Michigan Bell Telephone Co. v. Chappelle
| Decision Date | 12 August 2002 |
| Docket Number | No. 01-CV-71517.,01-CV-71517. |
| Citation | 222 F.Supp.2d 905 |
| Parties | MICHIGAN BELL TELEPHONE COMPANY, d/b/a Ameritech Michigan, Plaintiff, v. Laura CHAPPELLE, Robert B. Nelson and David Svanda, Commissioners of the Michigan Public Service Commission (In Their Official Capacities and not as Individuals), Defendants. |
| Court | U.S. District Court — Eastern District of Michigan |
Bruce R. Byrd, Detroit, MI, Sara A. Arons, Pending App., Lansing, MI, Craig A. Anderson, Detroit, MI, Michael G. Vartanian, Jeffery V. Stuckey, Erin E. Gravelyn, John M. Dempsey, Dickinson Wright, Lansing, MI, for Plaintiff.
David A. Voges, Michigan Department of Attorney General, Public Service Division, Michael A. Nickerson, Michigan Department of Attorney General, Corrections Division, Lansing, MI, Robert J. Franzinger, Thomas M. Scher, Dykema Gossett, Detroit, MI, Albert Ernst, Dykema Gossett, Lansing, MI, John R. Harrington, Jenner & Block, Chicago, IL, George Hogg, Jr., Arthur A. LeVasseur, Fischer, Franklin, Detroit, MI, John J. Reidy, III, Pending App., Chicago, IL, for Defendants.
This is an appeal by Plaintiff Michigan Bell Telephone Company, d/b/a Ameritech Michigan ("Ameritech") from a March 19, 2001 decision ("MPSC Order") by the Michigan Public Service Commission ("MPSC"). Plaintiff Ameritech is suing the individual commissioners of the MPSC, Defendants Laura Chappelle, David A. Svanda, and Robert B. Nelson ("Commissioners"), seeking to enjoin implementation of three aspects of the MPSC Order. MCImetro Access Transmission Services ("MCI"), AT & T Communications of Michigan, and TCG Detroit (collectively "AT & T") were granted leave to intervene ("Intervenors").
On November 29, 2001, Defendant Commissioners filed a Motion to Dismiss, and Plaintiff Ameritech filed a Motion for Summary Judgment. The Court held oral argument on both motions on April 1, 2002. The Court denied the Motion to Dismiss on April 24, 2002, finding this Court has jurisdiction over the issues raised by Plaintiff Ameritech. Thus, only Ameritech's Motion for Summary Judgment remains before the Court. For the reasons stated below, Plaintiff's Motion for Summary Judgment [19-1] is DENIED and the MPSC Order is AFFIRMED.
1. Background
Local telephone service was traditionally provided by state-regulated monopolies, who were each given a distinct operating area and were overseen by state public utility commissions. In 1996, Congress passed the Federal Telecommunications Act, Pub.L. No. 104-104, 110 Stat. 56 (1996) (codified at 47 U.S.C. §§ 151-615b) ("FTA") to deregulate the telephone industry.
Under the FTA, Plaintiff Ameritech is considered an incumbent local exchange carrier ("ILEC" or "incumbent") because it was providing local exchange service prior to the effective date of the FTA. Other companies who are now trying to provide local exchange service are known as competitive local exchange carriers ("CLECs" or "new entrants"). Because the state public utility commissions have extensive experience regulating local phone companies, the FTA gives state commissions a role in the implementation of deregulation. As part of the continuing deregulation process, Ameritech submitted an application to the MPSC for approval of its plan to allow CLECs to use portions of its network. On March 19, 2001, the MPSC issued an opinion regarding Ameritech's plan, and Ameritech filed this lawsuit seeking an injunction to prevent implementation of three aspects of the MPSC Order.
A telephone company's network is made up of "network elements," which are the equipment and facilities used to provide telephone services. The new entrants into the market lease "unbundled" portions of the incumbent's network, so they can provide services to their own customers.2 The FTA forbids incumbents from providing network elements on a "discriminatory" basis, or on terms less favorable than what the incumbents provide to themselves. The FTA provides that in determining what network elements should be unbundled and made available to CLECs, the state commissions:
shall consider, at a minimum, whether —
(A) access to such network elements as are proprietary in nature is necessary; and
(B) the failure to provide access to such network elements would impair the ability of the telecommunications carrier seeking access to provide the services that it seeks to offer.
47 U.S.C. § 251(d)(2) (emphasis added).
There are three network elements that are relevant to the present case: (1) shared transport, (2) operator services/directory assistance ("OS/DA"), and (3) transiting. First, "shared transport," means ILECs must allow CLECs to route calls from the CLEC's customers on the same facilities between offices and switches within the ILEC's network that the ILEC uses to route calls from its own customers. As a practical matter, it is impossible to provide shared transport without also providing unbundled "local switching," which directs how calls are routed over an ILEC's network.3 Ameritech does not dispute that it is required to unbundle shared transport in the local market, but questions whether it must do so in the local toll market. According to Ameritech, "[t]he real dispute here is over the Commission's requirement that Ameritech Michigan must now also carry the toll portion of an end-to-end long distance call for the CLEC's and charge them only a cost-based rate" (P's Brief at 15).4
The second network element at issue is operator services/directory assistance ("OS/DA"). Operator services are "any automatic or live assistance to a consumer to arrange for billing or completion, or both, of a telephone call" (Int.'s brief at 9, citing 47 C.F.R. § 51.319(f)). The FCC found that since there is an emerging competitive market for OS/DA services, in some circumstances, incumbents are no longer required to unbundle OS/DA. In re Implementation of the Local Competition Provisions in the Telecomms. Act of 1996, Third Report and Order and Fourth Further Notice of Proposed Rulemaking, CC Docket No. 96-98, 15 F.C.C.R. 3696, ¶ 441 (Nov. 5, 1999) ("UNE Remand Order"). However, if the incumbent lacks "customized routing," then the ILEC must continue to provide OS/DA unbundled. Id. at ¶ 462. The question, then, is whether the customized routing offered by Ameritech is sufficient to allow it to stop unbundling OS/DA.
Transiting is the third element at issue. The Plaintiff defines transiting as "the use of an incumbent LEC's facilities to transport or transit traffic from a CLEC's switch to a third party's switch" (P's Brief at 45, n. 25). Prior to the MPSC Order, Ameritech was offering transiting on a voluntary basis, but now the MPSC Order requires it to do so, and Plaintiff objects.
In a continuing effort to implement the FTA, there have been several proceedings between Ameritech and CLECs before the MPSC. In one such proceeding, Case No. U-12622, Ameritech filed an application with the MPSC for approval of its proposed permanent shared transport offering on September 18, 2000.5 Several parties were allowed to intervene. After evidentiary hearings, the Administrative Law Judge issued a Proposal for Decision ("PFD") on January 30, 2001. Ameritech, AT & T and MCI filed exceptions to the PFD. On March 19, 2001, the Commission issued its Order ("MPSC Order") that is the subject of this proceeding.
On April 18, 2001, Ameritech filed the present case, seeking to enjoin implementation of three aspects of the MPSC Order. On May 25, 2001, and June 18, 2001, the parties filed a stipulated order granting AT & T and MCI, respectively, the right to intervene. On November 29, 2001, Defendant Commissioners filed a Motion to Dismiss, and Plaintiff Ameritech filed a Motion for Summary Judgment. On the same date, the Defendants and Intervenors filed their responses, and the Plaintiff filed a joint reply brief to both responses. Defendant Commissioners' also filed a Supplemental Brief in Opposition to Summary Judgment. On March 20, 2002, MCI filed a "Notice of Supplemental Authority."
Oral argument on Commissioners' Motion to Dismiss and Ameritech's Motion for Summary Judgment was held on April 1, 2002. The Motion to Dismiss was denied on April 24, 2002. On May 14, 2002, the Court sent a letter asking each party to advise the Court what effect, if any, the new Supreme Court decision in Verizon Communications, Inc., v. Federal Communications Commission, et al., ___ U.S. ___, 122 S.Ct. 1646, 152 L.Ed.2d 701 (2002) had on the parties positions. Each party responded by letter to the Court's request. This opinion and order addresses and resolves the pending Motion for Summary Judgment.
Federal district courts must review questions of federal law de novo, but state commission decisions on all other issues are entitled to arbitrary and capricious review. Michigan Bell Tel. Co. v. MCI Metro Access Transmission Serv., Inc., 128 F.Supp.2d 1043, 1051 (E.D.Mich.2001). Another court in this district explained arbitrary and capricious review as follows:
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. [U.S. West Communications, Inc. v. Hix, 986 F.Supp. 13, 18 (D.Colo. 1997)]. 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)....
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...
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