Case Title: Verizon Florida, Inc. v. E. Leon Jacobs, Jr.

Citation: 

Docket Number: SC01-323

State: florida

Court: Florida Supreme Court

Date: 2002-02-14T00:00:00Z

Document:
1. In re Petition by Verizon Florida, Inc. for Declaratory Statement, 1
F.P.S.C. 1:201 (2001).
Supreme 
Court 
of 
Florida
 
____________
No. SC01-323
____________
VERIZON FLORIDA, INC.,
Appellant,
vs.
E. LEON JACOBS, JR., ET AL.,
Appellees.
[February 14, 2002]
PER CURIAM.
Verizon Florida Incorporated has filed this appeal from Order No. PSC-01-
0097-DS-TL of the Public Service Commission, concerning imputation of
telephone directory advertising revenues1.  We have jurisdiction.  See  art V, § 3
(b)(2) Fla. Const.  We reverse the decision of the Public Service Commission for
the reasons expressed below.
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BACKGROUND
Verizon Florida (“Verizon”) is a local exchange carrier licensed under
chapter 364, Florida Statutes (2001) to provide telecommunications services in
certain areas of Florida.  Verizon, as a local exchange company, is required to
distribute a white pages directory listing its customers’ telephone numbers.  See
Fla. Admin. Code Rule 25-4.040.  Verizon contracts with Verizon Directories
(“Directories”), its corporate affiliate, to publish the required white pages
directories.  Directories also publishes and sells yellow pages directory advertising. 
Under the contract, Verizon bills and collects yellow pages advertising revenue for
Directories by including the charges in its telephone bills.  Directories pays Verizon
for these services and these payments are included in Verizon’s regulated revenues. 
However, Verizon does not include in its regulated revenues the money it bills and
collects for Directories or any other company for which it bills and collects.  
In 1995, the Legislature enacted section 364.051, Florida Statutes (1995),
relating to price regulation of local exchange telecommunications companies.  See
ch. 95-403, § 9, Laws of Fla.  Under section 364.051, a telecommunications
company could elect to cap its rates for basic services.  In exchange for this,
“price-capped” companies are exempted from rate base, rate of return regulation,
2. Section 364.051 expressly exempts price-cap companies from sections
364.03, 364.035, 364.037, 364.05, 364.055, 364.14, 364.17, and 364.18, Florida
Statutes (2001).
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and the requirements of several statutes,2 including section 364.037, Florida
Statutes (2001), regarding the inclusion of directory advertising revenues for
purposes of rate setting.  See § 364.051(c), Fla. Stat. (2001).  Effective January 1,
1996, Verizon elected to operate under this price cap regulation scheme.  
On October 13, 2000, Verizon requested a declaratory statement asking the
Commission to declare that it is not required to pay regulatory assessment fees on
the yellow pages advertising revenues that are earned and booked by Directories. 
In its petition, Verizon argued that it should not be required to pay such fees
because they are earned and booked by an affiliate, Directories.  Verizon contended
that section 364.037, which directs the Commission to consider revenues derived
from advertisements in telephone directories when establishing telecommunications
rates, no longer applies to Verizon because as a “price-cap” company it is exempt
under section 364.051.
The Commission, in Order No. PSC-01-0097-DS-TL, disagreed with
Verizon, concluding that it was allowed to impute the yellow pages directory
revenues booked by Directories to Verizon.  In support of this proposition, the
Commission cited its earlier order, In re Investigation into Regulatory Assessment
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Fee Calculations for 1985 and 1986 for United Telephone Company of Florida, 89
F.P.S.C. 6-224 (1989) (Order No. 21364) issued June 9, 1989, in Docket No.
880149-T L.  In that order, the Commission imputed revenues associated with the
affiliate company to the local telecommunications company, even though the
revenues were recorded on the books of the affiliate.  Based on this previous order,
the Commission explained here that it did not matter that Directories did not meet
the definition of a telecommunications company, so long as the service being
provided was one that “Verizon [was] required to provide by virtue of Verizon
being certificated to provide basic local telecommunications service.”  Order No.
PSC-01-0097-DS-TL at 4.  The Commission found that in the instant case,
publishing the yellow pages advertising did not appear to be a separate function
from publishing the white pages.  See Order No. PSC-01-0097-DS-TL at 7. 
APPEAL
On appeal, Verizon contends that the Commission incorrectly interpreted
section 364.336, Florida Statutes (2001), when it concluded that Verizon had to pay
a regulatory assessment fee on the yellow pages advertising revenues it books and
collects for Directories.  Verizon argues that the Commission, in its order, failed to
give effect to the plain meaning of section 364.336, which would preclude the
Commission from including Directories’ revenues in the calculation of Verizon’s
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regulatory assessment fees. 
An agency’s interpretation of the statute it is charged with enforcing is
entitled to great deference.  See BellSouth Communications, Inc. v. Johnson, 708
So. 2d 594, 596 (Fla. 1998).  Further, a court will not depart from the
contemporaneous construction of a statute by a state agency charged with its
enforcement unless the construction is “clearly erroneous.”  PW Ventures, Inc. v.
Nichols,  533 So. 2d 281, 283 (Fla. 1988).  Verizon contends that the
Commission’s interpretation of section 364.336, Florida Statutes, is clearly
erroneous.  We agree.
Section 364.336, Florida Statutes, states in pertinent part: “[E]ach
telecommunications company licensed or operating under this chapter . . . shall pay
to the commission . . . a fee that may not exceed 0.25 percent annually of its gross
operating revenues derived from intrastate business.”  
Under Florida's rules of statutory construction, the phrase “its gross
operating revenues" must be given its plain and ordinary meaning.  See Citizens v.
Florida Pub. Serv. Comm’n, 425 So. 2d 534 (Fla. 1982).  There is no need to
resort to other rules of statutory construction when the language of the statute is
unambiguous and conveys a clear and ordinary meaning.  See Starr Tyme, Inc. v.
Cohen, 659 So. 2d 1064 (1995).
3. Section 364.037, entitled “Telephone directory advertising revenues,”
provides the following:
   The commission shall consider revenues derived from advertising in
telephone directories when establishing rates for telecommunications
services. When establishing such rates, the gross profit from all
directory advertising in the local franchise area of a
telecommunications company shall be allocated between the regulated
portion and the nonregulated portion of its operation as provided in
this section.
   (1) The gross profit derived from directory advertising to be
included in the calculation of earnings for ratemaking purposes shall be
the amount of gross profit derived from directory advertising during
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The pertinent language of section 364.336 is plain when it states that
telecommunications companies, operating under chapter 364, are only required to
pay regulatory assessment fees based on a percentage of their own gross operating
revenues derived from intrastate business.  In its order, the Commission imputes
Directories’ revenues to Verizon for purposes of regulatory assessment fee
calculation.  Yet, nothing in the plain language of section 364.336 serves as a basis
for allowing the Commission to impute revenues to Verizon from Directories in the
regulatory assessment fee calculus.  Accordingly, we hold that the Commission
does not have the authority under section 364.336 to impute Directories’ yellow
pages advertising revenues to Verizon.
It appears that Verizon’s practice of imputing affiliate revenues is based on
the intent of section 364.037,3 to “secure most of the benefits of such profits for
the year 1982 adjusted, for each subsequent year, by the Consumer
Price Index published by the United States Department of Commerce
and by customer growth or the amount of gross profit actually derived
from directory advertising in the local franchise area for the year,
whichever is less.
   (2) The gross profit derived from directory advertising to be
allocated to the nonregulated operation of a company shall be the
gross profit which is in excess of the adjusted 1982 amount
determined in accordance with subsection (1).
   (3) For the purpose of this section, the amount of gross profit of a
company from directory advertising for the year 1982 is the actual
gross profit derived from such advertising for that year. If, however,
the expense to a company to furnish directories in 1982 exceeded 40
percent of the gross revenue derived from its directory advertising, the
1982 level of gross profit shall be adjusted to reflect a cost of 40
percent of its 1982 gross revenue. This adjusted 1982 gross profit
level shall be utilized in lieu of actual gross profit for 1982 when
making the calculations in subsection (1).
   (4) Any profit associated with providing directory advertising
service outside the franchise area of a company may not be
considered when determining gross profit derived from directory
advertising for ratemaking purposes. Any investment or expenses
associated with providing directory advertising service outside its
franchise area may not be recovered through rates for telephone service.
   (5) Notwithstanding any provision of this section to the contrary, no
less than two-thirds of the total gross profit of a company from
directory advertising within its local franchise area for any year shall be
included in the regulated portion of its operation when establishing
rates.
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telephone companies’ ratepayers.”  In re Investigation into the Regulatory
Assessment Fee Calculations for 1985 and 1986 of United Telephone Company of
Florida, 89 F.P.S.C. 5:83 (1989) (Order No. 21171).  As Commissioner Baez
pointed out in his dissent from the instant order, the publication of a directory by a
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company which is not a telecommunications company is not subject to regulation
by the Commission, but for the mandate of section 364.037.  Here, Verizon is
exempt from the requirements of section 364.037 by virtue of its status as a “price-
cap” company.  See § 364.051(c).  Since Verizon’s yellow pages advertising
revenues are exempt from section 364.037's rate of return calculation, the basis for
their imputation no longer exists.  Accordingly, section 364.037 offers no basis to
impute Directories’ yellow pages advertising revenues to Verizon.
CONCLUSION
Accordingly, we reverse the order of the Commission.  We hold that the
Commission erred in declaring that yellow pages advertising revenues that are billed
and collected by Verizon, but which are booked by Directories, should continue to
be imputed to Verizon for purposes of regulatory assessment fee calculation.  
It is so ordered.
WELLS, C.J., and SHAW, HARDING, ANSTEAD, PARIENTE, LEWIS, and
QUINCE, JJ., concur.
NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION, AND
IF FILED, DETERMINED.
An Appeal from the Public Service Commission
Marvin E. Barkin and Marie Tomassi of Trenam, Kemker, Scharf, Barkin, Frye,
O’Neill & Mullis, P.A., St. Petersburg, Florida; and Kimberly Caswell, Tampa,
Florida,
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for Appellant
Harold McLean, General Counsel, and Christiana T. Moore, Associate General
Counsel, Florida Public Service Commission, Tallahassee, Florida,
for Appellees
Raoul G. Cantero, III of Adorno & Zeder, P.A., Miami, Florida,
for BellSouth Telecommunications, Inc., Amicus Curiae