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In the Matter of )

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Starpower Communications, LLC ) CC Docket No. 00-52

Petition for Preemption of Jurisdiction of the )

Virginia State Corporation Commission )

Pursuant to Section 252(e)(5) of the )

Telecommunications Act of 1996 )

By the Commission: Commissioner Furchtgott-Roth dissenting and issuing a statement; Commissioner Powell issuing a statement

1. This Memorandum Opinion and Order addresses the petition of Starpower Communications, LLC (Starpower) for preemption of the jurisdiction of the Virginia State Corporation Commission (Virginia Commission) with respect to a dispute concerning the interpretation and enforcement of its interconnection agreements with Bell Atlantic-Virginia, Inc., (Bell Atlantic) and GTE South, Incorporated (GTE). Specifically, Starpower seeks preemption of the jurisdiction of the Virginia Commission pursuant to section 252(e)(5) of the Communications Act of 1934, as amended (the Act). For the reasons set forth below, we grant Starpower’s petition.

2. Section 252(e)(5) requires the Commission to preempt the jurisdiction of a state commission in any proceeding or matter in which the state commission "fails to act to carry out its responsibility" under section 252. Section 252 of the Act sets forth the procedures by which telecommunications carriers may request and obtain interconnection, services, or unbundled network elements from an incumbent local exchange carrier (LEC).

3. Starpower filed a petition with the Virginia Commission on February 3, 1999, seeking a declaratory ruling directing GTE to pay reciprocal compensation to Starpower for delivering GTE’s traffic to Internet Service Providers (ISPs) served by Starpower. On September 15, 1999, Starpower filed a similar petition with the Virginia Commission against Bell Atlantic, again seeking payment of reciprocal compensation for traffic bound to ISPs.

1. On January 24, 2000, the Virginia Commission issued a final order declining jurisdiction over Starpower’s petition with respect to GTE by stating, "we find we should take no action." Similarly, in response to Starpower’s petition against Bell Atlantic, the Virginia Commission issued an order dismissing the complaint and adopting, in its entirety, the reasoning set forth in the Starpower/GTE Decision. In both cases, the Virginia Commission encouraged the parties to seek relief from this Commission. Starpower filed the present petition in March 2000, requesting that the Commission preempt the jurisdiction of the Virginia Commission over the Starpower/GTE and Starpower/Bell Atlantic contract disputes.

2. DISCUSSION

1. We conclude that the unique circumstances presented by Starpower’s petition require us to assume the jurisdiction of the Virginia Commission. Section 252(e)(5) directs the Commission to preempt the jurisdiction of a state commission in any proceeding or matter in which a state commission "fails to act to carry out its responsibility under [section 252]." We recognize that the proceeding over which Starpower urges us to assert federal jurisdiction is not one encompassed within the Commission’s existing rules under section 252(e)(5). Indeed, the Commission’s existing rules state that it will preempt a state commission’s jurisdiction for a "failure to act" under section 252(e)(5) in those "instances where a state commission fails to respond, within a reasonable time, to a request for mediation or arbitration, or fails to complete arbitration within the time limits of section 252(b)(4)(C)." This rule, promulgated in the First Report and Order, addresses only the Commission’s 252(e)(5) responsibilities in the context of a state’s "failure to act" with respect to its mediation and arbitration obligations pursuant to Section 252. The rule does not consider the Commission’s Section 252 responsibilities in the context of a state’s "failure to act" with respect to its other Section 252 obligations. In adopting those rules, however, the Commission did not consider whether a state commission could "fail to act" in the context of a subsequent proceeding to interpret or enforce an existing interconnection agreement. In this proceeding, we apply Section 252(e)(5) for the first time to matters outside the scope of mediation and arbitration.
2. In applying Section 252(e)(5), we must first determine whether a dispute arising from interconnection agreements and seeking interpretation and enforcement of those agreements is within the states’ "responsibility" under section 252. We conclude that it is. In reaching this conclusion, we find federal court precedent to be instructive. Specifically, at least two federal courts of appeal have held that inherent in state commissions’ express authority to mediate, arbitrate, and approve interconnection agreements under section 252 is the authority to interpret and enforce previously approved agreements. These court opinions implicitly recognize that, due to its role in the approval process, a state commission is well-suited to address disputes arising from interconnection agreements. Thus, we conclude that a state commission’s failure to "act to carry out its responsibility" under section 252 can in some circumstances include the failure to interpret and enforce existing interconnection agreements.
3. We must next consider whether the Virginia Commission has "failed to act" within the meaning of section 252(e)(5). In this case, the Virginia Commission expressly declined to resolve the petitions before it and interpret and enforce Starpower’s interconnection agreements with GTE and Bell Atlantic. Specifically, the Virginia Commission stated in the Starpower/GTE decision, "we believe the only practical action is for this Commission to decline jurisdiction and allow the parties to present their cases to the FCC." We first note that we are sympathetic to the concerns of the Virginia Commission with regard to the status of the law governing inter-carrier compensation for ISP-bound traffic. Because the decisions explicitly declined to take any action with respect to Starpower’s petitions, however, we are compelled to conclude that the Virginia Commission "failed to act to carry out its responsibility" under section 252. Accordingly, the Act requires us in these unique circumstances to assume the jurisdiction of the Virginia Commission and resolve the outstanding interconnection disputes.
4. We reject the arguments of Bell Atlantic and GTE that the mere issuance of the Virginia Commission’s final order in each proceeding was sufficient to fulfill its responsibility under section 252(e)(5). Rather, as we have found in other orders interpreting section 252(e)(5), we evaluate whether a state commission has fulfilled its responsibility under section 252 based on the particulars of each case. For example, we have found that a state commission has carried out "its responsibility [under section 252]" when it resolves the merits of a section 252 proceeding or dismisses such a proceeding on jurisdictional or procedural grounds. The Virginia Commission did not dismiss Starpower’s petitions because of jurisdictional or procedural defect, but rather expressly declined to resolve the merits of the case. Furthermore, we disagree with Bell Atlantic and GTE that Starpower’s filing of an appeal of the Virginia Commission’s order in federal district court precludes a finding that the state commission has failed to act under section 252(e)(5). Rather, by seeking relief concurrently in Federal district court and this Commission, Starpower exercised its right to seek alternative remedies.
5. Starpower may now file with the Commission for resolution of the interconnection disputes that were the subject of the Virginia Commission proceedings addressed herein. Upon receiving the appropriate filings from Starpower, the Commission will proceed to resolve only the question that the Virginia Commission would have resolved had it chosen to act: whether the existing interconnection agreements between Starpower and GTE and Bell Atlantic require GTE and Bell Atlantic to pay compensation to Starpower for the delivery of ISP-bound traffic. In resolving that question, the Commission will apply, inter alia, the principles that the Commission suggested state commissions apply to such disputes in the Inter-Carrier Compensation Declaratory Ruling. In addition, to expedite resolution of this case, we strongly encourage the parties to contact the Market Disputes Resolution Division of the Enforcement Bureau before filing to discuss how the issue might best be handled. We also reiterate the finding in the Local Competition Order that the Commission retains exclusive jurisdiction over any proceeding or matter over which it assumes responsibility under section 252(e)(5). Similarly, any findings made by the Commission after it assumes responsibility over a proceeding and any judicial review of such findings shall be the exclusive remedies available to the parties.

10. For the foregoing reasons, we grant Starpower’s Petition for Commission preemption of jurisdiction over its complaints against Bell Atlantic and GTE and invite Starpower to file for resolution of its disputes with Bell Atlantic and GTE under 47 C.F.R. § 1.720 et seq.

11. Accordingly, IT IS ORDERED that, pursuant to section 252 of the Communications Act of 1934, as amended, and section 51.801(b) of the Commission’s rules, 47 U.S.C. § 252 and 47 C.F.R. § 51.801(b), the Petition for Commission preemption of jurisdiction filed by Starpower Communications, LLC on March 16, 2000, IS GRANTED.

FEDERAL COMMUNICATIONS COMMISSION

Magalie Roman Salas

Although it seems particularly unfortunate that we must preempt a state commission for "failure to act" based on its reaction to our garbled Reciprocal Compensation Order, I believe the record and statute compel this result.

Prior to that order, a number of state commissions, including Virginia’s, had chosen to treat a phone call to destinations on the Internet as two calls; the first "call" was a local one to an Internet service provider (ISP), and the second "call" was from the ISP to destinations on the Internet. The first of these segments was clearly "telecommunications" and thus states required reciprocal compensation to be paid, pursuant to section 251(b)(5), by the originating local carrier to the local carrier carrying the traffic to the ISP. In our Reciprocal Compensation Order, we declared that Internet-bound traffic was a single communication (i.e., one call, rather than two) and thus the nature of the communication was interstate. The effect of this declaration was to preempt the "two-call theory" used by Virginia and other states in awarding reciprocal compensation. Moreover, because the nature of the Internet-bound calls was interstate, it empowered the FCC, if it chose, to determine a federal compensation scheme for such traffic. (Because this declaratory ruling potentially pitted the federal authority against state authority, the "one-call"/"two-call" dispute is frequently referred to as the "jurisdictional issue.") Although we did not establish a federal inter-carrier compensation mechanism for the traffic we had just declared interstate, we did initiate a subsequent proceeding to consider that question, which is still pending.

Because we did not proffer a federal compensation rule in our Reciprocal Compensation Order, the question arose as to how our decision would affect current interconnection agreements that included reciprocal compensation provisions. The Commission did not wish to abrogate immediately those agreements and thus suggested that states could continue to "treat" the traffic as local until we considered alternate compensation schemes. This caused considerable confusion among state commissions and carriers. At once, we said the traffic was interstate and within our authority and at the same time that it could be "treated" as local, permitting states to sustain current agreements under some vague notion of delegation. In addition to permitting states to continue to treat traffic as local for some period, we also suggested a number of bases other than the two-call theory on which a state could act, including state contracting principles and any "other legal or equitable considerations." At the time, I questioned this analysis as one that would only confuse states and that would raise more questions than it resolved.

Starpower petitioned the Virginia Commission to resolve a dispute between it and Bell Atlantic. In an order, Virginia demonstrated that it was reasonably in doubt about how the FCC would ultimately rule on reciprocal compensation and that it did not feel empowered to act on some purported delegation by the FCC. The Virginia Commission specifically "declined jurisdiction" and instructed the parties to seek their relief at the FCC. A fair reading of the Virginia Commission’s decision is that it provided a reasoned basis for why the Virginia Commission would not resolve the underlying interconnection dispute, but Virginia failed to act nonetheless.

Section 252 clearly requires state commissions to resolve interconnection disputes expeditiously in order to allow carriers to get back to the business of providing service, rather than litigating. This duty is not limited to any particular basis for resolving these disputes, such as the jurisdictional nature of traffic between carriers. Rather, state commissions have a duty to resolve interconnection disputes by relying on any legitimate bases (including state law bases), so long as those bases do not conflict with federal law.

Thus, even if we were to accept the Virginia Commission's argument that the ambiguities created or perpetuated by our Reciprocal Compensation Order prevented the state from resolving the interconnection dispute on the basis of jurisdiction, Virginia had a duty to look at other bases for resolution. Unfortunately, however, there is no indication that the Virginia Commission looked at any bases for resolution other than jurisdiction, despite the fact that it had already concluded that jurisdiction was left ambiguous by our Reciprocal Compensation Order. This seems particularly troubling given the existence of other potential bases for resolution, some of which we alluded to in that order.

Moreover, some of the text of the Virginia Commission’s decision declining to resolve the instant interconnection dispute reads almost as an admission that it failed to act, in that the Virginia Commission knowingly failed to resolve a dispute that it likely knew it could resolve. Although the Virginia Commission’s analysis may persuade us that it acted reasonably or that the FCC contributed to Virginia’s dilemma, the state commission's rationales do not change the fact that it did not resolve the dispute, which section 252 requires it to do.

In addition, I would note that the equities or policy benefits of section 252 run to the disputing carriers, particularly new entrants, rather than to state commissions. Although it is important, in the interest of promoting federal-state comity, that we try to avoid unnecessary preemption, what is most important in considering preemption here is that the carriers have not enjoyed the benefit of the forum for dispute resolution guaranteed them by section 252. Section 252(e)(5) says, in essence, that when the state fails to provide the section 252 forum for resolving interconnection disputes, the FCC has to step in to perform the state's responsibilities. That is why we must preempt here, despite any reluctance we might have given the troubled nature of our reciprocal compensation precedents.

I also am unpersuaded that Starpower is somehow estopped from seeking preemption by the fact that it simultaneously filed an action in district court. I believe that FCC preemption is the exclusive remedy for a party that believes the state commission has failed to act. When there is some question, however, as to whether the facts, fairly read, evidence a failure to act it is reasonable for the party to seek relief both at the Commission (which has exclusive authority if the state commission fails to act) and in district court (which has jurisdiction to review the state commission’s decision if it did not fail to act). I am unwilling to conclude that, by turning to both forums simultaneously, Starpower has somehow conceded that the Virginia Commission acted within the meaning of section 252(e)(5). The law does not make clear which forum – the FCC or the district court – has the authority in the first instance to determine whether there has been a failure to act.

For these reasons, I support, albeit reluctantly, the decision to preempt the Virginia Commission in this case.