Under Section 251, When can a CLEC Offer Wholesale Services in a State?

August 12, 2022 | by Andrew Regitsky

Under Section 251, When can a CLEC Offer Wholesale Services in a State?

Industry comments are due on August 16, 2022, in a unique Petition for Declaratory Ruling (Petition) by the CLEC Midcontinent Communications (Midcontinent) filed on July 12, 2022, in Docket 22-277.

In its Petition, Midcontinent requests the FCC to issue a declaratory ruling affirming that a telecommunications carrier authorized to provide any telecommunications service in a state may seek interconnection with any other telecommunications carrier under section 251(a) of the Telecommunications Act for the purpose of providing wholesale interconnection services for the exchange of local traffic, without the need to obtain additional authority from a state regulator, including a certificate of authority to provide local exchange service.

Midcontinent asserts that such a ruling is necessary because the South Dakota Public Utilities Commission (PUC) recently found that Midcontinent is not entitled to interconnection with a rural ILEC to provide wholesale interconnection services until Midcontinent obtains a certificate of authority to provide local exchange service in the exchange where Midcontinent is seeking to provide the services.

The problem began when Midcontinent decided to provide wholesale interconnection services to any customer authorized to provide voice services in the portion of South Dakota served by James Valley Telecommunications Cooperative (“James Valley”), a rural ILEC. Midcontinent made a formal request to James Valley for interconnection, tried to negotiate an agreement, and filed a petition for arbitration after James Valley declined to enter negotiations. During arbitration, the South Dakota PUC ruled that, to provide wholesale interconnection services, Midcontinent must obtain a certificate of authority (a “COA”) for local exchange service that covers the James Valley territory, even though Midcontinent did not propose to offer retail voice services.

Midcontinent believes that the Commission addressed this issue previously when Time Warner Cable Requested a Declaratory Ruling that CLECs may obtain interconnection under Section 251 to provide wholesale services to VoIP Providers, in a 2007 Order in Docket No. 06-55. In that Order, the FCC confirmed that “providers of wholesale telecommunications services enjoy the same rights as any ‘telecommunications carrier’ under” sections 251(a). The Order also concluded that the availability of such interconnection to exchange local traffic would promote facilities-based voice competition.

Un swayed by this, the South Dakota PUC issued an Order on March 18, 2022, rejecting Midcontinent's arguments and rejecting its attempts to interconnect. The PUC stated that:

Specifically, the proposed interconnection agreement states Midcontinent seeks to interconnect with James Valley “for the sole purpose of exchanging Local/EAS Traffic.” The Commission finds the services described in the proposed interconnection agreement are local exchange services. SDCL 49-31-1(13) defines local exchange service as the “access to and transmission of two-way switched telecommunications service within a local exchange area.”

This definition does not exclude interconnection service and does not limit local exchange service to only those services provided to an end use or only those services provided at retail. Further, the proposed traffic will originate and terminate within the James Valley local exchange area. A certificate of authority is required for a telecommunications company to provide local exchange service pursuant to SDCL 49-31-69. 

Time Warner, while relevant to the topic of whether a company is entitled to 47 U.S.C. § 251 interconnection, does not address the bifurcated question. The FCC does not preempt state regulation regarding a certificate of authority to provide local exchange service (Midcontinent Petition at p. 9).

In response, Midcontinent makes the point that section 251 interconnection is solely a federal issue.

Regardless of what state law might say, this is a federal question. As the Supreme Court has held, the Telecommunications Act of 1996 placed questions concerning local telephone competition squarely in the Commission’s hands.32 And under both the plain terms of the Act and binding Commission precedent, a state regulator cannot impose any requirements to obtain additional authority on a telecommunications carrier as a condition of obtaining interconnection under Section 251(a) to provide wholesale interconnection services. (Id., at p. 10).

We’ll wait to see if industry comments provide compelling arguments against Midcontinent’s request. Until then, we believe that a declaratory ruling would resolve disagreements on this issue among state regulators and would aid the development of voice competition in rural areas especially in rural states like South Dakota. It seems like an open and shut case.