State ex rel. Sprint v. Missouri Pub. Serv.

• Decision Date: 29 April 2003
• Docket Number: No. WD 60942.,No. WD 60928.,No. WD 61070.,No. WD 60929.,WD 60928.,WD 60929.,WD 60942.,WD 61070.
• Citation: 112 S.W.3d 20
• Parties: STATE of Missouri, ex rel, SPRINT SPECTRUM L.P., d/b/a Sprint PCS, Appellant, State of Missouri ex rel. Southwestern Bell Wireless LLC, Appellant, State of Missouri ex rel, Cellco Partnership, Appellant, Cybertel Cellular Telephone Company d/b/a, Verizon Wireless, Appellant, State of Missouri ex rel, AT & T Wireless Services, Inc., Appellant, v. The MISSOURI PUBLIC SERVICE COMMISSION, Respondent, Southwestern Bell Telephone, Intervenor, Office of Public Counsel, Respondent, Small Telephone Company Group, Respondent, Missouri Independent Telephone Company Group, Respondent.
• Court: Missouri Court of Appeals

112 S.W.3d 20

STATE of Missouri, ex rel, SPRINT SPECTRUM L.P., d/b/a Sprint PCS, Appellant State of Missouri ex rel. Southwestern Bell Wireless LLC, Appellant State of Missouri ex rel, Cellco Partnership, Appellant Cybertel Cellular Telephone Company d/b/a, Verizon Wireless, Appellant State of Missouri ex rel, AT & T Wireless Services, Inc., Appellant, v. The MISSOURI PUBLIC SERVICE COMMISSION, Respondent, Southwestern Bell Telephone, Intervenor, Office of Public Counsel, Respondent, Small Telephone Company Group, Respondent, Missouri Independent Telephone Company Group, Respondent.

No. WD 60928.

No. WD 60929.

No. WD 60942.

No. WD 61070.

Missouri Court of Appeals, Western District.

April 29, 2003.

Motion for Rehearing and/or Transfer to Supreme Court Denied July 1, 2003.

Application for Transfer Denied August 26, 2003.

Charles W. McKee, Overland Park, KS, for Sprint Spectrum, Paul S. Deford, Kansas City, Co-Counsel for Sprint Spectrum.

Dan K. Joyce, Jefferson City, MO, for Respondent.

Before EDWIN H. SMITH, P.J., LOWENSTEIN and HARDWICK, JJ.

LISA WHITE HARDWICK, Judge.

This appeal arises from the Public Service Commission's approval of tariffs allowing certain rural telephone companies to charge specified rates for delivering calls from wireless companies. As Appellants, the wireless companies assert the Commission erroneously applied the law in granting the tariffs. We affirm in part and reverse in part.

I. Factual and Procedural History

A. Summary of Disputed Issue and Parties

This litigation involves a dispute concerning how small rural telephone companies ("rural carriers") in western Missouri¹ can be compensated for delivering calls that originate from wireless phones. Currently, the wireless companies direct their originated calls to a large interexchange carrier for transport to the destination telephone within the network of one of the rural local exchange companies. Although the wireless customers pay the wireless companies for originating such calls, and the wireless companies compensate the large interexchange carrier for transporting the traffic, this dispute arose because no one compensates the rural carriers for the use of their networks in completing these calls. The rural carriers initiated this proceeding by filing tariffs, with the Missouri Public Service Commission, to establish rates, terms, and conditions for delivering the wireless originated traffic to their local customers.

The parties relevant to this appeal are as follows:

"Rural carriers"—collectively refers to the local exchange companies that provide telephone services between points within an exchange; twenty-nine of these carriers² in the rural areas of western Missouri filed the "Wireless Termination Service" tariffs that are the subject of this litigation.

"Wireless companies"—collectively refers to AT & T Wireless Services, Inc., Cingular, Sprint PCS, and Verizon Wireless, all of which provide cellular or wireless telecommunications services in western Missouri and filed motions to oppose the subject tariffs.

Southwestern Bell Telephone Company ("SWBT")—a large telecommunications company providing interexchange, local exchange, and exchange access services in the western Missouri trading area; SWBT opposed the subject tariffs as an intervenor in the Commission proceedings.

Missouri Public Service Commission ("Commission")—the administrative agency charged with regulating public utilities in Missouri; the Commission approved the subject tariffs over the objections of the wireless companies and SWBT.

B. Historical Interrelationship of the Parties

During the 1980's and early 1990's, wireless traffic was delivered to the rural carriers primarily through SWBT's wireless tariff. The tariff allowed wireless companies to send calls to SWBT's local exchanges but did not establish compensation for calls terminated in exchanges owned by the rural carriers. In a series of cases during the 1990's, the Commission found SWBT was liable to the rural carriers for their respective "terminating access" rates to complete the wireless calls. Thereafter, SWBT paid the rural carriers for those terminations until the tariffs were revised in 1998.

In February 1998, the Commission permitted tariff revisions that eliminated SWBT's obligation to pay for wireless traffic delivered to the rural carriers. In the Matter of SWBT's Tariff Filing to Revise its Wireless Carrier Interconnection Service Tariff, P.S.C. Mo. No. 40, 7 Mo. P.S.C.3d 38 (December 23, 1997). However, the revisions also prohibited the wireless companies from sending calls through SWBT that terminated with the rural carriers, unless the wireless companies had an agreement to compensate the rural carriers. Id. Despite the fact that no such agreements were ever obtained, the wireless companies continued to send, and SWBT continued to transmit, wireless calls to the networks of the rural carriers without compensation. The rural carriers had no means to selectively block or refuse these wireless originated calls. The inability of the rural carriers to refuse these calls left the wireless companies with no incentive to make compensation arrangements when they could continue to terminate their calls at no cost.

Some of the rural carriers sought to obtain payment for the termination services by amending their intrastate-switched access tariffs³ to apply to all traffic regardless of type or origin. The Commission rejected this proposal, concluding that calls originating and terminating in the same major trading area (intraMTA traffic) constitute "local traffic" not properly subject to switched access charges. In the Matter of Alma Tel. Co., 8 Mo. P.S.C.3d 520 (January 27, 2000).⁴ As a result of that determination, the rural carriers filed the wireless termination tariffs at issue here in August 2000.

C. Commission's Report and Order

In February 2001, the Commission issued a Report and Order approving the "Wireless Termination Service" tariffs requested by the rural carriers. The tariffs set rates, terms, and conditions applicable to wireless traffic originating and terminating within the western Missouri trading area, in the absence of negotiated agreements between the wireless companies and the rural carriers. The tariff rates differ for the various carriers, ranging from $.0506 to $.0744 per minutes of use, but uniformly include a $.02 surcharge for the use of the each rural carrier's local loop in completing the wireless calls. A provision in the tariffs also requires SWBT to assist the rural carriers in blocking wireless traffic if the wireless companies default on their payment obligations.

The Commission's decision was affirmed by the Circuit Court of Cole County in November 2001. The wireless companies appeal.

II. Standard of Review

We review the determination of the Commission, not the circuit court. State ex rel. City of St. Joseph v. Pub. Serv. Comm'n, 713 S.W.2d 593, 595 (Mo. App. W.D.1986). The Commission's determination is presumed to be valid. Friendship Vill. of S. County v. Pub. Serv. Comm'n, 907 S.W.2d 339, 344 (Mo.App. W.D.1995). On appellate review, we must first determine whether the Commission's order is lawful. MO.CONST. art. V, § 18. In doing so, we exercise independent judgment and correct any erroneous interpretations of law. Friendship, 907 S.W.2d at 344. If the Commission's order is lawful, we must then determine if it is reasonable. Id. Reasonableness depends on whether the order is supported by competent and substantial evidence on the whole record, whether the decision was arbitrary, capricious, or unreasonable, or whether the Commission abused its discretion. State ex rel. Mobile Home Estates, Inc. v. Pub. Serv. Comm'n of Mo., 921 S.W.2d 5, 9 (Mo.App. W.D.1996).

III. Issues on Appeal

The parties to this appeal all agree that the rural carriers should be compensated for terminating wireless traffic. The disputed issue is whether the Wireless Termination Service tariffs comply with federal and state law. In this regard, the wireless companies contend the tariffs should not have been approved because they violate preemptive provisions of Federal Telecommunications Act of 1996 and Missouri laws that require just and reasonable rates and prohibit single-issue ratemaking.

A. Federal Law

1. Preemption Doctrine

Under the Federal Telecommunications Act of 1996 ("Act"), each "local exchange carrier" has the duty to "establish reciprocal compensation arrangements for the transport and termination of telecommunications." 47 U.S.C. § 251(b)(5). This duty includes the responsibility to negotiate such compensation arrangements in good faith. Id. at § 251(c)(1). If the local exchange carrier negotiates but can not reach agreement, any party in the negotiation can request the state utility regulation commission to mediate the compensation arrangement based on the Act's pricing standards. Id. at §§ 252(a)(2), 252(b)(1)(2).

In Points I and II of this appeal, the wireless companies contend the Act provides the exclusive procedure by which the rural carriers can seek compensation for terminating telephone traffic. Where federal statutes establish a comprehensive scheme to address a particular issue, a state has no authority to use different procedures other than those prescribed by federal law. Amalgamated Ass'n of Street Elec. Ry. and Motor Coach Employees v. Lockridge, 403 U.S. 274, 288-89, 91 S.Ct. 1909, 29 L.Ed.2d 473 (1971). Pursuant to this preemption doctrine, the wireless companies argue that a state's tariff proceedings cannot be used to supplant the negotiation requirements and pricing standards established in Sections 251 and 252 of the Act. Verizon North, Inc. v. Strand, 140 F.Supp.2d 803 (W.D.Mich.2000); MCI Telecomms. Corp. v. GTE Northwest, Inc., 41 F.Supp.2d 1157 (D.Or.1999). Because the Commission approved the Wireless Termination Service tariffs without following the Act's federally mandated procedures, the wireless companies seek...