U S West Commun., Inc. v. Mfs Intelenet, Inc.

35 F.Supp.2d 1221

U S WEST COMMUNICATIONS, INC. Plaintiff, v. MFS INTELENET, INC., and Roger Hamilton, Chairman, Ron Eachus, Commissioner, and Joan H. Smith, Commissioner, in their official capacities as Commissioners of the Oregon Public Utility Commission; and Oregon Public Utility Commission, Defendants.

No. CIV. 97-857-JE.

United States District Court, D. Oregon.

January 30, 1998.

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Lawrence H. Reichman, Chin See Ming, Perkins Coie, Portland, OR, Sherilyn C. Peterson, Kirstin S. Dodge, Perkins Coie, Bellevue, WA, Norton Cutler, Denver, Co, for U S West Communications, Inc.

Alexia Morrison, Morton J. Posner, Swidler & Berlin, Washington, D.C., Sara Siegler Miller, Portland, for Defendant MFS Intelenet, Inc.

W. Benny Won, Timothy M. Wood, Dept. of Justice General Counsel, Salem, OR, Joseph T. McNaught, Hardy Myers, Assist, Atty. General, Dept. of Justice, Salem, OR, for Roger Hamilton, Ron Eachus, Joan H. Smith, Oregon Public Com'n.

Herbert C. Sundby, Kristine Olson, U.S. Attorney's Office, Portland, OR, Theodore C. Hirt, U.S. Dept. of Justice Civil Div., Washington, DC, Jonathan T. Foot, U.S. Dept. of Justice, Civil Div., Fed. Programs Branch, Washington, DC, for U.S.A., Federal Communications Com'n, intervenor.

OPINION AND ORDER

JELDERKS, United State Magistrate Judge.

Plaintiff U S West Communications, Inc. (U.S. WEST) brings this action against defendants MFS Intelenet, Inc. (MFS), the Oregon Public Utility Commission (PUC), and PUC Commissioners Roger Hamilton, Ron Eachus, and Joan Smith (the Commissioners). The Commission defendants move to dismiss based upon lack of subject matter jurisdiction, and MFS moves to dismiss for failure to state claims upon which relief may be granted. The United States of America and the Federal Communications Commission (FCC) move to intervene. I grant the FCC's motion to intervene, deny the Commissioner's motion to dismiss, and grant in part and deny in part MFS's motion to dismiss.

BACKGROUND

1) Telecommunications Act of 1996

U S West has provided local telephone and exchange access service to Oregon customers for more than one hundred years. Through most of this time, U S West has had no competition in its service territories.

In February 1996, Congress enacted the Telecommunications Act of 1996 (1996 Act), Pub.L. No. 104-104, 110 Stat. 56; 47 U.S.C. § 153 et seq. The act, which amends the Telecommunications Act of 1934, is designed to promote competition in local and long distance telephone markets. The Act sets out a comprehensive scheme for removing barriers to entry into these markets, and reflects a Congressional intent to promote the rapid development of competition by encouraging new entrants to build their own local telephone networks. See 47 U.S.C. §§ 251-253.

The Act provides for the entry of competitors through two distinct mechanisms. Under the first of these, competitors can purchase individual, "unbundled" network elements that can be combined with their own network facilities to provide services. "Loops" are an example of such unbundled elements. These are the wires and other equipment needed to connect individual telephone customers to a provider's central offices, its trunk lines, communications databases, and support systems. The second mechanism allows new competitors to purchase, at wholesale prices, an incumbent local exchange carrier's (LEC's) assembled finished services, such as residential or business telephone service, for resale. These two mechanisms allow new competitors to begin competing with existing LECs before their new completed, competing networks are in place.

The Act sets out obligations for various kinds of telecommunications service providers. Under Section 25 of the Act, incumbent LECs such as U S West are required to:

(1) negotiate in good faith to reach Agreements with new competitors under the Act;

(2) offer interconnection to competing providers at "any technically feasible point" within their network. This interconnection must be at least equal in quality to that provided by the LEC to itself, and must be provided on rates and terms that are "just, reasonable, and nondiscriminatory;"

(3) provide access to unbundled network elements at "any technically feasible point" on rates and terms that are "just, reasonable, and nondiscriminatory." "Network elements" are facilities or equipment used to provide telecommunications services. "Unbundling" refers to selling individual network elements, as opposed to aggregations of network elements;

(4) offer at wholesale rates any telecommunications service that the LEC provides at retail prices to customers who are not telecommunications carriers;

(5) provide notice of changes in the information necessary for the transmission and routing of services on the LEC's network; and

(6) provide for "collocation" of the equipment necessary for interconnection or access to unbundled elements on rates and terms that are "just, reasonable, and nondiscriminatory." "Physical collocation" requires an incumbent LEC to provide the office space that its competitors need to install and operate their own equipment. "Virtual collocation" requires an incumbent LEC to dedicate to its competitors the equipment they request and to permit the competitors to interconnect with the equipment in the LEC's offices.

Under the Act, incumbent LECs are entitled to recover the costs of providing interconnection, unbundled network elements, transportation and termination of traffic, resale and collocation, and may also recover a reasonable profit. 47 U.S.C. § 252(d)(1).

Section 252 of the Act sets out a comprehensive framework for reaching Agreements between LECs and competitors. If these parties are unable to reach an Agreement resolving all of the issues covered by the Act, a party can seek mediation under § 252(a)(2). If that mediation does not produce an Agreement, a party may seek compulsory arbitration under § 252(b). State Commissions like defendant PUC are responsible for conducting arbitration, subject to certain limitations. A Commission may reject an Agreement, or a portion of an Agreement, that has been reached through arbitration if it finds that the agreement does not comply with the requirements of § 251 and any FCC regulations in effect under that section, or with the standards set out in § 252(d).

The Act provides for federal district court review of interconnection agreements concluded pursuant to § 252. Section 252(e)(6) provides that, if a state commission "makes a determination under this section, any party aggrieved by such determination may bring an action in an appropriate Federal district court to determine whether the Agreement ... meets the requirements of the Act."

The Act also allows states to decline to carry out the regulatory roles set out above. Section 252(e)(5) provides that

If a State commission fails to act to carry out its responsibility under this section in any proceeding or other matter under this section, then the Commission [FCC] shall issue an order preempting the State Commission's jurisdiction of that proceeding or matter within 90 days after being notified (or taking notice) of such failure, and shall assume the responsibility of the State commission under this Section with respect to the proceeding or matter and act for the state commission

47 U.S.C. § 252(e)(5). If a state does not act, FCC proceedings and any judicial review of the FCC's action provide the exclusive remedies. 47 U.S.C. § 252(e)(6). The Act precludes state court review of interconnection agreements arbitrated under the Act. 47 U.S.C. § 252(e)(4).

Section 252(e)(3) provides that

"nothing in this section shall prohibit a State commission from establishing or enforcing other requirements of State law in its review of an [interconnection] Agreement, including requiring compliance with intrastate telecommunications service quality standards or requirements."

2) Arbitration Giving Rise to this Action

MFS requested interconnection and related network elements from U S West shortly after the Act was passed. U S West and MFS were unable to resolve all of the issues related to that request, and MFS filed a petition with the PUC for arbitration pursuant to § 252(b). Arbitration was conducted in late September 1996, and the parties filed final briefs on October 8, 1996.

In a decision issued on November 8, 1996, the arbitrator resolved certain issues, and required the parties to submit a contract in accordance with the decision. U S West filed its Exceptions to the arbitrator's decision, objecting to the provisions complained of in the present action, on November 18, 1996. MFS filed its comments on the Arbitrator's decision and requested the Commissioners' approval of the arbitration order on November 21, 1996. The Commissioners and the PUC approved and adopted the arbitration order on December 9, 1996.

U S West petitioned for reconsideration of the Commission decision approving the arbitration decision on February 6, 1997. The Commissioners and the PUC denied that petition in an Order dated April 7, 1997.

At the time that the complaint in this action was filed, MFS had yet to comply with the arbitrator's order requiring it to submit an executed contract to U S West "incorporating terms that reflect the Commission's final decision" in the underlying proceedings. In their opening memorandum in support of their motion to dismiss, the PUC and Commissioners contended that the absence of an approved interconnection agreement deprived this court of subject matter jurisdiction. However, on August 25, 1997, U S West executed an interconnection agreement that MFS had tendered on August 21, 1997. The PUC approved the interconnection agreement before the PUC and the Commissioners filed their reply brief in support of the motion to dismiss, and withdrew their contention that the action was not ripe for review in that...