United States District Court, D. Minnesota
Charter Advanced Services (MN), LLC, and Charter Advanced Services VIII MN, LLC, Plaintiffs,
v.
Nancy Lange, in her official capacity as Chair of the Minnesota Public Utilities Commission, et al., Defendants.
Adam
G. Unikowsky, David A. Handzo, Leah J. Tulin, Luke Platzer,
Jenner & Block LLP and Steve W. Gaskins, Gaskins Bennett
Birrell Schupp, LLP for Plaintiffs.
Andrew
Tweeten, Minnesota for Defendants.
MEMORANDUM OPINION AND ORDER
SUSAN
RICHARD NELSON, United States District Judge
I.
INTRODUCTION
Before
the Court are the parties' cross-motions for summary
judgment [Doc. Nos. 75, 81], and Plaintiffs' Motion to
Exclude the Opinions of Defendants' Expert Robert Loube
[Doc. No. 91]. For the reasons stated herein, the Court
grants Plaintiffs' summary judgment
motion-Defendants' motion is correspondingly denied.
Because the Court concludes that no issues of material fact
exist so as to preclude summary judgment even if
Defendants' expert's opinions are considered, the
Court denies Plaintiffs' Daubert motion as moot.
II.
BACKGROUND
A.
Factual History
Plaintiffs
Charter Advanced Services (MN), LLC and Charter Advanced
Services VIII (MN), LLC (collectively, “Charter
Advanced”) are subsidiaries of Charter Communications,
Inc. (“Charter”), a national communications
company that provides services to residential and business
customers-such as cable video, broadband internet access, and
voice communications-through its affiliates. (See
Compl. [Doc. No. 1] ¶¶ 9, 17; Pls.' Statement
of Undisputed Material Facts [Doc. No. 84]
(“SUF”) ¶¶ 1, 2.) Defendant Nancy
Lange[1] is the Chair of the Minnesota Public
Utilities Commission (“MPUC”), and is sued in her
official capacity. (Defendants Dan Lipschultz, John Tuma,
Matthew Schuerger, and Katie Sieben are Commissioners of the
MPUC, and are also sued in their official
capacities.[2] (See Compl. ¶¶ 10-14.)
One of
the features Charter Advanced offers its customers is
real-time, two-way voice calling, which it currently markets
as “Spectrum Voice.”[3] (See SUF ¶ 2.)
Charter Advanced provides this feature using Voice over
Internet Protocol (“VoIP”) technology, which
transmits voice signals via a broadband internet connection
as Internet Protocol (“IP”) data packets.
(See Id. ¶¶ 4-9.) In contrast, traditional
telephone networks (commonly known as the “public
switched telephone network” or “PSTN”)
provide voice telephony services using “circuit
switching” technology, in which a dedicated pathway is
established over the line for the duration of a call.
(Id. ¶ 15.) To route multiple calls over the
same PSTN, traditional telephone providers use a technique
known as Time Division Multiplexing (“TDM”).
(Id. ¶ 16.)
To
effect transmission of voice signals as IP data packets,
Charter Advanced provides its Spectrum Voice subscribers with
a device known as an embedded Multimedia Terminal Adapter
(“eMTA”). (Id. ¶ 10.) The eMTA is
housed in the same device as the cable modem that provides
access generally to Charter's broadband internet service.
(Id. ¶ 11.) The eMTA alters the format of voice
calls between an analog electrical signal-as transmitted by
the customer's handset-and the IP data packets
transmitted over Charter Advanced's cable network.
(Id. ¶ 12-14.) When a Charter Advanced customer
calls or receives a call from a subscriber of a traditional
telecommunications carrier, the call must be converted
between IP and TDM-a process commonly referred to as
“protocol conversion.” (See Id. ¶
20; Compl. ¶ 21.) Because it offers this capability to
interact seamlessly with PSTN networks, Spectrum Voice is an
“interconnected” VoIP service. Although not all
Spectrum Voice calls involve protocol conversion, the
majority of Charter Advanced's voice traffic in Minnesota
currently does so. (SUF ¶ 23.)
In
addition to providing voice transmission, Spectrum Voice has
the capability to provide customers with several additional
communications features. These include an online web portal
(“Voice Online Manager”) that allows customers to
access voicemails as digital audio files, convert voicemails
to text, and forward them via email. (Id. ¶
26.) Voice Online Manager also offers the ability to review
and export call logs, maintain lists of contacts associated
with call logs and voicemails, and direct numerous calling
features, such as specifying a “backup phone”
that will ring in the event of an outage, “simultaneous
ring” that will cause incoming calls to ring numerous
phone numbers at once, call forwarding, selective call
blocking, etc. (Id.) Spectrum Voice can also send
caller ID information to cable set-top boxes, allowing
subscribers with Charter cable video services to display call
information on their televisions. (Id. ¶ 27.)
Beyond these and other current features, Charter
Advanced's IP infrastructure makes it possible to add new
features to Spectrum Voice through software and network
equipment changes. (Id. ¶ 27.) Anticipated new
features include a “softphone” feature-allowing
Spectrum Voice subscribers to access calling features through
a tablet or smartphone app-and a feature designed to identify
and block unwanted “robo” calls by simultaneously
routing incoming calls to a system that queries dynamic
internet-connected databases of known robocalling numbers,
terminating calls if it finds a match. (Id. ¶
35.)
Charter
Advanced provides every Spectrum Voice subscriber with access
to all current additional communication features.
(Id. ¶ 37.) Although subscribers can opt not to
activate or utilized certain features, and may obtain the
voice calling aspect of Spectrum Voice without its other
features, Charter Advanced would need to have its personnel
deactivate those features manually. (Id.
¶¶ 38, 39.) Very few customers request that Charter
Advanced do so. (Id. ¶ 39.) Further, because
Charter Advanced must activate a broadband connection to a
residence or business in order to implement Spectrum Voice,
it is not marketed as a standalone offering, but as a service
option for customers who subscribe to Charter's broadband
internet and cable television services. Although a customer
could request Spectrum Voice without internet or cable, and
Charter Advanced would supply it, such requests are
“exceedingly rare.” (Id. ¶¶
40-42.)
B.
Procedural History
Prior
to March 2013, Charter offered VoIP services in Minnesota
through two affiliates-Charter Fiberlink CCO, LLC and Charter
Fiberlink CC VIII, LLC (collectively, “Charter
Fiberlink”). (Comp. ¶ 26.) In March 2013, Charter
Fiberlink assigned its retail voice customers to the
newly-established Charter Advanced. (Id. ¶ 27.)
The frank purpose behind the assignment was to limit the
reach of state regulation, thereby enhancing Charter's
market competitiveness. (See Tweeten Aff. [Doc. No.
78], Ex. 9 (“Moore Dep.”) at 25:3-6, 27:11-19.)
Charter Fiberlink notified its subscribers in writing of the
change a month ahead of time and advised them that they could
accept the revised terms by continuing their service. (Compl.
¶ 27.)
The
Minnesota Department of Commerce (“MDOC”)
responded to Charter's realignment on September 26, 2014,
by filing a complaint with the MPUC. (Id. ¶
28.) The complaint raised fifteen separate allegations,
including that Charter Advanced was in violation of several
Minnesota statutes. (See Tweeten Aff., Ex. 1
(“MDOC Compl.”) at 13-14.) Charter Advanced
responded, in part, by arguing that state regulation of
Spectrum Voice is preempted by federal law. (See
Tweeten Aff., Ex. 2 (“MPUC Order”) at 2.) The
MPUC issued an order on July 28, 2015, finding that state
regulation is not preempted. (See generally id.) It
ordered Charter Advanced to submit within thirty days a
proposed plan for compliance with applicable Minnesota rules
and regulations. (See id. at 15.) A final order to
that effect was issued on September 24, 2015. (Compl. ¶
29.)
Charter
Advanced responded to the MPUC's decision by instituting
the present action. Its Complaint seeks declaratory relief
that state regulation of Spectrum Voice is preempted by
federal law, and injunctive relief prohibiting Defendants
from seeking to enforce that regulation of its service.
(See Compl. ¶¶ 36-42.) Defendants moved to
dismiss, arguing that Charter Advanced's VoIP service is
a “telecommunications service” for purposes of
the Telecommunications Act of 1996, and therefore subject to
dual state and federal regulation. See Charter Advanced
Servs. (MN), LLC v. Heydinger, 15-cv-3935 (SRN/KMM),
2016 WL 3661136, at *2 (D. Minn. July 5, 2016).
On
referral from this Court, United States Magistrate Judge
Hildy Bowbeer issued a Report and Recommendation
(“R&R”) recommending that Defendants'
motion be denied. (See generally R&R [Doc. No.
46].) The R&R concluded that Defendants had not
established, as a matter of law, that Spectrum Voice was not
an “information service” for which state
regulation is preempted. (See Id. at 44.) The MPUC
timely objected, and on independent reconsideration this
Court overruled those objections and adopted the R&R.
See generally Charter Advanced, 2016 WL 3661136. In
addition to ruling on the legal relevance of several orders
of the Federal Communications Commission (“FCC”)
and federal courts, the importance of which will become
relevant as Defendants' current arguments are considered,
the Court narrowly framed the issue for summary judgment:
whether Spectrum Voice is a telecommunications service or an
information service for purposes of the Telecommunications
Act of 1996. See Id. at *5. If the former,
regulation by the MPUC is permissible, if the latter, it is
preempted and impermissible. The parties having completed
discovery and cross-moved under Federal Rule of Civil
Procedure 56, that issue is now ripe for resolution.
III.
DISCUSSION
A.
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