Opinion
No. WD 62961 Consolidated with Cases WD 62983, WD 62984, WD 62985, and WD 62986
October 5, 2004
Appeal from the Circuit Court of Cole County, Missouri, Honorable Thomas J. Brown, III, Judge.
Paul S. Deford and Alok Ahuja, Kansas City, MO, for Appellant, ATT Wireless Services.
Dan K. Joyce, and Marc D. Poston, Jefferson City, MO, for Appellant, Public Service Comm.
Larry W. Dority, Jefferson City, MO, for Appellant, SW Bell Wireless.
Kenneth A. Schifman, Overland Park, KS, for Appellant, Sprint Sepctrum.
Leo J. Bub and Paul G. Lane, St. Louis, MO, for Appellant, Southwestern Bell Tel.
Craig S. Johnson, Jefferson City, MO, for Respondent, Alma Telephone.
William R. England, III, Jefferson City, MO, for Respondent, BPS Telephone.
Before Hardwick, P.J., Spinden and Newton, JJ.
This appeal arises from the Public Service Commission's rejection of amended tariffs that would have compensated certain rural telephone companies for completing wireless calls in their local exchanges. The rural companies contend the Commission erroneously applied federal law in rejecting the tariffs. We agree and, therefore, reverse and remand the proposed tariffs for further consideration.
I. FACTUAL AND PROCEDURAL HISTORY
A. SUMMARY OF DISPUTE
This litigation involves a dispute concerning how certain rural telephone companies should be compensated for delivering calls that originated from wireless telephones and terminated in the rural companies' local exchanges during February 1998 through January 2001. The telephone traffic at issue involves wireless calls that occurred within one of Missouri's two Major Trading Areas (MTA) for telecommunications. Thus, the traffic was intrastate, as well as intraMTA.
"Rural companies" collectively refers to the local exchange companies that provide telephone services between points within an exchange. There are two groups of rural companies involved here: (1) the Alma group, comprised of Alma Telephone Company, Chariton Valley Telephone Corporation, Choctaw Telephone Company, Mid-Missouri Telephone Company, MoKan Dial, Inc., and Peace Valley Telephone Company; and (2) the BPS group, comprised of BPS Telephone Company, Citizens Telephone Company of Higginsville, Mo., Inc., Craw-Kan Telephone Cooperative, Inc., Ellington Telephone Company, Farber Telephone Company, Goodman Telephone Company, Granby Telephone Company, Grand River Mutual Telephone Corporation, Green Hills Telephone Corporation, Holway Telephone Company, Iamo Telephone Company, Kingdom Telephone Company, KLM Telephone Company, Lathrop Telephone Company, Le-Ru Telephone Company, McDonald County Telephone Company, Mark Twain Rural Telephone Company, Miller Telephone Company, New London Telephone Company, Orchard Farm Telephone Company, Ozark Telephone Company, Seneca Telephone Company, Steelville Telephone Exchange, Inc., and Stoutland Telephone Company.
During the relevant period of February 1998 through January 2001, the wireless companies directed their originated calls to a large interexchange carrier, such as Southwestern Bell Telephone L.P. (SWBT), for transport to destination phones within the network of one of the rural local exchange companies. The wireless customers paid their wireless companies for originating the calls. The wireless companies in turn compensated the interexchange carrier for transporting the calls. However, the rural companies were not compensated for use of their networks in completing these wireless calls.
"Wireless companies" collectively refers to ATT Wireless, Southwestern Bell Wireless (now Cingular), and Sprint Spectrum L.P. d/b/a Sprint PCS, all of which provide cellular or wireless telecommunications services and oppose the amended tariffs.
In 1999, the rural companies initiated this proceeding with the Missouri Public Service Commission to amend their existing intrastate switched access tariffs to apply to all traffic originating from the wireless companies and terminating in the rural networks. The existing access tariffs were applicable to calls that were originated from a competitive local exchange carrier in Missouri, transited by an interexchange carrier, and then terminated in a rural company exchange. The amended tariffs sought to clarify that the existing access rates also applied to calls originated by wireless companies during the relevant three-year period.
B. HISTORICAL USE OF TARIFFS TO DELIVER WIRELESS TRAFFIC
During the 1980's and early 1990's, wireless traffic was delivered to the rural companies primarily through SWBT's wireless interconnection tariff. The tariff allowed wireless companies to send intrastate 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 liable to the rural companies under SWBT's existing access tariffs. Thereafter, SWBT paid the rural companies for terminating the wireless traffic until the access tariffs were revised in 1998.
See, e.g., In the Matter of United Telephone Company of Missouri's Complaint against Southwestern Bell Telephone Company for Failure to Pay United Its Terminating Access for Cellular-Originated Calls which are Terminated in United's Territory, Case No. TC-96-112, Report and Order, 6 Mo. P.S.C.3d 224 (April 11, 1997); In the Matter of Chariton Valley Telephone Corporation and Mid-Missouri Telephone Company's Complaints Against Southwestern Bell Telephone Company for Terminating Cellular Compensation, Case Nos. TC-98-251 and TC-98-340, Report and Order, 8 Mo. P.S.C. 3d 205 (June 10, 1999).
Effective in February 1998, the Commission approved tariff revisions that eliminated SWBT's obligation to pay for wireless traffic delivered to the rural companies. However, the revisions also expressly prohibited wireless companies from sending calls through SWBT to the rural companies absent an agreement by the wireless companies to compensate the rural companies. The wireless companies failed to negotiate such an agreement, but SWBT continued to transmit the wireless calls to the rural companies' networks without compensation and in violation of the Commission's order. The rural companies had no means to selectively block or refuse these wireless originated calls, thereby leaving the wireless carriers without an incentive to make compensation arrangements when they could continue to terminate their calls at no cost.
In the Matter of Southwestern Bell Telephone Company's Tariff Filing to Revise Its Wireless Carrier Interconnection Service Tariff, P.S.C. Mo.-No. 40, 77-79, 524, Report and Order 7 Mo. P.S.C. 3d 38 (December 23, 1997).
The rural companies also attempted to use their existing access tariffs to bill the wireless companies for terminating the wireless calls. The existing tariffs established the rates the rural companies could charge for providing access to their local exchanges to complete a long distance or toll call. The wireless companies refused to pay the bills because it was unclear whether the existing tariffs applied to wireless originated traffic.
C. Request to Amend Existing Access Tariffs
When no compensation agreement was reached by 1999, the rural companies filed an amendment to their existing switched access tariffs to clarify that they were applicable to the wireless traffic. The amendment proposed to add the following language to the tariffs:
The proposed amendment did not affect the rate of the switched access tariff. The sole purpose of the amendment was to make the existing tariff rates applicable to the intraMTA wireless termination traffic.
The provisions of this tariff apply to all traffic regardless of type or origin, transmitted to or from the facilities of the Telephone Company, by any other carrier, directly or indirectly, until and unless superseded by an agreement approved pursuant to the provisions of 47 U.S.C. 252, as may be amended.
The wireless companies and SWBT intervened in the Commission proceeding and objected to the amended tariffs. After a hearing, the Commission rejected the amended tariffs. In the Matter of Alma Tel. Co. , 8 Mo. P.S.C.3d 520 (January 27, 2000). On appeal, this court reversed and remanded for further consideration in light of the Commission's failure to make adequate findings in support of the tariff denials. ATT Communications of the Southwest, Inc. v. Pub. Serv. Comm'n , 62 S.W.3d 545 (Mo.App. 2001).
The Commission subsequently made additional findings in an Amended Report and Order. In the Matter of Alma Tel. Co. , No. TT-99-428 (Mo. P.S.C. April 9, 2002). The Commission found the amended tariffs violated provisions of the federal Telecommunications Act of 1996 that required the rural companies to establish reciprocal compensation agreements with the wireless companies. The Commission also relied on federal regulatory rulings in concluding that the intraMTA wireless calls were "local traffic" to which access charges could not be applied. Based on the preemptive effect of federal law, the Commission rejected the amended tariffs as unlawful.
The rural companies sought review by the circuit court. While the review was pending, we issued a decision in a separate case, State ex rel. Sprint Spectrum, L.P., et al. v. Mo. Pub. Serv. Comm'n , 112 S.W.3d 20 (Mo.App. 2003), involving related tariffs and the same wireless traffic at issue here. The Sprint case arose following the Commission's initial rejection of the rural companies' amended switch access tariffs in January 2000. Later that year, the rural companies took a different approach by filing new termination tariffs to provide compensation for completing the wireless calls. The Commission approved the new tariffs, which became effective in February 2001. On appeal, we affirmed the wireless termination tariffs as an appropriate payment remedy for the rural companies in the absence of a negotiated compensation agreement with the wireless companies. Id. at 26.
While affirming the rural companies' entitlement to a new tariff, we also reversed $.02 of the tariff amount, finding it was arbitrary and unsupported by the evidence. Sprint , 112 S.W.3d at 28.
On May 12, 2003, the circuit court reversed the Commission's rejection of the amended switched access tariffs. Relying on our decision in Sprint , the circuit court held that federal law did not preclude the rural companies from applying tariff rates in the absence of a compensation agreement with the wireless companies. The circuit court also determined the access charges were proper because the Commission had previously applied access rates to intraMTA wireless traffic in at least three cases arising after the enactment of the federal Telecommunications Act of 1996.
The Commission, the wireless companies, and SWBT now appeal to this court. However, because this court reviews the Commission's decision rather than the circuit court's ruling, the rural companies are placed in the position of appellants for purposes of briefing the issues on appeal. Rule 84.05(e).
II. STANDARD OF REVIEW
Appellate review of the Commission's decision involves a two-part analysis: we must first determine whether the decision is lawful and then whether it is reasonable. MO. CONST. art. V, § 18; Sprint , 112 S.W.3d at 24. The burden is on the appellants to show that the decision should be reversed because it is either unlawful or unreasonable. § 386.430, RSMo. (2000)
In determining whether the decision is lawful, we exercise unrestricted, independent judgment and must correct any erroneous interpretations of law. State ex rel. Alma Tel. Co. v. Mo. Pub. Serv. Comm'n , 40 S.W.3d 381, 388 (Mo.App. 2001). Lawfulness depends upon whether the decision is supported by statutory or other applicable legal authority. State ex rel. AG Processing, Inc. v. Mo. Pub. Serv. Comm'n , 120 S.W.3d 732, 734 (Mo. banc 2003).
If the decision is lawful, we must then determine whether it is reasonable. Sprint , 112 S.W.3d at 24. Reasonableness depends on whether the order is supported by competent and substantial evidence, whether the decision is arbitrary, capricious, or unreasonable, or whether the Commission abused its discretion. Id. The decision of the Commission on factual issues is presumed to be correct until the contrary is shown, and we are obligated to affirm if the decision is supported by substantial evidence based on review of the whole record. State ex rel. Atmos Energy Corp. v. Mo. Pub. Serv. Comm'n , 103 S.W.3d 753, 759 (Mo. banc 2003).
III. ISSUE ON APPEAL
All parties to this appeal agree that the rural companies are entitled to compensation for terminating wireless traffic. This court previously determined in Sprint that wireless termination tariffs can provide a lawful and reasonable means for the rural companies to secure compensation for this traffic in the absence of negotiated agreements. 112 S.W.3d at 26. However, the instant case was filed before Sprint and proposed a different means of compensation through the application of switched access rates. The primary issue now in dispute is whether the switched access tariffs can be applied to intraMTA wireless traffic terminated in the rural companies' networks from February 1998 through February 2001, the three-year period prior to the implementation of the termination tariffs approved in Sprint.
As appellants, the rural companies contend the Commission misapplied the law in determining that the amended tariffs violated the reciprocal compensation provisions of the federal Telecommunications Act of 1996, 47 U.S.C. § 251(b)(5). The Act imposes a duty on local telephone companies to negotiate in good faith and establish compensation arrangements for the transport and termination of telecommunications traffic. 47 U.S.C. § 251(b)(5), (c)(1). However, the Act does not impose a similar obligation on the wireless companies with whom the rural companies would have to negotiate. The rural companies contend their efforts to establish compensation agreements have been frustrated by the calculated inaction of wireless companies who have no incentive to negotiate because their calls can not be blocked. Based on our recent holding in Sprint , the rural companies argue that tariffs are a lawful means of establishing payment rates when compensation agreements have not been negotiated.
We are mindful that the Commission's Amended Report and Order was issued one year prior to our decision in Sprint. Nonetheless, it is clear the Commission's rejection of the amended tariffs was partially based on an interpretation of the Act's reciprocal compensation provision that is inconsistent with our more recent ruling. We recognized in Sprint that tariffs are permissible if they are expressly subordinate to the Act's requirements:
Federal courts have recognized the right of states to enforce tariff provisions [that] are not inconsistent with the Act. The tariffs approved by the Commission expressly state that they are subordinate to any negotiated agreements under the Act. Thus, the Commission's action does not prevent the negotiation of reciprocal compensation arrangements or otherwise conflict with the Act's procedural requirements.
112 S.W.3d at 25-26 (citations omitted).
Here, the language of the proposed amendments specified that the tariff rates would apply to all traffic "until and unless superceded by [a reciprocal compensation] agreement[.]" Thus, as in Sprint , the amended tariffs are expressly subordinate to the Act's federal mandates. Nothing in the amended tariffs precludes the wireless companies from negotiating compensation agreements or seeking mediation of the compensation rates as permitted by the Act. 47 U.S.C. §§ 252(a)(2), 252(b)(1)-(2). The Commission misapplied the law in determining that the use of this tariff procedure violated the reciprocal compensation provisions of the federal Act.
As respondents, the wireless companies, SWBT, and the Commission argue that even if the tariff procedure is a proper remedy for compensation in the absence of negotiated agreements, the subject access tariffs could not be lawfully applied to the intraMTA wireless calls as local traffic. In making this argument, the respondents rely upon the FCC's First Report and Order, which implemented and interpreted the reciprocal compensation provisions of the federal Act. In the Matter of Implementation of the Local Competition Provisions of the Telecommunications Act of 1996 , First Report and Order, 11 F.C.C. Rcd. 15299 (1996). The FCC therein determined that the Act preserves the "legal distinctions" between transport/termination charges for local traffic and access charges for long distance traffic. Id. at ¶ 1033. The FCC further defined wireless traffic as being "local" when it originates and terminates in the same MTA. Id. at ¶ 1036. The Respondents contend the federal Act and related regulatory rulings support the Commission's conclusion that existing access tariffs cannot be lawfully applied to the wireless intraMTA traffic at issue.
We disagree that federal law is controlling in this situation where the wireless companies have not taken the necessary steps to invoke the reciprocal compensation procedures under the Telecommunications Act of 1996. The rural companies had no alternative but to pursue tariff options under state law because the wireless companies could not be compelled to negotiate compensation rates under the federal Act. Sprint , 112 S.W.3d at 25. To avoid the tariffs, all the wireless companies have to do is engage in rate negotiations with the rural companies and, thereby, invoke preemptive application of the Act's reciprocal compensation procedures and pricing standards. Id. at 25-26. Until that happens, the wireless companies should not be heard to complain that the access tariffs must be rejected under federal law.
The Commission erroneously determined that the amended switched access tariffs were preempted by federal law. The subordination clause in the amended tariffs avoids any conflict with the federal Act and yet preserves the option of the wireless companies to invoke federal law if they desire to have it applied. Given the language of the amendment and the Commission's history of approving access charges on intraMTA traffic under its state regulatory authority, the rejection of the amended tariffs was neither lawful nor reasonable. In 1997 and 1999, the Commission ordered SWBT to pay the rural companies for terminating wireless intraMTA calls under SWBT's existing access tariffs. In the Matter of United Telephone Co. , 6 Mo. P.S.C.3d 224; In the Matter of Chariton Valley Telephone Corp. , 8 Mo. P.S.C. 3d 205. In another case decided shortly after the federal Act became law in 1996, the Commission approved the application of intrastate switched access rates to intraMTA wireless traffic until negotiated compensation arrangements could be made: In the Matter of ATT Communications of the Southwest, Inc.'s Petition for Arbitration Pursuant to Section 252(b) of the Telecommunications Act of 1996 to Establish an Interconnection Agreement with Southwestern Bell Telephone Company , Case No. TO-97-40, Arbitration Order (Mo. P.S.C. Dec. 11, 1996). No reasonable explanation is offered here as to why the rural companies' amended access tariffs could not be similarly approved until negotiated rates are in effect.
We reverse the Amended Report and Order and remand the amended tariffs for further consideration in light of the Commission's state regulatory authority.
All concur.