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Telecommunications act's ADR approach.

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Vol. 14, No. 10 November 1996
Alternatives 123
CPR Institute for Dispute Resolution
Telecommunications Act’s ADR Approach
By Andrew D. Lipman 8c
Lawrence R. Freedman
With the passage of comprehensive
telecommunications legislation last
February, Congress sought to open up
to greater competition an industry that
touches the lives and livelihoods of
every U.S. business and consumer.
Such competition, however, requires
the development of comprehensive
agreements to interconnect networks
between at least two parties who have
little incentive to agree: competitors.
Alternative dispute resolution is, for
several reasons, uniquely well-suited in
such circumstances. Indeed, ADR
methods, such as negotiation, mediation, and arbitration, are featured
prominently in this reform, in concert
with tight time frames, as away to overcome a history of delay and unequal
bargaining positions and to promptly
effectuate the new law’sgoals. While a
widely disparate range of procedures
has emerged in the development of
ADR approaches, the experience so far
under the Telecommunications Act of
1996 shows that, where carefully and
thoughtfully applied, ADR plays a key
role in attaining policy and business
objectives in deregulated and newly
competitive industries.
History
The Telecommunications Act of 1996
was enacted to introduce competition
into the local telephone market. For
more than 100 years, local telephone
exchange carriers have owned local
telephone networks and have operated
essentiallywithout competition, based
in many states on state laws and regulations granting them an exclusive
monopoly to conduct the local telephone business.
In recent years, as some states gradually have allowed competition, and in
light of the explosive development of
long-distance service competition,
some companies have attempted to
negotiate for interconnection and access to the local telephone networks in
order to compete for local telephone
Andrew Lipman is a partner and Lawrence
Freedman is an associate in Washington,
D. C.S Swidler & Berlin.
business. After all, since the incumbent
telephone company typically owns the
extensive network of, for example,wires
and poles, ubiquitous facilities-based
competition is not possible in many
geographical markets given the shortterm impractabilityof building a redundant local network,
unless economically efficientaccess to that infrastructure is granted.
oreo over, a comprehensive agreement for
interconnection isnecessary in order to govern such a complex
and technical relationship where significant
sums and complicated
operating procedures
are involved.
But obtaining economically efficient
competitive access has been a difficult
and slow process since, as the Federal
Communications Commission has
found, “historically,the ILECs [incumbent local exchange carriers] have had
strong incentives to resist, and have actively resisted, efforts to open UP their
networks to users, competitors, or new
t e c h n o l o ~ ~ r i v eapplications
n
of network technology.”First Report and Order at I241.
The chief objective for Potential
competitors was to obtain a ComPrehensive operating agreement for interconnection-with a party for whom
such an agreement was Patently undesirable. In short, potential competitors
sought a “forced marriage.”
In recent Years, Prospective COmPetitors have advanced their objectives
through various state public service
commissions, obtaining increasingly
favorable authority from these commissions requiring interconnection
with incumbent carriers. Some state
commissionshave authorized fairly extensive competition in the local exchange market, and in some areas
competitors are gaining access to the
i r m m d ~ n company’s
t
network. But
such proceedings, oriented as they are
toward litigation-type proceedings before administrative tribunals, have
been fragmented, cumbersome, ex-
pensive, and, perhaps most important,
glacially slow. Even in those instances
where state commissions issued orders
for interconnection, petitions for reconsideration, appeals, and arguments
over the meaning of broad policy directives and how they should be inter-
ADR methods generally
are well-suited to address
a number of objectives
under the Telecommunications Act of 1996.
preted in the context of an interconnection agreement, have caused
interminable delays and frustrated local competition.
The 1996 Act
The 1996 act was intended to m e l i e
rate this sirnation by “opening all telecommunications markets to competition,”and to do so promptly. S. Rep. No.
10423,104th Cong.. 1stSess.,at 2. ADR
methods generally are well-suited to address a number of objectives under the
act. After all, the necessary end result is
an agreement between two disparate
parties. A set of procedures designed to
foster agreement, rather than exacerbate conflict, furthers Congressional
intent. This is particularly important
where the parties will have to have a significant ongoing business relationship
with oneanotherin h e implementation
ofthe interconnection agreements.ADR
methods offer the chance to focus on
the real issues in dispute and negotiate
directly as to those issues without dl of
the trappings,burdens, and distractions
oftraditional litigationprocedures.And
ADRfacilitatesa mechanism for obtaining competition that is faster, less costly,
and more direct.
Congress crafted a creative mix of
negotiations and voluntary ADR procedures, buttressed by the ‘‘teeth”of
tight deadlines and binding procedures
(continued on following page)
124 Alternatives
ADR Approach
(continued on following page)
CPR Institute for Dispute Resolution
tive to traditional administrative litigation. In some instances, such as in Oregon, for example, these procedures
were only briefly outlined and allowed
for great informality and flexibility in
the use ofADR. Other states articulated
more detailed provisionsfor procedures
which nevertheless were ADR procedures, and dealt with issues traditionally encountered in these settings, such
as time limits, exchange of information,
confidentiality, and other issues.
should consensus not be achieved.The
act’s initial focus is on negotiations.
Congress imposed a duty to negotiate
in good faith on both the incumbent
company and the new entrant. Any
party negotiating an interconnection
agreement may, at any point in the negotiation, ask a state commission to
participate in the negotiation and to
mediate any differencesarising in
the course of the negotiation.
The request to initiate negotiaAct Sparks
tions triggers a statutorily manNew ADR Group
dated “clock”:during the period
from the 135th to the 160th day
CPR Institute for Dispute Resolution memafter such request is made, any
bers in the telecommunications industry
party may petition astate commis
met
last month in New York to review ADR
sion to arbitrate any open issues.
practices
under the Telecoinmunications
The act provides any agreeAct
of
1996.
The ad hoc group expects to
ments reached between the inrecommend
procedures
to state regulators
cumbent carrier and new
and
the
Federal
Communications
Commisentrants must be approved by the
sion
on
establishing
ADR
programs,
as well
state commission,pursuant to the
as
rules
for
sections
of
the
law
that
already
act’s criteria. In addition, certain
require ADR.
specific arbitration standards are
set forth. Precise time frames are
imposed toward obtaining a final
Still other states, such as Florida,
agreement.
perhaps because of the short time peFor example, state commissionsmust
riod for adoption, determined simply
conclude the arbitrations within nine
to move forward in accordance with
months from the initial negotiation
their traditional administrative procerequest, and arbitrated agreements
dural rules, incorporating all of the
must be approvedwithin 30 days. In the
traditional methods for pleadings, disevent a state commission “failsto carry
covery, depositions, and formal hearout its responsibility,” the FCC is emings before state commissions. In
powered to step in and conduct the
contrast, arbitration in Indiana, Masarbitration itself. In an interesting prosachusetts and Mississippiare handled
cedural twist, any party “aggrieved”by
by third-party arbitrators. Most juristhe determination of a state commisdictions, however, continue to rely on
sion can bring an action in federal dishearing examiners or panels of staff
trict court to determine whether the
attorneys, who make recommended
decision complies with the act.
decisions to the state commissions.
Implementation
Upon passage of the act, the various
state commissions each faced the formidable task of whether and how to
fashion specific procedures to implement their ADR functions under the
act. This generally was done under a
“notice and comment” rulemaking
mechanism under which parties were
invited to provide input.
The resultsvaried widely. Some states
developed and implemented procedures clearly distinct and as an alterna-
Experience to Date
The arbitrations involve a wide range
of complex technical issues, including
rates for local interconnection, network unbundling, price levels of resold
services and interface between operating support systems. Given the statutorily mandatory deadlines for
decision, it appears that the states likely
will reach the goal of speedy disposition. Such strict deadlines, however,
cut two ways: Some states apparently
Vol. 14, No. 10 November 1996
chose not to try to develop real alternative procedures in light of the lack
of time before commencing the act
proceedings. But ADR process has
worked best where it has operated as
an effective alternative to traditional
litigation procedures.
In Oregon, for example, in a proceeding the authors participated in on
behalf of a competitive carrier, the arbitrator in his discretion dispensed almost wholly with a pre-set schedule of
witnesses, cross-examination,
and argument. Instead, he allowed the parties to adjourn the
arbitration at points to further
negotiate as many issues as possible. The parties ultimatelywere
able to crystallize the remaining
disputed issues to a discrete and
select few items. Then, the parties and the arbitrator together
crafted a procedure where the
issues were addressed, one at a
time, with each side permitted
to offer, in a concise format, a
combination of statements or
representations from a party r e p
resentative, expert, or counsel
focused directly on the points at
issue. The result: The submission of a
draft proposed agreement with disputed contentions highlighted and
each parties’ alternative language
stated. The arbitrator expressed his a p
preciation for the parties’ efforts and
forecast issuing his decision in advance
of the schedule previously established
by statute.
Lessons Learned
We are still at an early stage in the act’s
implementation and, accordingly,any
conclusions drawn at this stage are
preliminary. That said, it appears that:
ADR methods can play a key role in
a deregulating/newly competitive environment such as local exchange competition;
It is important to structure the process so as to ensure that real alternatives to traditional processes can be
instituted, and that the benefits of such
alternatives,including speed, efficiency,
and flexibility, can be realized; and
Sufficient time and direction must
be in place to assure that such a structure is realized.
I
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