Utah Dept. of Business Regulation, Division of Public Utilities, Business Tel. Systems v. Public Service Commission

• Decision Date: 23 October 1979
• Docket Number: No. 15701,15701
• Citation: 602 P.2d 696
• Court: Utah Supreme Court
• Parties: UTAH DEPARTMENT OF BUSINESS REGULATION, DIVISION OF PUBLIC UTILITIES, BUSINESS TELEPHONE SYSTEMS, Intervenors, Plaintiffs, v. PUBLIC SERVICE COMMISSION of Utah; Milly O. Bernard, Chairman; Olof E. Zundel Commissioner; and Kenneth Rigtrup, Commissioner Mountain States Telephone& Telegraph Company, Defendants.

Page 696

602 P.2d 696

UTAH DEPARTMENT OF BUSINESS REGULATION, DIVISION OF PUBLIC

UTILITIES, BUSINESS TELEPHONE SYSTEMS, Intervenors, Plaintiffs, v. PUBLIC SERVICE COMMISSION of Utah; Milly O. Bernard,

Chairman; Olof E. Zundel Commissioner; and Kenneth

Rigtrup, Commissioner Mountain States

Telephone& Telegraph Company,

Defendants.

No. 15701.

Supreme Court of Utah.

Oct. 23, 1979.

Bruce P. Saypol of Cohn & Marks, Washington, D. C., David M. Bown, Salt Lake City, for intervenors, plaintiffs.

David E. Salisbury and J. Rand Hirschi of VanCott, Bagley, Cornwall & McCarthy, Salt Lake City, for defendants.

HALL, Justice:

This case arises on writ of certiorari from an order of the Public Service Commission of the State of Utah, pursuant to a petition by appellant Business Telephone Systems of Utah, Inc. (hereinafter "BTS"). BTS challenges a final report and order of the Commission which approved certain service tariffs proposed by the Mountain States Telephone & Telegraph Company (hereinafter "Mountain Bell"), a regional subsidiary of American Telephone and Telegraph (hereinafter "AT&T").

Mountain Bell is a certified public utility in the State of Utah, which enjoys monopoly status with regard to telecommunications services within this state. Prior to 1968, this monopoly status extended also to the furnishing of "terminal telephone equipment," which term embraces all types of standard consumer-operated telephone units, business exchange terminals, etc. Following a 1968 decision of the Federal Communications Commission, ¹ it became unlawful for AT&T (or any of its regional subsidiaries) to penalize, in its tariff structure, the use of independently-manufactured terminal equipment on telecommunications services furnished by AT&T. Since that time, a market has emerged for the production and distribution of telephone terminal equipment. While this market has produced a number of competitors of Mountain Bell and other AT&T subsidiaries, their number and market power is relatively small to date. ² Between 1968 and 1976, Mountain Bell offered the business terminal equipment known as the private branch exchange (PBX) system, on a month-to-month rental basis, similar to the leasing system used for simple residential telephone equipment, while its competitors offered sales of PBX equipment, together with long-term leases, which constituted substantially better terms than Mountain Bell could provide. As such, on September 1, 1976, Mountain Bell filed a petition with the Public Service Commission, outlining an alternative service tariff to the users of PBX equipment.

The Mountain Bell proposal, designated the Telalease system, is essentially a long-term leasing package offered to business customers for periods of three, five, seven, or ten years. Characterized by Mountain Bell as a two-tier leasing system, the proposed Telalease plan exacts a tariff composed of two parts. The first part, (tier A), consists of a set payment designed to recover the cost of fixed capital reflected in the unit or system leased to the customer. This amount is set at the beginning of the lease agreement and runs only for the fixed period of the lease, after which it terminates. The second portion, (tier B), reflects an additional 18 percent of the fixed cost of capital in the equipment held by the customer (in other words, the tier A payment), and also covers all ongoing expenses associated with that particular unit or system.

For purposes of calculating the amount due under the tier A portion of the proposed tariff, Mountain Bell has adopted an "equated cost of money" analysis for figuring book investment value. This analysis considers the depreciation in value of a PBX system over the life of the system, and permits the user to make a tier A payment which takes that depreciation into account (a return to the investor being due only on the undepreciated value of the asset). The "book value" on which the user makes the tier A payment, consequently, averages out at about 62 percent of the asset's original worth. By the conclusion of the lease period, the total investment has been recovered.

In calculating the recurring, or incremental, costs of furnishing PBX service to its customers (which costs would be reflected in the tier B payment), Mountain Bell has adopted the so-called long-run incremental analysis (LRIA). The LRIA method begins not with the covering of costs involved in furnishing the service, but with the maximizing of profits (referred to as "contribution" in a utility setting) in the competitive PBX market. To this end, Mountain Bell considers numerous market factors, and derives therefrom an initial pricing figure. This figure is then examined to ascertain whether it will cover all incremental, or ongoing, costs of providing the service. No proportionate share of overhead costs common to all Mountain Bell services is included in such examination.

The user of a Mountain Bell PBX system under the proposed Telalease plan must continue for the fixed term of the lease. Should early termination be desired a charge is levied equal to the sum of the monthly payments for the unexpired portion of the initial lease period, with a credit allowed against any unpaid tier A payments equal to the reusable value of the equipment. The lease may be freely assigned.

Prior to Mountain Bell's presentation of the above tariff proposal, on September 22, 1976, BTS was permitted to intervene in the proceedings pending before the Public Service Commission. (BTS is a local member of a national trade association of vendors, lessors, and manufacturers of telephone equipment known as the North American Telephone Association (NATA), whose members have opposed similar tariff proposals before state public utility commissions across the country.) In addition, the office of the Utah State Attorney General filed an amicus curiae brief opposing the Mountain Bell tariff proposal in light of antitrust law. Following lengthy hearings at which all assertions and claims were fully examined, on December 2, 1977, the Commission entered its final report and order approving Mountain Bell's proposed two-tired Telalease system. On January 4, 1978, 33 days following the entry of the final report and order, BTS filed an application for rehearing before the Commission. ³ The Commission denied this petition on January 30, 1978, stating that the application was not timely filed as required by U.C.A., 1953, 54-7-15. BTS then filed a petition for a writ of certiorari with this Court on March 1, 1978. Mountain Bell made motion on May 30, 1978, to dismiss the petition filed by BTS on jurisdictional grounds, which motion was subsequently denied.

In response to BTS's claim of error, Mountain Bell reasserts that BTS failed to file a petition for rehearing before the Public Service Commission within the required time. Mountain Bell claims (1) that such an assertion may again be raised, notwithstanding this Court's denial of its May 30 motion to dismiss, and (2) that the failure to timely apply for rehearing deprives this Court of jurisdiction to rule in this matter. We are compelled to agree on both points.

With regard to Mountain Bell's first contention, it is axiomatic that a tribunal's legal competence to hear a given claim and rule thereon is a fundamental prerequisite to all other considerations in the case. As such, an objection to the court's exercise of jurisdiction may be made at any point during the proceedings. ⁴ It is to be noted, moreover, that the denial of a motion to dismiss does not necessarily constitute a ruling on the merits of the motion. As in the present case, such a denial may constitute no more than a decision, on the part of the court, to defer ruling on the merits of the motion together with the merits of the appeal itself, thereby permitting a more comprehensive treatment of the moving party's position. Consequently, it was permissible for...