Court Opinion

ID: 4130189
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:01:20.232205+00
Date Added: 2024-06-11T14:31:53.190588
License: Public Domain

December 31, 1990

Honorable Bob Bullock      Opinion No.   JM-1280
Comptroller of Public
   Accounts                Re:   Gross receipts assessment for
L.B.J. Office Building     for telephone companies under sec-
Austin, Texas 78774        tions 78 through 82 of article
                           1446c, V.T.C.S., the Public Utility
                           Regulatory Act   (RQ-2090)

Dear   Mr. Bullock:

     Sections 78 through 82 of article 1446c, V.T.C.S.,   the
Public Utility Regulatory Act   [hereinafter PURA], impose a
regulatory fee on each public utility     falling within  the
Public Utility Commission's   [hereinafter PUC] jurisdiction
for the purpose of defraying the costs and expenses incurred
by the commission in the administration of PURA. The fee is
calculated as a percentage of the gross receipts from rates
charged by public utilities to ultimate consumers.

     You ask a series of nine questions regarding the appli-
cation of the gross receipts     fee to telecommunications
carriers operating in Texas. Specifically, you ask whether
and under what circumstances the fee may be imposed upon
certain telecommunications carriers, in light of the dives-
titure by American   Telephone & Telegraph Company   [herein-
after AT & T] of Bell operating    companies imposed   in an
antitrust consent decree entered by order of the federal
courts. Essentially, you wish to know which carriers      are
subject to the jurisdiction of the      PUC and who is an
"ultimate consumer" under certain circumstances for purposes
of section 78 of PUPA.

     Section 78 of PURA imposes an assessment    upon each
"public utility" subject to the PUC's jurisdiction that is
based upon the "rates" charged to the "ultimate consumers."
Section 78 of PURA provides:

             An assessment is hereby imvosed uvon each
          public utilitv within the commission's iuris-
          diction, includinu interexchanue telecommuni-
          cations carriers. servina the ultimate   con-
          sumer eoual to one-sixth of one percent     of
          its oross receints   from rates charsed the
          ultimate consumers in Texas for the wurwose

                               p. 6866
Honorable Bob Bullock - Page 2    (JM-1280)

        of defravina the costs and exnenses    incurred
        in the administration of this Act;.      There-
        after the commission shall, subject to the
        approval of the Legislature,       adjust this
        assessment  to provide     a level of income
        sufficient to fund the commission      and the
        office of public      utility counsel.       -Y
        interexchange   telecommunications      carrier
        found dominant as to any service market under
        Section 100(b) or filing a petition        under
        Section 100(f) of this Act shall be required
        to reimburse the Office of Public Utility
        Counsel for the costs of participation before
        the commission   on behalf of       residential
        ratepayers in. any of the proceedings      under
        Section 100 of this Act to the extent      found
        reasonable by the commission.      Recovery   of
        costs under this section by the Office of
        Public Utility   Counsel shall not       exceed
        $175,000 per annum. Nothina     in this Act or
        any other nrovision    of law shall nrohibit
        interexchanae telecommunications carriers who
        do not vrovide     local exchanue     teleuhone
        service from collectina the fee imnosed under
        this Act as an additional      item senaratelv
        stated on the customer bill as 'Utilitv Gross
        Receints Assessment*.    (Emphasis added.)

     You first ask:

        What telephone  companies  should be paying
        this assessment  -- does it apply to all
        telephone companies which may be subject to
        any facet of the PUC's jurisdiction, whether
        for rate making purposes or for more limited
        purposes?

     You inform us that you have advised all "long distance
telephone companies"  that they fall within the reach of
section 78 and are thereby subject to the assessment,    but
that several carriers disagree with your construction.    We
assume that there is no question that local exchange
carriers (known as LECs) who provide     local services to
residential and business subscribers  fall within the ambit
of the act. We assume that, with the phrase "long distance
telephone companies,"  you refer to interexchange   carriers
(known as IXCs) that offer either interLATA or intraLATA
long distance service. You state that the PUC has failed to
take any consistent   position on whether    the assessment
applies to all carriers subject to any facet of its
jurisdiction or just to "dominant carriers"   as defined  in
section 3(c)(2)(B) of PURA. It is suggested that section 78
P. 6867
Honorable Bob Bullock - Page 3      (JM-1280)

reaches only those carriers over which the PUC has    ratemak-
ing authority.  We disagree.

     In Attorney General Opinion H-811 (1976), this office
was asked, inter alla whether section 70 reached only those
utilities over which'the   PUC had ratemaking authority  or
whether it extended to any utility over which it exercised
any type of jurisdiction.  The opinion concluded:

           The quoted language of section 78 is
        unqualified.   Consequently,   the Commission
        need not exercise any particular      form of
        jurisdiction  over a utility     in order to
        assess the utility.   In our view, the term
        \Commission's  jurisdiction'    may best    be
        defined by reference to article III of the
        Act, entitled  'Jurisdiction.'    Therein  the
        Commission is given jurisdiction over various
        utilities.

The relevant language of section 78 has not been amended
since the issuance of Attorney General Opinion H-811, except
for the addition of the phrase     llincluding interexchange
carriers."

     Any doubt as to whether section 78 now' reaches all
interexchange carriers is resolved by examining the legis-
lative history for Senate Bill No. 229, which was enacted in
1987. Prior to the enactment of that bill, section          78
provided that the assessment was l'imposed upon each public
utility within the commission's jurisdiction      serving the
ultimate consumer." The bill added the phrase       "including
interexchange telecommunications carriers.*' Acts 1987, 70th
Leg., ch. 414, 5 3 at 1950.       Moreover, the bill amended
subsections 3(c) and 18 (c) and (d) of PUHA, which had
effectively provided that IXCs other than AT & T were not
"public utilities" for purposes of section 3 and not subject
to the PUC's jurisdiction    under section 18. Subsequent   to
the enactment of Senate Bill 229, IXCs other than AT & T
became "public utilities II for purposes of conferring limited
jurisdiction over them on the PUC.

     The *@Background" section of    the bill analysis for   the
bill provides:

        Current Texas law requires a public utility
        to submit to the jurisdiction of the Public
        Utility Commission  (commission). There are
        now at least 70 interexchange  telecommunica-
        tions carriers operating in the state that do
        not fall under the definition of a public
        utility because they do not provide     local

                              P. 6868
Honorable Bob Bullock - Page 4      (JM-1280)

        exchange telephone service. Because they do
        not fall in the category of a public utility,
        they are not subject to regulations       that
        carriers who provide local telephone  service
        are subject to. For examvle. wrier6        who
        provide local exchanae telenhone service must
        pav one-sixth  of one nercent of the aross
        receints from rates charaed consumers to the
        PlJC, which is used to defray the exoen e
        incurred in runnina the commission.    (Emp:as
        sis added.)

Bill Analysis, S.B. 229, 70th Leg. (1987).

     The l'Purpose*@section of the bill analysis stated:

        As proposed,   S.B. 229 amends the Public
        Utility Regulatory  Act by making    interex-
        change telecommunications   carriers   public
        utilities, thereby placing them under the
        jurisdiction of the Public Utility    Commis-
        sion. S.B..229 also requires that the long
        distance rates be averaged statewide and that
        long distance    carriers   not   discontinue
        service to any area of the state without
        permission of the PUC.

     And finally, the qqSection by Section Analysis" portion
of the bill analysis described    the bill in the following
way:

        SECTION 1.      Amends Section 3(c),       Public
        Utility Regulatory    Act (PURA), Art.     1446c,
        V.T.C.S., to define a public utility as it
        affects telecommunications.    Provides for the
        term      'interexchange     telecommunications
        carriers' to be substituted for the terms
        *specialized communications common carriers'
        and 'resellers of communications      and other
        common carriers.'    Provides that the commis-
        sion's iurisdiction over those interexchanae
        telecommunications    carriers   who    do    not
        provide local exchanae telephone service will
        be limited to the extent defined       in PURA.
        Strikes from the amendment to the definition
        of a public utility any reference to the term
        'dominant carrier' as defined        in Section
        3(c) (2) (b).
        SECTION 2.   Amends Sections       18(c) and   (d),
        PURA, Art. 1446~.

                                 P. 6869
:   Honorable Bob Bullock - Page 5      (JM-1280)

              Subsection (cl DrOVideS swecific iurisdic-
           tion of the commission   over  'interexchm
           telecommunications carriers who do not Dro-
           vide local exchanae televhone spwic e. '   Re-
           moves the reference to *dominant carriers.'
           Provides for the commission   to conduct   in-
           vestigations   regarding competition   in the
           industry.

               (c)(4) Requires the commission to maintain
            statewide average rates or prices of message
            telecommunications service.

               *i;)(5) Authorizes  the commission  to re-
            clul   that interexchanae   telecommunications
            carriers mav not abandon or        discontinue
            messaae telecommunications service in or to a
            local exchanae area unless the commission
            swecificallv so orders.

               (d) Provides that an interexchange tele-
            communications  carrier must maintain   its
            tariffs or service lists on file with the
            commission.

            SECTION 3. Amends Section 78. PURA. Article
            1446~. V.T.C.S..     to recniire that      inter-
            exchanae     telecommunications    carriers    be
            included amoncl those Dublic utilities       that
            must suwwort    the Public Utilitv    COmmiSSiOn
            throuah an assessment      of one-sixth   of  one
            percent of their aross receivts.        (Emphasis
            added.)

         We conclude that, with the enactment of Senate Bill 229
    in 1987, the legislature  clearly intended to confer juris-
    diction, however limited, to the PUC over all interexchange
    common carriers. Therefore, we conclude that the section 78
    assessment reaches all local exchange carriers      and all
    interexchange carriers operating in Texas.

         Your second question asks:

            Are local access charges     subject to the   as-
            sessment?

         Section 78 imposes an assessment that is calculated  on
    the basis of the "rates charged the ultimate consumer."  The
    phrase "ultimate consumer" is not defined anywhere in PURA,
    but the term "rate" is. Subsection (d) of section 3 of PURA
    defines l'rate" and provides:

                                     P- 6870
Honorable Bob Bullock - Page 6   (JM-1280)

           The term 'rate,' when used in this Act,
        means and includes every compensation,   tar-
        iff, charge, fare, toll, rental, and classi-
        fication, or any of them demanded,  observed,
        charged, or collected whether directly     or
        indirectly by any public utility     for any
        service, product, or commodity described   in
        Subdivision (c) of   this section, and any
        rules, regulations,  practices, or contracts
        affecting  any such compensation,     tariff,
        charge, fare, toll, rental, or classifica-
        tion.

     End user access charges exacted upon residential      and
business subscribers by an LECs or IXC are "rates charged to
the ultimate consumer"  for purposes of the regulatory     as-
sessment imposed by section 78   of PUBA.   You  ask  whether
interexchange carrier access charges received by an LEC from
an IXC are "rates charged to the ultimate consumer."      That
they fall within  the definition  of VateNt is clear.      The
issue is whether the interexchange carrier,     in paying   an
access charge to a local exchange carrier is, an Qltimate
consumer."

     Prior to the divestiture, charges analogous to those
about which you ask were held by the PUC not to fall within
the section 78 assessment.  In Docket 2054, 23 P.U.C. Bull.
vol. IV, No. 23, 2074 (1979), the PUC held,that      charges
imposed upon telegraph     companies  for access    services
provided by local telephone exchange companies     were not
charges imposed upon the @'ultimate consumer."     See also
Attorney General Opinion H-811.

     You suggest that that administrative    holding    is no
longer controlling because of the court-ordered divestiture.
You suggest that, because the Bell operating companies     are
restricted primarily   to providing local exchange    services
and access to their local systems to interexchange carriers,
while interexchange carriers are prohibited from providing
local exchange   service, an interexchange    carrier   is an
"ultimate consumer" of the services provided to them in the
identical way that residential and business subscribers    are
ultimate consumers of the services provided    to them.    For
two reasons, we disagree.

     First, words ordinarily are given their plain meaning,
unless the statute clearly shows that they were used in some
other sense. Bia H Auto Auction. Inc. v. Saenz Motors,   665
S.W.2d 756 (Tex. 1984); Tavlor v. Firemen‘s 8 Policemen's
Civil Service Comm., 616 S.W.2d 187 (Tex. 1981). The ordi-
nary meaning  of the phrase Vltimate    consumer" refers to
someone who is last in the chain of sale or use. See, e.g.,

                              P. 6871
Honorable Bob Bullock - Page 7      (JM-1280)

Alto. Bev. Code SS 16.01, 16.05, 64.01; Nat. Res. Code
5 113.081(a)(4).  The final consumer in the chain created
when someone makes a long distance telephone    call is the
residential or business subscriber who initiates the call.

     There are three essential components of any long dis-
tance telephone  call. First, the calling party places a
call through the facilities of an LHC serving his area.
Second, the originating LEC connects the call to an IXC that
transports the call to its destination.      Third, the IXC
accesses the local network of the destination         LHC to
complete transmission of the call to its destination.     See
National Ass'n of Rea Util. Comm‘rs v. F C.C., 737 F.2d
1095 (D.C. Cir.), cert denied, 469 U.S. 1227 (1984).      The
interexchange access charge is imposed upon the interex-
change carrier by both local exchange companies.        These
charges comprise part of the rate that          interexchange
carriers impose upon their customers.  In effect, the access
is Vesold,l* as it were, by the interexchange carrier to its
customer. That the legislature understood that access by an
IXC to local exchange companies  is a resold service to the
residential or business   subscriber  is evidenced    by the
legislative history    of the statute that added section
151.323 of the Tax Code.1     This provision   exempts tele-
communications services from the reach of the sales and use
tax. See Bill Analysis, H.B. 1949, 69th Leg. (1985).

     Second, the section 78 assessment is imposed upon the
interexchange carriers' gross receipts from its subscribers,
which includes the charges passed through to their customers
to recoup the access charges paid to local           exchange
carriers.    If  we  were to   conclude   that  interexchange
carriers were   %ltimate  consumers"    for purposes  of the
imposition of the interexchange carrier access charge, that
charge would be included twice in the total assessment
imposed upon the telecommunications   industry. There is no
indication that the legislature intended such a result.

     1.       Section 151.323 of the Tax Code provides in part:

   There are exempted from the taxes imposed by this
   chapter the receipts from the sale, use, or other
   consumption in this state of:

          .    .   .   .

         (3) access to a local exchange telephone   com-
   pany's network by a regulated provider of telecommun-
   cations services. . . .

                                  P. 6872
Honorable Bob Bullock - Page 8      (JM-1280)

     Your third, fourth, fifth, sixth, and seventh questions
are as follows:

        If Question Two is answered 'yes', are local
        access charges subject to the assessment  on
        calls from:

           (3) a point in Texas to another point        in
        Texas in a different LATA;

              (4) a point in Texas to another state:

           (5) a point in another state to a point in
        Texas ;

              (6) a point in   Texas to another   country;
        and

           (7) a point in another country to a       point
        in Texas?

Because of our answer to your second question, we need       not
address your third through seventh questions.

     Your eighth question asks:

        Under the Supreme Court case of Goldbera
        Sweet, 488 U.S. 252, 109 S. Ct. 582, 112
L. Ed. 2d 607 (1989), it is clear that Texas
        could constitutionally impose this assessment
        on the long distance portion of a call that
        originates in or is received in Texas so long
        as the call is billed to a Texas address.
        Should the assessment on long distance  calls
        be based on the formula approved by the court
        in Goldbera v. Sweet or, if not, what formula
        should be used?

     In Goldbera v. Sweet, 488 U.S. 252 (1989) the United
Supreme Court held that the Illinois Excise Tax, which
imposed an excise tax on interstate calls that separated
local exchange costs from the costs associated     with the
actual use of the interstate interexchange carrier's   line,
did not violate the commerce clause of the United     States
Constitution.  The Illinois statute imposed a five percent
tax on the gross charge of interstate telecommunications
originated or terminated    in Illinois and charged   to an
Illinois service address regardless of where the telephone
call is billed or paid. The statute imposed an identical
five percent tax on intrastate telecommunications.  In order
to prevent actual multi-state taxation that would be viola-
tive of the commerce clause of the United States Consti-

                                 P. 6873
Honorable Bob Bullock - Page 9   (JM-1280)

tution, the statute provided a credit to any taxpayer   that
has paid a tax in another state on the same telephone   call
that triggered the Illinois tax.

     We do not understand you to ask whether you may promul-
gate administrative rules that would permit you to admin-
ister the section 78 assessment     charge in a way that
comports with the holding of Goldberq. We understand you to
ask whether any rules so drafted would be constitutional.
You have not submitted to us any specific proposed    rules;
therefore, any discussion by this office of any hypothetical
formula would be speculative.   This office does not answer
hypothetical questions in the opinion process.    Therefore,
we decline to answer your eighth question.

     Your ninth question asks:

        Does the assessment apply to activities  such
        as 'billing and collection    services* per-
        formed by local exchange companies on behalf
        of, and billed to, long distance    telephone
        companies?

     The definition of "rate" set forth in section 3 of PUPA
includes '*services.lV Subsection (6) of section 3 of PUPA
defines lVservice**and provides:

           'Service is used in this Act in its
        broadest and most inclusive sense, and in-
        cludes any and all acts done, rendered,    or
        performed and any and all things furnished or
        supplied, and any and all facilities used,
        furnished, or supplied by public utilities in
        the performance  of their duties under this
        Act to their patrons, employees, other public
        utilities, and the public, as well as the
        interchange of facilities between two or more
        of them.    Service shall not include the
        printing, distribution, or sale of advertis-
        ing in telephone directories.

Billing and collection    services clearly  fall within   the
definition of lVservices" and "services" falls within the
definition of "rate."   However, the section 78 regulatory
fee may be imposed only on those t*rateslV charged to
"ultimate consumers."  We assume that these service charges
are passed through to the IXC's subscribers.   Because of our
answer to your second question, we answer your ninth
question in the negative.

                              p. 6874
Honorable Bob Bullock - Page 10    (JM-1280)

                       SUMMARY

           The assessment  imposed by section 78 of
        article 1446c, V.T.C.S.,   the Public Utility
        Regulatory Act, reaches all public utilities
        subject to the jurisdiction of the act.    In-
        terexchange  carriers    are   not   "ultimate
        consumers" for purposes of section 78, if the
        local access charges are passed through to
        their subscribers.

                                     JIM     MATTOX
                                     Attorney General of Texas

MARY KELLER
First Assistant Attorney General

I0U MCCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLKY
Special Assistant Attorney General

RKNEA HICKS
Special Assistant Attorney General

RICK GILPIN
Chairman, opinion Committee

Prepared by Jim Moellinger
Assistant Attorney General

                              P-   6875