Ohio Consumers' Counsel v. Public Utilities Commission

117 Ohio St. 3d 301
Ohio Supreme Court·Decided March 6, 2008·No. No. 2007-0659·Published·Cited by 2 cases

Opinion

O’Connor, J.

{¶ 1} This is an appeal as of right by appellant, Ohio Consumers’ Counsel (“OCC”), from an order of the Public Utilities Commission of Ohio (“commission” or “PUCO”). The commission approved an application by intervening appellee, AT & T Ohio (“AT & T”), for alternative regulation of its- basic local exchange telephone service in 136 of AT & T’s telephone exchanges. OCC appealed, arguing that the decision is unlawful due to the inadequacy of the commission’s rules and their improper application.

{¶ 2} We hold that the commission appropriately relied on the statutory amendments and created lawful and reasonable tests to effectuate those changes. Likewise, we affirm the commission’s factual determinations in approving AT & T’s application.

BACKGROUND

{¶ 3} On November 4, 2005, Am.Sub.H.B. No. 218 (“H.B. 218”) took effect, amending certain provisions of the state telecommunications law. Affected statutes include R.C. 4905.04, 4927.02, 4927.03, and 4927.04. This appeal deals with changes to R.C. 4927.02 and 4927.03, which deal with exemption from regulation and alternative regulation.

{¶ 4} The amendments to R.C. 4927.02 set forth the policy in this area of the law, which includes reliance on market forces to maintain just and reasonable rates, consideration of competitive services in determining the scope of the commission’s regulation, and a prohibition against unduly favoring or disadvantaging providers of competing services. R.C. 4927.02(B) directs that the commission use these policy guidelines to carry out the chapter and to reduce or eliminate the regulation of telephone companies under those sections.

{¶ 5} Together with these new policy considerations, the General Assembly expanded the services eligible for alternative regulation in R.C. 4927.03(A)(1) by authorizing the commission to grant alternative regulation of basic local exchange service (“BLES”) offered by incumbent local exchange companies (“ILECs”). [303] Previously, the statute allowed alternative regulation for any service other than BLES.1

{¶ 6} R.C. 4927.03(A)(1) allows the commission to exempt phone companies from traditional rate regulation when it is in the public interest and either the utility is “subject to competition” for that service or customers have “reasonably available alternatives.” R.C. 4927.03(A)(1)(a) and (b). In addition, the commission must find that there are “no barriers to entry.” R.C. 4927.03(A)(3). R.C. 4927.03(C) allows the commission to abrogate or modify orders awarding alternative regulation if the findings it relied on are no longer valid and if that action is in the public interest.

{¶ 7} In response to H.B. 218, the commission established rules for the alternative regulation of basic local exchange service. See Ohio Adm.Code 4901:1-4-01 et seq.; In the Matter of the Implementation of H.B. 218 Concerning Alternative Regulation of Basic Local Exchange Service of Incumbent Local Exchange Telephone Companies (Mar. 7, 2006), PUCO No. 05-1305-TP-ORD, 2006 WL 707476 (“05-1305”). These rules covered everything from the geographic area that would be considered for awarding alternative regulation to the tests an ILEC must meet to be eligible for alternative regulation. The rules became effective on August 7, 2006.

{¶ 8} In Ohio Adm.Code 4901:1-4-10(0), the commission established four competitive tests to determine eligibility for alternative regulation. An applicant must satisfy at least one of these tests. The most important tests for purposes of this appeal are Ohio Adm.Code 4901:1-4-10(0(3) and (4) (“Test 3” and “Test 4”). AT & T relied on Test 3 for 26 of its requested exchanges and on Test 4 for the remaining 119. Certain shared elements of the tests are challenged in this case by OCC.

{¶ 9} Test 3 has three main requirements. First, the applicant must demonstrate in each requested exchange that at least 15 percent of the total residential access lines are provided by unaffiliated competitive local exchange carriers. Second, the applicant must demonstrate the presence of at least two unaffiliated facilities-based competitive local exchange carriers providing basic local exchange service to residential customers. Third, the applicant must demonstrate the presence of at least five alternative providers serving the residential market. Ohio Adm.Code 4901:l-4-01(B) defines an alternative provider as a provider of competing services to the basic local exchange service offerings, regardless of the technology and facilities used in the delivery of the services.

[304] {¶ 10} Test 4 requires that the applicant demonstrate that in each requested exchange area, the applicant has lost at least 15 percent of total residential access lines since 2002. The applicant must also demonstrate the presence of at least five unaffiliated faeilities-based alternative providers serving the residential market.

{¶ 11} On December 20, 2006, the commission issued an opinion and order approving AT & T’s application for alternative regulation of its basic local exchange telephone service in 136 of the requested 145 telephone exchanges.

STANDARD OF REVIEW

{¶ 12} R.C. 4903.13 provides that a PUCO order shall be reversed, vacated, or modified by this court only when, upon consideration of the record, the court finds the order to be unlawful or unreasonable. Under this statutory standard, this court will not reverse or modify a PUCO decision as to questions of fact when the record contains sufficient probative evidence to show that the PUCO’s determination is not manifestly against the weight of the evidence and is not so clearly unsupported by the record that it shows misapprehension, mistake, or willful disregard of duty. AT & T Communications of Ohio, Inc. v. Pub. Util. Comm. (2000), 88 Ohio St.3d 549, 555, 728 N.E.2d 371.

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Ohio Consumers' Counsel v. Public Utilities Commission, 117 Ohio St. 3d 301 (Ohio 2008).

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