Wisconsin Bell, Inc. v. PUBLIC SERVICE COM'N

• Decision Date: 18 November 2004
• Docket Number: No. 03-2235.,03-2235.
• Citation: 2004 WI App 223,691 N.W.2d 697,277 Wis.2d 729
• Parties: WISCONSIN BELL, INC., d/b/a Ameritech Wisconsin, Petitioner-Appellant, v. PUBLIC SERVICE COMMISSION OF WISCONSIN, Respondent-Respondent.
• Court: Wisconsin Court of Appeals

277 Wis.2d 729

2004 WI App 223

691 N.W.2d 697

WISCONSIN BELL, INC., d/b/a Ameritech Wisconsin, Petitioner-Appellant, v. PUBLIC SERVICE COMMISSION OF WISCONSIN, Respondent-Respondent.

No. 03-2235.

Court of Appeals of Wisconsin.

Submitted on briefs April 22, 2004.

Decided November 18, 2004.

On behalf of the petitioner-appellant, the cause was submitted on the briefs of Linda M. Clifford and Jennifer Cotner of La Follette, Godfrey & Kahn, Madison, with Steven R. Beck of SBC Wisconsin, Milwaukee.

On behalf of the respondent-respondent, the cause was submitted on the brief of Michael E. Newmark and Edward S. Marion of Public Service Commission of Wisconsin, Madison.

Before Deininger, P.J., Dykman and Higginbotham, JJ.

¶ 1. HIGGINBOTHAM, J.

Wisconsin Bell, d/b/a Ameritech Wisconsin, appeals an order of the circuit court affirming a final decision and order of the Public Service Commission (PSC) concluding that Ameritech's Local Saver Packs and Solutions Packages (Packages) are subject to price regulation by the PSC under WIS. STAT. ch. 196 (2001-02).¹ Ameritech argues that the PSC misinterpreted Wisconsin law and acted beyond its statutory authority by imposing price regulation on its Packages. We agree and reverse the order of the circuit court.

FACTS

¶ 2. The facts are undisputed. Prior to 1994, telephone service was subject to rate-of-return regulation. The PSC awarded a rate of return on a company's business investment and set the company's prices in return for granting the company an exclusive right to provide telephone services within a given territory.

¶ 3. Departing from traditional rate-of-return regulation, 1993 Wis. Act 496 partially deregulated the telecommunications industry in Wisconsin, establishing a new regulatory model to transition to a more competitive local telecommunications marketplace. The principal feature of 1993 Wis. Act 496 was the creation of new forms of regulation, such as price regulation, to replace the traditional rate-of-return regulation. Price regulation limits the PSC's jurisdiction over all but certain basic telecommunications services. 1993 Wis. Act 496 created WIS. STAT. § 196.196, which established "price regulation" as an alternative to the more rigid rate-of-return system. In September 1994, Ameritech elected to be subject to price regulation under § 196.196. In doing so, Ameritech submitted to the PSC's price regulation jurisdiction over prices it can charge for "basic local exchange service" in exchange for a substantial reduction of PSC jurisdiction over the prices, terms and conditions for "any other services" it offers, including "new telecommunications services." See § 196.196(3)(a).

¶ 4. Between September 1994 and October 2001, an Ameritech customer had only one way to acquire telephone service: purchase, under pre-existing price regulated tariffs, a working telephone access line and local calling usage at a per-call rate. In October 2001, Ameritech introduced two new types of alternative services for residential customers: Local Saver Packs and Solutions Packages.

¶ 5. Local Saver Packs charge a flat monthly rate, rather than a per-call rate, for basic local exchange service. Local Saver Packs come in three sizes: Local Saver Pack 200, Local Saver Pack 400 and Local Saver Pack Unlimited. The names of the packages reflect the number of local calls included in the package. The cost of each respective Local Saver Pack was less than the cost of purchasing the same number of local calls at the pre-existing, price-regulated per-call rate.

¶ 6. Solutions Packages charge a flat monthly rate for basic local exchange service combined with additional services. Ameritech offered four types of Solutions Packages: Economy, Sensible, Complete and Two Line Complete. Each Solutions Package included an access line, a Local Saver Pack, an intraLATA toll calling plan, Caller ID with name and Call Waiting. The Solutions Packages differed based upon the additional services, as indicated below:

------------------------------------------------------------------------------------------------------- | Type of Solutions | Economy | Sensible | Complete | Two Line | | Package | | | | Complete | |-------------------|-----------------|-------------------|-------------------|-------------------------| | | | | | Primary and | | Access Lines | Primary Only | Primary Only | Primary Only | Additional | |-------------------|-----------------|-------------------|-------------------|-------------------------| | Local Saver Pack | 200 | Unlimited | Unlimited | Unlimited | |-------------------|-----------------|-------------------|-------------------|-------------------------| | IntraLATA Toll | Anytime Rate | Ameritech Saver | Unlimited Two | Unlimited Two | | Calling Plan | Calling Plan | Pack 60 | Point MTS Usage | Point MTS Usage | |-------------------|-----------------|-------------------|-------------------|-------------------------| | Vertical Features | Caller ID | Caller ID | Caller ID | Caller ID | | | | | | | | | Caller ID with | Caller ID with | Caller ID with | Caller ID with | | | name | name | name | name | | | | | | | | | Call Waiting | Call Waiting | Call Waiting | Call Waiting | | | | | | | | | | Call Forwarding | Call Forwarding | Call Forwarding | | | | | | | | | | Three-Way Calling | Three-Way Calling | Three-Way Calling | -------------------------------------------------------------------------------------------------------

¶ 7. Like the Local Saver Pack customer, a Solutions Package customer purchaser enjoyed a discount compared to purchasing the components on a standalone basis under the pre-existing price-regulated rates. With both the Local Saver Pack and Solutions Packages, an Ameritech customer was still able to purchase basic local exchange telephone services on a per-call basis, as before, under pre-existing price-regulated tariffs or, in the alternative, purchase one of the new flat-rate Packages. Ameritech filed tariffs that described the prices, terms, rate structures and conditions of the Packages.

¶ 8. The rate structure for basic local exchange service includes a recurring monthly rate for the primary residential access line and a per-call rate for each call made within the customer's local exchange or extended service area boundary. This rate structure continues to be available to both new and existing Ameritech customers and Ameritech acknowledges this rate structure continues to remain subject to the PSC's price regulation authority.

¶ 9. Each year a price-regulated telecommunications utility is obligated to file information with the PSC regarding revenues, investment and service quality. WIS. ADMIN. CODE § PSC 163.04. Using the investment and service quality information, the PSC calculates the utility's annual "price cap index" or PCI. Then, using the revenue information, the PSC applies the PCI to control the amount the utility may increase or must decrease the rates. WIS. ADMIN. CODE § PSC 163.04. The PCI limits the prices the utility may charge for its price-regulated services.

¶ 10. In August 2002, Ameritech filed its annual price regulation information reflecting "Grand Total Residence and Business Revenues" of $208,042,546. This figure did not include revenues generated from the Packages. At the PSC's request, Ameritech filed Comments on whether its Packages were subject to price regulation. Ameritech's Comments asserted that WIS. STAT. § 196.196(3)(a) expressly exempts from PSC jurisdiction "other services, including new telecommunications services, offered by a price-regulated telecommunications utility." Ameritech's Comments contended that the Packages fit the § 196.19(1m)(a) definition of "new telecommunications services" because they were "alternative rate structures" offered after 1993 for any pre-existing telecommunication service and the rate structure effective prior to January 1, 1994 for the pre-existing service continued to be available to both new and existing costumers. According to Ameritech, because the express jurisdictional limitations in § 196.196(3)(a) cross-reference the § 196.19(1m) definition of "new telecommunication services," the Packages fell outside the PSC's jurisdiction. ¶ 11. Ameritech's Comments further argued that the Packages did not constitute "basic local exchange service" subject to regulation under WIS. STAT. § 196.196(1)(a) because as "discretionary or optional services," they were expressly excluded from the WIS. STAT. § 196.01(1g) definition of "basic local exchange service."

¶ 12. In a November 1, 2002 Final Decision, the PSC rejected Ameritech's interpretation of WIS. STAT. §§ 196.196(1)(a) and (3)(a) and concluded that the Packages were subject to price regulation because "no definition of `new telecommunication service' is found in the definitions section of Chapter 196, or in WIS. STAT. § 196.196" and the definition of "new telecommunications service" in WIS. STAT. § 196.19(1m)(a) did not apply to § 196.196(3)(a). The Final Decision did not price regulate all the Packages but limited price regulation to the Local Saver Packs and the access line and local usage components of the Solutions Packages. As a result of its PCI calculations, the Final Decision ordered Ameritech to "file tariffs that decrease its rates by an average of 1.22 percent for price-regulated services." In order to implement the 1.22% decrease on the Packages' revenues, the PSC required Ameritech to "supplement its annual revenue report to include those offerings."

¶ 13. On November 27, 2002, Ameritech filed a petition for WIS. STAT. ch. 227 review of the PSC's Final Decision. On July 9, 2003, the circuit court issued a decision affirming the PSC's Final Decision, concluding that the Packages were subject to price regulation. Ameritech appeals.

DISCUSSION

Standard of Review

[1, 2]

¶ 14. We review the PSC's decision, not that of the circuit court. Wisconsin Bell, Inc. v. PSC of Wisconsin, 2004 WI App 8, ¶ 16, 269...