PUBLISHED OPINION
Case No.: 94-0458
Complete
Title
of
Case:WISCONSIN STATE
TELEPHONE ASSOCIATION,
A WISCONSIN NON-STOCK CORPORATION,
Petitioner-Appellant,
v.
PUBLIC SERVICE COMMISSION OF
WISCONSIN,
Respondent-Respondent.
Submitted
on Briefs: November 8, 1994
COURT COURT OF
APPEALS OF WISCONSIN
Opinion
Released: April 25, 1996
Opinion
Filed: April
25, 1996
Source
of APPEAL Appeal from an order
Full
Name JUDGE COURT: Circuit
Lower
Court. COUNTY: Dane
(If
"Special" JUDGE: Susan
R. Steingass
so
indicate)
JUDGES: Eich,
C.J., Dykman and Sundby, JJ.
Concurred:
Dissented:
Appellant
ATTORNEYSFor the petitioner-appellant the
cause was submitted on the briefs of William C. Williams of Bell,
Metzner, Gierhart & Moore, S.C. of Madison.
Respondent
ATTORNEYSFor the respondent-respondent the
cause was submitted on the brief of Natalie G. Crosetto of the Public
Service Commission of Wisconsin.
COURT OF
APPEALS DECISION DATED AND
RELEASED April
25, 1996 |
NOTICE |
A party may file with the Supreme Court a petition to review an
adverse decision by the Court of Appeals.
See § 808.10 and Rule
809.62, Stats. |
This opinion is subject to further editing. If published, the official version will appear in the bound
volume of the Official Reports. |
No. 94-0458
STATE OF WISCONSIN IN
COURT OF APPEALS
WISCONSIN
STATE TELEPHONE ASSOCIATION,
A
WISCONSIN NON-STOCK CORPORATION,
Petitioner-Appellant,
v.
PUBLIC
SERVICE COMMISSION OF WISCONSIN,
Respondent-Respondent.
APPEAL
from an order of the circuit court for Dane County: SUSAN R. STEINGASS, Judge.
Affirmed in part and reversed in part.
Before
Eich, C.J., Dykman and Sundby, JJ.
SUNDBY,
J. The Wisconsin State Telephone Association (WSTA), a trade
association of local exchange carriers, appeals from an order affirming in part
an order of the Public Service Commission entered in Docket No. 05-TR-103 March
23, 1993. The order was entered to
effect the Commission's findings and conclusions resulting from its
investigation of intrastate access costs and intrastate access charges. We affirm the order in part and reverse in
part.
BACKGROUND
An
access charge[1] is paid by
an interexchange carrier (IXC) to a local exchange carrier (LEC)[2]
for services and facilities supplied by the LEC to an IXC to complete and bill
for telephone calls carried by the IXC.
Prior to the breakup of the Bell System January 1, 1984, access charges
did not exist. AT&T reimbursed LECs
for the cost of providing what are today called access services according to a
Federal Communications Commission (FCC) costing methodology. After divestiture and with the beginning of
interstate competition, the FCC developed a system of interstate access charges. The Public Service Commission ordered
Wisconsin LECs to set intrastate access rates which "mirrored"
interstate rates. Since that time, the
Commission and the telecommunications industry have struggled to move away from
"mirrored" rates to Wisconsin-based costs. The Commission considered these Wisconsin-based charges
experimental and created a Task Force to examine access charges and advise the
Commission on policy changes. The Task
Force reported in October 1990. The
Commission adopted major parts of the report but rejected a proposed reduction
in access rates except as an "interim" solution.
The
Commission held hearings on the Task Force's recommendations and issued interim
orders. The parties agreed that the
then-current access rates had to be reduced.
Access rates had to be brought closer to economic costs. The parties also agreed that the price of
long distance telephone service had to be equalized statewide, i.e.,
geographically averaged. The Commission
rejected "generic" access rates in favor of company-specific rates,
set in rate proceedings.
In
Docket No. 05-TR-103, the Commission set a series of "benchmark"
access rates, toward which the Commission expected all LECs to move. The Commission did not, however, set
benchmark rates for billing and collection.
The
LECs or ICOs have two main sources of revenue:
access charges and local service rates.
In a previous docket, 05-TR-102, the Commission approved a support fund
to ameliorate "rate shock" caused by the move to company-specific
access rates (except for carrier common line charges (CCLC)).[3] In previous orders in this Docket,
05-TR-103, the Commission approved four support funds as part of an interim
solution. However, the Commission
approved funding for only two of the funds, called High Cost Funds, and the
remaining two were eliminated. It
directed the Task Force to develop proposals for the funding and administration
of the funds. In its second report,
October 1991, the Task Force made its recommendations. The two remaining funds (the Wisconsin
Support Fund and the NTS Transition Fund) were combined into a fund called the
Intrastate Universal Service Fund (IUSF), administered by WSTA.
However,
to minimize the financial distress for some LECs caused by the withdrawal of
the High Cost Funds support, the Commission ordered that the funds be phased
out in three equal steps ending January 1, 1995. It is the phasing out of these funds which WSTA claims was beyond
the Commission's authority. WSTA argues
that by eliminating these funds the Commission eliminated a rate, toll or
charge not subject to the Commission's regulatory authority because of the
partial deregulation of small telecommunication utilities (STUs).[4] In the Commission's third interim order in
this docket, each LEC whose access costs exceeded access revenue was directed
by the Commission to show how much support it would receive from the High Cost
Funds. WSTA argues that the elimination
or reduction of those funds affected the utilities' tariffs and was therefore
not subject to the Commission's regulatory authority.
WSTA
also attacks that part of the Commission's order which required LECs to file
tariffs eliminating language allowing only certain service providers and
carriers to purchase access services.
WSTA argues that the Commission has no statutory authority to make that
requirement.
STANDARD OF REVIEW
Our
standard of review is mixed. We owe no
deference to the Commission's construction of its own authority under ch. 196, Stats.
See Madison Metro. School Dist. v. DPI, 199 Wis.2d
1, 8, 543 N.W.2d 843, 846 (Ct. App. 1995).
As to WSTA's constitutional claims, we are bound by the Commission's
findings of fact if they are supported by credible evidence. See Schaefer v. Northern Assur.
Co., 182 Wis.2d 148, 164, 513 N.W.2d 615, 622 (Ct. App. 1994) (citing
§ 805.17(2), Stats.). However, whether those facts establish a
"taking" or violate WSTA's right to due process are questions of law
which we decide without deference to the Commission. See State v. Verstoppen, 185 Wis.2d 728,
736, 519 N.W.2d 653, 656 (Ct. App. 1994).
Finally, we accord to the Commission's decisions and findings which
implicate its experience, technical competence, and special knowledge
"great weight." Sieger
v. Wisconsin Personnel Comm'n, 181 Wis.2d 845, 855, 512 N.W.2d 220, 223
(Ct. App. 1994).
DECISION
(a) Affect of Deregulation.
STUs
were partially deregulated by 1985 Wis. Act 297. The Act exempted STUs from prior Commission review and approval
of rates for telecommunications services and the types of services which they
could offer customers. Wisconsin's
New Law Authorizing Partial Deregulation of Telecommunications Services,
Legislative Council Staff Memorandum 86-11, at 9 (May 7, 1986). The STUs could be made subject to the
Commission's authority if certain rate conditions existed or upon petition of a
percentage of customers. Id. The deregulation of STUs was further
affected by 1989 Wis. Act 344.
The
Commission does not dispute the need for "high-cost" funding for both
companies and customers "to preserve universal service." It argues, however, that support funds are
not payments for services but subsidies.
We agree. The need for support
funding arose from structural changes in the industry and not from new
services. WSTA argues that this subsidy
is part of a STU tariff because if that funding is withdrawn, the STUs will be
required to raise their rates to make up for the revenue shortfall. That may well be the effect of the phasing
out of the High Cost Funds, but that is what deregulation is all about.
In
any event, the Commission's order protected LECs who may have experienced
financial hardship because of the loss of support funds. The order permitted a LEC to suspend
reduction in its support funding by filing a rate case under § 196.20, Stats.
The
Commission's order requires that the IUSF which replaces the phased-out High
Cost Funds will be financed by a per-minute surcharge on terminating CCLC rates
paid by LEC toll providers. This terminating
CCLC surcharge does not apply to calls carried by a LEC toll provider which
terminate in its own exchange. Instead,
WSTA monthly assesses each LEC toll provider an amount equal to the revenue it
would have collected if it had imposed CCLC surcharges on minutes of use. Under the order in this docket, WSTA files a
tariff including the CCLC surcharge, and the ICO files a concurrence in its
tariff. WSTA, as fund administrator,
may revise the surcharge as necessary.
The
Commission's order provides in part:
"All LEC toll providers shall file tariffs containing language
concurring with the WSTA CCLC surcharge by May 1, 1993." The Commission's findings of fact state: "LEC toll providers and the ICOs should
file tariffs incorporating such [surcharge] language by May 1, 1993." WSTA asks:
"Does the Public Service Commission ... have the authority to
require small telecommunications utilities to alter their tariffs?" We do not read WSTA's briefs to attack that
part of the Commission's order requiring all LEC toll providers to file tariffs
containing language concurring in the WSTA CCLC surcharge. WSTA's attacks are directed at the
Commission's alteration of the LECs' tariffs by eliminating the High Cost Funds
and the tariff language allowing only certain service providers and carriers to
purchase access services from the access tariff. See Findings of Fact, Conclusions of Law and Final Order,
PSCW Docket No. 05-TR-103, at 40 (March 23, 1993).
We
have held that the High Cost Funds were not payments for service but were
subsidies which the Commission was not required to continue. Elimination of those subsidies did not
constitute regulation of the ICOs' rates, charges and tolls. We conclude, however, that the Commission
had no statutory authority to require an ICO meeting the definition of a STU to
alter its tariff to require it to allow all classes of customers to purchase
access services.
The
Commission argues that it has statutory authority to regulate the terms and
conditions of STU access tariffs and to order to whom STUs must offer their
access services. It contends that such
authority is consistent with the intent of the legislature expressed in
§ 1, 1985 Wis. Act 297, that universal telecommunications services shall continue
to be available to the people of this state at just and reasonable rates and of
sufficient quantity, quality and reliability to meet the public interest. However, the Commission overlooks its own
agreement with the telecommunications industry as to the scope of the partial
deregulation of STUs. In the drafting
record of 1989 Wis. Act 344, the telecommunications industry and the Commission
agreed to the following intent section:
"It is the intent of the Legislature to give small
telecommunications utilities greater flexibility and to reduce the regulatory
burdens, costs, and delays by permitting those companies to establish their
rates for service, depreciation ..., profit sharing and classifications without
commission review, investigation and approval." Drafting record, Appendix 1 (small telecommunications utilities
regulation intent section).
The
Commission also argues that it has authority under § 196.60(3), Stats., to seek forfeitures from any
STU guilty of discriminating in the provision of service to any person. Section 196.60(3) is enforceable by a court,
not the Commission. Further, the
Commission has not attempted to impose a forfeiture against a STU under this
statute. It also claims that it can
place a STU under full regulation for a violation of § 196.60. Its argument is premature; it has not
determined that a STU has violated § 196.60. Finally, it cites a number of statutes which it argues show that
WSTA's position as to deregulation doesn't make sense. In its appearance before the legislature in
support of the bill which became 1989 Wis. Act 344, the Commission supported
the concept of partial deregulation of STUs.
Drafting Record, Testimony of Executive Assistant to the Chairman of the
Public Service Commission (Feb. 22, 1989).
The Commission now appears to wish to return to full regulation of
STUs. We reject its argument which
fails to give effect to the intent of the legislation to partially deregulate
STUs.
(b) WSTA's Constitutional Claims.
1.
Inadequate Rates.
WSTA
argues that the Commission's phasing out of the High Cost Funds without
determining the impact on each company affected is confiscatory. It contends that the Commission could
withdraw such support funding only on a case-by-case basis. WSTA argues that the result may be that some
rates are so insufficient as to be confiscatory, citing Waukesha Gas
& Electric Co. v. Railroad Comm'n, 181 Wis. 281, 194 N.W. 846
(1923).
The
Commission addresses WSTA's past practice argument but does not address its
constitutional arguments. A.T.&T.,
in its nonparty brief, does address those arguments. It correctly notes that WSTA's claim is speculative. WSTA does not present any evidence that
because of the phasing out of the High Cost Funds, any LEC will be unable to
earn a fair rate of return. Further,
the Commission provided a safety valve when it permitted a LEC to suspend the
reduction in support funding by filing a rate case under § 196.20, Stats.
PSCW Findings of Fact at 27. A
constitutional taking does not occur as long as the property owner has a remedy
to avoid the taking. See Nollan
v. California Coastal Comm'n, 483 U.S. 825, 831 (1987).
As
to WSTA's past practice argument, we find no precedent binding the Commission
to deal in a certain way with the enormous regulatory problems caused by
divestiture.
2.
Due Process.
WSTA argues that the
Commission's elimination of the High Cost Funds "raises due process
concerns," citing Mid-Plains Telephone v. Public Serv. Comm'n,
56 Wis.2d 780, 202 N.W.2d 907 (1973).
It is not clear whether WSTA's concerns are lack of procedural due
process or deprivation of substantive due process. However, it argues that the Commission's procedures result in
confiscatory rates and are thus arbitrary and capricious. WSTA's claim is that the Commission could
not do to LECs what it did; therefore, its concern is that some LECs may have
been denied substantive due process. See
Zinermon v. Burch, 494 U.S. 113, 125-26 (1990). This claim is merely a restatement of its
taking claim and fails for the same reasons its taking claim failed.
(c) Universal Service Programs.
The
Commission ordered all LECs to establish universal service programs--lifeline,
link-up and early intervention. It
argues that § 196.395, Stats.,
empowered it to make that order. While
WSTA does not contend that the Commission could not order the LECs to establish
universal service programs, it asks that we disabuse the Commission of the
notion that § 196.395 gives it authority to take some actions by a
conditional order which it cannot take by a direct order. We decline the invitation because we would
be giving an advisory opinion. See
Brown v. LaChance, 165 Wis.2d 52, 58, 477 N.W.2d 296, 299 (Ct.
App. 1991). The Commission has not made
a conditional order which WSTA contests.
By
the Court.—Order affirmed in
part and reversed in part.
[1] "Access
charges" are payments which long distance carriers make for the use of
local phone companies' exchange plants for originating and terminating
calls. Public Service Commission,
Docket No. 05-TR-103, Report of the Access Charge Task Force 1 (October
1990).
[2] The Commission also refers to LECs as local
telephone companies or independent companies (ICOs).
[3] The Task Force commented on Docket No. 05-TR-102
as follows:
[T]he Commission allowed companies who would be
financially harmed by changing to cost-based access charges to make up at least
a portion of the revenue loss through local rate increases. In order to cushion the rate shock, the
companies were allowed to increase rates gradually, while recovering any
shortfall from a transition shortfall fund.
Access Charge Task Force at 6.
[4] A "[s]mall telecommunications
utility" was defined as:
"[A]ny telecommunications utility or a successor in interest of a
telecommunications utility that provided landline local and access telecommunications
service as of January 1, 1984, and that has less than 9,000 access lines in use
in this state."
Section 196.01(8), Stats.,
1991-92. What the legislature did next
was peculiar. By § 1 of 1993 Wis. Act
121, the legislature amended the definition of STUs to increase the number of
lines to 50,000; however, by § 2 of the same act, the legislature decreased the
number of lines back to 9,000. It
appears that the legislature "dropped [a] stitch." See Scharping v. Johnson,
32 Wis.2d 383, 393 n.6, 145 N.W.2d 691, 697 (1966).