STATE SOVEREIGN Im1UNITY AND JUDICIAL REVIEW OF INTERCONNECTION AGREEMENTS UNDER THE TELECOMMUNICATIONS ACT OF 1996 Douglas C. Melcher* I. INTRODUCTION created new opportunities for businesses to enter markets for providing telecommunications serv- The Telecommunications Act of 1996 ("1996 ices. 6 Act"),' the most significant revision of federal In formulating the 1996 Act's common carrier communications law since the adoption of the provisions, 7 Congress recognized the significant Communications Act of 1934 (as amended, the competitive advantages of incumbent local ex- "Communications Act"),2 addresses a broad range change carriers ("ILECs") and sought to reduce of communications issues, including the areas of these advantages by imposing substantive obliga- common carrier, broadcast, and cable regula- 8 3 tions on all ILECs. One of the most important of tion. these obligations is the duty of mandatory inter- The stated goals of the 1996 Act are "to secure connection which the 1996 Act established by ad- lower prices and higher quality services for Ameri- ding section 251 to the Communications Act.9 can telecommunications consumers" and to "en- Under this section, an ILEC must physically con- courage the rapid deployment of new telecommu- nect its telecommunications network with the net- 4 nications technologies." Congress envisioned work of any other telecommunications carrier that these goals would be achieved through mar- who so requests.' The obligation of mandatory ketplace competition. 5 Accordingly, the 1996 Act * The author is an associate in the Communications and duce these effects by promoting competition. See HENK Technology Group of Paul, Weiss, Rifkind, Wharton & BRANDS & EvAiN T. LEO, THE Lxw AND REGULATION OF TELE- Garrison in Washington, DC. The views expressed in this COMMUNICATIONS CARRIERS 12-30, 369-79 (1999). article are those of the author and do not necessarily reflect 6 See, e.g., Telecommunications Act of 1996 § 101, Pub. L. the views of Paul, Weiss, Rifkind, Wharton & Garrison or any No. 104-104, 110 Stat. 56, 61-80, 47 U.S.C. §§ 251-261. other person or entity. The author wishes to thank Professor 7 See id. Ira C. Lupu of The George Washington University Law 8 See, e.g., 47 U.S.C. § 251 (1994 & Supp. II 1997). School, who provided very useful and intelligent comments 9 See id. on earlier drafts of this article. 10 See 47 U.S.C. §§ 251(a), 251 (c)(2). See also BRANDS & I Telecommunications Act of 1996, Pub. L. No. 104-104, LEO, supra note 5, at 387-88. 110 Stat. 56 (codified in scattered sections of 47 U.S.C.). "In the FCC's terminology, interconnectiondoes not refer 2 Communications Act of 1934, ch. 652, 48 Stat. 1064 to the same thing as transport and termination ... [inter- (codified as amended at 47 U.S.C. §§ 151-714). connection] refers to arrangements needed to create 3 The 1996 Act includes seven titles, three of which bear the physical interconnection of networks ... Transport noting here. Title I addresses common carriers, Title 1I ad- and termination, on the other hand, refers to the actual dresses broadcast services and Title III addresses cable serv- exchange of telephone traffic between interconnect[ed] ices. See Telecommunications Act of 1996, Pub. L. No. networks." 104-104, 110 Stat. 56. Id. Interconnection facilitates the seamless transport of tele- 4 Telecommunications Act of 1996, Pub. L. No. 104-104, communications traffic between networks. See id. Lacking in- 110 Stat. 56. terconnection, telecommunications carriers seeking to com- 5 See id. Many telecommunications services have histori- pete against ILECs would be at a severe competitive cally been provided by entrenched monopolists. For exam- disadvantage because consumers would strongly prefer the ple, in most parts of the country residential customers are vastly superior connectivity of the ILECs' existing networks. able to obtain telephony services from only a single incum- The value of a network increases as more locations are inter- bent local exchange carrier such as Bell Atlantic. Basic connected by the network; in the field of economics, this microeconomic theory provides that monopolists will exer- phenomenon is known as "network externalities." Id. at cise their monopoly power by reducing output and increas- 19-20. An insurgent initially has very few interconnected lo- ing prices. By adopting the 1996 Act, Congress sought to re- cations and thus is at a severe competitive disadvantage as COMMLAW CONSPECTUS [Vol. 8 interconnection promotes the goals of the 1996 suits against state governments.' 9 Under this doc- Act, including the goal of competition, by estab- trine, a state commission defendant in a section lishing an enforceable mechanism to ensure that 251/252 suit can seek dismissal of the federal 2' non-incumbent telecommunications carriers will suit. 0 With a dismissed suit in federal court and not be excluded from local markets.'' no recourse in the state courts because of the ex- Although Congress mandated interconnection press denial of state court jurisdiction, the ag- under the 1996 Act, it realized that ILECs would grieved parties conceivably could be left with no have little or no financial incentive to provide in- method for obtaining relief. terconnection to requesting carriers on terms that The doctrine of state sovereign immunity is are just and reasonable. Therefore, the 1996 Act closely intertwined with the Eleventh Amend- also added section 252 to the Communications ment, which provides that "[t] he judicial power of Act of 1934. 12Section 252 specifies the procedure the United States shall not be construed to extend for developing interconnection agreements and to any suit in law or equity, commenced or prose- delegates the duty to monitor the implementation cuted against one of the United States by Citizens of the agreements to state commissions.' Where of another State, or by Citizens or Subjects of any the parties to a proposed agreement are unable to Foreign State."'2 However, the doctrine of state agree on specific terms, the state commission's sovereign immunity extends well beyond the plain role is under section 252 is to resolve the dis- text of the Eleventh Amendment to encompass, pute' 4 and approve or reject the final settlement inter alia, suits against states initiated by its own of the parties. '5 citizens 22 or suits brought in state court pursuant If a party is aggrieved by the state commission's to federal causes of action. 23 There is general decision, the aggrieved party is expressly author- agreement that the limitations imposed by the ized to bring suit in federal district court to deter- doctrine of state sovereign immunity are equally 24 mine whether the decision is consistent with sec- applicable to agencies of state government. tions 251 and 252.1 The state courts, however, It is important to note that at the time the 1996 are denied jurisdiction over interconnection dis- Act was adopted it was believed that the Com- putes.' 7 The exclusive federal judicial review of merce Clause empowered Congress to "abrogate" state commission decisions under sections 251 state sovereign immunity by establishing a statu- and 252 immediately reveals potential conflict tory cause of action against the states enforceable with the doctrine of state sovereign immunity, 18 in federal court pursuant to its regulatory author- which generally bars a federal court from hearing ity over interstate commerce. 2 5 However, in Semi- compared to a carrier that has a vast network of intercon- nole Tribe of Florida v. Florida, 517 U.S. 44, 57-73 (1996); nected locations. See id. at 20. Interconnection between College Savings Bank v. Florida Prepaid Postsecondary Edu- ILECs and other telecommunications carriers is facilitated by cation Expense Board, 527 U.S. 666 (1999). private contracts known as interconnection agreements. See 2( Dismissal is based on lack of subject matter jurisdic- id. tion. See ERWIN CHEMERINSKY, FEDERAL JURISDICTION 367-419 I' See BRANDS & LEO, supra note 5, at 379-90 (quoting at (1994) (providing an overview of the doctrine of state sover- length In re Implementation of the Local Competition Provi- eign immunity). See also FED. R. Civ. P. 12(b)(1) (motion to sions in the Telecommunications Act of 1996, First Report and dismiss for lack of subject matter jurisdiction). Order, 11 FCC Rcd. 15499 (1996)). 21 U.S. CONsT. amend. XI. 12 See Telecommunications Act of 1996 § 101, 47 U.S.C. 22 See, e.g., Hans v. Louisiana, 134 U.S. 1; Employees of § 252 (1994 & Supp. Il1 1997). the Dep't of Pub. Health & Welfare v. Dep't of Pub. Health & I3 See id.; see also 47 U.S.C. § 153(41) (defining "state Welfare, 411 U.S. 279 (1973); Edelman v. Jordan, 415 U.S. commission"). 651 (1974); Seminole Tribe, 517 U.S. 44. 14 See 47 U.S.C. § 252(b). 23 See generally Alden, 527 U.S. 706. 15 See 47 U.S.C.§ 252(e). 24 See, e.g., Edelman, 415 U.S. 651; College Savings, 527 U.S. 16 See 47 U.S.C.§ 252(e) (6). 666. In each of these cases, the Court assumed without ques- 17 See 47 U.S.C.§ 252(e) (4). tion that a state agency may invoke the state sovereign immu- 18 As sovereigns, states are immune from certain types of nity defense. suits. See U.S. CONST. amend. XI. ("The Judicial power of the 25 See Pennsylvania v. Union Gas Co., 491 U.S. 1 (1989), United States shall not be construed to extend to any suit in overruled by Seminole Tribe, 517 U.S. 44. There is no question law or equity, commenced or prosecuted against one of the that Congress adopted section 252 pursuant to its Interstate United States by Citizens of another State, or by Citizens or Commerce Clause power.