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11/03/88 North Incorporated, v. Commerce Commission Et Al

November 3, 1988

APPELLATE COURT OF ILLINOIS, FOURTH DISTRICT ILLINOIS INDEPENDENT TELEPHONE ASSOCIATION, PETITIONER

v.

ILLINOIS COMMERCE COMMISSION ET AL., RESPONDENTS. -- GTE NORTH INCORPORATED, PETITIONER,

v.

ILLINOIS COMMERCE



Before considering the merits of this issue, two preliminary matters need to be addressed. First, the ICC's September 30, 1987, supplemental order states the IITA and GTE contend the granting of MCI's application for intra-MSA interexchange service authority will violate section 13 -- 401 because MCI's WATS and dedicated leased line services could be used to complete local calls. However, both the IITA and GTE simply stated in their replies to the hearing examiner's proposed order, the services which MCI plans to provide pursuant to its request for intra-MSA interexchange service authority will be violative of subsection 13 -- 401(a) because they can be utilized to provide local exchange telecommunications service, and MCI does not possess a certificate of exchange service authority. Thus despite indications in the ICC's supplemental order to the contrary, the petitioners properly presented in the ICC proceedings their contention all services which MCI seeks to provide on an intra-MSA interexchange basis would be in violation of section 13 -- 401(a).

COMMISSION et al., Respondents

539 N.E.2d 717, 183 Ill. App. 3d 220, 132 Ill. Dec. 154 1988.IL.1592

Petition for review of order of Illinois Commerce Commission.

APPELLATE Judges:

JUSTICE KNECHT delivered the opinion of the court. McCULLOUGH and LUND, JJ., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE KNECHT

This case involves questions concerning the conditions under which long-distance telephone carriers may provide service between points located in the same market service area . Several provisions of the Universal Telephone Service Protection Law of 1985 (Protection Law) (Ill. Rev. Stat. 1985, ch. 111 2/3, pars. 13-100 through 13- 803) provide the principal bases for the contentions of the parties.

Many technical terms peculiar to the telecommunications industry pervade this opinion. These terms are defined in our recent opinion in GTE MTO, Inc. v. Illinois Commerce Comm'n (1988), 166 Ill. App. 3d 916, 521 N.E.2d 547, and we will not in this opinion repeat their definitions. (On January 6, 1989, the supreme court dismissed a petition for leave to appeal this court's decision in GTE MTO and vacated this court's judgment in that case. In a further order entered February 24, 1989, the supreme court denied a motion to reconsider its January 6, 1989, dismissal of the petition for leave to appeal in GTE MTO and remanded the cause to this court with instructions to consider all issues briefed and argued by the parties. The apparent basis for these orders was amendments to the Universal Telephone Service Protection Law of 1985 (Ill. Rev. Stat. 1985, ch. 111 2/3, pars. 13-100 through 13-803), which were passed by the legislature and signed into law after the filing of this court's opinion in GTE MTO. (Pub. Act 85-1161, eff. Aug. 12, 1988; 1988 Ill. Legis. Serv. 1188, 1188-89 (West); 1988 Ill. Laws 1306 (amending Ill. Rev. Stat. 1987, ch. 111 2/3, par. 13-405).) These statutory amendments are discussed later in this opinion. They do not, however, affect the validity of the definitions of technical terms contained in this court's opinion in GTE MTO.)

On December 22, 1986, respondent MCI Telecommunications Corporation filed with the Illinois Commerce Commission an application for modification of its intra-MSA certificate of interexchange service authority, requesting it be authorized to provide facility-based intra-MSA interexchange telecommunications services throughout Illinois. MCI's application noted the ICC had previously found MCI possesses sufficient technical and operational competence, and possesses the legal authority and financial ability, to be entitled to authority to provide inter-MSA service in Illinois. MCI further noted that on May 16, 1986, the ICC had granted it authority to provide resold intra-MSA interexchange telecommunications services throughout Illinois.

In orders not included in the record, the Illinois Independent Telephone Association and GTE North, Inc. , were apparently granted leave to intervene in this proceeding.

An evidentiary hearing on MCI's application for modification of its certificate of interexchange service authority was held on May 26, 1987. Robert M. Barry, a senior analyst for MCI, presented prepared testimony. Barry stated MCI possesses the technical and managerial ability to provide intra-MSA service. He stated, "the evidence used to support MCI's qualifications to provide inter-MSA service is identical to that needed to support an application to provide intra-MSA service." Barry also testified MCI's ability to provide intra-MSA service is further demonstrated by its continued provision of inter-MSA service.

Barry also stated MCI is financially qualified to provide intra-MSA service. It is the second largest interexchange telephone company in the nation, with substantial assets and a demonstrated ability to secure funds in the capital market. Barry further stated MCI's customers will use carrier-specific access codes when using MCI's dial one/direct dial service on an intra-MSA basis.

On cross-examination, Barry stated the services which MCI seeks to provide on an intra-MSA basis are the same as those it currently provides on an inter-MSA basis -- dial one/direct dial service, credit card service, dedicated leased line service, and WATS service. There are presently no plans to provide services other than these.

Barry stated according to MCI's tariff, WATS customers must originate calls via dedicated facilities between their premises and MCI's terminal location, and such calls are terminated via a combination of MCI-provided intercity facilities, local business telephone lines, and the resold facilities of other carriers. According to Barry, MCI is not certified to provide any facility-based local exchange service in Illinois. It might technically be possible for users of MCI's WATS, credit card, and dial one/direct dial services to use the services to make calls within a local exchange, but such use of these services is not cost effective. This is not "the service that MCI involves in the market place" and is not a service that MCI promotes. Sophisticated WATS users would have "very little incentive to give of a cost associated with tying up of a WATS line to make local exchange calls."

Carrier-specific access codes are not applicable to dedicated leased line service, and Barry believed they are also not applicable to WATS service. In some instances, MCI uses equipment and services provided by local exchange carriers in providing dedicated facilities between the users' premises and MCI's terminal location. Thus, use of dedicated facilities does not always permit the bypassing of local exchange carriers. Barry further stated the majority of WATS customers are "sophisticated telecommunications customers which are in most instances business customers."

To Barry's knowledge, the blocking of local calls is very difficult, and he does not feel MCI has the capability of doing this. Barry did not know if MCI's WATS service involves different technology from that involved in dial one/direct dial service.

Also submitting prepared testimony at the evidentiary hearing was Madelon A. Kuchera, who is director of the Telecommunications Program of the ICC's Policy Analysis and Research Division. Kuchera stated it was not necessary MCI demonstrate its financial, managerial, and technical standing to the ICC in this proceeding, since it had already demonstrated these matters in previous inter-MSA and reseller of service certificate of service authority proceedings. When asked if the introduction of facilities-based intra-MSA competition is in the public interest, Kuchera responded:

"Yes, the introduction of competition into the intraMSA market will yield more efficient pricing. Competition will ensure that prices better reflect the economic cost of providing the service. In the long run the public will benefit from facilities-based intraMSA interexchange competition through increased choices of service offerings and the potential for lower prices brought about from increased competition."

Kuchera recommended MCI be granted authority to modify its existing certificate of interexchange service authority "to include the provision of intraMSA interexchange facilities based certificate of service authority."

On cross-examination, Kuchera stated she has done no studies to determine the impact on the primary toll carrier plan of granting MCI an intra-MSA certificate of interexchange service authority. Nor has she done any studies concerning the impact of MCI being granted such a certificate on access charges by local exchange carriers or local exchange rates.

At the evidentiary hearing, MCI, in response to a request of the IITA, agreed to provide a non-technical description of dialing requirements for the various services contained in MCI's intrastate tariff. In a document filed June 3, 1987, MCI indicated the dialing of access codes is not necessary with respect to dedicated leased line service and WATS service. The dialing of access codes is necessary with respect to the credit card and dial one/direct dial services, except a user of dial one service need not dial an access code if the customer is presubscribed to the service, i.e., has chosen MCI as its "1" carrier.

In a supplemental order entered September 30, 1987, the ICC granted MCI a modification of its certificate of interexchange service authority, thereby permitting MCI to provide facilities-based intra-MSA interexchange telecommunications service.

The IITA filed an application for rehearing on November 5, 1987, and GTE filed a petition for rehearing on the same day. On November 24, 1987, the ICC denied both of the above motions.

The IITA and GTE appeal the ICC's September 30, 1987, supplemental order. They assert the order is erroneous and contrary to State law because: (1) it permits MCI to provide intra-MSA interexchange service which uses a dialing arrangement in place July 1, 1985, and does not require the dialing of carrier-specific access codes; (2) the fact it would be technically possible to utilize some of the services which MCI plans to provide on an intra-MSA basis for local calls precludes MCI from offering the services on an intra-MSA basis; and (3) MCI was obligated to establish its providing intra-MSA interexchange service would be in the public interest, and MCI did not establish this. Additionally, the IITA asserts the authority granted to MCI by the ICC's supplemental order is overly broad because it places no limitations on the types of telecommunications services which MCI may provide or the geographic areas which it may serve.

The parties are not in agreement as to the standard of review applicable to our determination of the above issues.

Subsection 10 -- 201(e)(iv) of the Public Utilities Act provides in part:

"(iv) The [reviewing] court shall reverse a Commission rule, regulation, order or decision, in whole or in part, if it finds that:

A. The findings of the Commission are not supported by substantial evidence based on the entire record of evidence presented to or before the Commission for and against ...


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