Venture Commc'ns Coop. v. James Valley Coop. Tel. Co.
| Decision Date | 11 May 2022 |
| Docket Number | 3:20-CV-03011-RAL |
| Parties | VENTURE COMMUNICATIONS COOPERATIVE, INC., Plaintiff, v. JAMES VALLEY COOPERATIVE TELEPHONE COMPANY, NORTHERN VALLEY COMMUNICATIONS, LLC, Defendants. |
| Court | U.S. District Court — District of South Dakota |
The parties in this action are broadband[1] internet providers and competitors in South Dakota. Plaintiff Venture Communications Cooperative, Inc. (Venture) sued Defendants Northern Valley Communications, LLC (Northern Valley) and James Valley Cooperative Telephone Company (James Valley) for violating 47 U.S.C. § 220(e), intentional interference with business expectancy, and civil conspiracy. In short, Venture alleges that Northern Valley intentionally and falsely reported its broadband capabilities to the Federal Communications Commission (FCC) on Form 477s, and Northern Valley's false reporting deprived Venture of millions of dollars in federal subsidies. But the material facts not subject to genuine dispute show no such intentionally false reporting by Northern Valley under the FCC guidance that governs Form 477 filings. This Court therefore grants Defendants' motion for summary judgment.
A. The Connect America Fund (CAF), Alternative Connect America Cost Model (A-CAM I), and Alternative Connect America Cost Model II (A-CAM II)
Venture provides broadband internet and voice service to approximately 12, 000 customers in rural South Dakota. Doc. 1 at 2; Doc. 20 at 1; Doc. 48 at 1. James Valley and Northern Valley (collectively Defendants) also provide broadband internet and voice service in South Dakota. Doc. 1 at 2. Northern Valley is a wholly-owned subsidiary of James Valley and James Groft is the CEO of both companies. Doc. 1 at 5; Doc. 7; Doc. 20 at 3; Doc. 110-5 at 2; Doc. 110-7 at 9.
Providing broadband internet in rural areas is often not cost efficient. See Doc. 1 at 2, 7. In recognition of this, the FCC created the Connect America Fund (CAF) in 2011 to expand internet access by funding companies to offer broadband internet in rural areas. Doc. 1 at 7; Doc. 48 at 7; Doc. 105-10 at 3. In 2014, the FCC created the Alternative Connect America Cost Model (A-CAM I) to distribute CAF funding to eligible broadband providers. Doc. 1 at 7; Doc. 48 at 7; Doc. 108-1 at 2. A-CAM I awarded CAF grants totaling approximately $1.5 billion over ten years. Doc. 122 at 8; Doc. 135 at 3.
Under A-CAM I, the FCC relied on information in broadband carriers' Form 477 filings to determine how to distribute CAF funding. Doc. 1 at 6; Doc. 20 at 3; Doc. 48 at 8. Broadband providers report the broadband speeds they offer by census block in Form 477s and submit Form 477s to the FCC twice a year. Doc. 1 at 5-6; Doc. 20 at 3; Doc. 48 at 5-6. Since 2013, the FCC has required broadband providers such as Northern Valley to report their maximum “advertised” bandwidth speed per census block in Form 477s. Doc. 120-7 at 3; Doc. 121 at 22; Doc. 122 at 2; Doc. 135 at 1.
The FCC does not require broadband providers to test and report the broadband speeds they actually provide by census block, and the FCC has acknowledged such a requirement would impose an undue burden on providers. Doc. 120-7 at 3; Doc. 122 at 2-3; Doc. 135 at 2. In 2013, the FCC explained:
The Commission currently collects data on advertised speeds. The Commission sought comment on whether it should continue to collect data only on advertised speeds, or whether, for example, providers should provide information about actual speeds by geographic area, or speeds that extend beyond the access network .... We conclude that it is not appropriate or feasible to collect actual speed information from broadband providers via Form 477. Many commenters expressed concern because there is no way for providers to report actual speed information in a meaningful way. Commenters explain that the collection of these data is a highly complex, time consuming, and expensive undertaking that requires the use of specialized equipment in the providers' networks and at their customers' premises. As the Commission found in 2008, “the record of this proceeding does not identify a methodology or practice that could be applied, consistently and by all types of broadband fliers, to measure the information transfer rates actually observed by end users?' We continue to believe that conclusion is correct.
Doc. 122 at 2 (emphasis added); Doc. 135 at 2. If a broadband provider does not advertise broadband speeds, the FCC instructs the provider to “report the best speed that an end user can reasonably expect to receive over that particular technology” per census block. Doc. 122 at 5; Doc. 135 at 2. If at least one customer in a census block is expected to receive a particular speed, the FCC instructs providers to report that speed for the entire census block. Doc. 111-1 at 5, 7. Broadband providers also report voice subscriptions by census block in Form 477s.[2] Doc. 108-1 at 2, 25 n.12.
It is a crime to willfully misrepresent broadband speeds in 477 Forms under 47 U.S.C § 220(e). 47 U.S.C § 220(e). Additionally, 47 U.S.C. § 207 gives broadband providers a private right of action to sue competitors who intentionally misreport data on their Form 477s. 47 U.S.C. § 207; see also Venture Commc'ns Coop., Inc, v. James Valley Coop. Tel, Co., 492 F.Supp.3d 946, 955-57 (D.S.D. 2020). A Form 477 must be signed by a broadband provider's “certifying official, ” who attests that the form was filled out correctly to the best of his or her knowledge. Doc. 48 at 7.
Using data collected from Form 477s, the FCC awarded grants under A-CAM I to broadband providers serving census blocks in which an “unsubsidized competitor” was NOT already providing voice service and broadband speeds at a minimum of 10 megabits per second (Mbps) download and 1 Mbps upload (10/1 Mbps). Doc. 1 at 7-8; Doc. 20 at 3; Doc. 48 at 8; Doc. 122 at 8; Doc. 135 at 3. To target rural areas with the highest need, A-CAM I also did not award CAF funding for census blocks in which a broadband provider had already deployed fiber optic cable. Doc. 121 at 31; Doc. 122 at 8; Doc. 135 at 3. After the FCC announced CAF grants under A-CAM I, a provider could challenge a grant decision through a formal review process. Doc. 48 at 8. The FCC issued an order that resolved challenges to A-CAM I decisions in 2016, granting some requests to adjust CAF grants and denying others. Doc. 108-1; Doc. 122 at 9; Doc. 135 at 3.
In March 2018, the FCC implemented A-CAM II to support broadband providers that had been excluded under A-CAM I. Doc. 1 at 8; Doc. 20 at 3; Doc. 122 at 11; Doc. 135 at 4. Under A-CAM II, the FCC continued to award CAF funds annually for up to 10 years but made several voice subscription data by census block, rather than the availability of voice service by census block. Doc. 105-2 at 19-20; Doc. 108-1 at 2, 25 n.12. modifications to broaden eligibility. Doc. 1 at 8; Doc. 20 at 3; Doc. 48 at 8. First, A-CAM II no longer excluded broadband providers that had already deployed fiber optic cable in their service areas. Doc. 107-1 at 6; Doc. 122 at 11; Doc. 135 at 4. Next, A-CAM II excluded census blocks from funding only if an unsubsidized competitor provided broadband speeds of at least 25/3 Mbps in those census blocks. Doc. 105-10 at 8; Doc. 122 at 13; Doc. 135 at 5. Like with A-CAM I, A-CAMII relied on data from Form 477s to determine CAF grants. Doc. 1 at 8; Doc. 48 at 8. But A-CAM II eliminated the challenge process that was available under A-CAM I. Doc. 1 at 8; Doc. 20 at 5; Doc. 48 at 8; Doc. 122 at 12; Doc. 135 at 4. The FCC explained that the challenge process proved to be unhelpful in practice because it was difficult to prove when an unsubsidized competitor was not providing broadband speeds as reported in Form 477 filings. Doc. 122 at 13; Doc. 135 at 5.
Importantly, in 2016, the FCC issued an order stating that whether a broadband provider provides voice service under A-CAM I is “determined at the holding company level in a state.”[3]Doc. 108-1 at 2, 25 n.12. The parties agree that this language means a broadband provider who offers voice service somewhere in a state is considered to offer voice service throughout a state and may be considered an “unsubsidized competitor” under A-CAM I and A-CAM II. Doc. 122 at 13-14; Doc. 124-13 at 3; Doc. 135 at 5. Chad Duvall, an expert witness for Defendants, explained in his report that although the “FCC Form 477 reports voice subscription totals at the statewide level as well as voice subscription counts at the census tract level, ” the FCC made a “policy decision to count voice subscription anywhere in the state as the availability of voice service everywhere in that state.” Doc. 111-5 at 11, 20. In other words, “[t]he FCC determined that for purposes of both A-CAM I and A-CAM II that the provision of voice services by a carrier anywhere within a state would be interpreted to mean that the carrier provided voice services in all census blocks within the state.” Doc. 111-5 at 21.
Venture was not eligible for any funding under A-CAM I in census blocks where it had deployed fiber optic cable. Doc. 122 at 9; Doc. 135 at 3. However, because A-CAM II no longer excluded census blocks from funding in which providers had already deployed fiber optic cables, Venture became eligible for CAF funding under A-CAM II in certain census blocks. In fact, Venture was awarded and accepted a CAF grant under A-CAM II of $103, 795, 460 over ten years. Doc. 122 at 49; Doc. 123-6 at 10; Doc. 135 at 21.
Venture however, alleged in its complaint that it would have received a total grant of $123, 989, 660 if the FCC had not improperly excluded census blocks in...
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