Time Warner Telecom of Oregon v. City of Portland
| Citation | 452 F.Supp.2d 1084 |
| Decision Date | 08 March 2006 |
| Docket Number | No. CV 04-1393-PA.,No. CV 05-1386-PA.,CV 04-1393-PA.,CV 05-1386-PA. |
| Parties | TIME WARNER TELECOM OF OREGON, LLC, and Qwest Communications Corp., Plaintiffs, v. THE CITY OF PORTLAND, Defendant. Qwest Corp., Plaintiff, v. The City Of PORTLAND, Defendant. |
| Court | U.S. District Court — District of Oregon |
Arthur A. Butler, Ater Wynne, LLP, John H. Ridge, David R. Goodnight, Maren R. Norton, Stoel Rives, LLP, Seattle, WA, Mark A. Turner, Ater Wynne, LLP, Alex M. Duarte, Qwest Communications, Brad S. Daniels, Stoel Rives, LLP, Portland, OR, Cynthia A. Mitchell, Hogan & Hartson, LLP, Boulder, CO, Peter S. Spivack, Hogan & Hartson, LLP, Washington, DC, for Plaintiffs.
Benjamin E. Walters, City of Portland City Attorney's Office, Terence L. Thatcher, City Attorney's Office, Portland, OR, Joseph L. Van Eaton, Miller & Van Eaton, PLLC, Washington, DC, for Defendant.
Plaintiffs Time Warner Telecom of Oregon (TWT), and Qwest Communications Corp. (QCC) sell telecommunications services in Oregon. Plaintiffs have franchise agreements with the City of Portland (the City) that permit plaintiffs to install and operate telecommunications systems in City streets.
In this action against the City, plaintiffs claim that their franchise agreements violate federal telecommunications law. Plaintiffs also claim that the City illegally competes with them by providing telecommunications services to other governments and public schools.
The parties move for summary judgment. I conclude that the Telecommunications Act of 1996, 47 U.S.C. § 253, preempts the in-kind compensation provisions in TWT's franchise agreement and the most-favored-rate provisions in both franchise agreements. Section 253 does not preempt other provisions of plaintiffs' franchise agreements, or the City's sales of telecommunications services to public schools and other governments.
The City's, fiber optic network, the Integrated Regional Network Enterprise (IRNE), provides the City with voice and Ethernet high-speed data transmission services. IRNE also sells Ethernet highspeed data transmission services to other governments and public schools in the Portland area.
In 2000, the City considered creating a fiber optic network that would provide Ethernet service, to increase speed, capacity, and security. In July 2001, the City received a certificate from the Oregon Public Utility Commission to operate as a competitive local exchange carrier, or CLEC. (Plaintiffs are also certified as CLECs in Oregon.) IRNE obtained a telecommunications franchise agreement with the City. However, IRNE is not a separate legal entity from the City.
Before creating IRNE, the City, working with the Oregon Department of Transportation and the Tri-Metropolitan Transportation District (Tri-Met), formed the Cooperative Telecommunications Infrastructure Committee (CTIC), through an intergovernmental agreement . The CTIC members share resources such as fiber optic cable to help build IRNE's fiber network. See Or.Rev. Stat. § 190.110(1) (statutory authorization for IGAs).2
The City initially invested about $11 million in IRNE. The City obtained IRNE's physical facilities from different sources. For the conduit and aerial runs connecting IRNE's nodes, 43% were built by the City; 38% were acquired through the City's membership in the CTIC; 5% were built by the City with other public entities; 3% were built by the City with private telecommunications providers; and 11% were obtained from "in-kind" contributions made by private telecommunications providers under permits or franchise agreements. By length, about 9% of IRNE's fiber runs through underground duct obtained through in-kind compensation from private carriers.
IRNE does not use any in-kind duct obtained from TWT, QCC, or Qwest Corp. (The City previously used conduit from QCC but no longer does so.) As part of its franchise agreement with QCC, the City purchased conduit from QCC for $15,000, which the City used to transmit IRNE and traffic control signals over the Ross Island Bridge.
Plaintiffs contend that IRNE should be prohibited from providing Ethernet highspeed data transmission services3 to any entity other than the City itself. IRNE began offering its services to non-City governmental customers in mid-2002. IRNE's governmental customers sign fiveyear intergovernmental agreements with the City, but there are no penalties for ending service before the agreement date. For a 100 megabits per second (mbps) Ethernet connection, a customer pays IRNE about $530 per month, plus installation and on-site equipment. (A DS-1 line, by contrast, runs at 1.5, mbps.)
Currently, IRNE serves Multnomah County, the State of Oregon, Portland Public Schools, the Port of Portland, the Multnomah Educational Service District, the Metropolitan Service District (Metro), the City of Sherwood, the City of Hillsboro, the City of Gresham, and the U.S. Army Corps of Engineers. IRNE links the State Office Building, Portland Public Schools, the Multnomah Educational Service District, and Metro to a central location where high-speed connections may be made to any internet service provider. IRNE connects Multnomah County and the Port of Portland to the 911 Emergency Center and to the Portland Police headquarters and Multnomah County offices.
IRNE does not provide telecommunications services to any non-governmental third parties. The City does not solicit sales for IRNE. Counsel for the City stated at oral argument that the City has no plans ever to offer services to non-governmental entities.
IRNE's governmental customers have found that IRNE provides improved telecommunications services at a competitive price. IRNE allows participating government agencies to share critical information, such as law enforcement files, efficiently and securely.
The City states that it received about $83,000 in revenue from IRNE for the last fiscal year. Plaintiffs dispute that figure, contending that the City should include revenue from the Institutional Net or I-NET, which provides high-speed transmission services to local schools and government agencies. The I-Net is authorized by statute. See 47 U.S.C. § 531(b) & (f).
The City states that the cable company Comcast Corp. (Comcast) built and owns the I-Net. Comcast did not use any in-kind underground duct or intergovernmental fiber in constructing the I-Net. The City and. Comcast agreed that the City will manage the I-Net, while Comcast owns and operates the network itself. According to the City, I-Net generated about $1.055 million in revenues for the last fiscal year, of which $650,000 went to the City and $405,000 went to Comcast. I-Net customers pay about $554 per month for each primary port per location. Out of that monthly payment, the City receives $314 for management and maintenance services, while $240 goes to Comcast for transmission over its system.
The City states that IRNE's customers generally purchase either an IRNE connection or an I-Net connection. Only the Portland Public School District, the Multnomah Educational Services District, and Multnomah County purchase both IRNE and I-Net connections. The I-Net connects 89 schools for Portland Public Schools and 72 schools for the Multnomah Educational Service District.
I conclude that the City may properly exclude I-Net revenue from IRNE's gross revenues. However, even if the I-Net revenue should be included, that would not change my legal rulings.
Twenty-one telecommunications providers, including plaintiffs, sell services in the Portland area under City franchise agreements or permits. Some franchise agreements, including TWT's, permit ubiquitous access to the City's rights of way, while other agreements, including QCC's, authorize the use of specific routes.
The City has never denied a franchise application to provide telecommunications services. No potential telecommunications provider has ever withdrawn an application because of the proposed terms of a franchise agreement with the City.
TWT sells telecommunications services in more than forty metropolitan areas across the United States. TWT owns and operates a telecommunications system in Portland.
According to the City, TWT had gross revenues of $2.2 million in fiscal year (FY) 2002-2003; $3.7 million in FY 2003-2004; and $4.6 million in FY 2004-2005. Under the franchise agreement, TWT paid the City fees equal to 5% of TWT's gross revenues: $110,225 in 2002-03; $183,579 in 2003-04; and $231,357 in 2004-05. TWT will neither confirm nor deny the accuracy of the City's figures because TWT uses a different fiscal year than the City.
TWT's franchise agreement requires that TWT provide the City with in-kind underground duct if requested. TWT has not provided any duct to the City.
QCC entered the Portland market in the 1990s, providing long-distance services. QCC had no revenues in Oregon in 2001 and 2002. QCC's revenues for one quarter of 2003 were $4.7 million, and its revenues for 2004 were $15.2 million. QCC does not track its revenue separately for the Portland metropolitan area.
QCC and the City entered into a franchise agreement in 1997 that gave QCC the right to run its facilities from the west end of the Ross Island Bridge to downtown Portland. QCC pays the City an annual fee per foot of use, adjusted for inflation. According to the City, the most recent fee was about $3 per foot, for a total of about $38,000.
The court must grant summary judgment if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(c). If the moving party shows that there are no genuine issues of material. fact,...
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...both other courts and the Federal Communications Commission have both accorded § 253(a). See Time Warner Telecom of Oregon, LLC v. City of Portland, 452 F. Supp. 2d 1084, 1096-97 (D. Or. 2006) (finding that a private carrier could challenge franchise agreement with city under § 253(a) becau......