In a long-awaited opinion, the U.S. Court of Appeals for the Eighth Circuit has ruled that the Federal Communications Commission exceeded its authority in approving pricing regulations to open the telecommunications local exchange market to competition.
The court upheld, however, major portions of the FCC regulations governing the duty owned by incumbent local exchange carriers to provide access to the public switched network for new market entrants.
The court rejected claims that the FCC's rules would provide such extensive access to LEC networks as to create an unconstitutional taking of utility property. The court earlier had granted a temporary stay of the FCC ruling as requested by state utility regulators and by the major LECs. See, Iowa Utils. Bd. v. FCC, 109 F3d 418 (8th Cir.1996).
The states and the LECs had claimed the FCC had interfered with the state's ratemaking authority. The parties argued the FCC interfered when it mandated certain methods for setting prices that incumbent LECs could charge new competitors for interconnection to the network and for resale of services.
The FCC argued that the Telecommunications Act clearly grants it the authority to issue general rules governing the ratemaking process. It said state commissions are left to establish the actual prices by applying the FCC's mandates.