Qwest Corporation v. Minnesota Public Utilities Commission

Qwest Corporation (Qwest) (defendant) was a successor Bell operating company (BOC) that provided intrastate telecommunications services in Minnesota. Prior to 1996, local telephone markets were dominated by local service providers called incumbent local exchange carriers (ILECs), of which Qwest was one. In 1996, Congress passed the Telecommunications Act (the act), codified in various sections of Title 47 of the United States Code, including 47 U.S.C. §§ 251 and 271. Under § 251, Qwest was required to share its network by leasing certain property—unbundled network elements (UNEs)—to competitors on just, reasonable, and nondiscriminatory terms. The Federal Communications Commission (FCC) regulated the network elements that ILECs were required to make available. Under § 271, BOCs like Qwest had the ability to petition the FCC for permission to provide long-distance services by complying with certain unbundling requirements under § 251. In 1999 and 2003, the FCC made determinations relating to pricing of UNEs that effectively allowed Qwest to charge higher rates under § 271 than it could if a different pricing method under § 251 applied. Qwest provided certain network elements in Minnesota—high-capacity transport and loops—to competitors at rates specified by the Minnesota Public Utilities Commission (the commission) (plaintiff) for intrastate service and by the FCC for interstate service. In 2005, the FCC issued an order stating that high-capacity transport and loops were no longer subject to § 251(c)(3) unbundling requirements in competitive markets. One effect of the FCC’s order was that Qwest no longer had to provide the specified network elements in numerous major Minnesota cities. Qwest continued to provide them as required by § 271 but at higher rates than those it charged interstate customers. In 2006, the commission initiated an investigation of Qwest to determine whether Qwest’s intrastate rates for § 271 network elements were just and reasonable. Qwest argued that the FCC had exclusive jurisdiction over the rates, but the commission disagreed. Qwest’s rates were found to be unjust and unreasonable, and the commission ordered Qwest to justify its pricing for § 271 network elements. The district court approved the commission’s ruling, finding that the state still had authority to regulate telecommunication facilities if there was no conflict with federal law. Qwest appealed.