Mci Telecommunications v. Michigan Bell Telephone
| Decision Date | 29 September 1999 |
| Docket Number | No. 97-74362.,97-74362. |
| Citation | 79 F.Supp.2d 768 |
| Parties | MCI TELECOMMUNICATIONS CORP. and MCImetro Access Transmission Services, Inc., Plaintiffs, v. MICHIGAN BELL TELEPHONE COMPANY d/b/a Ameritech Michigan, Inc., et al., Defendants. |
| Court | U.S. District Court — Eastern District of Michigan |
Robert J. Franzinger, Dykema Gossett, Detroit, MI, Albert Ernst, Dykema Gossett, Lansing, MI, for MCI Telecommunications Corporation, MCImetro Access Transmission.
Theodore C. Hirt, U.S. Department of Justice, Civil Division, Washington, DC, for United States of America, Federal Communications Commission.
Michael G. Vartanian, Jeffery V. Stuckey, John M. Dempsey, Dickinson, Wright, Lansing, MI, Bruce R. Byrd, Dickinson, Wright, Detroit, MI, Michael A. Holmes, Ameritech, Detroit, MI, for Michigan Bell Telephone Company.
Don L. Keskey, David A. Voges, Sharon Feldman, Michigan Department of Attorney General, Public Service Division, Lansing, MI, for Michigan Public Service Commission, John G. Strand, John C. Shea, David A. Svanda.
OPINION AND ORDER AFFIRMING IN PART AND REVERSING IN PART DECISIONS BY THE MICHIGAN PUBLIC SERVICE COMMISSION
This case came before the Court at a hearing on September 8, 1999, on the parties' cross appeals of rulings by the Michigan Public Service Commission (MPSC). The parties claim that the Interconnection Agreement between them, as arbitrated and approved by the MPSC, is inconsistent with the Telecommunications Act of 1996 and the FCC's implementing regulations.
As explained below, the decisions of the MPSC are AFFIRMED in part and REVERSED in part.
Plaintiffs, MCI Telecommunications Corporation and MCImetro Access Transmission Services, Inc. (collectively "MCI") and Michigan Bell Telephone Company d/b/a Ameritech Michigan, Inc ("Ameritech") have appealed MPSC Case No. U-11168, each claiming that certain terms of their Interconnection Agreement violate the Telecommunications Act of 1996.1
Historically, local phone service was provided by a monopoly and was regulated by the states. States usually gave an exclusive franchise to one carrier, which owned the entire local exchange network, including local loops (the cables that connect telephones to switches), the switches (computers that direct calls to their destination), and transport facilities (equipment that directs calls between switches). In 1996, Congress sought to end monopolization of local phone service by enacting the Telecommunications Act, which fundamentally restructures local telecommunications markets. The purpose of the Act is to shift monopoly local telephone markets to competition as quickly as possible. H. Rep. No. 104-204, at 89 (1995), reprinted in 1996 U.S.C.C.A.N. 10 (JA 44).2
In essence, the Act requires an incumbent local exchange carrier (ILEC), like Ameritech, to share its network with competing local exchange carriers (CLEC's). Under section 251, the Act imposes substantive requirements on incumbents and under section 252, the Act sets forth a procedure for implementing those requirements in an interconnection agreement.3 Section 251 provides that a requesting carrier can obtain access to the incumbent's network in three ways: 1) it can interconnect its facilities with the incumbent's facilities; 2) it can purchase the incumbent's services at wholesale prices and resell the services to customers; or 3) it can lease elements of the incumbent's network on an "unbundled basis." 47 U.S.C. § 251. In each case, the incumbent must charge rates that are just, reasonable, and nondiscriminatory. Id. Under section 252 of the Act, incumbent local exchange carriers are required to negotiate in good faith over the terms of interconnection, resale, and access to network elements, and to enter into interconnection agreements with competitors. Id. §§ 251(c)(1) & 252(a)(1). When the parties cannot arrive at a complete agreement through negotiations, the parties are subject to compulsory arbitration via administrative proceedings before the local public service commission. Id. § 252(b) & 252(e)(5). The state commissions must apply the substantive federal requirements set forth in section 251 and the FCC's implementing regulations. 47 U.S.C. § 252(c)(1). After the proposed interconnection agreement is finally negotiated and/or arbitrated, it is submitted to the state public service commission for final approval. Id. § 252(e)(1). The parties then may bring suit in federal district court challenging the terms of the final agreement on the ground that the terms are inconsistent with the Act or with the FCC regulations. 47 U.S.C. § 252(e)(6).4 This suit falls under section 252(e)(6).
In this case, MCI and Ameritech entered into an Interconnection Agreement. The parties negotiated and then arbitrated certain disputed issues before an Arbitration Panel. Arbitration Decision (JA 17). Both parties objected to the Arbitration Decision, and on December 20, 1996, the MPSC issued an order resolving the objections and approving the Agreement. First Approval Order (JA 20). In this First Approval Order, the Commission ordered the parties to file a completed agreement within ten days. The parties disputed additional issues, including Ameritech's proposed limitation of liability provisions. The Commission ordered MCI to accept Ameritech's proposed limitation of liability provisions. Commission Order, June 5, 1997 (JA 27) Then, the Commission again approved the Agreement. Commission Order, July 31, 1997 (JA 28).
MCI and Ameritech challenge certain terms of their Interconnection Agreement in this consolidated lawsuit.5 Ameritech in its Complaint alleges that the Agreement, as approved by the Commission in its various orders, violates the Act as follows:
1. The Agreement includes performance benchmarks and penalties proposed by MCI (Ameritech's Complaint Counts I-IX);
2. The Agreement provides a two-hour conversion window and a five minute conversion interval for cutover of unbundled loops (Ameritech's Complaint Count XIII);
3. The Agreement imposes unreasonable time periods for the bona fide request process (Ameritech Complaint Count XI).
4. The Agreement improperly defines "rights-of-way" (Ameritech's Complaint Count XII); and
5. The Agreement requires Ameritech to offer dark fiber as an unbundled network element (Ameritech's Complaint Count X);
MCI's Amended Complaint alleges that the Agreement violates the Act as follows:6
1. The Agreement fails to require Ameritech to provide immediate and nondiscriminatory unbundled access to loop distribution (Count III);
2. The Agreement imposes non-cost-based prices for local switching when it is purchased in conjunction with common transport (Count VI);
3. The Agreement fails to require Ameritech to pay MCI the tandem interconnection rate as compensation for the transport and termination of local telecommunications traffic (Count I);
4. The Agreement fails to require Ameritech to provide MCI with access to Ameritech's yellow pages (Count IV); and
5. The Agreement improperly limits Ameritech's liability for misconduct (Count II).
In reviewing a 252(e)(6) action, district courts must review questions of law de novo, and issues of fact under an arbitrary and capricious standard. U.S. West Communications, Inc. v. Hix, 986 F.Supp. 13, 19 (D.Colo.1997). The arbitrary and capricious standard requires that a district court give deference to the state commission's decisions; the agency's action will be presumed valid if a reasonable basis exists for its decision. Id. at 18. This court should not "sit as a surrogate public utilities commission to second-guess the decisions made by the state agency to which Congress has committed primary responsibility for implementing the Act." U.S. West Communications, Inc. v. Jennings, 46 F.Supp.2d 1004, 1008 (D.Ariz. 1999) (Supplemental Authority, June 22, 1999, Ex. 4).
In determining whether a decision is arbitrary and capricious, a court must consider whether the decision was based on the relevant factors and whether there was a clear error of judgment. Hix, 986 F.Supp. at 18.
Generally, an agency decision will be considered arbitrary and capricious if the agency had relied on factors which Congress had not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise. The Court is not empowered to substitute its judgment for that of the agency.
Id. (citing Friends of the Bow v. Thompson, 124 F.3d 1210, 1215 (10th Cir.1997) (citations omitted)). A court can uphold the state commission's decision only on the grounds set forth in the decision. MCI Telecomm. Corp. v. Bell Atlantic-Virginia, Inc., No. 3:97CV629, 1988 U.S. Dist. LEXIS 17558, at *17 (E.D.Va. July 1, 1998) (JA 56).
To apply this standard of review, a court must examine the Commission's decision and the record underlying the decisions. The Commission's decision is inextricably intertwined with the Interconnection Agreement because the Commission's decisions resulted in certain provisions of the Agreement. GTE South Inc. v. Morrison, 957 F.Supp. 800, 804 (E.D.Va.1997).
Ameritech appeals the MPSC decision adopting certain performance benchmarks and penalties, which were proposed by MCI and incorporated into the Agreement by the MPSC. The performance benchmarks limit the time within which Ameritech must fill MCI orders for interconnection, access to network elements, and wholesale services. The penalties require Ameritech to pay "delay credits," "performance failure credits," and "subscriber usage credits" to MCI when Ameritech...
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