Iowa Telecommunications Servs. v. Iowa Utilities

• Decision Date: 28 April 2009
• Docket Number: No. 08-2140.,08-2140.
• Citation: 563 F.3d 743
• Parties: IOWA TELECOMMUNICATIONS SERVICES, INC., doing business as Iowa Telecom, Plaintiff/Appellant, Citizens Mutual Telephone Cooperative; Clear Lake Independent Telephone Company; Farmers Mutual Cooperative Telephone Co. of Shelby; Farmers Telephone Company; Grand River Mutual Telephone Corporation; Heart of Iowa Communications Cooperative; Huxley Communications; Kalona Cooperative Telephone; Lost Nation-Elwood Telephone Company; Mabel Cooperative Telephone Company; Minburn Telecommunications, Inc.; North English Cooperative Telephone Company; Sharon Telephone; Shell Rock Telephone Company, doing business as Bevcomm c/o Blue Earth Valley Telephone Company; South Central Communications, Inc.; South Slope Cooperative Telephone Company; Sully Telephone Association; Titonka Telephone Company; Ventura Telephone Company, Inc.; Webster Calhoun Cooperative Telephone Association; Wellman Cooperative Telephone Association; West Liberty Telephone Company, doing business as Liberty Communications; Winnebago Cooperative Telephone Association; Rockwell Cooperative Telephone Association, Plaintiffs, v. IOWA UTILITIES BOARD, Utilities Division, Department of Commerce; John Norris, In his official capacity as a member of the Iowa Utilities Board and not as an Individual; Diane Munns, In her Official Capacity as a member of the Iowa Utilities Board and not as an Individual; Curtis Stamp, In his Official Capacity as a member of the Iowa Utilities Board and not as an Individual; Sprint Communications LP, doing business as Sprint Communications Company, L.P., Defendants/Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

563 F.3d 743

IOWA TELECOMMUNICATIONS SERVICES, INC., doing business as Iowa Telecom, Plaintiff/Appellant Citizens Mutual Telephone Cooperative; Clear Lake Independent Telephone Company; Farmers Mutual Cooperative Telephone Co. of Shelby; Farmers Telephone Company; Grand River Mutual Telephone Corporation; Heart of Iowa Communications Cooperative; Huxley Communications; Kalona Cooperative Telephone; Lost Nation-Elwood Telephone Company;

Mabel Cooperative Telephone Company; Minburn Telecommunications, Inc.; North English Cooperative Telephone Company; Sharon Telephone; Shell Rock Telephone Company, doing business as Bevcomm c/o Blue Earth Valley Telephone Company; South Central Communications, Inc.; South Slope Cooperative Telephone Company; Sully Telephone Association; Titonka Telephone Company; Ventura Telephone Company, Inc.; Webster Calhoun Cooperative Telephone Association; Wellman Cooperative Telephone Association; West Liberty Telephone Company, doing business as Liberty Communications; Winnebago Cooperative Telephone Association; Rockwell Cooperative Telephone Association, Plaintiffs, v. IOWA UTILITIES BOARD, Utilities Division, Department of Commerce; John Norris, In his official capacity as a member of the Iowa Utilities Board and not as an Individual; Diane Munns, In her Official Capacity as a member of the Iowa Utilities Board and not as an Individual; Curtis Stamp, In his Official Capacity as a member of the Iowa Utilities Board and not as an Individual; Sprint Communications LP, doing business as Sprint Communications Company, L.P., Defendants/Appellees.

No. 08-2140.

United States Court of Appeals, Eighth Circuit.

Submitted: December 12, 2008.

Filed: April 28, 2009.

Deborah Marie Tharnish, argued, Robert F. Holz, Jr., Steven Lowell Nelson, Des Moines, IA, on the brief, for appellant.

Raymond A. Cardozo, argued, Kirsten J. Daru, on the brief, San Francisco, CA, for appellee Sprint.

David Lynch, argued, Des Moines, IA, for appellee IA Utilities, et al.

Before WOLLMAN, BYE, and RILEY, Circuit Judges.

WOLLMAN, Circuit Judge.

Iowa Telecommunications Services, Inc. (Iowa Telecom) appeals from the district court's¹ order affirming the Iowa Utilities Board's ruling that Sprint Communications LP (Sprint) is a telecommunications carrier under the Telecommunications Act of 1996(Act) and thus entitled to interconnect with the local exchange carriers' networks. We affirm.

I. Background

The issue on appeal is whether Sprint is a telecommunications carrier under the Act, and we limit our background discussion accordingly. We borrow heavily from the district court's thorough presentation of the statutory, factual, and procedural background. See Iowa Telecomm. Servs., Inc. v. Iowa Utils. Bd., 545 F.Supp.2d 869 (S.D.Iowa 2008).

A. Statutory Background

The Telecommunications Act of 1996 was enacted to promote competition, reduce regulation, and encourage the development of new technologies within the telecommunications industry. Before the Act was passed, incumbent local exchange carriers² served as the exclusive providers of local telephone service, which was considered a natural monopoly. To facilitate the market entry of competitors, the Act imposed certain duties upon the incumbent carriers, including the duty to provide interconnection with their networks to any requesting telecommunications carrier. 47 U.S.C. § 251(c)(2); see also id. § 251(b)(1)-(6) (obligations of all local exchange carriers); id. § 251(c)(1)-(6) (additional obligations of incumbent local exchange carriers). The Act also provided the procedures for negotiation, arbitration, and approval of interconnection agreements between the telecommunications carrier and the incumbent local exchange carrier. Id. § 252.

Interconnection allows multiple carriers to exchange telephone traffic. Without it, a new-to-the-market carrier "would not be able to connect its customers to a customer served by the ILEC [incumbent local exchange carrier] without building its own infrastructure to serve both customers." Iowa Network Servs., Inc.v. Qwest Corp., 363 F.3d 683, 686 (8th Cir.2004). Only telecommunications carriers have the right to compel interconnection with a local exchange carrier. 47 U.S.C. § 251(c)(2). The Act defines "telecommunications carrier" as "any provider of telecommunications services," and defines "telecommunications service" as "the offering of telecommunications for a fee directly to the public, or such classes of users as to be effectively available directly to the public, regardless of the facilities used." Id. § 153(44), (46).

The Federal Communications Commission (FCC) has held that the term "telecommunications carrier" has essentially the same meaning as the term "common carrier" under the Communications Act of 1934. AT & T Submarine Sys., Inc., 13 F.C.C.R. 21585, 21587-88 ¶ 6 (1998); Cable & Wireless, PLC, 12 F.C.C.R. 8516, 8522 ¶ 13 (1997); see also V.I. Tel. Corp. v. F.C.C., 198 F.3d 921, 925 (D.C.Cir.1999). The Communications Act defines "common carrier" as "any person engaged as a common carrier for hire, in interstate or foreign communication by wire" and imposed upon local telephone companies certain common carrier obligations.³ 47 U.S.C. § 153(10); Time Warner Telecom, Inc. v. F.C.C., 507 F.3d 205, 210 (3d Cir.2007). "The primary sine qua non of common carrier status is a quasi-public character, which arises out of the undertaking to carry for all people indifferently." Nat'l Ass'n of Regulatory Util. Comm'rs v. F.C.C., 533 F.2d 601, 608 (D.C.Cir.1976) (NARUC II) (internal quotations omitted).

A two-prong test has emerged to determine whether a carrier is a common carrier under the Communications Act: "(1) whether the carrier holds himself out to serve indifferently all potential users; and (2) whether the carrier allows customers to transmit intelligence of their own design and choosing." United States Telecom Ass'n v. F.C.C., 295 F.3d 1326, 1329 (D.C.Cir.2002) (internal quotations omitted); see also Sw. Bell Tel. Co. v. F.C.C., 19 F.3d 1475, 1481 (D.C.Cir.1994); NARUC II, 533 F.2d at 608-09; NARUC I, 525 F.2d at 641-42. The key factor in determining common carriage is whether the carrier offers "indiscriminate services to whatever public its service may legally and practically be of use." United States Telecom Ass'n, 295 F.3d at 1334 (quoting NARUC I, 525 F.2d at 642). Iowa Telecom concedes on appeal that Sprint meets the second prong of the test and that Sprint holds itself out to serve all potential users. It contends, however, that Sprint does not or will not serve those users indifferently or indiscriminately because its contracts are confidential and individually negotiated and its rates are not public.

B. Sprint's Business Model

Sprint has developed a business model in which it partners with local cable companies to provide local telephone services. Sprint provides the facility to interconnect calls to and from other carriers, the switch that gathers and distributes the telephone traffic, and various back-office functions. The local cable company provides the system of wires and cables which takes a phone call from the user's premises to the connection point. This system is known as "last-mile" or "loop" services, and it carries calls to and from the switch and the end user.

In Iowa, Sprint has partnered with MCC Telephony of Iowa, L.L.C. (MCC), the local cable company and an affiliate of Mediacom. Under their arrangement, Sprint provides the wholesale telecommunications services described above, which MCC retails. MCC provides last-mile facilities and is in charge of all sales, billing, and customer service. Sprint has no direct relationship with the customers and does not provide any retail services. Sprint believes this model is advantageous to both companies, allowing them to enter the market quickly, efficiently, and without duplicating resources. The terms, conditions, and prices of Sprint's contract with MCC are considered confidential, and its rates are not available to the public.

C. Procedural Background

In October 2004, Sprint sent a request for interconnection to various local exchange carriers in Iowa, including Iowa Telecom.⁴ Sprint sought an interconnection agreement to use for its business with MCC, as well as for potential business with other similarly situated cable providers. Iowa Telecom refused to execute an interconnection agreement directly with Sprint because it believed that Sprint was not the proper party to the agreement. Instead, Iowa Telecom indicated its willingness to negotiate with MCC or with Sprint acting as MCC's agent. Sprint made clear that it was not acting as MCC's agent or legal partner; it sought interconnection in its own right, albeit in connection with its relationship with MCC.

Sprint filed a petition for arbitration with the Iowa Utilities Board (Board) in March 2005. See 47 U.S.C. § 252(b)(1). Iowa Telecom moved to dismiss, arguing that Sprint did not meet the Act's definition of "telecommunications carrier." The Board agreed and dismissed the petition because Sprint "[was] not, in this context, holding itself out as a common carrier." Sprint Comm. Co., L.P. v. Ace Comm. Group, et al., Docket No. ARB-05-2, at 12, Order Granting Motions To Dismiss, 2005 WL 1415230 (Iowa Utils.Bd. May 26, 2005). Sprint had not asserted that it would make its proposed services available on a common carrier basis, and the Board determined that Sprint did not intend to offer its proposed services "to any party other than its private business partners, pursuant to individually-negotiated contracts." Id. at 13. Without status as a telecommunications carrier, Sprint was not entitled to interconnect with the local exchange carriers' networks.

Sprint appealed the Board's decision to the district court. During the course of those proceedings, it became apparent that there were unresolved evidentiary and legal issues relevant to the Board's order of dismissal. Accordingly, Sprint...