Aventure Commc'n Tech. v. Iowa Utilities Bd.

• Decision Date: 17 August 2010
• Docket Number: No. C 10-4074-MWB,C 10-4074-MWB
• Citation: 734 F.Supp.2d 636
• Court: U.S. District Court — Northern District of Iowa
• Parties: AVENTURE COMMUNICATION TECHNOLOGY, L.L.C., an Iowa corporation, Plaintiff, v. IOWA UTILITIES BOARD, Utilities Division, Department of Commerce; Robert B. Berntsen, Krista K. Tanner, and Darrell Hanson, in their Official Capacities as Members of the Iowa Utilities Board and not as Individuals, Defendants, and Verizon Communications, Inc., McImetro Access Transmission Services, L.L.C., d/b/a Verizon Access Transmission Services, MCI Communications Services, Inc., d/b/a Verizon Business Services; Qwest Communications Company, L.L.C., f/k/a Qwest Communications Corporation; AT & T Communications of the Midwest, Inc.; TCG Omaha; and Sprint Communications Company, L.P., Intervenors/defendants.

734 F.Supp.2d 636

AVENTURE COMMUNICATION TECHNOLOGY, L.L.C., an Iowa corporation, Plaintiff,
v.
IOWA UTILITIES BOARD, Utilities Division, Department of Commerce; Robert B. Berntsen, Krista K. Tanner, and Darrell Hanson, in their Official Capacities as Members of the Iowa Utilities Board and not as Individuals, Defendants,
and
Verizon Communications, Inc., McImetro Access Transmission Services, L.L.C., d/b/a Verizon Access Transmission Services, MCI Communications Services, Inc., d/b/a Verizon Business Services; Qwest Communications Company, L.L.C., f/k/a Qwest Communications Corporation; AT & T Communications of the Midwest, Inc.; TCG Omaha; and Sprint Communications Company, L.P., Intervenors/defendants.

No. C 10-4074-MWB.

United States District Court,
N.D. Iowa,
Western Division.

Aug. 17, 2010.

734 F.Supp.2d 639

Paul D. Lundberg, Lundberg Law Firm, Sioux City, IA, for Plaintiff.

MEMORANDUM OPINION AND ORDER REGARDING AVENTURE'S MOTION FOR PRELIMINARY INJUNCTION AND INTEREXCHANGE CARRIERS' MOTIONS TO INTERVENE

MARK W. BENNETT, District Judge.

TABLE OF CONTENTS

I. INTRODUCTION 640

A. Factual Background 640

1.	The entities involved and their dispute	640
2.	The IUB's rule-making	641
3.	Aventure's tariff revisions	646

B. Procedural Background 646

II. LEGAL ANALYSIS 649

A.	Intervention	649
B.	Qwest's "Jurisdictional " Challenges	651
C.	Standards For Preliminary Injunctive Relief	653
D.	Application Of The Standards	654

1. Likelihood of success 654

a.	Applicable standards	654
b.	Analysis	655

i.	Vagueness	655
ii.	Barriers to competition	658
iii.	Interference with interstate commerce	660
iv.	Violation of Iowa law and the filed rate doctrine	662

2. Threat of irreparable harm 664

a.	Applicable standards	664
b.	Arguments of the parties	665
c.	Analysis	665

3. Balance of harms 666

a.	Applicable standards	666
b.	Arguments of the parties	666
c.	Analysis	667

4. The public interest 667

III. CONCLUSION 667

734 F.Supp.2d 640

A competitive local exchange carrier (CLEC), which provides interstate and intrastate exchange access telephone service, as well as local, long distance, and enhanced telephone services to business and residential customers in Iowa, seeks a preliminary injunction enjoining action to enforce an order of the Iowa Utilities Board (IUB) concerning "high volume access service" (HVAS). HVAS includes conference bridges, chat lines, help desks, and other services based upon a high volume of incoming and outgoing calls. The IUB, its members, and four prospective intervenors-interexchange carriers (IXCs) that terminate long-distance calls to telephone numbers assigned to the CLEC-oppose such a preliminary injunction.

I. INTRODUCTION

A. Factual Background

The court is mindful of the general rule that "the findings of fact and conclusions of law made by a court granting a preliminary injunction are not binding at trial on the merits." University of Texas v. Camenisch, 451 U.S. 390, 395, 101 S.Ct. 1830, 68 L.Ed.2d 175 (1981); accord United States Sec. and Exchange Comm'n v. Zahareas, 272 F.3d 1102, 1105 (8th Cir.2001) ("[W]e have long held that 'findings of fact and conclusions of law made by a court granting a preliminary injunction are not binding.' ") (quoting Patterson v. Masem, 774 F.2d 251, 254 (8th Cir.1985)); National Credit Union Admin. Bd. v. Johnson, 133 F.3d 1097, 1103 n. 5 (8th Cir.1998) (quoting this principle from Camenisch ); Henderson v. Bodine Aluminum, Inc., 70 F.3d 958, 962 (8th Cir.1995) (citing this statement from Camenisch as the "general rule" for findings of fact and conclusions of law in preliminary injunction rulings). Thus, all findings of fact in this ruling are provisional.

1. The entities involved and their dispute

Plaintiff Aventure Communication Technology, L.L.C. (Aventure), alleges that it is a so-called competitive local exchange carrier or CLEC, that is, a telecommunications carrier that operates a local telephone network and provides switched exchange access to that network by long distance companies, so-called interexchange carriers or IXCs, including Qwest Communications Company, L.L.C. (Qwest), Verizon Communications, Inc. (Verizon), AT & T Corporation (AT & T), and Sprint Communications Company, L.P. (Sprint). Access to Aventure's local telephone network allows the IXCs to complete long distance calls placed by the IXCs' long distance customers to numbers that have been assigned to Aventure's local customers. Aventure's business customers include companies that provide conference calling services to the public. Callers reach the conference calling "bridges" by dialing a long distance telephone number, just as they would to call any other residential or business telephone number in Iowa. IXCs must compensate Aventure for calls from IXCs completed to numbers assigned to Aventure's customers by paying a "terminating access charge." Aventure's compensation rates-its tariffs-are regulated, in part, by the Federal Communications Commission (FCC), which has jurisdiction over long distance calls that cross state boundaries (interstate or international traffic), and, in part, by the Iowa Utilities Board (IUB), which has jurisdiction over calls that originate and terminate within the state of Iowa (intrastate traffic). Approximately 98% of Aventure's long distance traffic is interstate, while the rest is intrastate.

This dispute is one of a series of disputes between Iowa LECs, like Aventure, and IXCs, such as Qwest, Verizon, AT &

734 F.Supp.2d 641

T, and Sprint, about whether the IXCs must pay access charges to the Iowa LECs for traffic terminated to conference call providers and other high volume access services. Aventure contends that the IXCs have refused to pay the tariffed rates for calls terminated to Aventure's conference call providers. The IXCs assert that Aventure is engaged in "traffic pumping" or "access stimulation," involving actively pursuing then billing a high volume of calls to free calling service companies that do not qualify for switched access service at rates determined on historically low volume and relatively high costs per call.

Of particular interest here is a state-based case before the IUB initiated by Qwest in February 2007, identified by Aventure as the IUB Proceedings, but more precisely identified as Qwest Communications Corp. v. Superior Tel. Coop., IUB Docket No. FCU07-2. In the IUB Proceedings, Qwest alleged that it did not owe eight LECs, including Aventure, the terminating access charges for which Qwest had been billed and that, to the extent that Qwest had paid any of those charges, it was entitled to a refund. Eventually, in a Final Order in the IUB Proceedings dated September 21, 2009, the IUB found that the conference-calling service providers did not subscribe to services provided by the LECs pursuant to their tariffs- i.e., they were not "end users" under those tariffs-so that Qwest did not owe access charges to the LECs for traffic delivered to the conference call service providers. The Final Order also announced that the IUB would initiate formal rule-making proceedings to consider the policy issues raised in its Final Order.

2. The IUB's rule-making

Indeed, on September 18, 2009, the IUB issued an order establishing Docket No. RMU-2009-0009 and commencing a rule-making proceeding (the IUB Rule-Making Proceedings ). See In re High Volume Access Services, RMU-2009-0009, Order Initiating Rule Making (IUB Sept. 18, 2009) ("HVAS NPRM"), attached to Aventure's Motion For Preliminary Injunction as Exhibit 2. In that notice, the IUB proposed to amend its rules "to address High Volume Access Service (HVAS) and the effect HVAS can have on a local exchange carrier's (LEC's) revenues from intrastate switched access services." HVAS NPRM at 1.

The IUB released its Order Adopting Rules ( HVAS Order ) in the IUB Rule-Making Proceedings on June 7, 2010. See Complaint, Exhibit 1. In the HVAS Order, the IUB explained that the rules amendments were, in particular, "focused on situations in which an [sic] LEC's rates for intrastate access services are based, indirectly, on relatively low traffic volumes, but the LEC then experiences a relatively large and rapid increase in those volumes, resulting in a substantial increase in revenues without a matching increase in the total cost of providing access service." HVAS Order at 1. The HVAS Order recognized,

This can happen, for example, as a result of adding an [sic] HVAS customer that offers conference bridges, chat lines, help desks, or other services that are based upon high volumes of incoming or outgoing interexchange calls. The result is an increase in the LEC's access service minutes, which leads in turn to a matching increase in the amount the LEC bills to interexchange carriers (IXCs) for switched access services. When this situation is actively pursued by the LEC, it is sometimes referred to as "access stimulation."

HVAS Order at 1-2.

The court finds the "Background" to the amendment of the rules in the HVAS Order to be particularly instructive. Therefore,

734 F.Supp.2d 642

the court quotes that "Background" here, in its entirety:

The Federal Communications Commission (FCC) has described access stimulation and the economic incentives for it under the federal system of rate regulation as follows:

Oversimplifying somewhat, to establish their rates, rate-of-return carriers calculate a revenue requirement, which is intended to recover expenses plus a reasonable rate of return. Once the revenue requirement is determined, carriers propose prices for all interstate services, which, when multiplied by historical or projected demand, are targeted to equal the revenue requirement. If, after rates are set, actual demand and expenses differ from the estimated demand and expenses, the realized rate-of-return may be greater or less than the targeted rate of return. The limited information we have suggests that, in certain instances, some LECs are experiencing dramatic increases in demand for switched access services. If the average cost per minute falls as demand grows, the realized rates of return are likely to

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