Level 3 Communications v. Colorado Public Util.

300 F.Supp.2d 1069

LEVEL 3 COMMUNICATIONS, LLC, a Delaware limited liability company, Plaintiff, v. PUBLIC UTILITIES COMMISSION OF COLORADO, et al., Defendants.

No. CIV.A.01-N-2455(CBS).

United States District Court, D. Colorado.

December 8, 2003.

Rogelio E. Peña, Esq., Peña & Associates, Boulder, for Plaintiff.

Greg Rogers, Esq., Director — State Regulatory Affairs, Level 3 Communications, LLC, Broomfield, for Plaintiff.

Winslow B. Waxter, Esq., Qwest Services Corporation, Denver, for Defendant Qwest Corporation.

Andrew R. Newell, Esq., Nichols & Associates, Boulder, for Plaintiff.

Stephen E. Abrams, Esq., Perkins Coie, LLP, Denver, for Defendant Qwest Corporation.

John M. Devaney, Esq., Kelly A. Cameron, Esq., Perkins Coie, LLP, Washington, D.C., for Defendant Qwest Corporation.

David M. Nocera, Esq., Michael J. Santisi, Esq., Assistant Attorneys General, Business and Licensing Section, for Defendants Colorado Public Utilities Commission, Raymond L. Gifford, Polly Page, and Jim Dyer.

ORDER AND MEMORANDUM OF DECISION

NOTTINGHAM, District Judge.

This is a judicial review of an agency decision. Plaintiff, Level 3 Communications, LLC ("Level 3"), alleges that the defendant, Public Utilities Commission of Colorado ("CPUC"), erred in its decision that internet-bound telephone traffic should not be included as "originating" traffic in allocating costs of such traffic between Level 3 and Defendant, Qwest Corporation ("Qwest"). This matter is before the Court on (1) "Defendant Qwest Corporation's Cross-Motion for Summary Judgment," filed September 13, 2002, (2) "State Defendants' Motion for Summary Judgment," filed September 13, 2002, and (3) "Plaintiff's Motion for Summary Judgment," filed September 13, 2002. Jurisdiction is based upon 47 U.S.C.A. § 252(e)(6) (West 2001 & Supp.2003), and 28 U.S.C.A. § 1331 (West 1993 & Supp.2003).

FACTS

The Telecommunications Act of 1996 (the "Act"), 47 U.S.C.A. §§ 251-276, makes former monopoly telephone companies "subject to a host of duties intended to facilitate market entry. Foremost among these duties is the [carrier's] obligation ... to share its network with competitors." AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 371, 119 S.Ct. 721, 726, 142 L.Ed.2d 835 (1999). The Act requires telecommunications carriers to interconnect directly or indirectly with the facilities and equipment of other telecommunications carriers. 47 U.S.C.A. § 251(a)(1) (West 2001 & Supp.2003). Specifically, the Act sets forth a system by which a competitive local exchange carrier ("CLEC") can negotiate and enter into a binding agreement for interconnection with an incumbent local exchange carrier ("ILEC"), the former monopoly telephone company. 47 U.S.C.A. § 252(a).

Level 3 is a CLEC, and Qwest is an ILEC under the terms of the Act. (Mot. to Supplement Defs.' Joint Statement of Undisputed Material Facts ¶¶ 1-2 [filed Sept. 12, 2002] [hereinafter "Supp. Facts"].)¹ Level 3 and Qwest entered into negotiations to interconnect their networks under an interconnection agreement. (Def. Qwest Corp.'s Br. in Supp. of its Cross-Mot. for Summ. J. at 6 [filed Sept. 13, 2002] [hereinafter "Qwest's Br."]; Admin. R. at 1, 3 [filed June 14, 2002] [hereinafter "Admin. R."].)² These negotiations left several unresolved issues. (Id.) If there are any unresolved issues over the terms of an interconnection agreement, any party in the negotiations may petition the relevant state commission to arbitrate these unresolved terms. 47 U.S.C.A. § 252(b); AT&T, 525 U.S. at 371, 119 S.Ct. at 726. The determination of the relevant state commission is incorporated into the final interconnection agreement. 47 U.S.C.A § 252(b)(4)(C). Here, the relevant state commission is CPUC.³ On October 21, 2000, Level 3 filed such a petition with CPUC. (Joint Facts ¶ 1.)

A series of administrative reviews occurred regarding the unresolved issues. (Id. ¶¶ 2-11.) CPUC issued two decisions during these administrative reviews that are relevant to the issues in the parties' summary judgment motions. First, CPUC issued an "Initial Commission Decision" on March 16, 2001. (Admin. R. at 524-66.) Second, CPUC issued a decision on an application for rehearing, reargument, or reconsideration ("RRR") on May 1, 2001. (Id. at 756-66.)

In this court, Level 3 initially challenged two parts of these decisions by CPUC — referred to as Issue 2, and Issue 6 in CPUC's proceedings. (Compl. [filed Dec. 19, 2001] [hereinafter "Compl."].) Issue 2 is no longer in dispute, so I need only fully address Issue 6. (Stipulation of the Parties to Dismiss a Claim [filed Feb. 12, 2003] [hereinafter "Stipulation"].)

Issue 6 involved "whether Internet-related traffic should be included in calculating each party's responsibility for originating traffic over its own network." (Admin. R. at 554-55.) As background: when a telephone customer places a telephone call, the call will first go through the originating carrier's network. See e.g. Wisconsin Bell, Inc. v. Bie, 216 F.Supp.2d 873, 876 (W.D.Wis.2002) ("if a customer of carrier A calls a customer of carrier B, the call originates on carrier A's equipment but terminates on carrier B's equipment"). The originating carrier in this dispute is Qwest. (Qwest's Br. at 6; Mem. in Supp. of Mot. for Summ. J. at 4-5 [filed Sept. 13, 2002] [hereinafter "Level 3's Br."]; Qwest's Resp. at 17.) The call is completed ("terminated") on, what is called, the terminating carrier's network. See Wisconsin Bell, 216 F.Supp.2d at 876; 47 C.F.R. § 51.701(d) (2003). If the call both originates and terminates on the Qwest network — i.e. one Qwest customer calling another Qwest customer — Qwest is, for the purposes here, responsible for the entire cost of the call.

If the call is to be terminated, not with a Qwest customer, but with a customer of another entity (here, Level 3) the call must switch from Qwest's network to Level 3's network. For the call to switch from one network to the other, it must go through trunk and interconnection facilities. (Level 3's Br. at 5; Qwest's Br. at 27.) Trunks are cables, often "high capacity copper or fiberoptic cables[,] ... which connect the parties' networks so that traffic can be exchanged" between them. Intermedia Communications, Inc. v. Bellsouth Telecommunications, Inc., 173 F.Supp.2d 1282, 1283 (M.D.Fla.2000). The point where the call switches between networks is called the point of interconnection. See e.g. Iowa Network Services, Inc. v. Qwest Corp., No. 4:02-cv-40156, 2002 WL 31296324, at *2 (S.D.Iowa, Oct.9 2002).

The broad issue, in the case at hand, is whether Qwest is entirely responsible for the costs of the portion of a call originating on Qwest's networks before the call gets to the point of interconnection, or if Level 3 must share some of this cost. (Admin. R. at 554-55; Level 3's Br. at 5; State Defs.' Mem. Br. in Supp. of Mot. for Summ. J. at 11 [filed Sept. 13, 2002] [hereinafter "CPUC's Br."].) Level 3 and Qwest agree that as a general proposition, the financial responsibility for trunks and facilities should be apportioned between them on the basis of each company's originating traffic flowing over these trunks. (Id. at 555.) Apparently, virtually all traffic originates from Qwest, because it is Qwest, through whom most telephone customers place their calls. (Qwest's Resp. at 17; Level 3's Br. at 4-5.) Thus, Qwest would normally be responsible for the predominant costs of this telephone traffic.

The CPUC has effectively created an exception to this general rule, and that exception has produced this litigation. According to CPUC's determination, a telephone call which originates on Qwest's network but terminates with an internet service provider ("ISP") who is a customer of Level 3 would not be considered in allocating financial responsibility for the trunk. (Admin. R. at 559, 761-63.)⁴ In other words, if 95% of calls originate from Qwest's network, Qwest would normally be responsible for 95% of the cost up to the point of interconnection on the relevant trunk. (Admin. R. at 556.) However, if 95% of these calls originate from Qwest's network, but are all terminated with ISPs on Level 3's network, Level 3 would be responsible for 100% of the costs of the relevant trunks. (Id. at 556, 559.)

CPUC, in its initial decision, explained its policy rationale for this conclusion by stating that:

[t]he logic underlying our decision on reciprocal compensation for Internet bound traffic dictates a similar result here.⁵ When connecting to an ISP served by a CLEC, the ILEC end-user acts primarily as the customer of the ISP, not as the customer of the ILEC. The end-user should pay the ISP; the ISP should charge the cost-causing end-user. The ISP should compensate both the ILEC (Qwest) and the CLEC (Level 3) for costs incurred in originating and transportation the ISP-bound call. Therefore, we agree with Qwest that Internet related traffic should be excluded when determining relative use of entrance facilities and direct trunked transport.

(Admin. R. at 559 [footnote added].) In CPUC's Decision on Application for Rehearing, Reargument, or Reconsideration, CPUC stated that its reliance on the logic of reciprocal compensation "was not improper[ ]." (Id. at 762-63.) CPUC's "logic" behind "reciprocal compensation," beyond the reasoning set forth above, includes CPUC's goals to eliminate economic distortions and unintended arbitrage opportunities. (Id. at 538, 541, 544, 559.)

CPUC's distinction between internet-related traffic, and other traffic, is critical to the parties because Level 3 has an exclusive focus on serving ISPs. (Id. at 557.) Thus, since Level 3 exclusively serves ISPs, and virtually all calls originate with Qwest, Level 3 will be responsible for the costs of the relevant trunks and relevant interconnection facilities if Qwest prevails on this issue. Level 3, consequently, contests CPUC's determination.

On December 19, 2001, Level 3 filed a complaint with this court challenging...