Case Title: AT&T Communications of Ohio, Inc. v. Pub. Util. Comm.

Citation: 2000-Ohio-422

Docket Number: 19980028

State: ohio

Court: Ohio Supreme Court

Date: 2000-05-31T00:00:00Z

Document:
[Cite as AT&T Communications of Ohio, Inc. v. Pub. Util. Comm., 88 Ohio St.3d 549, 2000-
Ohio-422.] 
 
 
 
 
 
AT&T COMMUNICATIONS OF OHIO, INC., APPELLANT, v. PUBLIC UTILITIES 
COMMISSION OF OHIO, APPELLEE. 
MCI TELECOMMUNICATIONS CORPORATION, APPELLANT, v. PUBLIC UTILITIES 
COMMISSION OF OHIO, APPELLEE. 
[Cite as AT&T Communications of Ohio, Inc. v. Pub. Util. Comm. (2000), 88 Ohio 
St.3d 549.] 
Public Utilities Commission — Telephone companies — Intrastate switched 
access charges — Commission order affirmed, when. 
(Nos. 98-28 and 98-30 — Submitted December 15, 1999 — Decided May 31, 
2000.) 
APPEALS from the Public Utilities Commission of Ohio, No. 96-336-TP-CSS. 
 
These appeals involve an order of the Public Utilities Commission of Ohio 
(“commission”) in PUCO No. 96-336-TP-CSS (“complaint case”).  In April 1996, 
AT&T Communications of Ohio, Inc. (“AT&T”) filed a complaint with the 
commission, alleging that intrastate switched access charges levied by Ameritech 
Ohio 
(“Ameritech”) 
violated 
R.C. 
4905.33 
and 
4905.35. 
 
MCI 
Telecommunications Corporation (“MCI”), Time Warner Communications, Inc. 
(“Time Warner”), and the Office of Consumers’ Counsel (“OCC”) intervened.  
MCI and OCC asserted positions substantially similar to those asserted by AT&T. 
 
 
2
 
Evidentiary hearings were conducted, followed by briefs from AT&T, MCI, 
OCC, and Ameritech.  On September 18, 1997, the commission issued its Opinion 
and Order in the complaint case in which it (1) found that AT&T failed to sustain 
its burden of proof that Ameritech had violated the several statutes and (2) ordered 
that the complaint be denied. 
 
All parties to the complaint case, with the exception of Time Warner, filed 
applications for rehearing, all of which the commission denied in its Entry on 
Rehearing, dated November 6, 1997. 
 
On January 5, 1998, AT&T filed its notice of appeal in this court’s case No. 
98-28, and on the same date MCI filed its notice of appeal in this court’s case No. 
98-30.  Ameritech intervened in both appeals as an appellee and OCC provided a 
brief amicus curiae in support of appellant AT&T in case No. 98-28.  We granted 
appellants’ motions to consolidate the two appeals and the causes are before us 
upon appeals as of right. 
__________________ 
 
David J. Chorzempa; Vorys, Sater, Seymour & Pease, L.L.P., Sandra J. 
Anderson, Benita Kahn and W. Evan Price II, for appellant AT&T 
Communications of Ohio, Inc. 
 
Bell, Royer & Sanders Co., L.P.A., Barth E. Royer and Judith B. Sanders, 
for appellant MCI Telecommunications Corporation. 
 
 
3
 
Betty D. Montgomery, Attorney General, Duane W. Luckey, Steven T. 
Nourse and Stephen A. Reilly, Assistant Attorneys General, for appellee Public 
Utilities Commission of Ohio. 
 
Michael T. Mulcahy; Porter, Wright, Morris & Arthur, Daniel R. Conway, 
Samuel H. Porter and Robert W. Trafford, for intervening appellee Ameritech 
Ohio. 
 
Robert S. Tongren, Ohio Consumers’ Counsel, Yolanda V. Vorys and David 
C. Bergmann, Assistant Consumers’ Counsel, urging reversal in case No. 98-28, 
for amicus curiae, Ohio Consumers’ Counsel. 
__________________ 
 
FRANCIS E. SWEENEY, SR., J.  The complaint case proceedings before the 
commission that are the subject of this appeal involved the legality and 
reasonableness of Ameritech’s intrastate “switched access charges.”  Access 
charges are charges that long distance telephone companies (also called 
“Interexchange Carriers” or “IXCs”) pay to local service telephone companies 
(also called “Local Exchange Carriers” or “LECs”) for the use of their local 
network facilities to originate and terminate long distance (“interexchange”) calls.  
The access charge system was an outgrowth of the divestiture of the Bell Operating 
Companies (also known as the “BOCs”), including Ameritech.  The divestiture 
was the result of United States v. Am. Tel. & Tel. Co. (D.D.C.1982), 552 F.Supp. 
 
 
4
131, affirmed sub nom., Maryland v. United States (1983), 460 U.S. 1001, 103 
S.Ct. 1240, 75 L.Ed.2d 472, in which the federal district court concluded that the 
Federal Communications Commission (“FCC”) had responsibility for setting post-
divestiture  access charges for interstate interexchange service, and that state utility 
commissions had responsibility for setting access charges for intrastate 
interexchange service. 
 
Through a series of orders during 1984-1987, the commission established an 
intrastate access charge plan for Ohio’s LECs.  Under the commission’s plan, the 
LECs, including Ameritech, “mirrored” (albeit with certain exceptions) the federal 
approach and the LECs’ interstate access rates.1  That is, rate changes approved by 
the FCC were automatically implemented in Ohio, except when ordered otherwise 
by the commission. 
 
In 1994, the commission reiterated its policy of mirroring when it approved 
Ameritech’s application for an alternative form of regulation (“Alternative 
Regulation Plan”) in PUCO No. 93-487-TP-ALT,2 capping the price for intrastate 
switched access service at the mirrored interstate rates.  This court overturned the 
commission’s approval of that plan on procedural grounds in Time Warner AxS v. 
Pub. Util. Comm. (1996), 75 Ohio St.3d 229, 661 N.E.2d 1097.  However, later in 
1996, the Ohio General Assembly reinstated the plan, including mirroring, 
effective as of the original effective date of the plan.  See Settlement Agreement, 
 
 
5
In the Matter of the Implementation of Substitute Senate Bill 306 or Substitute 
House Bill 734 of the 121st  General Assembly (May 20, 1996), PUCO No. 96-
532-TP-UNC. 
 
AT&T’s complaint before the commission pursuant to R.C. 4905.26 alleged 
that Ameritech’s intrastate switched access rates were excessive and should be 
reduced, and that they were preferential and discriminatory in violation of R.C. 
4905.33 and 4903.35. 
 
This appeal presents several discrete issues for consideration by the court.  
The first is whether the pricing of intrastate switched access service must be cost-
based. 
 
AT&T’s position is that Ameritech must offer Ohio intrastate switched 
access services at rates based on the Long Run Service Incremental Costs 
(“LRSIC”)3 of providing those services.  MCI’s position is that the commission 
erred by refusing to establish Ameritech’s intrastate access charges based on its 
economic cost of providing access service as determined in a separate commission 
proceeding.  The cost-based access pricing referred to by MCI is the pricing of 
Unbundled Network Elements (“UNEs”)4 utilized in the provision of switched 
access service, as determined or to be determined by the commission’s employing 
the TELRIC methodology used in Ameritech’s “TELRIC case.”5, 6 
 
 
6
 
The appellants argue that the cost-based sale pricing of the UNEs used to 
furnish switched access service determines the cost of that service.  The appellants 
then argue that switched access service should be provided to them at rates (or 
charges) no higher than the costs of providing that service so determined.  
However, the appellants provide no legal authority for the proposition that the 
commission is legally constrained from permitting rates for switched access 
service to be in excess of the costs of providing such service, and they offered no 
testimony or evidence of the costs of providing the service other than the costs 
determined in Ameritech’s TELRIC case. 
 
As the commission noted in its order below, TELRIC-determined costs 
established in a proceeding separate from the complaint case might not be the 
proper costs for switched access service considered in a complaint proceeding 
involving the reasonableness of charges for such service.  TELRIC-determined 
costs are forward-looking incremental costs only.  On the other hand, switched 
access service charges might appropriately contain elements of historical, 
embedded costs traditionally employed in the ratemaking process.  Also, there may 
be joint or common costs shared with UNEs other than UNEs employed in 
providing switched access service that should have been, but were not, considered 
in Ameritech’s TELRIC case. 
 
 
7
 
We find that the appellants failed to show that the commission cannot allow 
Ameritech to charge rates for its intrastate switched access service that are in 
excess of the costs of providing that service.  Moreover, appellants did not show 
that the proper costs of providing that service are the costs of the switched access-
related UNEs determined in Ameritech’s TELRIC case. 
 
The applications for rehearing filed below and the notices of appeal filed in 
these consolidated appeals include the appellants’ contention that the commission 
erred in failing to find that Ameritech’s switched access charges were so excessive 
as to be unjust and unreasonable under R.C. 4905.26, although AT&T’s complaint 
before the commission failed explicitly to charge Ameritech with a violation of 
that statute. 
 
In support of that contention, the appellants again point out that the rates for 
switched access service exceed the TELRIC-determined costs of providing that 
service.  AT&T refers the court to testimony in the complaint case to the effect that 
Ameritech’s switched access rates are five times higher than the TELRIC-
determined costs of providing switched access service.  The appellants’ position is 
that switched access rates must be strictly cost-based and, if the rates exceed the 
cost of providing switched access service, the rates are ipso facto unjust and 
unreasonable. 
 
 
8
 
However, Ameritech’s switched access rates are an outgrowth of the 
Alternative Regulation Plan, under which intrastate switched access charges were 
capped at the mirrored interstate rates.  According to the commission, interstate 
rates have been reduced from time to time, and such rate reductions were, and will 
continue to be, a result of a combination of regulatory prescription and market 
forces.  The commission observed that if mirroring is continued, the rates, being in 
part market-based, will incrementally over time achieve equivalency to costs. 
 
The appellants urged the commission to prescriptively cap Ameritech’s 
intrastate switched access charges at Ameritech’s cost of providing switched access 
service.  However, the commission did not have any testimony or evidence before it 
that addressed the issue of Ameritech’s cost of providing switched access service, 
other than references to costs of certain UNEs determined in the Ameritech 
TELRIC case.  Moreover, the commission was not convinced that the TELRIC-
determined costs constituted Ameritech’s cost of providing switched access service. 
 
Rather than prescriptively tying switched access charges solely to the costs 
of providing switched access service, the commission chose to cap the intrastate 
switched access charges at the level of mirrored FCC-determined interstate 
switched access charges.  The commission considered the mirrored switched access 
charges to be in part prescriptively determined and to be in part market-driven.  As 
 
 
9
a matter of policy, the commission preferred the mirroring of switched access 
charges as opposed to tying them strictly to cost. 
 
Notwithstanding the appellants’ opinions and assertions otherwise, there is 
nothing in the record in the complaint case to suggest that Ameritech’s mirrored 
switched access charges were unjust or unreasonable under R.C. 4905.26.  In fact, 
the commission’s decisions were fully supported by the record below. 
 
Finally, the appellants argue that the switched access charges are in violation 
of R.C. 4905.33 and 4905.35, which prohibit preferential and discriminatory utility 
rates being charged to similarly situated customers for like service.  Appellants 
contend that the cost to Ameritech of providing intrastate switched access service is 
less than its charges for that service, and, therefore, Ameritech, as an ILEC (see 
footnote 3, supra), benefits from the switched access charges to the detriment of the 
appellants, which are IXC’s, that pay the access charges.  The appellants also point 
out that an IXC could purchase from Ameritech the UNEs necessary to provide 
switched access service to itself and would be required to pay only the TELRIC-
determined cost-based prices for the UNEs, which are lower than the switched 
access charges payable by the appellants. 
 
However, the appellants, themselves, are IXCs, and their argument ignores 
the fact that, as IXCs, they could purchase from Ameritech the UNEs necessary to 
provide switched access service to themselves at the TELRIC-determined prices.  
 
 
10
Also, when an IXC purchases and uses the UNEs necessary to provide switched 
access service, it becomes a new entrant CLEC (see footnote 3, supra) with respect 
to provision of that service, making it an entity different from a carrier that provides 
strictly interexchange service, such as the appellants. 
 
Allnet Communications Serv., Inc. v. Pub. Util. Comm. (1994), 70 Ohio 
St.3d 202, 638 N.E.2d 516, which involved intrastate switched access charges that 
mirrored FCC-established interstate charges, determined that (1) for there to be a 
violation of R.C. 4905.33, there must be a showing that an entity similarly situated 
to the complainant is charged rates different from those charged the complainant for 
the same service, and (2) for there to be a violation of R.C. 4905.35, there must be a 
showing that an entity similarly situated to the complainant has received 
preferential or advantageous treatment by virtue of the charge payable by it 
compared to the charge payable by the complainant for the same service. 
 
The appellants have failed to make either showing.  In fact, the evidence 
before the commission in the complaint case indicated that because both 
complainants below were IXCs, each would be required to pay the same switched 
access charges as were payable by the other, and that all other IXCs (which had not 
also become CLECs) would be required to pay the same switched access charges as 
were payable by the complainants. 
 
 
11
 
Thus, the appellants have failed to demonstrate that Ameritech’s switched 
access charges did or could result in entities’ similarly situated to the complainants 
paying different charges for switched access service than charges paid by the 
complainants.  We find that no violation of R.C. 4905.33 has been shown. 
 
Likewise, the appellants have not demonstrated that Ameritech’s switched 
access charges result in the appellants’ being prejudiced or disadvantaged compared 
to IXC entities similarly situated to the complainant.  Thus, no violation of R.C. 
4905.35 has been shown. 
 
Appeals of commission decisions are subject to the standard of review 
contained in R.C. 4903.13, which provides: 
 
“A final order made by the public utilities commission shall be reversed, 
vacated, or modified by the supreme court on appeal, if, upon consideration of the 
record, such court is of the opinion that such order was unlawful or unreasonable.” 
 
This court has consistently interpreted the statutory standard of review as 
follows: 
 
“In MCI Telecommunications Corp. v. Pub. Util. Comm. (1988), 38 Ohio 
St.3d 266, 268, 527 N.E.2d 777, 780, we repeated our interpretation of this 
standard, stating: 
 
“ ‘Under the “unlawful or unreasonable” standard specified in R.C. 4903.13, 
this court will not reverse or modify a PUCO decision as to questions of fact where 
 
 
12
the record contains sufficient probative evidence to show the PUCO’s 
determination is not manifestly against the weight of the evidence and is not so 
clearly unsupported by the record as to show misapprehension, mistake, or willful 
disregard of duty.  Dayton Power & Light Co. v. Pub. Util. Comm. (1983), 4 Ohio 
St.3d 91, 4 OBR 341, 447 N.E.2d 733 * * * .’ ”  Ohio Edison Co. v. Pub. Util. 
Comm. (1992), 63 Ohio St.3d 555, 556, 589 N.E.2d 1292, 1294. 
 
Our review of the record reveals that it is replete with testimony and 
evidence both supporting and challenging the commission’s mirroring of interstate 
rates to establish a cap on Ameritech’s intrastate switched access charges. 
 
Consideration of that record indicates to us that sufficient probative evidence 
was adduced before the commission to show that the commission’s determinations 
were just and reasonable and not manifestly against the weight of the evidence.  
Nor were they so clearly unsupported by the record as to show misapprehension, 
mistake, or willful disregard of duty.  Based on the record before it, the 
commission’s decisions were lawful and reasonable under R.C. 4903.13. 
 
For the foregoing reasons, we affirm the order of the commission. 
Order affirmed. 
 
MOYER, C.J., DOUGLAS, FORD, COOK and LUNDBERG STRATTON, JJ., concur. 
 
PFEIFER, J., dissents. 
 
 
13
 
DONALD R. FORD, J., of the Eleventh Appellate District, sitting for RESNICK, 
J. 
FOOTNOTES: 
 
1. 
This court recounted in detail the various orders issued during 1984-
1987 by the commission in a case that established the access charge framework in 
MCI Telecommunications Corp. v. Pub. Util. Comm. (1987), 32 Ohio St.3d 306, 
513 N.E.2d 337 (“MCI-I”). See, also, MCI Telecommunications Corp. v. Pub. Util. 
Comm. (1988), 38 Ohio St.3d 266, 527 N.E.2d 777 (“MCI-II”). 
 
2. 
In the Matter of the Application of the Ohio Bell Tel. Co. for Approval 
of an Alternative Form of Regulation (Nov. 23, 1994), PUCO No. 93-487-TP-
ALT, at 72. 
 
3. 
Long Run Service Incremental Costs (“LRSIC”), Total Element Long 
Run Incremental Cost (“TELRIC”), Unbundled Network Elements (“UNES”), 
Incumbent Local Exchange Carrier (“ILEC”), Competitive Local Exchange Carrier 
(“CLEC”), and Competitive Access Providers (“CAPs”) are terms of art which 
came into being post-divestiture, many of them in connection with the 
Telecommunications Act of 1996, which is referred to in footnote 6, infra. 
 
4. 
See footnote 3, supra. 
 
5. 
The commission reviewed Ameritech’s TELRIC cost studies in In the 
Matter of the Review of Ameritech Ohio’s Economic Costs for Interconnection, 
 
 
14
Unbundled Network Elements, and Reciprocal Compensation for Transport and 
Termination of Local Telecommunications Traffic (June 19, 1997), PUCO No. 96-
922-TP-UNC. 
 
6. 
In 1996, Congress passed the Telecommunications Act of 1996, 
Pub.L. No. 104-104, 110 Stat. 56, 61, which was designed, in part, to erode the 
monopolistic nature of the local telephone service industry by obligating the 
current providers of local phone service to facilitate the entry of competing 
companies into local telephone service markets across the country.  Specifically, 
the 1996 Act forces an incumbent LEC (1) to permit a requesting new entrant in 
the incumbent LEC’s local market to interconnect with the incumbent LEC’s 
existing local network and thereby use the incumbent LEC’s network to compete 
with the incumbent LEC in providing local telephone services (interconnection); 
(2) to provide its competing telecommunications carriers with access to individual 
elements of the incumbent LEC’s own network on an unbundled basis (unbundled 
access); and (3) to sell to its competing telecommunications carriers, at wholesale 
rates, any telecommunications service that the incumbent LEC provides to its 
customers at retail rates in order to allow the competing carriers to resell the 
service.  Sections 251(c)(2), (3), and (4), Title 47, U.S. Code.  The Ohio General 
Assembly expressly sanctioned the commission’s exercise of authority under the 
1996 Act.  See R.C. 4905.04(B). 
 
 
15
__________________ 
 
PFEIFER, J., dissenting.  It is easy to get lost in acronyms and terms of art 
when dealing with a case of this technical complexity.  What we should not lose 
sight of is why we have a Public Utilities Commission, statutory and regulatory 
schemes, and appellate review.  Government regulation and scrutiny exist to 
protect against the ill effects of monopolies, including price gouging. 
 
Here, Ameritech’s switched access rates are five times higher than the costs 
of providing the service.  The pricing should bear a reasonable relationship to the 
cost of providing the service.  Under the current structure, there is no such 
reasonable relationship, and I would find that Ameritech’s pricing scheme violates 
R.C. 4905.26. 
 
It is my sense that the PUCO has lost sight of its own big picture and has 
become too protective of local phone companies at the expense of better service 
and fairer pricing for Ohioans.