In re Complaint of MCTA

• Decision Date: 29 August 2000
• Docket Number: Docket No. 210586.
• Citation: 241 Mich. App. 344,615 N.W.2d 255
• Parties: In re COMPLAINT OF MICHIGAN CABLE TELECOMMUNICATIONS ASSOCIATION Against Ameritech Michigan. Ameritech Michigan, Respondent-Appellant/Cross-Appellee, v. Michigan Public Service Commission, Appellee/Cross-Appellee, and Michigan Cable Telecommunications Association, Comcast Cablevision of Taylor, Inc, And Comcast Cablevision of Southeast Michigan, Inc, Complainants-Appellees/Cross-Appellants.
• Court: Court of Appeal of Michigan — District of US

615 N.W.2d 255

241 Mich. App. 344

In re COMPLAINT OF MICHIGAN CABLE TELECOMMUNICATIONS ASSOCIATION Against Ameritech Michigan.

Ameritech Michigan, Respondent-Appellant/Cross-Appellee, v. Michigan Public Service Commission, Appellee/Cross-Appellee, and Michigan Cable Telecommunications Association, Comcast Cablevision of Taylor, Inc, And Comcast Cablevision of Southeast Michigan, Inc, Complainants-Appellees/Cross-Appellants.

Docket No. 210586.

Court of Appeals of Michigan.

Submitted November 10, 1999, at Lansing.

Decided May 26, 2000, at 9:30 a.m.

Released for Publication August 29, 2000.

Michael A. Holmes and Dickinson Wright PLLC (by Joseph A. Fink, John M. Dempsey, Jeffery V. Stuckey, Detroit, and Daniel D. Quick), Lansing, for Ameritech Michigan.

Jennifer M. Granholm, Attorney General, Thomas L. Casey, Solicitor General, and David A. Voges and Judith I. Blinn, Assistant Attorneys General, for the Public Service Commission.

Fraser Trebilcock Davis & Foster, P.C. (by David E.S. Marvin and Michael S. Ashton), Lansing, for Michigan Cable Telecommunications Association, Comcast Cablevision of Taylor, Inc., and Comcast Cablevision of Southeast Michigan, Inc.

Before: SAWYER, P.J., and HOOD and WHITBECK, JJ.

PER CURIAM.

The Michigan Public Service Commission (MPSC) found that Ameritech Michigan violated subsection 308(3) of the Michigan Telecommunications Act (MTA), M.C.L. § 484.2308(3); MSA 22.1469(308)(3), by failing to report that it had transferred "substantial assets" related to video dialtone (VDT) services to its sister corporation, Ameritech New Media, Inc. Ameritech Michigan appeals the MPSC's resulting order as of right. The Michigan Cable Telecommunications Association, Comcast Cablevision of Taylor, Inc., and Comcast Cablevision of Southeast Michigan, Inc. (collectively, the MCTA Group), cross appeal the MPSC's decision not to fine Ameritech Michigan for its actions. We reverse the MPSC's order, including the award of attorney fees and other reasonable costs.

I. Statutory Context

A. Overview

An understanding of Ameritech Michigan's alleged statutory violation for failing to report to the MPSC that it had transferred some of its VDT assets to an affiliated entity depends on an understanding of the recent and significant changes in the way Michigan regulates the telecommunications industry. Accordingly, we outline the relevant statutory changes below in order to provide the legal context for the facts in this case.

B. The MTA 1992-1995¹

In 1991, the Michigan Legislature enacted the MTA, M.C.L. § 484.2101 et seq.; MSA 22.1469(101) et seq., effective January 1, 1992. The MTA repealed and replaced laws regulating telephone service that went back as far as 1883. See 1991 PA 179, M.C.L. § 484.2603; MSA 22.1469(603) (repealing 1883 PA 72, 1913 PA 206, and 1913 PA 383 as codified). As a substantive matter, the MTA replaced "regulation of entities with regulation of telecommunication services ... in an effort to provide an environment of structured competition for the provision of telecommunication services." Telephone Ass'n of Michigan v. Public Service Comm., 210 Mich.App. 662, 663-664, 534 N.W.2d 223 (1995). The MTA therefore tended to "deregulate the telecommunication industry with a view toward fostering competition between telecommunication service providers." GTE North Inc. v. Public Service Comm., 215 Mich.App. 137, 142, 544 N.W.2d 678 (1996).

The Legislature accomplished its goals of deregulating the telecommunications industry and promoting competition among providers by individualizing the regulation in the MTA according to the type of

telecommunication services offered. For example, basic local exchange service, i.e. basic local telephone service, is subject to extensive regulation because local exchange carriers retain a monopoly position. On the other hand, toll services, such as long distance, are regulated to a lesser extent. In the case of access service, which is the service that provides toll carriers with a network connection to the local exchange so that they may originate or terminate a call in that exchange for their toll customers, the act provides for structured competition and free contracting, subject to regulation when parties cannot reach agreement and to prevent discrimination. A variety of services, such as paging, cellular, and mobile services, are subject to little or no regulation. [ In re Filing Requirements for Complaints & Applications Filed Under the Michigan Telecommunications Act, 210 Mich.App. 681, 683-684, 534 N.W.2d 234 (1995)

.]

In terms of directly regulating how telecommunications providers transferred assets, the Legislature crafted MTA subsection 308(3), M.C.L. § 484.2308(3); MSA 22.1469(308)(3), which read:

A provider of basic local exchange service shall notify the commission when it transfers, in whole or in part, substantial assets, functions or employees associated with basic local exchange service to an affiliated entity, indicating the identity of the affiliated entity, description of the transaction and the impact on basic local exchange service. After consultation with interested parties, the commission shall specify by order the form and manner in which notification will be required under this subsection.

Practically speaking, then, MTA subsection 308(3) required a "provider of basic local exchange service" to notify the MPSC when it "transfers ... substantial assets ... associated with basic local exchange service to an affiliated entity" and to disclose specific information regarding the transfer.

As this Court's opinion in In re Filing Requirements, supra,

suggested, the MTA did not grant the MPSC the authority to regulate all types of telecommunications providers in the same manner. Rather, subsection 401(1) of the MTA, M.C.L. § 484.2401(1); MSA 22.1469(401)(1), specifically restricted the MPSC's authority to regulate certain telecommunications services, notably cable services, stating:

Except as otherwise provided by section 305, the commission shall not have authority over enhanced services, paging, cellular, mobile, and answering services, video, cable television, pay-per-view, shared tenant, private networks, financial services networks, radio and television, WATS, personal communication networks, municipally owned telecommunication system, 800 prefix services and the reselling of telecommunication service. None of the foregoing shall be considered to be the provision of basic local exchange service. [Emphasis supplied.]

This particular statutory provision creates a unique twist in this case. Although Ameritech Michigan is a basic local exchange service provider, the VDT assets it conveyed to Ameritech New Media, Inc., were related in some manner to cable services. Indeed, Ameritech New Media, Inc., the business that purchased the VDT assets, was evidently incorporated for the specific purpose of providing cable services.

C. The MTA 1995-2001²

In 1995, the Michigan Legislature substantially amended the MTA by passing 1995 PA 216, effective November 30, 1995. With respect to cable television services, 1995 PA 216 added subsection 102(c), M.C.L. § 484.2102(c); MSA 22.1469(102)(c), which defined cable service as "1-way transmission to subscribers of video programming or other programming services and subscriber interaction for the selection of video programming or other programming services." MCL 484.2102(b); MSA 22.1469(102)(b) defined basic local exchange service as "the provision of an access line and usage within a local calling area for the transmission of high-quality 2-way interactive switched voice or data communication." When read with amended MTA subsection 102(dd), M.C.L. § 484.2102(dd); MSA 22.1469(102)(dd),³ subsection 102(c) effectively excludes cable services from the definition of basic local exchange services. Moreover, 1995 PA 216 amended subsection 401(1), M.C.L. § 484.2401(1); MSA 22.1469(401)(1), so that it now reads:

Except as otherwise provided by law or preempted by federal law, the commission shall not have authority over enhanced services, paging, cellular, mobile, and answering services, video, cable service, pay-per-view, shared tenant, private networks, financial services networks, radio and television, WATS, personal communication networks, municipally owned telecommunication system, 800 prefix services, burglar and fire alarm services, energy management services, except for state institutions of higher education the reselling of centrex or its equivalent, payphone services, and the reselling of an unlicensed telecommunication service. The foregoing services shall not be considered part of basic local exchange service. [MCL 484.2401(1); MSA 22.1469(401)(1) (emphasis supplied).]

Rather clearly, then, the Legislature prohibited the MPSC from exercising regulatory authority over telecommunications providers offering cable services, authority the MPSC might otherwise exercise over those same providers if cable services were considered part of basic local exchange services.

1995 PA 216 also amended MTA subsection 308(3), by removing the last sentence, which previously read, "After consultation with interested parties, the commission shall specify by order the form and manner in which notification will be required under this subsection." See also M.C.L. § 484.2213(1); MSA 22.1469(213)(1) (granting the MPSC rulemaking authority). Evidently, the MPSC never issued any order specifying the form and manner of notice required under MTA subsection 308(3) before 1995 PA 216 repealed this specific provision requiring the MPSC to promulgate rules.

II. Basic Facts and Procedural History

A. Ameritech Michigan's Acquisition Of The VDT Assets

According to Ameritech Michigan, in 1994 it⁴ applied to the Federal Communications Commission (FCC) to provide interstate video dialtone service, known as VDT service. Ameritech Michigan describes VDT service as a "two-way, interactive video communications service subject...