The Southern New England v. Perlermino

• Decision Date: 06 May 2011
• Docket Number: 3:09-cv-1787(WWE)
• Court: U.S. District Court — District of Connecticut
• Parties: THE SOUTHERN NEW ENGLAND TELEPHONE COMPANY d/b/a AT&T CONNECTICUT, Plaintiff, v. ANTHONY J. PERLERMINO, KEVIN DELGOBBO and JOHN W. BETOSKI III, in their official capacity as Commissioners of the Connecticut Department of Public Utility Control Defendants.

THE SOUTHERN NEW ENGLANDTELEPHONE COMPANY d/b/a AT&T CONNECTICUT, Plaintiff,

v. ANTHONY J. PERLERMINO, KEVINDELGOBBO and JOHN W. BETOSKI III, in their official capacity as Commissionersof the Connecticut Department of Public Utility Control Defendants.

3:09-cv-1787(WWE)

UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT

Dated: May 6, 2011

MEMORANDUM OF DECISION

This is a declaratory judgment action concerning a decision by the Connecticut Department of Public Utility Control ("DPUC") issued on October 7, 2009. Plaintiff Southern New England Telephone Company, d/b/a AT&T Connecticut ("AT&T Connecticut"), asks the Court to find DPUC's ruling to be unlawful and to issue an injunction barring its enforcement.

BACKGROUND

I. The Telecommunications Act of 1996

Congress passed the Telecommunications Act of 1996 ("1996 Act") to promote competition in all telecommunications markets, including markets for local exchange services. Before the 1996 Act, states would typically grant an exclusive franchise in each local service to a local exchange carrier ("LEC") which owned the local exchange network and its component parts. See Worldcom, Inc. v. Conn. Dep't of Pub. Util. Control, 375 F. Supp. 2d 86, 88 (D. Conn. 2005). The 1996 Act changed this system.Under the law, "[s]tates may no longer enforce laws that impede competition, and incumbent LECs are subject to a host of duties intended to facilitate market entry." AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 371 (1999).

Pursuant to the 1996 Act, an incumbent LEC ("ILEC") is obligated to interconnect with a new competitor's facilities "to whatever extent is necessary to allow the competitor's facilities to operate." Verizon Communs., Inc. v. FCC, 535 U.S. 467, 491 (2002) (citing 47 U.S.C. §§ 251(a) and (c)(2)). Section 251 of the 1996 Act creates a three-tiered structure that spells out the duties incumbent upon ILECs to create a competitive market. Section 251 (a) requires that every telecommunication carrier interconnect directly or indirectly with the facilities and equipment of other telecommunications carriers. 47 U.S.C. § 251(a). Section 251(b) places obligations on all LECs. Finally, section 251(c) puts additional requirements upon ILECs, including a requirement that it share its network. Worldcom, 375 F. Supp. 2d at 88. The section requires that each ILEC (1) negotiate the terms and conditions of agreements in connecting with new entrants into the market and (2) interconnect with new entrants. 47 U.S.C. § 251(c). In addition, an ILEC must provide to "any requesting telecommunications carrier for the provision of telecommunications service, non-discriminatory access to network elements on an unbundled basis at any technically feasible points on rates, terms and conditions that are just, reasonable, and nondiscriminatory in accordance with the terms and conditions of the agreement and the requirements of [47 U.S.C § 252]." 47 U.S.C. § 251(c)(3). When an entrant seeks access to an ILEC's system, the entrant and incumbent may negotiate the terms of such access. If that fails, the parties can petition the state commission to arbitrate theparties' open issues. AT&T Corp., 525 U.S. at 371-73.

Section 252 provides the procedures for negotiations for terms of interconnection. Pursuant to section 252(d), when a state commission is called upon to arbitrate rates for interconnection, the rates are to be based on the total element long-run incremental cost ("TELRIC") methodology. In the Matter of Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, 11 F.C.C.R. 15499 (1996) ("First Report and Order"); 47 C.F.R. § 51.505. The terms agreed upon by the parties are subject to approval by the state commission. 47 U.S.C. § 252(e). The agreement may be rejected only if (1) it discriminates against a telecommunication carrier who is not a party; (2) the implementation is not consistent with the public interest, convenience or necessity; or (3) the agreement does not meet the requirements of section 251, the regulations promulgated pursuant thereto or section 252(d). 47 U.S.C. § 252(e)(2).

Where two carriers must indirectly interconnect, they do so through an intermediate carrier. In re Developing a Unified Intercarrier Compensation Regime, 20 F.C.C.R. 4685, ¶ 120 (2005) ("Further Notice of Proposed Rulemaking"). The immediate carrier provides "transit service" or "transiting." An intermediate carrier transits a signal from an originating carrier to a terminating carrier's end customer.¹ The intermediate carrier is usually an ILEC.

II. AT&T Connecticut and Pocket Communications' History

This action is a challenge to a decision by the DPUC on a petition by Youghiogheny Communications-Northeast, LLC d/b/a Pocket Communications ("Pocket"). Pocket is a wireless telecommunication service provider. The petition sought a declaratory ruling that Southern New England Telephone Company d/b/a AT&T Connecticut ("AT&T Connecticut") was in violation of Conn. Gen. Stat. § 16-247B.

Plaintiff AT&T Connecticut is an ILEC in Connecticut. It had a state-granted franchise to act as the exclusive provider prior to the enactment of the 1996 Act. According to the brief submitted by Comcast Phone of Connecticut, Inc., Cablevision Lightpath-CT, Inc. and Cox Connecticut Telecom, LLC (together, "Carriers"), and as found by the DPUC in its decision, AT&T Connecticut is the only carrier that has direct interconnections with every other competitive local exchange carrier ("CLEC") and wireless provider in the state of Connecticut.

The DPUC is a "state commission" as defined by 47 U.S.C. § 153(48) insofar as it has "regulatory jurisdiction with respect to intrastate operations of carriers." Defendants Palermino, Delgobbo and Betoski are commissioners of the DPUC and are sued in their official capacities.

STANDARD OF REVIEW

Pursuant to 47 U.S.C. § 252(e)(6), federal courts have jurisdiction to review state commission decisions and determinations. Although the 1996 Act does not specify how federal district courts are to review such decisions and determinations, courts haveconcluded that the state commission's interpretations of federal law are reviewed de novo. See S. New Eng. Tel. Co. v. MCI WorldCom Communs., Inc., 353 F. Supp. 2d 287, 290 (D. Conn. 2005). The commission's interpretations of state law and its findings of fact are reviewed under an "arbitrary and capricious" standard. See Worldcom, 375 F. Supp. 2d at 92.

DISCUSSION

In this challenge to the DPUC's decision, there are several issues for the Court to resolve. The first question is whether transit service qualifies as "interconnection" under the 1996 Act. If transit service indeed qualifies as interconnection, is it indirect interconnection governed under 47 U.S.C. § 251(a) or direct interconnection under 47 U.S.C. § 251(c)? Then, if transit service is direct interconnection, must it be provided at TELRIC-based price rates?

I. Whether Transiting Service Qualifies As "Interconnection" and What Kind of Interconnection Is It?

In its decision, the DPUC found that ILECs must provide transit service pursuant to 47 U.S.C. §§ 251 and 252. AT&T Connecticut contends that the FCC has precluded this finding. Defendants argue, on the other hand, that the FCC has merely denied making a decision on such point.

Interconnection refers to the "the physical linking and use of networks owned by different carriers to permit customers of one carrier to call customers of another carrier." Iowa Network Servs., Inc. v. Qwest Corp., 385 F. Supp. 2d 850, 855 n.6 (S.D. Iowa 2005). The FCC's regulations define interconnection as "the linking of two networks for the mutual exchange of traffic." 47 C.F.R. § 51.5; First Report and Order, 11 F.C.C.R.15499, ¶ 176. The regulations exclude "transport and termination of traffic" from the definition of interconnection. 47 C.F.R. § 51.5. "Interconnection" refers to the physical linking of two networks through the provision of necessary facilities and equipment. See Southwestern Bell Tel., L.P. v. Mo. Pub. Serv. Comm'n, 530 F.3d 676, 684 (8th Cir. 2008). It does not refer to the provision of any specific service. AT&T Corp. v. FCC, 317 F.3d 227, 234-35 (D.C. Cir. 2003).

Under section 251(c), CLECs do not have the legal obligation that ILECs have to directly connect between carriers. See 47 U.S.C. § 251(c) (only ILECs must interconnect directly). Therefore, CLECs rely on an ILEC to serve as intermediary to connect two users of the network. This service is considered "transit traffic service" ("TTS").

The FCC stated numerous times in dicta that it has not found a duty for an ILEC to provide transit service. This statement is usually in conjunction with a statement that the specific case is not the occasion to determine whether such a duty exists. See, e.g., In re Application by Qwest Commc'ns. Int'l, Inc., 18 F.C.C.R. 7325, ¶ 92 n.305 (2003) ("Although we do not address the merits of AT&T's assertion that Commission rules require Qwest to provide transit service under section 251(c)(2), we note that the Commission has not had occasion to determine whether incumbent LECs have such a duty, and we find no clear Commission precedent or rules declaring such a duty."); In re Petition of WorldCom, Inc. Pursuant to Section 252(e)(5), 17 F.C.C.R. 27039, ¶ 117 (Wireline Competition Bureau, 2002) ("WorldCom Petition") (same); In re Application by BellSouth Corp., 17 F.C.C.R. 25828, ¶ 155 (2002) (same).

More recently, the FCC has started to reconsider this approach. In 2005, theFCC wrote:

We seek comment on the Commission's legal authority to impose transiting obligations. For example, competitive LECs and CMRS carriers point to sections 251(a)(1) and 251(c)(2)(B) of the Act in support of transiting obligations. AT&T and Sprint contend that the language in section 251(a) regarding indirect interconnection requires carriers to provide transiting arrangements. In addition, these carriers rely on the "at any technically feasible

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