Cite as: 535 U. S. 467 (2002)
Opinion of the Court
interpreted by the FCC's regulations, § 252(e)(2)(B). These regulations are at issue here.
As to pricing, the Act provides that when incumbent and requesting carriers fail to agree, state commissions will set a "just and reasonable" and "nondiscriminatory" rate for interconnection or the lease of network elements based on "the cost of providing the . . . network element," which "may include a reasonable profit." 15 § 252(d)(1). In setting these rates, the state commissions are, however, subject to that important limitation previously unknown to utility regulation: the rate must be "determined without reference to a rate-of-return or other rate-based proceeding." Ibid. In AT&T Corp. v. Iowa Utilities Bd., 525 U. S. 366, 384-385 (1999), this Court upheld the FCC's jurisdiction to impose a new methodology on the States when setting these rates. The attack today is on the legality and logic of the particular methodology the Commission chose.
As the Act required, six months after its effective date the FCC implemented the local-competition provisions in its First Report and Order, which included as an appendix the new regulations at issue. Challenges to the order, mostly by incumbent local-exchange carriers and state commissions, were consolidated in the United States Court of Appeals for the Eighth Circuit. Iowa Utilities Bd. v. FCC, 120 F. 3d 753, 792 (1997), aff'd in part and rev'd in part, 525 U. S. 366, 397 (1999). See also California v. FCC, 124 F. 3d 934, 938 (1997), rev'd in part, 525 U. S. 366, 397 (1999) (challenges to In re Implementation of Local Competition Provisions in Telecommunications Act of 1996, 11 FCC Rcd. 19392 (1996) (Second Report and Order)).
So far as it bears on where we are today, the initial decision by the Eighth Circuit held that the FCC had no au-15 Rates for wholesale purchases of telecommunications services are covered separately, and must be based on the incumbent's retail rates. § 252(d)(3).
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