Verizon Maryland Inc. v. Rcn Telecom Services, No. CIV.S-99-2061.

Decision Date05 March 2003
Docket NumberNo. CIV.S-99-2061.
Citation248 F.Supp.2d 468
PartiesVERIZON MARYLAND INC., f/k/a BELL ATLANTIC-MARYLAND, INC. Plaintiff, v. RCN TELECOM SERVICES, INC., f/k/a RCN Telecom Services of Maryland Inc., et al., Defendants.
CourtU.S. District Court — District of Maryland

James P. Garland, Miles and Stockbridge PC, Baltimore, MD, Mark L. Evans, Sean A. Lev, Aaron M. Panner, Kellogg Huber Hansen Todd and Evans LLC, Washington, DC, for Plaintiff.

John R. Harrington, Darryl M. Bradford, Jenner and Block, Chicago, IL, Jodie L. Kelley, Elena Nicole Broder-Feldman, Jenner and Block, Washington, DC, Glen Keith Allen, Piper Rudnick LLP, Baltimore, MD, Michael L. Shor, Robin L. Redfield, Richard M. Rindler, Swidler Berlin Shereff Friedman LLP, Washington, DC, Matthew W. Nayden, Kelly Culp Hoelzer, Ober Kaler Grimes and Shriver, Baltimore, MD, Michael Albert McRae, AT & T Law Department, Oakton, VA, Susan Stevens Miller, Maryland Public Service Commission, Baltimore, MD, Thomas M. Di-Biago, Kaye A. Allison, Jennifer Lilore Huesman, Office of the United States Attorney, Baltimore, MD, Theodore C. Hirt, David T. Zaring, U.S. Department of Justice Civil Division Federal Programs, Rachel J. Hines, United States Department of Justice, Washington, DC, Michael J. Travieso, Theresa V. Czarski, Baltimore, MD, David A. Konuch, Kelley Drye and Warren LLP, Washington, DC, Ira T. Kasdan, Kelley Drye and Warren LLP, Vienna, VA, James R. J. Scheltema, Columbia, MD, for Defendants.

Chan Park, Akin Gump Strauss Hauer and Feld LLP, McLean, VA, for Movant.


SMALKIN, District Judge.

The plaintiff, Verizon Maryland Inc. ("Verizon"), formerly known as Bell Atlantic-Maryland, Inc., filed an amended complaint against the defendants alleging that the Public Service Commission of Maryland ("PSC") issued an order that violates the Telecommunications Act of 1996 ("the 1996 Act"), Pub.L. 104-104, 110 Stat. 56 (codified as amended in scattered sections of 47 U.S.C). Now before the Court are the cross-motions for summary judgment of: (1) the plaintiff Verizon; (2) defendants Catherine I. Riley, Claude M. Ligon, J. Joseph Curran III, Gail C. McDonald, and Ronald Guns, all in their official capacities as members of the PSC (collectively, "the commissioners"); (3) defendant RCN Telecom Services, Inc. ("RCN Telecom"); (4) defendant Starpower Communications, LLC ("Starpower"); (5) defendant TCMaryland; (6) defendant Global NAPS, Inc. ("Global"); and (7) intervenor-defendants MCI WorldCom Communications, Inc., and MCImetro Access Transmission Services LLC (collectively, "WorldCom"). The issues have been fully briefed by the parties, and no oral hearing is necessary. Local Rule 105.6 (D.Md.).


Congress enacted the 1996 Act to promote competition in local telecommunications markets. See AT & T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 371, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999). Toward that end, the 1996 Act imposes various obligations on incumbent local exchange carriers ("ILECs"), including a duty to share their networks with competing local exchange carriers ("CLECs"). See 47 U.S.C. § 251(c). When a CLEC seeks access to the market, the ILEC must "provide ... interconnection with" its network. Id. § 251(c)(2). The carriers must then "establish reciprocal compensation arrangements for the transport and'termination of telecommunications." Id. § 251(b)(5).

An ILEC "may negotiate and enter into a binding agreement" with a CLEC to fulfill the duties imposed by § 251(b) and (c), but "without regard to the standards set forth in" those provisions. Id. § 252(a)(1). The parties must negotiate in good faith. Id. § 251(c)(1). If private negotiations fail, either party may petition the relevant state commission to arbitrate open issues. Id. § 252(b).

An ILEC may also prepare and file with a state commission a statement of generally available terms ("SCAT") that the ILEC offers to CLECs to comply with the requirements of §§ 251 and 252. Id. § 252(f)(1). If an ILEC submits a SGAT, the state commission must review it and either approve or disapprove it. Id. § 252(f)(3)-(4). The state commission may not approve a SGAT unless it meets certain requirements of the 1996 Act. Id. § 252(f)(2). The state commission may also establish and enforce requirements of state law in its review of a SGAT. Id. The submission or approval of a SGAT, however, does not relieve an ILEC of its duty to negotiate the terms and conditions of an agreement under § 251. Id. § 252(f)(5). Nevertheless, an ILEC and a CLEC may adopt the terms and conditions of an approved SGAT as their interconnection agreement. Id. § 252(i).

Once an interconnection agreement is in place, whether negotiated, mediated, or arbitrated, the parties must submit it to the state commission for approval or rejection. Id. § 252(e)(1). The state commission must ensure that each agreement is consistent with certain requirements of the 1996 Act, but may also enforce requirements of state law, such as intrastate quality service standards. Id. § 252(e)(2), (3). A state commission may reject a voluntarily negotiated agreement only if the agreement discriminates against a carrier not a party, or if its implementation "is not consistent with the public interest, convenience, and necessity." Id. § 252(e)(2)(A). A state commission may reject an agreement adopted by arbitration only if the agreement fails to meet the requirements of §§ 251 and 252(d) and FCC regulations issued thereunder. Id. § 252(e)(2)(B). A party aggrieved by a "determination" of a state commission under § 252 may bring an action in federal district court "to determine whether the agreement or statement meets the requirements" of §§ 251 and 252. Id. § 252(e)(6).

In this case, Verizon, the ILEC in Maryland, negotiated an interconnection agreement (the "WorldCom agreement") with MFS Intelenet of Maryland, Inc., later acquired by intervenor-defendant World-Com. The PSC approved the agreement on October 9, 1996. Neither party sought review in federal district court (or elsewhere). Three other defendant CLECs— RCN Telecom, Starpower, and TCG-Maryland—all subsequently entered into voluntary agreements with Verizon in relevant part substantively identical to the WorldCom agreement. The PSC approved them all; no one sought review. Adopting Verizon's PSC-approved SGAT, Global, another defendant CLEC, entered into an agreement with Verizon in August 2000. On or around May 9, 2001, the PSC approved the Global-Verizon agreement.

Sometime after the PSC approved the WorldCom agreement, a dispute arose between Verizon and WorldCom over the terms of the reciprocal compensation arrangement. The agreement required reciprocal compensation for "local traffic." WorldCom agreement UK 1.44, 1.61, 5.7. When a Verizon customer would place a local call to a WorldCom customer, the caller would be using part of WorldCom's network, and Verizon would have to compensate WorldCom for such usage. The agreement set the rates of compensation. As it happened, several customers of WorldCom were internet service providers ("ISPs"), offering modem-based internet access to their own customers. The customers of the ISPs, through their computers, placed telephone calls to their ISPs, which then connected them to the internet. Needless to say, these ISP-bound calls tended to be longer than average local calls, and many of the ISPs' customers used Verizon as their local telephone service provider. Thus, if this ISP-bound traffic were "local," Verizon would have to pay reciprocal compensation to WorldCom; if nonlocal, no reciprocal compensation would be due.

Around April 1997, Verizon informed WorldCom that it would no longer pay reciprocal compensation for telephone calls made by Verizon's customers to ISPs serviced by WorldCom. Verizon claimed that such calls were not "local traffic" because the ISPs were connecting customers to distant websites. WorldCom disputed Verizon's claim and filed a complaint with the PSC. On September 11, 1997, the PSC found in favor of WorldCom, ordering Verizon "to timely forward all future interconnection payments owed [WorldCom] for telephone calls placed to an ISP" and to pay WorldCom any reciprocal compensation that it had withheld pending resolution of the dispute. Am. Compl., Ex. D (the "First WorldCom Order"). Verizon appealed to a Maryland state court, which affirmed the PSC's order. Bell Atl-Md., Inc. v. Pub. Serv. Comm'n, Civ. No. 178260 (Md. Cir. Ct. Montgomery County Mar. 26,1998).

Subsequently, the FCC issued a ruling that categorized ISP-bound calls as nonlocal, but concluded that, absent a federal compensation mechanism, state commissions could construe interconnection agreements as requiring reciprocal compensation. See IN RE IMPLEMENTATION OF THE LOCAL COMPETITION PRVISIONS OF THE TELECOMMUNICATIONS ACT OF 1996, 1999 WL 98037, 14 F.C.C.R. 3689 (1999)(the "ISP Order"), vacated and remanded, Bell Atl. Tel. Cos. v. FCC, 206 F.3d 1 (D.C.Cir.2000).1 Verizon filed a new complaint with the PSC, arguing that the ISP Order dictated that Verizon no longer had to provide reciprocal compensation for ISP-bound traffic. In a 3-to-2 decision, the PSC rejected Verizon's argument, concluding as a matter of state contract law that Verizon and WorldCom had agreed to treat ISP-bound calls as local traffic, subject to reciprocal compensation. See Am. Compl., Ex. A (the "Second WorldCom Order").

Verizon filed an action in this Court to review the Second WorldCom Order, citing 47 U.S.C. § 252(e)(6) and 28 U.S.C. § 1331 as bases for jurisdiction. The original complaint named as defendants the PSC, its individual members in their official capacities, WorldCom, and five other CLECs. On motion of the PSC, this Court dismissed the complaint, holding that the doctrine of sovereign immunity precluded its exercise of subject-matter jurisdiction under either ...

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