FCC Action in Maine Fight over Section 271 May Be Elusive

Section 271 required Bell operating companies entering the long-distance business to unbundle loops, transport and switching facilities for CLEC customers. Section 271 often is mentioned in tandem with Section 251, which governs unbundled network elements. FCC moves under its triennial remand order and triennial review remand order have shrunken competitors’ access under Section 251 to UNEs at advantageous rates. That has prompted efforts to use Section 271 as an avenue to lower fees to access incumbent local exchange carrier facilities, raising the provision’s profile with CLECs, incumbents and state regulators.

FairPoint is pressing the state commission to remove the Section 271 status it granted the disputed loops in 2005, when they belonged to Verizon. FairPoint entered the Maine market in 2008 by buying Verizon’s landlines in that state, Vermont and New Hampshire. The deal ended up landing the company in a Chapter 11 bankruptcy reorganization in U.S. District Court in Manhattan.

Great Works hopes to preserve an arrangement that has the CLEC paying as much as $1,000 per airline mile less per month per loop than FairPoint wants to charge. Great Works asked the Maine commission to refer its case to the FCC, and earlier a federal appeals court told the Maine commission to take an earlier version of the case to the FCC.

Maine specifically asked the FCC to rule on whether, under Section 271, FairPoint must “make certain dark fiber loops, dark fiber transport, dark fiber entrance facilities, and line sharing available to competitors seeking access and interconnection services from FairPoint in Maine.” To support its petition, the Maine commission cited Section 271 orders in its state, Pennsylvania, Arkansas, Missouri and Vermont.

The case dates from 2005, when Verizon and Great Works disagreed over interconnection rates. Their 2001 interconnection agreement called for Verizon to provide dark fiber loops as Section 251 elements at TELRIC rates. But according to Verizon and later FairPoint, the FCC’s 2005 Triennial Review Remand Order (TRRO) should have triggered renegotiation of rates on the dark fiber loops. But the Maine commission, asserting what it contended was its authority to enforce Section 271, ordered Verizon to continue to give Great Works access to the loops at TELRIC rates.

Verizon complied with the Maine order but it -- and other carriers facing similar orders in other states -- sued in federal courts. The carriers claimed state commissions were usurping the FCC’s Section 271 enforcement authority. In the Maine case, Verizon lost in district court but won on appeal. Before remanding the case to the district court in Maine, the 1st U.S. Circuit Court of Appeals said TELRIC rates don’t apply to Section 271 elements, and Verizon wasn’t bound to charge them. The appeals court also decided that the FCC hadn’t ruled on whether the delisted Section 251 elements in fact came under Section 271. Declaring Section 271 to be the sole province of the FCC, the court told the state commission to take the matter to the federal one. The court reversed the Maine order, a finding echoed in a string of later decisions against other state commissions.

The 8th Circuit ruled in a Missouri case in June 2008 that Section 271’s “plain language … makes clear states have no authority to interpret or enforce” that section of the Act, and “the FCC must address any enforcement issues.” The 7th Circuit said, in an Illinois case in September 2008, that Section 271 “does not require a carrier to charge a rate no higher than its cost.” The 11th Circuit upheld in January 2009 a district court ruling that the Georgia commission “lacks authority to set rates for facilities and services” required under 271. In June, the 9th Circuit agreed in an Arizona case. Disconnection Threat

In a filing Jan. 8, Great Works petitioned Maine’s commission to investigate billing, collection and disconnection practices by FairPoint and to impose an emergency moratorium on the carrier’s disconnection of wholesale phone services. The current arrangement “is not sustainable,” Great Works staff attorney Fredrick Samp told us. “Something is really lacking in FairPoint’s billing system. Every time we hear from them they're telling us something different. We think that when all these matters are resolved FairPoint will owe us money.” Great Works “has regularly paid invoices from FairPoint and Verizon for Dark Fiber Loops as they come due and remains current as of this date on all regular monthly Dark Fiber Loop bills presented to it by FairPoint and Verizon,” the CLEC said in its petition.

In March 2009, Great Works said, FairPoint told the CLEC it would stop processing orders for dark-fiber loops “under any circumstances.” The letter said FairPoint soon would give official notice that within 12 months that it would be disconnecting dark-fiber loops in service. It also told Great Works it “would not be willing to continue to provide existing Dark Fiber Loops under any terms and conditions,” Great Works told the PUC. “FairPoint has not provided the written notice discussed on March 18, 2009,” Great Works said. It complained that FairPoint was violating the companies’ interconnection agreement and asked the Maine commission to direct that FairPoint continue processing dark- fiber loop orders. The complaint hasn’t been resolved.

In September FairPoint sent Great Works a letter invoking the 1st Circuit decision. FairPoint claimed the right to bill Great Works back to September 2006 at $1,100 per airline mile a month, counting 77 loops and estimating the total due at nearly $3.1 million. FairPoint gave Great Works until Oct. 19 to pay in full or face termination Dec. 18 of all its dark-fiber-loop leases. Great Works challenged FairPoint’s count, prompting the carrier to admit an error and to report that only 17 dark fiber loops are involved. Since then, Great Works told the Maine commission, FairPoint’s only direct communication has been an offer to extend the termination deadline to Jan. 17.

To speed up its case at the Maine commission, Great Works asked the U.S. District Court in Manhattan to lift or change an automatic stay against outside claims until a bankrupt company leaves Chapter 11. The judge rejected the CLEC’s request.

In response, FairPoint filings called Great Works “a deadbeat” that “has failed to pay the below-market rates which it maintains should still apply.” In mid-January, FairPoint said in its response filing, that it told Great Works that the CLEC has no contract for dark-fiber loops and “invited” it to negotiate a new contract by Feb. 12 or lose its access to dark-fiber loops. Great Works is trying to “mask its real intent to seek improper relief for the lawful termination of its dark fiber loops with a general request for an investigation into FairPoint’s billing and collection practices so that it appears that it is within the jurisdiction of the Commission,” FairPoint said Jan. 14.

“While there are many holes in Great Works’ argument, the most glaring is that its claims for pre-billing credits are properly before the Bankruptcy Court and subject to the automatic stay,” FairPoint said. “Great Works has already attempted to have the stay lifted and was unsuccessful. The Commission should not assist Great Works in circumventing the Bankruptcy Court and should dismiss Great Works’ Complaint for lack of jurisdiction.” FairPoint “does not now, nor has ever had” any intention of disconnecting the disputed loops, FairPoint said in its filing.

The new deadline for Great Works to pay is Feb. 12, a FairPoint spokesman said. “Our intention is to continue to work with Great Works to resolve this situation,” he told us. “We want a settlement. They rolled the dice in district court and the 1st Circuit, and they rolled the dice in the bankruptcy court, and they came up nothing. Now it’s time to pay.”

Maine’s petition for an FCC declaratory ruling may come to little, some sources in the incumbent camp told us. They were commenting not only on the Maine matter but a November petition to the FCC by a coalition of CLECs. Accusing Qwest, AT&T and Verizon of exploiting what it called FCC inaction, the coalition asked the commission for rules guiding enforcement of big carriers’ Section 271 duties (CD, Nov10, p6). Recreating the World of 251

“The end game here seems to be an attempt to rewrite Section 251 into Section 271,” said an ILEC-related source. “They appear to be trying to say, ‘OK, FCC, we need you to interpret Section 271 to get the same results that were found to be outside the purview of Section 251.’ Section 271 has separate obligations, but there seems to be an effort under way to recreate the unbundled world of Section 251 under Section 271. They're trying to operate Section 271 at the state level.”

Under Section 251, the states followed through on guidelines provided by the FCC, the source said. “Section 271 sets broad guidelines that frankly don’t need rules to be implemented,” the source added. Those that think an incumbent carrier isn’t complying with Section 271 can go to the FCC or a federal court, he said.

“Why is Maine asking the FCC for a declaratory ruling?” the source asked. “It’s not clear what Maine could do if the FCC said, ‘Why, yes. Here are carriers’ obligations under 271.’ Why doesn’t Great Works just bring a complaint at the FCC or in federal court? Even the CLECs that recently petitioned the FCC to issue Section 271 regulations made clear that FCC is THE authority when it comes to 271. Maine seems to be trying to avoid acknowledging that.”

Competitive carriers have been disadvantaged by FCC’s hands-off stance on interpreting 271, said an attorney for CLECs. “The statute imposes an express obligation on ILECs, but there has been no enforcement of that obligation,” the lawyer said. “There’s tremendous concern about this because no one knows who has jurisdiction to declare UNEs to have 271 status.”

The FCC’s reluctance may have several causes, the lawyer said. “The Martin-era commission didn’t want to do anything that would benefit competitors. And the issue raises resources concerns for the agency. As the courts were deciding that only the FCC has jurisdiction to set 271 rates, it was obvious that the FCC didn’t have the staff capacity to conduct cost proceedings to set rates. They would potentially have to review cost studies and set rates for all the states, the District of Columbia and Puerto Rico. In 2000, the FCC assumed jurisdiction to arbitrate several interconnection disputes with Verizon when the Virginia commission declined to act. The FCC’s final decision on rates wasn’t issued until three years later.”

Competitive carriers and their allies had hoped that the first decision in Verizon’s suit against Maine presaged a different outcome. “We in the industry were ecstatic about the District Court decision in the Verizon case,” the CLEC lawyer said. “It was a blow when the 1st Circuit reversed that ruling.”

The campaign for Section 271 rules seems like a long shot, said an attorney familiar with the provision from work for incumbents. “The perspective among ILECs is that new Section 271 unbundling requirements would discourage investment, and the FCC has agreed on that in regard to TELRIC pricing,” the attorney said. “Taking that hands-off approach to line-sharing and dark fiber would help facilitate broadband, and the last thing that the FCC should want are policies that discourage investment by anybody in broadband. That would hurt both sides. Incumbents would see a diminishment of the returns on their investments and it would keep CLECs from becoming self-reliant by discouraging them from developing their own broadband facilities.”

“For the last 10 years of unbundling fights, Section 251 was the focus, with a lot of back and forth about what it did and didn’t cover,” the attorney said. “The courts and the FCC agreed that when it came to dark fiber and line sharing that it is pro-competitive not to have TELRIC pricing under unbundling requirements.”

Now the debate has turned to Section 271 as a possible avenue to pricing that existed under 251, the attorney said. “Section 271 only became an issue when 251 went out. It’s as if they're asking, ‘Well, if there was no Section 251, would Section 271 do the same thing?'”

Section 271 doesn’t deal with what Section 251 does, the attorney said. “There are no requirements. There’s some unbundling under 271, but can you get to dark fiber and line sharing with it? The language in 271 doesn’t get you there. Unbundling applies to loops and transport, and incumbents that once were Bell companies are doing this. But that doesn’t mean breaking up the line on an unbundled basis. Dark fiber isn’t even a transport service.”

The FCC has never ruled on this aspect of Section 271, the attorney said. “In its petition, Maine cites language that lumps together Sections 251 and 271, but that’s from the old days, before the TRO and the TRRO. The FCC has made clear that it has a lot of priorities such as broadband and universal service. I haven’t heard that unbundling, which is a pretty settled universe, is one of those priorities.”