Central Arkansas Telephone Cooperative, Inc. et al. v. Arkansas Public Service Commission

CENTRAL ARKANSAS TELEPHONE COOPERATIVE, INC.,
et al. v. ARKANSAS PUBLIC SERVICE COMMISSION

CA 97-950                                          ___ S.W.2d ___

                  Court of Appeals of Arkansas
                      Divisions III and IV
                Opinion delivered March 25, 1998


1.   Public Service Commission -- Telecommunications Regulatory Reform Act --
     finding that participation in Toll Pool made voluntary by -- no evidence
     that appellants suffered lost revenue -- prejudice not demonstrated. --
     Where appellants argued that the Public Service Commission
     erred in finding that Act 77, the Telecommunications
     Regulatory Reform Act of 1997, made participation in the Toll
     Pool voluntary, maintaining that the Commission's action
     allowed members to leave the Toll Pool before the Arkansas
     Universal Services Fund, provided for in the Act, was in
     place, thereby causing a reduction in revenues to the Toll
     Pool and thus a reduction in the revenues received by the
     remaining Toll Pool members, the appellate court concluded
     that there was no evidence that appellants had suffered any
     lost revenue since the Commission held that Act 77 rendered
     participation in the Toll Pool voluntary; even if the
     Commission had erred in its finding, appellants did not
     demonstrate that they had been prejudiced by its action.

2.   Appeal & error -- advisory opinions not issued. -- The appellate court
     does not render advisory opinions nor answer academic
     questions.

3.   Appeal & error -- prejudice must be shown -- error not presumed
     prejudicial. -- Where error is alleged, prejudice must be shown;
     it is no longer presumed that error is prejudicial.

4.   Appeal & error -- appellants' argument moot -- appeal dismissed. --
     Assuming, without deciding, that appellants were correct in
     their contention that Act 77 of 1997 did not render
     participation in the Toll Pool voluntary as of the date of its
     enactment, the appellate court held that appellants' argument
     was moot because the Arkansas Universal Services Fund was in
     place; thus, a decision on the issue appellants raised on
     appeal would have had no practical effect; the appeal was
     dismissed.  

5.   Appeal & error -- when issue is moot. -- An issue is moot when it
     has no legal effect on an existing controversy and when a
     decision of the court could not afford appellant any relief. 

6.   Appeal & error -- moot issues not addressed. -- As a general rule, the
     appellate courts do not address moot issues.


     Appeal from the Arkansas Public Service Commission; dismissed.
     William Bullock; George Hopkins; and Williams & Anderson, by:
Leon Holmes, for appellants.
     Paul J. Ward, for appellee Arkansas Public Service Commission.
     Stephen B. Rowell; and Friday, Eldredge & Clark, by: Kevin A.
Crass and R. Christopher Lawson, for appellee ALLTEL Arkansas, Inc.

     Terry Crabtree, Judge.
     On August 18, 1997, Central Arkansas Telephone Cooperative and
seven other local exchange carriers, appellants, filed a notice of
appeal from Order No. 9 issued by the Arkansas Public Service
Commission (Commission) in Docket No. 96-428-U.  Appellants also
filed a motion for stay and expedited appeal.  This court denied
their motion for stay but granted their motion for an expedited
appeal.  Their appeal concerns Act 77, the þTelecommunications
Regulatory Reform Act of 1997,þ and its effect on the Arkansas
IntraLATA Toll Pool (AITP or Toll Pool).  In Order No. 9, the
Commission held that the passage of Act 77 made participation in
the Toll Pool voluntary and vacated Order No. 7, which created the
Toll Pool.  On appeal, appellants argue that the Commission erred
in holding that Act 77 made participation in the Toll Pool
voluntary without further action of the Commission. 
     The Arkansas IntraLATA Toll Pool (the Toll Pool) was
established by Commission Order No. 7 in Docket No. 83-042-U to
allow local exchange carriers (LECs) to recover their costs of
providing intraLATA toll service.  Participation in the Toll Pool
was required by Order No. 7, and the Toll Pool agreement provided
that all LECs would charge their customers uniform rates for
intraLATA toll calls and contribute these revenues to the Toll
Pool.  The Toll Pool then redistributed the revenues to the LECs
based on their individual needs, causing some LECs to contribute
more to the Toll Pool than their actual expenditures and some LECs
to receive more in reimbursements than their contributions to the
Toll Pool.
     In 1996, GTE Southwest, Inc., and GTE Arkansas, Inc.
(collectively þGTEþ), sought permission from the Commission to exit
the Toll Pool so that it could flexibly price intraLATA toll
services to meet competition as required by the federal
Telecommunications Act of 1996.  GTE argued that it was the only
local exchange carrier in Arkansas that was required to implement
full competition for intraLATA toll service in its serving areas by
August 7, 1997, and therefore, it needed the same flexibility in
pricing toll plans as the interexchange carriers, which is
inconsistent with a pooling environment.  Docket No. 96-428-U was
opened by the Commission in response to GTEþs motion.  
     Act 77, the þTelecommunications Regulatory Reform Act of
1997,þ was passed by the Arkansas General Assembly and became law
on February 4, 1997.  Act 77 significantly changed the Commissionþs
regulation of the telecommunications industry.  Basically, it
limited the Commissionþs authority over certain þelectingþ LECs and
their revenues and permitted companies that elect regulation under
Act 77 to avoid much of the rate regulations of the Commission to
which telephone companies are subject.  Additionally, section 4 of
the Act created the Arkansas Universal Services Fund (AUSF), the
purpose of which is þto promote and assure the availability of
universal service at rates that are reasonable and affordable, and
to provide for reasonably comparable services and rates between
rural and urban areas.þ 
     After Act 77 was enacted, the Commission expanded Docket No.
96-428-U to also consider AT&T Communications of the Southwest,
Inc.þs (AT&T's) request to abolish the Toll Pool in light of the
passage of Act 77.  The Commission entered Order No. 5, which set
a public hearing on GTEþs and AT&Tþs requests.  Alltel Arkansas,
Inc. (Alltel) and appellants, and others were permitted to
intervene in the docket.  
     In its comments filed with the Commission, AT&T argued that
the Toll Pool should be abolished because it depends on mandatory
participation.  AT&T noted that section 11(f) of Act 77 exempts
certain LECs from the requirements of Ark. Code Ann.  23-3-114(b),
which gives the Commission authority to fix uniform rates, and that
this exemption could be interpreted to mean that the Commission no
longer has authority to order uniform or statewide average
intraLATA toll rates for electing LECs.  
     Alltel argued in its prefiled testimony that participation in
the Toll Pool became voluntary with the passage of Act 77.  Its
witness, Jack Redfern, testified in his prefiled testimony that Act
77 significantly changed the status of telecommunications providers
in the state of Arkansas:
     [H]istorically the Commission has relied on a provision
     of Arkansas law which allowed it to require statewide
     average toll rates.  This law is referred to in the AT&T
     Comments as Arkansas Code Annotated Section 23-3-114. 
     Section 11(f) of Act 77 expressly provides that Arkansas
     Code Annotated Section 23-3-114 is not applicable to
     companies electing alternative regulation under Act 77. 
     Additionally, and just as importantly, Act 77 provides
     ILECs [Interstate Local Exchange Carriers] the ability to
     elect to be regulated under forms of regulation that are
     alternative to the traditional rate base rate of return
     regulation.  A number of ILECs have elected to be
     regulated under Section 6 or Section 12 of Act 77, the
     alternative regulation provisions.  One of the
     significant results of these elections is that the
     Commission no longer regulates the earnings and revenue
     streams of the ILECs.  While rates of basic local
     exchange services and intrastate switched access rates
     are capped, electing ILECs are granted pricing
     flexibility with regard to all other services including
     intraLATA toll.  The electing ILECs, therefore, cannot be
     required to maintain toll rates at the same level as all
     other ILECs.  Thus, there is an irreconcilable conflict
     between Act 77 and the Commissionþs previous Order
     requiring ILECs to participate in the Toll Pool.  As a
     result of the passage of Act 77 and the subsequent
     election of ILECs under Act 77, the Toll Pool, therefore
     has become a purely voluntary arrangement among
     telecommunications providers and the Commission cannot
     mandate participation in the Toll Pool.  In other words,
     the Commission lacks jurisdiction to require
     participation in the Toll Pool or to establish the
     intraLATA toll rates charged by an incumbent local
     exchange carrier.

     Staff of the Commission also argued that participation in the
Toll Pool became voluntary as a result of the passage of Act 77. 
John Bethel, manager of the Telecommunications section of the
general Staff of the Commission, argued that participation in the
Toll Pool should no longer be mandatory for all LECs.  In his
prefiled testimony, he noted that sections 8(c) and 9(a) of Act 77
authorize ILECs selecting alternative forms of regulation to
increase or decrease rates at any time for telecommunications
services (including intraLATA toll service) and, consequently,
electing ILECs may change their intraLATA toll rates without prior
Commission approval.  He then explained that the operation of the
Toll Pool is dependent upon all members charging uniform intraLATA
toll rates and that, absent identical toll rates being charged by
all participants, the Toll Pool members could not be equitably
compensated under the Toll Poolþs current compensation scheme.  He
concluded that participation in the Toll Pool should no longer be
mandatory for all ILECs.
     Appellantsþ witness Larry Lovell, chairman and CEO of E.
Ritter Telephone Company and Tri County Telephone Company,
disagreed with AT&Tþs suggestion that the Commission should abolish
the Toll Pool and argued that the establishment of the Arkansas
Universal Services Fund (AUSF) must precede the abolishment of the
Toll Pool.  He testified that the LECs realize that the current
Toll Pool arrangement will have to change with the implementation
of the dialing arrangements required by federal law but argued that
significant time and industry resources would be required to allow
an acceptable method of Toll Pool compensation to replace the
existing Toll Pool procedures.  He also testified that, under
section 4(e) of Act 77 of 1997, the LECs must have an opportunity
to apply for replacement of any revenue shortfalls that might be
caused by elimination of the Toll Pool and, at this time, it is
unclear when the AUSF will be in place and available to replace
such revenue losses. 
     Another witness for appellants, Steven Sanders, president and
general manager of Northern Arkansas Telephone Company, Inc., also
stated in his prefiled testimony that he did not believe the
General Assembly intended to abolish the Toll Pool with the passage
of Act 77.  
     Order No. 9 was entered by the Commission on July 2, 1997.  In
it, the Commission held that participation in the Toll Pool became
voluntary with the passage of Act 77.  The Commission explained:
          In Act 77, the General Assembly clearly provided
     ILECs the opportunity to elect to operate under
     alternative forms of regulation and once an ILEC elects
     alternative regulation, it can flexibly price intraLATA
     toll services under  8(c) and 12(a) of Act 77. 
     Furthermore, when an ILEC elects alternative regulation,
      11(f) of Act 77 exempts the ILEC from a number of
     statutory requirements including, Ark. Code Ann.  23-3-
     114 which requires the maintenance of average message
     toll service rates.  The ILEC deregulatory election
     provisions in conjunction with the  11(f) exemptions of
     Act 77 supersede and vacate the Commission Order
     requiring mandatory participation of the ILECs in the
     AITP.

          Based upon Act 77, the Commission finds that ALLTEL
     is correct in stating that þthe Toll Pool became
     voluntary with the passage of Act 77" and pursuant to Act
     77 þthe Commission lacks jurisdiction to require
     participation in the Toll Pool or to establish the
     intraLATA toll rates chargedþ by electing ILECs. 
     Therefore, the Commission finds that by operation of law
     Order No. 7 in Docket No. 83-042-U was vacated effective
     February 4, 1997, upon enactment of Act 77.  AT&Tþs
     request to abolish the AITP need not be addressed since
     the Commission order requiring participation in the AITP
     was vacated by operation of law.  With the enactment of
     Act 77, GTEþs Motion became moot.

     Thereafter, appellants moved for clarification of Order No. 9,
specifically requesting the Commission to issue an order stating
that any reduction in the net revenue experienced by any rural
telephone company as a result of the operation of Act 77 on the
distributions of the Toll Pool would be subject to revenue
replacement in accordance with section 4(e)(4)(B) of Act 77.  The
Commission responded in Order No. 10 that absolutely nothing in
Order No. 9 should be interpreted as a bar to any LECþs right,
pursuant to section 4(e)(4)(B) of Act 77, to seek revenue
replacement later in an appropriate docket.  Appellants petitioned
the Commission to rehear Order No. 9 and to stay its effective date
pending rehearing.  The Commission denied appellants' petition in
Order No. 11.  
     Appellantsþ single point for reversal is that the Commission
was clearly erroneous in interpreting Act 77 to hold that it
rendered participation in the Toll Pool voluntary effective the
date of its passage.  Appellants argue that nowhere in the Act does
it state that participation in the Toll Pool becomes voluntary on
the effective date of the Act and that section 4(e) of the Act
prohibits participation in the Toll Pool being made voluntary
before the AUSF is implemented.  Section 4(e) of Act 77 provides: 
þThe Commission shall not, prior to the implementation and
availability of funds from the AUSF, require any local exchange
carrier to reduce rates for intrastate switch access services or
require any local exchange carrier to reduce its net revenue
received from the Arkansas IntraLATA Toll Pool (AITP).þ  
     The Commission addressed this argument in Order No. 9:
          The ILECs contend that no action may be taken on the
     AITP until such time as the Arkansas Universal Service
     Fund is established to compensate the ILECs for any
     revenues lost through dissolution of the AITP....
 
          The Commission has not taken any action which
     requires any ILEC þto reduce rates for intrastate
     switched access services,þ nor has the Commission taken
     any action which requires any ILEC þto reduce its net
     revenue receivedþ from the AITP.  Act 77 vacated the
     Commission order requiring participation in the AITP
     effective February 4, 1997, without Commission action. 
     Therefore,  4(e) of Act 77 cited by the ILECs has no
     application in this proceeding.

     Nevertheless, appellants maintain that the Commissionþs action
in holding that participation in the Toll Pool became voluntary
allows members to leave the Toll Pool before the AUSF is in place,
which will cause a reduction in revenues to the Toll Pool and thus
a reduction in the revenues received by the remaining Toll Pool
members.  They conclude that this result is contrary to the plain
wording of section 4(e).  The problem with appellantsþ argument is
that there is no evidence that appellants have suffered any lost
revenue since the Commission held that Act 77 rendered participation
in the Toll Pool voluntary.  Consequently, even if the Commission
erred in its finding, appellants have not demonstrated that they
have been prejudiced by this action.  While they speculate that they
could be prejudiced by the Commissionþs decision in the future, no
prejudice has been shown at this time.  It is well settled that the
appellate court does not render advisory opinions nor answer
academic questions.  Wilson v. Pulaski Assþn of Classroom Teachers,
330 Ark. 298, 954 S.W.2d 221 (1997).  See also Almond v. Cigna
Property and Casualty Ins. Co., 322 Ark. 268, 908 S.W.2d 93 (1995);
Tortorich v. Tortorich, 50 Ark. App. 114, 902 S.W.2d 247 (1995).  
Where error is alleged, prejudice must be shown.  City of W. Memphis
v. Burroughs, 319 Ark. 611, 893 S.W.2d 323 (1995).  It is no longer
presumed that error is prejudicial.  Abernathy v. Weldon, Williams,
& Lick, Inc., 54 Ark. App. 108, 923 S.W.2d 893 (1996); Jones v.
Jones, 43 Ark. App. 7, 858 S.W.2d 130 (1993). 
     Moreover, assuming without deciding that appellants are correct
in their contention that Act 77 did not render participation in the
Toll Pool voluntary effective the date of its enactment, appellantsþ
argument is now moot because the AUSF is in place.  Appellantsþ
initial appeal was that the Commission erred in finding that
participation in the Toll Pool became voluntary prior to the
implementation and availability of funds from AUSF.  In its response
to the appellantsþ motion for stay and expedited appeal, the
Commission attached a copy of Order No. 5, which states that þthe
Commission will implement rules for the AUSF and make funds
available to the eligible telecommunication carriers on or before
October 13, 1997.þ  Order No. 5 was entered in Docket No. 97-041-R,
a  rule-making proceeding to establish rules and procedures
necessary to implement the Arkansas Universal Service Fund.  Indeed,
appellantsþ counsel acknowledged in the oral argument of this appeal
that the AUSF is in effect.  Therefore, a decision on the issue
appellants raised on appeal will have no practical effect.  An issue
is moot when it has no legal effect on an existing controversy; when
a decision of this court could not afford appellant any relief. 
Bryant v. Arkansas Pub. Serv. Commþn, 45 Ark. App. 47, 870 S.W.2d 775 (1994).  As a general rule, the appellate courts do not address
moot issues.  Dillon v. Twin City Bank, 325 Ark. 309, 924 S.W.2d 802
(1996). 
     Appeal dismissed.
     Robbins, C.J., and Arey, Jennings, Stroud, and Meads, JJ., agree.