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Bluestem Telephone Co. v. Kansas Corp. Commission4/8/2005
2003. The court also ordered the Commission to examine the costs of all qualified telecommunications entities providing local service to determine KUSF distributions. The court otherwise affirmed all other portions of the Commission's orders.
In explanation of its orders, the court noted the primary issue turned on the interpretation of K.S.A. 66-2008. After reviewing K.S.A. 66-2008(e), the court agreed with SIA/ITG's arguments that this subsection was unambiguous and mandated consideration of rural LECs' costs before any adjustment could be made to its KUSF payments. The court also noted that enforcing K.S.A. 66-2008(e) as it was clearly written was consistent with the KTA's policy considerations set forth in K.S.A. 66-2001. The court also found accepting the language of K.S.A. 66-2008(e) on its face was consistent with other subsections in K.S.A. 66-2008. In addition, the court found that the provisions of K.S.A. 66-2009, which provide for KUSF payments to COLRs, implicitly reaffirmed the concept that KUSF payments had to be cost-based for COLRs because they incurred costs in maintaining their facilities regardless of the number of customers actually using them.
Finally, the district court found the Commission's order failed to satisfy the competitively neutral standard of K.S.A. 66-2008(b) because the order allowed distributions to non-LEC carriers without evaluating all the cost/expense information of these companies. Without evaluating each carrier's costs and expenses, the court found the Commission would be "compar apples to oranges."
Issues Decided in this Appeal
The three core issues that we must address are:
1. Was the district court's interpretation of K.S.A. 66-2008(e) correct?
2. Does the embedded cost requirement of K.S.A. 66-2008(e) apply to carriers of last resort governed by K.S.A. 66-2009?
3. Did the district court erroneously order the Commission to audit nonrural phone companies as part of the procedure of deciding the amount of KUSF payments to be made in a competitively neutral manner?
K.S.A. 66-2008(e) and Embedded Costs
The district court held that the statute was clear and unambiguous in requiring all adjustments to KUSF support be based on an LEC's embedded costs and revenue requirement. The district court also found this plain reading of 66-2008(e) was not contrary to any other provision of the KTA. Accordingly, the district court reversed the Commission's order requiring that KUSF payments be made on a per-line basis because that could cause a reduction in KUSF payments without considering the embedded costs and revenue requirement of the company. This interpretation also indirectly invalidated the portability provisions in the Commission's order.
The statute in question is K.S.A. 66-2008, which provides:
"On or before January 1, 1997, the commission shall establish the Kansas universal service fund, hereinafter referred to as the KUSF.
"(b) Pursuant to the federal act, distributions from the KUSF shall be made in a competitively neutral manner to qualified [telecommunications providers], that are deemed eligible both under subsection (e)(1) of section 214 of the federal act and by the commission.
"(c) The commission shall periodically review the KUSF to determine if the costs of qualified [telecommunications providers] to provide local service justify modification of the KUSF. If the commission determines that any changes are needed, the commission shall modify the KUSF accordingly.
"(d) Any qualified [telecommunications provider] may request supplemental funding from the KUSF based upon a perc
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