Bryan Tramont

On January 25, 1999, the U.S. Supreme Court reversed in part and affirmed in part the Eighth Circuit's decision, Iowa Utilities Board v. FCC, 120 F.3d 753 (8th 1997). Most significantly, the Majority adopted a more expansive interpretation of the FCC's power over intrastate communications than the Eighth Circuit. In addition, the Court upheld many of the Commission's "unbundling" rules. However, the Court vacated the FCC's rule specifying which network elements incumbent carriers had to permit new entrants to access and remanded this issue to the agency for further action. The Decision signals a significant shift of authority towards the Commission at a time when deregulation and state autonomy are purportedly on the rise.

Jurisdiction: Reversing the Eighth Circuit, the Court held that the FCC has general jurisdiction to implement the 1996 Act's local competition provisions, including rules regarding pricing. The Majority noted that Congress expressly directed that the 1996 Act be inserted into the 1934 Act, and that Section 201(b) of the 1934 Act authorizes the FCC to "prescribe such rules and regulations as may be necessary in the public interest to carry out the provisions of this Act." The Majority held that Section 152(b) of the 1934 Act, which provides that "nothing in this chapter shall be construed to apply or to give the Commission jurisdiction with respect to . . . intrastate communications service," does not limit the FCC's jurisdiction over 1996 Act's interconnection provisions. The Court also held that the FCC has jurisdiction to design a pricing methodology applicable to intrastate services and network elements despite Section 252(c), which authorizes state commissions to "establish any rates for interconnection, services, or network elements . . . ."

This jurisdictional view was far from unanimous, however. In a separate opinion concurring in part and dissenting in part, Justice Thomas, joined by Chief Justice Rehnquist and Justice Breyer, argued that, based on the longstanding tradition of state authority over intrastate telecommunications, Section 201(b) simply does not represent the "unambiguous" grant of authority necessary to overcome Section 152(b)'s jurisdictional fence.

Unbundling: The Commission's unbundling rules require incumbents to permit requesting carriers to combine unbundled network elements (UNEs) into the equivalent of existing services without providing any facilities of their own, and prohibit ILECs from disassembling existing combinations of UNEs. The Supreme Court upheld the challenged bundling rules but struck down 47 C.F.R. § 51.319, which specifies the UNEs to which access must be provided.

Section 51.319 identifies seven UNEs to which unbundled access must be provided. The Court vacated this rule, finding that the FCC did not adequately consider the Section 251(d)(2) "necessary and impair" standards when it gave requesting carriers blanket access to these network elements. Although the Court declined to decide whether, as a matter of law, Section 251(d)(2) requires the FCC to apply a standard akin to the "essential facilities" doctrine of antitrust theory, it nevertheless concluded that the Act requires the FCC to apply some limiting standard, rationally related to the goals of the Act. This issue will now be addressed at the Commission on remand.

Pick and Choose: The Commission's "pick and choose" rule permits a competitive carrier to pick only certain contract provisions from other competitive carriers' contracts for use in a new agreement. The carriers argued that allowing competitors to pick and choose provisions meant that subsequent carriers would get all the benefits of the bargains without any of the corresponding burdens. The Supreme Court disagreed and upheld the Commission's rule.