Sw. Bell Tel. Co. v. Fitch

Decision Date22 July 2011
Docket NumberCIVIL ACTION NO. 4:09-CV-1548
CourtU.S. District Court — Southern District of Texas

Plaintiff is Southwestern Bell Telephone Company d/b/a AT&T Texas ("AT&T Texas") and Defendant is F. Cary Fitch d/b/a Affordable Telecom ("Affordable"). Each party alleges that the other has failed to pay money required under their June 2007 Two-Way CMRS Interconnection Agreement ("2007 Agreement"). Pending before the Court is AT&T Texas's Motion for Summary Judgment [Doc. # 42] ("AT&T Texas's Motion") to which Affordable has responded [Doc. # 45], and AT&T Texas has replied [Doc. # 46].1 Also pending before the Court is Affordable'sMotion for Partial Summary Judgment [Doc. # 43] ("Affordable's Motion"), to which AT&T Texas has responded [Doc. # 44], and Affordable has replied [Doc. # 47]. The Court heard oral argument on these summary judgment motions on May 18, 2011 [Doc. # 59]. The motions are now ripe for decision. Having considered the parties' briefing, the applicable legal authorities, and all matters of record, the Court concludes that AT&T Texas's Motion should be granted in part and denied in part and Affordable's Motion should be denied.

A. Regulatory Background

The Telecommunications Act of 1996, 47 U.S.C. § 151 et. seq. (the "1996 Telecom Act") requires incumbent local exchange carriers ("ILECs"), such as AT&T Texas, to provide "interconnection with the [ILEC's] network" for "the facilities and equipment of any requesting telecommunications carrier." 47 U.S.C. § 251(c)(2). This interconnection is accomplished through "interconnection agreements" with the competitive local exchange carriers ("CLECs") even though they compete with the ILEC providing the interconnection. CLECs and ILECs all provide landlinetelecommunications services.

The Federal Communications Commission ("FCC") has extended the right to establish interconnection agreements under 47 U.S.C. §§ 251 and 252 to Commercial Mobile Radio Service ("CMRS")2 carriers3 that provide wireless services, such as paging or cellular telephone services. ILECs and CMRS carriers physically interconnect their networks pursuant to the terms of their interconnection agreements. These interconnections allow CMRS carriers and ILECs to exchange traffic over their networks for delivery to their end users (i.e., the caller and the called/receiving party).

The CLECs and ILECs are permitted to and do charge each other fees for the services they render to each other pursuant to the interconnection agreements. The prices to be paid for the routing of the calls are established in the interconnection agreements.

B. Prior Dealings Between the Parties

In 2001, Fitch obtained a one-way CMRS license that allowed him to providepaging services. AT&T Texas then began delivering traffic to Affordable (Fitch's sole proprietorship) under an interim agreement.4 Affordable then sought a formal interconnection agreement from the Public Utility Commission of Texas ("PUCT").5On July 15, 2005, the PUCT issued an arbitration award, which as modified, dictated the terms of that interconnection agreement.6

Affordable had sought from the PUCT authority to provide not only paging services through his interconnection agreement with AT&T Texas but also to use those interconnection trunks and facilities to allow customers to call a dial-up Internet access service that Affordable offered under the name "USA Wide.net."7 In this PUCT proceeding, Affordable thus sought to serve as an "Internet Service Provider" ("ISP") and sought to use its interconnection with AT&T Texas to carry Internet access traffic.8 The FCC has recognized that ISPs "are end users oftelecommunications services that are required to purchase LEC business lines" from local exchange carriers like AT&T Texas in order to receive calls to their dial-up Internet service.9 Affordable sought to avoid this requirement through the PUCT proceeding.

Relying on 47 C.F.R. § 51.100(b),10 the PUCT rejected Affordable's claims thatit could use its paging interconnection with AT&T Texas to carry Internet access traffic because Affordable did not offer telecommunications service "through" interconnection facilities; rather, it merely transmitted radio signals to activate its pagers.11 The PUCT arbitrators explained that "47 C.F.R. § 51.100(b) allows the offering of information service through an interconnection facility, but only as an incident to the telecommunications service for which the carrier obtained the interconnection facility."12 The PUCT arbitrators concluded that Affordable was only authorized to provide paging services, and "consequently [it] may not receive any traffic other than paging traffic through the interconnection facility."13 Affordable appealed the PUCT's decision to the federal district court, which affirmed the PUCT.14The Fifth Circuit also affirmed.15 Affordable nevertheless continued to operate as anISP for approximately one year after the PUCT's decision.16

C. Formation of the 2007 Agreement

At some point, Affordable obtained a two-way CMRS license from the FCC, which allows the company to both send and receive wireless radio communications within a limited bandwidth.17 Affordable then sought to adopt the interconnection agreement between Cingular and AT&T Texas.18 AT&T Texas was required by law to let any "requesting telecommunications carrier" opt into this agreement. See 47 U.S.C. § 252(i); 47 C.F.R. § 51.809. AT&T Texas initially resisted Affordable's request to adopt that agreement, expressing concern that Affordable would use this new agreement to improperly provide information services, just as Affordable had done under the one-way paging agreement.19 Affordable's counsel represented that Affordable acquired his two-way CMRS license to comply with the PUCT's decision.20 On June 22, 2007, AT&T Texas and Affordable formally entered into aninterconnection agreement ("2007 Agreement"), which the PUCT approved.21 The 2007 Agreement called for the parties to "connect their facilities and interchange traffic . . . as telecommunications carriers for the purpose of offering wireless to wireline or wireline to wireless communications service to their respective end users . . . ."22

D. The Instant Lawsuit

Several billing and other disputes have arisen between the parties. AT&T Texas claims that Affordable has failed to pay for services under the 2007 Agreement. AT&T Texas states that it provided facilities and services pursuant to the 2007 Agreement and submitted charges to Affordable but that, despite repeated demands for payment, Affordable has refused to remit the sums due. AT&T Texas therefore brings claims for breach of contract.23

Affordable disputes many of AT&T Texas's billings and further alleges that AT&T Texas has refused to pay certain compensation that Affordable claims is due.Affordable brings counterclaims against AT&T Texas for breach of contract, declaratory judgment, and violations of the Telecom Act.24

AT&T Texas alleges that in the months preceding the 2007 Agreement, Affordable represented to the FCC that it would be providing not only "information services" but also "telecommunications services,"25 such that it was entitled to "interconnection" under FCC rules. AT&T Texas states that these representations by Affordable were key to AT&T Texas's willingness to enter the 2007 Agreement, and to the PUCT's approval of the 2007 Agreement, but these representations were materially false.

Affordable concedes that more than ninety percent of its business comes from its ISP customers or "Internet service provider aggregator customers"26 (collectively referred to herein as "ISPs," "ISP customers," or "dial-up ISP customers").Affordable defines these customers as "receiv[ing] telecommunication service via delivery of calls from the PSTN to equipment owned by [the ISP, Affordable's customer]. [Affordable] transports and terminates calls that originate on the PSTN to the [ISP] customer-designated demarcation."27 The PSTN, i.e., the public switched telephone network, is "the worldwide voice telephone network accessible to all those with telephones and access privileges."28 Affordable concedes its ISP customers provide "dial-up Internet service"29 and that Affordable provides only "PRI circuits"30to the ISPs. Affordable concedes this service is essentially providing its dial-up ISP customers with business lines that they would otherwise have to purchase fromLECs.31 Affordable's two-way wireless services under the June 2007 Agreement32 are unrelated to the services it provides to the ISPs, and its dial-up ISP customers do not use the wireless spectrum.33 AT&T Texas alleges that this use of Affordable's interconnection is a breach of the 2007 Agreement. Affordable disputes this characterization and seeks a declaration that Affordable is allowed to provide these services through his interconnection with AT&T Texas. AT&T Texas also alleges that Affordable Telecom's representations to Plaintiff and the FCC, namely, its representations that it would provide telecommunications services in addition to information services, were false. Based upon these allegations, AT&T Texas asserts a claim for fraud.34

The parties have filed cross-motions for summary judgment, which have been fully briefed and are ripe for decision.


Rule 56 of the Federal Rules of Civil Procedure "mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a sufficient showing of the existence of an element essential to the party's case, and on which that party will bear the burden at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc); see also Baton Rouge Oil & Chem. Workers Union v....

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