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The Supreme Court 5/13/02 upheld the authority of the Federal Communication Commission (the “FCC”) to promulgate certain regulations under the Telecommunications Act of 1996 (the “Act”). The challenged regulations, among other things, (1) required state utility commissions to set the rates charged by incumbent local telephone service companies for leasing network elements in keeping with a prescribed "forward-looking economic cost" calculation, and (2) required incumbents to combine such elements at the request of new entrants leasing these elements from them. Several incumbent companies challenged these regulations as beyond the FCC’s authority under the Act. The Supreme Court held that the plain language of the Act authorized the FCC to set rates on a "forward-looking" basis untied to the incumbents’ investments. The Court rejected the incumbents’ argument that the particular methodology prescribed by the FCC exceeded the FCC's authority, finding that the challenged method was a reasonable means to establish “just and reasonable” rates as allowed by the Act. Finally, the Court held that the FCC could require incumbents to combine network elements, finding that the language of the Act was ambiguous in this regard and that the FCC's rule was reasonable under Chevron. Justice Breyer, joined in part by Justice Scalia, dissented, disagreeing with the Court's conclusion "that the specific pricing and unbundling rules at issue . . . Are authorized by the Act.” This opinion is important to companies operating in the telephone industry.