City of Plano v. Public Utility Com'n, 03-96-00691-CV

• Decision Date: 14 August 1997
• Docket Number: No. 03-96-00691-CV,03-96-00691-CV
• Parties: CITY OF PLANO, Texas, Appellant, v. PUBLIC UTILITY COMMISSION and MFS Intelenet of Texas, Inc., Appellees.
• Court: Texas Court of Appeals

Page 416

953 S.W.2d 416

180 P.U.R.4th 568

CITY OF PLANO, Texas, Appellant, v. PUBLIC UTILITY COMMISSION and MFS Intelenet of Texas, Inc., Appellees.

No. 03-96-00691-CV.

Court of Appeals of Texas,

Austin.

Aug. 14, 1997.

Walter Washington, Butler, Porter, Gay & Day, Austin, for appellant.

Susan Bergen Schultz, Myra A. McDaniel, Jesus Sifuentes, Bickerstaff, Heath, Smiley, Pollan, Kever & McDaniel, L.L.P., Austin, for appellee MFS Intelenet of Texas, Inc.

Dan Morales, Attorney General, Andrew S. Miller, Assistant Attorney General, Natural Resources Division, Austin, for appellee Public Utility Commission.

Before CARROLL, C.J., and ABOUSSIE and B.A. SMITH, JJ.

BEA ANN SMITH, Justice.

In an effort to enhance competition in the telecommunications industry, the legislature enacted the Public Utility Regulation Act of

                1995 ("1995 PURA"). 1  This statute expands the avenues available to companies seeking to provide local exchange telephone service.  In lieu of seeking the traditional certificate of convenience and necessity, a utility may now more easily obtain a certificate of operating authority or a service provider certificate of operating authority.  This appeal requires us to decide if an applicant for a service provider certificate of operating authority must first obtain, or at least apply for, a franchise from the municipality in which it intends to provide telephone services before the Public Utility Commission may issue the certificate.  We will uphold the Commission's ruling that the 1995 PURA imposes no such requirement
                

BACKGROUND

The Commission was created to protect the public interest by regulating rates and services in public utilities dominated by monopolies; regulation by this public agency was intended as a substitute for normal market competition. 1995 PURA § 1.101(a). As technological advances made the telecommunications industry more competitive, the legislature determined to reduce regulation to acknowledge growing competition in the marketplace:

The legislature finds that the telecommunications industry through technical advancement, federal legislative, judicial and administrative actions, and the formulation of new telecommunications enterprises has become and will continue to be in many and growing areas a competitive industry which does not lend itself to traditional public utility regulatory rules, policies, and principles ...

Id. § 3.051(a). Accordingly, Title III of the 1995 Act was enacted to promote diversity of providers and to encourage a more competitive telecommunications marketplace, while guaranteeing quality telephone services at affordable rates. Id. § 3.001. The Commission is now required "to do those things necessary to enhance the development of competition by adjusting regulation to match the degree of competition in the marketplace, thereby reducing the cost and burden of regulation and maintaining protection of markets that are not competitive." Id. To accomplish this new state policy, the Commission is authorized to promulgate rules and establish procedures that create "appropriate regulatory treatment to allow incumbent exchange companies to respond to significant competitive challenges." Id. § 3.051(e)(1).

Under the 1995 Act, the Commission may issue two new types of certificates to telephone utilities: a certificate of operating authority (COA) to utilities that will invest in and use their own facilities, id. § 3.2531, and a service provider certificate of operating authority (SPCOA) to utilities that will purchase services from the incumbent local exchange company at a discount and resell them to the public using the incumbent company's facilities. Id. § 3.2532. Section 3.2555(a) of the Act requires an applicant for both types of certificates of operating authority to

file with its application a sworn statement that it has applied for any necessary municipal consent, franchise, or permit required for the type of services and facilities for which it has applied....

Id. § 3.2555(a).

In September 1995, MFS Intelenet of Texas applied for a service provider certificate of operating authority to resell local exchange service in an area that includes the City of Plano. It included with its application the following statement: ²

MFSI-TX does not intend to construct or operate any transmission facilities or to occupy any public rights-of-way or other property, but rather will operate exclusively as a reseller of local exchange services. The applicant therefore believes that no municipal franchises, permits, licenses, or consents are required for its proposed operations.

I, Timothy Devine, attest to the fact that the Applicant has applied for any necessary The Commission provided the required notice of MFS Intelenet's application to interested parties by publishing the notice, time, and place of the hearing in the Texas Register. See id. § 3.2531(b); 20 Tex. Reg. 7211, 7212 (Sept. 12, 1995). The City of Plano, a home rule municipality, intervened in the proceedings to contest MFS Intelenet's application on the ground that the Commission could not issue the certificate until MFS Intelenet had obtained municipal consent in the form of a franchise. Over the city's complaints that MFS Intelenet had not applied for a franchise, the Commission granted the application. In its order, the Commission's Finding of Fact 19 stated:

municipal consent, franchise, or permit required for the types of services and facilities for which it is applying.

The Applicant filed an affidavit with its application stating that it applied for all necessary municipal franchises, permits, or consents.

The Commission then issued an Order onRehearing in which it adopted its prior order and, at Plano's request, added Finding of Fact 20:

The Commission has not determined the applicant's need for a municipal franchise, consent, or permit.

The Commission also ruled in Conclusion of Law 13 that:

PURA 95 § 3.2555 does not grant the Commission jurisdiction or authority to determine the necessity of a franchise between a municipality and an SPCOA holder.

After its second motion for rehearing was overruled, Plano sued for judicial review of the Commission's order in district court. The district court affirmed the order.

DISCUSSION

While the Commission grants public utilities the right to sell their services to the public, home rule municipalities such as Plano are authorized to collect fees from those who use or occupy public streets or rights-of-way with their facilities. Tex.Rev.Civ. Stat. Ann. art. 1175 (West 1996); Tex. Local Gov't Code Ann. § 282.003 (West Supp.1997); Tex. Transp. Code Ann. § 311.071 (West Supp.1997). Typically these municipal franchise agreements base compensation to the city on a percentage of the telephone company's gross receipts. The 1995 PURA requires an incumbent local exchange company to offer services to the holder of a SPCOA at a discount; if the incumbent company's gross receipts are reduced because of the discount, the city's franchise revenues also will fall. This potential for reduced franchise revenues is at the heart of Plano's concern. Plano complains that if pure resellers of local exchange service such as MFS Intelenet are not required by the Commission to apply for and obtain municipal consent, cities may lose revenues when one of these new certificates of operating authority is issued. Plano argues in five points of error that the Commission violated the 1995 PURA by issuing MFS Intelenet a special provider certificate of operating authority without requiring it to first obtain, or at least apply for, a municipal franchise, consent, or permit.

MFS Intelenet never applied for a franchise from Plano; rather, it determined that, as a pure reseller that would construct no new facilities, it would not need a franchise. MFS Intelenet intended to purchase telephone services at a discount from a local company that had already paid the city a franchise fee for the use of the city's rights of way. Thus MFS Intelenet submitted its sworn statement that it "had applied for any necessary consent, franchise, or permit," because it believed no application was necessary. The Commission determined that the utility's sworn statement satisfied the requirement of section 3.2555(a), refusing to require the utility to first apply for and obtain consent or waiver from the city before issuing the certificate.

In its first and fourth points of error, Plano contends the Commission's interpretation of section 3.2555(a) impermissibly allows the utility rather than the city to decide whether municipal consent is necessary. Plano insists that section 3.2555(a) is meaningless if it does not require the applicant first to apply for and obtain a franchise or waiver of the requirement by the city.

In construing section 3.2555(a), we give serious consideration to an agency's construction of a statute that it is charged with enforcing, so long as the interpretation is reasonable and does not contradict the plain language of the statute. Stanford v. Butler, 142 Tex. 692, 181 S.W.2d 269, 273 (1944); Borden, Inc. v. Sharp, 888 S.W.2d 614, 620 (Tex.App.--Austin 1994, writ denied); TEXALTEL v. Public Util. Comm'n, 798 S.W.2d 875, 884 (Tex.App.--Austin 1990, writ denied). This is particularly true where the statute is ambiguous due to the complexity of the subject matter. TEXALTEL, 798 S.W.2d at 884. Indeed, if the statute can reasonably be read as the agency has ruled, and that reading is in harmony with the rest of the statute, then the court is bound to accept that interpretation even if other reasonable interpretations exist. Quorum Sales, Inc. v. Sharp, 910 S.W.2d 59, 64 (Tex.App.--Austin 1995, writ denied).

Section 3.2555(a) requires the applicant for a certificate of operating authority or service provider certificate of operating authority to file "a sworn statement that it has applied for any necessary municipal consent, franchise, or permit required for the type of services...