Telrite Corp. v. Neb. Pub. Serv. Comm'n

288 Neb. 866

852 N.W.2d 910

Telrite Corporation, doing business as Life Wireless, appellant,

v.Nebraska Public Service Commission, appellee.

No. S–13–870

Supreme Court of Nebraska.

Filed August 22, 2014

Appeal from the Public Service Commission. Reversed and remanded for further proceedings.

Stephen M. Bruckner, Russell A. Westerhold, and Jacqueline M. DeLuca, of Fraser Stryker, P.C., L.L.O., for appellant.

Jon Bruning, Attorney General, and L. Jay Bartel for appellee.

Wright, Connolly, Stephan, McCormack, Miller–Lerman, and Cassel, JJ.

Syllabus by the Court

1. Public Service Commission: Appeal and Error. Under Neb.Rev.Stat. § 75–136(2) (Supp.2013), an appellate court

reviews an order of the Nebraska Public Service Commission de novo on the record.

2. Appeal and Error. In a review de novo on the record, an appellate court reappraises the evidence as presented by the record and reaches its own independent conclusions concerning the matters at issue.

3. Public Service Commission: Appeal and Error. Under Neb.Rev.Stat. § 75–136 (Supp.2013), an appellate court must reappraise the evidence on the record as it relates to the penalty issued by the Nebraska Public Service Commission and reach an independent conclusion.

4. Appeal and Error. An appellate court is not obligated to engage in an analysis that is not necessary to adjudicate the case and controversy before it.

Connolly, J.

SUMMARY

Telrite Corporation, doing business as Life Wireless (Telrite), was designated as an eligible telecommunications carrier (ETC) and a Nebraska eligible telecommunications carrier (NETC) by the Nebraska Public Service Commission (PSC). These designations permitted Telrite to participate in the “Lifeline” program and receive subsidies from federal and state funds for the provision of telecommunications service to low-income households. Six weeks after receiving its designations, Telrite held a 1–day outdoor enrollment event in Omaha, Nebraska. At the event, Telrite used the wrong enrollment form, and the PSC later received inquiries and complaints from consumers who had attended.

The PSC issued a show cause order to Telrite and thereafter revoked Telrite's ETC designation and ordered it to cease and desist from offering Lifeline service in Nebraska. Telrite appeals from the PSC order, arguing that the PSC imposed an excessive penalty, exceeded its statutory authority, and failed to comply with its regulations. We agree that the penalty was excessive. Therefore, we reverse the order and remand the cause for further proceedings before the PSC.

BACKGROUND

Statutory Background

The Telecommunications Act of 1996 (Telecommunications Act) ¹ established the principle of “universal service,” which is broadly defined as the goal of “ensuring that all Americans have access to affordable phone service.” ² The Telecommunications Act created the federal Universal Service Fund (Federal Fund) by requiring telecommunications carriers providing interstate services to contribute to “mechanisms established by the [Federal Communications] Commission to preserve and advance universal service.” ³ Telecommunicationscompanies participating in universal service programs are eligible to receive support from the Federal Fund if they are designated as an ETC.⁴ The Telecommunications Act provides that state commissions are primarily responsible for making ETC designations. ⁵ In Nebraska, the PSC makes ETC designations.⁶

Among the mechanisms established by the Federal Communications Commission (hereinafter FCC) and supported by the Federal Fund is the Lifeline program, under which qualified low-income consumers pay reduced charges for voice telephone services.⁷ ETC's participating in the Lifeline program receive a monthly disbursement of $9.25 from the Federal Fund for each qualified consumer.⁸ Lifeline support is limited to a single subscriber per household, and eligibility is determined by the subscriber's income or participation in government programs directly related to income. ⁹

The Telecommunications Act also authorized states to create their own universal service funds and maintain them with mandatory contributions from providers of intrastate telecommunications services.¹⁰ The Nebraska Legislature exercised this power by enacting the Nebraska Telecommunications Universal Service Fund Act (NTUSFA).¹¹ The NTUSFA created the Nebraska Telecommunications Universal Service Fund (Nebraska Fund) in order to advance the state universal service effort.¹² The Nebraska Fund receives contributions from surcharges collected on all “end-user telecommunications” provided in Nebraska commerce.¹³ The NTUSFA also charged the PSC with the creation of the Nebraska Telephone Assistance Program to promote universal service for low-income households and to determine eligibility guidelines and standards for the federal and Nebraska support mechanisms.¹⁴

In addition to making ETC designations as provided by the Telecommunications Act, the PSC determines the telecommunications providers that are eligible for support from the Nebraska Fund. The PSC denominates a provider eligible to receive support from the Nebraska Fund as a “Nebraska Eligible Telecommunications Carrier” (NETC).¹⁵ The PSC's regulations require ETC's receiving federal support to participate in Nebraska's universal service program,¹⁶ in effect requiring an ETC to receive an NETC designation. An NETC providing services under the Lifeline program is entitled to $3.50 per month for each qualified consumer from the Nebraska Fund.

Factual and Procedural Background

Telrite is a Georgia corporation with a certificate of authority to do business in Nebraska. Telrite received its first ETC designation in 2010 and has rapidly become “one of the largest Lifeline ETCs in the country,” with designations in approximately half of the states. Telrite often attracts customers by holding outdoor tent events at which it gives qualified applicants a “free” cell phone. If an applicant is qualified for the Lifeline program, the cell phone is activated onsite. In February 2013, Telrite filed an amended application with the PSC seeking designation to participate in the Lifeline program in Nebraska as a prepaid wireless service.

On May 29, 2013, the PSC issued an order designating Telrite as both an ETC and NETC. The order stated that Telrite had committed to comply with all of the Nebraska-specific requirements for ETC's and NETC's, including the requirement to use the form approved by the PSC. The order did not direct Telrite to comply with any specific requirements other than the use of a particular form.

On July 12, 2013, Telrite held its first enrollment event in Nebraska at an outdoor tent in Omaha. Consumer interest was heavy, and the PSC was later notified that applicants had to “wait[ ] in line for extended periods of time in over ninety (90) degree heat with no shelter or water.” As reported by a local media outlet, the police were called to the event when “tempers flared on a hot day.” The PSC fielded a number of inquiries from consumers in the days following the event. The questions included: “When was the free phone they received going to be hooked up?”; “When were the tents going to be open again and where?”; “Were there any phones left and could they pick it up at the office?”; “Why was the media coverage not better as to when and where this event was taking place?”; “Why were there only tents in Omaha and not in Lincoln?”; “Why wasn't more information provided in the [PSC's] office about where there are free phones being handed out?”; and “Why was the information about the free phone give away not made more public?” The PSC also received a report that Telrite's representatives had run out of cell phones and told prospective applicants to return on Sunday, July 14, but that when the consumers did so, Telrite representatives were not present. After the PSC contacted Telrite, it voluntarily ceased enrolling additional customers in Nebraska on July 15.

The PSC issued an order on July 30, 2013, demanding that Telrite show cause why its ETC designation should not be revoked or administrative penalties levied against it. The order alleged that Telrite had not contacted the PSC before beginning operations in Nebraska, failed to use the form approved by the PSC, and handed out flyers that failed to state that the PSC made the final eligibility determination. In its answer, Telrite “apologize[d] for the errors made during the launch of its Lifeline service in Nebraska” and “humbly ask[ed] the [PSC] to afford it the opportunity to correct its mistakes.” Telrite admitted that it had “failed to implement state-specific customization of [Telrite's] FCC-default standard forms” and control “unruly behavior in the queue.” Explaining that turnout had exceeded expectations, Telrite promised to hire security for future events and make water available if the temperature exceeded 85 degrees.

The PSC held a hearing on the show cause order on August 27, 2013. Telrite's counsel began by stating that the PSC had the power to order “revocation, fine, some other remedy, whatever you deem appropriate,” but that its decision should be “guided by ... the public interest.” Brian Lisle, Telrite's president, admitted that Telrite had used the form applicable in states where the FCC is responsible for ETC designations instead of the form approved by the PSC. Lisle testified that he had sent an e-mail to Telrite's compliance department about the Nebraska-specific requirements, but that there had been “a lack of follow-up on communication there.” Lisle testified that the independent contractor who administered the Omaha event had received “FCC training” but not “[Nebraska Telephone Assistance Program] training.”

Lisle also testified about the status of persons who had received cell phones at the Omaha event and Telrite's plan to “re-enroll” those individuals. Lisle stated that about 944 people had applied at the event and that Telrite approved 796...