IN RE APPLICATION OF GCC LICENSE CORP., No. S-01-343.

• Court: Supreme Court of Nebraska
• Writing for the Court: CONNOLLY, J.
• Citation: 647 N.W.2d 45,264 Neb. 167
• Decision Date: 28 June 2002
• Docket Number: No. S-01-343.
• Parties: In re APPLICATION No. C-1889 OF GCC LICENSE CORPORATION (Western Wireless). State of Nebraska, Public Service Commission, Appellee, v. Arlington Telephone Company et al., Intervenors-Appellants, and Arapahoe Telephone Company et al., Intervenors-Appellees.

647 N.W.2d 45
264 Neb. 167

In re APPLICATION No. C-1889 OF GCC LICENSE CORPORATION (Western Wireless).
State of Nebraska, Public Service Commission, Appellee,
v.
Arlington Telephone Company et al., Intervenors-Appellants, and
Arapahoe Telephone Company et al., Intervenors-Appellees

No. S-01-343.

Supreme Court of Nebraska.

June 28, 2002.

647 N.W.2d 47

Kelly R. Dahl and John W. McMullen, of Baird, Holm, McEachen, Pedersen, Hamann & Strasheim, L.L.P., Omaha, for appellants

Steven G. Seglin, of Crosby Guenzel, L.L.P., Lincoln, and Mark J. Ayotte, and Philip R. Schenkenberg, of Briggs and Morgan, P.A., St. Paul, MN, for appellant GCC License Corporation (Western Wireless).

647 N.W.2d 48

Don Stenberg, Attorney General, and L. Jay Bartel, Lincoln, for appellee Nebraska Public Service Commission

HENDRY, C.J., WRIGHT, CONNOLLY, GERRARD, STEPHAN, McCORMACK, and MILLER-LERMAN, JJ.

CONNOLLY, J.

GCC License Corporation is a wholly owned subsidiary of Western Wireless Corporation, doing business in Nebraska as Cellular One (Western Wireless). It was designated by the Nebraska Public Service Commission (PSC) as an eligible telecommunications carrier (ETC) under 47 U.S.C. § 214(e)(2) (Supp. V 1999), part of the federal Telecommunications Act of 1996. Designation as an ETC makes a company eligible for state and federal funding to ensure that all consumers have access to affordable telephone service, a concept that is generally referred to as "universal service." See, e.g., Alenco Communications, Inc. v. F.C.C., 201 F.3d 608 (5th Cir.2000). The appellants are rural Nebraska telephone companies who intervened in the PSC action to contest the designation of Western Wireless as an ETC.

The appellants contend that to receive ETC designation, Western Wireless had to prove that the designation would be in the public interest under 47 U.S.C. § 214(e). They argue that the PSC was required to engage in rulemaking to define the term "public interest." They also argue that even if rulemaking is not required, the PSC adopted the wrong test to define the public interest and that the designation of Western Wireless as an ETC was not supported by the evidence. They further argue that the PSC, by certifying Western Wireless' ETC status to the Federal Communications Commission (FCC) after an appeal was filed, violated a stay provision in Neb. Rev Stat. § 75-134(3) (Cum.Supp. 2000).

We determine that rulemaking was not required and that Western Wireless met its burden of proof that it was eligible for ETC designation. We affirm.

BACKGROUND

APPLICATION PROCEEDINGS

In August 1998, Western Wireless applied for designation as an ETC in multiple service areas, and the appellants intervened. A hearing was held on the application in October 1999. All parties provided evidence regarding the definition of public interest and whether designation of Western Wireless as an ETC was in the public interest.

Gene DeJordy, an attorney and Western Wireless' representative on a rural task force established by the "Federal State Universal Service Joint Board," testified for Western Wireless as follows: He stated that the federal Telecommunications Act of 1996 and the Nebraska Telecommunications Universal Service Fund Act established a mechanism to achieve a competitive universal service market by bringing the benefits of competition to rural areas. The acts allow incumbent local exchange carriers, as well as competitive carriers, to enter universal service market areas by seeking ETC status. He testified that Western Wireless was capable of offering universal service to rural customers if it was given ETC status. Western Wireless met all of the criteria for ETC designation, including the ability to offer required supported services, such as access to required emergency services.

Western Wireless planned to implement a universal service offering through the use of wireless local loop technology. Using this system, customers would use a

647 N.W.2d 49

wireless system for their home telephone that would be compatible for use with computers and fax machines. DeJordy explained that wireless loop technology has a more powerful output than a handheld wireless telephone and that the quality of service with a wireless loop system was equal to, or better than, a landline system. He conceded that terrain could cause a signal to be unavailable to a handheld cellular telephone in certain areas, but indicated that the stronger signal of the wireless loop system would generally prevent that problem. He also stated that a signal could be optimized at a location by using antennas. Additional cellular sites would be constructed to make service available to all areas if necessary. He conceded that the wireless loop service would not likely be installed in hospitals because the antenna would have to be placed outside instead of inside where it could affect medical devices

DeJordy further testified that Western Wireless would offer the services at a fixed monthly rate similar to what was offered by the incumbent telephone companies. Western Wireless would also provide an expanded local calling area. According to DeJordy, some customers would likely keep their service with the incumbent local carrier, but would use Western Wireless' services as a second telephone line instead of seeking two lines with the incumbent carrier.

DeJordy testified that designation of Western Wireless as an ETC was in the public interest by providing rural customers with a choice between service providers. Western Wireless would provide a new and innovative service with some extra features such as 24-hour customer service, some mobility of the telephone, and expanded local calling areas. Western Wireless did not provide an economic study regarding the impact a second ETC would have on incumbent rural telephone carriers.

Cynthia Bittinger, the secretary-treasurer for a local exchange carrier, testified on behalf of the appellants. She testified as follows: Western Wireless had not provided enough information to show that it would support the services necessary for ETC designation and had not disclosed the prices and terms under which it would offer services. Designation of Western Wireless as an ETC was not in the public interest because it would jeopardize the ability of incumbent rural carriers to provide basic and advanced services to their customers due to lost revenues. She suggested that costs to consumers would rise because of the possibility that a universal service surcharge paid by customers would need to be increased to support multiple ETC's in rural areas. Bittinger expressed doubt that the economy of rural areas could support two ETC's, especially if the fund had to be adjusted for consumers who carried lines with both carriers. She knew of customers who had experienced dead spots in her area where they were unable to receive a signal when using conventional mobile cellular services provided by Western Wireless.

Steven Watkins, a consultant and attorney, testified for the appellants as follows: Western Wireless had failed to provide sufficient detail regarding the terms and conditions under which it would offer or provide universal service in a manner that would satisfy the conditions necessary for ETC designation. Designation of Western Wireless was not in the public interest because if the funds available were diluted due to multiple ETC's, all the carriers might be prevented from upgrading services in high cost areas and rural customers might be subjected to higher rates. He believed that Western Wireless did not have the capacity to serve all the customers

647 N.W.2d 50

in an area as a carrier of last resort. On cross-examination, he stated his disagreement with existing federal rules and admitted that he believed it would never be in the public interest to designate an additional ETC in a rural telephone company area.

Donald Macke, an economist and the executive director of the Nebraska Rural Development Commission, reviewed Western Wireless' application for ETC designation and wrote a detailed report of his findings. Based on standards used to determine whether to assist development projects, Macke testified that it was not in the public interest to designate Western Wireless as an ETC because the ability of rural markets to support a single provider was in question and they could not support multiple providers.

Barbara Wilcox, the director of product and market issues for U S West Communications, Inc., testified that Western Wireless' services might not be affordable to all customers. She testified that Western Wireless should be required to file a business plan and present details regarding the costs of their services before ETC designation could be granted. She admitted that U S West Communications did not file a business plan when it was designated as an ETC.

PSC FINDINGS

In November 2000, the PSC granted Western Wireless' application for ETC designation. In its order, the PSC stated that it must be shown by clear and convincing evidence that designation of a second ETC in a rural area is in the public interest. The PSC found that the purpose of the public interest requirement of 47 U.S.C. § 214(e) was not to protect rural telecommunications companies from competition but to ensure that rural areas receive the same benefits as urban areas. The PSC determined that the public interest requirement is centered on a threshold issue of whether a proposed application has defined its service area reasonably enough to prevent "`cherry picking'" of desirable customers by incoming ETC's. The PSC determined that the designated service area was large enough to prevent cherry-picking. The PSC then determined that Western Wireless also offered additional benefits to the public interest such as an expanded calling area and mobility.

The PSC found the report written by Macke to be unpersuasive. The PSC found that the report suggested that it should consider the...