Centennial P.R. License Corp.. v. Telecommunications Regulatory Bd. of P.R.

• Decision Date: 07 February 2011
• Docket Number: No. 10–1091.,10–1091.
• Citation: 634 F.3d 17
• Parties: CENTENNIAL PUERTO RICO LICENSE CORP., Plaintiff, Appellee,Puerto Rico Telephone Company, Inc., Plaintiff, Appellant,v.TELECOMMUNICATIONS REGULATORY BOARD OF PUERTO RICO, Defendant, Appellee,Vicente Aguirre Iturrino; Sandra Torres López; Nixyvette Santini Hernández, Defendants.
• Court: U.S. Court of Appeals — First Circuit

634 F.3d 17

52 Communications Reg. (P&F) 558

CENTENNIAL PUERTO RICO LICENSE CORP., Plaintiff, Appellee,Puerto Rico Telephone Company, Inc., Plaintiff, Appellant,

v.TELECOMMUNICATIONS REGULATORY BOARD OF PUERTO RICO, Defendant, Appellee,Vicente Aguirre Iturrino; Sandra Torres López; Nixyvette Santini Hernández, Defendants.

No. 10–1091.

United States Court of Appeals, First Circuit.

Heard Sept. 16, 2010.Decided Feb. 7, 2011.

Eduardo R. Guzmán–Casas, with whom Joe D. Edge, Christopher C. Sabis and Drinker Biddle & Reath LLP were on brief, for appellant.Robert F. Reklaitis, with whom Leslie Paul Machado and LeClair Ryan were on brief, for appellee Telecommunications Regulatory Board of Puerto Rico.Christopher W. Savage, with whom Davis Wright Tremaine LLP was on brief, for appellee Centennial Puerto Rico License Corp.Before TORRUELLA, RIPPLE,^* and LIPEZ, Circuit Judges.RIPPLE, Circuit Judge.

The plaintiff telecommunications companies brought these consolidated actions in the United States District Court for the District of Puerto Rico against defendants-appellees Telecommunications Regulatory Board of Puerto Rico (“the Board”) and various individual commissioners. They alleged violations of federal and commonwealth law in connection with the arbitration and approval of the companies' interconnection agreements. On cross-motions for summary judgment, the district court issued an opinion and order granting in part and denying in part summary judgment for the Board, granting in part and denying in part summary judgment for plaintiff-appellee Centennial Puerto Rico License Corporation (“Centennial”), vacating in part the Board's order on reconsideration and denying in full summary judgment for plaintiff-appellant Puerto Rico Telephone Company, Inc. (“PRTC”). PRTC now seeks review of the district court's decision. We believe that the Board was correct in all aspects of its order. Therefore, we affirm in part and reverse in part the judgment of the district court and remand for proceedings consistent with this opinion.

IBACKGROUND

A. The Statutory Scheme

Congress enacted the Telecommunications Act of 1996 (“the Act”) to reduce regulation of the telecommunications industry and to end the historical monopoly of incumbent local exchange carriers (“LECs”) over local telecommunications services.¹ In addition to removing state regulatory barriers to new entry, see 47 U.S.C. § 253,² Congress sought to encourage competition by mandating that carriers interconnect with one another and by requiring incumbent LECs to share elements of their existing telecommunications infrastructure with competing LECs. See id. §§ 251– 252.

To achieve these goals, the Act creates “a three-tier system of obligations imposed on separate, statutorily defined telecommunications entities.” Atlas Tel. Co. v. Oklahoma Corp. Comm'n, 400 F.3d 1256, 1262 (10th Cir.2005). First, all telecommunications carriers have a duty “to interconnect directly or indirectly with the facilities and equipment of other telecommunications carriers.” 47 U.S.C. § 251(a)(1). Second, the Act imposes a number of duties upon all LECs (both incumbent and competing), including the duty “not to prohibit, and not to impose unreasonable or discriminatory conditions or limitations on, the resale of its telecommunications services.” Id. § 251(b)(1). Finally, the Act obliges incumbent LECs to lease to competitors unbundled elements of their existing local networks, id. § 251(c)(3), to interconnect calls from customers of one LEC to customers of another LEC, id. § 251(c)(2), to allow competitors to purchase the incumbents' services at wholesale rates and resell those services at retail, id. § 251(c)(4), and to negotiate in good faith the terms of providing interconnection and services to other carriers, id. § 251(c)(1). The Act also directs the FCC to promulgate regulations implementing these provisions and to set standards of service and interconnection. See id. § 251(d).

Although the incumbent LECs' obligations to furnish network elements and allow interconnection are mandatory, Congress intended that the parties negotiate, in the first instance without government intervention, the terms of use and interconnection. See id. § 252(a). Section 252 sets forth the procedures for telecommunications providers to follow in requesting and negotiating the terms of these agreements.

Upon a request for access from a telecommunications provider, an incumbent LEC must enter into good-faith negotiations to reach a voluntary interconnection agreement. Id. § 252(a)(1). At any time during the negotiations, a party may ask a state commission to participate as a mediator. Id. § 252(a)(2). If negotiations prove unsuccessful, subsection 252(b) establishes a mechanism through which any party may petition the state commission to compel arbitration of any unresolved terms. In addition, subsection 252(e) requires any interconnection agreement reached by negotiation or arbitration to be submitted to the state commission for approval; it also specifies the grounds on which the commission may reject the agreement. See § 252(e)(1)–(2).

Specifically, a state commission may reject an arbitrated agreement only if it finds that “the agreement prescribed by the arbitrator (1) does not hold the carriers to their obligations under section 251 ... or (2) fails to meet the pricing standards of section 252(d).” WorldNet Telecomms., Inc. v. Puerto Rico Tel. Co., 497 F.3d 1, 5–6 (1st Cir.2007) (citing 47 U.S.C. § 252(e)(2)(B)). In reviewing agreements, the state commission is also bound by any standards set by the FCC. See AT & T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 384–85, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999); Global NAPs, Inc. v. Verizon New Eng., Inc. ( Global NAPs I ), 396 F.3d 16, 19 (1st Cir.2005). Despite these limitations, the Act provides that “nothing in this section shall prohibit a State commission from establishing or enforcing other requirements of State law in its review of an agreement, including requiring compliance with intrastate telecommunications service quality standards or requirements.” 47 U.S.C. § 252(e)(3). A party dissatisfied with the state commission's determination can seek review in federal district court. See id. § 252(e)(6).

The Act thus engages in a process of “cooperative federalism,” Puerto Rico Tel. Co. v. Telecomms. Regulatory Bd. of Puerto Rico, 189 F.3d 1, 8 (1st Cir.1999): It sets certain minimum interconnection and service obligations and provides the FCC with the power to set general standards. However, it also leaves room for otherwise consistent state regulations, see 47 U.S.C. § 253(b),³ and it vests in the several state commissions the authority to implement state policy and to impose additional, individual requirements on telecommunications providers by reviewing interconnection agreements. See Verizon New Eng., Inc. v. Maine Pub. Utils. Comm'n, 509 F.3d 1, 7 (1st Cir.2007) (describing the “dual federal-state regime”); WorldNet, 497 F.3d at 9 (stating that “the Act sets a federally mandated floor of equal service, and State commissions retain authority to ‘raise the bar’ ”) (quoting Indiana Bell Tel. Co. v. McCarty, 362 F.3d 378, 391–93 (7th Cir.2004)).

In order to strike a balance between federal and state interests, the Act provides that the FCC “shall not preclude the enforcement of any regulation, order, or policy of a State commission” that is “consistent with the requirements” of § 251 and “does not substantially prevent implementation of the requirements of [§ 251] and the purposes” of the Act. 47 U.S.C. § 251(d)(3)(B)–(C). The Act also disclaims—at least to a certain extent—preemption of state law:

Nothing in this part precludes a State from imposing requirements on a telecommunications carrier for intrastate services that are necessary to further competition in the provision of telephone exchange service or exchange access, as long as the State's requirements are not inconsistent with this part or the Commission's regulations to implement this part.

Id. § 261(c).B. Proceedings Before the Board

In 2005, PRTC, an incumbent LEC, and Centennial, a competing LEC, completed two interconnection agreements, which they renegotiated in 2008. During the renegotiation, PRTC and Centennial failed to reach an agreement on eighteen issues, and Centennial petitioned the Board, the commission responsible for administering the Act in Puerto Rico, to compel arbitration. The Board-appointed arbitrator conducted a hearing, and then the Board issued a decision resolving the outstanding issues. Later, the Board modified its decision on reconsideration.⁴ Three of those issues are relevant here:

1. Billing Dispute Fees

The 2005 agreements contained a term governing billing disputes between the parties. Under this term, if an invoiced party disputed a service bill, that party was required to put the invoiced amount in escrow. If the invoicing party prevailed in the dispute, it was entitled to the escrowed funds plus interest and a “late payment penalty.” R.1, Ex. 1 at 9 (Report and Order, Aug. 8, 2008, at 6). The agreement did not provide, however, for a reciprocal erroneous billing penalty if the invoiced party prevailed. During renegotiation, Centennial (which, it seems, is usually the invoiced party) wished to dispense with the late payment penalty, and PRTC wished to retain it. The Board determined that the agreements would retain the late payment fee.

On reconsideration, the Board reversed its initial determination. In order to achieve symmetry, the Board decided that the parties should either include both a “late payment fee” and an “erroneous billing fee” or abjure both fees. R.1, Ex. 4 at 10 (Order on Reconsideration, Nov. 25, 2008) (quotation marks omitted). According to the Board, although it believed at first that a late payment fee would compensate the party wrongly denied use of the funds in a way that an erroneous billing fee would not, upon...