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Bluestem Telephone Co. v. Kansas Corp. Commission4/8/2005
strict 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. The court also stated that it was "only logical that costs under K.S.A. 66-2009 equate to embedded costs . . . as allowed in K.S.A. 66-2008(e)."
The district court had no jurisdiction to make such a ruling. No carrier has requested separate KUSF funding for costs associated with its status as a COLR. The Commission's orders challenged in the district court made no determination about KUSF support payments for COLR costs. Consequently, the district court had no jurisdiction to determine how COLR costs must be calculated.
Ordering Commission to Audit Non-rural Carriers
The district court also ruled 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."
For this question, we must interpret K.S.A. 66-2008(b). The relevant section states: "'(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.'" (Emphasis added.) Since the KTA does not define "competitively neutral," the Commission's interpretation of this language must be given deference if there is a rational basis for this interpretation. Rural Telephone Service Co., 31 Kan. App. 2d at 765.
The Commission found the statutory requirement of "competitive neutrality" was served by providing equal support for all carriers serving the same market. It reasoned that basing support on each Eligible Telecommunication Carrier's individual actual cost could cause negative consequences and harm consumers by rewarding inefficiencies and would discourage technological improvement and innovation. This reasoning appears to be consistent with the federal model. In the Federal Communications Commission's (FCC's) implementation of the federal universal service fund, 47 U.S.C. § 254, the FCC issued a detailed order. In that order, the FCC found:
" he least burdensome way to administer the [universal service] support mechanism will be to calculate an [incumbent LEC]'s per-line support by dividing the ILEC's universal service support payment . . . by the number of loops served by that ILEC. That amount will be the support for all other eligible telecommunications carriers serving customers within the ILEC's study area.
"We are not persuaded by commenters that assert that providing support to CLECs [competitive LECs] based on the incumbents' embedded costs gives preferential treatment to competitors and is contrary to the Act and the principle of competitive neutrality. While the CLEC may have costs different from the ILEC, the CLEC must also comply with Section 254(e), which provides that ' carrier that receives such support shall use that support only for the provision, maintenance, and upgrading of facilities and services for which the support is intended.' . . . If a CLEC can serve the customer's line at a much lower cost than the incumbent, this may indicate a less than efficient ILEC. The presence of a more efficient competitor will require that ILEC to increase its efficiency or lose customers." In
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