Pacific Bell v. Pac-West Telecomm, Inc.

Congress passed the Telecommunications Act of 1996 (“the Act”), Pub.L. 104- *1118 104, 110 Stat. 56 (codified in part at 47 U.S.C. §§ 251-261 ), to foster competition in local and long distance telephone markets by neutralizing the competitive advantage inherent in incumbent carriers’ ownership of the physical networks required to supply telecommunication services. Sections 251 and 252 of the Act require established incumbent local exchange carriers (“ILECs”) 1 to allow new competitive local exchange carriers (“CLECs”) to interconnect with their existing networks. See 47 U.S.C. §§ 251 , 252.

In addition, all local exchange carriers are required to “establish reciprocal compensation arrangements [in their interconnection agreements] for the transport and termination of telecommunications.” 47 U.S.C. § 251 (b)(5). These compensation provisions allow ILECs and CLECs to negotiate the terms under which they will terminate calls from each other’s customers. One of the negotiated terms in an interconnection agreement is the amount of reciprocal compensation that an ILEC will pay to a CLEC when an ILEC customer calls a CLEC customer, and vice versa. 2 These new arrangements…