South. New England Telephone v. Mci Worldcom Comm., CIV.A.3:02 CV 274(SRU).
| Decision Date | 28 January 2005 |
| Docket Number | No. CIV.A.3:02 CV 274(SRU).,CIV.A.3:02 CV 274(SRU). |
| Citation | 353 F.Supp.2d 287 |
| Parties | THE SOUTHERN NEW ENGLAND TELEPHONE COMPANY, Plaintiff, v. MCI WORLDCOM COMMUNICATIONS, INC., et al., Defendants. |
| Court | U.S. District Court — District of Connecticut |
Timothy P. Jensen, Tyler, Cooper & Alcorn, New Haven, CT, Michael C. D'Agostino, Bingham McCutchen, Hartford, CT, David L. Schwarz, Michael K. Kellogg, Kellogg, Huber, Hansen, Todd & Evans, Washington, DC, for Plaintiff.
Timothy G. Ronan, Robert J. Sickinger, Cummings & Lockwood, Stamford, CT, Michael B. Desanctis, Jenner & Block, Washington, DC, Robert L. Marconi, Tatiana D. Eirmann, Attorney General's Office, New Britain, CT, for Defendants.
DECISION AND ORDER
On November 21, 2001, the Connecticut Department of Public Utility Control ("the DPUC") issued a decision setting out the terms it required the Southern New England Telephone Company ("SNET") and MCI WorldCom Communications, Inc., MCI Metro Access Transmission Services, Inc., and Brooks Fiber Communications of Connecticut (collectively "MCI") to include in their proposed telecommunications interconnection agreement. SNET and MCI both challenge that decision, each arguing that several of the required terms are inconsistent with the Telecommunications Act of 1996 ("the 1996 Act" or "the Act") and each seeking, by way of summary judgment, a ruling vacating the terms it challenges and upholding the terms its opponent challenges. The DPUC argues that all the challenged terms are permissible and must be left untouched. I conclude that all of the challenged terms are either inconsistent with federal law or arbitrary and capricious, and I remand the case to the DPUC for further proceedings.
Discarding the notion that telecommunications services are most efficiently provided by a state-regulated monopoly, the 1996 Act creates a federal regime designed to loosen the grip of incumbent local exchange carriers ("ILECs") on the telecommunications market and to allow the entry into that market of competitive local exchange carriers ("CLECs"). Towards that end, the Act imposes a number of obligations on local exchange carriers in general and incumbent local exchange carriers in particular; three are relevant to this case.
Reciprocal Compensation. All local exchange carriers are required to "establish reciprocal compensation arrangements for the transport and termination of telecommunications." 47 U.S.C. § 251(b)(5). In general, this requirement means that, for calls originating on one carrier's network and terminating on another's, the two carriers involved must arrange for the originating carrier, which typically bills the customer directly, to compensate the terminating carrier, which typically cannot bill the customer, for the use of the terminating carrier's network.
Dialing Parity. All local exchange carriers must allow their competitors "to have nondiscriminatory access to telephone numbers, operator services, directory assistance, and directory listing, with no unreasonable dialing delays." 47 U.S.C. § 251(b)(3).
Unbundled Access. An incumbent local exchange carrier must provide requesting competitive local exchange carriers with unbundled access to the elements of the incumbent's telecommunications network. Unbundled access means "nondiscriminatory access to network elements on an unbundled basis at any technically feasible point on rates, terms, and conditions that are just, reasonable, and nondiscriminatory." 47 U.S.C. § 251(c)(3).
ILECs and CLECs arrange to satisfy their federal obligations by entering into "interconnection agreements," which govern all aspects of their relationship, including the issues of reciprocal compensation, dialing parity, and unbundled access. In the first instance, carriers attempt to voluntarily negotiate their interconnection agreement, but, if that fails, either party may seek compulsory arbitration by the relevant state public utility commission. 47 U.S.C. § 252(b). Once an agreement is reached, either voluntarily or through arbitration it is submitted to the state public utility commission, where it is reviewed for, among other things, compliance with federal law. 47 U.S.C. § 252(e). Any party aggrieved by the state commission's decision may bring an action in federal district court. 47 U.S.C. § 252(e)(6).
SNET is Connecticut's ILEC. MCI is a CLEC. In January 2000, SNET and MCI began negotiating an interconnection agreement but failed to reach a consensus. MCI petitioned the DPUC for arbitration. The DPUC assigned the arbitration to one of its commissioners who issued a decision on May 15, 2001. Over SNET's objection, the DPUC adopted the arbitrator's decision as the commission's final decision ("the Final Decision").
On February 14, 2002, SNET brought this suit, in which it challenges four of the determinations made by the DPUC in the Final Decision. MCI defends the DPUC's actions on those four issues, but claims that two other determinations in the Final Decision are incorrect. SNET denies that the two issues raised by MCI pose any problem. The DPUC maintains that its decision was correct in all material respects.
In August 2002, the DPUC voluntarily reopened proceedings in this case to consider whether the Final Decision required modification in light of changes in federal law. On November 13, 2002, the DPUC issued a ruling concluding that the Final Decision needed no change.
SNET and MCI have both moved for summary judgment on their respective claims and against the other's claims. The DPUC opposes both motions.
The 1996 Act does not explain how district courts are to review the determinations of state public utility commissions. Those courts that have faced the issue have uniformly concluded that a state commission's interpretations of federal law are reviewed de novo, but its interpretations of state law and its findings of fact are reviewed under an "arbitrary and capricious" standard. See SNET v. DPUC, 285 F.Supp.2d 252, 258 (D.Conn.2003) (collecting cases); Global NAPS, Inc. v. Verizon New England Inc., 327 F.Supp.2d 290, 296 (D.Vt.2004) (collecting cases).
In reviewing an agency's decision under the arbitrary and capricious standard, a court will uphold the agency's decision if it can discern a rational connection between the facts found and the choice made. SNET v. DPUC, 285 F.Supp.2d at 258. The court may not, however, supply a reason for the agency's decision that the agency itself has not given. Id.
When reviewing an agency's interpretation of federal law, the court applies the law in effect at the time it conducts its review, even if that was not the law in effect at the time the agency made its decision. Pacific Bell v. Pac-West Telecomm, Inc., 325 F.3d 1114, 1130 n. 14 (9th Cir.2003) (citing U.S. West v. Jennings, 304 F.3d 950, 956 (9th Cir.2002)).
Though they filed motions for summary judgment, SNET and MCI effectively seek an administrative appeal of the DPUC's determination under the standards just given. Accordingly, it is those standards, rather than the familiar summary judgment standards, that govern this decision.
The six issues in dispute in this case relate to three of the obligations imposed by the 1996 Act: (1) reciprocal compensation, (2) dialing parity, and (3) unbundled access.
Two of the DPUC determinations at issue in this case involve reciprocal compensation issues. SNET takes issue with the Final Decision's determination that traffic bound for Internet Service Providers ("ISPs") is subject to reciprocal compensation ("the ISP Issue"). MCI takes issue with the Final Decision's determination that "foreign exchange" or "FX" traffic is not subject to reciprocal compensation ("the FX Issue").
The law governing the reciprocal compensation obligations of local exchange carriers is very much a product of history and is best understood by reviewing that history.
The 1996 Act imposes on all local exchange carriers the "duty to establish reciprocal compensation arrangements for the transport and termination of telecommunications." 47 U.S.C. § 251(b)(5).
In its first order implementing the Act, the FCC explained more exactly what the requirement entailed. "We conclude that section 251(b)(5) reciprocal compensation obligations should apply only to traffic that originates and terminates within a local area." First Report and Order,1 11 F.C.C.R. 15499, 16013 ¶ 1034 (1996). According to the FCC, reciprocal compensation arrangements were only needed in the situation where two competing local carriers work together to complete a local call. Id. When two carriers complete a local call, the originating carrier will recover its costs directly from the calling customer through payment of the customer's local subscription. The terminating carrier, however, will not be able to recover its costs because, in general, customers are not billed for receiving calls. Of course, if the competing carriers exchange approximately the same volume of traffic, then originating and terminating costs will balance. When one carrier terminates many more calls than another, however, unless reciprocal compensation applies, the terminating carrier would be subsidizing its competitor by terminating the competitor's calls for free.
By contrast, non-local calls, either interstate or intrastate, do not need reciprocal compensation because they already have a cost-recovery mechanism in place, namely, access charges. Completion of non-local calls typically involves three carriers — the originating LEC, the inter-exchange carrier ("the IXC"), and the terminating LEC. Id. Customers are ordinarily billed a per-call distance-based rate by the IXC, which in turn compensates both the originating LEC and terminating LEC by paying an access charge for the use of each...
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