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Bluestem Telephone Co. v. Kansas Corp. Com'n

Court of Appeals of Kansas

December 12, 2013

BLUESTEM TELEPHONE COMPANY, et al., Petitioners/Appellants,
KANSAS CORPORATION COMMISSION, Respondent/Appellee, and Sprint Communications Company, L.P., Intervenor.

Syllabus by the Court

1. An appellate court may exercise jurisdiction only under circumstances allowed by statute. Whether jurisdiction exists is a question of law over which an appellate court has unlimited review.

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2. The most fundamental rule of statutory construction is that the intent of the legislature governs if that intent can be ascertained. An appellate court must first attempt to ascertain legislative intent through the statutory language enacted, giving common words their ordinary meanings.

3. When a statute is plain and unambiguous, an appellate court does not speculate as to the legislative intent behind it and will not read into the statute something not readily found in it. Where there is no ambiguity, the court need not resort to statutory construction. Only if the statute's language or text is unclear or ambiguous does the court use cannons of construction or legislative history to construe the legislature's intent.

4. K.S.A. 66-118a(b), which grants the Court of Appeals exclusive jurisdiction to review any agency action of the state corporation commission arising from a rate hearing, is construed and applied.

5. K.S.A. 66-118a(b) does not grant the Court of Appeals exclusive jurisdiction to review a Kansas Corporation Commission order from a generic docket simply because the order ultimately may impact rates that a public utility charges to consumers.

J. Nick Badgerow, of Spencer Fane Britt & Browne LLP, of Overland Park, Mark E. Caplinger, of Mark E. Caplinger, P.A. of Topeka, [49 Kan.App.2d 746]Thomas E. Gleason, Jr., of Gleason & Doty, Chartered, of Lawrence, Colleen R. Harrell, of James M. Caplinger, Chartered, of Topeka, for petitioners/appellants.

Dana A. Bradbury and Brian G. Fedotin, of Kansas Corporation Commission, for respondent/appellee.

Russell S. Jones, Jr., Anthony W. Bonuchi, and Michael S. Foster, of Polsinelli PC, of Kansas City, Missouri, and Diane C. Browning, of Sprint Communications Company L.P., of Overland Park, for intervenor.



Bluestem Telephone Co. and numerous other Kansas Rural Local Exchange Carriers (RLECs) appeal from orders of the Kansas Corporation Commission (Commission) issued during two general investigation dockets. The Commission opened these dockets to explore the impact of proposed new federal regulations relating to the provision of and payment for universal service in the telecommunications industry. The RLECs filed their petition for judicial review in the Washington County District Court. The Commission filed a motion seeking to transfer the case to the Court of Appeals under K.S.A. 66-118a(b), claiming the challenged orders arose from a " rate hearing." The district court agreed and found that this court had exclusive jurisdiction to hear the case.

The threshold issue in this appeal is whether the Court of Appeals has exclusive jurisdiction under K.S.A. 66-118a(b) to hear the RLECs' challenge to the Commission's orders. We conclude this case does not arise from a " rate hearing," nor is it sufficiently like a rate hearing to grant this court exclusive jurisdiction under K.S.A. 66-118a(b). Thus, the district court erred in transferring the case to this court, and we remand to the district court for further proceedings.


In 2009, Congress directed the Federal Communication Commission (FCC) to ensure Americans had ubiquitous access to broadband service through the National Broadband Plan (NBP). At Congress' direction, the FCC issued a report proposing to change the focus of universal telecommunication services to a broadband infrastructure for many forms of communications, including [49 Kan.App.2d 747] voice communication. The FCC's proposed reforms focused on wireless/mobility, universal service, and intercarrier compensation (ICC). Due to the FCC's initial proposals, the Commission issued an order on September 13, 2011, opening a general investigation docket— No. 12-GIMT-170-GIT (the 12-170 docket)— to explore the impact of the FCC's potential reforms on the Kansas Universal Service Fund (KUSF).

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By way of additional background, the KUSF was created by the 1996 Kansas Telecommunications Act, K.S.A. 66-2001 et seq. Initially, KUSF funds were paid to replace lost access charge revenues that previously subsidized services provided by Local Exchange Carriers (LECs). Many LECs had charged more for intrastate connections than for interstate connections; thus, the Commission made KUSF payments to the LECs when they were required to bring their intrastate fees into parity with interstate charges. See Bluestem Telephone Co. v. Kansas Corporation Comm'n, 33 Kan.App.2d 817, 819, 109 P.3d 194, rev. denied 280 Kan. 981 (2005). After a 3-year transition period, KUSF began shifting to a cost-based fund. For LECs electing to operate under a traditional rate of return regulation (which were primarily rural LECs), all KUSF support was to be " based on such carrier's embedded costs, revenue requirements, investments and expenses." K.S.A.2012 Supp. 66-2008(e).

Prior to 2011, eligible Kansas LECs also received support from a Federal Universal Service Fund (FUSF) if they operated in a high-cost service area. The Commission would consider the amount of FUSF funds an LEC received when determining the amount of KUSF support that would be paid to that company. Thus, any changes to the FUSF would directly impact the amount of subsidies available for Kansas LECs. One of the Commission's stated purposes for opening the 12-170 docket was to explore changes that would be needed to maintain a KUSF that is " ‘ not inconsistent with the [FCC's] rules to preserve and advance universal service.’ " (Quoting 47 U.S.C. ยง 254[f] [2006].) Telecommunications carriers operating in Kansas were asked to address a variety of issues the Commission perceived would arise as a result of FCC actions.

[49 Kan.App.2d 748] On November 18, 2011, the FCC released Report and Order 11-161 (FCC Order) detailing its planned reforms and issuing a notice of proposed rulemaking. The FCC Order acknowledged the Congressional mandate to develop the NBP. To do so, the FCC proposed creating the Connect America Fund (CAF) and the Access Recovery Charge (ARC) as methods to reform universal service funding and to accelerate targeting of subsidies to unserved areas. The FCC also proposed to reform the FUSF to cap growth of subsidies charged to consumers and to reduce inefficiencies it found in the current funding mechanisms. Finally, the FCC proposed to reform the FUSF to promote broadband deployment and to reform the ICC scheme. The FCC Order marked a fundamental shift in the FUSF and ICC systems previously used at the federal level.

As part of the FCC's reformation of the ICC scheme, LECs were ordered to cap intrastate terminating access rates to interstate levels. Consequently, the Commission opened a separate industry-wide docket— No. 13-GIMT-004-GIT (the 13-004 docket)— on July 12, 2012. Following staff recommendations, the Commission ordered Kansas RLECs to file specific reports delineating between each RLEC's originating intrastate access rates and the RLEC's terminating intrastate access rates. In addition, the Commission requested comments from the parties on a variety of related issues. In its order, the Commission determined that the RLECs could receive an increase or decrease from the KUSF for part of 2013 due to adjusting intrastate access to parity but that after June 30, 2013, any recovery or reduction related to terminating access charges would be removed from KUSF and recovered via the federal ARC set forth in the FCC Order.

The RLECs filed their access reduction calculations with the Commission in August 2012, and these were ultimately accepted. The RLECs also filed comments taking issue with the Commission's indications that they would not be receiving KUSF payment for losses caused by capping terminating access recovery and that any revenue recovery would be transferred to ARC. For the sake of administrative efficiency, the Commission ordered in September 2012 that any issues relating to KUSF reimbursements would be [49 Kan.App.2d 749] ...

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