U.S. West Communications, Inc. v. Public Utilities Com'n of State of S.D.

Decision Date11 August 1993
Docket NumberNo. 17891,17891
Citation505 N.W.2d 115
PartiesUS WEST COMMUNICATIONS, INC., Appellant, v. PUBLIC UTILITIES COMMISSION OF the STATE OF SOUTH DAKOTA, Appellee.
CourtSouth Dakota Supreme Court

William P. Heaston, Denver, CO, Thomas J. Welk of Boyce, Murphy, McDowell & Greenfield, Sioux Falls, for appellant.

Mark Barnett, Atty. Gen., Doug Eidahl, Rolayne Ailts, Public Utilities Com'n, Pierre, for appellee Public Utilities Com'n of State of SD.

Darla Pollman Rogers, Brian Meyer of Meyer & Rogers Onida, Benjamin H. Dickens, Jr. of Blooston, Mordkofsky, Jackson & Dickens, Washington, DC, for appellees South Dakota Network, Inc. and SDCEA.

FITZGERALD, Circuit Judge.

US West Communication (USWC) appeals from a circuit court judgment affirming in all respects the Public Utilities Commission's (PUC) findings of fact, conclusions of law and decisions in dockets F-3860, F-3866 and F-3699. We affirm, in part, reverse, in part, and remand.

PROCEDURAL HISTORY

DOCKET NO. F-3860--IN THE MATTER OF THE APPLICATION OF SOUTH DAKOTA NETWORK, INC. AND SOUTH DAKOTA CENTRALIZED EQUAL ACCESS, INC. FOR PERMISSION TO CONSTRUCT CENTRALIZED EQUAL ACCESS FACILITIES.

The PUC received an application from South Dakota Network, Inc. (SDN) for permission to construct centralized equal access transport and switching facilities in the eastern third of South Dakota. The proposed facilities include access facilities operating within the service territory occupied and served by USWC.

The PUC issued an amended order granting SDN permission to construct the centralized equal access transport and switching facilities and ordering that SDN would have a monopoly over all switched access service originating or terminating in the SDN member exchanges. The PUC found that the construction and operation of the centralized equal access facilities was in the public interest because the facilities would provide modern state of the art telecommunications services and would encourage toll competition in the SDN member local exchange service areas. In addition, the construction and operation of the centralized equal access facilities would stimulate and preserve the small independent telephone companies in South Dakota. The PUC granted SDN a "short-term monopoly" on both originating and terminating access service in order to ensure that SDN would survive financially and prosper, with the goal that SDN would ultimately compete with USWC for interexchange access services without any monopoly protection.

Commissioner Schoenfelder dissented from the portion of the order mandating the originating and terminating access monopoly and preventing USWC from using its own facilities to transport its own traffic to the service boundaries of exchanges operated by SDN members. Commissioner Schoenfelder noted, that "to mandate that USWC not be allowed to use their existing facilities to terminate their own traffic will result in increased access rates for USWC customers, caused by stranded investment in part and in part by increased terminating access charges."

DOCKET NO. F-3866--IN THE MATTER OF THE APPLICATION OF BROOKINGS MUNICIPAL TELEPHONE, INTERSTATE TELECOMMUNICATIONS COOPERATIVE, INC., MCCOOK COOPERATIVE TELEPHONE COMPANY AND SIOUX VALLEY TELEPHONE COMPANY TO CONSTRUCT NON-COMPETITIVE TELECOMMUNICATIONS FACILITIES.

The PUC received an application from Brookings Municipal Telephone (Brookings), Interstate Telecommunications Cooperative, Inc. (ITC), McCook Cooperative Telephone Company (McCook), and Sioux Valley Telephone Company (Sioux Valley) for authorization to construct and operate their respective non-competitive fiber optic transport facilities that would cross territories already served by other telecommunications companies. The purpose of the facilities was to permit each of the joint applicants to connect their local exchange areas with meet points for the SDN centralized equal access system. All the facilities terminate in the service territory of USWC. USWC's petition to intervene was granted.

The PUC approved the construction of the McCook facility and granted Brookings and Sioux Valley (Lightwave) and ITC permission to carry intrastate traffic. Lightwave was granted a construction permit and PUC approval to carry interstate traffic in Docket No. F-3699. ITC was also granted a construction permit and approval to carry interstate traffic in Docket No. F-3822.

The PUC found that the proposed access transport lines were necessary to connect the local exchanges served by Brookings, ITC, McCook and Sioux Valley with the SDN's centralized equal access system. The connection would allow the local telephone exchanges to enjoy competitive long distance service and related benefits provided by the SDN centralized equal access system. The PUC granted a monopoly on all switched access traffic in order to be consistent with the decision in Docket No. F-3860.

Commissioner Schoenfelder dissented from the portion of the order that mandated the terminating access monopoly which prevented USWC from using its own facilities to transport USWC traffic to the local exchanges, stating "[c]onsistent with the intent of Senate Bill 42 [SDCL 49-31-20 and 21], terminating transport must be competitive to foster competition for access services."

DOCKET NO. F-3699--IN THE MATTER OF THE PROPOSED BROOKINGS TO SIOUX FALLS JOINT LIGHTWAVE TOLL FACILITY IN SOUTH DAKOTA.

The PUC was notified of Lightwave's proposal to construct and operate a fiber optic telecommunications transmission facility from Brookings to Sioux Falls, South Dakota. The facility was intended to carry only interstate switched telecommunications traffic to the AT & T switch in Sioux Falls. In April 1989, the PUC determined that it had jurisdiction over the proposed facility but it did not determine whether the facility was in the public interest, because, in the PUC's view, the facility was a non-access facility. USWC and Lightwave appealed that decision with USWC objecting to the non-access finding and Lightwave challenging the PUC's jurisdiction. The circuit court affirmed the PUC's order. On appeal, this Court affirmed the PUC's jurisdiction but reversed the non-access determination and remanded the case to the PUC for the required public interest determination. Northwestern Bell v. Public Util. Com'n., 467 N.W.2d 468 (S.D.1991).

The PUC held a hearing on whether the construction of the Lightwave facility was in the public interest and issued an order granting the construction permit after finding that the construction was in the public interest. USWC appealed all three PUC decisions to the circuit court. The three appeals were consolidated by the circuit court and the court issued a judgment affirming, in all respects, the PUC's decision in Dockets F-3860, F-3866 and F-3699. USWC appeals.

STATEMENT OF FACTS

DOCKET NO. F-3860.

SDN is composed of twelve member companies, each of which is engaged in the business of providing local exchange telephone service. 1 The twelve member companies of SDN serve seventy-six local telephone exchanges in eastern South Dakota. In addition to monopoly local exchange telephone service, each of the member companies furnishes switched access service 2 which allows long distance telephone companies to utilize the facilities of the local exchange company for the origination and termination of long distance calls.

SDN itself will not be in the business of providing local exchange telephone service. Rather, SDN's primary business activity will be to transport long distance telecommunications traffic to and from the seventy-six local exchanges operated by the SDN member companies to the SDN switching facility that will be constructed in Sioux Falls.

SDN's application, filed with the PUC, requests permission to construct centralized equal access facilities. Centralized equal access provides presubscription Feature Group D (FGD) 3 on a "1+" basis. Equal access will provide competition for toll services by allowing a customer to chose, by dialing the number "1" plus the ten or seven digit telephone number, the inter and intraLATA 4 interexchange carrier 5, respectively, as the primary interexchange carrier of the customer's long distance telecommunications. However, as proposed, the equal access facility will only provide competition for toll services after the call reaches the SDN equal access switching tandem in Sioux Falls. Pursuant to the PUC's order, an originating and terminating monopoly was granted to SDN, which means that it is the sole provider from the seventy-six SDN exchanges to the access tandem in Sioux Falls and vice versa. Currently, equal access is unavailable in SDN's member exchanges. SDN would be the first telecommunications company to offer intraLATA, intrastate equal access.

The facilities would consist of a centralized equal access tandem switch, in Sioux Falls, operated by SDN's wholly owned subsidiary South Dakota Centralized Equal Access, Inc., (SDCEA) and additional plant consisting of fiber cable connecting the seventy-six member exchanges to the SDN owned switching facility. The tandem switch, located in Sioux Falls, is within the certified local exchange territory of USWC. This facility (speaking collectively of the tandem switch and fiber optic cable) would provide inter and intrastate and inter and intraLATA switched access telecommunications services between Sioux Falls and the seventy-six local exchanges of the twelve member telecommunications companies that own stock in SDN.

SDN's proposed fiber cable connecting the member exchanges to the SDN switching facility essentially duplicates USWC's already existing fiber facilities. 6 USWC currently uses the existing facilities to transport its own long distance telecommunications traffic to and from customers in the exchanges operated by SDN member companies. USWC also uses those same facilities to carry long distance traffic for other long distance companies to...

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