Case Title: Cincinnati Bell Tel. Co. v. Pub. Util. Comm.

Citation: 2001-Ohio-134

Docket Number: 20000507

State: ohio

Court: Ohio Supreme Court

Date: 2001-07-05T00:00:00Z

Document:
[Cite as Cincinnati Bell Tel. Co. v. Pub. Util. Comm., 92 Ohio St.3d 177, 2001-Ohio-134.] 
 
 
CINCINNATI BELL TELEPHONE COMPANY, APPELLANT, v. PUBLIC UTILITIES 
COMMISSION OF OHIO, APPELLEE. 
[Cite as Cincinnati Bell Tel. Co. v. Pub. Util. Comm. (2001), 92 Ohio St.3d 
177.] 
Public Utilities Commission — Access by new competitive local exchange 
carrier to local markets — Commission’s order denying Cincinnati Bell 
Telephone Company’s proposed local phone line charge not manifestly 
against the weight of evidence and not unreasonable or unlawful — 
Commission’s order to reject Cincinnati Bell’s cost study for its 
directory assistance database and to adopt rates deemed presumptively 
reasonable by the Federal Communications Commission was based on 
ample evidence, was not against the manifest weight of the evidence, and 
was neither unreasonable nor unlawful. 
(No. 00-507 — Submitted January 30, 2001 — Decided July 5, 2001.) 
APPEAL from the Public Utilities Commission of Ohio, No. 96-899-TP-ALT. 
__________________ 
 
PFEIFER, J.  In 1996, the United States Congress sought to provide for 
local market competition in the telecommunications industry with the passage of 
the Telecommunications Act of 1996 (the “1996 Act”).  The 1996 Act allows for 
new competitive local exchange carriers (“CLECs”) to enter local telephone 
markets by several mechanisms.  One mechanism involves the CLEC’s access to 
parts of the network of an incumbent local exchange carrier (“ILEC”) as 
unbundled network elements (“UNEs”) and provision of local telephone services 
over those elements. By using this entry method, the CLEC can use its own 
facilities (e.g., switching) in combination with facilities of the ILEC (e.g., the 
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2 
local phone line or “loop”).  See, generally, Section 251(c)(2) through (4), Title 
47, U.S.Code. 
 
Section 251(d)(1) of the 1996 Act directed the Federal Communications 
Commission (“FCC”) to establish rules implementing the local competition 
provisions contained in Section 251 of the 1996 Act.  On August 8, 1996, the 
FCC issued its comprehensive implementation order, In re Implementation of the 
Local Competition Provisions in the Telecommunications Act of 1996, CC Docket 
No. 96-98, FCC 96-325 (1996), 11 FCC Record 15499.1  The order determined 
that rates charged to CLECs for access to UNEs would be established using a new 
methodology it called TELRIC.2  Because the Public Utilities Commission of 
Ohio proceeding on appeal dealt with establishing the rates charged to CLECs for 
access to Cincinnati Bell Company’s UNEs and other facilities, the commission 
was correct in characterizing it as a TELRIC proceeding. 
 
This is an appeal as of right of orders of the commission in its case No. 
96-899-TP-ALT, in which the appellant challenges the commission’s 
determination of costs that devolve into the rates to be charged by Cincinnati Bell 
as an ILEC for several of its UNEs or other service elements to be provided to 
CLECs. 
I 
Local Loops 
                                                          
 
1. 
The Public Utilities Commission of Ohio issued its own Local Service Guidelines, which 
were contained in rules it promulgated in the proceeding entitled In re Commission Investigation 
Relative to the Establishment of Local Exchange Competition & Other Competitive Issues, case 
No. 95-845-TP-CO1.  The Guidelines included in substantial part the TELRIC (see footnote 2) 
methodology espoused by the FCC. 
2. 
TELRIC stands for Total Element Long Run Incremental Cost.  TELRIC is a costing 
methodology established by the FCC that determines costs on the basis of the lowest cost and 
most efficient technology, using forward-looking costs.  Section 51.505(b)(1), Title 47, C.F.R., 
rule vacated, Iowa Util. Bd. v. Fed. Communications Comm. (2000), 219 F.3d 744, certiorari 
granted, 531 U.S. ___, 121 S.Ct. 877-879, 148 L.Ed.2d 788. 
January Term, 2001 
3 
 
One category of UNEs for which the commission determined costs was 
local loops.3  TELRIC costing methodology and the applicable FCC and 
commission rules require a weighting of business and residential loops.  
Cincinnati Bell’s cost studies originally weighted its loop costs on the basis of 
eighty percent business loops and twenty percent residential loops to develop an 
average loop cost.  That weighting was based on a marketing projection of the 
types of loops that CLECs were expected to request access to as UNEs. 
 
Upon further consideration of the requirements of TELRIC pricing theory, 
Cincinnati Bell decided that it was inappropriate for it to predict what loops 
CLECs might request access to.  Rather, Cincinnati Bell  proposed to weight the 
cost of business and residential loops according to the actual quantities of each 
type in its network.  It used its total loop universe and actual loop populations in 
its three rate bands, representing geographical areas, the rates and the business-to-
residential weighting being different for each rate band.  After considering these 
changes, the commission adopted the eighty/twenty weighting proportions 
originally submitted by Cincinnati Bell. 
 
Cincinnati Bell argues that the court should reverse the commission’s 
decision regarding the pricing of loops and remand the matter to the commission 
for further proceedings.  It contends that the eighty/twenty weighting proportions 
adopted by the commission are inaccurate, because they were based on 
projections of usage by CLECs that are based on a small sample of loops.  
Cincinnati Bell argues that the projections should be based on the total universe of 
loops, as required by the TELRIC methodology adopted by the commission. 
 
On the other hand, the commission argues that its finding of eighty percent 
business loops and twenty percent residential loops is appropriate and supported 
                                                          
 
3. 
Local loops are copper wires/cables, fiber optic cable, other digital loop carriers, and 
other facilities between ILECs’ switch locations and end-user customers, over which telephone 
signals are transmitted.  The TELRIC methodology assumes that customer locations and switch 
locations will remain unchanged. 
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4 
by the manifest weight of the evidence.  The commission contends that Cincinnati 
Bell in its appeal is asking the court to reweigh the evidence and substitute its 
judgment for that of the commission. 
 
We agree with the commission.  We have consistently refused to substitute 
our judgment for that of the commission on evidentiary matters.  Cincinnati Gas 
& Elec. Co. v. Pub. Util. Comm. (1999), 86 Ohio St.3d 53, 711 N.E.2d 670; 
Dayton Power & Light Co. v. Pub. Util. Comm. (1983), 4 Ohio St.3d 91, 4 OBR 
341, 447 N.E.2d 733; Columbus v. Pub. Util. Comm. (1959), 170 Ohio St. 105, 10 
O.O.2d 4, 163 N.E.2d 167.  Traditionally, we have deferred to the judgment of the 
commission in instances involving the commission’s special expertise and its 
exercise of discretion, when the record supports either of two opposing positions.  
AT&T Communications of Ohio, Inc. v. Pub. Util. Comm. (1990) 51 Ohio St.3d 
150, 555 N.E.2d 288; Dayton Power & Light Co. v. Pub. Util. Comm. (1962), 174 
Ohio St. 160, 21 O.O.2d 427, 187 N.E.2d 150.  We have held that we will reverse 
a commission order only where it is unreasonable, unlawful, or against the 
manifest weight of the evidence or shows misapprehension, mistake, or willful 
disregard of duty.  Cincinnati Gas & Elec. Co., 86 Ohio St.3d 53, 711 N.E.2d 
670; Ohio Edison Co. v. Pub. Util. Comm. (1992), 63 Ohio St.3d 555, 589 N.E.2d 
1292; see R.C. 4903.13. 
 
We have reviewed the record in the matter of local loops and find that it 
supports the commission’s decision.  Because of its unique experience and 
expertise, the commission is invested with a high level of discretion and is 
remarkably qualified to make the determination as to local loop weighting.  We 
affirm its order. 
II 
Loop-Qualification Services Procedural Issue 
 
The commission claims that the issue of charges for loop-qualification 
services is not properly before the court on appeal, because it was not a subject of 
January Term, 2001 
5 
Cincinnati Bell’s application for rehearing below and an application for rehearing 
is a jurisdictional prerequisite to an appeal under R.C. 4903.10.  R.C. 4903.10(B) 
states, “Such application shall be in writing and shall set forth specifically the 
ground or grounds on which the applicant considers the order to be unreasonable 
or unlawful.  No party shall in any court urge or rely on any ground for reversal, 
vacation, or modification not so set forth in the application.” 
 
Cincinnati Bell filed an application for rehearing by the commission in 
which it alleged seven errors, and intervenors below filed a joint application for 
rehearing in which they alleged five errors.  Cincinnati Bell had originally 
prevailed on the issue of loop-qualification charges, which was raised by the 
intervenors in their joint application for rehearing.  On reconsideration, the 
commission ruled against Cincinnati Bell on the issue in its January 20, 2000 
Second Entry on Rehearing. 
 
While assertion of error in an application for rehearing is a statutory 
jurisdictional prerequisite to an appeal on the alleged error, R.C. 4903.10 does not 
require that the error be alleged in the appellant’s application for rehearing; it can 
be in an application for rehearing filed by a nonappellant intervening party.  Cf. 
Columbus & S. Ohio Elec. Co. v. Pub. Util. Comm. (1984), 10 Ohio St.3d 12, 10 
OBR 166, 460 N.E.2d 1108.  The issue of loop-qualification charges was raised 
below in an intervenor’s application for rehearing.  Accordingly, that issue is 
properly before this court, and we now address it. 
Substantive Issue 
 
Cincinnati Bell proposed that it be allowed to impose a loop-qualification 
charge, a nonrecurring charge to a CLEC to recover Cincinnati Bell’s cost of 
determining the physical makeup of a specific loop.  In its January 26, 2000 
Second Entry on Rehearing, the commission prohibited Cincinnati Bell from 
charging CLECs for the costs of performing loop-qualification services. 
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6 
 
Cincinnati Bell also proposed a loop-conditioning charge to recover 
Cincinnati Bell’s costs of conditioning a loop, when requested by a CLEC, as 
provided by the FCC’s rules.  Conditioning involves an ILEC’s physical removal 
of devices that it had previously added to the loop.4  The commission approved 
the conditioning charge. 
 
On appeal, Cincinnati Bell argues that it will be necessary to qualify a 
loop before it can be conditioned.  It points out that the FCC’s rules provide for 
recovery of an ILEC’s cost of conditioning a loop and argues that the  services 
rendered in qualifying a loop should be considered conditioning  services, the 
costs of which are recoverable from a CLEC requesting loop conditioning.  The 
parties did not dispute the necessity of Cincinnati Bell’s qualifying a loop before 
it could be conditioned.  However, it is evident that the activities and services to 
be performed to qualify a loop are different from those required to condition a 
loop.  We therefore conclude that the commission was justified in distinguishing 
between the two and denying Cincinnati Bell’s proposed loop-qualification 
charge. 
 
Because the commission’s decision denying the proposed loop-
qualification charge was not manifestly against the weight of the evidence and 
was not unreasonable or unlawful, we affirm the commission’s order. 
III 
Directory Assistance Database 
 
The proceedings below also involved the pricing of Cincinnati Bell’s 
directory assistance database, which, according to the commission’s Local 
Service Guidelines, is to be set at a level that allows it (as an ILEC) to recover the 
                                                          
 
4. 
These devices include loading coils, bridge taps, low-pass filters, range extenders, and 
similar devices.  ILECs such as Cincinnati Bell added these devices to the loops in order to gain 
architectural flexibility and voice transmission capability.  Providing these benefits diminishes the 
loops’ capacity to deliver advanced services and thus precludes a requesting CLEC from gaining 
January Term, 2001 
7 
TELRIC of providing such services, together with a reasonable contribution to the 
joint and common costs incurred.  Guidelines, Section XV(C)(3); see footnote 1 
above. 
 
Cincinnati Bell presented to the commission a TELRIC cost study for its 
directory assistance database, which considered circumstances assumed to exist in 
the future.  The commission disagreed with a number of Cincinnati Bell’s 
assumptions and projections.  The commission also criticized Cincinnati Bell’s 
cost study as overstating certain costs.  November 4, 1999 Supplemental Opinion 
and Order at 65 and 66.  In addition, the commission compared Cincinnati Bell’s 
proposed directory assistance database rates to the rates charged by Bell operating 
companies in Texas and in New York, which it found to be significantly lower 
than Cincinnati Bell’s proposed rates.  Id. at 66.  Based on the foregoing, the 
commission found that Cincinnati Bell had not presented a sufficient basis for 
concluding that its proposed directory assistance database rates should be 
adopted.  Id. 
 
Having rejected Cincinnati Bell’s cost study and proposed directory 
assistance database rates, the commission concluded that Cincinnati Bell should 
adopt the rates which the FCC established as presumptively reasonable: $0.04 per 
initial subscriber directory listing and $0.06 per updated listing.  November 4, 
1999 Supplemental Opinion and Order at 65-67, citing Third Report and Order in 
CC Docket No. 96-115 (1999), 14 FCC Record 15555, 15599-15605, paragraphs 
93-94. 
 
On appeal Cincinnati Bell disputes the commission’s rejection of certain 
of its cost-study assumptions and determinations and complains that the 
commission should not have used the rates of the Bell operating companies in 
Texas and New York to reject Cincinnati Bell’s cost study.  However, Cincinnati 
                                                                                                                                                              
 
full use of the loop’s capabilities.  CC 96-98 Third Report and Order (1999), 15 FCC Record 
3696, 3775, at paragraph 172. 
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Bell has not established that the commission acted unreasonably or unlawfully.  
The commission did not adopt the rates of the other carriers in substitution for 
Cincinnati Bell’s proposed rates.  Rather, it compared the rates of other carriers to 
Cincinnati Bell’s proposed rates to test their reasonableness.  We find that the 
commission’s comparison was sensible and warranted. 
 
Cincinnati Bell also criticized the commission for its adoption of the 
“presumptively reasonable” directory assistance database rates determined by the 
FCC and its application of those rates to Cincinnati Bell, because they were 
announced after conclusion of the hearing below.  However, the FCC-announced 
rates became a matter of public record before the commission reached its 
decisions in the proceedings below, and the commission deemed them to be 
relevant to its deliberations.  Moreover, Cincinnati Bell was granted ample 
opportunity to determine and to demonstrate to the commission its costs of 
preparing its directory assistance database, and the commission rejected 
Cincinnati Bell’s cost determination. 
 
Cincinnati Bell argues that the FCC-announced rates should not be applied 
to Cincinnati Bell because those rates were for sales of lists to publishers of 
telephone directories and not for recovery of the costs of preparing a directory 
assistance database.  However, the commission specifically found that the costs 
incurred by Cincinnati Bell in providing subscriber lists to directory publishers 
should be similar to those for providing such information to competitive carriers 
and based on that finding, adopted the FCC-announced rates.  Id. at 66. 
 
Cincinnati Bell has failed to demonstrate that the commission acted 
unreasonably or unlawfully by applying the FCC-announced rates to Cincinnati 
Bell.  The commission’s decisions to reject Cincinnati Bell’s cost study for its 
directory assistance database and to adopt the rates deemed presumptively 
reasonable by the FCC were based on ample evidence, were not against the 
manifest weight of the evidence, and were neither unreasonable nor unlawful.  
January Term, 2001 
9 
Therefore, we affirm the commission as to the matter of the directory assistance 
database. 
Order affirmed. 
 
MOYER, C.J., DOUGLAS, MCMONAGLE, F.E. SWEENEY, COOK and 
LUNDBERG STRATTON, JJ., concur. 
 
TIMOTHY E. MCMONAGLE, J., of the Eighth Appellate District, sitting for 
RESNICK, J. 
__________________ 
 
Frost & Jacobs, L.L.P., and Douglas E. Hart, for appellant. 
 
Betty D. Montgomery, Attorney General, Duane W. Luckey, Steven T. 
Nourse and Stephen A. Reilly, Assistant Attorneys General, for appellee. 
 
Vorys, Sater, Seymour & Pease, L.L.P., Philip F. Downey and Benita A. 
Kahn; David J. Chorzempa; Sidley & Austin, Michael D. Warden and David L. 
Lawson, urging affirmance for amicus curiae TCG Ohio. 
 
Bell, Royer & Sanders Co., L.P.A., and Judith B. Sanders, urging 
affirmance for amicus curiae WorldCom, Inc. 
__________________.