Supreme Court to Resolve Circuit Split Regarding Treatment of Entrance Facilities


On December 10, 2010, in Talk America, Inc. v. Michigan Bell Tel. Co., No. 10-313, the United States Supreme Court agreed to hear an appeal of a decision by the Sixth Circuit in Michigan Bell Telephone Co. v. Covad Comms. Co., No. 07-2469 that created a conflict between the Sixth Circuit and the Seventh, Eighth and Ninth Circuits.  The case will be consolidated with another appeal from the Sixth Circuit in Isiogu v. Michigan Bell Tel. Co., No. 10-329.

At issue in Michigan Bell was the rate charged by incumbent local exchange carriers (“ILECs”) for competitors’ use of entrance facilities (cables or wires used to connect the ILEC’s switch to the competitor’s switch).   The ILEC argued that the FCC’s rules permitted it to charge higher, non-cost-based rates for these facilities, instead of the cost-based rates required for unbundled network elements.

The Sixth Circuit held, contrary to the FCC’s own interpretation of its regulation and the decisions of other circuits, that ILECs could charge market-based rates for entrance facilities.  The court reasoned that the lower cost of building entrance facilities, the broad availability of these facilities from other providers and the greater potential of additional revenue from the facilities eliminates any potential ILEC monopolistic control of entrance facilities.  In contrast, the Seventh (Illinois Bell v. Box), Eighth (Southwestern Bell v. Missouri PSC) and Ninth Circuits (Pacific Bell v. California PUC) have all held that ILECs must charge cost-based rates for entrance facilities.

In a separate matter, on December 16, 2010, the U.S. Court of Appeals for the Fourth Circuit in Verizon Maryland v. Core Communications, upheld a decision by the Maryland Public Service Commission that Verizon violated Section 251 and its interconnection agreement by not providing Core Communications an OC-12 loop facility for interconnection as requested by Core.   The Court found that Verizon had provided similar facilities for interconnection to both Core and other carriers and that the FCC’s rules make clear that the requesting carrier, not the ILEC, should determine the type and quality of interconnection it receives.

The Supreme Court’s opinion will resolve the conflict in federal law created by the Sixth Circuit’s decision and provide a final determination as to the appropriate pricing methodology applicable to entrance facilities in all jurisdictions.  However, because the appeals raise only the pricing issue, the Court may not address any other issues related to entrance facilities, such as potential disputes over what facilities qualify.

Clients with comments or questions regarding this Advisory should contact the attorney responsible for their account.


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