McLeodusa Telecommunication v. Arizona Corp., 2:07-cv-2145-HRH.

• Decision Date: 15 July 2009
• Docket Number: No. 2:07-cv-2145-HRH.,2:07-cv-2145-HRH.
• Citation: 655 F.Supp.2d 1003
• Parties: McLEODUSA TELECOMMUNICATIONS SERVICES, INC., Plaintiff, v. ARIZONA CORPORATION COMMISSION; et al., Defendants.
• Court: U.S. District Court — District of Arizona

655 F.Supp.2d 1003

McLEODUSA TELECOMMUNICATIONS SERVICES, INC., Plaintiff, v. ARIZONA CORPORATION COMMISSION; et al., Defendants.

No. 2:07-cv-2145-HRH.

United States District Court, D. Arizona.

July 15, 2009.

John Matthew Derstine, Timothy James Sabo, Michael W. Patten, Roshka Dewulf & Patten, PLC, Phoenix, AZ, William A. Haas, McLeodusa Telecommunications Services Inc., Hiawatha, IA, for Plaintiff.

Maureen Ann Scott, Arizona Corporation Commission, Theresa Dwyer-Federhar, Timothy J. Berg, Fennemore Craig PC, Phoenix, AZ, Lisa A. Anderl, Qwest Corporation, Seattle, WA, for Defendants.

DECISION ON REVIEW

H. RUSSEL HOLLAND, District Judge.

This is an action for judicial review of a decision of the Arizona Corporation Commission, in which it rejected plaintiffs claims. Plaintiff has filed an opening brief,¹ to which defendants have separately responded.² Plaintiff has replied.³ Oral argument was requested and has been heard.

Background

Plaintiff is McLeodUSA Telecommunications Services, Inc. Defendants are the Arizona Corporation Commission, the individual commissioners in their official capacities,⁴ and Qwest Corporation.

This case arises under the Telecommunications Act of 1996 (the 1996 Act). The 1996 Act was "designed to foster competition in local telecommunications markets." Pac. Bell v. Cook Telecom, Inc., 197 F.3d 1236, 1237 (9th Cir.1999). "The key provisions by which Congress sought to' open local telecommunications markets to competition are 47 U.S.C. §§ 251 and 252." Id.

Section 251 of the 1996 Act imposes a host of duties upon incumbent local exchange carriers (ILECs), the most important of which is a duty to share their networks with local telephone providers, known as competitive local exchange carriers (CLECs). In this case, McLeodUSA is the CLEC and Qwest is the ILEC. ILECs can "offer access to their local networks, either by selling local telephone service to [CLECs] at wholesale rates, by leasing parts of their networks, or by allowing competitors to connect to their networks."⁵ AT & T Commc'ns of Cal. Inc. v. Pac. Bell Tel. Co., 375 F.3d 894, 897-98 (9th Cir.2004).

"[S]ection 252 of the [1996] Act permits carriers to contract independently for interconnection and the provision of goods and services." MCI Telecommc'ns Corp. v. U.S. West Commc'ns, 204 F.3d 1262, 1266 (9th Cir.2000). "If the carriers do not reach an independent agreement within a specified period, the parties may petition the state agency responsible for regulating local telecommunications to arbitrate the open issues." Id. "All interconnection agreements, whether reached independently or through arbitration, must be approved by the state agency[.]" Id. The state agency responsible for regulating local telecommunications in Arizona is the Arizona Corporation Commission ("the Commission"). A CLEC may also "`opt in'" to an ICA that the ILEC has with another CLEC. BellSouth Telecommc'ns, Inc. v. Se. Tel., Inc., 462 F.3d 650, 653 (6th Cir.2006).

Section 251(d)(1) of the 1996 Act required the Federal Communications Commission (FCC) to adopt regulations for the implementation of Section 251. Section 251(c)(2), which addresses interconnection; Section 251(c)(3), which addresses unbundled network elements;⁶ and Section 251(c)(6), which addresses collocation⁷—all contain a requirement that an ILEC provide these items to CLECs on "rates, terms and conditions that are just, reasonable, and nondiscriminatory." The FCC established rules which govern an ILEC's obligation to provide interconnection on a nondiscriminatory basis in its First Report and Order. The FCC concluded "that Congress did not intend the term 'nondiscriminatory' in the 1996 Act be synonymous with `unjust and unreasonable discrimination' used in the 1934 act,[⁸] but rather, intended a more stringent standard."⁹ Thus, the FCC:

reject[ed] for purposes of section 251, [its] historical interpretation of "nondiscriminatory" which [it] interpreted to mean a comparison between what the incumbent LEC provided other parties in a regulated monopoly environment. We believe that the term "nondiscriminatory," as used throughout section 251, applies to the terms and conditions an incumbent LEC imposes on third parties as well as on itself.[¹⁰]

In the First Report and Order, the FCC also defined an ILEC's obligation to provide nondiscriminatory access to unbundled network elements:

[W]e conclude that the phrase "nondiscriminatory access" in section 251(c)(3) means at least two things: first, the quality of an unbundled network element that an incumbent LEC provides, as well as the access provided to that element, must be equal between all carriers requesting access to that element; second, where technically feasible, the access and unbundled network element provided by an incumbent LEC must be at least equal-in-quality to that which the incumbent LEC provides to itself.[¹¹]

Although the FCC addressed collocation in its First Report and Order, it did not specifically discuss the nondiscrimination requirement set forth in Section 251(c)(6).

In 2000, McLeodUSA opted into an interconnection agreement (ICA) that Qwest had with Pathnet, Inc. The ICA¹² was approved by the Commission. The ICA provides that Qwest will provide DC power to the equipment that McLeodUSA collocates in Qwest's central offices. In order to provide DC power, Qwest has equipment in its central offices that converts AC power to DC power. This equipment includes batteries, rectifiers, and generators. The equipment is referred to collectively as the DC power plant. All users of DC power in a central office are served by the same DC power plant. Separate power distribution cables carry the DC power from the DC power plant to each carrier's equipment. The power distribution cables are not considered part of the power plant.

The ICA also provides that the Agreement would "reflect the outcome of generic pricing proceedings by the Commission."¹³ A generic price proceeding, referred to herein as the Cost Docket, was commenced by the Commission in 2001. McLeodUSA participated in the Cost Docket. In the Cost Docket, the Commission adopted Qwest's proposed power rates,¹⁴ which were subsequently set out in Exhibit A to the ICA.¹⁵ The Commission expressly concluded that "[t]he prices for unbundled network elements are 'based on the cost (determined without reference to a rate of return or other rate-based proceeding) of providing the interconnection or network element ... [and are] nondiscriminatory.'"¹⁶

Exhibit A sets out the two "rate elements" that Qwest charges for the DC power it provides to McLeodUSA.¹⁷ McLeodUSA is charged for "DC power plant", which represents its share of the cost of the DC power plant. McLeodUSA is also charged for "power usage," which represents the actual power that McLeodUSA uses to run its collocated equipment. Prior to July 2004, both the "DC power plant" and the "power usage" rate elements were charged based on the amount of power McLeodUSA had "ordered."

The amount of power that McLeodUSA "ordered" was based on its order for power distribution cables.¹⁸ Qwest's collocation application provides options for ordering power distribution cables in 20 amps, 30 amps, 40 amps, 60 amps, or some other size chosen by the CLEC.¹⁹ McLeodUSA orders its "power distribution cables based on the List 2 requirements that it ultimately expects its equipment to draw over the relevant planning horizon[.]"²⁰ List 2 drain represents peak current under "worst case" conditions of voltage, traffic, and similar items.

Qwest's power plant is designed to have sufficient capacity to accommodate both Qwest and the CLECs. Qwest does not "charge" itself for DC power plant which, pursuant to interconnection agreements, is shared by Qwest with all of the CLECs. These circumstances were accounted for in the Cost Docket. There, use of the power plant was imputed to Qwest for purposes of spreading amongst all users the cost of constructing and maintaining the power plant. In the Cost Docket, Qwest's allocation of power plant costs was based upon its experience-based use of the power plant;²¹ whereas allocation to the CLECs was based upon the combined amperage rating of the power distribution cabling requested by all of the CLECs. Qwest's proposed rates, thus constructed, were found by the Commission to be just, reasonable, and nondiscriminatory.²²

In July 2004, McLeodUSA began considering whether to enter into an amendment of the ICA.²³ On August 12, 2004, McLeodUSA and Qwest entered into the DC Power Measuring Amendment, which amended the ICA "by adding the terms, conditions and rates for DC Power Measuring, as set forth in Attachment 1[.]"²⁴ Attachment 1 is entitled "DC Power Measuring" and has two sections: Section 1.0 is entitled "Monitoring" and Section 2.0 is entitled "Rate Elements—All Collocation."²⁵ Section 1.0 provides:

1.1. CLEC orders DC power in increments of twenty (20) amps whenever possible. If CLEC orders an increment larger than sixty (60) amps, engineering practice normally terminates such feed on a power board. If CLEC orders an increment smaller than or equal to sixty (60) amps, the terminations will normally appear on a Battery Distribution Fuse Board (BDFB).

1.2. If CLEC orders sixty (60) amps or less, it will normally be placed on a BDFB where no monitoring will occur since the power usage rate reflects a discount from the rates for those feeds greater than sixty (60) amps. If CLEC orders more than sixty (60) amps of power, it normally will be placed on the power board. Qwest will monitor usage at the power board on a semi-annual basis. However, Qwest also agrees to take a reading within thirty (30) Days of a written CLEC request, after CLEC's installation of new equipment. Qwest will perform a maximum of four (4) readings per year on a particular collocation site. Based on these readings, if CLEC is utilizing less than the ordered amount of power, Qwest will reduce the monthly usage rate to...