Opinion ID: 2230356
Heading Depth: 1
Heading Rank: 2

Heading: Competitive Neutrality

Text: Qwest next claims that the fixed minimum performance standards as adopted are not competitively neutral because they require higher levels of service to CLECs than that which Qwest provides for its subsidiaries and retail customers. Qwest also claims that the standards burden it for the benefit of the CLECs. Qwest cites TCG New York, Inc. v. City of White Plains, 305 F.3d 67 (2d Cir.2002), to support its argument that the fixed minimum performance standards are not competitively neutral because they are imposed on Qwest and not the CLECs. In essence, Qwest views competitively neutral regulation as regulation that does not affect competitive balance. In response, the CLECs argue that Qwest, as the incumbent carrier, has long enjoyed the advantage of having a monopoly in the local telephone market and that relying on the MPAP alone would allow such a fundamental inequality to continue because under the parity criteria Qwest is in the position to determine service quality for all others. The CLECs also argue that having fixed minimum performance standards in quality-sensitive areas leaves little room for Qwest to manipulate service quality. In other words, the CLECs view competitively neutral to mean regulation that levels the playing field between carriers who are new entrants into the market and incumbent carriers, recognizing incumbent carriers' competitive advantage in the market due to their ownership of the local exchange infrastructure. Contradicting Qwest's claim that the competitively neutral standard requires that state regulation allowed under the Act have no impact on competition, the 1996 Act expressly permits state regulation of incumbent carriers for the purpose of fostering competition. See 47 U.S.C. § 261(c) (Nothing in this part precludes a State from imposing requirements on a telecommunications carrier for intrastate services that are necessary to further competition   .). In this case, recognizing Qwest's competitive advantage, the MPUC, in its order, attempted to address that imbalance by requiring Qwest to provide consistent and reliable wholesale services in six specific areas. The MPUC argues that allowing Qwest to provide inconsistent, albeit equal, wholesale services would undermine competition by leaving Qwest room to manipulate the quality of its wholesale service quality. Thus, the MPUC argues that the adoption of the fixed minimum performance standards ensures that the quality of wholesale services will be consistent and reliable, and puts Qwest and CLECs on a leveled playing field. We agree. As discussed above, the fixed minimum performance standards are necessary to ensure quality service and to foster competition. As the incumbent carrier, Qwest has a competitive advantage over the CLECs. Qwest's incumbent advantage, absent some mechanism limiting Qwest's ability to manipulate the quality of wholesale services provided to the CLECs, would be maintained and perhaps even grow. That could result in anything but competitive neutrality. The fixed minimum performance standards, imposed in only the six areas found to be most sensitive for new entrants to the market, merely prevent Qwest from using its competitive advantage to the detriment of the CLECs. By leveling the playing field between Qwest and the CLECs in this manner, Qwest is not put at a competitive disadvantage. As for Qwest's reliance on TCG, we note that the regulation at issue here is different from the local regulation at issue in that case. In TCG, the franchise fee imposed by the city applied only to CLECs, thus burdening the CLECs and at the same time preserving, perhaps enhancing, the competitive advantage of the incumbent carrier. 305 F.3d at 79. The Second Circuit therefore held that the fee was not competitively neutral. Id. at 80. In contrast, the fixed minimum performance standards at issue here do not disadvantage Qwest. The standards only require that Qwest provide its wholesale customers, the CLECs, certain minimum levels of service. Qwest retains complete control over the services it provides to its subsidiaries and retail customers and may, if it so chooses, provide to them the same level of service as it provides to its wholesale customers. Leveling the playing field between Qwest and the CLECs in a way that does not burden Qwest does not run afoul of the Act's requirement that state regulation be competitively neutral.