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AMERITECH MICHIGAN

v.

MICHIGAN PUBLIC SERVICE COMMISSION, et al.

February 22, 2000

No. 209011

MPSC

LC No. 11412

AMERITECH MICHIGAN,

Appellant,

v

MICHIGAN PUBLIC SERVICE COMMISSION, MICHIGAN CABLE TELECOMMUNICATIONS ASSOCIATION, COMCAST CABLEVISION OF TAYLOR, INC., COMCAST CABLEVISION OF SOUTHEAST MICHIGAN, INC., MEDIAONE OF SOUTHEAST MICHIGAN, INC., and CABLEVISION INDUSTRIES LIMITED PARTNERSHIP,

Appellees.

Before: Murphy, P.J., and Gage and Wilder, JJ.

PER CURIAM.

Appellant Ameritech Michigan appeals as of right from an order of the Michigan Public Service Commission (PSC) ordering it to cease and desist from further violations of the Michigan Telecommunications Act (MTA), MCL 484.2101 et seq.; MSA 22.1469(101) et seq., and requiring it to pay the reasonable expenses, including attorney fees, incurred by appellee Michigan Cable Telecommunications Association (MCTA) in bringing the complaint. We affirm in part and reverse in part.

In May, 1997 Ameritech New Media, Inc. (New Media), a wholly owned subsidiary of Ameritech Corporation, launched a program to promote its Americast cable television service. New Media offered "AmeriChecks" to prospective customers to induce them to subscribe to the cable television service. Depending on the terms of a subscription to the cable television service, a customer would receive six or twelve AmeriChecks. The AmeriChecks, written in $10 denominations, were pre-dated, pre-signed, and made payable to "Ameritech." The AmeriChecks could be used to pay for most Ameritech services, including basic local exchange telephone service offered by Ameritech Michigan, a wholly owned subsidiary of Ameritech Corporation. Ameritech Michigan accepted AmeriChecks as payment for basic local exchange service.

On May 23, 1997 the MCTA, an association of cable television providers, filed a complaint regarding the AmeriChecks promotion. The complaint alleged, inter alia, that Ameritech Michigan violated § 305(3) of the MTA, MCL 484.2305(3); MSA 22.1469(305)(3), by providing basic local exchange service in combination with unregulated cable television service at a price that did not exceed its total service long run incremental costs (TSLRIC). Section 305(3) provides:

Until a provider has complied with section 304a, the provider of a rate regulated service shall not provide that service in combination with an unregulated service in section 401 or an unbundled or resold service under section 357 at a price that does not exceed the total service long run incremental cost of each service.

Section 304a(1), MCL 484.2304a(1); MSA 22.1469(304a)(1), provides that "[u]pon filing with and the approval of the commission, a basic local exchange provider shall restructure its rates for basic local exchange, toll, and access services to ensure that the rates are not less than the [TSLRIC] of providing each service." The MCTA’s complaint requested that the PSC: (1) order Ameritech Michigan and its affiliates to terminate the AmeriChecks program and to refrain from further violations of § 305(3); (2) impose a fine as authorized by § 601 of the MTA, MCL 484.2601; MSA 22.1469(601); and (3) award costs and attorney fees for bringing the complaint.

The PSC found that Ameritech Michigan’s decision to allow its customers to use AmeriChecks to offset rates for basic local exchange service resulted in a combination of that regulated service with unregulated cable television service, in contravention of MCL 484.2305(3); MSA 22.1469(305)(3). The PSC ordered Ameritech Michigan to cease and desist from further violations of the MTA, and to pay the expenses, including attorney fees, incurred by the MCTA.

The standard of review for PSC orders is narrow and well defined. Pursuant to MCL 462.25; MSA 22.44, all rates, fares, charges, classification and joint rates, regulations, practices, and services prescribed by the PSC are presumed, prima facie, to be lawful and reasonable. Michigan Consolidated Gas Co v Public Service Comm, 389 Mich 624, 635-636; 209 NW2d 210 (1973). A party aggrieved by an order of the PSC bears the burden of establishing by clear and convincing evidence that the order is unlawful or unreasonable. MCL 462.26(8); MSA 22.45(8). Const 1963, art 6, § 28 also applies, and provides that a final agency order must be authorized by law and be supported by competent, material, and substantial evidence on the whole record. We give due deference to the PSC’s administrative expertise, and will not substitute our judgment for that of the PSC. Attorney General v Public Service Comm, 206 Mich App 290, 294; 520 NW2d 636 (1994).

Statutory interpretation is a question of law subject to de novo review. As a general rule, we will defer to the construction placed on a statute by the governmental agency charged with interpreting it, unless the agency interpretation is clearly erroneous. An agency’s initial interpretation of new legislation is not entitled to the same measure of deference as is a long-standing interpretation. However, merely establishing that another interpretation of a statute is plausible does not satisfy a party’s burden of proving by clear and convincing evidence that the PSC’s interpretation is unlawful or unreasonable. In re MCI Telecommunications Complaint, 229 Mich App 664, 681-682; 583 NW2d 458 (1998), aff’d in part and rev’d in part 460 Mich 396; 596 NW2d 164 (1999).

On appeal, Ameritech Michigan argues that the PSC’s order holding that it violated § 305(3) by accepting AmeriChecks is unlawful and unreasonable. Initially, it asserts that because it complied with § 304a, the PSC erred by applying § 305(3). The applicable rate structure was the same prior to the PSC’s approval of the pricing methodology, and during the relevant time period. Furthermore, Ameritech Michigan contends that regardless of the requirements of § 304a, no violation of § 305(3) occurred. Section 305(3) applies only in circumstances in which the same provider furnishes a combination of regulated and unregulated services. New Media is a wholly separate corporate entity, is not a provider as that term is defined in MCL 484.2102(cc); MSA 22.1469(102)(cc), and furnishes a service, cable television, over which the PSC has no regulatory jurisdiction. MCL 484.2401(1); MSA 22.1469(401)(1). Finally, Ameritech Michigan asserts that the PSC erred by finding that by accepting AmeriChecks, it offered basic local exchange service at a price below the TSLRIC for that service. The prices charged were the full tariff rates at all times.

We disagree. The PSC’s approval of Ameritech Michigan’s restructuring of its rates was not complete during the time Ameritech Michigan accepted AmeriChecks as payment for its regulated basic local exchange service. Thus, Ameritech Michigan was not in compliance with § 304a during the time relevant to this litigation. The PSC has only the powers granted to it by statute, Union Carbide Corp v Public Service Comm, 431 Mich 135, 146; 428 NW2d 322 (1988), and was without the statutory authority to approve Ameritech Michigan’s rate restructuring on a retroactive basis.

The PSC’s order finding that Ameritech Michigan violated § 305(3) is not unlawful or unreasonable. Ameritech Michigan, a provider as that term is defined by § 2102(cc), furnishes basic local exchange service, a rate-regulated service. Because Ameritech Michigan had not complied with § 304a during the period relevant to this litigation, it was prohibited from offering its basic local exchange service in combination with an unregulated service. The plain language of § 305(3) does not require that the regulated service and the unregulated service be furnished by the same provider, or that both services be offered at a single price. To interpret § 305(3) in such a manner, as advocated by Ameritech Michigan, would allow a provider to circumvent the statute simply by joining with an affiliate to offer a regulated service in combination with an unregulated service. Such an interpretation would lead to an unreasonable result, which should be avoided whenever possible. Michigan Trucking Ass’n v Public Service Comm (On Remand), 225 Mich App 424, 430; 571 NW2d 734 (1997).

To find that Ameritech Michigan violated § 305(3) the PSC was not required to, and did not, pierce the corporate veil of New Media. The PSC’s finding that Ameritech Michigan and New Media were affiliated companies was supported by the undisputed evidence that both companies were subsidiaries of Ameritech Corporation, that both companies did business under the assumed name "Ameritech," and that both companies promoted a single corporate image. The PSC focused on Ameritech Michigan’s acceptance of AmeriChecks as payment for a regulated service. The PSC’s finding that Ameritech Michigan’s acceptance of AmeriChecks resulted in the combining of Ameritech Michigan’s regulated service with New Media’s unregulated service in violation of § 305(3) was supported by testimony presented by a Staff witness. The PSC was entitled to rely on this testimony, notwithstanding the existence of contradictory evidence. Great Lakes Steel v Public Service Comm, 130 Mich App 470, 481-482; 344 NW2d 321 (1983). Finally, the PSC’s finding that Ameritech Michigan’s acceptance of AmeriChecks as payment for its basic local exchange service resulted in customers paying less than the TSLRIC for that service was supported by documentary evidence which demonstrated that application of one $10 AmeriCheck to a tariff rate of $10 to $13.25, depending on the plan, necessarily resulted in a charge below the TSLRIC for that plan.

The PSC’s interpretation of § 305(3) is not long-standing, and thus is entitled to less deference than usually is accorded to the interpretation of a statute by the agency charged with its enforcement. In re MCI Complaint, supra, 682. Nevertheless, Ameritech Michigan has not demonstrated by clear and convincing evidence that the PSC’s interpretation or application of § 305(3) in this case is unlawful or unreasonable. MCL 462.26(8); MSA 22.45(8).

Next, Ameritech Michigan argues that the PSC improperly shifted the burden of proof by requiring it to overcome the conclusions contained in the Proposal for Decision authored by the administrative law judge. We disagree. The burden of proof rests with the party bringing a complaint before the PSC. MCL 484.2203(3); MSA 22.1469(203)(3); 1992 AACS, R 460.17515. The Proposal for Decision becomes the final decision only in the absence of exceptions. MCL 24.281(3); MSA 3.560(181)(2). The PSC’s opinion and order addresses the exceptions filed by various parties, and does not shift the burden of proof to Ameritech Michigan.

Finally, we reverse that portion of the PSC’s order awarding attorney fees to the MCTA. In Michigan, attorney fees may not be awarded unless specifically authorized by statute. Section 601 of the MTA, MCL 484.2601; MSA 22.1469(601), empowers the PSC to make whole ratepayers and others who have suffered an economic loss, but does not confer on the PSC the authority to award attorney fees. Furthermore, the fact that the MTA provides for an award of attorney fees if an opposing party’s position is frivolous, MCL 484.2209(1); MSA 22.1469(209)(1), indicates that the Legislature could have provided for an award of attorney fees under § 601 if it had chosen to do so. Ameritech Michigan v Public Service Comm, 235 Mich App 523, 533-535; ___ NW2d ___ (1999).

Affirmed in part and reversed in part.

/s/ William B. Murphy
/s/ Hilda R. Gage
/s/ Kurtis T. Wilder