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February 20, 2003


The opinion of the court was delivered by: Castillo, District Judge.



As part of the deregulation of the telecommunications industry under the Telecommunications Act of 1996 (the "Act"), incumbent local exchange carriers ("ILECs") are required to negotiate interconnection agreements with competing local exchange carriers ("CLECs") seeking to enter the local telecommunications marketplace. 47 U.S.C. § 251. These interconnection agreements allow a CLEC, in return for negotiated fees, to utilize portions of an ILEC's infrastructure to set up competing telecommunications services. Upon request, the ILEC has a duty to attempt to negotiate an interconnection agreement with a CLEC. 47 U.S.C. § 251-252(a)(1). To the extent that the parties are not able to resolve any provisions of the interconnection agreement after a period of negotiation, either party may petition the appropriate state agency to oversee mandatory arbitration of any open issues. 47 U.S.C. § 252(b). The state agency's responsibility in turn is to ensure that the resulting interconnection agreement complies with the provisions of the Act, and in particular, that negotiated rates comply with the pricing methodology for network elements promulgated by the FCC under the Act. 47 U.S.C. § 252(c)(1) — (2).

The Act authorizes the FCC to establish a pricing methodology for determining the costs associated with different network elements provided by the ILEC to the CLEC in an interconnection agreement. 47 U.S.C. § 251. The resulting FCC rules established the Total Element Long-Run Incremental Cost ("TELRIC") methodology, providing that costs for network elements be "based on the use of the most efficient telecommunications technology currently available and the lowest cost network configuration, given the existing location of the [ILEC's] wire centers." 47 C.F.R. § 51.505(b)(1). Either party to an interconnection agreement may seek federal court review of an agreement provision approved by a state agency if it believes that provision fails to comply with a provision of the Act or the FCC rules promulgated thereunder. 47 U.S.C. § 252(e)(6).

Pursuant to the Act, Ameritech Illinois and McLeod entered into negotiations for an interconnection agreement. Because they were unable to agree on terms for a number of provisions in the agreement, McLeod petitioned the ICC for arbitration resolving the open issues. (R. 9, Pl.'s Facts, ¶ 4.) One of these provisions concerned Ameritech Illinois' ability to charge for a service called "manual loop qualification," performed to determine whether the transmission path carrying telecommunications services to subscribers can support various types of advanced telecommunications services. (Id. at ¶¶ 11, 18.) Ameritech Illinois introduced evidence that, while most requests for loop qualification information could be handled through a mechanized process, certain situations occurred where staff intervention was necessary in order to retrieve mechanized information on loop status. (Id. at ¶ 14.) To support its proposed charge as required under the FCC rules, 47 C.F.R. § 51.505(e), Ameritech Illinois provided a cost study that purported to comply with the TELRIC pricing standards and detailed the additional labor costs associated with the manual loop qualification procedure.

As is usual in ICC arbitration proceedings, the ICC staff prepared its recommendations for resolving the disputed provisions of the agreement. (R. 9, Pl.'s Facts, ¶¶ 5-6.) The ICC staff recommended that the proposed charge for the manual loop qualification procedure not be incorporated in the agreement on the grounds that the charge did not comply with TELRIC principles. (R. 10, Pl.'s App., Ex. A at 20.) Administrative Law Judges also reviewed the evidence presented during the hearings as well as the ICC staff recommendation. The ALJs drafted a proposed order allowing the manual loop qualification charge proposed by Ameritech Illinois. (R. 9, Pl.'s Facts, 1 21.)

The ICC rejected the proposed charge on the grounds that it did not comply with TELRIC principles. (R. 9, Pl.'s Facts, ¶ 21; R. 10, Pl.'s App., Ex. A at 21.) In its Arbitration Decision, the ICC noted that Ameritech Illinois had previously submitted an identical cost study in prior proceedings addressing its proposed charge for the manual loop qualification procedure, and at that time the ICC had found that the study did not conform to TELRIC pricing methodology. (R. 10, Pl.'s App., Ex. A at 21-22.) In addition, the ICC held that to impose this charge now on McLeod, when it had not allowed the charge to be incorporated in previous interconnection agreements, would be discriminatory and therefore a further violation of TELRIC. (Id.) Ameritech Illinois contends in its motion for summary judgment that this decision was arbitrary and capricious and should be reversed on the grounds that the ICC failed to consider the additional evidence provided by Ameritech Illinois in support of its cost study and because no evidence in the record supports the existence of another, "most efficient technology" as described in the FCC TELRIC rules.


Summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

"In order for the Court to issue a declaratory judgment, there must be a dispute which calls, not for an advisory opinion upon a hypothetical basis, but for an adjudication of present right upon established facts." Boozell, 979 F. Supp. at 674 (internal quotations omitted). "When all is said and done . . . `the propriety of declaratory relief in a particular case will depend upon a circumspect sense of its fitness informed by the teaching and experience concerning the functions and extent of federal judicial power.'" Id. (quoting Wilton v. Seven Falls Co., 515 U.S. 277, 287, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995)). Although neither Defendant filed a cross motion for summary judgment, an evaluation of Ameritech Illinois' motion calls for "an adjudication of present right upon established facts," and therefore a denial of Ameritech Illinois' motion for summary judgment necessitates declaratory judgment in favor of the defendants. Boozell v. United States, 979 F. Supp. 670, 674 (N.D.Ill. 1997) (internal quotations omitted).

This Court has jurisdiction over this proceeding pursuant to 47 U.S.C. § 252(e)(6). The Act, which authorizes federal review of state agency findings made pursuant to 47 U.S.C. § 251-252, does not itself provide a standard of review. Federal district courts have uniformly held that a state agency's legal determinations are to be reviewed de novo. U.S. West Communications, Inc. v. Hix, 986 F. Supp. 13, 18 (Colo. 1997). Any other determinations made during an arbitration proceeding are reviewed under the arbitrary and capricious standard. Id.

In Hix, the first district court case addressing standard of review under the Act, the court laid out a series of factors for determining whether an agency has acted arbitrarily and capriciously in the fulfillment of its responsibilities ...

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