Present: All the Justices
LEVEL 3 COMMUNICATIONS OF VIRGINIA, INC.
v. Record No. 040481 OPINION BY JUSTICE ELIZABETH B. LACY
November 5, 2004
STATE CORPORATION COMMISSION, ET AL.
FROM THE STATE CORPORATION COMMISSION
Level 3 Communications of Virginia, Inc. (Level 3),
appeals an order of the State Corporation Commission
(Commission) denying its application for certificates of
public convenience and necessity to provide local and
interexchange telecommunications services throughout the
Commonwealth. Level 3's primary complaint is that the
Commission misinterpreted the public interest criteria
contained in Code § 56-265.4:4 and that the Commission's
actions violated the Telecommunications Act of 1996. 47
U.S.C. § 151, et seq.
In reviewing a decision of the Commission, we apply well-
established principles. The Commission is a specialized body
with broad discretion in regulating public utilities. A
decision by the Commission comes to this Court with a
presumption of correctness. We will not substitute our
judgment in matters within the province of the Commission and
will not overrule the Commission's findings of fact unless
they are contrary to the evidence or without evidentiary
support. Virginia Gas Distribution Corp. v. Washington Gas
Light Co., 201 Va. 370, 375, 111 S.E.2d 439, 443 (1959).
However, we will reverse the Commission's order if it is based
upon a mistake of law. Northern Virginia Electric Coop.v.
VEPCO, 265 Va. 363, 368, 576 S.E.2d 741, 744 (2003).
Level 3 is a wholly owned subsidiary of Level 3
Communications, LLC (Level 3 LLC). In March 1998, the
Commission granted Level 3 LLC's certificates of public
convenience and necessity to provide local and interexchange
telecommunications services in the Commonwealth. (SCC report,
Case no. PUC-1997-00197, 1998 SCC Ann. Rpt. 245 (March 31,
1998)). Level 3 LLC became embroiled in controversies when it
laid fiber optic cable to provide those services without the
permission of the property owners. Level 3 LLC decided that
the controversies could be resolved by creating Level 3 as a
Virginia public service corporation with the power of eminent
domain to condemn the affected properties. Level 3 LLC
intended to transfer all its Virginia utility assets to Level
3 after Level 3 received its own certificates of public
convenience and necessity to provide local and interexchange
telecommunications service.
Level 3 was incorporated as a Virginia public service
corporation on February, 11, 2003 and filed its application
for certificates of public convenience and necessity to
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provide interexchange and local telecommunications services on
February 20, 2003. Pursuant to the Commission's order, Level
3 published notice of its application. In response, Brenda L.
Stewart filed comments and asked for a hearing on Level 3's
application. Ms. Stewart was one of the landowners involved
in the disputes with Level 3 LLC. The request for a hearing
was accompanied by a petition signed by other landowners who
also had claims against Level 3 LLC.
The Commission held a two-day hearing and, on November 6,
2003, entered a final order denying Level 3's application
without prejudice. Noting that Level 3 agreed that its
management could be measured by the practices of Level 3 LLC's
management, the Commission concluded that Level 3 had "not
established that it possesses sufficient managerial resources,
policies, and abilities such that granting the requested
certificates would be in the public interest." Specifically,
the Commission found that Level 3 LLC did not obtain the
necessary permission to enter the land to construct its
facilities and, after learning of the problems associated with
the installation of the fiber optic cable, "Level 3 LLC failed
to take reasonable steps" to identify potentially affected
landowners and failed to "establish reasonable means" to
address the problem. The Commission concluded that Level 3
LLC's actions involving the installation of the fiber optic
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cable and its efforts to identify and remedy "potential
wrongdoings" related to the installation were not in the
public interest. The Commission denied Level 3's motion for
rehearing and Level 3 filed this appeal.
Level 3 maintains that the Commission denied its
application for certificates of public convenience and
necessity to provide local and interexchange
telecommunications service in this Commonwealth because of the
actions its parent company, Level 3 LLC, took in creating and
failing to resolve controversies with landowners over the
laying of fiber optic cable. Level 3 argues that denying its
application on this basis violates the statutory standards of
public interest required for granting such applications, the
Commission's own rules for granting such applications, and the
provisions of the Telecommunications Act of 1996. For the
following reasons, we conclude that the Commission did not
apply improper statutory standards, did not violate its rules,
and did not violate the Telecommunications Act of 1996.
1. Statutory Standards of Public Interest
By statute, the Commission is required to make a finding
that granting a certificate to provide local or interexchange
telecommunications service is in the public interest. Code
§ 56-265.4:4(A), relating to interexchange service, provides
in pertinent part:
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The Commission may grant certificates to
competing telephone companies . . . for
interexchange service where it finds that such
action is justified by public interest, and is
in accordance with such terms, conditions,
limitations, and restrictions as may be
prescribed by the Commission for competitive
telecommunications services.
(emphasis added). Subsection (B)(1) of that section governs
certificates for the provision of local exchange service and
provides in pertinent part:
In determining whether to grant a certificate
. . . the Commission may require that the
applicant show that it possesses sufficient
technical, financial, and managerial resources.
Before granting any such certificate, the
Commission shall: (i) consider whether such
action reasonably protects the affordability of
basic local exchange telephone service . . .
and reasonably assures the continuation of
quality local exchange telephone service; and
(ii) find that such action will not
unreasonably prejudice or disadvantage any
class of telephone company customers or
telephone service providers, including the new
entrant and any incumbent local exchange
telephone company, and is in the public
interest.
(emphasis added). The parties agree that both provisions are
unambiguous and, accordingly, the language is to be given its
ordinary meaning and intent. Brown v. Lukhard, 229 Va. 316,
321, 330 S.E.2d 84, 87 (1985).
Level 3 asserts that the phrase "such terms, conditions,
limitations, and restrictions as may be prescribed by the
Commission" in subsection (A) modifies the public interest
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finding required by that subsection. According to Level 3,
the Commission adopted a rule, 20 VAC 5-411-30, to implement
this section. Therefore, Level 3 contends, the "terms,
conditions, limitations, and restrictions" contained in the
Commission's rule define the statutory public interest
standard. We disagree.
The language of the statute does not support Level 3's
position. The statute identifies two findings the Commission
must make when granting an interexchange certificate. These
findings are stated in the conjunctive. Under the plain
language of the subsection, the requisite finding of "public
interest" is an independent finding and not limited by other
portions of the subsection. Accordingly, we reject Level 3's
construction of Code § 56-265.4:4(A).
The public interest inquiry contained in subsection
(B)(1), according to Level 3, is limited to consideration of
whether the grant of the certificate will "unreasonably
prejudice or disadvantage" telephone customers or other
telephone service providers. Level 3 contends that subsection
(B)(1) allows the Commission to require information about an
applicant's management resources, but does not allow the
Commission to consider that information as part of the public
interest analysis when considering applications for provision
of local exchange service. Again, we disagree.
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The proper construction of the subsection requires that
the Commission make two findings before a certificate can be
granted. It must find that "such action," the granting of the
certificate, (1) does not unreasonably prejudice or
disadvantage other telephone customers and companies; and (2)
is in the public interest. The language of the subsection
does not limit the public interest inquiry to the impact of
the certificate on other telephone customers and companies.
Furthermore, in construing a statute, all the words used are
presumed to have an effect. Raven Red Ash Coal Corp. v.
Absher, 153 Va. 332, 335, 149 S.E. 541, 542 (1929). The
subsection unequivocally requires the Commission make a
finding regarding the impact of the certificate on other
customers and companies. Requiring a second finding on the
same basis as part of the public interest inquiry, as Level 3
asserts, would be superfluous and would render the language
referring to a finding of public interest meaningless.
Accordingly, we conclude that the public interest
determination required by subsection (B)(1) of Code § 56-
265.4:4 is an independent finding, not limited by other
portions of the subsection.
2. Commission Rules
Level 3 also argues that the Commission failed to follow
its own rules. Level 3 maintains that, in considering
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management resources necessary for a local exchange
certificate under subsection (B), the Commission was limited
to the management issues addressed in the Commission's rule
promulgated to evaluate applications for local exchange
service. That rule, 20 VAC 5-417-20(G), requires information
showing the applicant's ability "to render local exchange
telecommunications services." Level 3 LLC's actions in laying
fiber optic cable are not related to the rendering of such
services, according to Level 3 and, therefore, by considering
these actions, the Commission violated its rule.
We reject this argument. The Commission's rule, 20 VAC
5-417-20(G), prescribes the information an applicant must
submit in its application for a certificate to provide local
exchange service. Nothing in that rule limits the Commission
to the information contained in the application when it is
considering whether to grant the certificate. Furthermore,
the Commission in its order in this case determined that the
installation of telecommunications facilities including the
laying of fiber optic cable was part of the applicant's
rendering of telecommunication services. The Commission's
interpretation of its own rules is entitled to deference, see
generally 1 Richard J. Pierce, Administrative Law Treatise,
§ 6:11 at 394-404 (4th ed. & Supp. 2004), and we find nothing
in the Commission's determination that would support our
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reversal of the interpretation. Finally, the Commission by
rule could not supersede or limit the statutory standards for
granting a certificate, standards which we have held include
consideration of the public interest.
Accordingly, we conclude that the Commission's
consideration of Level 3's application for a certificate to
provide local exchange service was not limited to the
information required by 20 VAC 5-417-20(G).
3. Telecommunications Act of 1996
The Telecommunications Act of 1996 provides in pertinent
part:
(a) In general. No state or local statute or
regulation . . . may prohibit or have the
effect of prohibiting the ability of any
entity to provide any interstate or intrastate
telecommunications service.
(b) State regulatory authority. Nothing in
this section shall affect the ability of a
State to impose, on a competitively neutral
basis and consistent with section 254
requirements necessary to preserve and advance
universal service, protect the public safety
and welfare, ensure the continued quality of
telecommunications services, and safeguard the
rights of consumers.
(c) State and local government authority.
Nothing in this section affects the authority
of a State or local government to manage the
public rights-of-way or to require fair and
reasonable compensation from
telecommunications providers, on a
competitively neutral and nondiscriminatory
basis, for use of public rights-of-way on a
nondiscriminatory basis, if the compensation
required is publicly disclosed by such
government.
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47 U.S.C. § 253. Level 3 asserts that the Commission's
expansive definition of public interest gives the Commission
"unfettered discretion" in denying the applications at issue
and that this "unfettered discretion" constitutes a "barrier
to entry" prohibited by 47 U.S.C. § 253(a).
In support of its argument, Level 3 cites a number of
cases finding that "unfettered discretion" by a municipality
violated 47 U.S.C. § 253(a). New Jersey Payphone Ass'n, Inc.
v. Town of West New York, 130 F.Supp.2d 631, 640 (D. N.J.
2001); TCG New York, Inc. v. City of White Plains, 305 F.3d 67
(2d Cir. 2002) cert. denied, 538 U.S. 923 (2003); City of
Auburn v. Qwest Corp., 260 F.3d 1160 (9th Cir. 2001); Qwest
Corp. v. City of Santa Fe, 224 F.Supp.2d 1305 (D. N.M. 2002).
However, Level 3's supporting case law concerns application of
subsection (c) of 47 U.S.C. § 253 to actions of local
government. See New Jersey Payphone, 130 F.Supp.2d at 639;
TCG of New York, 305 F.3d at 77; City of Auburn, 260 F.3d at
1177; and Qwest Corp., 244 F.Supp.2d at 1317-18. The
Commission's actions at issue come within the provisions of
subsection (b) of 47 U.S.C. § 253 which provide a "safe
harbor" for state regulations based on protection of the
interest of public welfare and safety. As the Commission
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notes, there is a vast difference in authority protected by
subsections (b) and (c):
[T]he division between (b) and (c) seems to define
the boundaries of each body's regulatory authority:
it suggests that states may regulate broadly with
respect to public safety and welfare, service
quality, and consumer protection, while local
governments, in addition to any powers specifically
delegated by the state, have narrower residual
authority to manage and demand compensation for the
use of their rights of way.
Cablevision of Boston, Inc. v. Public Improvement Comm'n of
the City of Boston, 184 F.3d 88, 98 (1st Cir. 1999).
The only limitation on the broad exception set out in 47
U.S.C. § 253(b) of the Telecommunications Act of 1996 is that
the decisions or procedures must be competitively neutral.
See US West Communications, Inc. v. Arizona Corporation
Commission, 34 P.3d 351, 355 (Ariz. 2001); In re Regulation of
Operator Serv. Providers, 778 A.2d 546, 558 (N.J. Super. Ct.
App. Div. 2001); RT Communications, Inc. v. FCC, 201 F.3d
1264, 1267 (10th Cir. 2000). The public interest standard as
applied by the Commission involved the protection of public
welfare, was competitively neutral and, therefore, did not
violate § 253(a) of the Telecommunications Act of 1996.
4. Miscellaneous
The remaining issues raised by Level 3 are also without
merit. Level 3 asserts that the Commission erred by
considering the disputes between the property owners and Level
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3 LLC in making its certification determination and,
therefore, failed to make appropriate findings of fact and
conclusions of law in contravention of Code § 56-
265.4:4(B)(2). To the extent the Commission considered the
property disputes, it did so in the context of items relevant
to the certificating decision − the applicant's managerial
resources, policies and abilities, concededly measured by the
managerial actions of Level 3 LLC.
We also reject Level 3's argument that it was treated
inequitably in violation of Code § 56-265.4:4(B)(3)(ii)
because the Commission applied "unique and unjustified
criteria" that it did not apply to other applicants. The
cited Code section does not apply to Level 3. Subsection
(B)(3) contains legislative directives to the Commission
regarding policies that the Commission should follow in the
regulation of certificated local exchange companies. The
provision cited by Level 3 provides that the Commission
"require equity in the treatment of the certificated local
exchange companies so as to encourage competition based on
service, quality, and price differences between alternative
providers." Code § 56-265.4:4(B)(3)(ii) (emphasis added).
Level 3 is not a certificated local exchange company and this
section does not establish policies or standards to be applied
to applications for certification.
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Accordingly, for the reasons stated, we will affirm the
judgment of the Commission denying without prejudice Level 3's
application for certificates of public convenience and
necessity to provide local and interexchange
telecommunications services in the Commonwealth.
Affirmed.
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