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07/22/96 ILLINOIS BELL TELEPHONE COMPANY v.

July 22, 1996

ILLINOIS BELL TELEPHONE COMPANY, PETITIONER-APPELLANT,
v.
ILLINOIS COMMERCE COMMISSION, MCI TELECOMMUNICATIONS CORPORATION, CITIZENS UTILITY BOARD, AT&T TELECOMMUNICATIONS OF ILLINOIS, INC., THE PEOPLE OF THE STATE OF ILLINOIS, TC SYSTEMS-ILLINOIS, THE CABLE TELEVISION AND COMMUNICATIONS ASSOCIATION OF ILLINOIS, SPRINT COMMUNICATIONS LP, LDDS WORLDCOM, INC., AND SOUTHWESTERN BELL MOBILE SYSTEMS, INC., RESPONDENTS-APPELLEES.



Petition for Review of an Order of the Illinois Commerce Commission. No. 95-135; 95-179.

As Modified on Denial of Rehearing August 27, 1996. Released for Publication August 27, 1996.

Present - Honorable Peg Breslin, Presiding Justice, Honorable Michael P. Mccuskey, Justice, Honorable Kent Slater, Justice. Presiding Justice Breslin delivered the opinion of the court. McCUSKEY and Slater, JJ., concurring.

The opinion of the court was delivered by: Breslin

MODIFIED UPON DENIAL OF REHEARING

PRESIDING JUSTICE BRESLIN delivered the opinion of the court:

Illinois Bell Telephone Company (Ameritech) filed the instant petition for appellate review of the Illinois Commerce Commission's (Commission) ruling that certain services it offered to business customers are noncompetitive within the meaning of section 13-502(b) of the Illinois Public Utilities Act (Act), 220 ILCS 5/13-502(b) (West 1994). We hold that the Commission's interpretation of section 13-502(b) was not clearly erroneous. We therefore defer to the Commission's interpretation. In addition, we hold that the Commission's findings are supported by substantial evidence in the record. For these reasons, we affirm.

In 1995, Ameritech reclassified certain services it provided to business customers from noncompetitive to competitive. These services included band B calls (calls to a party between 8 and 15 miles away), band C calls (calls to a party over 15 miles away), credit card calls, and operator assistance services. According to the Act, a service is competitive only if the service, its functional equivalent or a substitute service is reasonably available to a defined group of customers or within a defined geographic area. 220 ILCS 5/13-502(b) (West 1994). By classifying these services as competitive instead of noncompetitive, Ameritech could change its prices with fewer procedural obstacles and less scrutiny from the Commission. After classifying the services as competitive, Ameritech raised its rates on band C calls and increased its surcharges on calling card calls.

After Ameritech reclassified the services, the Commission initiated an investigation proceeding. AT&T and MCI intervened in this proceeding, arguing that the services should be classified as noncompetitive. At a hearing before the Commission hearing examiner, Ameritech presented evidence that it had lost 13.4% of its market share for bands B and C services to competitors such as AT&T and MCI (IXCs). The only difference between Ameritech's bands B and C service and that provided by the IXCs is the method of gaining access to the service. Ameritech customers access the service by dialing "1" plus the seven or ten digit phone number. The IXCs' customers access their services by dialing a five digit access code prior to dialing the seven or ten digit telephone number. Ameritech introduced evidence that 40-50% of its business usage is attributable to customers who have phones that can be programmed for automatic access to IXC services. In addition, some customers have installed dedicated access lines which eliminate the need to dial access codes, and some customers have speed dialing features on their phones that permit one-button access to IXC services.

AT&T and MCI presented witnesses who testified that the need to dial codes or employ special technology in order to access their services hindered their ability to compete with Ameritech. The IXCs also presented evidence that Ameritech's loss of business can be attributed to the loss of only a few large volume customers.

The IXCs also offered the same operator assistance and calling card services that Ameritech offered. Ameritech presented evidence that its revenues for these services have been declining while overall market revenues have been on the rise. As in the Bands B and C services, the only difference between Ameritech's service and the IXCs' service was the method of access. While some IXC customers have direct access to the IXC's operators, others must dial an "800" number to access the IXC's operators.

After the hearing, the Commission hearing examiner issued a proposed order recommending that Ameritech be permitted to classify as competitive all of its operator assistance and calling card services as well as its bands B and C services for business customers with three or more lines. The Commission rejected this proposed order. The differences in the methods of accessing the competing bands B and C services caused the Commission to conclude that the IXCs' services were not functionally equivalent to or a substitute for Ameritech's services. Because Ameritech held 86.6% of the market share, the Commission found that the IXCs' services were not reasonably available to Ameritech's customers.

With regard to the operator assistance and calling card services, the Commission found that the IXCs had a greater market share than they did in the market for bands B and C service. However, the commission noted that the data regarding the competitive nature of this service was of recent origin and did not conclusively show an assured and effective competitive structure. The Commission thus concluded that all of the services at issue in this proceeding should be classified as noncompetitive. The Commission further ordered Ameritech to roll back its price increases and refund amounts charged in excess of the previous rates. The Commission denied Ameritech's petition for rehearing and Ameritech appeals.

The first issue on appeal is whether the Commission properly interpreted section ...


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