Qwest keeps fight against $26 million fine alive
In a federal appeals court, the state's major phone company may be in the final chapter of a three-year battle against the Public Utilities Commission.
By Leslie Brooks Suzukamo
St Paul Pioneer Press

Tuesday, September 12, 2005

The Minnesota Public Utilities Commission's record $26 million fine against Qwest Communications International should be thrown out because it was "arbitrary and capricious," the phone company argued before the U.S. Court of Appeals for the 8th Circuit in St. Paul on Monday.

But the commission and a host of competing phone companies, including giant AT&T, said that not only should the fine remain in place, but the circuit court should reinstate a PUC order telling Qwest to reimburse competitors for discounts that could reach $15 million.

The appeal to the three-judge panel could be the final act of a contentious three-year battle between the commission and Minnesota's dominant phone company.

Back in October 2002, the PUC found Qwest guilty of unfairly playing favorites among some phone companies with secret deals that may have hurt local phone competition.

Qwest, with 1.9 million phone lines in the state, provides wholesale service to competitors under a 1996 federal law that was supposed to stimulate local phone competition the same way an earlier federal decision opened up competition for long-distance phone carriers.

On Monday, both Qwest and its competitors were trying to overturn parts of a lower court order by U.S. District Court Judge Ann Montgomery of Minneapolis that gave each side half a loaf.

Montgomery had ruled that the PUC did not have the authority to order Qwest to make restitution to phone companies that did not receive special deals like those Qwest had made with some small local phone providers.  That restitution could total between $10 million and $15 million, lawyers from the two sides said.

But Montgomery upheld the PUC's $26 million fine against Qwest, the largest fine the commission had ever levied.

Without the ability to order restitution, the PUC "would be powerless to remedy unjust and unfair discrimination.  Essentially the PUC would be left with a hollow authority," lawyer Dan Lipschultz argued on behalf of the competing phone companies Monday.

But Qwest believes the commission exceeded its authority by ordering the restitution, Qwest lawyer Peter Spivack of the Washington, D.C., law firm Hogan & Hartson told the panel Monday.

Furthermore, the commission "picked a number out of the air" and tried to justify it after its decision, Spivack said.

For its part, PUC attorney Steve Alpert said the $26 million figure was derived in part from a detailed record developed by an administrative law judge and from its own discussions during public hearings.

If Qwest loses its appeal on the fine, it could pay the $26 million or appeal the case to the U.S. Supreme Court, but such an appeal would have to be over a federal issue, Spivack said.

Though its battle in Minnesota has been contentious, Qwest has settled other government actions, including a $20 million settlement in Arizona and a $250 million settlement with the Securities and Exchange Commission, both in 2004.

"Unlike (discussions with) other states, our attempts to resolve this with the commission and through mediation were unsuccessful," Qwest spokeswoman Joanna Hjelmeland said Monday.

Leslie Brooks Suzukamo can be reached at 651-228-5475 or lsuzukamo@pioneerpress.com.