COME NOW N.E. Colorado Cellular d/b/a Viaero Wireless ("Viaero Wireless"), United

Transcription

1 Complaint Regarding the Filing of ) Unauthorized Line Counts by ) Cellco Partnership d/b/a Verizon Wireless ) Docket No. 11-CELZ-634-COM For Purposes of Receiving High-Cost Support ) From the Federal Universal Service Fund ) RESPONSE OF N.E. COLORADO CELLULAR D/B/A VIAERO WIRELESS, UNITED STATES CELLULAR CORPORATION, NEX-TECH WIRELESS, LLC, UNITED WIRELESS COMMUNICATIONS, INC., AND WESTLINK COMMUNICATIONS, LLC TO ANSWER OF CELLCO PARTNERSHIP D/B/A VERIZON WIRELESS COME NOW N.E. Colorado Cellular d/b/a Viaero Wireless ("Viaero Wireless"), United States Cellular Corporation ("U.S. Cellular"), Nex-Tech Wireless, LLC ("Nex-Tech Wireless"), United Wireless Communications, Inc. ("United Wireless"), and Westlink Communications, LLC ("Westlink Communications") (collectively, the "Complainants"), by their undersigned attorneys, and hereby file this Response to the Answer of Cellco Partnership d/b/a Verizon Wireless ("Verizon Wireless") filed April 4, The Verizon Wireless Answer was filed in response to the Complaint filed March 9, 2011 by Complainants asserting that Verizon Wireless was unlawfully claiming high-cost support from the federal Universal Service Fund ("USF") without any authorization from the Kansas Corporation Commission (the "Commission"). 1

2 I. SUMMARY. issue: 1. In its Answer, Verizon Wireless tries mightily to obfuscate the critical underlying Has this Commission granted authority for Verizon Wireless to serve as an Eligible Telecommunications Carrier ("ETC") in the State ofkansas? 2. Verizon Wireless does not deny that it has never been granted ETC status in Kansas. Instead, Verizon Wireless appears to assert that it can rely on the ETC status ofalltel, a company which Verizon purchased in January 2009, to count not only Alltel's lines for high-cost support, but also to count all "legacy" Verizon Wireless lines for high-cost support. Complainants submit that Verizon Wireless has been abusing Alltel's ETC designation since 2009 and has unilaterally taken actions that have caused and will continue to cause damage to the State of Kansas and other Kansas CETCs barring corrective action by this Commission. Of course, Verizon Wireless' unilateral decision to count these lines was made without any approval to do so by this Commission. Under Verizon Wireless' interpretation, the Alltel ETC designation apparently can be expanded to include the customers of any acquiring entity, without the formal approval of this Commission (or even notice) and regardless of the qualifications of that controlling entity to be an ETC. 3. The simple truth is that Verizon Wireless has disregarded the Commission's jurisdiction and authority. It has failed to obtain its own ETC designation or Commission consent to transfer Alltel's ETC designation. Instead, it now seeks authority to transfer Alltel's ETC designation, nearly two years after closing on the Alltel acquisition. 2

3 4. Further, Verizon Wireless attempts - without success - to render meaningless the unanimous and definitive decision of the Georgia Public Service Commission ("Georgia PSC") which found, in a virtually identical scenario, that Verizon Wireless had never been designated as an ETC in Georgia, and that Verizon Wireless had never been authorized to receive high-cost funding from the federal USF for its "legacy" customers in Georgia. l The Georgia PSC decision is directly on point, and provides important precedent for this Commission. II. THIS CASE IS ABOUT WHETHER VERIZON WIRELESS HAS BEEN AUTHORIZED TO BE AN ETC; IT IS NOT ABOUT HOW FEDERAL HIGH COST SUPPORT IS DISTRIBUTED. 5. Page after page of Verizon Wireless' Answer is devoted to issues completely unrelated to those raised by Complainants? In January 2009, Verizon Wireless acquired Alltel. As of this date, this Commission has never passed upon the qualifications of Verizon Wireless to be an ETC in Kansas, or upon the question of whether the public interest would be served by its designation in Kansas. Verizon Wireless has never provided this Commission with a complete picture of the post-alltel merger ownership structure, or what it is filing with USAC to justify the support it is receiving. Verizon Wireless has not described how its network has been merged with Alltel's. The Commission is entitled to review all of these matters, consistent with the authority provided to it by Section 214( e) of the Communications Act, as amended, as well as this Commission's own rules. 1 See Exhibit 1. 2 Verizon Wireless repeatedly tries to muddy the critical issue regarding its lack of authority by asserting that Complainants have not identified the correct entities within the Verizon Wireless family. For example, the Answer states that "it should be noted that Cellco has not filed any claims for USF support in connection with Alltel's ETC designation in Kansas. The quarterly reports submitted to [USAC]... are filed by Alltel, not Cellco." Answer at p.3. The fact that Alltel, the acquired entity, filed reports with USAC that included all ofverizon Wireless' legacy lines, is at the very heart of this proceeding. 3

4 6. By contrast, several Alltel affiliates and subsidiaries have been designated as ETCs by the Commission pursuant to its authority under 47 U.S.C. 214(e).3 In each case, the Alltel entity filed an application with the Commission seeking authority to be designated as an ETC, prior to seeking federal high-cost support. In each case, the Commission designated Alltel on the basis of Alltel's detailed demonstration of its ability to provide the supported services over its own network facilities, under the licenses issued to it by the FCC. The ETC designation orders did not cover any customers, infrastructure, facilities, licenses, retail outlets, or properties other than those owned or used by Alltel. 7. Having never been granted ETC status in the State of Kansas, Verizon Wireless is not authorized to seek, or to collect, federal high-cost support for its operations in the State of Kansas. Under Section 254(e) of the Act, "only an eligible telecommunications carrier designated under Section 214(e) shall be eligible to receive specific Federal universal service support.',4 Verizon Wireless elected not to seek state commission authority to step into Alltel's shoes as an ETC in Kansas, nor to seek this Commission's consent prior to collecting high-cost support on the "legacy" Verizon Wireless lines. Yet, since 2009, Verizon Wireless has been abusing the Alltel ETC designation at the expenses of the State of Kansas and other Kansas CETCs, by adding all of its legacy Verizon Wireless lines to the reports submitted by Alltel something for which Verizon Wireless now appears to be seeking a post facto "rubber stamp" from this Commission. 3 See e.g., ALLTEL Kansas Limited Partnership, Docket No. 04-ALKT-283-ETC (Sept. 24, 2004) and ALLTEL Kansas Limited Partnership, Docket No. 04-ALKT -283-ETC (March 17, 2005). 447 U.S.C. 254(e) and 214(e). 4

5 A. The Complaint is Not a Collateral Attack on FCC Funding Decisions. 8. Verizon Wireless asserts that the Complaint is a collateral attack on the FCC's funding decisions. Nothing could be further from the truth. Complainants' are not challenging the FCC's Interim Cap Order. s The Court of Appeals has already upheld that Order, and there are no further legal proceedings pending. 6 Nor are Complainants' challenging the FCC's Corr Wireless Order. 7 Columbia Circuit. s That Order is on appeal before the U.S. Court of Appeals for the District of B. The Issue Raised in the Complaint is Not a Federal Issue. 9. There can be no doubt that this Commission has exclusive jurisdiction to designate ETCs in the State of Kansas. As the Complaint emphasized, Section 214( e )(2) of the Communications Act of 1934, as amended (the "Act"), provides as follows: Designation of eligible telecommunications carriers: A State Commission shall upon its own motion or upon request designate a common carrier that meets the requirements of [Section 214(e)(1)] as an eligible telecommunications carrier for a service area designated by the State commission. Upon request and consistent with the public interest, convenience and necessity, the State commission may, in the case of an area served by a rural telephone company, and shall, in the case of all other areas, designate more than one common carrier as an eligible telecommunications carrier for a service area designated by the State commission, so long as each additional requesting carrier meets the requirements of [Section 214(e)(I)].9 5 See High-Cost Universal Service Support, Order, 23 FCC Red. 8834, 8850 (2008) ("Interim Cap Order"), affd, Rural Cellular Ass 'n v. FCC, 588 F.3d 1095 (D.C. Cir. 2009). 6Id. 7 See High-Cost Universal Service Support; Federal-State Joint Board on Universal Service, Order and Notice of Proposed Rulemaking, WC Docket No , CC Docket No , FCC (ret, Sept. 3, 2010) ("Corr Wireless I Order"), ~ 20, recon. pending. 947 U.S.C. 214(e)(emphasis added). 5

6 10. As Complainants' emphasize throughout this Response, this Commission must first determine whether Verizon Wireless (whether on its own or through its Alltel subsidiary) has the requisite ETC authority which only this Commission can grant - to allow it to file any line counts seeking high-cost support for legacy Verizon Wireless customers. In filing its Application with the Commission, Verizon Wireless inherently recognizes that this Commission has jurisdiction to grant or deny an application seeking ETC status in Kansas. C. Integration of Alltel and Verizon Wireless Facilities Does Not Relieve Verizon Wireless of its Fundamental Obligation to Obtain State Authority to Operate as an ETC. 11. Verizon Wireless admits that it integrated its network with the Alltel network, yet it never addresses why it waited nearly two years to inform the Commission of these facts. Instead, Verizon Wireless states, somewhat glibly, that "it is no longer feasible to separately identify all of the former Alltel subscribers or segregate all of those customers from other subscribers of "Verizon Wireless" service."l0 The level of integration - which was wholly within the control of Verizon Wireless - and the potential difficulty of separating out customers is hardly a reason to give Verizon Wireless a free pass on the fundamental issue of its eligibility to be an ETC in Kansas. Without a grant of ETC status, Verizon Wireless is not authorized to report any lines to USAC for support - whether it reports those lines on its own or through its Alltel subsidiary. 10 Answer at p. 6. Whether or not it is feasible for Verizon Wireless to distinguish between fonner Alltel subscribers and Verizon Wireless subscribers is irrelevant to the core issue presented in the Complaint. However, Complainants note that it should be possible for Verizon Wireless to distinguish such customers. For example, as of the Closing Date, Verizon Wireless had to have known how many customers it had in the relevant service areas, and how many customers Alltel had. In addition, wireless carriers are assigned different NPA-NXX prefixes. Surely, Verizon Wireless can separate out customers with an Alltel prefix from customers with a Verizon Wireless prefix. 6

7 12. If the Commission were to allow Verizon Wireless' actions on a post facto basis, it would send a clear message that a carrier (l) could simply purchase ETC authority by buying a designated carrier and (2) need not come to the Commission in advance for authority to transfer a grant of ETC status. Indeed, why would a carrier feel compelled to come to this Commission in advance for much of anything in the future? Why not wait two years, declare that the deal is done, everything is integrated, and nothing can be done about it? There is a certain audacity to what Verizon Wireless is doing here, embodied in this argument that the past actions of Verizon Wireless should take precedence over what is legally required. D. The FCC's Order in the VerizonlRCC Merger Does Not Support Verizon Wireless' Actions in Kansas. 13. Verizon Wireless offers a citation from the FCC's Order approving its 2008 acquisition of Rural Cellular Corporation ("RCC") that addressed, in a narrow and specific context, the ETC obligations of RCC after the consummation of its acquisition by Verizon Wireless. ll For a variety of reasons, the VerizonIRCC Order is wholly inapposite to the Commission's review ofthe critical issue in this proceeding. 14. The VerizonIRCC Order approved Verizon Wireless' acquisition of RCC. RCC provided service primarily in rural areas in 15 states using a second generation GSM network. Verizon Wireless operated a nationwide CDMA network. GSM and CDMA technologies are not compatible, and require different handsets. The Joint Petitioners objected to the proposed acquisition, concerned that Verizon Wireless would not maintain RCC's legacy GSM network, a II Applications of Cellco Partnership d/b/a Verizon Wireless and Rural Cellular Corporation for Consent to Transfer Control of Licenses, Authorizations. and Spectrum Manager Leases, WT Docket No , Memorandum Opinion and Order and Declaratory Ruling, 23 FCC Red (2008)("VerizonlRCC Order"). 7

8 network that was built, in part, with USF funds. 12 Joint Petitioners were also concerned that Verizon Wireless would not continue to offer various low-cost RCC service plans made possible by high-cost support. 13 Verizon Wireless addressed most ofthese concerns by agreeing to divest to AT&T Mobile all RCC markets that overlapped with existing Verizon Wireless markets. However, there remained some markets where there was no overlap - and thus, Verizon Wireless would operate RCC's GSM network until such time as Verizon Wireless built out a new CDMA network. 15. Verizon Wireless responded to the concerns of Joint Petitioners as follows: [T]he Joint Petitioners' assertion that Verizon Wireless must be required to preserve RCC's GSM network because RCC has previously received CETC funding has nothing to do with this transaction and is wholly without basis. As this Commission has explicitly found in a similar context, Section 214(e) provides that the individual states have primary authority for ETC designation, including the accompanying requirements, and thus there is no basis for the [Federal Communications] Commission to insert itself broadly into this process Complainants fully agree with Verizon Wireless. The FCC also agreed with Verizon Wireless, finding that Section 214(e)(2) of the Act provides state commissions with the primary responsibility for performing ETC designations. Is As a result, the FCC ostensibly limited this aspect of its decision to states where it, not the state commission, makes the determination about ETC status. 12 See Petition to Deny of Consumer Federation of America, et. al. ("Joint Petitioners"), flied Feb. 11, 2008 in Docket No Petition to Deny at p Opposition to Petitions to Deny and Comments f:tled by Cellco Partnership d/b/a Verizon Wireless and RCC on Feb. 21, 2008, in Docket No at p. 20 (emphasis added). 15 VerizonlRCC Order at

9 17. Nonetheless, over the objections of Verizon Wireless, the FCC determined that "the ETC obligations in effect prior to the proposed transaction will remain in effect upon consummation of the proposed transaction.,,16 In the very same paragraph, the FCC continued on to state that: To the extent that after the consummation of the proposed transaction Joint Petitioners observe any predicted or unpredicted public interest harms in a given state for which RCC has obtained designation as an ETC, they may seek remedies from the relevant state commission or the [Federal Communications] Commission as appropriate. 17 Clearly, then, the FCC recognized that the designation of ETC status and the determination of compliance with ETC requirements, is first and foremost the responsibility of the state commissions. 18. Significantly, nowhere in the VerizonlRCC Order did the FCC address the broad issue of whether an entity could essentially "acquire" the ETC designation of another carrier, and use that ETC designation to seek high-cost support for all of its legacy customers. In fact, the scope of the FCC's ruling in the VerizonlRCC Order is applicable only to markets where Verizon Wireless did not previously have operations a situation completely different than presented in this case. The VerizonlRCC Order was narrowly limited to requiring Verizon Wireless to comply with ETC obligations for existing RCC customers - and this requirement was imposed in the face of stiff opposition from Verizon Wireless. The VerizonlRCC Order is also distinguishable because the FCC set forth the scope of the CETC authority prior to the acquisition, not two years later. 161d. at, d. at ~

10 19. As Verizon Wireless acknowledges, the FCC's order approvmg Verizon Wireless' acquisition of Alltel contains no such language. Verizon Wireless seeks to explain away the missing language by asserting that: "by the time of Cellco-Alltel merger..., the obligation to continue serving as a competitive ETC was beyond question and, therefore, was not even raised by opponents of the transaction. Nor did the FCC deem it necessary to restate the obvious.,, As discussed in detail above, the FCC's determination in the VerizonlRCC Order was in the context of a very specific and narrow concern that had never been, and has not since, been addressed. In all events, Verizon Wireless offers a novel legal theory: that an administrative agency can be silent on an important matter because it need not restate the obvious. Complainants submit that it was the responsibility of Verizon Wireless to raise the matter with the FCC, particularly if Verizon Wireless were so confident that its interpretation of the matter was settled law. E. Other Attempts by Verizon Wireless to Obfuscate the Key Issue Must Fail. 21. In keeping with its effort to re-direct the focus to issues unrelated to the fundamental question of whether Verizon Wireless has the requisite ETC authority, Verizon Wireless raises several other non-germane matters. For example, Verizon Wireless asserts that "if the Complainants truly believed that they were not receiving sufficient USF support in Kansas, the FCC has already afforded them a remedy.,,19 The remedy is irrelevant, however, because it is wholly unrelated to the fundamental question of whether Verizon Wireless has the 18 Answer at p Answer at p

11 requisite ETC authority. Verizon Wireless also "denies the assumption [in the] Complaint that Alltel's line count reports are solely responsible for decreases in USF support by other competitive ETCs, because other carriers... have reported significant increases in their line count reports during the same time period...,,20 Complainants readily admit that other carriersand importantly, these carriers are authorized ETCs - have reported increases in their line counts. However, Verizon Wireless (apparently, via Alltel) has reported a significant - and unauthorized - increase in its line count. III. THE GEORGIA PSC ORDER PROVIDES IMPORTANT PRECEDENT. 22. As Complainants discussed in their Complaint, the Georgia PSC - reviewing a virtually identical situation -- issued an Order unanimously and conclusively finding that Verizon Wireless has never been designated as an ETC in Georgia, and that Verizon Wireless has never been authorized to receive high-cost funding from the federal USF for its "legacy" Verizon Wireless customers in Georgia The Georgia PSC addressed the very same fundamental issue raised by Complainants. Preliminarily, the Georgia PSC determined that "Verizon Wireless... served areas in Georgia prior to the acquisition of Alltel, but [Verizon Wireless] ha[d] never been designated by the [Georgia PSC] as an ETC.,,22 The Georgia PSC also ruled that it had jurisdiction over the Verizon Wireless ETC amendment application "pursuant to Section 214(e)(2) of the... Act, [under which] state commissions are authorized to designate common 20 Answer at p Order on Joint Petition for Declaratory Ruling, Georgia PSC, February 21, 2011, Docket No ("Georgia PSC Order") at pp. 3 and 5 (emphasis added). See Exhibit Georgia PSC Order at p

12 carriers as eligible telecommunications carriers.,,23 The Georgia PSC rejected Verizon Wireless' argument that state commissions lack jurisdiction over the issues, ruling: [I]t is within the Commission's authority to clarify that it has not authorized Verizon Wireless to receive ETC funding from the USF in connection with its "legacy" customers.... The Commission is charged with considering the public interest when designating additional ETCs for rural areas. The Commission has not designated Verizon Wireless as an ETC... and did not make any public interest finding with regard to Verizon Wireless being designated as a[n] ETC in Georgia?4 24. In its Answer, Verizon Wireless seeks to nullify the significance of the Georgia PSC Order, asserting that "the Georgia PSC did issue a declaratory determination, but specifically declined to grant any of the requested non-declaratory relief.,,25 Verizon Wireless further asserts that "the Georgia PSC merely construed its own orders and determined that those orders had not previously designated Cellco as an ETC and had not authorized Cellco to receive high-cost funding.,,26 In essence, Verizon Wireless appears to be asserting that the Georgia PSC Order is meaningless, a legal exercise without any legal effect. Such an argument is nonsensical. 25. In plain fact, the Georgia PSC examined the fundamental issue of whether Verizon Wireless had the requisite authority from the Georgia PSC to seek high-cost support for legacy Verizon Wireless lines, and the Georgia PSC clearly and emphatically ruled that Verizon Wireless did not have such authority. Lacking such authority, Verizon Wireless had no legal right to seek high-cost support from USAC for such lines. In fact, even Verizon Wireless' counsel admitted that Verizon Wireless lacked such authority, stating: 23 Georgia PSC Order at p Georgia PSC Order at p Answer at p Answer at pp

13 We agree the [Georgia Public Service] Commission did not previously desi~ate Cellco 2 Partnership which does business as Verizon Wireless in Georgia as an ETC Verizon Wireless also attempts to minimize the findings of the Nevada PUC staff. In an odd and rather dismissive statement, Verizon Wireless asserts that it "admits that Nevada Staff misconstrued the purpose of the amendment application.,,28 Next, Verizon Wireless "admits [that] Nevada [PUC] Staff filed two petitions with the Nevada PUC seeking inappropriate relief.,,29 Verizon Wireless appears to have little, if any, regard for the careful factual and legal findings ofstate commissions and their staffs. IV. CONCLUSION. 27. The Complainants urge the Commission to move expeditiously to establish a procedural schedule, including a pre-hearing conference, in this proceeding, and for such other relief as the Commission deems necessary and proper. Respectfully submitted, N.E. COLORADO CELLULAR d/b/a VIAERO WIRELESS UNITED STATES CELLULAR CORPORATION NEX-TECH WIRELESS, LLC, UNITED WIRELESS COMMUNICATIONS, INC., AND WESTLINK COMMUNICATIONS, LLC 27 Georgia Public Service Commission, Telecom Commission Hearing in Docket No , February 11, 2011, Testimony of Mr. Chuck Palmer, counsel to Verizon Wireless, at pp of hearing transcript (prepared by Capital Reporting Company). 28 Answeratp I d. 13

14 ~li,~~ SNRDenton 7028 SW 69th Street Auburn, KS Phone: (816) Counsel to N.E. Colorado Cellular d/b/a Viaero Wireless and United States Cellular Corporation aplinger, Jr #11147 J arne. Caplinger, Jr. Chartered 823 W. 1Oth Avenue Topeka, KS Phone: (785) jrcaplinger@caplinger.net Counsel to Nex-Tech Wireless, LLC, United Wireless Communications, Inc. and Westlink Communications, LLC David A. LaFuria Todd B. Lantor Robert S. Koppel Lukas, Nace, Gutierrez & Sachs, LLP 8300 Greensboro Drive, Suite 1200 McLean, VA (703) dlafuria@fcc1aw.com tlantor@fcc1aw.com bkoppel@fcclaw.com Counsel to N.E. Colorado Cellular d/b/a Viaero Wireless, United States Cellular Corporation, Nex-Tech Wireless, LLC, United Wireless Communications, Inc. and Westlink Communications, LLC April 18,

15 VERIFICATION STATE OF KANSAS ) ) SS COUNTY OF SHAWNEE ) I, James M. Caplinger, Jr., of lawful age, being first duly sworn upon my oath, state: I am an attorney for Nex-Tech Wireless, LLC, United Wireless Communications, Inc., and Westlink Communications, LLC, have read the foregoing Complaint, and upon information and belief, state that the matters therein appearing are true and correct to the best of my knowledge and information. Subscribed and sworn to before me this 18 th day ofapril, r My appointment expires: cx~d&/1 15

16 CERTIFICATE OF SERVICE I, the undersigned, certify that on this 18th day of April, 2011, a true and correct copy of the foregoing was sent by U.S. Mail, postage prepaid, and properly addressed to the following: Robert Lehr, Litigation Counsel Kansas Corporation Commission 1500 S.W. Arrowhead Rd. Topeka, KS David E. Bengston Stinson Morrison Hecker LLP 1625 N. Waterfront Parkway, Suite 300 Wichita, KS David LaFuria Todd B. Lantor Robert S. Koppel Lukas, Nace, Gutierrez & Sachs, LLP 8300 Greensboro Drive, Suite 1200 McLean, VA

17 LAW OFFICES JAMES M. CAPLINGER, CHARTERED 823 W. 10th TOPEKA, KANSAS JAMES M. CAPLINGER JAMES M. CAPLINGER, JR. (785) MARK E. CAPLINGER Fax (785) April 18,2011 Ms. Susan Duffy Executive Director Kansas Corporation Commission 1500 SW Arrowhead Road APR 1 8 Z011 Topeka, Kansas Re: Dear Ms. Duffy: Docket No. ll-celz-634-com STATE CORPORA1ION COMMISSION ~~ Enclosed please find the original and nine (9) copies of the Response ofn.e. Colorado Cellular d/b/a Viaero Wireless, United States Cellular Corporation, Nex-Tech Wireless, LLC, United Wireless Communications, Inc., and Westlink Communications, LLC to Answer of Cellco Partnership d/b/a Verizon Wireless in the above captioned docket. Should the Commission or Staff have any questions, please contact this office. Sincerely, JMCj/dh enclosures