Verizon Pa. Inc. v. Pa. Pub. Util. Comm'n.

VERIZON PENNSYLVANIA, INC., et al.

v. PENNSYLVANIA PUBLIC UTILITY COMMISSION., et al.Ditter, J.

CIVIL ACTION No. 08-CV-3436

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

May 26, 2011

MEMORANDUM AND ORDER

This case is essentially an appeal from a state regulatory agency's interpretation of federal regulations issued under the Telecommunications Act of 1996. Plaintiffs, Verizon Pennsylvania, Inc. and Verizon North, Inc. (hereinafter "Verizon"), have filed a motion for summary judgment on Count I of their complaint. In Count I, Verizon challenges the Pennsylvania Public Utility Commission's ("PUC")¹ interpretation of federal regulations that control Verizon's obligations to provide access to wire centers at a reduced cost in order to promote competition among providers of telephone services. The defendants and defendant-intervenors have responded. A reply and sur-reply have also been filed. For the reasons that follow, Verizon's motion for summary judgment is GRANTED.

I. The Telecommunications Act of 1996

Central to the resolution of this motion is the Telecommunications Act of 1996 ("Act"), legislation enacted by Congress to break the monopoly telephone companies had over localtelephone service. Under the Act, incumbent local exchange carriers, like Verizon, are required to allow a competitive local exchange carrier to connect its equipment to their existing network. This permits the competitive carrier to compete without having to bear the full costs of building its own telecommunications network.

The Federal Communications Commission ("FCC") promulgated regulations to implement the Act that require companies like Verizon to provide various network elements to its competitors at a low, regulated rate. 47 U.S.C. § 251 (2005) (the best rate is known as "TELRIC").² This obligation is referred to as "unbundling,"³ and it requires incumbent providers like Verizon to "interconnect with and [] rent parts of their networks to new entrants - especially those parts of a local network that it is least economic for a new entrant to duplicate." Bellsouth Telecomm., Inc. v. Ky. Pub. Serv. Comm'n, 693 F. Supp. 2d 703, 705-6 (E.D. Ky. Feb. 22, 2010) (quoting Qwest Corp. v. Pub. Utils. Comm'n of Colorado, 479 F.3d 1184, 1187 (10th Cir. 2007). "Unbundling" of network elements, and those unbundled network elements, are referred to as "UNEs."

Two types of incumbent provider facilities that are required to be made available as UNEs in certain locations are "transport" and high capacity "loops." In this case, "transport" refers to those facilities that carry traffic between Verizon wire centers. "Loops" refer to those facilities that carry traffic from an end-user's premises to a switch of the serving carrier's network. FCC regulations set the standard for making impairment and unbundlingdeterminations. See 47 U.S.C. § 251(d)(2); United States v. Telecomm. Ass'n v. FCC, 359 F.3d 554, 565-58 (D.C. Cir. 2004), cert. denied, 542 U.S. 925 (2004) ("USTA II").

Verizon is only required to unbundle those network elements for which, among other requirements, the "failure to provide access to such network elements would impair" the ability of other carriers to provide competitive service and cannot be forced to unbundle where those standards are not met. 47 U.S.C. § 251(d)(2)(B). If there is presently sufficient competition so a wire center is not impaired, unbundling is not required.

II. Factual and Procedural Background⁴

A Competitive Fiber Provider ("CFP") is an independent company unaffiliated with an incumbent local exchange carrier like Verizon. Its business is the leasing of dark fiber transport to competitive carriers as an alternative to those competitive carriers using their own or Verizon's fiber transport. Verizon makes space available to the CFP in its wire center and charges the CFP pursuant to its tariff for using the space. As a wholesale provider of fiber capacity, a CFP may bring into a Verizon wire center (through the wire center cable vault), a high capacity, fiber-optic cable with a minimum of 72 and a maximum of 432 dark fiber strands for distribution to other competitive carriers.

A competitive carrier that leases from a CFP must have its own collocation arrangement in the wire center that includes active electrical power and optronics equipment capable of lighting the dark fiber strands it is obtaining.

As a result of certain technology that is unique to Verizon, a CFP can access a sharedalternate splice point near the wire center cable vault for the purpose of terminating CFP fiber facilities at the terminal for distribution via CAT Terminal ("CAT") collocation arrangements.⁵ This arrangement permits the competitive carrier to lease dark fiber strands within a CFP's fiber-optic cable. Those strands become dedicated to the competitive carrier. Using its own optronics equipment in its collocation arrangement, the competitive carrier lights the dark fiber strands that it has leased, and in that way transmits telephone or data traffic into and out of the wire center.

A competitive carrier may lease dark fiber that comes from the CFP as its only fiber-based transport leaving the wire center. It is also possible for a competitive carrier to lease dark fiber from the CFP and also to have a separate fiber facility from its collocation leaving the wire center, where, for example, the facilities leased from the CFP were used to provide survivability or over-flow capacity.

As stated in the tariff, a competitive carrier that leases dark fiber strands from a CFP is not responsible for supplying, installing, and maintaining the CFP's fiber-optic cable from theCAT to the wire center cable vault (i.e., the exit of the wire center).

The dispute in this case arises from proceedings before the PUC. In 2006, a group of competitive local exchange carriers petitioned the PUC to review and pre-approve for their use a list of wire centers Verizon had listed as exempt from the unbundling requirements of the FCC regulations. The competitive carriers challenged Verizon's interpretation of the FCC regulations definition of "fiber-based collocator."⁶ The PUC declined this pre-certification request, but suggested the parties attempt to mediate the disputed issues with the guidance of PUC staff members in an attempt to avoid litigation. In September, 2007, with the mediation efforts stalled, the competitive carriers filed a petition seeking PUC intervention through the PUC's "material question" procedure. 52 Pa. Code § 5.302. This procedure provides for the PUC to answer hypothetical questions about the application of FCC rules.

Availing themselves of this procedure, the competitive carriers asked the PUC to interpret the FCC's regulatory definition of a fiber-based collocator as a carrier that operates a fiber-optic cable or comparable transmission facility. The competitive carriers also asked the PUC to find that neither a CAT collocation arrangement leased out by Verizon nor a collocation arrangement of any carrier obtaining services through a CAT should be counted for purposes of determiningwhether a wire center was impaired. In other words, that neither the CAT nor the competitive carriers to which it leases fiber should be counted.

Verizon asked the PUC to find that a CAT and any unaffiliated competitive carrier that leases a portion of the fiber-optic cable pursuant to a CAT fiber termination agreement, be counted as separate, fiber-based collocators for purposes of determining whether a wire center was impaired.

The PUC determined that the CAT provider satisfied the criteria for a fiber-based collocator, but any competitive carriers that connect to that provider's cable did not.

In part, Verizon contests the PUC's determination. Verizon contends that a CAT fiber termination agreement is specifically identified in the FCC's order issuing its regulations as a qualified form of fiber-based collocation, and therefore, the PUC erred when it determined that such an arrangement does not qualify.⁷ Moreover, Verizon asserts that the PUC erred in finding that a competitive carrier that leases dark fiber from another competitive carrier should not be counted as a fiber-based collocator even though the same dark fiber collocation arrangement with an incumbent carrier would be counted.

Consistent with its contention that in determining whether certain of its Pennsylvania wire centers qualified for an exemption or not, Verizon counted the CAT and any competitive carrier(s) that leased dedicated dark fiber strands located on the CAT as separate fiber-based collocators. For the purposes of this case, Verizon has identified two Pennsylvania wire centers- WKBGPWK (Wilkinsburg) and TRCKPACT (Turtle Creek) - as wire centers that would be downgraded to Tier 3 status under the FCC regulations as interpreted by the PUC. Tier 3 status would require Verizon to unbundle DS1, DS3, and dark fiber transport on all routes connecting to these wire centers and there would be no exemption for unbundling transport out of them.⁸

III. Standard of review

Although the present motion is for summary judgment on Count I of the complaint, the parties agree that this action is more akin to appellate review. In this instance, there are no specific factual findings to review because no hearing was held. Thus, I shall conduct a de novo review of the PUC orders to determine whether, as a matter of law, they are consistent with the 1996 Act and applicable FCC regulations. See MCI Telecomm, Corp. v. Bell Atl-Pa., 271 F.3d 491, 517 (3d Cir. 2001).

IV. Discussion

At issue is whether a competitive carrier that has collocated equipment in a Verizon wire center and accesses through the CAT Terminal dark fiber strands within a CFP's fiber-optic cable is a fiber-based collocator as the FCC defines the term.⁹ As set forth above, the PUC determined that they were not. I look to the federal statutory and regulatory scheme of the Act to resolve this dispute.

A. The...