DATE:	August 24, 2011
TO:	Office of Commission Clerk (Cole)
FROM:	Office of the General Counsel (Tan) Division of Regulatory Analysis (Gowen, King)
RE:	Docket No. 090538-TP – Amended Complaint of Qwest Communications Company, LLC against MCImetro Access Transmission Services (d/b/a Verizon Access Transmission Services); XO Communications Services, Inc.; tw telecom of florida, l.p.; Granite Telecommunications, LLC; Broadwing Communications, LLC; Access Point, Inc.; Birch Communications, Inc.; Budget Prepay, Inc.; Bullseye Telecom, Inc.; DeltaCom, Inc.; Ernest Communications, Inc.; Flatel, Inc.; Lightyear Network Solutions, LLC; Navigator Telecommunications, LLC; PaeTec Communications, Inc.; STS Telecom, LLC; US LEC of Florida, LLC; Windstream Nuvox, Inc.; and John Does 1 through 50, for unlawful discrimination.
AGENDA:	09/8/11 – Regular Agenda – Motion to Dismiss – Oral Argument Requested – Participation is at the Discretion of the Commission
COMMISSIONERS ASSIGNED:			All Commissioners
PREHEARING OFFICER:			Edgar
CRITICAL DATES:			None
SPECIAL INSTRUCTIONS:			None
FILE NAME AND LOCATION:			S:\PSC\GCL\WP\090538.RCM.DOC

 

 Case Background

 Qwest Communications Company, LLC (Qwest) filed a complaint on December 11, 2009, alleging rate discrimination in connection with the provision of intrastate switched access services.  Qwest was granted leave to file an Amended Complaint on October 22, 2010, adding additional Respondents.[1]  The current Respondents are MCImetro Access Transmission Services (d/b/a Verizon Access Transmission Services); XO Communications Services, Inc.; tw telecom of florida, l.p.; Granite Telecommunications, LLC; Broadwing Communications, LLC; Access Point, Inc.; Birch Communications, Inc.; Bullseye Telecom, Inc.; DeltaCom, Inc.; Ernest Communications, Inc.; Flatel, Inc.; Lightyear Network Solutions, LLC; Navigator Telecommunications, LLC; PaeTec Communications, Inc.; STS Telecom, LLC; US LEC of Florida, LLC; Windstream NuVox; and John Does 1 through 50 (CLECs whose true names are currently unknown).[2]

Generally speaking, switched access charges refer to payments made by long distance carriers to local service providers for originating and terminating calls on local telephone networks.  Both ILECs and CLECs charge interexchange carriers (IXCs), such as Qwest, interstate and intrastate access charges.  In this complaint, Qwest alleges that private contracts gave other carriers rates that differed from a carrier’s published pricelist and were far less than the prices offered to Qwest. 

To date, all actions taken regarding this complaint have been preliminary in nature:

·        On May 7, 2010, the Commission granted the Joint Movants’ Partial Motion to Dismiss in Order No. PSC-10-0296-PCO-TP, to the extent Qwest sought monetary damages and injunctive relief.

·        On March 2, 2011, by Order No. PSC-11-0145-FOF-TP, the Commission denied the Joint Movants’ Motion to Dismiss, holding that Qwest has standing to pursue a complaint, has stated a cause of action for which relief may be granted, and that it has the authority to investigate the allegations in this Complaint.

·        On May 16, 2011, in Order No. PSC-11-0222-FOF-TP, the Commission held that the Joint Movants did not identify a point of fact or law which was overlooked or which the Commission failed to consider in its previous decision, and denied the Joint Movants’ Joint Motion for Reconsideration.

·        On June 28, 2011, in Order No. 11-0282-PCO-TP, the Commission denied the Joint Movants’ request for abeyance in the docket and scheduled an issue identification meeting.

·        On July 1, 2011, Chapter 2011-36, Laws of Florida, (Regulatory Reform Act) became effective, repealing and amending statutes in Chapter 364.

·        On July 8, 2011, the Joint Movants filed a Joint Motion to Dismiss for Lack of Subject Matter Jurisdiction, a Joint Motion to Stay and Requests for Oral Argument for each Motion.[3]

 

·         On July 11, 2011, Qwest filed a Request for Extension of Time to Respond to the Joint Motion to Dismiss.

 

·        On July 18, 2011, Order No. PSC-11-0304-PCO -TP granted the extension of time and postponed the scheduled issue identification meeting pending resolution of the Joint Motion to Dismiss.  Qwest filed its Response to the Joint Motion to Dismiss on August 1, 2011.

 

            This recommendation addresses the Joint Motion to Dismiss Qwest’s Amended Complaint due to lack of subject matter jurisdiction.  The Commission is vested with jurisdiction over these matters pursuant to the provisions of Chapters 364 and 120, F.S.
Discussion of Issues

 

Issue 1: 

 Should the Commission grant the Joint Movants' request for Oral Argument?

Recommendation: 

 Yes. Oral Argument would assist the Commission’s consideration of the Motion to Dismiss. Staff recommends the parties be allowed ten minutes per side.  (Tan)

Staff Analysis: 

 Rule 25-22.0022(3), Florida Administrative Code (F.A.C.), states that granting or denying a request for oral argument is within the sole discretion of the Commission or the Prehearing Officer, whichever presides over the matter to be argued. 

            The Joint Movants argue that the recent revision of Chapter 364, by the Regulatory Reform Act, changes the Commission’s jurisdiction over telecommunications.  The Joint Movants contend that oral argument would allow the Commission to understand how the recent changes in law and lack of a savings clause remove the Commission’s jurisdiction and Qwest’s basis for relief in this complaint.[4]  The Joint Movants request 15 minutes per side for oral argument.  The Joint Movants further request time permitted for rebuttal.  Qwest did not file a response to the Joint Movants’ Request.

Analysis

            The Commission has traditionally granted oral argument upon a finding that oral argument would aid the Commission in its understanding and disposition of the underlying matter.  Rule 25-22.0022(3), F.A.C., provides that granting or denying a request for oral argument is within the sole discretion of the Commission.

 

Staff believes that the Commissioners would benefit from oral argument regarding the impact of the Regulatory Reform Act on the Commission’s authority in this case.  Therefore, staff recommends that the Commission grant the Joint Movants’ Request for Oral Argument.  If the Commission, in its discretion, allows oral argument, staff recommends that each side be allowed 10 minutes to present their arguments.

 

Conclusion

 

Staff recommends that the Movants’ Request for Oral Argument be granted.

Issue 2: 

 Should the Commission grant the Joint Movants' Motion to Dismiss for lack of subject matter jurisdiction?

Recommendation: 

 No. The Commission retains jurisdiction over Qwest’s Complaint.  The Commission should deny the Joint Movants’ Motion to Dismiss because Qwest has stated a cause of action for which relief may be granted and the issue identification meeting should be rescheduled.    (Tan)

Staff Analysis: 

 

Qwest’s Amended Complaint Against all Respondents

 

Qwest’s amended complaint seeks relief from the Joint CLECs and Verizon Access for engaging in unlawful rate discrimination.  Specifically, Qwest alleges that by extending to other IXCs contracts or agreements that contained rates that differed from those published in rate schedules or pricelists, advantages were withheld from Qwest.  As such the Joint CLECs and Verizon Access failed to abide by their pricelists, and charged Qwest more for switched access than other similarly situated IXCs.  Qwest requests the following three claims of relief:

1) refund overcharges with interest,

2) lower intrastate switched access rates to be consistent with rates offered to other       IXCs, and

3) file with the Commission any such contract service agreements.

Standard of Review

A motion to dismiss raises as a question of law the sufficiency of the facts alleged to state a cause of action.[5]  In order to sustain a motion to dismiss, the moving party must show that, accepting all allegations as true, the petition still fails to state a cause of action for which relief may be granted.[6]  The moving party must specify the grounds for the motion to dismiss, and all material allegations must be construed against the moving party in determining if the petitioner has stated the necessary allegations.[7]  A sufficiency determination should be confined to the petition and documents incorporated therein, and the grounds asserted in the motion to dismiss.[8]

To evaluate a motion to dismiss, all allegations in the petition must be viewed as true and in the light most favorable to the petitioner in order to determine whether there is a cause of action upon which relief may be granted.[9]

 

The Joint Movants’ Motion to Dismiss

             The Legislature enacted a repeal and revision of applicable Statutes altering Commission jurisdiction.

The Joint Movants assert that because both statutes, 364.08, Florida Statutes (F.S.) (provided that a carrier must charge rates established in the schedule/available pricelist) and 364.10, F.S. (provided that a telecommunications company may not prejudice or show undue preference to any person or locality) have been repealed, Qwest’s First Claim for Relief fails.

 The Joint Movants contend that Qwest’s Second and Third Claims for Relief are also impacted by the revision of Section 364.04, F.S. The Joint Movants identify the following changes to the statute:

·        Commission jurisdiction over the form and content of pricelists was eliminated; and

·        Carriers are permitted to enter into private contracts with rates that differ from published rates.

The Joint Movants believe the Legislature intended that claims such as those raised by Qwest be eliminated.[10] 

The lack of a savings clause eliminates the Commission’s jurisdiction over this complaint.

            The Joint Movants argue that the Legislation lacks a savings clause thereby precluding the Commission from retaining authority after July 1, 2011, and that powers are held only as delegated by the Legislature.[11]  The Joint Movants believe that only with an express savings clause may the Commission consider claims that a party engaged in prohibited conduct prior to a change in law.[12]  Contending that the absence of a savings clause means that the Commission has no ability to enforce the repealed statute, the Joint Movants argue that a “repeal of a statute that has conferred jurisdiction eliminates such jurisdiction, even over pending matters.”[13]   Further, the Joint Movants claim agencies cannot apply prior law to pending cases where the conduct in question is no longer prohibited by a statute.[14]

Applying a statute that has been repealed after the effective date, would allow the Commission to operate beyond the control of the Legislature.[15]  The Joint Movants argue that the Legislature has previously contemplated and enacted savings clauses, including in 1980, 1990, 1995, 2007 and 2010.[16]  Therefore, the Joint Movants contend that with respect to the Commission’s jurisdiction, the Commission would be reversed by the appellate court if it attempts to assert jurisdiction over matters in this docket, where the court determined that the statutory amendments should not be applied retroactively to pending cases.[17]

The Commission has already begun to implement the Regulatory Reform Act in other areas of regulation.

By closing pending wireless ETC applications due to lack of jurisdiction, the Joint Movants argue that the Commission recognizes that its authority “only extends to the applicable laws delegated to it by the Legislature that are in effect at the time of its decision, not the law when the case commenced.”[18]  The Joint Movants assert that the lack of Commission jurisdiction questions Qwest’s vested rights and standing to bring forth a claim before the Commission. Ultimately, the Joint Movants argue that Qwest’s complaint should be dismissed in its entirety, stating that no jurisdiction remains over any portion of Qwest’s complaint.

Qwest’s Response to the Joint Motion to Dismiss

Qwest argues that the Joint Motion to Dismiss seeks to prevent the Commission from evaluating the Respondents “unlawfully discriminatory and anti-competitive conduct.”[19]  Qwest asserts that legislation is presumed not to have retroactive effect and may only be applied retroactively if a) the legislature clearly intended the legislation to be retroactive and b) it would be constitutionally permissible to apply it retroactively.[20]  Qwest argues that the Joint Movants have not established that the Legislature intended the Regulatory Reform Act to be retroactive or that it intended to limit the Commission’s jurisdiction to prevent anti-competitive carrier-to-carrier behavior.

Clear legislative intent for retroactive application has not been established.

Qwest contends that absent clear legislative intent, Florida law establishes that new statutes cannot be applied retroactively if new legal consequences are attached to events completed prior to the enactment of the new law.[21]  Clear legislative intent, determined primarily by the language of the statute, establishes that the Legislature considered any potential unfairness.[22]

Qwest asserts that although Sections 364.08 and 364.10(1), F.S., created substantive protections against rate discrimination, the Commission has recognized other sources of Commission jurisdiction over Qwest’s claims.  Specifically, Sections 364.16(1) and (2), F.S., continue to establish the Commission’s jurisdiction over carrier-to-carrier relationships and the prevention of anti-competitive behavior.[23] 

Qwest contends that clear evidence of legislative intent to apply the legislation retroactively must first be established before determining that a statute may be applied retroactively, otherwise the law is prospective.[24]  Rather, a statute without a savings clause may not be applied retroactively where substantive rights are involved.[25]  Qwest contends that if the Commission were unable to address the Joint Movants’ behavior which occurred prior to the change in law, Qwest’s substantive claim would be lost.

Qwest asserts that the legislative intent was to limit the Commission’s jurisdiction over retail services and not carrier-to-carrier anti-competitive behavior.[26]  Qwest notes that in the Regulatory Reform Act, the Legislature was silent and did not provide an explicit provision that carriers who have violated non-repealed provisions are no longer responsible or liable for actions prior to July, 2011.[27]

Retroactive application is not constitutionally permissible.

Qwest argues that a retroactive application of the legislation would not be constitutionally permissible.[28]  If a retroactive application of a statute impairs “vested rights, creates new obligations, or imposes new penalties,” the retroactive application is flawed.[29]  Qwest asserts a vested right, as the conduct occurred prior to the enactment of the change in law.[30]  Assuming for the purposes of the Motion to Dismiss that the allegations are correct, Qwest contends that for each billing period prior to and including June 30, 2011, there is a vested right to a cause of action stemming from the statutes, mainly Sections 364.04, 364.08, and 364.10, F.S.[31]

The Commission retains jurisdiction over anti-competitive behavior.

Qwest believes that the legislature clearly intended for the Commission to retain authority to protect carriers against anti-competitive behavior, including the allegedly discriminatory rate treatment of the purchase of intrastate switched access, which is a wholesale service.[32]  Qwest notes that the legislature also amended Section 364.16, F.S., continuing the Commission’s regulatory oversight over carrier-to-carrier relationships and the prevention of anti-competitive behavior.[33]  Qwest argues that the legislature intended for the Commission to continue to prevent the abuse of switched access practices.

Qwest contends that the legislature intended to deregulate retail services and continue the Commission’s jurisdiction over wholesale, carrier-to-carrier practices.[34]  Qwest notes that the Senate bill analysis reflects the intent to deregulate retail services, maintain the Commission’s role in resolving wholesale disputes, and ensure fair market treatment.[35]  Qwest believes Chapter 364 continues to prevent and correct business practices that impose high switched access rates for certain IXCs while charging other IXCs lower, private rates for identical services.  Qwest requests that the Commission deny the Joint Movants’ Motion to Dismiss and allow issue identification to proceed.

Analysis 

Staff believes that the Commission continues to retain jurisdiction over anti-competitive behavior, including predatory pricing practices, and fair and effective competition.[36]  While the Regulatory Reform Act repealed and amended parts of Chapter 364, the Commission clearly maintains jurisdiction over wholesale, carrier-to-carrier disputes.  Staff believes that the legislation has not modified the Commission’s exclusive jurisdiction over wholesale carrier-to-carrier disputes, and the Commission’s obligation to ensure fair and effective competition among telecommunications service providers; therefore, the Commission still retains jurisdiction to oversee fair and effective competition.[37] 

The lack of a savings clause is not clear legislative intent for retroactive application.

Without an actual savings clause addressing the repealed and amended statutes, staff cannot speculate what the Legislature’s intent would be regarding Chapter 364.[38]  A savings clause is unique to each statute to which it applies; therefore, without specifics, it would be impossible to determine how a savings clause might affect the repealed statutes.[39]  Staff believes that the absence of a savings clause is not an express statement of legislative intent that a change in law be retroactively applied to carrier actions prior to July 1, 2011.  Without an express statement of legislative intent, there is a presumption against retroactivity.[40]  Therefore, the “general rule is that in the absence of clear Legislative intent to the contrary, a law affecting substantive rights, liabilities and duties is presumed to apply prospectively.”[41]

Retroactive application is not constitutionally permissible.

Even in a situation where there is no clear indication that the Legislature intended a statute to have retroactive application, a savings clause must be constitutionally permissible.  In such a situation, a determination must be made that the retroactive application of a statute cannot impair “vested rights, create new obligations or imposes new penalties.”[42]   A vested right is a "fixed" right that cannot be taken away without violation of the possessor's right to due process.[43]      Under Sections 364.08 and 364.10, F.S., Qwest was allegedly treated to discriminatory pricing on switched access rates prior to July 1, 2011.  Viewing the petition in the light most favorable to Qwest and taking all allegations in the petition as true, consistent with Varnes, staff believes that Qwest has a vested interest for each billing period prior to the change in law as a result of the alleged anti-competitive behavior.[44]

 

 

An application for certification is not similar to a violation.

Staff disagrees with the Joint Movants’ belief that the Commission should treat this complaint similar to that of a wireless ETC certification.  Staff believes that there is a distinction between preexisting violations that occurred during the Commission’s authority and an application for a prospective certification over which the Commission has yet to take action.  Staff believes that the Commission retains jurisdiction over the preexisting violations.

The Commission retains jurisdiction over this complaint.

            For carrier actions prior to July 1, 2011, staff believes that the Commission continues to have jurisdiction under the statutes enacted prior to the Regulatory Reform Act.  Staff believes further that the Commission continues to have jurisdiction over predatory pricing under the new law enacted by the Regulatory Reform Act.  Nonetheless, staff believes whether the Commission retains jurisdiction prospectively would be more appropriately addressed during issue identification and examined during the hearing process.

 

Conclusion

Staff believes that this Commission is vested with the subject matter jurisdiction to ensure a fair and effective wholesale market, including oversight of anti-competitive practices such as predatory pricing among telecommunication service providers. Consistent with our previous Commission decisions,[45] staff recommends that the Joint Movants’ Motion to Dismiss should be denied, and the issue identification meeting should be rescheduled.    

Issue 3: 

 Should this docket be closed?

Recommendation: 

  No.  If the Commission accepts staff’s recommendation, this docket should not be closed until after an evidentiary hearing has been held and a final order issued. If the Commission denies staff’s recommendation in Issue 2 and grants the Movants’ Motion to Dismiss, the amended complaint should be dismissed and the docket closed. (Tan)

Staff Analysis: 

 If the Commission accepts staff’s recommendation, this docket should not be closed until after an evidentiary hearing has been held and a final order issued. If the Commission denies staff’s recommendation in Issue 2 and grants the Movants’ Motion to Dismiss, the amended complaint should be dismissed and the docket closed.[46]