Ohio Consumers' Counsel v. Public Utilities CommissionOhio Consumers' Counsel v. Public Utilities Commission
{¶ 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
{¶ 4} The amendments to
{¶ 5} Together with these new policy considerations, the General Assembly expanded the services eligible for alternative regulation in
{¶ 6}
{¶ 7} In response to H.B. 218, the commission established rules for the alternative regulation of basic local exchange service. See
{¶ 8} In
{¶ 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.
{¶ 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}
{¶ 13} This presents a heavy burden for the party challenging an order, because this court has consistently deferred to the commission’s judgment in matters that require the commission to apply its special expertise and discretion to make factual determinations. Cincinnati Bell Tel. Co. v. Pub. Util. Comm. (2001),
{¶ 14} Although we defer to factual findings and conclusions by the commission, this court has “complete and independent power of review as to all questions of law” in appeals from the commission. Ohio Edison Co. v. Pub. Util. Comm. (1997),
ANALYSIS
Stand-Alone Service
{¶ 15} In its first proposition of law, OCC argues that the commission’s analysis of what constitutes a competitive service under the competitive tests is too broad. Specifically, OCC asserts that the commission should not consider bundled-service offerings as “competition” for basic service when determining whether an applicant is “subject to competition.” OCC asserts that because alternative treatment was already available for packages that include basic local exchange service, the changes in H.B. 218 apply only to stand-alone service, and only providers of stand-alone service count as “competition.”
{¶ 16} The commission found that customers receiving basic local exchange service as part of a package are still considered basic local exchange service customers. Thus, the providers of those bundled services are potential alternative providers. The commission admits that alternative basic local exchange services might not be currently offered under terms and conditions identical to those offered by stand-alone providers, but argues that functionally equivalent or substitute services are readily available at competitive rates, terms, and conditions. The commission contends that
{¶ 17} The commission relied on evidence that AT & T had lost local exchange service customers in the presence of alternative providers and concluded that those customers must have found the other providers’ rates, terms, and conditions to be a competitive and reasonable alternative to or substitute for AT & T’s basic service. The commission suggests that it is reasonable to assume that customers would not have switched from AT & T’s basic local exchange service had customers not found competitive rates, terms, and conditions elsewhere.
{¶ 18} In H.B. 218, the General Assembly amended
{¶ 20} The central issue is the scope of the term “competition” as used in
{¶ 21} OCC’s argument fails to recognize the legislative guidance provided by the changes to the policy section of the chapter in
{¶ 22} The commission established that bundled services provide competition to basic phone service. The commission determined that customers are switching service in the presence of competitors and that those customers find the alternative services to be adequate substitutes for AT & T’s services. The court will not reverse or modify a commission decision as to questions of fact in cases in which the record contains sufficient probative evidence to show that the commission’s decision was not manifestly against the weight of the evidence and was not so clearly unsupported by the record as to show misapprehension, mistake, or willful disregard of duty. Monongahela Power Co. v. Pub. Util. Comm.,
Extent of Market Presence
{¶ 23} In its fifth proposition, OCC challenges the commission’s application of Tests 3 and 4, which award alternative regulation if the applicant shows, inter alia, the presence of a minimum number of qualified alternative providers serving the residential market in each requested exchange area. OCC asserts that the four cable companies AT & T offered as alternative providers under both tests do not serve the entirety of the’exchange areas, and the commission violated statutory requirements when it considered those providers. Failure to serve the entire exchange means that the service is not “readily available” within the
{¶ 24} The commission argues that there is no requirement that all alternative providers offer ubiquitous service throughout the exchange. In its order, the commission called OCC’s argument a “narrow interpretation,” contending that OCC’s position would require the relevant market to be reduced from an exchange to an area as small as a city block to ensure that every single customer has access to all alternate providers. The commission stated that OCC’s argument would even require the commission to test cell coverage in individual homes.
{¶ 25} This dispute centers on the geographic area the commission approved to consider alternative regulation. According to
{¶ 26} We affirm the commission’s finding that alternative providers have services readily available in AT & T’s exchanges. The commission established the exchange area to judge the overall presence in that area, not a subset of that area. The commission found no requirement in the law or in its rules that an alternative provider must serve 100 percent of the relevant market. The commission points out that OCC supported using the telephone exchange as the relevant market in the 05-1305 rulemaking case. The area is small enough to share common characteristics while still providing years of historical data. Thus, it is reasonable to accept the commission’s determination to judge the area as a whole.
“Presence” of Alternative Providers
{¶ 27} OCC’s first proposition questions the legitimacy of Test 4, arguing that by requiring only the “presence” of alternative providers in the exchange, the test fails to consider the size of those providers or other indicators of market power such as market share or growth, as required by
{¶ 29}
{¶ 30} The commission’s approach to assessing competition recognizes the realities of the market by, for instance, requiring that the unaffiliated alternative providers be facilities-based. A facilities-based provider has a physical presence in the state and has invested in plant and equipment, which demonstrates a long-term commitment to stay in the market.
{¶ 31} Understanding of the current market is crucial to the analysis here. We defer to the commission’s expertise in this regard. The commission complied with
Access-Line Loss
{¶ 32} OCC’s second proposition challenges the relevance of the applicant’s access-line losses since 2002 as a prong of Test 4. This line-loss prong requires a showing that the applicant lost at least 15 percent of its residential access lines in each requested exchange since 2002.
{¶ 33} OCC questions the relevance of the line-loss provision to the statutory criteria in
{¶ 35} In H.B. 218, the General Assembly required the commission to develop rules to carry out the amendments.
{¶ 36} The commission’s finding that Test 4 adequately judges alternative competition by combining two criteria, the presence of at least five unaffiliated facilities-based competitors and a significant loss of access lines, is reasonable. The test incorporates the market reality that there are some forms of competition that the commission has no power to regulate or formally review. The commission interpreted the intent of the General Assembly and developed a test to determine the level of competition and the availability of alternative providers regardless of regulatory oversight. This court may rely on the expertise of a state agency in interpreting a law where “highly specialized issues” are involved and “where agency expertise would, therefore, be of assistance in discerning the presumed intent of our General Assembly.” Consumers’ Counsel v. Pub. Util. Comm. (1979),
{If 37} Further,
{¶ 38} We affirm the commission’s finding that Test 4 meets statutory requirements and that AT & T satisfied the line-loss portion of that test. Accordingly, we reject OCC’s proposition of law.
Barriers to Entry
{¶ 39} OCC’s fourth proposition asserts that the commission’s findings in this case and its administrative rules fail to comply with the requirements of
{¶ 40} The commission established its view on the lack of barriers in the 05-1305 rulemaking case. The commission stated that all competitors seeking entry into a new market face difficulties, and the real issue is whether these difficulties can be overcome or whether barriers exist that actually prevent entry or significantly impede it, over and above those risks and costs normally associated with entering a new market.
{¶ 41} OCC asserts that the commission’s view of what constitutes a “barrier” does not comport with the legislature’s objective, as it effectively replaces the statutory phrase “no barriers to entry” with “no significant barriers to entry.”
{¶ 42} The commission found that OCC’s arguments on potential barriers to entry were fatally generic and lacking in any specific focus on any of the exchanges identified by AT & T in this proceeding. Moreover, the commission did not find any evidence in the record of any barriers to entry present in the requested exchanges that might bar providers from entering those markets. The commission found that the barriers pointed out by OCC in the 05-1305 rulemak-ing case are minimized by federal and state laws and rules. In addition, the commission found that OCC had failed to identify a single barrier to entry applying specifically to the relevant exchanges.
{¶ 43} We find that this issue involves another factual determination by the commission. The commission developed an independent test to assist it in making its factual determinations under the statute. The commission’s rule for determining the presence of alternative providers and loss of access lines (i.e., loss of customers) is a reasonable method for establishing that there are no barriers preventing competition in the exchange.
{¶ 44} OCC’s interpretation of the lack-of-barriers requirement would make alternative regulation impossible to achieve. No market is completely barrier-free. OCC’s suggested test, which would require a finding that the market
{¶ 45} In establishing Tests 3 and 4, the commission identified those factors that it believes are significant in complying with the intent of H.B. 218, while at the same time not making the test so demanding that alternative regulation as contemplated by H.B. 218 would be unattainable. H.B. 218 provided no definition of “barrier” and no criteria for finding a lack of barriers. We agree with the commission’s conclusion that the legislature’s criteria for granting alternative regulation was not as restrictive as OCC suggests and that “the ultimate decision-making authority regarding that implementation was left to the Commission.” We are not persuaded that Tests 3 and 4 fail to properly address the absence of barriers to entry, and the commission’s factual finding that AT & T provided sufficient evidence of a lack of barriers will not be disturbed by this court.
Public Interest
{¶ 46} OCC argues in its sixth proposition that the commission granted alternative regulation in violation of
{¶ 47} The commission responded that in a competitive environment, further commitments are not appropriate, and the pressures imposed by market competition will work to the public’s benefit by encouraging innovation, affordability, diversity of choice, and other consumer benefits.
{¶ 48} The commission reiterated its belief in the importance of ensuring that the largest numbers of residents have access to high-quality telephone service regardless of income or geographic location. But it also recognized the legislature’s direction that market forces be allowed to create an environment that will promote competitive pricing, thereby maintaining just and reasonable rates. The commitments required of applicants for alternative regulation, set forth in
{¶ 49}
{¶ 50} Moreover, the public-benefit finding is a factual determination made by the commission. Its finding that AT & T met the requirements for a showing of public interest will not be disturbed by this court absent a demonstration that it is clearly unsupported by the record. AT & T,
{¶ 51} Having considered them carefully, we affirm the commission’s finding that AT & T’s application is in the public interest and reject OCC’s argument.
CONCLUSION
{¶ 52} Ultimately, OCC is appealing the rules that the commission adopted to streamline its review for alternative treatment under the statute. The rules, as applied to the facts in this case, satisfy the statutory factors needed to award alternative treatment. The commission made appropriate factual determinations. OCC’s arguments to the contrary are rejected, and the commission’s order is affirmed.
Decision affirmed.
Notes
. Basie local exchange service is defined in