Qwest Corp. v. City of Portland

• Decision Date: 22 March 2002
• Docket Number: Civil No. 01-1005-JE.
• Citation: 200 F.Supp.2d 1250
• Parties: QWEST CORPORATION, a Colorado corporation, Plaintiff, v. CITY OF PORTLAND, an Oregon municipal corporation, Defendant, The City of Ashland, an Oregon municipal corporation; The City of Happy Valley, an Oregon municipal corporation; The City of Keizer, an Oregon municipal corporation; The City of North Plains, an Oregon municipal corporation; The City of Pendleton, an Oregon municipal corporation; The City of Redmond, an Oregon municipal corporation; The City of Salem, an Oregon municipal corporation; The City of Springfield, an Oregon municipal corporation, Defendants in Intervention.
• Court: U.S. District Court — District of Oregon

200 F.Supp.2d 1250

QWEST CORPORATION, a Colorado corporation, Plaintiff, v. CITY OF PORTLAND, an Oregon municipal corporation, Defendant,

The City of Ashland, an Oregon municipal

corporation; The City of Happy Valley, an Oregon municipal corporation; The City of Keizer, an Oregon municipal corporation; The City of North Plains, an Oregon municipal corporation; The City of Pendleton, an Oregon municipal corporation; The City of Redmond, an Oregon municipal corporation; The City of Salem, an Oregon municipal corporation; The City of Springfield, an Oregon municipal corporation, Defendants in Intervention.

Civil No. 01-1005-JE.

United States District Court, D. Oregon.

March 22, 2002.

COPYRIGHT MATERIAL OMITTED

Lawrence Reichman, John P. Nusbaum, Perkins Coie LLP, Portland, OR, David R. Goodnight, Yana D. Koubourlis, Dorsey & Whitney LLP, Seattle, WA, for Plaintiff.

Pamela J. Beery, Paul C. Elsner, Beery & Elsner LLP, Portland, OR, Kenneth A. Wittenberg, Portland, OR, for Cities of Ashland, Happy Valley, Keizer, North Plains, Pendleton, Redmond, Salem and Springfield.

Jeffrey Rogers, Benjamin Walters, Office of City Attorney, Portland, OR, Carl R. Neil, Jay W. Beattie, Lindsay, Hart, Neil & Weigler LLP, Portland, OR, Nicholas P. Miller, Joseph Van Eaton, Miller & Van Eaton, P.L.L.C., Washington, DC, for City of Portland.

William F. Gary, Jerome Lidz, Linda J. Kessel, Harrang Long Gary Rudnick, P.C., Eugene, OR, for Intervenor City of Eugene.

OPINION AND ORDER

JELDERKS, United States Magistrate Judge.

Plaintiff Qwest Corp. claims that the Federal Telecommunications Act of 1996, 47 U.S.C. § 253, prohibits Oregon cities from collecting a percentage of Qwest's revenues in exchange for Qwest's use of public rights of way. The defendants are the Cities of Ashland, Eugene, Happy Valley, Keizer, North Plains, Pendleton, Portland, Redmond, Salem, and Springfield (the Cities). The Cities counterclaim for past-due fees that Qwest refuses to pay pending resolution of this lawsuit.

The parties have filed cross-motions for summary judgment. I grant the Cities' motions and deny Qwest's motions.

BACKGROUND

For many years, Qwest and its predecessors¹ have used the Cities' public rights of way to provide telecommunications services. Qwest negotiated, and in some cases drafted, franchise agreements with the Cities. Under the current franchise agreements, Qwest has promised to pay each City 7% of gross revenues from telecommunications services in that City, in exchange for Qwest's use of public rights of way.²

In 1989, Qwest successfully lobbied for a state statute that allows Oregon cities to impose revenue-based "privilege taxes" of up to 7% on telecommunications carriers for use of the public rights of way. Or. Rev.Stat. § 221.515(1).³ Only gross revenues from exchange access services are subject to the right-of-way privilege tax. Or.Rev.Stat. § 221.515(2).

In April 2001, the Ninth Circuit issued the initial opinion in City of Auburn v. Qwest Corp., 260 F.3d 1160 (9th Cir.2001), cert. denied, ___ U.S. ___, 122 S.Ct. 809, 151 L.Ed.2d 694 (2002). Based on its interpretation of the City of Auburn decision, Qwest brought this action and stopped paying revenue-based right-of-way fees to the Cities.

STANDARDS

The court must grant summary judgment if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(c). If the moving party shows that there are no genuine issues of material fact, the nonmoving party must go beyond the pleadings and designate facts showing an issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

The substantive law governing a claim or defense determines whether a fact is material. T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir.1987). The court should resolve reasonable doubts about the existence of an issue of material fact against the moving party. Id. at 631. The court should view inferences drawn from the facts in the light most favorable to the nonmoving party. Id. at 630-31.

DISCUSSION

I. Preemption Under § 253

This case turns on the proper application of 47 U.S.C. § 253. Section 253, which is entitled, "Removal of barriers to entry," provides in relevant part:

(a) In general

No State or local statute or regulation, or other State or local legal requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service.

(b) State regulatory authority

Nothing in this section shall affect the ability of a State to impose, on a competitively neutral basis and consistent with section 254 of this section, requirements necessary to preserve and advance universal service, protect the public safety and welfare, ensure the continued quality of telecommunications services, and safeguard the rights of consumers.

(c) State and local government authority Nothing in this section affects the authority of a State or local government to manage the public rights-of-way or to require fair and reasonable compensation from telecommunications providers, on a competitively neutral and nondiscriminatory basis, for use of public rights-of-way on a nondiscriminatory basis, if the compensation required is publicly disclosed by such government.

When applying § 253, the court must first determine whether the challenged ordinances or franchise requirements "prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service." 47 U.S.C. § 253(a). Even if local requirements do not expressly prohibit a telecommunications service, the requirements might be so burdensome that they effectively achieve the same result. AT & T Communications of the Pac. Northwest, Inc. v. City of Eugene, 177 Or.App. 379, 408, 35 P.3d 1029, 1047 (2001) (City of Eugene). The burden is on Qwest to show that § 253(a) bars the challenged requirements. New Jersey Payphone Ass'n, Inc. v. Town of West New York, 130 F.Supp.2d 631, 636 (D.N.J.2001); In re TCI Cablevision of Oakland County, Inc., 12 F.C.C.R. 21396, 21440 (1997), quoted in City of Eugene, 177 Or.App. at 408, 35 P.3d at 1047.

In its briefs and at oral argument, Qwest has relied on an incorrect, overly broad version of § 253(a)'s preemption test, which was unfortunately quoted in the City of Auburn opinion: "Section 253(a) preempts `regulations that not only "prohibit" outright the ability of any entity to provide telecommunications services, but also those that "may ... have the effect of prohibiting" the provision of such services.'" City of Auburn, 260 F.3d at 1175 (emphasis added; original ellipses) (quoting Bell Atlantic-Maryland, Inc. v. Prince George's County, 49 F.Supp.2d 805, 814 (D.Md.1999), vacated, 212 F.3d 863 (4th Cir.2000)). The quoted phrase simply misreads the plain wording of the statute, and implies that the statute bars not only those local requirements that actually prohibit or have the effect of prohibiting the ability to provide telecommunication service, but also those local requirements that may have that effect. That is not what the statute says. The statute actually provides that no local requirements may:

(1) prohibit the ability to provide service, or

(2) have the effect of prohibiting the ability to provide service.

A correct reading of the statute shows that Congress used the word "may" as a synonym for "is permitted to": "No State or local statute or regulation, or other State or local legal requirement, may [i.e., is permitted to] prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service." 47 U.S.C. § 253(a). The City of Auburn opinion elsewhere recites the preemption test correctly. See, e.g., 260 F.3d at 1176 ("The ordinances ... include several features that, in combination, have the effect of prohibiting the provision of telecommunication services.").

If the challenged requirements do not prohibit or have the effect of prohibiting the ability of an entity to provide a telecommunications service, § 253 does not preempt the requirements and the court's inquiry is complete. City of Eugene, 177 Or.App. at 407, 35 P.3d at 1046. If, and only if, a requirement does prohibit or has the effect of prohibiting the ability to provide a telecommunications service, the court then must determine whether the requirement is protected by the safe-harbor provisions of § 253(b) or (c). City of Auburn, 260 F.3d at 1177.

II. The Cities' Requirements Do Not Have the Effect of Prohibiting Qwest's Ability to Provide Any Telecommunications Service

Qwest has not shown that the Cities' revenue-based right-of-way fees, or other franchise requirements, have barred Qwest's entry into any markets. Qwest has managed to provide telecommunications services in the Cities for many years while laboring under the allegedly prohibitive right-of-way fees and other requirements. See City of Dallas v. Metropolitan Fiber Systems of Dallas, Inc., Civ. No. 98-2128, 2000 WL 198104, at *5 (N.D.Tex. Feb.17, 2000) ("the ordinances in question could not have acted as a barrier to entry in violation of § 253 because MFS and Brooks were already in the market"); City of Eugene, 177 Or.App. at 410, 35 P.3d at 1048 ("it is not easy to understand how being required to satisfy a requirement that the companies ... already have satisfied constitutes an effective prohibition of their ability to provide services"). Qwest has not pointed to a single telecommunications service that it, or any other entity, is effectively prohibited from providing because of the Cities' revenue-based fees or any of the other challenged requirements. See BellSouth Telecommunications, Inc. v. City of Mobile, 171 F.Supp.2d 1261, 1281 (S.D.Ala.2001) (§ 253(a) "speaks in terms of prohibition, not in terms of minor delays" that may be incurred in...