Southwestern Bell Telephone v. Missouri Public

• Decision Date: 14 September 2006
• Docket Number: No. 4:05-CV-1264 CAS.,4:05-CV-1264 CAS.
• Citation: 461 F.Supp.2d 1055
• Parties: SOUTHWESTERN BELL TELEPHONE, L.P., d/b/a SBC Missouri, Plaintiff, v. The MISSOURI PUBLIC SERVICE COMMISSION, et al., Defendants.
• Court: U.S. District Court — Eastern District of Missouri

461 F.Supp.2d 1055

SOUTHWESTERN BELL TELEPHONE, L.P., d/b/a SBC Missouri, Plaintiff, v. The MISSOURI PUBLIC SERVICE COMMISSION, et al., Defendants.

No. 4:05-CV-1264 CAS.

United States District Court, E.D. Missouri, Eastern Division.

September 14, 2006.

COPYRIGHT MATERIAL OMITTED

John F. Medler, Jr., Mary B. MacDonald, SBC Missouri, St. Louis, MO, Sean A. Lev, Cohn S. Stretch, Kellogg `and Huber, P.L.L.C., Washington, DC, for Plaintiff.

William K. Haas, Missouri Public Service Commission, Mark W. Comley, Newman, Comley & Ruth, P.C., Jefferson City, MO, William L. Magness, Casey and Gentz, L.L.P., Austin, TX, Carl J. Lumley, Curtis and Heinz, P.C., Erik O. Solverud, Spencer and Fane, LLP, Celia K. Douglas, Sonnenschein and Nath, LLP, Gretchen Garrison, Stinson Morrison Hecker LLP, John D. Ryan, Lathrop and Gage, Julie L. Waters, Greensfelder and Hemker, St. Louis, MO, Jeffrey A. Rackow, Verizon, Arlington, VA, Christopher W. Savage, Kevin C. Halm, Cole & Raywid, David P. Murray, Willkie Farr & Gallagher, Washington, DC, Karl Zobrist, Mark P. Johnson, Sonnenschein and Nath, Kansas City, MO, for Defendants.

MEMORANDUM AND ORDER

SHAW, District Judge.

This action was filed by Southwestern Bell Telephone, L.P., d/b/a SBC Missouri ("SBC") seeking declaratory and injunctive relief under the Federal Telecommunications Act of 1996.¹ The matter is before the Court on a motion to dismiss for lack of subject matter jurisdiction, two motions to strike, and motions for summary judgment filed by SBC and defendants Sprint Communications Company, L.P. and Charter Fiberlink-Missouri, LLC. The Court concludes that it has subject matter jurisdiction over this action, the motions to strike should be denied, plaintiff SBC's motion for summary judgment should be granted in part and denied in part, defendant Sprint Communications Company, L.P.'s motion for summary judgment should be granted, and defendant Charter Fiberlink-Missouri, LLC's motion for summary judgment should be denied.

I.

Introduction and Regulatory Framework.

By enacting the Telecommunications Act of 1966 (the "Act"), "Congress entered what was primarily a state system of regulation of local telephone service and created a comprehensive scheme of telecommunications regulation administered by the Federal Communications Commission." Indiana Bell Tel. Co. v. Indiana Utility Regulatory Comm'n, 359 F.3d 493, 494 (7th Cir.2004). While state utility commissions have a role in carrying out the Act, the Supreme Court of the United States has stated that the Act "unquestionably" took "regulation of local telecommunications competition away from the States." AT & T Corp. v. Iowa Utilities Bd., 525 U.S. 366, 378 n. 6, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999).

The Supreme Court has described the fundamental change effected by the Act in telephone markets as follows:

Until the 1990's, local phone service was thought to be a natural monopoly. States typically granted an exclusive franchise in each local service area to a local exchange carrier (LEC),² which owned, among other things, the local loops (wires connecting telephones to switches), the switches (equipment directing calls to their destinations), and the transport trunks (wires carrying calls between switches) that constitute a local exchange network. Technological advances, however, have made competition among multiple providers of local service seem possible, and Congress recently ended the longstanding regime of state-sanctioned monopolies.

The Telecommunications Act of 1996 ... fundamentally restructures local telephone markets. States may no longer enforce laws that impede competition, and incumbent LECs are subject to a host of duties intended to facilitate market entry. Foremost among these duties is the LEC's obligation under 47 U.S.C. § 251(c) to share its network with competitors. Under this provision, a requesting carrier can obtain access to an incumbent's network in three ways: It can purchase local telephone services at wholesale rates for resale to end users; it can lease elements of the incumbent's network "on an unbundled basis"; and it can interconnect its own facilities with the incumbent's network. When an entrant seeks access through any of these routes, the incumbent can negotiate an agreement without regard to the duties it would otherwise have under § 251(b) or § 251(c). See § 252(a)(1). But if private negotiation fails, either party can petition the state commission that regulates local phone service to arbitrate open issues, which arbitration is subject to § 251 and the FCC regulations promulgated thereunder.

AT & T Corp. v. Iowa Utilities Bd., 525 U.S. 366, 371-73, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999) (footnote added).

"To facilitate the entry of competing carriers into the market for local [telephone] service, the Act requires that incumbent carriers provide `interconnection' and other wholesale services to the competing carriers on a non-discriminatory basis." Indiana Bell, 359 F.3d at 495. "Sections 251 and 252 of the Act lay out a process for reaching `interconnection agreements' by which competing carriers can gain interconnection with the incumbent carrier's networks, facilities and services." Id.

Among the duties that apply to incumbent local exchange carriers ("ILECs")³ is the obligation to lease certain parts of their networks to competitors at regulated rates. See 47 U.S.C. § 251(c)(3). Before a network facility is required to be made available under this provision, however, the Federal Communications Commission ("FCC") must determine that competitors are "impaired" without access to it. Id., § 251(d)(2). A facility that the FCC has determined must be made available under this provision is known in the telecommunications industry as an "unbundled network element," or "UNE."⁴

UNE components include "loops," "switches," and "transport facilities." Loops are copper wires that connect a home or business to the local phone company switch. A switch is a device, usually software, that routes a call from a home or office to the intended recipient. Transport facilities are devices such as copper wires or fiberoptic cables that transport calls between switches. A UNE Platform is a combination of all the network elements required to provide local telephone service, required to be offered in a pre-packaged form that permits competing local exchange carriers ("CLECs") to provide telephone service with no actual switching, loop or transport facilities of their own. See Peter W. Huber, et al., Federal Telecommunications Law § 2.7.4 at 123 (2d ed. Cum.Supp.2004).

Rates that ILECs can charge for UNEs must be based on cost. 47 U.S.C. § 252(d)(1). The FCC has implemented this directive by a pricing methodology known as "total element long-run incremental cost," or TELRIC. See Local Competition Order,⁵ 1996 WL 452885, 11 F.C.C.R. at 15,844, ¶ 672. TELRIC allows access to UNEs at very low rates, and has been upheld by the Supreme Court as the pricing methodology used under certain portions of the Act. Verizon Commc'ns Inc. v. FCC, 535 U.S. 467, 489, 122 S.Ct. 1646, 152 L.Ed.2d 701 (2002).

The duties of § 251 are implemented through "interconnection agreements" between ILECs and CLECs. See 47 U.S.C. § 252. The Act requires ILECs and CLECs to negotiate in good faith the terms and conditions of agreements to fulfill the duties described in §§ 251(b) and (c). Id., § 251(c)(1). If negotiations are unsuccessful, either party may ask the appropriate state public utility commission to arbitrate "any open issues" the parties have been unable to resolve. See id., § 252(b). In deciding these "open issues," the state commission must adhere to the requirements of the statute and the FCC's implementing regulations. Id., § 252(c).

The Eleventh Circuit recently described the history of the FCC's efforts to implement a regulatory scheme under the Act which ultimately resulted in the FCC's Triennial Review Remand Order ("TRRO").⁶ Under the TRRO, the FCC no longer required unbundled access to certain network elements under § 251 and established a transition plan for the telecommunications industry to implement the new regulations:

For eight years, the FCC tried and failed to implement a regulatory scheme that, after review by federal courts, satisfied the 1996 Act. For most of those eight years, the FCC required unbundling on the theory that it enhanced competition. The FCC required ILECs and CLECs to enter "voluntary" agreements to provide unbundled access to local telephone networks. If the parties could not agree, an agreement was provided either by the FCC or by state commerce commissions. States were given the authority to oversee voluntary agreements and arbitrate disputes arising from those agreements. 47 U.S.C. § 252(a), (b).

. . . .

In 2004, in a challenge to the FCC scheme filed by ILECs, the D.C. Circuit vacated the second attempt of the FCC to implement the directive of Congress regarding local phone service. See U.S. Telecom Ass'n v. FCC, 359 F.3d 554 (D.C.Cir.2004). The D.C. Circuit concluded, in part, that the unbundling regime enacted by the FCC was not based on a rational analysis of whether "CLECs are impaired in the mass market without unbundled access to ILEC switches." Id. at 569. The D.C. Circuit also expressed some frustration regarding the "failure [of the FCC], after eight years, to develop lawful unbundling rules, and its apparent unwillingness to adhere to prior judicial rulings." Id. at 595. In response to the ruling of the D.C. Circuit, the FCC issued interim rules that preserved the status quo ante while the FCC wrote new rules, and the FCC established a transition period, ending in early 2005, in which only existing customers could be served through UNE s.

In February 2005, the FCC released its Triennial Review Remand Order (TRRO), which stated that the unbundling of certain "UNE-Platform" (UNE-P) elements harmed competition by discouraging innovation. To redress that...