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Pacific Bell Telephone Co. v. Public Utilities Commission of the State of California

April 6, 2005

PACIFIC BELL TELEPHONE COMPANY, PLAINTIFF,
v.
THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA, ET AL., DEFENDANTS.
VERIZON CALIFORNIA, INC., PLAINTIFF,
v.
THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Susan Illston United States District Judge

ORDER RE: PLAINTIFFS' MOTIONS FOR SUMMARY JUDGMENT

On March 17, 2005, the Court heard arguments on the motions for summary judgment filed by each plaintiff in these two related cases. Having carefully considered the arguments of counsel and the papers submitted, the Court hereby VACATES the CPUC's January 30, 2003 Decision; and REMANDS the matter to the CPUC in order for it to adopt regulations in compliance with FCC regulations. The parties' motions for summary judgment are accordingly GRANTED in part and DENIED in part.

BACKGROUND

This action arises out of the alleged violation by the California Public Utilities Commission ("CPUC" or "Commission") of the Federal Telecommunications Act of 1996 ("1996 Act" or "Act"), the Federal Communications Commission ("FCC") rules implementing the 1996 Act, and the Takings and Due Process Clauses of the United States Constitution and the California Constitution. On January 30, 2003, the CPUC issued Decision No. 03-01-077 ("Decision") requiring Pacific Bell Telephone Company ("SBC California") to: (i) provide competing local exchange telecommunications carriers ("CLECs") with access to the high-frequency portion of the electronic spectrum of a copper loop ("HFPL") in SBC California's network as an unbundled*fn1 network element*fn2 ("UNE");*fn3 (ii) charge a monthly recurring price of zero ($0.00) for the HFPL; and (iii) refund to CLECs that have purchased the HFPL all of their previous payments for the HFPL, which were made under the interim monthly price of approximately $5.00 per HFPL. Id. at ¶ 1.

The CPUC implemented these requirements even though the FCC decision initially determining that the HFPL was a UNE was vacated by the D.C. Circuit in United States Telecom Association v. Federal Communications Commission, 290 F.3d 415 (D.C. Cir. 2002) ("USTA I") as inconsistent with the 1996 Act. At the time the CPUC issued the Decision, the FCC had not yet issued a new decision or rules addressing the issue.

In response to the D.C. Circuit's ruling in USTA I, the FCC released its order containing the new rules, i.e., the "Triennial Review Order" or "TRO," on August 21, 2003. See In the Matter of Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers, 2003 WL 22175730 (Aug.21, 2003). The TRO did not require unbundling of HFPL on a nationwide basis. TRO at ¶ 255. The FCC reversed itself based on its findings that CLECs could engage in line splitting, in which one CLEC provides voice service on the low frequency portion of the loop and the other provides DSL on the high frequency portion. Id. at ¶ 259. The FCC also considered competition from cable companies, which provide nearly 60 percent of all high speed lines. Id. at ¶ 262. Based in part on these findings, the FCC determined that the "costs of unbundling the HFPL outweigh the benefits." Id. at ¶ 263.

The D.C. Circuit upheld this portion of the TRO in United States Telecom Association v. Federal Communications Commission, 359 F.3d 554 (D.C. Cir. 2004) ("USTA II"). State regulatory commissions also were parties to the action and had argued that the TRO "improperly preempts state unbundling regulations that exist independent of the Commission's federal unbundling regulations enacted pursuant to [47 U.S.C.] § 251." USTA II, 359 F.3d at 594. However, the D.C. Circuit found that the states' claim was not ripe: "The general prediction voiced in ¶ 195 [that a state's decision to unbundle a network element would likely conflict with the federal regime] does not constitute final agency action, as the Commission has not taken any view on any attempted state unbundling order." Id. To this date, the FCC has still not taken any view on the CPUC's decision to unbundle HFPL.

On May 5, 2004, this Court denied intervenor-defendant Covad Communication Company's ("Covad") motion to dismiss and granted defendant CPUC's motion to hold the proceedings in abeyance until the Supreme Court decided whether it would grant certiorari to review the D.C. Circuit's decision in USTA II. On July 29, 2004, Verizon California, Inc. ("Verizon") also filed a complaint in this Court against the CPUC, seeking declaratory and injunctive relief because the CPUC Decision is inconsistent with the FCC's TRO and substantially prevents the FCC's implementation of the provisions of the 1996 Telecommunications Act. This Court issued an order relating the Verizon case (C 04-3092 SI) to the Pacific Bell/SBC California case (C 03-1850 SI) already before this Court.

On October 12, 2004, the Supreme Court denied certiorari in USTA II. As a result, on January 14, 2005 plaintiffs in each action filed motions for summary judgment, renewing their argument that the CPUC's requirement to unbundle HFPL is preempted by the FCC's holding in the TRO. Both motions are before the Court today.

LEGAL STANDARD

Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c).

DISCUSSION

1. Unbundling ...


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