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Federal Communications Commission
Washington, D.C. 20554
In the Matter of )
CoreComm Communications, Inc., )
Z-Tel Communications, Inc., )
Complainants, ) File No. EB-01-MD-017
SBC Communications Inc., )
Southwestern Bell Telephone )
Pacific Bell Telephone Company, )
Nevada Bell Telephone Company, )
The Southern New England )
Telephone Company, )
Illinois Bell Telephone )
Indiana Bell Telephone Company, )
Michigan Bell Telephone )
The Ohio Bell Telephone
Wisconsin Bell, Inc.,
MEMORANDUM OPINION AND ORDER
Adopted: April 10, 2003 Released: April 17,
By the Commission: Commissioner Abernathy issuing a
1. In this Memorandum Opinion and Order, we grant in
part and deny in part the formal complaint filed by
CoreComm Communications, Inc. (``Core'') and Z-Tel
Communications, Inc. (``Z-Tel'') (collectively,
``Complainants''), pursuant to section 208 of the
Communications Act of 1934, as amended (``Act'' or
``Communications Act''),1 against nine incumbent local
exchange carriers (``ILECs'') and their parent
corporation, SBC Communications Inc. (``SBC'')
2. Core and Z-Tel state in their complaint that they
purchased access to the shared transport unbundled network
element (``UNE'') from Defendants, but that Defendants
have refused to allow them to use that UNE to transport
intraLATA toll traffic. Core and Z-Tel allege that
Defendants' refusal violates sections 201(b), 202(a),
251(c)(1), and 251(c)(3) of the Act, 3 Commission rules
51.309(a), 51.309(b), and 51.313(b), 4 and paragraph 56 of
the SBC/Ameritech Merger Order Conditions.5
3. As discussed
below, we grant Core and Z-Tel's claim that Defendants
Illinois Bell Telephone Company, Indiana Bell Telephone
Company, Michigan Bell Telephone Company, The Ohio Bell
Telephone Company, and Wisconsin Bell, Inc. (collectively,
``Ameritech'') violated paragraph 56 of the SBC/Ameritech
Merger Order Conditions, and, in this regard, section
201(b) of the Act. We otherwise deny the complaint.
A. Statutory and Regulatory Background
4. Section 251(c)(3) of the Act obligates an ILEC
``to provide, to any requesting telecommunications carrier
for the provision of a telecommunications service,
nondiscriminatory access to network elements on an
unbundled basis ... .''6 The Commission determined that
one of the UNEs to be provided pursuant to section
251(c)(3) is the shared transport UNE, defined as
``transmission facilities shared by more than one carrier,
including the incumbent LEC, ... in the incumbent LEC
5. Section 252 of the Act8 establishes procedures for
negotiating, arbitrating, and approving agreements between
ILECs and requesting carriers for interconnection,
services, and access to UNEs pursuant to section 251.
Section 252(a)(1) provides that the parties may negotiate
and enter into a binding agreement ``without regard to the
standards set forth in subsections (b) and (c) of section
251.''9 Section 252(b) provides that either party to
section 251 negotiations may petition the state commission
to arbitrate any open issues, and section 252(c) provides
that the state commission's resolution of arbitrated
issues shall ``meet the requirements of section 251,
including the regulations prescribed by the Commission
pursuant to section 251... .''10 Section 252(i)11
obligates a local exchange carrier to make available ``any
interconnection, service, or network element'' provided
under an approved agreement to which it is a party to any
other requesting carrier upon the same terms and
conditions as those provided in the agreement. This
provision allows a requesting carrier to ``opt in'' to
existing agreements (or specific provisions of existing
agreements) between other carriers.
6. Section 201(b) of the Act declares unlawful any
unjust or unreasonable ``charge, practice, classification,
or regulation'' by a carrier in connection with
communication service.12 Section 202(a) provides that it
shall be unlawful for any common carrier to make any
unjust or unreasonable discrimination in connection with
like communication service.13
7. In the Merger Order, the Commission approved the
applications filed by SBC and Ameritech Corporation,
pursuant to sections 214 and 310 of the Act,14 for
approval to transfer control of certain licenses and lines
from Ameritech Corporation to SBC in connection with the
companies' proposed merger. The Commission made its
approval subject to certain conditions, stating ``We
conclude that approval ... is in the public interest
because such approval is subject to significant and
enforceable conditions designed to mitigate the potential
public interest harms of their merger ... .''15 One
condition, contained in paragraph 56 of the Merger Order
Conditions, requires Ameritech to ``offer shared transport
... within the Ameritech states under terms and conditions
... that are substantially similar to (or more favorable
than) the most favorable terms [SWBT] offers to
telecommunications carriers in Texas as of August 27,
B. Factual Background
8. The Defendants are ILECs in one or more of 13
states (``13-state region'').17 Core is a competitive
local exchange carrier (``CLEC'') providing
telecommunications services in four states in the 13-state
region; Z-Tel is a CLEC providing telecommunications
services in eleven states in the 13-state region.18
9. Core and Z-Tel purchased the shared transport UNE
from Defendants Ameritech, Pacific, and SWBT by ``opting
in,'' pursuant to section 252(i) of the Act, to existing
Ameritech, Pacific or SWBT interconnection agreements or
Statements of Generally Accepted Terms (``Agreements'').19
Core and Z-Tel have not purchased the shared transport UNE
from Defendants SNET or Nevada Bell, and do not allege
that they are in negotiations to do so.20
10. Core and Z-Tel allege that the Merger Order,
the Act, and Commission rules 51.309 and 51.313 require
Defendants to allow them to use the shared transport UNE
to transport intraLATA toll traffic.21 Core and Z-Tel
state that they will file a supplemental complaint for
damages if successful in establishing liability,22 and
request ``that the Commission order [Defendants] to permit
[Core and Z-Tel] to transport intraLATA toll traffic over
the entirety of [Defendants'] shared transport
11. In their Answer, Defendants assert that the
Commission does not have jurisdiction over Core and Z-
Tel's claims,24 and that, in any event, neither the Merger
Order, nor the Act, nor the Commission's rules obligates
them to allow CLECs to use the shared transport UNE to
transport intraLATA toll traffic.25 In addition,
Defendants deny the substance of Core and Z-Tel's claims
as to each of the Defendants, although on different
grounds depending on the company. First, Defendants deny
the claims against SBC, SNET, and Nevada Bell on the
ground that Complainants have not purchased shared
transport from these Defendants.26 Defendants deny the
claims against SWBT on the ground that SWBT allows
Complainants to use shared transport for intraLATA toll.27
As to the remaining states, Defendants assert that the
Ameritech and Pacific Agreements do not make available
shared transport for intraLATA toll and that, therefore,
Complainants fail to state a claim or have waived their
B.1. Merger Order Conditions
12. Defendants assert that the Commission lacks
jurisdiction over Core and Z-Tel's claims alleging
violations of the Merger Order.29 We disagree. Sections
214(c) and 310(d) of the Act30 expressly authorize the
Commission to impose conditions such as the Merger Order
Conditions, and section 416(c) of the Act31 requires
compliance with such conditions, thereby creating a cause
of action under section 208 for violation of the
conditions. Moreover, the Commission has a duty to
enforce those conditions to protect the public interest,
and has discharged this duty by adjudicating section 208
complaints alleging violations of merger conditions
imposed in orders approving license transfers, as well by
initiating forfeiture proceedings on our own motion.32
Nothing in the Merger Order or the Act suggests that the
Commission cannot enforce paragraph 56 of the Merger Order
Conditions. Quite to the contrary, we stated in the
Merger Order that, ``[a]ttaching conditions to a merger
without an efficient and judicious enforcement program
would impair the Commission's ability to protect the
public interest.''33 Section 208 formal complaint
proceedings are an integral part of that enforcement
process: ``Members of the public may pursue a claim
[alleging failure to comply with the Merger Order] in
accordance with either section 207 or 208 of the Act. ...
In this way, the enforcement plan rightly ensures that
consumers will not be forced to bear the costs of
SBC/Ameritech's mistakes.''34 Accordingly, we find that
we have jurisdiction, pursuant to section 208, to resolve
Core and Z-Tel's claims relating to the Merger Order
B.2. Section 251 and the FCC's Rules
13. Defendants also assert that the Commission
lacks jurisdiction over Core and Z-Tel's claims alleging
violations of section 251(c) of the Act, and the
Commission's rules implementing section 251(c).35
According to Defendants, ``[t]he 1996 Act makes
unmistakably clear ... that such disputes are to be
determined in the first instance not through [section 208]
complaint proceedings before this Commission, but rather
through private negotiations, and, if necessary, state
commission arbitrations, with Federal district court (not
Commission) review of such arbitrations.''36 We find
that, while the section 252 process is the primary means
of resolving disputes about what should be included in an
interconnection agreement, and that failure to invoke that
process may in some cases deprive parties of a cause of
action, the Commission has jurisdiction to adjudicate Core
and Z-Tel's complaint.37 The language, structure, and
purpose of the statute all support our conclusion. Our
jurisdiction is, of course, concurrent with state
jurisdiction to interpret and enforce interconnection
14. The language of the Communications Act
expressly grants the Commission jurisdiction to resolve
complaints alleging any violation of the Act. Section 206
makes carriers liable for damages for ``any act, matter,
or thing in this Act prohibited or declared to be
unlawful'' and for ``omit[ting] to do any act, matter, or
thing in this Act required to be done.''39 Similarly,
section 208 allows a complaint to be filed by ``[a]ny
person...complaining of anything done or omitted to be
done by any common carrier subject to this Act, in
contravention of the provisions thereof... .''40 Thus,
the Commission's complaint jurisdiction has generally been
understood to be coextensive with the reach of the
substantive provisions at issue. Here, Core and Z-Tel
allege violations of the Act, bringing their complaint
squarely within the scope of sections 206 and 208.
15. Defendants' jurisdiction arguments rest
on the assumption that sections 251 and 252 of the Act
implicitly override the broad language of sections 206 and
208. Section 601 of the Telecommunications Act provides,
however, that ``[t]his Act and the amendments made by this
Act shall not be construed to impair, or supersede
Federal, State, or local law unless expressly so
provided.''41 Accordingly, in order for the 1996 Act to
supersede the Commission's broad general complaint
authority, it would have to do so explicitly. There is,
however, no explicit language in sections 251 or 252, or
elsewhere in the Act, depriving the Commission of
jurisdiction to hear complaints involving the local
16. The structure of the Act also supports
the view that the Commission's complaint authority extends
to complaints alleging violations of sections 251 and 252
of the Act. In this regard, in Iowa Utilities Board,42
the Supreme Court examined the structure of the Act in
assessing the extent of the Commission's rulemaking
authority, and the reasoning of the Court on that issue is
equally valid here. The Court held that Congress's
general grant of authority to the Commission in section
201(b) of the Act to prescribe rules and regulations ``to
carry out the provisions of this Act''43 included a grant
of authority to promulgate rules and regulations
implementing sections 251 and 252. ``Since Congress
expressly directed that the 1996 Act, along with its
local-competition provisions, be inserted into the
Communications Act of 1934,'' the Court stated, ``the
Commission's rulemaking authority would seem to extend to
implementation of the local-competition provisions.''44
Further, the Court found that it ``cannot plausibl[y] [be]
assert[ed]'' that Congress, in passing the 1996 Act, was
unaware of section 201(b), because section 251(i)
specifically refers to section 201.45
17. It seems equally true that, since
Congress inserted the local competition provisions into
the existing statute, the complaint provisions of that
statute extend to the local competition provisions. And,
as with the section 201(b) rulemaking authority, it may
not ``plausibl[y] [be] assert[ed]'' that in passing the
1996 Act, Congress was unaware of section 208. Indeed,
Congress was fully aware of section 208, having amended
that section in the 1996 Act.46 Thus, the logic of the
Supreme Court on the issue of rulemaking authority leads
directly to the conclusion that the Commission's
enforcement authority also extends to the local
competition provisions of the 1996 Act.47
18. We also find that our interpretation
furthers the purpose of the Act, to promote competition.
In this case, the Complainants allege violations
throughout SBC's 13-state region. If the statute were
read to exclude complaint authority in this case, the
parties would have to litigate the same issue in multiple
states. Allowing for the filing of a single complaint
under section 208 enhances enforcement, and competition,
by resolving the issues economically, helping to achieve
uniform results, and relieving the parties of the burdens
of multistate litigation.
19. In short, we find that we have jurisdiction,
pursuant to section 208, to resolve Core and Z-Tel's
claims.48 The fact that we have jurisdiction pursuant to
section 208 to resolve a particular complaint does not, of
course, necessarily mean that the complainant has a
meritorious cause of action. Indeed, as explained below,
we find that Z-Tel cannot prevail in this case in
California because it failed properly to invoke governing
statutory and contractual provisions to amend its existing
B. The Merits
1. The Ameritech
20. Defendants admit that Core and Z-Tel
purchased the shared transport UNE from Ameritech, that
Core and Z-Tel requested permission to use the UNE to
transport intraLATA toll call traffic, and that Ameritech
denied those requests.49 Given these facts, we find that
Ameritech has violated the Merger Order.50
21. As we recently stated, ``[t]he plain
language of paragraph 56 required [Ameritech] to offer ...
shared transport for intraLATA toll to CLECs in the
Ameritech region as of October 8, 2000.''51 Thus, we
reject Defendants' arguments here that the Merger Order
does not require Ameritech to offer shared transport for
intraLATA toll traffic. The Merger Order obligates
Ameritech to ``offer'' use of the shared transport UNE for
intraLATA toll to CLECs who request such use. To the
extent that Ameritech's existing agreements with the
Complainants did not make available shared transport for
intraLATA toll, the Merger Order required Ameritech to
agree to the necessary amendments to do so. When Core and
Z-Tel asked for this functionality, however, Ameritech
just said ``no.''52 That refusal self-evidently
constituted a failure to offer under paragraph 56.
22. Defendants nevertheless argue that the
Complaint fails to state a claim, or that Complainants
have waived their right to claim that Ameritech violated
the Merger Order.53 According to Defendants, ``[u]nder
the plain language and structure of the 1996 Act, once
parties have concluded an interconnection agreement, the
terms of that agreement - not the ... Commission's ...
orders - govern their relations.''54
23. We reject Defendants' argument, as
unsupported by the statute and fundamentally inconsistent
with the purpose of the paragraph 56 condition. As
Defendants note,55 under section 252(a)(1), parties are
free to negotiate terms that do not meet the requirements
of sections 251(b) and (c). The issue before us in this
claim, however, is not whether Defendants complied with
their obligations under section 251(c), but whether they
violated the terms of the Merger Order. Paragraph 56 of
the Merger Order Conditions, which SBC itself proposed,56
imposes an obligation pursuant to sections 214(c) and
303(r) of the Act. Even if sections 251 and 252 did not
obligate Defendants to amend their agreements with Core
and Z-Tel to provide for shared transport for intraLATA
toll traffic, the Merger Order did. Section 252(a)(1)
says nothing about overriding requirements beyond those
established in section 251, and Defendants have provided
no support to lead us to read it that way.
24. Moreover, Defendants' suggested approach
would run entirely counter to the basic purpose of the
paragraph 56 condition. As Defendants recognize, prior to
the Merger Order, Ameritech had refused to provide shared
transport;57 indeed, that refusal is what made the
paragraph 56 condition necessary. Thus, presumably
Ameritech interconnection agreements predating the Merger
Order, including those with the Complainants in some
states, did not provide for shared transport of any
kind.58 Yet if we accepted Defendants' arguments, then
those carriers who had been denied shared transport
previously would be unable to amend their agreements to
take advantage of a merger condition specifically designed
to remedy the situation.
25. Paragraph 56 requires Ameritech to offer
shared transport for intraLATA toll traffic to carriers
who request it. Here it did not do so. Rather than
agreeing to make any necessary amendments to its
interconnection agreements, Ameritech responded to
requests by asserting that it was not required to provide
shared transport for intraLATA toll. Accordingly, we find
that Ameritech violated paragraph 56 of the Merger Order
Conditions, and in so doing, engaged in an unjust and
unreasonable practice under section 201(b) of the Act.59
2. SNET (Connecticut) and Nevada Bell
26. We deny Core and Z-Tel's claims against SNET
and Nevada Bell because the record does not support
Complainants' allegations against these Defendants.
Complainants allege that they purchased the shared
transport UNE from Defendants, and that Defendants have
violated the Act and Commission rules by refusing to agree
to allow Complainants to use that UNE for intraLATA toll
calls.60 The record does not show that SNET and Nevada
Bell ever failed to comply with the Commission's UNE
rules, however, because Core and Z-Tel have not purchased
the shared transport UNE from either SNET or Nevada
Bell.61 Accordingly, we deny the Complaint against
Defendants SNET and Nevada Bell because the claims against
these Defendants are not supported by the record.
3. The SWBT States (Arkansas, Kansas,
Missouri, Oklahoma, and
27. We also deny the complaint with respect to
the SWBT states. The record shows no violation in Kansas
or Oklahoma, because SWBT agreed to allow Z-Tel to use the
shared transport UNE for intraLATA toll in Kansas and
Oklahoma after Z-Tel opted into SWBT interconnection
agreements for those states.62 Similarly, the record does
not establish that SWBT ever denied Core or Z-Tel use of
the shared transport UNE for intraLATA toll in Texas,
Arkansas or Missouri.63
II.A.1. Pacific Bell (California)
28. Core and Z-Tel assert that Pacific has
violated sections 201(b), 202(a), 251(c)(1), and 251(c)(3)
of the Act, and the Commission's unbundling rules, by
refusing to provide shared transport for intraLATA toll
traffic. We find that Complainants have failed to prove
their case, and deny the claims against Pacific.64
29. Z-Tel currently has an interconnection
agreement with Pacific, entered into through the section
252(i) opt-in process,65 that includes provisions for the
shared transport UNE. Core and Z-Tel do not appear to
assert that Z-Tel's current agreement with Pacific is
itself in violation of the Act or Commission rules,66 nor
do they assert that Pacific has breached that agreement.
Core and Z-Tel effectively admit, for purposes of this
complaint, that Z-Tel's agreement with Pacific does not
permit the use of shared transport for intraLATA toll
traffic.67 The premise of their complaint is that Pacific
violated the Act and Commission rules by refusing to
negotiate in good faith and agree to an amendment to
permit the use of shared transport for intraLATA toll
traffic. The record indicates that Z-Tel asked Pacific to
agree to such an amendment by signing a ``Memorandum of
Understanding,''68 and that Pacific refused that
request.69 Defendants assert that they are not required
to agree to amend their agreement with Z-Tel except
insofar as Z-Tel has complied with any modification or
change of law provision in that agreement.70
30. Our rules do ``plainly require unbundling of
shared transport for use with intraLATA toll traffic.''71
At the same time, however, the obligations created by
section 251 and our rules are effectuated through the
process established in section 252 - that is, by reaching
agreement through negotiation, arbitration, or opt-in.72
In this case, Z-Tel opted into a pre-existing Pacific
interconnection agreement with another party, including
its shared transport terms, and then sought to negotiate
an amendment to that agreement. We agree with Defendants
that Z-Tel is bound by the terms of its agreement, and
that therefore any request to amend the interconnection
agreement must comply with any modification or change of
31. Z-Tel provides no evidence in this record
that it complied with any modification or change of law
provisions. Furthermore, Z-Tel does not assert that
Pacific failed to comply with such provisions; as noted
above, Complainants expressly disavow any claim that
Pacific has breached the agreement. Under these
circumstances, we cannot find that Core and Z-Tel have met
their burden of demonstrating that Pacific's refusal to
agree to an amendment violated either the substantive
requirements of the Act and our rules, or the duty to
negotiate in good faith. Accordingly, we deny the claims
32. Core and Z-Tel seek support for their claims
in the Local Competition First Report and Order's
statement that a party may file a section 208 complaint
alleging violations of section 251 or Commission rules
``even if the [defendant] carrier is in compliance with an
agreement approved by the state commission.''73 It is
true, as the Local Competition First Report and Order
states, that there may be circumstances in which a carrier
could file (and prevail on) a section 208 complaint, even
where the defendant is in compliance with its
interconnection agreement. For instance, a carrier could
allege a violation of the duty to negotiate in good faith
under section 251(c)(1), ``even if the [defendant] carrier
is in compliance with an agreement approved by the state
commission.''74 By choosing to opt into an agreement that
Complainants say does not provide shared transport for
intraLATA toll traffic, however, Z-Tel effectively waived
any right to insist upon different terms. In light of the
specific processes established in section 252 for
effectuating the obligations set forth in section 251, Z-
Tel cannot rely upon the general section 251 duties to
circumvent the terms of its agreement.
33. We also find that Core and Z-Tel fail to
establish a cause of action against Pacific pursuant to
section 201(b) of the Act.75 Core and Z-Tel assert no
reason, independent of the obligations imposed by section
251(c) and Commission implementing rules, why Pacific's
refusal to allow Z-Tel to use shared transport for
intraLATA toll is an ``unjust or unreasonable'' practice
within the meaning of section 201(b). Yet, as discussed,
the requirements of section 251 and Commission
implementing rules do not apply where, as here, the
parties have entered into a section 252(a)(1) agreement on
34. Finally, Core and Z-Tel have not established
a cause of action against Pacific pursuant to section
202(a) of the Act.76 Core and Z-Tel's complaint alleges
that ``the intraLATA toll service that ... Complainants
provide to their local exchange customers and the
intraLATA toll service SBC provides to its retail
customers are like services... .''77 Section 202(a) is
not concerned with whether the services of two separate
carriers are ``like''; it is concerned with whether two
services offered by the same carrier are like, and
provides that, if the services are ``like,'' the carrier
may not unjustly or unreasonably discriminate in their
35. In sum, we deny Core and Z-Tel's claims
against Pacific pursuant to sections 201(b), 202(a), and
251(c)(1) and (3) of the Act, as well as the Commission's
rules implementing section 251(c).79
IV. ORDERING CLAUSE
36. Accordingly, IT IS ORDERED, pursuant to
sections 201, 202, 208, and 251 of the Communications Act
of 1934, as amended, 47 U.S.C. §§ 201, 202, 208, and 251,
sections 51.309 and 51.313 of the Commission's rules, 47
C.F.R. §§ 51.309 and 51.313, and Paragraph 56 of the
Merger Order Conditions, that the instant formal
complaint, IS GRANTED to the extent indicated herein, and
is in all other respects DENIED.
Marlene H. Dortch
Secretary SEPARATE STATEMENT OF
COMMISSIONER KATHLEEN Q. ABERNATHY
Re: Core Communications and Z-Tel Communications v. SBC
Communications Inc., et al., File No. EB-01-MD-017,
Memorandum Opinion and Order
I support the foregoing Order, both in terms of its
jurisdictional analysis and its discussion of the merits. I
write separately to explain the narrowness of the
Commission's jurisdictional holding.
This Order holds that the Commission has concurrent
jurisdiction with the state commissions to adjudicate
interconnection disputes. I agree that the plain language
of the Act compels this conclusion. But I also believe
there are significant limitations on the circumstances in
which complainants actually will be able to state a claim
under section 208 for violations of section 251(c) and the
Commission's implementing rules.
First, as the Order acknowledges, the section 252
process of commercial negotiation and arbitration provides
the primary means of resolving disputes about what should be
included in an interconnection agreement. A party's failure
to adhere to the requirements of an interconnection
agreement ~ its change-of-law provisions, for example ~
likely would foreclose any remedy under section 208. Thus,
in this case, the failure of Core Communications and Z-Tel
to follow the change-of-law provision in their
interconnection agreement in California denied them a cause
of action against SBC for failing to provide shared
transport for intraLATA toll traffic in California. Order
at ¶¶ 28-35.
In addition, if a party does invoke the state-
commission arbitration process prescribed in section 252,
and loses, it seems clear that the party's sole remedy is to
file an appeal in federal district court under section
252(e)(6) ~ the party may not collaterally attack the state
action before the FCC in a section 208 complaint.
Permitting a second bite at the apple before the Commission
would appear to violate not only the text and structure of
section 252, but also black letter law on collateral
estoppel. I recognize that the Local Competition Order
suggested that a party aggrieved by a state arbitration
determination may prevail in a section 208 action against a
carrier that is in compliance with the state-approved
agreement.80 While the facts of this proceeding do not
require the Commission to confront this issue, I believe the
Local Competition Order was clearly wrong to the extent it
suggested that section 208 confers jurisdiction for
collateral attacks on state arbitration decisions. I hope
that if the Commission is presented with such an effort to
supplant the statutory scheme, we squarely hold that our
jurisdiction under section 208 does not authorize such
1 47 U.S.C. § 208.
2 See Formal Complaint, File No. EB-01-MD-017 (filed
Aug. 28, 2001) (``Complaint''). Core and Z-Tel filed the
Complaint jointly pursuant to Commission rule 1.723(a). 47
C.F.R. § 1.723(a).
3 47 U.S.C. §§ 201(b), 202(a), 252(c)(1), (c)(3).
4 47 C.F. R. §§ 51.309(a), 51.309(b), 51.313(b).
5 Applications of Ameritech Corp., Transferor, and SBC
Communications Inc., Transferee, for Consent to Transfer
Control of Corporations Holding Commission Licenses and
Lines Pursuant to Sections 214 and 310(d) of the
Communications Act and Parts 5, 22, 24, 25, 63, 90, 95 and
101 of the Commission's Rules, Memorandum Opinion and
Order, 14 FCC Rcd 14712 (1999) (``SBC/Ameritech Merger
Order'' or ``Merger Order'' ) at Appendix C
6 47 U.S.C. § 251(c)(3).
7 47 C.F. R. § 51.319(d)(1)(iii).
8 47 U.S.C. § 252.
9 47 U.S.C. § 252(a)(1).
10 47 U.S.C. §§ 252(b), 252(c)(1).
11 47 U.S.C. § 252(i).
12 47 U.S.C. § 201(b).
13 47 U.S.C. § 202(a).
14 47 U.S.C. §§ 214, 310.
15 Merger Order, 14 FCC Rcd at 14716, ¶ 2.
16 Merger Order Conditions, 14 FCC Rcd at 15023-4, ¶ 56.
17 Revised Joint Statement of Stipulated Facts, File No.
EB-01-MD-017 (filed Nov. 23, 2001) (``Revised Joint
Statement'') at 2, ¶¶ 3-4; Defendants' Answer, File No. EB-
01-MD-017 (filed Oct. 10, 2001) (``Answer'') at 1-2 n.1.
The 13-state region is comprised of Arkansas, California,
Connecticut, Illinois, Indiana, Kansas, Michigan, Missouri,
Nevada, Ohio, Oklahoma, Texas, and Wisconsin. The
Ameritech Defendants are ILECs in Illinois, Indiana,
Michigan, Ohio, and Wisconsin. The Southern New England
Telephone Company (``SNET''), Nevada Bell Telephone Company
(``Nevada Bell''), and Pacific Bell Telephone Company
(``Pacific'') are ILECs in Connecticut, Nevada, and
California, respectively. Southwestern Bell Telephone
Company (``SWBT'') is an ILEC in Arkansas, Kansas,
Missouri, Oklahoma, and Texas. Answer at 1-2 n.1.
18 Revised Joint Statement at 2-3, ¶ 6-7.
19 Revised Joint Statement at 2-3, ¶¶ 6-7.
20 Revised Joint Statement at 2, ¶ 4; Letter to Magalie
R. Salas, Office of the Secretary, FCC, from Michael H.
Hazzard, counsel to Core and Z-Tel, File No. EB-01-MD-017
(filed Sept. 20, 2001) (stating that ``neither Core nor Z-
Tel provide[s] service in ... Connecticut or Nevada,'' and
only ``plan eventually to provide service in those
jurisdictions'') (emphasis added). See Revised Joint
Statement at 2-3, ¶¶ 6-7; Answer at 1-2 n.1.
21 Complaint at 14-24, ¶¶ 35-97 (citing 47 U.S.C. §§
201(b), 202(a), 251(c); 47 C.F.R. §§ 51.309(a), 51.309(b),
51.313(b); SBC/Ameritech Merger Order, 14 FCC Rcd 14712).
An intraLATA toll call is one that stays within LATA
boundaries but that is "between stations in different
exchange areas for which there is made a separate charge
not included in contracts with subscribers for exchange
service." 47 U.S.C. § 153(48) (defining "telephone toll
service"). Complainants allege that Defendants' refusal to
allow them to use the shared transport UNE for intraLATA
toll calls has forced them to transport their intraLATA
toll traffic to an interexchange carrier. Complaint at ii.
22 Complaint at 24-25, ¶ 99 (citing 47 C.F.R. §
23 Complaint at 15, ¶ 41; 16, ¶ 48; 17, ¶ 55; 19, ¶ 63;
20, ¶ 71; 21, ¶ 77; 22, ¶ 83; 23, ¶ 89; 24, ¶ 96.
24 Answer at 2-5.
25 Answer, Ex. C (Defendants' Legal Analysis) at 15-55.
26 Answer at 19, ¶ 21; Revised Joint Statement at 2, ¶ 4.
27 Answer at 12-13, ¶ 13.
28 Answer at 3-5.
29 Answer at 2-5, Ex. C (Defendants' Legal Analysis) at
30 Section 214(c) authorizes the Commission, in resolving
a section 214 application, to impose ``such terms and
conditions as in its judgment the public convenience and
necessity may require.'' 47 U.S.C. § 214(c). Section
310(d) prohibits the transfer of licenses except ``upon
finding by the Commission that the public interest,
convenience, and necessity will be served thereby.'' 47
U.S.C. § 310(d).
31 47 U.S.C. § 416(c).
32 See, e.g., Global NAPs, Inc. v. Verizon, Memorandum
Opinion and Order, 17 FCC Rcd 4031 (2002) (section 208
complaint); In the Matter of SBC Communications, Inc.,
Apparent Liability for Forfeiture, Forfeiture Order, 17 FCC
Rcd 19923, petition for reconsideration pending (2002)
(``SBC Forfeiture Order'') (self-initiated forfeiture
proceeding); SBC Communications Inc., Order of Forfeiture,
16 FCC Rcd 5535 (EB 2001), review denied, Order on Review,
16 FCC Rcd 12306 (2001) (self-initiated forfeiture
33 SBC/Ameritech Merger Order, 14 FCC Rcd at 14881, ¶
34 SBC/Ameritech Merger Order, 14 FCC Rcd at 14885, ¶
415. See In the Matter of SBC Communications, Inc.,
Apparent Liability for Forfeiture, Notice of Apparent
Liability, 17 FCC Rcd 1397 (2002) at ¶ 19 (rejecting SBC's
argument that the Commission lacks authority to enforce the
Merger Order Conditions).
35 Answer, Ex. C (Defendants' Legal Analysis) at 6;
Defendants' Response Brief, File No. EB-01-MD-017 (filed
Feb. 12, 2002) (``Defendants' Response Br.'') at 2-4.
36 Answer, Ex. C (Defendants' Legal Analysis) at 6.
37 Our conclusion here is consistent with our previous
statements on this issue. See Implementation of the Local
Competition Provisions in the Telecommunications Act of
1996, Interconnection Between Local Exchange Carriers and
Commercial Mobil Radio Service Providers, First Report and
Order, 11 FCC Rcd 15499 (1996) (subsequent history omitted)
(``Local Competition First Report and Order''), at 15564, ¶
126 (``[s]ections 251 and 252 do not divest the Commission
of its section 208 authority''). See also TSR Wireless,
LLC v. US West Communications, Inc., 15 FCC Rcd 11166
(2000) (rejecting defendants' arguments that the Commission
lacked jurisdiction to resolve the formal complaints before
it), upheld on appeal on different reasoning, Qwest Corp.
v. FCC, 252 F.3d 462 (D.C. Cir. 2001).
38 See, e.g., BellSouth Telecomm., Inc. v. MCIMetro
Access Transmission Services, Inc., 317 F.3d 1270 (11th
Cir. 2003) (en banc); Southwestern Bell Tel. Co. v. Pub.
Util. Comm'n of Texas, 208 F.3d 475, 479-80 (5th Cir.
2000); Southwestern Bell Tel. Co. v. Brooks Fiber
Communications of Oklahoma, Inc., 235 F.3d 493, 496-97
(10th Cir. 2000).
39 47 U.S.C. § 206 (emphasis added).
40 47 U.S.C. § 208 (emphasis added). In 1997, the
Eighth Circuit ruled that the Commission lacks authority to
enforce sections 251 and 252 of the Act through section 208
complaints, but the Supreme Court reversed, finding that
the issue was not ripe for judicial review. Iowa Utilities
Board v. FCC, 120 F.3d 753, 803-804 (8th Circuit 1997),
aff'd in part, rev'd in part sub nom. AT&T Corp. v. Iowa
Utilities Board, 525 U.S. 366 (1999). In the vacated
decision, the Eighth Circuit asserted that ``nothing in the
Act even suggests that the FCC has the authority to enforce
the terms of negotiated or arbitrated agreements or the
general provisions of sections 251 and 252.'' Iowa
Utilities Board v. FCC, 120 F.3d at 804. We believe,
however, that the language of sections 206 through 208
directly grants such authority.
41 47 U.S.C. § 152 note (emphasis added).
42 Iowa Utilities Board v. FCC, 525 U.S. 366
43 47 U.S.C. § 201(b).
44 Iowa Utilities Board, 525 U.S. at 377-78 (citations
45 Id. at 378 n.5.
46 The 1996 Act changed the statutory deadlines for
certain section 208 complaints. See 47 U.S.C. §208(b)(1).
In addition, Congress considered (and then rejected) a
proposal to allow the Commission to forbear from section
208. H.R. Rep. No. 104-458, 184 (1996), reprinted in 1996
U.S. Code Cong. & Admin. News 1584.
47 The Supreme Court decision in Iowa Utilities Board
also discredits the Eighth Circuit's conclusion that FCC
jurisdiction to adjudicate complaints involving sections
251 and 252 would ``provide the FCC with jurisdiction over
intrastate communications services in contravention of
section 2(b).'' Iowa Utilities Board, 120 F.3d at 804.
The Supreme Court rejected a similar conclusion by the
Eighth Circuit that section 2(b) restricted the
Commission's local competition rulemaking authority, and
the same reasoning should apply to enforcement. See
National Cable & Telecomm. Ass'n v. Gulf Power Co., 534
U.S. 327 (2002) (rejecting arguments that the language and
structure of the 1996 Act implicitly limit the scope of the
general grant of authority to the Commission pursuant to
48 In support of their jurisdictional argument,
Defendants cite the Eighth Circuit's ruling in Iowa
Utilities Board. See Answer, Ex. C (Defendants' Legal
Analysis) at 7. The decision does not support Defendants'
position, however, because the Supreme Court vacated it.
See Iowa Utilities Board, 525 U.S. at 386. Moreover, as
discussed above, the logic of the Supreme Court's opinion
supports our conclusion that the Commission has
jurisdiction over this dispute. Defendants also cite
Trinko v. Bell Atlantic Corp., 305 F.3d 89 (2d Cir. 2002),
pet. for cert. granted in part on other grounds sub nom.
Verizon Communications, Inc. v. Trinko, -- S.Ct. --, 2003
WL891459 (Mar., 2003), for the proposition that the Second
Circuit has ``rejected the notion that a plaintiff can sue
an ILEC alleging a violation of section 251 where an ILEC
has entered into an interconnection agreement in accordance
with section 252.'' Letter to Secretary, FCC, from SBC,
File No. EB-01-MD-017 (filed July 24, 2002). In Trinko, a
divided panel of the Second Circuit dismissed a suit in
federal court alleging that breach of an interconnection
agreement violated section 251 of the Act. We need not
address Trinko, as this case expressly does not involve
breach of an agreement, nor does it involve a suit in
federal court. We also note that the court did not have
before it a cause of action alleging violations of
conditions imposed by the Commission pursuant to sections
214(c) and 303(r) of the Act.
49 Answer at 15-16, ¶¶ 17-18; Revised Joint Statement at
5-6, ¶¶ 19-20, 7 ¶¶ 22-23.
50 Core and Z-Tel allege that all of the Defendants
violated Paragraph 56 of the Merger Order Conditions.
Complaint at 24, ¶ 95. By its very terms, however, that
condition applies only in the five states in which the
Ameritech Defendants are ILECs. Merger Order Conditions,
14 FCC Rcd at 15023-4, ¶ 56 (requiring that Ameritech
``offer shared transport ... within the Ameritech
states...'') (emphasis added). We therefore find no
violation of the Merger Order outside the Ameritech states.
51 SBC Forfeiture Order, 17 FCC Rcd at 19925-6, ¶ 5.
See In the Matter of SBC Communications Inc., Apparent
Liability for Forfeiture, Notice of Apparent Liability for
Forfeiture, 17 FCC Rcd 1397 (2002) (``SBC Notice of
Apparent Liability'') at 1399-1406, ¶¶ 7-19.
52 See, e.g., Answer at 16-17, ¶ 18 (admitting that Z-Tel
requested negotiation of the shared transport issue in
Illinois and Michigan, but that Defendants denied those
53 Answer at 3-5.
54 Answer, Ex. C (Defendants' Legal Analysis) at 3.
55 Answer, Ex. C (Defendants' Legal Analysis) at 12-13.
56 Merger Order, 14 FCC Rcd at 14716, ¶ 1.
57 Answer, Ex. C (Defendants' Legal Analysis) at 39, 44.
58 For example, Core entered into agreements in Illinois
and Ohio, and Z-Tel in Ohio, prior to the effective date of
paragraph 56 of the Merger Order Conditions. Letter dated
December 7, 2001 from Christopher M. Heimann, counsel to
SBC, to Magalie R. Salas, Office of the Secretary, FCC,
File No. EB-01-MD-017 (filed Dec. 7, 2001) (enclosing the
Agreements between SBC and Core or Z-Tel).
59 We do not address Core and Z-Tel's claim that
Ameritech violated section 251(c) and relevant implementing
rules, because our finding that Ameritech violated the
SBC/Ameritech Merger Order grants Core and Z-Tel all the
relief to which they are entitled against Ameritech.
60 Complaint at 7, ¶¶ 16-17.
61 See Letter dated September 20, 2001 to Magalie R.
Salas, Office of the Secretary, FCC, from Michael H.
Hazzard, counsel to Core and Z-Tel, File No. EB-01-MD-017
(filed Sept. 20, 2001) at Attachment (stating that
``neither Core nor Z-Tel provide[s] service in ...
Connecticut or Nevada,'' and only ``plan eventually to
provide service in those jurisdictions.'') (emphasis
added). See also Revised Joint Statement at 2-3, ¶¶ 6-7;
Answer at 1-2 n.1. Moreover, the only count in the
Complaint alleging failure to negotiate in good faith
asserts that Defendants have failed in good faith to
negotiate amendments to existing interconnection
agreements. Complaint at 17, ¶ 52; 19, ¶ 68.
62 See Complaint, Tab D, Ex. 13 (Letter dated December
21, 2000 from SBC to Z-Tel) at 1 (referring to the fact
that Z-Tel informed SBC on December 5, 2000 that Z-Tel had
opted into SWBT interconnection agreements for the states
of Kansas and Oklahoma, and agreeing that Z-Tel could use
the shared transport UNE for intraLATA toll in those
63 The record establishes that Z-Tel was allowed to use
shared transport for intraLATA toll in Arkansas and
Missouri by at least August 8, 2001, but contains no
evidence that Z-Tel was denied such use prior to that date.
See Complaint, Tab D, Ex. 1 (Letter dated August 8, 2001
from SBC to counsel to Z-Tel) at 3-4 (expressing surprise
at Z-Tel's assertion that it was unable to obtain shared
transport for intraLATA toll throughout the 13-state region
since ``Z-Tel can purchase this capability under its
current interconnection agreement ... in ... Arkansas,
[and] ... Missouri ...''). Similarly, the record
establishes that Z-Tel was allowed to use shared transport
for intraLATA toll calls in Texas by at least November 30,
2000, but contains no evidence that Z-Tel was denied such
use prior to that date. See Complaint, Tab D, Ex. 10
(Letter from counsel Z-Tel to SWBT dated December 5, 2000)
at 1 (discussing the fact that Z-Tel was using the shared
transport for intraLATA toll in Texas on November 30,
2000). See also Revised Joint Statement at 4, ¶ 11; 6 ¶¶
19-20 (Complainants stipulate that SWBT provides Z-Tel
shared transport for intraLATA toll in Arkansas, Missouri,
64 Core has no agreement with Pacific, nor does the record
indicate that it has ever attempted to negotiate one. We
therefore focus solely on Z-Tel, and Pacific's actions with
respect to Z-Tel.
65 We note that if Z-Tel was dissatisfied with the
shared transport terms of the Agreement, it need not have
opted into them. Under our ``pick and choose'' rule, 47
C.F. R. § 51.809, Z-Tel had the option of opting into only
those portions of the Agreement with which it was
satisfied. Z-Tel could then have sought negotiation, and
arbitration if necessary, on the shared transport UNE. Z-
Tel instead took the approach of opting into an agreement,
and then requesting additional rights.
66 Given that Pacific appears to have complied with Z-
Tel's opt-in request, we see no basis for any such
67 Accordingly, for purposes of this case only, we
presume that the agreement between Z-Tel and Pacific does
not provide for shared transport for intraLATA toll
traffic. The complaint is premised on Pacific's refusal to
agree to the desired terms, not on any argument that the
interconnection agreement requires Pacific to provide
shared transport for intraLATA toll traffic but that
Pacific has failed to comply with the agreement. The
Complainants do not allege any breach of the agreement, and
indeed explicitly disavow any such allegation.
In particular, Defendants allege in support of their
Second Affirmative Defense that Complainants ``have
specifically disavowed any claim that Defendants have
violated [the Pacific Agreement] ...,'' Answer at 4, n.9,
and that ``Complainants voluntarily ... adopted [an]
existing interconnection agreement that do[es] not make
available the intraLATA interexchange transmission
capability they seek ... . '' Answer at 4-5. Core and Z-
Tel's Reply to Defendants' affirmative defense does not
deny Defendants' allegations, and asserts instead that
Defendants have violated the Act and Commission rules even
if they are in compliance with the Pacific Agreement.
Reply at 8-9. Moreover, Complainants informed the
Commission that two key legal issues in this proceeding are
``whether Complainants have waived any claim that
Defendants' conduct is inconsistent with the Act ...
because Complainants voluntarily ... adopted [an] existing
interconnection agreement that do[es] not make available
the intraLATA interexchange transmission capability they
seek ..., '' and ``whether Complainants have failed to
state a claim upon which relief can be granted given that
Complainants ... have disavowed any claim that Defendants
have violated the terms of [the Pacific] agreement...''.
Revised Joint Statement, Statement of Key Legal Issues at
11-12, ¶¶ 6-7. Finally, Complainants do not allege that
Pacific is in breach of the Pacific Agreement, did not file
a copy of the agreement until ordered to do so by
Commission staff, and have not cited any of the agreement's
provisions as providing use of shared transport for
We note that SBC has made apparently contradictory
statements about what its agreement with Z-Tel requires.
In California, Z-Tel opted into the Pacific-AT&T agreement.
In this record, Defendants deny that the interconnection
agreement ``require[s] Defendants to provide shared
transport in the manner requested by Complainants.''
Answer at ¶ 16. In its section 271 application for
California, however, SBC argues that under this same
agreement, it does have a legal obligation to ``offer
shared transport for intraLATA toll in accordance with the
order of the California PUC in the AT&T Arbitration.''
Reply Comments of SBC in Support of In-Region InterLATA
Relief in California at 62, filed November 4, 2002 in WC
Docket No. 02-306, and Shannon Affidavit at ¶ 94,
Application by SBC Communications, Inc. et al., for
Provision of In-Region, InterLATA Services in California,
filed September 20, 2002, in WC Docket No. 02-306. We need
not resolve the apparent inconsistency between these
positions here, as it would not affect the outcome of this
case. If we were to take SBC's most recent statements as
true, we would still find in favor of Defendants, since
Core and Z-Tel have specifically disavowed any claim of
breach of the interconnection agreement.
68 Revised Joint Statement at 5-6, ¶ 19.
69 Revised Joint Statement at 6, ¶ 20.
70 Answer, Ex. C (Defendants' Legal Analysis) at 4.
71 See SBC Forfeiture Order, 17 FCC Rcd at 19932, ¶ 18.
Defendants argue that the D.C. Circuit decision in United
States Telecom Assoc'n v. FCC, 295 F.3d 1326 (D.C. Cir.
2002) prevents the Commission from enforcing this rule
against them. Because we rule in favor of Defendants,
however, we need not address this argument.
72 See, e.g., 47 U.S.C. § 251(c)(1) (duty to negotiate in
good faith ``the particular terms and conditions of
agreements to fulfill the duties described in paragraphs
(1) through (5) of subsection (b) and this subsection.'')
73 Local Competition First Report and Order, 11 FCC Rcd
at 15565, ¶ 127.
75 Section 201(b) of the Act states, ``All charges,
practices, classifications, and regulations for and in
connection with such communication service, shall be just
and reasonable, and any such charge, practice,
classification, or regulation that is unjust or
unreasonable is hereby declared to be unlawful ... .'' 47
U.S.C. § 201(b).
76 Section 202(a) of the Act provides, ``It shall be
unlawful for any common carrier to make any unjust or
unreasonable discrimination in charges, practices,
classifications, regulations, facilities, or services for
or in connection with like communications service ... .''
47 U.S.C. § 202(a).
77 Complaint at 14, ¶ 37.
78 See, e.g., Competitive Telecomm. Ass'n v. FCC, 998
F.2d 1058, 1064 (D.C. Cir. 1993) (``Section 202(a) is
designed to prevent a carrier from granting a discount to
one (usually large) user that it would not grant were the
same or a `like' service purchased by another (usually
79 Core and Z-Tel request ``that the Commission order
[Defendants] to permit [Core and Z-Tel] to transport
intraLATA toll traffic over the entirety of [Defendants']
shared transport network.'' Complaint at 15 ¶ 41. The SBC
Forfeiture Order imposes a fine upon SBC for violating
Paragraph 56 of the Merger Order Conditions by refusing to
allow ILECs to use the shared transport UNE for intraLATA
toll calls. Moreover, as explained in the SBC Forfeiture
Order, the Commission's implementing rules require that
ILECs allow CLECs to use the shared transport UNE for any
telecommunications service, including intraLATA toll
service, unless the parties agree otherwise pursuant to
section 252(a)(1). See SBC Forfeiture Order, 17 FCC Rcd at
19928-33, ¶¶ 1-17. Defendants are required by law fully to
comply with the Act and our rules, and their failure to do
so will result in appropriate enforcement action.
80 Implementation of the Local Competition Provisions in
the Telecommunications Act of 1996, 11 FCC Rcd 15499,
15564-65 ¶¶ 127-28 (1996).