INDIANA BELL TEL. v. TIME WARNER COMM., 93A02-9907-EX-460.

• Decision Date: 14 April 2003
• Docket Number: No. 93A02-9907-EX-460.,93A02-9907-EX-460.
• Citation: 786 N.E.2d 301
• Parties: INDIANA BELL TELEPHONE COMPANY, INCORPORATED, d/b/a/ Ameritech Indiana, Appellant-Respondent, v. TIME WARNER COMMUNICATIONS OF INDIANA, L.P., Appellee-Complainant.
• Court: Indiana Appellate Court

786 N.E.2d 301

INDIANA BELL TELEPHONE COMPANY, INCORPORATED, d/b/a/ Ameritech Indiana, Appellant-Respondent, v. TIME WARNER COMMUNICATIONS OF INDIANA, L.P., Appellee-Complainant.

No. 93A02-9907-EX-460.

Court of Appeals of Indiana.

April 14, 2003.

Michael R. Fruehwald, Barnes & Thornburg, Brian D. Robinson, Ameritech Indiana, Indianapolis, IN; Of Counsel: Theodore A. Livingston, John E. Muench, Demetrios G. Metropoulos, Mayer Brown Rowe & Maw, Chicago, IL, Attorneys for Appellant.

David L. Steiner, Office of Indiana Attorney General, Indianapolis, IN, Attorney for Appellee, Indiana Utility Regulatory Commission.

Clayton C. Miller, Baker & Daniels, Indianapolis, IN, Douglas W. Trabaris, AT&T Corporation, Chicago, IL, Attorneys for Appellee, TCG Indianapolis.

OPINION

BARNES, Judge

Case Summary

Indiana Bell Telephone Company, d/b/a Ameritech Indiana ("Ameritech"), appeals an order of the Indiana Utility Regulatory Commission ("IURC") requiring Ameritech to pay reciprocal compensation to a competing telecommunications provider, Time Warner Communications of Indiana ("Time Warner"), for calls placed by Ameritech's customers to Internet service provider ("ISP") customers of Time Warner. We affirm.

Issue

The sole restated issue for our review is whether the IURC properly interpreted the interconnection agreement between Ameritech and Time Warner, which was entered into pursuant to the Telecommunications Act of 1996 ("1996 Act"), as requiring reciprocal compensation for ISP-bound traffic.

Facts

"The Telecommunications Act of 1996 . . . created a new telecommunications regime designed to foster competition in local telephone markets." Verizon Maryland, Inc. v. Public Serv. Comm'n of Maryland, 535 U.S. 635, 638, 122 S.Ct. 1753, 1756, 152 L.Ed.2d 871 (2002). Under the 1996 Act, incumbent local-exchange carriers ("ILECs") have a duty to share their pre-existing telephone networks with competing local-exchange carriers ("CLECs"). Id.; 47 U.S.C. § 251(c). To implement the 1996 Act's competition scheme, ILECs are required to enter into interconnection agreements with a CLEC that wishes to access the ILEC's market, so that a customer of an ILEC who wishes to call a customer of a CLEC may do so, and vice versa. Southwestern Bell Tele. Co. v. Public Util. Comm'n of Texas, 208 F.3d 475, 477 (5th Cir.2000). Such agreements must provide for reasonable reciprocal compensation. 47 U.S.C. §§ 251(b)(5) and 252(d)(2)(A). "Reciprocal compensation" means that "[w]hen an LEC's customer places a local call to a customer of another LEC, the LEC whose customer initiated the call compensates the receiving LEC for transporting and terminating the call through its network." Southwestern Bell, 208 F.3d at 477.

Ameritech, an ILEC, entered into an interconnection agreement with Time Warner, a CLEC, in July 1996. Section 5.11 of the agreement addresses "Reciprocal Compensation Arrangements—Section 251(b)(5)," and states, "Ameritech's and [Time Warner]'s compensation for transport and termination on their respective networks of all Local Traffic exchanged between [Time Warner] and Ameritech shall be determined as set forth in the Pricing Schedule." R. p. 50.¹ "Reciprocal Compensation" is defined elsewhere as being "As Described in the Act." R. p. 45. "Local Traffic" is defined as meaning "local service area calls as defined by the [IURC]." R. p. 43. The crux of the dispute in this case, as it has been in numerous disputes between ILECs and CLECs throughout the country, is whether a telephone call from a customer of an ILEC to an ISP that is a customer of a CLEC is a call for which the ILEC must pay reciprocal compensation to the CLEC under the terms of the parties' interconnection agreement. It would appear that many such agreements executed in 1996 or thereabouts failed to specifically address the question of whether calls to ISPs constituted "local traffic" or were non-local, with reciprocal compensation being required only for "local traffic." In a simplified nutshell, these disputes have arisen because from one perspective calls to an ISP usually are "local," toll-free, and not seen as long distance by the customer calling the ISP. On the other hand they are also non-local, because the ISP itself connects the customer to the World Wide Web, meaning a caller in Indianapolis eventually may connect with a web site based in Los Angeles, for example, or as far away as Timbuktu.

In 1997, Ameritech announced to Time Warner and other CLECs that it did not intend to pay reciprocal compensation for calls placed by its customers to ISPs serviced by CLECs. On January 5, 1998, Time Warner filed a complaint with the IURC seeking a ruling that its interconnection agreement with Ameritech required Ameritech to pay reciprocal compensation to Time Warner for local calls Ameritech's customers placed to Time Warner's ISP customers. Several other CLECs who claimed to have substantially similar interconnection agreements with Ameritech filed petitions to intervene in the proceedings, including TCG Indianapolis, d/b/a AT&T ("AT&T"), which petitions were granted. Time Warner moved for summary judgment on its complaint. On February 3, 1999, the IURC granted Time Warner's motion, concluding, inter alia, that calls from Ameritech's customers to Time Warner's ISP customers were "Local Traffic subject to reciprocal compensation." R. p. 1928.

On February 23, 1999, Ameritech asked the IURC to reconsider its February 3 order. On February 26, 1999, the Federal Communications Commission ("FCC") issued a "Declaratory Ruling" that stated, in part, "ISP-bound traffic is jurisdictionally mixed and appears to be largely interstate," but that "In the absence, to date, of a federal rule regarding the appropriate inter-carrier compensation for this traffic, we therefore conclude that parties should be bound by their existing interconnection agreements, as interpreted by state commissions." In the Matter of Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, 14 F.C.C.R. 3689, 1999 WL 98037, ¶ 1. On June 9, 1999, the IURC concluded that the FCC's ruling did not affect its February 3, 1999 order, and declined to reconsider that order. Ameritech initiated an appeal to this court and also filed suit in the United States District Court for the Southern District of Indiana, pursuant to 47 U.S.C. § 252(e)(6). We granted Ameritech's motion to stay consideration of this appeal on August 30, 1999. On April 4, 2001, we received notice that Time Warner had settled with Ameritech. Time Warner was dismissed as a party, with the appeal remaining as to Ameritech and the intervenors in the IURC proceeding.² On August 22, 2002, after the action in the federal district court was dismissed, we resumed consideration of this appeal.

Analysis³

Ameritech argues that the IURC, as a matter of Indiana contract law, erred in reading its interconnection agreement with Time Warner as requiring reciprocal compensation for ISP-bound telephone traffic because the Act does not require reciprocal compensation for such traffic and the parties intended to limit reciprocal compensation only to what is required by the Act. Initially, we address the conflicting standards of review the parties propose. Ameritech asks us to review the IURC's decision de novo, because it concerned the interpretation of a contract and thus addressed a pure question of law requiring no deference to the administrative agency. See Cowper v. Collier, 720 N.E.2d 1250, 1255 (Ind.Ct.App.1999),

trans. denied (2000). AT&T urges that we review the decision under an arbitrary and capricious standard; however, it cites no authority for applying this standard. In fact, the usual standard of review for IURC decisions is two-fold: first, whether the decision is supported by specific findings of fact and sufficient evidence, and second, whether the decision is contrary to law. Knox County Rural Elec. Membership Corp. v. PSI Energy, Inc., 663 N.E.2d 182, 189 (Ind.Ct.App.1996),

trans. denied. That standard is inapplicable here, with the case having been resolved on summary judgment.⁴

The standard of review for summary judgment orders under Indiana Trial Rule 56 is de novo, and we must determine that no genuine issues of material fact exist and that the movant is entitled to judgment as a matter of law to affirm a grant of summary judgment. See Greater Hammond Cmty. Servs., Inc. v. Mutka, 735 N.E.2d 780, 782 (Ind.2000)

. We are aware that this is not a typical contract at issue here because it is intertwined to a certain degree with statutes and regulations that the IURC is charged with administering, which might ordinarily require some deference to its reading of the contract. See Department of Natural Res. v. Peabody Coal Co., 740 N.E.2d 129, 134 (Ind.Ct.App.2000). Nevertheless, because this case involved the interpretation of a written contract decided on summary judgment, and because AT&T cites no authority for applying its suggested arbitrary and capricious standard of review, we grant Ameritech the benefit of the doubt and review the IURC's decision de novo.

Whether reciprocal compensation is due for ISP-bound traffic is an issue that has generated voluminous litigation between ILECs and CLECs across the country in the past five years. Some additional background information may be helpful to put this entire question into a framework. The 1996 Act, among other things, imposed a duty on all local exchange carriers "to establish reciprocal compensation arrangements for the transport and termination of telecommunications." 47 U.S.C. § 251(b)(5). State utility regulatory commissions were given the authority to review and approve interconnection agreements between LECs, and were instructed not to "consider the terms and conditions for reciprocal compensation to be just and reasonable unless . . . such terms and conditions provide for the mutual and reciprocal recovery by each carrier of costs...