CoreTel Virginia, LLC v. Verizon Virginia, LLC et al

Filing 203

MEMORANDUM OPINION re: 144 MOTION for Partial Summary Judgment by CoreTel Virginia, LLC; 150 MOTION for Partial Summary Judgment by Bell Atlantic Communications, Inc., MCI Communications Services, Inc., MCImetro Access Transmission Services LLC, Verizon Business Global LLC, Verizon South, Inc., Verizon Virginia, LLC. Signed by District Judge Claude M. Hilton on 4/22/2013. (stas)

IN THE UNITED
FOR THE

STATES DISTRICT COURT

EASTERN DISTRICT OF VIRGINIA

Alexandria Division

CORETEL VIRGINIA,

LLC,

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APR 22 2013 pi

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Plaintiff,
Civil Action No.

v.

VERIZON VIRGINIA LLC,

l:12-cv-741

et al.,

Defendants

MEMORANDUM OPINION

This matter comes before the Court on Plaintiff CoreTel

Virginia, LLC's Motion for Partial Summary Judgment with respect
to Count II of the Amended Complaint and Counts I and II of the
Amended Counterclaims.

Also before the Court is Defendants'

Motion for Partial Summary Judgment.

The Defendants in this

matter are Verizon Virginia LLC, Verizon South Inc., MCIMetro
Access Transmission Services LLC,
Inc.,

Verizon Business Global LLC,

MCI Communications Services
and Bell Atlantic

Communications Inc. d/b/a/ Verizon Long Distance (collectively,
"Verizon").

n

.,.)

Defendants moved for summary judgment on Counts I,

II, V, VI and VII of the Amended Counterclaims, partial summary
judgment on Counts III and IV of the Amended Counterclaims, and

partial summary judgment on all claims in the Amended Complaint.
Plaintiff CoreTel is a competitive local exchange carrier
("CLEC") operating in Virginia since 2005 that provides

telecommunications services such as telephone calls and data
transmissions.

Defendants Verizon Virginia LLC and Verizon

South Inc. are telephone companies known as incumbent local

exchange carriers ("ILECs") who provide local telephone service
in Virginia.

The remaining Defendants are long-distance

carriers.

The Telecommunications Act of 1996 ("1996 Act") compels

ILECs like Verizon Virginia and Verizon South (collectively, the
"Verizon ILECs") to negotiate contracts, known as
interconnection agreements, with CLECs like CoreTel.

U.S.C. §§ 251(c)(1), 252.

See 47

The 1996 Act also gives a CLEC the

right to unilaterally select an existing contract between the
incumbent and a different CLEC as its own interconnection

agreement.

See Id. § 252(i).

CoreTel and Verizon are party to

two interconnection agreements ("ICAs"), both of which were

originally interconnection agreements between Verizon Virginia
and Cox Virginia Telecom Inc. which CoreTel subsequently

adopted.

The two ICAs are identical except for pricing of

certain matters not at

issue here.

At issue here are interconnection charges, referred to as
"facilities" charges, which consist of network resources that

provide a physical link connecting CLEC and ILEC networks such
as trunks, ports and multiplexing.

Also at issue are the

termination charges, known as "intercarrier compensation," for

resources within each network used to complete incoming calls to

the appropriate end user.

These charges can be broken down into

reciprocal compensation, intrastate switched access, and
interstate switched access.

The ICAs govern the terms of

physical interconnection of networks, the exchange of traffic
between the parties, and payment of intercarrier compensation
for termination of locally-dialed traffic.
The Amended Complaint in Count I seeks declaratory judgment

regarding the parties' rights and responsibilities under the
ICAs regarding interconnection, intercarrier compensation, and
switched access charges.

Count II of the Amended Complaint

seeks damages for breach for nonpayment of intrastate switched
access charges, among other reasons for breach.

Count III

requests injunctive relief to prevent the Defendants from
terminating the ICAs and interconnections.

The counts in the

Amended Counterclaims allege the following: Count I alleges
breach of the interconnection agreements for failing to pay for
facilities CoreTel used; Count II is for declaratory judgment
regarding facilities; Count III is for breach of the ICAs by
CoreTel due to billing Verizon ILEC for calls that were

originated by local telephone companies other than Verizon and
were routed through Verizon ILECs network to reach CoreTel's
network; Count IV seeks a declaratory judgment regarding
reciprocal compensation from the calls in Count III of the

Amended Counterclaims; Count V alleges breach of 47 U.S.C. § 201

by tariffing a rate in excess of the maximum permitted under 47
C.F.R. § 61.26 and charging Defendants under its federal tariff
for interstate switched access services; Count VI alleges breach

of state and federal law and state and federal tariffs by
charging Verizon for End Office Switching and other related
rates without providing such service,

in violation of its

tariffs and the filed rate doctrine; Count VII seeks declaratory
judgment regarding interstate and intrastate switched access
charges.

This Court must grant summary judgment when a party fails

to make a showing sufficient to establish the existence of any
essential element of the party's case on which that party has
the burden of proof at trial.
U.S.

317,

322-23

(1986);

Fed.

Celotex Corp. v. Catrett, 477
R. Civ.

P.

56(c).

A movant need

only show that there is an absence of evidence or support for
the opposing party's case.

See Celotex Corp.,

477 U.S. at 325.

If the nonmovant fails to identify specific facts that

demonstrate a genuine and material issue for trial, then the

Court will grant summary judgment, "to prevent 'factually
unsupported claims and defenses'
Felty v. Graves-Humphreys Co.,
1987)

(quoting Celotex Corp.,

v. Liberty Lobby,

Inc.,

from proceeding to trial."

818 F.2d 1126,
477 U.S.

1128

(4th Cir.

at 324-25); see Anderson

477 U.S. 242, 247-48 (1986).

"Mere

unsupported speculation is not sufficient to defeat a summary
judgment motion if the undisputed evidence indicates that the
other party should win as a matter of law."
Allen & Hamilton,

(citing Felty,

Inc.,

452 F.3d 299,

308

Francis v. Booz,

(4th Cir.

2006)

818 F.2d at 1128).

A dispute over an issue of material fact is "genuine" under
Rule 56 only if the evidence is such that a reasonable jury
could return a verdict for the non-moving party.
U.S.

at

248.

"The mere

existence of a

scintilla

Anderson,

477

of evidence

in

support of the plaintiff's position will be insufficient; there
must be evidence on which the jury could reasonably find for the

plaintiff."

Id. At 252.

Facilities

According to the terms in section 4.3.2 of the parties'
ICA,

in order to send calls to the Verizon ILECs'

networks,

CoreTel must either "provide its own facilities" to link the

companies'
ILECs.

networks or "purchase" facilities from the Verizon

Section 4.3.3 of the ICA further explains that if

CoreTel elects to order from Verizon any of the interconnection
methods, they may do so "...in accordance with the order

intervals, and other terms and conditions, including without

limitation, rates and charges, set forth in this Agreement, in
any applicable Tariff(s), or as may be subsequently agreed to
between the Parties."

Plaintiff contends Defendants are

required to provide interconnection facilities to CoreTel at
cost-based TELRIC (Total Element Long Run Incremental Cost)
rates but that Defendants improperly charged their tariff
instead.

Both parties cite to the Supreme Court's decision in Talk
America,

Inc. v. Michigan Bell Telephone Co.,

131 S. Ct. 2254

(2011) in support of their respective positions.

Plaintiff

CoreTel refers to the language in Talk America that incumbent

telephone service providers are required under 47 U.S.C.S. §
251(c)(2)

to provide competitors,

such as CoreTel, with cost-

based rates for existing entrance facilities for
interconnection.

Id.,

at 2264-65.

However,

Defendants'

have

properly distinguished Talk America in that the Supreme Court

was not interpreting the language of the existing contract.
FCC has held that where,
issue,

as here,

The

an existing contract is at

a competitor "cannot rely on the general section 251

duties to circumvent the terms of its agreement."
Communications Inc.,

et al.,

18 FCC Red 7568

CoreComm

(2003).

The FCC

held that CoreComm, by "choosing to opt into an agreement
that...does not provide" for a service required under § 251(c)

had "effectively waive[d]

any right to insist upon" receiving

that

7582.

service.

See Id.

at

CoreTel takes issue with being charged the tariffed rates

for interconnection because they cite to the statutory

requirements of § 251(c)(2)

and (3).

However, section 252

explicitly states, "Upon receiving a request for
interconnection,

services,

or network elements pursuant to

section 251, an incumbent local exchange carrier may negotiate
and enter into a binding agreement with the requesting
telecommunications carrier or carriers without regard to the
standards set forth in subsections (b) and (c) of section 251.

Plaintiff CoreTel then cites four provisions of the ICA
that they claim justify their refusal to pay Verizon the

tariffed rates, sections 4.2.1, 4.3.1(c), 26.1, and 27.1.

Upon

reviewing the ICA and the related provisions, this Court finds
Defendants are entitled to summary judgment on Counts I and II

of the Amended Counterclaims and partial summary judgment on

Counts I and III of the Amended Complaint insofar as they
address Defendants'

facilities invoices because the tariffed

rates are proper.

CoreTel has purportedly billed Verizon ILECS for roughly

$1.7 million for facilities charges including multiplexing and
trunk ports that Verizon ILECS supposedly ordered.

CoreTel

contends the Defendants ordered facilities from CoreTel as

evidenced by Access Service Requests ("ASRs") sent by
Defendants.

With respect to CLEC pricing to the ILEC, Plaintiff

points to page 151 of the ICA in support of these charges which

provides that these "services" can be charged at "generally

available rates."

As a result, CoreTel has charged Defendants

TELRIC rates which are the lowest "generally available rates"
set by statute and regulations.

2258.

Talk America,

131 S. Ct.

at

Plaintiff also contends Defendants are financially

responsible for the trunk ports and multiplexing to connect the
parties' two "premises" as Verizon itself charges CoreTel for
trunk ports and multiplexing.
However,

CoreTel's bills violate the terms of the ICA as

nothing in the contract authorizes CoreTel to charge for trunk
ports and multiplexing that CoreTel uses when it receives calls

from the Verizon ILECs.

Verizon ILECs self-provisioned, at

their own expense, the facilities that carry their customers'

traffic to CoreTel's network.

Section 4.3.4 only authorizes

CoreTel to bill for multiplexing that is "necessary" to its
provision of entrance facilities;

it does not authorize CoreTel

to charge when the Verizon ILECs - not CoreTel - provide the
entrance facility.

Defendants assert the ASRs are not in fact

orders but rather reflect entries from Verizon's own ordering
systems provided to CoreTel so that CoreTel could configure its
own network to receive the calls that would be delivered over

the facilities Verizon self-provisioned.

The ASR that was

provided to this Court as evidence of an order was in fact part
of an email and only evidences the sharing of this data with
CoreTel so CoreTel could configure its own network.

8

Additionally, the ICA section 4.2.2 conveys that Verizon ILECs
are "responsible for delivering" calls to CoreTel's

interconnection point, where CoreTel takes over responsibility
for providing "transport and termination of traffic to its

customers," indicating Verizon has no financial responsibility
for the multiplexers and switch ports themselves.
The ICA itself does not authorize CoreTel to bill Verizon

for these facilities because they do not provide entrance
facilities to Verizon.

For these reasons, Verizon is entitled

to partial summary judgment as to Count II of the Amended

Complaint as it pertains to CoreTel's facilities invoices only.
Reciprocal Compensation
The next issue relates to Counts I and II of the Amended

Complaint and Counts III and IV of the Amended Counterclaims

insofar as those Counts implicate reciprocal compensation

charges.

Defendants allege CoreTel has breached the ICA by

billing the Verizon ILECs for third-party and non-local

interLATA calls.

The ICA requires each company to "compensate

[the] other for the transport and termination of Reciprocal
Compensation Traffic" which is defined as

local "traffic that is

originated by a customer of one Party on that Party's network
and terminates to a Customer of the other Party on that other
Party's network."

Section 5.7.1 and 5.7.2(a) and (c) of the ICA

prohibits CoreTel from billing reciprocal compensation charges

to the Verizon ILECs for third-party and non-local interLATA
calls, yet Verizon ILECs were supposedly billed for every call
delivered.

The trunks can carry third-party and non-local

traffic and CoreTel billed the Verizon ILECs for all of the

traffic delivered over the trunk groups without regard to the
source of origination or LATA.

Verizon contends that all calls

over these trunks were billed to Verizon without excepting the
prohibited third-party and non-local interLATA calls from the
charges in violation of Section 5.7.1 and 5.7.2(a) and (c).
CoreTel does not dispute that they billed reciprocal
compensation charges to Verizon ILECs for every call delivered
over the local connection interconnection trunk groups or that
third-party and non-local interLATA calls were delivered over
those trunk groups.

Under the ICA,

CoreTel may not bill

reciprocal compensation charges that include third-party and
non-local interLATA calls

in addition to the local calls.

As a

result, Verizon is entitled to partial summary judgment on
Counts

III and IV of the Amended Counterclaims and Counts

I and

II of the Amended Complaint regarding the reciprocal

compensation invoices to the Verizon ILECs for third-party and
non-local

interLATA traffic.

Switched Access Charges
The next issue this Court will address is the switched

access charges.

It is undisputed that CoreTel billed Verizon
10

for the "End Office Switching" service defined in its federal

and state tariff.

This issue revolves around the question of

whether or not CoreTel actually terminates end user lines in any
of its switches, thus providing end office switching defined in
CoreTel's tariffs.
affirmative,

If this question is resolved in the

this would then allow those tariffed rates to be

billed to Verizon.

Both parties rely on AT&T Corp.

v. YMax Communications

Corp., 26 FCC Red 5742 (2011)("YMax Order") as support for their
respective positions.

Defendants assert that CoreTel has not

provided Verizon with end office switching as defined in
CoreTel's tariffs because CoreTel does not terminate end user

lines in any of its switches.

Therefore, Defendants believe

CoreTel has improperly billed for services that are not within

its tariffs.

"A carrier can only charge its customers according

to the services and rates set forth in its tariff," and a
competitive LEC cannot collect its tariffed rates when "the

service that [the local company] performed for [the long
distance company] is not within its tariff."

CoreTel uses the

internet, or the "IP cloud," to route calls from its switches to

its customers and therefore does not utilize a physical
transmission facility.

According to the YMax Order, the "commonly understood
meanings of the terms 'termination[]'...and 'end user line' do
11

not include the type of non-physical

'virtual connection'" that

CoreTel uses and that such "'virtual' loop[s]...cannot be what
the Tariff means by 'termination' of...
Order at 514 4.

'end user lines.'" YMax

The FCC in YMax held that because YMax did not

terminate end user lines in the switches that it claimed

constituted end offices,

the "Tariff does not authorize YMax to

assess End Office Switching charges."

YMax Order S145.

CoreTel

has billed Defendants the composite switched access rate element

for intrastate long-distance calls and the local switching rate
element for interstate long-distance calls.

Both CoreTel's

federal tariff and state tariff include end office switching
which is defined in both to involve the "use of end office

switching equipment" and "the terminations in the end office of
end user lines."

The terms "termination" and "end user lines"

have established meanings within the telecommunications industry
and refer to a "physical transmission facility that provides a
point-to-point connection between an individual home or business

and a telephone company office."

YMax Order at A39.

Despite

using these settled terms in its tariffs, CoreTel does not route

calls to and from its customers via a physical transmission
facility.

Instead,

it uses an IP cloud to send calls from its

switches to its customers.

The FCC has squarely held that the

"commonly understood meanings of the terms 'termination!]'

...and 'end user line' do not include the type of non-physical
12

'virtual connection'" that CoreTel uses and such "'virtual'

loop[s]... cannot be what the Tariff means by 'termination' of...
'end user lines.'"

YMax Order at

Plaintiff contends

YMax

is

SI44.

irrelevant

because its

tariff

and system architecture is completely different from the CoreTel
tariff and architecture.

CoreTel asserts that it can charge its

tariffed composite rate for its entire switched access service,

even if it does not provide End Office Switching as defined in
its state tariff by relying on section 3.3.1.

Section 3.3.1

states the "composite rate is not discountable based on the
customer's use of only some of the identified elements."

In

reality, CoreTel has not provided its state tariffed switched
access service at all,

as that service is defined to include the

routing of calls "to and from [an] End Office," which CoreTel
does not have under the terms of its state or federal tariff.

Consequently, this Court shall grant summary judgment in
favor of Defendants on Counts V-VII of the Amended Counterclaims

and partial summary judgment in Defendants'

favor on Counts I

and II of the Amended Complaint as the relate to the switched
access charges as the court similarly did in MCI Worldcom.
MCI Worldcom Network Servs. v. Paetec Commc'ns.,

Dist.

LEXIS 37786 (E.D. Va. Aug.

31, 2005).

Inc. 2005 U.S.

Because CoreTel did

not provide Verizon with the switched access service in its

13

See

state or federal tariff,

it cannot bill or collect its composite

tariff rate from Verizon.

For the reasons stated herein,

Plaintiff's Motion for

Partial Summary Judgment should be denied and Defendants' Motion

for Partial Summary Judgment should be granted in the manner
discussed above.

An appropriate Order shall issue.

M.
Claude M. Hilton

United States District Judge

Alexandria,

Virginia

April J2-2-, 2013

14