Worldnet Telecommc'ns Inc v. Telecommc'ns Regulatory Bd. Of P.R.

707 F.Supp.2d 163

WORLDNET TELECOMMUNICATIONS, INC., Plaintiff,v.TELECOMMUNICATIONS REGULATORY BOARD OF PUERTO RICO, et al., Defendant.

Civil Nos. 08-1360 (FAB/BJM), 08-1359 (FAB/BJM).

United States District Court D. Puerto Rico.

Aug. 25, 2009.

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Francisco A. Rullan-Molina, Gray Robinson PA, Ft. Lauderdale, FL, R. Bruce Beckner, Fleischman and Harding LLP, Eduardo R. Guzman-Casas, Drinker Biddle & Reath LLP, Washington, DC, Maria Del C. Garcia-Garcia, Puerto Rico Telephone Co., San Juan, PR, for Plaintiff.

Leslie Paul Machado, Robert F. Reklaitis, Nixon Peabody LLP, Washington, DC, Eglee W. Perez-Rodriguez, Telecommunications Regulatory Board of Puerto Rico, San Juan, PR, for Defendant.

AMENDED OPINION AND ORDER

BRUCE J. McGIVERIN, United States Magistrate Judge.

In these consolidated cases, which arise under the Telecommunications Act of 1996 (the “Telecommunications Act” or “Act”), 47 U.S.C. § 251 et seq., the court is asked to review numerous decisions made by the Telecommunications Regulatory Board of Puerto Rico (the “Board” or “TRB”) approving or rejection provisions of an arbitrated interconnection agreement entered into between telecommunications carriers Puerto Rico Telephone Company, Inc. (“PRTC”) and WorldNet Telecommunications, Inc. (“WorldNet”).

Before the court are the parties' cross-motions for summary judgment. The TRB moved for summary judgment, attaching a statement of undisputed facts (“TRB's Fact Statement”). (Docket Nos. 58, 59, 60). PRTC also moved for summary judgment, attaching a statement of undisputed facts (“PRTC's Fact Statement”). (Docket Nos. 61, 62, 63). Finally, WorldNet moved for summary judgment, attaching a statement of undisputed facts (“WorldNet's Fact Statement”). (Docket No. 64). The parties each opposed the others' motions (Docket No. 71, 74, 75, 78), and PRTC replied to the oppositions to its motion. (Docket No. 84). The TRB and WorldNet each indicated that they did not dispute the opposing parties' Fact Statements. (Docket No. 69, 70, 72). PRTC opposed TRB's and WorldNet's Fact Statements. (Docket No. 76, 77). The parties consented to my jurisdiction (Docket No. 88), and the consolidated cases were referred to me for all proceedings, including entry of judgment. (Docket No. 89).

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

I. Telecommunications Act of 1996

Congress enacted the Telecommunications Act, 47 U.S.C. § 251 et seq., with the objective of creating competition in local telephone markets. Previously, markets were controlled by “Baby Bell” carriers, spun off of American Telephone & Telegraph as part of the 1982 divestiture ending the national telephone monopoly. AT & T Commc'ns of Ill., Inc. v. Ill. Bell Tel., 349 F.3d 402, 404 (7th Cir.2003). Under the Act, these former monopolistic owners are known as incumbent local exchange carriers (“ILECs” or “incumbent carriers”), and new carriers attempting to enter the market are known as competitive local exchange carriers (“CLECs” or “competitive carriers”). In order for competitive carriers to enter the local telecommunications markets, it is necessary for them to have access to the existing telecommunications lines and infrastructure owned by the incumbent carriers. This access, known as interconnection, “allows customers of the competitor to place calls to, and to receive calls from, customers on the incumbent's network.” WorldNet Telecomms., Inc. v. Puerto Rico Tel. Co., 497 F.3d 1, 3 (1st Cir.2007) (hereinafter, “ WorldNet I ”) (citation omitted).

The Act requires incumbent carriers to negotiate with any competitive carriers that request to negotiate an agreement, known as an interconnection agreement (“ICA”). If the parties are unable to successfully negotiate an ICA, either party may petition the state regulatory board to arbitrate the agreement. 47 U.S.C. § 252(b)(1). The Act creates a dual regulatory scheme in which the Federal Communications Commission (“FCC”) is the exclusive authority on certain aspects of the Act, while state regulatory boards (“state boards”) are responsible for setting local pricing rules, reviewing generally-applicable terms and conditions, ensuring that all interconnection agreements comply with the Act, and acting as arbitrators, where necessary, in ICA arbitrations. See, e.g., 47 U.S.C. §§ 252(b), 252(d), 252(e)(1), 252(f)(2).

A host of substantive provisions govern the terms of an agreement arbitrated pursuant to the Act, 47 U.S.C. § 252(c)(1), and a set of procedures govern the conduct of an arbitration under the Act. 47 U.S.C. § 252(b). The Act requires incumbents to sell their services as “unbundled network elements” (“UNEs”) to competitive carriers at non-discriminatory rates. In establishing rates, there is a tension between a competitive carrier's desire to purchase UNEs at rates allowing it to combine the elements and sell them at competitive retail rates, and an incumbent's desire to derive the same income from selling services to its competitors as it does from selling services to customers. AT & T Commc'ns of Ill., 349 F.3d at 404. These rates also affect each party's incentives to invest in creating or renovating facilities. Id. In implementing the Act, the FCC sought to address these tensions and incentives by directing carriers and state boards to set UNE rates using a forward-looking methodology known as “total element long-run incremental cost” (“TELRIC”). 47 C.F.R. §§ 51.505-515. Under TELRIC, prices are based on the long-run costs that would be incurred to produce services using the most-efficient technology presently available regardless of whether the incumbent carrier actually uses the most up-to-date technology. AT & T Commc'ns of Ill., 349 F.3d at 404-05.

In addition to these various substantive requirements, the Act sets forth the procedures a state board must follow in reviewing and approving interconnection agreements. The Act requires the state board to make a determination within nine months of the date the ILEC received the CLEC's request to negotiate. 47 U.S.C. § 252(b)(4)(C). The Act requires that the state board review both negotiated and arbitrated ICAs and either “approve or reject” the agreement with written findings detailing any deficiencies. 47 U.S.C. § 252(e)(1). In the case of arbitrated agreements, the commission may reject an agreement only for limited reasons: (1) the agreement is inconsistent with the requirements of the Act set forth in 47 U.S.C. § 251 or § 252(d), or the Act's implementing regulations, or (2) the agreement conflicts with other requirements of state law. 47 U.S.C. §§ 252(e)(2)(B), 252(e)(3). If either party is dissatisfied with a state board's determination, that party may file an action in an appropriate district court to review whether the board's determination meets the requirements of the Act. 47 U.S.C. § 252(e)(6). If the state board fails to approve or reject the agreement within thirty days after it is submitted by the parties, the ICA is deemed approved and ripe for federal judicial review. 47 U.S.C. § 252(e)(4). Moreover, if the state board fails to take any action to comply with its obligations under the statute, the FCC may intervene. 47 U.S.C. § 252(e)(5).

II. Proceedings in this Case

PRTC, an incumbent carrier, provides local and long distance telephone services throughout Puerto Rico. (Docket Nos. 63, ¶ 1; 64-3, ¶ 2). WorldNet, a competitive carrier, also provides local and long distance telephone services in Puerto Rico. (Docket Nos. 63, ¶ 2; 64-3, ¶ 2). The TRB is a state board, as defined by the Telecommunications Act. (Docket No. 63, ¶ 3). In October 2006, WorldNet formally requested interconnection agreement negotiations with PRTC. (Docket No. 59, ¶ 3). After engaging in negotiations with PRTC for various interconnection terms, WorldNet filed a Petition for Arbitration with the TRB on March 7, 2007, requesting that the Board resolve 374 issues then outstanding. (Docket Nos. 63, ¶ 4; 59, ¶ 4). The Board thereby opened an arbitration proceeding, which was assigned Case Number JRT-2007-AR-0001. (Docket No. 63, ¶ 5). The parties resolved many of their disputed issues, and approximately 200 issues were submitted to the arbitrator. (Docket No. 59, ¶ 10, 11). In advance of the arbitration, the parties submitted over 1,000 pages of pre-filed direct and rebuttal testimony from a combined total of twenty fact witnesses and eight expert witnesses. (Docket No. 59, ¶ 12-14). From May 22-25, 2007, the parties participated in a hearing consisting of opening statements, cross-examination of fact and expert witnesses, and closing arguments. (Docket No. 59, ¶ 15). Following the hearing, the parties submitted extensive post-hearing briefs addressing the open issues that needed to be resolved by the arbitrator. (Docket No. 59, ¶ 16).

On July 2, 2007, the arbitrator issued a ruling resolving approximately 200 outstanding issues. (Docket No. 59, ¶ 17). In compliance with the requirements of Section 252(e)(1), the parties jointly submitted the resulting arbitrated interconnection agreement (the “Agreement”) to the Board for its approval. (Docket No. 63, ¶ 7). On November 2, 2007, the Board issued an order approving the Agreement in its entirety. (Docket No. 63, ¶ 8). WorldNet and PRTC each sought reconsideration of the Board's approval as to certain portions of the Agreement, and on February 25, 2008, the Board issued a ruling addressing approximately sixty issues raised in these motions. (Docket Nos. 63, ¶ 9; 59, ¶ 21). For eight pricing issues, the Board determined that neither party had proposed TELRIC-compliant rates, and thereby adopted interim rates and scheduled a follow-on hearing to determine the rates. (Docket No. 59, ¶ 22, 23). The Board conducted the follow-on hearing and issued a ruling on those issues on August 8, 2008. (Docket No. 63, ¶ 10). Next,...