264 Kan. 363
(956 P2d 685)
Nos. 78,548; 78,822; 78,823; 78,834
CITIZENS' UTILITY RATEPAYER BOARD, Appellant, v. THE STATE CORPORATION COMMISSION OF THE STATE OF KANSAS, Appellee.
MULTIMEDIA HYPERION TELECOMMUNICATIONS and KANSAS CITY FIBER NETWORK L.P., Appellants, v. THE STATE CORPORATION COMMISSION OF THE STATE OF KANSAS, Appellee.
CMT PARTNERS, TOPEKA CELLULAR TELEPHONE COMPANY, INC., and AIRTOUCH CELLULAR OF KANSAS, INC., Appellants, v. THE STATE CORPORATION COMMISSION OF THE STATE OF KANSAS, Appellee.
SYLLABUS BY THE COURT
1. The legislature determines utility policy, and so long as a legislative act does not contravene federal or state law, courts should not interfere with it, even though the action taken appears, to the court, to be unsound and not the best way, or even a good way, to carry out the stated purpose of the act.
2. Courts must construe all provisions of statutes in pari materia with a view of reconciling and bringing them into workable harmony, if reasonably possible to do so.
3. In interpreting a statute, a court must give effect to its plain and unambiguous language, without determining what the law should be.
4. In construing statutes, the legislative intention is to be determined from a general consideration of the entire act. Effect must be given, if possible, to the entire act and every part thereof. To this end, it is the duty of the court, as far as practicable, to reconcile the different provisions so as to make them consistent, harmonious, and sensible.
5. A tax is a forced contribution to raise revenue for the maintenance of government services offered to the general public.
6. A strict application of the separation of powers doctrine is inappropriate today in a complex state government where administrative agencies exercise many types of power and where legislative, executive, and judicial powers are often blended together in the same administrative agency.
7. A statute should express the law in general terms and delegate the power to apply it to an executive agency under standards provided by the legislature. What is a sufficient standard must necessarily vary somewhat according to the complexity of the area sought to be regulated. Standards may be implied from the statutory purpose. The modern trend is to require less detailed standards and guidance to the administrative agencies in order to facilitate the administration of laws in areas of complex social and economic problems.
8. In a Kansas Corporation Commission (KCC) rate case, the record is examined and it is held: (1) A revenue neutral concept is not prohibited by or contrary to the Federal Telecommunications Act of 1996; (2) the Kansas Telecommunications Act of 1996 does not prevent a subsequent audit and earnings study; (3) the Kansas Act does not conflict with the KCC's statutory duty to regulate and ensure just and reasonable rates and charges to consumers; (4) by failing to include what it would have presented at the technical hearings in its motion for KCC reconsideration, CMT waived the issue of improper notice of the hearings; (5) K.S.A. 1996 Supp. 66-2008(b) and K.S.A. 66-1,143(b) do not conflict; (6) K.S.A. 1996 Supp. 66-2008 is a delegation of administrative power, not legislative power, to the KCC; (7) the KCC did not order and was not required to order a local service rate increase or rate rebalancing, and the initial funding amount for the Kansas Universal Service Fund (KUSF) is appropriate; and (8) the KCC orders allowing a setoff procedure are not inequitable or discriminatory.
Review of the judgment of the Court of Appeals in 24 Kan. App. 2d 222, 943 P.2d 494 (1997). Appeal from the Kansas Corporation Commission. Judgment of the Court of Appeals reversing and remanding the Kansas Corporation Commission is affirmed in part and reversed in part. The orders of the Kansas Corporation Commission are affirmed. Opinion filed March 13, 1998.
Walker Hendrix, consumer counsel, of Topeka, argued the cause, and Allen Brady Cantrell, consumer counsel, of Topeka, was with him on the briefs for appellant Citizens' Utility Ratepayer Board.
Mark P. Johnson,, of Sonnenschein Nath & Rosenthal, of Kansas City, Missouri, argued the cause, and Tamara Seyler-James, Lisa C. Creighton, and Amy E. Bauman, of the same firm, were with him on the briefs for appellants Kansas City Fiber Network L.P. and Multimedia Hyperion Telecommunications.
Marc E. Elkins and Lisa J. Hansen, of Morrison & Hecker L.L.P., of Kansas City, Missouri, were on the briefs for appellants CMT Partners, Topeka Cellular Telephone Company, Inc., and Airtouch Cellular of Kansas, Inc.
Eva Powers, assistant general counsel, argued the cause, and Glenda Cafer, general counsel, and Marianne Deagle, Susan Stanley, and Janette Corazzin, assistant general counsels, of Topeka, were with her on the briefs for appellee Kansas Corporation Commission.
Robert A. Fox, of Foulston & Siefkin, L.L.P., of Topeka, argued the cause, and Dana Bradbury Green, of the same firm, and Michael J. Jewell, of Austin, Texas, were with him on the briefs for intervenor AT&T Communications of the Southwest, Inc.
William R. Drexel, of Topeka, argued the cause, and Michael C. Cavell and Lori A. Fink, of Topeka, and Frank A. Caro, of Polsinelli, White, Vardeman & Shalton, of Overland Park, were with him on the brief for intervenor Southwestern Bell Telephone Company.
Stephen D. Minnis, of Overland Park, argued the cause, and Martha Jenkins, of Kansas City, Missouri, was with him on the briefs for intervenor United Telephone Companies of Kansas d/b/a Sprint Communications.
Mark E. Caplinger and James M. Caplinger, of James M. Caplinger, Chartered, of Topeka, and Thomas E. Gleason, Jr., of Gleason & Doty, Chartered, of Ottawa, were on the briefs for intervenors State Independent Alliance and Independent Telecommunications Group, Columbus, et al.
The opinion of the court was delivered by
ABBOTT, J.: This case is before the Supreme Court on petitions for review by various parties and intervenors, viz., appellee Kansas Corporation Commission (KCC), intervenor Southwestern Bell Telephone, intervenor Sprint Communications/United Telephone Companies, intervenor State Independent Alliance, intervenor Independent Telecommunications Group, Columbus, et al., and appellants/cross-petitioners for review CMT Partners, et al.
SWBT and Sprint/United are incumbent local exchange carriers (LECs) in Kansas. State Independent Alliance and Independent Telecommunications Group, Columbus, et al., are special interest groups representing rural independent LECs (ILECs). The rural ILECs represented by these two groups provide local exchange services throughout Kansas. CMT Partners, et al., are business entities and radio common carriers providing commercial mobile radio service in Kansas (wireless service providers). Multimedia Hyperion Telecommunications and Kansas City Fiber Network L.P. are providers of private line and competitive access services in Kansas.
In general, the Court of Appeals in 24 Kan. App. 2d 222, 943 P.2d 494 (1997), invalidated certain portions of the Kansas Telecommunications Act of 1996 (Kansas Act) (L. 1996, ch. 268, § 1 through § 12, codified at K.S.A. 1996 Supp. 66-2001 et seq.) and the KCC orders implementing that Act on grounds they were inconsistent with the Federal Telecommunications Act of 1996 (Federal Act), Pub. L. No. 104-104, 110 Stat. 56 (1996), and also inconsistent with certain provisions of Kansas law. The Court of Appeals also held K.S.A. 66-1,143(b) does not prevent the KCC from requiring wireless service providers to contribute to the Kansas Universal Service Fund (KUSF); wireless service providers were not given proper notice of the proceedings and a reasonable opportunity to prepare for the hearings before the KCC; and the legislature's authorization to the KCC to determine the appropriate level of funding contribution and regulation of the KUSF pursuant to K.S.A. 1996 Supp. 66-2008 is not an unconstitutional delegation of legislative power to an administrative agency.
The KCC, SWBT, and Sprint are seeking to uphold the KCC orders and the provisions of the Kansas Act that the Court of Appeals found offensive. Citizens' Utility Ratepayer Board (CURB), Multimedia Hyperion/KCFN, and AT&T Communications of the Southwest, Inc., (AT&T) are seeking to have the provisions in question invalidated. CMT Partners, et al., also seek to invalidate these provisions. They believe they should not be required to contribute to the KUSF based on the fact that, as wireless service providers, they are not subject to KCC oversight and control. The real interest of State Independent Alliance and Independent Telecommunications Group, Columbus, et al., seems to be that, however this matter ends up, they do not want to lose any revenues in the process.
This court ordered a prehearing conference conducted by Chief Justice, Retired, David Prager. The only issues properly before this court for decision at the present time are the eight issues set out in the prehearing conference order. Sections 253 and 254(e) of the Federal Act are not at issue, nor are KUSF distributions.
At the outset, we make three observations. First, although the underlying KCC regulations may ultimately increase competition, the underlying legislation appears to be largely a cost shift between consumers, with no actual reduction in the total cost of service. Second, the ultimate issues in this case will, for the most part, be determined by the federal courts under federal law, which will render most of this opinion as a suggestion to the federal courts for such consideration as they choose to give it, if any. Third, the appeal seems, in most part, to be premature. As we view the briefs, no actual harm is alleged, only potential or the possibility of harm. However, we do have jurisdiction and thus will decide the case.
BACKGROUND
By way of background, the KCC scheduled a Competition Docket in 1994. In Phase I of the KCC's Competition Docket, the KCC conducted hearings and established task forces regarding competition in the telecommunications industry in Kansas. Several telecommunications providers participated in Phase I, but appellant CMT, a wireless service provider, did not participate in any of these activities, nor did any other wireless service provider. On April 4, 1996, after the Federal Telecommunications Act was passed, the KCC issued its Phase II Procedural Order in the Competition Docket. On May 17, 1996, the Governor signed the Kansas Telecommunications Act. Within this Act, K.S.A. 1996 Supp. 66-2008(b) authorized the KCC to assess all telecommunications carriers, public utilities, and wireless service providers a surcharge for support of the KUSF.
Based on this statute, in May 1996, the KCC issued an order modifying the Phase II Procedural Schedule by including wireless issues. This order identified rate rebalancing, intrastate access rate reductions, and an assessment on toll minutes of use as issues to be addressed in the Phase II technical hearings, which were to be held August 12-15, 1996. This order also established a schedule for filing direct testimony on unresolved wireless issues. Finally, this order indicated that the KCC intended to exercise jurisdiction over wireless service providers in regard to universal service. The affected parties had 70 days to retain experts and prepare direct testimony for the technical hearing and 45 days to review the KCC staff testimony and prepare cross-examination for the technical hearing. On June 17, 1996, the KCC also issued an order scheduling four public hearings on the issue of rate rebalancing.
The KCC served these orders on the telecommunications service providers who had participated in Phase I of the KCC's Competition Docket. Wireless service providers had not participated in Phase I and were not served orders notifying them of the Phase II hearings, even though the KCC considered exercising jurisdiction over wireless service providers in Phase II of the Competition Docket. The KCC directed all telecommunications companies, with notice of the hearings, to notify their customers of the hearings through a billing insert in the July 1996 billing cycle and through a newspaper advertisement in newspapers with general circulation in the counties where the telecommunications companies provided service. The KCC ordered the telecommunications companies to file affidavits of compliance with these notice requirements.
On August 12-15, 1996, the KCC conducted technical hearings pursuant to its April 4, 1996, Phase II Procedural Order. At the beginning of the hearings, CMT filed a petition to intervene in these proceedings, which the KCC granted. Upon intervention, CMT objected to the hearing, claiming that it had not received sufficient notice of the hearings. Due to this lack of notice, CMT claimed it had not had adequate time to prepare and file direct testimony or cross-examine witnesses who had already filed direct testimony. The KCC found that the notice of the proceeding was adequate and overruled CMT's objection.
Based on the facts presented at the Phase II technical hearings, the KCC issued an order on December 27, 1996, which provided for funding of the KUSF.
In general, the KCC final orders require: (1) intrastate toll and access rates for long distance service to be reduced by $111.6 million over 3 years with the objective of equalizing interstate and intrastate rates in a revenue neutral, specific, and predictable manner (i.e., toll and access charges paid by long distance companies to LECs are to be reduced by that amount within that time frame); (2) the initial amount of the KUSF to offset revenues lost by local exchange carriers as a result of the reduction in intrastate toll and access long distance rates (i.e., the initial amount of the KUSF is to equal the amount of local exchange carriers' loss of revenue from reduced toll and access rates); (3) contributions to the KUSF to be based on each carrier's total intrastate retail revenues; (4) rates for pay phone calls to be increased to 35¢ and the free call allowances for directory assistance to be eliminated; and (5) wireless service providers to contribute to the KUSF.
CURB and various telecommunications providers appealed to the Court of Appeals from the KCC final orders, contending the Kansas Act and the KCC orders pursuant to that Act violated the Federal Act. The Court of Appeals stated that the key issue in this appeal is whether the Kansas Act and the KCC orders implementing that Act violate or are inconsistent with the Federal Act. The Court of Appeals held that the KCC orders do not comply with the Federal Act and must be set aside. The Court of Appeals also implicitly invalidated portions of the Kansas Act pertaining to the concept of revenue neutrality, K.S.A. 1996 Supp. 66-2005(c) and 66-2008(a), and prohibiting audits and earnings reviews, K.S.A. 1996 Supp. 66-2005(u), by directing the KCC to disregard those provisions upon remand.
THE FEDERAL ACT
The Federal Act became law on February 8, 1996. The Federal Act was intended to deregulate the telecommunications industry, open local and long distance telecommunications markets to competition, and ensure universal telephone service for all citizens at affordable rates.
Section 254(b) of the Federal Act provides in relevant part as follows:
"(b) UNIVERSAL SERVICE PRINCIPLES. The Joint Board and the Commission shall base policies for the preservation and advancement of universal service on the following principles:
. . . .
"(4) EQUITABLE AND NONDISCRIMINATORY CONTRIBUTIONS. All providers of telecommunications services should make an equitable and nondiscriminatory contribution to the preservation and advancement of universal service.
"(5) SPECIFIC AND PREDICTABLE SUPPORT MECHANISMS. There should be specific, predictable and sufficient Federal and State mechanisms to preserve and advance universal service." 110 Stat. 71-72.
Section 254(f) of the Federal Act provides:
"(f) A State may adopt regulations not inconsistent with the Commission's rules to preserve and advance universal service. Every telecommunications carrier that provides intrastate telecommunications services shall contribute, on an equitable and nondiscriminatory basis, in a manner determined by the State to the preservation and advancement of universal service in that State. A State may adopt regulations to provide for additional definitions and standards to preserve and advance universal service within that State only to the extent that such regulations adopt additional specific, predictable, and sufficient mechanisms to support such definitions or standards that do not rely on or burden Federal universal service support mechanisms." 110 Stat. 73.
Section 254(i) of the Federal Act provides:
"(i) CONSUMER PROTECTION. The Commission and the States should ensure that universal service is available at rates that are just, reasonable, and affordable." 110 Stat. 75.
Section 254(k) of the Federal Act provides:
"(k) SUBSIDY OF COMPETITIVE SERVICES PROHIBITED. A telecommunications carrier may not use services that are not competitive to subsidize services that are subject to competition. The Commission, with respect to interstate services, and the States, with respect to intrastate services, shall establish any necessary cost allocation rules, accounting safeguards, and guidelines to ensure that services included in the definition of universal service bear no more than a reasonable share of the joint and common costs of facilities used to provide those services." 110 Stat. 75.
THE KANSAS ACT
K.S.A. 1996 Supp. 66-2001 sets out the public policy underlying the Kansas Act.
K.S.A. 1996 Supp. 66-2002(h) requires the KCC, on or before January 1, 1997, to establish the KUSF pursuant to K.S.A. 1996 Supp. 66-2008 and to make various determinations relating to the implementation of the fund. The fund was established by the KCC's December 27, 1996, final orders.
K.S.A. 1996 Supp. 66-2005(c) requires the reduction of intrastate access and toll charges for long distance service over a 3-year period with the objective of equalizing interstate and intrastate rates in a revenue neutral, specific, and predictable manner. In addition, that section provides that the KCC is authorized to rebalance local residential and business service rates to offset the intrastate access and toll charge reductions; further, any remaining portion of the reduction in access and toll charges not recovered through local residential and business service rates shall be paid out from the KUSF pursuant to K.S.A. 1996 Supp. 66-2008. Rural telephone companies are required to reduce their intrastate switched access rates to interstate levels on March 1, 1997, and every 2 years thereafter, as long as amounts equal to such reductions are recovered from the KUSF.
K.S.A. 1996 Supp. 66-2005(u) provides that "[n]o audit, earnings review or rate case shall be performed with reference to the initial prices filed" by local exchange carriers pursuant to 66-2005(b).
K.S.A. 1996 Supp. 66-2008(a) provides that the initial amount of the KUSF shall be comprised of local exchange carrier revenues lost as a result of rate rebalancing and such revenues shall be recovered on a revenue neutral basis.
K.S.A. 1996 Supp. 66-2008(b) provides that the KCC shall require every telecommunications carrier, telecommunications public utility, and wireless service provider that provides intrastate telecommunications services to contribute to the KUSF on an equitable and nondiscriminatory basis and that those contributors may collect from customers an amount equal to their contribution.
THE COURT OF APPEALS' OPINION
The Court of Appeals held:
1. K.S.A. 1996 Supp. 66-2008(b), which requires wireless service providers to contribute to the KUSF, does not impermissibly confer jurisdiction on the KCC over wireless service providers in contravention of K.S.A. 66-1,143(b), which prohibits regulation of radio common carriers by the KCC. Requiring wireless service providers to make an equitable contribution to the KUSF is distinguishable from the regulation of wireless service providers by the KCC. 24 Kan. App. 2d at 234-35.
2. (a) The concept of "revenue neutrality" as used in K.S.A. 1996 Supp. 66-2005(c) and 66-2008(a) is not unconstitutionally vague.
(b) The term "revenue neutral" has a recognized meaning; the words "equitable and nondiscriminatory" have an understandable meaning that gives adequate direction to the KCC. No unlawful delegation of legislative authority has been shown by the legislature's use of the terms "revenue neutral" and "equitable and nondiscriminatory" in K.S.A. 1996 Supp. 66-2008. 24 Kan. App. 2d at 237.
3. The concept of revenue neutrality, K.S.A. 1996 Supp. 66-2008(a) and 66-2005(c), and the prohibition against audits and earnings review in K.S.A. 1996 Supp. 66-2005(u) are inconsistent with the Federal Act, specifically §§ 254(b)(4), (b)(5), (f), and (i), and prevented the KCC from performing its regulatory responsibilities in general and ensuring compliance by carriers with § 254(k) of the Federal Act. It is impossible for the KCC to determine an affordable rate for universal service without being able to perform an audit or earnings review of the incumbent LECs. The KCC order has created a $111.6 million fund that bears no rational relation to the concept of universal service and its cost. The record on appeal does not contain substantial competent evidence to support the KCC's actions regarding the KUSF, and the KCC orders were made without foundation in fact and are unreasonable, arbitrary, and capricious. The statutory prohibition against audits and the concept of revenue neutrality are clearly inconsistent with the obligation of the KCC to ensure just and reasonable rates and charges for the consumers of Kansas. 24 Kan. App. 2d at 237-39.
4. Upon remand, the KCC must comply with the Federal Act in establishing local rates and funding of the KUSF. In this context, its order must be consistent with § 254(f), (i), and (k). Compliance should result in contributions to the KUSF by individual entities on an "equitable and nondiscriminatory" basis, as required under K.S.A. 1996 Supp. 66-2008(b). Without a thorough analysis of cost information, the equitable and nondiscriminatory standard of K.S.A. 1996 Supp 66-2008(b) cannot be shown to have been met. 24 Kan. App. 2d at 239.
5. The absence of evidence before the KCC regarding whether wireless service providers should be treated differently than other providers was due to wireless service providers not being given proper notice of the proceedings or a reasonable opportunity to prepare for the hearings before the KCC. 24 Kan. App. 2d at 240.
6. The KCC orders unduly burden the basic local service consumer with loop costs that are attributable to other services. Upon remand, the KCC should make reasonable efforts to ensure that a reasonable apportionment of the costs of the local loop is made. 24 Kan. App. 2d at 240.
7. The KCC's final orders relating to the KUSF are set aside, and the matter is remanded to the KCC for further proceedings. The KCC's decision to allow an increase in pay phone and directory assistance rates must also be set aside since that decision was part and parcel of the KUSF funding decision. Upon remand, the KCC must disregard the concept of revenue neutrality and the prohibition against any audit or earnings review. 24 Kan. App. 2d at 240-41.
ISSUES
At the prehearing conference, the parties agreed that the issues on appeal are as follows:
A. Whether the Kansas Act and the KCC orders implementing that Act violate or are inconsistent with the Federal Act because the concept of revenue neutrality required by the Kansas Act, K.S.A. 1996 Supp. 66-2005(c) and 66-2008(a), is inconsistent with and/or preempted by § 254(b)(4), (b)(5), (f), (i), or (k) of the Federal Act.
B. Whether the Kansas Act and the KCC orders implementing that Act violate or are inconsistent with the Federal Act because the prohibition against audits and earnings review found in the Kansas Act, K.S.A. 1996 Supp. 66-2005(u), is inconsistent with and/or preempted by § 254(b)(4), (b)(5), (f), (i), or (k) of the Federal Act.
C. Whether the concept of revenue neutrality and the prohibition against audits and earnings review prevent the KCC from performing its regulatory responsibilities in general, K.S.A. 66-1,187 et seq., and/or are inconsistent with other provisions of the Kansas Act, such as the public policy of Kansas expressed in K.S.A. 1996 Supp. 66-2001.
D. Whether CMT et al., wireless service providers, were given proper notice of the proceedings and a reasonable opportunity to prepare for the hearings before the KCC.
E. Notwithstanding the provisions of K.S.A. 1996 Supp. 66-2008(b), whether K.S.A. 66-1,143(b) prevents the KCC from requiring wireless service providers to contribute to the KUSF.
F. Whether the Court of Appeals' decision has an unforeseen, adverse effect on rural ILECs, in light of the mandated reductions in ILEC intrastate access rates effective March 1, 1997, such that the Court of Appeals' decision should be reversed.
G. Whether the legislature's authorization to the KCC to determine the appropriate level of funding contribution and regulation of the KUSF pursuant to K.S.A. 1996 Supp. 66-2008 is an unconstitutional delegation of legislative power to an administrative agency.
H. Whether the KCC orders are in conformity with the Kansas Act, (1) as the initial size of the KUSF fails to comply with the mandate of K.S.A. 1996 Supp. 66-2008 and (2) the KCC orders improperly exempt LECs from contributing to the KUSF in violation of K.S.A. 1996 Supp. 66-2008(b).
Pursuant to the Kansas Act, K.S.A. 1996 Supp. 66-2005(c), the KCC ordered LECs to reduce intrastate access and toll rates for long distance services to interstate levels over a 3-year period. ("[A]ll local exchange carriers shall reduce intrastate access charges to interstate levels. . . . Rates for intrastate switched access, and the imputed access portion of toll, shall be reduced over a three-year period for SWBT and United with the objective of equalizing interstate and intrastate rates in a revenue neutral . . . manner.") This reduction would result in a loss of revenue to LECs. To make up for this lost revenue, LECs are allowed to recover revenue they otherwise will have lost as a result of the ordered access and toll reductions.
In general, "revenue neutrality" refers to equalizing interstate and intrastate rates for long distance service while at the same time making up the lost revenues resulting from the ordered intrastate rate reductions through payouts from the KUSF, by an increase in pay telephone call rates, and by charges for all directory assistance calls. The idea is to equalize interstate and intrastate rates for long distance service by forcing intrastate rates down and then offset the resulting loss of LEC revenue by substituting from other sources an amount equal to the amount lost.
All companies providing intrastate telecommunications services are required to contribute to the KUSF on an equitable and nondiscriminatory basis. Any provider which contributes to the KUSF may collect from customers an amount equal to such provider's contributions. K.S.A. 1996 Supp. 66-2008(b).
At the heart of its decision, the Court of Appeals held that the concept of revenue neutrality, K.S.A. 1996 Supp. 66-2008(a) and 66-2005(c), and the prohibition against audits and earnings review, K.S.A. 1996 Supp. 66-2005(u), both of which underlay the KCC orders, are inconsistent with § 254(b), (f), (i), and (k) of the Federal Act:
"(b) UNIVERSAL SERVICE PRINCIPLES. The Joint Board and the Commission shall base policies for the preservation and advancement of universal service on the following principles:
. . . .
(4) EQUITABLE AND NONDISCRIMINATORY CONTRIBUTIONS. All providers of telecommunications services should make an equitable and nondiscriminatory contribution to the preservation and advancement of universal service.
(5) SPECIFIC AND PREDICTABLE SUPPORT MECHANISMS. There should be specific, predictable and sufficient Federal and State mechanisms to preserve and advance universal service.
. . . .
"(f) STATE AUTHORITY. A State may adopt regulations not inconsistent with the Commission's rules to preserve and advance universal service. Every telecommunications carrier that provides intrastate telecommunications services shall contribute, on an equitable and nondiscriminatory basis, in a manner determined by the State to the preservation and advancement of universal service in that State. A State may adopt regulations to provide for additional definitions and standards to preserve and advance universal service within that State only to the extent that such regulations adopt additional specific, predictable, and sufficient mechanisms to support such definitions or standards that do not rely on or burden Federal universal service support mechanisms.
. . . .
"(i) CONSUMER PROTECTION. The Commission and the States should ensure that universal service is available at rates that are just, reasonable, and affordable.
. . . .
"(k) SUBSIDY OF COMPETITIVE SERVICES PROHIBITED. A telecommunications carrier may not use services that are not competitive to subsidize services that are subject to competition. The Commission, with respect to interstate services, and the States, with respect to intrastate services, shall establish any necessary cost allocation rules, accounting safeguards, and guidelines to ensure that services included in the definition of universal service bear no more than a reasonable share of the joint and common costs of facilities used to provide those services."
Because of the holding that the revenue neutral concept and the no audit provision of the Kansas Act are inconsistent with the Federal Act, the Court of Appeals determined the KCC orders, which implement and follow the revenue neutral concept and the no audit provision, are likewise inconsistent with the Federal Act and must be set aside. 24 Kan. App. 2d at 240-41.
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