WISCONSIN BELL v. Public Service

• Decision Date: 23 December 2003
• Docket Number: No. 02-3163.,02-3163.
• Citation: 269 Wis.2d 409,675 N.W.2d 242,2004 WI App 8
• Parties: WISCONSIN BELL, INC., (d/b/a Ameritech Wisconsin), a Wisconsin corporation, Petitioner-Respondent-Cross-Appellant, v. PUBLIC SERVICE COMMISSION OF WISCONSIN, Respondent-Appellant-Cross-Respondent, SPRINT TELECOMMUNICATIONS, INC., Excel Telecommunications, Inc., and AT&T Communications of Wisconsin L.P., Co-Appellants-Cross-Respondents.
• Court: Wisconsin Court of Appeals

269 Wis.2d 409

2004 WI App 8

675 N.W.2d 242

WISCONSIN BELL, INC., (d/b/a Ameritech Wisconsin), a Wisconsin corporation, Petitioner-Respondent-Cross-Appellant,¹ v. PUBLIC SERVICE COMMISSION OF WISCONSIN, Respondent-Appellant-Cross-Respondent, SPRINT TELECOMMUNICATIONS, INC., Excel Telecommunications, Inc., and AT&T Communications of Wisconsin L.P., Co-Appellants-Cross-Respondents.

No. 02-3163.

Court of Appeals of Wisconsin.

Oral argument October 7, 2003.

Decided December 23, 2003.

On behalf of the respondent-appellant-cross-respondent, the cause was submitted on the briefs of Diane M. Ramthun and Steven Levine, assistant general counsels of The Public Service Commission of Wisconsin.

On behalf of the co-appellants-cross-respondent, the cause was submitted on the combined briefs of Peter L. Gardon, Stephen J. Liccione, and Ryan J. Owens of Reinhart, Boerner, Van Deuren, S.C., of Madison, Wisconsin, and Arthur J. LeVasseur of Fischer, Franklin & Ford, of Detroit, Michigan.

On behalf of the petitioner-respondent-cross-appellant, the cause was submitted on the briefs of Linda M. Clifford, Jennifer L. Peterson of LaFollette, Godfrey & Kahn, of Madison.

Before Wedemeyer, P.J., Fine and Schudson, JJ.

¶ 1. SCHUDSON, J.

The Public Service Commission of Wisconsin, Sprint Telecommunications, Inc., Excel Telecommunications, Inc., and AT&T Communications of Wisconsin, L.P., appeal from the circuit court order reversing the Commission's order granting Sprint's, Excel's, and AT&T's request for a revenue refund from Wisconsin Bell, Inc., d/b/a Ameritech Wisconsin (n/k/a "SBC Wisconsin"; referred to as "Ameritech" in this opinion). The court concluded that while the Commission had correctly determined that the Ameritech long-distance charges that had generated that revenue were unlawful, the requested refund was foreclosed by WIS. STAT. § 196.37(2) (2001-02).² Ameritech cross-appeals from the same circuit court order affirming the Commission's determination that the underlying long-distance charges were unlawful.

¶ 2. We conclude that the circuit court correctly affirmed the Commission's determination that the Ameritech charges were unlawful. We also conclude, however, that the court incorrectly reversed the Commission's order granting the requested refund of the unlawful revenue. Accordingly, on the appeal we reverse, and on the cross-appeal we affirm.

I. BACKGROUND

A. Introduction

¶ 3. To say that the factual background can seem complicated is like saying that pasta can be filling. Reviewing the record, reading the briefs, and listening to oral argument, the author of this opinion often felt like the hungry but uncertain traveler who, sitting down to indulge in fine Italian cuisine for the first time, loosens his belt but wonders whether he must untangle the linguini before eating it.

¶ 4. Fortunately, however, our digestion is eased because the parties at least agree on most of what happened here. In the cross-appeal, for example, the Commission responds that, in general, it "takes no issue with the background and statement of facts set forth by Ameritech," even adding that much of Ameritech's summary serves as "an exhaustive and helpful explanation for the court of a complex area of telecommunications regulation." Thus, in our effort to accurately state the technical aspects of this case, we rely heavily on the parties' presentations and, in our effort to clarify, we set aside many of the acronym-loaded details choking this case.

¶ 5. In the last decade or so, few Americans have escaped the chaotic, consumer-unfriendly complications spawned by the deregulation of the telecommunications industry. As many companies compete to satisfy consumers and produce profits, they struggle to sort out the remaining rules and regulations, as well as new ones. Navigating their way with considerable uncertainty, the industry and government have formulated various price-setting and regulatory approaches.³ The issues in this appeal and cross-appeal come from Wisconsin's approach.

¶ 6. Specifically, the parties' primary dispute derives from their differing understandings of what constitutes compliance with WIS. STAT. § 196.196(2)(b)3, which provides: "After eliminating intrastate carrier common line charges, the telecommunications utility may not reinstate an intrastate carrier common line charge or a substitute charge." In this case, therefore, the primary issue is whether the "presubscribed interexchange carrier charge" (PICC) Ameritech charged was a prohibited "substitute" for the former "carrier common line charge" (CCLC).

B. Access Charges

¶ 7. On July 5, 1994, the Wisconsin legislature enacted 1993 Wisconsin Act 496, which included WIS. STAT. § 196.196, titled, "Telecommunications utility price regulation." 1993 Wis. Act 496, § 76. That statute, in part, allows telecommunications companies the option of accepting a modified form of pricing known as "price cap regulation." Ameritech elected this option on September 1, 1994—the statute's effective date—and, by doing so, accepted various restrictions, including limitations on "access" charges.

¶ 8. Access charges are the charges telecommunications carriers and, derivatively, their customers pay the primary local telephone company to tap into its network for long distance calling service. See WIS. STAT. § 196.01(1b).⁴ In this case, the local exchange carriers are Sprint, Excel, and AT&T the company providing the network is Ameritech.⁵

¶ 9. Access charges on long distance calls from one state to another are "interstate access charges," and are regulated by the Federal Communications Commission. See MCI Telecomms. Corp. v. State, 203 Wis. 2d 392, 397, 553 N.W.2d 284 (Ct. App. 1996) ("The Federal Communications Commission has exclusive regulatory jurisdiction over interstate telecommunications."), aff'd, 209 Wis. 2d 310, 562 N.W.2d 594 (1997). Access charges on long distance calls within one state are "intrastate access charges," and are regulated by state laws. See id. at 398 (The Commission "regulates the intrastate activities of telecommunications utilities in Wisconsin."). In a practice known as "mirroring," states may set intrastate access charges based on interstate access charges. Wisconsin does so, with exceptions, under WIS. STAT. § 196.196(2)(b).⁶ That intrastate access rate, part of which consists of the "carrier common line charge" (CCLC), see WIS. STAT. § 196.196(2)(b)1, is, according to the parties, "at the core of this case." But what, exactly, surrounds that core? To identify that, we need to understand what Ameritech did following the Federal Communications Commission's revision of the interstate access charge rate structure.

¶ 10. Ameritech, having elected to operate under "price cap regulation," was required, by WIS. STAT. § 196.196(2)(b)2, to "eliminate intrastate carrier common line charges," and was prohibited, under § 196.196(2)(b)3, from "reinstat[ing] an intrastate carrier common line charge or a substitute charge." Ameritech complied by eliminating the intrastate carrier common line charges, denominated as such. But in 1997, the FCC revised the interstate access charge rate structure and created the "presubscribed interexchange carrier charge" (PICC). Ameritech explains:

Among other things, the FCC's new access charge rate structure eliminated the previous CCLC and created a new rate element, the presubscribed interexchange carrier charge ("PICC"). Under Act 496's concept of mirroring, a question arose: How could [Ameritech] "mirror" the new federal access charge rate structure while preserving the state-required elimination of the old CCLC?

Ameritech answers that it "chose the only logical option: It mirrored the new federal rate structure but, on the intrastate side, it lowered one rate element—the PICC—to account for the forgone CCLC revenues." Ameritech maintains that its "implementation of the PICC in its intrastate rate structure" did not violate § 196.196(2)(b)3.

¶ 11. The Commission disagreed. In its November 16, 2001 decision, the Commission concluded that Ameritech's assessment of the federal PICC constituted a prohibited "substitute charge" for the carrier common line charge, under WIS. STAT. § 196.196(2)(b)3. The Commission ordered Ameritech to refund the approximate $18,000,000 it had collected through the PICC charges during the previous four years.

¶ 12. Ameritech gained judicial review under WIS. STAT. ch. 227 and, on August 27, 2002, the circuit court affirmed the Commission's conclusion that Ameritech had assessed an unlawful "substitute charge," thus leading to Ameritech's cross-appeal. The court however, reversed the Commission's refund order, thus leading to the appeal by the Commission and Sprint, Excel, and AT&T, the companies to which the refunds would have been paid.

¶ 13. Did the Commission reasonably conclude that Ameritech's implementation of the PICC in its intrastate rate structure amounted to a substitute charge for the carrier common line charge? And, if so, did the Commission correctly order Ameritech to refund the revenue generated by the PICC?

II. AMERITECH'S CROSS-APPEAL

¶ 14. Logically, we begin with the cross-appeal. If we agree with Ameritech's argument that the Commission erred in concluding that the challenged long-distance charges were unlawful, the issue of the appeal —whether the law forecloses a revenue refund— evaporates. If not, we go on to decide the appeal in order to determine whether, contrary to the circuit court's conclusion, the Commission correctly ordered the refund.

¶ 15. We start, therefore, by considering whether the Commission correctly determined that Ameritech, "[a]fter eliminating intrastate carrier common line charges," see WIS. STAT. § 196.196(2)(b)3, violated the statute by "reinstat[ing] . . . a substitute charge," see id., through its implementation of the federal PICC.⁷ Our consideration requires review of the Commission's interpretation of what constitutes a ...