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GS Texas Ventures, LLC v. Public Utility Commission of Texas

Court of Appeals of Texas, Third District, Austin

January 15, 2020

GS Texas Ventures, LLC, Appellant
v.
Public Utility Commission of Texas, Appellee

          FROM THE 353RD DISTRICT COURT OF TRAVIS COUNTY NO. D-1-GN-17-001526, THE HONORABLE JAN SOIFER, JUDGE PRESIDING

          Before Chief Justice Rose, Justices Kelly and Smith

          MEMORANDUM OPINION

          JEFF ROSE, CHIEF JUSTICE

         Appellant GS Texas Ventures, LLC (GSTV), filed an application seeking to be designated an eligible telecommunications carrier (ETC) and an eligible telecommunications provider (ETP). An administrative law judge (ALJ) heard the application and issued a proposal for decision recommending that the application be approved, but in its final order, the Public Utility Commission of Texas denied GSTV's application. GSTV sought judicial review, the trial court affirmed the Commission's denial of the application, and GSTV filed this appeal. As explained below, we affirm the trial court's order affirming the denial of GSTV's application.

         STATUTORY FRAMEWORK

         "One of the goals of the Federal Communications Commission ('FCC') is to ensure that all Americans have access to affordable phone service," and "[a]s a result, Texas and the federal government have established universal service funds to award subsidies to companies providing service to low income and rural, high-cost areas." Public Util. Comm'n v. Texas Tel. Ass'n, 163 S.W.3d 204, 207 (Tex. App.-Austin 2005, no pet.); see In re Southwestern Bell Tel. Co., 235 S.W.3d 619, 621-22 (Tex. 2007) (orig. proceeding) ("Universal service-that is, 'adequate and efficient telecommunications service' available to all citizens at 'just, fair, and reasonable rates'-has long been a policy objective of our state and national governments." (quoting Tex. Util. Code § 52.001)). This appeal concerns Texas's subsidy fund-the Texas Universal Service Fund, which is governed by the Public Utility Regulatory Act (PURA), see Tex. Util. Code §§ 56.021-.033, and subchapter P of 16 Texas Administrative Code, chapter 26, see 16 Tex. Admin. Code §§ 26.401-.424 (2019) (Public Util. Comm'n of Tex., Texas Universal Service Fund).

         Subsidies paid under state and federal funds are only available to a carrier that is designated as an ETC or ETP after meeting the requirements set out in applicable state and federal statutes and rules. Texas Tel. Ass'n, 163 S.W.3d at 207. Under federal law, a carrier may be designated an ETC if it provides "the services that are supported by Federal universal service support mechanisms under section 254(c)[1] of this title, either using its own facilities or a combination of its own facilities and resale of another carrier's services." 47 U.S.C. § 214(e)(1)(A). The FCC issued rules to implement section 254, see generally 47 C.F.R. §§ 54.1-.1403 (2019) (Part 54, titled "Universal Service"), which provide that a state commission "shall" designate as an ETC a carrier that offers the services required under Subpart B[2] through "its own facilities or a combination of its own facilities and resale of another carrier's services, "[3] id. § 54.201(b), (d)(1). "Supported services" were originally defined in Subpart B as nine specific services, including "voice grade access to the public switched network," single party service, access to emergency and operator services, and access to directory assistance. Universal Service, 62 Fed. Reg. 32862, 32949-50 (June 17, 2007) (former version of 47 C.F.R. § 54.101). In 2011, Subpart B was amended by the "USF Reform Order"[4] to provide that "[v]oice telephony services and broadband service shall be supported by federal universal service support mechanisms" and to define "eligible voice telephony services" as follows:

Eligible voice telephony services must provide voice grade access to the public switched network or its functional equivalent; minutes of use for local service provided at no additional charge to end users; access to the emergency services . . .; and toll limitation services. . . .

47 C.F.R. § 54.101(a).

         The Texas Legislature thus mandated that the Commission adopt rules to govern the Fund. Tex. Util. Code §§ 56.021, .023. The Commission in turn promulgated rules governing how an entity can obtain ETP designation so as to "receive funds from the Texas Universal Service Fund," 16 Tex. Admin. Code § 26.417 (Designation as Eligible Telecommunications Providers to Receive Texas Universal Service Funds (TUSF)), and ETC designation so as to "receive support from the federal universal service fund," id. § 26.418 (Designation of Common Carriers as Eligible Telecommunications Carriers to Receive Federal Universal Service Funds). To be designated an ETC in a non-rural area, as GSTV seeks, the carrier must, among other things, "provide federally supported services pursuant to" Subpart B, offering "the services that are supported by the federal universal service support mechanisms under [Subpart B] either using its own facilities or a combination of its own facilities and resale of another carrier's services." Id. § 26.418(c)(1), (d)(1).

         FACTUAL AND PROCEDURAL BACKGROUND

         GSTV sought ETC and ETP status, asserting that it would provide "home phone local exchange service to Texans with cutting-edge technology." Commission staff opposed the designation, and the matter was referred to an ALJ at the State Office of Administrative Hearings. See Tex. Gov't Code § 2003.049(a) (State Office of Administrative Hearings performs contested case hearings for Commission). In considering GSTV's application, the ALJ considered evidence that included testimony from two witnesses-Michael Hatfield, president of GSTV, and Liz Kayser, a Commission Section Director, both of whom submitted written testimony before the hearing and testified at the hearing with the ALJ.

         The parties primarily disagreed about whether GSTV's proposed services would satisfy the "own-facilities" requirement.[5] Commission staff asserted that under the 2011 USF Reform Order, "voice telephony service" is one service made up of four "functionalities"- voice grade access to the public switched network, local service minutes at no additional charge, emergency services, and toll limitation services-and that all four functionalities must be provided, at least in part, through GSTV's own equipment or facilities. GSTV, on the other hand, insisted that the four requirements should be considered separate services and that it satisfies the own-facilities requirement if it provides at least one service through its own facilities. The ALJ provided the following chart to explain the parties' positions:

         In his written testimony, Hatfield explained that GSTV will provide its services through a switch it has leased, [6] and that the switch will "handle customers' outbound and inbound calls and [GSTV] will have total and sole control over its leased capacity." The only Subpart B service or functionality that will not go through the switch is emergency service, which will be provided by way of a contract with Sprint. Further, GSTV will provide its customers with wireless receivers that convert wireless signals into a format compatible with landline telephones. The receivers are "fixed, non-mobile devices that would ordinarily remain in one location," they are owned by GSTV, and customers will have to return them if they cancel GSTV's service. Hatfield's written testimony only touched on the installation of the receivers by saying that the equipment would be installed in customers' homes by GSTV service technicians, who would "go to the customer's home, disconnect the old telephone company loop from the customer premises wiring, and install the tabletop wireless receiver into the home's existing wiring" using a standard landline telephone jack, called an RJ11 jack.

         In his live testimony before the ALJ, Hatfield was asked about the installation of the wireless receivers. He said:

The current process is we send a technician out to the home. It's important that they disconnect the house from the traditional network that's outside. They will go in, you know, at the customer's discretion to select their room, an existing RJ-11 jack. They will mount the device on the wall. They will hardwire it into the electrical loop of the house, and at the same time if it's possible they'll hardwire it into the telecom loop of the house through the RJ-11 jack.

         Hatfield testified that it was a "fire hazard to plug these devices into the telephone loop while they're still connected to the wireline loop." He also explained that there would be "safety considerations" if a customer tried to disconnect the device, saying, "It's hardwired into the electrical loop. Unless [the customer] had some knowledge of electricity and some training in electricity or some training along those lines or some knowledge they could stand to be severely injured in an electrical situation." Hatfield acknowledged that the devices could function without being hardwired but said that GSTV's contracts with its customers would require the receivers to be hardwired and would bar customers from attempting to move them.[7] He agreed that in responding to staff inquiries, GSTV had not said that the devices would be hardwired.

         In her written testimony, Kayser focused on whether GSTV was a CRMS reseller and on whether GSTV was required to provide all four functionalities or services through its own equipment. She did not address the installation of the receivers, other than to note that the wireless receivers "can be taken to different locations" and contain battery backup-facts that relate to the CRMS issue because they are relevant to whether the receivers are "mobile" devices. Keyser stated that although GSTV had said in its application that it "would provide the supported services by utilizing its own facilities, including switching equipment, in combination with facilities furnished by" other providers, in response to discovery requests it instead had "stated that it would be providing service through reselling the wireless service of the underlying wireless carrier and leasing switch capacity from a third party." She also testified that in the USF Reform Order, "[t]he FCC further stated that only carriers that provide voice telephone as defined under [Subpart B, 47 C.F.R. § 54.101(a)] as amended using their own facilities will be deemed to meet the requirements of section 214(e)(1)." Kayser testified that GSTV's application should be denied because it will not provide emergency services using its own facilities.

         In her live testimony, Kayser again focused on her view of Subpart B's amendments, testifying that Subpart B initially specified "nine supported services," but that after the 2011 amendments, "there is one supported service" that "has to be able to do four things." She said "the 'in whole' or 'in part' language in the FCC orders remains" because although a carrier must provide all four required functionalities "[s]omewhere along the way," it does not have to provide the service through its own facilities "in its entirety." She explained that although emergency services did not have to go through GSTV's leased switch, those services had to be provided "at some point on your network." Kayser did not address the issue of the receivers being hardwired.

         In the proposal for decision, the ALJ stated that Hatfield had said that the receivers would be hardwired into the homes' telecommunications wiring "if possible," and found "this evidence too amorphous to conclude that GSTV proved it will hardwire the wireless receiver into the home's telecommunications wiring." She further stated that GSTV had "established that it will hardwire the wireless receiver into the home's electrical loop." The ALJ noted that GSTV had not mentioned the electrical hardwiring in Hatfield's written testimony or in its responses to staff requests for information and stated that it was "understandable" if Commission Staff was frustrated at the "moving target" of GSTV's proposed method of installation. However, she said, "Staff learned in discovery that GSTV had considered such a plan," although GSTV did not indicate that it would "actually implement such measures," and thus had "sufficient opportunity to address it."

         As for the amendments to Subpart B, the ALJ disagreed with the Commission Staff's interpretation and instead defined the "own facilities requirement" as "the requirement that an ETC or ETP provide at least one supported service in whole or in part using either its own facilities [GSTV's leased switch] or a combination of its own facilities and resale of another carrier's service." She determined that GSTV met that requirement as well as the other requirements for ETC designation and recommended that GSTV's ETC application be approved. The ALJ further recommended that GSTV receive the requested ETP designation, determining that its commitments were ...


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