The Ohio Bell Telephone Co. v. Public Utilities Comm. of Ohio

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit I.O.P. 32.1(b)

File Name: 13a0079p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

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THE OHIO BELL TELEPHONE COMPANY, dba

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AT&T Ohio,

Plaintiff-Appellant, -

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No. 12-3145

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v.

THE PUBLIC UTILITIES COMMISSION OF OHIO; -

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TODD A. SNITCHLER, in his official capacity

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as the Chairman of the Public Utilities

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Commission of Ohio; STEVEN D. LESSER,

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CHERYL ROBERTO, ANDRE T. PORTER, and

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LYNN SLABY, in their official capacities as

Commissioners of the Public Utilities -

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Commission of Ohio; INTRADO

Defendants-Appellees. -

COMMUNICATIONS INC.,

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Appeal from the United States District Court

for the Southern District of Ohio at Columbus.

No. 2:09-cv-918—Algenon L. Marbley, District Judge.

Argued: November 27, 2012

Decided and Filed: March 28, 2013

Before: NORRIS, GIBBONS, and DONALD, Circuit Judges.

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COUNSEL

ARGUED: J. Tyson Covey, MAYER BROWN LLP, Chicago, Illinois, for Appellant.

Thomas G. Lindgren, OFFICE OF THE OHIO ATTORNEY GENERAL, Columbus,

Ohio, for Commission Appellees. Edward A. Yorkgitis, Jr., KELLEY, DRYE &

WARREN, LLP, Washington, D.C., for Intrado Appellee. ON BRIEF: J. Tyson Covey,

MAYER BROWN LLP, Chicago, Illinois, for Appellant. John H. Jones, OFFICE OF

THE OHIO ATTORNEY GENERAL, Columbus, Ohio, for Commission Appellees.

Edward A. Yorkgitis, Jr., Barbara A. Miller, KELLEY, DRYE & WARREN, LLP,

Washington, D.C., for Intrado Appellee.

1

No. 12-3145 Ohio Bell v. Pub. Utils. Comm’n, et al. Page 2

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OPINION

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ALAN E. NORRIS, Circuit Judge. AT&T Ohio (“AT&T”) and Intrado

Communications, Inc. (“Intrado”), rival telecommunications carriers, submitted to an

arbitration conducted by the Public Utilities Commission of Ohio (“the Commission”)

to determine how to interconnect their networks to service 9-1-1 calls. AT&T insisted

that all points of interconnection be on its network, relying upon Section 251(c)(2) of the

federal Telecommunications Act of 1996 (“the Act”), 47 U.S.C § 251(c), a provision

only applicable to incumbent carriers1 like AT&T. The Commission rejected this

request and, instead relied on the general provisions of Section 251(a), and ordered the

carriers to establish interconnection points on both AT&T’s and Intrado’s networks.

AT&T sought judicial review of the arbitration award, and the district court affirmed.

On appeal, AT&T argues that the Commission exceeded its arbitral authority by

applying Section 251(a) because Intrado had petitioned for interconnection only under

Section 251(c). AT&T also challenges the arbitration award itself, arguing that the

Commission improperly interpreted an incumbent carrier’s interconnection duties under

the Act. Having carefully considered these arguments, we affirm the judgment of the

district court.

I.

Intrado, a telecommunications provider specializing in emergency

communications, hoped to compete with AT&T for servicing Ohio 9-1-1 calls. To that

end, it began negotiations with AT&T to interconnect their networks. Without a

physical interconnection, the carriers could not exchange traffic, and customers of one

carrier would be unable to reach 9-1-1 operators serviced by the other carrier.

1

Under the Act, an incumbent carrier is defined as a carrier that provided telephone service to an

area prior to February 8, 1996. 47 U.S.C. § 251(h)(1).

No. 12-3145 Ohio Bell v. Pub. Utils. Comm’n, et al. Page 3

The two carriers were unable to agree whether and how to interconnect their

networks and Intrado petitioned for an arbitration conducted by the Commission, as

provided for by Section 252(b)(2) of the Act. In its petition, Intrado argued that it was

entitled to “interconnection under Section 251(c) of the Act.” According to Intrado, this

provision requires incumbent carriers, such as AT&T, to provide interconnection with

a requesting telecommunications carrier for the transmission and routing of telephone

exchange services. In other words, an entrenched carrier must allow would-be

competitors to connect to its network.

Intrado also argued that it “has the right to choose the location and number of

points of interconnection on the incumbent’s network.” It urged that, in geographic

areas where Intrado was the primary provider of 9-1-1 emergency services–meaning,

where Intrado serviced the 9-1-1 operator–it would be more efficient and reliable for

AT&T to connect to Intrado’s network. Specifically, Intrado’s petition reads,

[I]n geographic areas in which Intrado has been selected as the primary

provider of 911 services . . . AT&T’s network must interconnect with

Intrado’s 911/E911 network so that customers of AT&T located in that

geographic area can complete emergency calls to the appropriate [9-1-1

operator] (i.e. Intrado’s end user customer).

This arrangement, Intrado claimed, would be consistent with how AT&T and other

incumbent carriers routinely interconnected with each other for purposes of servicing 9-

1-1 calls. In its initial arbitration brief, Intrado argued that Congress adopted the Act to

prevent incumbent carriers from discriminating against less-established carriers.

Therefore, Intrado claimed, it was entitled to the same interconnection arrangement–“the

preferred method of interconnection for completing [9-1-1] calls”–that AT&T had with

other incumbent carriers.

The Commission agreed that, in some instances, AT&T must connect to Intrado’s

network. Specifically, the Commission ordered AT&T to establish a point of

interconnection on Intrado’s network for the delivery of its customers’ 9-1-1 calls in

geographic areas where Intrado was the designated 9-1-1 service provider. Conversely,

Intrado would need to establish a point of interconnection on AT&T’s network in the

No. 12-3145 Ohio Bell v. Pub. Utils. Comm’n, et al. Page 4

areas serviced by AT&T. The Commission later clarified that its decision was based on

Section 251(a) of the Act, which generally “establishes the duty of a telecommunications

carrier to interconnect directly or indirectly with the facilities of other

telecommunications carriers” not on the incumbent carrier-specific provisions of Section

251(c).

AT&T requested a rehearing on this issue, arguing that the Commission

inappropriately applied the general provisions of Section 251(a) when Intrado had

petitioned for interconnection solely under Section 251(c). The Commission denied this

request, noting that,

[T]he record clearly reflects that the proper location of the [point of

connection] when Intrado is the 911 service provider . . . is a primary

issue. Furthermore, AT&T discussed Section 251(a) at length on the

record in arguing against Intrado’s desire to have AT&T establish a POI

on Intrado’s network. Further, it would be inappropriate to apply the

requirements of Section 251(c) in this scenario when the Commission has

already determined that the applicable section of the Act is Section

251(a), regardless of whether or not both parties contend such

arrangements fall under Section 251(c). In sum, AT&T has asserted no

facts or arguments that would give us a basis for varying from the award

issued in this matter . . . .

AT&T then filed a complaint in the Southern District of Ohio challenging the

arbitration award. AT&T again argued that the Commission erred in relying on Section

251(a) where “no party raised any issue for arbitration regarding alleged interconnection

under Section 251(a), and no such ‘open issue’ was presented to the [Commission] for

decision.” AT&T also argued that Section 251(c)(2) alone applied to interconnection

issues involving an incumbent carrier and, under that section, Intrado was entitled only

to interconnection on AT&T’s network.

The district court rejected these arguments and affirmed the Commission’s

arbitration award. The court explained that “the issue of whether Intrado’s arrangement

with AT&T would include compelling AT&T to interconnect on Intrado’s network was

raised, albeit not explicitly pursuant to [the Commission’s] authority under Section

251(a) as opposed to Section 251(c).”

No. 12-3145 Ohio Bell v. Pub. Utils. Comm’n, et al. Page 5

The court recognized that there was “no clear answer” to AT&T’s argument

regarding Section 251(c)(2) and the location of the points of interconnection. It

explained that Section 251 provides a tiered hierarchy of interconnection requirements,

designed to foster competition in telecommunications markets. While Section 251(a)

imposes a general duty for all carriers to provide for interconnection, subsection (c)

provides additional obligations specific to incumbent carriers. These additional

obligations include allowing for interconnection “at any technically feasible point within

the [incumbent] carrier’s network.” The court concluded that, based on this hierarchy,

the Commission could compel AT&T to interconnect on Intrado’s network under 251(a),

regardless of 251(c)(2)’s requirement that AT&T offer a point on its own network: “If

a competitor [non-incumbent carrier] can compel interconnection to another competitor

[non-incumbent carrier] under Section 251(a) . . . it follows that an [incumbent carrier]

can be compelled to interconnect with a competitor [non-incumbent carrier] under

Section 251(a) as well. [Incumbent carriers], after all, have greater obligations to

interconnect than competitor [non-incumbent carriers], not the other way around, as is

well-established under the requirements of Section 251.”

This appeal followed.

II.

Under the Telecommunications Act of 1996, a party may appeal the final

arbitration decision of the state utilities commission to a federal district court. 47 U.S.C.

§ 252(e)(6). On appeal, this Court’s jurisdiction is based upon 28 U.S.C. § 1291. When

reviewing state public service commission orders, we are limited to determining whether

the order is consistent with Sections 251 and 252 of the Act. Mich. Bell Tel. Co. v.

MCIMetro Access Transmission Servs, Inc., 323 F.3d 348, 354 (6th Cir. 2003) (citing

Mich. Bell Tel. Co. v. Strand, 305 F.3d 580, 586 (6th Cir. 2002)). With respect to the

Commission’s findings of fact, we apply the arbitrary and capricious standard, the most

deferential standard of judicial review. Finally, we review de novo the Commission’s

interpretation of the Act. Id.

No. 12-3145 Ohio Bell v. Pub. Utils. Comm’n, et al. Page 6

III.

On appeal, AT&T argues that the Commission exceeded its arbitral authority by

applying Section 251(a) when Intrado had petitioned for interconnection under Section

251(c)(2) only. As AT&T explains, the Commission’s statutory authority to arbitrate

an interconnection agreement is confined to the open issues set forth in the petition or

the response. 47 U.S.C. § 252(b)(4)(A). Although this issue is fact-dependant, it is

essentially a question of statutory interpretation–how specifically must an issue be raised

in a petition to be deemed “an open issue” for purposes of arbitration? In answering this

question, we look to Federal Rule of Civil Procedure 15 for guidance. Under this rule,

an issue not properly raised by the pleadings may nonetheless be tried by the parties’

implied consent. Fed.R.Civ.P. 15(b)(2). “Implied consent to the trial of an unpleaded

issue is not established merely because evidence relevant to that issue was introduced

without objection. At least it must appear that the parties understood the evidence to be

aimed at the unpleaded issue.” MBI Motor Co., Inc. v. Lotus/E., Inc., 506 F.2d 709, 711

(6th Cir. 1974).

This situation, although not governed by Rule 15, is analogous. Here, throughout

the arbitration proceedings, AT&T understood and contested Intrado’s request to

establish a point of interconnection on its own network, regardless of whether or not

Intrado had properly raised the issue in its petition. Therefore, this issue–whether

ultimately resolved under Section 251(c) or Section 251(a)–was sufficiently before the

Commission. See MCI Tele. Corp. v. Mich. Bell Tel. Co., 79 F. Supp. 2d 768, 774 (E.D.

Mich. 1999) (ruling that an issue, although not raised in the petition or response, was

properly before the state commission because the parties had discussed the issue

throughout the arbitration proceedings).

IV.

AT&T argues that the Commission erroneously applied the general provisions

of Section 251(a) in determining the points of interconnection because, whenever an

incumbent carrier is involved, the more-specific provisions of Section 251(c) control.

No. 12-3145 Ohio Bell v. Pub. Utils. Comm’n, et al. Page 7

The precedence of specific provisions over general provisions, AT&T argues, is a

“bedrock principle of statutory interpretation.” AT&T also notes that Section 251(c)

explicitly incorporates the requirements of 251(b) and not those of 251(a). This

omission, AT&T argues, evidences that “Section 251(a) simply does not apply” to an

incumbent carrier subject to Section 251(c).

We have explained that Congress passed the Act “in order to end local

telecommunications monopolies and engender competition in local telecommunications

markets.” Verizon N., Inc. v. Strand, 309 F.3d 935, 939 (6th Cir. 2002). The Act was

designed to “minimize the barriers to market entry erected during the period in which

the incumbent provider functioned as a monopoly.” MCI Telecomm. Corp. v. Ohio Bell

Tel. Co., 376 F.3d 539, 542 (6th Cir. 2004).

In order to accomplish this goal, Sections 251(a) through (c) create “a three-

tiered hierarchy of escalating obligations based on the type of carrier involved.” In re

Guam Pub. Util. Comm’n, 12 F.C.C.R. 6925, 6937 (May 19, 1997). First, Section

251(a)2 “imposes relatively limited duties on all telecommunications carriers.” Second,

Section 251(b) imposes more extensive duties on carriers that qualify as “local exchange

carriers.” Third and finally, Section 251(c) imposes the most extensive duties on local

exchange carriers that are also incumbents, such as AT&T.3 Id. The Supreme Court has

2

In relevant part, Section 251(a) reads,

(a) General duty of telecommunications carriers

Each telecommunications carrier has the duty--

(1) to interconnect directly or indirectly with the facilities and

equipment of other telecommunications carriers; and

....

3

In relevant part, Section 251(c) reads,

(c) Additional obligations of incumbent local exchange carriers

In addition to the duties contained in subsection (b) of this section, each incumbent local

exchange carrier has the following duties:

(1) Duty to negotiate

....

(2) Interconnection

The duty to provide, for the facilities and equipment of any requesting

No. 12-3145 Ohio Bell v. Pub. Utils. Comm’n, et al. Page 8

explained that, in the “host of duties” imposed on incumbent carriers by Section 251,

“[f]oremost among these duties is the [incumbent carrier’s] obligation under 47 U.S.C.

§ 251(c) to share its network with competitors.” AT&T Corp. v. Iowa Util. Bd., 525 U.S.

366, 371 (1999) (citations omitted).

AT&T, in support of its argument that Section 251(c) relieves incumbent carriers

of the general interconnection duties set forth under Section 251(a), relies upon language

found in In re Implementation of the Local Competition Provisions in the Telecomm. Act,

11 F.C.C.R. 15499, 15991 (Aug. 1, 1996), vacated by Iowa Util. Bd. v. F.C.C., 219 F.3d

744 (8th Cir. 2000), where the FCC said that “Section 251 is clear in imposing different

obligations on carriers depending upon their classification.” In relying upon this isolated

passage, AT&T mischaracterizes the FCC’s position. In its order, the FCC recognized

that Section 251(a) “applies to all telecommunications carriers,” although it does not

“apply equally to all telecommunication carriers.” In this regard, the agency explained

that Section 251 clearly imposes greater interconnection burdens on incumbent carriers,

citing the additional obligations set forth under Section 251(c) as an example. Id.

Admittedly, the text of the Act is not always clear. However, we are persuaded

that the district court’s interpretation, that incumbent carriers are subject to Section

251(a)’s general interconnection duties, is the correct one. Simply stated, it makes little

sense to read the Act in a way that imposes fewer duties on incumbent carriers than on

less-established, nondominant carriers. As we have previously recognized, the Act is

designed to encourage competition by imposing the greatest interconnection duties on

incumbent carriers like AT&T. Here, were AT&T not an incumbent carrier subject to

Section 251(c) and, instead, were a less-established carrier, the issue would be easy: the

Commission clearly would have the authority under Section 251(a) to order

interconnection on Intrado’s network. There is no limiting language in the statute stating

telecommunications carrier, interconnection with the local exchange carrier's

network--

....

(B) at any technically feasible point within the carrier's network;

....

47 U.S.C. § 251(c); see also 47 C.F.R. § 51.305(a).

No. 12-3145 Ohio Bell v. Pub. Utils. Comm’n, et al. Page 9

that interconnection must occur on the incumbent carrier’s network and, based on the

hierarchical structure of the Act, it logically follows that the Commission has the

authority to impose this same duty on an incumbent carrier.

V.

For the foregoing reasons, we affirm the judgment of the district court.