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Berkshire Telephone Corp. v. Sprint Communications Co.

October 27, 2006

BERKSHIRE TELEPHONE CORPORATION, ET AL., PLAINTIFFS,
v.
SPRINT COMMUNICATIONS COMPANY, L.P., NEW YORK PUBLIC SERVICE COMMISSION, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Charles J. Siragusa United States District Judge

DECISION AND ORDER

INTRODUCTION

This is an action pursuant to § 252(e)(6) of the Telecommunications Act of 1996 ("the Act"), 47 U.S.C. § 251 et seq., in which plaintiffs seek judicial review of a decision by the New York Public Service Commission ("PSC") pertaining to interconnection agreements between plaintiffs and Sprint, who are competing providers of local telephone service. The following applications are now before the Court: 1) plaintiffs' motion for summary judgment [#25]; 2) PSC's cross-motion for summary judgment [#30]; and 3) Sprint's cross-motion for summary judgment [#33]. For the reasons that follow, plaintiffs' motion is denied and defendants' motions are granted.

BACKGROUND

This action involves a dispute between plaintiffs and defendant Sprint, all of whom are "local exchange carriers" ("LECs") within the meaning of the Act. Such LECs "are companies that provide local telephone service." Global NAPs, Inc. v. Verizon New England, Inc., 454 F.3d 91, 93 n. 1 (2d Cir. 2006). The act "established two types of local-exchange carriers: incumbents (or ILECs) and competitors (or CLECs). Before the 1996 Act, the ILECs held exclusive local telephone franchises. The 1996 Act, however, preempted local laws establishing the franchises and permitted the CLECs to interconnect their networks to that of the ILECs." Id. In this regard, the Act was intended to promote competition and reduce regulation in order to secure lower prices and higher quality services for American telecommunications consumers and encourage the rapid deployment of new telecommunications technologies. A major purpose of the 1996 Act was to end local telephone monopolies and develop a national telecommunications policy that strongly favored local telephone market competition. Toward this end, the 1996 Act imposes, among other things, a duty on ILECs (such as [plaintiffs]) to provide interconnection with their networks and to negotiate in good faith the terms and conditions of the agreements with CLECs (such as [Sprint]). 47 U.S.C. § 251(a)(1), (c)(1) (2006). If the parties cannot agree, either party may petition the state commission charged with regulating intrastate operations of carriers to arbitrate any unresolved issues. [47 U.S.C.] § 252(b)(1).

Id. at 94 (citations omitted). In the instant case, Sprint petitioned defendant PSC to arbitrate various issues, after Sprint and plaintiffs were unable to come to terms on an interconnection agreement. The PSC eventually resolved those issues in Sprint's favor, which led plaintiffs to commence the subject proceeding.

Before addressing the specific legal issues raised by plaintiffs, it is necessary to discuss Sprint's relationship to another key player in this dispute, Time Warner Communications ("Time Warner"). Essentially, Sprint and Time Warner have entered into an agreement whereby they each provide to the other certain aspects of local telephone service. Sprint provides certain "telecommunications services," namely: "interconnection to the public switched telephone network (PSTN), number acquisition and administration, submission of local number portability orders to the ILEC, inter-carrier compensation for local and toll traffic, 911 connectivity, operator services, directory assistance and the placement of orders for telephone directory listings." (Joint Record, Ex. 1, p. 6) Time Warner provides the remaining aspects of local telephone service, consisting of "the 'last mile' network over Hybrid Fiber Coaxial [cable], marketing and sales, end user billing and customer service." (Joint Record Ex. D, p. 2) Under this arrangement, Sprint does not have a direct business relationship with the end-user consumers who will be benefitting from Sprint's services, but rather, those consumers deal directly with Time Warner.

Pursuant to its agreement with Time Warner, Sprint was required to obtain all necessary interconnection agreements, including those at issue here.*fn1 That is, Sprint and Time Warner agreed that Sprint would negotiate and enter into interconnection agreements on their behalf with ILECs. Accordingly, Sprint requested that the plaintiff ILECs enter into such agreements. Plaintiffs and Sprint negotiated but were unable to come to terms, in large part because plaintiffs objected to the fact that Sprint did not have a direct relationship with Time Warner's end-user customers. As a result, Sprint petitioned defendant PSC to arbitrate the dispute.

The parties raised various issues before the PSC, but only three are significant to the instant action. First, plaintiffs argued that, under 47 U.S.C. § 251(a), they were not required to enter into interconnection agreements with Sprint because Sprint was not a "telecommunications carrier." Second, plaintiffs asserted that, even if Sprint was a telecommunications carrier, Sprint was not able to assert rights under 47 U.S.C. § 251(b), since those rights belonged only to Time Warner. And finally, plaintiffs maintained that the definition of "local traffic" in the interconnection agreements, which definition affects reciprocal compensation obligations under 47 U.S.C. § 251(b)(5), should not include "extended area service" ("EAS") calls, which are inter-exchange calls billed as local calls, rather than as toll calls.

With regard to this first issue, in the proceeding before the PSC, plaintiffs admitted that Sprint would be a "telecommunications carrier" if it was acting as "the ultimate provider of end user services." However, they claimed that Sprint was not a telecommunications carrier when it acted as a mere "'transit provider' for other service providers", such as Time Warner. (Joint Record, Ex. B, p. 5) Plaintiffs argued that when Congress enacted the Act, it did not "contemplate[ ] that end user service providers [such as Time Warner] could [use such arrangements as that between Sprint and Time Warner to] skirt their obligations to request and negotiate competitive interconnection agreements with the ILEC." (Id. at 6) Rather, plaintiffs stated, the Act requires "a Telecommunications Carrier [such as Time Warner] that provides end user services to request . . . interconnection agreements directly with the ILEC." (Id.) (Emphasis added) In short, plaintiffs argued that under the Act, they had the right to "deal directly with the requesting telecommunications carrier [i.e. Time Warner] that intends to serve the end user for which that carrier and the [plaintiffs] will compete." Id.*fn2

In their initial brief before the PSC, plaintiffs argued that Sprint was not a telecommunications carrier, solely because Sprint had no direct relationship with Time Warner's end-user customers. (Joint Record, Ex. B) Plaintiffs did not make any argument as to whether or not Sprint was a common carrier. (In that regard, and as will be discussed further below, it is undisputed that a telecommunications carrier must also be a common carrier.) However, in a footnote in their reply brief, plaintiffs raised the common carrier issue, stating: "Conspicuously absent from Sprint's Petition and Submission is any demonstration of whether, when Sprint acts as a 'facilitator' for a third party carrier like [Time Warner], those arrangements will be provided on a common carrier basis." (Joint Record, Ex. E, p. 2 n. 4)

Following the submission of briefs to the PSC, the parties met with an Administrative Law Judge ("ALJ") to discuss the issues. Counsel for the parties informed the ALJ that they would rely on their briefings, and the ALJ specifically agreed that the PSC would consider plaintiffs' reply brief as part of the record. (Id. at 52)

On May 24, 2005, the PSC issued a decision in which it rejected plaintiffs' arguments and found, in relevant part, that Sprint was a "telecommunications carrier" because the services that it provided to Time Warner "[met] the definition of 'telecommunications services." (Joint Record, Ex. K, p. 5) The PSC further stated that "Sprint's arrangement with Time Warner enables it to provide service directly to the public," and that "the function that Sprint performs is no different than that performed by other competitive local exchange carriers with networks that are connected to the [ILECs]." (Id.) Significantly, in finding that Sprint was a telecommunications carrier, the PSC did not specifically discuss whether Sprint was a "common carrier," though such a finding is implicit in the determination that one is a telecommunications carrier under the Act. The PSC further found that Sprint was entitled to assert the rights set forth under 47 U.S.C. § 251(b), and that the term ""local traffic" in the interconnection agreements should include "extended area service" ("EAS") calls. With regard to the definition of local traffic, the PSC stated:

Sprint proposes to use a broad definition of 'local traffic' that includes calls between telephone numbers in the same rate center, and calls between telephone numbers in different rate centers that have an established local calling area approved by the Commission. The Independents, on the other hand, support a more restrictive definition of local traffic, limiting local calls to single telephone exchanges, not extending to local calling areas . . . .

***

Our regulations and orders (in 16 NYCRR ยง 602.1 and Cases 00-C-0789 and 01-C-0181) define local exchange service and provide the requirements for the exchange of local traffic. To comply with our regulations and requirements, the interconnection and the traffic exchange agreements provided by incumbent and competitive local exchange carriers have defined the local service exchange areas and the local calling areas. Thus, the applicable regulations establish the basis for the definition of local traffic that we are requiring here. We find that Sprint's definition ...


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