The FCC has released an order that affirms earlier decisions requiring rural carriers to provide interconnection to competitors, extending those decisions to cover wholesale competitors and to require state regulators to arbitrate disputes. This decision is a significant victory for competitive voice providers and, particularly, for cable operators seeking to compete in rural markets. The order is available on the FCC’s web site at http://www.fcc.gov/document/crccommunications‐maine‐inc‐and‐time‐warner‐cable‐inc.

HIGHLIGHTS

  • This order expands on earlier decisions that require rural incumbent telephone companies to interconnect under Sections 251(a) and 251(b) of the Communications Act. Section 251(a) is less stringent than the rules that apply to larger incumbents, but still provides a path to interconnection.
  • The order requires state regulators to arbitrate rural interconnection disputes under the same rules that apply to larger carriers. This resolves a question that has been open since 1996 and gives competitors a powerful new tool to force rural incumbents to interconnect with them.
  • The order clarifies that wholesale providers have the same rights to interconnect with rural incumbents as retail providers. This will make it easier for cable operators and companies like Level 3 to obtain interconnection in rural areas.
  • The order does not address significant questions about the terms of interconnection, including cost, so some roadblocks remain. 

OVERVIEW

The Telecommunications Act of 1996 created new rules for interconnection between telephone companies. At the time, most of the attention was focused on the provisions of Section 251(c), which cover interconnection between competitive carriers and non‐rural incumbent telephone companies, and of Section 251(b), particularly the rules that address number portability and payment for completing local calls. In fact, the FCC’s order implementing the local competition provisions devoted just 15 of its 668 pages to Section 251(a), the provision that is central to this decision.

Section 251(a) governs interconnection in any situation that is not covered by Section 251(c), including interconnection between competitive carriers, interconnection with long distance companies and interconnection with rural carriers that are exempt from Section 251(c). As the order describes, since 1996 many questions about how Section 251(a) operates have remained unanswered or have been answered differently in different parts of the country. When combined with the reluctance of many state regulators to lift the rural exemption, this uncertainty has limited the ability of those competitors to enter rural markets.

This order is intended to provide definitive, uniform guidance on how competitive providers can obtain interconnection from rural carriers. To do so, it addresses three basic issues: (1) Whether rural carriers are required to provide interconnection under Section 251(a) and to meet Section 251(b) requirements; (2) How competitive carriers can enforce their Section 251(a) and (b) rights; and (3) Whether wholesale providers of interconnection can take advantage of Section 251(a) and (b).

INTERCONNECTION RIGHTS

One of the few conclusions that the FCC reached about Section 251(a) in 1996 was that it was available to any carrier, whether or not interconnection under Section 251(c) was available. Nevertheless, there have been decisions that have concluded that rural incumbents might not be required to provide interconnection even under Section 251(a) if they were exempt from Section 251(c) interconnection. One decision even went so far as to suggest that a competitor that failed to convince a state regulator to lift the rural exemption had forfeited the right to obtain interconnection under Section 251(a).

This order takes the opportunity to reaffirm the 1996 decision. It notes that “when incumbent carriers resist interconnection with competitive telecommunications carriers, it impedes the development of facilities‐based voice services in those areas,” and that “[t]he ability to provide competitive voice services also drives network investment decisions.” In light of these considerations and the FCC’s belief that it is important to have a national, uniform policy governing the rural exemption, the order determines that

Consistent with Commission precedent, we reaffirm that all telecommunications carriers, including rural carriers covered by section 251(f)(1) [the rural exemption], have a basic duty to interconnect their networks under section 251(a) and that all LECs, including rural LECs covered by section 251(f)(1), have the obligation to comply with the requirements set forth in section 251(b).

The order concludes that this interpretation of the Communications Act “flows directly from the language of Section 251 itself,” and particularly from the language in the rural exemption provision that covers only Section 251(c). It determines that any other interpretation would prevent competitors from obtaining interconnection, contrary to the intent of the 1996 Act.

ENFORCING SECTION 251(A) AND (B) RIGHTS

It is somewhat helpful for carriers to know what rights they have, but it may be difficult to exercise those rights without specific ways to enforce them. The order addresses this issue by determining that competitive carriers can obtain arbitration at state regulatory commissions under Section 252 if they cannot reach voluntary interconnection agreements with rural carriers.

The FCC reaches this conclusion based on its reading of Section 252. It notes that Section 252’s arbitration provisions generally refer to Section 251, not just to Section 251(c), and that other parts of Section 252 that address particular provisions of Section 251 refer to those provisions, not to Section 251 as a whole. In doing so, the FCC rejects state commission decisions that have determined that arbitration is not available when a competitor asks for interconnection under Section 251(a).

This determination means that competitive carriers that wish to enforce their rights under Section 251(a) and Section 251(b) can use a process very similar to the one used for obtaining interconnection from nonrural carriers under Section 251(c):

  • The competitive carrier makes a formal request for interconnection.
  • The competitive carrier and rural carrier may start negotiations.1
  • If negotiations occur, either party may ask the state regulator to mediate at any time.
  • If the parties do not reach an agreement, either one may file a request for arbitration from the 135th to 160th day following the request for interconnection.
  • If a request for arbitration is filed, the state regulator must decide the open issues within 270 days of the request for interconnection.
  • The state regulator approves any agreement that results from negotiation or arbitration.

In practice, it is not clear whether rural carriers will choose to negotiate. However, the likelihood that they will negotiate may be increased by the FCC’s determination that arbitration is available. In the past, some states have not been interested in deciding these kinds of interconnection disputes, and so a refusal to negotiate was one way to avoid interconnection. With a specific timeline in place (even if states often do not meet the deadlines in Section 252), the benefit of not negotiating will be much less significant than it has been. This, and the likelihood of having to expend real resources to defend an arbitration case, may make rural carriers more likely to seek the most favorable interconnection terms that they can negotiate.

WHOLESALE PROVIDERS

The order also addresses whether wholesale providers are entitled to the same interconnection rights as companies that provide retail telecommunications services. The order explains that there is no reason for any distinction in interconnection rights because:

The definition of “telecommunications services” in the Act does not specify whether those services are “retail” or “wholesale,” but merely specifies that “telecommunications” be offered for a fee “directly to the public, or to such classes of users as to be effectively available directly to the public.”

This conclusion is the same one reached only a few years ago in the Time Warner decision, which addressed the refusal of rural carriers to interconnect with voice over IP providers using wholesale interconnection services.2 It appears that the FCC is reaffirming the earlier decision for at least two reasons. First, as the order explains, affirming wholesale interconnection rights “promote[s] facilities‐based voice competition and also bolster[s] the case for deploying additional broadband facilities and upgrading existing broadband networks in rural areas.” Second, the Time Warner decision was made at the staff level, not by the entire Commission. An order at the Commission level is more definitive, and therefore less susceptible to claims that it is not fully binding.

NEXT STEPS

This is a final order, and because it is a declaratory ruling, it does not need to be published in the Federal Register before it can become effective. As a result, this order goes into effect immediately, and can be used by competitive carriers across the country.

The order can be appealed, and it is possible that some rural carriers or state regulators will decide to appeal it. It is more likely that rural carriers will seek to have the decision reversed, but it is not clear that they will be successful in doing so. The FCC’s interpretation of Sections 251(a) and 251(b) is fairly straightforward, and essentially repeats an earlier interpretation that was not appealed. While the analysis of the arbitration requirements in Section 252 is new, the FCC has skirted the most significant issues raised by its interpretation by determining that rural carriers are not required to enter into negotiations.

While this order creates new tools for competitors seeking interconnection in rural areas, it does not address all of the issues that may arise. In particular, Section 251(a) permits both direct and indirect interconnection and says nothing about how much interconnection will cost. There is no guarantee that competitors in rural areas will be able to resolve these issues favorably, even considering the additional leverage this decision gives them.