South Carolina Cable Television Ass'n v. Southern Bell Tel. and Tel. Co.

• Court: South Carolina Supreme Court
• Writing for the Court: HARWELL; CHANDLER, FINNEY and MOORE, JJ., and CLARENCE T. GOOLSBY, Jr.
• Citation: South Carolina Cable Television Ass'n v. Southern Bell Tel. and Tel. Co., 417 S.E.2d 586, 308 S.C. 216 (S.C. 1992)
• Decision Date: 23 March 1992
• Docket Number: No. 23647,23647
• Parties: , 131 P.U.R.4th 604, Util. L. Rep. P 26,200 SOUTH CAROLINA CABLE TELEVISION ASSOCIATION, Appellant, v. SOUTHERN BELL TELEPHONE AND TELEGRAPH COMPANY, Steven W. Hamm as Consumer Advocate of South Carolina, MCI, and The Public Service Commission of South Carolina, Respondents. . Heard

Page 586

417 S.E.2d 586

308 S.C. 216, 131 P.U.R.4th 604, Util. L.

Rep. P 26,200

SOUTH CAROLINA CABLE TELEVISION ASSOCIATION, Appellant, v. SOUTHERN BELL TELEPHONE AND TELEGRAPH COMPANY, Steven W Hamm as Consumer Advocate of South Carolina, MCI and The Public Service Commission of South Carolina, Respondents.

No. 23647.

Supreme Court of South Carolina.

Heard March 23, 1992.

Decided April 27, 1992.

Mitchell Willoughby, John M.S. Hoefer, and B. Craig Collins, all of Law Offices of Mitchell Willoughby, Columbia, for appellant.

Fred A. Walters, of Southern Bell Tel. and Tel. Co., and A. Camden Lewis, of Lewis, Babcock & Hawkins, Columbia, for respondent Southern Bell Tel. and Tel. Co.

Marsha A. Ward, Gen. Counsel, Columbia, for respondent South Carolina Public Service Com'n.

Steven W. Hamm, Raymon E. Lark, Jr., and Nancy J. Vaughn, Columbia, for respondent Consumer Advocate.

HARWELL, Chief Justice:

Respondent Public Service Commission (the PSC) approved the application of respondent Southern Bell Telephone and Telegraph Company (Southern Bell) for revised depreciation rates and amortization schedules. Appellant South Carolina Cable Television Association (SCCTA) alleges that the trial judge erred in upholding the PSC's rulings and denying SCCTA's petition for judicial review. We affirm.

I. FACTS

The controversy before us arises out of Southern Bell's proposed adjustments for depreciating its aerial, underground, and buried metallic cable plant. Southern Bell asserts that technological advancements soon will make fiber optic cable more economical to use than the metallic cable currently in place.

SCCTA alleges that Southern Bell intends to retire metallic cable and replace it with fiber optics in order to position itself to offer video and broadband services to the public. ¹ SCCTA moved the PSC to dismiss Southern Bell's application for depreciation rate adjustments, or, in the alternative, to hold the application hearing in abeyance pending institution of a separate proceeding to determine whether Southern Bell was earning in excess of its authorized rate of return. The PSC denied the motion, finding that it would be premature to consider the impact of any adjustments to depreciation rates on Southern Bell's earnings. The PSC subsequently approved Southern Bell's application for new depreciation rates and amortization schedules. The revised rates and schedules resulted in an increased intrastate depreciation expense of $14.8 million based on a January 1, 1989 investment base.

SCCTA's petition for reconsideration of the order approving the new depreciation rates was denied by the PSC. SCCTA thereafter sought judicial review of the PSC's rulings. The trial judge found that the PSC had acted within its statutory authority, had ruled within its discretion, and had based its findings upon substantial evidence in the record. Accordingly, the trial judge denied SCCTA's petition for judicial review.

II. DISCUSSION

Orders issued under the powers and authority vested in the PSC have the force and effect of law. Chemical Leaman Tank Lines, Inc. v. South Carolina Public Service Commission, 258 S.C. 518, 189 S.E.2d 296 (1972). The PSC's findings of fact are presumptively correct and its orders are presumptively valid. Id. This Court will not substitute its judgment for that of the PSC upon a question as to which there is room for a difference of opinion. Id. We will not set an order of the PSC aside unless it is found by a convincing showing to be unsupported by evidence or to embody arbitrary or capricious action as a matter of law. Greyhound Lines v. South Carolina Public Service Commission, 274 S.C. 161, 262 S.E.2d 18 (1980).

A.

SCCTA first asserts that the PSC erred in refusing to reconsider its original order approving Southern Bell's application for revised depreciation rates. We disagree.

SCCTA complains that Southern Bell failed to produce a memorandum prepared by Southern Bell's sole witness, H.G. Prophitt, which previously had been produced for a depreciation rate hearing in Florida. In the memorandum, Prophitt discussed the need to deploy fiber optics in order to enhance Southern Bell's entrance into the video entertainment market utilizing fiber optics' broadband and video capabilities.

The PSC found that Southern Bell had no duty to produce the memorandum because SCCTA's interrogatories had requested studies upon which Southern Bell had relied regarding the economic feasibility of deploying fiber optics in South Carolina. The PSC discerned that a memorandum from another jurisdiction was irrelevant to Southern Bell's acts in South Carolina. Nevertheless, the PSC reviewed Prophitt's memorandum in detail and concluded that SCCTA had fully explored all the issues raised by the memorandum when it cross-examined Prophitt. We find substantial evidence in the record to support the PSC's conclusion that utilization of a more advanced technology will benefit Southern Bell's telephone service subscribers, regardless of any commercial potential Southern Bell may be able to exploit in the future. We affirm the trial judge's holding that the PSC did not err in refusing to reconsider its order approving Southern Bell's application for approval of new depreciation rates.

B.

SCCTA next contends that the PSC's findings concerning depreciation life were not supported by substantial evidence. We disagree.

Southern Bell's 1989 depreciation rate study indicates that metallic cable will be retired rapidly once deployment of fiber optics occurs, resulting in a shorter useful life for metallic cable than current depreciation rates reflect. SCCTA urges that the depreciation rates developed by Southern Bell are based upon Southern Bell's anticipated entrance into the video entertainment market, which allegedly will stimulate the utilization of fiber optics and accelerate the obsolescence of metallic cable. Thus, contends SCCTA, Southern Bell's depreciation study and Prophitt's testimony, which was premised upon the depreciation study, are predicated on speculation rather than on evidence of probative value.

Southern Bell, for its part, asserts that its depreciation study addressed metallic cable life cycles in scenarios analyzing both the potential broadband market as well as Southern Bell's current telephone-only services. Southern Bell offered projected lives of 18 years for aerial, 17 years for underground, and 18 years for buried metallic cable accounts, based on substitution of metallic cable with fiber optics for telephone services only.

The PSC reviewed a fiber optics cost curve analysis, a Fisher-Pry technology life cycle forecasting analysis, and several economic alternative analyses known as capital utilization criteria studies. The PSC rejected a historical mortality analysis and retirement patterns as failing to take into account recent advancements in technology and the effects of technological obsolescence. The PSC found the data developed by Southern Bell to be consistent with accepted economic and forecasting principles, and to be supported by other data considered by the PSC in setting new depreciation rates. The PSC staff recommended estimates of 20 years for aerial, 21 years for underground, and 21 years for buried metallic cable accounts.

The depreciation rates proposed by Southern Bell fall well within a range of figures supported by other depreciation studies utilizing different methodology. ² We find that the trial judge did not err in concluding that the PSC's findings concerning depreciation life were supported by substantial evidence.

C.

SCCTA next asserts that the PSC shifted the burden of proof to SCCTA to disprove Southern Bell's proposed depreciation rates. We disagree.

SCCTA's expert witness, W. Page Montgomery, gave his opinion as to deficiencies in Southern Bell's depreciation study, and testified in favor of the figures derived from the historical mortality analysis eventually rejected by the PSC. SCCTA contends that the PSC dismissed Montgomery's testimony because Montgomery failed to conduct an...