Southern New England Telephone Co. v. Connecticut

• Decision Date: 30 September 2003
• Docket Number: No. 3-02-CV-1022 (JCH).,3-02-CV-1022 (JCH).
• Citation: 285 F.Supp.2d 252
• Court: U.S. District Court — District of Connecticut
• Parties: SOUTHERN NEW ENGLAND, TELEPHONE COMPANY, Plaintiff, v. State of CONNECTICUT, DEPARTMENT OF PUBLIC UTILITY COMPANY, et al., Defendants.

285 F.Supp.2d 252

SOUTHERN NEW ENGLAND, TELEPHONE COMPANY, Plaintiff, v. State of CONNECTICUT, DEPARTMENT OF PUBLIC UTILITY COMPANY, et al., Defendants.

No. 3-02-CV-1022 (JCH).

United States District Court, D. Connecticut.

September 30, 2003.

Robert W. Allen, Timothy P. Jensen, Tyler, Cooper & Alcorn, New Haven, CT, Keith M. Krom, George M. Moreira, Southern New England Telephone, Co., New Haven, CT, for Southern New England Telephone Co.

Robert S. Golden, Jr., Robert L. Marconi, Attorney General's Office, New Britain, CT, for Connecticut Dept. of Public Utility Control.

Brad N. Mondschein, Updike, Kelly & Spellacy, P.C., Hartford, CT, for PaeTec Communications, Inc.

RULING ON MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 18, 33, 37]

HALL, District Judge.

In this case, the Southern New England Telephone Company ("SNET") seeks review of a decision by the State of Connecticut, Department of Public Utility Control ("DPUC") requiring SNET to treat certain telecommunications traffic involving its competitor PaeTec Communications, Inc. ("PaeTec") as "local," and thus subject to reciprocal compensation pursuant to an interconnection agreement between the parties. PaeTec is an intervener in the case.

I. BACKGROUND

A. The Telecommunications Act of 1996

The Telecommunications Act of 1996 ("the Act"), Pub.L. 104-104, 110 Stat. 56, "created a new telecommunications regime designed to foster competition in local telephone markets." Verizon Maryland v. Pub. Serv. Comm. of Maryland, 535 U.S. 635, 638, 122 S.Ct. 1753, 152 L.Ed.2d 871 (2002). Before Congress passed the Act, local telephone service throughout the United States was typically provided in a "natural monopoly" fashion, with only one company providing service throughout a given area, often because of state-granted exclusive franchises. See AT & T Corp. v. Iowa Utilities Bd., 525 U.S. 366, 371, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999). The Act facilitated the break up of these monopolies by requiring, inter alia, the incumbent local exchange carrier ("LEC") to share its networks with new entrants to the market, referred to as competitor local exchange carriers ("CLEC"). The Act also requires local telephone companies to establish "reciprocal compensation arrangements" for the "transport and termination of local calls that originate with one carrier and terminate with another." 47 U.S.C. § 251(b)(5). The Act gives LECs and CLECs the option of negotiating an interconnection agreement governing this access and compensation. An entering CLEC can either opt into an existing interconnection agreement between the LEC and another CLEC, or it can negotiate its own interconnection agreement. See 47 U.S.C. § 252(e)(6). The Act provides that disputes over interconnection agreements are to be arbitrated by the state commission that regulates local phone service, in Connecticut the Department of Public Utility Control. The Act further provides that a party aggrieved by a state commission determination can petition for review in the federal district court. The courts have termed this arrangement "cooperative federalism." See, e.g., Puerto Rico Tel. Co. v. Telecomm. Regulatory Bd. of Puerto Rico, 189 F.3d 1, 8 (1st Cir. 1999).

B. The Dispute Between SNET and PaeTec

In 1999, pursuant to Section 252(i) of the Act, PaeTec opted into a pre-existing interconnection agreement between SNET and WorldCom Technologies, which dealt solely with interconnection in Connecticut. When SNET was acquired by SBC, however, SBC required a single multi-state interconnection agreement for all of its member providers. Accordingly, PaeTec and SBC entered into a "SBC-13state" interconnection agreement ("the Agreement"), which was filed on January 8, 2001, with the DPUC and approved by it on April 18, 2001.¹

The overlap of different telephone service providers creates complex issues of compensation and classification. Telecommunications service is divided, much like concentric circles, into several geographical territories of increasing specificity. Generally, a call which originates and terminates within the same physical calling area is termed a "local call." A call which originates in one physical calling area and terminates within another physical calling area, but is still within a larger "local access and transport area" ("LATA"), is termed an "intraLATA" call. A call which, on the other hand, terminates in a different "LATA" is termed an "interLATA" call. Because some states have more than one LATA, a call can be "intrastate interLATA" or "interstate interLATA." The state of Connecticut, however, is all within the same "LATA," though some areas of Greenwich are included in the New York City calling area. Calls are tracked and classified by the first digits of the telephone number, e.g., in a hypothetical 203-555-0000 telephone number, by the "203-555" portion of the number. The "203" is called the "NPA" code and the "555" is called the "NXX" code.

Generally stated, local calls are subject to the reciprocal compensation of the Act. With the advent of the internet and other phone networks, however, this classification has become more complicated. Telephone service providers have begun offering local numbers (local NPA/NXX codes) that correspond with long distance call destinations — what that the Agreement calls "Virtual FX" traffic. A customer may dial a local number that actually corresponds to a number outside his or her local calling area, so that the call seems local but actually terminates in a different calling area; similarly, he or she may dial a local number to access an Internet Service Provider ("ISP"), but connect through that number to services and websites outside his or her local calling area. This situation has created confusion about whether such "local" numbers should be classified as "local calls" for purposes of billing.

In the Agreement, SBC and PaeTec specified interconnection compensation terms. The Agreement contained an "Appendix Reciprocal Compensation" ("the Appendix") that specified that "calls delivered to or from numbers that are assigned to an exchange within a common mandatory local calling area but where the receiving or calling party is physically located outside the common mandatory local calling area of the exchange .... are not Local Calls for intercarrier compensation and are not subject to local reciprocal compensation." Appendix at § 2.7.

The parties, however, also executed an amendment to the Agreement ("the Amendment"), which overrides conflicting provisions of the Agreement. Amendment at § 1.1. Section 3.1 provided:

If PaeTec Communications, Inc. designates different rating and routing points such that traffic that originates in one rate center terminates to another routing point designated by PaeTec Communications, Inc. in a rate center that is not local to the calling party even though the NXX is local to the calling party, such traffic ("Virtual Foreign Exchange" traffic) shall be rated in reference to the rate centers associated with the NXX prefixes of the calling and called parties' numbers but treated as Local traffic for purposes of compensation.

Section 3.2 further defined "Compensable Local Traffic." Section 3.2.1 then exempted certain "InterLATA toll" and "IXCcarried intraLATA toll" from "total Compensable Local Traffic."

From January to September 2001, PaeTec sent reciprocal compensation invoices to SNET for PaeTec's termination of "Local Traffic," which PaeTec claimed comported with the Agreement and Amendment. Those invoices contained calls between numbers with the same NXX prefixes but that originated with SNET users in Connecticut and terminated with PaeTec users in New York. SNET objected to the inclusion of this interstate traffic as "local traffic" and refused to make reciprocal billing payment. PaeTec invoked the dispute resolution procedures in the Agreement, and began applying amounts it owed SNET as offsets to SNET's unpaid reciprocal compensation charges.

On August 22, 2001, filed a Complaint and Petition with the DPUC, requesting that the DPUC issue an order compelling SNET to pay PaeTec all past-due reciprocal compensation amounts, and requiring such payments to be timely in the future. In its final decision, the DPUC found that PaeTec's InterLATA FX traffic was, under the Amendment, subject to reciprocal compensation.

SNET has appealed that ruling to this court. SNET asserts: (1) that the DPUC does not have the authority to regulate or otherwise determine compensation for interstate interLATA traffic; and (2) that the DPUC's decision incorrectly applied Connecticut contract law in interpreting the Agreement and Amendment and concluding that the Amendment encompassed interstate interLATA traffic. SNET, DPUC, and PaeTec, which intervened in the action, have all filed motions for summary judgment.

II. JURISDICTION

A. Subject Matter Jurisdiction

The application of the Act's "cooperative federalism" has created numerous interpretive problems regarding the scope of federal court jurisdiction to review state agency actions implicating interconnection agreements. The Supreme Court has acknowledged that the Act is "not a model of clarity," but is instead "in many important respects a model of ambiguity or indeed even self-contradiction." AT & T Corp., 525 U.S. at 395-96, 119 S.Ct. 721.

SNET's lawsuit implicates several layers of jurisdictional analysis. While the Act explicitly invests the federal courts with jurisdiction to review a state commission's action in approving or disapproving an interconnection agreement, federal courts may also review state commissions' interpretation of existing interconnection agreements. In this latter regard, the circuit courts of appeal have based this jurisdiction on Section 252(e)(6) of the Act. See BellSouth Telecomms. v. MCImetro Access Transmission Servs., Inc., 317 F.3d 1270, 1276 (11th Cir.2003) (en banc); Michigan Bell Tel. Co. v. Strand, 305 F.3d 580, 582 (6th Cir.2002); ...