dissenting. AT&T Communications of the Southwest, Inc. filed a complaint with the Arkansas Public Service Commission challenging a levy by the City of Little Rock of $.004 per minute on all long distance calls billed by interexchange long distance telephone companies to a service address within the City. The charge, which is based entirely on the number of minutes of telephone use, is billed to a telephone service address, and the charge may be passed on to the phone user.
An Administrative Law Judge for the Public Service Commission heard the complaint. In summary, he ruled that the levy was a validly enacted franchise fee, and not a tax; that the ordinance does not impose an unreasonable burden on interstate commerce; that the amount of the fee is reasonable; and that a rational basis exists for the differentiation between the cellular telephone companies and interexchange telephone carriers.
AT&T filed a petition for rehearing with the Administrative Law Judge. The petition was denied. AT&T filed a petition for rehearing with the full Public Service Commission, and it upheld the Administrative Law Judge’s ruling. AT&T then appealed to the court of appeals and, for reversal, relied on three points: (1) (a) the City lacked authority to enact the ordinance, and (b) the levy was an unauthorized tax; (2) the amount of the fee is arbitrary, capricious, and discriminatory as applied to AT&T; and (3) the ordinance is an unconstitutional burden on interstate commerce. The court of appeals held that the levy constituted a tax, and, because it had not been adopted at an election by the qualified electors of the city, it was invalid. AT&T Communications v. City of Little Rock, 44 Ark. App. 30, 866 S.W.2d 414 (1993). The court of appeals reversed the ruling of the Public Service Commission, but in so doing did not reach the issues of whether the levy is arbitrary, capricious, or discriminatory, or whether it constitutes an unconstitutional burden on interstate commerce.
The City of Little Rock and the Arkansas Public Service Commission both petitioned this court for review of the decision of the court of appeals. See Ark. Sup. Ct. R. 1 -2(f). Thus, the case is in the supreme court on certiorari to the court of appeals to review its reversal of the decision of the Arkansas Public Service Commission.
I.
Procedurally, on a grant of certiorari to the court of appeals, we will consider the case as if it were initially appealed to this court. Maloy v. Stuttgart Memorial Hosp., 316 Ark. 447, 872 S.W.2d 401 (1994). On certiorari we can affirm the trial court in part and reverse the court of appeals in part. See, e.g., Henry v. Kennedy, 273 Ark. 383, 619 S.W.2d 632 (1981); Hair v. Hair, 272 Ark. 80, 613 S.W.2d 376 (1981). We can address issues argued to, but not decided by, the court of appeals. See Oliver v. State, 286 Ark. 198, 691 S.W.2d 842 (1985).
The Public Service Commission, in its brief to this court, discusses the standard of review of the Administrative Law Judge’s findings of fact, but that is not a real issue in this appeal. There is no dispute about whether the Administrative Law Judge was clearly in error in determining any fact. Some of the facts were developed by testimony of interested witnesses, and some by introduction of documents such as city ordinances, but the vast majority of the facts were stipulated by the parties. The real issues are questions of law, and, if the Administrative Law Judge or the Public Service Commission is wrong on a question of law, we will reverse.
The majority opinion affirms the Public Service Commission, and reverses the court of appeals’ holding that the levy is a tax that is invalid because it was not adopted at an election by the qualified electors of the City. See Ark. Code Ann. § 26-73-103 (1987).
II.
Section 14-200-101 of the Arkansas Code Annotated of 1987, the controlling statute in this case, provides that a city can “determine” the “terms and conditions” for public utilities’ use of city streets and rights-of-way. The statute contains three provisions that are significant to the outcome of this case.
A.
The first of the significant provisions is contained in subsection (a)(1), which provides that a city can determine the “terms” upon which a public utility may be permitted “to occupy the streets, highways, or other public places within the municipality.” The word “terms” in such a statute means the “time and amounts of payment.” Nakdimen v. Ft. Smith & Van Buren Bridge Dist., 115 Ark. 194, 208, 172 S.W. 272, 276 (1914). In Southwestern Bell Telephone Co. v. City of Fayetteville, 271 Ark. 630, 609 S.W.2d 914 (1980), in dictum, we said section 14-200-101 granted authority to cities to determine reasonable terms for the use by public utilities of public streets. Id. at 635, 609 S.W.2d at 918. Thus, section 14-200-101 (a)(1) is authority for a municipality to charge a public utility for the use of its streets and rights-of-way.
B.
The second significant provision is also contained in subsection (a) and provides that a city can enact the charge “by ordinance or resolution.” Thus, it is not necessary for the qualified electors to approve the terms of an ordinance setting the amount of the charge for the use of a city’s streets and rights-of-way by a public utility. Because the statute authorizes the charge to be adopted “by ordinance or resolution,” it logically follows that the charge is not invalid because there was no election by the qualified electors of a city.
The court of appeals held that the levy is a tax and that the tax is invalid because there was no election. That holding is based upon our case of City of Marion v. Baioni, 312 Ark. 423, 850 S.W.2d 1 (1993). There we discussed the distinctions between a fee and a tax in situations in which there is no applicable statute. The issue was whether a charge to connect onto a city’s water and sewer system was a fee or a tax. Since there was no statute authorizing the charge, we had to look at all of the factors involved to determine the issue. To the contrary, in this case, there is a statute that specifically authorizes a charge for the use of city streets and rights-of-way. This is not a charge for maintaining regular and traditional governmental services, but rather is rent for occupation of city streets and rights-of-way. Since the applicable statute specifically authorizes this rental charge, the case of City of Marion is not in point. Thus, I concur with that part of the majority opinion that holds that the City of Little Rock is authorized by statute to charge for the use and occupation of its streets and rights-of-way.
C.
The third significant section of the statute, subsection (b)(1), requires that any rent charged for the use of a city’s streets or rights-of-way be reasonable. In pertinent part, it provides:
Any public utility affected by any such ordinance [charging rent for rights-of-way] . . . may appeal from the action of the council ... by filing ... a written complaint with the [Arkansas Public Service] commission setting out wherein the ordinance ... is unjust, unreasonable, or unlawful, whereupon the commission shall proceed . . . with the same procedure that it would dispose of any other complaint. . . .
Ark. Code Ann. § 14-200-101 (b)(1) (1987) (emphasis added). Even granting the rebuttable presumption of reasonableness of the charge, as set out in subsection (2), the rent assessed AT&T in the ordinance is unjust and unreasonable.
The ordinance provides that the amount charged AT&T is “for the use of the public rights-of-way.” The stipulated facts, computations using those facts, and undisputed evidence are summarized as follows:
There are approximately 1,198 miles of streets, roads, and alleys in the City, and the City received from public utilities, as fees for the use of its rights-of-way, $718,415.43 in 1990, and $703,970.24 in 1991.
AT&T maintains twenty-three miles of fiber optic cables, and eight and one-half miles of those facilities are on the City’s rights-of-way. AT&T’s rental payment in 1990 was $290,715.15, and in 1991 was $264,195.72, or an average annual rent of $ 277,455.00 This amounts to an average of $34,682.00 per mile for use of the City’s rights-of-way. AT&T does not own, possess, operate, or maintain any other facility within the City’s rights-of-way.
Arkansas Louisiana Gas Company maintains 943 miles of facilities, and approximately 850 miles of those facilities are on the City’s rights-of-way. Arkla paid an average of $2.5 million dollars, or about $2,940.00 per mile for use of the City’s rights-of-way.
Southwestern Bell Telephone Company’s average annual rental payment is $2 million dollars. About one-half of Southwestern Bell’s facilities are on the City’s rights-of-way, and about one-half are on private property. In the argument part of its brief the Public Service Commission cites the record and states that Southwestern Bell has facilities on about 1,000 miles of rights-of-way in the City. Assuming the ubiquitous availability of telephone service, Southwestern Bell’s occupancy is probably on about half, or 500 miles of the City’s rights-of-way. From these facts, it appears that Southwestern Bell pays about $2,750.00 per mile for use of the City’s rights-of-way.
Arkansas Power and Light Company maintains 970 miles of overhead facilities in the City, and about 775 miles of those facilities are on the City’s rights-of-way. It additionally maintains underground conduit, estimated by AT&T to be over 250 miles. AP&L paid an average rent of $8.8 million, or about $11,350.00 per mile if just the overhead facilities are counted. If the underground conduit are counted, the average cost per mile would be $5,900.00.
From the above statistics, AT&T concludes that it pays fourteen times as much rent per mile as Arkla, thirteen times as much as Southwestern Bell, and six times as much as AP&L. Neither the City nor the Public Service Commission dispute AT&T’s conclusions.
III.
The City does not deny that it charges AT&T a greater amount than the other utilities when the fee is considered on a per mile basis, and the Commission admits that “at first blush, [it] does make the charge assessed seem disproportionately high.” However, the City, the Commission, and the majority opinion respond to AT&T’s argument in two ways.
A.
First, the City and the Commission argue that AT&T’s cost per mile comparison is not valid because it ignores the 1,000 miles of the City’s rights-of-way used by Southwestern Bell to gain access to telephone customers, and, they contend, without that arrangement, AT&T would have to maintain its own physical facilities. This response, questioning the comparative costs per mile, will not stand scrutiny for either of two reasons. The first is that AT&T pays charges or tariffs to Southwestern Bell that are regulated by the Public Service Commission and the Federal Communications Commission, and AT&T cannot direct Southwestern Bell to route long distance calls over either its City rights-of-way, which constitutes about one-half of Southwestern Bell’s rights-of-way, or over privately owned right-of-way, which constitutes the other one-half of Southwestern Bell’s rights-of-way. Moreover, the argument is inconsistent with the ordinance itself because the ordinance requires the rental charge to be applied to all of AT&T’s long distance calls, even including those delivered over Southwestern Bell’s facilities that are on private rights-of-way.
B.
The second response by the City and the Commission is that a charge of a percentage of gross revenue as rent is not unreasonable or discriminatory when compared to the rentals charged other public utilities that operate within the City. The majority opinion adopts this rationale. The statute provides that a city can determine the terms “upon which the public utility may be permitted to occupy the streets, highways, or other public places within the municipality.” Ark. Code Ann. § 14-200-101 (a)( 1) (1987) (emphasis supplied). This section provides that a city may levy a charge for occupying the geographical area of the streets and other rights-of-way. It is written in terms of physical occupation of space. The statute does not authorize a “franchise fee” for the use of the rights-of-way, and it does not authorize the City to charge a gross receipts fee. The majority opinion, in upholding a fee on gross receipts, refers to the case of Goldberg v. Sweet, 488 U.S. 252 (1989), but that case provides a solid underpinning for this dissent. In Goldberg, the statute at issue imposed a “5% tax on the gross charges of interstate telecommunications.” The statute at issue in the case does not authorize a tax, and it does not authorize a tax on gross charges; it authorizes only a charge for the occupation of a city’s streets and other rights-of-way.
The ordinance, drafted in contemplation of the statute, provides that it levies a charge “for the use of the public rights-of-way, including those public areas along, across, on, over, through, above, and under all public streets, avenues, alleys, public grounds and airways, and places in the city.” The language patently shows that the charge is to be for the physical occupation of a geographical area of the streets and rights-of-way. Yet, the levy contained in the ordinance is based solely upon the minutes of long distance use by the telephone customer. In fact, the ordinance was deliberately drafted so that the fee could be passed on to the end user. In summary, the fee is not related to the physical use or occupancy AT&T makes of the City’s streets or other rights-of-way. AT&T’s occupancy of the rights-of-way is the same regardless of whether the fiber optic cable is carrying none, one, or a thousand long distance calls.
The majority opinion notes that “AT&T concedes, by acknowledging the telephone companies’ payment of franchise fees during past years, its proposed construction of the Act has not been the one applied by the telephone companies and cities.” The observation is valid and citation of Mears v. Arkansas State Hospital, 265 Ark. 844, 581 S.W.2d 339 (1979), is in point. However, one apparent reason for AT&T’s change in position, while not admitted by AT&T, is sufficient to disregard the past payments that were made without objection by AT&T. In the past most, if not all, holders of franchises from the City held exclusive franchises. AP&L holds an exclusive franchise on furnishing electricity within the City, ARKLA holds an exclusive franchise on furnishing natural gas, and in the past AT&T held an exclusive franchise on furnishing long distance service. Such franchise holders are allowed by the PSC to charge a rate sufficient for a “reasonable rate of return.” It would seem logical that an exclusive franchise holder would prefer that “reasonable rate of return” to be on the largest amount possible. For example, if the reasonable rate of return in any one year were determined to be ten percent, the franchise holder would prefer to make a ten percent return on two million dollars instead of on only one million dollars. The inherent difficulty with the “cost plus ten” concept is that such a system encourages high costs. It is most likely that while AT&T held an exclusive franchise on the long distance service, it relished the idea of higher costs by paying the franchise fee. Now, after the breakup of the parent American Telephone and Telegraph Company, it is in competition with Sprint, MCI, and LDDS. The concept of a guaranteed “cost plus ten” is gone, and AT&T must now change its position to meet competition. But the change in position affects more than AT&T. The change in position benefits the telephone user, the citizen, and taxpayer. Their rates should be lower. Under these circumstances, the past payment of the fee without protest should not defeat AT&T’s current position.
IV.
Charges are authorized for a public utility’s occupation of “the streets, highways, or other public places within the municipality.” Ark. Code Ann. § 14-200-101 (a)(1) (1987). Such charges cannot be unjust or unreasonable. Id. § (b)(1). The charge levied against AT&T under the ordinance, when compared to charges levied on other public utilities, is disproportionately high and discriminates against AT&T. Because the charge to AT&T is unjust and unreasonable, I respectfully dissent from the majority opinion.
Corbin, J., joins in this dissent.