3rd Circuit Holds Interconnection Actions Must First Be Brought in the State PUC
May 9, 2007. The U.S. Court of Appeals (3rdCir) issued its opinion [29 pages in PDF] in Core Communications v. Verizon, a case regarding the proper procedure of adjudicating disputes regarding interconnection agreements between carriers. The Court of Appeals held that the state public utility commissions that approve these interconnection agreements "are given the first crack at interpreting and enforcing" these agreements.
Verizon Pennsylvania is an incumbent local exchange carrier (ILEC) in the state of Pennsylvania. Core Communications is a competitive local exchange carrier (CLEC).
The interconnection provisions of the Telecommunications Act of 1996 are codified at 47 U.S.C. § 251 and 47 U.S.C. § 252.
Subsection 251(a) provides that "Each telecommunications carrier has the duty ... to interconnect directly or indirectly with the facilities and equipment of other telecommunications carriers".
Moreover, subsection 251(c)(1) provides that "each incumbent local exchange carrier has ... The duty to negotiate in good faith in accordance with section 252 of this title the particular terms and conditions of agreements ..." In addition, "The requesting telecommunications carrier also has the duty to negotiate in good faith the terms and conditions of such agreements".
Subsection 252(a) provides that "Upon receiving a request for interconnection, services, or network elements pursuant to section 251 of this title, an incumbent local exchange carrier may negotiate and enter into a binding agreement with the requesting telecommunications carrier or carriers". Also, Subsection 252(b) provides that any "party to the negotiation may petition a State commission to arbitrate any open issues".
Subsection 252(i) provides that "A local exchange carrier shall make available any interconnection, service, or network element provided under an agreement approved under this section to which it is a party to any other requesting telecommunications carrier upon the same terms and conditions as those provided in the agreement."
Core entered into an interconnection agreement with Verizon (actually, its predecessor in interest, Bell Atlantic Pennsylvania) by opting into an existing interconnection agreement between MCI and Verizon (Bell Atlantic).
The Court of Appeals wrote that Core asserts that when it requested interconnection to various markets in Pennsylvania, "Verizon deliberately and unjustifiably refused to interconnect with Core at technically feasible points in a timely manner. Rather than using existing facilities with spare capacity to interconnect, Verizon cited its internal policy of requiring the construction of new, dedicated facilities to interconnect with Core. No technical or business justification was given explaining the need for this requirement. Core claims that Verizon intentionally took these steps in order to maintain its competitive advantage in Pennsylvania markets and to intimidate and financially harm Core."
Without first exhausting remedies before the Pennsylvania Public Utility Commission (PPUC), Core filed a complaint in U.S. District Court (EDPa) against Verizon. Count I alleged violation of 47 U.S.C. §§ 201 and 202. Count II alleged violation of 47 U.S.C. § 251. Count III alleged a material breach of an interconnection agreement. Count IV alleged intentional non-disclosure and fraudulent concealment under Pennsylvania common law.
The District Court dismissed all four counts of Core's complaint without prejudice. It held that interconnection related claims must first be brought in the relevant state PUC, before bringing an action in U.S. District Court.
The District Court relied upon the Federal Communications Commission's (FCC) 2000 ruling in In re Starpower Communications, LLC, for the principle that the complaining carrier must first go to the state PUC. The District Court relied upon the Supreme Court of the U.S.'s 1984 opinion in Chevron U.S.A., Inc. v. Natural Resources Defense Council for the appropriate degree of deference to accord to the FCC.
Core brought the present appeal.
The Court of Appeals, reviewed the statute and FCC rulings, applied Chevron deference, and concluded that "the most sensible harmonization of the Act's structure and the FCC's declarations is a solution under which the bodies that are responsible for overseeing the formation of interconnection agreements are given the first crack at interpreting and enforcing them."
It concluded that "we will affirm the judgment of the District Court dismissing Count III of Core’s complaint without prejudice, vacate the dismissal of the remaining counts, and remand for further proceedings consistent with this opinion."
This case is Core Communications, Inc. v. Verizon Pennsylvania, Inc., U.S.
Court of Appeals for the 3rd Circuit, App. Ct. No. 06-2419, an appeal from the
U.S. District Court for the Eastern District of Pennsylvania, D.C. No.
04-cv-04513, Judge Timothy Savage presiding. Judge Fisher wrote the opinion of
the Court of Appeals, in which Judges Smith and Gustave Diamond joined.