4. Comments on Proposed Decision
The proposed decision of the ALJ in this matter was mailed to the parties in accordance with § 311 of the Pub. Util. Code and Rule 14.2(a) of the Commission's Rules of Practice and Procedure. Pac-West filed Comments on January 3, 2011; the CMRS carriers filed joint reply comments on January 10, 2011.
4.1. Elimination of Alleged Dicta
Pac-West's comments on the PD ask us to hold these cases "in abeyance" until the D.C. Circuit rules on the MetroPCS Review Order, or - in the alternative -- eliminate unnecessary "dicta" in the proposed decision.15 Originally, the CMRS carriers themselves asked that these cases be held in abeyance, but now find the same request in Pac-West's comments to be "a 180 degree about-face by Pac-West," and argue that the proposed decision should be adopted as written.16
Upon consideration, and in view of the continually evolving situation in the D.C. Circuit and at the FCC (which we describe below), we agree that it is not necessary at this time to address in full the merits of each of Pac-West's causes of action.17 We will, instead, rely on our earlier ruling in D. 06-04-010, where - as noted above -- we concluded that dismissal without prejudice is the proper procedure where related matters are pending at the federal level.
Although we have decided to omit a significant portion of the case discussion that appeared in the PD, it should be noted that none of the cases cited by Pac-West in support of claims it contends are based solely on state law is inconsistent with the approach we take today, because none of those cases dealt with the propriety of dismissing state law claims without prejudice when related federal proceedings might be determinative of the issues presented by the state claims.18
4.2. The Complaints Implicate Federal Law.
In its comments on the PD, PacWest continues to argue that some of its causes of action plead purely state claims, and that this Commission has jurisdiction to determine a reasonable CMRS termination rate under state law.19 The problem with this theory is that paragraphs 28-29 of each of the complaints plead 47 C.F.R. § 20.11, the MetroPCS Review Order, "and other federal authority." Paragraphs 28 and 29, in turn, are incorporated into each of Pac-West's causes of action, creating an uncertainty about whether any of those causes of action are indeed based solely on state law.
Pac-West also claims that it "does not seek to invoke its Intrastate Tariff against Defendants," as such a result would be preempted by the FCC's T-Mobile decision.20 Here again, Pac-West's introductory paragraphs give the lie to its claims: paragraphs 23, 27 (quoted above), and 32 all reference Pac-West's Intrastate Tariff, and all are incorporated into each of Pac-West's causes of action, including those which do not otherwise mention the tariff.
Thus, the Pac-West Complaints at issue here inevitably ask us to wade into issues that are under review at the federal level, and/or have been left unclear by past FCC decisions.21 As described below, it remains to be seen whether and to what extent the FCC may on its own initiative provide guidance on the extent of a CMRS provider's obligation to compensate CLECs for terminating asymmetric traffic originated by the CMRS provider's customers, or may be forced by the D.C. Circuit to decide this issue itself.
4.3. As a Prudential Matter, this Commission Will Follow Its Earlier Decision to Defer Adjudicating these Cases in Order to Give the FCC and the D.C. Circuit the Opportunity to Clarify the Scope of the Commission's Authority Regarding CMRS-CLEC Traffic.
Pac-West's January 3, 2011 comments on the PD suggest that a decision by the D.C. Circuit on the petition for review of the MetroPCS Review Order can be expected momentarily, and that this Commission should simply wait until that decision is rendered and proceed from there.22 We believe the situation is more complex than that.
Before the FCC, Metro PCS had requested that the FCC provide some guidance to this Commission as to what factors the Commission might consider in setting a "reasonable rate" for asymmetrical CMRS-CLEC traffic terminated by North County. The FCC refused to do so in the MetroPCS Review Order,23 although it has softened this position somewhat before the D.C. Circuit.24 As noted previously, Metro PCS has argued in its petition for review that the FCC acted arbitrarily and capriciously by failing to give guidance about the parameters of a proper intrastate CMRS termination rate.25
The situation is further complicated by the FCC's most recent attempt to develop a "unified intercarrier compensation regime," in the form of a Notice of Proposed Rulemaking and Further Notice of Proposed Rulemaking (NPRM/FNPRM) issued on February 8-9, 2011.26 This massive document, comprising several hundred pages and over 700 paragraphs of text, directly addresses the issue of the sort of asymmetrical traffic at issue here, and suggests that the solution to this problem that the FCC adopted with respect to ISP-bound traffic in the so-called ISP Remand Order (i.e., rate caps, and/or bill & keep)27 might be extended to all asymmetrical or unidirectional "access stimulation" traffic. See, e.g., NPRM/FNPRM at ¶ 672 ("CTIA alleges that traffic stimulation involving reciprocal compensation rates between CMRS providers and competitive LECs is increasing");28 and ¶ 675 ("[s]ome states, such as Iowa, have taken action to curb access stimulation associated with intrastate access rates"). Indeed, paragraph 673 of the NPRM/FNPRM directly asks about the "impact, if any, of the Commission's recent North County [MetroPCS Review Order] decision," and whether "the decision has had any impact on traffic stimulation."
While we assume that the NPRM/FNPRM will have prospective effect only, it calls into question whether it would be worthwhile for this Commission to invest the significant resources that might be required to hold a costing proceeding to establish a reasonable CMRS termination rate. As noted above, one of the key concerns expressed in the June 30 PHC Ruling in these cases, as well as in D.10-06-006, was that going forward with the complaints here could effectively require this Commission to engage in an extensive costing proceeding to arrive at a reasonable rate for intrastate CMRS traffic termination, since all parties acknowledge that the T-Mobile Ruling prohibits ILECs and CLECs from setting rates for CMRS traffic termination through tariffs.29 Our decision on the NCC application cited the workload this costing work would create (and the potential for the work to be wasted) as one of the grounds for dismissing A.10-01-003 without prejudice. (D.10-06-006 at 16.)
While Pac-West is correct that this Commission has regularly used the TELRIC-based costs of ILECs as a benchmark in determining the reasonableness of CLEC rates,30 we have never ruled out the possibility that, in appropriate circumstances, CLECs might be required to submit cost studies for specified purposes. In this case, there is a non-frivolous argument for requiring such cost studies, because we think the approach that Pac-West has suggested in its papers here - simply approving the termination rate set forth in its intrastate tariff without further review, because that rate is based on the costs of AT&T California -may not pass muster as the type of "non-tariff procedural mechanism" that ¶ 14 of the MetroPCS Review Order said should be used to determine a CMRS termination rate.
The argument for waiting is also underscored by a recent FCC amicus brief filed in the Ninth Circuit in the AT&T v. Pac-West appeal.31 There, the FCC opined that this Commission had overstepped its bounds by applying Pac-West's intrastate tariff, rather than the ISP Remand Order's rules, to ISP-bound traffic, which is similar to the traffic at issue here because it is largely (if not completely) unidirectional.32 While asymmetric or unidirectional ISP-bound traffic has characteristics that have allowed the FCC to assert jurisdiction over it as interstate, the same policy concerns about regulatory arbitrage apply to the intrastate traffic at issue here, because such chat-room and other traffic is also asymmetric.33
Thus, while we agree with the FCC's position before the D.C. Circuit in the petition for review of the MetroPCS Review Order that CLECs are entitled (at least at this point in time) to some compensation for terminating CMRS traffic,( even if that traffic is asymmetric) 34, the rules that the FCC would have the states apply, and the specific terms of the FCC's referral of the dispute between MetroPCS and North County to this agency, are still undefined.
If Metro PCS succeeds in its petition for review before the D.C. Circuit, and/or if the FCC clarifies or changes the rules applicable to asymmetric CMRS to CLEC traffic, the time and effort this Commission would have to invest if it were to determine now an appropriate intrastate CMRS termination rate applicable to these cases could be either wasted or substantially diminished in its effect. Accordingly, in accordance with the cases described in Section 3.2 of this decision, the most appropriate course of action is to dismiss these four complaint cases without prejudice. If, after the decision from the D.C. Circuit, there remains anything for this Commission to decide, there will be a greater degree of assurance that the time we spend on those tasks will not be wasted.
On the other hand, this Commission should not have to wait indefinitely for the FCC to act. We are dismissing these cases without prejudice at this time in order to give the FCC (and/or the D.C. Circuit) an opportunity to clarify the applicable rules. If such clarity has not come about within the next 12 to 18 months, we invite Pac-West to refile these complaints. As noted above, if such a refiling occurs, Pac-West's claims will be preserved against any statute of limitation defense that arose after the filing of the original complaints, and will relate back to Pac-West's initial filings herein.
4.4. Arriving at a Reasonable Rate for Asymmetric CMRS-CLEC Traffic is More Difficult than Pac-West Suggests.
In its comments on the PD, Pac-West argues that the PD errs in ruling, "contrary to decades of state and federal precedent," that "the Commission may require a complex incremental or [TELRIC] cost study to establish a reciprocal compensation rate applicable to CLEC termination of local traffic." (Pac-West PD Comments at 9.) Rather than undertaking such an unjustified exercise, Pac-West argues, this Commission should follow the example of the New York Public Service Commission (NYPSC) in its February 4, 2010 Order Granting Motion to Dismiss in Part and Denying in Part and Granting Complaint in Part and Denying in Part (Initial Order) in Case 07-C-1541, Complaint of XChange Telecom, Inc. Against Sprint Nextel Corporation for Refusal to Pay Terminating Compensation.
In that order, according to Pac-West, the NYPSC exercised its authority under New York law and set a rate for the termination of wireless traffic over XChange's network based upon the reciprocal compensation rate of Verizon New York, "the largest ILEC in New York." (Pac-West PD Comments at 9.) Pac-West argues that this Commission should take the same approach here and reject the "premature and unnecessary advisory opinion" expressed in the PD that in order to set a termination rate for CMRS traffic, "cost studies are likely to be necessary." (Id. at 11.)
When read in its entirety, the NYPSC Initial Order is not nearly as simple in its analysis as Pac-West suggests. Rather, it grapples with the complexity of setting a rate where the traffic is asymmetric, and where the CLEC involved cannot compel arbitration.35 In a subsequent Notice Requesting Comments issued in the same proceeding (which Pac-West does not cite and which is described below), the NYPSC appears to have developed enough concerns about the termination rate set in the Initial Order to justify asking the affected parties for comments on the reasonableness of this rate.36 All of these factors support the conclusion in the PD that doing what Pac-West seeks here - a pro forma rubber-stamping of the termination rate contained in its intrastate tariff -- would not be appropriate, and might well fail to pass muster under the limited guidance on rate-setting the FCC has provided in the MetroPCS Review Order.
In the Notice Requesting Comments issued in the XChange v. Sprint Nextel docket in June of last year, the NYPSC noted that while Sprint Nextel and several other CMRS carriers had filed petitions for rehearing of the Initial Order, "very few comments were filed on the appropriateness of the actual rate established [in the Initial Order] pursuant to the FCC's pricing standards."37 Accordingly, the NYPSC asked the parties for comments that addressed "whether the rate established in our February 4, 2010 Order is reasonable and otherwise address the issues presented on rehearing."38 In response to this Notice, comments were filed during the summer and fall of 2010, and the entire case remains pending before the NYPSC.
Although Pac-West's January 3, 2011 comments strenuously argue that the PD engaged in a "premature and unnecessary advisory opinion" in suggesting that cost studies might be necessary in these cases, we believe that the Initial Order and the Notice Requesting Comments of the NYPSC in the XChange v. Sprint Nextel case demonstrate that the PD was right to conclude that Pac-West had failed to engage in a serious and focused analysis of the problems involved in setting a rate for the traffic at issue here.
Pac-West also argues that the PD erred in reaching a "premature and unfounded conclusion that [the] issue [of traffic pumping] is somehow relevant to CLEC wireless termination rates." (Pac-West PD Comments at 9, 11.) In view of the careful analysis in the NYPSC's Initial Order, and the New York Commission's subsequent request for comments on the reasonableness of the CMRS termination rate that it did set, the concerns expressed in the PD that cost studies might be necessary here, and that "discovery may be necessary concerning the actual nature of the traffic that Pac-West terminates for the defendants," were well-founded.
15 Pac-West Comments, at 2, 11, 14, passim.
16 Defendants' Reply Comments on PD, at 1, fn. 1.
17 Compare D.10-06-006, at 1-2 ("Since the Commission has decided to dismiss the application without prejudice at this time, the Commission will not address the merits of the application").
18 As noted in the PD, one of Pac-West's more serious allegations is that the defendants have unreasonably discriminated against Pac-West by refusing to pay it charges for terminating CMRS traffic, even though the defendants pay such charges to ILECs with which they have ICAs. Pac-West contends that this differing treatment violates Pub. Util. Code § 453. We demonstrate elsewhere in this decision why -- at least for the time being -- this practice appears to be permissible under federal law. The principal decision that Pac-West has cited in support of its § 453 claim is Gay Law Students Assn. v. Pacific Tel. & Tel. Co., 24 Cal.3d 458 (1979). That decision merely held, however, that a group of gay law students who had sued Pacific Telephone & Telegraph (Pacific) over its refusal to hire or promote openly homosexual persons stated a cause of action against Pacific under Pub. Util. Code § 453, as well as other provisions of state law. The case did not involve any claim of primary jurisdiction by a state or federal agency, nor - unlike the situation here - did it involve the pendency of any appeals in federal court that might have been determinative of the claims made by the law students.
The same is true of the principal decisions Pac-West cites to support its second cause of action, which alleges that the defendants' refusal to pay Pac-West termination charges constitutes a violation of Pub. Util. Code § 761. One of those is D.99-08-025 (2 CPUC3d 97), the decision on rehearing in Irvine Apartment Communities v. Pacific Bell. Pac-West argues that this decision stands for the proposition that § 761 "has frequently `been applied in complaint cases' and that, in conjunction with § 762, allows `aggrieved parties to complain about utility conduct which may comply with all existing laws and regulations but nonetheless may be unreasonable.'" As the PD demonstrated, however, the basic holding of D.99-08-025 was to reaffirm the Commission's earlier decision in D.98-12-023 (83 CPUC2d 286) that Pacific Bell had violated § 453 when it refused a request by an apartment owner to reconfigure the demarcation point between the apartment owner's telecommunications facilities and those owned by Pacific Bell so that Cox Communications could compete with Pacific Bell to provide residential telephone service at the apartment owner's properties. As the PD also explained, D.98-12-023 differed from the situation here because it did not present any potential for conflict with a decision in a pending federal appeal.
Nor do the cases cited by Pac-West in support of its unjust enrichment claim preclude a dismissal without prejudice here. In support of its unjust enrichment claim, Pac-West relies on common law principles and two Commission decisions. In the first of these, Re Southern California Gas Company, D.96-01-014 (64 CPUC2d 496), the Commission ordered interstate gas pipeline shippers to pay for interconnection access service provided by a California gas utility. The Commission's decision was based both on the terms of the gas utility's tariff and common law principles of unjust enrichment. (64 CPUC2d at 500-501.) However, when the interstate shippers sought relief on account of these charges from the Federal Energy Regulatory Commission (FERC), that agency held that this Commission lacked jurisdiction to impose the charges, because they amounted to an impermissible access charge on interstate shippers seeking to introduce gas into an intrastate system. The FERC's decision was upheld against a claim that it was arbitrary and capricious in Public Utilities Com'n of Cal. V. FERC, 143 F.3d 610, 614 (D.C. Cir. 1998).
The other decision cited by Pac-West in support of its unjust enrichment claim, West San Martin Water Works, Inc. v. San Martin County Water District, D.97-02-040 (71 CPUC2d 75), involved a situation in which this Commission ordered the defendant water district to return to the complainant possession and control of certain facilities the district had seized, because the facilities had been specifically ceded by a predecessor of the water district to the complainant 15 years before as a contribution in aid of construction. D.97-02-040 did not involve a situation in which related issues were being litigated in a federal appeal, and its brief discussion of this Commission's equitable powers must be read in light of the California Supreme Court's more extensive discussion of those powers (and their limitations) in Consumers Lobby Against Monopolies v. Public Utilities Com., 25 Cal.3d 891, 909-912 (1979).
19 See, e.g., Pac-West Comments, at pp. 4-7; see also Opposition to Joint Motion to Dismiss, filed September 2, 2010, at 9 ff ("Pac-West `s Complaints assert claims arising fully under state law").
20 Opposition, at 51.
21 The FCC's T-Mobile decision disapproved of tariffs as a basis for rating CMRS traffic terminated to local landline telephones, suggesting instead that CMRS providers and ILECs could enter into interconnection agreements. It did not address the situation of CLECs, which have no ability to demand interconnection agreements. 20 FCC Rcd at 4864-65, ¶16 (February 17, 2005).
22 Comments, at 2-3.
23 Metro PCS Review Order, at ¶ 21:
Recognizing that we might affirm the Bureau Merits Order, MetroPCS asks, in the alternative, that we provide guidance to the California PUC about how to establish a reasonable termination rate under the particular facts of this case. MetroPCS focuses especially on the facts that the traffic at issue is unidirectional toward North County and routed entirely to chat-lines. We decline MetroPCS's request. We believe that the California PUC is fully equipped to determine a reasonable termination rate under the specific circumstances presented. (Footnotes omitted.)
24 See FCC's May 27, 2010 Brief for Respondents, in MetroPCS California, LLC v. FCC, D.C. Circuit Case No. 10-1003, at 36, fn 32 ("...if a state were to set the charge for the intrastate component of interconnection `so high as to effectively preclude interconnection,' the state would be inviting federal preemption"), referencing the FCC's Second Report and Order re Implementation of Sections 3(n) and 332 of the Communications Act; Regulatory Treatment of Mobile Services (*9 FCC Rcd 1411 (1994) at ¶¶ 228, 231.
25 Initial Brief of Petitioner (filed April 27, 2010), MetroPCS California, LLC v. FCC, D.C. Cir. Case No. 10-1003, pp. 45-46.
26 FCC 11-13, In re Connect America Fund, WC Docket No. 10-90 and related proceedings (including Developing an Unified Intercarrier Compensation Regime, CC Docket No. 01-92), Notice of Proposed Rulemaking and Further Notice of Proposed Rulemaking (NPRM/FNPRM).
27 Order on Remand and Report and Order, Implementation of Local Competition Provisions in Telecommunications Act of 1996; Intercarrier Compensation for ISP-Bound Traffic, 16 FCC Rcd 9151 ¶¶1, 3-4, 78, 80-81 (2001) (ISP Remand Order).
28 The FCC asks for comment on whether a bill-and-keep regime should be imposed on LECs terminating traffic that exceeds a 3:1 terminating to originating ratio, a proposal adopted with regard to ISP-bound traffic in the FCC's ISP Remand Order.
29 Paragraph 14 of the T-Mobile Ruling provides in full:
Although we deny the CMRS providers' requested ruling under the current rules, we now take action in this proceeding to amend our rules going forward in order to make clear our preference for contractual arrangements for non-access CMRS traffic. As discussed above, precedent suggests that the Commission intended for compensation arrangements to be negotiated agreements and we find that negotiated agreements between carriers are more consistent with the pro-competitive policies reflected in the 1996 Act. Accordingly, we amend Rule 20.11 of the Commission's rules to prohibit LECs from imposing compensation obligations for non-access traffic pursuant to tariff. Therefore, such existing wireless termination tariffs shall no longer apply upon the effective date of these amendments to our rules. We take this action pursuant to our plenary authority under sections 201 and 332 of the Act, the latter of which states that "upon reasonable request of any person providing commercial mobile service, the Commission shall order a common carrier to establish physical connections with such service . . . " (20 FCC Rcd at 4863-64; footnotes omitted.)
30 Pac-West PHC Statement at 7-8; footnote omitted.
31 February 2, 2011 Amicus Brief for the Federal Communications Commission in Partial Support of Plaintiff-Appellant Urging Reversal, in Ninth Circuit No. 08-17030, AT&T v. Pac-West Telecom et al.
32 Id. at 6, 9, 20-21.
33 The matter is further complicated because, in D.06-06-055, the decision that gave rise to the AT&T v Pac-West appeal, the Commission believed it was defensible to apply a CLEC's tariff to the traffic at issue because there appeared to be no rule prohibiting it, and because the policies embodied in the Telecommunications Act of 1996 would not be frustrated. In these cases, by contrast, there clearly is a rule that prohibits the relief Pac-West is seeking, i.e., the T-Mobile Ruling's prohibition on using state tariffs to rate CMRS-LEC traffic. T-Mobile, supra, 20 RCC Rcd at 4863-64, and ¶¶ 1, 3, 14, 19, passim.
34 FCC Respondents Brief, supra, at 19 ("general requirement that carriers compensate each other for terminating traffic that originates on the other carrier's network"), 34 ("by adopting Rule 20.11(b), the Commission has already determined that reasonable compensation is owed"), 35 ("right, under Rule 20.11(b), to be mutually compensated").
35 In the Initial Order, the NYPSC began its analysis by noting that in the T-Mobile Ruling, the FCC "expanded the scope of the negotiation/arbitration procedures set forth under § 252 to allow ILECs to request mandatory negotiation/arbitration from a CMRS provider and submit to the state's jurisdiction." (NYPSC Initial Order at 3.) However, the NYPSC continued:
The FCC opted not to expand the scope of the § 252 mandatory negotiation/arbitration to LEC-CMRS requests. Therefore . . . we find that XChange's request to enter into an ICA under the mandatory arbitration process pursuant to federal law is denied and Sprint's motion to dismiss in that regard is granted. The Commission does not have the authority to arbitrate an ICA between a CLEC and a CMRS provider under § 252 of the Act. (Id. at 3; footnotes omitted.)
The NYPSC then concluded that it had jurisdiction to set a termination rate under New York law, because - apart from forbidding the use of tariffs for doing so - "the FCC did not [in the T-Mobile Riling] preempt state regulation of intrastate rates that LECs can charge CMRS providers for termination of their traffic." (Id.) The New York Commission noted that the FCC had recently reaffirmed this conclusion in the MetroPCS Review Order.
The New York Commission then turned to the question of what the termination rate should be. The NYPSC rejected XChange's argument that it was entitled to a rate comprised of Verizon's tandem reciprocal compensation rate, its tandem transit rate, and its record processing charge, because it was clear that XChange's network did not perform all of these functions:
The Commission previously determined in its Competition II Proceeding that CLECS should be entitled to, at a minimum, charge the per-minute Verizon tandem termination rate if their networks were functionally equivalent to Verizon's. However, we are advised by Department Staff that in this particular situation the functionality of XChange's network is not operationally equivalent to a tandem arrangement since the calls coming into the XChange switch are terminated to customers on that switch and not routed to other XChange local switches for termination. Since XChange's network does not replicate the functionality of a tandem, but only an end-office switch, it is appropriate that the rate reflect the cost associated only with end office call termination. (Id. at 12-13; footnote omitted.)
While the NYPSC rejected Sprint's argument that a "convergent traffic" rate should apply because "there is no evidence that XChange is involved in a traffic-pumping scheme whereby XChange has a relationship with certain end-users in an effort to generate large one-way call volumes, thereby exploiting intercarrier compensation," the New York Commission also emphasized that "Sprint is free to petition the Commission to consider the appropriateness of a convergent rate . . . on a showing that the traffic imbalance between the XChange and Sprint networks warrants such treatment." (Id. at 14; footnoted omitted.)
Finally, the NYPSC denied XChange's request for interim rate relief, "because the rate we establish today will apply prospectively. Any retroactive relief is not appropriate given that, up until now, the Commission has not acted in establishing a rate for the exchange of this type of traffic and no agreement exists governing the [parties'] interconnection." (Id.)
36 June 21, 2010 Notice Requesting Comments, at 3 (available at http://www.dps.state.ny.us/New_Search.html, by searching for Case No. 07-C-1541)
37 Id.
38 Id.
