Public Utility Com'n of Texas v. AT & T Communications of the Southwest
| Decision Date | 12 July 1989 |
| Docket Number | No. C-6957,C-6957 |
| Citation | 777 S.W.2d 363 |
| Parties | PUBLIC UTILITY COMMISSION of TEXAS et al., Petitioners, v. AT & T COMMUNICATIONS OF THE SOUTHWEST et al., Respondents. |
| Court | Texas Supreme Court |
Jim Mattox, Atty. Gen., Steven Baron, Asst. Atty. Gen., Austin, for Public Utility Comm.
Robert J. Hearon, Jr., Pamela Stanton Baron, Austin, for Southwestern Bell.
Marion Taylor, Austin, for Public Utility Council.
John Andrew Martin, Dallas, Don R. Richards, Lubbock, John F. Bell, Jr., Fort Worth, Brook Bennett Brown, Edmond R. McCarthy, Jr., Don R. Bertler, Steven A. Porter, Austin, William G. Mundy, Irving, Geoffrey M. Gay, Jon Dee Lawrence, Alfred G. Richter, Jr., Edward L. Eckhart, Austin, Dale H. Johnson, Lubbock, Ward W. Wueste, Jr., San Angelo, for petitioners.
Jim Mattox, Atty. Gen., Lou McCreary, Scott McCullough, Asst. Attys. Gen., Austin, for State Purchasing and General Services Comm.
Martha Smiley, Carolyn E. Shellman, Katie Bond, R. Steven Davis, II, Joe N. Pratt, Joyce Beasley, J. Alan Holman, Austin, Michael J. Ball, Thomas A. Grimaldi, Kansas City, MO., John M. Kyser, Paul Herrmann, Austin, Ray G. Besing, Dallas, for respondents.
This is an appeal from two administrative determinations by the Public Utility Commission. The district court considered the administrative appeals together and affirmed the commission's orders in both cases. The court of appeals reversed the judgments of the district court, holding that the system of access charges implemented by the commission was unreasonably discriminatory. 735 S.W.2d 866 (1987). We find the rate structure adopted by the commission to be reasonably based on differences between the two types of carriers, with the differences found as facts by the commission supported by substantial evidence in the record. We reverse the judgments of the court of appeals and affirm the judgments of the trial court.
This case arises from two related docket cases before the commission. The first case, docket number 5113, was a rate design case that was to be used for future rate change hearings. It was instituted by the commission in April 1983 to assess the effects of the federal court decisions mandating AT & T to divest itself of the local Bell operating companies on the rate structure and telephone utility revenues in Texas.
The basic federal order, which is known as the modification of final judgment or modified final judgment, divided the United States into geographic regions called local access and transport areas (LATAs). The modified final judgment ordered AT & T to divest itself of the Bell operating companies, including Southwestern Bell. The decree further provided that the divested local Bell operating companies could not provide long-distance service between LATAs, i.e., interLATA service; that right was reserved to long-distance companies independent of the Bell operating companies, which are known as interexchange carriers. The Bell operating companies were allowed to provide long distance service within a LATA, i.e., intraLATA service. The interexchange carriers were not specifically allowed to offer intraLATA service; instead, each state could decide whether to allow the interexchange carriers to compete for intraLATA calls.
The second case, docket number 5220, is a rate case filed by Southwestern Bell in which the commission implemented the rate design that it had adopted in docket number 5113. The commission also adopted and incorporated by reference in docket number 5220 the findings of fact and conclusions of law from docket number 5113.
Texas has a number of local telephone companies other than the Bell operating companies. These companies are referred to as local operating companies. The Bell operating companies and the local operating companies are collectively known as local exchange companies.
Although not parties to the federal divestiture suit, the local operating companies were drastically affected by the modified final judgment because they had been operating under a contractual sharing arrangement 1 with respect to revenues from long-distance calls that originated or terminated within the state. Under this arrangement the local operating companies shared in the revenue generated by long distance service. Under the modified final judgment, however, the local exchange companies lost the pool of long-distance revenue they would have received under this arrangement.
This revenue loss had to be recouped from some other source for the local operating companies to remain profitable. The commission allowed the interexchange carriers to participate in the proceeding to determine how to recoup this revenue loss.
The interplay between the federal orders and the state's exclusive regulatory domain focused the dispute largely on the allocation of non-traffic sensitive costs. Non-traffic sensitive costs are those associated with the local exchange company's telephone plant that do not increase as traffic or usage increases, such as cables, poles, and telephone instruments.
The interexchange carriers advocated allocating the non-traffic sensitive costs on the end users of local exchange services. Under this proposal a very significant portion of the non-traffic sensitive costs of the local exchange companies would have been recovered as some form of end user charge, which would have been reflected in increased rates for basic telephone service. The commission rejected this proposed rate structure.
The local exchange companies advocated recouping non-traffic sensitive costs by imposing charges on the interexchange carriers for their use of the network owned by the local exchange companies. The local exchange companies argued that the interexchange carriers should contribute to defraying the costs of the local exchange network since they use it to complete virtually all of the calls they carry. 2 The charge under this proposed rate structure is called an interexchange carrier access charge. The commission adopted a modified form of the interexchange carrier access charge as its rate structure in docket number 5113.
The commission determined that the interexchange carrier access charge should apply to all intrastate toll calls whether the calls were intraLATA or interLATA. By definition, the charge applies only to interexchange carriers. The commission based its determination to apply the access charge to all calls in part on the finding that local exchange companies cannot determine whether a call is intraLATA or interLATA. Thus, all calls will be considered interLATA, to which access charges apply, even though the call might be wholly intraLATA. As a result, the interexchange carriers would pay an access charge on intraLATA long distance calls whereas the local exchange companies would not.
The commission left the existing rate structure for the local exchange companies largely intact. In particular, the commission did not require the local exchange companies to impute an access charge on themselves for the intraLATA long-distance service they provide. In a concession to the interexchange carriers' arguments that the proposed order would make them bear too much of the local exchange companies' non-traffic sensitive costs, the commission ordered a ten percent increase in the intraLATA long-distance rates for the local exchange companies.
The court of appeals' opinion is based on its observation that for certain intraLATA long-distance calls, especially ones for shorter distances, the access charge paid by the interexchange carriers exceeds the entire rate charged by the local exchange companies. 735 S.W.2d at 869. The court of appeals concluded that the net effect is that a customer must pay more for an intraLATA long-distance call placed through an interexchange carrier than for one placed through a local exchange company, thus placing the interexchange carriers at a competitive disadvantage with the local exchange companies. Id.
Virtually all of the respondents concede that the court of appeals' factual conclusion that a customer must pay more for an intraLATA long-distance call placed through an interexchange carrier than for one placed through a local exchange company is not only a fact not found by the commission, but is factually incorrect. The reviewing appellate court is not to make independent findings of fact; the right to find facts rests with the administrative agency. Imperial Am. Resources Fund, Inc. v. Railroad Comm'n, 557 S.W.2d 280, 286 (Tex.1977). The court is not to substitute its judgment for that of the administrative body. Id.
Further, the conclusion that the interexchange carriers are placed at a competitive disadvantage because of the rate design adopted by the commission is a finding the commission expressly declined to make. The hearing examiner's report in both cases expressly stated that the interexchange carriers failed to prove that the proposed access charge system placed them at a competitive disadvantage, and the commission adopted these findings. The hearing examiner's report further states that it would be inequitable, in the absence of proof establishing competitive disadvantage, to impute intraLATA toll related non-traffic sensitive costs on local exchange customers when these customers are already paying their fair share of the costs. 3
The reviewing court, in determining whether the administrative agency has adequately articulated its findings of fact and conclusions of law, is to give appropriate consideration to such statements in the reports that were adopted by the commission in its final order. See State Banking Board v. Allied Bank Marble Falls, 748 S.W.2d 447, 448-49 (Tex.1988). Thus, the court of appeals made findings that the commission expressly refused to make, thereby invading the fact finding authority of the commission.
This court has previously set forth the authority of the commission to design rates based on...
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