Court Opinion

ID: 2859319
Source: CourtListenerOpinion
Date Created: 2015-09-05 19:50:21.963804+00
Date Added: 2024-06-11T15:13:50.440200
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TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-94-00113-CV

AT&T Communications of the Southwest, Inc., Appellant

v.

Public Utility Commission of Texas, Southwestern Bell Telephone Company,

and GTE Southwest Incorporated, Appellees

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 201ST JUDICIAL DISTRICT

NO. 92-02127, HONORABLE JOSEPH H. HART, JUDGE PRESIDING

	AT&T Communications of the Southwest, Inc. (AT&T) sued the Public Utility
Commission for judicial review of a final order issued by the Commission in a contested case. (1) 
Southwestern Bell Telephone Company (SWB) and GTE Southwest Incorporated (GTE)
intervened in the district-court suit to defend the Commission order.  AT&T appeals from the
district-court judgment affirming the order.  We will affirm the district-court judgment.

THE CONTROVERSY

	AT&T, SWB, and GTE submitted competing bids for the contract right to provide
the State of Texas long-distance telephone service--the "TEXAN II" network--for a five-year
period.  In arriving at its bid, AT&T calculated its projected costs on an assumption that it would
obtain Private Branch Exchange (PBX) trunk-line rates from SWB and GTE, the local-exchange
carriers for the TEXAN II area. (2)  AT&T won the contract, underbidding SWB and GTE by about
sixteen million dollars.
	In the course of implementing the network, AT&T ordered PBX trunk lines from
SWB and GTE as described in their local and general-exchange tariffs.  SWB and GTE declined
to provide the trunk line at a PBX-surcharge rate on the ground that the AT&T equipment did not
qualify for that rate.  They insisted that AT&T must pay instead the higher access-charge rate
established in their tariffs under the heading "Feature Group A."  To resolve the dispute, AT&T
initiated in the Commission a contested-case proceeding to obtain the following relief:  (1)
declaratory relief that the interpretation given their tariffs by SWB and GTE was unjust,
unreasonable, and unlawful; (2) an agency order directing that SWB and GTE provide AT&T the
trunk-line services at the PBX surcharge rate listed under their general and local exchange tariffs;
and (3) an agency order directing that SWB and GTE bill the State of Texas or AT&T as the
State's agent for the PBX rates fixed in the general and local tariffs of SWB and GTE.  The
Commission denied the requested relief.  On judicial review, the district court affirmed the
Commission order.  AT&T appeals on three points of error.

TARIFF INTERPRETATION

	AT&T disputes in its first point of error the Commission's interpretation of GTE's
and SWB's tariffs and the resulting agency decision that the tariffs required that AT&T pay the
higher access-charge rate for "Feature Group A" rather than the lower PBX-surcharge rates. (3)

Local Exchange Access Charges and the "Leaky PBX" Factor.
	Both local telephone calls and long-distance calls originate and terminate over PBX
trunk lines.  When a long-distance call is made, the call travels from the caller's telephone to a
local-exchange carrier's office.  There the call is directed to the inter-exchange carrier's portion
of the network, or that carrier's "point of presence."  Inter-exchange carriers compensate local-exchange carriers, by access charges based on usage, for use of the latter's portion of the network. 
PBX systems provide "pooled" access to the local carrier's line, thereby reducing the number of
trunk lines required by the customer and thus the customer's expense.  Many PBX systems have
the capacity to "leak" incoming long-distance calls into the local network; in such instances, the
"leaked" long-distance calls are indistinguishable from purely local calls.  For example, a PBX-system customer having offices in several Texas cities may place a long-distance call from its
Dallas office to its Austin office, and the call may be "leaked" or transferred to another off-network location within Austin.  The call will register as a local call in Austin even though it
connects a caller in Dallas to a recipient in Austin.  Because such "leaks" appear to be purely
local calls, local-exchange carriers lose the associated access charges.  To compensate local
carriers for the resulting loss of income, the Federal Communications Commission ("FCC")
instituted a flat rate of twenty-five dollars per month to be assessed generally against all PBXs
capable of such "leaks." (4)
	AT&T installed a digital switching device, known as a "5ESS," in the Sam Houston
State Office Building in Austin and sixteen "System 75s" throughout the State as part of the Tex-An II network.  Calls are first routed to the 5ESS in Austin and then switched to the appropriate
System 75.  These System 75s, developed by AT&T for use in the Tex-An II network, are similar
to PBX systems but are not capable of originating local calls. (5)  However, state employees may
place local calls by using PBX systems incorporated in the Tex-An II network.  Moreover, the
System 75s are used solely to switch long-distance on-network calls off the network and onto a
local line so that the call appears to be a local call, thus bypassing the local-exchange carrier's
access charge.  The terms of the Tex-An II contract estimate that approximately seventy-six
percent of the on-network calls to off-network calls would be routed over non-usage-sensitive
facilities in order to avoid inter-exchange access charges.  In fact, each and every on-network call
destined for an off-network location avoids the access charge.

The Commission's Interpretation of the Tariffs.
	SWB's and GTE's tariffs are divided into several sections headed by descriptive
titles.  The present dispute involves only SWB's and GTE's "General Exchange," "Local
Exchange," and "Access Service" tariffs. (6)  It is undisputed, of course, that SWB and GTE must
abide by the tariffs. (7) See Public Utility Regulatory Act of 1995 (PURA), 74th Leg., R.S., ch. 9, §§ 3, 4, 1995 Tex. Sess. Law Serv. 31, 87-88 (West); PURA §§ 31, 32; 16 Tex. Admin. Code
§ 23.24(a) (West 1988).
	Construing the tariff provisions as a whole, the Commission determined that the
Feature Group A access tariff applied.  It is implicit in the Commission's findings of fact and
conclusions of law that AT&T would have qualified for the lesser "leaky" PBX surcharge if, in
fact, AT&T's System 75s functioned as PBX systems.  AT&T does not challenge the
Commission's findings that the System 75s were connected to one or no station lines and were not
used to access the local network--findings that negated the defining functions of a PBX system
(findings of fact 33(a), (c), and (d)).  Nor does AT&T challenge the Commission's finding that
PBX systems that processed local calls were present in the locations where System 75s were
placed (finding of fact number 33(e)).  AT&T does challenge the Commission's "findings of fact"
(conclusions of law, really) numbered 35, 48, and 50.  They are as follows:

35.	GTE and SWB tariffs are permissive rather than prohibitive and one must look
beyond the local and general tariffs to the access tariffs to find the tariff
applicable to the local termination of an on-network to off-network long
distance network call. (8)
48.	Although SWB's and GTE's local and general exchange tariffs do not
expressly state that AT&T cannot terminate interexchange traffic over PBX
trunks, all applicable tariff provisions read together clearly indicate that
prohibition.

50.	The use of the facility determines which tariff applies. (9)

	AT&T argues as follows:  (1) AT&T relied upon SWB's and GTE's local or
general exchange tariffs, which do not specifically prohibit AT&T's intended use for the PBX
trunk lines when bidding on the State contract; (2) SWB's and GTE's local and general tariffs (and
their included surcharge for "leaky" PBXs) are therefore the proper tariff charge; (3) even if the
Access tariffs apply, AT&T should only be charged for the "leaky" PBX surcharge also found in
the Access tariffs; (4) the Commission unduly discriminated against AT&T by subjecting it to
restrictions not stated in the tariffs; (5) the Commission's construction of the tariffs has destroyed
their predictability and will discourage other companies from developing new cost-efficient
networks in the future; and (6) there is no such thing as a "wrong" tariff and AT&T may select
the service it desires from any of a utility's tariffs in the absence of a rule prohibiting such
selection.
	SWB and GTE rejoin that in cases involving tariff interpretation, one must look to
the intended use (10) of the equipment to determine which tariff properly applies as opposed to the
mere name or label assigned the equipment.  In order to qualify for the lesser surcharge for
"leaky" PBX equipment, they say, the equipment must be a "true" PBX, that is to say, the
equipment must amount to a switching device located on the customer's premises and consist of
multiple individual telephone instruments on lines that are connected to a central office line.  And
because the System 75s are not connected to individual telephones within the State network but
are used only to terminate on-network calls on the local system, the System 75s do not qualify as
a "PBX or other switching device."  Moreover, SWB and GTE contend, their local and general
tariffs do not prohibit AT&T's intended use for the trunk lines; the Access tariffs implicitly permit
their use, albeit at a greater charge.

Classification by Equipment Use.
	The Commission, by classifying the System 75s by their use (findings number 48
and 50), conformed to the agency's previously established rules.  See 16 Tex. Admin. Code
§ 23.3 (1994); (11) see also Central Tex. Iron Works, Inc. v. Red Arrow Freight Lines, Inc., 440
S.W.2d 674, 676 (Tex. Civ. App.--Dallas 1959, writ dism'd) (nature and use of property
determines which tariff applies); Associated Press v. Federal Communications Comm'n, 452 F.2d
1290, 1296 (D.C. Cir. 1971) (headings in tariff provisions do not fix scope of tariff operation,
but they do identify rates applicable to particular type of usage and distinguish that type from
others; and provisions under specific tariff designation prevail over those included under more
general heading).  We also note that the Federal Communications Commission (FCC) focuses on
the function of particular equipment to determine which of several tariffs applies in a particular
case.  For example, the FCC determined that when a "Centrex-ETS" combined the functions of
a Common Controlled Switching Arrangement ("CCSA") with a PBX-like switching device,
customers were obliged to pay the Feature Group A access charge fixed for CCSAs because
Centrex-ETSs competed directly with CCSAs.  In the Matter of Bell Atl. Petition for Declaratory
Ruling Concerning Application of the Commission's Access Charge Rules to Private
Telecommunications Sys., 2 F.C.C. Rcd. No. 25, 7458 ("FCC Docket 87-361").  Stated another
way, the FCC determined that because the Centrex-ETS performed the same function as a CCSA,
the customers of Centrex-ETS were not permitted the lower rates merely because the Centrex-ETS
also performed the functions of a PBX.  The use or function of the equipment was the determining
factor even though the tariffs did not expressly prohibit charging the PBX rate.

Construing the Tariffs as a Whole.
	The Commission followed a familiar rule of document interpretation by construing
together all applicable tariff provisions (finding number 48).  We believe the tariffs are not
rendered unpredictable as a result.  We believe it unreasonable, on the other hand, to extract the
words "PBX or other switching device" from their tariff context and to seek to apply them
standing alone, which appears to be the sense of AT&T's argument.  And assuming for purposes
of discussion that the local and general exchange tariffs do apply to the systematic termination of
long-distance traffic, it is well established that whenever two rate classifications appear to be
equally applicable, that which specifically includes the requested service will control to the
exclusion of the general tariff.  Roberts Express, Inc. v. Expert Transp., Inc., 842 S.W.2d 766,
770 (Tex. App.--Dallas 1992, no writ); see also United States v. Gulf Ref. Co., 268 U.S. 542, 546
(1925).  System 75s are used exclusively to terminate long-distance calls.  We therefore find
unpersuasive AT&T's argument that the Commission was unreasonable in its conclusion that local
tariffs apply to local calls while switched-access tariffs apply to inter-exchange calls that are
switched onto a local network.

The Commission's Determination that the PBX Surcharge Applied Solely to Incidental "Leakage."
	The Commission also concluded that access charges ordinarily apply to a system
that switches long-distance network calls to a local line unless no means existed for determining
that a long-distance call was switched (finding number 24), and that a relatively small "leaky"
PBX surcharge ($25 per month) was implemented by the FCC because "leakage" was considered
to be only incidental (finding number 29).  In recognizing the existence of a significant problem
with the surcharge, the FCC determined that it was nevertheless the best alternative available to
compensate local-exchange carriers.  See In the Matter of Amendment of Part 69 of the
Commission's Rules Relating to Private Networks and Private Line Users of the Local Exchange,
2 F.C.C. Rcd. No. 25, 7441 ("FCC Docket 87-530").  The small, almost nominal, surcharge
promulgated by the FCC was intended to be a temporary solution until technological advances
allowed a superior method for calculating the charge through "actual measurement or otherwise." 
Id.
	We believe the Commission could reasonably infer from the FCC's estimate of
"leakage" that the FCC surcharge was intended to apply only to incidental leakage and was not
intended to apply to a PBX system or other device that "leaks" one-hundred percent of its calls. 
We note, for example, the FCC also determined as follows:

[W]hile PBX switches could, and no doubt in many cases did, leak interstate traffic
into the local exchange, they also switch substantial amounts of local traffic. 
Indeed, it appeared that, in most cases, local calling rather than interstate leakage
was the predominant use of local exchange lines connected to PBX switches.

FCC Docket 87-530, at 7441 (emphasis added).  As stated above, "leaky" PBX surcharges were
intended to apply where it was impossible for local-exchange carriers to detect which function the
PBX was performing.  Therefore, when it is undisputed that a System 75 is used solely to switch
long-distance calls onto the local network, then the Commission could reasonably conclude that
the "leakage" is not "incidental" and the resulting surcharge is inadequate.

Whether the Commission's Interpretation Is Inconsistent with Its Previous Decisions.
	AT&T assails the Commission's finding number 110, which states as follows:  "If
other inter-exchange carriers follow AT&T's lead, the loss of revenue could be significant and
could lead to the imposition of higher local exchange rates.  Such a result would adversely affect
universal service."  AT&T does not dispute the Commission's determination that a significant
amount of revenue may be lost if other inter-exchange carriers follow AT&T's lead.  Rather,
AT&T complains that the proper remedy for any defect in tariffs is to amend them; and by not
requiring SWB and GTE to follow that course the Commission acted contrary to its previous
decisions in the cases next to be discussed.
	AT&T cites the Commission's previous decision in Tex. Public Utils. Comm'n,
Complaint of National Telecommunications of Austin Against Southwestern Bell Telephone
Company, Docket No. 8914, 17 Tex. P.U.C. Bull. 2977 (May 16, 1990) (hereafter "Docket No.
8914").  In Docket No. 8914, the parties agreed that SWB's tariff did not expressly state that a
reseller must have a switch in each Local Access and Transport Area (LATA) in order to be
classified as a "pure reseller" entitled to certain credits.  The Commission determined in that case
that tariffs must be clear and specific, and stated as follows:

Under the PURA and the Commission's rules, if imaginative consumers or
technological or regulatory changes create a perceived problem for which a utility's
tariff provides no solution, that presents an issue for resolution by this
Commission, not by the monopoly provider of access service.  In such instance, the
utility should propose an amendment to its tariff.

Id. at 2997 (emphasis added).  At issue in the case was the meaning of the expression "pure
reseller," which was not defined in SWB's tariffs.  The issue in the present appeal is in a sense
analogous--what constitutes a "leaky" "PBX or other device" for the purpose of determining which
tariff rate applies to AT&T.  The present case differs, however, in that portions of SWB's and
GTE's tariffs specifically address the disputed term.  For example, GTE's General Exchange
Tariff specifically defines a PBX as a "communication system consisting of various stations,
equipment and facilities to connect these stations to central office lines of [sic] to other stations
in the system either manually or automatically."  It is undisputed that the System 75s were not
connected to "various stations."  Moreover, the Commission did not depart from its stated policy
that tariff provisions must be clear and specific.  After considering the words and phrases of the
tariff provisions in light of the facts of the case, the Commission simply determined that the tariff
language clearly and explicitly dictated the meaning the agency fixed. (12)
	AT&T also refers to the Commission's previous decision in Tex. Public Utils.
Comm'n, Petition of Southwestern Bell Telephone Company for an Order to Show Cause
Concerning Disconnection of DIAL 976 Service to Norman Cheney and for Other Relief, Docket
No. 7252, 13 Tex. P.U.C. Bull. 1032 (March 13, 1987) (hereafter "Docket No. 7252").  In
Docket No. 7252, SWB applied for a Commission order directing that a subscriber to the utility's
DIAL-976 service (13) appear and show cause why SWB should not disconnect the service because
of alleged violations of tariff provisions prohibiting "sexually explicit" messages from being
delivered to persons under age eighteen.  SWB's tariff did not define the term "sexually explicit." 
Accordingly, SWB requested the Commission to adopt SWB's definition for purposes of the show-cause hearing and for any future controversy.  The Commission declined to adopt SWB's
suggested definition, concluding that the only means of clarifying the tariff would be a proceeding
to amend it.  Docket No. 7252, at 1055.  The decision in Docket No. 7252 is distinguishable on
the ground that the questioned term here is defined in the tariff provisions pertaining to switched-access service.

CONCLUSION

	We cannot find that the Commission's conclusions are unreasonable in light of the
facts found by the agency from the evidence, the applicable tariff language, the rules of the
Commission, or any statutory provision.  Accordingly, we overrule AT&T's first point of error.
	In AT&T's second and third points of error, the company complains the district
court erred in its determinations that AT&T, rather than the State of Texas, was SWB's and
GTE's customer, and that the State was the reseller of network services.  It is unnecessary to
address these two points of error in light of our disposition of AT&T's first point of error.
	For the reasons given, we affirm the district-court judgment.

  
					John Powers, Justice
Before Chief Justice Carroll, Justices Powers and B. A. Smith
Affirmed
Filed:   August 30, 1995
Publish
1.        See Tex. Public Utils. Comm'n, Petition for Declaratory Judgment and Relief of AT&T
Communications of the Southwest, Inc. Against Southwestern Bell Telephone Company, Docket
No. 8395, 17 Tex. P.U.C. Bull. 1973 (Dec. 6, 1994).
2.        Pursuant to the divestiture ordered in United States v. American Telephone & Telegraph
Co., 552 F. Supp. 131 (D. D.C. 1982), aff'd, 460 U.S. 1001 (1982), modified, United States v.
Western Electric Co., 714 F. Supp. 1 (D. D.C. 1988), the court divided the United States into
geographic areas denominated "Local Access and Transport Areas" (LATAs) or exchange areas. 
Under the order, AT&T may provide only inter-exchange long-distance service while SWB and
GTE provide only local-exchange long-distance telephone service in their respective geographical
areas.  These limitations gave rise to the necessity that AT&T purchase local-exchange service
from SWB and GTE in order to complete the TEXAN II network.
3.        The Commission's interpretation of a utility's tariff provisions would ordinarily be
entitled to a good deal of judicial deference simply because of the agency's experience and
expertise in tariff administration and its statutory responsibilities for all aspects of utility
regulation, including the duty of assuring rates that are fair, just, reasonable, and free from
undue discrimination.  See Calvert v. Kadane, 427 S.W.2d 605, 608 (Tex. 1968); Stanford v.
Butler, 181 S.W.2d 269, 273 (Tex. 1944).  See generally 2 Am. Jur. 2d Technical Matters § 523
(1944).  AT&T contends, however, that the Commission's interpretation of the tariff provisions
is entitled to little or no judicial deference--construction of the applicable words and phrases
involves only a question of law and a reviewing court is fully competent to perform that task as
in the case of any document requiring interpretation.  The matter is, in our view, not that simple.

        "A tariff is not an abstraction. . . .  Complex and technical cost-allocation and accounting
problems must be solved in setting the tariff initially. . . .  It therefore follows that the decision
whether a certain item was intended to be covered by the tariff . . . involves an intimate
knowledge" of the reasons why the tariff was established as it was in the first instance.  United
States v. Western Pac. R.R., 352 U.S. 59, 66 (1956).  In some cases, it may be true that a
reviewing court is competent to construe tariff language based merely on common usage.  On the
other hand, the tariff language may involve words or phrases that are "technical" or "not
commonly understood"; or the words and phrases may have a regulatory impact not understood
or appreciated by the ordinary reader.  Roberts Express, Inc. v. Expert Transp., Inc., 842 S.W.2d
766, 777 (Tex. App.--Dallas 1992, no writ).  The distinction always depends "on the particular
facts of each case."  Western Pac. R.R., 352 U.S. at 69.  And a reviewing court must understand
that the facts of the case may bear on the meaning proper to be assigned the tariff language.  In
that connection, due respect must be given the agency's orchestration of the tariff language and
the facts the agency has found from the evidence in the particular case.  Id. at 64-65.  On the
other hand, there may be no antecedent agency fact findings, the facts may, indeed, be stipulated,
and the material tariff provisions may be susceptible of judicial interpretation based merely upon
common usage.  See, e.g., United States v. Missouri Pac. R.R., 250 F.2d 805, 807 (5th Cir.),
cert. denied, 358 U.S. 821 (1958).

        In the present controversy, the tariff language is not susceptible to an interpretation based
merely upon ordinary usage; technical words and phrases are laden with regulatory impact and
the facts found by the Commission bear importantly upon which tariff provisions apply in the
case.  We conclude, therefore, that the Commission's construction of the tariff provisions is
entitled to commensurate respect and deference on our part.
4.        The FCC calculated the $25 monthly surcharge by estimating that eighty percent of all
lines were capable of leakage and that only eight percent of all communications made over
these lines were interstate.  The FCC then determined that 6.4 percent of all private-line
usage "leaked" into the local exchange (eight percent of eighty percent equals 6.4 percent). 
Estimating that local-exchange carriers were losing approximately four hundred dollars
monthly, the FCC calculated that the "leaky" surcharge should be twenty-five to thirty-two
dollars per month (6.4 percent of $400-$500).  See In the Matter of MTS & WATS Mkt.
Structure, 97 F.C.C.2d 718, 720 (1983) (pet. for reconsideration).
5.        The parties concede that the System 75 set up in Potter County, Texas is capable of
originating local calls and is functioning as a PBX system.  Therefore, the Potter County
system is not at issue and is not included in our discussion of System 75s.
6.        Pertinent portions of the tariffs relied on by the parties provide as follows:

SWB'S GENERAL EXCHANGE TARIFF:
1.6	Local Exchange Access Line Charges
1.6	Application of Business Local Exchange Access Line Charges:
	(A)	The PBX trunk or Hotel rate applies for use in providing access to
communication systems which perform switching functions and/or
connect with the local exchange access lines on a pooled access basis.

SWB'S ACCESS SERVICE TARIFF:
1.	Application of Tariff
1.1	This tariff contains regulations, rates and charges applicable to the provision
of Carrier Common Line, End User Access, Switched Access, and Special
Access services, and other miscellaneous services . . . .
	. . . .

6.	Switched Access Service
6.1	General
	Switched Access Service, which is available to customers for their use in
furnishing their services to end users, provides a two-point electrical
communications path between a customer's premises and an end user's
premises.  It provides for the use of common terminating, switching and
trunking facilities, and common subscriber plant of the Telephone
Company.  Switched Access Service provides for the ability to originate
calls from an end user's premises to a customer's premises, and to terminate
calls from a customer's premises to an end user's premises in the [Local
Access and Transport Area] where it is provided.
	. . . .

6.2.1	Feature Group A (FGA)
	(A)	Description
	(1)	FGA is provided in connection with Telephone Company
electronic and electromechanical end offices.  At the option
of the customer, FGA is provided on a single or multiple line
group basis and is arranged for originating calling only,
terminating calling only, or two-way calling . . . .
	. . . .

7.4.2	Surcharge for Special Access Service
	(A)	General Description
		The Special Access Surcharge applies to all jurisdictionally intrastate
special access facilities ordered from the Special Access section of the
Access Service Tariff unless exempted as specified in (B) following. 

		All such facilities terminated at an end user's PBX or other
device that connect the special access facility with local
exchange lines or trunks, irrespective of whether the
interconnection capability exists in the customer's premises
equipment or in a Centrex Co type switch are subject to the
surcharge.

(Emphasis added.)

GTE'S GENERAL EXCHANGE TARIFF:
	Private Branch Exchange (PBX/PABX):
	A communication system consisting of various stations, equipment and
facilities to connect these stations to central office lines of [sic] to other
stations in the system either manually or automatically.
	. . . .

Definition of Terms
	Switched System:  A Private Branch Exchange
	[GTE's special access surcharge provisions are substantially similar to
SWB's access surcharge and exemptions.]

(Emphasis added.)
7.        The Commission is empowered to "fix and regulate rates of public utilities, including
rules and regulations for determining the classification of customers and services and for
determining the applicability of rates."  Public Utility Regulatory Act of 1995 (PURA), 74th
Leg., R.S., ch. 9, §§ 3, 4, 1995 Tex. Sess. Law Serv. 31, 87-88 (West).  In ratemaking
proceedings, the burden of proof as to rate and service classifications rests upon the utility. 
See id. § 10.  Once the Commission approves a utility's tariffs, the utility may not charge a higher
rate than provided in its tariffs.  See id. §§ 31, 32.  The approved tariffs govern a utility's
relationship with its customers and have the force and effect of law.  Southwestern Bell Tel. Co.
v. Vollmer, 805 S.W.2d 825, 828-29 (Tex. App.--Corpus Christi 1991, writ denied); Southwestern
Bell Tel. Co. v. Rucker, 537 S.W.2d 326, 331 (Tex. Civ. App.--El Paso 1976, writ ref'd n.r.e.).

        A reasonable classification of customers and services, in the utility's tariffs filed with the
Commission, is essential to prevent undue discrimination and unreasonable rates.  The central idea
in classifying customers and services is that there must be a genuine rationale for any disparate
treatment among customers who are similarly situated:  reasonableness of the classifications, in
terms of the service involved, is the major criterion.  A not unreasonable "yardstick" for
measuring reasonableness is the substantial similarity of "billing factors."  Ford v. Rio Grande
Valley Gas Co., 174 S.W.2d 479, 480 (Tex. 1943).  "Any matter which presents a substantial
difference as a ground for distinction between customers, such as quantity used, time of use, or
manner of service, is a material billing factor."  Id. (emphasis added); see also Texas & N.O. R.R.
v. Texas R.R. Comm'n, 286 S.W.2d 112, 121-22 (Tex. 1955).  See generally 1 A.G.J. Priest,
Principles of Public Utility Regulation 295-307, 340-45 (1969).  The burden of proving unlawful
discrimination, resulting from tariff classifications of customers and services, rests upon the party
asserting the claim.  Rio Grande Valley Gas Co., 174 S.W.2d at 481-82.
8.        GTE disputes that its tariffs do not prohibit the application of the local-exchange tariff,
pointing to its General Exchange tariff section entitled "Use of Intraexchange Private Line
Channels."  It asserts that AT&T may use PBX trunks for administrative purposes; however,
it may not utilize PBX trunks to provide dedicated interexchange service.  That portion of
GTE's tariff provides:

Services provided under this tariff shall be used by private line customers for use in
obtaining end-to-end private line services.  Interexchange Carriers may use services
found in this tariff that will meet their administrative needs; however, an
Interexchange Carrier is restricted from utilizing services found in this tariff to
furnish a portion of their authorized service offerings.

(Emphasis added.)

        SWB and the Commission argue that tariffs, by their nature, are permissive rather than
prohibitive and that when there are affirmative provisions in an appropriate tariff that specifically
address a particular situation, prohibitions throughout other tariffs are irrational, duplicative, and
unnecessary.
9.        Other findings of fact and conclusions of law that focus on the use of the equipment are
as follows:  (1) "A leaky PBX surcharge is not applicable to the disputed facilities because a
leaky PBX can exist only if a PBX exists, and in this case the System 75s are neither PBXs
nor functioning as PBXs." (finding of fact number 40); (2) "The use of a telecommunications
facility and not its label is the determining factor in rate application." (finding of fact
number 41); (3) "In construing tariffs in a manner consistent with the public interest, the
Commission is bound to consider the use of the service." (conclusion of law number 7); and
(4) "The $25 per month leaky PBX surcharge does not apply to the disputed facilities,
because neither the 5ESS nor the System 75s function as PBXs." (conclusion of law number
11).
10.        The Commission repeatedly found that the use of the equipment controlled which tariff
applied.  See supra note 9 and accompanying text; see also supra note 7.
11.        The Commission's substantive rules define a "[c]lass of service or customer class" as
"[a] description of utility service provided to a customer which denotes such characteristics
as nature of use or type of rate."  16 Tex. Admin. Code § 23.3 (emphasis added).  Tariffs must
be "stated separately by type or kind of service and the customer class."  Id. (emphasis added).
12.        AT&T refers in its brief to the fact that the Commission created in its final order
Project 10756, entitled Inquiry into the Necessity of Creating a Rule Requiring Local Exchange
Telephone Companies to More Clearly Define the Prohibition Against Using Local Exchange
Service Tariffs and Leaky PBXs (Special Access Service) Tariffs to Terminate Off-Network Long
Distance Traffic.  AT&T argues that because the Commission initiated a study to determine
whether the tariffs required revision, it necessarily follows that revision was needed.  We are
unable to find the results of Project 10756 in the appellate record.
13.        DIAL-976 service consists of SWB routing and transporting calls from the public to
entities which provide recorded messages to the public for a charge.  Examples of this service
include Dial-a-Joke and Dial-a-Santa.

 are similarly situated:  reasonableness of the classifications, in
terms of the service involved, is the major criterion.  A not unreasonable "yardstick" for
measuring reasonableness is the substantial similarity of "billing factors."  Ford v. Rio Grande
Valley Gas Co., 174 S.W.2d 479, 480 (Tex. 1943).  "Any matter which presents a substantial
difference as a ground for distinction between customers, such as quantity used, time of use, or
manner of service, is a material billing factor."  Id. (emphasis added); see also Texas & N.O. R.R.
v. Texas R.R. Comm'n, 286 S.W.2d 112, 121-22 (Tex. 1955).  See generally 1 A.G.J. Priest,
Principles of Public Utility Regulation 295-307, 340-45 (1969).  The burden of proving unlawful
discrimination, resulting from tariff classifications of customers and services, rests upon the party
asserting the claim.  Rio Grande Valley Gas Co., 174 S.W.2d at 481-82.
8.        GTE disputes that its tariffs do not prohibit the application of the local-exchange tariff,
pointing to its General Exchange tariff section entitled "Use of Intraexchange Private Line
Channels."  It asserts that AT&T may use PBX trunks for administrative purposes; however,
it may not utilize PBX trunks to provide dedicated interexchange service.  That portion of
GTE's tariff provides:

Services provided under this tariff shall be used