions that are just, reasonable, and nondiscriminatory." 47 U.S.C. S 251(c)(2)(D), 47 C.F.R. S 51.305. An ILEC which denies a CLEC access to the network at a particular point must "prove to the state commission that interconnection at that point is not technically feasible." 47 C.F.R. S 51.305(e).

Second, a CLEC may lease individual elements of the existing network on an "unbundled basis" at "any technically feasible point" on "rates, terms, and conditions that are just, reasonable, and nondiscriminatory." 47 U.S.C. S 251(c)(3), 47 C.F.R. SS 51.307-51.319. A network element is "a facility or equipment used in the provision of a telecommunications service," i.e., "features, functions, and capabilities that are provided by means of such facility or equipment, including subscriber numbers, databases, signaling systems, and information sufficient for billing and collection or used in the transmission, routing or other provision of a telecommunications service." 47 U.S.C. S 153(29). The FCC determines the network elements that must be made available for purposes of S 251(c)(3); in so doing, it must consider 1) whether access to proprietary network...