SUPREME COURT OF FLORIDA. Case No. SC PSC Docket No TP NORTHEAST FLORIDA TELEPHONE COMPANY, Appellant, BRAULIO L. BAEZ, ETC., ET. AL.

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1 SUPREME COURT OF FLORIDA Case No. SC PSC Docket No TP NORTHEAST FLORIDA TELEPHONE COMPANY, Appellant, v. BRAULIO L. BAEZ, ETC., ET. AL., Appellees. INITIAL BRIEF OF APPELLANT NORTHEAST FLORIDA TELEPHONE COMPANY Benjamin H. Dickens, Esq. Florida Bar No Blooston, Mordkofsky, Dickens, Duffy & Prendergast 2120 L Street, N.W., Suite 300 Washington, DC (202) (Telephone) (202) (Telecopier) Kenneth A. Hoffman, Esq. Florida Bar No Martin P. McDonnell, Esq. Florida Bar No Marsha E. Rule, Esq. Florida Bar No Rutledge, Ecenia, Purnell & Hoffman, P.A. P. O. Box 551 Tallahassee, FL (850) (Telephone) (850) (Telecopier) Attorneys for Appellant Northeast Florida Telephone Company

2 TABLE OF CONTENTS TABLE OF CITATIONS... iv PREFACE... 1 STATEMENT OF THE CASE AND FACTS... 2 A. THE PARTIES BELOW... 2 B. THE PROCEEDING BELOW... 4 SUMMARY OF ARGUMENT... 9 ARGUMENT I. THE FLORIDA PUBLIC SERVICE COMMISSION ERRED IN DISMISSING NORTHEAST FLORIDA S PETITION FOR LACK OF STANDING A. STANDARD OF REVIEW B. NORTHEAST FLORIDA S PETITION CONTAINS SUFFICIENT ALLEGATIONS TO ESTABLISH STANDING The application of the Agrico test must be considered with reference to the Commission s statutory role as the arbiter of fair and effective local service competition Northeast Florida s Petition clearly alleged injury in fact of sufficient immediacy to entitle the company to a formal hearing Page ii

3 3. The injury alleged by Northeast Florida is exactly the type the Legislature intended to protect against in certification proceedings CONCLUSION CERTIFICATE OF SERVICE CERTIFICATE OF COMPLIANCE iii

4 TABLE OF CITATIONS CASES Agrico Chemical Co. v. Dept. of Environmental Regulation, 406 So.2d 478 (Fla. 2 nd DCA 1981)...passim Alachua County v. Scharps, 855 So.2d 195 (Fla. 1 st DCA 2003) Ameristeel Corp. v. Clark, 691 So.2d 473 (Fla. 1997) Florida Society of Ophthalmology v. State Board of Optometry, 532 So.2d 1279 (Fla. 1 st DCA 1988)...26, 27 Hospice of Palm Beach County v. State, Agency for Health Care Administration, 876 So.2d 4 (Fla. 1 st DCA 2004) International Jai-Alai Players Association v. Florida Pari-Mutuel Commission, 561 So.2d 1224 (Fla. 3 rd DCA 1990) Maverick Media Group, Inc. v. Dept. of Transp., 791 So.2d 491 (Fla. 1 st DCA 2001) McWhirter, Reeves, McGlothin, Davidson, Rief & Bakas, P.A. v. Weiss, 704 So.2d 214 (Fla. 2 nd DCA 1998) Midflorida Schools Federal Credit Union v. Fansler, 404 So.2d 1178 (Fla. 2 nd DCA 1981) Oguz v. Oguz, 478 So.2d 437 (Fla. 5 th DCA 1985) Sprint-Florida, Inc. v. Jaber, 885 So.2d 286 (Fla. 2004) Tampa Electric Company v. Garcia, 767 So.2d 428 (Fla. 2000) Varnes v. Dawkins, 624 So.2d 349 (Fla. 1 st DCA 1993) Village Park Mobile Home Association, Inc. v. State, Department of Business Regulation, 506 So.2d 426 (Fla. 1 st DCA 1987), rev. den., 513 So.2d 1063 (Fla. 1987) iv

5 FLORIDA STATUTES , Florida Statutes...15, 21, (2), Florida Statutes (7), Florida Statutes (1), Florida Statutes , Florida Statutes...30, 32, (1)(a), Florida Statutes...31, (4), Florida Statutes , Florida Statutes...30, 33, (1) and (3), Florida Statutes...6 FLORIDA PUBLIC SERVICE COMMISSION ORDERS In re: Application for Certificate to Provide Alternative Local Exchange Telecommunications Service by BellSouth BSE, Inc., 98 FPSC 4:374 (1998)... 27, 28, 33, 34 In re: Compliance investigation of Southeastern Services, Inc. for apparent failure to disclose required information on each of its applications for alternative access vendor certificate, competitive local exchange company certificate, and interexchange company certificate [PAA Order] 05 FPSC 7:57 (2005)....passim n re: Compliance investigation of Southeastern Services, Inc. for apparent failure to disclose required information on each of its applications for alternative access vendor certificate, competitive local exchange company certificate, and interexchange company certificate [Amendatory Order] 05 FPSC 7:005 (2005)...6 v

6 In re: Compliance investigation of Southeastern Services, Inc. for apparent failure to disclose required information on each of its applications for alternative access vendor certificate, competitive local exchange company certificate, and interexchange company certificate [Final Order] 05 FPSC 7:10:220 (2005)....passim In re: Establishment of eligible telecommunications carriers pursuant to Section 214(e) of the Telecommunications Act of 1996, 97 FPSC 10:355 at 358 (1997)...2 In re: Request for approval of resale agreement between Northeast Florida Telephone Company, Inc. and Southeastern Services, Inc. 99 FPSC 10:454 (1999)...3 In re: Request for approval of transfer of control of MCI Communications Corporation (parent corporation of MCI Metro Access Transmission Services, Inc., holder of AAV/ALEC Certificate 2986, and MCI Telecommunications Corporation, holder of IXC Certificate 61, PATS Certificate 3080, and AAV/ALEC Certificate 3996) to TC Investments Corp., a wholly-owned subsidiary of WorldCom, Inc. d/b/a LDDS WorldCom, 98 FPSC 5:299 at 309 (1998)...28, 29 LAWS OF FLORIDA Ch , Sec. 5, Laws of Florida...17, 18 FEDERAL STATUTES 47 U.S.C. 251(c)(4) U.S.C. 252(e)...3 vi

7 PREFACE Northeast Florida Telephone Company appeals the Florida Public Service Commission s dismissal of its petition protesting the agency s proposed decision to grant Southeastern Services, Inc. s amended applications for certificates of authority to provide various types of telecommunications services. Appellant Northeast Florida Telephone Company will be referred to herein as Northeast Florida; appellee Florida Public Service Commission will be referred to as the PSC or Commission; and appellee Southeastern Services, Inc. will be referred to as SSI. All references to Florida Statutes are to the 2004 version unless otherwise noted. References to the record below are identified by Volume and Page Number as (V., P. ). References to the Appendix to this Initial Brief are identified by Appendix Tab and Page Number as (App. Tab ). The order on appeal, Order No. PSC FOF-TP (Order Granting Motion to Dismiss Protest) will be referred to as the Final Order. In re: Compliance investigation of Southeastern Services, Inc. for apparent failure to disclose required information on each of its applications for alternative access vendor certificate, competitive local exchange company certificate, and interexchange company certificate, 05 FPSC 1

8 10:220 (2005). The order protested by Northeast Florida, Order No. PSC PAA-TP (Notice of Proposed Agency Action Order Imposing Penalty and Ordering Record Correction), will be referred to as the PAA Order. In re: Compliance investigation of Southeastern Services, Inc. for apparent failure to disclose required information on each of its applications for alternative access vendor certificate, competitive local exchange company certificate, and interexchange company certificate, 05 FPSC 7:57 (2005). STATEMENT OF THE CASE AND FACTS A. THE PARTIES BELOW Northeast Florida is an incumbent local exchange telecommunications company 1 authorized by the Commission to provide basic local telecommunications service. Northeast Florida has been designated by the Legislature and the Commission as the sole carrier of last resort in Baker County, Florida, through January 1, 2009, and is thus required to furnish basic local exchange telecommunications service within a reasonable time period to any person requesting such service within the company s service territory. See (1), Florida Statutes; In re: Establishment of eligible telecommunications carriers pursuant to Section 214(e) of the 1 See (7), Florida Statutes. 2

9 Telecommunications Act of 1996, 97 FPSC 10:355 at 358 (1997). In contrast, SSI is authorized by the Commission to provide Competitive Local Exchange Company ( CLEC ) services, Alternative Access Vendor ( AAV ) services, and Interexchange Company ( IXC ) or long distance services. Unlike Northeast Florida, SSI is not a carrier of last resort, and has no obligation to serve all persons within its territory upon request. Pursuant to 47 U.S.C. 251(c)(4), Northeast Florida and SSI are parties to a Commission-approved Resale Agreement under which SSI purchases wholesale basic local telecommunications service from North Florida and resells that service to its own customers. 2 SSI thus competes with Northeast Florida in the provision of basic local telecommunications service in Baker County, Florida. SSI also purchases access to Northeast Florida s network for the purpose of originating intrastate and interstate long distance calls marketed and provided by SSI in its capacity as an interexchange carrier. 2 As required by 47 U.S.C. 252(e), the Commission reviewed and approved the Resale Agreement in Order No. PSC FOF-TP, thus asserting and exercising its jurisdiction over the parties contractual relationship. In re: Request for approval of resale agreement between Northeast Florida Telephone Company, Inc. and Southeastern Services, Inc. 99 FPSC 10:454 (1999). 3

10 B. THE PROCEEDING BELOW In order to receive authority to provide CLEC, AAV and IXC service in Florida, SSI filed applications in 1999, 2000 and 2001, respectively, as required by applicable Commission rules. Each application form contains a section requiring the applicant to reveal whether any of its officers, directors, or ten largest stockholders had ever been found guilty of any felony or of any crime. In each of SSI s original CLEC, IXC and AAV applications, Mark Woods, the company s president, filed a sworn supporting affidavit in which he denied that he or any officer, director or large shareholder had ever been found guilty of a felony or crime, stating No or None in response to this question. (V. 1, P ) The affidavit form for each of the applications expressly warns in bold print that [w]hoever knowingly makes a false statement in writing with the intent to mislead a public servant in the performance of his official duties shall be guilty of a misdemeanor of the second degree. (V. 1, P. 26, 28, 30) Contrary to his repeated sworn statements, Mr. Woods had been adjudicated guilty of the felony crime of grand theft on December 4, 1979, prior to the submission of the above-referenced applications and sworn affidavits. (V. 1, P. 10) 4

11 Northeast Florida advised the Commission of Mr. Woods failure to disclose his prior felony conviction by letter dated March 29, (V. 1, P. 6-22) By letter dated April 12, 2005, Commission Staff formally requested Mr. Woods to explain his misrepresentations and propose a resolution thereof. (V. 1, P. 23) Counsel for Mr. Woods responded by letter dated May 4, 2005, alleging that Mr. Woods repeated misrepresentations in his applications were unintentional because Mr. Woods had been advised by an attorney that his record had been cleared. (V. 1, P. 31) Thereafter, the Commission opened an investigation in Docket No TP, the case below, on May 19, (V. 1, P. 4) By letter dated that same day, SSI offered to resolve this matter by making a $2, contribution to the Florida general revenue fund. (V. 1, P. 34) On June 6, 2005, SSI s counsel attempted to amend the company s original CLEC, AAV and IXC applications by filing, in Docket No TP, amended responses to certain questions in the original 1999, 2000, and 2001 applications. The amended responses provided the same explanation for Mr. Woods failure to disclose his prior felony conviction as that provided by SSI s counsel s letter dated May 4, Each amended response was accompanied by a new sworn affidavit executed by Mr. Woods disclosing the felony conviction. (V. 1, P ) 5

12 On July 8, 2005, the Commission issued the PAA Order in which the agency proposed to accept SSI s offer of $2,500 and terminate its review of SSI s amended applications. (V. 1, P. 59; App. Tab 1) 3 On August 2, 2005, Northeast Florida timely filed a Petition protesting the PAA Order. (V. 1, P. 66) In its Petition, Northeast Florida alleged that SSI lacked managerial fitness to provide telecommunications services as required by (1) and (3), Florida Statutes, and that such deficiency directly and substantially affects Northeast Florida as a competitor with SSI, as the incumbent carrier and provider of last resort in Baker County, and as a party to a Commission-approved agreement detailing the respective obligations of the two carriers in the exchange of traffic. Specifically, Northeast Florida alleged the following facts: 1. Mr. Woods failed to truthfully attest under oath to his grand theft conviction when SSI filed the original applications for certificates; 3 The PAA Order was amended to correct a scrivener s error by Amendatory Order No. PSC A-PAA-TP issued July 12, 2005, In re: Compliance investigation of Southeastern Services, Inc. for apparent failure to disclose required information on each of its applications for alternative access vendor certificate, competitive local exchange company certificate, and interexchange company certificate, 05 FPSC 7:005 (2005). (V. 1, P. 64; App. Tab 1) 6

13 2. SSI marketed and provided Commission-regulated intrastate long distance telecommunications service in Florida prior to applying for and securing the statutorily required IXC certificate from the Commission; 3. SSI openly advertised and provided long distance telecommunications service in Florida yet failed to pay the required regulatory assessment fees to the Commission based on the gross revenues SSI derived for intrastate long distance telecommunications services; 4. SSI unlawfully utilized its Resale Agreement with Northeast Florida to avoid payment to Northeast Florida of originating intrastate switched access charges in excess of $1 million due and payable to Northeast Florida from SSI s access to and use of Northeast Florida s network in the provision of SSI s long-distance service; 5. Northeast Florida s ability to compete with SSI in the provision of local service and its status under its Resale Agreement with SSI are directly and substantially affected by SSI s misrepresentations, failure to abide by 7

14 Commission rules, failure to pay required regulatory assessment fees, and lack of managerial capability; and 6. As the incumbent local exchange provider and the carrier of last resort in the Baker County area, Northeast Florida is directly affected by the Commission s ultimate determination and application of the statutory criteria to the amended applications for certificates filed by SSI, and could ultimately be required to provide service to SSI s existing customers pending the Commission s disposition of SSI s amended applications. (V. 1, P ) SSI moved to dismiss Northeast Florida s protest on August 30, (V. 1, P. 124) The Commission heard argument on the motion at its October 18, 2005 Agenda Conference. The agency ignored Northeast Florida s allegations and on October 20, 2005, issued its Final Order in which it granted SSI s motion to dismiss, with prejudice, on the ground that Northeast Florida lacked standing to protest SSI s amended applications for certificates under Agrico Chemical Co. v. Dept. of Environmental Regulation, 406 So.2d 478, 482 (Fla. 2 nd DCA 1981). (V. 2, P. 221; App. Tab 2) Northeast Florida timely filed this appeal. (V. 2, P. 257) 8

15 SUMMARY OF ARGUMENT The Agrico test for standing cannot be applied in a vacuum. The Commission is required by statute to consider whether an applicant for a certificate has the managerial, financial and technical capability to provide service. A local exchange company that is not honest and forthright with the Commission and blatantly and repeatedly violates Commission statutes and rules gains the upper hand in competing for customers in the local service market. The Commission abdicated its statutory obligation to consider the managerial fitness of the transgressor in this case, SSI, by assuming and then concluding that SSI s violations had no impact on its only competitor in Baker County, Northeast Florida. The Commission is required by the Legislature to ensure that competitors in the local telecommunications market compete on a level playing field. There is no question that Northeast Florida established its standing to protest the order by which the Commission proposed to prematurely terminate its review of SSI s amended certificate applications and summarily grant the applications. The Commission unlawfully denied Northeast Florida a formal administrative hearing where it could present evidence addressing SSI s sworn misrepresentations in affidavits filed with the Commission, SSI s managerial ability and fitness to provide service, the 9

16 impact of SSI s transgressions on Northeast Florida, and the appropriate penalties that the Commission should impose on SSI. Instead, in return for SSI s payment of a $2,500 settlement check, Northeast Florida s Petition was dismissed and the Commission s required statutory review terminated. As a competitor of SSI, as the telecommunications carrier of last resort in Baker County, and as a party to a Commission-approved agreement governing the exchange of local telecommunications traffic with SSI, Northeast Florida has been injured and will continue to be injured by SSI s flagrant violations of Commission statutes and rules as well as criminal statutes. The proceeding in which Northeast Florida attempted to participate is the very type of proceeding which the Legislature intended would protect against such injuries. As a competitor in the provision of local telecommunications service, Northeast Florida has every right to expect that the Commission will exercise its power under Chapter 364 and perform the duties mandated therein to ensure that all competitors, including SSI, play by the rules of the game. These rules require telecommunications companies to secure certificates before they offer regulated services, pay regulatory assessment fees, and pay intercarrier compensation governed by tariffs and Commission-approved contracts. SSI has failed to comply with each of these regulatory and legal requirements. 10

17 The Commission dismissed Northeast Florida s Petition on the ground that Northeast Florida lacked standing, relying on irrelevant case law that holds that speculation regarding potential economic harm is not sufficient to confer standing. The notion that Northeast Florida is not directly affected by its competitor s failure to abide by regulatory statutes and rules ignores the reality of a competitive marketplace and renders the Commission s statutory mandate to ensure fair and effective competition meaningless. The Commission s Final Order failed to take into account the Legislature s intent and the Commission s obligation to foster and ensure fair and effective competition among competitors in the local service market. The Commission also overlooked its own precedent where the Commission held that a local exchange company has standing to protest and request a hearing on a competitor s application for a certificate. Northeast Florida s Petition clearly demonstrated both an injury in fact of sufficient immediacy to entitle the company to a hearing and that its injury is of the very type the Commission s proceeding was designed to protect. The Commission s Final Order to the contrary should be reversed. 11

18 ARGUMENT I. THE FLORIDA PUBLIC SERVICE COMMISSION ERRED IN DISMISSING NORTHEAST FLORIDA S PETITION FOR LACK OF STANDING A. STANDARD OF REVIEW Whether a party has standing to bring an action is question of law to be reviewed under the de novo standard. Hospice of Palm Beach County v. State, Agency for Health Care Administration, 876 So.2d 4, 7 (Fla. 1 st DCA 2004) citing Alachua County v. Scharps, 855 So.2d 195, 198 (Fla. 1 st DCA 2003). In determining standing, the allegations contained in the petition must be taken as true. Id. Citing Maverick Media Group, Inc. v. Dept. of Transp., 791 So.2d 491, 494, n. 2 (Fla. 1 st DCA 2001). This appeal involves purely questions of law. Accordingly, the traditional deference granted to Commission decisions which reflect the Commission s consideration of evidentiary issues has no application in this appeal. See, Tampa Electric Company v. Garcia, 767 So.2d 428 (Fla. 2000). The only question of law presented in this appeal is whether the Commission erroneously granted SSI s motion to dismiss with prejudice, based on the 12

19 Commission s determination that Northeast Florida lacks standing to challenge the Final Order. It is well settled that the purpose of a motion to dismiss is to determine whether the complaining party has properly asserted facts upon which relief can be granted: The function of a motion to dismiss is to raise as a question of law the sufficiency of the facts alleged to state a cause of action. (Citations omitted) Significantly, all material factual allegations of the complaint must be taken as true. (Citations omitted). Varnes v. Dawkins, 624 So.2d 349, 350 (Fla. 1 st DCA 1993); see also, McWhirter, Reeves, McGlothin, Davidson, Rief & Bakas, P.A. v. Weiss, 704 So.2d 214, 215 (Fla. 2 nd DCA 1998). Motions to dismiss are looked on with disfavor and are granted sparingly and with care. Oguz v. Oguz, 478 So.2d 437 (Fla. 5 th DCA 1985); see also, Midflorida Schools Federal Credit Union v. Fansler, 404 So.2d 1178 (Fla. 2 nd DCA 1981) (holding that cases are generally to be tried on their proofs rather than the pleadings). B. NORTHEAST FLORIDA S PETITION CONTAINS SUFFICIENT ALLEGATIONS TO ESTABLISH STANDING In its Final Order, the Commission held that Northeast Florida lacked standing to file the Petition under Agrico Chemical Co. v. Dept. of Environmental Regulation, 406 So.2d 478, 482 (Fla. 2 nd DCA 1981). Under 13

20 Agrico, the test for a party s standing is a substantial interest in the outcome of a proceeding, as shown by allegations that the party will suffer an injury in fact which is of sufficient immediacy to entitle him to a formal administrative hearing, and that the asserted substantial interest is of a type or nature which the proceeding is designed to protect. Id. at 482. The Commission erred in dismissing Northeast Florida s petition for lack of standing because the company clearly has met the Agrico test. 1. The application of the Agrico test must be considered with reference to the Commission s statutory role as the arbiter of fair and effective local service competition. The Commission plays an essential statutory role as the sole arbiter of competition in the provision of local telecommunications service in Florida. In 1995, the Florida legislature enacted groundbreaking revisions to Chapter 364, Florida Statutes, discussed more fully below, which opened Florida to local telecommunications competition and placed the Commission at the focal point of the newly-competitive landscape as the arbiter of the rules of the road which would foster and ensure meaningful, fair competition between providers of local telecommunications services. In determining that Northeast Florida had not met the test for standing under Agrico, the Commission failed to consider its statutory role as the arbiter of local service competition and instead erroneously predicated its dismissal of Northeast 14

21 Florida s Petition on a series of cases which generally hold that conjecture regarding future economic detriment is too remote to establish standing. The Commission misses the point. Northeast Florida s standing is not based on potential economic detriment (although, clearly, economic harm can flow from anticompetitive behavior); rather Northeast Florida seeks the protection guaranteed by the Legislature under , Florida Statutes, which requires the Commission to ensure fair competition between local service providers. This statutory role is particularly critical where, as alleged below, Northeast Florida s contractual obligations with SSI and its public interest obligations as a carrier of last resort are directly affected by SSI s transgressions and the potential outcome of SSI s amended applications for certificates to provide local and other telecommunications services. This Court has previously examined the statutory framework for the development of local telephone service competition in the State of Florida. In Sprint-Florida, Inc. v. Jaber, 885 So.2d 286 (Fla. 2004), the Court explained the advent of local service competition in Florida as follows: GENERAL BACKGROUND Until the mid-1900s, local telephone service within each of Florida s local calling areas was provided by a single company, which operated under an exclusive franchise granted by the State in exchange for the construction of extensive networks ensuring universal provision of service. 15

22 Such companies are now known as incumbent local exchange carriers (ILECs). Meanwhile, service between local calling areas has been subject to competition for decades. Generally, when a call is placed between local calling areas, it is passed via a long-distance or interexchange carrier (IXC), and the IXC must pay access charges to the ILECs at each end of the call. The Federal Communications Commission (FCC), which has authority over interstate calls, sets those access fees high to compensate local carriers for the use of their local facilities and to maintain low local rates. In 1995, the Florida Legislature introduced competition into local telephone service by establishing procedures for the certification of alternative local exchange carriers (ALECs) 4 to provide local service. See ch , Laws of Fla. Likewise, in 1996, Congress passed the Telecommunications Act of 1996 (Act), which was designed in part to foster competition in local markets. As a result, an ILEC s customer could call an ALEC s customer, or vice versa, within the same local exchange. Under such circumstances, section 251 of the Act requires the carrier serving the calling party to pay a reciprocal compensation fee to the other carrier for the cost of delivering and terminating the call. Id. at Thus, in 1995, the Legislature established a statutory scheme intended to promote local service competition with the Commission serving 4 ALECs are now known as Competitive Local Exchange Telecommunications Companies or CLECs. See (4), Florida Statutes. For continuity and ease of reference, the term CLEC will be used throughout this Initial Brief. 16

23 as the referee. Prior to the passage of the 1995 legislation, the Legislature already had granted the Commission plenary powers in (2), Florida Statutes, to address and enforce the regulatory and ratemaking provisions in Chapter 364: (2) It is the legislative intent to give exclusive jurisdiction in all matters set forth in this chapter to the Florida Public Service Commission in regulating telecommunications common carrier. 5 With the 1995 amendments to , the Commission s exclusive power to address and enforce the provisions in Chapter 364 was expanded, and the Commission took on a new and uncharted role -- overseeing the development of local competitive markets. In , the Legislature clearly stated its intent to open up local markets to competition and the role the Commission would play in the development of competitive local telecom markets: (3) The Legislature finds that the competitive provision of telecommunications services, including local exchange telecommunications service, is in the public interest and will provide customers with freedom of choice, encourage the introduction of new telecommunications service, encourage technological innovation, and encourage investment in telecommunications infrastructure. The Legislature further finds that 5 In the 1995 legislation, the term common carriers in (2), Florida Statutes was changed to companies. See Ch , Sec. 5, Laws of Florida. 17

24 the transition from the monopoly provision of local exchange service to the competitive provision thereof will require appropriate regulatory oversight to protect consumers and provide for the development of fair and effective competition. (4) The commission shall exercise its exclusive jurisdiction in order to: (g) Ensure that all providers of telecommunications services are treated fairly, by preventing anticompetitive behavior and eliminating unnecessary regulatory restraint. (i) Continue its historical role as a surrogate for competition for monopoly services provided by local exchange telecommunications companies. Ch , Sec. 5, Laws of Florida (emphasis supplied). Prior to the discovery of Mr. Woods false sworn affidavits and other violations of Commission statutes and rules alleged in Northeast Florida s Petition, SSI was an existing provider of local telecommunications service. Even the Commission would likely agree that Northeast Florida would have standing to file a complaint against SSI for a violation of a particular Commission statute, rule or order. These types of complaints are heard by the Commission all the time. Yet, in the proceeding below, even though SSI is an existing provider and chose to file amended applications to continue its existing provider status, the Commission erroneously concluded that another existing provider, Northeast Florida, lacked standing to raise allegations 18

25 demonstrating SSI s violation of both Commission statutes and rules and criminal statutes. 2. Northeast Florida s Petition alleges an injury in fact of sufficient immediacy to entitle the company to a formal hearing. Under the first prong of the Agrico test, the party seeking a hearing must allege that he will suffer an injury in fact which is of sufficient immediacy to entitle him to a formal administrative hearing. When due regard is given to the type of proceeding below and the statutory framework for the development of competition, there can be no question that Northeast Florida s Petition meets this test. The proceeding below initially commenced as an investigation of Mr. Woods false statements but was transformed into a request by SSI to approve amended applications for various telecommunications certificates by SSI s filing of amended applications. SSI, as the applicant in a certification proceeding, must demonstrate that it has the technical, financial and managerial abilities to provide service. Northeast Florida disputed SSI s qualifications, and its Petition raised the following disputed issues of material fact concerning SSI s qualifications, particularly its managerial abilities: 19

26 1. Mr. Woods failed to truthfully attest under oath to his grand theft conviction when SSI filed the original applications for certificates; 2. SSI marketed and provided Commission-regulated intrastate long distance telecommunications service in Florida prior to applying for and securing the statutorily required IXC certificate from the Commission; 3. SSI openly advertised and provided long distance telecommunications service in Florida yet failed to pay the required regulatory assessment fees to the Commission based on the gross revenues SSI derived for intrastate long distance telecommunications services; 4. SSI unlawfully utilized its Resale Agreement with Northeast Florida to avoid payment to Northeast Florida of originating intrastate switched access charges in excess of $1 million due and payable to Northeast Florida for SSI s access to and use of Northeast Florida s network in the provision of SSI s long-distance service; 5. Northeast Florida s ability to compete with SSI in the provision of local service and its status under its Resale Agreement with SSI are directly and substantially affected by SSI s misrepresentations, 20

27 failure to abide by Commission rules, failure to pay required regulatory assessment fees, and lack of managerial capability; and 6. As the incumbent local exchange provider and the carrier of last resort in the Baker County area, Northeast Florida is directly affected by the Commission s ultimate determination and application of the statutory criteria to the amended applications for certificates filed by SSI, and could ultimately be required to provide service to SSI s existing customers pending the Commission s disposition of SSI s amended applications. (V. 1, P ) These allegations directly, substantially and immediately affect Northeast Florida s statutory right to fair competition under , Florida Statutes. For example, had the Commission denied SSI s Motion to Dismiss and proceeded to hearing, Northeast Florida would have had the opportunity to cross-examine Mr. Woods and present expert testimony testing the credibility of Mr. Woods (or his counsel s) explanation for his failure to disclose his prior felony conviction. Northeast Florida also would have had the opportunity to tender evidence demonstrating that SSI s provision of long distance service without a certificate unlawfully subsidized SSI s local service operations and gave SSI an unfair competitive advantage over 21

28 Northeast Florida in the provision of local services issues that are uniquely within the Commission s statutory role as arbiter of local competition. Northeast Florida also alleged that SSI, in its capacity as an IXC, failed to pay Northeast Florida over $1 million in originating access charges. This allegation is directly relevant to SSI s managerial capability and integrity, and as to whether SSI s failure to pay Northeast Florida for the use of Northeast Florida s network gives SSI an unfair competitive advantage. 6 Finally, Northeast Florida s statutory role as the carrier of last resort also is directly affected by the outcome of the amended application proceedings; should SSI s certificates be suspended or cancelled, Northeast Florida would then have network planning and service obligations to SSI s customers as the carrier of last resort. The impact of SSI s alleged actions on a competitor such as Northeast Florida was not lost on Commissioner Deason, who, in the following exchange with the Commission Staff Attorney, acknowledged the Commission s obligation to determine the applicant s technical, financial and managerial abilities when considering its application for a 6 This issue was not raised to show economic harm. Northeast Florida has filed a civil action in Baker County Circuit Court for damages arising out of SSI s alleged fraud in the inducement, breach of the Resale Agreement, violation of the Florida Unfair and Deceptive Trade Practices Act, and unjust enrichment. 22

29 telecommunications certificate, noted that the order permitted affected parties to protest it, and questioned who could possibly be affected by such an order other than a competitor: COMMISSIONER DEASON: Mr. Chairman, I have a question, and I will direct this one to staff. Staff, you agree with SSI s position that NEFCOM lacks standing and does not meet the Agrico test. But you also acknowledge and agree that this Commission has an obligation to determine the technical, financial and managerial abilities or qualifications of a company before it s granted a certificate, correct? MR. FORDHAM: That s correct, Commissioner. COMMISSIONER DEASON: And I think it was issued as a PAA, is that correct? MR. FORDHAM: That s correct. COMMISSIONER DEASON: I guess my question is this: When you issued it as a PAA, the Commission is - - well, we all know what a PAA is, and that we are taking proposed action, and we are asking people who are affected to tell us if they disagree and why. So we are recognizing that there is someone out there, conceivably, that has standing to question whether someone has technical, financial, and managerial qualifications. If it is not a competitor that has that standing, who has that standing to bring that type of a protest before the Commission? MR. FORDHAM: A competitor certainly is affected to the extent that competition does take away from their business, and particularly in this 23

30 case where there is one sole competitor in that service area. COMMISSIONER DEASON: Well, let me ask. Who suffers harm of immediacy if this Commission were to grant a certificate to someone who does not have financial, technical or managerial qualifications? MR. FORDHAM: I don t know, Commissioner, who that might be. * * * COMMISSIONER DEASON: if this Commission were to issue a certificate to someone who doesn t have the necessary qualifications, and we are depending on somebody to bring that to our attention, it seems to me that the pool of potential people, the best pool of potential people are probably the people out there that are competing with them. (Tr ; V. 2, P , emphasis supplied) That was precisely what occurred in the proceeding below: Northeast Florida, the sole telecommunications provider currently competing with SSI in Baker County and the very type of person that the Commission was depending on, not SSI advised the Commission that Mr. Woods failed to disclose his prior felony conviction in sworn affidavits and that SSI provided regulated long distance telephone service without the required IXC certificate. 24

31 The cases cited by the Commission in the Final Order for the proposition that Northeast Florida s allegations are too remote to establish standing are easily distinguishable and have no application to the statutory framework which provides the basis for Northeast Florida s protest of the PAA Order. In Ameristeel Corp. v. Clark, 691 So.2d 473 (Fla. 1997), the court affirmed the Commission s determination that a customer of Florida Power & Light Company ( FPL ) did not have standing to protest a territorial agreement approved by the Commission involving FPL and the Jacksonville Electric Authority where the customer was an FPL customer both before and after the new territorial agreement. In International Jai-Alai Players Association v. Florida Pari-Mutuel Commission, 561 So.2d 1224 (Fla. 3 rd DCA 1990), the court held that an association of jai alai players was not affected by proposed changes in fronton playing dates based on speculation that the change in playing dates might provide a strategic advantage to the fronton owners in their labor dispute with the association. In Village Park Mobile Home Association, Inc. v. State, Department of Business Regulation, 506 So.2d 426 (Fla. 1 st DCA 1987), rev. den., 513 So.2d 1063 (Fla. 1987), the court held that residents of a mobile home park did not have standing to challenge the mobile home park s prospectus because the residents of the park did not demonstrate that any homes had 25

32 been offered for sale, had been sold, or that the homeowners were unable to sell their homes due to the provisions set forth in the prospectus. Finally, in Florida Society of Ophthalmology v. State Board of Optometry, 532 So.2d 1279 (Fla. 1 st DCA 1988), the court held that an association of ophthalmologists did not have standing to challenge applications for certification submitted by optometrists to prescribe and administer certain drugs based on an allegation that the ophthalmologists would suffer economic losses. These decisions all speak to the general proposition, as characterized by the Commission, that [c]onjecture about future economic detriment is too remote to establish standing. Final Order, 05 FPSC 10:220, 223. (App. Tab 2) Northeast Florida s standing is not predicated on future economic detriment nor is it remote. Northeast Florida competes with SSI in the provision of local service, is a party to an agreement with SSI approved by the Commission governing its obligations in the exchange of traffic with SSI, and serves as the carrier of last resort for SSI s local service customers. The Commission s proposal to terminate its investigation and grant the amended application of an existing competitor who has flouted the Commission s rules and skirted its regulatory framework, without any scrutiny whatsoever of that amended application, creates an immediate risk 26

33 of injury to Northeast Florida, who is thereby forced to do business with SSI. In Florida Society of Ophthalmology, the court found that objections by ophthalmologists to the certification of optometrists under the applicable statute failed to show that, other than the potential economic impact on their practice, their interests would be affected in any manner that differs from the interests of the public generally in seeing that all optometry applicants are certified in accordance with the statutory requirements. In the proceeding below, however, Northeast Florida s substantial interests are affected more directly and acutely than those of the general public. As a competitor of SSI, as the carrier of last resort serving the general public, and as party to a commercial agreement with SSI governing the exchange of traffic, Northeast Florida is affected to a far greater degree and with far greater immediacy than is the general public. Contrary to its decision in the proceeding below, the Commission has previously allowed intervention in a certification proceeding initiated after the 1995 legislation specifically to ensure the protection of the intervenors competitive interests. In In re: Application for Certificate to Provide Alternative Local Exchange Telecommunications Service by BellSouth BSE, Inc., 98 FPSC 4:374 (1998), BellSouth BSE, Inc. filed an application to 27

34 provide competitive local exchange service. MCI, a competing CLEC, and the Florida Competitive Carriers Association ( FCCA ), an association of CLECs, moved to intervene in opposition to BellSouth BSE s application whereupon BellSouth moved to dismiss. The Commission denied the motion to dismiss stating: The Commission has a duty under Section (4)(g), Florida Statutes, to [e]nsure that all providers of telecommunications services are treated fairly, by preventing anti-competitive behavior. 98 FPSC 4:374 at 376. (App. Tab 3) In a subsequent proceeding involving an application by MCI for approval to transfer control of its existing certificates to a different corporate entity, the Commission granted MCI s motion to dismiss GTE Corporation/GTE Communications Corporation s petition to intervene and distinguished the BellSouth BSE decision, recognizing again that the entry of a new competitor into the telecommunications market would directly affect competing CLECs: In addition, our determination in Order No. PSC PCO-TX, issued April 22, 1998, in Docket No TX, that MCI and FCCA did have standing to protest Order No. PSC FOF-TP, in which we granted BellSouth BSE, Inc. a [CLEC] certificate is distinguishable from this case for several reasons. First, the entry of BSE, a new competitor, into the local market would directly affect MCI and FCCA s members as competing [CLECs]. 28

35 In re: Request for approval of transfer of control of MCI Communications Corporation (parent corporation of MCI Metro Access Transmission Services, Inc., holder of AAV/ALEC Certificate 2986, and MCI Telecommunications Corporation, holder of IXC Certificate 61, PATS Certificate 3080, and AAV/ALEC Certificate 3996) to TC Investments Corp., a wholly-owned subsidiary of WorldCom, Inc. d/b/a LDDS WorldCom, 98 FPSC 5:299 at 309 (1998). (App. Tab 4) Another reason cited by the Commission for its finding that BellSouth BSE s competitors had standing to contest its certification while MCI s competitors lacked standing to contest the transfer of its certificate is that BellSouth BSE like SSI in the instant case sought certification from the Commission. Id. at 310. Northeast Florida s interests are correspondingly directly affected by SSI s request to remain in the local service market via its amended certificate applications. Just as MCI and FCCA had standing to contest the certification application of their proposed competitor BellSouth BSE, Northeast has standing to contest the amended certification application of its current competitor SSI. 29

36 3. The injury alleged by Northeast Florida is exactly the type the Legislature intended to protect against in certification proceedings. Under the second prong of the Agrico test, the asserted substantial interests of the petitioning party must be one that is of a type or nature which the proceeding is designed to protect. In addressing the second prong of the test, the Final Order held: Though NEFCOM s response references proceedings under both Sections and , Florida Statutes, Section is not, in any way, applicable to the discussion of the present issue. Only Section , F.S., contains the applicable criteria, as well as the standard of review for the subject certificates. This provision does not appear to contemplate consideration of the type of intercarrier and competitive issues raised by NEFCOM. Thus, arguably, NEFCOM also fails the second prong of the Agrico test. Final Order, 05 FPSC 10:220, 224. (App. Tab 2) The Commission s rationale and conclusions are erroneous. In its Petition, Northeast Florida alleged that the Commission and SSI failed to comply with parts of , Florida Statutes. 7 Northeast Florida noted 7 Section provides in pertinent part as follows: (1) Each applicant for a certificate shall: (a) Provide all information required by rule or order of the commission, which may include a detailed inquiry into the ability of the applicant to provide service, a detailed inquiry into the territory 30

37 that (1)(a) requires the applicant for a certificate to provide sufficiently detailed information to allow the Commission to conduct a and facilities involved, and a detailed inquiry into the existence of service from other sources within geographical proximity to the territory applied for. * * * (2) If the commission grants the requested certificate, any person who would be substantially affected by the requested certification may, within 21 days after the granting of such certificate, file a written objection requesting a proceeding pursuant to ss and The commission may, on its own motion, institute a proceeding under ss and to determine whether the grant of such certificate is in the public interest. The commission shall order such proceeding conducted in or near the territory applied for, if feasible. If any person requests a public hearing on the application, such hearing shall, if feasible, be held in or near the territory applied for, and the transcript of the public hearing and any material submitted at or prior to the hearing shall be considered part of the record of the application and any proceeding related to the application. * * * (4) Revocation, suspension, transfer, or amendment of a certificate shall be subject to the provisions of this section; except that, when the commission initiates the action, the commission shall furnish notice to the appropriate local government and to the Public Counsel. (emphasis supplied) 31

38 detailed inquiry into the ability of the applicant to provide service and a detailed inquiry into the territory and facilities involved. (V. 2, P. 200, 207) Northeast Florida also alleged that the Commission failed to comply with the notice requirements applicable to amended applications for certificates under (4), Florida Statutes. (V. 2, P. 200, 209) Despite the clear language in , the Commission claimed in the Final Order that did not apply. The Commission s position defies the plain language of the statute and the Commission s very own words in the PAA Order, confirming the application of and asserting its jurisdiction based on that very statute: Section (1)(a)&(d), Florida Statutes, Application for a Certificate, states: (1) Each applicant for a certificate shall: (a) Provide all information required by rule or order of the commission, which may include a detailed inquiry into the ability of the applicant to provide service, * * * (d) Submit an affidavit that the applicant has caused notice of its application to be given to such persons and in such manner as may be prescribed by commission rule. * * * 32

39 We are vested with jurisdiction in this matter pursuant to Sections , , , , Florida Statutes. PAA Order, 05 FPSC 7:57, 59 (emphasis supplied). (App. Tab 1) The Commission apparently retreated from this position and tried to cover its tracks in the Final Order. The PAA Order clearly stated that the provisions of required SSI to submit and the Commission to review SSI s ability to provide service, and clearly asserted the Commission s jurisdiction based on However, after Northeast Florida requested a hearing to address SSI s managerial, technical and financial ability to provide service in accordance with the PAA Order, the Commission without explanation retracted its earlier holding and dismissed the Petition, denying that was in any way applicable. Final Order, 05 FPSC 10:220, 224. (App. Tab 2) The Commission s transparent attempt to avoid the application of can only be remedied by this court. Second, the notion that the criteria for addressing applications and amended applications for certificates do not contemplate consideration of intercarrier and competitive issues is undermined by the legislative intent provisions set forth in and the Commission s BellSouth BSE decision. The disturbing result of the Commission s 33

40 rationale is that an applicant for a certificate can engage in any number of transgressions and violations of Commission and criminal statutes and that applicant s competitor has no remedy before the Commission. Commissioner Deason was clearly troubled by that prospect: COMMISSIONER DEASON: I don t want this (decision) to be interpreted that a competitor never has standing to being a question of a company s technical, financial and managerial qualifications before the Commission. At some point in the future there could be a set of facts where we would want to do that. (Tr ; V. 2, P ) Despite the concern raised by Commissioner Deason, the Final Order flatly states that no competitor has standing to raise a certificated applicant s managerial capability and integrity in a certification proceeding. As the Commission put it, does not appear to contemplate consideration of the type of intercarrier and competitive issues raised by [Northeast Florida]. Final Order, 05 FPSC 10:220, 224. (App. Tab 2) This determination undermines the Commission s statutory obligation to ensure fair competition and cannot be reconciled with the clear, express holding in the BellSouth BSE decision. SSI s repeated and varied violations of regulatory and criminal statutes were amply laid out in Northeast Florida s Petition. Ultimately, the Commission utilized irrelevant case law and a 34