Rural Iowa Independ. Tele. Ass'n v. Iowa Utilities

385 F.Supp.2d 797

RURAL IOWA INDEPENDENT TELEPHONE ASSOCIATION, Plaintiff, v. IOWA UTILITIES BOARD, Defendant Qwest Corporation, Intervenor.

No. 4:02 CV 40348.

United States District Court, S.D. Iowa, Central Division.

August 11, 2005.

Thomas G. Fisher Jr., Attorney at Law, Des Moines, IA, for Plaintiff.

Allan Kniep, David Jay Lynch, Iowa Utilities Board, Dept. of Commerce, Des Moines, IA, for Defendant.

Amy M. Bjork, Dennis Wayne Johnson, Sheila K. Tipton, Dorsey & Whitney LLP, Des Moines, IA, Bobbee Joan Musgrave, Steven James Perfrement, Musgrave & Theis LLP, Joseph V. Hatala, Qwest Corporation, Roy E. Hoffinger, Perkins Coie LLP, Denver, CO, David S. Sather, Littleton, CO, for Intervenor.

ORDER ON MOTION BY INTERVENOR AND DEFENDANT FOR SUMMARY JUDGMENT

GRITZNER, District Judge.

This matter is before the Court on the Motion for Summary Judgment filed by Intervenor (Clerk's No. 51) and joined by Defendant (Clerk's No. 53). Attorney for Plaintiff is Thomas G. Fisher; attorney for Defendant is David J. Lynch; attorneys for Intervenor are Sheila K. Tipton, Dennis W. Johnson, Amy M. Omvig, and Roy E. Hoffinger. A hearing on the motion was held March 1, 2005, and the Court considers the motion fully submitted and ready for ruling.

PROCEDURAL HISTORY

Plaintiff, Rural Iowa Independent Telephone Association ("RIITA"), commenced this action against Defendant, the Iowa Utilities Board ("the IUB" or "the Board"), in this Court on July 19, 2002.¹ Qwest Corporation ("Qwest") moved to intervene on October 1, 2002, and its motion was granted on October 25, 2002.

This Court² granted a motion to dismiss in an order filed December 3, 2002, solely on the Hobbs Act argument asserted by Qwest. The Eighth Circuit reversed and remanded the District Court's order, stating that "RIITA challenges the IUB's interpretation of [an FCC] order, ... [and] district courts have jurisdiction to determine whether a state administrative agency correctly interprets federal law...." Rural Iowa Indep. Tel. Ass'n v. Iowa Utils. Bd., 362 F.3d 1027, 1030 (8th Cir.2004) (citing Verizon Maryland Inc. v. Public Serv. Comm'n of Maryland, 535 U.S. 635, 643-44, 122 S.Ct. 1753, 152 L.Ed.2d 871 (2002), and Pac. Bell v. Pac-West Telecomm., Inc., 325 F.3d 1114, 1125 (9th Cir.2003)).³ The parties resolved remaining issues in the remanded motion to dismiss.⁴ On November 4, 2004, Qwest filed a motion for summary judgment, which was subsequently joined by the IUB.⁵ RIITA has resisted the motion.

BACKGROUND FACTS

A. Preliminary Statement

This case concerns intercarrier compensation for telephone calls ("traffic") placed by customers of third-party commercial mobile radio service ("CMRS") providers (i.e., "wireless carriers")⁶ to end-user customers served by third-party Incumbent Local Exchange Carriers ("ILECs")⁷ located in the same calling area.⁸ The calls at issue are (1) placed (i.e., "originated") by end-user customers of third-party wireless carriers, (2) delivered by the wireless carriers to Qwest, (3) transported approximately six blocks by Qwest and delivered to Iowa Network Services ("INS")⁹, (4) transported by INS to the ILECs serving the called parties, and (5) routed and delivered (i.e., "terminated") by the ILECs to the premises of the called parties (i.e., the ILECs' end-user customers). RIITA is an ILEC involved in terminating the calls to its subscribers.¹⁰ Qwest and INS are involved in the transport of these calls because the originating third-party wireless carriers and the terminating ILECs have elected to "interconnect" their networks "indirectly" to permit calls between their end-user customers.¹¹

B. Plaintiff's Challenge

In its Complaint before this Court, RIITA alleges the IUB issued a series of orders in docket number SPU-00-7 that misinterpret and misapply various provisions of the Telecommunications Act, in particular section 251, and the result is to deprive rural ILECs such as RIITA of their property without just compensation. Pursuant to 47 U.S.C. § 252(e)(6), RIITA is challenging the Board's determinations that (a) wireless calls that are placed and received by subscribers of different carriers located in the same major trading area ("MTA")¹² are classified as "local" and are not subject to long distance access charges, notwithstanding the fact that the originating and terminating carriers are interconnected indirectly through one or more additional carriers; (b) the termination of such calls is subject to the "reciprocal compensation" provisions of 47 U.S.C. § 251(b), as implemented through negotiated or arbitrated interconnection agreements between the originating and terminating carriers pursuant to 47 U.S.C. § 252; and (c) Qwest, which provides an indirect interconnection and transiting service between the CMRS provider and INS, is not responsible for payment to the ILECs of access charges or other compensation for their termination of calls placed by subscribers of the CMRS providers.¹³

C. Telecommunications in Iowa

RIITA is an association of small rural independent telephone companies. RIITA was a party to the IUB action and represents approximately 130 rural Iowa companies, all of which receive the type of traffic at issue here. The IUB, the only remaining Defendant,¹⁴ is the board charged with governing telecommunications in Iowa, so far as it is granted the authority to do so. Qwest, formerly known as U.S. West, is the Intervenor in this case. Qwest is the former Regional Bell Operating Company in the state of Iowa.

Due to the largely rural nature of Iowa, telecommunications service in much of the state has historically been provided by small independently-owned companies located in and serving small designated geographic areas. These phone companies provide local telephone services, called "telephone exchange service", within a defined geographic area known as the local exchange. Providing such services made these local phone companies "local exchange carrier[s]" ("LECs").¹⁵ Many, if not all, of these Iowa LECs were independently owned. Qwest, which provides local telephone services to customers throughout a fourteen-state area, is also an LEC, though not independently owned. Though differing greatly in size, Qwest and the independent LECs provide basically identical services.¹⁶

Typically, LECs own the wires, computer switches, and other facilities necessary to provide telecommunications service to their subscribing customers. Access services or exchange services were available for purchase to competing carriers, thereby allowing purchasers to send or receive calls from a subscriber over the facilities owned and maintained by another LEC. The major benefit of purchasing access was that a company could reach specific phone customers by purchasing access to the LEC circuits without having to build facilities throughout an area served by another LEC.

In 1987, most of the independent LECs then in existence in Iowa joined together to form Iowa Network Services ("INS"). The major benefit of this formation was that calls placed to or from a customer served by one of the companies in INS could now utilize INS' network to reach whichever independent LEC the customer subscribed to through INS' one centralized network. As was customary, INS charged access fees to use its network, fees set forth in tariffs on file with the Federal Communications Commission ("FCC"), which governed INS' interstate services, and tariffs on file with the IUB, which governed INS' intrastate services.

As long as telephone calls were placed from traditional land-based wire connected phones, the system of ordering access to the INS network detailed above worked well. Technology had an impact on the development and popularity of wireless cellular phones, however, and as the popularity of wireless phones grew, so too did ambiguities surrounding the access services and charges associated with accessing the INS network.

Traditionally, when a call begins at a third-party wireless caller's phone, the call is connected by radio signal to the wireless service provider. The call then travels over the wireless carrier's network until it interconnects with Qwest's network/facilities. Qwest then transports the call on its network to a point of interconnection with INS, with INS carrying the call over its network to a point of interconnection with the independent LEC network serving the person being called. In short, as relevant to the present action, Qwest delivers to the INS network wireless phone calls originated by customers of third-party CMRS carriers who are calling subscribers of independent local exchange carriers such as RIITA, and whose calls originate and terminate in the same MTA. Until 1999, Qwest paid the tariffed rates for taking the wireless-originated calls from non-Qwest customers and delivering them to the independent LECs via the INS network pursuant to either the INS intrastate tariffs filed with the IUB or INS interstate tariffs on file with the FCC.

D. The Telecommunications Act¹⁷ and FCC Implementing Decisions

Congress enacted the Telecommunications Act ("the Act" or "the 1996 Act")¹⁸ in February 1996, greatly amending the Communications Act of 1934. Prior to the Act, when a new company entered a geographic area, it routinely had to compete with an established LEC for customers in that particular service area.¹⁹ The Act was intended to enhance competition in the market for local telephone service. See AT & T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 371, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999). To break down barriers to competition in the local phone market, the Act requires all carriers to "interconnect, directly or indirectly" with other carriers. 47 U.S.C. § 251(a)(1).

The Act also established interconnection agreements, requiring ILECs to agree, upon request, to provide interconnection to a competing carrier pursuant to the interconnection agreement approved by a state public utility commission rather than pursuant to...