2. Procedural Background
As indicated by the discussion below, our decision today follows extensive briefing by the parties on the joint motion to dismiss that the defendants filed on August 19, 2010. The motion to dismiss resulted, in turn, from discussion at the prehearing conference (PHC) held in these matters on July 22, 2010. Prior to that PHC, both Pac-West and the defendants had submitted extensive PHC statements in response to a ruling issued by the assigned Administrative Law Judge (ALJ) on June 30, 2010.
Because of this extensive procedural history, we begin the discussion below with a description of the allegations in the four complaints. We then describe D.10-06-006, the decision that dismissed without prejudice A.10-01-003, the proceeding in which NCC sought relief similar in many respects to what is being sought in these complaints. Following the description of D.10-06-006, we summarize the ALJ ruling of June 30, 2010, as well as the discussion that occurred at the PHC. The final section of this decision considers the issues raised by both the complainants and the defendants in their respective pleadings.
2.1. The Allegations in the Complaints
The four complaints at issue here are nearly identical.5 All of them allege that Pac-West has carried out its duty under § 558 of the Pub. Util. Code to terminate CMRS traffic for the defendants, but that defendants have wrongfully refused to pay Pac-West any compensation for these termination services. The complaints also allege that since Pac-West does not have an ICA with any of the defendants, it is necessary for the Commission to set an appropriate termination rate. Finally, Pac-West alleges that the appropriate amount is the rate for termination appearing in Pac-West's intrastate tariff, which this Commission has approved and which is normally applicable to carriers with which Pac-West does not have an ICA.
With respect to how the rate for CMRS termination should be set, paragraph 27 of each complaint alleges:
In D.06-06-055, the Commission found that ". . . it is appropriate to apply the CLEC's intrastate tariff for termination services afforded to another CLEC where no interconnection agreement is in effect between the two CLECs." In this instance, the Commission should reaffirm that the terms, conditions and charges set forth in Pac-West's tariff are reasonable and should be made applicable to the traffic that [defendant] sends to Pac-West for termination. Specifically, the Commission should not enforce Pac-West's Intrastate Tariff against [defendant] per se, but should instead find that the rates set forth in the tariffs constitute reasonable compensation to Pac-West for the termination services it provides to [defendant].
Each complaint also alleges that under the MetroPCS Review Order, this Commission has jurisdiction to set a rate for intrastate CMRS termination. Paragraphs 29 and 30 in each complaint allege:
29. Pursuant to the [MetroPCS Review Order] and other federal authority, this Commission has the responsibility and authority to determine reasonable compensation owed to Pac-West for terminating intrastate calls that originated on [defendant's] network.
30. The Commission's jurisdiction to determine reasonable compensation owed to Pac-West for terminating intrastate calls includes intraMTA and interMTA traffic originated by [defendant]. Upon information and belief, substantially all of the traffic originated by [defendant] and terminated by Pac-West is intraMTA and intrastate.
After setting forth the general allegations described above, each complaint pleads multiple (usually five6) "causes of action":
· A first cause of action, which pleads the tariff, and then requests that Commission determine a "reasonable rate" based on 47 C.F.R. § 20.11 and the MetroPCS Review Order - although this cause of action specifies that the reasonable rate should be PacWest's intrastate tariff;
· A second cause of action, which asks for reasonable compensation pursuant to Pub. Util. Code §§ 558 and 761, with reference to the tariff;
· A third cause of action, requesting "reasonable compensation" pursuant to 47 CFR § 20.11(b)(2), with no reference to tariff;
· A fourth cause of action, which asks for "reasonable compensation" pursuant to Pub. Util. Code § 558 and the common law of unjust enrichment, with no reference to the tariff; and
· A fifth cause of action, which advances a novel theory of undue discrimination pursuant to Pub. Util. Code § 453; viz., that the defendant CMRS carriers are discriminating against Pac-West by paying large ILECs such as AT&T for termination services, but not paying smaller CLECs like PacWest for such termination services.
2.2. The NCC Application and D.10-06-006
As noted above, the four complaints here all rely on the FCC's November 2009 ruling in the MetroPCS Review Order, which held that this Commission was a "more appropriate forum" than the FCC for determining the rate applicable to intrastate CMRS traffic that NCC terminates for MetroPCS. The MetroPCS Review Order was also the basis for A.10-01-003, in which NCC requested this Commission to set a rate for the intrastate traffic that NCC terminates for MetroPCS.
On June 3, 2010, we dismissed NCC's application without prejudice in D.10-06-006. That decision began by noting that the MetroPCS Review Order
. . . left unchanged the referral of [NCC] to this Commission for a determination of a "reasonable rate" for call termination. The FCC also placed the complaint of [NCC] in abeyance "pending the California PUC's determination of a reasonable rate for [NCC's] termination of MetroPCS's intrastate traffic." (D.10-06-006 at 6.)
D.10-06-006 pointed out that despite the referral of the termination rate issue to this Commission, the MetroPCS Review Order did not disclaim the FCC's own jurisdiction to decide what a proper rate for termination of intrastate CMRS traffic should be. In support of this interpretation, the decision quoted the following passage from the MetroPCS Review Order:
Contrary to the parties' contention, the Enforcement Bureau did not hold that only a state commission has jurisdiction to determine what constitutes "reasonable compensation" under section 20.11 of the Commission's rules [47 C.F.R. § 20.11] . . . Thus, by affirming the Bureau Merits Order, we do not hold that the Commission lacks such jurisdiction. Rather, we merely affirm the Bureau's finding that the state commission, in this instance, is the more appropriate forum. (Id. at 7, quoting MetroPCS Review Order at ¶ 12, note 46.)
D.10-06-006 also pointed out that in the MetroPCS Review Order, the FCC had declined to rule on whether NCC was entitled to any compensation at all under FCC Rule 20.11 until after the FCC had the benefit of this Commission's deliberations. D.10-06-006 quoted the MetroPCS Review Order as follows:
We note that the purpose of converting North County's claim back into a formal complaint would not be to review the propriety of the termination rate prescribed by the California PUC. Such a review, if any, of the California PUC's rate prescription would proceed according to whatever mechanism is provided by applicable California law. The purpose of any conversion of North County's claim back into a formal complaint would, instead, be limited to determining whether, despite the application of the termination rate prescribed by California law, MetroPCS has still failed to pay North County "reasonable compensation" under rule 20.11. (Id. at 6, quoting MetroPCS Review Order at ¶ 24.)
In light of the character of the FCC's rulings in the MetroPCS Review Order, D.10-06-006 concluded that the most appropriate course of action was to dismiss A.10-01-003 without prejudice:
On the question before us - whether to proceed at this time - the arguments of MetroPCS and the Wireless Coalition are convincing. First, it makes no sense to proceed with this matter while it is before the D.C. Circuit. Initially, both parties sought resolution of this entire matter by the FCC, and MetroPCS is appealing the FCC's decision to the D.C. Circuit. The decision of that court may lead to a resolution of this matter, and will likely shed light on the many jurisdictional issues that the parties have raised in the FCC proceeding and in this proceeding, as well. Thus, awaiting the court decision may either resolve this matter or provide guidance that facilitates action by this Commission.
Second, we take to heart the Wireless Coalition's reminder to this Commission of the years of effort that the Commission and telecommunications companies spent in the unbundling proceedings of the 1990's that were rendered irrelevant by subsequent judicial and FCC actions, as well as by technological and market developments. It is incontrovertible that this Commission's efforts to cost and price call services were both complex and costly for all involved. In light of this experience and the current limitations on resources arising from California's budgetary constraints, it would certainly be unwise to proceed with a consideration of this application without a clear commitment from the FCC to use the results of California's regulatory efforts and a determination that MetroPCS is liable for payment to North County. (Id. at 15-16.)
An application for rehearing of D.10-06-006 is pending.
2.3. The ALJ Ruling Convening the PHC in These Cases
On June 30, 2010, the assigned ALJ for these four proceedings issued a ruling tentatively consolidating them and scheduling a PHC for July 22, 2010.7 After noting the key points in D.10-06-006 summarized above, the June 30 PHC Ruling stated that the principal issue to be discussed at the PHC would be "why, if at all, the factors relied upon in D.10-06-006 do not apply with equal force to these cases, and why, therefore, these case should not also be dismissed."
The ruling acknowledged that there were differences between A.10-01-003 and these proceedings, the most obvious being that the former was cast as an application seeking to have the Commission set a rate, whereas these cases take the form of complaints alleging wrongful withholding of compensation for CMRS call termination. However, the ruling continued, "these differences appear to be matters of form rather than substance." (June 30 PHC Ruling at 5.)
In particular, the ruling singled out paragraph 27 of each complaint, which is quoted above and which asks the Commission not to enforce Pac-West's intrastate tariff per se, but instead to "find that the rates set forth in the tariffs constitute reasonable compensation to Pac-West for the termination services it provides." Concerning this paragraph, the Ruling stated:
Although this request may seem reasonable at first glance, it is apparent on reflection that it is an attempt to plead around the limitations in the MetroPCS Review Order and to avoid the issues that led to dismissal of NCC's application. By asking the Commission not to "enforce Pac-West's intrastate tariff against [the defendants] per se," Pac-West is obviously seeking to avoid the FCC's prohibition [in the T-Mobile Ruling] against using intrastate tariffs to set CMRS termination rates where no interconnection agreement is in effect between the parties. However, as D.10-06-006 recognized, the only plausible way this Commission could do that is by undertaking the kind of time-consuming and resource-intensive costing exercise that proved wasteful with respect to TSLRIC in the OANAD proceeding.
In short, Pac-West has glossed over the substantial burdens and potential for wasted Commission effort that its request for relief in the complaints here would involve, especially if the D.C. Circuit agrees with petitioners in the MetroPCS case that the FCC acted unlawfully by failing to set an intrastate CMRS termination rate on its own. (Id. at 6.)
The June 30 PHC Ruling closed by directing Pac-West to submit a PHC statement dealing with specified issues no later than July 12, 2010, and the defendants to submit a response no later than July 19. The ruling also provided that Pac-West would be given an opportunity at the PHC to respond to the defendants' arguments.
2.4. The Discussion at the July 22 PHC
The PHC in these four cases took place as scheduled on July 22, 2010. The PHC began with a lengthy oral reply by Pac-West's counsel to the points raised in the defendants' joint response of July 19, which had supported the proposed dismissal of these cases.
First, although Pac-West's counsel conceded that in the MetroPCS Review Order, the FCC had not disclaimed its own jurisdiction to decide the intrastate termination rate issue, he argued it was nonetheless appropriate for this Commission to adjudicate the four complaint cases. This Commission has never held that the pendency of an appeal of a federal decision is a sufficient ground for the Commission not to discharge its duties under the Public Utilities Code and other California law, he maintained, especially in view of the possibility that litigation over the issues raised in the in the MetroPCS Review Order could go on for years. (PHC Transcript, pp. 13-15).
Second, he argued that the amount of work necessary for the Commission to develop a rate for intrastate CMRS traffic termination was less than the June 30 PHC Ruling, D.10-06-006, and the defendants all seemed to assume. Pac-West argued in its July 12 PHC statement that this Commission has consistently used the costs of incumbent local exchange carriers (ILECs) based on the Total Element Long Run Incremental Cost Methodology (TELRIC) as proxies when evaluating the reasonableness of rates proposed by competitive local exchange carriers (CLECs) such as Pac-West, and that the Commission has never required CLECs to submit cost studies. Since the defendants here do not appear to dispute these facts, it is not reasonable to assume that the setting of an intrastate CMRS termination rate would necessarily involve a complex and time-consuming proceeding. (Id. at 15-17.)
Third, counsel argued that the FCC "traffic pumping" proceeding cited by the defendants8 is no reason not to move forward with these cases. The FCC itself has recognized that alleged traffic pumping by CLECs may raise issues different from those for other carriers, and in any event, the FCC has not yet promulgated any rules in this area. Allegations that CLECs such as Pac-West have business models based on impermissible traffic pumping are necessarily fact-intensive and would require a hearing. (Id. at 23-26.)
Fourth, Pac-West's counsel reviewed the causes of action set forth in the complaints, and while acknowledging that the first and third causes of action are based on federal law, argued that valid claims are stated under the Pub. Util. Code and other California law for unreasonable utility practices, unjust enrichment, and undue discrimination. (Id. at 28-30.)
In her response to these arguments, counsel for defendant Cricket Communications, Inc. (Cricket) asserted that in all of its pleadings, Pac-West had failed to address one of the key concerns in D.10-06-006 and the June 30 PHC Ruling; viz., the potential for wasted effort by this Commission if the D.C. Circuit were to agree with the petitioner in the MetroPCS Review Order case that (1) the FCC has a duty under Rule 20.11 to determine the rate for intrastate CMRS traffic termination itself, or (2) that the FCC had acted arbitrarily and capriciously in failing to give this Commission guidance about what would constitute a proper termination rate. (Id. at 34-35.) She also disagreed that Pac-West's various causes of action stated valid claims under California law.
In his remarks, counsel for defendant Sprint PCS9 argued that the use of TELRIC-based ILEC termination charges would not necessarily be appropriate to determine rates for CMRS traffic termination, since it is not clear that ILEC-like services are the nature of the termination services that Pac-West is providing. Thus, the Commission should not accept Pac-West's assurances that if these cases were to move forward, there would be no need for a protracted cost proceeding. (Id. at 43-46.)
After a discussion with the ALJ, it was agreed that the defendants would file a motion to dismiss setting forth their various contentions on August 19, 2010, and that Pac-West would file a response on September 2, 2010. The ALJ also said that he would entertain a request from the defendants to file a reply, if they deemed that necessary.
The defendants filed a 34-page motion to dismiss the complaints on August 19, and Pac-West filed a 59-page opposition on September 2, 2010. The defendants were granted leave by the ALJ to file a joint reply to the opposition, which they did on September 17, 2010. We consider the arguments raised in these pleadings in the discussion below.
5 At the July 22 PHC, counsel for Pac-West acknowledged that the only real difference among the complaints (apart from the number of minutes terminated and the amount sought) is that the complaint against Sprint PCS (C.09-12-014) does not include a specific cause of action for undue discrimination under Pub. Util. Code § 453. (July 22 PHC Transcript, p. 27.) We note, however, that the claim pleaded under § 761 in the complaint against Sprint PCS is essentially an undue discrimination claim.
6 See previous footnote.
7 Administrative Law Judge's Ruling Tentatively Consolidating Cases and Scheduling Prehearing Conference, issued June 30, 2010. Hereinafter, this ruling will be referred to as the "June 30 PHC Ruling."
8 Establishing Just and Reasonable Rates for Local Exchange Carriers, Notice of Proposed Rulemaking (FCC 07-176), 22 FCC Rcd 17989 (2007).
9 As noted in the caption for C.09-12-014, "Sprint PCS" is the trade name under which Sprint Spectrum, L.P., WirelessCo. L.P., Sprint Telephony PCS, L.P., and Nextel of California, Inc. do business.
