Iowa Telecommunications v. Iowa Utilities Bd., 4:06cv0291 JAJ.
| Citation | 545 F.Supp.2d 869 |
| Decision Date | 15 April 2008 |
| Docket Number | No. 4:06cv0291 JAJ.,No. 4:06cv0376 JAJ.,4:06cv0291 JAJ.,4:06cv0376 JAJ. |
| Parties | IOWA TELECOMMUNICATIONS SERVICES, INC. dba Iowa Telecom, Plaintiff, v. IOWA UTILITIES BOARD, Utilities Division, Department of Commerce; John Norris, Diane Munns and Curtis Stamp, in their Official Capacities as Members of the Iowa Utilities Board and not as Individuals; and Sprint Communications, L.P., dba Sprint Communications Company, L.P., Defendants. 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; Rockwell Cooperative Telephone Association; Sharon Telephone; Shell Rock Telephone Company dba 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 dba Liberty Communications; and Winnebago Cooperative Telephone Association, Plaintiffs, v. Iowa Utilities Board, Utilities Division, Department of Commerce; John Norris, Diane Munns and Curtis Stamp, in their Official Capacities as Members of the Iowa Utilities Board and not as Individuals; and Sprint Communications, L.P., dba Sprint Communications Company, L.P., Defendants. |
| Court | U.S. District Court — Southern District of Iowa |
Robert F. Holz, Jr., Steven L. Nelson, Davis Brown Koehn Shors & Roberts PC, Des Moines, IA, for Plaintiffs.
David Jay Lynch, Mary Frances Whitman, Iowa Utilities Board, James L. Pray, Philip E. Stoffregen, Brown Winick Graves Gross Baskerville & Schoenebaum PLC, Des Moines, LA, Raymond A. Cardozo, Reed Smith LLP, San Francisco, CA, for Defendants.
This case comes before the Court pursuant to Iowa Telecommunications Service's ("Iowa Telecom") June 23, 2006 complaint (Docket No. 1), which was consolidated with an August 4, 2006 complaint by a group of Rural Local Exchange Carriers ("RLECs").1 (Docket No. 14). Iowa Telecom and the RLECs seek review of the Iowa Utilities Board's ("IUB") arbitrated interconnection agreement. (Docket Nos. 1-4). For the reasons set forth below, the Court finds for Defendants, upholding the decision of the IUB.
In an effort to increase competition in the provision of telecommunications services, particularly in rural areas, Congress enacted the Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 () ("Telecommunications Act"). In this case, Sprint contends that it is a telecommunications carrier entitled to interconnect, under the Act, with local telephone companies so that it can compete with them. It secured a ruling from the IUB requiring local telephone companies to allow Sprint to interconnect.
The local telephone companies now seek declaratory relief, asking the Court to declare that Sprint is a not a telecommunications carrier and therefore, (1) Plaintiffs have no duty to negotiate with Sprint; (2) Plaintiffs have no duty to interconnect with Sprint; and (3) the parties' arbitrated interconnection agreement exceeds federal law. Plaintiffs also ask the Court to (4) void the IUB's arbitration order and subsequent arbitration; (5) enjoin the IUB and its members from enforcing the challenged orders; and (6) enjoin Sprint from enforcing the arbitrated interconnection.
Plaintiffs also ask the Court to rescind the IUB's November 28, 2005, Order on Rehearing, arguing that the board did not have jurisdiction to reopen and rehear the case. Last, the Plaintiffs seek to invalidate a provision of the arbitrated interconnection agreement that allows Sprint to commingle local, long-distance, and wireless telephone traffic on one interconnection trunk.
The Court finds that Sprint is a telecommunications carrier because it provides indiscriminate service to all potential customers. Therefore, Sprint is entitled to interconnection with Iowa Telecom and the RLECs. The Court finds that the IUB had jurisdiction to reopen and rehear the case. The Court also concludes that it was neither arbitrary nor capricious to allow Sprint to commingle multiple types of telecommunications traffic.
Prior to the Telecommunications Act of 1996 ("the Act"), local phone service "was thought to be a natural monopoly." See AT & T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 371, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999). States granted the exclusive right to provide local telephone service to a local exchange carrier, which are "local telephone company providing traditional landline phone services." Alma Communs Co. v. Mo. PSC, 490 F.3d 619, 620 (8th Cir.2007). The Act "fundamentally restructure [ed]" telecommunications by permitting multiple carriers to provide telephone service in a local market. AT & T, 525 U.S. at 371, 119 S.Ct. 721. To do this, the Act imposes "specific duties" on incumbent carriers "[t]o facilitate the market entry of competitors and ensure the integration of competitors' networks with incumbents' networks." WWC License, L.L.C. v. Pub. Serv. Comm'n, 459 F.3d 880, 884 (8th Cir.2006) (citing 47 U.S.C. § 251(c)(1)(6)).
One of those duties is the duty of interconnection. Existing telecommunications carriers are required to interconnect, directly or indirectly, with any requesting telecommunications carrier.2 47 U.S.C. § 251(a). Interconnection allows customers of multiple carriers to exchange telephone traffic. Without interconnection, the transport and termination of calls would be much more costly. The Act also set up a reciprocal compensation scheme in which "[t]he carrier for the party originating the call is compensated by its customer, the caller." Alma Communs., 490 F.3d at 621; 47 U.S.C. § 251(b).
In order for a carrier (i.e. Sprint), to assert the rights of interconnection, the carrier must be a "telecommunications carrier" as defined by the Act. The Act defines a telecommunications carrier as "any provider of telecommunications services, except that such term does not include aggregators of telecommunications services." Section 153(46), in turn, defines "telecommunications services" as "the offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used." Id. § 153(46).
The first step a telecommunications carrier must take to assert rights of interconnection is to request interconnection with the local exchange carrier(s), in this case Iowa Telecom and the RLECs. 47 U.S.C. § 252(a). The carriers then may "negotiate and enter into a binding agreement with the requesting telecommunications carrier." Id. § 252(a)(1). If negotiations fail, either party "may petition a State commission to arbitrate any open issues" between the 135th and 160th day after the LEC receives the request for negotiation. Id. § 252(b)(1). The state commission then "resolve[s] each issue set forth in the petition" and, if necessary, compels interconnection. Id. § 252(b)(4)(C). The state commission must then approve an interconnection agreement between the parties. Id. § 252(e)(1). Either party may then seek judicial review of the arbitrated interconnection agreement in the appropriate federal district court. Id. § 252(e)(6). Here, Plaintiffs Iowa Telecom and the RLECs seek judicial review of the IUB-approved interconnection agreement with Sprint, arguing that it violates federal law.
Local telephone service consists of three primary components: (1) the system of wires and cables that takes the phone call from the user's premises to the connection point; this is referred to as "last-mile" or "loop" services; (2) a switch that gathers and distributes the telephone traffic; and (3) a facility to interconnect calls to and from other carriers. Sprint has developed a business model in which it works together with a local cable company to provide these services. Here, the local cable company is MCC Telephony of Iowa, L.L.C. ("MCC"), an affiliate of Mediacom. Under this arrangement, Sprint provides the switching and interconnection functions,3 while MCC provides the system of cables to carry calls to and from the switch and the "end-user."4
In addition to providing last-mile facilities, MCC is also in charge of all sales, billing, and customer service. In this model, Sprint has no direct relationship with the customer, nor do they provide any retail services. MCC solely interacts with customers. Sprint's role is to provide wholesale telecommunications services which MCC retails. Sprint believes this model is advantageous to both companies because it allows them to quickly and efficiently enter the market and not duplicate resources.
Based on this business model, Sprint argues that they are a telecommunications carrier, giving them the right to interconnect with local exchange carriers under Section 251(a) of the Telecommunications Act.
On October 20, 2004, Sprint requested interconnection negotiations with various RLECs in Iowa. Sprint sought an interconnection agreement to use not only for its business with MCC, but also with other similarly situated cable providers. See In re Arbitration of Sprint Comm. Co., L.P. v. Ace Comm. Group, ARB-05-2, at 10, 2005 WL 3624405 (Iowa Util.Bd. Nov. 28, 2005) (). The RLECs objected, however, characterizing Sprint as "merely one of many suppliers of...
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