Cmc Telecom, Inc. v. Michigan Bell Telephone Co.
| Decision Date | 28 August 2009 |
| Docket Number | No. 1:07-cv-319.,1:07-cv-319. |
| Citation | 654 F.Supp.2d 677 |
| Parties | CMC TELECOM, INC. and Grid 4 Communications, Inc., Plaintiffs, v. MICHIGAN BELL TELEPHONE CO., et al., Defendants. |
| Court | U.S. District Court — Western District of Michigan |
Norman C. Witte, Law Office of Norman C. Witte, Gary L. Field, Law Office of Gary L. Field, PLLC, Lansing, MI, for Plaintiffs.
Albert Calille, Ameritech, Detroit, MI, Mark R. Ortlieb, AT & T Services Inc., Stephen S. Sanders, Mayer Brown Rowe & Maw LLP, Chicago, IL, William J. Champion, III, Dickinson Wright PLLC, Ann Arbor, MI, Steven D. Hughey, MI Dept Attorney General, Lansing, MI, for Defendants.
Plaintiff CMC Telecom, Inc. and Plaintiff Grid 4 Communications, Inc. (Plaintiffs) allege Defendant Michigan Bell Telephone Company, d/b/a AT & T Michigan (Defendant or Defendant AT & T) violated the Telecommunications Act of 1996(Act), 47 U.S.C. §§ 151 et seq. The controversies this Court must resolve all relate to individual case basis (ICB) contracts offered by Defendant AT & T to various non-residential customers.1 Plaintiffs urge this Court to find portions of an order issued by Defendant Michigan Public Service Commission (MPSC) violates federal law. Plaintiffs challenge four holdings in the MPSC Order, all concerning Defendant AT & T's ICB related practices.
Plaintiffs, along with the Michigan Communications Carriers Association, filed a complaint with the MPSC on August 1, 2006. An Administrative Law Judge (ALJ) heard oral argument on a motion to dismiss and later issued a Proposal for Decision (Proposal). The parties filed exceptions to the Proposal and replies. The MPSC issued its order on February 27, 2007. Plaintiffs then filed this complaint and request for declaratory relief on March 27, 2007. Then presiding senior Judge Wendell A. Miles issued a case management order in July 2007, providing a schedule for the parties to brief the "appeal" portion of the case. The order stated "the court shall initially determine whether the MPSC Order and AT & T Michigan's actions violated federal law." (Dkt. No. 17—CMO at 1.) If the court issued a ruling favorable to Plaintiffs, a subsequent case management order would issue scheduling deadlines for discovery regarding damages and the remainder of the case. Id. After the case was reassigned to the undersigned, oral argument was held. The court invited the parties to file additional briefs, which all the parties have done.
Congress enacted the Telecommunications Act of 1996 in order to introduce competition into local telecommunications markets. Southwestern Bell Tel. Co. v. Apple, 309 F.3d 713, 714 (10th Cir.2002). Before the Act, local telephone service was a regulated monopoly where the provider was given protection from new companies seeking entry into the market. Id. Under the Act, incumbent local exchange carriers (ILECs), whose monopoly had been protected, were given various affirmative duties designed to promote competition and introduce new carriers into the market. Id. The ILECs, as owners of the local exchange network, had to provide network access to competing local exchange carriers (CLECs). Michigan Bell Tel. Co. v. MFS Intelenet of Michigan, Inc., 339 F.3d 428, 430 (6th Cir.2003).
One of the new duties imposed on ILECs was the obligation to sell telecommunications services it offered at retail to their competitors, the CLECs, at wholesale rates for resale to consumers. 47 U.S.C. § 251(c)(4)(A). Under the resale duty, an ILEC is prohibited from imposing unreasonable or discriminatory conditions or limitations on the resale of the telecommunications services. 47 U.S.C. § 251(c)(4)(B). The FCC has also promulgated regulations implementing the Telecommunications Act. ILECs must make their services available for resale on terms and conditions that are reasonable and nondiscriminatory. 47 C.F.R. § 51.603(a). Any service offered by an ILEC at retail must be offered at wholesale rates to CLECs for resale. 47 C.F.R. § 51.605(a). Several exceptions exist for the broad requirement under section 605(a), such as cross-class selling (e.g. CLECs may not resell business services to residential users) and short term promotions (ILECs need not offer promotional prices to CLECs if the promotion lasts less than 90 days). 47 C.F.R. § 51.613(a). ILECs may impose a restriction not allowed under section 613(a) if they establish that the restriction is reasonable and nondiscriminatory. 47 C.F.R. § 51.613(b). Thus, under the federal regulation, a presumption exists that a condition or limitation on resale is unreasonable or discriminatory.
In addition to regulations, the FCC has issued a number of orders designed to guide those bodies who administer, interpret and enforce the act. Among those orders is In the Matter of Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, 11 F.C.C.R. 15499 (1996) (Local Competition Order). See Apple, 309 F.3d at 715 n. 1. Section VIII of the Local Competition Order contains a discussion of the resale provision. In Paragraph 939, the FCC stated that restrictions on resale are presumptively unreasonable. In Paragraph 948, the FCC concluded section 251(c)(4) does not include any exception for promotional or discounted offerings or for other customer-specific offerings. In Paragraph 951, the FCC concluded the same section of the Act applies to volume based discounts. In Paragraph 953, the FCC explained that, with respect to volume based discounts, requirements that end users meet the volume base are presumptively unreasonable so long as the reseller, the CLEC, "in aggregate, under the relevant tariff, meets the minimal level of demand."
For CLECs, ILECs operate both as a network provider, see 47 U.S.C. § 251(c)(3) (), and as a provider of wholesale telecommunication services, see 47 U.S.C. § 251(c)(4). ILECs are also retail providers for both network access and telecommunications services for their own end use customers. The Act requires carriers to file a schedule of charges for services, known as tariffs.2 See AT & T v. Cent. Office Tel., Inc., 524 U.S. 214, 216, 118 S.Ct. 1956, 141 L.Ed.2d 222 (1998). State Commissions determine the wholesale discount rate for CLECs from an ILEC's telecommunications services. 47 U.S.C. § 252(d)(3). The wholesale rate discount from Defendant AT & T Michigan's tariffed services is 16.62%.3
ILECs will sometimes negotiate individual contracts with specific end users which include discounts from the published tariff prices.4 Defendant AT & T considers more than a dozen factors when determining whether to offer an ICB to a customer and the price it will offer for the services requested. Those factors include, but are not limited to, (1) the services included in the package, (2) revenue commitment, (3) marketplace prices and the cumulative price differential, (4) prices offered for similar or bundled services, (5) location, (6) loop length, (7) cable complement, (8) availability of facilities, (9) wire center, (10) timing and current competitive environment, (11) general state of the economy, (12) network architecture or service configuration, (13) quantity commitment, and (14) various risk factors. (Dkt. No. 18-17 Exhibit P to Plaintiffs' Opening Brief— Plaintiffs' Discovery Request Question CL-AT & T-003.) The wholesale discount for the assumption of existing ICBs is 4.34%.5 The wholesale discount for the resale of existing ICBs to new customers is 5.71%.6 AT & T currently does not make its ICBs known to CLECs.
In their complaint filed with the MPSC, Plaintiffs asserted Defendant AT & T violated federal law by "failing to make certain discounted services available to competitive local exchange carriers ("CLEC") at wholesale rates based upon the actual retail prices paid by AT & T retail customers." Plaintiffs alleged Defendant AT & T has a duty under federal law not to impose unreasonable or discriminatory conditions or limitations on the resale of their telecommunications services. (Id.) Plaintiffs explained Defendant AT & T offered discounted rates to retail customers that were lower than the lowest wholesale rates available to CLECs. (Id. ¶ 3.) Specifically, the complaint alleged Defendant AT & T violated 47 U.S.C. § 251(c)(4) through (1) its "winback" program, (2) its volume discounts, and (3) its term discounts. As part of the prayer for relief on each of the three counts, Plaintiffs requested a mechanism, a password protected website, be established on which Defendant would disclose the prices for services offered through their ICBs.
The ALJ summarized the various arguments advanced by both parties in his Proposal for Decision. (Dkt. No. 18-12 Exhibit K to Plaintiffs' Opening Brief— ALJ Proposal.) Before addressing Plaintiffs' specific allegations regarding volume and term discounts, the ALJ discussed the propriety of Defendant AT & T's unwillingness to disclose the terms, conditions and pricing in its ICB contracts. (ALJ Proposal at 25-31.) The ALJ concluded Defendant AT & T's failure to disclose the terms and conditions of an ICB was a prohibited restriction. (Id. at 28.) At the same time, the ALJ found Defendant AT & T's concerns about confidentiality meritorious and recommended requiring Defendant AT & T to post the terms and conditions of its ICBs on a password protected website.7 (Id. at 29.) The ALJ concluded aggregation of ICB contracts would be unjustified and unworkable. (Id. at 36.) The ALJ also rejected Plaintiffs' request that they be allowed to resell ICB contracts to customers who are not similarly situated to the customers for which the ICB was created. (Id. at 37.)
The MPSC issued an order in which it addressed...
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Cmc Telecom Inc. v. Mich. Bell Tel. Co.
...contracts without customer consent, and endorsed the commission's reasoning on CMC's other claims. CMC Telecom, Inc. v. Mich. Bell Tel. Co., 654 F.Supp.2d 677 (W.D.Mich.2009). Additionally, the district court identified certain factors that AT & T could apply in determining customer similar......