STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

Transcription

1 STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION In the matter, on the Commission s own motion, ) to determine potential changes to the Lifeline ) Case No. U discount pursuant to MCL ) AT&T MICHIGAN S COMMENTS Mark R. Ortlieb AT&T Michigan 225 West Randolph Street, Floor 25D Chicago, IL mo2753@att.com J. Tyson Covey Mayer Brown LLP 71 South Wacker Drive Chicago, IL jcovey@mayerbrown.com

2 TABLE OF CONTENTS Page INTRODUCTION AND SUMMARY OF ARGUMENT... 1 ARGUMENT... 5 I. CURRENT LIFELINE DISCOUNT... 5 II. FUTURE CHANGES TO THE SECTION 316 LIFELINE DISCOUNT RESULTING FROM FEDERAL CHANGES... 5 A. History of Lifeline Discounts in Michigan Lifeline Discounts Prior to Section Section 316 and Subsequent Amendments Impact of Changes to the Federal Discount After B. Section 316(4) Requires the State Lifeline Discount to Decrease In Lockstep With the Federal Lifeline Discount III. THE COMMISSION SHOULD CLARIFY THAT THE $2.00 STATE DISCOUNT IS PART OF THE SECTION 316 DISCOUNT, NOT AN INDEPENDENT REQUIREMENT A. The $2.00 State Discount is Incorporated Into Section B. Section 316 Precludes the Commission From Requiring Any Additional Lifeline Discount C. Requiring ILECs Alone to Provide an Extra Lifeline Discount Would Be Discriminatory and Anticompetitive CONCLUSION i-

3 Michigan Bell Telephone Company d/b/a AT&T Michigan ( AT&T Michigan ) respectfully submits these Comments in response to the Commission s Order dated October 24, INTRODUCTION AND SUMMARY OF ARGUMENT The October 24 Order asks for comments regarding the impact of changes to the federal Lifeline discount on the amount of the Lifeline discount required under Section 316 of the Michigan Telecommunications Act ( MTA ), MCL Specifically, the Commission requests comments on: 1. The amount of the current Lifeline discount being applied to eligible customer bills by the providers of basic local exchange service ( BLES ) in Michigan pursuant to section 316; 2. How the current discount will be affected by the change in the federal reimbursement provisions; and 3. What the new Lifeline discount for Michigan customers will be and when it will apply. This request is very timely, given the need for providers of residential BLES, such as AT&T Michigan, to begin implementing a stand-alone state Lifeline discount on January 1, Until now, providers of residential BLES have administered state and federal Lifeline discounts, with a single set of eligibility criteria for qualifying low-income customers. Beginning January 1, 2019, however, there will be different eligibility criteria for the state and federal Lifeline discounts. AT&T Michigan therefore will have to determine which customers qualify for the state (but not the federal) Lifeline discount and will have to apply a stand-alone state Lifeline discount for those customers. AT&T Michigan believes it currently has about 300 such customers. AT&T Michigan applauds the Commission for addressing this important question and urges the Commission to issue an order in this proceeding well before January 1, 2019 to allow for 1

4 timely implementation. That order should find that the correct amount of a stand-alone state Lifeline discount under Section 316 is $2.00, $3.50 for seniors. The language and history of Section 316 compel this conclusion, for reasons we summarize here and demonstrate in detail in the Argument sections that follow. First, the Commission approved a $2.00 state Lifeline discount for AT&T Michigan s qualifying customers before the Legislature enacted Section 316 in That $2.00 state discount was combined with a $2.00 federal low-income discount, for a total $4.00 discount, thus establishing the practice of combining the state and federal discounts. Second, Section 316 was adopted in 1991 and required providers of residential BLES to offer a Lifeline discount but did not specify the dollar amount. The Commission then held that the existing $4.00 discount ($2.00 state + $2.00 federal) satisfied Section 316. In 1995, Section 316 was amended to make the $4.00 Lifeline discount explicit. In addition, the 1995 amendment confirmed that the $4.00 discount was inclusive of the $2.00 federal discount. Thus, the Legislature made clear that the $4.00 Section 316 discount was the sum of the previously approved $2.00 state discount and the $2.00 federal discount. When the FCC increased the federal discount to $6.25 in 1997, the Legislature correspondingly increased the Section 316 discount to $8.25, so that it remained the sum of the $2.00 state discount and the $6.25 federal discount. And when a $12.35 senior discount was added to Section 316 in 2005, that too was a combination of the state discount and the federal discount. The Legislature has at all times maintained the Section 316 discount as the sum of the $2.00 state discount and the applicable federal discount. Third, Section 316(4) expressly requires the Section 316 discount to be adjusted annually to reflect any increases or decreases in the federal contribution. That, of course, is further proof that the Section 316 discount is to be the sum of the state and federal discounts. Most importantly, 2

5 Section 316(4) is a legislative mandate that the $8.25 and $12.35 figures in Section 316 are fluid, changeable amounts not static creatures of state law. Section 316(4) requires those dollar figures to be adjusted annually to reflect any increases or decreases in the federal Lifeline discount. In keeping with this requirement, the Section 316 discount has increased as the FCC increased the federal Lifeline discount, and AT&T Michigan always implemented those increases (including the jump to an $11.25 discount when the FCC increased the federal discount to $9.25 in 2012). But just as the Section 316 discount increases as the federal discount increases, so too must it decrease as the FCC decreases the federal Lifeline discount in the future. The Section 316(4) mechanism works in both directions to automatically adjust the Section 316 discount in lockstep with federal changes. The fact that the adjustment mechanism works in both directions is significant now because in 2016 the FCC decided to phase out the federal Lifeline discount over several years. The federal discount will remain at $9.25 until December 2019; will then decrease to $7.25 until December 2020; will then decrease to $5.25 until November 2021; and will thereafter go to zero. As the amount of the federal discount ratchets down, so too must the combined state/federal discount under Section 316, decreasing step by step. Thus, when the federal discount ultimately goes to zero in December 2021, the discount amount under Section 316 must automatically adjust to eliminate the entire federal portion of the discount, leaving only the $2.00 state portion ($3.50 for seniors). For perspective, it is critical to recognize that these reductions in the Section 316 discount will affect only a very small and ever-shrinking number of consumers. That is because Section 316 applies only to ILECs and CLECs that provide BLES, and ILECs and CLECs have already lost most of their BLES customers to other options, primarily wireless and VoIP services. 3

6 Moreover, these ILECs and CLECs continue to lose more BLES customers all the time. Between 2005 and December 2016, the number of traditional ILEC residential wireline customers in Michigan decreased by 83%, from 2,814,824 lines to 475,000 lines. AT&T Michigan s traditional residential retail lines in Michigan decreased by 89% between 2005 and June In fact, in just the 18 months from year-end 2015 through June 2017, AT&T Michigan s residential line count dropped 26%, and it declined an additional 16% as of June While BLES lines have plummeted, wireless subscriptions have exploded. According to FCC reports, the number of wireless subscribers in Michigan increased from 3,488,826 in December 2000 to more than 10,304,000 by December As for VoIP services, there were 1,745,000 interconnected VoIP lines in Michigan at the end of The wireless and VoIP lines are not subject to Section 316. These BLES line losses are mirrored in ILECs and CLECs loss of customers who receive the Lifeline discount. At the end of June 2018, AT&T Michigan served only 3,881 Lifeline customers less than 1% of the 388,532 Lifeline subscribers in the State. In other words, more than 99% of Lifeline customers in Michigan obtain their Lifeline discount from providers other than AT&T Michigan almost exclusively wireless providers. Indeed, only 300 AT&T Michigan Lifeline customers will be affected by the change to Lifeline eligibility criteria that takes effect on January 1, 2019, and the total pool of customers obtaining a Lifeline discount under Section 316 will continue to shrink over time as BLES consumers keep switching to wireless and VoIP services, which are not subject to Section 316. Given the trends of the past decade, which show no signs of slowing, it is likely that extremely few (if any) customers will still be obtaining a Section 316 discount by the time the federal Lifeline discount ends in late

7 I. CURRENT LIFELINE DISCOUNT ARGUMENT The October 24 Order (at 4) requests comment on the amount of the current Lifeline discount being applied to eligible customer bills by the providers of BLES in Michigan pursuant to Section 316. As discussed above, AT&T Michigan currently complies with Section 316 by providing a Lifeline discount to BLES customers of $11.25 ($2.00 state discount + $9.25 federal discount) and to over-65 BLES customers of $12.75 ($3.50 state senior discount + $9.25 federal discount). II. FUTURE CHANGES TO THE SECTION 316 LIFELINE DISCOUNT RESULTING FROM FEDERAL CHANGES The October 24 Order (at 4) also seeks comment on how the current discount will be affected by the change in the federal reimbursement provisions and if affected, what the new Lifeline discount for Michigan customers will be and when it will apply. AT&T Michigan addresses that question below, after first providing a detailed history of the Section 316 discount. Since Section 316 s enactment in 1991, the Section 316 discount has always been set equal to the sum of the $2.00 state discount ($3.50 for seniors) plus the then-applicable federal discount. In the past this formula has always produced increases to the Section 316 discount as the federal discount grew. Under Section 316(4), however, the Legislature requires the Section 316 discount to be adjusted annually for any increases or decreases in the federal discount. The upcoming changes to the federal discount will therefore affect the Section 316 discount as follows. First, beginning January 1, 2019, customers who qualify for a state Lifeline discount under Michigan s eligibility criteria, but who do not qualify for a federal Lifeline discount under FCC-approved eligibility criteria, will receive the state Lifeline discount of $2.00 ($3.50 for seniors). Second, for other customers, the Section 316 discount will step down as follows: decrease to $9.25 in 5

8 December 2019 ($2.00 state + $7.25 federal); decrease to $7.25 in December 2020 ($2.00 state + $5.25 federal); decrease to $2.00 in December 2021 ($2.00 state and zero federal). Similar changes would apply to ultimately reduce the senior discount to $3.50. The legal basis for these conclusions starts with the history of Lifeline discounts in Michigan and Section 316. A. History of Lifeline Discounts in Michigan The history of the Lifeline discount in Michigan shows that the stand-alone state discount is $2.00, $3.50 for seniors. 1. Lifeline Discounts Prior to Section 316 In 1987, the Commission directed AT&T Michigan (then Michigan Bell) to file proposals for repricing certain services. AT&T Michigan did so, and its proposals included a new Lifeline service that would provide rate discounts to low-income households for telecommunications voice service. 1 In 1988, in Case No. U-8816, the Commission approved AT&T Michigan s proposed Lifeline offering in substantial part. 2 The approved offering included a $4.00 discount on BLES. The $4.00 discount consisted of a $2.00 state discount plus the available $2.00 federal discount provided by the FCC s lifeline assistance program. 3 Thus, from the outset, the amount of the Lifeline discount in Michigan has been expressed as the sum of the state and the federal Lifeline discounts, and the state portion of that discount was (and is) $ See MPSC Order (Nov. 10, 1988) in Case No. U-8816, In the matter of the application of MICHIGAN BELL TEL. CO. for authority to revise its Tariffs M.P.S.C. Nos. 1, 3, 5 and 25 as they pertain to message toll, interzone message, wide area telephone and access services and to provide a new service offering: Lifeline service, 1988 Mich. PSC LEXIS 320, at *1. To be clear, Lifeline service is not a distinct type of telecommunications service. It is simply discounted BLES. 2 Id. at * Id. at *32, 36, The $2.00 federal discount was given to the customer by reducing a portion of the federal end user common line ( EUCL ) charge. 6

9 In its 1988 Order approving the $4.00 discount to be provided by AT&T Michigan, the Commission directed all other Michigan LECs to initiate proceedings for authority to establish appropriate Lifeline service programs. 4 In 1990, the Commission approved Lifeline programs for GTE North and the members of the Michigan Exchange Carriers Association ( MECA ) that, like the AT&T Michigan program, included a $4.00 monthly discount for eligible customers ($2.00 state discount + $2.00 federal discount) Section 316 and Subsequent Amendments In 1991, the Legislature enacted Section 316 of the MTA, entitled Lifeline Services. This new statute directed the Commission to require each provider of residential BLES to offer BLES to certain low-income customers at a rate below the regulated rate. The statute did not specify the amount of the required discount. 6 In 1992, however, the Commission ruled that the discount being provided by AT&T Michigan, GTE North, and MECA ($2.00 state discount + $2.00 federal discount) satisfied Section In 1995, the Legislature amended Section 316 to fully occupy the field and directly establish the amount of the Lifeline discount via statute. As amended, the statute stated that the discount would be 20% [25% for seniors] or $4.00, which shall be inclusive of any federal 4 Id. at *41, MPSC Order (March 13, 1990), Case No. U-9385, In the matter of the application of GTE NORTH INCORPORATED for authority to revise its schedule of rates and charges, 1990 Mich. PSC LEXIS 60 ( GTE North ); MPSC Order (June 14, 1990), Case No. U-9368, In the matter of the application of the MICHIGAN EXCHANGE CARRIERS ASSOCIATION, INC. for authority to establish a Lifeline service program, 1990 Mich. PSC LEXIS 161 ( MECA ) Mi. SB 124, enacted Dec. 23, 1991 (1991 Mich. Legis. Serv. P.A. 179 (S.B. 124 (West)). 7 MPSC Order (May 6, 1992), Case No. U-10091, In the matter of establishing compliance and rate requirements for Lifeline services under the Michigan Telecommunications Act, 1992 Mich. PSC LEXIS

10 contribution, whichever is greater, below the regulated rate. 8 The $4.00 discount was the sum of the $2.00 state discount that the Commission approved in prior orders plus the $2.00 federal Lifeline discount. 9 Thus, Section 316 maintained the established practice of setting the Lifeline discount equal to the sum of the state and federal discounts. In 1997, the FCC increased the federal discount. It expressed the new federal discount in a formula that equated to $ $ ½ of any state discount (up to an additional $1.75). 10 In Michigan, plugging the $2.00 state discount into this formula yielded a federal Lifeline discount of $6.25 ($ $ $1.00 (½ of the state discount)). Tracking this change, the Legislature amended the Section 316(2) discount amount to be at a minimum, 20% of the basic local exchange rate or $8.25, which shall be inclusive of any federal contribution, whichever is greater. 11 As always, the required discount (now $8.25) equaled the sum of the $2.00 state discount plus the $6.25 federal discount. In 2005, the Legislature again amended Section Most significantly, the Legislature added the following language to subsection (4): The dollar amounts in subsections (2) and (3) shall be adjusted annually to reflect any increases or decreases in the federal contribution. 13 Thus, Mi. SB 722, enacted Nov. 30, 1995 (1995 Mich. Legis. Serv. P.A. 216 (S.B. 722) (West)). 9 Prior to 1997, the federal Lifeline discount was an amount up to $3.50 (the amount of the federal Subscriber Line Charge (also called a SLC ) which is the same thing as the EUCL charge), to the extent matched by a state discount. Federal-State Joint Board on Universal Service, 12 FCC Rcd. 8776, (1997) ( Universal Service Order ). Because the state discount in Michigan at the time was $2.00, the federal Lifeline discount for Michigan was capped at $ Universal Service Order, 12 FCC Rcd. 8776, Mi. SB 788, enacted Dec. 30, 1997 (1997 Mich. Legis. Serv. P.A. 183 (S.B. 788 (West)). 12 In the interim, the Legislature in 1999 reenacted Section 316 as it then was, evidently because the 1997 version of the statute was set to expire in Mi. HB 5237, enacted Nov. 21, 2005 (2005 Mich. Legis. Serv. P.A. 235 (H.B. 5237) (West)). 8

11 while the 1995 and 1997 amendments adjusted the Section 316 discount to specifically account for changes to the federal discount (see discussion above), subsection (4) eliminated the need to amend Section 316 every time the federal discount changed by making such changes automatic. The 2005 amendment also increased the discount for seniors in subsection (3) from $8.25 to $ This reflected the industry s agreement to increase the state senior discount by $1.50, to $3.50. Thus, applying the formula set forth above and using the then-current federal EUCL, the computation was as follows: $5.35 (the federal EUCL in 2005) + $ (½ of the state Lifeline discount after adding $1.50 to the existing $2.00 state discount) + $3.50 (agreed-upon new state senior discount) = $ The next amendment of Section 316, which made only a minor technical change, occurred in This yielded the current version of the statute, which provides, in pertinent part: (1) The commission shall require each provider of residential basic local exchange service to offer certain low income customers the availability of basic local exchange service and access service at reduced rates as described in subsections (2) and (3). (2) Except as provided under subsections (3) and (4), the rate reduction for low income customers shall be at a minimum, 20% of the basic local exchange rate or $8.25, which shall be inclusive of any federal contribution, whichever is greater. (3) Except as provided under subsection (4), if the low income customer is 65 years of age or older, the rate reduction shall be, at a minimum, 25% of the basic local exchange rate or $12.35, which shall be inclusive of any federal contribution, whichever is greater. (4) The dollar amounts in subsections (2) and (3) shall be adjusted annually to reflect any increases or decreases in the federal contribution. 9

12 3. Impact of Changes to the Federal Discount After 2005 In 2012, the federal Lifeline discount increased to $ Consistent with Section 316(4), AT&T Michigan increased the Lifeline discount it provided under Section 316(2) to $11.25 ($2.00 state discount + $9.25 federal discount). AT&T Michigan filed annual reports with the Commission showing it applied the discount in this way, from at least 2012 to 2018, and the Commission audited those reports. In the 2017 audit, which was representative, MPSC Staff issued an audit closure letter to AT&T Michigan, stating that no material misstatements were found with the 2017 expenses and revenues and that no specific areas of concern exist with the audit information submitted by AT&T Michigan. See Attachment 1 hereto. In the 2016 Lifeline Order, 15 the FCC changed the federal Lifeline program s eligibility rules by, among other things, removing state-specific Lifeline eligibility criteria. This is significant because, prior to this FCC order, low-income customers could qualify for federal Lifeline discounts based on state eligibility criteria. Because the Michigan eligibility criteria is more lenient than the federal eligibility criteria, 16 customers could qualify for the federal discount in Michigan even though they would not qualify under the federal eligibility criteria. Under the 2016 Lifeline Order, which was to go into effect on December 2, 2016, Michigan customers would qualify for the federal Lifeline discount only if they satisfied the federal eligibility criteria. Those customers that satisfied the Michigan eligibility criteria, but not the 14 Lifeline and Link Up Reform and Modernization, 27 FCC Rcd. 6656, 58 (2012). 15 Lifeline and Link Up Reform and Modernization, 31 FCC Rcd. 3962, 64-65, , (rel. Apr. 27, 2016) ( 2016 Lifeline Order ). 16 For example, a low-income customer can qualify for the state Lifeline discount if his or her income is at or below 150% of the federal poverty guidelines. That customer would not qualify for the federal Lifeline discount, which sets the income criteria at or below 135% of the federal poverty guidelines. 10

13 federal eligibility criteria, would only be entitled to the state Lifeline discount, not the federal Lifeline discount. Prior to the December 2, 2016 effective date, the Commission (together with a handful of other states) requested a one-year waiver. The FCC s Wireline Competition Bureau granted a waiver until December 31, In November 2017, Michigan was granted another waiver to June 30, In May 2018, the Commission requested another waiver and on June 14, 2018 the FCC s Wireline Competition Bureau extended the waiver until December 31, No additional waiver has been requested. Thus, as of January 1, 2019, AT&T Michigan will have to provide a stand-alone state Lifeline discount for those customers who satisfy the state eligibility criteria, but who no longer satisfy the federal eligibility criteria. 18 In addition, beginning November 2019, the federal Lifeline discount will begin stepping down over time, and as of December 1, 2021, the federal Lifeline discount on stand-alone voice service will decrease to $0.00 (with some exceptions). 19 B. Section 316(4) Requires the State Lifeline Discount to Decrease In Lockstep With the Federal Lifeline Discount The primary objective in statutory interpretation is to implement the intent of the Legislature. In re Reliability Plans of Electric Utils. for , 2018 WL , at *5 (Mich. App. 2018). The first step to determining intent is to examine the plain language and 17 Lifeline and Link Up Reform and Modernization, 2018 WL , 7 (WCB 2018) ( Second Waiver Extension Order ). 18 Further, AT&T Michigan has an open proceeding before the Commission concerning the relinquishment of its designation as an Eligible Telecommunications Carrier ( ETC ) in certain areas of the state. MPSC Case No. U-20064, filed January 26, When AT&T Michigan is no longer designated an ETC in those areas, it will no longer participate in the federal Lifeline discount program and will only be required to offer the state Lifeline discount to eligible customers Lifeline Order, 31 FCC Rcd. 3962, 64-65,

14 structure of the statute. Koontz v. Ameritech Servs., Inc., 466 Mich. 304, 312, 645 N.W.2d 34 (2002). The decisionmaker must consider the statute as a whole and seek to give effect to every word, phrase, and clause. People v. Juntikka, 310 Mich. App. 306, 309, 871 N.W.2d 555 (2015). Decisionmakers also must pay particular attention to statutory amendments, because a change in statutory language is presumed to reflect either a legislative change in the meaning of the statute itself or a desire to clarify the correct interpretation of the original statute. Bush v. Shabahang, 484 Mich. 156, 167, 772 N.W.2d 272 (2009). The plain language of Section 316, as underscored by its amendment history, requires the Section 316 discount to increase and decrease in lockstep with changes to the federal discount. At every turn, the Legislature set the Section 316 discount equal to the sum of the $2.00 state discount that was originally established by this Commission plus the federal discount. This must be regarded as intentional; the Legislature incorporated the $2.00 state discount into Section 316 and added the federal discount, just as the Commission itself had done before Section 316 was enacted. Bush, 484 Mich. at ( This Court cannot assume that language chosen by the Legislature is inadvertent. To the contrary, this Court must assume that an express legislative change denotes either a change in the meaning of the statute itself or a clarification of the original legislative intent of the statute. ). Just as clearly, the Legislature amended Section 316(4) in 2005 to make such matching adjustments automatic, and thus ensured that the Section 316 discount would always increase or decrease in lockstep with increases or decreases to the federal Lifeline discount. Subsection (4) mandates that [t]he dollar amounts in subsections (2) and (3) shall be adjusted annually to reflect any increases or decreases in the federal contribution. (Emphasis added). And that is how AT&T Michigan has applied the statute. For example, since the federal Lifeline discount increased to 12

15 $9.25 in 2012, AT&T Michigan has given a total Section 316(2) discount of $11.25 the $2.00 state discount plus the $9.25 federal discount. 20 The same result must also apply when the federal discount decreases, because subsection (4) requires adjust[ments] for any increases or decreases in the federal discount. (Emphasis added). Accordingly, just as AT&T Michigan applied a larger discount than $8.25 when the federal discount went up, it must apply a smaller discount than $8.25 when the federal discount goes down. 21 Specifically, it must apply the sum of the $2.00 state discount plus the federal discount in effect at the time. 22 Any other interpretation of Section 316 would run afoul of the fundamental principle that one must give meaning to all the words in a statute and avoid interpretations that would nullify them. 23 In particular, there can be no argument that the Section 316(2) discount must always be at least $8.25. Section 316(2) states that the discount is to be a minimum of $8.25 [e]xcept as provided under subsection[]... (4). (Emphasis added). Subsection (4), in turn, requires that the discount be adjusted to account for any... decreases in the federal discount. Failure to fully account for federal decreases, even when they bring the discount below $8.25, would therefore 20 See Michigan Bell Telephone Company, Tariff M.P.S.C. 20R, 12th Revised Sheet 3, Section 1.C For simplicity, the remainder of these Comments will discuss only the Section 316(2) discount. All of the same arguments, facts, and legal principles, however, apply equally to the Section 316(3) senior discount. 22 Given the Commission s original adoption of a $2.00 state Lifeline discount in its 1988 and 1990 orders and the Legislature s series of amendments to keep the Section 316 discount equal to $2.00 plus the then-effective federal discount, it is clear that the state-discount component of the Section 316(2) discount is $ Bush, 484 Mich. at 167; Juntikka, 310 Mich. App. at 309 ( In giving meaning to a statutory provision, we consider the provision within the context of the whole statute and give effect to every word, phase, and clause... [to] avoid an interpretation that would render any part of the statute surplusage or nugatory. ) (internal quotation marks omitted); Verizon North, Inc. v. Pub. Serv. Comm n, 263 Mich. App. 567, 570, 689 N.W.2d 709 (2004). 13

16 nullify parts of Sections 316(2) and (4). In other words, if the $8.25 figure were treated as a minimum fixed in stone, there would be no except[ion] to the $8.25 requirement, because there would be no possibility of adjust[ing] that figure to reflect... decreases in the federal discount that bring the Section 316(2) discount below $8.25 even though such adjustments are exactly what the express language of Section 316 requires. The Legislature cannot have intended its words to have no meaning. Ideally, as the federal contributions have changed over time, the Commission would have issued an order or some other directive to show the annual adjustment required by Section 316(4). That did not take place. To provide clarity for all BLES providers and customers now, the Commission should issue an order in this proceeding to confirm that the Section 316 discounts are to be changed to track reductions in the federal Lifeline discount. Accordingly, when the federal Lifeline discount is decreased to $7.25 in December 2019 pursuant to the FCC s 2016 Lifeline Order, the overall Lifeline discount required under Section 316 must decrease by $2.00, and AT&T Michigan will at that time offer an overall discount of $9.25 ($2.00 state discount + $7.25 federal discount) to customers who meet federal eligibility criteria. Similarly, when the federal discount is phased down to $5.25 in December 2020 pursuant to the FCC s 2016 Lifeline Order, the overall Lifeline discount required under Section 316 will decrease by another $2.00, and AT&T Michigan will at that time offer an overall discount of $7.25 ($2.00 state discount + $5.25 federal discount) to federally eligible customers. And when the federal discount goes to zero in December 2021, the overall Lifeline discount will decline by $5.25, to $2.00. That is appropriate because 14

17 $2.00 is the amount of the original state Lifeline discount that the Legislature built into Section 316(2). 24 These computations focus on the dollar amounts specified in Section 316, but the same dollar reductions would apply to the dollar amounts resulting from the percentage figures in Section 316(2) and (3). Bill Analysis issued by the Senate Fiscal Agency paraphrased the annual adjustment language as requiring the rate reductions for all low-income customers to be adjusted annually to reflect any increases or decreases in the federal contribution. Bill Analysis for HB 5237 (emphasis added). Thus, the authors of the Bill Analysis understood the term dollar amounts in the new statutory language requiring annual adjustments to mean the amounts of the total Lifeline discount, i.e., the $8.25 or $12.35 figures or the dollars associated with the 20% or 25% figures, if applicable. The dollar figures associated with the percentages have generally been irrelevant because they are less than the dollar figures specified in the statute, and that will continue to be true as the federal Lifeline reductions are applied to the dollar figures that result from applying those percentages to BLES rates. Accordingly, for example, if 20% of a carrier s BLES rate equaled $5.00, that $5.00 figure would be reduced by $2.00 in December 2019 (down to $3.00) when the federal discount is reduced by $2.00, by another $2.00 in December 2020 (to $1.00) when the federal discount is reduced by another $2.00, and then to zero in December 2021 when 24 The math is the same for the Section 316(3) senior discount. When the federal Lifeline discount is phased down to $7.25 in December 2019 pursuant to the FCC s 2016 Lifeline Order, the overall Lifeline discount required under Section 316(3) will decrease by $2.00, and AT&T Michigan will at that time offer an overall discount of $10.75 ($3.50 state senior discount + $7.25 federal discount) to customers that meet federal eligibility criteria. Similarly, when the federal discount is phased down to $5.25 in December 2020 pursuant to the FCC s 2016 Lifeline Order, the overall Lifeline discount required under Section 316(3) will decrease by another $2.00, and AT&T Michigan will at that time offer an overall discount of $8.75 ($3.50 state senior discount + $5.25 federal discount) to federally eligible customers. When the federal discount goes to zero in December 2021, the Section 316(3) Lifeline discount for seniors will decline by $5.25, to $

18 the federal discount is reduced again and goes to zero. This means that the discount resulting from adding the $2.00 state discount plus the federal discount will at all times be the greater discount under Section 316. III. THE COMMISSION SHOULD CLARIFY THAT THE $2.00 STATE DISCOUNT IS PART OF THE SECTION 316 DISCOUNT, NOT AN INDEPENDENT REQUIREMENT As explained above in Section II.A.1, when the Commission first ordered AT&T Michigan, GTE North, and MECA to provide a $2.00 state Lifeline discount on top of the then-$2.00 federal discount, no Michigan statute addressed Lifeline discounts. When the Legislature addressed Lifeline discounts by enacting Section 316 in 1991, that new law superseded, and thus nullified, the Commission s prior Orders establishing the $2.00 state Lifeline discount for AT&T Michigan, GTE North, and MECA. In other words, the Legislature incorporated the $2.00 state discount into the discounts required by Section 316(2) and (3), as the later amendments to Section 316 show. Some commenters may assert that the Commission s 1988 and 1990 orders establish a separate $2.00 discount that exists independent of and in addition to the discount required in Section 316, and therefore impose an additional duty on the ILECs covered by those orders. That view cannot survive legal scrutiny. AT&T Michigan accordingly asks the Commission to confirm in its order here that the $2.00 discount first required in those prior orders is incorporated into, and part of, the Section 316 discount. A. The $2.00 State Discount is Incorporated Into Section 316 When the Commission issued the original $2.00 discount orders in 1988 and 1990, Section 316 did not exist. The Commission therefore approved the $2.00 state low-income discount pursuant to its general authority under MCL c. 25 Once the Legislature passed Section 316, Mich. PSC LEXIS 320 at *38 n.5. 16

19 however, that statute necessarily superseded those prior orders by requiring all carriers to offer a low-income discount on voice service as specified in Section 316. Indeed, the history of amendments to Section 316, discussed above, demonstrates the Legislature s intent that the $2.00 state Lifeline discount be incorporated as the baseline and that the federal Lifeline discount be added to it to make up the full Section 316 discount. If the Legislature had wanted there to be a state Lifeline discount totally independent of Section 316, it could have established one, but it did not. And if the Legislature had wanted the pre-section 316 $2.00 state discount to be separate from and in addition to the Section 316 discount it could have said so, but it did not. Instead, the Legislature twice amended Section 316 to ensure that the total Michigan discount would be $2.00 plus the then-effective federal discount. B. Section 316 Precludes the Commission From Requiring Any Additional Lifeline Discount. It is well established that the Commission has only such authority as is delegated by the Legislature. In re Reliability Plans of Electric Utilities for , 2018 WL , at *6. The statutes conferring power on the Commission are strictly construe[d], such that power must be conferred by clear and unmistakable language. Id., quoting Union Carbide Corp. v. Pub. Serv. Comm n, 431 Mich. 135, 151, 428 N.W.2d 322 (1988). Delegated power cannot be extended by inference, and no other or greater power [is] given than that specified. Id. (internal quotation marks omitted). Here, Section 316 expressly defines the scope of what [t]he commission is to require in terms of reduced rates for low income customers of residential BLES. That specific delegation of authority precludes the Commission from relying on a pre-section 316 order to impose an additional rate-reduction requirement for BLES that is not authorized by any statute. Herrick Dist. Library, 293 Mich. App. at 83 ( An administrative agency that acts outside its statutory boundaries 17

20 usurps the role of the legislature, and such administrative overreach of course conflicts with our federal and state constitutions ); Columbia Associates, L.P. v. Dept. of Treasury, 250 Mich. App. 656, 688, 649 N.W.2d 760 (2002) ( [a]n administrative rule cannot exceed the statutory authority granted by the Legislature, and a requirement that does so is unenforceable ). An agency action taken without underlying statutory authority such as any attempt to enforce that 1988 Order is void and has no effect. E.g., Utah Power & Light Co. v. United States, 243 U.S. 389, 392 (1917) ( If any of the regulations go beyond what [the Legislature] can authorize, or beyond what it has authorized, those regulations are void and may be disregarded ); City of Santa Clara v. Andrus, 572 F.2d 660, 677 (9th Cir.1978) ( administrative actions taken in violation of statutory authorization or requirement are of no effect ). Moreover, the 1988 Order establishing a $2.00 state Lifeline discount for AT&T Michigan was superseded once the Legislature elected to directly address the issue itself and establish the dollar amount of the Lifeline discount in Section 316 (which, as the amendments show, incorporated the prior $2.00 state discount). Indeed, and most importantly, the legislation that enacted Section 316 (Act 179 of 1991) also repealed MCL c. 26 That repeal eliminated the statutory basis for the pre-section 316 discount requirement and, consequently, negated the parts of the 1988 and 1990 orders that imposed that requirement. Courts have long recognized that when an order imposes an ongoing requirement based on a statute that is later repealed or superseded by another statute with different provisions, that order is no longer enforceable P.A. 1991, No. 179, 603, effective Jan. 1, 1992 (1991 Mich. Legis. Serv. P.A. 179 (S.B. 124) (West), at Article 6). 27 System Federation No. 91 v. Wright, 364 U.S. 642, (1961) (because a court s authority to adopt a consent decree comes only from the statute which the decree is intended to enforce, court could not enforce the decree once the statute was amended to allow the conduct the decree had prohibited); State of Pennsylvania v. Wheeling & Belmont Bridge Co., 18 How. 421, , 59 U.S. 421, (1855) (where statute on which court s earlier decision was based was 18

21 Because nothing in the MTA today authorizes the Commission to require a Lifeline discount outside of Section 316, and the statute on which the 1988 Order relied has been repealed, the 1988 Order has no effect and cannot be used to require a discount independent of Section 316. Simply put, the Commission cannot lawfully enforce today an old order that it could not lawfully issue today. C. Requiring ILECs Alone to Provide an Extra Lifeline Discount Would Be Discriminatory and Anticompetitive Finally, treating the $2.00 discount adopted in the 1988 and 1990 orders as being separate from the Section 316 discount would be anticompetitive and unjustly discriminatory. The 1988 and 1990 orders applied only to ILECs. Today, however, there are many more LECs CLECs in particular that offer residential BLES in Michigan, just like the ILECs. There would be no conceivable rational basis on which the Commission could require ILECs to provide an extra, non- Section 316 Lifeline discount that CLECs did not have to provide which helps explain why Section 316 applies equally to ILECs and CLECs. As a result, any state Lifeline discount that did not apply to all residential BLES providers would not be competitively neutral and would therefore by preempted by federal law, 47 U.S.C. 253(b). 28 modified by subsequent legislation to allow the prohibited conduct, the earlier decision cannot be enforced ); Williams v. Lesiak, 822 F.2d 1223, 1227 (1st Cir. 1987) ( In cases involving a change in the statute which the court order was meant to enforce, the order must be modified when a failure to do so would enforce rights the statute no longer gives. ), quoting System Federation, supra; McGrath v. Potash, 199 F.2d 166, (D.C. Cir. 1952) ( The statutory basis for the injunction having been removed by Congress, the injunction should be vacated[.] ); Stand Up for Democracy v. Secretary of State, 492 Mich. 588, , 822 N.W.2d 159 (2012) (the Michigan Supreme Court ruled that its own prior opinion was superseded by statute on the basis of new clear guidance by the Legislature). 28 Moreover, while Section 316 allows ILECs to recover the cost of providing the $2.00 state Lifeline discount, not all ILECs want to, or are able to, surcharge this amount to their other customers. In AT&T Michigan s case, it is running a large deficit from the cost of participating in the Lifeline program. According to the latest information provided by AT&T Michigan to the Commission, AT&T Michigan has under-recovered its costs by over $25,000,000 in the period 19

22 For all of these reasons, the Commission should make clear that the $2.00 discount imposed in the 1988 and 1990 order is now part of the Section 316 discount required of all providers of residential BLES. CONCLUSION For the reasons stated, AT&T Michigan requests that the Commission issue a decision before January 1, 2019 clarifying that: 1. Under Section 316(4), the Lifeline discount amounts in Sections 316(2) and (3) must be adjusted annually to reflect any increases or decreases in the federal Lifeline discount. This is required, regardless of whether the federal Lifeline discount changes through a phase-out of the federal discount, through the expiration of the FCC eligibility criteria waiver, or through the relinquishment of an ETC designation. 2. The stand-alone state Lifeline discount incorporated into the discount required by Section 316(2) and (3) is $2.00 and $3.50, respectively. Thus, beginning January 1, 2019, customers who qualify for a state Lifeline discount under Michigan s eligibility criteria, but who do not qualify for a federal Lifeline discount under FCC-approved eligibility criteria, will receive the state Lifeline discount of $2.00 ($3.50 for seniors). 3. The Commission s 1988 and 1990 orders establishing a $2.00 state Lifeline discount for AT&T Michigan, GTE North, and MECA have been incorporated into the state portion of the Lifeline discount set forth in Sections 316(2) and (3), and the 1988 and 1990 Orders were superseded and nullified by Section 316 and have no independent effect. from 2001 to See Data provided by AT&T Michigan to Staff on June 4, 2018 in connection with Staff s 2018 audit of AT&T Michigan s Lifeline program. 20

23 Respectfully submitted, Mark R. Ortlieb AT&T Michigan 225 West Randolph Street, Floor 25D Chicago, IL J. Tyson Covey Mayer Brown LLP 71 South Wacker Drive Chicago, IL

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