Verizon Communications Inc. v. Federal Communications Commission

Background

A group of new competitors in local telephone markets and incumbent local telephone companies are at odds over how much the newcomers must pay to connect to existing networks. The Federal Communications Commission adopted a cost method based on the efficient replacement cost of existing technology. A Court of Appeals decision rejected that method and raised related questions about constitutional and statutory limits. The Supreme Court granted review limited to three specific questions; the cases were consolidated and one hour was allotted for oral argument. The lower-court opinion is reported at 219 F. 3d 744.

Reasoning

The Court agreed to consider whether the Telecommunications Act and a particular statutory provision stop the FCC’s modern cost method for setting interconnection rates, whether the Takings Clause or the Act requires using an incumbent’s historical costs instead, and whether regulators may require incumbents to combine previously separate network elements when a new entrant requests that combination and offers to pay. The Supreme Court’s order narrows review to those precise questions, so the Justices will focus on the legal scope of the statute, the FCC’s chosen cost approach, and constitutional concerns about compensation.

Real world impact

The outcome could change how new competitors are billed to use incumbent networks, whether incumbents are paid based on old accounting or newer replacement-cost methods, and whether regulators can force companies to assemble separate network parts. Because the Court has only granted review on those questions, the decision is not a final resolution of the merits and could still produce different results on appeal.

Dissents or concurrances

Justice O’Connor took no part in the consideration or decision of these petitions, as noted in the order.