Michigan Bell Telephone Co. v Climax Telephone

• Decision Date: 12 October 2000
• Docket Number: No. 5:97-CV-197.,5:97-CV-197.
• Citation: 121 F.Supp.2d 1104
• Parties: MICHIGAN BELL TELEPHONE COMPANY, d/b/a Ameritech Michigan, Plaintiff, v. CLIMAX TELEPHONE COMPANY, et al., Defendants.
• Court: U.S. District Court — Western District of Michigan

121 F.Supp.2d 1104

MICHIGAN BELL TELEPHONE COMPANY, d/b/a Ameritech Michigan, Plaintiff, v. CLIMAX TELEPHONE COMPANY, et al., Defendants.

No. 5:97-CV-197.

United States District Court, W.D. Michigan, Southern Division.

October 12, 2000.

Joseph A. Fink, John M. Dempsey, Dickinson Wright, PLLC, Lansing, MI, for Michigan Bell Telephone Company dba Ameritech Michigan, Inc., pltfs.

Gary L. Field, Harvey J. Messing, Loomis, Ewert, Parsley, Davis, et al., Lansing, MI, David A. Voges, Sharon L. Feldman,

Jennifer M. Granholm, Attorney General, Public Service Division, Lansing, for Climax Telephone Company, John G. Strand, John C. Shea, David A. Svanda, Commissioners of the Michigan Public Service Commission (In Their Official Capacities and not as Individuals), defts.

OPINION

QUIST, District Judge.

Plaintiff, Michigan Bell Telephone Company, d/b/a Ameritech Michigan ("Ameritech"), filed this action pursuant to § 252(e)(6)of the Telecommunications Act of 1996 (the "FTA"), Pub.L. No. 104-104, 110 Stat. 56 (1996)(codified as amended in scattered sections of 47 U.S.C.), seeking review of an interconnection agreement (the "Agreement") between Ameritech and Defendant Climax Telephone Company ("Climax") that was arbitrated and approved by the Michigan Public Service Commission (the "MPSC") under §§ 251 and 252 of the FTA. Ameritech sues Climax and MPSC Commissioners John G. Strand, John C. Shea, and David A. Svanda (the "Commissioners"). In Count I of its Amended Complaint, Ameritech alleges that the Agreement violates the FTA by permitting Climax to pay only local call rates for termination of calls that are classified under Ameritech's tariffs as "toll" calls subject to higher toll call rates. In Count II, Ameritech alleges that the MPSC exceeded its authority under the FTA by requiring Ameritech to provide intraLATA toll service to Climax customers. Finally, in Count III, Ameritech alleges that the MPSC's decision to require Ameritech to provide interLATA toll service to Climax's customers violated § 306 of the Michigan Telecommunications Act, M.C.L. §§ 484 .2101 to .2604 ("MTA"). Now before the Court are the parties' motions for summary judgment.¹

I. Overview and Facts

A. Telecommunications Act of 1996

Congress enacted the FTA in 1996 "[t]o promote competition and reduce regulation in order to secure lower prices and higher quality services for American telecommunications consumers and encourage the rapid deployment of new telecommunications technologies." Pub.L. No. 104-104, 110 Stat. 56 (1996). In particular, the FTA is aimed at introducing competition into local telephone markets, which were traditionally state-sanctioned monopolies. See A T & T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 371-72, 119 S.Ct. 721, 726, 142 L.Ed.2d 835 (1999). In order to encourage competition, the FTA allows startup local exchange carriers ("LEC") to interconnect to an incumbent local exchange carrier's ("ILEC") "existing local networks, to lease elements of existing local networks at reasonable rates, and to purchase the incumbents' services at wholesale rates and resell those services to retail customers." MCI Telecomm. Corp. v. Illinois Bell Tel. Co., 222 F.3d 323, 328 (7th Cir.2000)(citing 47 U.S.C. § 251).

The FTA provides a process to facilitate interconnection between ILECs and new market entrants. First, ILECs and requesting telecommunications carriers must negotiate in good faith regarding the terms and conditions of interconnection agreements. See 47 U.S.C. § 251(c)(1). Among other things, both parties must establish reciprocal compensation arrangements for the transport and termination of telecommunications. See 47 U.S.C. § 251(b)(5). The ILEC is required to provide interconnection "on rates, terms, and conditions that are just, reasonable, and nondiscriminatory, in accordance with the terms and conditions of the agreement and the requirements of" sections 251 and 252. 47 U.S.C. § 251(c)(2)(D). If the parties are unable to resolve their differences, either party may petition the state regulatory commission to arbitrate any open issue. See 47 U.S.C. § 252(b)(1). The party seeking arbitration must identify the unresolved issues and the positions of the parties with respect to those issues. See 47 U.S.C. § 252(b)(2). The non-petitioning party may respond to the petition and submit additional information within 25 days after the state commission receives the petition. See 47 U.S.C. § 252(b)(3). In conducting the arbitration, the state commission must limit its consideration of issues to those identified in the petition and the response, although it may require either party to submit additional information relative to the unresolved issues. See 47 U.S.C. § 252(b)(4). The arbitration panel must ensure that its resolution of the issues and any conditions imposed meet the requirements of § 251 and the regulations adopted by the Federal Communications Commission ("FCC") to implement § 251 and that the rates for interconnection, services, or network elements are in accordance with § 252(d). See 47 U.S.C. § 252(c). With respect to charges for transport and termination of traffic, a state commission may consider the rate of reciprocal compensation just and reasonable only if:

(i) such terms and conditions provide for the mutual and reciprocal recovery by each carrier of costs associated with the transport and termination on each carrier's network facilities of calls that originate on the network facilities of the other carrier; and

(ii) such terms and conditions determine such costs on the basis of a reasonable approximation of the additional costs of terminating such calls.

47 U.S.C. § 252(d)(2)(A).

All interconnection agreements, whether reached through negotiation or arbitration, must be submitted to the state commission for approval. See 47 U.S.C. § 252(e). A state commission may reject a negotiated agreement only if it discriminates against a non-party to the agreement or if it is inconsistent with the public interest or necessity; an arbitrated agreement may be rejected only if it does not meet the requirements of § 251 and its implementing regulations or if it fails to meet the pricing standards set forth in § 252(d). See 47 U.S.C. § 252(e)(2). Any party aggrieved by a state commission's determination may bring an action in federal court to determine whether the agreement meets the requirements of §§ 251 and 252. See 47 U.S.C. § 252(e)(6). State courts are expressly deprived of jurisdiction to review interconnection agreements. See 47 U.S.C. § 252(e)(4).

B. Facts

Climax has been a provider of local telephone service in the Climax, Michigan area since 1911. In 1996, Climax petitioned the MPSC pursuant to § 303 of the MTA to service an additional geographic area, designated the "Metro exchange," which combined into one local calling area Ameritech's Battle Creek, Kalamazoo, Scott, and Galesburg exchanges. On October 7, 1996, the MPSC granted Climax the authority to create the new exchange. As a result of the expanded local area, Climax customers who subscribed to Climax's Metro service could place a call within the area covered by the Metro exchange without paying toll charges, regardless of whether the person called was a Climax customer or an Ameritech customer. In contrast, an Ameritech customer placing a call to either a Climax or another Ameritech customer in a different Ameritech local calling area, e.g., a call between Ameritech's Battle Creek and Galesburg exchanges, would pay toll charges for that call. Thus, a call by an Ameritech customer in Kalamazoo to a Climax customer in Battle Creek would be a toll call, whereas a call by the Climax customer in Battle Creek to the Ameritech customer in Kalamazoo would be a local call and, therefore, less expensive than the Ameritech call.

When a call is placed by a customer of one telecommunications carrier to a customer of another telecommunications carrier, the telecommunications carrier that "terminates" or completes the call to its customer is entitled to a charge for its services. See Iowa Utils. Bd. v. FCC, 120 F.3d 753, 792 n. 7 (8th Cir.1997), aff'd in part, rev'd in part sub nom., A T & T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999). For example, in this case, a call placed by a Climax Metro exchange customer to an Ameritech customer travels over Climax's facilities to Ameritech's central office, which then routes the call over the loop connecting the central office to the Ameritech customer's phone. For local calls, Ameritech is entitled to a call termination charge of 1.5¢ per minute. However, Ameritech's termination rate is 2.299¢ per minute if the call is a toll call.

On October 1, 1996, Climax Telephone Company ("Climax") made a request to Ameritech to negotiate the terms of an interconnection agreement and related services. Climax and Ameritech engaged in extensive discussions regarding the terms, prices, and conditions of the interconnection agreement, but at some point reached an impasse on certain issues. On March 10, 1997, Climax filed a petition for arbitration with the MPSC. The MPSC appointed an arbitration panel and the parties made oral presentations to the panel on May 1, 1997. The panel issued its decision on May 21, 1997, in which it decided that:

Climax should not be obligated to pay toll access termination charges to Ameritech Michigan when (i) the calls originate in Climax's Metro Exchange and terminate within Climax's Metro Exchange as licensed by the Commission; (ii) the calls are not routed over any Ameritech Michigan toll facilities or through any Ameritech toll tandems; (iii) the calls are routed exclusively over facilities provided by Climax; and (iv) the calls are classified as local under Climax's tariff.

(Decision Of The Arbitration Panel at 4-5, Pl.'s Ex. F.) Thus, the arbitration panel concluded that Ameritech is only entitled to receive local call termination charges for calls placed by...