Sprint Commc'ns Co. v. Bernsten
| Citation | 152 F.Supp.3d 1144 |
| Decision Date | 30 December 2015 |
| Docket Number | No. 11–cv–183–JAJ,11–cv–183–JAJ |
| Parties | Sprint Communications Company Plaintiff, v. Robert B. Bernsten, Krista Tanner, and Darrell Hanson, in their official capacities as members of the Iowa Utilities Board, Defendants. v. Windstream Iowa Communications, Inc., Office of Consumer Advocate, Intervenors. |
| Court | U.S. District Court — Southern District of Iowa |
Jared P. Marx, Christopher J. Wright, Mark D. Davis, Timothy J. Simeone, Harris, Wiltshire & Grannis LLP, Washington, DC, Bret Alan Dublinske, Fredrikson & Byron, P.A., Des Moines, IA, for Plaintiff.
David Jay Lynch, Mary Frances Whitman, Iowa Utilities Board, Des Moines, IA, for Defendants.
Andrew R. Anderson, Todd P. Langel, Faegre Baker Daniels, LLP, Mark R. Schuling, Anna K. Ryon, Iowa Department of Justice Consumer Advocate, Des Moines, IA, Gregory J. Vogt, Law Offices of Gregory J. Vogt, PLLC, Black Mountain, NC, for Intervenors.
JOHN A. JARVEY
Mediacom has historically offered its customers the ability to make telephone calls over the Internet. That technology is called “Voice over Internet Protocol,” or VoIP. One difficulty with VoIP is that traffic sent over the internet is formatted differently than traffic sent over ordinary telephone lines.1 Without something to convert Internet formatting to telephone formatting, Mediacom's customers could not call telephone users. Sprint Communications provided that conversion service. When a Mediacom customer placed a VoIP call, Mediacom passed that traffic to Sprint. Sprint changed its format, and then delivered it to telephone lines owned by Windstream Iowa Communications. Sprint paid Windstream to use the lines. It paid at rates set by a tariff that Windstream had filed with the Iowa Utilities Board, in accordance with Iowa law.
In 2009, Sprint stopped paying Windstream for that use, and started withholding payments for other services. It argued that it had been overpaying Windstream: it should have been paying rates determined by federal law, because state law had been preempted. The Iowa Utilities Board heard the dispute, and found in Windstream's favor. It ordered Sprint to pay what it owed Windstream under state law. Sprint sued the Board's members in this Court, arguing that the Board's order was contrary to federal law and seeking declaratory and injunctive relief. Windstream and the Office of Consumer Advocate intervened as defendants, and all parties have agreed on the material facts and moved for summary judgment.
Commercial telephone service in the United States. began as a monopoly: Alexander Graham Bell's telephone company held all the key patents. Peter W. Huber, et. al., Federal Telecommunications Law, § 1.3 (2d ed. Supp.2011); AT & T Corp. v. Iowa Utilities Bd., 525 U.S. 366, 402, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999)
(). Even after the patents expired, the Bell company maintained its dominance by refusing to carry telephone traffic from independent telephone companies. Huber, Federal Telecommunications, at § 1.3; AT & T Corp., 525 U.S. at 403, 119 S.Ct. 721 (Thomas, J., concurring in part and dissenting in part). The Communications Act of 1934 enshrined the monopolistic approach, requiring telephone carriers to get permission from the new Federal Communications Commission before operating a new telephone line or acquiring an old one. 47 U.S.C. § 214(a) ; see also
F.C.C. v. RCA Communications, 346 U.S. 86, 92–93, 73 S.Ct. 998, 97 L.Ed. 1470 (1953) (). This system left Bell in control of the telephony market.2 Huber, Federal Telecommunications, at § 1.3.4.
The Act gave the F.C.C. other regulatory powers, but limited its jurisdiction to “interstate and foreign communication.” 47 U.S.C. § 152(a)
. The F.C.C. had no authority over “services ... for or in connection with intrastate communication.” 47 U.S.C. § 152(b) ; see also
Louisiana Public Service Com'n v. F.C.C., 476 U.S. 355, 360, 106 S.Ct. 1890, 90 L.Ed.2d 369 (1986) ()
A communication was classified as either interstate or intrastate based on an “end-to-end” analysis. In the Matter of Vonage Holdings Corporation, 19 F.C.C. Rcd. 22404, 22413 (2004)
. If a call both began and ended within a state, it was intrastate; if it ended in a different state or in a foreign country, it was interstate. Id. If a service enabled both intra- and interstate calls, it was “jurisdictionally mixed.” Id. Usually both the F.C.C. and the states regulated “mixed” services, the states regulating their intrastate components and the F.C.C. their interstate components. Id. But if the intrastate and interstate components could not be disentangled, the F.C.C. could preempt state regulation and regulate unilaterally. Louisiana Public, 476 U.S. at 375 n. 4, 106 S.Ct. 1890 ; Public Service Com'n of Maryland v. F.C.C., 909 F.2d 1510, 1515 (D.C.Cir.1990). That rule was called the “impossibility exception.” People of State of Cal. v. F.C.C., 905 F.2d 1217, 1243 (9th Cir.1990)
.
The impossibility exception is relevant to this case because it applied to some VoIP services. VoIP services come in two varieties: nomadic and fixed. Minnesota Public Utilities Com'n v. F.C.C., 483 F.3d 570, 575 (8th Cir.2007)
. Nomadic VoIP services can be used anywhere “in the universe” the user can get an Internet connection. Id. Fixed VoIP services require equipment installed at a specific location, like a cable connection, to work. Id. The F.C.C. decided to exercise exclusive jurisdiction over one nomadic VoIP service, because the end points of those calls could not be determined. Vonage Holdings Corporation, 19 F.C.C. Rcd. 22404, 22424 (2004). The parties debate that decision's breadth.
The Bell monopoly system was in tension with federal antitrust law, and over the years Bell defended an increasing number of antitrust suits brought by both private plaintiffs and the federal government. See, for example, Pastor v. American Tel. & T. Co., 76 F.Supp. 781 (S.D.N.Y.1940)
; Carter v. American Tel. & Tel. Co., 365 F.2d 486 (5th Cir.1966) ; Litton Systems, Inc. v. American Tel. and Tel. Co., 700 F.2d 785 (2nd Cir.1983). Finally, in the mid–1980s, Bell settled one such suit through a massive divestiture. William J. Quirk and Fred A. Walters, A Constitutional and Statutory History of the Telephone Business in South Carolina, 51 S.C. L.Rev. 290, 336 (2000). The consent decree divided the country into “local access and transport areas,” or “exchanges,” and split Bell up into a number of local operating companies and one long distance carrier. Huber, Federal Telecommunication, at § 4.5.8.2. The local operating companies provided only local telephone service—service within the exchanges. Joseph D. Kearney, From the Fall of the Bell System to the Telecommunications Act: Regulation of Telecommunications under Judge Greene, 50 Hastings L.J. 1395, 1414 (1999). They were not allowed to provide inter-exchange (also called long-distance) service. Id. at 1413 n.53. Long-distance service providers (also called interexchange carriers) would provide services by paying the local companies for “equal access” to their telephone lines. Id. at 1413 ; Great Lakes Communication Corp. v. Iowa Utilites Bd., No. C09–4085–DEO, 2009 WL 3806176, at *1 (N.D.Iowa Nov. 10, 2009) (). The payment amounts were set by either tariffs filed with the F.C.C., for interstate traffic, or by the relevant state's law. See 47 U.S.C. § 203(a) ; Brief for the Federal Communications Commission as Amicus Curiae at 4, Central Telephone Company of Virginia, Inc. v. Sprint Communications Co., 715 F.3d 501, 508–10 (4th Cir.2013) (). This system assumed that the market for local telephone services was naturally monopolistic, but that the long-distance service market could be competitive. Huber, Federal Telecommunications, at § 4.5.7. The local monopolies were therefore permitted, but their influence over long-distance services limited. Id. ; Kearney, From the Fall of the Bell System, at 1417.
The F.C.C. recognized one significant exception to the access charges system. Telecommunications law had already distinguished between services which transmit information and services which somehow modify that information. Huber, Federal Telecommunications, at § 12.1; In the Matter of Regulatory and Policy Problems Presented by the Interdependence of Computer and Communication Services and Facilities (Computer I), 28 F.C.C.2d 267, 267–68 n.3 (1971)
(); compare 47 U.S.C. § 153(53) (defining telecommunications service) with 47 U.S.C. § 153(24) (defining information service). The former are called “basic services” or “telecommunications services,” while the latter are referred to as “enhanced services” or “information services.”3 Huber, Federal Telecommunications, at §§ 12.2.1 & 12.2.2. Many information service providers, like interexchange carriers, need to purchase access to local telephone lines. In the 1980s, the F.C.C. exempted them from the tariffs that applied to interexchange carriers. Connect America Fund, 26 F.C.C. Rcd. 17663, 18016 n. 1959 (20...
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