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MCImetro Access Transmission Services LLC v. New Jersey Board of Public Utilities

October 19, 2007

MCIMETRO ACCESS TRANSMISSION SERVICES LLC, PLAINTIFF,
v.
NEW JERSEY BOARD OF PUBLIC UTILITIES, AN AGENCY OF THE STATE OF NEW JERSEY, ET AL., DEFENDANTS, AND UNITED TELEPHONE COMPANY OF NEW JERSEY, INC., INTERVENOR-DEFENDANT.



The opinion of the court was delivered by: Greenaway, Jr., U.S.D.J.

OPINION

This matter comes before this Court on the motion for summary judgment, pursuant to FED. R. CIV. P. 56(c), by Plaintiff MCImetro Access Transmission Services, LLC ("MCI")*fn1 . For the reasons set forth below, MCI's motion is denied.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. The Interconnection Agreement

MCI is a competitive local exchange carrier ("CLEC") authorized to provide telecommunications services in New Jersey. United Telephone of New Jersey, Inc. ("United")*fn2 is an incumbent local exchange carrier ("ILEC") authorized to provide local exchange services in New Jersey. On July 28, 1997, MCI and United entered into an interim interconnection agreement ("Interconnection Agreement"), which was later filed with and approved by the New Jersey Board of Public Utilities ("BPU"). Among other things, the Interconnection Agreement requires the parties to pay reciprocal compensation for "local traffic," or telecommunications traffic that begins on one party's network and is delivered to -- that is, terminated on -- the other party's network. Significantly, the Interconnection Agreement does not expressly exclude from its definition of "local calls" any calls made from a modem to an Internet Service Provider, or ISP-bound traffic.

Although the Interconnection Agreement does not specify an expiration date, its language indicates that the parties intended to enter into a final superceding agreement. To date, however, MCI and United have not executed a superceding interconnection agreement for local telephone call traffic in New Jersey.

Section III(A) of the Interconnection Agreement includes a "change-of-law" provision, which states:

In the event the FCC or the Commission promulgates rules or regulations or issues orders, or a court with appropriate jurisdiction issues orders which conflict with or make unlawful any provision of this Agreement, the Parties shall negotiate promptly and in good faith in order to amend the Agreement to substitute contract provisions which are consistent with such rules, regulations or orders. In the event the Parties cannot agree on an amendment within thirty (30) days from the date any such rules, regulations or orders become effective, then the Parties shall resolve their dispute under the applicable procedures set forth in [Section] XII Default and Dispute Resolution hereof.

(February 2005 Joint Stipulation of Facts Ex. JS-1 at 13.) Under the Interconnection Agreement's Default and Dispute Resolution provision, the parties consent to negotiate again before submitting the dispute to the BPU:

The Parties agree that in the event of a default or violation hereunder, or for any dispute arising under this Agreement or related agreements the Parties may have in connection with this Agreement, the Parties shall first confer to discuss in good faith the dispute and seek resolution prior to taking any action before any court or regulator, or before making any public statement about or disclosing the nature of the dispute to any third party. Such conference shall occur at least at the Vice President level for each Party. In the case of Sprint, its Vice President for Local Competition, or equivalent officer, shall participate in the meet and confer meeting, and MCIm Vice President, or equivalent officer, shall participate. Thereafter on a non-exclusive basis, the parties agree that any dispute that arises as to the interpretation of any provision of this Agreement or as to the proper implementation of this Agreement may be brought before the Commission for a resolution of the dispute. However, each party reserves any rights it may have to seek judicial review of any ruling made by the Commission concerning this Agreement or to seek resolution of a dispute before any other federal or state body or tribunal.

(Id. at 17.)

B. The ISP Remand Order

The Telecommunications Act of 1996 (the "Telecommunications Act" or the "Act") authorizes ILECs and CLECs to negotiate and enter into agreements governing the terms and conditions under which their facilities and networks are interconnected. The Act provides, with some exceptions, that carriers must establish reciprocal compensation arrangements for the transport and termination of telecommunications, but is silent as to whether reciprocal compensation must be paid for ISP-bound traffic.

The Federal Communications Commission ("FCC") first addressed this open question in 1999, when it issued a declaratory ruling stating that ISP-bound traffic is not local traffic and thus is not subject to the Act's reciprocal compensation requirement. In re Implementation of Local Competition Provisions in Telecomm. Act of 1996, 14 F.C.C.R. 3689, 3703-04 (1999). In 2000, the Court of Appeals for the District of Columbia vacated the FCC's declaratory ruling and remanded the issue back to the FCC. Bell Atl. Tel. Co. v. Fed. Commc'n Comm'n, 206 F.3d 1 (D.C. Cir. 2000). Thereafter, the FCC issued an order ("ISP Remand Order"), effective July 14, 2001, in which it again declared that ISP-bound traffic is not subject to the Act's reciprocal compensation requirement. In re Implementation of Local Competition Provisions in Telecomm. Act of 1996, 16 F.C.C.R. 9151 (2001).*fn3 Carriers that did not exchange ISP-bound traffic before the effective date of the ISP Remand Order are prohibited from receiving reciprocal compensation for terminating ISP-bound traffic. Id. at 9188-89. If carriers have already agreed to exchange compensation for the termination of ISP-bound traffic, however, the ISP Remand Order provides for the use of a compensation scheme with rate caps that decrease over time. Id. at 9189. The rate caps in the ISP Remand Order's compensation scheme are lower than those listed in the Interconnection Agreement entered into by the parties to the instant action. (Pl. Br. 7.)

The ISP Remand Order also provides:

The interim compensation regime we establish here applies as carriers re-negotiate expired or expiring interconnection agreements. It does not alter existing contractual obligations, except to the extent that parties are ...


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