Northwest Pub. Commc'ns Council v. Oregon Pub. Util. Comm'n

• Decision Date: 27 July 2011
• Docket Number: No. 3:10–CV–685–BR.,3:10–CV–685–BR.
• Citation: 805 F.Supp.2d 1058
• Court: U.S. District Court — District of Oregon
• Parties: THE NORTHWEST PUBLIC COMMUNICATIONS COUNCIL, Unidentified PSPs A to Z, and NPCC Members: Central Telephone, Inc.; Communication Management Services, LLC; Davel Communications a/k/a Phonetel Technologies, Inc.; Interwest Telecom Services Corporation; NSC Communications Public Services Corporation; National Payphone Services, LLC; Pacific Northwest Payphones; Partners In Communication; T & C Management, LLC; Corban Technologies, Inc.; and Valley Pay Phones, Inc., Plaintiffs, v. OREGON PUBLIC UTILITY COMMISSION, an agency of the State of Oregon; Ray Baum, in his capacity as Commissioner of PUC; Susan Ackerman, in her capacity as Commissioner of PUC; John Savage, in his capacity as Commissioner of PUC; and Qwest Corporation, Defendants.

805 F.Supp.2d 1058

THE NORTHWEST PUBLIC COMMUNICATIONS COUNCIL, Unidentified PSPs A to Z, and NPCC Members: Central Telephone, Inc.; Communication Management Services, LLC; Davel Communications a/k/a Phonetel Technologies, Inc.; Interwest Telecom Services Corporation; NSC Communications Public Services Corporation; National Payphone Services, LLC; Pacific Northwest Payphones; Partners In Communication; T & C Management, LLC; Corban Technologies, Inc.; and Valley Pay Phones, Inc., Plaintiffs,

v.OREGON PUBLIC UTILITY COMMISSION, an agency of the State of Oregon; Ray Baum, in his capacity as Commissioner of PUC; Susan Ackerman, in her capacity as Commissioner of PUC; John Savage, in his capacity as Commissioner of PUC; and Qwest Corporation, Defendants.

No. 3:10–CV–685–BR.

United States District Court,D. Oregon.

July 27, 2011.

Franklin G. Patrick, Portland, OR, for Plaintiffs.

Matthew J. Donohue, Oregon Department of Justice, Salem, OR, for PUC Defendants.

Lawrence H. Reichman, Perkins Coie, LLP, Portland, OR, for Defendant Qwest Corporation.

OPINION AND ORDER

BROWN, District Judge.

This matter comes before the Court on Defendants' Joint Motion (# 20) to Dismiss. For the reasons that follow, the Court GRANTS Defendants' Motion and DISMISSES this matter.

GENERAL BACKGROUND

I. Regulatory Background.

In 1996 Congress amended the Federal Communications Act (FCA) of 1934 in part to improve competition in the telecommunications industry in the wake of the breakup of the former AT & T into Bell Operating Companies (BOCs). See 47 U.S.C. § 151, et seq. In particular, Congress enacted §§ 201 and 276 of the Act to promote greater competition among payphone service providers (PSPs) and to prevent Local Exchange Carriers (LECs) that were often owners of payphone lines and payphone service providers from discriminating against other PSPs in favor of their own payphone services. In Davel Communications, Inc. v. Qwest Corporation, PSPs and LEC Qwest disputed certain payphone service tariffs charged by Qwest. 460 F.3d 1075 (9th Cir.2006). In Davel the Ninth Circuit set out the following regulatory background that summarizes the numerous administrative orders issued by the Federal Communications Commission (FCC) in its implementation of the Act:

Chapter 5 of the Federal Communications Act of 1934 as amended by the 1996 Act regulates the telecommunications industry. 47 U.S.C. § 151 et seq. As a general matter, the Federal Communications Act requires common carriers subject to its provisions to charge only just and reasonable rates, id. § 201, and to file their rates for their services with the FCC or, in some cases, with state agencies. Id. § 203. As part of the 1996 Act's general focus on improving the competitiveness of markets for telecommunications services, § 276 substantially modified the regulatory regime governing the payphone industry by providing, in general terms, that dominant carriers may not subsidize their payphone services from their other telecommunications operations and may not “prefer or discriminate in favor of [their] payphone service[s]” in the rates they charge to competitors. Id. § 276(a). The 1996 Act directs the FCC to issue regulations implementing these provisions, specifying in some detail the mandatory contents of the regulations. Id. § 276(b).

Pursuant to this directive, the FCC adopted regulations requiring local exchange carriers such as Qwest to set payphone service rates and “unbundled features” rates, including rates for fraud protection, according to the FCC's “new services test” (sometimes “NST”). The new services test requires that rates for those telecommunications services to which it applies be based on the actual cost of providing the service, plus a reasonable amount of the service provider's overhead costs. The FCC's regulations required local exchange carriers to develop rates for the use of public access lines by intrastate payphone service providers that were compliant with the new services test. The rates were to be submitted to the utility commissions in the states in the local exchange carriers' territory, which would review and “file” ( i.e., approve) the rates. See In re Implementation of the Pay Telephone Reclassification and Compensation Provisions of the Telecommunications Act of 1996, Report and Order, FCC 96–388, 11 F.C.C.R. 20,541 (Sept. 20, 1996); In re Implementation of the Pay Telephone Reclassification and Compensation Provisions of the Telecommunications Act of 1996, Order on Reconsideration, FCC 96–439, 11 F.C.C.R. 21,233 (Nov. 8, 1996) ¶ 163 (“Order on Recons.”) (collectively “Payphone Orders”). Also pursuant to the regulations, local exchange carriers were required to file their “unbundled features” rates with both the state commissions and the FCC for approval. Order on Recons. ¶ 163. The FCC required the local exchange carriers to file the new tariffs for both kinds of rates by January 15, 1997, with an effective date no later than April 15, 1997. Id.

In addition, the Payphone Orders required interexchange carriers, mainly long distance telephone service providers, to pay “dial-around compensation” to payphone service providers, including Qwest, for calls carried on the carrier's lines which originated from one of the provider's pay telephones. If, however, the payphone service provider was also an incumbent local exchange carrier, as was Qwest, the Payphone Orders required full compliance with the new tariff filing requirements, including the filing of cost-based public access line rates and fraud protection rates, before the local exchange carrier could begin collecting dial-around compensation.

* * *

On April 15, 1997, the FCC issued an order granting a limited waiver of the new services test rate-filing requirement. In re Implementation of the Pay Telephone Reclassification and Compensation Provisions of the Telecommunications Act of 1996, Order, DA 97–805, 12 F.C.C.R. 21370 (Apr. 15, 1997) (“Waiver Order”). Specifically, the Waiver Order granted an extension until May 19, 1997, for filing intrastate payphone service rates compliant with the new services test, while at the same time permitting incumbent local exchange carriers to begin collecting dial-around compensation as of April 15, 1997. Id. ¶ 2. The Waiver Order stated that the existing rates would continue in effect from April 15, 1997, until the new, compliant rates became effective (“the waiver period”). The NST-compliant rates were to be filed with state utility commissions, which were required to act on the filed rates “within a reasonable time.” Id. ¶ 19 n. 60; see also id. ¶¶ 2, 18–19, 25. If a local exchange carrier relied on the waiver, it was required to reimburse its customers “from April 15, 1997 in situations where the newly [filed] rates, when effective, are lower than the existing [filed] rates.” Id. ¶¶ 2, 20, 25. The order emphasized that the waiver was “limited” and “of brief duration.” Id. ¶¶ 21, 23.

460 F.3d at 1081–83 (footnotes omitted).

II. Administrative History.

Plaintiff Northwest Public Communications Council (NPCC) is a regional trade organization that represents companies providing public payphone services. Some of its members, including the named Plaintiffs, purchase payphone services from Defendant Qwest and are generally known as PSPs.

Defendant Oregon Public Utilities Commission (PUC) is an Oregon Agency charged with regulating telecommunications in the State of Oregon. Defendants Ray Baum, Susan Ackerman, and John Savage are Commissioners of PUC whom Plaintiffs have sued in their official capacities.

Defendant Qwest is a BOC as defined in 47 U.S.C. § 153 and a regulated LEC that owned nearly 80% of the payphone lines in Oregon during the relevant period until it sold its payphone services business in 2004.

Plaintiffs have been pursuing this matter with PUC for nearly 12 years at the administrative level. At the heart of the dispute at the state level are refunds that Plaintiffs are seeking pursuant to FCC Orders issued in the mid–1990s, including the April 15, 1997, Waiver Order. The relevant administrative history includes (1) the history of Qwest's payphone tariff rates for Public Access Lines (PALs) and Fraud Protection services (CustomNet) that Qwest charged Plaintiffs and filed with PUC and (2) the procedural history of NPCC's claim filed with PUC in May 2001 (Docket DR 26/UC 600)(Refund Case) against Qwest for refunds of tariffs paid to Qwest allegedly in excess of and not compliant with the federal New Services Test (NST).

A. Qwest's Oregon Payphone Tariff Rates.

In September 2001 PUC concluded an administrative process begun by Qwest to set tariff rates in accordance with the FCA (Docket UT 125) (Rate Case). The Rate Case facilitated the design of the tariffs, and PUC ultimately adopted certain Qwest tariff rates for payphone services. In March 2002 NPCC appealed PUC's final rate determination to the Marion County Circuit Court and subsequently appealed that court's decision to uphold the rates to the Oregon Court of Appeals in October 2002. While the appeal was pending, Qwest filed acknowledgments with PUC that reflected Qwest's reduction of PAL and CustomNet rates. Qwest contended those reductions were compliant with the FCC orders that the rates were to be set in accordance with the NST. PUC accepted Qwest's rate filings and made the rates effective for PAL on March 17, 2003, and for CustomNet on August 28, 2003.

In November 2004 the Oregon Court of Appeals issued its decision in Northwest Public Communications Council v. Public Utility Commission of Oregon in which it reversed the Marion County Circuit Court, remanded PUC's initial rate-setting decision, and required PUC to reconsider the payphone services rates in light of the recent FCC orders, including the Wisconsin Order that clarified the method for applying the NST. 196 Or.App. 94, 100 P.3d 776 (2004).

On October 15, 2007, Qwest and NPCC stipulated the PAL and CustomNet rates ...