## Facts

- Congress enacted the Telecommunications Act of 1996, imposing duties on incumbent local exchange carriers (ILECs) to open local markets to competition through interconnection, resale, and access to unbundled network elements under 47 U.S.C. §§ 251–252.
- The Federal Communications Commission (FCC) issued nationwide rules implementing §§ 251–252, including pricing standards for resale and unbundled elements, procedures for arbitration and agreement approval, and rules governing which network elements must be unbundled and how they must be offered.
- State utility commissions and ILECs challenged the FCC’s authority and specific rules, arguing that local service regulation was primarily state-controlled and that the FCC’s unbundling mandates were too expansive.
- The U.S. Court of Appeals for the Eighth Circuit held the FCC lacked jurisdiction to issue several categories of rules (including pricing and certain non-pricing matters), upheld some interpretations related to unbundling, and invalidated a rule restricting ILECs from separating already-combined elements.
- The Supreme Court granted review and considered both the FCC’s rulemaking authority and the validity of key implementing rules, including the FCC’s unbundling list and rules affecting how competitors could obtain elements and contract terms.

## Issues

1. Whether 47 U.S.C. § 201(b) authorizes the FCC to issue binding rules implementing the local-competition provisions of §§ 251–252, including pricing and procedural rules.
2. Whether the FCC reasonably applied § 251(d)(2)’s “necessary” and “impair” standards when it required ILECs to provide broad access to listed unbundled network elements (Rule 319).
3. Whether the FCC permissibly interpreted “network element” and could allow entrants to offer service using only unbundled elements of an ILEC’s network (the “all-elements” approach).
4. Whether FCC rules governing the combining/splitting of elements (including Rule 315(b)) and the “pick-and-choose” availability of agreement terms under § 252(i) were consistent with the statute.

## Decision

- The Court held the FCC has rulemaking authority under § 201(b) to implement §§ 251–252 and reversed the Eighth Circuit’s contrary jurisdictional holding.
- The Court vacated and remanded the FCC’s unbundling list rule (Rule 319) because the FCC failed to apply the “necessary” and “impair” limits required by § 251(d)(2) and instead adopted an overly sweeping, near-blanket approach.
- The Court left undisturbed the conclusion that the FCC reasonably interpreted the statutory definition of “network element” and did not reject the general permissibility of competitors assembling service from unbundled elements.
- The Court vacated Rule 315(b), agreeing it conflicted with the statutory requirement of “unbundled” access by effectively compelling provision of elements in bundled form.
- The Court upheld the FCC’s “pick-and-choose” rule as a reasonable interpretation of § 252(i), permitting requesting carriers to obtain individual provisions from existing interconnection agreements.
- The Court reversed in part, affirmed in part, and remanded for further proceedings consistent with its interpretations.

## Legal Principles

- Section 201(b)’s grant of authority to “prescribe such rules and regulations as may be necessary in the public interest to carry out the provisions of this Act” extends to the local-competition provisions added by the Telecommunications Act of 1996 (§§ 251–252).
- Judicial deference to an agency’s statutory interpretation does not save rules that disregard or nullify express statutory constraints; an agency must give operative effect to limiting terms such as “necessary” and “impair” in § 251(d)(2).
- The statutory definition of “network element” is sufficiently broad to support expansive coverage of facilities and functional capabilities, but the scope of mandatory unbundling must still satisfy § 251(d)(2)’s standards.
- A rule requiring ILECs to provide access to network elements on a bundled basis is inconsistent with the statutory requirement of access to “unbundled” network elements.
- Section 252(i)’s requirement that carriers make available “any interconnection, service, or network element” on the “same terms and conditions” reasonably permits requesting carriers to select individual agreement provisions.

## Conclusion

The Supreme Court confirmed that the FCC may issue nationwide rules implementing the 1996 Act’s local-competition regime under § 201(b), but it invalidated key unbundling regulations for failing to apply Congress’s “necessary” and “impair” limits, while sustaining other implementing choices such as “pick-and-choose” access to agreement terms.


AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366 (1999)