Charter Advanced Services (MN), LLC v. Lange

          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. ...