Big River Telephone Co. v. Southwestern Bell Telephone Co.

Citations: 440 S.W.3d 503; 2014 Mo. App. LEXIS 623; 2014 WL 2466414Docket: No. WD 76420

Court: Missouri Court of Appeals; June 3, 2014; Missouri; State Appellate Court

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Big River Telephone Company, LLC, appeals a Public Service Commission (PSC) Report and Order that denied its complaint against Southwestern Bell Telephone, L.P. (d/b/a AT&T Missouri) and upheld AT&T's counter-complaint. The dispute centers on access charges billed by AT&T to Big River, with Big River arguing that the charges were improperly applied to non-chargeable information or enhanced services. In contrast, AT&T contended that the charges were justified based on Big River's provision of interconnected voice over internet protocol (I-VoIP) services, supported by statutory requirements and their interconnection agreement (ICA). The PSC sided with AT&T, affirming that the services in question were indeed I-VoIP and that the billed amounts were owed. 

The legal context includes the transformation of local telephone service regulation post-1996 Telecommunications Act, which replaced the prior monopolistic structure with a competitive environment for local exchange carriers (LECs). The Act mandates interconnection among LECs, ensuring that compensation is established for call transport and termination, particularly addressing the challenges posed by interconnection where one LEC's customer calls another's without direct billing to the caller. The Act differentiates between 'information services' and 'telecommunications services,' defining the former as capabilities for handling information via telecommunications and the latter as the transmission of information without alteration.

The dispute involves an Interconnection Agreement (ICA) between Big River, a Competitive Local Exchange Carrier (CLEC), and ATT, an Incumbent Local Exchange Carrier (ILEC), following arbitration and approval by the Public Service Commission (PSC) on August 13, 2005. The ICA differentiates between enhanced/information services traffic, exempt from access charges, and telecommunications traffic, which is subject to such charges. Enhanced services traffic is defined as traffic undergoing a net protocol conversion or providing enhanced capabilities. The ICA classifies voice over Internet Protocol (VoIP) traffic as enhanced service. Under the ICA, Big River was required to report its Percent Enhanced Usage (PEU) to ATT; Big River reported a PEU of 100, indicating all its traffic was enhanced and not subject to access charges.

In 2008, Missouri enacted House Bill 1779, mandating that interconnected VoIP services be subject to access charges, while protecting existing interconnection agreements until January 1, 2010. The bill also required VoIP providers to register with the PSC and granted the PSC authority over complaints regarding exchange access service payments. Despite Big River's PEU representation, ATT billed it for access charges, leading Big River to file a lawsuit on September 29, 2008, claiming $487,779 in overcharges for terminating enhanced services traffic. A confidential settlement resulted in an amendment to the ICA, stipulating that disputes regarding enhanced services prior to January 1, 2010, would be resolved under a specific section of the ICA, exempting Big River from access charges for certain interconnected VoIP traffic until that date. Following January 1, 2010, the obligations of both parties would be governed by the amended ICA reflecting the new compensation framework established by House Bill 1779, effective August 28, 2008.

The amendment introduced a provision requiring the exchange of interconnected voice over Internet protocol (VoIP) service traffic between the Parties, in accordance with Section 386.020 RSMo, subject to applicable exchange access charges applicable to telecommunications services. Existing inter-carrier compensation provisions for VoIP traffic, as of August 28, 2008, would remain effective until December 31, 2009, with the new access charge arrangements taking effect on January 1, 2010. The amendment supersedes, amends, and modifies the Agreement, ensuring its provisions govern in case of inconsistencies.

On February 5, 2010, ATT began billing Big River for access charges under account number 110 401 0113 803. Big River disputed these charges, claiming its service remained exempt from access charges, leading to an informal dispute resolution process that failed to resolve the issue. ATT warned Big River that continued non-payment would result in the suspension of service provisioning.

Big River subsequently filed a complaint with the PSC on March 1, 2012, asserting that its services were enhanced services under the ICA and not subject to access charges. ATT countered with a complaint asserting that Big River’s traffic was I-VoIP and thus subject to the billed access charges. Both parties and the PSC Staff submitted a Joint Stipulation of Non-Disputed Material Facts, confirming that as of January 1, 2010, the traffic delivered by Big River to ATT was VoIP traffic originating from IP-enabled customer equipment, allowing real-time communication with the PSTN.

The PSC was presented with two issues: 1) the classification of the traffic delivered by Big River to ATT—whether it should be categorized as interconnected VoIP, enhanced services, or neither; and 2) determining applicable charges for said traffic. Big River contended that while its service was VoIP, it did not meet the statutory definition of I-VoIP since it did not require a broadband connection.

Big River contended that broadband should be defined as internet service exceeding dial-up speeds of 200 kbps. They argued that since their customers could make calls at speeds of 40 kbps—lower than the average dial-up speed of 56 kbps—broadband was not necessary, and thus their service did not qualify as Internet Voice over Internet Protocol (I-VoIP). Big River claimed its service included enhanced features, negating the need for access charges. In contrast, ATT maintained that Big River’s service was I-VoIP, subjecting it to access charges totaling $350,637.60 as of August 2012 under the amended Interconnection Agreement (ICA). ATT contended that the features cited by Big River did not convert telecommunications services into enhanced services. The PSC sided with ATT, ruling that Big River's service constituted I-VoIP and was subject to access charges of $352,123.48, based on ATT's evidence, while opting not to address the enhancement question. Big River subsequently appealed.

In reviewing the PSC’s decision, the standard presumes validity, placing the burden on Big River to demonstrate its invalidity. The review involves assessing whether the order was lawful—having statutory authority—and reasonable, which requires it to be based on substantial evidence, not arbitrary, and not an abuse of discretion. Big River raised four points in its appeal: (1) the PSC lacked jurisdiction to impose monetary damages; (2) the PSC's finding lacked competent evidence due to reliance on inadmissible information; (3) the classification of Big River’s traffic as I-VoIP was unreasonable based on an incorrect broadband definition; and (4) the determination of access charges was unreasonable and contrary to substantial evidence indicating that the traffic met the enhanced service definition.

The PSC's determination that Big River owed ATT $352,123.48 is lawful and does not constitute an award of monetary damages. Big River contends that the PSC, being a creature of statute, has limited jurisdiction and no authority to award monetary damages, rendering the PSC's determination unlawful. ATT argues that the PSC's order was a lawful exercise of its authority to interpret and enforce the Interconnection Agreement (ICA), not a damages award. Staff claims Big River's argument is not reviewable as it was not included in its application for rehearing; however, it asserts that the determination was a proper exercise of authority.

Upon review, Big River's claim regarding the PSC's subject matter jurisdiction is acknowledged, despite not being raised in the rehearing application as required by law. The Commission's authority is limited to that explicitly granted by statute, with a narrow exception for claims of exceeding subject matter jurisdiction. While it is recognized that the Commission cannot award monetary damages, the determination of the owed amount does not equate to a damages award. ATT sought enforcement of the ICA's terms rather than damages. The Commission has the authority to enforce ICAs under the Telecommunications Act, which requires that such agreements be submitted for state commission approval, thereby granting the Commission inherent authority to interpret and enforce these agreements.

Section 392.550.4(5) grants the public service commission (PSC) authority to resolve complaints regarding payment for exchange access services, irrespective of the user's certification status. Big River acknowledged the PSC's jurisdiction in its complaint about interconnection agreement terms. The PSC's determination that Big River owed ATT $352,123.48 was upheld as it exercised its lawful authority to interpret and enforce the interconnection agreement (ICA) under federal and state law. 

In its appeal, Big River contended that the PSC's finding lacked competent and substantial evidence, claiming that the supporting evidence was inadmissible. The PSC based its decision on ATT’s Exhibit 33, a spreadsheet by William Greenlaw, which detailed the charges from February 2010 to December 2012. Big River did not dispute the accuracy of these charges during the informal dispute resolution process. 

Big River's motion to exclude Greenlaw's testimony argued that he lacked the necessary experience to serve as a fact or expert witness. However, the PSC's procedures, governed primarily by Chapter 386, allow flexibility regarding evidence rules. The Missouri Administrative Procedure Act (MAPA) fills in gaps in PSC statutes, stating that compilations like ATT’s Exhibit 33 are admissible if the supervising witness is present, testifies to its accuracy, and is subject to cross-examination. This ensured that the PSC's reliance on the spreadsheet was appropriate and justified.

The statute allows for the introduction of evidence regarding the circumstances of a compilation of figures, affecting its weight but not its admissibility. Exhibit 33, a compilation of figures billed by ATT to Big River, was created by Greenlaw, who consulted various sources and had relevant qualifications and experience with ATT. Although he did not testify to the accuracy of the figures—an aspect not contested by Big River during the IDR process—the PSC deemed his qualifications sufficient for the testimony to be admitted. Big River's challenges to Greenlaw's qualifications pertain only to the weight of the evidence, not its admissibility, leading to the conclusion that the Commission's determination of the amount due was supported by competent evidence.

Additionally, Big River contested the Commission's classification of its traffic as I-VoIP, arguing that the definition of "broadband" used was incorrect. Both ATT and Staff countered that the Commission's understanding of broadband—beyond dial-up or narrowband—was reasonable and that Big River's services necessitated broadband connections. The statutory definition of I-VoIP includes four criteria, which Big River’s services met as they enable real-time voice communication, require a broadband connection, utilize IP-compatible equipment, and permit calls to and from the public switched telephone network.

Big River acknowledged the presence of factors (a), (c), and (d) but disputed factor (b). It admitted to providing VoIP services but denied offering I-VoIP, despite the distinction being merely the presence of interconnection. The service in question is interconnected, as evidenced by the terms of an Interconnection Agreement, and Big River has previously acknowledged that its service qualifies as I-VoIP, subject to access charges from January 1, 2010. The company also represented its services as I-VoIP to other states and the FCC, indicating uniformity across its operations.

The parties agreed that broadband is defined as a connection speed faster than dial-up, although they disagreed on specific speeds. Big River contended that because its customers could make calls at speeds slower than dial-up, broadband should not be deemed "required." However, the Commission concluded that since Big River does not provide dial-up services and its offerings are designed for broadband users, a broadband connection is indeed "required." This conclusion is supported by the classification of Big River's service connections as broadband, as they exceed analog dial-up speeds.

The Commission referenced a Supreme Court ruling distinguishing broadband from dial-up and noted Big River's partnerships with cable and DSL providers to deliver IP-based telephone service over broadband connections. Even a demonstration of a voice call at a slower speed was conducted over a DSL connection, which Big River identified as a VoIP call, affirming that DSL is intended for speeds greater than dial-up. The term "required" in this context is interpreted as "useful or appropriate," aligning with FCC expectations that most VoIP services should operate over broadband connections. Ultimately, since Big River does not offer dial-up services, the Commission's determination that broadband is necessary for using its voice communication services was deemed reasonable.

Big River disputes the Commission’s definition of broadband, specifically challenging the assertion that dial-up service connects at 14.4 kilobits per second (kbps), arguing that the standard is 56 kbps. Big River claims that its capped customer connection speed of 40 kbps negates the necessity for broadband. However, it is acknowledged that while broadband is not essential for VoIP calls, it is generally necessary for Big River customers due to limited alternatives. The court concludes that since Big River exclusively provides broadband connections, regardless of speed, broadband is deemed "required." Consequently, the Commission’s finding that Big River provided I-VoIP traffic is upheld.

Regarding whether Big River’s traffic constitutes enhanced services, the Commission’s omission of this determination is deemed unnecessary. Big River argues that the Commission should have clarified this point, but ATT counters that under section 392.550.2, I-VoIP is subject to exchange access charges akin to telecommunications services, making the classification of enhanced services irrelevant. Staff concurs, stating that the Commission's classification of the traffic as I-VoIP suffices. The court further clarifies that accepting Big River's interpretation could conflate telecommunications and enhanced services, contrary to statutory definitions. Thus, I-VoIP is properly categorized as a telecommunications service under the law, and acknowledging it as an enhanced service would undermine the purpose of section 392.550.2. The court emphasizes that legislative provisions are not to be interpreted as meaningless, reinforcing the distinct definitions of telecommunications and enhanced services.

The amendment to the original Interconnection Agreement (ICA) clarifies that I-VoIP traffic is to be classified as a telecommunications service, thus making it subject to access charges, despite the previous language which did not differentiate between enhanced services and VoIP. According to the amendment, any inconsistencies with the original Agreement are resolved in favor of the amendment's provisions. The Commission's determination that Big River’s traffic constituted I-VoIP is upheld, and its choice not to evaluate whether this traffic also qualified as an enhanced service is considered reasonable. Consequently, the Commission’s Report and Order is affirmed as lawful and reasonable.

Section 386.020(23) defines 'Interconnected voice over Internet protocol service' based on specific criteria, which include enabling real-time voice communication and requiring broadband connectivity. Big River demonstrated I-VoIP service with a voice call over its network. ATT claimed Big River owed approximately $352,806.75 as of December 5, 2012, based on an affidavit not presented during the hearing. Big River chose not to cross-examine ATT's witness, Greenlaw, who provided background on his qualifications and experience with ATT's wholesale regulatory policy. There remains a dispute between the parties regarding the burden of proof.

Big River contends that ATT has the burden of proving its traffic is classified as I-VoIP since ATT alleged this classification. In contrast, ATT argues that Big River should disprove the I-VoIP classification because Big River claimed its traffic was exempt from access charges, and the details of the traffic are primarily known to Big River. The Public Service Commission (PSC) determined that the burden lies with ATT, but the court finds it unnecessary to resolve this issue, as there is ample evidence from both parties to support the PSC’s findings.

The Federal Communications Commission (FCC) defines VoIP as technology allowing voice calls over a broadband Internet connection rather than traditional phone lines. I-VoIP is characterized as VoIP services enabling calls to and from the regular telephone network. Big River has maintained that "broadband" equates to a minimum speed of 200 kbps, citing various FCC rulings. However, these rulings specify broadband as services capable of exceeding 200 kbps in at least one direction, indicating capability rather than a minimum requirement. Furthermore, the FCC has clarified that the broadband speed thresholds in their reports do not carry regulatory significance regarding the classification of interconnected VoIP providers. The court references prior case law, noting that its role is limited to either affirming or overturning the Commission’s decisions, without directing specific outcomes. Therefore, even if the court were to agree with Big River on the necessity of evaluating its traffic as enhanced services, the court would only be able to remand the matter for the Commission’s consideration.