Qwest Corp. v. Scott
| Decision Date | 23 August 2004 |
| Docket Number | No. 03-1489.,03-1489. |
| Parties | QWEST CORPORATION, Plaintiff-Appellee, v. Gregory SCOTT, Chair, Minnesota Public Utilities Commission; Edward A. Garvey, Commissioner, Minnesota Public Utilities Commission; LeRoy Koppendrayer, Commissioner, Minnesota Public Utilities Commission; R. Marshall Johnson, Commissioner, Minnesota Public Utilities Commission; Phyllis Reha, Commissioner, Minnesota Public Utilities Commission; AT & T Communications of the Midwest, Inc., Defendants, Worldcom, Inc.; Time Warner Telecom of Minnesota, LLC, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Appeal from the United States District Court for the District of Minnesota, Ann. D. Montgomery, J John R. Harrington, argued, Chicago, Illinois (Angela B. Debush, Chicago Illinois, Stephen P. Safranski, Minneapolis, Minnesota and Jeffrey A. Rackow, Washington, D.C. on the brief), for appellant.
Larry D. Espel, argued, Minneapolis, Minnesota (John M. Baker and Jeanette M. Bazis, Minneapolis, Minnesota on the brief), for appellee.
Before WOLLMAN, MORRIS SHEPPARD ARNOLD, and COLLOTON, Circuit Judges.
WorldCom, Inc. and Time Warner Telecom of Minnesota, LLC (collectively "WorldCom") appeal the district court's entry of a permanent injunction barring the Minnesota Public Utilities Commission from requiring appellee Qwest Corporation to provide WorldCom with reports regarding the provision of certain telecommunications services. Because we conclude that the Federal Communications Commission (FCC) has not preempted the authority of the Minnesota Public Utilities Commission in this area, we reverse.
Qwest Corporation is an incumbent provider of local telephone services in Minnesota. Long distance providers, such as WorldCom, rely on local telephone providers, such as Qwest, to connect customers to their long distance networks. One method of connecting local and long distance networks is through a "special access" line, which provides a direct connection from a home or business to a long distance network through a dedicated line, rather than through the switched public telephone network. Special access services generally are used by entities, such as large businesses or public institutions, that engage in a high volume of long distance telephone calling, and also allow for the provision of high-speed Internet connections to homes and businesses.
Because of alleged discrimination and quality problems in the provision of special access services by Qwest (formerly U.S. West, referred to herein as Qwest), AT & T Communications of the Midwest filed a complaint with the Minnesota Public Utilities Commission ("Minnesota Commission") on August 18, 1999. On August 15, 2000, over Qwest's objection, the Minnesota Commission asserted jurisdiction over the regulation of Qwest's performance, and found that an investigation should be opened to determine whether quality standards should be developed for Qwest. AT&T Communications of the Midwest, Inc. v. U.S. WEST Communications, Inc., Docket No. P-421/C-99-1183, at 5, 15, 2000 WL 1481017 (Minn.P.U.C. Aug.15, 2000). The Minnesota Commission also ordered Qwest to conform to "detailed reporting requirements." Id. at 15.
The investigation arising out of the AT & T complaint was consolidated with a separate proceeding, which examined the quality of Qwest's provision of various wholesale services to numerous other telecommunications companies, including WorldCom. Following consolidation, the Minnesota Commission heard WorldCom's proposed measurement plan for special access services. On March 4, 2002, the Minnesota Commission issued an order requiring Qwest to provide reports regarding special access performance data to AT & T and WorldCom, in accordance with WorldCom's suggested requirements. In the Matter of Qwest Wholesale Serv. Quality Standards, Docket No. P-421/M-00-849, at 4, 2002 WL 906589 (Minn.P.U.C. March 4, 2002). It did so over Qwest's continued assertion that the Minnesota Commission lacked jurisdiction to require such reports. Id. Qwest's petition for reconsideration of this order was denied by the Minnesota Commission. See In the Matter of Qwest Wholesale Serv. Quality Standards, Docket No. P-421/M-00-849, at 4, 2002 WL 1554523 .
Qwest brought suit in district court, alleging that the Minnesota Commission lacked jurisdiction to require Qwest to comply with the reporting requirements. The district court found that the FCC has exclusive jurisdiction over lines that the FCC classified as "interstate" through a federal regulatory procedure known as "jurisdictional separations," and that the Minnesota Commission's reporting requirements were preempted with respect to those lines. The district court therefore granted Qwest's motion for a permanent injunction as to those special access lines which had been classified as interstate, leaving the Minnesota Commission able to regulate only those lines that had been classified as intrastate through the FCC's jurisdictional separations process.
A district court's grant of a permanent injunction is reviewed for abuse of discretion, Forest Park II v. Hadley, 336 F.3d 724, 731 (8th Cir.2003), but where, as here, the determinative question is purely legal, our review is more accurately characterized as de novo. See United States v. Blue Bird, 372 F.3d 989, 991 (8th Cir.2004).
The Communications Act of 1934 ("the Act"), codified at 47 U.S.C. § 151 et seq., established "a system of dual state and federal regulation over telephone service." Louisiana Pub. Serv. Comm'n v. FCC, 476 U.S. 355, 360, 106 S.Ct. 1890, 90 L.Ed.2d 369 (1986) ("LouisianaPSC"). The FCC has authority to regulate interstate wire and radio communications, 47 U.S.C. § 151, but the Act specifically denies the Commission jurisdiction to regulate intrastate communication services, and leaves that authority with the States. 47 U.S.C. § 152(b); cf. Smith v. Illinois Bell Tel. Co., 282 U.S. 133, 148-51, 51 S.Ct. 65, 75 L.Ed. 255 (1930).1 While it may, at first blush, seem a simple matter to divide communication services between "intrastate" and "interstate" categories, "the realities of technology and economics belie such a clean parceling of responsibility." Louisiana PSC, 476 U.S. at 360, 106 S.Ct. 1890.
This clean parceling is not possible, because facilities and equipment used to provide intrastate telecommunications services often are used for interstate telecommunications services as well. Such facilities are "conceivably within the jurisdiction of both state and federal authorities," id., and are described by the FCC as "jurisdictionally mixed" or "mixed use" facilities. E.g., Southwestern Bell Tel. Co. v. FCC, 153 F.3d 523, 543 (8th Cir.1998). The special access lines at issue in this case are in the mixed use category, because they carry both interstate and intrastate traffic.
Recognizing that conflicts may emerge because of this dual regulatory system, the Act "establishes a process designed to resolve what is known as `jurisdictional separations' matters, by which process it may be determined what portion of an asset is employed to produce or deliver interstate as opposed to intrastate service." Louisiana PSC, 476 U.S. at 375, 106 S.Ct. 1890 (citing 47 U.S.C. §§ 221(c), 410(c)). The Supreme Court explained that "[b]ecause the separations process literally separates costs such as taxes and operating expenses between interstate and intrastate service, it facilitates the creation or recognition of distinct spheres of regulation." Id. The FCC has promulgated regulations entitled "Jurisdictional Separations Procedures." According to the Commission, the procedures "are designed primarily for the allocation of property costs, revenues, expenses, taxes and reserves between state and interstate jurisdictions." 47 C.F.R. § 36.1(b).
In 1989, the FCC revised the jurisdictional separations procedures for "mixed use special access lines," such as the lines at issue in this case, which carry both interstate and intrastate traffic. See In the Matter of MTS and WATS Mkt. Structure, Amendment of Part 36 of the Commission's Rules and Establishment of a Joint Bd., 4 F.C.C.R. 5660, at ¶ 1, 1989 WL 511212 (1989) ("10% Order"). The FCC explained that prior to this revision, "the cost of special access lines carrying both state and interstate traffic [was] generally assigned to the interstate jurisdiction." Id. at ¶ 2. This allocation was known as the "contamination doctrine;" any interstate traffic was deemed to "contaminate" the service, even when the facilities involved were physically located intrastate. See In the Matter of MTS and WATS Mkt. Structure, Amendment of Part 36 of the Commission's Rules and Establishment of a Joint Bd., 4 F.C.C.R. 1352, at ¶ 5 n. 14, 1989 WL 511865 (1989) ("10% Recommendation"). The contamination doctrine was criticized because it deprived state regulators of authority over largely intrastate private line systems that carried only small amounts of interstate traffic to otherwise intrastate lines. 10% Order, 4 F.C.C.R. 5660, at ¶¶ 5-6.
The Commission therefore adopted a bright-line rule known as the "ten percent rule," under which interstate traffic is deemed de minimis when it amounts to ten percent or less of the total traffic on a special access line. Under the ten percent rule, the cost of a mixed use line is directly assigned to the interstate jurisdiction only if the line carries interstate traffic in a proportion greater than ten percent. Id. at ¶¶ 2, 6-7; see also 47 C.F.R. § 36.154(a)-(b). The FCC concluded that the new rule would "resolve existing concerns in a manner that reasonably recognizes state and federal regulatory interests and fosters administrative simplicity and economic efficiency." 10% Order, 4 F.C.C.R. 5660, at ¶ 6 (footnote omitted).
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