TW Telecom of N.M. v. NM Pub. Reg. Comm'n

I attest to the accuracy and
integrity of this document
New Mexico Compilation
Commission, Santa Fe, NM
'00'04- 17:25:17 2011.07.14

IN THE SUPREME COURT OF THE STATE OF NEW MEXICO

Opinion Number: 2011-NMSC-029

Filing Date: June 21, 2011

Docket No. 32,193

TW TELECOM OF NEW MEXICO, L.L.C.,

Appellant,

v.

NEW MEXICO PUBLIC REGULATION COMMISSION,

Appellee,

and

QWEST CORPORATION and
OFFICE OF THE ATTORNEY GENERAL,

Intervenors.

APPEAL FROM THE NEW MEXICO PUBLIC REGULATION COMMISSION

Jones, Snead, Wertheim & Wentworth, P.A.
Carol A. Clifford
Santa Fe, NM

for Appellant

Margaret Kendall Caffey-Moquin
Santa Fe, NM

for Appellee

Montgomery & Andrews, P.A.
Jaime R. Kennedy
Thomas W. Olson
Santa Fe, NM

Gary K. King, Attorney General

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Brian Edward Harris, Assistant Attorney General
Santa Fe, NM

for Intervenors

OPINION

MAES, Justice.

{1} Appellant, tw telecom of new mexico, llc (tw telecom), appeals from the final order
issued by the New Mexico Public Regulation Commission (the PRC) in In the Matter of the
Development of an Alternative Form of Regulation Plan for Qwest Corporation (AFOR III),
No. 09-00094-UT (AFOR III Final Order). tw telecom claims that the PRC (1) adopted
certain conclusions from a previous final order, lacking justification in the AFOR III record;
(2) deregulated Qwest Corporation’s (Qwest) rates in violation of the New Mexico
Telecommunications Act, NMSA 1978, Sections 63-9A-1 to -20 (1985) (as amended
through 2004), and the separation of powers doctrine in Article III, Section 1 of the New
Mexico Constitution; and (3) deprived tw telecom of proper due process. We annul and
vacate the AFOR III Final Order and remand to the PRC for further proceedings affording
the parties an opportunity to present evidence. Because we remand this case based on the
PRC’s due process violation, resulting from the adoption of conclusions from a previous
proceeding without affording the parties an opportunity to be heard, we do not address tw
telecom’s second claim.

FACTS AND PROCEDURAL HISTORY

{2} The claims raised in this appeal involve three cases before the PRC that concerned
the development of various alternative form of regulation plans issued by the PRC, and
Qwest’s compliance with the terms and conditions therein. The cases addressed various
issues, including pricing provisions and detailed requirements for the filing of tariff changes,
tariffs for new services, promotional offerings, packaged services, and individual contracts
for services. Those facts relevant to the development of the final orders issued in those cases
are introduced in this section; additional facts are set forth as needed.

{3} In the first case, the AFOR II final order on pricing and quality of service (AFOR II
Final Order), was issued in In the Matter of the Development of an Alternative Form of
Regulation Plan for Qwest Corporation (AFOR II), No. 05-00466-UT, on November 28,
2006. The AFOR II Final Order specifically addressed Qwest’s pricing and quality of
service provisions. The effective dates of the AFOR II Final Order were January 1, 2007
through December 31, 2009.

{4} Pursuant to the procedures enumerated in the AFOR II Final Order, Qwest filed a
series of promotions and tariff changes with the PRC in which Qwest offered waivers or
reductions of recurring monthly charges and of nonrecurring charges. Cyber Mesa

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Computer Systems, Inc. (CyberMesa) and the PRC staff (Staff) filed objections to the
promotional and tariff programs, and claimed that Qwest had engaged in anti-competitive
behavior by pricing its services below cost. The objections resulted in two separate cases,
later consolidated: In the Matter of Objections to Qwest Corporation’s Proposed
“Residence and Business Competitive Response Program” Tariff Changes in its Transmittal
2008-022, No. 08-00326-UT; and In the Matter of a Protest of a 90 Day “Residence and
Business Competitive Response Programs” Promotion by Qwest Corporation for “Potential
New” Qwest Residence Local Exchange Customers and Existing Qwest Business Customers
“in Retention Situations,” No. 08-00197-UT (collectively the “Competitive Response
Case”).

{5} The focus of the Competitive Response Case was to decide the relevant costs used
to determine a price floor for a promotional offering or a tariff reduction. tw telecom made
a business decision not to intervene in the Competitive Response Case because tw telecom
did not actively market the Qwest business services that were the subject of the promotions
or tariffs.

{6} The final order issued by the PRC in the Competitive Response Case on August 25,
2009 (Competitive Response Case Final Order), was sent via email by the AFOR III hearing
examiner to the AFOR III parties, which included tw telecom. The PRC urged the AFOR
III hearing examiner and parties to “take note of [the] ruling and to see whether, if adopted
[in AFOR III], it might forestall similar confusion in the implementation of AFOR III.”

{7} The third case resulted in the AFOR III Final Order which is the subject of this
appeal. The AFOR III case was initiated by the PRC to develop the third alternative form
of regulation, specifically addressing how Qwest was to calculate its rates and charges. The
PRC provided that “[t]he scope of this proceeding shall extend to all issues necessary and
convenient to the development of a new AFOR plan concerning Qwest Corporation,
including but not limited to, pricing, quality of service, infrastructure investment, and
deployment of advanced services.” The PRC determined that the AFOR III case would be
conducted as an adjudicated case and all interested parties would be given an opportunity
to participate in developing the next alternative form of regulation plan. Notice was served
to all entities listed on the PRC’s Telecommunications Service List, and a copy of the notice
was placed on the PRC’s website.

{8} A time line of critical dates relating to the development of AFOR III follows.

July 7-10, 2009: AFOR III public hearing.

August 28, 2009: AFOR III briefs-in-chief were due; AFOR III parties received
notice of the Competitive Response Case Final Order.

October 22, 2009: The hearing examiner filed the AFOR III recommended decision.

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November 2009: Certain AFOR III parties, including tw telecom, Qwest,
CyberMesa, Level 3, the New Mexico Attorney General, and the Department of
Defense/Federal Executive Agencies, filed exceptions to the AFOR III recommended
decision.

November 6, 2009: Qwest filed a request for oral argument on exceptions to the
AFOR III recommended decision.

December 8, 2009: Oral argument was held at which tw telecom, Qwest,
CyberMesa, Level 3, the New Mexico Attorney General, and the Department of
Defense/Federal Executive Agencies, presented their exceptions to the AFOR III
recommended decision.

December 31, 2009: AFOR II expired. The PRC issued its AFOR III Final Order,
adopting the AFOR III recommended decision, as modified, and it became effective.

{9} The PRC imported findings from the Competitive Response Case Final Order into
the AFOR III Final Order to establish the correct price floor for AFOR III. The PRC also
adopted the finding from the Competitive Response case that “ Qwest does not need to file
imputation studies in support of its rates” test because the analysis should “focus on Qwest’s
costs and revenues, rather than on those incurred by [Competitive Local Exchange
Carriers],” such as tw telecom.

{10} The PRC recognized in the AFOR III Final Order that several parties had raised due
process concerns regarding the inclusion of the Competitive Response Case Final Order
provisions in the AFOR III Final Order. Specifically, tw telecom claimed that since it was
not a party to the Competitive Response Case, its

procedural and substantive rights [were] implicated by the Commission’s
decision in this [c]ase; it has relied in good faith on the scope of [the] case as
defined by the Commission’s notice here; and [it] should not be deprived of
its right to be heard on the merits of the testimony and evidence presented
here.

Quoting from the AFOR III recommended decision filed by the hearing examiner, the PRC
concluded that,

based on the evidence in this case, no reason has been shown for reversing
the Commission’s prior finding that Qwest does not need to file imputation
studies in support of its rates. However, any final decision on these issues
should be deferred pending the outcome of the motions for rehearing that
have been filed in the Competitive Response Case.

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The PRC further concluded that the AFOR III Final Order was decided on the merits, and
the decision not to require an imputation test was made independent of prior orders, namely
the AFOR II Final Order and the Competitive Response Case Final Order.

{11} The PRC provided notice to tw telecom and the other AFOR III parties that the
Competitive Response Case Final Order could be adopted into the AFOR III when the
Competitive Response Case Final Order was issued. Specifically, the PRC advised “the
parties and the Hearing Examiner in the AFOR III case to take note of this ruling and see
whether, if adopted there, it might forestall similar confusion in the implementation of
AFOR III.” The AFOR III parties received notice of the Competitive Response Final Order
the same day the parties’ post-hearing AFOR III briefs-in-chief were due and over a month
after the AFOR III public hearing.

{12} PRC Commissioner Jason Marks issued a dissent to the AFOR III Final Order in
which he reiterated concerns previously set forth in his dissent to the Competitive Response
Case Final Order. Commissioner Marks expressed his due process concerns that, “[w]hen
decisions are based on information not brought forward in testimony or otherwise put into
the record, parties that might be opposed to these provisions are denied the opportunity to
cross examine the information or offer alternative testimony.”

{13} tw telecom filed a motion for rehearing, but it was deemed denied by the PRC’s
inaction. 1.2.2.37(F)(6)(a) NMAC (“If the commission does not act on a motion for
rehearing within twenty (20) days after the final order has been issued, the motion shall be
deemed denied.”). Thereafter, tw telecom filed its direct appeal to this Court. See NMSA
1978, § 62-11-1 (1993) (providing a right of direct appeal from a final order of the PRC).

{14} tw telecom claims that the conclusions in the Competitive Response Case Final Order
adopted by the PRC in the AFOR III Final Order are not supported by substantial evidence,
are arbitrary and capricious, represent an abuse of discretion, and are unlawful. NMSA
1978, § 63-7-1.1(G) (1998); NMSA 1978, § 63-9A-16(B) (1998). tw telecom raises three
issues on appeal: (1) whether “the [PRC] adopted the new pricing plan derived from the
Competitive Response Case [Final Order] without justification in the AFOR III Case record
and without explanation”; (2) whether “the new pricing plan effectively deregulate[d]
Qwest’s rates in violation of the New Mexico Telecommunications Act . . . and the
separation of powers doctrine, Article III, Section 1 of the New Mexico Constitution”; and
(3) whether “the [PRC] . . . deprived [tw telecom] and other parties of their right to
procedural due process by denying them the right to confront the evidence supporting the
new pricing plan.”

STANDARD OF REVIEW

{15} When reviewing a PRC decision, the challenging party bears the burden of proving
that the decision “is arbitrary and capricious, not supported by substantial evidence, outside
the scope of the agency’s authority, or otherwise inconsistent with law.” Albuquerque

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Bernalillo Cnty. Water Util. Auth. v. N.M. Pub. Regulation Comm’n and Pub. Serv. Co. of
N.M. (ABCWUA), 2010-NMSC-013, ¶ 17, 148 N.M. 21, 229 P.3d 494 (internal quotation
marks and citations omitted); see § 63-9A-16(B). The due process claims raised by tw
telecom are constitutional issues of law that we review de novo. ABCWUA, 2010-NMSC-
013, ¶ 19.

DISCUSSION

{16} tw telecom conceded during oral argument that if this Court found a violation of tw
telecom’s due process rights, there would be no need to address the other issues raised in
their brief-in-chief. tw telecom claims that the PRC “deprived the parties of essential
elements of due process including adequate notice, an opportunity to present witnesses or
evidence, the chance to cross-examine witnesses, and, perhaps most important, the right to
have a decision based on the record with a statement of reasons for the decision.” The PRC
argues that tw telecom had actual notice and an opportunity to be heard in both the
Competitive Response Case and AFOR III, in which they referred to and relied upon the
Competitive Response Case record in the AFOR III proceedings.

{17} Due process is not a concrete concept, but rather “is flexible in nature and may
adhere to such requisite procedural protections as the particular situation demands.” U S
West Commc’ns, Inc. v. N.M. State Corp. Comm’n (U S West), 1999-NMSC-016, ¶ 25, 127
N.M. 254, 980 P.2d 37 (internal quotation marks and citations omitted); see also Morrissey
v. Brewer, 408 U.S. 471, 481 (1972) (“It has been said so often by this Court and others as
not to require citation of authority that due process is flexible and calls for such procedural
protections as the particular situation demands.”). Although the specific procedural
requirements of due process vary depending on the situation, “‘[i]t is well settled that the
fundamental requirements of due process in an administrative context are reasonable notice
and opportunity to be heard and present any claim or defense.’” ABCWUA, 2010-NMSC-
013, ¶ 21 (emphasis added) (quoting Jones v. N.M. State Racing Comm’n, 100 N.M. 434,
436, 671 P.2d 1145, 1147 (1983)). The opportunity to be heard should be “at a meaningful
time and in a meaningful manner.” N.M. Indus. Energy Consumers v. N.M. Pub. Serv.
Comm'n, 104 N.M. 565, 568, 725 P.2d 244, 247 (1986); see Fuentes v. Shevin, 407 U.S. 67,
80 (1972) (holding that for procedural due process to be met, “the right to notice and an
opportunity to be heard must be granted at a meaningful time and in a meaningful manner”
(internal quotations marks and citation omitted)).

{18} The PRC claims that in AFOR III, tw telecom “had, and took advantage of, ample
opportunity to present its own price floor proposal, to present evidence, and to advocate for
its position.” The PRC cites tw telecom’s testimony in AFOR III, which referenced
evidence from the Competitive Response Case, to show that tw telecom had knowledge that
the PRC was considering adoption of certain pricing methodologies in the Competitive
Response Case into the AFOR III Final Order.

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{19} tw telecom admits to citing to “the procedural history of the Competitive Response
Case to demonstrate that the Commission needed to streamline its procedures for tariff
filings so as to avoid the delay and expense necessitated by that case.” However, tw telecom
claims to have responded only to those portions of the Competitive Response Case that were
placed in the AFOR III record, and argues that “[i]f the entire Competitive Response Case
record had been taken notice of, [then] tw telecom would have responded accordingly.”

{20} “The [PRC] is authorized only to make its decision [based] upon the evidence
adduced at the hearing and made a part of the record.” Transcon. Bus Sys. v. State Corp.
Comm’n, 56 N.M. 158, 177, 241 P.2d 829, 841 (1952). The AFOR III Final Order was not
based solely on the evidence presented and made part of the record; rather, certain
conclusions were based on evidence heard at the Competitive Response Case hearing a
month earlier and later incorporated into the AFOR III recommended decision. Although
tw telecom referenced Competitive Response Case evidence in its AFOR III testimony, such
reference does not negate the fact that tw telecom was denied the opportunity to present
evidence and to examine and cross-examine witnesses regarding PRC’s decision in the
Competitive Response Case. Furthermore, tw telecom’s motion for a rehearing, requesting
that the AFOR III parties be given the opportunity to present evidence regarding the
implementation of the Competitive Response Case to AFOR III, was deemed denied by the
PRC’s inaction. 1.2.2.37(F) NMAC.

{21} Due to the timing of the Competitive Response Case Final Order, the parties were
denied the opportunity to substantively address the impact of the Competitive Response Case
Final Order on the pending AFOR III proceeding through the presentation of evidence or the
examination and cross-examination of witnesses. Because tw telecom was precluded from
making a record in AFOR III regarding the Competitive Response Case Final Order, an
essential element of due process, the opportunity to be heard, was violated.

CONCLUSION

{22} We annul and vacate the AFOR III Final Order and remand to the PRC for further
proceedings so that the parties are afforded the opportunity to present evidence. See NMSA
1978, § 62-11-5 (1982) (“The supreme court shall have no power to modify the action or
order appealed from, but shall either affirm or annul and vacate the same.”). Because we
remand this case based on the due process violation, we do not address tw telecom’s second
claim.

{23} IT IS SO ORDERED.

_____________________________________
PETRA JIMENEZ MAES, Justice

WE CONCUR:

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_____________________________________
CHARLES W. DANIELS, Chief Justice

_____________________________________
PATRICIO M. SERNA, Justice

_____________________________________
RICHARD C. BOSSON, Justice

_____________________________________
EDWARD L. CHÁVEZ, Justice

Topic Index for tw telecom v. NMPRC, Docket No. 32,193

AL ADMINISTRATIVE LAW AND PROCEDURE
AL-DU Due Process
AL-NO Notice
AL-RE Record

CT CONSTITUTIONAL LAW
CT-DP Due Process

PU PUBLIC UTILITIES AND COMMUNICATIONS
PU-TL Telecommunications

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