Verizon New York Inc. v. Global Naps, Inc.

• Decision Date: 01 December 2006
• Docket Number: No. 1:03CV05073ENV-RML.,1:03CV05073ENV-RML.
• Citation: 463 F.Supp.2d 330
• Parties: VERIZON NEW YORK INC., Verizon New England Inc., Verizon New Jersey Inc., Verizon Pennsylvania Inc., Verizon Maryland Inc., Verizon Washington, DC Inc. and Verizon Virginia Inc., Plaintiffs, v. GLOBAL NAPS, INC., Global NAPS Virginia, Inc. and Global NAPS South, Inc., Defendants.
• Court: U.S. District Court — Eastern District of New York

463 F.Supp.2d 330

VERIZON NEW YORK INC., Verizon New England Inc., Verizon New Jersey Inc., Verizon Pennsylvania Inc., Verizon Maryland Inc., Verizon Washington, DC Inc. and Verizon Virginia Inc., Plaintiffs, v. GLOBAL NAPS, INC., Global NAPS Virginia, Inc. and Global NAPS South, Inc., Defendants.

No. 1:03CV05073ENV-RML.

United States District Court, E.D. New York.

December 1, 2006.

COPYRIGHT MATERIAL OMITTED

John J.D. McFerrin-Clancy, Schlam, Stone & Dolan, Robert Louis Weigel, Gibson Dunn & Crutcher, New York, NY, for Plaintiffs.

Glenn B. Manishin, Kelley Drye & Warren LLP, Washington, DC, Jeffrey C. Melick, William J. Rooney, Jr., Jeffrey C. Melick, Global Naps Legal Department, Norwood, MA, Robert I. Steiner, Kelley, Drye & Warren, New York, NY, for Defendants.

DECISION AND ORDER

VITALIANO, District Judge.

Plaintiffs Verizon New York Inc., Verizon New England Inc., Verizon New Jersey Inc., Verizon Pennsylvania Inc., Verizon Maryland Inc., Verizon Washington, DC Inc., and Verizon Virginia Inc. (collectively "Verizon") and defendants Global NAPS, Inc., Global NAPS Virginia, Inc., and Global NAPS South, Inc. (collectively "Global") are two families of telecommunications industry competitors partnered through a shotgun wedding orchestrated by legislative policy designed to ensure the compatible, competitive, and cost efficient delivery of telephone service, 47 U.S.C. § 151. The parameters of their interrelationship are set by the Communications Act of 1934 ("1934 Act"), 47 U.S.C. §§ 151 et seq., as amended by the Telecommunications Act of 1996 ("TCA"), Pub.L. 104-404, 110 Stat. 56. Verizon brings this action charging that Global breached the terms of their arranged marriage by not paying for certain services Verizon had rendered and continues to render to Global as is required by federal law and regulation and the parties' agreements.

Verizon now moves for partial summary judgment. Its motion culls out of its overall complaint unpaid charges for transport services and facilities it provided to Global solely and exclusively to accommodate Global's own customers and pegs the amounts demanded to rates specified in Verizon's filed tariffs.¹ Global not only opposes Verizon's motion but also moves to dismiss the action in its entirety on the basis of the primary jurisdiction of the Federal Communications Commission ("FCC"), or, in the alternative, on the ground that both federal law and the parties' written agreements prohibit Verizon from levying the charges demanded.

Both sides agree that the matters raised on the motions can be resolved "simply." And, despite the mountain of papers filed on the motions and the hours of oral argument, both sides are correct. For the reasons stated below, both motions are also denied.

Background

A. Regulatory Framework

A brief review of the regulatory framework is necessary to place the parties' dispute in context. The TCA amended the 1934 Act to create competition in the local telephone service market by requiring incumbent local exchange carriers ("ILECs"), like Verizon and its predecessors,² to allow competitive local exchange carriers ("CLECs"), like Global, to interconnect with their networks. Interconnection is the "the linking of two networks for the mutual exchange of traffic," 47 C.F.R. § 51.5, and "permits customers of one local exchange carrier to make calls to, and receive calls from, customers of other local exchange carriers," Global NAPS, Inc. v. Verizon New England Inc., 444 F.3d 59, 62 (1st Cir.2006).³ An interconnection agreement must be in harmony with federal telecommunications law. To that end, an interconnection agreement must reflect several statutory obligations imposed by the TCA on incumbent and competitive local exchange carriers, including the "duty to establish reciprocal compensation arrangements for the transport and termination of telecommunications." 47 U.S.C. § 251(b)(5). Incumbent local exchange carriers have additional overarching statutory duties, including the "duty to negotiate in good faith ... particular terms and conditions of agreements to fulfill the duties [including to establish reciprocal compensation arrangements, to negotiate, and to interconnect] described in [§ 251(b) and (c)]" and the duty to allow CLECs to interconnect with the ILEC's network. 47 U.S.C. § 251(c)(1)-(2).

Disputes about where and how network interconnection is to be implemented often are, as they are here, the highly combustible source of controversy. Technology does afford interconnection options but the choices are not unfettered. To reject an interconnection point proposed by a CLEC, the ILEC must show that it is not technically feasible. See 47 C.F.R. § 51.305(e). See also US West Comms., Inc. v. Jennings, 304 F.3d 950, 961 (9th Cir.2002). At the same time, "[w]hile the ILEC cannot be required to allow interconnection at technically unfeasible points, similarly the CLEC cannot be required to interconnect at points where it has not requested to do so." MCI Telecomm. Corp. v. Bell Atlantic-Pennsylvania, 271 F.3d 491, 517-18 (3d Cir.2001). Put another way, the right to pick the physical point of interconnection rests with the CLEC subject to technical feasibility. See In re Petition of WorldCom, Inc., 17 F.C.C.R. 27039, 27074 ¶ 67 (2002).

Resolution of an interconnection controversy requires an understanding both of ever-changing technology and the developmental history of the telecommunications industry. Telecommunications regulation originated in an industry that was land based and wired. Land line service, as opposed to wireless, is subdivided into local and long distance transmissions. The division between local and long distance is not necessarily by state or municipal boundaries; rather calls within a local access transport area ("LATA") are local, and those without are long distance. See United States v. Western Elec. Co., 569 F.Supp. 990, 993 nn. 4 & 9 (D.D.C.1383). LATAs "delineate the areas in which the various [types] of telecommunications companies will operate." Id. at 995. See also 47 U.S.C. § 153(25). Local phone calls, i.e., those originating and terminating within a single LATA, are generally handled by local exchange carriers, 47 U.S.C. § 153(26), such service is known as telephone exchange service, 47 U.S.C. § 153(47), and has been referred to as "traditional local telephone service," United States v. Western Elec. Co., 969 F.2d 1231, 1233 (D.C.Cir.1992). The essential elements of a local exchange carrier's network are "the local loops (wires connecting telephones to switches), the switches (equipment directing calls to their destinations), and the transport trunks (wires carrying calls between switches)." AT & T Corp. v. Iowa Utilities Bd., 525 U.S. 366, 371, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999). Long distance calls, i.e., those originating in one LATA and terminating in another, are generally handled by interexchange carriers. See Western Elec. Co., 569 F.Supp. at 994 nn. 14-15. See also Iowa Network Servs., Inc. v. Qwest Corp., 363 F.3d 683, 688 (8th Cir.2004) (interexchange carriers provide "what consumers would traditionally consider to be `long-distance' telephone service."). An interexchange carrier cannot complete a call without a local exchange carrier to make the local connection: "When a customer makes a long distance call, the [interexchange carrier] must have `access' to the local networks at both the originating and receiving end of the call in order to complete the connection." WorldCom, Inc. v. Federal Communications Comm'n, 238 F.3d 449, 453 (D.C.Cir.2001).

To state the obvious, cost does attach to the provision of these services. One source of payment is the reciprocal compensation provided for in 47 U.S.C. § 251(b), which is further defined by 47 C.F.R. § 51.703:

(a) Each LEC shall establish reciprocal compensation arrangements for transport and termination of telecommunications traffic with any requesting telecommunications carrier.

(b) A LEC may not assess charges on any other telecommunications carrier for telecommunications traffic that originates on the LEC's network.

Reciprocal compensation, however, applies only to local traffic, 47 C.F.R. § 51.701(b)(1), defined as "traffic that originates and terminates within a [LATA]." In re Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, 11 F.C.C.R. 15,499, 1996 WL 452885, ¶ 1034 (1996). See also 47 C.F.R. § 51.1(b) (stating that the purpose of the regulations is to implement 47 U.S.C. §§ 251, 252). "[I]nterstate or intrastate interexchange traffic," i.e. traffic between local areas, is not subject to reciprocal compensation; instead LECs charge the carriers of such traffic according to specified tariffs, "just as they did prior to enactment of the 1996 Act." In re Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, 11 F.C.C.R. 15,499, 1996 WL 452885, at ¶ 1034. See also Southern New England Tel. Co. v. MCI WorldCom Communications, 353 F.Supp.2d 287, 291 (D.Conn. 2005) ("[N]on-local calls, either interstate or intrastate, do not need reciprocal compensation because they already have a cost-recovery mechanism in place, namely, access charges.").

Once the ILEC and CLEC have concluded an interconnection agreement, the agreement is then submitted to the public utilities commission ("PUC") of the state where the LATA is located for approval.⁴ See 47 U.S.C. § 252(e). If the parties negotiate the terms of an agreement, they can choose to enter into a binding agreement "without regard to the standards set forth in [§ 251(b) and (c),]" but they must "include a detailed schedule of itemized charges for interconnection and each service or network element included in the agreement." See 47 U.S.C. § 252(a)(1). A PUC may only reject a voluntarily negotiated agreement if it "discriminates against a telecommunications carrier not a party to the agreement" or "is not consistent with the public...