396 F.3d 16 (1st Cir. 2005), 04-1711, Global Naps, Inc. v. Verizon New England, Inc.

Docket Nº:04-1711.
Citation:396 F.3d 16
Party Name:GLOBAL NAPS, INC., Plaintiff, Appellant, v. VERIZON NEW ENGLAND, INC.; Massachusetts Department of Telecommunications and Energy; Paul B. Vasington, in his capacity as Commissioner; James Connelly, in his capacity as Commissioner; W. Robert Keating, in his capacity as Commissioner; Diedre K. Manning, in her capacity as Commissioner; and Eugene J. S
Case Date:January 19, 2005
Court:United States Courts of Appeals, Court of Appeals for the First Circuit
 
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396 F.3d 16 (1st Cir. 2005)

GLOBAL NAPS, INC., Plaintiff, Appellant,

v.

VERIZON NEW ENGLAND, INC.; Massachusetts Department of Telecommunications and Energy; Paul B. Vasington, in his capacity as Commissioner; James Connelly, in his capacity as Commissioner; W. Robert Keating, in his capacity as Commissioner; Diedre K. Manning, in her capacity as Commissioner; and Eugene J. Sullivan, in his capacity as Commissioner, Defendants, Appellees.

No. 04-1711.

United States Court of Appeals, First Circuit

January 19, 2005

Heard Dec. 10, 2004

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William J. Rooney, Jr., with whom Jeffrey Melick was on brief, for appellant.

Scott H. Angstreich, with whom Bruce P. Beausejour, Keefe B. Clemons, Sean A. Lev, Mary Ann McGrail, and Kellogg, Huber, Hansen, Todd, & Evans were on brief, for appellee Verizon New England, Inc.

Thomas A. Barnico, Assistant Attorney General, with whom Thomas F. Reilly, Attorney General, was on brief, for appellee Massachusetts Department of Telecommunications and Energy.

Before LYNCH, LIPEZ, and HOWARD, Circuit Judges.

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LYNCH, Circuit Judge.

This appeal represents one part of a larger dispute between Global NAPs, a competitive local exchange carrier (CLEC), and Verizon New England, Inc., an incumbent local exchange carrier (ILEC), in their attempt to reach an interconnection agreement under the Telecommunications Act of 1996(TCA), Pub.L. No. 104-104, 110 Stat. 56 (codified as amended in scattered sections of 47 U.S.C.). The TCA sets up detailed procedures for the creation of interconnection agreements in order to serve the TCA's goal of fostering competition in local telephone markets. Those procedures allow competing carriers to gain access to the incumbent carrier's telecommunications network and facilities and govern the terms and fees of that access.

Global NAPs appeals from the district court's judgment affirming a February 19, 2003 order of the Massachusetts Department of Telecommunications and Energy (DTE), the state commission given the power to arbitrate disputes over interconnection agreements under the TCA. 47 U.S.C. § 252(b). The February 19, 2003 administrative order followed an earlier December 12, 2002 DTE order deciding the arbitration between Verizon and Global NAPs. That arbitration had been initiated by Global NAPs after a period of negotiation with Verizon failed to produce an agreement on all issues.

The challenged February 19 order allowed a remedial motion by Verizon to force Global NAPs to sign an interconnection agreement consistent with the terms of the DTE's earlier December 12 arbitration order. Verizon brought this motion because Global NAPs had balked at the December 12 arbitration order, said it was not bound by the result of the arbitration, and that it was instead exercising what it thought was its unconditional right under § 252(i) of the Act to adopt the terms of an interconnection agreement Verizon had with Sprint, which preexisted Global NAPs' arbitration request.

The merits of the underlying December arbitration order from the DTE are not before us. The merits issue before us is whether in its February order the DTE acted in violation of § 252(i) of the TCA in precluding Global NAPs from nullifying and avoiding the effect of the arbitration--which binds Global NAPs and Verizon to an agreement--by instead opting into the terms of an older agreement Verizon had signed with Sprint. If Global NAPs were free to so opt in, that would moot the challenge to the underlying December arbitration order. We find that the DTE's February 19 order was not in violation of the TCA and affirm the district court.

I.

Before the passage of the TCA, local telephone service was provided mainly by state-regulated monopolies, such as Verizon. These monopolies, the ILECs, owned all networks and facilities (including telephone lines, poles, trunks, etc.) attendant to the provision of local telephone service. See AT & T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 371, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999). A purpose of the TCA was to end the local telephone monopolies and create a national telecommunications policy that strongly favored competition in local telephone markets. See P.R. Tel. Co. v. Telecomm. Regulatory Bd. of P.R., 189 F.3d 1, 7 (1st Cir. 1999).

Section 251 of the TCA imposes obligations on both competing carriers and incumbent carriers. Section 251(a) (1) imposes a duty on all carriers "to interconnect directly or indirectly with the facilities and equipment of other telecommunications carriers." 47 U.S.C. § 251(a) (1).

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The TCA imposes on an incumbent carrier more stringent duties, including "the duty to permit other carriers to interconnect with its facilities, to provide other carriers with access to elements of its local network on an 'unbundled' basis, to sell to other carriers at wholesale prices the services that it provides to its customers, and to negotiate interconnection agreements in good faith." P.R. Tel. Co., 189 F.3d at 8; see 47 U.S.C. § 251(c).

Section 252 provides the procedures for the creation of interconnection agreements.1 Interconnection agreements govern the terms and conditions by which CLECs may gain access to the ILECs' local telephone network and facilities, thus allowing the CLECs to provide competing local telephone service. Incumbents and competitors may negotiate freely an interconnection agreement, and both parties have a duty to negotiate in good faith. 47 U.S.C. § 251(c) (1). If the parties reach an agreement through negotiation, that agreement need not satisfy the substantive requirements of §§ 251(b) and (c). Id. § 252(a) (1). If after a period of negotiation the parties are not able to come to an agreement on some issues, either party may petition a state commission to decide those open issues in arbitration. Id. § 252(b) (1). The commission then has the authority to decide the open issues between the parties, and to impose conditions on the parties for the implementation of the terms of arbitration into an agreement. Id. § 252(b) (4) (C). In deciding those issues, the commission must "ensure that such resolution and conditions meet the requirements of section 251 of this title, including the regulations prescribed by the [Federal Communications Commission] pursuant to section 251." Id. § 252(c) (1). Further, either party's refusal to negotiate or to cooperate with the state commission acting as arbitrator constitutes a breach of its duty to negotiate in good faith. Id. § 252(b) (5).

In addition, the TCA requires ILECs to allow any requesting CLEC to adopt the terms and conditions of any interconnection agreement it has with any other CLEC, provided that agreement has been approved by the requisite state telecommunications commission. Id. § 252(i).

Once a negotiated or arbitrated agreement is completed, it must be submitted to the state commission for approval. Id. § 252(e) (1). The commission may reject any negotiated agreement if it discriminates against a third party carrier or if its implementation is "not consistent with the public interest, convenience, and necessity." Id. § 252(e) (2) (A). The commission may reject an arbitrated agreement if it fails to meet the substantive requirements of § 251, including the FCC's implementing regulations, or the pricing standards set forth in § 252(d). Id. § 252(e) (2) (B). That commission decision is subject to federal judicial review:

In any case in which a State commission makes a determination under this section, any party aggrieved by such determination may bring an action in an appropriate Federal district court to determine whether the agreement or statement meets the requirements of section 251 of this title and this section.

Id. § 252(e) (6).

Verizon and Global NAPs began the negotiation process for a new interconnection

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agreement in early 2002, because their previous agreement was approaching expiration. On July 30, 2002, Global NAPs filed a petition with the DTE to arbitrate several issues on which the parties could not agree. The DTE issued an order on December 12, 2002, resolving all open issues and ordering the parties to incorporate the arbitrated terms into an agreement and file that agreement with the DTE within 21 days, or by January 2, 2003. The DTE allowed the parties' joint motion for extension of time to file the agreement until January 17, 2003.

On December 30, 2002, Global NAPs brought an action in federal district court challenging the merits of the DTE's arbitration determination.2 The merits of that December 12, 2002 DTE order are not before us.

On January 9, 2003, Global NAPs informed Verizon that, rather than entering into the agreement embodying the DTE's arbitration decision, it would seek to adopt the terms of a preexisting December 19, 2001 agreement Verizon had with Sprint ("Sprint agreement"). Global NAPs contended that it has an unconditional right to do so pursuant to 8 U.S.C. § 252(i). Global NAPs said its adoption of the preexisting Sprint agreement was consistent with the arbitration order, under which Global NAPs retained its § 252(i) rights.

On January 16, 2003, Global NAPs informed the DTE of its intention to opt into the Sprint agreement, in place of the arbitrated agreement. In response, on January 17, 2003, Verizon filed a motion with the DTE to approve the arbitration order, seeking, in essence, to force Global NAPs to execute an agreement consistent with the arbitration order, or alternatively, should the DTE allow Global NAPs to opt into the Sprint agreement, to order that the "agreement be modified to reflect the [DTE]'s legal and policy determinations set forth in the Arbitration Order."

On February 19, 2003, the DTE granted the initial portion of Verizon's motion and ordered the parties to sign and file an agreement consistent with the initial arbitration order. That February 19, 2003 order is the subject of this appeal. All parties...

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