Tcg New York, Inc. v. City of White Plains, N.Y.
| Decision Date | 20 December 2000 |
| Docket Number | No. 99CIV.4419(BDP).,99CIV.4419(BDP). |
| Citation | 125 F.Supp.2d 81 |
| Parties | TCG NEW YORK, INC., TC Systems, Inc., and Teleport Communications d/b/a TCNY, Plaintiffs, v. CITY OF WHITE PLAINS, NEW YORK, Defendant. |
| Court | U.S. District Court — Southern District of New York |
Daniel L. Carroll and Leigh Roveda, Hutton Ingram Yuzek Gainen Carroll & Bertolotti, New York City, Robert G. Scott and T. Scott Thompson, Cole Raywid & Braverman, Washington DC, for the plaintiffs.
Anthony D. Boccanfuso and Philip W. Horton, Arnold & Porter, New York City, for the defendant.
Plaintiffs TCG New York, Inc., TC Systems, Inc. and Teleport Communications d/b/a TCNY (collectively, "TCG" or "Plaintiffs") commenced this action against the City of White Plains (the "City" or "Defendant"), alleging violations of § 253 of the Telecommunications Act of 1996, 47 U.S.C. § 253 (the "TCA"), the Fourteenth Amendment of the United States Constitution and New York state law. The case was tried to the Court on a statement of stipulated facts (the "Stipulated Facts"). This Court's decision, based on those facts, follows.
Plaintiffs are all wholly-owned subsidiaries of Teleport Communications Group, a subsidiary of AT & T Corporation, and are in the business of providing telephone and telecommunications services. Plaintiff TC Systems, Inc. is organized to construct, own, use and maintain lines for telephone purposes within the State of New York under the New York Transportation Corporations Law. See N.Y. Transp. Corp Law §§ 2, 25. Plaintiffs have been issued certificates of public convenience and necessity by the New York Public Service Commission ("PSC") for the provision of public telephone service in the State of New York. See N.Y. Pub. Serv. Law § 99.
The City is a municipal corporation and a political subdivision of the State of New York. Plaintiffs have sought the City's approval to construct telecommunications facilities and place other equipment in the City's rights-of-way, in particular new conduit networks as well as a fiber optic network of cables to run through new and preexisting conduits in the City.
On December 1, 1997, in response to Congress' enactment of the TCA in 1996, the City passed an ordinance setting forth the process by which new telecommunications carriers could obtain approval to place equipment in the City's rights-of-way (the "Ordinance"). See White Plains Municipal Code, Telecommunications Franchising and Licensing, Articles 1 — 3.
The Ordinance requires that a carrier submit a formal application to the Commissioner of Public Works and the Office of Corporation Counsel which must include, inter alia, information regarding the carrier, its affiliates, the equipment to be placed in the rights-of-way, the carrier's construction plans, its legal, financial, technical and other appropriate qualifications, and the financing for the proposed construction. See Ordinance §§ 2-3-01 & 02.
After the application is complete, the Ordinance requires that the carrier obtain a "franchise," or, in the case of carriers seeking only a limited use of the rights-of-way (e.g., installing less than 2500 feet of cable), a "revocable license." See Ordinance § 2-1. The parties are required to negotiate the terms of the franchise agreement or the revocable license, including compensation to the City, insurance, performance bonds, the City's right to inspect the premises, indemnification requirements, non-assignment clauses and other provisions. See Ordinance §§ 2-6, 2-9.
Once the carrier and City reach an agreement, the application is referred to the Common Council, which may reject the application or adopt it by a separate ordinance. See Ordinance § 2-1-04. In its review, the Common Council may consider a number of factors, including, inter alia, the carrier's ability to satisfy construction requirements and to maintain the City in good condition, the adequacy of the terms of the franchise agreement or license, the adequacy of the compensation to the City, legal, financial, technical and other qualifications of the carrier and any other factors as Council deems appropriate and in the public interest of the City. See Ordinance § 2-7.
The parties have had numerous discussions since early 1992 regarding the possible use of the City's rights-of-way in connection with TCG's plan to construct telecommunications facilities. TCG formally applied in 1992 and 1994, regularly communicating with City representatives in an attempt to obtain the City's consent.1
In April 1998 — following the enactment of the Ordinance — TCG filed a formal application with the City for a revocable licence to install a relatively small amount of fiber optic cable and about 240 feet of underground conduit. Soon thereafter, TCG requested a full-blown franchise, and made a formal application for a franchise in February 1999.
Since TCG's request, the parties have engaged in vigorous negotiations, particularly over a May 1999 draft of the proposed franchise agreement, the terms of which were substantially based upon a "Model Franchise" which the City seeks to impose on all prospective telecommunications providers.2 When it was clear that agreement could not be reached on the terms of that proposal, TCG filed this lawsuit on June 18, 1999, alleging violations of federal, state and constitutional law.
After the initiation of this lawsuit, the parties attempted to resolve their differences, and their negotiations resulted in an offer by the City of a new proposed franchise agreement (the "August Proposal") which sought to address some, but not all, of TCG's objections. As a result of further negotiations, the City offered additional modifications to the August Proposal, which were not sufficient to satisfy TCG.3
The City's August Proposal would, inter alia, require TCG to pay an annual franchise fee to the City equal to five percent of gross revenues, require a guarantee of payment from its parent corporation, and would require that TCG build a limited amount of additional conduit without charge at the City's request. In addition, the August Proposal would reserve the right of the City to examine TCG's records, impose a most favored vendees status on behalf of the City, and mandate that upon termination of the agreement, TCG would be required to remove its facilities from public property at its own expense.
The current incumbent local exchange telephone carrier in the City is Bell Atlantic (and its predecessors-in-interest, NYNEX and New York Telephone). The City has had arrangements and understandings with Bell Atlantic since as far back as 1919, at which time Bell Atlantic agreed to provide the City with free conduit for certain municipal uses. Throughout the years, a symbiotic relationship existed between Bell Atlantic and the City, whereby Bell Atlantic would provide free conduit space in exchange for permission to use the City's public rights-of-way. Since 1954, Bell Atlantic has constructed an extensive underground conduit network in the downtown area of the City, which is more extensive than the underground facilities constructed by, or proposed to be constructed by, any other telecommunications provider in the City, including TCG. Of the thirty-one mile network of fiber optic cable and copper wire that make up the City's own network, twenty miles are in conduit owned by the City on aerial poles owned by Bell Atlantic and ConEd. The other eleven miles are run through underground conduit provided by Bell Atlantic at no cost to the City.
Consequently, Bell Atlantic is not subject to the regulations set forth in the Ordinance, and is not required to obtain, and does not have, a franchise agreement with the City. Unlike new providers of telecommunications services in the City, Bell Atlantic does not pay a franchise fee, is not subject to the same general construction permitting requirements, and is free from requirements for insurance, deposits and permitting fees.
TCG objects to the requirements that the City seeks to impose on several grounds. First, plaintiffs claim that provisions of the Ordinance and the August Proposal effectively prohibit TCG from providing telecommunications services, and regulate beyond the City's public rights-of-way, violating § 253(a), (b) and (c) of the TCA (Claims 1 — 4, 6 — 8, 11 and 12 of the Complaint). Second, TCG complains that Bell Atlantic's de facto exemption from the Ordinance, and from having to enter into a franchise agreement, is both non-competitive and discriminatory against TCG, in violation of § 253(c) of the TCA (Claim 5). Third, TCG claims that the Ordinance and the August Proposal violate the New York Transportation Corporations Law and the New York Public Service Law (Claims 9 — 12). Finally, TCG contends that the City has denied plaintiffs' due process rights under the Fourteenth Amendment (Claim 13).
The gravamen of plaintiffs' complaint is that the City's regulations set forth in the Ordinance and the August Proposal are preempted under § 253 of the TCA. Accordingly, a brief look at the history and structure of the TCA is helpful.
By adopting the TCA in 1996, Congress "fundamentally restructure[d] local telephone markets" by prohibiting states and local governments from "enforc[ing] laws that impede competition." AT & T Corp. v. Iowa Utilities Board, 525 U.S. 366, 371, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999). For nearly a century, the rationale behind the regulation of the telecommunications industry presumed that telephone monopolies would best provide reliable and universal service. See Cablevision of Boston, Inc. v. Public Improvement Commission of the City of Boston, 184 F.3d 88, 97 (1st Cir.1999). The promulgation of the TCA, however, signaled the...
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