On Thursday, June 9, 2011, the Supreme Court held that incumbent local exchange carriers (ILECs) must provide interconnection facilities to competitors at cost-based (i.e., TELRIC) rates. Because TELRIC rates are normally significantly lower than the tariff rates most ILECs have been charging, this ruling should provide an immediate economic benefit to competitive local exchange carriers (CLECs), their interconnected VoIP provider partners, and wireless (CMRS) carriers which lease such interconnection facilities from ILECs at the higher tariffed rates.

Background

In 2010 the Sixth Circuit Court of Appeals (covering Kentucky, Michigan, Ohio and Tennessee) ruled that ILECs could charge relatively high tariff rates for so-called “Entrance Facilities”—communications links from the CLEC’s switch to an ILEC switch over which local traffic is exchanged. The Sixth Circuit reasoned that Entrance Facilities were not unbundled network elements (UNEs) under Section 251(c)(3), for which discounted pricing is required. It reached this conclusion based on a misreading of prior Federal Communications Commission (FCC) rulings concerning appropriate pricing for Entrance Facilities.

The Sixth Circuit’s ruling conflicted with decisions in other circuits (Seventh, Eighth, and Ninth), all of which ruled that ILECs must provide Entrance Facilities at TELRIC rates. These other circuits concluded that the FCC had ruled that when Entrance Facilities are used for interconnection, pursuant to Section 251(c)(2), TELRIC pricing still applies. Many ILECs, including AT&T, rallied behind the Sixth Circuit ruling, often refusing to offer cost-based rates for Entrance Facilities even outside the Sixth Circuit.