Demanda OneLink JRT PRTC

UNITED STATES DISTRICT COURTDISTRICT OF PUERTO RICO

SAN JUAN CABLE LLC d/b/a ONELINK COMMUNICATIONS and PUERTO RICO CABLE ACQUISITION CORP. d/b/a CHOICE CABLE T.V.,

Plaintiffs,

-against-

THE TELECOMMUNICATIONS REGULATORY BOARD OF PUERTO RICO, SANDRA TORRES LOPEZ in her official capacity as its President, and GLORIA ESCUDERO MORALES and NIXYVETTE SANTINI HERNANDEZ in their official capacities as its Associate Members,

Defendants.

Civil No.

COMPLAINTFOR INJUNCTIVE ANDOTHER RELIEF

Plaintiffs San Juan Cable LLC d/b/a OneLink Communications (“OneLink”) and

Puerto Rico Cable Acquisition Corp. d/b/a Choice Cable T.V. (“Choice”), as and for their

complaint herein against defendants the Telecommunications Regulatory Board of Puerto Rico,

Sandra Torres Lopez in her official capacity as President of the Telecommunications Regulatory

Board, and Gloria Escudero Morales and Nixyvette Santini Hernandez in their official capacities

as Associate Members of the Telecommunications Regulatory Board (collectively the “Board” or

“defendants”) hereby respectfully allege as follows:

NATURE OF THE ACTION

1. This is a related action to Civil No. 11-2135 (GAG) whereby Puerto Rico

Telephone Company, Inc. (“PRTC”) has claimed against OneLink under federal and Puerto Rico

antitrust laws.

Case 3:11-cv-02152-DRD Document 1 Filed 11/29/11 of 40

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INTRODUCTION

2. The Board is a state entity authorized by the U.S. Congress and the

Commonwealth of Puerto Rico to guide and protect the cable television market in Puerto Rico by

ensuring that cable operators on the island comply with federal and Commonwealth law and

regulations governing the provision of such service.

3. Prior to 2011, the Board had granted or approved the transfer of cable

franchises to three cable operators, including to Plaintiffs OneLink and Choice, after ensuring

that such operators complied with all applicable requirements of federal and Commonwealth law

and regulations.

4. From 2008 to November 2011, the Board considered an application for a

cable franchise submitted by PRTC. During the Board’s consideration, it developed a substantial

administrative record of factual and legal findings, including findings that PRTC was engaged in

on-going illegal activity and that it consistently failed to comply with federal and state

requirements for obtaining a cable franchise.

5. In November 2009, a former long-time and high-level PRTC employee –

Defendant Torres – was appointed to be President of the Board, after which the Board’s process

became increasingly secretive, irregular and emotionally divided between Defendant Torres, who

openly favored granting PRTC a franchise and opposed further evaluation of its application, and

the two other Commissioners, who remained concerned about PRTC’s continuing violations and

ineligibilities.

6. In September 2011, the Board officially ended its evaluation of PRTC’s

franchise application and voted to issue a franchise to PRTC, provided that specific conditions


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and restrictions were imposed on PRTC to remedy its past illegal conduct and prevent future

violations.

7. On November 2, 2011, the Board issued an order (the “November 2 Order”)

ratifying its September 2011 decision by first setting forth material facts and findings based on

the Board’s three-year administrative process, including a number of failures and violations on

the part of PRTC, and then granting PRTC a franchise with specific conditions and restrictions to

address those findings.

8. On November 8, 2011, the Board, acting on its own motion at Defendant

Torres’ urging, suddenly and without explanation voted to eliminate the November 2 Order and

grant PRTC a radically different franchise. On November 16, 2011, the Board issued an order

(the “November 16 Order”) ratifying that sudden reversal. The November 16 Order eliminates

and makes no mention of the material facts and findings in the November 2 Order, including the

list of PRTC violations and ineligibilities to be overcome, or the specific conditions and

restrictions that the November 2 Order placed on PRTC in order to protect competition and the

public from those continuing violations and ineligibilities. Indeed, the November 16 Order does

not even acknowledge the existence of the November 2 Order.

9. As such, the November 16 Order awards PRTC a cable franchise without any

meaningful conditions or restrictions, in blatant violation of federal and Commonwealth

substantive and procedural law and in astonishing contradiction of the Board’s own substantial

administrative record.

10. The turn-around of the Board from the adoption of the November 2 Order to

the adoption of the November 16 Order is not a mystery. The only thing that changed between

the two events had nothing to do with the administrative record. No new facts were found. The


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sole development was that after the Board’s decision on which the November 2 Order was based

– but before the order itself was released – the term of one of the three Board member expired

and a new Board member was appointed. The new Board member – Defendant Escudero – was

another former long-time PRTC employee. As such, the only development that led to the

wholesale removal of restrictions on PRTC and the complete abdication of the administrative

record was that the composition of the Board shifted from having one former PRTC official as a

minority member to having two former PRTC officials as majority members.

11. The Board’s actions under color of law have, and continue to, deprive

Plaintiffs of their rights to due process and the equal protection of the law as secured by the

Fourteenth Amendment to the Constitution and are actionable under 42 U.S.C. § 1983. The

Board’s actions also violate the protections afforded cable operators under the Cable

Communications Policy Act of 1984, 47 U.S.C. §§ 521 et seq. (as amended, the “Cable Act”).

12. Plaintiffs are entitled to an equitable remedy against the Board in order to

prevent the continuing violations of their federal rights and to prevent the imminent irreparable

harm resulting from the Board’s actions.

13. Without court intervention, the Board’s action will cause irreparable harm to

Plaintiffs and their cable franchises by permitting a cable operator that does not meet the

requirements and has not followed the rules to unfairly provide cable services in Puerto Rico in

blatant violation of federal and Commonwealth law. In light of the Board’s actions, and the

irreparable harm they will cause, Plaintiffs have no meaningful state or administrative remedy of

any kind.


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PARTIES

14. Plaintiff OneLink is a Commonwealth of Puerto Rico (“Puerto Rico”) limited

liability company with a principal place of business of Urb. Industrial Tres Monjitas, 1 Manuel

Camuñas, San Juan, Puerto Rico.

15. Plaintiff Choice is a Puerto Rico corporation with a principal place of business

of Bo. Vayas Torres X-1, Ponce, Puerto Rico.

16. Defendant the Telecommunications Regulatory Board of Puerto Rico is the

agency in charge of regulating telecommunications and cable television services in Puerto Rico,

which regulation includes the issuance of cable television franchises. Defendant’s offices are

located at 500 Ave. Roberto H. Todd (Pda 18 – Santurce), San Juan, Puerto Rico.

17. Defendant Sandra Torres Lopez is a resident of Puerto Rico and the President

of the Telecommunications Regulatory Board of Puerto Rico. She is sued only in her official

capacity.

18. Defendants Gloria Escudero Morales and Nixyvette Santini Hernandez are

residents of Puerto Rico and Associate Members of the Telecommunications Regulatory Board

of Puerto Rico. They are sued only in their official capacities.

JURISDICTION AND VENUE

19. This Court has jurisdiction over this action and the named parties pursuant to

28 U.S.C. § 1331 as this action arises under the laws and the Constitution of the United States,

particularly, the Cable Communications Policy Act of 1984, 47 U.S.C. §§ 521 et seq.; Section

1983 of the Civil Rights Act of 1871, 42 U.S.C. § 1983; and the Fifth and Fourteenth

Amendments to the U.S. Constitution.

20. Venue is proper in this district pursuant to 28 U.S.C. § 1391(b).


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FACTS COMMON TO ALL CAUSES OF ACTION

A. Statutory Framework

21. Sections 621(a)(2) and 621(b)(1) of the Cable Act, 47 U.S.C. §§ 541(a)(2),

(b)(1), prohibit a cable operator from building a cable system, in whole or in part, or providing

cable service without first obtaining a cable franchise.

22. In turn, Section 621(a)(1) of the Cable Act delegates to local governmental

entities (termed “franchising authorities”) the authority to grant cable franchises pursuant to, and

within, the Cable Act’s jurisdiction. 47 U.S.C. § 541(a)(1). Implicit in this federal grant of

authority is the authority to establish and enforce the criteria and standards that must be met in

order to obtain such a franchise, provided that such criteria and standards as well as their

enforcement, comply with the Cable Act and federal law generally.

23. In Puerto Rico, the Cable Act’s delegation resulted in the establishment of

criteria and standards for obtaining a cable franchise, which are found in Section 269h of the

Puerto Rico Telecommunications Act of 1996, 27 L.P.R.A. § 269h (as amended, “Law 213”),

and in conforming regulations adopted by the Board. See Section 6 of the Board’s Rules for the

Issuance of Certifications and Franchises (“Regulation 5631”).

24. In compliance with the Cable Act, Section 269h(a)(1) of Law 213 prohibits a

cable operator from building a cable system, in whole or in part, or providing cable service

without first obtaining a cable franchise. 27 L.P.R.A. § 269h(a)(1); Regulation 5631 at § 6.1.

25. Further, pursuant to the Cable Act’s delegation, Law 213 and Regulation 5631

authorize the Board to issue a cable franchise if it determines, among other things, that: (a) the

applicant has submitted a complete and accurate franchise application containing all information

required by Section 6.2 of Regulation 5631; (b) granting the franchise will benefit the public

interest and promote the goals of Law 213; (c) the applicant is technically, financially, legally


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and morally qualified to hold a franchise; and (d) the request for a franchise complies with all

other requirements of Law 213.

26. Upon submission of an application for a cable franchise, the Board considers

the application in light of the above legal and regulatory requirements. When doing so, the

Board is authorized to hold hearings, take evidence, and otherwise make findings as part of its

consideration of the application request.

B. Plaintiffs Obtain Cable Franchises In Compliance With Requirements Of The Cable Act And Puerto Rico Law

27. On or about October 31, 2005, OneLink acquired two franchises to provide

cable service in the municipalities of San Juan, Bayamon, Carolina, Trujillo Alto, Guaynabo,

Toa Alta, Toa Baja and Cataño in Puerto Rico from an existing cable operator.

28. In order to obtain its franchises, OneLink was required to, and did, meet the

criteria and standards for transfer of a franchise established in Law 213, Regulation 5631, and

the existing cable operator’s franchise agreements with the Board. The requirements for

transferees to acquire franchises in Puerto Rico are substantially similar to the requirements for

grant of a new franchise. Moreover, upon information and belief, OneLink’s predecessor was

required to, and did, meet the criteria and standards to obtain its franchises in the first instance.

29. OneLink’s franchise agreements are subject to the Cable Act and Puerto Rico

law, and affirmatively provide that the Board “desires competition in cable services” and

“intends to encourage the development of fair competition.” (Emphasis added). The agreements

also provide that such competition will be developed “without substantial injury to [OneLink] or

[OneLink’s] ability to” operate under its franchises.


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30. Choice obtained Board authorization to provide cable service in a number of

municipalities in the predominantly rural southern and western portions of the island through six

cable franchises.

31. In order to obtain its franchises, Choice was required to, and did, meet the

criteria and standards to receive a franchise established under then-applicable law (i.e., the

predecessor statute and regulations to Law 213 and Regulation 5631, which were in place prior

to the adoption of the Cable Act). Choice has also satisfied the criteria and standards for renewal

of its franchises under Law 213 and Regulation 5631, in accordance with the Cable Act.

32. Choice’s franchise agreements are subject to the Cable Act and Puerto Rico

law, and affirmatively provide that “the Board shall not authorize or permit any person to enter

into Public Rights of Ways or public easements for the purpose of constructing or operating a

Cable System or providing Cable Service to any part of the Franchise area on terms or conditions

more favorable or less burdensome to such person than those applied to [Choice] pursuant to

[these] Franchise[s], in order that one operator not be granted an unfair competitive advantage

over another, and to provide all parties equal protection under the law.”

33. One other entity has been granted one or more franchises to provide cable

service in Puerto Rico: Liberty Cablevision of Puerto Rico, Inc. (“Liberty”). Upon information

and belief, and based on all available information, it is apparent that Liberty was required to, and

did, meet the criteria and standards established in Law 213 and Regulation 5631 (or its

predecessor statute and regulations), in accordance with the Cable Act. Similarly, upon

information and belief, Liberty’s franchise agreement or agreements similarly provide that its

franchise(s) are governed by the Cable Act and Puerto Rico law and that the Board’s intention is


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to promote fair competition that will not cause substantial injury to Liberty’s ability to operate

under its franchise(s).

C. The Board Considers PRTC’s Applications For A Cable Franchise, Creating A Substantial Administrative Record Of Ineligibility

1. The Board Establishes A Record Demonstrating ThatPRTC Is Ineligible For A Franchise (2008)

34. PRTC is an indirect subsidiary of one of the largest providers of

telecommunications and video services (using both cable and satellite) in the world, America

Movil S.A. de C.V. (“America Movil”), which is a public company whose largest shareholder is

Mexican billionaire Carlos Slim. PRTC is widely known in Puerto Rico as a provider of

telecommunications services.

35. In February 2008, PRTC first applied for a cable franchise. At that time,

Defendant Torres and Defendant Escudero were not members of the Board, but rather high-level

employees with PRTC.

36. The Board conducted eight months of fact-finding that included granting

public access to the franchise application and related materials, solicitation and review of public

comments and reply comments from PRTC, and three days of public hearings in which

interested industry representatives were permitted to participate as “friends of the Board” by

questioning witnesses presented by PRTC. At the conclusion of that evaluation process, in

October 2008, the Board denied PRTC’s franchise application because it “suffer[ed] from

ailments that cannot be overcome,” including the fact that PRTC was engaged in multiple types

of illegal conduct.

37. The Board’s order denying PRTC’s first franchise application concluded that

PRTC was not eligible under the applicable laws for three crucial reasons, among others, which

were:


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(a) that PRTC was engaged in “crossed subsidies, prohibited by the applicable

Federal and Local regulations”;

(b) that there was repeated evidence that PRTC “began the proposed system’s

construction before obtaining the franchise” in violation of Law 213; and

(c) that the Board encountered continued instances where PRTC repeatedly

withheld or obscured information required by Regulation 5631.

PRTC did not appeal or otherwise challenge any aspect of this order.

38. The Board’s substantial findings supported the Board’s conclusion that PRTC

was ineligible for a cable franchise. In addition, as a result of PRTC’s substantial failures and

legal violations, the Board warned that PRTC had lost the benefit of any presumptions that had

been in its favor, and that any future request for a franchise by PRTC would be subject to

heightened scrutiny.

2. PRTC Again Applies For A Franchise And The Board GrantsPRTC Authority To Construct And Test Its Cable SystemWhile That Application Is Pending

39. On December 11, 2008, PRTC submitted a second franchise application,

which requested confidential treatment of several exhibits thereto, as well as a request that PRTC

be permitted to build and test its cable system even though it did not have a cable franchise.

40. The Board granted PRTC’s requests, including its request that it be permitted

to build test its cable system under a “special temporary authority,” or “STA.”

41. Plaintiff OneLink objected to the granting of PRTC’s special temporary

authority, which was nothing more than permission to continue the construction and testing of its

cable system without a franchise, which is expressly prohibited by federal and Commonwealth

law. Plaintiff OneLink also filed comments on PRTC’s franchise application, notifying the


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Board of its opinion that PRTC continued to fail to meet the requirements for a cable franchise,

for all the reasons that the Board had noted previously.

3. PRTC Continues Illegal Cable Construction Despite Board And Court Mandates

42. On February 18, 2009, in response to a legal challenge to the STA by

OneLink, the U.S. District Court for the District of Puerto Rico (Hon. Gustavo Gelpí) (the

“District Court”) found that the Board’s STA violated Section 621 of the Cable Act and ordered

the Board and PRTC to show cause why the Court should not issue an injunction to stop PRTC’s

construction and testing under that authority.

43. Under the imminent threat of an injunction, the Board revoked PRTC’s ability

to “test” its cable system and informed the District Court that “PRTC cannot conduct the beta-

test of IPTV; cannot build its network, cannot provide cable service; and cannot use public

rights-of-way for the purposes of providing cable service.” (Emphasis added.) In a separate

filing on February 24, 2009, PRTC represented to the District Court that “the activity authorized

by th[e] STA is … discontinued.” (Emphasis added.)

44. Later that day, the District Court dismissed OneLink’s complaint, explaining

that “the Board has stated that its withdrawal of authorization to conduct the beta test constitutes

a general withdrawal of authorization to provide cable service before PRTC obtains its cable

franchise, including its authorization to use existing facilities or construct facilities on the public

rights-of-way,” and that “PRTC has certified to this court that it terminated its test on February

23rd, immediately after the Board adopted its order.”

45. Notwithstanding these proceedings, OneLink observed PRTC continue to

engage in cable-related construction on several occasions even after the Board’s February 23,


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2009 Order that made clear that there was no authority for PRTC to build, or continue to build,

its cable system without a franchise.

46. Upon information and belief, PRTC has continued to build its cable system in

OneLink’s service area without a franchise.

D. Plaintiff OneLink Is Denied Administrative Participation Despite PRTC Violations

47. Based on PRTC’s continued violations, OneLink filed a motion with the

Board requesting the Board to dismiss PRTC’s pending application because the application

failed, on its face, to satisfy the criteria and standards for obtaining a franchise. In particular,

OneLink noted that PRTC had failed to submit a complete and accurate application, and it had

not even attempted to make a showing that it was legally or morally qualified to obtain a cable

franchise. To date, the Board has taken no action with respect to this motion.

48. OneLink also filed a Motion to Intervene with the Board, seeking to

participate in the administrative process, but the Board denied that motion on March 2, 2009.

49. OneLink sought judicial review of the Board’s denial and on March 31, 2009,

the Puerto Rico Court of Appeals upheld the Board’s denial of OneLink’s intervention request.

After this ruling, the Puerto Rico Supreme Court granted certiorari to review that decision and

stayed the PRTC application proceeding pending a final determination.

50. Ultimately, the Puerto Rico Supreme Court agreed that OneLink could not

intervene in the Board’s administrative process prior to the granting of a franchise. See P.R. Tel.

Co., Inc. v. Telecomm. Regulatory Bd. of P.R., 2010 PRSC 89 at 39 (P.R. 2010). The court

concluded that the proper time to intervene was after the franchise was granted, at which time an

“adjudicatory” process would begin. Id. at 26-27, 44.


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51. On April 7, 2009, after once again observing PRTC contractors building

cable-related facilities, OneLink filed a motion with the Board requesting it to open a separate

proceeding to investigate PRTC’s unlawful cable construction. On April 15, 2009, the Board

ordered PRTC to respond, but otherwise has taken no action on OneLink’s request to open a

separate proceeding.

52. In sum, OneLink’s attempts to participate formally in the administrative

process have been denied by the Board and upheld by the Puerto Rico court system.

E. The Board Obtains As Its President A Former High Ranking PRTC Executive, Who Pledges To Recuse Herself From PRTC Matters But Does Not Do So

53. In 2009, the term of President of the Board Miguel Reyes Davila expired and

Defendant Torres was confirmed as his replacement on or about November 16, 2009.

54. Upon information and belief, Defendant Torres had been employed by PRTC

for approximately 30 years in a variety of high-level legal positions, including (a) Director of the

Corporate, General and Labor Litigation; Legal and Regulatory Affairs; and Legal and Corporate

Affairs legal departments; (b) Manager of Litigation, Contacts and Opinions, Consulting and

Legislation; and (c) Secretary of the Board of Directors.

55. Upon information and belief, Defendant Torres’ husband was also a long-term

employee with PRTC, and both of them continue to receive pension benefits funded by PRTC.

56. During her confirmation hearing before the Puerto Rico Senate, Defendant

Torres was asked “how the matters related to PRTC would be taken care of” while she was on

the Board. In response, she

emphatically indicated that she would recuse herself from these matters and the other members of the Board that were present at the hearing indicated that a quorum can be obtained with two members, thus there should not be a problem in that regard.


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S. 16th Legis. Assemb., 2d Sess., Rep. on the Appointment of Atty. Sandra E. Torres Lopez as

President of the Telecomms. Bd., at 16 (P.R. 2009) (translation ours) (emphasis added).

57. Notwithstanding that representation, Defendant Torres has not recused herself

from all matters before the Board involving her former employer, PRTC; in particular, she did

not recuse herself from PRTC’s franchise proceeding despite requests that she do so.

F. After Defendant Torres Joins The Board, The Board Process Becomes Increasingly Irregular And Secretive

58. On November 24, 2010, under Torres’ direction, the Board resumed its

evaluation of PRTC’s franchise application and ordered PRTC to state its position on the

application. In response, PRTC submitted a “supplement” to its franchise application on January

3, 2011.

1. The Board Refuses To Disclose Application DocumentsOr Acknowledge OneLink Motions

59. On January 20, 2011, OneLink filed a motion with the Board requesting a

copy of PRTC’s application supplement. To date, the Board has not taken any action regarding

that motion.

60. In addition, beginning in 2011, the Board has not allowed OneLink access to

PRTC’s supplemental application or any documents at all submitted to the Board by PRTC,

including even supposedly “public” or “OCCO” (i.e., available only to outside counsel and

consultants only) documents, despite several specific requests by OneLink.

61. Based on Defendant Torres’ former position with PRTC, her receipt of

pension benefits funded by PRTC, her statements to the Senate, and her obvious conflict of

interest, on January 20, 2011, OneLink filed a Motion for Recusal, requesting that Defendant

Torres recuse herself from PRTC’s franchise proceeding. The motion asserted that Defendant

Torres was prohibited by the Puerto Rico Ethics in Government Act, 3 L.P.R.A. § 1801 et seq.


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(as amended, the “Ethics Act”), from participating in the evaluation of PRTC’s franchise

application or execution of a franchise agreement with PRTC. OneLink filed four supplements

to its motion, providing additional information on Torres’ conflicts of interest and grounds

requiring her recusal, between February 10, 2011 and April 27, 2011.

62. To date, Defendant Torres has not taken any action on the request for her

recusal.

2. The Board Excludes The Public From A “Public” Hearing

63. On April 6, 2011, the Board issued a Resolution and Order scheduling a

public hearing to evaluate how the public interest would be served by PRTC’s franchise request.

The hearing was held on April 27 and 28, 2001.

64. The Board permitted the public to attend only the beginning portion of the

“public hearing,” during which the witnesses presented by PRTC described their educational and

professional backgrounds. Further, even for the portion where the public was permitted, the

public was not allowed to participate in any way, to have a translator present, or to create or have

access to a record of the hearing.

65. The public was only permitted to hear the substantive testimony of one PRTC

witness. For the remaining witnesses, upon PRTC’s request, the Board removed the public from

the room before any substantive testimony was taken or substantive issues were discussed or

presented. As a result, OneLink and other members of the public were prevented from hearing

the majority of the testimony of PRTC’s witnesses.

3. The Board Does Not Provide Public Access to Information or Conduct a Transparent Process

66. The Board stated at the hearing that it would make publicly available the non-

confidential portions of PRTC’s supplemental application and, for a fee, would also provide a


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redacted transcript of the hearing prepared by the Board. The Board further stated that the public

would have 15 days to submit comments on PRTC’s supplemental application and the hearing

proceedings.

67. The Board has not made available PRTC’s supplemental application or the

hearing transcript, despite receiving the requested transcript fee from OneLink.

68. Nor has the Board provided an opportunity for anyone to submit comments on

PRTC’s supplemental application or the hearing.

69. Upon information and belief, during the non-public portions of the April 27-

28 hearing, the Board ordered PRTC to submit additional information responsive to questions

asked by the Commissioners. Upon information and belief, PRTC submitted its response on

May 18, 2011, but this filing has not been entered in the Board’s online docket for the PRTC

franchise proceeding, nor has the information therein been made available to the public.

G. The Board Finds That PRTC Continued To Violate Cross Subsidy Rules, Demonstrating PRTC’s Continued Ineligibility and Highlighting Defendant Torres’ Pro-PRTC Bias

70. In May 2011, the Board was conducting an arbitration between PRTC and

WorldNet Telecommunications, Inc. (“WorldNet”), a telecommunications company in Puerto

Rico that competes with PRTC, from which proceeding Defendant Torres had recused herself.

In that proceeding, the Board took evidence and found that the interconnection cost models

provided by PRTC failed to account for cable-related demand on PRTC’s network. The Board

stated that it knew the cable-related data had been omitted based, in part, on “confidential”

information it obtained during the Board’s “public” April 27-28, 2011 hearing on PRTC’s cable

franchise application.

71. In a May 11, 2011 order in that proceeding (the “May 11 Order”), the Board

noted that PRTC’s failure to account for cable-related demand on its network in its cost


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modeling would artificially inflate the rates PRTC charges other carriers to use its network. The

Board also stated that “[t]his omission by PRTC could be fatal for the [franchise] request….

Without [the cost] adjustment [required by the Board], a cross-subsidy where the competing

companies would be paying for the [cable] franchise infrastructure will be created. To the extent

there is a cross-subsidy, the Board will be unable to favorably evaluate the … [f]ranchise

request.” In re WorldNet Telecomms., Inc., Order in Response to WorldNet’s and PRTC’s

Compliance Filings and Requests for Additional Remedies, Case No. JRT-2010-AR-0001, at 4

n.1 (TRB rel. May 11, 2011) (translation ours).

72. In response, PRTC sought a preliminary injunction after which the Board

vacated the May 11 Order, stating that it had “determined that [the] issue [of the distribution of

PRTC’s cable costs] is more appropriately addressed in the [franchise] docket….” See The

Telecomm. Regulatory Bd. of P.R.’s Opposition to the Request for a Preliminary Injunction filed

by P.R. Tel. Co., Inc., P.R. Tel. Co, Inc. v. Telecomm. Regulatory Bd. of P.R., Civil No. 11-1152

(D.P.R. May 26, 2011).

73. On June 14, 2011, Defendant Torres gave a newspaper interview regarding

PRTC’s cable franchise under evaluation by the Board. Reports of the interview state that not

only was Defendants Torres the “only [Board member] who has spoken openly in favor of

granting the franchise to [PRTC],” but she also “reaffirmed” the fact that she “endorse[d] the

granting of the cable franchise.”

74. Defendant Torres was asked about PRTC’s problematic and consistent cost

distribution issues. She is reported to have responded that “[i]f there is a concern in this regard,

it is remedied by imposing a condition at the time of issuing a franchise….”


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H. The Board’s Final Proceedings Confirm The Significant Pro-PRTC Bias Of Defendant Torres

1. Defendant Torres Objects To Further Evaluation And To Public Participation

75. Based on the Board’s May 2011 conclusion that PRTC’s cost distribution

issues needed to be considered in the franchise process, the Board issued a Resolution and Order

(the “Hearing Designation Order”) in the franchise proceeding in July 2011 that:

(a) required PRTC to submit additional cost distribution data;

(b) summoned PRTC to a hearing on August 8, 2011; and

(c) invited industry representatives with an interest in the proceeding to

participate in the hearing as amici curiae to assist the Board in evaluation of

the issues of PRTC’s distribution of costs and protecting the public interest.

The order was signed by Commissioner Santini and Commissioner Aguirre.

76. Defendant Torres dissented from the Hearing Designation Order, writing that:

(a) allowing amici curiae, and OneLink in particular, to participate in the hearing

was contrary to the fact that OneLink had been denied the ability to intervene;

(b) an additional hearing was not needed because the franchise process had

already taken too long and the other Commissioners had already had sufficient

opportunity to evaluate their concerns; and

(c) “the two Associate Members have the procedural mechanism[ ] to address

their alleged concerns namely: to grant a conditioned franchise….”

2. Defendant Torres Displays Angry Outburst At Hearing When PRTC Violations Are Discussed

77. The Board proceeded with a hearing on PRTC’s franchise application on

August 8 and 9, 2011. During the hearing, WorldNet presented an expert witness who testified

that PRTC’s failure to account for cable-related demand on its network in its cost modeling


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artificially inflated the rates that PRTC charges other carriers for using its network. OneLink

submitted documentary evidence showing that PRTC had failed to submit and maintain a

complete and accurate franchise application.

78. Specifically, OneLink provided evidence that (a) PRTC had invested heavily

in illegally constructing its cable system in Puerto Rico, to the tune of $100 million and (b)

PRTC had failed to disclose that several of its affiliates that are also owned by America Movil

had been penalized for anti-competitive conduct, including the imposition of a $1 billion dollar

fine on one Mexican affiliate and the denial of a cable franchise to another Mexican affiliate.

79. During the hearing, Commissioner Santini stated that it was widely known

that PRTC had been building its franchise without authorization for the past 3 years.

Commissioner Aguirre agreed, and confirmed that the illegality of the construction was a

conclusion of law by the Board.

80. Commissioner Aguirre also issued a statement from the bench at the end of

the first day of hearing regarding the need to protect competition by ensuring that the Board only

franchises qualified and fair competitors, after which he left the hearing room.

81. After this statement, Defendant Torres angrily addressed the hearing room

regarding what she characterized as Commissioner Aguirre’s lack of professionalism and

“disrespect” for her former employer, PRTC. Although she ordered Board staff to turn off the

recording of the hearing during her outburst, video of the episode was posted on the Internet by a

member of the public due to the unusually emotional character of Defendant Torres’ comments.

82. The next day, August 9, 2011, PRTC moved for Commissioner Aguirre to

recuse himself. Aguirre declined to do so, explaining that he had a long history of promoting

competition and treating PRTC fairly.


20

83. At the conclusion of the hearing, the Board closed the public record in

PRTC’s franchise proceeding and began its deliberations on PRTC’s application. At that time,

Defendant Torres once again confirmed that OneLink would receive redacted copies of PRTC’s

supplemental application and the transcript of the April 27-28 hearing. To date, OneLink has not

received those documents.

I. The Board Economist Confirms PRTC Violations, Resulting In Board Agreement To Grant PRTC Franchise But Only With Specified And Necessary Conditions

84. Upon information and belief, the Board met on August 19, 2011 and agreed in

principle to grant a franchise to PRTC, subject to conditions including, among other things, a

requirement for PRTC to “establish a formula that corrects distortion that arises when using

telecommunications network for a service that concerns cable tv industry….”

85. Upon information and belief, Defendant Torres, on her own initiative and

unbeknownst to the other Commissioners, requested that the Board’s long-standing outside

economic consultant, Douglas Meredith, analyze the record in the franchise proceeding to

determine whether or not he could validate the concerns of Commissioner Santini and

Commissioner Aguirre that PRTC’s franchise proposal would result in prohibited cross-

subsidization in violation of the federal Communications Act and Law 213. In particular, upon

information and belief, Mr. Meredith has acted, and continues to act, as the Board’s economist in

the PRTC/WorldNet interconnection dispute.

86. After reviewing the record of PRTC’s franchise proceeding, Mr. Meredith

affirmed the concerns of Commissioners Santini and Aguirre. Upon information and belief, Mr.

Meredith submitted a memorandum (the “Meredith Report”) to the Board on or about September

16, 2009, in which he found that the administrative record of PRTC’s franchise proceeding

presented both cross-subsidy and improper cost modeling issues that could result in allowing


21

“PRTC to price its service below a reasonable cost floor and thus gain competitive advantage

over cable tv providers.”

87. Upon information and belief, during a meeting of the Board on September 29,

2011, the Board unanimously agreed to adopt Mr. Meredith’s recommendations regarding the

need to impose conditions and require additional information from PRTC.

88. Upon information and belief, the Board also agreed on the need for an urgent

show cause proceeding against PRTC with respect to its illegal construction before it could give

final approval of PRTC’s franchise.

89. Throughout the Board’s deliberations, Defendant Torres gave interviews and

made statements to the media disclosing the internal discussions of the Board members, as well

as the status of the franchise decision and the conditions under consideration.

90. Upon information and belief, at its September 29, 2011 meeting, the Board

reached a formal decision to grant a franchise to PRTC with specific and necessary conditions,

including those above.

J. A Second Former Long-Time High-Level PRTC Employee Is Appointed To The Board

91. On October 3, 2011, Commissioner Aguirre’s term as a member of the Board

expired. The following day, October 4, 2011, Gloria Escudero, a former long-time employee of

PRTC who, upon information and belief, receives pension benefits funded by PRTC, was

confirmed as a member of the Board.

92. Over the course of her thirty-three year career with PRTC, Defendant

Escudero held a number of positions, including: (a) Executive Advisor in the Marketing

Department, Special Services General Coordinator; (b) Director of a division in the Marketing


22

Department; (c) Special Assistant to the President; (d) Marketing Manager for multiline and

framework systems; and (e) Manager of DSL/Internet and Special Services.

K. The Board Ignores Choice’s Complaint Against PRTC Regarding Illegal Construction

93. On or about October 20, 2011, Choice observed PRTC personnel and

contractors building cable facilities at several sites in and around Ponce, Puerto Rico, within

Choice’s service area.

94. On October 27, 2011, Choice filed with the Board an administrative complaint

against PRTC and an urgent request for the Board to, among other things, order PRTC to stop

constructing cable-related facilities until PRTC obtained a franchise and executed a franchise

agreement.

95. Despite the fact that Choice requested urgent relief pursuant to Board rules

that require action within five days, upon information and belief, the Board did not even docket

Choice’s complaint until November 10, 2011, nearly two weeks later. Upon information and

belief, to date, the Board has taken no action whatsoever with respect to Choice’s complaint.

L. The Board’s Determination Is Issued On November 2 And Improperly Reversed On November 16

96. Upon information and belief, on October 20, 2011, Commissioner Santini and

former Commissioner Aguirre signed an order (i.e., the November 2 Order, so named for the

date it was released) that memorialized the official findings, conclusions and conditions agreed

upon by the members during their August 19 and September 29, 2011 meetings.

97. Upon information and belief, it is common practice at the Board for outgoing

Commissioners to return to the Board after the expiration of their terms to apply pro forma

signatures to Board decisions on which the Board had voted prior to the end of such terms. This


23

can be necessary because orders embodying Board decisions reached during a Commissioner’s

term need to be drafted, circulated, and finalized before signature.

98. Upon information and belief, when the November 2 Order was presented to

Defendant Torres for signature so that she could ratify her earlier vote in favor of the order, she

claimed that the order did not reflect what she agreed to and that she instead would issue a

dissent. Defendant Torres’ refusal to sign the November 2 Order occurred after her fellow

former PRTC employee, Defendant Escudero, had joined the Board.

1. The Board’s November 2 Order Granted A Franchise To PRTC While Making Specific Findings That PRTC Was Violating Federal And Commonwealth Law In Relation To Cross-Subsidization And Premature Construction

99. On November 2, 2011, over Defendant Torres’ objection and dissent, the

Board released the November 2 Order, which granted PRTC’s request for a franchise, but only

subject to material conditions and restrictions intended to address the problems that the Board

had identified in PRTC’s franchise proposal.

100. In the November 2 Order, the Board made a series of factual findings,

including without limitation that:

(a) “PRTC has been constructing its [cable] network which it will use to provide the proposed service since around March 2007” despite the fact that “from that date up until now, PRTC has not held a cable TV franchise awarded by the Board.”

(b) Although “PRTC submitted a sworn declaration ensuring the Board that PRTC does not and will not incur cross subsidies in its proposal” (emphasis in original), the Board’s “examin[ation of] the documents and evidence submitted by PRTC … established that [PRTC] would incur cross subsidies.”

(c) “Payment [by PRTC] of the local loop base price (when in fact a more advanced service will be used through this loop) as one of the elements in provision of [cable] service creates an inappropriate distortion which constitutes cross subsidy.” PRTC’s “failure to correct [this] distortion …would imply that … the service used and other regulated services must be subsidizing it.”


24

(d) “The present franchise application is the second occasion on which PRTC has requested that we issue a franchise for it to operate as a cable TV company. The first PRTC application suffered from substantial defects of such a nature that the Board was obliged to refuse it.”

(e) “The present application suffers from considerable but rectifiable defects which must be corrected for the application to be in keeping with the public interest…. If these corrections are not made, the Board would be obliged to refuse the application.”

(f) “The conditions and corrections imposed on the franchise must eliminate any potential danger of cross-subsidization and unfair competitive advantage.”

101. Based on those findings, the Board concluded as a matter of law that:

(a) PRTC’s failure to “extract[ ] from the two formulas (transportation and local loop cost) the investment that will be of use for the IPTV product corresponding to the Cable TV industry, creates a situation contrary to” federal interconnection rules.

(b) There were “other deficiencies in the application which produce cross-subsidies….”

(c) “PRTC unlawfully constructed its [cable] network contravening Law 213…,” including “after February [23, 2009], when PRTC withdrew its request for ‘Special Temporary Authority’ before the Board … [and] certified before the Board that it had stopped the construction process.”

2. The Board’s November 2 Order Required Imposition Of Specific And Necessary Conditions On PRTC To Remedy The Legal Violations

102. In order to remedy the PRTC violations, the Board determined that it was

necessary for PRTC to submit additional information about its cost allocation practices, adjust its

interconnection rates and cost distribution, and submit reports demonstrating compliance with

these requirements to the satisfaction of the Board. In addition, the Board decided to “begin an

order to show cause procedure for the illegal construction of the system” and that PRTC “must

comply with the determinations or penalties that might be imposed” as a result of that proceeding

before the Board could execute a franchise agreement with PRTC.


25

103. The Board explained that the conditions in the order, which it referred to as

“essential safeguards,” were intended to “place [PRTC] on equal footing with the rest of the

Cable TV industry, protect[ ] competition development of both the cable TV market and in the

telecommunications market, as [PRTC] will be paying a fair price for the infrastructure used in

compliance with federal regulations.” The Board stated that it would be “procedurally wrong to

grant permission to operate the franchise without having addressed the apparent lack of

compliance with elements of Law 213” and concluded that “[a]ll adjustments and requirements

contained in this order … constitute an essential condition for granting the franchise….”

104. On November 3, 2011, Defendant Torres issued her dissent from the Order,

claiming that (a) the order did not accurately reflect what the Board members agreed to during

their August 19 meeting and (b) that the order was null and void because former Commissioner

Aguirre signed the order after his term had expired. Defendant Torres’ dissent fails to mention

any Board deliberations or meetings after August 19, 2011, including the September 29, 2011

meeting at which the Board reached consensus on the conditions to be imposed on PRTC’s

franchise. It also fails to mention the Meredith Report or Mr. Meredith’s recommendations

regarding the November 2 Order, despite the fact that Defendant Torres herself commissioned

Mr. Meredith to conduct his analysis.

105. On November 7, 2011, PRTC filed an Urgent Motion to Declare Null and

Void the Resolution and Order Issued by the Board on November 2, 2011, which echoed

Defendant Torres’ dissent and requested the Board to vacate the order.

3. The Board Eliminates The November 2 Order That PRTC DislikesAnd Issues A New Order Signed By The Two Ex-PRTC BoardMembers That Is Considerably More Favorable To PRTC

106. Upon information and belief, on November 8, 2011, Defendant Torres called

an unscheduled meeting of the Board to consider PRTC’s Urgent Motion.


26

107. Upon information and belief, during that meeting, Defendant Torres and her

fellow former PRTC employee Defendant Escudero (who had been in office just over one

month) decided to replace the November 2 Order with an order that contained absolutely no

findings regarding PRTC’s illegal conduct and that contained absolutely no conditions to address

that misconduct, despite the extensive administrative proceedings and substantial record gathered

by the Board over a three-year period prior to Defendant Escudero’s arrival.

108. On November 15, 2011, OneLink filed a Motion to Intervene in the

adjudicatory phase of the proceeding that began upon the Board’s issuance of the November 2

Order. To date, the Board has not taken any action with respect to this motion.

109. The following day, November 16, 2011, OneLink filed a Motion for Vote of

No Confidence and Disqualification of Defendant Torres, once again seeking to exclude

Defendant Torres from PRTC’s franchise proceeding as a result of her actual or apparent conflict

of interests and her open bias in favor PRTC. To date, the Board has not taken any action with

respect to this motion.

110. Also on November 16, 2011, the Board released the November 16 Order,

granting PRTC a franchise without any factual findings regarding illegal conduct by PRTC or

meaningful conditions or restrictions to address that misconduct.

111. The November 16 Order did not even contain the condition from the Draft

Order that PRTC “establish a formula correcting the distortion which emerges in using the

telecommunications network for a service corresponding to the cable television industry, in such

a way that the cost is fair and reasonable,” to which Defendant Torres herself acknowledged

agreeing in her dissent from the November 2 Order.


27

112. The minimal additional requirements on PRTC remaining in the November 16

Order are so insignificant that the President of PRTC has publicly stated that he “do[es not] see

those as conditions” on the franchise, and instead considers them to be routine oversight by the

Board.

113. The same day, Commissioner Santini issued an extensive dissent from the

November 16 Order. Commissioner Santini detailed the Board’s deliberations and agreements

leading up to the adoption, execution and release of the November 2 Order, as well as

inconsistencies in Defendant Torres’ statements to the media, her internal statements to the

Board during its deliberations, her dissent from the November 2 Order, and the text of the

November 16 Order. In support of her dissent, Commissioner Santini quoted the Board’s

meeting minutes during the Board’s deliberations, as well as documents such as Mr. Meredith’s

report and proposed order language that were submitted for the Board’s consideration.

114. Commissioner Santini also stated in her dissent that, despite the fact that it

was Defendant Torres who commissioned the Meredith Report specifically for purposes of the

Board’s deliberations regarding PRTC’s franchise application and contrary to Puerto Rico

administrative procedure, Defendant Torres claimed that the report was not part of the record in

PRTC’s franchise process because it had not been submitted to the Secretary of the Board and

that Commissioner Santini had therefore “missed the bus” with respect to relying on Mr.

Meredith’s report. Commissioner Santini strongly criticized Defendant Torres for attempting to

impermissibly “hide” the Meredith Report from the public record, and for “attempt[ing] to distort

the facts” in the proceeding.

115. The November 16 Order drastically changes the granting of the cable

franchise to PRTC, permitting it virtually immediate rights to begin operating as a cable operator


28

without any protections for consumers and competitors from the effects of PRTC’s continued

unlawful conduct, despite the voluminous findings that such operation is contrary to federal and

Commonwealth requirements and contrary to the protection of fair competition and the interests

of the public and despite the fact that the Board required Plaintiffs (and Liberty) to follow

applicable law and rules, often at great expense to their operations.

M. The Board’s Decision To Grant PRTC A Cable Franchise In Violation of Federal And State Law Will Irreparably Harm Plaintiffs

116. Plaintiffs’ cable franchises entail the right to provide cable services in defined

areas within Puerto Rico, provided that they comply with applicable federal and Commonwealth

franchising and other cable laws and regulations. Plaintiffs have expended numerous resources

to properly and cautiously maintain their services and cable franchises for the past six years

pursuant to federal and Commonwealth law.

117. Plaintiffs’ cable franchises also encompass the right to provide such services

in a regulated market where competitors must also comply with the same federal and

Commonwealth laws and requirements.

118. The Board’s grant of the November 16 Order will cause irreparable harm to

Plaintiffs because PRTC has not complied with federal and Commonwealth laws and

requirements to obtain and maintain a franchise, as shown by the public records of the Board

prior to November 2011 and the Board’s November 2 Order, and as supported by information

generally known within the cable community. This allows PRTC to begin its cable operations

with a number of advantages, less burden, and faster than Plaintiffs, as well as the ability to

unlawfully manipulate its pricing.

119. Importantly for Plaintiffs, PRTC has been shown to be in consistent violation

of prohibitions against cross-subsidization and construction of its cable system without a


29

franchise. As a result of these violations, PRTC has obtained a nearly five-year head-start in

constructing its cable system over where it would be if it had complied with the franchise

requirements. While PRTC’s illegal construction affects OneLink disproportionately because,

upon information and belief, PRTC’s illegal construction to date has focused primarily on

OneLink’s service area, Choice is also impacted by PRTC’s unlawful head-start in Choice’s

service area. In addition, as the Board’s economic expert noted, the cross-subsidization that

PRTC has been found to be engaged in allows “PRTC to price its service below a reasonable

cost floor and thus gain competitive advantage over cable tv providers.”

120. Taken together, these unlawful actions will allow PRTC to begin luring

Plaintiffs’ subscribers away with artificially (and illegally) low cable prices almost immediately.

Indeed, PRTC has publicly stated for some time that it would be ready to begin providing cable

service as soon as it received “the little paper” (i.e., an unconditioned franchise such as the

November 16 Order).

121. Moreover, given the high transaction costs to subscribers of switching service

providers, particularly when a customer takes more than one service from a provider (such as

cable, Internet and telephone), if PRTC is permitted to begin offering service – and taking

Plaintiffs’ customers – it will be extremely difficult and costly to “win back” those customers

even if PRTC is later required to stop providing cable service.

122. PRTC has also been shown to be in violation of important disclosure

requirements that are critical to the Board’s ability to evaluate a cable franchise applicant’s

qualifications to obtain a franchise. In particular, PRTC failed to disclose that several of its

affiliates that are also owned by America Movil had been penalized for anti-competitive conduct,

including the imposition of a $1 billion dollar fine on one Mexican affiliate and the denial of a


30

cable franchise to another Mexican affiliate. As a result of PRTC’s withholding of information

from the Board, these known harms likely understate the adverse effects of PRTC’s failure to

comply with the law on Plaintiffs and on competition in the cable market generally.

123. Plaintiffs have relied on the fact that the Cable Act and applicable Puerto Rico

law ensure that no competitor is allowed to enter the market without a franchise, and prevent the

Board from granting any franchise unless doing so would promote fair competition and serve the

public interest.

124. By circumventing the Cable Act and applicable Puerto Rico law, the

November 16 Order seriously jeopardizes Plaintiffs’ cable franchises by directly creating unfair

competition, an unlevel playing field, and vast uncertainty on how to proceed in providing cable

services in Puerto Rico. These real harms, which will affect virtually every aspect of Plaintiffs’

businesses, will be felt immediately and are not subject to repair.

125. The harm from the November 16 Order is immediate because it authorizes

PRTC to use its illegally constructed cable system to begin providing cross-subsidized cable

service to Puerto Rico consumers, including in Plaintiffs’ service territories. In so doing, PRTC

will be competing unfairly with Plaintiffs, who have complied, and are complying, with federal

and Commonwealth law.

126. Money damages cannot be a sufficient remedy because the destruction of the

competitive market for cable television service in Puerto Rico cannot be adequately quantified.

AS AND FOR A FIRST CAUSE OF ACTION (42 U.S.C. § 1983 (DUE PROCESS))

127. Plaintiffs repeat and reallege each and every allegation contained in

paragraphs 1 through 126 above as if fully set forth herein.


31

128. “Every person who, under color of any statute, ordinance, regulation, custom,

or usage, of any State or Territory or the District of Columbia, subjects, or causes to be

subjected, any citizen of the United States or other person within the jurisdiction thereof to the

deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be

liable to the party injured in an action at law, suit in equity, or other proper proceeding for

redress, except that in any action brought against a judicial officer for an act or omission taken in

such officer’s judicial capacity, injunctive relief shall not be granted unless a declaratory decree

was violated or declaratory relief was unavailable.” 42 U.S.C. § 1983.

129. Puerto Rico is a “state” within the meaning of 42 U.S.C. § 1983.

130. At all times relevant to this Complaint, Defendants acted as employees, agents

and/or officials of the Commonwealth of Puerto Rico, and were thus acting under the color of the

laws, regulations, customs, and usages of the Commonwealth of Puerto Rico.

131. Plaintiff OneLink was granted two cable franchises on or about October 31,

2005, pursuant to delegated authority of the U.S. Congress and the requirements of federal and

Commonwealth law. Plaintiff Choice was granted six cable franchises, and has had those

franchises renewed multiple times since then, in all cases pursuant to the delegated authority of

the U.S. Congress and the requirements of federal and Commonwealth law.

132. Plaintiffs’ cable franchises are valuable property rights that are protected by

the Fourteenth Amendment.

133. Plaintiffs’ cable franchises encompass the right, under federal and

Commonwealth law, as well as state contracts, not to be hindered by competitors unless an

impartial administrative agency determines that the competitor has met applicable statutory

requirements and that granting that competitor a franchise is in the public interest.


32

134. Plaintiffs’ due process rights under the U.S. Constitution include the right to

have decisions that are made under the color of law depriving Plaintiffs of their property rights to

be made impartially and without bias or conflicts of interest.

135. The Board’s decision to grant PRTC the November 16 Order was made under

the color of law, was made in a biased and conflicted manner, and deprives Plaintiffs of their

federally protected property rights, thus violating Plaintiffs’ due process rights under the U.S.

Constitution.

136. The Board’s process and decision-making, as set forth in detail herein, are

plagued by the very sort of bias and partiality that is an anathema to due process.

137. As a direct and proximate result of the Board’s actions, Plaintiffs have

suffered and will continue to suffer irreparable harm, including harm because the Board’s

decisions deprived Plaintiffs of their property interests in violation of their due process rights in

violation of the Fifth and Fourteenth Amendments.

138. Plaintiffs do not have an available remedy under Puerto Rico law to obtain the

relief they seek.

139. Pursuant to 42 U.S.C. § 1983, injunctive relief against the Board is warranted.

An injunction ordering the Board to stay its November 16 Order and stay any further

consideration or effectiveness of the PRTC franchise application is warranted until the Court can

consider the process that is due Plaintiffs under the due process clause of the U.S. Constitution.

AS AND FOR A SECOND CAUSE OF ACTION (42 U.S.C. § 1983 (EQUAL PROTECTION))


paragraphs 1 through 139 of this Complaint as if set forth fully herein.


33

141. “Every person who, under color of any statute, ordinance, regulation, custom,

or usage, of any State or Territory or the District of Columbia, subjects, or causes to be

subjected, any citizen of the United States or other person within the jurisdiction thereof to the

deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be

liable to the party injured in an action at law, suit in equity, or other proper proceeding for

redress, except that in any action brought against a judicial officer for an act or omission taken in

such officer’s judicial capacity, injunctive relief shall not be granted unless a declaratory decree

was violated or declaratory relief was unavailable.” 42 U.S.C. § 1983.

142. Puerto Rico is a “state” within the meaning of 42 U.S.C. § 1983.

143. At all times relevant to this Complaint, Defendants acted as employees, agents

and/or officials of the Commonwealth of Puerto Rico, and were thus acting under the color of the

laws, regulations, customs, and usages of the Commonwealth of Puerto Rico.

144. The Board’s November 16 Order granting a franchise to PRTC was made

under color of law, and deprived Plaintiffs of their rights to the equal protection of the law as

secured by the Fourteenth Amendment to the Constitution.

145. By granting PRTC a franchise in the November 16 Order, the Board treated

PRTC’s application for a franchise differently than it had treated Plaintiffs applications for their

franchises, as well as how the Board treated PRTC’s own previous franchise application. The

Board required the Plaintiffs to meet the criteria and standards for obtaining franchises set forth

in Law 213 and Regulation 5631, in accordance with the Cable Act. Compliance with these

standards is essential because the whole point of restricting market entry through a franchise

system is to ensure that any entry of a new competitor into the market would promote fair


34

competition and serve the public interest. But the Board held PRTC’s application for a franchise

to a much lower standard than the law requires and than it applied to Plaintiffs.

146. The Board’s failure to require PRTC to comply with franchising regulations

and requirements that apply to all other cable franchises is discriminatory. As the Board’s

November 2 Order acknowledged, PRTC’s franchise application failed to comply with, among

other things, the provisions of Law 213 prohibiting cross-subsidization and construction of a

cable system without a franchise. The Board’s November 16 Order awarded a franchise to

PRTC despite PRTC’s failure to meet the criteria and standards for obtaining a franchise under

Law 213 and Regulation 5631, contrary to the Cable Act.

147. Plaintiffs were required to demonstrate that they complied with the provisions

of Law 213 and Regulation 5631 in order to obtain their cable franchises.

148. Plaintiff Choice’s franchise agreements explicitly prohibit the Board from

granting a franchise to any other person “on terms or conditions more favorable or less

burdensome to such person than those applied to [Choice] pursuant to [its franchises], in order

that one operator not be granted an unfair competitive advantage over another, and to provide all

parties equal protection of the law.” The Board’s November 16 Order directly violates that

provision by granting PRTC a franchise on terms that are substantially less burdensome than

those applied to Choice, which gives PRTC an unfair competitive advantage over Plaintiffs and

denies Plaintiffs equal protection of the law.

149. As a direct and proximate result of the Board’s actions, Plaintiffs have

suffered and will continue to suffer a competitive injury because it will be forced to compete

with a cable provider that has not been held to the same high standard as Plaintiffs of having to


35

demonstrate that the grant of their franchises would promote fair competition and serve the

public interest in accordance with federal and Puerto Rico law.

150. The Board’s differential treatment between PRTC and other similarly situated

cable operators was not rationally related to any legitimate government interest.

151. The Board’s differential treatment between PRTC and other cable operators

was purposeful and intentional, as the Board itself had determined only two weeks earlier, by the

majority vote of two unbiased Board members, that PRTC’s franchise application did not satisfy

the franchising requirements of Law 213 or Regulation 5631.

152. The discrimination effected by the Board’s decision to award a franchise to

PRTC despite PRTC’s failure to comply with the criteria and standards that all other franchised

cable operators in Puerto Rico were required to satisfy in order to obtain a franchise and the

Board’s decision to allow PRTC to construct its cable system without first obtaining a franchise

violate the rights of cable operators in Puerto Rico, including Plaintiffs, under the Equal

Protection Clause of the Fourteenth Amendment to the United States Constitution.

153. Plaintiffs do not have an available remedy under Puerto Rico law to obtain the

relief they seek.

154. Pursuant to 42 U.S.C. § 1983, injunctive relief against the Board is warranted.

An injunction ordering the Board to stay all effectiveness of its November 16 Order and stay all

further consideration of PRTC’s franchise application until the Court can consider what remedy

and process will afford equal protection to Plaintiff under the U.S. Constitution.

AS AND FOR A THIRD CAUSE OF ACTION (47 U.S.C. §§ 541(a)(1), 555 (THE CABLE ACT))




36

156. Section 635 of the Cable Act provides that “[a]ny cable operator adversely

affected by any final determination made by a franchising authority under section 541(a)(1) … of

this title may commence an action within 120 days after receiving notice of such determination,

which may be brought in the district court of the United States for any judicial district in which

the cable system is located.” 47 U.S.C. § 555(a)(1).

157. Plaintiffs provide cable service over cable systems in Puerto Rico and own

significant interests in such cable systems. Plaintiffs are therefore each a “cable operator” within

the meaning of the Cable Act. See 47 U.S.C. § 522(5).

158. Section 621(a)(1) of the Cable Act governs a local franchising authority’s

power to “award, in accordance with the provisions of this subchapter, 1 or more franchises

within its jurisdiction.” 47 U.S.C. § 541(a)(1).

159. The Board acted pursuant to its powers as a franchising authority under

Section 621(a)(1) when it awarded a cable franchise to PRTC through its November 16 Order.

That order is a final determination made by a franchising authority for purposes of Section 635.

160. Plaintiffs have been, and will be, adversely affected by the Board’s decision to

award a cable franchise to PRTC that does not satisfy the franchise requirements of applicable

law, and is therefore contrary to Section 621(a)(1). Specifically, the Board’s failure to require

PRTC to meet the criteria and standard to receive a franchise gives PRTC a “head-start” over

Plaintiffs, who complied with the franchise requirements prior to building and operating their

cable systems, which gives PRTC an unfair competitive advantage over Plaintiffs.

161. Plaintiffs therefore bring suit under Section 635 to challenge the Board’s

November 16 Order granting a franchise to PRTC under Section 621(a)(1). Plaintiffs challenge

the Board’s decision on the grounds that it was arbitrary and capricious based on all the


37

allegations alleged herein, including but not limited to the Board’s elimination of previous

material findings of fact without justification, the Board’s issuance of an order without any basis

in its administrative record, and the Board’s biased and improper processes evidenced by the

facts herein.

162. Accordingly, this Court should stay the Board’s November 16 Order and stay

all further Board action related to PRTC’s application for a cable franchise until proper review of

the merits can be provided by the Court.

AS AND FOR A FOURTH CAUSE OF ACTION (47 U.S.C. §§ 545, 555 (THE CABLE ACT))



164. Section 635 of the Cable Act provides that “[a]ny cable operator adversely

affected by any final determination made by a franchising authority under section 541(a)(1), 545,

or 546 of this title may commence an action within 120 days after receiving notice of such

determination, which may be brought in the district court of the United States for any judicial

district in which the cable system is located.” 47 U.S.C. § 555(a)(1).

165. The Supremacy Clause separately permits a plaintiff to assert federal

preemption of a state administrative proceeding as an affirmative cause of action to enjoin state

officials from interfering with federal rights. See Local Union No. 12004 v. Massachusetts, 377

F.3d 64 (1st Cir. 2004).

166. Plaintiffs provide cable service over cable systems in Puerto Rico and own

significant interests in such cable systems. Plaintiffs are therefore each a “cable operator” within

the meaning of the Cable Act. See 47 U.S.C. § 522(5).


38

167. By applying for a cable franchise, PRTC sought to become a “cable operator”

in the same markets as Plaintiffs. On November 2, 2011, the Board granted PRTC a franchise

subject to certain “essential conditions” to safeguard against cross-subsidization and unfair

competition based on PRTC’s prior unauthorized construction of its cable system.

168. Section 625 of the Cable Act provides that a cable operator “may obtain from

the franchising authority modifications of the requirements” of its franchise only after

demonstrating that “it is commercially impracticable for the operator to comply with such

requirement,” “the proposal by the cable operator for modification of such requirement is

appropriate because of commercial impracticability,” or, in the case of a franchise requirement

for services, that “the mix, quality, and level of services required by the franchise at the time it

was granted will be maintained after such modification.” 47 U.S.C. § 545(a)(1).

169. On November 16, 2011, the Board modified the requirements of the franchise

granted to PRTC in the November 2 Order by eliminating its “essential conditions” related to

cross-subsidization and prior illegal construction of a cable system from the November 16 Order.

The Board did so without receiving any evidence or assurances from PRTC that such

modifications were necessary because the prior requirements were “commercially

impracticable,” or that “the mix, quality, and level of services required by the franchise at the

time it was granted will be maintained after such modification.”

170. The November 16 Order is a final determination made by a franchising

authority for purposes of Section 635.

171. Plaintiffs have been adversely affected by the Board’s modification of

PRTC’s franchise requirements. In the Board’s own words, the “essential conditions” imposed

by its November 2 Order were necessary “to place [PRTC] on equal footing with the rest of the


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Cable TV industry, protecting competition development of both the cable TV market and in the

telecommunications market.” By eliminating those essential conditions in the November 16

Order, the Board has removed “essential safeguards” against cross-subsidization and illegal

construction and thus provided PRTC with an unfair competitive advantage over Plaintiffs.

172. Modifying PRTC’s franchise requirements without considering the factors

specified in Section 625(a)(1) violates the federal Cable Act. Plaintiffs therefore bring suit under

Section 635 and the Supremacy Clause to challenge the Board’s November 16 Order and to seek

reinstatement of the November 2 Order.

173. Accordingly, this Court should declare the Board’s November 16 Order

invalid under the Supremacy Clause and issue an injunction to the Board ordering that the Order

be withdrawn.

WHEREFORE, Plaintiffs are entitled to judgment as follows:

(a) An order vacating the Board’s November 16 Order, enjoining the Board from

authorizing PRTC to provide cable service or construct a cable system or negotiating a franchise

agreement with PRTC, and staying all further proceedings related to PRTC’s cable franchise

application until such time as the Court can determine the appropriate contours and requirements

of the process or of the Board rulings in light of Plaintiffs’ due process and equal protection

rights and in light of the requirements of federal and Commonwealth law.

(b) An award of Plaintiffs’ attorneys’ fees, expenses, disbursements and costs in

bringing this proceeding; and

(c) A grant to Plaintiffs of such other and further relief as this Court may deem

just and proper.


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Dated: November 28, 2011San Juan, Puerto Rico

s/ Mauricio O. Muñiz-Luciano Pedro A. Delgado-Hernandez, Esq.USDC-PR 202008Salvador J. Antonetti-Stutts, Esq.USDC-PR 215002Mauricio O. Muñiz-Luciano, Esq.USDC-PR 220914O’NEILL & BORGESAmerican International Plaza250 Muñoz Rivera Ave., Suite 800San Juan, Puerto Rico 00918-1813Tel.: (787) 764-8181Fax: (787) [email protected]@[email protected] to Plaintiff San Juan Cable LLC d/b/a OneLink Communications

s/ Jorge L. Bauermeister Jorge L. Bauermeister, Esq.USDC-PR 211214BAUERMEISTER LAW OFFICESVIG Tower Suite 15001225 Ponce de Leon AvenueSan Juan, PR 00913Tel.: (787) 474-4848Fax: (787) [email protected] to Plaintiff Puerto Rico Cable Acquisition Corp. d/b/a Choice Cable T.V.

Of Counsel to Plaintiff San Juan Cable LLC d/b/a OneLink Communications:

Abbe David Lowell, Esq.Pamela J. Marple, Esq.Dana Frix, Esq.CHADBOURNE & PARKE LLP1200 New Hampshire Avenue NWSuite 300Washington, D.C. 20036Tel.: (202) 974-5600Fax: (202) [email protected]@[email protected] Hac Vice Applications Pending

Of Counsel to Plaintiff Puerto Rico Cable Acquisition Corp. d/b/a Choice Cable T.V.:

Guillermo Ramos-Luiña, Esq.USDC-PR 204007PO Box 22763, UPR StationSan Juan, PR 00931-2763Tel.: (787) 620-0527Fax: (787) [email protected]


Demanda OneLink JRT PRTC

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