Case Title: In re Adelphia Business Solutions of VT, Inc.

Citation: 177 Vt. 136, 2004 VT 82, 861 A.2d 1078

Docket Number: 

State: vermont

Court: Vermont Supreme Court

Date: 2004-08-20T00:00:00Z

Document:
In re Adelphia Business Solutions of VT, Inc. (2003-397); 177 Vt. 136;
861 A.2d 1078

2004 VT 82

[Filed 20-Aug-2004]

       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that corrections may be made before this opinion goes
  to press.
  	

                                 2004 VT 82

                                No. 2003-397

  In re Petition of Adelphia Business	         Supreme Court
  Solutions of Vermont, Inc. (Verizon
  New England Inc., Appellant)	                 On Appeal from
      	                                         Public Service Board

                                                 April Term, 2004

  Michael H. Dworkin, Chair

  Peter H. Zamore of Sheehey Furlong & Behm P.C., Burlington, and Bruce P.
    Beausejour, Boston, Massachusetts, for Appellant Verizon New England Inc. 

  John H. Marshall and Robert A. Miller, Jr. of Downs Rachlin Martin PLLC,
    St. Johnsbury, for Appellee Adelphia Business Solutions, Inc.

  Aaron D. Adler, Montpelier, for Appellee Department of Public Service.

  PRESENT:  Amestoy, C.J. (FN1), Dooley, Johnson, Skoglund and Reiber, JJ.

        
       ¶  1.  SKOGLUND, J.   Verizon New England, Inc. d/b/a Verizon
  Vermont appeals from an order of the Public Service Board (PSB) in a
  dispute over the interpretation of two contracts.  The PSB concluded that
  the two contracts, known as interconnection agreements, required Verizon to
  pay a competing local exchange carrier (CLEC) for calls made by Verizon
  customers to the competing carrier's customers within the same local
  calling area, including calls to internet service providers.  Verizon
  challenges that interpretation of the parties' agreements, and we now
  affirm.

       ¶  2.  The simplicity of dialing a seven-digit telephone number to
  make a local call is belied by the complexity of wires and switches
  comprising the network that makes the call possible.  For our purposes, it
  is enough to break down a telephone call from the carrier's perspective
  into three basic steps: the calling party's carrier originates and
  transmits the call and the called party's carrier terminates the call. 
  Carrier interconnection agreements govern the compensation carriers pay
  each other for terminating local calls made between their customers. 
  Carriers may agree to charge their end users for the costs of call
  termination (bill and keep), or they may agree to recover their costs from
  each other (reciprocal compensation).  
   
       ¶  3.  Verizon and Telcove (FN2) entered into two interconnection
  agreements, one in 1996 and the other in 1999.  Among other things, the
  parties agreed to compensate one another on a per-minute basis for local
  calls made between their customers.  In contrast to the 1996 contract, the
  parties formed the 1999 agreement through Telcove's adoption of Verizon's
  agreement with another CLEC, an option made available to Telcove and other
  CLECs by the Telecommunications Act of 1996.   See 47 U.S.C.A. § 252(i)
  (West 2001) (allowing CLECs to adopt interconnection agreements entered
  into by incumbent carrier and other CLECs).  In the 1999 agreement, Verizon
  inserted an additional provision not present in the underlying agreement
  Telcove adopted.  The additional provision stated Verizon's disagreement
  that calls terminated to internet service providers (ISPs) are local when
  made to numbers within a designated local calling area.  In other respects,
  the two agreements contain identical provisions on reciprocal compensation
  for local traffic. (FN3)
         
       ¶  4.  The present dispute arose after Verizon withheld approximately
  $25 million in reciprocal compensation payments from Telcove.  Telcove has
  its own network facilities and serves approximately 900 customers in
  Vermont.  A small number of those customers are ISPs.  Carriers with ISP
  customers generally terminate a higher proportion of calls than carriers
  with few or no ISP customers because ISPs  receive more calls than they
  make.  See MCI Worldcom Communications, Inc. v. Dep't of Telecomm. &
  Energy, 810 N.E.2d 802, 805-06 (Mass. 2004).  That trend can result in
  asymmetrical compensation payments for terminating local traffic.  Id. 
  Until 1999, Verizon paid reciprocal compensation to Telcove for local
  ISP-bound calls made by Verizon customers.  In 1999, Verizon began
  objecting to the charges, claiming that the calls were not local because
  they terminated at some place on the internet beyond Telcove's network. 

       ¶  5.  In October 2001, Telcove sought PSB intervention into the
  parties' dispute.  Telcove asked the PSB to order Verizon to compensate
  Telcove for local calls made by Verizon customers to Telcove's ISP
  customers.  Telcove argued that the calls were local calls because they
  terminated on Telcove's facilities.  Verizon responded that calls made to
  ISPs were not local and therefore they were not subject to reciprocal
  compensation; that the agreements reveal an intent to track federal law,
  which considers calls to ISPs to be long-distance calls; and that the 1999
  agreement on reciprocal compensation was not enforceable because the
  parties disagreed on an essential term - whether ISP-bound traffic was
  local. 
   
       ¶  6.  A hearing officer took evidence on Telcove's petition and
  issued a proposed decision, which the PSB ultimately adopted.  The PSB
  concluded that calls to Telcove's ISP customers were local and were subject
  to the compensation obligations in the interconnection agreements before
  it.  The PSB found that Verizon's network facilities cannot distinguish
  between telephone calls made to Telcove's ISP customers within the same
  local calling area and similar calls to its non-ISP customers.   The PSB
  explained:

    A call to an ISP is virtually the same as other calls completed to
    a customer located in the same exchange.  The telecommunications
    network and underlying function used to transport and terminate
    the ISP-bound and other calls are the same.  They use the same
    facilities as well.  The only difference is that, in the case of
    calls to ISPs, the ISP then transmits a digital signal to the
    Internet.  Moreover, the telecommunications network itself treats
    the call as terminated at the time it reaches the ISP.  A call
    record is generated at that point and answer supervision (which
    indicates the successful completion of a call) is returned.  At
    this point, the network treats the call as completed, even though
    the ISP directs the electronic transmission to the Internet. 

  The PSB found that Verizon's network limitation required the company to
  bill its retail customers for all local calls - whether bound for an ISP or
  not - in accordance with Verizon's tariff for local service.   The PSB
  rejected Verizon's arguments that the parties intended to track federal law
  on the compensability of ISP-bound local traffic.  With approximately $25
  million at stake, Verizon appealed the PSB's decision here. 
   
       ¶  7.  This Court reviews PSB orders with deference to its informed
  judgment and expertise in telecommunications regulation.  In re Verizon New
  England, Inc., 173 Vt. 327, 334-35,