United States District Court, W.D. Michigan, Southern Division
OPINION AND ORDER
L. Maloney United States District Judge.
matter is before the Court for a review of administrative
actions taken by the Michigan Public Service Commission. For
the reasons stated below, the Commission's determination
must be affirmed in part and reversed and remanded in part.
enacted the Telecommunications Act of 1996, 47 U.S.C. §
152 et seq., to mandate “that local service,
which was previously operated as a monopoly overseen by the
several states, be opened to competition.” MCI
Telecomm. Corp. v. Bell Atl., 271 F.3d 491, 497 (3d Cir.
2001). Congress required the incumbent local exchange
carriers to cooperate with competitive local exchange
carriers to allow the CLECs to enter the market, either by
connecting their equipment to the ILEC's existing network
or by purchasing or leasing existing network elements and
services. Id. The ILECs and CLECs, through
negotiation or arbitration, enter into “interconnection
agreements, ” which set out the appropriate terms,
rates, and conditions. Id. Congress directed the
Federal Communications Commission (FCC) to promulgate
implementing regulations, but gave oversight of the
interconnection agreements to the state public-utility
aggrieved by a determination in an interconnection
arbitration may bring an action “in an appropriate
Federal district court.” 47 U.S.C. § 252(e)(6).
Accordingly, there is “no doubt that federal courts
have jurisdiction under § 1331 to entertain”
claims that a state commission violated federal law in
resolving issues under the Act. Verizon Md., Inc. v. Pub.
Serv. Comm'n of Md., 535 U.S. 635, 642 (2002).
reviewing state public service commission orders under the
Act, this [C]ourt is ‘limited to determining whether
the order is consistent with sections 251 and 252 of the
Act.'” Mich. Be l Tel. Co. v.
MCI Metro Access Transmission Servs., Inc., 323 F.3d
348, 354 (6th Cir. 2003) (quoting Mich. Bell. Tel. Co. v.
Strand, 305 F.3d 580, 586 (6th Cir. 2002)). This Court
must “review the Commission's interpretation of the
Act de novo . . ., according little deference to the
Commission's interpretation of the Act.”
Id. However, “[w]ith respect to the
Commission's findings of fact, [this Court] appl[ies] the
arbitrary and capricious standard.” Id.
“The arbitrary and capricious standard is the most
deferential standard of judicial review of agency action,
upholding those outcomes supported by a reasoned explanation,
based upon the evidence in the record as a whole.”
Michigan Bell Telephone's (AT&T Michigan's)
Claims I and II
Michigan Public Service Commission (hereinafter the
Commission) erred when it prematurely rejected the agreement
between Sprint and Michigan Bell Telephone (hereinafter
AT&T Michigan), and instead ordered those companies to
submit an interconnection agreement that included the IP
interconnection language the Commission preferred.
Third Circuit has provided a helpful summary framework for 47
U.S.C. § 252:
Section 252 sets out the process by which interconnection
agreements between ILECs and CLECs are to be established.
See MCI, 222 F.3d at 328; GTE South, 199
F.3d at 737. An incumbent and a requesting carrier may
“negotiate and enter into a binding agreement.”
47 U.S.C. § 252(a)(1). Such negotiations generally will
begin with a request for interconnection by the CLEC. 47
U.S.C. § 252(a)(1). At any time during negotiations,
either party may ask the state utility commission to
participate in negotiations and mediate any differences. 47
U.S.C. § 252(a)(2). The Act's clear
preference is for such negotiated agreements.
See Iowa Utils. I, 525 U.S. at 405, 119 S.Ct. 721
(Thomas, J., concurring in part and dissenting in part). An
agreement reached through negotiation need not conform to all
the detailed, specific requirements of § 251;
negotiation consequently bestows a benefit to those carriers
able to resolve issues through negotiation and compromise.
See MCI Telecomm. Corp. v. U.S. West Commc'ns,
204 F.3d 1262, 1266 (9th Cir. 2000); 47 U.S.C. §
252(a)(1). A negotiated agreement must merely be
nondiscriminatory to a carrier not a party to the agreement
and also be consistent with the public interest. See
47 U.S.C. § 252(e)(2)(A).
MCI Telecomm. Corp., 271 F.3d at 500 (emphasis
simply, “[p]rivate negotiation . . . is the centerpiece
of the Act.” Verizon North v. Strand, 309 F.3d
935, 940 (6th Cir. 2002) (internal citation and quotation
dispute goes to arbitration, the Commission has a duty to
make sure the requirements of § 251 are satisfied.
See 47 U.S.C. § 252(e)(2)(B). However, the Act
allows parties to negotiate binding terms
“without regard to the standards set forth in
subsections (b) and (c) of section 251.” 47 U.S.C.
§ 252(a); see § 252(e)(2)(A) (describing
that an agreement adopted by negotiation can only be rejected
if it discriminates against a party not to the agreement or
if it is contrary to the public interest).
procedural context in which this case arises is fairly
unsuccessful initial negotiations, several unresolved issues
between the parties were submitted for binding arbitration.
The Commission facilitates so-called “baseball
arbitration, ” where both parties submit proposals, and
the Commission chooses one.
Commission preliminarily adopted Sprint's proposal for
mandatory IP interconnection, the primary disputed issue in
this case. Accordingly, the Commission ordered the parties to
file a final ICA that reflected the terms as arbitrated.
after several extensions of time to file a final proposed
interconnection agreement, the parties negotiated different
terms with respect to TDM and IP interconnection, and filed a
joint submission in a new docket number.
filing included the following relevant language:
Pursuant to Sections 251 and 252 of the Act, Sprint and
AT&T Michigan engaged in good faith negotiations for an
interconnection agreement. Portions of the Agreement were
completed as a result of these negotiations.
The remaining portions were adopted by arbitration in MPSC
Case No. U-17349, in which the Commission directed AT&T
Michigan and Sprint to submit an agreement conforming to the
December 6, 2013 Commission Order in that case (the
“Arbitration Order”). A copy of the Agreement is
submitted with this joint submission as Exhibit A.
Sprint and AT&T Michigan hereby further notify the
(a) The parties have arrived at a contingent resolution of
the issue that was designated as Issue I in MPSC Case No.
(b) Pursuant to such contingent resolution, the Agreement
submitted herewith does not include the language for IP-to-IP
Interconnection proposed by Sprint for Issue 1 in that case
but, instead, includes the following language in the General
Terms and Conditions:
311.2.2 All traffic that Sprint exchanges with AT&T
Michigan pursuant to this Agreement will be delivered in TDM
format. 22.214.171.124 Nothing in this Agreement, including the
foregoing section 126.96.36.199, shall be construed to prohibit
the Parties from agreeing that Sprint may exchange traffic
with AT&T Michigan pursuant to a separate agreement, and
nothing herein prohibits Sprint from exchanging traffic with
AT&T Michigan in IP format pursuant to such an
(c) If the contingency upon which the parties' resolution
of Issue 1 depends is not fulfilled, the parties may, on or
about July 15, 2014, submit for MPSC review pursuant to
section 252(e)(2)(B) of the Telecommunications Act of 1996,
an amendment to the ICA building, as arbitrated language, the
language for IP-to-IP Interconnection proposed by Sprint for
Issue 1 in Case No. U-17349, and providing for the deletion
of the language set forth above.
No. 23-7 at PageID.2290-91.)
Commission issued an order rejecting the proposed agreement
on March 18, 2014. (See ECF No. 23-27 at
PageID.2484.) The Commission took issue with the proposed
language on “Issue 1” above, which was the only
language to stray from the arbitration order.The
Commission's order is not a model of clarity, but the
Court distills two reasons that the Commission rejected the
language. Both were legally erroneous.
The MPSC unlawfully rejected the portion of the
agreement adopted by negotiation after arbitration
by using the substantive standards for arbitration.
the Commission held, at least implicitly, that because it had
already favored Sprint's language in arbitration and
believed that § 251 required IP interconnection, the
parties were not free to negotiate otherwise. (See
id. at PageID.2487 (“In its December 6, order, the
Commission found that under Section 251(c)(2) of the FTA,
AT&T Michigan must provide Sprint with IP-to-IP
interconnection. . . . Accordingly, the Commission finds
that the parties must file, for Commission approval or
rejection, the agreement by which AT&T Michigan
shall provide Sprint with IP-to-IP
interconnection.” (emphasis added)), PageID.2489
(“Sprint Spectrum L.P. and AT&T Michigan shall
submit an internet protocol-to-internet protocol
interconnection agreement for Commission approval . . .
.”) (emphasis added)).)
the Act contemplates that parties may and should
“participate further in the negotiations, ” even
after arbitration. See § 252(b)(5). Indeed, the
failure “to continue to negotiate in good faith,
” even after unresolved issues are submitted to
arbitration, is forbidden by the Act. See id. To
hold that parties may not subsequently negotiate after
arbitration, but before the final approval stage, would be
inconsistent with the statutory language, purpose, and
relevant regulations. See id.; 47 C.F.R. §
51.807(h) (“Absent mutual consent of the
parties to change any terms and conditions adopted by the
arbitrator, the decision of the arbitrator shall be
binding on the parties.” (emphasis added)); see
also Verizon North, 309 F.3d at 935 (“Private
negotiation . . . is the centerpiece of the Act.”);
In the Matters of Deployment of Wireline Servs. Offering
Telecomm. Capability, 14 F.C.C.R. 20912, 20982, 1999 WL
1124073, at ¶ 158 (F.C.C. 1999) (“We reiterate
here our conclusion . . . that state arbitration of
interconnection agreements will be expedited and simplified
by a clear statement of terms that must be included in every
arbitrated agreement, absent consent to different
terms.”) (emphasis added)).
“agreement” is not, in fact, “submitted for
approval” until after arbitration occurs.
See 47 U.S.C. § 252(e)(1) (“Any
interconnection agreement adopted by negotiation or
arbitration shall be submitted for
approval.”). Thus, once parties submit an
agreement that reflects both negotiated and arbitrated
language, a commission must either “approve or reject
the agreement.” But it “may only reject”
“an agreement (or any portion thereof) adopted by
negotiation” if it makes certain factual findings under
§ 252(e)(2)(A); and it may only reject “an
agreement (or any portion thereof) adopted by
arbitration” if it makes separate factual findings
under § 252(e)(2)(B). A commission may not find that a
portion of an agreement “adopted by negotiation”
that was “submitted” is inconsistent with the
statutory section that only applies to a portion of an
agreement “adopted by arbitration, ” even if the
parties negotiate after arbitration and mutually
“submit” an agreement that does not perfectly
mirror “terms and conditions [previously] adopted by
the arbitrator.” See 47 C.F.R. §
a final agreement that contains both negotiated and
arbitrated terms is not at all unusual; the Commission
carries separate responsibilities in evaluating “an
agreement (or any portion thereof) adopted by
negotiation” and “an agreement (or any
portion thereof) adopted by arbitration”), as the
statutory language provides and case law reflects.
See § 252(e)(2) (noting the State
Commission's separate duties to evaluate negotiated
versus arbitrated language); see also, e.g., Indiana Bell
Tel. Co., Inc. v. McCarty, 30 F.Supp.2d 1100, 1102 (S.D.
Ind. 1998) (“The IURC . . . approved the parties'
final agreement, which contains a mix of negotiated and
the parties were permitted to negotiate after arbitration but
prior to any agreement being “submitted for approval,
” 47 U.S.C. § 252(e)(1), and the parties agreed to
other language, the Commission should have analyzed the final
negotiated language under the negotiation, and not
arbitration, standard. Thus, it was no longer the
Commission's place to evaluate, as it did (see
ECF No. 23-27 at PageID.2487-2489), whether the
“portion” of the agreement “adopted by
negotiation” met “the requirements of section
251.” Compare 47 U.S.C. § 252(e)(2)(A)
with § 252(e)(2)(B); see 47 C.F.R.
§ 51.3 (“[A] state commission shall have authority
to approve an interconnection agreement adopted by
negotiation even if the terms of the agreement do not comply
with the requirements of this part.”). And thus, the
Commission could only determine whether the
“portion” of the agreement “adopted by
negotiation” either 1) “discriminate[d] against a
telecommunications carrier not a party to the
agreement” or 2) “[wa]s not consistent with
public interest, convenience, and necessity.” 47 U.S.C.
the Commission's first ground for rejecting the proposed
ICA-that it had already decided that IP interconnection was
mandatory, and the parties therefore had to comply with ...