Court Opinion

ID: 7816753
Source: CourtListenerOpinion
Date Created: 2022-09-07 17:39:12.6235+00
Date Added: 2024-06-11T16:30:37.352999
License: Public Domain

Robert C. Compton, Special Associate Justice, (dissenting) . . I am unable to agree with the majority opinion and therefore respectfully dissent. This appeal questions the jurisdiction and right of the Arkansas Public Service Commission to grant the relief sought by Appellee Southwestern Bell Telephone Company prohibiting Appellant Allied Telephone Company from connecting to Bell’s facilities automatic long distance equipment conceived by Allied and called “Tel-fast.” Á unique problem and likely a case of first impression is before us because a public utility regulatory body, upon complaint by one telephone company, has restricted another telephone company as to its proposed use of equipment chosen by management. Certainly the effects of such action by such a regulatory body, if lawful, will be far reaching. Allied is an Arkansas corporation owning and operating telephone exchanges in towns and cities within the State, including Sheridan and Fordyce. Bell is a wholly owned subsidiary of American Telephone & Telegraph Company, which owns the lines carrying most of the long distance calls in the United States. Allied’s exchanges are interconnected with Bell’s lines. Bell and Allied operate under contract, cancelable by either party on sixty-days’ notice, the most recent being dated March 25, 1963. This contract sets forth the agreement between the two companies regarding Allied’s connections with BelPs lines, establishes points of connection, operating methods and procedures for the settlement of revenues derived from long distance calls. In recent years Bell has developed and put into wide use “Direct Distance Dialing” (DDD) by which the customer dials a distant number without the assistance of an operator, the calling and the called number and the time length of the call being recorded in a computer. Another recent automation of long distance calls is referred to as “PPCS” meaning “person-to-person collect and special.” "With this equipment, a customer, in addition to directly dialing a distant number, may,- in part, by dialing appropriate digits to activate the machine, call person-to-person, collect, etc., but such call is completed with some assistance from an operator. In March, 1961, Allied, over the objections of Bell, installed such a PPCS system at its toll center in Fordyce; This was the first installation of this type of equipment in the United States. Allied then programmed the installation of another PPCS system in Sheridan and on January 26, 1962, the Arkansas Public Service Commission granted Allied a Certificate of Convenience and Necessity for the Sheridan PPCS system. Subsequently, H. it. Wilburn, Jr., President and General Manager of Allied, himself conceived an improvement on the PPCS machine whereby a customer, if desiring to do so, could dial person-to-person, etc., entirely automatically and without any assistance from an operator. Allied presented its plans for such automatic machinery to the Kellogg Division of International Telephone and Telegraph Company and that company agreed to build the machine for Allied, the device being called “Telfast”. In May, 1962, Mr. Wilburn met with Bell personnel to explain the system to them. After a series of meetings, engineering studies and exchange of letters, Bell, by letter dated April 23, 1963, advised Allied that it would not agree to the connection with its lines of the Telfast system at Sheridan. Allied then informed Bell that it would install Telfast at Sheridan and instead of routing its long distance traffic through Bell’s lines to Pine Bluff, as provided by the contract, it would route Sheridan long distance traffic over its own lines to Fordyce, where Allied’s first PPCS system had been installed in 1961. On June 14, 1963, Bell filed an action before the Arkansas Public Service Commission praying that Allied be ordered to cease and desist from installing the Telfast system at Sheridan because (1) by installing the equipment Allied was breaching its contract with Bell, and (2) the installation of the equipment would be detrimental to the nationwide telephone system. Allied filed an answer and motion denying the Commission’s jurisdiction to grant the relief sought and moved that any action be held in abeyance for six months so that the Telfast system could be subjected to monitored testing by the Public Service Commission. Bell objected to Allied’s motion to hold in abeyance. The City of Sheridan, Arkansas, intervened in behalf of allowing Allied to install Telfast for service to Sheridan citizens. The Arkansas Telephone Association intervened and asserted that any telephone company, should have the right to test new f acilities. The Commission refused to hold Bell’s complaint in abeyance and the matter proceeded to hearing. On December 12, 1963, by a two-to-one decision, the Commission entered its findings, conclusions and order. The findings of the Commission were based upon the assumption that the proposed Allied equipment will work properly from a mechanical standpoint. The Commission nevertheless concluded that it had jurisdiction over the parties and the subject matter and that “the Allied proposal would degrade the quality of long distance service, would breach the contract between Bell and Allied; and would, therefore, be adverse to the public interest.” The Commission then ordered Allied to cease and desist from installing the proposed system at Sheridan for the purposes of connecting it to Bell’s facilities and to cease and desist from re-routing Sheridan long distance traffic through Fordyce and to maintain the present routing pursuant to the agreement between Allied and Bell. Following the filing of a vigorous and well-written dissent, the Commission entered a clarifying order stating that the order only prohibits Allied from connecting Telfast to Bell’s facilities and specifically stated that such order does not interfere with Allied’s right to test equipment on its own system. Allied appealed to the Pulaski Circuit Court, which affirmed the Commission’s order. Allied now appeals to this Court and for reversal of the Commission’s order asserts: (1) “The Commission exceeded its authority in prohibiting installation of automatic service equipment because of ‘degradation’ ”; (2) “The Commission exceeded its authority in prohibiting installation of Telfast because of an alleged breach of contract;” (3) “The order is erroneous because it is arbitrary and capricious.” Bell and the Public Service Commission have filled Appellees’ Briefs in support of the Commission’s actions. As expressed in oral argument Bell takes the position that this is an attempt by a flea on the end of the tail of a dog to wag the dog, inasmuch as Allied’s proposal would degrade the existing telephone system by destroying uniformity. For the purposes of this opinion these points will be discussed under the headings of Authority and Arbitrariness. AUTHOBITY Although one of the two conclusions, reached by the Commission, is that the installation of Telfast “would breach the contract between Bell and Allied”, there is no mention of the contract in the eleven findings of the Commission. However, the facts concerning this contract are not in controversy. It was entered into by the parties on March 25, 1962, approximately nine months after Allied had written Bell confirming an earlier conference at which the installation of Telfast was discussed, and shortly after a meeting discussing the installation in greater detail. Thus at the time this contract luas made Bell had full knowledge of Allied’s intention to install Telfast at Sheridan yet there are no provisions in that contract prohibiting such equipment. Thus it is clear that any anticipatory breach of the contract could not be due to the proposed use of Telfast but due to Allied’s plans to route its Sheridan long distance traffic to Fordyce rather than Pine Bluff, but this proposed change in routing was only made when Bell refused to permit the connection at Sheridan. In any event, the question of who breached the contract and the consequenses thereof is a question for a Court of Law and certainly not a determination that can properly be made by this state regulatory body. The governmental powers of this state are divided among the legislative, executive and judicial, no one of which may exercise any powers belonging to one of the others. Constitution of 1874, Article 4. The judicial power of the state is vested in certain specified courts and this list does not include the public service commission. Ibid, Article 7, Section 1. The Commission is an administrative agency and has no powers not specifically granted by the Legislature for the purpose of regulating public utilities. It is not a court and cannot exercise judicial powers. City of Ft. Smith v. Department of Public Utiliites, 195 Ark. 513, 113 S. W. 2d 100. This is not to say that the Commission could not have authority over any controversy which also involved a breach of contract. An act by a public utility in breach of a contract with another utility could also be in violation of the utility’s duty to the public within the statutory authority of the Commission. However, in such event, the authority of the Commission would exist because the act would violate the statutory regulation governing the activity of the utility, not because of the breech of the contract. That part of the Commission’s order based upon its conclusion of “breach of contract” could well fail because there are no findings of fact to support that conclusion, but must fail because the Commission has no authority to decide such matter. Having eliminated the Commission’s authority to prohibit Allied’s installation of Telfast because of any supposed breach of contract, did the Commission have authority to prohibit the installation because of ‘ ‘ degradation”? If so, one utility has successfully used the police power of the state to prohibit the use of particular machinery by another utility. Since Bell’s complaint was based only upon breach of contract and the alleged detrimental effect on the nationwide telephone system, that part of the Commission’s order concluding’ that the Allied proposal would ‘ ‘ degrade the quality of long distance service” grants Bell’s prayers on a ground not urged by Bell. The reason for this is obvious. The Arkansas Public Service Commission has no jurisdiction over the nationwide telephone system, so the Commission could not base its order on the nationwide effect of Telfast. This is a field pre-empted by Congress and in that arena the states have no power to regulate. 47 USCA 151, Oklahoma-Arkansas Telephone Company v. Southwestern Bell Telephone Company, 45 F. 2d 995 (C.C.A., Ark. 1930), Independent Theatre Owners v. Arkansas Public Service Commission, 235 Ark. 668, 361 S. W. 2d 642. The Commission does have authority to regulate public utilities within the state and under this authority to require utilities to furnish adequate facilities. In any utility there are different grades of service, e.g., the private telephone lines and the multiple party telephone lines. If the grade of service becomes so low that the service becomes inadequate, Commissions have authority to require that adequate service be provided the public by the utility. Here the Commission’s order was not based on a conclusion that the installation of Telfast would result in inadequate service to the people of Arkansas, but rather that it would ‘ ‘ degrade the quality of long distance service.” Yet, by its clarifying order, the Commission specifically stated that its order does not interfere with Allied’s right to test this equipment within its own system. In its tenth finding the Commission stated that it proceeded on the assumption that the equipment will -work properly from a mechanical standpoint. In its clarifying order it expressly permitted Allied to test the equipment within its own system, yet it enjoined Allied from connecting Telfast to Bell’s facilities. As shown, the Commission had no authority for this action on the ground of breach of contract. Likewise, the Commission’s action is not authorized on the ground of degradation of quality. When the Commission found that Telfast will work properly from a mechanical standpoint and then permitted Allied to test Telfast within its own system and actual effect was a determination of adequacy and the Commission exceeded its authority in prohibiting the connection of Telfast to Bell’s lines. To hold otherwise would result in the Commission’s allowing Allied to furnish inadequate service to the public within Allied’s system. The Commission is charged with the regulation of public utilities for the benefit of the consuming public. It cannot, with or without complaint, knowingly permit a utility to furnish inadequate service to any segment of the people of this state. It cannot correctly be said that a finding that the use of Telfast would degrade service is tantamount to a finding of unreasonable, unsafe, inadequate or insufficient service. If the Commission actually found that the use of Telfast would result in inadequate service to the public it could have and would have so stated. This Court cannot re-phrase the findings of the Commission in order to sustain the Commission’s unauthorized acts. The Commission simply does not have authority to prohibit the use of particular equipment on the basis of degradation. Otherwise, the Commission could direct the type of vehicles, poles, lines, insulators, telephone instruments and personnel based solely upon its own conception of grades of quality. Authority to regulate does not include authority to manage. If utility equipment functions mechanically and provides adequate and reasonable service to the public, a state regulatory body has no authority to overrule management’s decision to put that equipment into use. In Banton v. Belt Line Ry. Corp., 268 U.S. 413, 45 S. Ct. 534, 537, 69 L. Ed. 1020, it is said: “Broad as its power to regulate, the state does not enjoy the freedom of an owner. Appellees property is held in private ownership; and, subject to reasonable regulation in the public interest, the management and right to control the business policjr of the company belong to its owners. * * *” Certainly, there can be no question of the right of a utility to adopt new methods of furnishing service if those methods are reasonable. The Commission has no authority to substitute its judgment for the judgment .of management when the choice is between two systems which provide reasonable and adequate service. State of Missouri v. Public Service Commission of Missouri, 262 U.S. 276, 43 S. Ct. 544, 67 L. Ed. 981, 31 ALR 807. AEBITEAEINESS It is not often that an appellate court will construe the actions of the fact-finding administrative tribunal to be unreasonable, an abuse of authority or arbitrary and capricious. 2d Am. Jur. 2d. Administrative Law, Section 651. This Court has often stated that its judgment will not be substituted for that of the Commission and that an order of the Commission will not be disturbed if supported by substantial evidence. City of Ft. Smith v. Southwestern Bell Telephone Co., 220 Ark. 70, 247 S. W. 2d 474. But this does not mean that this Court should summarily affirm a Commission’s act, even when based upon substantial evidence, if that act exceeds the Commission’s authority and is arbitrary and unreasonable. The entire evidence relating to the effect of Telfast is speculation. The cost to Allied, Bell and the public; the nature and extent of confusion and customer education, and the overall effect of change in uniformity are all actually unknown. This is true because nobody really knows and cannot know until the device is adequately tested. All Allied asks is an opportunity to submit the device to an adequate test. It has already invested a substantial sum in the development and manufacture of Telfast; its management is convinced that it will be of benefit to the public and Allied is willing to indemnify Bell against any loss by reason of the connection of Telfast to Bell’s lines. Of course, a test confined to Allied’s own small territory would in reality be no test at all. The principle that new ideas deserve to be tested by customer acceptance or rejection is basic to the concept of a free enterprise society. The Arkansas law clearly reflects this principle in that the Commission is directed (Ark. Stats. 73-201, 218) to prescribe reasonable regulations for the examination and testing of the plant and equipment or apparatus employed by airy public utility in performing any service to its customers. In its finding no. 7, the Commission states that “the feature of Allied’s proposal that is objected to as being contrary to the public interest is the elimination of operator control over those types of long distance calls in which, under the ‘PPCS’ system, the operator performs an essential function.” However, the record shows that if a customer so desires he may merely dial the digit “0” and place his call in the present manner. Also, Allied offers to have an operator on duty to furnish aid, if needed, in the public’s use of telfast. The Commission, also states that uniformity is a desirable quality in the nation’s toll network, however, uniformity was not met by the Commission permitting Bell’s installation of ‘ ‘ DDD ’ ’ equipment and its prior approval of the Allied “PPCS” system at Fordyce. The Commission prohibited Allied from connecting Telfast to Bell’s toll lines, yet permitted Allied to install Telfast within its own system which would, of course, result in non-uniformity. Each innovation in the telephone communications industry has resulted in non-uniformity until the proven contribution of that innovation and subsequent industry-wide adaption has resulted in the uniformity of its use. Truly, necessity is the mother of invention and the building of a better mouse trap will carve a path to the door of the builder. The record in this case reveals that all parties recognize a need for fully automatic long distance equipment and, according to Bell’s own witness, a need that Bell has been studying and working toward for some years. Allied has now developed and had manufactured a machine designed to fill that need. It asks that the device be tested for six months, that such test be monitored by the Commission and Bell and offers to hold Bell harmless for any loss it may sustain. The Commission has denied Allied permission to connect Telfast to Bell’s lines for such a test. That action effectively prevents Allied from adequately testing the device because such test confined to its own small system would be inconsequential. A determination of the adequacy of Telfast as a fully automatic long distance device cannot be made unless and until it is put into use as a part of the telephone system. Allied has developed the device and its management has directed its installation at Sheridan. The City of Sheridan asks that Allied be permitted to install Telfast at Sheridan. The Arkansas Telephone Association asserts the right of telephone companies to test new facilities. Only Bell objects to the installation and connection with its lines. Under these facts and circumstances the action of the Commission not only exceeded its authority hut is also arbitrary and unreasonable. This cause should be reversed and remanded to the Pulaski Circuit Court, to he remanded to Arkansas Public Service Commission with directions to permit Allied to install Telfast at Sheridan and connect it with Bell’s lines for a six-months ’ test to he monitored by the Commission and Bell, Allied first to indemnify Bell against loss by reason of the connection of Telfast to Bell’s lines. Smith and Johnson, J. J., join in this dissent.