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Federal Communications Commission
Washington, D.C. 20554
In the Matter of
Saturn Telecommunications Services, Inc.,
BellSouth Telecommunications, Inc.,
d/b/a AT&T Florida,
File No. EB-09-MD-008
Order on reconsideration
Adopted: October 3, 2014 Released: October 7, 2014
By the Commission:
In the Telecommunications Act of 1996, Congress established a process by which competitive providers of telecommunications service can negotiate and enter into agreements with the incumbent local telephone company to provide for interconnection with, and access to elements of, the incumbent's network. The parties in this case -- Saturn Telecommunication Services, Inc. (STS) and BellSouth Telecommunications, Inc., d/b/a AT&T Florida (AT&T) -- executed such an agreement in November 2006. The agreement included a dispute resolution clause that requires the parties to bring any disputes related to the agreement before the Florida Public Service Commission (PSC). A few days later, the parties entered into a settlement agreement in which STS released certain claims against AT&T. In this Order, we enforce the terms of the settlement agreement and the dispute resolution clause.
Specifically, this Order denies in its entirety a Motion for Reconsideration filed by STS, a competitive local exchange carrier (LEC) in Florida, in which STS seeks reconsideration of an Enforcement Bureau order that dismissed with prejudice STS's formal complaint (Complaint) against AT&T. In its Complaint, STS alleged that AT&T, a Florida incumbent LEC, unlawfully failed to negotiate the parties' interconnection agreement in good faith, refused to provide STS access to certain unbundled network elements (UNEs), and failed to migrate STS's customers to a special access facility in an appropriate manner. As discussed below, we affirm the Enforcement Bureau's ruling dismissing the Complaint. We find that the Enforcement Bureau correctly concluded that STS released all of the statutory claims raised in its Complaint under the terms of the settlement agreement. We further find that, to the extent STS contends that AT&T's failure to provide STS access to certain UNEs or migration processes violates the terms of the parties' interconnection agreement, STS may raise these claims before the Florida PSC pursuant to the forum selection clause in that agreement.
We briefly summarize below the facts relevant to STS's Motion for Reconsideration. The Enforcement Bureau Order dismissing STS's Complaint with prejudice contains a more complete discussion of the factual and legal background, and we incorporate herein by reference the entire Order.
Subsection 251(c)(1) of the Act obligates incumbent LECs such as AT&T to "negotiate in good faith in accordance with Section 252 the particular terms and conditions of agreements to fulfill the duties described in" subsections 251(c)(2) and (3), among others. Subsections 251(c)(2) and (c)(3) obligate incumbent LECs, "in accordance with the terms and conditions of the agreement," to provide interconnection and access to UNEs "at any technically feasible point." Section 252, which establishes procedures for state commissions to negotiate, arbitrate and approve Section 251(c) agreements, permits carriers to "negotiate and enter into a binding agreement . . . without regard to the standards set forth in [Section 251(c)]."
The Commission has released two orders implementing Sections 251(c) and 252 of the Act that are relevant to this proceeding. First, in the 2003 Triennial Review Order (TRO), the Commission concluded that incumbent LECs must permit competitive LECs to commingle UNEs with wholesale services, including interstate access services. Second, in the 2005 Triennial Review Remand Order (TRRO), the Commission determined that incumbent LECs were no longer required under Section 251(c)(3) to provide unbundled access to the combined local loop, switch and transport UNE platform (UNE-P).
Prior to the TRRO's release, STS and AT&T were parties to an interconnection agreement under which STS served its residential and small business customers by leasing UNE-P from AT&T. In early 2005, in anticipation of the TRRO's elimination of UNE-P, STS and AT&T began discussing reconfiguring STS's network. In the course of these discussions, AT&T offered STS a special access transport facility called a "SmartRing." AT&T initially stated that STS's UNE-P customers could be connected to the SmartRing with relatively inexpensive UNE loops called "non-designed" DS-0 loops, or SL1 loops. After STS entered into an agreement to purchase the SmartRing, however, AT&T changed its position. AT&T informed STS that it was not technically feasible to commingle SL1 loops with special access transport facilities such as the SmartRing, and that STS therefore would have to lease more expensive UNE loops from AT&T called "designed" DS-0 loops, or SL2 loops. AT&T also informed STS that it had not created a bulk migration process to convert STS's UNE-P customers to the kind of commingled network STS had chosen. After further discussions with AT&T, STS became concerned that AT&T had no conversion process for transitioning STS's embedded base of UNE-P customers to the commingled network.
In June 2006, STS filed a petition with the Florida PSC and comments in a proceeding before this Commission (collectively, the 2006 Proceedings) complaining, among other things, that AT&T refused to commingle SL1s with STS's SmartRing. STS asserted that AT&T's refusal to allow SL1 commingling in accordance with the original network design violated the TRO, was fraudulent, deceptive, in bad faith, and aimed at driving STS out of business. STS also alleged that AT&T violated the TRRO by failing to provide bulk migration or some other method of migrating STS's UNE-P base of customers in a timely and profitable manner.
In July 2006, the parties mediated and agreed to settle their dispute. The mediation resulted in the parties' execution of a term sheet (Term Sheet) on July 12, 2006, in which: (1) the parties agreed to negotiate a new interconnection agreement; (2) AT&T agreed "that STS will be able to convert 2500 UNE-P lines to SL2 loops commingled with special access transport"; (3) STS agreed to withdraw its petition before the Florida PSC and to withdraw its FCC Comments; and (4) the parties agreed that after they executed a new interconnection agreement they would release all claims, known or unknown, against each other "relating to" STS's petition before the Florida PSC.
In November 2006, STS and AT&T entered into a new interconnection agreement (ICA). The parties agree that the ICA does not obligate AT&T to provide SL1 commingling, but disagree as to whether it obligates AT&T to provide bulk migration. In accordance with the Term Sheet, a few days later STS and AT&T entered into a settlement agreement (Settlement Agreement), which states:
STS agrees not to re-file the [2006 Proceedings] or the allegations raised in or associated with [2006 Proceedings] at the [Florida PSC, the FCC] or in any other forum.
* The Settlement Agreement also contains a release (Release), which states: "STS releases, acquits, and discharges [AT&T] from all Demands, Actions and Claims, whether known or unknown, asserted or which could have been asserted, against [AT&T] related to the [2006 Proceedings]." The term, "Demands, Actions, and Claims" is defined to include:
[A]ll obligations, . . . controversies, suits, actions, causes of action, . . . claims, demands [and] rights . . . of any kind or sort whatsoever or howsoever or whenever arising . . . that relate to the claims set forth by STS in the [2006 Proceedings].
After the Settlement Agreement and ICA were executed, AT&T migrated approximately 85 of STS's existing UNE-P customers to the commingled arrangement using SL2 loops. STS alleges that the migration process was slow, unwieldy and expensive, and that STS's customers suffered outages and other inconvenience.
STS sought to address these issues by filing suit against AT&T in the United States District Court for the Northern District of Florida (District Court). STS's District Court complaint alleged that AT&T had breached the Settlement Agreement by failing to convert the 2500 lines, that AT&T had fraudulently induced STS to enter the Settlement Agreement, and that AT&T had violated the ICA. The District Court dismissed the claim for breach of the ICA, ruling that the terms of the ICA designated the Florida PSC as the appropriate forum for that claim. The court also dismissed STS's fraudulent inducement claim, holding that STS could not have reasonably relied on AT&T's alleged misrepresentations in entering into the Settlement Agreement because the parties were in adverse positions at the time the alleged misrepresentations were made.
Following these rulings, STS voluntarily dismissed its District Court Complaint and filed the instant Complaint with the Commission. The Complaint here alleges that AT&T violated Sections 201(a), 201(b), 202(a), 251(c)(1), 251(c)(2), 251(c)(3), and 271(c)(2)(B) of the Act by refusing to permit STS to commingle special access with SL1 loops and requiring STS to purchase the higher-priced SL2 loops instead, and by intentionally misrepresenting that the commingling of SL1 loops was technically infeasible. The Complaint further alleges that AT&T violated Sections 202(a) and 251(c)(2)(C) of the Act by failing to provide "seamless conversions" of STS's UNE-P customers to the commingled network through use of a bulk migration process.
In the Order, the Enforcement Bureau found that all of these claims were barred by the parties' Settlement Agreement and dismissed the Complaint in its entirety. Specifically, the Order concluded that by executing the Settlement Agreement in conjunction with the ICA, STS had released any rights it had under the Act regarding services that were the subject of the 2006 Proceedings, including the commingling of SL1 loops and the bulk migration of lines, except through enforcement of the Settlement Agreement or the ICA. The Order further concluded that STS should pursue any efforts to enforce its commingling or migration rights under the ICA before the Florida PSC, the parties' chosen forum for dispute resolution. STS challenges the Order on several grounds, discussed below. For the reasons explained, we find that STS's arguments lack merit and deny STS's Motion in full.
* STS Settled its Claim that AT&T Did Not Negotiate the ICA in Good Faith.
STS's Complaint asserts at Count XIII that AT&T violated Section 251(c)(1) of the Act by failing to negotiate the ICA in good faith. STS alleged in its Complaint that it is technically feasible to commingle SL1s with special access transport such as the SmartRing, and that AT&T made an intentional misrepresentation when, during negotiation of the ICA, it stated that such commingling was not feasible. We affirm the Enforcement Bureau's decision to dismiss this claim. The Order correctly found that the claims in Count XIII concerning AT&T's alleged misrepresentations and bad faith were barred by the Settlement Agreement's Release because they "relate to" claims that STS "asserted" or "could have  asserted" in the 2006 Proceedings.
In addition, we agree with the Bureau's finding that STS's Count XIII claims are also barred by language in the Settlement Agreement, which states that STS would not "re-file the allegations raised in or associated with the [2006 Proceedings]." Despite this promise, STS makes essentially the same allegations in Count XIII that it made in the 2006 Proceedings. For example, just as STS alleges in its Complaint that AT&T's refusal to provide SL1 commingling violates the law, STS alleged in the 2006 Proceedings that "the FCC in its TRO . . . required the commingling [of SL1s]," and described AT&T's refusal to commingle SL1s as "arbitrary," and in "flagrant disregard for the law." Similarly, STS alleged in the 2006 Proceedings that AT&T's claim of infeasibility was an intentional or reckless misrepresentation, and described AT&T's refusal to provide SL1s as an act of "bad faith" negotiation aimed at driving STS out of business. Because the Settlement Agreement bars STS from reasserting here allegations raised in or associated with the 2006 Proceedings, we find that the Order correctly dismissed Count XIII.
STS argues in its Motion for Reconsideration that AT&T's conduct in negotiating the ICA was not covered by the Settlement Agreement's release language because negotiation and execution of the ICA was a condition of the settlement Term Sheet the parties negotiated months before they executed the ICA. STS does not assert, and the record contains no persuasive evidence, that the parties continued to negotiate about commingling SL1s after they signed the Term Sheet. Indeed, the Term Sheet establishes that the parties had resolved their dispute over SL1s no later than the date of its execution, because the Term Sheet declares that AT&T will provide "SL2 loops commingled with special access transport," and that "STS agrees to withdraw its current bill disputes regarding the delta between SL1 and SL2 rates." In any event, regardless of whether negotiations over SL1s continued after the Term Sheet was signed, we conclude, as the Order found, that STS resolved its claim that AT&T failed to negotiate the ICA in good faith when, after executing the ICA, STS entered into the Settlement Agreement.
STS also argues in its Motion for Reconsideration that the Settlement Agreement is "void" and "unenforceable" because it allows AT&T to "continue to violate [the Act]" by refusing to provide SL1s and bulk migration. On the contrary, the Settlement Agreement does not excuse any AT&T violations of the Act after the date of the Settlement Agreement, but, as discussed below, settles mature claims, and as such is favored by the law.
* STS Settled its SL1 and Bulk Migration Claims.
STS's Complaint further alleges that AT&T was obligated under the Act to commingle SL1s with STS's special access SmartRing, and to provide a "seamless" bulk migration process for converting STS's customers from UNE-P. Specifically, STS alleged that AT&T's refusal to do so violated Sections 201, 202, 251(c), 271(c) of the Act. We agree with the Enforcement Bureau that STS released its claims that AT&T was required to commingle SL1s and to provide for "seamless" bulk migration of STS's customers, except to the extent the ICA and Settlement Agreement provide for such commingling and migration, and we affirm the Bureau's decision to dismiss these claims. In the Settlement Agreement, STS agreed to release "all . . . Claims, whether known or unknown, asserted or which could have been asserted, against [AT&T] related to the [2006 Proceedings]." STS also agreed that it would not "re-file the allegations raised in or associated with the [2006 Proceedings]" in any forum. STS claimed in the 2006 Proceedings that AT&T was obligated to commingle SL1s with the SmartRing and to provide a method for transitioning STS's customers to STS's commingled network in a timely manner, and that AT&T's failure to do so violated the Act. Applying that release provision, the Order correctly found that by executing the Settlement Agreement in conjunction with the ICA, the parties intended that STS would give up any right it had to insist on the commingling of SL1 loops and the bulk migration of customers, except to the extent such services were provided for in the Settlement Agreement or the ICA.
STS attempts to escape this conclusion by arguing that the Settlement Agreement only applies to AT&T's conduct before the Settlement Agreement was executed, and does not relieve AT&T of liability for its refusal to provide SL1 commingling or bulk migration after the agreement's execution. STS misunderstands the law. STS relies on cases in which a party unsuccessfully argued that a settlement agreement discharged its liability for a cause of action arising after the date of the settlement agreement. These cases have no bearing here because STS's claims that AT&T was obligated to provide SL1 commingling and a process for timely migration of customers accrued before the Settlement Agreement was signed. Courts have widely upheld settlements of federal statutory claims where the claims accrued before the settlement was executed. The record here establishes that STS's claims that AT&T was obligated to provide SL1 commingling and an effective means of migrating customers had accrued no later than June 2006, when STS raised these issues in the 2006 Proceedings. These claims thus accrued before the Settlement Agreement was executed in November 2006 and are subject to its release provisions.
* STS Must Bring Any Actionable Post-Settlement Agreement Comingling and Migration Claims Before the Florida PSC.
The Complaint alleges that the migration processes AT&T employed following the Settlement Agreement were so defective as to impair STS's ability to commingle any DS-0 loops with special access transport. STS charges AT&T with violating its obligations under Sections 251(c)(2) and (3) of the Act to provide interconnection and nondiscriminatory access to UNEs, and its obligations under Section 271(c)(2)(B)(i) and (ii) of the Act to comply with Section 251(c)(2) and (3). STS also claims that AT&T's post-settlement migration and comingling failures violate Sections 201(a) and (b) and 202(a) of the Act. The Order correctly found that by entering into the Settlement Agreement and ICA, STS released these statutory claims and the parties agreed that STS's rights to migration processes or commingling arrangements would be governed by the terms of the ICA and the Settlement Agreement. Accordingly, under the parties' settlement, STS must pursue any actionable post-Settlement Agreement claims through enforcement of the ICA.
Further, wholly apart from the terms of the parties' settlement, by entering into the ICA in November 2006, STS waived any rights it might have had under Sections 251 or 271 of the Act to insist on commingling or migration terms different from those set forth in the ICA. The duty to provide a UNE, such as a DS-0 loop, or a migration service, under Section 251(c)(2) and (3) is not self-executing, but takes effect only to the extent it is incorporated into an agreement pursuant to Section 252 of the Act. A LEC may waive its Section 251(c) rights by entering into an interconnection agreement under Section 252 that provides for a different resolution than specified by Section 251(c) and the Commission's implementing rules. Accordingly, STS's Section 251(c)(2) and (3) claims may succeed only if AT&T is in breach of the ICA. Likewise, because STS's Section 271(c)(2)(B)(i) and (ii) claims are premised entirely on AT&T's alleged violation of Section 251(c)(2) and (3), these claims, too, can succeed only if AT&T has breached the ICA.
STS admits that the ICA does not obligate AT&T to provide SL1 commingling. As noted in the Order, the parties disagree about the scope and meaning of the ICA's migration provisions. STS contends in its Complaint and in its Motion for Reconsideration that the ICA requires AT&T to provide bulk migration of STS's embedded customer base, a position that AT&T disputes. The Order concluded that any dispute about the scope of the ICA's migration provisions should be brought before the Florida PSC under the terms of the ICA's forum selection clause. We agree. The ICA states:
[I]f any dispute arises as to the interpretation of any provision of this Agreement or as to the proper implementation of this Agreement, the aggrieved Party, if it elects to pursue resolution of the dispute, shall petition the [Florida PSC] for a resolution of this dispute. However, each Party reserves any rights it may have to seek judicial review of any ruling made by the [PSC]. . . .
STS contends in its Motion for Reconsideration that, even if the forum selection clause applies, it should not be enforced because the Florida PSC does not have jurisdiction over STS's Section 271(c)(2)(B)(i) and (ii) claims. Yet a forum selection clause should be enforced "absent a compelling reason not to do so." We see no compelling reason here. STS's Section 271(c)(2)(B)(i) and (ii) claims are based entirely on AT&T's alleged failure to comply with Section 251(c)(2) and (3). Any violations under 251(c) may be adjudicated by bringing an action before the Florida PSC. Thus, this is not "a dispute that lies at the core of [the Commission's] enforcement mission," as distinct from the enforcement mission of the PSC. Indeed, Section 252, which authorizes state commissions to mediate, arbitrate and approve interconnection agreements, demonstrates that Congress intended state commissions to play an active and important role in ensuring compliance with the local competition provisions of the Act. Further, STS's claim is not one that "inevitably touches commercial relations among many participants in the relevant industry." AT&T states that STS is the only competitive LEC anywhere in AT&T's entire 22-state region that has ever asked to commingle SL1 or SL2 loops with special access transport, and STS provides no persuasive evidence to the contrary. In sum, this dispute does not raise federal concerns sufficient to disregard a valid forum selection clause, and we decline to disrupt the parties' forum choice.
Finally, we note that in addition to being released under the parties' Settlement Agreement, STS's allegations that AT&T's alleged post-settlement migration and commingling failures violated Sections 201(a) and (b) and 202(a) of the Act must be denied for failure to state a claim. As the Commission has long recognized, "sections 201 and 202 of the Act are concerned with `interstate communication' or `foreign communication' by a `common carrier' as those terms are defined in section 3 of the Act . . . ." Yet STS has alleged violations of Sections 201(a) and (b) and 202(a) of the Act without identifying any basis for those claims other than AT&T's alleged failure to comply with its unbundling obligations. The Commission has held that "the provision of an unbundled network element is not the provision of a telecommunications service." Nor do STS's allegations otherwise explain how the claimed violations of Sections 201 or 202 arise from actions for or in connection with an interstate or foreign service within the scope of those statutory provisions. STS does not allege that AT&T is in breach of its interstate tariff or that it provisioned any foreign or interstate service or facility in an unlawful manner. As a result, STS's Section 201 and 202 claims must be denied on the independent ground that they fail to state a claim under those statutory provisions.
* STS's Motion to Open Proceedings is Without Merit.
STS has filed a motion asking this Commission to investigate "the impartiality of the [Enforcement Bureau] proceedings and the appearance of impartiality." STS notes that the Chief of the Enforcement Bureau's Market Disputes Resolution Division (MDRD) during the initial stages of the MDRD proceeding was subsequently employed by AT&T. STS also notes that AT&T's lead counsel at the first conference in the proceeding subsequently became the Commission's General Counsel. Finally, STS is concerned because, before joining the Commission many years ago, the Chief of the Enforcement Bureau at the time the Order was released was a partner in a law firm that represented AT&T on other matters.
We conclude that the Enforcement Bureau proceeding was conducted in an impartial manner, and that there is no appearance of impartiality. The Enforcement Bureau and agency ethics staff with knowledge of the facts confirm that both the former Chief of MDRD and the FCC General Counsel complied fully with applicable Office of Government Ethics recusal requirements in this matter. In particular, the MDRD Chief promptly and properly followed the Commission's job-seeking recusal requirements, disqualifying himself from all AT&T matters, including this proceeding, upon being contacted by AT&T regarding potential employment. The Commission's General Counsel had no involvement in this proceeding whatsoever after coming to the Commission. Further, this individual is no longer with the Commission. With respect to the former Chief of the Enforcement Bureau, after consultation with agency ethics officials, we conclude that, the fact that the bureau chief was, 18 years before, a partner in a firm that represented AT&T on other matters, would not cause a reasonable person to question her impartiality in this matter, and thus no recusal on her part was warranted. Moreover, this individual is no longer in the Enforcement Bureau.
Accordingly, IT IS ORDERED, pursuant to Sections 1, 4(i), 4(j), 201, 202, 208, 251, 252, 271, and 405 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151, 154(i), 154(j), 201, 202, 208, 251, 252, 271, and 405, and Sections 1.1, 1.106, and 1.302 of the Commission's rules, 47 C.F.R. §§ 1.1, 1.106, and 1.302, that the Motion for Reconsideration is DENIED.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch