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Bluestem Telephone Co. v. Kansas Corp. Commission4/8/2005
Affirmed in part, vacated in part, reversed in part and remanded with directions.
After the deregulation of public utilities in this country, the Kansas Legislature created the Kansas Universal Service Fund (KUSF) that would distribute money to telecommunication companies including rural telecommunication companies that provide telephone service to sparsely populated areas of the state. The Kansas Corporation Commission, charged with overseeing this fund, decided to distribute the fund to rural companies on a per-line basis and not according to "embedded costs" as set out in the statute. A number of rural telecommunication companies comprising the State Independent Alliance (SIA) and the Independent Telecommunications Group (ITG) challenged several orders issued by the Commission on this subject. The district court struck down this per-line method established by the Commission. The Commission appeals these rulings. We agree with the district court's interpretation of the statute in question; it is unambiguous and directs that these funds are to be distributed based on embedded costs.
On the other hand, we hold that the district court had no jurisdiction to carry its ruling over into the area of regulation of carriers of last resort and vacate that order. And finally, in light of our ruling affirming the interpretation of the statute, we think the Commission needs to reassess the issue of whether the KUSF funds are being distributed on a competitively neutral basis as required by law and, therefore, remand that matter to the Commission for further proceedings.
Statutory Background
In February 1996, the federal government passed the Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56, 47 U.S.C. § 151 et seq. (2000). The federal act was designed to significantly alter the regulation of the telecommunications industry. The Act proposed to serve the dual purposes of ensuring "universal service" to all regions of the country, including low-income consumers and consumers in high-cost areas, while also encouraging the development of competition in all telephone service markets. 47 U.S.C. § § 251-254 (2000). The federal act required both federal and state agencies to create funds to ensure that universal service was available to all consumers and to ensure consumers in high-cost areas (usually poor and/or rural areas) received services for rates "reasonably comparable" to those services offered in urban areas. 47 U.S.C. § 254(b)(2)-(5). See Alenco Communications, Inc. v. F.C.C., 201 F.3d 608, 614-15 (5th Cir. 2000).
In response, the State of Kansas enacted the Kansas Telecommunications Act (KTA), K.S.A. 66-2001 et seq., in 1996. The public policy goals of the KTA were similar to the two established by Congress: ensure every Kansan had access to first-class telecommunications service at an affordable price; allow consumers throughout the state to realize the benefits of competition; promote consumer access to a full range of telecommunications services; advance development of a telecommunications infrastructure; and protect consumers. K.S.A. 66-2001.
Regulatory Background of Several KCC Dockets
Prior to the KTA, local exchange carriers (LECs) subsidized the cost of basic local service by charging higher rates to consumers and other carriers for intrastate tolls and access charges; thus, intrastate access rates implicitly subsidized local service costs. The KTA required the LECs to reduce their intrastate access charges over a 3-year period to a level equal or close to rates charged for interstate access charges. The Commission recognized that if local telephone rates were increased to make up for the lost intrastate acc
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